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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

Or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to               

Commission file number 001-37558

Nabriva Therapeutics plc

(Exact name of registrant as specified in its charter)

Ireland

Not applicable

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

25-28 North Wall Quay

IFSC, Dublin 1, Ireland

Not applicable

(Address of principal executive offices)

(Zip Code)

+353 1 649 2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol (s)

    

Name of each exchange
on which registered

Ordinary Shares, nominal value $0.01 per share

NBRV

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes    No  

As of October 31, 2020, the registrant had 150,775,676 ordinary shares outstanding.

Table of Contents

NABRIVA THERAPEUTICS plc

INDEX TO REPORT ON FORM 10-Q

Page

PART I — FINANCIAL INFORMATION

Item 1:

Financial Statements

5

Consolidated Balance Sheets as of December 31, 2019 and September 30, 2020 (unaudited)

5

Consolidated Statements of Operations for the three months and nine months ended September 30, 2019 and 2020 (unaudited)

6

Consolidated Statements of Changes in Stockholders’ Equity for the three months and nine months ended September 30, 2019 and 2020 (unaudited)

7

Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2020 (unaudited)

8

Notes to the Unaudited Consolidated Financial Statements

9

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3:

Quantitative and Qualitative Disclosures About Market Risk

44

Item 4:

Controls and Procedures

45

PART II — OTHER INFORMATION

Item 1:

Legal Proceedings

46

Item 1A:

Risk Factors

46

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

107

Item 3:

Defaults Upon Senior Securities

107

Item 4:

Mine Safety Disclosures

108

Item 5:

Other Information

108

Item 6:

Exhibits

109

SIGNATURES

110

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements contained in this Quarterly Report, other than statements of historical fact, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate, “around” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. The forward-looking statements in this report include, among other things, statements about:

our ability to successfully continue commercial activities for XENLETA (lefamulin) for the treatment of community-acquired bacterial pneumonia, or CABP, including the availability of and ease of access to XENLETA through hospital formularies, managed care plans and major U.S. specialty distributors;
our ability to successfully commercialize SIVEXTRO and realize value from our agreement with Merck & Co., Inc.;
our ability to build and maintain a sales force for the commercialization of XENLETA, SIVEXTRO and CONTEPO, if approved;
the timing of the resubmission of the NDA for CONTEPO and potential marketing approval of CONTEPO and other product candidates, including the completion of any post marketing requirements with respect to XENLETA and any other product candidates we may obtain;
our expectations regarding how far into the future our cash on hand and anticipated revenues from product sales will fund our ongoing operations and the continued availability and cost of capital to sustain our operations on a longer term basis;
our expectations regarding our strategy to 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, including additional community products;
our ability to comply with the restrictive covenants under our debt facility with Hercules Capital, Inc., or Hercules, including but not limited to the ability to maintain minimum cash balance requirements;
our ability to satisfy interest and principal payments under our debt facility with Hercules;
our sales, marketing and distribution capabilities and strategy;
the potential extent of revenues from future sales of XENLETA, SIVEXTRO and/or CONTEPO, if approved;
our expectations about the impact of the COVID-19 pandemic on our business operations, ongoing clinical trials and regulatory matters;
the uncertainties inherent in the initiation and conduct of clinical trials, availability and timing of data from clinical trials, and whether results of early clinical trials or studies in different disease indications will be indicative of the results of ongoing or future trials;
our ability to resolve the matters set forth in the Complete Response Letter we received from the U.S. Food and Drug Administration, or FDA, in connection with our New Drug Application, or NDA, for CONTEPO for the treatment of complicated urinary tract infections, or cUTIs, including acute pyelonephritis;

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our plans and the related cost expectations to pursue development of XENLETA for additional indications other than CABP, and of CONTEPO for additional indications other than cUTI;
our plans to pursue development of other product candidates;
the availability of lefamulin in China and Canada;
our expectations regarding the ability of our customers to satisfy the demand for XENLETA with their existing inventory;
our expectations with respect to the potential financial impact, synergies, growth prospects and benefits of our acquisition of Zavante Therapeutics, Inc., or Zavante, which was completed on July 24, 2018, or the Acquisition, pursuant to the Agreement and Plan of Merger dated July 23, 2018, or the Merger Agreement, by and among Nabriva, Zuperbug Merger Sub I, Inc., or Merger Sub I, Zuperbug Merger Sub II, Inc., or Merger Sub II, Zavante and the Zavante stockholder representative, including the potential realization of the expected benefits from the Acquisition;
our expectations with respect to milestone payments pursuant to the Merger Agreement and expectations with respect to potential advantages of CONTEPO or any other product candidate that we acquired in connection with the Acquisition;
our ability to establish and maintain arrangements for manufacture of our product candidates;
the potential advantages of XENLETA, SIVEXTRO, CONTEPO, and our other product candidates;
our estimates regarding the market opportunities for XENLETA, SIVEXTRO, CONTEPO, and our other product candidates;
the rate and degree of market acceptance and clinical benefit of XENLETA for CABP, SIVEXTRO for
acute bacterial skin and skin structure infections, CONTEPO for cUTI and our other product candidates;
our ability to establish and maintain collaborations including additional licensing agreements for XENLETA outside the United States, Canada and the greater China region;
the future development or commercialization of XENLETA in the greater China region and Canada;
the potential benefits under our license agreements with Sinovant Sciences, Ltd., or the Sinovant License Agreement, and with Sunovion Pharmaceuticals Canada Inc., or the Sunovion License Agreement;
our future intellectual property position;
our ability to effectively manage our anticipated growth;
our ability to maintain the level of our expenses consistent with our internal budgets and forecasts;
the demand for securities of pharmaceutical and biotechnology companies in general and our ordinary shares in particular;
competitive factors;
risks of relying on external parties such as contract manufacturing organizations;

