Earnings Call Transcript - ITRM Q4 2021

Operator, Operator

Hello, and welcome to the Iterum Therapeutics Fourth Quarter and Full Year 2021 Financial Results Call. My name is Alex, and I will be coordinating the call today. I'll now hand over to your host, Louise Barrett, Senior Vice President of Legal Affairs. Over to you, Louise.

Louise Barrett, Senior Vice President of Legal Affairs

Thanks, Alex. Good morning, and welcome to Iterum Therapeutic's fourth quarter and full year 2021 financial results and business update conference call. A press release with our fourth quarter and full year results was issued earlier this morning and can be found on our website. We're joined this morning by Corey Fishman, our CEO; and Judy Matthews, our CFO. Corey will provide some opening remarks. Judy will provide some details on our financial results, and then we will open the lines for Q&A. Before we begin, I'd just 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 the post-clinical trials, our expectations with regard to our ability to resolve the matter set forth in the complete response letter received in July 2021 and obtain approval for oral sulopenem, the timing and conduct of potential future clinical 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 development, availability and timing of data from such clinical trials, the timing or likelihood of regulatory SEC filings and approvals, including the potential release of our NDA for oral sulopenem, changes in regulatory requirements, 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 our cash on hand will fund our ongoing operations, including carrying out proposed additional clinical development of oral sulopenem, the impact of COVID-19 and related response measures, our ability to maintain our listing on the NASDAQ capital markets, and other risk factors set out in our filings with the SEC, including our most recently filed annual report on Form 10-K. 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, and we specifically disclaim any obligation to update such statements. We will also be referencing non-GAAP financial measures during the call and have provided reconciliations of GAAP reported to non-GAAP adjusted information in the press release issued this morning. We believe that the presentation of these measures when viewed with our results under GAAP and the accompanying reconciliation provide useful supplementary information and facilitates additional analysis by our investors, analysts, and our management in assessing our performance and results from period to period. With that said, I'll turn it over to you, Corey, for your opening remarks.

Corey Fishman, CEO

Great. Thanks, Louise. Welcome and thanks for joining us today on our year-end 2021 conference call. I'd like to begin by highlighting that in 2021, we raised a substantial amount of cash and continued to operate our organization in an extremely streamlined fashion. These proactive steps have allowed us to extend our cash runway into 2024 and, subject to final determination of design and planned conduct of additional clinical and non-clinical development of oral sulopenem, which I will discuss in more detail later in the call, to carry out the proposed additional development to support, if successful, the resubmission of our NDA to the FDA. We ended 2021 with about $81 million of cash on the balance sheet. Since the end of 2021, there are two significant events that I'd like to share. First, we fully repaid our outstanding term loan with Silicon Valley Bank, and now we have no bank debt at all on the balance sheet. Additionally, as it relates to compliance with NASDAQ's minimum bid price requirements, in early March, we received a 180-day extension to regain compliance with this requirement. We now have until September 5th to meet this requirement, including by affecting a reverse share split if necessary. On the FDA front, over the last few months, we have held three substantive meetings and a number of discussions with the agency to talk about the additional clinical work required to support the potential resubmission of our package. Specifically, based on those discussions to date, the FDA has stated they will require an additional Phase 3 clinical study in uncomplicated urinary tract infection, which, if successful, along with our existing data package, should support the resubmission of our NDA. We are working diligently to align with the FDA on the specifics of this additional clinical study and hope to finalize the details of this study in the second quarter. If we are successful in finalizing the details of that study in the second quarter, we would expect to be in a position to begin this additional Phase 3 study with oral sulopenem in the second half of this year. Once the design and planned conduct have been finalized, we'll provide an outline of the study in its relevant parameters, including a proposed high-level timeline for enrollment and completion of the study, the likely timing for availability of top-line data, and if the study is successful, potential timing for resubmission of our NDA. As we have said before, we believe that oral sulopenem can play a very important role in the treatment of uncomplicated urinary tract infections in the community for elevated-risk patients and those patients with resistant infections. Also, we'd like to thank our investors and stakeholders for their patience as we work diligently with the FDA to define our path forward. Now I'll turn the call over to Judy for details on our financial results.

