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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, 2019

 

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 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, 2019, the registrant had 78,350,487 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, 2018 and September 30, 2019 (unaudited)

5

 

 

 

 

Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2019 (unaudited)

6

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2018 and 2019 (unaudited)

7

 

 

 

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2019 (unaudited)

8

 

 

 

 

Notes to the Unaudited Consolidated Financial Statements

9

 

 

 

Item 2 

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

28

 

 

 

Item 3 

Quantitative and Qualitative Disclosures About Market Risk

40

 

 

 

Item 4 

Controls and Procedures

41

 

 

 

 

PART II — OTHER INFORMATION

 

 

 

 

Item 1 

Legal Proceedings

42

 

 

 

Item 1A 

Risk Factors

42

 

 

 

Item 2 

Unregistered Sales of Equity Securities and Use of Proceeds

96

 

 

 

Item 3 

Defaults Upon Senior Securities

96

 

 

 

Item 4 

Mine Safety Disclosures

96

 

 

 

Item 5 

Other Information

96

 

 

 

Item 6 

Exhibits

96

 

 

 

SIGNATURES 

98

 

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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 launch and commercialize XENLETA (lefamulin) for the treatment of community-acquired bacterial pneumonia, or CABP, including the availability of and ease of access to XENLETA through major U.S. specialty distributors;

·

our ability to build and maintain a sales force for the commercial launch of XENLETA;

·

our expectations regarding how far into the future our cash on hand will fund our ongoing operations and the continued availability and cost of capital to sustain our operations on a longer term basis.

·

the uncertainties inherent in the initiation and conduct of clinical trials, availability and timing of data from clinical trials, 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;

·

our ability to satisfy interest and principal payments under our debt facility with Hercules Capital, Inc., or Hercules;

·

our ability to comply with the restrictive covenants under our debt facility with Hercules;

·

the potential extent of revenues from future sales of XENLETA and/or CONTEPO if approved;

·

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;

·

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;

2

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·

the timing of and our ability to submit applications to obtain and, if approved, maintain marketing approval of CONTEPO and other product candidates, including the completion of any post-marketing requirements with respect to any marketing approval we may obtain, including XENLETA;

·

our ability to establish and maintain arrangements for manufacture of our product candidates;

·

our sales, marketing and distribution capabilities and strategy;

·

the potential advantages of XENLETA, CONTEPO and our other product candidates;

·

our estimates regarding the market opportunities for XENLETA, CONTEPO and our other product candidates;

·

the rate and degree of market acceptance and clinical benefit of XENLETA for CABP, CONTEPO for cUTI and our other product candidates;

·

our ability to establish and maintain collaborations;

·

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 ability to acquire or in-license additional products, product candidates and technologies;

·

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;

·

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.

3

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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.

4

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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, 2018

    

September 30, 2019

Assets

 

 

  

 

 

  

Current assets:

 

 

  

 

 

  

Cash and cash equivalents

 

$

102,003

 

$

78,101

Restricted cash

 

 

 —

 

 

228

Short-term investments

 

 

225

 

 

175

Accounts receivable, net and other receivables

 

 

3,871

 

 

6,540

Contract asset

 

 

1,500

 

 

 —

Inventory

 

 

 —

 

 

162

Prepaid expenses

 

 

1,154

 

 

1,202

Total current assets

 

 

108,753

 

 

86,408

Property, plant and equipment, net

 

 

1,139

 

 

2,655

Intangible assets, net

 

 

98

 

 

343

Long-term receivables

 

 

428

 

 

716

Total assets

 

$

110,418

 

$

90,122

Liabilities and equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,304

 

$

3,221

Accrued expense and other current liabilities

 

 

14,502

 

 

11,663

Total current liabilities

 

 

17,806

 

 

14,884

Non-current liabilities

 

 

 

 

 

 

Long-term debt

 

 

23,718

 

 

34,241

Other non-current liabilities

 

 

264

 

 

1,782

Total non-current liabilities

 

 

23,982

 

 

36,023

Total liabilities

 

 

41,788

 

 

50,907

Commitments and contingencies (Note 12)

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

Ordinary shares, nominal value $0.01,  1,000,000,000 ordinary shares authorized at September 30, 2019; 67,019,094 and 77,994,207 issued and outstanding at December 31, 2018 and September 30, 2019, respectively