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compliance with current or prospective governmental regulation;
general economic and market conditions;
our ability to attract and retain qualified employees and key personnel;
our business and business relationships, including with employees and suppliers, following the Acquisition;
our ability to satisfy milestone, royalty and transaction revenue payments pursuant to the Stock Purchase Agreement between Zavante and SG Pharmaceuticals, Inc.; and
other risks and uncertainties, including those described in the ‘‘Risk Factors’’ section of this Form 10-Q.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make.

You should refer to the “Risk Factors” section of this Form 10-Q for a discussion of important factors that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. We do not assume any obligation to update any forward-looking statements, except as required by applicable law.

Throughout this Form 10-Q, unless the context requires otherwise, all references to “Nabriva,” “the Company,” we,” “our,” “us” or similar terms refer to Nabriva Therapeutics plc, together with its consolidated subsidiaries.

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PART I

ITEM 1.  FINANCIAL STATEMENTS

NABRIVA THERAPEUTICS plc

Consolidated Balance Sheets (unaudited)

As of

As of

(in thousands, except share data)

    

December 31, 2019

    

September 30, 2020

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

86,019

$

41,122

Restricted cash

392

230

Short-term investments

 

175

 

16

Accounts receivable, net and other receivables

2,744

3,385

Inventory

682

5,803

Prepaid expenses

 

1,158

 

3,754

Total current assets

 

91,170

 

54,310

Property, plant and equipment, net

 

2,474

 

2,007

Intangible assets, net

 

91

 

84

Long-term receivables

 

378

 

369

Total assets

$

94,113

$

56,770

Liabilities and equity

 

 

Current liabilities:

 

 

Accounts payable

$

4,673

$

2,041

Accrued expense and other current liabilities

 

11,966

 

8,934

Total current liabilities

 

16,639

 

10,975

Non-current liabilities

Long-term debt

34,502

7,610

Other non-current liabilities

 

1,698

 

1,956

Total non-current liabilities

36,200

9,566

Total liabilities

52,839

20,541

Commitments and contingencies (Note 12)

 

 

Stockholders’ Equity:

 

 

Ordinary shares, nominal value $0.01, 1,000,000,000 ordinary shares authorized at September 30, 2020; 94,545,116 and 150,006,432 issued and outstanding at December 31, 2019 and September 30, 2020, respectively

945

1,500

Preferred shares, par value $0.01, 100,000,000 shares authorized at September 30, 2020; None issued and outstanding

Additional paid in capital

 

517,044

 

563,095

Accumulated other comprehensive income

 

27

 

27

Accumulated deficit

 

(476,742)

 

(528,393)

Total stockholders’ equity

41,274

 

36,229

Total liabilities and stockholders’ equity

$

94,113

$

56,770

The accompanying notes form an integral part of these consolidated financial statements.

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NABRIVA THERAPEUTICS plc

Consolidated Statements of Operations (unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

(in thousands, except share and per share data)

    

2019

    

2020

    

2019

    

2020

Revenues:

 

  

 

  

 

  

 

  

Product revenue, net

$

1,445

(47)

$

1,445

$

61

Collaboration revenue

5,051

616

6,051

768

Research premium and grant revenue

424

722

1,652

1,738

Total revenue

6,920

1,291

9,148

2,567

Operating expenses:

 

 

 

 

Cost of product sales

(15)

(25)

(15)

(401)

Research and development expenses

(5,601)

(3,486)

(21,213)

(14,930)

Selling, general and administrative expenses

 

(18,503)

 

(10,997)

 

(45,339)

 

(35,094)

Total operating expenses

(24,119)

(14,508)

(66,567)

(50,425)

Loss from operations

(17,199)

(13,217)

(57,419)

(47,858)

Other income (expense):

 

 

 

 

Other income (expense), net

 

(10)

 

450

 

116

 

614

Interest income

 

94

 

5

 

176

 

85

Interest expense

 

(709)

 

(261)

 

(2,512)

 

(1,536)

Loss on extinguishment of debt

(2,757)

Loss before income taxes

(17,824)

(13,023)

(59,639)

(51,452)

Income tax benefit (expense)

 

29

 

72

 

(80)

 

(199)

Net loss

$

(17,795)

(12,951)

$

(59,719)

$

(51,651)

Loss per share

    

    

    

    

Basic and Diluted ($ per share)

$

(0.24)

(0.09)

$

(0.83)

$

(0.44)

Weighted average number of shares:

 

  

 

 

  

 

Basic and Diluted

 

75,161,192

 

144,690,904

 

72,153,405

 

117,454,536

The accompanying notes form an integral part of these consolidated financial statements.