Judy Matthews, CFO

Thanks, Corey. Total operating expenses were $6.8 million and $24.5 million in the fourth quarter and full year 2021 compared to $4.6 million and $32.1 million in the fourth quarter and full year 2020. Operating expenses include research and development expenses and general and administrative expenses. R&D costs were $3.7 million for the fourth quarter of 2021 compared to $2.4 million for the same period in 2020. The primary driver of the $1.3 million increase in R&D costs was non-cash amortization of an intangible asset in 2021. Full year R&D costs were $10.7 million in 2021 versus $21.1 million in 2020 as a result of the completion of our Phase 3 trials in 2020. G&A costs were $3.1 million for the fourth quarter of 2021, which is $800,000 higher than G&A costs of $2.3 million in the fourth quarter of 2020, due primarily to higher non-cash share-based compensation for employees and directors. Full year G&A costs were $13.8 million in 2021 compared to $11.1 million in 2020, resulting in a $2.7 million increase due to higher consulting spend on pre-commercialization activities through the first half of 2021 prior to receiving a complete response letter in July and higher share-based compensation expense, partially offset by lower G&A headcount. Moving on to non-operating items: Interest expense was $800,000 for the fourth quarter of 2021 compared to $4.2 million in the fourth quarter of 2020. The primary reason for the $3.4 million decrease in interest expense was non-cash interest expense associated with the lower outstanding exchangeable notes balance of $12.6 million as of December 31, 2021 versus $51.8 million as of December 31, 2020. On a strictly cash basis, we paid interest related to our term loan with SBB of approximately $60,000 in the fourth quarter of 2021 versus approximately $230,000 in the fourth 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 continued until our final payment, which was made earlier this month. Our net loss on a U.S. GAAP basis was $4.2 million for the fourth quarter of 2021 and $91.6 million for the full year. The full year net loss was primarily driven by non-cash fair value adjustments totaling $61 million recorded at the time of conversion of approximately $39 million of the exchangeable notes in 2021. There was no impact of these adjustments on cash or cash runway, which I will turn to in a moment. On a non-GAAP basis, which excludes certain non-cash adjustments, our net loss was $3.3 million and $19.4 million in the fourth quarter and full year 2021 compared to our non-GAAP net loss of $4.4 million and $30.9 million in the fourth quarter and full year 2020. The $1.1 million and $11.5 million decrease in our non-GAAP net loss for the fourth quarter and full year was a result of lower operating expenses as previously discussed. At the end of December, we had cash and short-term investments of $81.3 million. For the full year 2021, we spent approximately $16 million or $1.3 million on average per month operating the business on an efficient basis. We also made loan repayments to SBB of $6.5 million for total cash spent in 2021 of approximately $22.5 million. And as previously mentioned, our final payment to SBB was made earlier in March. Based on our current operating plan and subject to final determination of the design and planned conduct of potential additional clinical and nonclinical development for sulopenem, we have cash into 2024. As such, we expect that our existing cash will be sufficient to allow us to carry out the proposed additional development of oral sulopenem to support, if successful, a resubmission of the NDA to the FDA for the treatment of uncomplicated urinary tract infections. As of December 31, 2021, we had approximately 183 million ordinary shares outstanding. As of the end of December, we have 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, including accrued interest at the option of the note holder. Now I will turn it back over to Corey for some closing comments.

Corey Fishman, CEO

Great. Thank you, Judy. We'd like to open the line now for any questions.

Operator, Operator

Thank you. Our first question for today comes from Ed Arce of H.C. Wainwright. Ed, your line is now open.