 

 

670

 

 

780

Preferred shares, par value $0.01,  100,000,000 shares authorized at September 30, 2019; None issued and outstanding

 

 

 —

 

 

Additional paid in capital

 

 

461,911

 

 

492,105

Accumulated other comprehensive income

 

 

27

 

 

27

Accumulated deficit

 

 

(393,978)

 

 

(453,697)

Total stockholders’ equity

 

 

68,630

 

 

39,215

Total liabilities and stockholders’ equity

 

$

110,418

 

$

90,122

 

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

5

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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)

    

2018

    

2019

    

2018

    

2019

Revenues:

 

 

  

 

 

  

 

 

  

 

 

  

Product revenue, net

 

$

 —

 

$

1,445

 

$

 —

 

$

1,445

Collaboration revenue

 

 

 —

 

 

5,051

 

 

6,500

 

 

6,051

Research premium and grant revenue

 

 

461

 

 

424

 

 

2,359

 

 

1,652

Total revenue

 

 

461

 

 

6,920

 

 

8,859

 

 

9,148

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

 

 

 

(15)

 

 

 

 

(15)

Research and development expenses

 

 

(40,804)

 

 

(5,601)

 

 

(60,800)

 

 

(21,213)

Selling, general and administrative expenses

 

 

(12,582)

 

 

(18,503)

 

 

(31,555)

 

 

(45,339)

Total operating expenses

 

 

(53,386)

 

 

(24,119)

 

 

(92,355)

 

 

(66,567)

Loss from operations

 

 

(52,925)

 

 

(17,199)

 

 

(83,496)

 

 

(57,419)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

(54)

 

 

(10)

 

 

(172)

 

 

116

Interest income

 

 

11

 

 

94

 

 

39

 

 

176

Interest expense

 

 

(8)

 

 

(709)

 

 

(19)

 

 

(2,512)

Loss before income taxes

 

 

(52,976)

 

 

(17,824)

 

 

(83,648)

 

 

(59,639)

Income tax benefit (expense)

 

 

151

 

 

29

 

 

(307)

 

 

(80)

Net loss

 

$

(52,825)

 

$

(17,795)

 

$

(83,955)

 

$

(59,719)

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share

    

 

 

    

 

 

    

 

 

    

 

 

Basic and Diluted ($ per share)

 

$

(0.90)

 

$

(0.24)

 

$

(1.85)

 

$

(0.83)

Weighted average number of shares:

 

 

  

 

 

 

 

 

  

 

 

 

Basic and Diluted

 

 

58,442,987

 

 

75,161,192

 

 

45,369,040

 

 

72,153,405

 

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

6

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NABRIVA THERAPEUTICS plc

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ordinary Shares

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Number

 

 

 

 

Additional

 

other

 

 

 

 

Total

 

 

of

 

 

 

 

paid in

 

comprehensive

 

Accumulated

 

Stockholders'

(in thousands)

    

shares

    

Amount

    

capital

    

income

    

deficit

    

Equity

January 1, 2018

 

36,708

 

$

367

 

$

360,872

 

$

27

 

$

(279,198)

 

$

82,068

Issuance of ordinary shares

 

3,526

 

 

35

 

 

19,353

 

 

 —

 

 

 —

 

 

19,388

Equity transaction costs

 

 —

 

 

 —

 

 

(916)

 

 

 —

 

 

 —

 

 

(916)

Stock-based compensation expense

 

 —

 

 

 —

 

 

1,244

 

 

 —

 

 

 —

 

 

1,244

Net loss

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(13,342)

 

 

(13,342)

March 31, 2018

 

40,234

 

 

402

 

 

380,553

 

 

27

 

 

(292,540)

 

 

88,442

Issuance of ordinary shares

 

725

 

 

 8

 

 

3,389

 

 

 —

 

 

 —

 

 

3,397

Equity transaction costs

 

 —

 

 

 —

 

 

(152)

 

 

 —

 

 

 —

 

 

(152)

Stock-based compensation expense

 

 —

 

 

 —

 

 

767

 

 

 —

 

 

 —

 

 

767

Net loss

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(17,788)

 

 

(17,788)

June 30, 2018

 

40,959

 

 

410

 

 

384,557

 

 

27

 

 

(310,328)

 

 

74,666

Issuance of ordinary shares

 

18,188

 

 

182

 

 

49,817

 

 

 —

 

 

 —

 

 

49,999

Shares issued in connection with acquisition of Zavante Therapeutics, Inc.

