Nabriva Therapeutics plc - Annual Report: 2017 (Form 10-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

Commission file number 001-37558

Nabriva Therapeutics plc
(Exact name of registrant as specified in its charter)

+353 1 649 2000
(Registrant's telephone number, including area code)

         Securities registered pursuant to Section 12(b) of the Act:

         Securities registered pursuant to Section 12(g) of the Act: None

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

         If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ý

         Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act). Yes o    No ý

         As of June 30, 2017 (the last business day of the registrant's most recently completed second fiscal quarter), the aggregate market value of the registrant's voting securities held by non-affiliates was approximately $166.7 million based on the last reported sale price of the registrant's ordinary shares on June 30, 2017. As of February 28, 2018, the registrant had 36,716,356 ordinary shares outstanding.

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NABRIVA THERAPEUTICS AG
INDEX TO REPORT ON FORM 10-K

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FORWARD-LOOKING STATEMENTS

        This Annual Report contains forward-looking statements that involve substantial risks and uncertainties. All statements contained in this Annual Report, other than statements of historical fact, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words "anticipate, "around" "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. The forward-looking statements in this report include, among other things, statements about:

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the timing and conduct of our clinical trials of our lead product candidate, lefamulin, including statements regarding the timing and completion of the trials, and the period during which the results of the trials will become available;



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our expectations regarding how far into the future our cash on hand will fund our ongoing operations;



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the timing of and our ability to submit applications for, obtain and maintain marketing approval of lefamulin;



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the potential receipt of revenues from future sales of lefamulin;



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our plans to pursue development of lefamulin for additional indications other than community-acquired bacterial pneumonia, or CABP;



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our plans to pursue research and development of other product candidates;



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our ability to establish and maintain arrangements for manufacture of our product candidates;



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our sales, marketing and distribution capabilities and strategy;



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our ability to successfully commercialize lefamulin and our other product candidates;



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the potential advantages of lefamulin and our other product candidates;



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our estimates regarding the market opportunities for lefamulin and our other product candidates;



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the rate and degree of market acceptance and clinical benefit of lefamulin and our other product candidates;



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our ability to establish and maintain collaborations;



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our ability to acquire or in-license additional products, product candidates and technologies;



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our future intellectual property position;



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our estimates regarding future expense, capital requirements and needs for additional financing;



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our ability to effectively manage our anticipated growth;



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our ability to maintain the level of our expenses consistent with our internal budgets and forecasts;



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the demand for securities of pharmaceutical and biotechnology companies in general and our ordinary shares in particular;



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competitive factors;



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compliance with current or prospective governmental regulation;



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general economic and market conditions;



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our ability to attract and retain qualified employees and key personnel; and,

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other risks and uncertainties, including those described in the "Risk Factors" section of this Form 10-K.

        We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Annual Report, particularly in the "Risk Factors" section of this Annual Report, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

        You should read this Annual Report and the documents that we have filed as exhibits to this Annual Report completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, except as required by applicable law.

        This Annual Report includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.

SPECIAL NOTE REGARDING THE REDOMICILIATION

        On June 23, 2017, Nabriva Therapeutics plc, a public limited company organized under the laws of Ireland, or Nabriva Ireland, became the successor issuer to Nabriva Therapeutics AG, a stock corporation (Aktiengesellschaft) organized under the laws of Austria, or Nabriva Austria, for certain purposes under both the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such succession occurred following the conclusion of a tender offer related to the exchange of American Depositary Shares and common shares of Nabriva Austria for ordinary shares of Nabriva Ireland, which resulted in Nabriva Ireland, a new Irish holding company, becoming the ultimate holding company of Nabriva Austria (the predecessor registrant and former ultimate holding company) and its subsidiaries, which we refer to as the Redomiciliation Transaction. On October 19, 2017, Nabriva Austria was converted into a limited liability company under Austrian law and renamed Nabriva Therapeutics GmbH.

        Unless the context requires otherwise, all references in this Annual Report to "Nabriva," "the Nabriva Group," "the Company," "we," "ours," "us," or similar terms on or prior to June 23, 2017 (the effective date of the Redomiciliation Transaction), refer to our predecessor, Nabriva Therapeutics AG, together with its subsidiaries.

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PART I

ITEM 1.    BUSINESS

Overview

        We are a clinical stage biopharmaceutical company engaged in the research and development of novel anti-infective agents to treat serious infections, with a focus on the pleuromutilin class of antibiotics. We are developing our lead product candidate, lefamulin, to be the first pleuromutilin antibiotic available for systemic administration in humans. We are developing both intravenous, or IV, and oral formulations of lefamulin for the treatment of community-acquired bacterial pneumonia, or CABP and may potentially develop lefamulin for additional indications other than CABP.

        We initiated the first of two pivotal, international Phase 3 clinical trials of lefamulin, which we refer to as Lefamulin Evaluation Against Pneumonia 1, or LEAP 1, in September 2015 and initiated the second trial, which we refer to as LEAP 2, in April 2016. On September 18, 2017, we announced positive top-line results for LEAP 1. In LEAP 1, which enrolled 551 patients, lefamulin met all of the primary endpoints of non-inferiority compared to moxifloxacin with or without linezolid as required by the U.S. Food and Drug Administration, or FDA, and European Medicines Agency, or EMA. Lefamulin also showed a favorable tolerability profile in the LEAP 1 trial, with no unexpected safety signals or evidence of off-target activity. We completed patient enrollment of 738 adult patients in LEAP 2 in December 2017 and expect to have top-line data available from LEAP 2 in the spring of 2018. If the results of LEAP 2 are also favorable, including achievement of the primary efficacy endpoints of the trial, we expect to submit a new drug application, or NDA, for marketing approval of lefamulin for the treatment of CABP in adults in the United States in the second half of 2018. We also expect to submit a marketing authorization application, or MAA, for lefamulin for the treatment of CABP in adults in Europe a few months after our NDA filing.

        We believe that pleuromutilin antibiotics can help address the major public health threat posed by bacterial resistance, which the World Health Organization, or WHO, characterized in 2017 as one of the biggest threats to human health. Increasing resistance to antibiotics used to treat CABP is a growing concern and has become an issue in selecting the appropriate initial antibiotic treatment prior to determining the specific microbiological cause of the infection, referred to as empiric treatment. For example, the U.S. Centers for Disease Control and Prevention, or CDC, has classified Streptococcus pneumoniae, the most common respiratory pathogen, as a serious threat to human health as a result of increasing resistance to currently available antibiotics. In addition, the CDC recently reported on the growing evidence of widespread resistance to macrolides, widely used antibiotics that disrupt bacterial protein synthesis, in Mycoplasma pneumoniae, a common cause of CABP that is associated with significant morbidity and mortality. Furthermore, Staphylococcus aureus, including methicillin-resistant S. aureus, or MRSA, which has also been designated as a serious threat to human health by the CDC, has emerged as a more common cause of CABP in some regions of the world, and a possible pathogen to be covered with empiric therapy.

