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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, 2022

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, 2022, the registrant had 63,204,829 ordinary shares outstanding.

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NABRIVA THERAPEUTICS plc

INDEX TO REPORT ON FORM 10-Q

Page

PART I — FINANCIAL INFORMATION

Item 1:

Financial Statements

7

Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (unaudited)

7

Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (unaudited)

8

Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2022 and 2021 (unaudited)

9

Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited)

10

Notes to the Unaudited Consolidated Financial Statements

11

Item 2:

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

26

Item 3:

Quantitative and Qualitative Disclosures About Market Risk

38

Item 4:

Controls and Procedures

39

PART II — OTHER INFORMATION

Item 1:

Legal Proceedings

39

Item 1A:

Risk Factors

39

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

104

Item 3:

Defaults Upon Senior Securities

104

Item 4:

Mine Safety Disclosures

104

Item 5:

Other Information

104

Item 6:

Exhibits

105

SIGNATURES

106

1

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CAUTIONARY NOTE REGARDING 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 commercialize SIVEXTRO and realize value from our agreement with Merck & Co., Inc.;
our ability to successfully commercialize 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 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 adequately secure additional financing;
our ability to meet the minimum listing requirements for continued listing on The Nasdaq Global Select Market;
our sales, marketing and distribution capabilities and strategy;
the potential extent of revenues from future sales of SIVEXTRO, XENLETA and/or CONTEPO, if approved;
our ability to build, manage and maintain a sales force for the commercialization of SIVEXTRO, XENLETA and CONTEPO, if approved;
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;
the timing of the resubmission of the NDA for CONTEPO for the treatment of cUTIs and potential marketing approval of CONTEPO and other product candidates, including the completion of any post marketing requirements with respect to XENLETA for CABP and any other product candidates we may develop or obtain;
our plans to pursue development of other product candidates including XENLETA for the treatment of infections in patients with cystic fibrosis;
our expectations regarding our strategy to expand our product pipeline through opportunistically in-licensing or acquiring the rights to complementary products, product candidates and technologies for the treatment of a range of infectious diseases or other products, including additional community products;
our ability to comply with the restrictive covenants under our debt facility with Hercules Capital, Inc., or Hercules, including but not limited to the ability to maintain minimum cash balance requirements;

2

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our ability to satisfy interest and principal payments under our debt facility with Hercules;
our ability to successfully maintain inventory levels to satisfy product demand, as well as limit the unrealizable value of inventory based on historical usage, known trends, inventory age and market conditions;
our ability to satisfy payments and comply with the terms of the Hovione Supply Agreement for the long-term commercial supply of the active pharmaceutical ingredient for XENLETA;
our expectations about the impact of the COVID-19 pandemic on our business operations, ongoing clinical trials and regulatory matters, including the ability of regulatory authorities to operate;
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 preclinical studies in different disease indications will be indicative of the results of ongoing or future trials;
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;
the future development and commercialization of XENLETA in the greater China region and Canada;
our expectations with respect to milestone payments pursuant to the Agreement and Plan of Merger, dated July 23, 2018, and expectations with respect to potential advantages of CONTEPO or any other product candidate that we acquired in connection with the acquisition of Zavante Therapeutics, Inc., or the Acquisition;
our ability to establish and maintain arrangements for manufacture of our product candidates;
the potential advantages of SIVEXTRO, XENLETA, CONTEPO, and our other product candidates;
our estimates regarding the market opportunities for SIVEXTRO, XENLETA, CONTEPO, and our other product candidates;
the rate and degree of market acceptance and clinical benefit of SIVEXTRO for acute bacterial skin and skin structure infections, XENLETA for CABP, CONTEPO for cUTI and our other product candidates, if approved;
our ability to establish and maintain collaborations including additional licensing agreements for XENLETA outside the United States, Canada and the greater China region;
the potential benefits under our license agreements with Sumitomo Pharmaceuticals (Suzhou), or the China Region License Agreement, and with Sunovion Pharmaceuticals Canada Inc., or the Sunovion License Agreement;
our future intellectual property position;
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;

3

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risks of relying on external parties such as contract manufacturing and sales 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;
our ability to satisfy milestone, royalty and transaction revenue payments pursuant to the Stock Purchase Agreement between our wholly owned subsidiary Zavante Therapeutics, Inc. 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 Factor Summary” and “Risk Factors” sections 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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RISK FACTOR SUMMARY

Our business is subject to a number of risks of which you should be aware before making an investment decision. Below we summarize what we believe are the principal risk factors but these risks are not the only ones we face, and you should carefully review and consider the full discussion of our risk factors in the “Risk Factors” in Part II, Item 1A, together with the other information in this Quarterly Report.

We depend heavily on the success of SIVEXTRO, XENLETA and CONTEPO. The U.S. Food and Drug Administration, or FDA, has approved SIVEXTRO for oral and intravenous use by adults and adolescents for the treatment of acute bacterial skin and skin structure infections, or ABSSSI, and XENLETA for oral and intravenous use for the treatment of community-acquired bacterial pneumonia, or CABP. CONTEPO is being developed for complicated urinary tract infections, or cUTI. If we are unable to obtain marketing approval for CONTEPO, or if we fail in our commercialization efforts for SIVEXTRO and/or XENLETA, or experience significant delays in doing so, our business will be materially harmed.
We have incurred significant losses since our inception and anticipate that we will incur losses for at least the next several years and may never generate profits from operations or maintain profitability.
We will need substantial additional funding. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.
If we fail to meet the requirements for continued listing on The Nasdaq Global Select Market, our ordinary shares could be delisted from trading, which would decrease the liquidity of our ordinary shares and our ability to raise additional capital.
Our level of indebtedness and debt service obligations could adversely affect our financial condition and may make it more difficult for us to fund our operations. We may not have cash available to us in an amount sufficient to enable us to make interest or principal payments on our indebtedness when due or to comply with minimum cash balance requirements.
The number of ordinary shares underlying our outstanding warrants is significant in relation to our currently outstanding ordinary shares, which could have a negative effect on the market price of our ordinary shares and make it more difficult for us to raise funds through future equity offerings.
SIVEXTRO, XENLETA and any other product candidate that receives marketing approval may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success and the market opportunity for such products and product candidates, if approved, may be smaller than we estimate.
We have entered into a Sales Promotion and Distribution Agreement with Merck & Co. related to the promotion, distribution and sale of SIVEXTRO. If our collaboration with Merck is not successful, we may incur significant expenses related to the distribution of SIVEXTRO without realizing adequate value from the agreement.
We have entered into and may enter into additional collaborations with third parties for the development or commercialization of XENLETA, CONTEPO and our other product candidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of these products and product candidates.
If we are unable to obtain and maintain patent protection for our technology, products and product candidates, or if the scope of the patent protection is not sufficiently broad, our competitors could develop

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and commercialize technology, products and product candidates similar or identical to ours, and our ability to successfully commercialize our technology, products and product candidates may be adversely affected.
Business interruptions resulting from the SARS-CoV-2 infection causing COVID-19 outbreak or similar public health crises have caused and could continue to cause a disruption of the commercialization of our products and the development of our product candidates and adversely impact our business.
If clinical trials of XENLETA, CONTEPO or any of our other product candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA, regulatory authorities in the European Union, or other regulatory authorities or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of XENLETA, CONTEPO or any other product candidate.
If we experience delays or difficulties in the enrollment of patients in our clinical trials, our receipt of necessary marketing approvals could be delayed or prevented.
If serious adverse or undesirable side effects are identified in SIVEXTRO, XENLETA, or CONTEPO or any other product candidate that we develop or following their approval and commercialization, we may need to modify, abandon or limit our development or marketing of that product or product candidate.
We are a “smaller reporting company”, and the reduced disclosure requirements applicable to smaller reporting companies may make our ordinary shares less attractive to investors.
The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation. We are incorporated as a public limited company under Irish law.
The intended efficiency of our corporate structure depends on the application of the tax laws and regulations in the countries where we operate, and we may have exposure to additional tax liabilities or our effective tax rate could change, which could have a material impact on our results of operations and financial position.
U.S. persons who own 10 percent or more of our shares may be subject to U.S. federal income taxation on certain of our foreign subsidiaries’ income even if such income is not distributed to such U.S. persons.
A transfer of our ordinary shares, other than a transfer effected by means of the transfer of book-entry interests in the Depository Trust Company, may be subject to Irish stamp duty.
We may be classified as a passive foreign investment company for one or more of our taxable years, which may result in adverse U.S. federal income tax consequence to U.S. holders.

