Ladies and gentlemen, welcome to the Iterum Therapeutics First Quarter 2021 Financial Results Conference Call. My name is Katie and I'll be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Louise Barrett, Senior Vice President of Legal Affairs to begin. Louise, please go ahead..

Good morning and welcome to Iterum Therapeutics first quarter 2021 financial results conference call. A press release with the company's first quarter results was issued earlier this morning, and can be found on our website. We are joined this morning by Corey Fishman, CEO and Judy Matthews, CFO. Corey will provide some opening remarks.

Judy will provide details on our financial results, and then we'll open the lines for Q&A.

Before we begin, I would just like to remind you that this call will contain forward-looking statements concerning our plans, strategies and prospects for our business including, with respect to the timing of review by the FDA of our NDA for oral sulopenem and related PDUFA date, the holding of an FDA Advisory Committee meeting to discuss the NDA or expectations for potential approval on the PDUFA date, the market potential for sulopenem, commercialization activities including the ability to enter into a definitive agreement with respect to commercialization services and to successfully launch oral sulopenem if approved, the ability to expand any approved label for sulopenem by adding additional indication, and the sufficiency of our cash resources to execute our strategy.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including our business, financial condition and operations, the timing or likelihood of regulatory filings on approval, commercialization plans and timelines, if oral sulopenem is approved, the actions of third-party clinical research organizations, suppliers and manufacturers, the accuracy of our expectations regarding how far into future our cash on hand will fund our ongoing operations, the impact of COVID-19 and related response measures thereto and other risk factors set out in our filings with the SEC, including in the most recently filed quarterly report on Form 10-Q.

In addition, any forward-looking statements represent our views only as of the date of this call and should not be relied on as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statement. With that, I’ll now turn the call over to Corey for his opening remarks..

Thank you, Louise. Welcome and thanks for joining us today. Q1 was a busy quarter for interim, and I'll share some of the highlights with you now.

First, our New Drug Application for oral sulopenem for uncomplicated urinary tract infections in patients with a quinolone non-susceptible organism was accepted in late January, with a PDUFA date of July 25 of 2021. Additionally, we successfully raised over $74 million of cash in the first quarter.

And we partnered with EVERSANA, a world-class end-to-end commercialization enterprise, to work with us on a variety of pre-launch activities.

As it relates to the FDA review of our new drug application, as we had communicated, the FDA had planned and holding an Advisory Committee on June 2, but informed us that they needed more time to review the data in our package and therefore, was postponing this meeting.

We continue to prepare for this meeting, and await clarity from the FDA on timing. Importantly, however, the FDA review of our new drug application continues and our interactions to data progressed well and are typical as to where we'd expect to be a few months from a potential approval. I'll share some further detail on this with you now.

Over the last few months, the FDA has sent us a number of information requests regarding clinical and manufacturing data, and all of these inquiries have been addressed. The FDA has performed routine audits on a number of our sites, and I'm happy to report that no observations have been noted in any of those audits to date.

Additionally, the FDA has reviewed detailed manufacturing data, and to date, no issues have been identified. As we prepare for a potential launch of oral sulopenem in the fourth quarter, I'd like to highlight a few items.

The pre launch work we have done in collaboration with EVERSANA thus far has been incredibly valuable in helping us build a solid platform on which we can launch oral sulopenem in the US, if approved. We've recently conducted payer research to better understand the access and reimbursement landscape.

The research was very useful in helping us understand the potential market access for oral sulopenem. Based on these discussions with payers, that represent about 250 million lives in the US, we believe, oral sulopenem could achieve unrestricted third tier coverage in about 70% of commercial plans within one year of launch.

We have also commenced physician research to understand the current market dynamics in the uncomplicated urinary tract infection space.

We are developing an unbranded awareness campaign that will be rolled out shortly, with the sole purpose of highlighting the challenges of antibiotic resistance in general, and can provide physicians in the US, with the level of resistance to various classes of drugs, currently use in the uncomplicated urinary tract infection market in the particular zip codes, where these physicians are practicing.