        As a result of increasing resistance to antibiotics and the wide array of potential pathogens that cause CABP, the current standard of care for hospitalized patients with CABP whose treatment is initiated in the hospital usually involves first-line empiric treatment with a combination of antibiotics (beta-lactams and macrolides) to address all likely bacterial pathogens or monotherapy with a fluoroquinolone. Combination therapy presents the logistical challenge of administering multiple drugs with different dosing regimens, with some drugs available only as IV, and increases the risk of drug-drug interactions and the potential for serious side effects. Fluoroquinolones are associated with safety and tolerability concerns, including a relatively high risk for developing Clostridium difficile infection and increasing rates of resistance for uropathogens. We believe these concerns have resulted in a decreasing use of flouroquinolones and restriction of their use within a growing number of hospitals. In addition, in May 2016, the FDA announced that an FDA safety review has shown that

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fluoroquinolones, when used systemically, in the form of tablets, capsules and injectable, are associated with disabling and potentially permanent serious side effects that can occur together. These side effects can involve the tendons, muscles, joints, nerves, and central nervous system. Fluoroquinolones are typically administered in combination with other antibiotics, if community-acquired MRSA is suspected. In addition, many currently available antibiotic therapies are only available for IV administration and are prescribed for seven to fourteen days, meaning continued treatment requires prolonged hospitalization or a switch to a different antibiotic administered orally, with the attendant risk that the patient might respond differently.

        Effective January 1, 2017, the Joint Commission & Center for Medicare and Medicaid Services, or CMS, began requiring all U.S. hospitals to have Antibiotic Management guidelines, also known as "Stewardship" Committees, in place to identify antibiotics most appropriate and targeted to each individual patient's infection. Past efforts to "cast the widest net possible" with broad-spectrum antibiotics that affect many types of bacteria have caused problems, such as C. difficile infections, by killing good bacteria or increased antibiotic resistance in other bacteria in different areas of the body. Additionally, in 2016, the Infectious Diseases Society of America and the Society for Healthcare Epidemiology of America, or IDSA/SHEA, updated their Antibiotic Stewardship guidelines for antibiotic use. We believe that three key goals from these guidelines are applicable to the treatment of CABP:

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Reduce the risk of antibiotics associated with a high risk of C. difficile infections;



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Increase use of oral antibiotics as a strategy to improve outcomes or decrease costs; and



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Reduce antibiotic therapy to the shortest effective duration.

        Consistent with the Antimicrobial Stewardship principles, we believe that lefamulin could be well suited as either a first-line or second-line empiric monotherapy for the treatment of CABP patients in the hospital setting, outpatient-transition of care or in the community setting, because of its novel mechanism of action, complete spectrum of activity for CABP pathogens, including against multidrug resistant strains, achievement of substantial drug concentrations in lung fluids and lung immune cells, and flexibility as step down oral agent with both the IV and oral formulations and favorable safety and tolerability profile.

        In recognition of the growing need for the development of new antibiotics, recent regulatory changes, including priority review and regulatory guidance enabling smaller clinical trials, have led to renewed interest from the pharmaceutical industry in anti-infective development. For example, the Food and Drug Administration Safety and Innovation Act became law in 2012 and included the Generating Antibiotic Incentives Now Act, or the GAIN Act, which provides incentives, including access to expedited FDA review for approval, fast track designation and five years of potential data exclusivity extension for the development of new QIDPs.

Our Strategy

        Our goal is to become a fully integrated biopharmaceutical company focused on the research, development and commercialization of novel anti-infective products. The key elements of our strategy to achieve this goal are:

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Complete Phase 3 clinical development of lefamulin for CABP.  We are devoting a significant portion of our financial resources and business efforts to completing the clinical development of lefamulin for the treatment of CABP. We initiated two international Phase 3 clinical trials of lefamulin for the treatment of moderate to severe CABP. We initiated the first of these trials, LEAP 1, in September 2015 and the second trial, LEAP 2, in April 2016. In September 2017, we reported positive top-line results from our LEAP 1 trial. With respect to LEAP 2, we completed patient enrollment in December 2017, and we anticipate receiving top-line data for LEAP 2 in

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the spring of 2018. If the results of the LEAP 2 trials are favorable, including achievement of the primary efficacy endpoints, we expect to submit applications for marketing approval for lefamulin for the treatment of CABP in the United States in the second half of 2018 and in Europe a few months later.

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Maximize the commercial potential of lefamulin for CABP.  We own exclusive, worldwide rights to lefamulin. We expect that our initial target patient population for lefamulin will consist of patients with moderate to severe CABP. If lefamulin receives marketing approval from the FDA for the treatment of CABP, we plan to commercialize it in the United States with our own targeted sales and marketing organization that we plan to establish. We believe lefamulin has an innovative profile which, if approved, would support its adoption in the United States for adult CABP patients, treated both as in-patients in a hospital setting as well as outpatient transition of care from the hospital, which we believe represents a significant commercial opportunity. We believe that we will be able to effectively communicate lefamulin's differentiating characteristics and key attributes to clinicians, hospital pharmacies and payors with the goal of establishing favorable reimbursement as well as a favorable formulary status in the targeted hospitals.

If lefamulin receives marketing approval outside the United States for the treatment of CABP, we expect to utilize a variety of types of collaboration, distribution and other marketing arrangements with one or more third parties to commercialize lefamulin in such markets.

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Pursue the continued development of lefamulin in additional indications.  We are evaluating the continued development of lefamulin for indications in addition to CABP. Pediatric oral formulation development is ongoing, and we anticipate intiating a Phase 1 clinical trial in pediatric patients in mid-2018. We believe lefamulin has potential to treat acute bacterial skin and skin structure infection (ABSSSI), ventilator-associated bacterial pneumonia (VABP) or hospital-acquired bacterial pneumonia (HABP) and sexually transmitted infections (STIs). In addition, we may explore longer duration of treatment with lefamulin to support development of a treatment for osteomyelitis and prosthetic joint infections. We believe that lefamulin would be differentiated from other treatment options for these potential indications because of its novel mechanism of action, spectrum of activity, including activity against multi-drug resistant pathogens, achievement of substantial concentrations in relevant tissues, availability as both an IV and oral formulation and favorable safety and tolerability profile.



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Advance the development of other pleuromutilin product candidates and possibly compounds in other classes. We are currently evaluating additional pleuromutilin product candidates by using our deep understanding of this class of antibiotics. Our product candidate BC-7013 has completed a Phase 1 clinical trial. We believe that this pleuromutilin compound is well suited for the topical treatment of a variety of Gram-positive infections, including uncomplicated skin and skin structure infections, or uSSSIs. Furthermore, we own diverse libraries of compounds in other antibacterial classes, such as ß-lactams and acremonic acids, which are a potential basis for the discovery and development of novel antibacterial agents.



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Evaluate business development opportunities and potential collaborations.  We plan to evaluate the merits of entering into collaboration agreements with other pharmaceutical or biotechnology companies that may contribute to our ability to efficiently advance our product candidates, build our product pipeline, concurrently advance a range of research and development programs and leverage our commercial infrastructure. Potential collaborations may provide us with funding and access to the scientific, development, regulatory and commercial capabilities of the collaborators. We also plan to encourage local and international government entities and non-government organizations to provide additional funding and support for our development programs. We may expand our product pipeline through opportunistically in-licensing or acquiring the rights to

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complementary products, product candidates and technologies for the treatment of a range of infectious diseases.