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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)

    

March 31, 2022

December 31, 2021

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

33,784

$

47,659

Restricted cash

174

175

Short-term investments

 

 

16

Accounts receivable, net and other receivables

11,007

12,751

Inventory

15,632

14,509

Prepaid expenses

 

4,602

 

5,155

Total current assets

 

65,199

 

80,265

Property and equipment, net

 

181

 

233

Intangible assets, net

 

21

 

31

Other non-current assets

 

379

 

380

Total assets

$

65,780

$

80,909

Liabilities and stockholders´ equity

 

 

Current liabilities:

 

 

Current portion of long-term debt

$

4,196

$

3,765

Accounts payable

1,578

4,372

Accrued expense and other current liabilities

 

10,496

 

13,829

Deferred revenue

 

 

374

Total current liabilities

 

16,270

 

22,340

Non-current liabilities:

Long-term debt

3,917

4,265

Other non-current liabilities

 

968

 

954

Total non-current liabilities

4,885

5,219

Total liabilities

21,155

27,559

Commitments and contingencies (Note 12)

 

 

Stockholders’ equity:

 

 

Ordinary shares, nominal value $0.01, 300,000,000 ordinary shares authorized at March 31, 2022; 61,725,236 and 56,715,306 issued and outstanding at March 31, 2022 and December 31, 2021, respectively

617

567

Preferred shares, nominal value $0.01, 100,000,000 shares authorized at March 31, 2022; None issued and outstanding

Additional paid in capital

 

651,476

 

648,432

Accumulated other comprehensive income

 

27

 

27

Accumulated deficit

 

(607,495)

 

(595,676)

Total stockholders’ equity

44,625

 

53,350

Total liabilities and stockholders’ equity

$

65,780

$

80,909

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

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NABRIVA THERAPEUTICS plc

Consolidated Statements of Operations (unaudited)

Three Months Ended

March 31, 

(in thousands, except share and per share data)

    

2022

    

2021

Revenues:

 

  

 

  

Product revenue, net

$

7,040

$

130

Collaboration revenue

629

2,002

Research premium and grant revenue

351

397

Total revenues

8,020

2,529

Operating expenses:

 

 

Cost of revenues

(3,361)

(62)

Research and development expenses

(3,517)

(3,868)

Selling, general and administrative expenses

 

(12,700)

 

(12,047)

Total operating expenses

(19,578)

(15,977)

Loss from operations

(11,558)

(13,448)

Other income (expense):

 

 

Other income (expense), net

 

308

 

(122)

Interest expense, net

 

(215)

 

(221)

Loss before income taxes

(11,465)

(13,791)

Income tax expense

 

(354)

 

(190)

Net loss

$

(11,819)

$

(13,981)

Loss per share

    

    

Basic and diluted loss per share

$

(0.20)

$

(0.53)

Weighted average number of shares:

 

  

 

  

Basic and diluted

 

58,794,142

 

26,413,590

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

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NABRIVA THERAPEUTICS plc

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Accumulated

Additional

other

Total

Ordinary shares

paid in

comprehensive

Accumulated

stockholders'

(in thousands)

Number of shares

    

Amount

    

capital

    

income

    

deficit

    

equity

January 1, 2021

21,079

$

211

$

579,123

$

27

$

(546,226)

$

33,135

Issuance of ordinary shares

 

14,294

 

143

 

37,097

 

 

 

37,240

Shares issued in connection with the vesting of restricted share units

40

1

1

Equity transaction costs

 

 

 

(2,325)

 

 

 

(2,325)

Stock-based compensation expense

 

 

 

921

 

 

 

921

Net loss

 

 

 

 

 

(13,981)

 

(13,981)

March 31, 2021

 

35,413

$

354

$

614,817

$

27

$

(560,207)

$

54,991

Accumulated

Additional

other

Total

Ordinary shares

paid in

comprehensive

Accumulated

stockholders'

(in thousands)

    

Number of shares

    

Amount

    

capital

    

income

    

deficit

    

equity

January 1, 2022

56,715

$

567

$

648,432

$

27

$

(595,676)

$

53,350

Issuance of ordinary shares

 

4,938

 

49

 

2,172

 

 

 

2,221

Shares issued in connection with the vesting of restricted share units

72

1

(1)

Equity transaction costs

 

 

 

(127)

 

 

 

(127)

Stock-based compensation expense

 

 

 

1,000

 

 

 

1,000

Net loss

 

 

 

 

 

(11,819)

 

(11,819)

March 31, 2022

 

61,725

$

617

$

651,476

$

27

$

(607,495)

$

44,625

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

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NABRIVA THERAPEUTICS plc

Consolidated Statements of Cash Flows (unaudited)

Three Months Ended March 31, 

(in thousands)

    

2022

2021

Cash flows from operating activities

  

Net loss

$

(11,819)

$

(13,981)

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

 

Non-cash other income (expense), net

 

164

(2)

Non-cash interest income

 

(1)

Non-cash interest expense

 

93

(76)

Depreciation and amortization expense

 

78

99

Amortization of right-of-use assets

169

Stock-based compensation

 

1,000

921

Other, net

 

10

20

Changes in operating assets and liabilities:

 

(Increase) decrease in other non-current assets

 

1

(13)

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

 

2,297

(4,642)

Increase in inventory

(1,123)

(3,151)

Increase (decrease) in accounts payable

 

(2,781)

734

Decrease in accrued expenses and other liabilities

 

(3,616)

(1,482)

Decrease in deferred revenue

(374)

Increase (decrease) in other non-current liabilities

 

14

(202)

Increase (decrease) in income tax liabilities

 

187

(20)

Net cash used in operating activities

 

(15,870)

(21,626)

Cash flows from investing activities

 

Purchases of equipment and intangible assets

 

(35)

(119)

Changes in restricted cash

(1)

(1)

Net cash used in investing activities

 

(36)

(120)

Cash flows from financing activities

 

Proceeds from issuance of common stock and warrants

1,643

25,462

Proceeds from at-the-market facility

595

11,830

Equity transaction costs

 

(44)

(2,362)

Net cash provided by financing activities

 

2,194

34,930

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

 

(164)

244

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

 

(13,876)

13,428

Cash, cash equivalents, and restricted cash at beginning of period

 

47,834

41,590

Cash, cash equivalents and restricted cash at end of period

$

33,958

55,018

Supplemental disclosure of cash flow information:

 

Interest paid

123

122

Taxes paid

1

Equity transaction costs included in accounts payable and accrued expenses

795

728

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

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NABRIVA THERAPEUTICS plc

Notes to the Unaudited Consolidated Financial Statements

1.           Organization and Business Activities

Nabriva Therapeutics plc, or Nabriva Ireland, together with its wholly owned and consolidated subsidiaries, Nabriva Therapeutics GmbH, or Nabriva Austria, Nabriva Therapeutics US, Inc., Zavante Therapeutics, Inc., or Zavante, 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.