And finally, we continue to refine our targeting and segmentation work in the US, with real world data to optimize our commercialization strategy, which will be based on resistance rates in a particular territory, the availability of high value physician targets in that territory and payer coverage in that territory as well.

We are currently working on expanding the relationship with EVERSANA to include full launch and commercialization activities and negotiations on a definitive agreement with EVERSANA for these services are ongoing, and we expect to finalize the agreement in the coming weeks.

On the clinical development front, Iterum will be requesting a type B meeting with the FDA in the next few weeks, to discuss the potential path to regulatory approval for sulopenem in the treatment of complicated urinary tract infections.

As you may recall, we have already completed a large phase three trial in complicated urinary tract infections, where sulopenem performed very well across a variety of time points and measures, including clinical outcomes, but missed the endpoint due to microbiologic impact of asymptomatic bacteriuria.

We plan to focus our discussion with the FDA around endpoints, as well as what additional work, if any, could provide the basis for a filing in complicated urinary tract infections. With regard to some key catalysts that are upcoming, there are number of important events that we expect to see over the next few quarters.

We will have a potential advisory committee meeting over the next quarter or so. We have a planned discussion with the FDA on complicated urinary tract infections that we expect to have in the third quarter of this year. In the third quarter, we also have our PDUFA date.

And we have the potential launch of oral sulopenem in the fourth quarter of this year. In closing, we believe that we’re in a very solid position with our NDA under review, and having about $100 million of cash on the balance sheet.

We expect this will allow us to execute on our strategy of launching oral sulopenem later this year, assuming approval, and begin the further development of sulopenem in additional indications where new oral agents are desperately needed. We anticipate being able to operate the business into 2023, without additional funding.

Now I'll turn the call over to Judy for some details on our financial results..

Thanks Corey, total operating expenses were $5.8 million in the first quarter of 2021, compared to $12.9 million in the first quarter of 2020. Operating expenses include research and development expenses and general and administrative expense.

R&D costs were $2.5 million for the first quarter of 2021 compared to $9.7 million for the same period in 2020. The R&D category includes expenses for our clinical and development program, our CMC costs and our regulatory expenses. The primary driver of the $7.2 million dollar decrease in R&D costs, with the completion of our Phase 3 program in 2020.

G&A costs were $3.4 million for the first quarter of 2021, which is $200,000 higher than G&A costs of $3.2 million in the first quarter of 2020, due to higher spend on pre-commercialization activities and higher consulting costs to support administrative functions, partially offset by lower G&A headcount. Moving on to non-operating items.

interest expense was $3 million for the first quarter of 2021, compared to $2.6 million in the first quarter of 2020.

The primary reason for the $400,000 increase in interest expense was non-cash interest expense associated with the write-off of previously capitalized financing fees associated with our royalty linked notes which are now being recorded at fair value following derivative accounting, which I will discuss in a moment.

On a strictly cash basis, we paid interest related to our term loan with SBB of approximately $150,000 in the first quarter of 2021 compared to $300,000 in the first quarter of 2020.

The reduction in cash interest is largely due to a lower principal balance on our term loan, as monthly amortization began in the fourth quarter of 2019 and will continue until our final payment in March 2022.

Our net loss on a US GAAP basis of $99 million there is explanation, as it was driven by a $90 million non-cash adjustments to recorded derivatives surrounding our exchangeable note and royalty link note. The accounting for derivatives is complex, and the result of this application on financial statements is often misunderstood.

The primary reason for the large adjustment to record the derivatives at their fair value was the increase in our stock price and market capitalization, during the first quarter of 2021.

In the future, changes in our share price and market capitalization, and changes in management's assumptions, may result in significant changes in the value of these derivatives, resulting in non-operating, non-cash gains or losses. To reiterate, there was absolutely no impact of this adjustment on cash or cash runway, which I will turn to now.

At the end of March, we had cash and short term investments of $100.5 million following two equity financings in February 2021 that raised just, over $74 million on a net basis. Based on our current plan, we have cash into the first half of 2023.

As such, we believe we have the ability to continue our pre-launch activities with EVERSANA, complete the FDA review, launch oral sulopenem in the U.S. if approved, potentially initiate a registration trial for complicated urinary tract infections and operate in 2023 without incremental funding.