 

7,337

 

 

73

 

 

26,829

 

 

 —

 

 

 —

 

 

26,902

Equity transaction costs

 

 —

 

 

 —

 

 

(3,739)

 

 

 —

 

 

 —

 

 

(3,739)

Stock-based compensation expense

 

 —

 

 

 —

 

 

1,423

 

 

 —

 

 

 —

 

 

1,423

Net loss

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(52,825)

 

 

(52,825)

September 30, 2018

 

66,484

 

$

665

 

$

458,887

 

$

27

 

$

(363,153)

 

$

96,426

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ordinary Shares

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Number

 

 

 

 

Additional

 

other

 

 

 

 

Total

 

 

of

 

 

 

 

paid in

 

comprehensive

 

Accumulated

 

Stockholders'

(in thousands)

    

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

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

 

1,221

 

 

12

 

 

3,522

 

 

 —

 

 

 —

 

 

3,534

Shares issued in connection with the employee stock purchase plan

 

91

 

 

 1

 

 

169

 

 

 —

 

 

 —

 

 

170

Shares issued in connection with the vesting of restricted stock units

 

258

 

 

 3

 

 

 —

 

 

 —

 

 

 —

 

 

 3

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

 

4,102

 

 

41

 

 

9,555

 

 

 —

 

 

 —

 

 

9,596

Shares issued in connection with the vesting of restricted stock units

 

171

 

 

 2

 

 

 —

 

 

 —

 

 

 —

 

 

 2

Shares issued in connection with acquisition of Zavante Therapeutics, Inc.

 

815

 

 

 8

 

 

(8)

 

 

 —

 

 

 —

 

 

 —

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

 

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

 

 

7

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NABRIVA THERAPEUTICS plc

Consolidated Statements of Cash Flows (unaudited)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 

(in thousands)

    

2018

    

2019

Cash flows from operating activities

 

 

  

 

 

  

Net loss

 

$

(83,955)

 

$

(59,719)

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

 

 

 

 

 

 

Non-cash other expense, net

 

 

167

 

 

(49)

Non-cash interest income

 

 

(57)

 

 

24

Non-cash interest expense

 

 

 —

 

 

379

Depreciation and amortization expense

 

 

391

 

 

162

Amortization of right-of-use assets

 

 

 —

 

 

291

Stock-based compensation

 

 

3,434

 

 

7,866

In-process research and development in connection with acquisition

 

 

31,930

 

 

 —

Deferred income taxes

 

 

 —

 

 

(5)

Other, net

 

 

12

 

 

 —

Changes in operating assets and liabilities:

 

 

 

 

 

 

(Increase)/decrease in long-term receivables

 

 

(3)

 

 

(288)

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

 

 

(2,361)

 

 

(1,258)

Increase in inventory

 

 

 —

 

 

(162)

(Decrease)/increase in accounts payable

 

 

(1,473)

 

 

(39)

Increase/(decrease) in accrued expenses and other liabilities

 

 

1,137

 

 

(3,553)

Increase/(decrease) in other non-current liabilities

 

 

41

 

 

(88)

Increase/(decrease) in income tax liabilities

 

 

245

 

 

34

Net cash used in operating activities

 

 

(50,492)

 

 

(56,405)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of plant and equipment and intangible assets

 

 

(209)

 

 

(97)

Purchases of term deposits

 

 

(216)

 

 

 —

Deposits into employee stock purchase plan restricted cash accounts

 

 

 —

 

 

228

Transaction costs related to Zavante acquisition, net of cash acquired

 

 

(3,950)

 

 

 —

Net cash provided by (used in) investing activities

 

 

(4,375)

 

 

131

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from July 2018 public offering

 

 

50,000

 

 

 —

Proceeds from at-the-market facility

 

 

22,784

 

 

23,189

Proceeds from long-term debt, net of issuance costs

 

 

535

 

