Earnings Call Transcript - ITRM Q3 2024

Operator, Operator

Hello, everyone, and thank you for holding, and welcome to the Iterum Therapeutics Reports Third Quarter 2024 Financial Results. My name is Ezra, and I will be your coordinator today. I will now hand you over to your host, Louise Barrett, Senior Vice President, Legal Affairs. Louise, please go ahead.

Louise Barrett, Senior Vice President, Legal Affairs

Thank you, Ezra. Good morning, and welcome to Iterum Therapeutics' third quarter 2024 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 our Chief Executive Officer, Corey Fishman; and our Chief Financial Officer, Judy Matthews. Corey will provide some opening remarks, Judy will provide details on our financial results, and then we will open the lines for Q&A. Before we begin, I'd like to remind you that some of the information presented on this conference call today will contain forward-looking statements concerning our plans, strategies, and prospects for our business, including the therapeutic and market potential of ORLYNVAH, the sufficiency of our cash resources to fund our operating expenses into 2025, including through the repayment date of the exchangeable notes. The listing of patents for ORLYNVAH in the FDA's Orange Book, the protection provided by our patents for ORLYNVAH and our strategic process to sell, license, or otherwise dispose of its rights to ORLYNVAH. Actual results may differ materially from those indicated by these forward-looking statements as a result of various factors outside of our control, including, but not limited to, risks and uncertainties concerning the outcome, impact, effects, and results of our evaluation of strategic alternatives, including the terms, timing, structure, value, benefits, and costs of any strategic transaction, our ability to complete the strategic transaction, our ability to successfully prepare and implement commercialization plans for ORLYNVAH with a commercial partner or directly if we are unsuccessful at entering into or completing a strategic transaction, the market opportunity for and the potential market acceptance of ORLYNVAH, the accuracy of expectations regarding how far into the future, our cash on hand will fund our ongoing operations, our ability to maintain our listing on the NASDAQ capital market and other factors discussed under the caption Risk Factors in our quarterly report on Form 10-Q filed with the SEC this morning. 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 obligation to update such statements. We will also be referencing non-GAAP financial measures during the call. We provide a reconciliations of GAAP reported to non-GAAP adjusted information in the press release issued this morning. With that all said, now I'll turn you over to Corey for your opening remarks.

Corey Fishman, CEO

Thank you, Louise. Good morning, and thanks for joining us today. As we previously announced, we are very excited to have received FDA approval for ORLYNVAH, our oral sulopenem product, last month for the treatment of uncomplicated urinary tract infections caused by the designated microorganisms E. coli, Klebsiella pneumoniae, or Proteus mirabilis in adult women who have limited or no alternative oral antibacterial treatment options. Our approval marks the first U.S. approval of an oral product in the penem class of drugs, which is a very potent and safe class of drugs, currently only delivered as intravenous therapy. Having an approved oral penem enables treatment for appropriate patients in the community, where new effective agents are desperately needed. As a potential treatment for patients with uncomplicated urinary tract infections who have limited or no other oral treatment options, ORLYNVAH has the potential to not only effectively treat these patients, but also help combat the growing health crisis of rising antimicrobial resistance by offering a new treatment alternative. We have received formal communication from the FDA of five additional years of exclusivity under the GAIN Act, meaning that ORLYNVAH has market exclusivity for 10 years from the date of approval or until October 25, 2034. Additionally, our U.S. patent portfolio provides protection for oral sulopenem into 2039, with issued U.S. patents covering both method of use and composition of matter. We have also submitted patent information for four U.S. patents for ORLYNVAH, which will be listed in the FDA's Orange Book, approved drug products with therapeutic equivalence evaluations. Overall, we are very pleased with the amount of protection that ORLYNVAH should have in the U.S. market to capture value without competition from a potential generic product. Now I'll provide a few comments on why we are so excited about the potential for ORLYNVAH. The uncomplicated urinary tract infection market in the U.S. has not had a new oral treatment launched in about 25 years. The leading product in the uncomplicated urinary tract infection market, Nitrofurantoin, was approved in 1953 and the majority of the other oral products in the market were approved in the 1970s and 1980s. The use of these products over time has led to rising resistance rates, resulting in the most widely used products having resistance rates approaching 20% and those rates can run as high as 30% or more. As most prescribing for uncomplicated urinary tract infections occurs empirically, this very high and oftentimes increasing resistance rate creates a challenge for practicing physicians, since the efficacy of these products continue to be eroded over time. Additionally, almost all of the widely used oral products in this therapy area have some safety concerns that again create challenges for treating physicians as to their choice of agent to use. Unfortunately, with almost no innovation in decades, physicians have been forced to use agents that may not work as well as they would like for their patients. With the ORLYNVAH approval, there now could be an alternative treatment option for those patients who have limited or no other oral treatment options available. We believe that there are many patients that fall into this category, specifically at-risk patients. We define at-risk patients as women who fall into any of the following categories: women who are 65 years or older, women who have diabetes, women with a history of recurrent or drug-resistant infections, or women that have other comorbidities that negatively impact their immune system. This group of patients are most at risk given their profiles, and many physicians are challenged to treat these patients with existing oral options that have substantial resistance as well as safety hurdles. Another key group of patients that are in significant need of a new, efficacious and safe oral treatment alternative are the patients that have pathogens resistant to all commonly used oral antibiotics. In our REASSURE uncomplicated urinary tract infection clinical trial, completed earlier this year and conducted exclusively in the U.S., over almost 1,000 patients, we found that approximately 1% of these patients had an isolate that was resistant to all available oral antibiotics. ORLYNVAH could play an important role in treating these patients as well. We firmly believe that ORLYNVAH has a very important place in the uncomplicated urinary tract infection market for appropriate patients. As we look at our operating plan and go-forward cash runway, we expect to be able to fund our operations into 2025, including through the repayment date of our exchangeable notes due January 31, 2025. And now I'll turn the call over to Judy Matthews for an update on our financial performance.