As of March 31st 2021, we had approximately 179 million ordinary shares outstanding, also as of the end of March, we had 8.2 million warrants outstanding, at an average price of $1.53 per share, and $14.3 million of exchangeable notes, still outstanding, which can be exchanged for approximately 19.8 million shares which includes a crude interest, at the option of the note holder.

Now I will turn it back over the Corey..

Thank you, Judy. We would like to open-up for some questions now..

Question-and:.

[Operator Instructions] Our first question comes from Gregory Renza from RBC Capital Markets. Gregory, please go ahead..

Thank you, and good morning, Corey and Judy. I appreciate all the color today and thanks for taking my questions.

Corey, just with respect of course with that with the regulatory actions in focus, I know we've kind of characterize this as a standard review, just in light of the Ad Com status changing, I'm just curious if you could maybe pine a little bit on, how you think the PDUFA date will playout.

It sounds like it's currently scheduled, but do you have the sense of any reschedule, or pushback in timing and when would you expect to sort of get clarity there. Thank you..

Great, thanks Greg for the question, appreciate it. I know, what's on everyone's mind it's certainly on ours. I wish I had more definitive information to share, but I will share with you what I can.

I believe that, we have asked the FDA a number of times, whether our PDUFA is changing, and as of right now, the answer is we're not changing it, and we may change it. So it's not terribly definitive.

But what I will tell you that I think can help people get a little bit of a sense of where we are, is I think the FDA is trying to stick to their original schedule, reasonably for other types of meetings as you know, during the process of review, they set out a schedule have a number of meetings that are planned.

And they're still planning on holding some of those internal meetings as well as internal meetings along with us. So, it's not terribly clear to us, whether there's a change to the, to the PDUFA date or not. And there has been no correspondence as of yet, with regard to timing on Ad Com or timing on a PDUFA being confirmed for that date or not.

Having said that, we certainly [Technical Difficulty]..

Corey, your line is open.

Are you able to speak back to us?.

Can you hear, Cory?.

Yes.

Can you guys hear me?.

Yes, I can hear you..

Okay, no – and so that was – did you hear the explanation or no? We had a little background noise here, so basically what I said is that you know, the review is continuing. FDA so far has tried to stick to their schedule on other internal meetings and in meetings with us.

And so we don't have any clarity yet, as to whether there'll be a change to the PDUFA and we would hope to have that over the coming weeks, that that clarity, at least from FDA..

That's great, thanks Cory.

And maybe just for my last question, I'll just zoom out a little bit and I'm just curious of your latest thoughts on sector interest in anti infective, there have been some strategic deals that have been occurring across the space, how do you see that evolving? You're certainly in a unique position with worth Iterum, but I'm just thinking of gathering your latest perspective on the anti infective sector in general.

Thanks again..

Sure, yeah. And when we talk about the sector, I think there's been a little bit of activity on the antibiotic side, there's certainly been a little bit of activity on the antifungal side. I think there's an opportunity for some of the larger pharma companies to reengage.

And the question becomes, are they interested in doing development or are they interested in doing only commercial? And I think for companies like Iterum at this stage you have a little bit of the best of both worlds because you can offer people potential partnership with someone who's commercial or near commercial.

It allows a company to have more flexibility, not having to do development work. Having said that, the last couple of deals that happened, Pfizer did both of them, they acquired Arixa and they acquired the antifungal company, whose name is APX now but both of those need development.

So clearly Pfizer is not an adverse to doing development on anti infectives.

So I think there's a little bit of a shift in terms of coming back to the space, and I think part of it is driven by recognizing that there are still a lot of severe medical needs that have not been met, and I think COVID has also highlighted that in kind of the secondary way, with regard to some of these follow on infections, particularly on the – you know pneumonia side and some of the other infections that folks have been getting.

And the, the therapies as we know that are out there today are not ideal. And that's where I think new applications of drugs like sulopenem and others can really be helpful for the community, but also for the larger companies to be able to provide a suite of products to basically serve the needs of the marketplace..