Background

Anti-Bacterial Market and Scientific Overview

        Bacteria are broadly classified as Gram-positive or Gram-negative. Gram-positive bacteria possess a single membrane and a thick cell wall and turn dark-blue or violet when subjected to a laboratory staining method known as Gram's method. Gram-negative bacteria have a thin cell wall layered between an inner cytoplasmic cell membrane and a bacterial outer membrane and, as a result, do not retain the violet stain used in Gram's method. Antibiotics that are active against both Gram-positive and Gram-negative bacteria are referred to as broad spectrum, while those that are active only against a select subset of Gram-positive or Gram-negative bacteria are referred to as narrow spectrum. Bacteria that cause infections are often referred to as bacterial pathogens. Because it often takes from 24 to 48 hours to definitively diagnose the particular bacterial pathogen causing an infection, the causative pathogen often remains unidentified and narrow spectrum antibiotics are not generally used as empiric monotherapy for first-line treatment of hospitalized patients with serious infections.

        Since the introduction of antibiotics in the 1940s, numerous new antibiotic classes have been discovered and developed for therapeutic use. The development of new antibiotic classes and new antibiotics within a class is important because of the ability of bacteria to develop resistance to existing mechanisms of action of currently approved antibiotics. However, the pace of discovery and development of new antibiotic classes slowed considerably in the past few decades. The CDC estimates that the pathogens responsible for more than 70% of U.S. hospital infections are resistant to at least one of the antibiotics most commonly used to treat them. The CDC also estimated in 2013, based on data collected from evaluations performed between 2006 and 2011, that annually in the United States at least two million people become infected with bacteria that are resistant to antibiotics and at least 23,000 people die as a direct result of these infections.

        Antibiotic resistance is primarily caused by genetic mutations in bacteria selected by exposure to antibiotics that do not kill all of the bacteria. In addition to mutated bacteria being resistant to the drug used for treatment, many bacterial strains can also become cross-resistant, meaning that they become resistant to multiple classes of antibiotics. As a result, the effectiveness of many antibiotics has declined, limiting physicians' options to treat serious infections and exacerbating a global health issue. For example, the WHO estimated in 2014 that people with infections caused by MRSA, a highly resistant form of bacteria, are 64% more likely to die than people with a non-resistant form of the infection. Resistance can increase the cost of healthcare because of the potential for lengthier hospital stays and more intensive care. Growing antibiotic resistance globally, together with the low level of investment in research and development, is considered one of the biggest global health threats. In 2010, the WHO stated that antibiotic resistance is one of the three greatest threats to human health. Partially in response to this threat, the U.S. Congress passed the GAIN Act in 2012, which provides incentives, including access to expedited FDA review for approval, fast track designation and five years of potential data exclusivity extension for the development of new QIDPs. Additional legislation is also being considered in the United States, including the Antibiotic Development to Advance Patient Treatment Act of 2013, which is intended to accelerate the development of anti-infective products, and the Developing an Innovative Strategy for Antimicrobial Resistant Microorganisms Act of 2014, which is intended to establish a new reimbursement framework to enable premium pricing of anti-infective products.

        In 2016, sales of antibiotics totaled approximately $39 billion globally. Although judicious use of antibiotics is important to reduce the rate of antibiotic resistance, this approach alone cannot fully

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address the threat from increasing antibiotic resistance. New antibiotics, and particularly new antibiotic classes, are needed to ensure the availability of effective antibiotic therapy in the future.

Community-Acquired Bacterial Pneumonia (CABP)

Market Overview

        The WHO estimated in 2002 that there were approximately 450 million pneumonia cases reported per year worldwide, causing approximately 4.0 million deaths in 2002. According to an article published in 2011 in the peer-reviewed medical journal Therapeutic Advances in Respiratory Disease, the annual incidence of community-acquired pneumonia is between five and 11 cases per 1,000 people, with the incidence rate rising in elderly patients. In a study published in 2004 in the peer-reviewed medical journal Clinical Infectious Diseases in which more than 46,000 people in the state of Washington were monitored over three years, the incidence of CABP among those 65 to 69 years of age was 18.2 cases per 1,000 people per year and increased to 52.3 cases per 1,000 people per year in those over 85 years of age.

        The U.S. National Center for Health Statistics estimated that between 1988 and 1994 there were approximately 5.6 million cases of pneumonia per year in the United States. More recently, based on our combined analysis of the CDC's 2007 National Ambulatory Medical Care Survey, the National Hospital Ambulatory Medical Care Survey and 2013 data from the Healthcare Cost and Utilization Project we estimate that over 5.0 million adults are treated annually for CABP in the United States and that the majority of these adult CABP patients have their treatment initiated in a hospital, including emergency departments. According to the Healthcare Cost and Utilization Project, or HCUP, in 2013, approximately 3.1 million adults sought treatment in a U.S. hospital for CABP. In addition, in 2013, approximately 2.4 million adults were admitted to U.S. hospitals for in-patient care with a diagnosis of CABP and approximately 700,000 adults were seen in an emergency department at U.S. hospitals for treatment of CABP and then released.

        Additionally, in 2014, based on CDC data approximately 50,000 patients died from CABP in the United States. Based on data collected from July 1, 2012 through June 30, 2015, on the Medicare.gov Hospital Compare website, the current national rate of readmissions for Medicare pneumonia patients is 17.1%, which is the percentage of patients who have had a recent hospital stay that must return to a hospital for unplanned care within 30 days of being discharged. The national average death rate for Medicare pneumonia patients, excluding Medicare Advantage plan data, is 16.3%, which is the percentage of patients who die, for any reason, within 30 days of admission to a hospital.

        Based on data from Arlington Medical Resources, or AMR, a leading provider of medical data from hospitals and other healthcare facilities, who reported that the number of antibiotic treatment courses for CABP adult patients in hospitals in the United States exceeded 6.8 million for full-year 2015, we estimate approximately 5.3 million of these CABP courses were for IV/injectable antibiotics for adult CABP patients, while approximately 1.5 million CABP oral antibiotic courses were prescribed for adult CABP patients in the hospital setting. Additionally, for the twelve months ending September 30, 2016, Source Health Solutions estimates that once adult CABP patients are discharged home from U.S. hospitals, approximately 4.2 million antibiotic oral prescriptions are written annually for their outpatient antibiotic treatment. Relative to the approximately 6.6 million adult CABP outpatient oral antibiotic prescriptions that Health Source Solutions estimates are written over the same time-period, approximately 6 out of every 10 oral antibiotic prescriptions for adult CABP results as a transition of care from hospital-initiated treatment to outpatient therapy. The remaining CABP prescriptions originate from prescribers in community clinics, primary care offices and at other non-hospital based sites of urgent care.