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NABRIVA THERAPEUTICS plc

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Accumulated

Additional

other

Total

Ordinary Shares

paid in

comprehensive

Accumulated

Stockholders'

(in thousands)

    

Number of Shares

    

Amount

    

capital

    

income

    

deficit

    

Equity

January 1, 2019

67,019

$

670

$

461,911

$

27

$

(393,978)

$

68,630

Issuance of ordinary shares

 

4,317

 

43

 

10,014

 

 

10,057

Exercise of stock options

 

 

 

 

 

 

Equity transaction costs

 

 

 

(270)

 

 

 

(270)

Stock-based compensation expense

 

 

 

1,907

 

 

 

1,907

Net loss

 

 

 

 

 

(20,217)

 

(20,217)

March 31, 2019

 

71,336

713

473,562

27

(414,195)

60,107

Issuance of ordinary shares

1,570

16

3,691

3,707

Equity transaction costs

 

 

(523)

 

 

 

(523)

Stock-based compensation expense

 

 

1,821

 

 

 

1,821

Net loss

 

 

 

 

(21,707)

 

(21,707)

June 30, 2019

72,906

$

729

$

478,551

$

27

$

(435,902)

$

43,405

Issuance of ordinary shares

5,088

51

9,547

9,598

Equity transaction costs

 

 

(131)

 

 

 

(131)

Stock-based compensation expense

 

 

4,138

 

 

 

4,138

Net loss

 

 

 

 

(17,795)

 

(17,795)

September 30, 2019

77,994

$

780

$

492,105

$

27

$

(453,697)

$

39,215

Accumulated

Additional

other

Total

Ordinary Shares

paid in

comprehensive

Accumulated

Stockholders'

(in thousands)

Number of Shares

    

Amount

    

capital

    

income

    

deficit

    

Equity

January 1, 2020

 

94,545

$

945

$

517,044

$

27

$

(476,742)

$

41,274

Issuance of ordinary shares

 

479

 

5

 

181

 

 

 

186

Equity transaction costs

 

 

 

(39)

 

 

 

(39)

Shares issued in connection with the vesting of restricted stock units

 

85

 

1

 

(1)

 

 

 

Stock-based compensation expense

1,752

1,752

Net loss

(23,259)

(23,259)

March 31, 2020

 

95,109

951

518,937

27

(500,001)

19,914

Issuance of ordinary shares

 

47,578

476

40,891

41,367

Equity transaction costs

 

 

 

(2,709)

 

 

 

(2,709)

Shares issued in connection with the employee stock purchase plan

93

1

42

43

Shares issued in connection with the vesting of restricted stock units

 

185

 

2

 

(2)

 

 

 

Stock-based compensation expense

1,287

1,287

Net loss

(15,441)

(15,441)

June 30, 2020

142,965

1,430

558,446

27

(515,442)

44,461

Issuance of ordinary shares

 

6,894

69

4,036

4,105

Equity transaction costs

 

(613)

(613)

Shares issued in connection with the vesting of restricted stock units

 

147

1

(1)

Stock-based compensation expense

1,227

1,227

Net loss

(12,951)

(12,951)

September 30, 2020

 

150,006

$

1,500

$

563,095

$

27

$

(528,393)

$

36,229

The accompanying notes form an integral part of these consolidated financial statements.

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NABRIVA THERAPEUTICS plc

Consolidated Statements of Cash Flows (unaudited)

Nine Months Ended September 30, 

(in thousands)

    

2019

    

2020

Cash flows from operating activities

  

 

  

Net loss

$

(59,719)

$

(51,651)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Non-cash other income/expense, net

 

(49)

 

(19)

Non-cash interest income

 

24

 

1

Non-cash interest expense

 

379

 

351

Loss on extinguishment of debt

2,757

Depreciation and amortization expense

 

162

 

315

Amortization of right-of-use assets

291

260

Stock-based compensation

 

7,866

 

4,266

Deferred income taxes

 

(5)

 

Other, net

 

 

(66)

Changes in operating assets and liabilities:

 

 

Increase/(decrease) in long-term receivables

 

(288)

 

Increase/(decrease) in accounts receivable, net and other receivables and prepaid expenses

 

(1,258)

 

(3,237)

Increase/(decrease) in inventory

(162)

(5,121)