 

9,980

Proceeds from employee share purchase plan

 

 

 —

 

 

170

Equity transaction costs

 

 

(4,723)

 

 

(659)

Net cash provided by financing activities

 

 

68,596

 

 

32,680

 

 

 

 

 

 

 

Effects of foreign currency translation on cash and cash equivalents

 

 

(167)

 

 

(80)

Net increase/(decrease) in cash, cash equivalents and restricted cash

 

 

13,562

 

 

(23,674)

Cash, cash equivalents and restricted cash at beginning of period

 

 

86,769

 

 

102,003

Cash, cash equivalents and restricted cash at end of period

 

$

100,331

 

$

78,329

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Transaction costs related to Zavante acquisition included in accounts payable and accrued expensed

 

$

243

 

$

 —

Interest paid

 

$

 4

 

$

1,735

Equity transaction costs incurred in prior periods and paid in current period 

 

$

 —

 

$

18

Equity transaction costs included in accounts payable and accrued expenses

 

$

109

 

$

382

 

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

(in thousands, except share and per share data)

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., 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.

On September 9, 2019, the Company announced that the oral and intravenous (“IV”) formulations of XENLETA (lefamulin) are available in the United States 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 (CABP).  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 entered into an Agreement and Plan of Merger (the “Merger Agreement”) for the acquisition of Zavante Therapeutics Inc., (“Zavante”) a biopharmaceutical company focused on developing CONTEPO (fosfomycin for injection). 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 and the Company anticipates resubmitting its NDA in the weeks ahead.  The Company cannot predict the final outcome of any interactions with the FDA or when CONTEPO will receive marketing approval, if at all.

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.

On June 24, 2019, the Company announced that the European Medicines Agency ("EMA") determined that the Company's Marketing Authorization Application ("MAA") for the IV and oral formulations of lefamulin was valid. Validation of the MAA confirms that the submission is sufficiently complete to begin the formal review process and an opinion of the EMA Committee for Medicinal Products for Human Use ("CHMP") is anticipated in the second half of 2020.

The EMA's review of the application will follow the centralized marketing authorization procedure. If approved by the EMA, XENLETA will receive marketing authorization in all 28 member states of the European Union ("EU"), as well as in Norway, Liechtenstein and Iceland. If approved, Nabriva intends to work with a commercial partner to make XENLETA available to patients in the EU.

 

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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, 2019, the Company had cash and cash equivalents, and short-term investments of $78.3 million.

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial StatementsGoing 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 seek additional funding in future periods for purposes of investment in its commercial and medical affairs organization as well as investing in its supply chain, in an effort to enhance the commercial launch of XENLETA and potential launch of CONTEPO. 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.

If the Company is not able to secure adequate additional funding in future periods, the Company may make 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.

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 product sales, marketing, distribution and manufacturing for XENLETA and, if approved, CONTEPO, including the recent hiring of a dedicated sales force.  It is uncertain when, if ever, the Company will generate sufficient revenues from product sales to achieve profitability. 

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 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.

The Company expects that its existing cash, cash equivalents and short-term investments as of September 30, 2019, proceeds from the sale of ordinary shares under the new Open Market Sales AgreementSM between the Company and Jefferies LLC (“Jefferies”), described below from September 30, 2019 until the date of this filing of $0.7 million, anticipated net product revenues and research premiums from the Austrian government for its qualified research and development expenditures, will be sufficient to enable the Company to fund its operating expenses, debt service obligations and capital expenditure requirements into the third quarter of 2020. The interim consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

In December 2018, the Company entered into a Loan Agreement with Hercules Capital, Inc., pursuant to which a term loan of up to an aggregate principal amount of $75.0 million is available to the Company. The Loan Agreement provides for an initial term loan advance of $25.0 million which was funded in connection with the closing of the Loan Agreement. Additionally, in connection with the approval of XENLETA, an additional advance of $10.0 million was drawn upon by the Company in the third quarter of 2019. The remaining $40.0 million under the Loan Agreement is available to the Company from time to time subject to conditions further described in Note 6 below.