In September 2021, Sumitomo Pharmaceuticals (Suzhou) and the Company announced the approval received by Sumitomo Pharmaceuticals (Suzhou) to market oral and intravenous formulations of XENLETA for the treatment of community-acquired pneumonia in adults in Taiwan.

In September 2020, the Centers for Medicare & Medicaid Services, or CMS, granted a new technology add-on payment, or NTAP, for XENLETA® (lefamulin) for injection, when administered in the hospital inpatient setting. Both the intravenous, or IV and oral formulations of XENLETA were granted Qualified Infectious Disease Product, or QIDP, and Fast Track designation by the U.S. Food and Drug Administration, or FDA. NTAP was also granted for CONTEPO™ (fosfomycin for injection, previously referred to as ZTI-01 and ZOLYD), making it the first QIDP antibiotic to be granted conditional NTAP approval prior to receiving FDA approval. CONTEPO was granted QIDP and Fast Track Designation by the FDA for the treatment of complicated urinary tract infections, or cUTIs, including acute pyelonephritis.

In July 2020, the Company announced that the European Commission, or EC, issued a legally binding decision for approval of the marketing authorization application for XENLETA™ (lefamulin) for the treatment of community-acquired pneumonia, or CAP, in adults following a review by the European Medicines Agency, or EMA. The EMA approval of XENLETA in CAP patients when it is considered inappropriate to use antibacterial agents that are commonly recommended for initial treatment or when these agents have failed paves the way for the launch of XENLETA across the European Economic Area, or EEA, and United Kingdom, or U.K. The EC approved XENLETA for all countries of the European Economic Area, or EEA, and United Kingdom, or U.K. Nabriva intends to work with a commercial partner to make XENLETA available to patients in the European Economic Area, or EEA, and United Kingdom, or U.K.

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

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

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

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

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

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 and XENLETA and SEVEXTRO product sales. As of March 31, 2022, the Company had cash and cash equivalents, restricted cash and short-term investments of $34.0 million.

The Company expects to seek additional funding in future periods to fund its operations. While the Company has raised capital in the past, its ability to raise capital in future periods is not considered probable, as defined under the accounting standards. As such, under the requirements of Accounting Standards Codification, or ASC, Topic 205-40, Presentation of Financial StatementsGoing Concern, or 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. It is also uncertain when, if ever, the Company will generate sufficient revenues from product sales to achieve profitability.

The Company follows the provisions of Financial Accounting Standards Board, or FASB, 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. As a result, based on the Company’s available cash and cash equivalents, restricted cash and short-term investments, 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 additional funding or to effectively implement cost reductions could harm the Company’s business, results of operations and future prospects. If the Company is not able to secure adequate additional funding in future periods, the Company would be forced to 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.

In May 2021, the Company entered into an Open Market Sale AgreementSM, or the Sale Agreement, with Jefferies, as agent, pursuant to which the Company may offer and sell ordinary shares from time to time 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. As of March 31, 2022, the Company has issued and sold an aggregate of 19,570,971 ordinary shares pursuant to the Sale Agreement and received gross proceeds of $31.0 million and net proceeds of $29.8 million, after deducting commissions to Jefferies and other offering expenses. From April 1, 2022 and through the date of this filing, the Company has issued and sold an aggregate of 276,150 ordinary shares pursuant to the Sale Agreement and received gross proceeds of $118 thousand and net proceeds of $115 thousand, 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 $10.5 million under the Sale Agreement.

In September 2021, the Company entered into a purchase agreement, or Purchase Agreement, with Lincoln Park Capital Fund, LLC, or Lincoln Park, which, subject to the terms and conditions, provides that the Company has the right to sell to Lincoln Park and Lincoln Park is obligated to purchase up to $23.0 million of its ordinary shares. In addition, under the Purchase Agreement, the Company agreed to issue a commitment fee of 632,474 ordinary shares, or the Commitment Shares, as consideration for Lincoln Park entering into the Purchase Agreement and for the payment of $0.01 per Commitment Share. Under the Purchase Agreement, the Company may from time to time, at its discretion,

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direct Lincoln Park to purchase on any single business day, or a Regular Purchase, up to (i) 400,000 ordinary shares if the closing sale price of its ordinary shares is not below $0.25 per share on Nasdaq, (ii) 600,000 ordinary shares if the closing sale price of its ordinary shares is not below $2.00 per share on Nasdaq or (iii) 800,000 ordinary shares if the closing sale price of its ordinary shares is not below $3.00 per share on Nasdaq. In addition to Regular Purchases, the Company may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases on the terms and subject to the conditions set forth in the Purchase Agreement. In any case, Lincoln Park’s commitment in any single Regular Purchase may not exceed $2.5 million absent a mutual agreement to increase such amount. As of March 31, 2022, the Company has issued and sold an aggregate of 6,000,000 ordinary shares pursuant to the Purchase Agreement and received net proceeds of $4.1 million. From April 1, 2022 and through the date of this filing, the Company has issued and sold an aggregate of 1,200,000 ordinary shares pursuant to the Purchase Agreement and received gross proceeds of $0.4 million. As of the date of this filing, the Company may issue and sell ordinary shares for gross proceeds of up to $18.6 million under the Purchase Agreement, subject to the Nasdaq rules which may limit the Company’s ability to make sales of its ordinary shares to Lincoln Park in excess of a specified amount without prior shareholder approval.

Based on its current operating plans, the Company expects that its existing cash, cash equivalents, restricted cash and short-term investments as of the date of this Quarterly Report on Form 10-Q together with its anticipated SIVEXTRO and XENLETA commercial sales receipts will be sufficient to enable the Company to fund its operating expenses, debt service obligations and capital expenditure requirements well into the fourth quarter of 2022. The Company has based this estimate on assumptions that may prove to be wrong, and the Company could use its capital resources sooner than expected. This estimate assumes, among other things, that the Company does not obtain any additional funding through grants and clinical trial support, collaboration agreements or equity or debt financings. This estimate also assumes that the Company remains in compliance with the covenants and no event of default occurs under the Loan Agreement. The consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

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, or US GAAP, for interim financial information, and US Securities and Exchange Commission, or SEC, regulations for quarterly reporting. The unaudited consolidated financial statements include the accounts of Nabriva Therapeutics plc and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying consolidated financial information as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 are unaudited. The December 31, 2021 balance sheet was derived from audited consolidated financial statements but does not include all disclosures required by US GAAP. The interim unaudited consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2022 and results of operations for the three months ended March 31, 2022 and 2021. The financial data and other information disclosed in these notes related to the three months ended March 31, 2022 and 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, 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, 2021 contained in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 29, 2022.

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, 2021. Since the date of those financial statements, there have been no changes to the Company’s significant accounting policies.

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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 three months ended March 31, 2022.