Increase/(decrease) in accounts payable

 

(39)

 

(2,529)

Decrease in accrued expenses and other liabilities

 

(3,553)

 

(3,103)

Increase/(decrease) in other non-current assets

9

Increase/(decrease) in other non-current liabilities

 

(88)

 

(156)

Increase/(decrease) in income tax liabilities

 

34

 

(44)

Net cash used in operating activities

 

(56,405)

 

(57,967)

Cash flows from investing activities

 

 

Purchases of plant and equipment and intangible assets

 

(97)

 

(95)

Deposits into employee stock purchase plan restricted cash accounts

 

228

 

Changes in restricted cash

(162)

Net cash used in investing activities

 

131

 

(257)

Cash flows from financing activities

 

 

Proceeds from exercise of warrants

665

Proceeds from issuance of common stock and warrants associated with May 2020 financing

38,414

Proceeds from at-the-market facility

23,189

7,119

Proceeds from long-term debt, net of issuance costs

 

9,980

 

Proceeds from employee stock purchase plan

 

170

 

43

Repayments of long-term borrowings

 

 

(30,000)

Equity transaction costs

 

(659)

 

(3,338)

Net cash provided by financing activities

 

32,680

 

12,903

Effects of exchange rate changes on the balance of cash and cash equivalents held in foreign currencies

 

(80)

 

262

Net decrease in cash, cash equivalents and restricted cash

 

(23,674)

 

(45,059)

Cash, cash equivalents and restricted cash at beginning of period

 

102,003

 

86,411

Cash, cash equivalents and restricted cash at end of period

$

78,329

$

41,352

Supplemental disclosure of cash flow information:

 

 

Interest paid

$

1,735

$

1,273

Equity transaction costs included in accounts payable and accrued expenses

$

382

$

564

The accompanying notes form an integral part of these consolidated financial statements.

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NABRIVA THERAPEUTICS plc

Notes to the Unaudited Consolidated Financial Statements

1.           Organization and Business Activities

Nabriva Therapeutics plc (“Nabriva Ireland”), together with its wholly owned and consolidated subsidiaries, Nabriva Therapeutics GmbH (“Nabriva Austria”), Nabriva Therapeutics US, Inc., Zavante Therapeutics, Inc., and Nabriva Therapeutics Ireland DAC, (collectively, “Nabriva”, or the “Company”) is a biopharmaceutical company engaged in the commercialization and development of novel anti-infective agents to treat serious infections. The Company’s headquarters are located at 25-28 North Wall Quay, Dublin, Ireland. Throughout these notes to the consolidated financial statements, unless the context requires otherwise, all references to “Nabriva,” “the Company,” or similar terms refer to Nabriva Therapeutics plc, together with its consolidated subsidiaries.

In September 2020, the Centers for Medicare & Medicaid Services (“CMS”) granted a new technology add-on payment (“NTAP”) for XENLETA® (lefamulin) for injection, when administered in the hospital inpatient setting. Both the intravenous (“IV”) and oral formulations of XENLETA were granted Qualified Infectious Disease Product (“QIDP”) and Fast Track designation by the U.S. Food and Drug Administration (“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 (“cUTIs”), including acute pyelonephritis.

On July 28, 2020, the Company announced that the European Commission (“EC”) issued a legally binding decision for approval of the marketing authorization application for XENLETA™ (lefamulin) for the treatment of community-acquired pneumonia (“CAP”) in adults following a review by the European Medicines Agency (“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 launch of XENLETA across Europe. The Company previously announced that the Committee for Medicinal Products for Human Use (“CHMP”) of the EMA adopted a positive opinion recommending approval of XENLETA for the treatment of CAP. The EC approved XENLETA for all 28 countries of the European Union (“E.U.”), Norway, Iceland, and Liechtenstein. Nabriva intends to work with a commercial partner to make XENLETA available to patients in the E.U.

On July 16, 2020, the Company announced that Sunovion Pharmaceuticals Canada Inc. (“Sunovion”), received approval from Health Canada to market oral and intravenous (“IV”) formulations of XENLETA® (lefamulin) for the treatment of CAP in adults, with the Notice of Compliance from Health Canada dated July 10, 2020. Nabriva entered into a license and commercialization agreement in March 2019 with Sunovion Pharmaceuticals Canada Inc. for XENLETA in Canada.

On July 15, 2020, the Company announced that it entered into a Sales Promotion and Distribution Agreement (the “Distribution Agreement”) with MSD International GmbH (“MSD”) and Merck Sharp & Dohme Corp. (“Supplier”), each a subsidiary of Merck & Co. Under the Distribution Agreement, MSD appointed the Company as its sole and exclusive distributor of certain products containing tedizolid phosphate as the active ingredient previously marketed and sold by Supplier and MSD under the trademark SIVEXTRO® for injection, intravenous use and oral use in the United States and its territories. SIVEXTRO is an oxazolidinone-class antibacterial indicated in adults and pediatric patients 12 years of age and older for the treatment of acute bacterial skin and skin structure infections caused by certain susceptible Gram-positive microorganisms. Nabriva has also engaged Amplity Health, a leading pharmaceutical contract commercial organization, to provide community-based commercial and sales services for SIVEXTRO and XENLETA® in the United States.