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In March 2018, the Company entered into a Controlled Equity OfferingSM Sales Agreement (the “Cantor ATM Agreement”), with Cantor Fitzgerald & Co. (“Cantor”), pursuant to which, from time to time, the Company could previously offer and sell its ordinary shares having aggregate gross proceeds of up to $50.0 million through Cantor. The Company terminated the Cantor ATM Agreement effective as of June 24, 2019. The Company did not incur any penalties as a result of the termination of the Cantor ATM Agreement. As of the effective date of the termination of the Cantor ATM Agreement, the Company had sold and issued an aggregate of 10,316,190 of its ordinary shares pursuant to the Cantor ATM Agreement for aggregate gross proceeds of $37.8 million and net proceeds to the Company of $36.9 million, after deducting commissions and offering expenses payable by the Company. The $12.2 million of ordinary shares that had been available for sale pursuant to the Cantor ATM Agreement remained unsold at the time of its termination.

On June 25, 2019, the Company entered into an Open Market Sale AgreementSM (the “Sale 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.

As of September 30, 2019, the Company has issued and sold an aggregate of 4,101,282 ordinary shares pursuant to the Jefferies ATM Agreement and received gross proceeds of $9.6 million and net proceeds of $9.0 million, after deducting commissions to Jefferies and other offerring expenses.  From September 30, 2019 through the date of this filing, the Company issued and sold an aggregate of 356,280 ordinary shares pursuant to the Jefferies ATM Agreement and received gross proceeds of $0.7 million and net proceeds of $0.7 million, after deducting commissions to Jefferies and other offering expenses.

In March 2019, the Company entered into a license and commercialization agreement (the “Sunovion License Agreement”), with Sunovion. As part of the Sunovion License Agreement, Nabriva Therapeutics Ireland DAC, the Company’s wholly owned subsidiary, granted Sunovion an exclusive license under certain patent rights, trademark rights and know-how to commercialize certain products containing XENLETA in the forms clinically developed by the Company or any of its affiliates (“Sunovian Licensed Products”) in Canada in all uses in humans in community-acquired bacterial pneumonia and in any other indication for which the Licensed Products have received regulatory approval in Canada. 

The Company has also entered into a license agreement with Sinovant Services, Ltd., an affiliate of Roviant Sciences, Ltd. To develop and commercialize Lefamulin in the greater China region (the “Sinovant License Agreement”).  See Note 11 for a description of the Sinovant License Agreement including the realization of certain milestone payments received through September 30, 2019 as well as the potential for additional milestone and royalty payments in future periods. 

 

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, 2019 and for the three months and nine months ended September 30, 2018 and 2019 are unaudited. The December 31, 2018 balance sheet was derived from

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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, 2019 and for the three and nine months ended September 30, 2018 and 2019. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2018 and 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019, 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, 2018 contained in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 12, 2019.

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 year ended December 31, 2018. Since the date of those financial statements, the Company has added the following significant accounting policy with respect to revenue recognition due to the commercial launch of XENLETA in September 2019.

Revenue Recognition—The Company recognizes revenue from sales of its commercial products in accordance with ASC 606, Revenue from Contracts with Customers ("ASC 606").

Product Revenue

Beginning in September 2019, the Company began selling its XENLETA product principally to a limited number of specialty distributors in the United States. The distributors place orders with the Company for sufficient quantities of its products to maintain an appropriate level of inventory based on its customers’ anticipated purchase volumes and demand.  The Company recognizes revenue once it has transferred physical possession of the goods and the distributor obtains legal title to the product.  Payment terms between Nabriva and its customers are generally approximately 60 days from the invoice date.  In addition to distribution agreements with customers, the Company enters into arrangements with health care providers and payers that provide for government mandated and/or privately negotiated rebates, chargebacks and discounts with respect to the purchase of its product. 

The transaction price that the Company recognizes as revenue reflects the amount it expects to be entitled to in connection with the sale and transfer of control of product to its customers. At the time that the Company’s customers take control of the product, which is when the Company’s performance obligation under the sales contracts is complete, the Company records product revenues 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 ("GPO") administration fees

·

Voluntary patient assistance programs

In determining the amounts of certain allowances and accruals, the Company must make significant judgments and estimates. For example, in determining these amounts, the Company estimates prescription demand from the specialty pharmacies, hospital demand, buying patterns by hospitals, hospital systems and/or group purchasing

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organizations and the levels of inventory held by specialty distributors and customers. The Company also analyzes third party end usage product consumption patterns to gauge demand for its products. Making these determinations involves analyzing third party industry data to determine whether trends in historical channel distribution patterns will predict future product sales. The Company receives data periodically from its specialty distributors and customers on inventory levels and historical channel sales mix, and the Company considers this data when determining the amount of the allowances and accruals for variable consideration, however given the recent launch of its XENLETA product this data is limited.