Thank you. Our next question comes from Ed Arce from H.C. Wainwright. Ed, your line is now open..

Great. Thanks Corey, Judy for taking my questions. First, Corey, just as a -- by the way, I think, the company that you're referring to that Pfizer recently acquired is Amplyx, the anti-fungal company..

That is correct. Thanks, Ed..

Yes. So on the timing of the Ad Com and PDUFA that's obviously top of mind, and I don't think there's really much more we can say at this point beyond what you've just said. But beyond that, I'm wondering about the FDA meeting that you intend to request, I believe in the next few weeks to discuss cUTI.

I'm curious about that, because I know that in the past you have stated that you wanted to be careful not to sort of overlap one discussion while there was an active NDA tending and to sort of not --not sort of confuse one -- one application with another potential future applications. I just wanted to get your thoughts on that.

And I have a couple follow-ups..

Sure. The idea that we have is -- I think if we asked for a meeting on uncomplicated UTI, while the uncomplicated UTI review was ongoing, it would be more challenging for the agency. And so we -- we've said that a meeting uncomplicated should not get in the way of their review of the uncomplicated.

Now, of course, there are crossovers and there are certain elements that are intertwined. But our expectation is that because it's not the same exact indication, we won't be having the very same conversation.

And so, I think by the time we get this meeting request in the next few weeks and then, presumably they'll grant that that's a 60 day time frame. We should be reasonably close to the end of their review.

Again, just to clarify, as we sit here today, there hasn't been anything where the FDA said, gosh, that doesn't, that doesn't work for us, hold on pencils down, nothing like that. So, our belief is that this is you know going to come to fruition at some point reasonably soon.

That's certainly our hope, and it doesn't -- right now doesn't send any signal other than that. And so I think when we have cUTI meeting, we should be in a pretty good spot to not have an over complication of the review, because as you know the FDA needs to finish their review, quite a ways in advance of the PDUFA get everyone to agree and sign off.

All of that hopefully is happening over the coming months. And by the time we have our cUTI meeting, we don't believe they'll really be a challenge for the FDA to entertain in that without impacting the uncomplicated review. So, we're pretty comfortable that'll be the case..

Okay. Thanks. Thanks for the clarity there. The next question is around the recent payer research that you completed with a number of payers, as you said covering approximately 250 million lives.

If you could expand a bit on the third tier coverage that you discussed and the goal of having the commercial lives -- number of commercial lives covered in that tier by the first year. I think I missed some of the detail there.

Any sort of expansion on what you're seeing from that survey would be helpful?.

Sure. So we did this research which is pretty standard. You'll go out and you'll talk to the large payers, and you talk about where they would see based on product profile, this drug fitting into the payer status. What we are looking for is, what tier and what restrictions, if any.

And so as we mentioned, we would expect about 70% unrestricted third tier and what that means is, that there's no prior authorization, and there's no step at it. It's unrestricted and that usually puts the co-payers somewhere in the $40 to $75 range for the patient.

And basically, what we would do is, again, with our commercialization strategy that's an important leg of our stool. We have three legs one is resistance rates, one is the number of high value targets and the third is payer coverage in that territory. And so that's an important element for us to understand where we would be placed.

Because the last thing we want to do is have someone get a prescription, walk into the pharmacy and not be able to get the drug. And so those are the three elements that we'll look at to reassure that we have a higher probability of success with regard to our commercial resources and the value of what they can provide.

And that's a set of research that we did, just in the last couple months with payers. And just to be clear as well, it's pretty -- it's a pretty good result, but also pretty consistent with other branded oral antibiotics that have launched in the last five years, as well as other spec pharma products.

So it's not like this is that kind of research where they tell you what you think -- they want -- that you want to hear. This is really what has been happening in the marketplace.

And so I think that puts us in a good spot from an access and reimbursement position, and will really lever that data to be sure we're putting commercial resources in places where we have the highest probability of those scripts getting filled. .

Great. That's very helpful. Final question for me, Corey, is around your ongoing negotiations with EVERSANA on a definitive agreement with them to move forward. If and when approved for commercialization with this end-to-end enterprise.

