Industry Matters: Paratek CEO on a novel antibiotic and the challenges plaguing the industry.

It’s no secret to anyone that the world is in the early stages of an antibiotic resistance crisis. Unfortunately, it has been allowed to fester beneath the gargantuan shadow of the Covid-19 pandemic. That’s ironic because a full blown wave of bacteria resistant to our most powerful medicines would make the Covid-19 pandemic look quaint. That isn’t hyperbole. Just consider this one example. All surgeries, regardless of how invasive it is or isn’t, will essentially be off the table. Even the slightest incision could kill you. That isn’t a reality that should be allowed to happen. Luckily, companies like Paratek Pharmaceuticals are on the forefront of the battle against superbugs. Regardless of the daunting reality that the antibiotics sector is notoriously difficult to do business in, they continue to develop newer antibiotics that could help stem dangers resistant bacteria pose.

Evan Loh, the CEO of Paratek, took time out to discuss the current state of the antibiotics industry and how Paratek continues to push forward despite a global pandemic and lack of governmental support.

We last spoke about Paratek a couple of years ago, at the beginning of the pandemic. How have things gone since then?

It was very hard to get into the hospitals to meet doctors because there was so much COVID-19 going on, so we struggled. Luckily, we had about a year before the pandemic to actually start some relationships. The product has continued to grow since then, though I think it’s grown slower than we would have anticipated otherwise. It’s still doing well though. 

Our current projections for this year is that we will land at net revenue for our core commercial business between $95 and $105 million. We are very excited about that. I think we’re probably a year to a year and a half behind where we would have liked to have been because of the COVID pandemic. 

The other feature of our story that has improved is that we’ve been able to get another broadening of the label for Nuzyra that includes an oral-only pneumonia-type of indication. That’s another potential upside. While there has been very little seasonal flu-related pneumonia because of the COVID pandemic, I think we can expect that we will start to see some normalization of the usual medical challenges when it relates to infections this year.

When were your sales reps able to start meeting doctors in person again?

Well, we continued to do that all through the pandemic, we never stopped. I think part of the challenge was that we had to convert our sales folks to be virtual, and try to reach out to docs that way. You know, doctors are extremely busy and when you interact virtually it’s not quite as impactful as being able to do it face to face. We continue to do that. I think it was hard for some of our hospital representatives. We like to characterize themselves as thoroughbreds that like to really like to race and they like to be free and out in the hospitals and try to find opportunities to meet folks, have coffee or you know just have a few minutes to talk to them. They couldn’t do that. I think it was a real challenge for them. I think we’re on the other side of that today.

When we last spoke, we discussed the partnership between Paratek and BARDA. How has that partnership gone so far?

Evan Loh, CEO of Paratek Pharmaceuticals.

Our partnership with BARDA is specifically related to anthrax. Last Fall, they expanded their contract with us. The initial indication was for the treatment of anthrax. Now, we are also developing a parallel program that they’re supporting for the prophylaxis against anthrax.

The other really important bit of progress that we’re making, besides the animal studies, is that our manufacturing process that we are developing in the United States continues to mature. Paratek is on track to complete validation for the manufacturing of NUZYRA intermediates, API, and both forms of finished drug product in the United States. We expect to complete the validation of the tablets by the end of 2022, and complete the validation of the intermediates, API, and IV formulation by the end of 2023. We’re very proud of that level of progress.

That material can be used for the commercial sales of Nuzyra in the US. It can also be geared up to be able to actually supply the U.S. government on a strategic national stockpiling basis, in order to have it available from a pandemic preparedness perspective against a potential anthrax attack.

What has it been like running an antibiotics company during a global viral pandemic?

It’s been hard. It’s been challenging. It’s hard to get traction. If you had to think about what people are focused on today, think about the White House, you think about some of the lobbying work we do on Capitol Hill, I think people are sympathetic. That being said, if you have to think about moving legislation forward, or getting support for our particular sector, either on the antibacterial side or on the antifungal side, it’s COVID, COVID, COVID. It’s been a real challenge. 

We’re clearly in a second, even third tier in terms of priority for the US government. It’s unfortunate because companies are continuing to struggle. In the next year or so, I think you’ll see continued bankruptcies of colleague companies that have recently had either Phase 3 successes. They have not fared well.

Did Covid-19 complicate fundraising?

A couple years ago, we talked about a couple of legislative bills that might, if they were to come through, could be very helpful for the antibacterial sector. We talked about the Disarm Act, which was to create a separate payment scheme outside of the bundled DRG system and the Pasteur Act which has had some recent interest. It creates a subscription model to purchase antibiotics for Medicare, Medicaid, beneficiaries outside of direct selling on a patient by patient basis. 

Unfortunately, those legislative efforts, I think, are clearly on the backburner in terms of priorities through Congress. When you think about that, there doesn’t seem to be any change in the challenges with regards to the commercial marketplace. As a consequence, I think the investor community has moved on. They don’t see this as a place to actually put their investor dollars. 

I think what’s aggravated and exacerbated is the fact that the markets right now are really struggling. It’s a perfect storm. You’ve got rising inflation; you’ve got a rising interest rate environment; you’ve got geopolitical instability. 

It is unfortunate to think about even the geopolitical instability. You’ve heard people have fears about the use of bioweapons like anthrax. We have a potential solution here. The U.S. government is willfully, woefully unprepared for a bioweapons attack. I don’t think they have really taken any lessons from what happened with COVID to really step-up their investment in preparedness from a public health perspective.

You’ve increased your budget for sales a good amount because you’re pushing for more hospital adoption. Does that eat away at other parts of your budget?

What we have done is that we’ve been able to allocate our capital in a judicious and conservative fashion. Would we have liked to have put out 200 sales reps overnight? Absolutely. But that would cost me more money than I have in the bank today. As we consider the rise in revenue over time, we can ask ourselves the question – what portion of that revenue could we reallocate to putting more sales reps out into the field? That’s what we’ve been able to do. 

We have thought about other priorities throughout the company in terms of where we devote our capital with regards to our research and development budget, to make sure that those efforts really are generating important scientific data that’s important for clinicians as it relates to our principal indications such as pneumonia but also in our new Rare Disease Program. 

The elephant in the room is the practice of diagnostic related groupings in hospitals which incentivises the usage of lower cost, older, but less effective antibiotics. It’s a complicated situation but one that needs addressing. Has there been any movement on that end?

The unfortunate answer is zero has been done. We speak with CMS and HHS directly. We believe that they do have the authority in terms of their providence to be able to actually make those changes. We have not seen that they actually have the courage to do that. They’re waiting for legislative cover. Without that from something like the Disarm Act, I think it’s not going to move forward. 

What the US government is basically saying is that they’re willing to actually only allow for older generation antibiotics to be on hospital formularies, even though we know that they are inadequate in terms of efficacy, and they also present a higher safety risk than some of the newer antibiotics such as our and use our product.

Lastly, what’s in store from Paratek for the remainder of this year?

We believe that we have a lifesaving antibiotic. We’re going to continue to expand our reach and frequency, in terms of getting access to doctors. We told Wall Street that we’re in the process of expanding our community salesforce. We had invested in about 40 to 45 reps last year to get out into the field. By the second half of this year we will put another 20 and 40 community representatives out there and that will continue to add to our growth. 

This interview has been edited for length and clarity.

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