In assessing the amount of net revenue to record, the Company considers both the likelihood and the magnitude of the revenue reversal. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company adjusts these estimates, which would affect net product revenue and earnings in the period such variances become known. The specific considerations the Company uses in estimating these amounts related to variable consideration associated with the Company’s products are as follows:

Fees-for-service – The Company offers discounts and pays certain distributor service fees for sales order management, data, and distribution services which are explicitly stated at contractually determined rates in the customer’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized.  In assessing if the consideration paid to the customer should be recorded as a reduction of the transaction price, the Company determines whether the payment is for a distinct good or service or a combination of both.  Since the Company’s distributor fees are not specifically identifiable, it does not consider the fees separate from the distributors’ purchase of the product.  Additionally, distributor services generally cannot be provided by a third party.  Because of these factors, the consideration paid is considered a reduction of revenue.  The Company records its fee-for-service accruals based on distributors’ purchases and the applicable discount rate. 

Product returns – Generally, the Company’s customers have the right to return product during the 18-month period beginning six months prior to the labeled expiration date and ending twelve months after the labeled expiration date. Since the Company currently does not have history of XENLETA returns, the Company estimated returns based on industry data for comparable products in the market. As the Company distributes its product and establishes historical sales over a longer period of time (i.e., two to three years), the Company will be able to place more reliance on historical purchasing, demand and return patterns of its customers when evaluating its reserves for product returns.  The Company’s XENLETA product has a thirty-six-month shelf life. 

At the end of each reporting period for any of our products, the Company may decide to constrain revenue for product returns based on information from various sources, including channel inventory levels and dating and sell-through data, the expiration dates of product currently being shipped, price changes of competitive products and introductions of generic products.

Chargebacks and rebates – Although the Company primarily sells products to specialty distributors in the United States, the Company also enters into agreements with hospitals and retail pharmacies, either directly or through group purchasing organizations acting on behalf of their members, in connection with the purchase of product. Based on these agreements, certain of the Company’s customers have the right to receive a discounted price on product purchases. The Company typically provides a credit to its specialty distributors customers (i.e., chargeback), representing the difference between the customer’s acquisition list price and the discounted price.  The calculation of the accrual for chargebacks and rebates is based on estimates of claims and their associated cost that the Company expects to receive associated with product sales that have been recognized as revenue but remain in the distribution channel as inventory at the end of each reporting period. 

Government rebates –The Company is subject to discount obligations primarily under state Medicaid and Medicare programs.  The Company estimates its Medicaid and Medicare rebates based upon a range of possible outcomes that are probability-weighted for the estimated payer mix.  These reserves are recorded in the same period the related product revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability that is included in accrued expenses on the consolidated balance sheet.  For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional

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liability under the Medicare Part D program.  The calculation of the accrual for government rebates is based on estimates of claims and their associated cost that the Company expects to receive associated with product sales that have been recognized as revenue but remain in the distribution channel as inventory at the end of each reporting period. 

Commercial payer and other rebates – The Company contracts with certain private payer organizations, primarily insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of XENLETA and contracted formulary status. The Company estimates these rebates and records reserves for such estimates in the same period the related revenue is recognized. Currently, the reserve for customer payer rebates considers future utilization based on third party studies of payer prescription data; the utilization is applied to product that remains in the distribution and retail pharmacy channel inventories at the end of each reporting period. As the Company distributes its product and establishes historical sales over a longer period of time (i.e., two years), the Company will be able to place more reliance on historical data related to commercial payer rebates (i.e., actual utilization units) while continuing to rely on third party data related to payer prescriptions and utilization. The calculation of the accrual for commercial payer and other rebates is based on estimates of claims and their associated cost that the Company expects to receive associated with product sales that have been recognized as revenue but remain in the distribution channel as inventory at the end of each reporting period. 