Thomas Yip, Analyst

This is Thomas Yip asking a couple of questions for Ed. Perhaps the first question for Corey. As obviously the most important this year is the Phase 3 study starting in the second half of this year. Can you give us a rough idea on size and primary endpoint and perhaps has a comparator drug been finalized with the FDA yet?

Corey Fishman, CEO

We would love to give you that, except it has not been finalized yet. And that is part of what we continue to have discussions with the agency on. As I mentioned, we hope to finalize that in the next quarter. The endpoint, as far as we know as we sit here today, will be the same endpoint that was in the previous uncomplicated UTI study, which is a combined endpoint of clinical and microbiological. But the other details have not been finalized and aligned with the agency as of yet. And as soon as we have that, of course, we'll be happy to provide all that information to you.

Thomas Yip, Analyst

And perhaps a follow-up on that. Can you tell us the estimated timeframe and perhaps costs of this new Phase 3 study relative to the completed Phase 3 uncomplicated UTI study?

Corey Fishman, CEO

It's a little hard to do that only because we don't have those parameters defined fully yet with the agency. Therefore, any projection I'd give you really wouldn't have the accuracy that I'd like it to. We don't know that answer. And it's a little frustrating, of course, for investors and for us as well as we try to nail that down with the FDA. So I wouldn't want to tell you something that could change in the course of the next couple of months. But suffice to say, I think one of the important elements that Judy mentioned, and I will cover as well, is that we have a sufficient cash balance that depending on how that outcome is derived with the agency regarding the size of the study, the comparator, etc., we believe we have cash to get into 2024. That should give us a pretty good chance to finish that study up—that's our current thinking, at least.

Thomas Yip, Analyst

Perhaps one final question for Judy. In the press release, you outlined the Silicon Valley Bank loan payment, just want to confirm that there's the 2025 notes. Can you tell us what is the rough amount that was repaid and the primary rationale for repaying the loan?

Judy Matthews, CFO

So, as you said, we paid off the SBB term loan. We do have the exchangeable notes, which I mentioned as well during the call. We started out the year with $51.8 million and we now have only $12.6 million outstanding—the other $39 million were converted to shares. If no one else converts that $12.6 million, along with interest, will be due in January 2025.

Corey Fishman, CEO

And Thomas, this is Corey, just to add to that. Important to note because it sounds like you may be under the impression that we paid some of those notes off. Those are conversions or redemptions by the note holders. Those are not anything that Iterum has paid cash to redeem. So that's an important distinction. As Judy said, those are convertible, and during the early part of '21, a number of folks did convert those notes. But we did not pay any cash to redeem them.

Thomas Yip, Analyst

So to clarify, the amount that was repaid this year in March 2022 for the loan would be approximately $12.6 million plus interest?

Judy Matthews, CFO

This year, if you're talking about the SBB term loan that we repaid this year, we had only about $1.5 million outstanding as of December. We paid that off this first quarter. So that has gone. Again, the $12.6 million if the note holders do not convert it, we would have to pay that back in January 2025.

Thomas Yip, Analyst

So the amount that was repaid in March, I guess earlier this month, would be about $1.5 million?

Judy Matthews, CFO

Yes.

Thomas Yip, Analyst

Thank you so much for clarifying that. And also, Corey, we appreciate all the details with Phase 3. We look forward to the trial starting later this year. Thank you again for taking our questions.

Operator, Operator

We have no further questions for today. So I'll hand back to Corey Fishman for any closing remarks.

Corey Fishman, CEO

Thank you. Just want to close by saying we appreciate you joining our conference call today. We remain confident in the value of oral sulopenem in the community for both patients and physicians, and we will continue to work collaboratively with the FDA to provide the additional clinical data needed for a potential NDA resubmission. We expect our existing cash resources to allow us to operate the company into 2024 and to carry out the proposed additional clinical study, subject to final determination of the design of such study. We look forward to sharing more details with you as they become available in the coming months. Thanks, and have a great day.

Operator, Operator

Thank you for joining today's call. You may now disconnect.