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Causes of CABP

        Pneumonia can be caused by a variety of micro-organisms, with bacteria being the most common identifiable cause. CABP refers to bacterial pneumonia that is acquired outside of a hospital setting. Signs and symptoms of CABP include cough, fever, sputum production and chest pain. A number of different types of bacteria can cause CABP, including both Gram-positive and Gram-negative bacteria. Pneumonia that is caused by atypical bacterial pathogens often has different symptoms and responds to different antibiotics than pneumonia caused by pathogens referred to as typical bacteria. However, atypical bacteria are not uncommon. The most common bacterial pathogens noted in current treatment guidelines from the Infectious Diseases Society of America, or IDSA, for hospitalized CABP patients who are not in the intensive care unit are Streptococcus pneumoniae, Mycoplasma pneumoniae, Haemophilus influenzae, Chlamydophila pneumoniae, and Legionella species. In addition, IDSA notes the emergence of resistance to commonly utilized antibiotics for CABP, specifically drug-resistant S. pneumoniae and community-acquired MRSA, or CA-MRSA, as a major consideration in choosing empiric therapy. However, a majority of patients do not have a pathogen identified using routine diagnostic tests available to physicians.

Currently Available Treatment Options

        In 2007, based on the most likely bacteria to cause CABP, IDSA and the American Thoracic Society, or ATS, recommend empiric treatment of hospitalized patients with CABP who do not require treatment in an intensive care unit with either:

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a combination of a cephalosporin, an antibiotic that disrupts the cell wall of bacteria, plus a macrolide, an antibiotic that disrupts bacterial protein synthesis; or



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monotherapy with a respiratory fluoroquinolone, an antibiotic that disrupts bacterial protein synthesis.

        In the event CA-MRSA is suspected, these guidelines recommend that vancomycin, an antibiotic that disrupts the cell wall of bacteria, or linezolid, an antibiotic that disrupts bacterial protein synthesis, be used or added to the current regimen.

        In addition, physicians need to be aware of the local susceptibility profiles of the common bacterial pathogens associated with CABP because of increasing resistance to first-line antibiotics. For example, rates of pneumococcal resistance to recommended first-line macrolides exceed 40% in some areas, while resistance in M. pneumoniae associated with severe disease has been recently reported by the CDC in the United States.

Limitations of Currently Available Treatment Options

        When confronted with a new patient suffering from a serious infection caused by an unknown pathogen, a physician may be required to quickly initiate first-line empiric antibiotic treatment, often with a combination of antibiotics, to stabilize the patient prior to definitively diagnosing the particular bacterial infection. However, currently available antibiotic therapies for first-line empiric treatment of CABP suffer from significant limitations.

Bacterial Resistance and Spectrum of Activity

        As a result of bacterial resistance, the effectiveness of many antibiotics has declined. For example, the CDC estimates that in 30% of severe S. pneumoniae cases, the bacterial pathogen is fully resistant to one or more clinically relevant antibiotics, with 44% of strains resistant to a macrolide in the United States. In addition, fluoroquinolone resistance in S. pneumoniae has increased from less than 0.5% to more than 3% of cases in some regions of North America, which parallels increased total fluoroquinolone prescriptions. Antibiotic resistance has a significant impact on mortality and

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contributes heavily to healthcare system costs worldwide. According to the CDC, cases of resistant pneumococcal pneumonia result in 32,000 additional doctor visits, approximately 19,000 additional hospitalizations and 7,000 deaths each year. None of the currently available treatment options provides a spectrum of antibacterial coverage as a monotherapy that sufficiently covers all of the most common bacterial causes of CABP, including multi-drug resistant strains.

Difficult, Inconvenient and Costly Regimens

        Currently available antibiotics used to treat CABP and other serious infections can be difficult, inconvenient and costly to administer. Physicians typically prefer IV administration for patients hospitalized with more serious illness to ensure adequate delivery of the drug rapidly. Many IV antibiotics are prescribed for seven to 14 days or more and patients can be hospitalized for much or all of this period or require in-home IV therapy. The diagnosis related group, or DRG, reimbursement system often used in the U.S. hospital setting pays a fixed fee for an episode of CABP that may not fully compensate hospitals for the duration of hospitalized care. Prolonged IV treatment that extends the period of hospitalization may cause hospital costs to increase in excess of the fixed reimbursement fee, resulting in significant negative impact on healthcare institutions. In addition, to address all likely bacterial pathogens in a patient with a more serious illness, IDSA guidelines recommend using a combination of antibiotics. Combination therapy presents the logistical challenge of administering multiple drugs with different dosing regimens and increases the risk of drug-drug interactions. While IV treatment delivers the drug more rapidly than is possible orally, once a patient is stabilized, oral treatment with the same drug would allow for more convenient and cost-effective out-patient treatment. Because many commonly used antibiotics are only available in IV form, a switch to an oral therapy requires changing to a different antibiotic, which may be less effective for the patient.

Adverse Effects

        Currently available antibiotic therapies can have serious side effects. These side effects may include severe allergic reaction, decreased blood pressure, nausea and vomiting, suppression of platelets, pain and inflammation at the site of injection, muscle, renal and oto-toxicities, optic and peripheral neuropathies and headaches. At times, these side effects may be significant and require discontinuation of therapy. As a result, some treatments require clinicians to closely monitor patients' blood levels and other parameters, increasing the expense and inconvenience of treatment. This risk may be increased with combination therapy, which exposes patients to potential adverse effects from each of the antibiotics used in treatment. For example, fluoroquinolones are associated with tendon rupture and peripheral neuropathy. In addition, fluoroquinolones have been associated with an increased frequency of C. difficile colitis, an overgrowth of a bacteria in the colon that produces a toxin that results in inflammation of the colon and repeated bouts of watery diarrhea. This has resulted in limitations on the use of fluoroquinolones in several countries. In November 2015, the FDA convened an Advisory Committee meeting to review the benefits and risks of fluoroquinolones in less severe indications, such as uncomplicated UTI, acute bacterial sinusitis and acute bacterial exacerbations of chronic bronchitis. Based on the committee's recommendation, in July 2016, the FDA approved changes to the labels of fluoroquinolones to indicate that fluoroquinolones should be reserved for use in patients who have no other treatment options for the indications mentioned above, because the risk of these serious side effects generally outweighs the benefits in these patients. These changes included a requirement that a separate patient Medication Guide be given with each prescription that describes the safety issues associated with this class of drugs.

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Our Product Development Pipeline

        The following table summarizes the indications for which we are developing our product candidates and the status of development.

DEVELOPMENT STAGE

Lefamulin

Overview

        We are developing lefamulin to be the first pleuromutilin antibiotic available for systemic administration in humans. Lefamulin is a semi-synthetic derivative of the naturally occurring antibiotic, pleuromutilin, which was originally identified from a fungus called Pleurotus mutilius. Lefamulin inhibits the synthesis of bacterial protein, which is required for bacteria to grow. Lefamulin acts by binding to the peptidyl transferase center, or PTC, on the bacterial ribosome in such a way that it interferes with the interaction of protein production at two key sites known as the "A" site and the "P" site, resulting in the inhibition of bacterial proteins and the cessation of bacterial growth. Lefamulin's binding occurs with high affinity, high specificity and at molecular sites that are different than other antibiotic classes. We believe that lefamulin's novel mechanism of action is responsible for the lack of cross-resistance with other antibiotic classes that we have observed in our preclinical studies and clinical trials and a

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low propensity for development of bacterial resistance to lefamulin. The binding of lefamulin to the PTC on the bacterial ribosome is depicted in the graphic below.