GPO administration fees – The Company contracts with GPOs and pays administration fees related to contacting and membership management services provided.  In assessing if the consideration paid to the GPO should be recorded as a reduction in the transaction price, the Company determines whether the payment is for a distinct good or service or a combination of both.  Since GPO fees are not specifically identifiable, the Company does not consider the fees separate from the purchase of the product.  Additionally, the GPO services generally cannot be provided by a third party.  Because of these factors, the consideration paid is considered a reduction of revenue. 

Patient assistance – The Company offers certain voluntary patient assistance programs for prescriptions, such as co-pay assistance programs, which are intended to provide financial assistance to qualified commercially insured patients with prescription drug co-payments required by payers. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with product sales that have been recognized as revenue but remains in the distribution channel as inventory at the end of each reporting period.

At the end of each reporting period, the Company will adjust its variable consideration estimates for product returns, chargebacks, and rebates when the Company believes actual experience may differ from current estimates.

The following table summarizes balances and activity of product revenue allowances and reserves:

 

 

 

 

 

 

    

Total

Balance at December 31, 2018

 

$

 —

Provision related to current period sales

 

 

575

Adjustment related to prior period sales

 

 

 —

Credit or payments made during the period

 

 

 —

Balance at September 30, 2019

 

$

575

 

The variable consideration for fee for service and estimates for chargebacks are recorded as contra-assets in accounts receivable, net, and other receivables whereas the other variable consideration estimates are recorded in accrued expenses as these payments are not made directly to the Company’s customers.

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Cost of product sales

Cost of product sales consists primarily of the direct and indirect manufacturing costs for XENLETA. All manufacturing costs incurred prior to XENLETA’s approval in the United States on August 19, 2019 were expensed in research and development expense.  Costs incurred after the approval date were capitalized as inventory. 

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.

Adopted as of the current period:

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors.  On January 1, 2019, the Company adopted the new lease standard using the optional transition method under which comparative financial information has not been restated and will continue to apply the provisions of the previous lease standard in its annual disclosures for the comparative periods.  In addition, the new lease standard provides a number of optional practical expedients in transition. The Company elected the package of practical expedients. As such, the Company did not  have to  reassess whether expired or existing contracts are or contain a lease;  and did not have to reassess the lease classifications or reassess the initial direct costs associated with expired or existing leases.

The new lease standard also provides practical expedients for an entity's ongoing accounting. The Company elected the short-term lease recognition exemption under which the Company will not recognize right of use (“ROU”) assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases. The Company elected the practical expedient to not separate lease and non-lease components for certain classes of assets (office buildings).

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease ROU assets, other current liabilities, and operating lease liabilities on the Company’s consolidated balance sheet as of September 30, 2019. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the remaining  lease term as of January 1, 2019.  Since none of the Company’s lease agreements provide an implicit rate, the Company estimated an incremental borrowing rate over the lease term based on the information available at January 1, 2019 in determining the present value of lease payments. Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. Variable lease costs such as operating costs and property taxes are expensed as incurred.

On January 1, 2019, the Company recognized ROU assets and lease liabilities of approximately $2.0 million on its consolidated balance sheet using an estimated incremental borrowing rate of 9.8%. This ROU asset is recorded in property, plant and equipment, net and the ROU liability is recorded in other non-current liabilities.

3.            Inventory

Inventory is stated at the lower of cost or estimated 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

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inventory, as well as inventory with a carrying value in excess of net realizable value when necessary.  Inventory at September 30, 2019 consisted of the following:

 

 

 

 

 

(in thousands)

    

  

 

Raw materials

 

$

 —

Work in process

 

 

12

Finished Goods

 

 

150

Total Inventory

 

$

162

 

 

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, 2018

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalent:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

50

 

$

 —

 

$

 —

 

$

50

Short term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Term deposits

 

 

175

 

 

 —

 

 

 —

 

 

175

Total Assets

 

$

225

 

$

 —

 

$

 —

 

$

225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalent:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

15,050

 

$

 —

 

$

 —

 

$

15,050

Short term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Term deposits

 

 

175

 

 

 —

 

 

 —

 

 

175

Total Assets

 

$

15,225

 

$

 —

 

$

 —

 

$

15,225

 

There were no transfers between Level 1 and 2 in the nine months ended September 30, 2019 or the year ended December 31, 2018. There were no changes in valuation techniques during the nine months ended September  30, 2019.