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 records 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. As of March 31, 2022, the Company had a $1.0 million non-cash reserve for excess and obsolete finished goods inventory due to the uncertainty of commercial activities underlying XENLETA product sales. Inventory reported at March 31, 2022 and December 31, 2021 consisted of the following:

  

As of

As of

  

March 31,

December 31,

(in thousands)

2022

2021

XENLETA raw materials

$

1,235

$

1,528

XENLETA work in process

 

9,415

 

9,142

XENLETA finished goods

402

18

Total XENLETA

11,052

10,688

SIVEXTRO finished goods

 

4,580

 

3,821

Total inventory

$

15,632

$

14,509

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

March 31, 2022

Assets:

Cash equivalent:

Money market fund

$

8,066

$

$

 

$

8,066

Total assets

$

8,066

$

$

 

$

8,066

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(in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

December 31, 2021

Assets:

Cash equivalent:

Money market fund

$

8,050

$

$

 

$

8,050

Short-term investments:

Term deposits

 

16

 

 

 

16

Total assets

$

8,066

$

$

 

$

8,066

There were no transfers between levels in the three months ended March 31, 2022 or the year ended December 31, 2021. There were no changes in valuation techniques during the three months ended March 31, 2022.

As of March 31, 2022, and December 31, 2021, the Company did not hold any financial instruments as liabilities that were held at fair value. 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

Accrued expenses and other liabilities include the following:

    

As of

As of

March 31,

December 31,

(in thousands)

    

2022

2021

Research and development related costs

$

821

$

789

Payroll and related costs

 

2,507

 

5,085

Accounting, tax and audit services

 

852

 

736

Manufacturing and inventory

791

592

Product returns

1,310

2,282

Government rebates

1,668

1,751

Other accrued gross to net

1,244

1,090

Other

 

1,303

 

1,504

Total other current liabilities

$

10,496

$

13,829

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., or 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 $10.0 million became available upon the approval by the FDA of the NDA for XENLETA, which was drawn down. The other tranches are no longer available as their contingencies were not achieved.

The 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, or 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, or 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, or the Prepayment Fee: (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

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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 Third Amendment, to its Loan Agreement with Hercules. Pursuant to the Third Amendment, the Company repaid $30.0 million of the $35.0 million in aggregate principal amount of debt outstanding under the Loan Agreement, or the Prepayment. The Company determined to enter into the Third 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, or the Liquidity Requirement. Under the Third 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 Fee 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 Third 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 FDA and the Company achieves at least 70% of its revised net product revenue targets under the Loan Agreement.

On June 2, 2021, the Company entered into a further amendment, or the Fourth Amendment, to its Loan and Security Agreement with Hercules. Pursuant to the Fourth Amendment, the date on which the Company must commence repaying principal under the Loan Agreement was extended to April 1, 2022. The Company began making interest and principal payments in April 2022. In addition, pursuant to the Fourth Amendment, the minimum liquidity requirement of $3.0 million in cash and cash equivalents will be waived at any time the Company has recognized $15.0 million of net product revenue during the applicable trailing three months.

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 certain 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 Company was in compliance with all of its Loan Agreement covenants at March 31, 2022.

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. The carrying value of the term loan payable at March 31, 2022 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.

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Long-term debt as of March 31, 2022 and December 31, 2021 consisted of the following:

As of

As of

March 31,

December 31,

(in thousands)

    

2022

    

2021

Term loan payable

 

$

5,000

 

$

5,000

End of term fee

2,401

2,331

Unamortized debt issuance costs

 

(120)

 

(145)

Carrying value of term loan

7,281

7,186

Other long-term debt

832

844

Less: Amounts due within one year

(4,196)

(3,765)

Total long-term debt

 

$

3,917

 

$

4,265

Maturities of long-term debt, including the end of term fee as of March 31, 2022 were as follows:

(in thousands)

2022

 

$

3,129

2023

$

5,020

2024

$

208

2025

$

208

7.           Revenues

Three Months Ended

March 31,

(in thousands)

    

2022

    

2021

Product revenue, net

$

7,040

$

130

Collaboration revenues

629

2,002

Research premium and grant revenue

351

397

Total revenues

$

8,020

$

2,529

Collaboration revenues for the three months ended March 31, 2022 included $0.6 million related to the restructured China Region License Agreement, a portion of which is recognized over the estimated period the manufacturing collaboration and regulatory support will be provided to Sumitomo Pharmaceuticals (Suzhou) (see Note 11). Collaboration revenues for the three months ended March 31, 2021 included $0.7 million related to the restructured license agreement with Sinovant Sciences, Ltd., or Sinovant, which is recognized over the estimated period the manufacturing collaboration and regulatory support will be provided to Sinovant, as well as $1.0 million of the Company’s share of revenues associated with the SIVEXTRO distribution agreement with Merck & Co., Inc.

The Company sells its products to pharmaceutical wholesalers/distributors (i.e., the Company’s customers). The Company’s wholesalers/distributors in turn sell the Company’s products directly to clinics, hospitals, and private practices. Revenue from the Company’s product sales is recognized as physical delivery of product occurs (when the Company’s customer obtains control of the product), in return for agreed-upon consideration.

For the three months ended March 31, 2022, SIVEXTRO product revenues, net of gross-to-net accruals and adjustments for returns were $7.2 million. For the three months ended March 31, 2022 and 2021 XENLETA product revenues, net of gross-to-net accruals and adjustments for returns, were negative $0.2 million and $130 thousand, respectively. The Company´s gross-to-net, or GTN, estimates are based upon information received from external sources (such as written or oral information obtained from the Company´s customers with respect to their period-end inventory levels and sales to end-users during the period), in combination with management’s informed judgments. Due to the inherent uncertainty of these estimates, the actual amount incurred may be materially above or below the amount initially estimated when product revenues are originally recorded, then requiring prospective adjustments to the Company’s reported product revenues, net.

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For the three months ended March 31, 2022, the Company recorded a $0.3 million returns reserve adjustment for shelf life expiration of certain XENLETA products. For the three months ended March 31, 2021, the Company did not record any adjustments to the return reserve.

8.           Share-Based Payments

Stock Plan Activity

On April 2, 2015, the Company’s shareholders, management board and supervisory board adopted the Stock Option Plan 2015, or the SOP 2015, as amended. 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. With the approval of the 2017 Share Incentive Plan, there were no further shares available for issuance under the SOP 2015. However, all outstanding awards under SOP 2015 will remain in effect and continue to be governed by the terms of the SOP 2015.

On July 26, 2017, the Company’s board of directors adopted the 2017 Share Incentive Plan, or the 2017 Plan, and the shareholders approved the 2017 Plan at the Company’s Extraordinary General Meeting of Shareholders on September 15, 2017. The 2017 Plan permitted the award of share options (both incentive and nonstatutory options), share appreciation rights, or SARs, restricted shares, restricted share units, or 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 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. 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. With the approval of the 2020 Share Incentive Plan, there were no further shares available for issuance under the 2017 Plan.

On March 12, 2019, the Company’s board of directors adopted the 2019 Inducement Share Incentive Plan, or the 2019 Inducement Plan and, subject to the adjustment provisions of the 2019 Inducement Plan, reserved 200,000 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. On April 28, 2020, the board of directors resolved not to make any further awards under the 2019 Inducement Plan.

In July 2018, the Company granted a non-statutory option to purchase 85,000 of its ordinary shares to the Company’s newly appointed Chief Executive Officer, or 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 $35.30 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 Company also issues non-statutory options to new employees upon the commencement of their employment.

On March 4, 2020, the Company´s board of directors adopted the 2020 Share Incentive Plan, or the 2020 Plan, which was approved by the Company´s shareholders at the 2020 Annual General Meeting of Shareholders in July 2020, or the 2020 AGM. As of the date of the 2020 AGM, the total number of ordinary shares reserved for issuance under the 2020 Plan was for the sum of 930,000 ordinary shares, plus the number of the Company´s ordinary shares that remained

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available for grant under the 2017 Plan as of immediately prior to the 2020 AGM and the number of ordinary shares subject to awards granted under the 2017 Plan and the 2015 SOP, that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right. The 2020 Plan provides for the grant of incentive share options, non-statutory share options, share appreciation rights, restricted share awards, restricted share units, other share-based and cash-based awards and performance awards. Under the 2020 Plan the Company granted RSUs to certain employees that vest in three six-month increments beginning in January 2021 and ending in January 2022. The Company also granted RSUs to certain employees, where vesting of the RSUs was subject to individual performance goals. The Company granted RSUs to certain employees which vest as to 25% of the shares underlying the RSUs in four annual increments. Additionally, the Company granted 7,000 RSUs to its former Chief Medical Officer and to its former Chief Financial Officer, which vest as to 50% of the shares underlying the RSUs each year over the term of their respective consulting agreements. During the three months ended March 31, 2022, option awards to purchase 592,000 ordinary shares with an exercise price of $0.45 per share and 295,900 RSUs were granted under the 2020 Plan, subject to shareholder approval, which, in the case of the options, will automatically convert to cash-settled share appreciation rights and, in the case of the RSUs, will represent the right to receive the economic equivalent of one ordinary share of the Company in cash on the applicable vesting date, in each case, if our shareholders do not approve the increase to our 2020 Plan at our 2022 Annual General Meeting of Shareholders. As a result, such grants awarded under the 2020 Plan are liability classified until such shareholder approval is obtained. Stock-based compensation expense for liability classified option awards and RSUs under the 2020 Plan was $16 thousand for the three months ended March 31, 2022.

At March 31, 2022, 99,220 ordinary shares excluding the liability classified awards were available for future issuance under the 2020 Plan.

On December 9, 2020, the Company´s board of directors adopted without stockholder approval the 2021 Inducement Share Incentive Plan, or the 2021 Inducement Plan and, subject to the adjustment provisions of the 2021 Inducement Plan, reserved 200,000 ordinary shares for issuance pursuant to equity awards granted under the 2021 Inducement Plan. In accordance with Nasdaq Listing Rule 5635(c)(4), awards under the 2021 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. In September 2021, the Company’s board of directors adopted an amendment to the 2021 Inducement Plan that increased the amount of shares reserved for issuance under the plan from 200,000 shares to 500,000 shares. 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.

Stock Options

The following table summarizes information regarding the Company’s stock option awards for the three months ended March 31, 2022:

Weighted

Weighted

Average

average

Remaining

Aggregate

exercise

Contractual

intrinsic

price in

Term

value

Options

$ per share

(in years)

(in thousands)

Outstanding as of January 1, 2022

1,348,477

20.46

8.0

Granted

604,000

0.45

Exercised

Cancelled and forfeited

(422)

24.79

Outstanding as of March 31, 2022

1,952,055

 

14.26

8.4

$

Vested and exercisable as of March 31, 2022

587,726

 

41.94

6.8

$

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The Company has 1,952,055 option grants outstanding at March 31, 2022 with exercise prices ranging from $0.45 per share to $110.00 per share. As of March 31, 2022, there was $1.6 million of total unrecognized compensation expense related to unvested stock options, which will be recognized over the weighted-average remaining vesting period of 1.1 years.

The stock options granted in the three months ended March 31, 2022 had a weighted average grant date fair value of $0.44 per share based on a Black Scholes option pricing model. The significant inputs into the model were as follows

    

Expected volatility

 

76.4% - 76.9%

Expected term of options (in years)

 

6.1

Range of risk-free interest rate

 

1.68% - 1.76%

Dividend yield

 

The expected price volatility is based on historical trading volatility of our ordinary shares 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.

Restricted Share Units (“RSUs”)

The following table summarizes information regarding the Company’s restricted share unit awards for the three months ended March 31, 2022:

Weighted

average fair

RSUs

value in $ per share

Outstanding as of January 1, 2022

789,738

2.92

Granted

461,700

0.45

Vested and issued

(87,552)

4.13

Forfeited

Outstanding as of March 31, 2022

1,163,886

1.88

The Company has total unrecognized compensation costs of $0.9 million associated with RSUs which are expected to be recognized over the awards average remaining vesting period of 1.5 years. The intrinsic value of RSU’s that vested during the three months ended March 31, 2022 was $41 thousand.

Stock-based Compensation

The following table presents stock-based compensation expense included in the Company’s consolidated statements of operations:

Three Months Ended

March 31, 

(in thousands)

    

2022

    

2021

Research and development expense

 

$

94

$

216

Selling, general and administrative expense

 

906

705

Total stock-based compensation expense

 

$

1,000

$

921

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, or the 2018 ESPP. The maximum aggregate number of shares of ordinary shares that may

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be purchased under the 2018 ESPP is 50,000 shares, or the ESPP Share Pool, subject to adjustment as provided for in the 2018 ESPP. 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. The Company suspended the 2018 ESPP in April 2020.

9.           Income Tax Expense

For the three months ended March 31, 2022, the Company recorded a tax expense of $0.4 million. For the three months ended March 31, 2021, the Company recorded a tax expense of $0.2 million.

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 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, 2022 and December 31, 2021.

10.         Earnings (Loss) per Share

Basic and Diluted Loss per Share

For the three months ended March 31, 2022 and 2021, basic and diluted net loss per share was determined by dividing net loss 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)

2022

    

2021

Net loss for the period

$

(11,819)

$

(13,981)

Weighted average number of shares outstanding

 

58,794,142

 

26,413,590

Basic and diluted loss per share

$

(0.20)

$

(0.53)

The following ordinary share equivalents were excluded from the calculations of diluted loss 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, 

2022

    

2021

Stock option awards

1,952,055

1,021,698

Restricted share units 

1,163,886

502,680

Warrants

10,619,347

10,619,347

11.         Significant Arrangements and License Agreements

Sales Promotion and Distribution Agreement with Merck & Co.

On July 15, 2020, the Company entered into a Sales Promotion and Distribution Agreement, or the Distribution Agreement, with MSD International GmbH, or MSD, and Merck Sharp & Dohme Corp., or Supplier, each a subsidiary of Merck & Co., Inc. Under the Distribution Agreement and subject to the satisfaction of certain conditions, MSD appointed the Company as its sole and exclusive distributor of certain products containing tedizolid phosphate as the active ingredient previously marketed and sold by Supplier and MSD under the trademark SIVEXTRO® for injection, intravenous use and oral use, or the Products, in the United States and its territories, or the SIVEXTRO Territory. SIVEXTRO is an oxazolidinone-class antibacterial indicated in adults and pediatric patients 12 years of age and older

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for the treatment of acute bacterial skin and skin structure infections caused by certain susceptible Gram-positive microorganisms. On April 12, 2021, in accordance with the terms of the Distribution Agreement, the Company began exclusive distribution of SIVEXTRO under its own National Drug Code, or NDC, and the Company recognizes 100% of net product sales of SIVEXTRO in its results of operations.

Under the Distribution Agreement and subject to the fulfillment of certain conditions, including the Company having engaged sufficient sales representatives, restrictions relating to travel and physician office access in the SIVEXTRO Territory due to COVID-19 having continued to decrease in a sufficient portion of the SIVEXTRO Territory so as not to hinder the successful detailing of SIVEXTRO, the Company has been granted the right by MSD initially to promote the Products in the SIVEXTRO Territory and, upon satisfaction of additional conditions, including an increase in sales representatives, the right to exclusively distribute the Products in the SIVEXTRO Territory, including the sole right and responsibility to fill orders with respect to the Products in the SIVEXTRO Territory. The Company successfully satisfied those conditions, including the increase in the number of sales representatives, and began filling orders of SIVEXTRO with its own Nabriva NDC beginning April 12, 2021. Subject to applicable law, the Company is entitled to determine the final selling prices of the Products charged by the Company to its customers at its sole discretion, subject to an overall annual limit on price increases, and will be solely responsible for sales contracting and all market access activities, including bidding, hospital listing and reimbursement. The Company is responsible for all costs related to the promotion, sale and distribution of the Products by the Company, as well as all costs required to meet its staffing obligations under the Distribution Agreement. The Company is obligated to use commercially reasonable efforts to promote and distribute the Products and to maximize the sales of the Products throughout the SIVEXTRO Territory. The Company has agreed to employ a sales force or retain the services of a contract sales organization to fulfill its obligations under the Distribution Agreement. The Company continues to operate a virtual and in-person sales effort with community-based expertise with Amplity Health, which is a contract sales organization, with a small and focused sales effort for SIVEXTRO and XENLETA. The Company expanded this effort to 60 sales representatives and may expand it further. The Company also piloted a virtual promotion effort with incremental sales representatives in the third quarter of 2021 and has engaged in-house district managers in April 2022. On April 22, 2022, the Company agreed to an extension of the Sales Promotion and Distribution Agreement with MSD International GmbH and Merck Sharp & Dohme Corp. for exclusive distribution of SIVEXTRO® for injection, intravenous use and oral use, in the SIVEXTRO Territory through December 31, 2026. SIVEXTRO is an oxazolidinone-class antibacterial indicated in adults and pediatric patients 12 years of age and older for the treatment of ABSSSI caused by certain susceptible Gram-positive microorganisms.

Furthermore, a subsidiary of Merck will sell, and the Company has agreed to purchase, SIVEXTRO at specified prices in such quantities as the Company may specify. Although the Company is entitled, subject to appliable law, to determine the final selling prices of SIVEXTRO in its sole discretion, subject to an overall annual limit on price increases, the Company may not be able to sell SIVEXTRO at prices high enough to recoup its investment in a sales force and other commercialization activities.

China Region License Agreement

In March 2018, the Company entered into the China Region License Agreement, with Sinovant Sciences, Ltd., or Sinovant, an affiliate of Roivant Sciences, Ltd., to develop and commercialize lefamulin in the greater China region. As part of the China Region 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, or the China Region Licensed Products, in the People’s Republic of China, Hong Kong, Macau, and Taiwan, together the Extended China Territory. In May 2021, the Company entered into an assignment, assumption and novation agreement, or the Assignment Agreement, pursuant to which the Company consented to the assignment by Sinovant, an affiliate of Roivant Sciences, Ltd., of the China Region License Agreement to develop and commercialize lefamulin in the greater China region to Sumitomo Pharmaceuticals (Suzhou), a wholly-owned subsidiary of Sumitomo Dainippon Pharma Co., Ltd., or Sumitomo. Pursuant to the Assignment Agreement, the Company agreed to release Sinovant and its affiliates from their obligations under the China Region License Agreement and consented to Sumitomo Pharmaceuticals (Suzhou)’s assumption of such obligations. In addition, Sumitomo Dainippon Pharma Co., Ltd., or Sumitomo, has agreed to guarantee all of the obligations of Sumitomo Pharmaceuticals (Suzhou) under the China Region License Agreement.

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Under the China Region License Agreement, Sumitomo Pharmaceuticals (Suzhou) and the Company’s subsidiaries have established a joint development committee, or the JDC, to review and oversee development and commercialization plans in the Extended China Territory. The China Region License Agreement includes milestone events consisting of a non-refundable $5.0 million upfront payment, 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 China Region Licensed Product receives a second or any subsequent regulatory approval in the People’s Republic of China. The Company has received the $5.0 million upfront payment, a $1.5 million payment for the submission of a clinical trial application, or CTA, by Sinovant to the Chinese Food and Drug Administration, which was received in the first quarter of 2019 and a $5.0 million milestone payment in the third quarter of 2019 in connection with the FDA approval for lefamulin. The Company will also be eligible to receive low double-digit royalties on sales, if any, of China Region Licensed Products in the Extended China Territory. In December 2020, the Company announced the restructuring of its China Region License Agreement. The restructured agreement provided for additional manufacturing collaboration and regulatory support to be provided to the contract counterparty by the Company that is expected to help expedite the delivery of XENLETA to patients in greater China. The restructured agreement also accelerated $3.0 million of the $5.0 million milestone payment to the Company that was previously payable upon regulatory approval of XENLETA in China, including a non-refundable upfront payment of $1.0 million which was received in the fourth quarter of 2020 and a $1.0 million milestone achieved during the first quarter of 2021. During 2021, management determined that the remaining $1.0 million milestone payment was probable of achievement and therefore the Company is recognizing the $3.0 million of accelerated payments under the restructured agreement as collaboration revenue in the consolidated statements of operations over the estimated period the manufacturing collaboration and regulatory support will be provided to the contract counterparty, which was $0.6 million for the three months ended March 31, 2022, based on the proportional performance of the underlying performance obligation. The remaining milestones of $86.0 million are tied to additional regulatory approvals and annual sales targets. The future regulatory and commercial milestone payments under the China Region License Agreement will be recorded during the period the milestones become probable of achievement.

Except for the manufacturing collaboration and regulatory support discussed above, Sumitomo Pharmaceuticals (Suzhou) will be solely responsible for all costs related to developing, obtaining regulatory approval of and commercializing China Region Licensed Products in the Extended China Territory and is obligated to use commercially reasonable efforts to develop, obtain regulatory approval for and commercialize China Region Licensed Products in the Extended China Territory. The Company is obligated to use commercially reasonable efforts to supply, pursuant to supply agreements to be negotiated by the parties, to Sumitomo Pharmaceuticals (Suzhou) a sufficient supply of lefamulin for Sumitomo Pharmaceuticals (Suzhou) to manufacture finished drug products for development and commercialization of the China Region Licensed Products in the Extended China Territory.

Unless earlier terminated, the China Region License Agreement will expire upon the expiration of the last royalty term for the last China Region Licensed Product in the Extended China Territory, which the Company expects will occur in 2033. Following the expiration of the last royalty term, the license granted to Sumitomo Pharmaceuticals (Suzhou) will become non-exclusive, fully-paid, royalty-free and irrevocable. The China Region License Agreement may be terminated in its entirety by Sumitomo Pharmaceuticals (Suzhou) upon 180 days’ prior written notice at any time. Either party may, subject to specified cure periods, terminate the China Region License Agreement in the event of the other party’s uncured material breach. Either party may also terminate the China Region License Agreement under specified circumstances relating to the other party’s insolvency. The Company has the right to terminate the China Region License Agreement immediately if Sumitomo Pharmaceuticals (Suzhou) does not reach certain development milestones by certain specified dates (subject to specified cure periods). The China Region License Agreement contemplates that the Company will enter into ancillary agreements with Sumitomo Pharmaceuticals (Suzhou), 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 certain products containing XENLETA in the forms clinically developed by us or any of our affiliates, or the Sunovion Licensed

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Products, in Canada in all uses in humans in CABP and in any other indication for which the Sunovion Licensed Products have received regulatory approval in Canada. Under the Sunovion License Agreement, Sunovion and DAC established a joint development committee, or the Sunovion JDC, to review and oversee regulatory approval and commercialization plans in Canada. Sunovion will be solely responsible for all costs related to obtaining regulatory approval of and commercializing Sunovion Licensed Products in the Canada and is obligated to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize Licensed Product in the Canada.

