View:
NBRV_Current_Folio_10Q

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 March 31, 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 April 30, 2020, the registrant had 99,972,760 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 March 31, 2020 (unaudited)

5

 

 

 

 

Consolidated Statements of Operations for the three months ended March 31, 2019 and 2020 (unaudited)

6

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2019 and 2020 (unaudited)

7

 

 

 

 

Consolidated Statements of Cash Flows for the three months ended March 31, 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

26

 

 

 

Item 3 

Quantitative and Qualitative Disclosures About Market Risk

37

 

 

 

Item 4 

Controls and Procedures

38

 

 

 

 

PART II — OTHER INFORMATION

 

 

 

 

Item 1 

Legal Proceedings

38

 

 

 

Item 1A 

Risk Factors

39

 

 

 

Item 2 

Unregistered Sales of Equity Securities and Use of Proceeds

97

 

 

 

Item 3 

Defaults Upon Senior Securities

97

 

 

 

Item 4 

Mine Safety Disclosures

97

 

 

 

Item 5 

Other Information

97

 

 

 

Item 6 

Exhibits

98

 

 

 

SIGNATURES 

99

 

1

Table of Contents

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 re-commence the commercial activities of 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 re-establish a sales force for the commercialization of XENLETA and CONTEPO, if approved,;

·

the timing of receiving 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 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 and/or CONTEPO, if approved;

·

our expectations about the impact of the COVID-19 pandemic on our business operations;

·

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;

·

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;

2

Table of Contents

·

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, 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;

3

Table of Contents

·

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.

4

Table of Contents

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

    

March 31, 2020

Assets

 

 

  

 

 

  

Current assets:

 

 

  

 

 

  

Cash and cash equivalents

 

$

86,019

 

$

26,938

Restricted cash

 

 

392

 

 

444

Short-term investments

 

 

175

 

 

175

Accounts receivable, net and other receivables

 

 

2,744

 

 

3,467

Inventory

 

 

682

 

 

4,224

Prepaid expenses

 

 

1,158

 

 

2,925

Total current assets

 

 

91,170

 

 

38,173

Property, plant and equipment, net

 

 

2,474

 

 

2,340

Intangible assets, net

 

 

91

 

 

111

Long-term receivables

 

 

378

 

 

378

Total assets

 

$

94,113

 

$

41,002

Liabilities and equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

4,673

 

$

2,033

Accrued expense and other current liabilities

 

 

11,966

 

 

9,929

Total current liabilities

 

 

16,639

 

 

11,962

Non-current liabilities

 

 

 

 

 

 

Long-term debt

 

 

34,502

 

 

7,374

Other non-current liabilities

 

 

1,698

 

 

1,752

Total non-current liabilities

 

 

36,200

 

 

9,126

Total liabilities

 

 

52,839

 

 

21,088

Commitments and contingencies (Note 12)

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

Ordinary shares, nominal value $0.01,  1,000,000,000 ordinary shares authorized at March 31, 2020; 94,545,116 and 95,109,047 issued and outstanding at December 31, 2019 and March 31, 2020, respectively

 

 

945

 

 

951

Preferred shares, par value $0.01,  100,000,000 shares authorized at March 31, 2020; None issued and outstanding

 

 

 —

 

 

 —

Additional paid in capital

 

 

517,044

 

 

518,937

Accumulated other comprehensive income

 

 

27

 

 

27

Accumulated deficit

 

 

(476,742)

 

 

(500,001)

Total stockholders’ equity

 

 

41,274

 

 

19,914

Total liabilities and stockholders’ equity

 

$

94,113

 

$

41,002

 

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

5

Table of Contents

NABRIVA THERAPEUTICS plc

Consolidated Statements of Operations (unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

(in thousands, except share and per share data)

    

2019

    

2020

Revenues:

 

 

  

 

 

  

Product revenue, net

 

$

 —

 

$

156

Collaboration revenue

 

 

1,000

 

 

145

Research premium and grant revenue

 

 

703

 

 

488

Total revenue

 

 

1,703

 

 

789

Operating expenses:

 

 

 

 

 

 

Cost of product sales

 

 

 

 

(8)

Research and development expenses

 

 

(7,538)

 

 

(4,944)

Selling, general and administrative expenses

 

 

(13,409)

 

 

(16,025)

Total operating expenses

 

 

(20,947)

 

 

(20,977)

Loss from operations

 

 

(19,244)

 

 

(20,188)

Other income (expense):

 

 

 

 

 

 

Other income (expense), net

 

 

70

 

 

798

Interest income

 

 

10

 

 

64

Interest expense

 

 

(899)

 

 

(1,024)

Loss on extinguishment of debt

 

 

 —

 

 

(2,757)

Loss before income taxes

 

 

(20,063)

 

 

(23,107)

Income tax expense

 

 

(154)

 

 

(152)

Net loss

 

$

(20,217)

 