        We are developing both IV and oral formulations of lefamulin. We believe that lefamulin is well suited to be used empirically as monotherapy for the treatment of respiratory tract infections, such as CABP, because of its spectrum of antibacterial activity against both the typical and atypical pathogens causing CABP, including multi-drug resistant pathogens such as MRSA. In addition, in preclinical studies, lefamulin showed potent antibacterial activity against a variety of Gram-positive bacteria, Gram-negative bacteria and atypical bacteria, including multi-drug resistant strains. In preclinical studies and in Phase 1 clinical trials, lefamulin achieved substantial concentrations in the epithelial lining fluid, or ELF, of the lung, the site infected during pneumonia. Lefamulin also provides the ability to switch from IV to oral therapy and maintain therapy with the same antibacterial treatment.

        The FDA has designated each of the IV and oral formulations of lefamulin as a qualified infectious disease product, or QIDP, which provides for the extension of statutory exclusivity periods in the United States for an additional five years upon FDA approval of the product for the treatment of CABP and granted fast track designation to these formulations of lefamulin. Fast track designation is granted by the FDA to facilitate the development and expedite the review of drugs that treat serious conditions and fill an unmet medical need. The fast track designation for the IV and oral formulations of lefamulin will allow for more frequent interactions with the FDA, the opportunity for a rolling review of any new drug application, or NDA, we submit and eligibility for priority review and a shortening of the FDA's goal for taking action on a marketing application from ten months to six months.

        We own exclusive, worldwide rights to lefamulin. Lefamulin is protected by issued patents in the United States, Europe and Japan covering composition of matter, which are scheduled to expire no earlier than 2028. We also have been granted patents for lefamulin relating to process and pharmaceutical crystalline salt forms in the United States, which are scheduled to expire no earlier than 2031. In addition, we own a family of pending patent applications directed to pharmaceutical compositions of lefamulin, which if issued would be scheduled to expire no earlier than 2036.

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Key Attributes of Lefamulin

        We believe that the combination of the following key attributes of lefamulin, observed in clinical trials and preclinical studies, differentiates lefamulin from currently available antibiotics and make lefamulin well suited for use as a first-line or second-line empiric monotherapy for the treatment of CABP.

        The preclinical studies and clinical trials we have conducted to date suggest that lefamulin's novel mechanism of action is responsible for the lack of cross resistance observed with other antibiotic classes and a low propensity for development of bacterial resistance to lefamulin. As a result of the favorable safety and tolerability profile we have observed in our clinical trials to date, we believe lefamulin has the potential to present fewer complications relative to the use of current therapies. Based on our research, we also believe that the availability of both IV and oral formulations of lefamulin, and an option to switch to oral treatment, could reduce the length of a patient's hospital stay and the overall cost of care.

Targeted Spectrum of Activity for CABP pathogens and Low Propensity for the Development of Bacterial Resistance

        We expect lefamulin's spectrum of antibacterial activity against typical and atypical pathogens could eliminate the need to use a combination of antibiotics for the treatment of CABP. In our completed Phase 2 clinical trial, IV lefamulin achieved a high cure rate against multi-drug resistant Gram-positive bacteria, including MRSA. In addition, in preclinical studies, lefamulin showed activity against a variety of Gram-positive bacteria, including S. pneumoniae and S. aureus, that are resistant to other classes of antibiotics, Gram-negative bacteria, including H. influenzae and M. catarrhalis, and atypical bacteria, including C. pneumoniae, M. pneumoniae and L. pneumophila. Included in lefamulin's spectrum of activity are all bacterial pathogens identified by IDSA as the most common causes of CABP for hospitalized patients who are not in the intensive care unit, as well as strains of the above listed bacteria that are resistant to other classes of antibiotics, including penicillins, cephalosporins, fluoroquinolones and macrolides.

        Based on observations from our preclinical studies and clinical trials of lefamulin, as well as industry experience with pleuromutilins used in vetinary medicine over the last 30 years, we believe that lefamulin's novel mechanism of action is responsible for the lack of cross-resistance observed with other antibiotic classes and a low propensity for development of bacterial resistance to lefamulin.

Convenient Dosing Regimen; Potential for Switching from IV to Oral Treatment

        We have developed both an IV and oral formulation of lefamulin, which we are utilizing in our clinical trials of lefamulin for the treatment of CABP. The administration of lefamulin as a monotherapy avoids the need for the complicated dosing regimens typical of multi-drug cocktails. We believe the availability of both IV and oral administration, and an option to switch to oral treatment, would be more convenient for patients and could reduce the length of a patient's hospital stay and the overall cost of care. The potential reduction in the overall cost of care could be particularly meaningful to healthcare institutions, as the DRG reimbursement system pays a fixed fee for the treatment of CABP regardless of the length of hospital stay. We believe that our Phase 3 trial design will permit us to submit for approval of both IV and oral formulations of lefamulin, subject to obtaining favorable results in LEAP 2, including achievement of the primary efficacy endpoints of the trials.

        We designed our Phase 3 clinical trials to follow the draft guidance published by the FDA for the development of drugs for CABP and guidance from the European Medicines Agency, or EMA, for the development of antibacterial agents with the goal of positioning lefamulin as a first-line empiric monotherapy for the treatment of CABP. We reached agreement with the FDA in September 2015 on a SPA regarding the study design for our first Phase 3 clinical trial and obtained input from select

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European authorities in anticipation of submitting a new drug application with the FDA and a marketing authorization application, or MAA, with the EMA, in each case, for the treatment of CABP. In April 2016, we reached agreement with the FDA regarding an amendment to the SPA. We also plan to conduct a number of studies to support FDA approval of lefamulin, including studies in patients with hepatic insufficiency and renal impairment. On September 18, 2017, we announced positive top-line results for LEAP 1. In LEAP 1, which enrolled 551 patients, lefamulin met all of the primary endpoints of non-inferiority compared to moxifloxacin with or without linezolid as required by the FDA, and EMA. Lefamulin also showed a favorable tolerability profile in the LEAP 1 trial, with no unexpected safety signals or evidence of off-target activity.

LEAP 1—IV/Oral Phase 3 Clinical Trial

        LEAP 1 was a multi-center, randomized, controlled, double-blind, global study comparing lefamulin to moxifloxacin, with or without linezolid, in adults with CABP who have a Pneumonia Outcomes Research Team, or PORT Class, of 3, 4 or 5. After providing informed consent and completing screening procedures, patients were randomized in a 1:1 ratio to receive lefamulin or moxifloxacin. At the time of randomization, if the investigator suspected methicillin-resistant S aureus, also called MRSA, patients randomized to receive moxifloxacin could also receive linezolid, while patients receiving lefamulin would have had placebo added. All patients initially received 3 days of IV study medication, after which the option to switch to oral therapy was permitted in each treatment arm based on whether a patient met predefined signs of improvement and the investigator discretion. Patients completed a total of 7 days of study drug unless they were suspected to have MRSA infection, in which case then they received 10 days of treatment. The lefamulin dosing was 150 mg IV or 600 mg orally every 12 hours; moxifloxacin was dosed at 400 mg for both IV and oral once-daily, and linezolid was dosed at 600 mg for both IV and orally every 12 hours.