Just wondering, what steps remained if there are any barriers that need to be resolved to get into that, I think you said that the expectations are for some agreement in the coming weeks, so just wondering, what's left?.

Yeah. No, it's a good question and you can imagine that we've literally been working on this since we signed our original agreement for pre-launch services, knowing that we wanted to partner with EVERSANA and work with them on the full commercialization. So this isn't sort of we just started the process.

This has been in for a few months and there is really no barriers. This is just kind of typical negotiating with a partner getting down to the last handful of details and we believe there's nothing standing in the way of getting this agreement signed in the next few weeks and just being done with that.

And all that pre-work is leading up to this anyway. So, we will be prepared to get that agreement signed as efficiently as we can. And then importantly, we'll be prepared for a launch in the fourth quarter as we've said, assuming we stick to our PDUFA. If the PDUFA does change, we will still be prepared for launch.

So if it's little bit later because the FDA needed a little bit more time, then -- so be it, we’ll be prepared. What we don't want to do is be caught flat-footed. We don't want to have a positive outcome from FDA and then have it go, gosh, we are not ready to launch so we need another six months of preparation. So we're going to prepare for launch.

And the good news is much of that is cost that is going to be put on the books, basically after you get approved. So we're not going to hire sales reps until we have an approval.

It will be contingent offers like most products that are launched in the market nowadays are contingent offers for sales reps, so we're not looking to add a ton of expense prior to the approval, but we're going to continue preparing and being ready to launch.

And as soon as we get that approval that will turn the switch and allow us to put reps on and get everyone trained up and ready to go..

Fantastic. Thanks for the extra detail, Corey..

Thanks for the questions, Ed.

Our final question comes from Kevin Kedra from G Research. Kevin, your line is now open..

Great. Thanks for taking the questions. Corey, I want to go back to this survey you guys did any idea of a third tier coverage on restricted note -- step edits or PPAs.

I want to understand how the payers are thinking about this indication that you're going for, specifically the quinolone resistant part of that? Will they be comfortable that if a doctor writes a script for sulopenem that it's for the appropriate indication that there's a high likelihood of quinolone resistance.

Are there other things that they will factor into that to determine whether or not a script is appropriate to really run through that third tier of having no real barriers or will they kind of differentiate between appropriate or seemingly -- maybe not appropriate scripts?.

Yes. There really won't be any differentiation and the reason predominantly Kevin will be that much of the uncomplicated UTI market is written empirically. So you won't know that answer of what kind of bug you had unless you went and got a culture.

So there's no real way for the payer to know the, kind of, the plan in terms of, you know, gosh, that that's a quinolone resistant pathogen or it wasn't. That part of the conversation we've had with the payers as well as everyone else is that's why we're putting commercial resources in places where resistance rates are high.

And that's why we're looking at those specific patient profiles to be sure that when we're giving sulopenem or recommending physicians use sulopenem, it's for patients in those highly resistant areas, and the patients who have higher risk of a failure causing a bad outcome; elderly folks, diabetic folks, immune compromised folks, folks who've had a history of recurrent infections.

Those are use sulopenem patients. And I think the payers, they understand that story and I think they're comfortable with it. Remember this is a category unlike many others that -- there hasn't been much activity on the brand side in a long time.

So it's not a high priority for them and they want to be sure we're doing the right thing and I think helping them understand our commercial strategy has gotten them very comfortable that we'll be doing that. And there's been no talk about trying to segregate was this inappropriate patient turnout..

Good appreciate the color. As far as the, the conversation with the FDA is -- it seems like they've, kind of, they're moving along as expected, aside from the uncertainty on the AdCom date so.

Certainly, AdCom seems to be a positive note, but on the AdCom should we expect that it's possible the FDA might make a decision on the drug without actually holding an AdCom or should we still be expecting that, an AdCom will be kind of rate limiting factor on the timing of an approval?.

Yeah. It's the $100,000 question and I will give you my opinion and just be to for everyone on the line to be super clear, it's my opinion. This is not coming from FDA, but they certainly have the ability to say, we don't need an AdCom to give you a decision.