$

(23,259)

 

 

 

 

 

 

 

Loss per share

    

 

 

    

 

 

Basic and Diluted ($ per share)

 

$

(0.29)

 

$

(0.25)

Weighted average number of shares:

 

 

  

 

 

 

Basic and Diluted

 

 

68,701,599

 

 

94,595,152

 

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

6

Table of Contents

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 common stock

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 common stock

 

479

 

 

 5

 

 

181

 

 

 —

 

 

 —

 

 

186

Shares issued in connection with the vesting of restricted stock units

 

85

 

 

 1

 

 

(1)

 

 

 —

 

 

 —

 

 

 —

Equity transaction costs

 

 —

 

 

 —

 

 

(39)

 

 

 —

 

 

 —

 

 

(39)

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

 

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

 

 

7

Table of Contents

 

NABRIVA THERAPEUTICS plc

Consolidated Statements of Cash Flows (unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

(in thousands)

    

2019

    

2020

Cash flows from operating activities

 

 

  

 

 

  

Net loss

 

$

(20,217)

 

$

(23,259)

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

 

 

 

 

 

 

Non-cash other income/expense, net

 

 

(27)

 

 

673

Non-cash interest income

 

 

(13)

 

 

15

Non-cash interest expense

 

 

227

 

 

 1

Loss on extinguishment of debt

 

 

 —

 

 

2,757

Depreciation and amortization expense

 

 

125

 

 

103

Amortization of right-of-use assets

 

 

109

 

 

15

Stock-based compensation

 

 

1,907

 

 

1,765

Other, net

 

 

 8

 

 

(22)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Increase in long-term receivables

 

 

(10)

 

 

 —

Increase in accounts receivable, net and other receivables and prepaid expenses

 

 

(2,650)

 

 

(2,326)

Increase in inventory

 

 

 —

 

 

(3,542)

Increase/(decrease) in accounts payable

 

 

4,302

 

 

(2,537)

Decrease in accrued expenses and other liabilities

 

 

(4,374)

 

 

(1,784)

Increase/(decrease) in other non-current liabilities

 

 

(30)

 

 

54

Increase/(decrease) in income tax liabilities

 

 

18

 

 

(21)

Net cash used in operating activities

 

 

(20,625)

 

 

(28,108)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of plant and equipment and intangible assets

 

 

(42)

 

 

(72)

Changes in restricted cash

 

 

 —

 

 

52

Net cash used in investing activities

 

 

(42)

 

 

(20)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from at-the-market facility

 

 

9,978

 

 

154

Repayments of long-term borrowings

 

 

 —

 

 

(30,000)

Equity transaction costs

 

 

(299)

 

 

(373)

Net cash provided by (used in) financing activities

 

 

9,679

 

 

(30,219)

 

 

 

 

 

 

 

Effects of foreign currency translation on cash and cash equivalents

 

 

27

 

 

(682)

Net decrease in cash, cash equivalents and restricted cash

 

 

(10,961)

 

 

(59,029)

Cash, cash equivalents and restricted cash at beginning of period

 

 

102,003

 

 

86,411

Cash, cash equivalents and restricted cash at end of period

 

$

91,042

 

$

27,382

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Interest paid

 

$

483

 

$

1,022

Proceeds from at-the-market facility in accounts receivable, net and other receivables

 

$

 —

 

$

164

Equity transaction costs included in accounts payable and accrued expenses

 

$

20

 

$

217

 

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

 

 

8

Table of Contents

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., 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.

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 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, Iceland and the U.K.. If approved, Nabriva intends to work with a commercial partner to make XENLETA available to patients in the E.U..

On November 7, 2019, the Company, through Sunovion Pharmaceuticals Canada, Inc. (“Sunovion”), submitted a New Drug Submission (“NDS”).  Health Canada determined there was a screening deficiency in December 2019 and a response from the Company/Sunovion was provided on December 18, 2019 and acknowledged by Health Canada on January 13, 2020.  The NDS approval is estimated to occur on July 10, 2020, with the assumptions of priority review and first cycle approval.

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 and established a PDUFA date of June 19, 2020. However, the Company cannot predict when CONTEPO will receive marketing approval, if at all.

9

Table of Contents

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 March 31, 2020, the Company had cash and cash equivalents, restricted cash and short-term investments of $27.6 million. The Company repaid $30.0 million of its outstanding debt with Hercules on March 20, 2020.

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, as well as investing in its supply chain for the commercialization of XENLETA 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.