        During the study, there were several pre-defined time points at which efficacy was assessed. The first time point, called the early clinical response assessment, or ECR, occurred at 96 +/– 24 hours after the first dose of study drug. The ECR is an on-therapy assessment and is the primary efficacy assessment required by the FDA. This endpoint assessed the four cardinal patient reported signs and symptoms of CABP. For a patient to be deemed to have a successful ECR, they must have had improvement in at least two of the four CABP symptoms, with none of the symptoms worsening, they also must have been alive and, must not have received a non-study antibacterial agent for the treatment of their CABP. The non-inferiority margin for the FDA primary endpoint is 12.5%, with a power >90%.

        The EMA primary efficacy endpoint is the Investigator Assessment of Clinical Response, or the IACR, in both the modified ITT and Clinically Evaluable populations at the test of cure, or TOC. In order for a patient to be deemed to have had a successful IACR, they must have had their signs and symptoms of CABP improved or resolved in the investigator's judgement such that no additional antibacterial therapy was administered for their CABP. The non-inferiority margin for the EMA primary endpoints was 10%, with an 80% power.

        Of the 551 patients enrolled in LEAP 1, there were 276 in the lefamulin arm versus 275 in the moxifloxacin with or without linezolid arm. Patients who were 65 or older were 47.8% in the lefamulin arm versus 39.3% in the moxifloxacin with or without linezolid arm. The lefamulin arm enrolled 196 (71.0%), 76 (27.5%) and 4 (1.4%) patients with a PORT score of III, IV and V, respectively. The moxifloxacin with or without linezolid arm enrolled 1 (0.4%), 201 (73.1%), 70 (25.5%) and 3 (1.1%) patients with a PORT score of II, III, IV and V, respectively.

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Topline Results

        In LEAP 1, lefamulin met the FDA's primary efficacy endpoint of early clinical response measured at 96 +/– 24 hours after the first dose of study medication in the ITT population. The early clinical response rate observed in the lefamulin treatment arm was 87.3% compared to a 90.2% response rate in the moxifloxacin with or without linezolid treatment arm. The difference in the point estimate for the ECR was –2.9 with a 95% confidence internal between –8.5 and +2.8. Lefamulin also met the EMA's primary endpoint of Investigator assessment of clinical response, or IACR, measured 5 to 10 days after the last dose of study drug, or the TOC, in both the modified ITT and clinically evaluable populations. In the CE-population the IACR was 86.9% compared to 89.4% in the lefamulin and moxifloxacin arms, respectively. The difference in the point estimate was –2.5, with a 95% confidence interval between –8.4 and +3.4. In the mITT population the IACR was 81.7% compared to 84.2% in the lefamulin and moxifloxacin arms, respectively. The difference in the point estimate was –2.6, with a 95% confidence interval between –8.9 and +3.9.

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ECR by Baseline Pathogen—micro ITT

ECR by Baseline Pathogen—Typical Pathogens [micro ITT]

        Lefamulin achieved a high clinical response against all of the most common bacterial causes of CABP. As expected, S. pneumoniae was the most common baseline pathogen identified and both lefamulin and moxifloxacin had high clinical success rates. Although a small number of S. pneumoniae resistant to at least one antibiotic was identified, the clinical success rate for lefamulin was 100% compared to with moxifloxacin's response rate of 67 to 83%.

        The second most common isolate identified at baseline was H. influenza, with 51 and 57 isolates recovered in the lefamulin and moxifloxacin treatment arms, respectively. The clinical response rate was excellent in both treatment groups, with 92.2% and 94.7% achieving ECR in the lefamulin and moxifloxacin arms, respectively.

        S. aureus was identified in 10 subjects receiving lefamulin and 4 subjects in the moxifloxacin +/– linezolid treatment arm, with 100% achieving ECR. All strains of S. aureus were methicillin susceptible. Lastly, against the atypical pathogens, M. pneumoniae, L. pneumophila and C. pneumoniae, both lefamulin and moxifloxacin performed very well with response rates between 84.2 and 94.7%.

LEAP 1 Adverse Events

        In the LEAP 1 trial, a similar rate of treatment-emergent adverse events, or TEAEs, was observed in the lefamulin arm (38.1%) and the moxifloxacin with or without linezolid arm (37.7%). In addition, the rates of TEAEs leading to study drug discontinuation were 2.9% for lefamulin versus 4.4% for moxifloxacin with or without linezolid, and the rates of withdrawal from the trial were 1.8% for lefamulin versus 4.0% for moxifloxacin with or without linezolid. Death occurred with similar frequency in both arms, with 6 patients dying in the lefamulin arm (2.2%) and 5 patients dying in the moxifloxacin with or without linezolid arm (1.8%).

        Gastrointestinal TEAEs were reported in 13% of patients on moxifloxacin as compared to 6.6% in the lefamulin arm. Of note, although no documented cases of Clostridium difficile infection were

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reported, diarrhea was observed in 7.7% of those receiving moxifloxacin as compared to 0.7% of those receiving lefamulin.

        The chart below provides all of the TEAEs that occurred in >2% of patients in either treatment group. Overall, both treatments were well tolerated, with only hypokalemia, nausea, insomnia, infusion site pain, infusion site phlebitis reported in >2% of lefamulin treated patients, and hypokalemia, nausea, Alanine transaminase increase, hypertension and diarrhea reported in >2% of moxifloxacin treated patients. In addition, no meaningful differences between the lefamulin and moxifloxacin with or without linezolid arms were observed in cardiac (2.9% versus 4.0%) or hepatobiliary (0.7% versus 1.5%) TEAEs.

        A summary of the maximum post baseline liver function enzyme elevations is shown below. Approximately 2% of patients in each treatment group had a >5x upper limit of normal ALT, 0.7% having a >5x ULN AST and 1.1% having a total bilirubin >1.5x ULN. In the lefamulin treatment group, one patient had a >10x ULN ALT and one patient had a >10x ULN AST. Neither patient had a baseline value reported and both patients' values reduced to near normal by the TOC visit. Additionally, no patients in either group met criteria for Hy's law.

        A summary of the post dose QTc changes is shown below. The change in QTcF was measured post dose at the time expected to result in peak concentration of study drug on day 3 which was when both drugs were expected to be at steady state concentrations. Overall, low rates of post dose increases in QTcF were reported in both treatment arms, with no patient in the lefamulin treatment arm

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experiencing the clinically relevant combination of a post dose change in QTcF >60 msec and an absolute total QtcF >480 msec.

LEAP 2—Phase 3 Clinical Trial of Oral Lefamulin

        Our second Phase 3 clinical trial of lefamulin for the treatment of CABP is a multi-center, randomized, controlled, double-blind study comparing oral lefamulin to moxifloxacin, a fluoroquinolone antibiotic. This trial is designed to assess the non-inferiority of oral lefamulin compared to moxifloxacin. The study population included male and female patients of at least 18 years of age. Enrollment of 738 patients was completed in December 2017. We anticipate that topline clinical results will be available in the spring of 2018. If the results of LEAP 2 are also favorable, including achievement of the primary efficacy endpoints of the trial, we expect to submit an NDA for marketing approval of lefamulin for the treatment of CABP in adults in the United States in the second half of 2018. We also expect to submit an MAA for lefamulin for the treatment of CABP in adults in Europe a few months after our NDA filing.

