Analyst Conference Summary

Biotechnology

date: November 12, 2019 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2019 (Q3, third quarter 2019)

Forward-looking statements

Overview: Struggling with low cash and its novel antibiotic revenue ramping to $1 million in the quarter.

Basic data (GAAP):

Revenue was $3.3 million, up sequentially from $1.1 million, and up from $1.2 million year-earlier.

Net income was negative $16.3 million, up sequentially from negative $22.9 million, and up from negative $20.0 million year-earlier.

Diluted EPS was negative $6.00, up sequentially from negative $8.40, and up from negative $7.39 year-earlier.

Guidance:

Believe cash can fund operations through Q3 2020.

Conference Highlights:

Larry Edwards, Tetraphase CEO, said "Xerava has now been on the market for just over a year, and during that time we have made significant progress, particularly in the third quarter, with 30% carton growth over last quarter, leading to a 23% increase in net Xerava revenue compared with the previous quarter. We are squarely focused on continuing to increase formulary uptake and pull-through, as we believe Xerava is a critically important new addition to the hospital antibiotic armamentarium, and that increased formulary uptake and pull through will result in increased sales. With our recent equity offering and payoff of debt, we are now in a stronger financial position to execute on these goals."

The reorder rate for Xerava was 57%, with the reorder rates as high as 70% within the tier 1 account segment. Xerava is available at over 1000 accounts and approximately 154 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.

After the quarter close Tetraphase raised $7 million in cash through sales of common stock and warrants. In August 2019 Tetraphase had paid off all the Solar Capital debt.

During Q3 2019 the stock was reverse-split 20 to 1.

On October 1 got J code and APC code, which should help sales and reimbursement. Also CMS made changes effective October 1, 2019 which should level the playing field so doctors can choose the most effective antibiotic for a patient. There is s clear unmet need for a non-Beta-lactam agent that can cover resistant pathogens. Resistance to beta-lactams continues to increase.

Xerava has a broad label. 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. In October 2019, Xerava was featured in seven poster presentations at IDWeek 2019. The data lend additional support for the continued use of Xerava in the hospital setting to treat serious, life-threating multidrug resistant infections, including complicated intra-abdominal infections (cIAI).

Revenue consisted of $1.0 million Xerava commercial sales, up sequentially from $0.8 million; $2.0 million license and collaboration; $0.4 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.

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 $24.5 million, down sequentially from $71.0 million. No 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 $17.7 million, consisting of cost of goods sold $1.0 million; R&D $5.3 million and SG&A $11.4 million. Loss from operations $14.3 million. Other expense net $2.0 million.

Q&A summary:

Prescription breakdown? 75% hospital, 5% long-term care, 20% home health infusion centers.

Ex-US strategy? We are looking for a partner in the EU and rest of world. We are in some discussions. May require multiple partners, even within the EU.

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