The Company announced a plan to restructure its hospital-based commercial sales force and transition to a community-based sales effort. The restructuring is intended to reduce costs and to align the capabilities of the Company’s sales effort with its strategic re-focus on making sales of XENLETA to community health care professionals. 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 has closed its administrative offices and shifted to a remote working business model. The Company has implemented a work-from-home policy for all of its employees, and the Company may take further actions that alter its operations as may be required by federal, state, or local authorities, or which the Company determines are in its best interests. The commercial and medical organizations have suspended in-person interactions with physicians and customers and are restricted to conducting educational and promotional activities virtually for the foreseeable future. Following the termination of these operational restrictions, the Company plans to secure a new sales effort with community-based expertise to replace its hospital-based sale force. However, the Company has not determined when it would retain such a community-based sales effort, as it is currently unknown how long the operational restrictions related to COVID-19 will remain in effect. 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.

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 CONTEPO, if approved. In light of the COVID-19 pandemic, the associated disruption to the healthcare delivery and the uncertainty of resuming 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.

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.

10

Table of Contents

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.  In light of the COVID-19 pandemic, the associated disruption to the healthcare delivery and the uncertainty of resuming direct physician promotion, future sales in 2020 are uncertain. Based on its current operating plans, the Company expects that its existing cash, cash equivalents and short-term investments as of March 31, 2020 and $3.3 million net proceeds raised under the ATM subsequent to March 31, 2020 through the date of this filing, will be sufficient to enable the Company to fund its operating expenses, debt service obligations and capital expenditure requirements into the fourth quarter of 2020. 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’s NDA for CONTEPO is approved on the PDUFA date and that it 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.

As of March 31, 2020, the Company has issued and sold an aggregate of 6,983,926 ordinary shares pursuant to the Jefferies ATM Agreement and received gross proceeds of $14.7 million and net proceeds of $13.9 million, after deducting commissions to Jefferies and other offering expenses. From March 31, 2020 through the date of this filing, the Company issued and sold an aggregate of 6,133,108 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. As of the date of this filing, the Company may issue and sell ordinary shares for gross proceeds of up to $32.0 million.

In December 2019, the Company sold to certain institutional investors in a registered direct offering an aggregate of 13,793,106 ordinary shares (the “Shares”), and accompanying warrants to purchase up to an aggregate of 13,793,106 ordinary shares (the “Warrants,” and together with the Shares, the “Securities”). 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. 

 

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 March 31, 2020 and for the three months ended March 31, 2019 and 2020 are unaudited. The December 31, 2019 balance sheet was derived from audited consolidated

11

Table of Contents

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 March 31, 2020 and results of operations for the three months ended March 31, 2019 and 2020. The financial data and other information disclosed in these notes related to the three months ended March 31, 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 quarter ended March 31, 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.  Inventory reported at December 31, 2019 and March 31, 2020 consisted of the following:

 

 

 

 

 

 

 

 

  

As of

 

 

As of

 

 

December 31, 2019

 

 

March 31, 2020

(in thousands)

 

2019

 

 

2020

Raw materials

$

 —

 

$

 —

Work in process

 

498

 

 

3,946

Finished goods

 

184

 

 

278

Total Inventory

$

682

 

$

4,224

 

 

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).

12

Table of Contents

·

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

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalent:

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

10,050

 

$

 —

 

$

 —

 

$

10,050

Short term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Term deposits

 

$

175

 

$

 —

 

$

 —

 

$

175

Total Assets

 

$

10,225

 

$

 —

 

$

 —

 

$

10,225

 

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

As of March 31, 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.

5.           Accrued Expenses and Other Liabilities

 

 

 

 

 

 

 

 

 

 

As of

 

As of

(in thousands)

    

December 31, 2019

    

March 31, 2020

Research and development related costs

 

$

1,347

 

$

1,260

Payroll and related costs

 

 

6,327

 

 

3,199

Accounting, tax and audit services

 

 

420

 

 

252

Manufacturing and inventory

 

 

639

 

 

2,939

Other

 

 

3,233

 

 

2,279

Total other current liabilities

 

$

11,966

 

$

9,929

 

 

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 lefamulin, 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.

13

Table of Contents

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, or 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 March 31, 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 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 March 31, 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. 

14

Table of Contents

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

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

December 31

 

March 31 

(in thousands)

    

2019

    

2020

Term loan payable

 

$

35,000

 

$

5,000

End of term fee

 

 

443

 

 

1,834

Unamortized debt issuance costs

 

 

(1,742)

 

 

(251)

Carrying value of term loan

 

 

33,701

 

 

6,583

Other long-term debt

 

 

801

 

 

791

Total long-term debt

 

$

34,502

 

$

7,374

 

Maturities of long-term debt as of March 31, 2020 were as follows:

 

 

 

 

 

(in thousands)

 

 

 

2020

 

$

 —

2021

 

 

1,156

2022

 

 

2,493

2023

 

 

1,351

 

 

7.           Revenue

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

(in thousands)

    

2019

    

2020

    

Product revenue, net

 

$

 —

 

$

156

 

Collaboration revenues

 

 

1,000

 

 

145

 

Research premium

 

 

393

 

 

290

 

Government grants

 

 

311

 

 

198

 

Total

 

$

1,703

 

$

789

 

 

The $1.0 million of collaboration revenue for the three months ended March 31, 2019 reflects the upfront payment under the Sunovion License Agreement  received in April 2019 (see Note 11). Product revenue, net, relate to sales of XENLETA.

