Analyst Conference Summary

Biotechnology

date: May 8, 2019 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2019 (first quarter 2019)

Forward-looking statements

Overview: Xerava antibiotic second quarter of revenue is a slow ramp.

Basic data (GAAP):

Revenue was $1.3 million, down sequentially from $4.3 million, and down 32% from $1.9 million year-earlier.

Net income was negative $19.5 million, up sequentially from negative $21.5 million, and up from negative $21.6 million year-earlier.

Diluted EPS was negative $0.36, up sequentially from negative $0.40, and up from negative $0.42 year-earlier.

Guidance:

Has cash to last through Q3 2020.

Conference Highlights:

Guy Macdonald, Tetraphase CEO, said "We are continuing to see hospital sales driving Xerava's growth because of its broad spectrum of coverage against Gram-positive and Gram-negative bacteria, as well as anaerobes, making it particularly useful for first-line empiric treatment of complicated intra-abdominal infections (cIAI). We are especially pleased that Xerava has been added to more than 200 formularies at top-prescribing hospitals, including some large integrated delivery networks, and we are on track to complete 400 formulary reviews by mid-year."

There is increasing public awareness about drug-resistant infections and the need for new antibiotics. We believe we have the right formula to succeed. We are managing our cash burn rate.

Reorder rate is over 55%. Most sales were pre-formulary approval, but sales on formulary are increasing as a percent of sales.

Xerava has a broad label. Field force is highly experienced. Completed outreach to 780 tier-1 accounts and 100 tier-2 accounts. Wholesale acquisition price is $175 per day. Priced to penetrate the growing intra-abdominal market.

Revenue consisted of $0.34 million Xerava commercial sales, up sequentially from $0.18 million; $0 million license and collaboration; $0.93 million government. Sales of Xerava began in mid-October 2018.

Xerava was approved for use in the EU in September 2018. But delaying introduction in the EU. Presented data at European Congress of Clinical Microbiology and Infectious Diseases (ECCMID) in April.

The first patient was dosed with Xerava in a Phase 3 cIAI trial in China by Everest Medicines.

Cash and equivalents ended at $87.6 million, down sequentially from $108 million. $29 million debt.

TP-6076, a fully synthetic tetracycline, had data from a Phase 1 study presented at IDSA in Q4 2018. Will complete a bronco-pulmonary disposition study in 2019.

Further down the pipeline, TP-271 completed its Phase 1 dosing study in Q4 2018.

Tetraphase presented preclinical data on TP-2846 at the AACR Annual Meeting in April 2019. TP-2846 is a possible therapy for AML (acute myeloid leukemia).

Operating expense was $20.3 million, consisting of cost of goods sold $0.3 million; R&D $6.7 million and SG&A $13.3 million. Loss from operations $19.0 million. Other expense net $0.5 million.

Q&A summary:

What might get Xerava going? Some of it is a matter of time. We saw a big bump in March. Our salesforce is at work. It is getting physicians used to using the product.

Oncology asset? Now in toxicology studies. When we complete those we can give a timeline to the IND.

Patient mix for Xerava, reimbursement issues? 95% now are commercial payers. No reimbursement issues. Reorder rate dropped q/q as we brought on new accounts, but over 50% is good for the industry. We had 40 new customers in March.

What is unusual is we are not getting pushback from doctors or institutions. The feedback is it is a great utility drug. The alternatives, beta-lactams, are having problems over time from overuse.

We do not have a timeline yet for the completion of the pediatric study.

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