On June 30, 2020 the Company announced that WE Pharma Ltd. (“WEP Clinical”), a specialist pharmaceutical services company, had signed an exclusive agreement with the Company to supply XENLETA® (lefamulin) on a named patient or expanded access basis in certain countries outside of the US, China and Canada. The Named Patient Program (“NPP”) is designed to ensure that physicians, contingent on meeting the necessary eligibility criteria and receiving

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approval, can request IV or oral XENLETA on behalf of patients who live in certain countries where it is not yet available and have an unmet medical need.

On September 9, 2019, the Company announced that the oral and intravenous (“IV”) formulations of XENLETA (lefamulin) are available in the United States for the treatment of community-acquired bacterial pneumonia (“CABP”) through major specialty distributors. This followed the approval by the U.S. Food and Drug Administration (“FDA”) of the Company’s New Drug Application (“NDA”) for XENLETA on August 19, 2019 for the treatment of adults with community-acquired bacterial pneumonia. XENLETA is the first oral and IV treatment in the pleuromutilin class of antibiotics available for the systematic administration in humans.

On July 23, 2018, the Company acquired Zavante Therapeutics Inc. (“Zavante”), a biopharmaceutical company focused on developing CONTEPO (fosfomycin for injection), and entered into an Agreement and Plan of Merger (the “Merger Agreement”). CONTEPO is potentially a first-in-class epoxide antibiotic for IV administration in the United States. The Company is developing CONTEPO IV for complicated urinary tract infections (“cUTI”) and may potentially develop XENLETA and CONTEPO for additional indications. In April 2019, the FDA issued a Complete Response Letter (“CRL”) in connection with the Company’s NDA for CONTEPO for the treatment of cUTIs, including acute pyelonephritis, stating that it was unable to approve the application in its current form. The CRL requests that issues related to facility inspections and manufacturing deficiencies at Nabriva’s active pharmaceutical ingredient contract manufacturer be addressed prior to the FDA approving the NDA. The Company requested a “Type A” meeting with the FDA to discuss its findings and this meeting occurred in July 2019. As the FDA did not request any new clinical data and did not raise any other concerns with regard to the safety or efficacy of CONTEPO in the CRL, the purpose of the meeting was to discuss and gain clarity on the issues related to facility inspections and manufacturing deficiencies at one of Nabriva's contract manufacturers that were described in the CRL and other matters pertaining to the steps required for the resubmission of the NDA for CONTEPO. The Company resubmitted its NDA in December 2019 and the FDA acknowledged the resubmission in January 2020. On June 19, 2020, the FDA issued a second CRL on the NDA for CONTEPO. Although the Company’s European contract manufacturing partners were prepared for regulatory authority inspections, the CRL cites observations at the Company’s manufacturing partners that could not be resolved due to FDA’s inability to conduct onsite inspections because of travel restrictions caused by the COVID-19 pandemic. In general, previously identified product quality and facility inspection related observations at the Company’s 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 or efficacy of CONTEPO in the second CRL. The Company’s contract manufacturers continue to interact with FDA to discuss its plans for conducting inspections at their sites. On October 30, 2020, the Company 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. The FDA informed the Company that it has not yet determined how it will conduct international inspections during the COVID-19 pandemic. As a result, next steps and specific timing of the CONTEPO NDA resubmission cannot be finalized until the FDA issues industry guidance. The Company and the industry await future communication from the FDA as it continues to assess the options available under existing regulations and laws to conduct these foreign facility inspections. 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, the Company cannot predict when the CONTEPO NDA will be resubmitted or when CONTEPO would receive marketing approval, if at all.

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Liquidity

Since its inception, the Company has incurred net losses and generated negative cash flows from its operations which has resulted in a significant accumulated deficit to date. The Company has financed its operations through the sale of equity securities, convertible and term debt financings and research and development support from governmental grants and proceeds from its licensing agreements. As of September 30, 2020, the Company had cash and cash equivalents, restricted cash and short-term investments of $41.4 million.

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements — Going Concern (“ASC 205-40”), which requires management to assess the Company’s ability to continue as a going concern for one year after the date the consolidated financial statements are issued.

The Company expects to continue to invest in critical commercial and medical affairs activities, its commitments per the agreement with Merck & Co., Inc., as well as investing in its supply chain for the commercialization of XENLETA, SIVEXTRO and the potential launch of CONTEPO. The Company expects to seek additional funding in future periods to support these activities. While the Company has raised capital in the past, the ability to raise capital in future periods is not considered probable, as defined under the accounting standards. As such, under the requirements of ASC 205-40, management may not consider the potential for future capital raises in their assessment of the Company’s ability to meet its obligations for the next twelve months.