 

8.           Share-Based Payments

Stock Option Plan 2015

On April 2, 2015, the Company’s shareholders, management board and supervisory board adopted the Stock Option Plan 2015 (the “SOP 2015”) and the shareholders approved an amended and restated version of the SOP 2015 on June 30, 2015. An amendment to the amended and restated SOP 2015 was approved by the shareholders on July 22, 2015. The SOP 2015 became effective on July 3, 2015 upon the registration with the commercial register in Austria of the conditional capital increase approved by the shareholders on June 30, 2015. The SOP 2015 initially provided for the grant of options for up to 95,000 Nabriva Austria common shares to the Company’s employees, including members of the management board, and to members of the supervisory board. Following the closing of the initial public offering of the Company, the overall number of options increased to 177,499 Nabriva Austria common shares. Following approval by the Company’s shareholders at its 2016 annual general meeting, the number of shares available for issuance under the SOP 2015 was increased to 346,235 Nabriva Austria common shares. In connection with the Redomiciliation Transaction, the SOP 2015 was amended to take account of certain requirements under Irish law and assumed by Nabriva Ireland, with each option to acquire one Nabriva Austria common share becoming an option to acquire ten ordinary shares of Nabriva Ireland on the same terms and conditions.

15

Table of Contents

Each vested option grants the beneficiary the right to acquire one share in the Company. The vesting period for the options is four years following the grant date. On the last day of the last calendar month of the first year of the vesting period, 25% of the options attributable to each beneficiary are automatically vested. During the second, third and fourth years of the vesting period, the remaining 75% of the options vest on a monthly pro rata basis (i.e. 2.083% per month). Options granted under the SOP 2015 have a term of no more than ten years from the beneficiary’s date of participation.

The following table summarizes information regarding the Company’s stock option awards under the SOP 2015 for the three months ended March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

average

 

 

 

 

 

 

 

exercise

 

Aggregate

 

 

 

 

price in

 

intrinsic

Stock Option Plan 2015

 

Options

    

$ per share

 

value

Outstanding as of January 1, 2020

 

2,290,594

 

8.33

 

 

  

Granted

 

 —

 

 —

 

 

 

Exercised

 

 —

 

 —

 

 

 

Forfeited

 

(28,229)

 

9.11

 

 

 

Outstanding as of March 31, 2020

 

2,262,365

 

8.32

 

$

 —

Vested and exercisable as of March 31, 2020

 

2,044,084

 

8.22

 

$

 —

 

Stock-based compensation expense under the SOP 2015 was $0.9 million and $0.4 million for the three months ended March 31, 2019 and 2020, respectively.

The weighted average remaining contractual life of the options as of March 31, 2020 is 6.2 years.

As of March 31, 2020, there was $1.2 million of total unrecognized compensation expense, related to unvested options granted under the SOP 2015, which will be recognized over the weighted-average remaining vesting period of 0.6 years.

2017 Share Incentive Plan

On July 26, 2017, the Company’s board of directors adopted the 2017 Share Incentive Plan (the “2017 Plan”) and the shareholders approved the 2017 Plan at the Company’s Extraordinary General Meeting of Shareholders on September 15, 2017. Following shareholder approval of the 2017 Plan, the Company ceased making awards under the SOP 2015, and future awards will be made under the 2017 Plan. However, all outstanding awards under SOP 2015 will remain in effect and continue to be governed by the terms of the SOP 2015. The 2017 Plan permits the award of share options (both incentive and nonstatutory options), share appreciation rights (“SARs”), restricted shares, restricted share units (“RSUs”), and other share-based awards to the Company’s employees, officers, directors, consultants and advisers. The 2017 Plan is administered by the Company’s board of directors.

Under the 2017 Plan, the number of ordinary shares that will be reserved for issuance will be the sum of (1) 3,000,000 ordinary shares; plus (2) a number of ordinary shares (up to 3,438,990 ordinary shares) which is equal to the sum of the number of the Company’s ordinary shares then available for issuance under the SOP 2015 and the number of ordinary shares subject to outstanding awards under the SOP 2015 that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right; plus (3) an annual increase, to be added on the first day of each fiscal year beginning in the fiscal year ended December 31, 2018 and continuing until, and including, the fiscal year ending December 31, 2027, equal to the least of (i) 2,000,000 ordinary shares, (ii) 4% of the number of outstanding ordinary shares on such date and (iii) an amount determined by the board of directors.

At March 31, 2020, 985,975 ordinary shares were available for future issuance under the 2017 Plan.

16

Table of Contents

Options and SARs granted will be exercisable at such times and subject to such terms and conditions as the board may specify in the applicable option agreement; provided, however, that no option or SAR will be granted with a term in excess of ten years. The board will also determine the terms and conditions of restricted shares and RSUs, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any. 