On November 7, 2019, the Company, through Sunovion, submitted a New Drug Submission, or 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 occurred on July 10, 2020.

The Company 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. With the NDS approval that occurred on July 10, 2020, the Company received a regulatory milestone payment of $0.5 million. Any future regulatory and commercial milestone payments under the Sunovion License Agreement will be recorded during the period the milestones become probable of achievement.

Named Patient Program Agreement with WE Pharma Ltd.

On June 30, 2020 the Company announced that WE Pharma Ltd., or WEP Clinical, a specialist pharmaceutical services company, had signed an exclusive agreement with the Company to supply XENLETA on a named patient or expanded access basis in certain countries outside of the US, China and Canada. The Named Patient Program, or NPP, is designed to ensure that physicians, contingent on meeting the necessary eligibility criteria and receiving approval, can request IV or oral XENLETA on behalf of patients who live in certain countries where it is not yet available and have an unmet medical need.

12.         Commitments and Contingencies

The Company has contractual commitments related primarily to contracts entered into with contract manufacturing organizations and contract research organizations in connection with the commercial manufacturing of XENLETA, the purchase of SIVEXTRO finished product and other research and development activities. The payments to the service providers are based on the achievement of milestones included within the agreements. Also, some of these contracts are subject to early termination clauses exercisable at the discretion of the Company.

XENLETA API Supply

On August 4, 2021, our wholly-owned subsidiary, Nabriva Therapeutics Ireland DAC, entered into an amendment, or the First Amendment, to its API Supply Agreement, or the Hovione Supply Agreement, with Hovione Limited, or Hovione, which provides for the long-term commercial supply of the active pharmaceutical ingredients, or API, for XENLETA. Under the First Amendment, Hovione agreed to cancel our May 2021 purchase order for XENLETA API, which represented our minimum purchase requirement under the Hovione Supply Agreement. In addition, pursuant to the First Amendment, Hovione agreed to reduce our annual minimum purchase requirements for XENLETA API to no minimum purchase requirement in 2021, by 50% from 2022 to 2024 and by 25% in 2025, in consideration for cash payments from us totaling €3.2 million and the right to a low single-digit royalty on total net sales of XENLETA in the United States for a period commencing on August 4, 2021 and ending on November 22, 2030, or the Royalty Term, which royalty payments shall be no greater than an aggregate of €10.0 million. If the aggregate amount of royalties payments received by Hovione under the First Amendment is less than an aggregate of €4.0 million, we are obligated to pay Hovione the difference in a lump sum payment at the end of the Royalty Term. In addition, pursuant to the First Amendment, Hovione agreed to extend the duration of the Hovione Supply Agreement from November 22, 2025 to November 22, 2030 with annual minimum purchase requirements for 2026 to 2030 at the newly agreed annual minimum purchase amount for 2025. Pursuant to the First Amendment, upon the occurrence of certain

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events of insolvency for us, any unpaid minimum annual commitment amounts and royalty amounts under the agreement will become immediately due and payable.

Zavante Obligations

In connection with the acquisition of Zavante in July 2018, the Company is obligated to pay up to $97.5 million in contingent consideration to the former Zavante shareholders, of which $25.0 million would become payable upon the first approval of a NDA from the FDA for CONTEPO for any indication, or the Approval Milestone Payment, and an aggregate of up to $72.5 million would become payable upon the achievement of specified sales milestones, or the Net Sales Milestone Payments. The Company’s shareholders have approved the issuance of the Company’s ordinary shares in settlement of potential milestone payment obligations that may become payable in the future to former Zavante stockholders, including the Approval Milestone Payment which will be settled in Company ordinary shares. The Company also has the right to settle the Net Sales Milestone Payments in Company ordinary shares, except as otherwise provided in the Merger Agreement.

The Company is obligated to pay $3.0 million in cash upon marketing approval by the FDA with respect to any oral, intravenous or other form of fosfomycin, or the Zavante Products, and milestone payments of up to $26.0 million that may be settled in ordinary shares in the aggregate upon the occurrence of various specified levels of net sales with respect to the Zavante Products. In addition, Zavante is obligated to make annual royalty payments of a mid-single-digit percentage of net sales of Zavante Products, subject to adjustment based on net sales thresholds and with such percentage reduced to low single-digits if generic fosfomycin products account for half of the applicable market on a product-by-product and country-by-country basis. Zavante will also pay a mid-single-digit percentage of transaction revenue in connection with the consummation of the grant, sale, license or transfer of market exclusivity rights for a qualified infectious disease product (within the meaning of the 21st Century Cures Act) related to a Zavante Product.

Litigation

As of the date of filing this Quarterly Report on Form 10-Q, there are no material outstanding legal proceedings against the Company or its current officers or directors.

13.         Subsequent Events

The Company has evaluated all subsequent events through the filing date of this Form 10-Q with the SEC, to ensure that this filing includes appropriate disclosure of events both recognized in the financial statements as of March 31, 2022, and events which occurred subsequently but were not recognized in the financial statements. There were no subsequent events which required recognition, adjustment to, or disclosure in the financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our historical consolidated financial statements and the related notes thereto appearing in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 29, 2022. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factor Summary” and “Risk Factors” sections of this Quarterly Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a biopharmaceutical company engaged in the commercialization and research and development of novel anti-infective agents to treat serious infections. We have the commercial rights to two approved products, SIVEXTRO and XENLETA, as well as one development product candidate, CONTEPO. In August 2019, our first product was approved by the U.S. Food and Drug Administration, or FDA, and we made it available in the United States in September 2019 under the brand name XENLETA. XENLETA (lefamulin) is a first-in-class semi-synthetic pleuromutilin antibiotic for systematic administration in humans discovered and developed by our team. XENLETA is designed to inhibit the synthesis of bacterial protein, that is required for bacteria to grow, by binding with high affinity, high specificity and at molecular targets that are different than other antibiotic classes. Based on results from two global, Phase 3 clinical trials, we believe that XENLETA is well-positioned for use as a first-line monotherapy for the treatment of community-acquired bacterial pneumonia, or CABP, due to its novel mechanism of action, targeted spectrum of activity, resistance profile, achievement of substantial drug concentration in lung tissue and fluid, availability of oral and intravenous, or IV, formulations and a generally well-tolerated safety profile. We believe XENLETA represents a potentially important treatment option for the five million adults in the United States diagnosed with CABP each year.

Since inception, we have incurred significant operating losses. As of March 31, 2022 we had an accumulated deficit of $607.5 million. To date, we have financed our operations primarily through equity offerings, convertible and term debt financings and research and development support from governmental grants and proceeds from our licensing agreements and SIVEXTRO and XENLETA product sales. We have devoted substantially all of our efforts to research and development, including clinical trials, as well as commercializing SIVEXTRO and XENLETA. Our ability to generate profits from operations and become and remain profitable depends on our ability to successfully develop and commercialize drugs that generate significant revenue.