Obviously, there's lots of drugs that go through this and don't have an AdCom and this is one that they could decide to stay on the original timeline, hit the PDUFA and say, yep, we're good. That is a possibility. Having said that, I don't have any reason, any concrete reason to say that from the FDA.

They haven't said, oh my gosh, we're going to do X, Y or Z. We've been really upfront about everything that the FDA has told us. I think it's a -- again, to your point, I think it's a good sign that they're trying to stick to a number of their kind of planned meetings that they had planned three or four months ago.

Now whether they say, okay that's great, now we'll schedule an AdCom for whenever end of June, don't know. But they certainly have the ability to say we don't need an AdCom. We're going to stick to the original schedule and that's the end of that. That's a possibility..

Okay. As far as the Type B meeting for complicated, you mentioned that you don't see really any overlap there with the NDA.

So should we take it that in the case of an Ad Com, you wouldn't expect there to be issues that might tie into the other indications, specifically complicated UTI where you had you had some of the issues with bacteria that kind of set off the endpoints.

Should we not expect that to be part of the NDA discussion for uncomplicated?.

Yeah. Look, I mean I think in reality, there's always going to be some opportunity for FDA to discuss that. And if there's an Ad Com, I would imagine that comes up. But we have to remember, this is an NDA for the uncomplicated UTI in the quinolone resistant population. Now well someone say yeah, but you had to face symptomatic bacteria in complicated.

I think that just bolsters our argument, which is yeah and it's a little bit unusual and you have this micro endpoint that sort of derailed you, but you have clinical outcomes in the 88%, 89% rate. Does that make sense? Even FDA is sort of scratch their heads at that one.

So I don't think -- I do think that could come up as a part of that conversation Kevin, but I don't see it as a, as a sort of a barrier to us having the conversation about cUTI.

And again, given the timing, we're going to get this request in the next few weeks, as I said, 60 days later, it's going to be August, basically, if we get this in at the end of May, then June, July, it'll be August, I'm hopeful that they're done with their review, because they have to finish their review well in advance of PDUFA.

They're not sort of doing this on the last minute saying okay its tomorrow, let's figure out what we want to do. They're done well in advance. So I don't think there's going to be any complicating factors of putting the request in for complicated UTI with regard to the NDA.

I think there's -- there could be some conversation that crosses over, because we did the study in complicated and have the same issue that we did in uncomplicated, but I don't see that as a big barrier to having a conversation and getting in the way of the review of the uncomplicated..

Great. Maybe, last question. You mentioned that even if there's a say three month delay that you would still be preparing for a launch in Q4. So if that comes to pass, should we understand that Q4 launch whether the approval comes in on time or three months later.

Q4 is still kind of in the cards or should we think about a bit of a pushback of three months to the launch timing if there were to be a three-month delay from FDA..

Yes. So, we don't know what the potential delay if there is any could be, I don't know where three months that FDA has done that to a number of people. So I think the short answer is, we will try to be as practical as possible.

If there is a delay that put this with an approval at the end of the third quarter, early fourth quarter, probably going to have to push the launch to first of the year. And the only reason is you've got the holidays, you don't want to really be launching in the middle of the holiday season, if that's when the approval comes.

So that's why, as I said, we'll be prepared to launch, and certainly, hope to launch in the fourth quarter, given what we know about the PDUFA today, and even a even a slight delay I think could put us into the fourth quarter still, but if it's something on the order of three months, then I think the reality is that would have to be pushed into the first of 2022..

Great. Thank you..

And we have no further questions. So, Corey, I will hand it back to you..

Great. Thank you. So, in closing, I just like to thank everyone for your time today. I appreciate it, appreciate the questions. We really do feel good about our progress and feel like this is a transformational year for Iterum.

We're working towards getting that first product approved in the first indication, really importantly we have solved for the time being, our cash concerns and have cash on hand to execute on our launch strategy for oral sulopenem further develops sulopenem and other indications, and really get into 2023 with no need for additional capital.

So we feel very good about our progress and where we are. And we look forward to sharing more updates with you as soon as we have them. So, thanks again for the time everyone..

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines..