Iterum Therapeutics plc (ITRMF) Earnings Call Transcript & Summary

Hello, and welcome to the Iterum Therapeutics Q3 Financial Results Conference Call. My name is Alex, and I will be your operator for today. [Operator Instructions] I will now hand over to your host, Louise Barrett, Senior Vice President, Legal Affairs. Louise, over to you.

Thank you, Alex. Good morning, and welcome to Iterum Therapeutics' Third Quarter 2021 Financial Results and Business Update Conference Call. A press release with our third quarter results was issued earlier this morning and can be found on our website. We are joined this morning by Corey Fishman, CEO; and Judy Matthews, CFO. Corey will provide some opening remarks. Judy will provide some details on our financial results, and then we will open the line for Q&A. Before we begin, I'd like to remind you that this call will contain forward-looking statements concerning our plans, strategies and prospects for our business, including with respect to planned interactions and communications with the FDA and our ability to reach agreement with the FDA on the design of any potential future clinical trials. Our expectations with regard to our ability to resolve the matters set forth in the complete response that received in July 2021 and obtained approval for oral sulopenem, the conduct of potential future clinical and nonclinical development of sulopenem and the sufficiency of our cash resources to execute on our strategy. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including uncertainties inherent in the initiation and conduct of clinical and nonclinical development; availability and timing of data from such clinical trials and nonclinical development; the timing or likelihood of regulatory filings and approvals, including the potential resubmission of our NDA for oral sulopenem; changes in public policy or legislation; the actions of third-party clinical research organizations, suppliers and manufacturers; the accuracy of our expectations regarding how far into the future the company's cash on hand will fund our ongoing operations, including completing potential additional clinical and nonclinical development of oral sulopenem; the impact of COVID-19 and related response measures thereto; our ability to maintain our listing on the NASDAQ Capital Market; and other risk factors set out in our filings with the SEC, including our most recently filed quarterly report on Form 10-Q. In addition, any forward-looking statements represent our views only as of the date of this call and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements. We will also be referencing non-GAAP financial measures during the call. We've provided reconciliations of GAAP reported to non-GAAP adjusted information in the press release issued this morning. With that said, I'll turn it over to you, Corey, for your opening remarks.

Thanks, Louise. Welcome, and thank you for joining us today. I'll be providing a brief update this morning. As we previously mentioned, we had requested a Type A meeting with the FDA to discuss our complete response letter that we received in late July. We recently had that meeting and the FDA informed us that, in their opinion, the totality of our NDA package was not sufficient to warrant approval for oral sulopenem at that time, even though they acknowledge that sulopenem showed statistical significance in the overall response rate by treatment arm against ciprofloxacin in the ciprofloxacin resistant population in the treatment of uncomplicated urinary tract infections. We then discussed what additional clinical work would be required in order to have a package that they deemed potentially adequate for approval, assuming the trial results were successful. The FDA feedback received was that one additional Phase III clinical trial should be sufficient, subject, of course, to reaching agreement with the FDA on the design of that trial. We have since requested a Type B meeting with the FDA to discuss the details of that additional trial, including the protocol, endpoints and other relevant factors. Our hope is that after this meeting, which we expect to occur around year-end, we will have clarity on all major aspects of the additional trial required to support potential resubmission of our NDA and be able to work expeditiously to get that study enrolling patients in the first half of 2022. It's important to note that given the urgent unmet medical need for new oral treatments for uncomplicated urinary tract infections, we remain confident in the value of oral sulopenem to treat multidrug-resistant infections and strongly believe sulopenem could be an important and valuable product for physicians and patients. Lastly, I'll spend just a moment on our cash position and outlook. We ended Q3 with a strong cash balance of approximately $86 million on the balance sheet. Based on our latest forecasts, we anticipate this cash balance will fund the company into 2024 and allow us to complete the proposed additional clinical development of sulopenem to support, if successful, the resubmission of our NDA to the FDA for the treatment of uncomplicated urinary tract infections. Now I'll turn the call over to Judy for details on our financial results.

Thanks, Corey. Total operating expenses were $4.9 million in the third quarter of 2021 compared to $6.3 million in the third quarter of 2020. Operating expenses include research and development expenses and general and administrative expenses. R&D costs were $1.8 million for the third quarter of 2021 compared to $3.9 million for the same period in 2020. The R&D category includes expenses for our clinical and development programs, our CMC costs and our regulatory expenses. The primary driver of the $2.1 million decrease in R&D costs was the completion of our Phase III program in 2020. G&A costs were $3 million for the third quarter of 2021, which is $600,000 higher than G&A costs of $2.4 million in the third quarter of 2020 due primarily to higher share-based compensation for employees and directors. Moving on to nonoperating items. Interest expense was $800,000 for the third quarter of 2021 compared to $4.2 million in the third quarter of 2020. The primary reason for the $3.4 million decrease in interest expense was noncash interest expense associated with the lower exchangeable note balance of $12.6 million as of September 30, 2021 versus $51.8 million as of September 30, 2020. On a strictly cash basis, we paid interest related to our term loan with SVB of approximately $90,000 in the third quarter of 2021 versus approximately $220,000 in the third quarter of 2020. The reduction in cash interest is largely due to a lower principal balance on our term loan as monthly amortization began in the fourth quarter of 2019 and will continue until our final payment in March 2022. As of September 30, 2021, there was a remaining balance of $3.2 million on our term loan with SVB. Our net income on a U.S. GAAP basis of $3.7 million was driven by a $9.8 million noncash adjustment to report a decrease in the value of the derivative components associated with our exchangeable notes as a result of a decrease in the price of our ordinary shares and market capitalization during the period. There was no impact of this adjustment on cash or cash runway, which I will turn to in a moment. On a non-GAAP basis, which excludes certain noncash adjustments, including adjustments to record derivatives at their fair value, our net loss of $5.2 million in the third quarter of 2021 was $1.8 million less than our net -- non-GAAP net loss of $7 million in the third quarter of 2020 as a result of the lower operating expenses previously discussed. At the end of September, we had cash and short-term investments of $85.7 million. Based on our current operating plan and subject to final determination of the design plan conduct of potential additional clinical and nonclinical development for sulopenem, we have cash into 2024. As such, we anticipate that our existing cash will be sufficient to allow us to complete the proposed additional development of oral sulopenem to support, if successful, a resubmission of the NDA to the FDA for the treatment of UTI. As of September 30, 2021, we had approximately 183 million ordinary shares outstanding. Also as of the end of September, we had 7.2 million warrants outstanding at an average price of $1.61 per share and $12.6 million of exchangeable notes, which can be exchanged for approximately 18 million shares, which includes accrued interest at the option of the note holder. Now I will turn it back over to Corey for some comments.

Thanks, Judy. We'd like to take a moment and just open the lines up for questions now.

[Operator Instructions] Our first question for today comes from Gregory Renza from RBC Capital Markets.

I look forward to all the upcoming progress. Corey, as you head into the Type B meeting, I'm just wondering if you could provide us with perhaps what your base case is on a trial design or any additional color at this point that you could touch on to just help us understand and maybe even baselining it to perhaps share, one, how you're thinking about that in size and scope. And then just second question is just around certainly a great deal of data you've generated already. I'm just curious if you have plans or how you're thinking about kind of reengaging the clinical and medical community and maybe sharing that data in parallel as you initiate a second pivotal trial.

Sure. Well, thanks, Greg, for the questions. I appreciate it. With regard to the first question, we really don't have a lot of details that are in a state that we're able to share yet regarding the study design simply because we have not yet solidified with the agency what that study design will be. And I'd rather not share sort of our thinking now and then have to come back to you all and say, well, FDA said this, and they said that, and we have to change it. Suffice to say that we will be doing a study per the guidance that FDA has issued a couple of years back for those trials and uncomplicated urinary tract infections. And our goal of the Type B meeting is to work with them on the specifics of that. We also aren't just sitting on our hands, as you'd imagine, we have begun conversations with a number of external vendors, including CROs to talk about the generalities, talk about the sites, talk about -- we don't have specifics yet to be able to say, here's exactly what we want to do. But we've begun all those conversations, and our CMC team has been working very hard on making sure we have plenty of clinical supply, which we do and figuring out the time lines for all of that to be able to get us to start this study in the first half of next year. I think that's probably as much as I can tell you that is valid and important for now. With regard to your second question, which was regarding the data. I agree with you, and we do actually have a plan to reengage in the medical community, talking about the data that we've generated because, as you know, it is very strong, and we have a great deal of data in uncomplicated UTI. And we also have data in complicated UTI as well that I think is interesting and important and certainly was supportive. And we want to make sure we get that out to the physicians, to the KOLs. And so we'll be working on presentations for upcoming meetings and conferences as well as manuscripts to try to at least help people understand the data that was generated, why we feel so good about the fact that we believe very strongly that this drug works well and just figuring out how to get that into the hands of the physicians and treating -- treating physicians and KOLs at the appropriate time is certainly on our radar for what we will be doing here over the next 6 to 12 months.

Our final question for today comes from Ed Arce from H.C. Wainwright.

This is Thomas Yip asking a couple of questions for Ed. Happy to see that sulopenem is back on track. Perhaps first, we would like to narrow down the meeting time line. Can you tell us when was the request formally accepted? And when do you expect the meeting to take place?

Yes. We put the request in, oh, I want to say probably 1 to 2 weeks ago, and we're expecting given that time line that the meeting should be granted around the end of the year. We'll provide more data as we get a solid data on that and have that conversation. But it should be in that year-end time frame. And that should allow us, Thomas, to be able to continue our planning as we've started to get this study up and running. And importantly, as we've talked about, I think, having the capital to do that is incredibly important for the company. So we are in a position that's pretty favorable from that standpoint.

Yes. Understood. And as you alluded to earlier details for the new Phase III, you prefer not to discuss well ahead of the Type B meeting. Have you given any thoughts on specific geographical location that you will like to focus on to open sites and considering the ongoing impact of COVID-19?

Yes, it's a really good question. And it's actually one of the things that our clinical folks as well as the rest of our team have been talking to the CROs. As I mentioned, we've started the conversation to better understand what's happening in various geographies. And that is -- from our perspective, that's not only in the U.S. geographies, but also in other countries. Historically, what we had done was predominantly in the U.S. for the uncomplicated UTI study. And we will continue to look at that as an option, but we will also look at other countries where there's an opportunity to get the highest quality work done in the most efficient time manner, which is, of course, what everybody does when they're looking at a study. But as you said, in the COVID world, that can be a little bit different. And so we're going to be sure that we are working with the CROs to understand what the flexibility is in various geographies here as well as other countries to be sure that we've got the best sites from a quality standpoint, but also from a time line standpoint. So it is an important consideration that we are taking into account as we look at who we choose in terms of a CRO and also the time lines for that study.

Okay. That makes sense. Perhaps one last question. This one is for Judy. We noticed that the cash runway estimate, it was previously into second half of 2023 and now it's into 2024. Can you outline some main factors that led to this adjustment?

Yes. We have a little more specificity internally about the type of trial that we might run in the cost. So we were able to build that in a little more specifically. And as you know, there has been no financing since the last quarter. But we just have some more specific estimates that we've begun working with the CROs and have been doing some planning during the last quarter.

Got it. And I guess, just to confirm that as you could say that your current cash holding is sufficient to see this entire Phase III trial through?

Right through the Phase III that we plan as well as a resubmission to the FDA.

Okay. Got it. We look forward to your final details of this new Phase III study.

That concludes the Q&A session. I will now hand back over to Corey Fishman for any closing remarks. Corey, over to you.

Thank you very much. So I just want to take one more moment to say thank you again to all the folks on the call for joining us today. We appreciate the continued support. As stated earlier, we remain very confident in the value of oral sulopenem to treat multidrug-resistant infections. We will continue to work collaboratively with the FDA to provide the additional clinical data requested in the Complete Response Letter that we received in July to support the approval of oral sulopenem as an important treatment option for physicians and patients. And perhaps most importantly, we expect our existing cash will allow us to complete the additional development of sulopenem to support, if successful, the resubmission of the NDA to the agency. So we are in a very good position from a cash perspective to get that work done without the need for additional financing. So thanks again to everyone, and have a great day.

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