The following table summarizes information regarding the Company’s stock option awards under the 2017 Plan for the three months ended March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

    

Weighted

 

 

 

 

 

 

 

average

 

 

 

 

 

 

 

exercise

 

 

Aggregate

 

 

 

 

price in $

 

 

intrinsic

2017 Plan

    

Options

    

per share

    

 

value

Outstanding as of January 1, 2020

 

4,422,664

 

3.55

 

 

  

Granted 

 

1,290,500

 

1.35

 

 

  

Exercised 

 

 —

 

 —

 

 

  

Forfeited 

 

(138,520)

 

3.07

 

 

  

Outstanding as of March 31, 2020

 

5,574,644

 

3.05

 

$

 —

Vested and exercisable as of March 31, 2020

 

1,820,897

 

4.32

 

$

 —

 

Stock-based compensation expense under the 2017 Plan was $0.5 million and $0.6 million for the three months ended March 31, 2019 and 2020, respectively. The weighted average fair value of the options granted during the three months ended March 31, 2020 was $0.80 per share. The options granted in the three months ended March 31, 2020 were valued based on a Black Scholes option pricing model using the following assumptions. The significant inputs into the model were as follows:

 

 

 

 

Input parameters

    

 

Range of expected volatility

 

63.8% - 64.0%

Expected term of options (in years)

 

6.1

Range of risk-free interest rate

 

0.8% - 1.5%

Dividend yield

 

 —

 

The expected price volatility is based on historical trading volatility for the publicly traded peer companies under consideration of the remaining life of the options. The risk-free interest rate is based on the average of five and seven-year market yield on U.S. treasury securities in effect at the time of grant.

The weighted average remaining contractual life of the options as of March 31, 2020 is 8.9 years.

As of March 31, 2020, there was $5.1 million of total unrecognized compensation expense, related to unvested options granted under the 2017 Plan, which will be recognized over the weighted-average remaining vesting period of 1.2 years.

Restricted Stock Units (“RSUs”)

Under the 2017 Plan, the Company granted RSUs which vest over a period of four years with 25% vesting upon the first anniversary of the grant date and on a monthly pro rata basis thereafter over the remaining three years. The Company also granted RSUs to certain employees that vest over a period of four years with 25% vesting upon the first anniversary of the grant date and on a monthly pro rata basis thereafter over the remaining three years.

During 2018, the Company granted RSUs to certain employees where vesting of the RSUs was subject to FDA approval of an NDA for XENLETA. Fifty percent (50%) of each RSU award vested upon FDA approval, and the remaining fifty percent (50%) will vest on the one- year anniversary of such approval. In connection with the FDA approval that was received in August 2019, the Company started recognizing compensation expense, as there was no compensation expense recognized on these awards prior to the FDA approval as it was determined that approval was not probable since it was outside of the Company’s control. Also during 2018, the Company granted RSUs to certain

17

Table of Contents

employees that will vest in three six-month increments beginning in May 2019 and ending in May 2020. Lastly, the Company granted RSUs in 2018 to certain employees where vesting of the RSUs is subject to FDA approval of an NDA for CONTEPO. Fifty percent (50%) of each RSU award will vest upon FDA approval, and the remaining fifty percent (50%) will vest on the one- year anniversary of such approval.

The following table summarizes information regarding our restricted stock unit awards under the 2017 Plan at March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

average fair

 

2017 Plan

    

RSUs

    

value per share

    

Outstanding as of January 1, 2020

 

901,686

 

3.69

 

Granted

 

1,557,300

 

1.35

 

Vested and issued

 

(139,705)

 

1.90

 

Forfeited

 

(32,260)

 

2.63

 

Outstanding as of March 31, 2020

 

2,287,021

 

3.31

 

 

 

Stock-based compensation expense for RSUs granted under the 2017 Plan was $0.3 million and $0.6 million for the three months ended March 31, 2019 and 2020, respectively.

 

The Company has total unrecognized compensation costs of $3.2 million associated with RSUs which are expected to be recognized over the awards average remaining vesting period of 1.3 years. The fair value of RSU’s that vested during the quarter ended March 31, 2020 was $0.3 million. 

 

2019 Inducement Share Incentive Plan

On March 12, 2019, the Company’s board of directors adopted the 2019 Inducement Share Incentive Plan (the “2019 Inducement Plan”) and, subject to the adjustment provisions of the 2019 Inducement Plan, reserved 2,000,000 ordinary shares for issuance pursuant to equity awards granted under the 2019 Inducement Plan. In accordance with Nasdaq Listing Rule 5635(c)(4), awards under the 2019 Inducement Plan may only be made to individuals who were not previously employees or non-employee directors of the Company (or following such individuals’ bona fide period of non-employment with the Company), as an inducement material to the individuals’ entry into employment with the Company.

At March 31, 2020, 1,297,350 ordinary shares were available for future issuance under the 2019 Inducement Plan.

Options and SARs granted will be exercisable at such times and subject to such terms and conditions as the board may specify in the applicable option agreement; provided, however, that no option or SAR will be granted with a term in excess of ten years. The board will also determine the terms and conditions of restricted shares and RSUs, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any.

18

Table of Contents

The following table summarizes information regarding the Company’s stock option awards under the 2019 Inducement Plan for the three months ended March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

average

 

 

 

 

 

 

 

exercise

 

Aggregate

 

 

 

 

price in $

 

intrinsic

2019 Inducement Plan

    

Options

    

per share

    

value

Outstanding as of January 1, 2020

 

605,650

 

2.14

 

 

  

Granted

 

182,000

 

2.75

 

 

  

Exercised

 

 —

 

 —

 

 

  

Forfeited

 

(85,000)

 

2.02

 

 

  

Outstanding as of March 31, 2020

 

702,650

 

1.95

 

$

 —

Vested and exercisable as of March 31, 2020

 

10,289

 

2.44

 

 

 —

 

Stock-based compensation expense under the 2019 Inducement Plan was $59 thousand and $40 thousand for the three months ended March 31, 2019 and 2020, respectively. The weighted average fair value of the options granted during the three months ended March 31, 2020 was $0.79 per share. The options granted in the three months ended March 31, 2020 were valued based on a Black Scholes option pricing model using the following assumptions. The significant inputs into the model were as follows:

 

 

 

 

Input parameters

    

 

Expected volatility

 

63.7% - 64.0%

Expected term of options (in years)

 

6.1

Risk-free interest rate

 

1.0% - 1.4%

Dividend yield

 

 —

 

The weighted average remaining contractual life of the options as of March 31, 2020 is 9.5 years.

As of March 31, 2020, there was $0.7 million of total unrecognized compensation expense, related to unvested options granted under the 2019 Inducement Plan, which will be recognized over the weighted-average remaining vesting period of 1.6 years.

Inducement Awards Outside of the 2019 Inducement Plan

On July 25, 2018, the Company granted a non-statutory option to purchase 850,000 of its ordinary shares and 150,000 performance-based RSUs to the Company’s newly appointed Chief Executive Officer (the “CEO”). These equity awards were granted outside of the 2017 Plan and the 2019 Inducement Plan, were approved by the Company’s compensation committee and board of directors and were made as an inducement material to the CEO entering into employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4). The exercise price per share for the share option is $3.53 per share, and the option award has a ten-year term and will vest over a four-year period, with 25% of the shares underlying the award vesting on the first anniversary of the grant date and the remaining 75% of the shares underlying the option award to vest monthly over the subsequent 36-month period. The performance-based restricted share units are subject to vesting as follows: 50% will vest upon certification by the board of directors of the receipt of approval by the FDA of an NDA for each of lefamulin and CONTEPO for any indication, and 50% will vest on the first anniversary of such certification by the board of directors, provided, in each case, the CEO is performing services to the Company on the applicable vesting dates. Since the FDA did not approve an NDA for both XENLETA and CONTEPO by January 31, 2020, the award was forfeited and the performance-based restricted share units terminated in full. The Company also issues non-statutory options to new employees upon the commencement of their employment

Stock-based compensation expense for the inducement awards granted outside of the 2019 Inducement Plan was $0.1 million for the three months ended March 31, 2020, compared to $0.1 million for the three months ended March 31, 2019. The performance-based RSUs had a grant date fair value of $3.53 per share and the options had a grant date fair value of $2.05 per share based on a Black Scholes option pricing model using the following assumptions. No

19

Table of Contents

expense has been recognized to date on the performance based RSUs as it was determined that approval of CONTEPO is not probable since it is outside of the Company’s control.  The significant inputs into the model were as follows:

 

 

 

 

Input parameters

    

 

 

Expected volatility

 

59.8

%

Expected term of options (in years)

 

6.1

 

Range of risk-free interest rate

 

2.9

%

Dividend yield

 

 —

 

 

The weighted average remaining contractual life of the options as of March 31, 2020 is 8.3 years.

As of March 31, 2020, there was $1.0 million of total unrecognized compensation expense, related to unvested inducement award options granted, which will be recognized over the weighted-average remaining vesting period of 1.2 years.

2020 Share Incentive Plan

On March 4, 2020, the Company´s board of directors, subject to shareholder approval, adopted the 2020 Share Incentive Plan, or the 2020 Plan. The 2020 Plan has not yet been approved by our shareholders and will be submitted for shareholder approval at our 2020 Annual General Meeting of Shareholders. The number of ordinary shares initially reserved for issuance under the 2020 Plan is 1,837,500 ordinary shares. Prior to submitting the 2020 Plan to our shareholders for approval at the 2020 Annual General Meeting of Shareholders, our board of directors plans to amend the 2020 Plan to increase the number of shares reserved for issuance thereunder.