Judy Matthews, CFO

Thanks, Corey. Total operating expenses were $4.9 million in the third quarter of 2024, compared to $16.7 million in the third quarter of 2023. Operating expenses include research and development expenses and general and administrative expenses. R&D costs were $3.1 million for the third quarter, compared to $14.9 million for the same period in 2023. The primary driver of the $11.8 million decrease in R&D expense for the third quarter was primarily due to higher costs incurred in 2023 to support our REASSURE trial, which began enrollment in October 2022 and completed enrollment in October 2023. G&A costs were $1.8 million for the third quarter of 2024, which is flat to G&A costs of $1.8 million in the third quarter of 2023. Our net loss on a U.S. GAAP basis was $6.1 million for the third quarter of 2024, compared to $3.9 million for the same period in 2023. On a non-GAAP basis, which excludes certain non-cash adjustments, our net loss was $4.8 million in the third quarter of 2024, compared to our non-GAAP net loss of $15.7 million in the third quarter of 2023. The $10.9 million decrease in our non-GAAP net loss for the third quarter was primarily a result of lower R&D expenses related to our REASSURE trial. At the end of September, we had cash, cash equivalents, and short-term investments of $14.5 million, and including warrant exercises and amounts raised under our ATM subsequent to quarter end, we expect to be able to fund operations into 2025, including through the repayment date of the exchangeable notes on January 31, 2025. As of November 4, 2024, which includes the shares issued under our ATM and warrant exercises, we had approximately 27.5 million ordinary shares outstanding. Also, we currently have approximately $11.1 million of exchangeable notes outstanding, which can be exchanged at the option of the noteholder for approximately 1.9 million shares. If the notes are not exchanged, we are obligated to pay the noteholders $11.1 million plus accrued interest in January 2025. Further, upon approval of ORLYNVAH, we owe Pfizer a $20 million regulatory milestone, which has been deferred for two years for issuance of a promissory note as permitted under the terms of our license. Now we will take questions.

Operator, Operator

Thank you very much. Our first question comes from Ed Arce with HC Wainwright. Ed, your line is open. Please go ahead.

Thomas Yip, Analyst

Hello, good morning everyone. This is Thomas Yip, asking a couple of questions for Ed. Thank you so much for taking our questions. So first, as you outlined earlier in the call, with now 10 years of market exclusivity up to 2034. Can you also discuss how far out the sulopenem portfolio provides coverage for both in the U.S. and maybe in Europe as well?

Corey Fishman, CEO

Sure, Thomas. Thanks for the question. So the GAIN Act provides the incremental five years of market exclusivity. And so that's 10 years in total from the date of approval. So that goes into 2034. The patents we have, the latest dates of expiration are into 2039 in the U.S., and they would be the same in other territories when they're granted, assuming they are granted. So we have patents in the U.S. and in a couple of other territories; we do not have them yet granted in Europe. So we have U.S. coverage into 2039 with patents and a couple of other territories, including Japan and Australia, but we have not yet been granted European patents.

Thomas Yip, Analyst

Understood. And then can you perhaps discuss ORLYNVAH's label as it was approved? Does it meet your internal expectations in terms of how broad it is and also the restrictions anticipated?

Corey Fishman, CEO

I'm sorry, Thomas, I couldn't hear that.