In April 2020, the Company announced a restructuring of its hospital-based commercial sales force and transition to a community-based sales effort. The restructuring has reduced costs to align with the capabilities of the Company’s sales effort with its strategic re-focus on making sales of XENLETA to community health care professionals. The Company incurred $676,000 of selling, general and administrative expense related to the reduction in personnel, consisting of severance, benefits and related costs, all of which were incurred in the second quarter of 2020. As of September 30, 2020, there were no outstanding liabilities associated with the restructuring. The termination of the sales force was timed, in part, to coincide with operational changes that have been implemented by the Company in response to the outbreak of the novel coronavirus, SARS-CoV-2, causing the disease referred to as “COVID-19”. In response to the COVID-19 pandemic, the Company closed its administrative offices and shifted to a remote working business model. The Company implemented a work-from-home policy for all of its employees. The commercial and medical organizations suspended in-person interactions with physicians and customers and were restricted to conducting educational and promotional activities virtually. The Company has secured a new virtual and in-person sales effort with community-based expertise with Amplity Health, which is a Contract Sales Organization, to replace its hospital-based sale force. In September 2020, the Company began a small and focused sales effort for SIVEXTRO and XENLETA, by utilizing 15 sales representatives. The Company plans to expand this effort to 60 sales representatives in November 2020.

The Company’s expenses will increase if it suffers any regulatory delays or is required to conduct additional clinical trials to satisfy regulatory requirements. The Company has incurred and expects to continue to incur significant commercialization expenses related to its commitments per the agreement with Merck & Co., Inc., product sales, marketing, distribution and manufacturing for XENLETA, SIVEXTRO and CONTEPO, if approved. In light of the COVID-19 pandemic, the associated disruption to the healthcare delivery and the uncertainty of resuming full direct physician promotion, future sales in 2020 are uncertain. It is also uncertain when, if ever, the Company will generate sufficient revenues from product sales to achieve profitability.

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As a result, based on the Company’s available cash resources, the minimum cash required under the Loan and Security Agreement (the “Loan Agreement”) with Hercules Capital, Inc., and in accordance with the requirements of ASC 205-40, management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for one year from the date these consolidated financial statements are issued. A failure to raise the additional funding or to effectively implement cost reductions could harm the Company’s business, results of operations and future prospects. If the Company is not able to secure adequate additional funding in future periods, the Company may make additional reductions in certain expenditures. This may include liquidating assets and suspending or curtailing planned programs. The Company may also have to delay, reduce the scope of, suspend or eliminate one or more research and development programs or its commercialization efforts.

As discussed in Note 6, the Company repaid $30.0 million of the $35.0 million in aggregate principal amount of debt outstanding under the Loan Agreement with Hercules in March 2020. Based on its current operating plans, the Company expects that its existing cash, cash equivalents and short-term investments as of September 30, 2020, will be sufficient to enable the Company to fund its operating expenses, debt service obligations and capital expenditure requirements substantially through the first quarter of 2021. The Company has based this estimate on assumptions that may prove to be wrong, and the Company could use its capital resources sooner than expected. This estimate assumes, among other things, that the Company does not obtain any additional funding through grants and clinical trial support, collaboration agreements or equity or debt financings. This estimate also assumes that the Company remains in compliance with the covenants and no event of default occurs under the Loan Agreement. The consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

On June 25, 2019, the Company entered into an Open Market Sale AgreementSM (the “Jefferies ATM Agreement”) with Jefferies, pursuant to which, from time to time, the Company 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. The Company also filed a prospectus supplement with the Securities and Exchange Commission in connection with the Offering under the Company’s shelf Registration Statement on Form S-3 (File No. 333-219567), which became effective on August 10, 2017 and filed a new prospectus supplement with the Securities and Exchange Commission in connection with the Offering under the Company’s new shelf Registration Statement on Form S-3 (File No. 333-248530), which became effective on September 11, 2020.

As of September 30, 2020, the Company has issued and sold an aggregate of 19,161,452 ordinary shares pursuant to the Jefferies ATM Agreement and received gross proceeds of $21.5 million and net proceeds of $20.5 million, after deducting commissions to Jefferies and other offering expenses. During the three months ended September 30, 2020, the Company issued and sold an aggregate of 6,044,418 ordinary shares pursuant to the Jefferies ATM Agreement and received gross proceeds of $3.4 million and net proceeds of $3.3 million, after deducting commissions to Jefferies and other offering expenses. From September 30, 2020 and through the date of this filing, the Company sold and issued 762,452 ordinary shares pursuant to the Jefferies ATM Agreement for net proceeds of approximately $0.4 million. As of the date of this filing, the Company may issue and sell ordinary shares for gross proceeds of up to $28.1 million under the Jefferies ATM Agreement.