The 2020 Plan provides for the grant of incentive share options, nonstatutory share options, share appreciation rights, restricted share awards, restricted share units, other share-based and cash-based awards and performance awards.

During the three months ended March 31, 2020, option awards to purchase 1,837,500 ordinary shares with an exercise price of $1.35 per share were granted under the 2020 Plan. Such awards will automatically convert to cash-settled share appreciation rights if our shareholders do not approve the 2020 Plan at our 2020 Annual General Meeting of Shareholders. As a result, the grants awarded under the 2020 Plan are liability classified until such shareholder approval is obtained. Stock-based compensation expense for the option awards under the 2020 Plan was $13 thousand for the three months ended March 31, 2020.

Employee Stock Purchase Plan

The Company’s board of directors adopted, and in August 2018 Company’s stockholders approved, the 2018 employee stock purchase plan (the “2018 ESPP”). The maximum aggregate number of shares of ordinary shares that may be purchased under the 2018 ESPP is 500,000 shares, (the “ESPP Share Pool”), subject to adjustment as provided for in the 2018 ESPP. The ESPP Share Pool represented 0.6% of the total number of shares of ordinary shares outstanding as of March 31, 2020. The 2018 ESPP allows eligible employees to purchase shares at a 15% discount to the lower of the closing share price at the beginning and end of the six-month offering periods commencing November 1 and ending April 30 and commencing May 1 and ending October 31 of each year.

9.           Income Tax Expense

For the three months ended March 31, 2020 the Company recorded a tax provision of $152 thousand, compared to a tax provision of $154 thousand for the corresponding period in the prior year.

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax bases of assets and liabilities using statutory rates. Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, including the Company’s history of losses and concluded that it is more likely than not that the Company will not recognize the

20

Table of Contents

benefits of its deferred tax assets. On the basis of this evaluation the Company has recorded a valuation allowance against all of its deferred tax assets at March 31, 2020 and December 31, 2019.

10.         Earnings (Loss) per Share

Basic and diluted loss per share

For the three months ended March 31, 2019 and 2020, basic and diluted net loss per share was determined by dividing net loss attributable to shareholders by the weighted average number of shares outstanding during the period.  Diluted net loss per share is the same as basic net loss per share during the periods presented as the effects of the Company’s potential ordinary share equivalents are antidilutive since the Company had net losses for each period presented below.

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

(in thousands, except per share data)

    

2019

    

2020

    

Net loss for the period

 

$

(20,217)

 

$

(23,259)

 

Weighted average number of shares outstanding

 

 

68,701,599

 

 

94,595,152

 

Basic and diluted loss per share

 

$

(0.29)

 

$

(0.25)

 

 

The following ordinary share equivalents were excluded from the calculations of diluted earnings per share as their effect would be anti-dilutive since the Company had net losses for each period presented below:

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

    

2019

    

2020

    

Stock option awards

 

8,242,762

 

11,227,159

 

Restricted stock units 

 

1,792,850

 

2,287,021

 

 

 

11.         Sinovant and Sunovion License Agreements

Sinovant License Agreement

In March 2018, the Company entered into a license agreement (the “Sinovant License Agreement”), with Sinovant Sciences, Ltd. (“Sinovant”), an affiliate of Roivant Sciences, Ltd., to develop and commercialize lefamulin in the greater China region. As part of the Sinovant License Agreement, Nabriva Therapeutics Ireland DAC and Nabriva Therapeutics GmbH, the Company’s wholly owned subsidiaries, granted Sinovant an exclusive license to develop and commercialize, and a non-exclusive license to manufacture, certain products containing lefamulin (the “Sinovant Licensed Products”), in the People’s Republic of China, Hong Kong, Macau, and Taiwan (together the “Territory”).

Under the Sinovant License Agreement, Sinovant and the Company’s subsidiaries have established a joint development committee (the “JDC’), to review and oversee development and commercialization plans in the Territory. The Company received a non-refundable $5.0 million upfront payment pursuant to the terms of the Sinovant License Agreement and will be eligible for up to an additional $91.5 million in milestone payments upon the achievement of certain regulatory and commercial milestone events related to lefamulin for CABP, plus an additional $4.0 million in milestone payments if any Sinovant Licensed Product receives a second or any subsequent regulatory approval in the People’s Republic of China. The first milestone was a $1.5 million payment for the submission of a clinical trial application (“CTA”), by Sinovant to the Chinese Food and Drug Administration, which was received in the first quarter of 2019.  Additionally, in connection with the FDA approval for lefamulin the Company received a $5.0 million milestone payment in the third quarter of 2019.  The remaining milestone payments of up to $86.5 million are tied to additional regulatory approvals and annual sales targets. The Company will also be eligible to receive low double-digit royalties on sales, if any, of Sinovant Licensed Products in the Territory.  The Company has recorded the payments received to date as collaboration revenue in the consolidated statements of operations. The future regulatory and commercial milestone payments will be recorded during the period the milestones become probable of achievement.