Thomas Yip, Analyst

What I was asking was the ORLYNVAH label as it was approved. Just wondering, did it meet your internal expectations in terms of how broad it is? And then also the restrictions anticipated?

Corey Fishman, CEO

Yes, it's a good question. Thank you. We are very pleased with the label and I'll share our thoughts. Anyone familiar with Iterum knows we've consistently stated that we believe this product is best suited for patients who are at risk or have elevated risk. We think our label allows us to treat those patients. Unfortunately, in the complex urinary tract infection space, many patients have limited oral treatment options due to resistance and the safety profiles of existing drugs, which is a key consideration for sulopenem patients. We are very satisfied with the label. There are no unusual restrictions or post-marketing requirements beyond standard pediatric studies and surveillance, which are typical for all antibiotic companies. We believe this label is very competitive and, given the market dynamics, it has the potential to perform well.

Thomas Yip, Analyst

Got it. And then perhaps one last question from us. I wonder if you can discuss what's your impression so far on your discussions on the strategic options to date?

Corey Fishman, CEO

Sorry, one more time, Thomas?

Judy Matthews, CFO

BD, he’s talking about BD.

Corey Fishman, CEO

Yes, we have renewed our process with our financial adviser to reach out to companies in pursuit of a strategic transaction. We just received approval to restart this effort, and we will be monitoring its progress moving forward.

Thomas Yip, Analyst

Okay. Got it. Thank you again for taking our questions. Looking forward to an update on your strategic options.

Corey Fishman, CEO

Thank you, Thomas.

Operator, Operator

Thank you. The next question comes from Jason McCarthy with Maxim Group. Jason, your line is now open. Please go ahead.

Jason McCarthy, Analyst

Hi, Corey. Thanks for taking the questions. Just from a partnering or acquirer perspective, given that your last Phase 3 trial was only in the U.S., would they need another trial in Europe, China, Japan, or some other region to extend approvals ex-U.S.? Or is the data sufficient with what you have?

Corey Fishman, CEO

Yes. Thanks, Jason, for the question. Appreciate it. It's a good question. Our understanding is that in the EU, if you go down that regulatory pathway, you can file with the current data package. They have a very standard process with check-in points and day 120 questions, day 180 questions, etc. So it's kind of a very regulated process, much like it is here. And you do not need another study. My understanding is in China, and Mainland China as well as in Japan, you would need an additional study in the local population. So I think you have opportunities everywhere for that, but it would require a little bit more time in China and Japan. I think the majority of the rest of the world has the ability to use the FDA data, and those are the two bigger countries that I believe are requiring a local clinical trial for potential approval.

Jason McCarthy, Analyst

Thank you. I have one more question. For any potential partner or suitor, although the trial had complications, the data remains quite promising and somewhat similar to what we've seen with uncomplicated urinary tract infections. Do you believe this could make the opportunity more appealing? Could they use that data to conduct another study, similar to yours, in order to gain approval for uncomplicated UTIs? Is this something you're discussing, or are they mainly focused on uncomplicated cases?

Corey Fishman, CEO

Yes. I think it's a great question. And I do think there is some interest in complicated UTI as a step-down drug. Again, we obviously didn't hit that endpoint. But to your point, now that you're approved in order to get a formal approved indication, you would need to do only one study. And I believe based on the data that we generated, we have a very good understanding of what that study would look like, who the comparator would be. And I think we would have a very good chance of hitting that endpoint. And I do think counterparties might be very interested in that because, again, I think that's where the value is in the oral. It's not so much to have another IV because there are lots of IVs out there. But there are very few orals that I think physicians are feeling comfortable not only in the community but in the hospital to send patients home. So I do think that that could be another area of interest for companies depending on what their portfolios look like.

Jason McCarthy, Analyst

Got it. Thanks for taking the question.

Corey Fishman, CEO

Thanks, Jason.

Operator, Operator

Thank you very much, Jason, and everyone for participating in the question-and-answer session. That marks the end of our question-and-answer session. I will now hand back over to Corey for any closing remarks.

Corey Fishman, CEO

Thanks very much. So we appreciate you all joining us today, and we want to reiterate that we're very excited to have received approval of ORLYNVAH and, along with our financial advisers, as I just mentioned, we have renewed our process of outreach to potential partners in an effort to achieve a strategic transaction with the goal of maximizing value for our stakeholders. And that process is underway and ongoing. So we appreciate your interest and your time, and thanks very much, and have a great day.

Operator, Operator

Thank you very much, Corey, and thank you, everyone, for joining. That ends today's conference call. You may now disconnect your lines.