As of September 30, 2019, and December 31, 2018, 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, 2018

    

September 30, 2019

Research and development related costs

 

$

5,032

 

$

1,718

Payroll and related costs

 

 

7,427

 

 

5,719

Accounting, tax and audit services

 

 

398

 

 

340

Other

 

 

1,645

 

 

3,886

Total other current liabilities

 

$

14,502

 

$

11,663

 

 

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. (the “Lender”), pursuant to which a term loan of up to an aggregate principal amount of $75.0 million is available to the Company. The Loan Agreement provides 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 the funding conditions described below and other customary funding conditions, five additional term loan advances comprised of the following; 1) $10.0 million (“Tranche 2 Advance”), 2) $5.0 million (“Tranche 3 Advance”), 3) $10.0 million (“Tranche 4 Advance”), 4) $15.0 million (“Tranche 5 Advance”) and 5) $5.0 million (“Tranche 6 Advance”). On September 20, 2019, the Company borrowed the Tranche 2 Advance, which became available upon the approval by the FDA of its NDA for XENLETA.  On September 26, 2019, the Company entered into an amendment to extend the Tranche 3 Advance which was previously available to the Company through September 30, 2019 upon the approval by the FDA of a NDA for CONTEPO, to June 15, 2020, subject to the Company obtaining a specified amount of net cash proceeds from equity financings and/or upfront proceeds from business development, corporate collaborations or similar arrangements received on or after September 12, 2019 and on or before a specified date and other customary funding conditions.

The Tranche 4 Advance will be available to the Company from January 1, 2020 through December 31, 2020 upon the approval by the FDA of the NDA for CONTEPO and upon the achievement of specified product revenue milestones. The Tranche 5 Advance will be available to the Company from July 1, 2020 through June 30, 2021 upon the approval by the FDA of the NDA for CONTEPO and upon the achievement of specified product revenue milestones. The Tranche 6 Advance will be available to the Company from January 1, 2021 through December 15, 2021 upon the approval by the FDA of the NDA for CONTEPO and upon the achievement of specified product revenue milestones. The Company may request a seventh term loan advance of $5.0 million prior to December 31, 2021 subject to the Lender’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 provides for interest-only payments through July 1, 2021, which may be incrementally extended from time to time upon the occurrence of certain conditions through January 1, 2022, 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. The Company is also required to satisfy certain financial covenants, including an obligation to maintain specified minimum amounts of cash and cash equivalents in accounts pledged to Hercules. The Company is also required to satisfy certain performance covenants, including a stipulation that actual net product sales must exceed a specified percentage of the forecasted net product sales over certain specified time periods or the Company will become subject to a financial covenant requiring it to maintain cash balances equal to the greater of the amount outstanding under the term loan or a specified minimum.  The Company was in compliance with all of its Loan Agreement covenants at September 30, 2019. 

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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 the Lender a security interest in all of their 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 Lender 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 $2.1 million of costs in connection with the Loan Agreement which along with the initial fee of $0.7 million paid to the Lender, were recorded as debt issuance cost and will be amortized as interest expense using the effective interest method over the term of the loan. The End of Term Fee will also be accrued as additional interest expense using the effective interest method over the term of the loan.

Long-term debt as December 31, 2018 and September 30, 2019 consisted of the following:

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

December 31

 

September 30

(in thousands)

    

2018

    

2019

Term loan payable

 

$

25,000

 

$

35,000

End of term fee

 

 

 —

 

 

305

Unamortized debt issuance costs

 

 

(1,990)

 

 

(1,845)

Carrying value of term loan

 

 

23,010

 

 

33,460

Other long-term debt

 

 

708

 

 

781

Total long-term debt

 

$

23,718

 

$

34,241

 

Maturities of long-term debt as of September 30, 2019 were as follows:

 

 

 

 

 

(in thousands)

 

 

 

2019

 

$

 —

2020

 

 

 —

2021

 

 

8,875

2022

 

 

17,450

2023