        In LEAP 2, lefamulin was dosed orally at 600mg every 12 hours. The comparator drug moxifloxacin was dosed according to approved labeling at 400 mg daily. All medications were administered according to a double-blind and double-dummy design.

        All patients enrolled in this trial were classified as PORT severity of at least 2 and no greater than 4 on a scale of 1 to 5 which corresponds to moderate disease. Patients who had previously taken no more than one dose of a short acting, potentially effective antibiotic for the treatment of the current CABP episode within 24 hours of receiving the first dose of study medication were allowed to participate in the trial but were limited to only up to 25% of the total intent to treat, or ITT, population. Investigators obtained baseline Gram's stain and culture of suitable specimens from the site of infection. Patients were treated for five days with lefamulin or for seven days with moxifloxacin. We assessed patients between 72 and 120 hours from the start of treatment, at the end of treatment, or EOT, within 48 hours of administration of the final dose of study medication, at a TOC visit between five and ten days after administration of the final dose of study medication and at a telephone follow-up 30 days after administration of the first dose of study medication.

        We will evaluate the following patient subsets:

•

an ITT population consisting of all randomized patients regardless of whether they have received study medication;



•

a MITT population consisting of all randomized subjects who receive any amount of study drug;



•

a microITT, population consisting of all subjects in the ITT population who have at least one baseline bacterial pathogen known to cause CABP, Legionella pneumophila from an appropriate microbiological specimen, or CABP caused by Mycoplasma pneumoniae or Chlamydophila pneumoniae;



•

a clinically evaluable, or CE, population which is a subset of the ITT population that will include subjects who meet the criteria for CABP and who have received at least the pre-specified minimal amount of the intended dose of study drug and duration of treatment, do not have an indeterminate response based on the investigator's assessment of clinical response at EOT for the CE-EOT population and at TOC for the CE-TOC population, did not receive concomitant

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antibacterial therapy that is potentially effective against CABP pathogens (except in the case of clinical failure) from the first dose of study drug through the EOT visit for the CE-EOT population and through the TOC visit for the CE-TOC population, and for whom there are no other confounding factors that interfere with the assessment of the outcome; and

•

a microbiologically evaluable, or ME, population consisting of all subjects who meet the criteria for inclusion in both the microITT, CE-EOT and ME-EOT populations or the CE-TOC and ME-TOC populations.

        The primary efficacy endpoint for the trial for the FDA is the proportion of patients in the ITT population for the lefamulin treatment group and for the moxifloxacin treatment group who are alive, have improvement in at least two of the four cardinal symptoms of CABP as outlined in the current FDA guidance, have no worsening in any of the four cardinal symptoms of CABP and have not received a concomitant antibiotic for the treatment of CABP up through 120 hours after the first dose of study medication. This endpoint is also referred to as early clinical response. The non-inferiority margin for the FDA primary endpoint is 10.0%, with a power of 90%.

        The primary efficacy endpoint for the EMA is the clinical success rate at the TOC visit for lefamulin in both the CE and MITT populations compared to moxifloxacin. Clinical success is based on the investigator's assessment that a patient has clinically responded to treatment, which means that the patient has complete resolution or significant improvement of all local and systemic signs and symptoms of infection such that no additional antibiotic treatment is administered for the treatment of the current episode of CABP. The non-inferiority margin for the EMA primary endpoints is 10%, with a greater than 90% power.

        Key secondary efficacy and exploratory endpoints for our second Phase 3 clinical trial include the following:

•

assessment of response for the primary efficacy outcome of early clinical response (the FDA primary endpoint) in the microITT population;



•

assessment of response in each treatment group with an investigator assessment of clinical response at TOC (the EMA primary endpoint) in the microITT and ME-TOC populations;



•

assessment of the microbiological response by pathogen for the microITT and ME-TOC populations at TOC; and



•

assessment of all-cause mortality through day 28 in the ITT population.

Completed Phase 2 Clinical Trial in ABSSSI

ABSSSI

        Acute bacterial skin and skin structure infections are common and are characterized by a wide range of disease presentations. Gram-positive bacteria, in particular S. aureus, S. pyogenes and S. agalactiae, are the most common pathogens in ABSSSI. The rising frequency of ABSSSI caused by MRSA and the significant increase in the occurrence of CA-MRSA infections over the past 15 years is an increasing concern. According to IDSA Skin and Skin Structure Infection guidelines 2014, in most U.S. cities, CA-MRSA is now the most common pathogen cultured from patients with ABSSSI in emergency departments. While the current standard of care for MRSA infections is vancomycin, the efficacy of this treatment is being compromised because of decreased susceptibility, or even resistance, of S. aureus to vancomycin. In addition, although linezolid is approved for ABSSSI due to MRSA, its use has been limited because of potential adverse events and drug-drug interactions with commonly prescribed concomitant medications such as antidepressants.

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        The emerging incidence of resistance to multiple antibiotics in pathogens makes ABSSSI increasingly difficult to treat and results in a need for alternate therapies. Based on our preclinical studies and clinical trials, we believe that lefamulin has potential to treat ABSSSI. In preclinical studies, lefamulin has shown in vitro antibacterial activity against the most relevant pathogens responsible for ABSSSI including S. aureus (MSSA, MRSA, and CA-MRSA), S. pyogenes, and S. agalactiae.

        In 2011, we completed a multi-center, randomized, double-blind Phase 2 clinical trial in the United States evaluating the efficacy, safety and pharmacokinetics of two different doses of the IV formulation of lefamulin administered over five to 14 days compared to vancomycin in patients with ABSSSI, and the clinical success rate at test of cure for lefamulin was similar to that of vancomycin. We selected ABSSSI as the indication for the trial to ensure that there would be a significant population of patients with multi-drug resistant Gram-positive bacteria. Gram-positive bacteria are the prevalent pathogens in ABSSSI. We selected vancomycin as the comparison therapy because vancomcyin is one of the antibiotics recommended by IDSA guidelines for the treatment of ABSSSI.

        We have discussed the design of a proposed Phase 3 clinical trial to evaluate the efficacy and safety of lefamulin for the treatment of ABSSSI with the FDA and several E.U. regulatory authorities.

Efficacy

        In the trial, the patients in the lefamulin treatment groups experienced a similar clinical success rate at the TOC visit as patients in the vancomycin treatment group, in each of the ITT, MITT, CE and ME patient subsets. These results are summarized in the table below. In addition, the clinical success rate in the trial was high for important subgroups of patients based on factors such as primary infection type and diabetes mellitus status. The table below also shows the 95% confidence interval, a statistical determination that demonstrates the range of possible differences in the point estimate of success that will arise 95% of the time that the endpoint is measured. However, this trial was not statistically powered to determine differences between treatment groups. The sample size chosen was to provide clinically meaningful information on efficacy, safety and tolerability. In this table and other tables appearing below, the abbreviation "N" refers to the number of patients or subjects in each group or subgroup.