21

Table of Contents

Sinovant will be solely responsible for all costs related to developing, obtaining regulatory approval of and commercializing Sinovant Licensed Products in the Territory and is obligated to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize Sinovant Licensed Products in the Territory. The Company is obligated to use commercially reasonable efforts to supply, pursuant to supply agreements to be negotiated by the parties, to Sinovant a sufficient supply of XENLETA for Sinovant to manufacture finished drug products for development and commercialization of the Sinovant Licensed Products in the Territory.

Unless earlier terminated, the Sinovant License Agreement will expire upon the expiration of the last royalty term for the last Sinovant Licensed Product in the Territory, which the Company expects will occur in 2033. Following the expiration of the last royalty term, the license granted to Sinovant will become non-exclusive, fully-paid, royalty-free and irrevocable. The Sinovant License Agreement may be terminated in its entirety by Sinovant upon 180 days’ prior written notice at any time.  Either party may, subject to specified cure periods, terminate the Sinovant License Agreement in the event of the other party’s uncured material breach. Either party may also terminate the Sinovant License Agreement under specified circumstances relating to the other party’s insolvency. The Company has the right to terminate the Sinovant License Agreement immediately if Sinovant does not reach certain development milestones by certain specified dates (subject to specified cure periods). The Sinovant License Agreement contemplates that the Company will enter into ancillary agreements with Sinovant, including clinical and commercial supply agreements and a pharmacovigilance agreement.

Sunovion License Agreement

In March 2019, the Company entered into 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 the 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. Under the Sunovion License Agreement, Sunovion and DAC will establish a joint development committee (the “Sunovion JDC”), to review and oversee regulatory approval and commercialization plans in the Territory. Sunovion will be solely responsible for all costs related to obtaining regulatory approval of and commercializing Licensed Products in the Territory and is obligated to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize Licensed Product in the Territory.

The Company has identified two performance obligations at inception: (1) the delivery of the exclusive license to Sunovion, which the Company has determined is a distinct license of functional intellectual property that Sunovion has obtained control of; and, (2) the participation in the Sunovion JDC. The $1.0 million non-refundable upfront payment was allocated entirely to the delivery of the license as the Sunovion JDC deliverable was deemed to be de minimis. Any future regulatory and commercial milestone payments under the Sunovion License Agreement will be recorded during the period the milestones become probable of achievement.

12.         Commitments and Contingencies

Leases

The Company leases office spaces in King of Prussia, Pennsylvania, San Diego, California, Dublin, Ireland and laboratory and office space in Vienna, Austria under agreements previously classified as operating leases.

The lease agreement in King of Prussia, Pennsylvania expires on December 15, 2023 and does not include any renewal options. The agreement provides for an initial monthly base amount plus annual escalations through the term of the lease. 

The lease agreement in San Diego, California expired on June 30, 2019 and was not renewed by the Company. In May 2019, the Company entered into a month-to-month sublease agreement for office space for two employees in San Diego, California.

22

Table of Contents

For the lease agreement in Vienna Austria, the Company can terminate the lease without the landlord’s consent and without paying a termination penalty by giving six months’ notice to the landlord. The agreement provides for a monthly base fixed amount. The Company is in the process of determining the appropriate space needed in the building based on its needs. As a result, the Company may negotiate a new lease or evaluate additional or alternate spaces. As such, the Company has classified the agreement as a short-term lease. Starting in the third quarter of 2019, the Company subleased certain space at its leased cost.

In March 2019, the Company entered into a lease agreement for office space in Dublin, Ireland which expires on April 30, 2021. The agreement can be automatically renewed  by both parties equal to the current lease term but for no less than three months. The agreement provides for a monthly based fixed amount of 7,000 euros beginning on the commencement date which was in May 2019.

In addition to the monthly base amounts under the lease agreements, the Company is required to pay its proportionate share of real estate taxes and operating expenses during the lease term for the King of Prussia lease.

For the three months ended March 31, 2020, the Company’s operating lease expense was $0.4 million.

As of March 31, 2020, the lease term of the King of Prussia operating leases was 3.7 years and the discount rate was 9.8%.

As of March 31, 2020, other information related to the operating leases were as follows:

Operating Cash Flow Supplemental Information:

 

 

 

 

 

(in thousands)

    

March 31, 2020

Cash paid for amounts included in the measurement of the operating lease liabilities

 

$

126

Right-of-use assets obtained in exchange for operating lease obligations

 

$

1,563

 

The following table sets forth by year the required future payments of operating lease liabilities:

 

 

 

 

 

(in thousands)

    

March 31, 2020

2020

 

 

381

2021

 

 

515

2022

 

 

522