In December 2019, the Company sold to certain institutional investors in a registered direct offering an aggregate of 13,793,106 ordinary shares, and accompanying warrants to purchase up to an aggregate of 13,793,106 ordinary shares. Each share was issued and sold together with an accompanying warrant at a combined price of $1.45 per security. The gross proceeds to the Company from the offering, before deducting the placement agent’s fees and other offering expenses payable by the Company were $20.1 million. Each warrant has an exercise price of $1.90 per share, is initially exercisable six months following the date of issuance (the “Initial Exercise Date”) and will expire on the three-year anniversary of the Initial Exercise Date. As of September 30, 2020, all of the warrants from this offering were outstanding.

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In May 2020, the Company sold to certain institutional investors, including Fidelity Management & Research Company, LLC, in a registered direct offering an aggregate of 41,445,373 ordinary shares and accompanying warrants to purchase up to an aggregate of 41,445,373 ordinary shares at a combined price of $0.91686 per security. The gross proceeds to the Company from the offering, before deducting the placement agent’s fees and other estimated offering expenses payable by the Company, were $38.0 million. Each warrant has an exercise price of $0.792 per share, is immediately exercisable and will expire on the two-year anniversary of the issuance date. As of September 30, 2020, 40,595,373 warrants from this offering were outstanding.

2.            Summary of Significant Accounting Policies

Basis of Preparation

The unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and U.S. Securities and Exchange Commission (“SEC”) regulations for quarterly reporting. The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying consolidated financial information as of September 30, 2020 and for the three and nine months ended September 30, 2019 and 2020 are unaudited. The December 31, 2019 balance sheet was derived from audited consolidated financial statements but does not include all disclosures required by US GAAP. The interim unaudited consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2020 and results of operations for the three and nine months ended September 30, 2019 and 2020. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2019 and 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, any other interim periods or any future year or period. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2019 contained in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 12, 2020.

The Company’s significant accounting policies are described in Note 2 of the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Since the date of those financial statements, there have been no changes to the Company’s significant accounting policies.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. The Company has not adopted any new accounting pronouncements for the nine months ended September 30, 2020.

3.            Inventory

Inventory is stated at the lower of cost or net realizable value. Inventory is valued on a first-in, first-out basis and consists primarily of material costs, third-party manufacturing costs, and related transportation costs along the Company's supply chain. The Company capitalizes inventory upon regulatory approval when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized; otherwise, such costs are recorded as research and development expense. Costs of drug product to be consumed in any current or future clinical trials will continue to be recognized as research and development expense and costs of sample inventory is recorded as selling, general and administrative expense. The Company reviews inventories for realization on a quarterly basis and would record provisions for estimated excess, slow-moving and obsolete inventory, as well as inventory with a carrying value in excess of net realizable value when necessary. During the nine months ended

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September 30, 2020, the Company recorded a $0.4 million non-cash reserve for excess and obsolete inventory due to the uncertainty of commercial activities underlying XENLETA product sales. Inventory reported at December 31, 2019 and September 30, 2020 consisted of the following:

  

As of

As of

December 31, 2019

September 30, 2020

(in thousands)

2019

2020

Raw materials

$

$

915

Work in process

 

498

 

4,596

Finished goods

 

184

 

292

Total Inventory

$

682

$

5,803

4.           Fair Value Measurement

US GAAP establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (as exchange rates).
Level 3: Valuation techniques that include inputs for the asset or liability that are not based on observable market data (those are unobservable inputs) and significant to the overall fair value measurement.

The following table presents the financial instruments measured at fair value and classified by level according to the fair value measurement hierarchy:

(in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

December 31, 2019

Assets:

Cash equivalent:

Money market fund

$

15,050

$

$

 

$

15,050

Short term investments:

Term deposits

 

175

 

 

 

175

Total Assets

$

15,225

$

$

 

$

15,225

(in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

September 30, 2020

Assets:

Cash equivalent:

Money market fund

$

8,050

$

$

 

$

8,050

Short term investments:

Term deposits

16

 

16

Total Assets

$

8,066

$

$

 

$

8,066

There were no transfers between Level 1 and 2 in the nine months ended September 30, 2020 or the year ended December 31, 2019. There were no changes in valuation techniques during the nine months ended September 30, 2020.

As of September 30, 2020, and December 31, 2019, the Company did not hold any financial instruments as liabilities that were held at fair value. Other receivables and accounts payable are carried at their historical cost which approximates fair value due to their short-term nature.