We expect to continue to incur significant expenses and have negative cash flows for at least the next several years. Our expenses will increase if we suffer any regulatory delays or are required to conduct additional clinical trials to satisfy regulatory requirements. If we obtain marketing approval for CONTEPO or any other product candidate that we develop, in-license or acquire, we expect to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing. In light of the COVID-19 pandemic, a substantial decrease of non-COVID-19 respiratory infections, the associated disruption to the healthcare delivery and the uncertainty of resuming full direct physician promotion, the timing and amount of sales of SIVEXTRO, XENLETA or any product candidates are uncertain. Based on our current forecasts and plans, we will need to obtain substantial additional capital in connection with our continuing operations. Adequate additional capital may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs and commercialization efforts.

Business Update Regarding COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic. The outbreak had an impact on the global economy, resulting in rapidly changing market and economic conditions. National

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and local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain non-essential businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. The COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, communities and business operations, as well as the U.S. economy and financial markets.

The extent of the impact of COVID-19 on our business will depend on the length and severity of the pandemic, including the extent there is any resurgence of the COVID-19 virus or any variant strains of the virus, the availability and effectiveness of vaccines and the impact of the foregoing on our business. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted. The full impact of COVID-19 is unknown. Federal, state and local governmental policies and initiatives designed to reduce the transmission of COVID-19 have resulted in, among other things, a significant reduction in physician office visits, the cancellation of elective medical procedures, and the adoption of hybrid-remote-working policies, all of which have had, and we believe will continue to have, an impact on our consolidated results of operations, financial position and cash flows.

In response to the COVID-19 pandemic, we closed our administrative offices and shifted to a remote working business model. We have implemented a hybrid-remote-working policy for all of our employees, and we may take further actions that alter our operations as may be required by federal, state, or local authorities, or which we determine are in our best interests. The commercial and medical organizations suspended in-person interactions with physicians and customers and were restricted to conducting educational and promotional activities virtually. The impact of the COVID-19 pandemic could continue to have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects in the near-term and beyond 2022. While we have used currently available information in our forecasts, the ultimate impact of the COVID-19 pandemic and our product sales for SIVEXTRO and XENLETA, on our results of operations, financial condition and cash flows is highly uncertain, and cannot currently be accurately predicted. Influenza-like illness cases are largely responsible for the seasonality observed with community-acquired bacterial pneumonia and we believe the decrease in bacterial respiratory tract infection rates, indicated by the decrease in the number of physician office visits, hospitalizations and antibiotic prescriptions, are a consequence of the public health measures that have been taken in response to the COVID-19 pandemic. Data from clinical laboratories in the United States indicated a 61% decrease in the number of specimens submitted and a 98% decrease in influenza activity as measured by percentage of submitted specimens testing positive. Our results of operations, financial condition and cash flows are dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy or any other negative trend in the U.S. or global economy and any new information that may emerge concerning the COVID-19 pandemic and the actions to contain it or treat its impact, which at the present time are highly uncertain and cannot be predicted with any accuracy.

SIVEXTRO is approved for the treatment of ABSSSIs caused by certain susceptible Gram-positive microorganisms. Before we were permitted to sell SIVEXTRO under the Distribution Agreement, we were required to secure a sales force of a certain size and the restrictions related to COVID-19 needed to be eased in a sufficient manner to permit us to promote and distribute SIVEXTRO. Re-securing a sales force of a certain size for the promotion and distribution of SIVEXTRO resulted in significant additional expense and our efforts to maintain a sales force may not be successful. We continue to operate a virtual and in-person sales effort with community-based expertise with Amplity Health, which is a contract sales organization, with a small and focused sales effort for SIVEXTRO and XENLETA. We expanded this effort to 60 sales representatives and may expand it further. We also piloted a virtual promotion effort with incremental sales representatives in the third quarter of 2021 and have engaged in-house district managers in April 2022.

XENLETA is approved for the treatment of CABP in adults in the United States. The National Institute for Allergy and Infectious Diseases, or NIAID, has identified that secondary bacterial pneumonia caused by common upper respiratory tract bacteria plays a predominant role in the cause of death in pandemic influenza. NIAID recommends that the prevention, diagnosis, prophylaxis, and treatment of secondary bacterial pneumonia, as well as the stockpiling of antibiotics and bacterial vaccines, be high priorities for pandemic planning. We believe there is a potential for XENLETA to be considered for U.S. government stockpiling for pandemic preparedness.

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Two ongoing pediatric Phase 1 clinical trials for lefamulin and IV fosfomycin were temporarily closed for enrollment as hospitals suspended access and non-essential clinical research to focus on health care delivery to COVID-19 patients. As of July 2020, both trials started to re-open, where allowed by the institution, and initiated screening of potential subjects at sites.

Financial Operations Overview

Revenue

In September 2019, we had our commercial launch of XENLETA and, in April 2021 we began exclusive distribution of SIVEXTRO in the United States and certain of its territories. For the three months ended March 31, 2022, we recorded $7.2 million of SIVEXTRO product revenue, net of gross-to-net accruals and adjustments for returns, and negative $0.2 million of XENLETA product revenue, net of gross-to-net accruals and adjustments for returns. Our distribution partners for XENLETA continue to hold inventory, with a 36 month shelf life, from the initial launch. With a near term shelf life expiration, we recorded a $0.3 million returns reserve adjustment in the first quarter of 2022. We launched a new 10-count blister pack of XENLETA in the fourth quarter of 2021, which has a four year shelf life. Future product revenues will be generated by the amount and frequency of reorders from our wholesale customers based on the ultimate consumption patterns from the end users of SIVEXTRO and XENLETA.

Collaboration revenues for the three months ended March 31, 2022 included $0.6 million related to the restructured China Region License Agreement, a portion of which is recognized over the estimated period the manufacturing collaboration and regulatory support will be provided to Sumitomo Pharmaceuticals (Suzhou).

Our revenues for the three months ended March 31, 2022 included governmental research premiums, collaboration revenues and the benefit of government loans at below-market interest rates.

Cost of Revenues

Cost of revenues represented 17.2% and 0.4% of our total operating expenses for the three months ended March 31, 2022 and 2021, respectively. Cost of revenues primarily represent the cost of the product itself, labor and overhead, and any reserve for excess or obsolete inventory. Other cost of revenues include costs associated with the manufacturing collaboration and regulatory support under our licensing agreements. The increase in cost of revenue for the three months ended March 31, 2022 was primarily due to the launch of SIVEXTRO under our own National Drug Code, or NDC, on April 12, 2021.

Research and Development Expenses

Research and development expenses represented 18.0% and 24.2% of our total operating expenses for the three months ended March 31, 2022 and 2021, respectively.

For each of our research and development programs, we incur both direct and indirect expenses. Direct expenses include third-party expenses related to these programs such as expenses for manufacturing services (prior to our products receiving FDA approval, after which time these costs are capitalized in inventory until product is sold), non-clinical and clinical studies and other third party development services. Indirect expenses include salaries and related costs, including stock-based compensation, for personnel in research and development functions, infrastructure costs allocated to research and development operations, costs associated with obtaining and maintaining intellectual property associated with our research and development operations, laboratory consumables, consulting fees related to research and development activities and other overhead costs. We utilize our research and development staff and infrastructure resources across multiple programs, and many of our indirect costs historically have not been specifically attributable to a single program. Accordingly, we cannot state precisely our total indirect costs incurred on a program-by-program basis.

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The following table summarizes our direct research and development expenses by program and our indirect costs.