Analyst Conference Summary

Biotechnology

date: August 8, 2019 @ 1:30 PM Pacific Time
for quarter ending: June 30, 2019 (Q2, second quarter 2019)

Forward-looking statements

Overview: Xerava antibiotic revenue doubled over Q1, but still a tiny fraction of what is needed to get Tetraphase out of the dog house. Still has cash to last a while.

Basic data (GAAP):

Revenue was $1.1 million, down sequentially from $1.3 million, and down from $11.6 million year-earlier.

Net income was negative $22.9 million, down sequentially from negative $19.5 million, and down from negative $9.5 million year-earlier.

Diluted EPS was negative $0.42, down sequentially from negative $0.36, and up from negative $0.18 year-earlier.

Guidance:

Has cash to last through middle of Q3 2020.

Conference Highlights:

Larry Edwards, Tetraphase CEO, said "we continued to work diligently to increase formulary uptake for Xerava and are excited to report that strong month over month sales growth resulted in a 133% increase in Xerava revenue compared with the previous quarter, with 154 new ordering customers in the second quarter. During the quarter, we also undertook a corporate reorganization aimed at maximizing the commercial opportunity of our lead asset, Xerava. Xerava is a critically important new addition to the hospital antibiotic armamentarium, and as a newly streamlined organization, we are concentrating our efforts entirely on ensuring its commercial success. We believe the growth rate in Xerava revenues will continue to be strong for the foreseeable future."

The reorder rate for Xerava continues to be greater than 50%, with the reorder rates as high as 65% within the tier 1 account segment. Xerava is available at over 500 accounts and approximately 300 formulary reviews are pending or planned to take place by the end of the fourth quarter of 2019. Believes can continue to execute a successful Xerava launch.

Due to limited cash and the slow revenue ramp, reorganizing the company to reduce expenses by about $8 million per year. Cost of reorganization was about $2.4 million, now mostly complete. Larry Edwards is the new CEO.

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. Xerava does not require dose adjustment for renal impairment, which is helping. The most used class for the label is seeing increased bacterial resistance, so a new drug is needed.

Revenue consisted of $0.8 million Xerava commercial sales, up sequentially from $0.34 million; $0 million license and collaboration; $0.3 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 2019.

The first patient was dosed with Xerava in a Phase 3 cIAI trial in China by Everest Medicines in Q2 2019. In July extended Everest Medicines exclusive license to develop and commercialize eravacycline for cIAI to Malaysia, Thailand, Indonesia, Vietnam and the Philippines

Cash and equivalents ended at $71.0 million, down sequentially from $87.6 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). Looking for a partner to develop this.

Operating expense was $23.7 million, consisting of cost of goods sold $0.4 million; R&D $8.2 million and SG&A $15.1 million. Loss from operations $22.6 million. Other expense net $0.3 million.

Q&A summary:

New customers in quarter, % growth from? About 40% from new customers, but reorders from existing customers is the main growth driver. Most institutions have ordered from three to five times so far. We have a 65% reorder rate at large institutions.

Second question was about what factors institutions use to decide whether to add the drug to their formularies.

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