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5.           Accrued Expenses and Other Liabilities

As of

As of

(in thousands)

    

December 31, 2019

    

September 30, 2020

Research and development related costs

$

1,347

$

1,059

Payroll and related costs

 

6,327

 

4,151

Accounting, tax and audit services

 

420

 

871

Manufacturing and inventory

639

434

Accrued gross to net

493

752

Other

 

2,740

 

1,667

Total other current liabilities

$

11,966

$

8,934

6.           Debt

In December 2018, the Company entered into the Loan Agreement by and among the Company, Nabriva Therapeutics Ireland DAC, and certain other subsidiaries of the Company and Hercules Capital, Inc. (“Hercules”), pursuant to which a term loan of up to an aggregate principal amount of $75.0 million was available to the Company. The Loan Agreement initially provided for an initial term loan advance of $25.0 million, which was funded in December 2018, and, at the Company’s option and subject to the occurrence of certain funding conditions, several additional tranches of which $5.0 million became available upon the approval by the FDA of the NDA for XENLETA, which was drawn down. The other Tranches are no longer available as their contingencies were not achieved. The Company may request a term loan advance of $5.0 million prior to December 31, 2021 subject to Hercules’s sole discretion.

The term loan bears interest at an annual rate equal to the greater of 9.80% or 9.80% plus the prime rate of interest minus 5.50%. The Loan Agreement provided for interest-only payments through July 1, 2021 and repayment of the outstanding principal balance of the term loan thereafter in monthly installments through June 1, 2023 (the “Maturity Date”). In addition, the Company is required to pay a fee of 6.95% of the aggregate amount of advances under the Loan Agreement at the Maturity Date (the “End of Term Fee”). At the Company’s option, the Company may elect to prepay any portion of the outstanding term loan that is greater than or equal to $5.0 million by paying such portion of the principal balance and all accrued and unpaid interest thereon plus a prepayment charge equal to the following percentage of the principal amount being prepaid: (i) 3.0% if the term loan is prepaid during the first 12 months following the initial closing, (ii) 2.0% if the term loan is prepaid after 12 months following the initial closing but before 24 months following the initial closing and (iii) 1.0% if the term loan is prepaid any time thereafter but prior to the Maturity Date.

On March 11, 2020, the Company entered into an amendment (the “Amendment”), to its Loan Agreement with Hercules. Pursuant to the Amendment, the Company repaid $30.0 million of the $35.0 million in aggregate principal amount of debt outstanding under the Loan Agreement (the “Prepayment”). The Company determined to enter into the Amendment following the effectiveness of a performance covenant in February 2020 under which it became obligated to either (1) achieve 80% of its net product revenue sales target over a trailing six-month period, or (2) maintain an amount of cash and cash equivalents in accounts pledged to Hercules plus a specified amount of eligible accounts receivables equal to the greater of the amount outstanding under the Loan Agreement or $40.0 million (the “Liquidity Requirement”). Under the Amendment, the Company and Hercules agreed to defer the end of term loan charge payment of $2.1 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 Amendment also reset the revenue performance covenant to 70% of targeted revenue based on a revised net product revenue forecast and lowered the 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 the Company achieves at least 70% of its revised net product revenue targets under the Loan Agreement. The Company was in compliance with all of its Loan Agreement covenants at September 30, 2020.

The Company’s obligations under the Loan Agreement are guaranteed by all current and future subsidiaries of the Company, and each of the Company and its subsidiaries has granted Hercules a security interest in all of their

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respective personal property, intellectual property and other assets owned or later acquired. The Loan Agreement also contains certain events of default, representations, warranties and covenants of the Company and its subsidiaries. For example, the Loan Agreement contains representations and covenants that, subject to exceptions, restrict the Company’s and its subsidiaries’ ability to do the following, among other things: declare dividends or redeem or repurchase equity interests; incur additional indebtedness and liens; make loans and investments; engage in mergers, acquisitions and asset sales; certain transactions with affiliates; undergo a change in control; and add or change business locations or settle in cash potential milestone payment obligations that may become payable by the Company in the future to former security holders of Zavante.

The Loan Agreement also grants Hercules or its nominee an option to purchase up to an aggregate of $2.0 million of the Company’s equity securities, or instruments exercisable for or convertible into equity securities, sold to investors in any private financing upon the same terms and conditions afforded to such other investors for as long as there are amounts outstanding under the Loan Agreement.

The Company incurred $1.3 million of costs in connection with the Loan Agreement which along with the initial fee of $0.7 million paid to Hercules were recorded as debt issuance cost and are being amortized as interest expense using the effective interest method over the term of the loan. In connection with the Amendment, the Company recognized a non-cash $2.7 million loss on the extinguishment of debt which represents the excess of the reacquisition price of the $30.0 million debt repaid over the net carrying amount of the extinguished debt. The carrying value of the term loan payable at September 30, 2020 includes the present value of the End of Term Fee and the Prepayment Fee. The End of Term Fee on the remaining $5.0 million principal balance is being accrued as additional interest expense using the effective interest method over the term of the loan.

Long-term debt as December 31, 2019 and September 30, 2020 consisted of the following:

As of

As of

December 31, 

September 30, 

(in thousands)

    

2019

    

2020

Term loan payable

 

$

35,000

 

$

5,000

End of term fee

443

1,976

Unamortized debt issuance costs

 

(1,742)

 

(215)

Carrying value of term loan

33,701

6,761

Other long-term debt