Clinical Success Rate at the TOC Visit (ITT, MITT, CE and ME Populations)

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        In the trial, the patients in the lefamulin treatment groups also experienced a similar clinical response at the day 3 visit as patients in the vancomycin treatment group in each of the ITT, MITT, CE and ME patient subsets. The clinical response results for the ITT patient subset are presented in the table below. Importantly, the assessment at day 3 included evaluation of a new primary endpoint recommended by the FDA of at least a 20% reduction in area of erythema, or redness.

Clinical Response at Day 3 (ITT Population)

        A list of all pathogens identified at baseline along with the corresponding eradication rate by treatment group in the MITT patient subset is presented in the table below. Microbiological eradication rate was defined as the proportion of patients with a microbiological outcome of eradication or presumed eradication based on cultures from both the primary infection site and blood cultures. Patients with indeterminate or missing clinical responses were considered non-eradication. Overall, in the MITT population, microbiological success was achieved in 40 of 50 patients (80.0%) in the lefamulin 100 mg group, 43 of 51 patients (84.3%) in the lefamulin 150 mg group, and 42 of 51 patients (82.4%) in the vancomycin group. We did not observe development of decreased susceptibility to lefamulin or vancomycin during the trial. In this table, the abbreviation "n" refers to the number of patients who had a microbiological outcome of eradication or presumed eradication for each specified pathogen.

Sponsor-Assessed Microbiological Eradication Rate at the TOC Visit by Baseline Target Pathogen (MITT Population)

        We evaluated the clinical success of lefamulin against S. aureus, which is the most commonly identified cause of ABSSSI. The clinical success rate against a variety of subsets of S. aureus based on in vitro antibiotic susceptibility (methicillin-resistance), as well as the presence or absence of the virulence factors PVL-positivity or USA300, are clinically important, as limited therapeutic options exist to treat such infection. A summary of the clinical success rate against S. aureus is presented in the table

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below. The clinical success rates for lefamulin against PVL-positive MRSA and USA300 MRSA strains were similar to, or numerically higher than, the corresponding clinical success rates for vancomycin. In this table, the abbreviation "n" refers to the number of patients with clinical success for each specified pathogen.

Clinical Success Rate at the TOC Visit by Baseline Target Pathogens (S. aureus) (MITT Population)

        The mean duration of exposure to study medication treatment was approximately seven days for all groups, and almost 70% of patients completed therapy within that time.

Safety and tolerability

        Lefamulin was well tolerated in this trial. No patient in the trial suffered any serious adverse events that were found to be related to lefamulin, and no patient in the trial died. The percentage of patients in the trial arms that experienced any treatment emergent adverse event were similar across treatment groups: 71.4% in the lefamulin 100 mg group, 69.0% in the lefamulin 150 mg group and 74.2% in the vancomycin group. Most of the treatment emergent adverse events were mild to moderate in severity. The table below shows the adverse events experienced by patients in the trial that were assessed by the investigator as possibly or probably related to study medication.

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Drug-Related Treatment-Emergent Adverse Events by Preferred Term Reported by More Than 2% of Patients in the ITT Population

        The incidences of pain, tenderness, itching, erythema, swelling and thrombosis at the infusion site were higher for the lefamulin 100 mg group and the lefamulin 150 mg group than for the vancomycin group. The majority of these local tolerability symptoms were mild in severity. No patient had a severe local tolerability issue of erythema or swelling. No patient had a local tolerability issue of necrosis. When summarized on an infusion basis, the proportions of infusions with local tolerability events were similar for the treatment groups.

        Four patients discontinued study medication following a drug-related adverse event: one patient (1.4%) in the lefamulin 100 mg group (events of hyperhidrosis, vomiting and headache), two patients (2.8%) in the lefamulin 150 mg group (infusion site pain in one patient and dyspnea in the other), and one patient (1.5%) in the vancomycin group (drug eruption).

        Because the potential for mild effect on ECG measurements was observed in preclinical studies, we have continued to assess this potential in all human clinical trials we have conducted. In the Phase 2 clinical trial, no change in ECG measurements was considered to be of clinical significance, and no drug-related cardiovascular adverse event was reported. Both lefamulin and vancomycin treatment were associated with a small increase in the QT interval. The QT interval is a measure of the heart's electrical cycle, with a lengthened QT interval representing a marker for potential ventricular arrhythmia. We plan to continue to evaluate the effect of lefamulin on the QT interval in our Phase 3 clinical trials of lefamulin for CABP.

Pharmacokinetics

        The table below summarizes selected pharmacokinetic parameters we obtained from pharmacokinetic sampling in the trial. C_max refers to the maximum observed peak blood plasma concentration of study medication. AUC refers to the area under the curve in a plot of concentration of study medication in blood plasma over time, representing total drug exposure over time. In this table, the abbreviation "SD" refers to the standard deviation of the results. Standard deviation is a

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statistical measure used to quantify the amount of variation within a set of data values. A standard deviation close to zero indicates that the data points do not vary greatly from the mean, while a high standard deviation indicates that the data points are spread over a wider range of values.

Summary Statistics for PK Exposure and Secondary PK Parameters

        Efficacy for the pleuromutilin class of antibiotics is related to the ratio of total drug exposure over time, measured by the AUC, to minimum inhibitory concentration, or MIC. MIC is the minimum concentration of an antibiotic needed to inhibit growth of an organism. The plasma concentration data obtained from the Phase 2 clinical trial are the first data that describe how lefamulin is absorbed, distributed around the body, metabolized and eliminated in patients suffering from an infection.

Phase 1 Clinical Development

        The objectives of our Phase 1 clinical trial program have been to understand the absorption and distribution of lefamulin in the blood and target tissues, evaluate the metabolism and elimination route of lefamulin and obtain safety and tolerability data to help predict safe and effective doses of lefamulin for the treatment of patients. In our Phase 1 clinical trials, subjects were exposed to single or multiple doses of IV or oral lefamulin.

        Our ongoing Phase 1 trials include two special populations studies (renal and hepatic impairment), one drug-drug interaction study, and a hADME study. All studies have completed enrollment but have not yet been reported.

        In the clinical Phase1 trials completed to date 382 male and female subjects, including elderly healthy subjects, were exposed to lefamulin in 12 studies where lefamulin was administered orally and in 10 studies with lefamulin administered intravenously. In these trials, there were no observed systemic adverse events of clinical concern and no serious adverse events in any of the Phase1 clinical trials with oral or IV administration of lefamulin.

Pharmacokinetic Overview

        Our key observations from our Phase 1 clinical trials include the following:

•

lefamulin is rapidly absorbed and distributed throughout the body after either IV or oral administration;



•

lefamulin achieves therapeutic concentrations in a variety of target tissues, including the lung, skin and soft tissue;



•

lefamulin has a half-life between 8.6 and 11.8 hours, which enables a twice daily regimen, and is eliminated primarily through non-renal pathways;

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•

lefamulin is a weak inhibitor of some liver enzymes, and we expect it to have limited adverse drug-drug interaction potential;



•

no statistically significant effects of age, gender, body weight or height, body mass index or other demographics on the pharmacokinetic parameters of lefamulin;



•

the absolute oral bioavailability of a 600 mg immediate release, or IR, tablet formulation of lefamulin were 25.8% in the fasted and 21% in the fed condition in healthy subjects; and



•

in the assessment of relative bioavailability, bioequivalence was demonstrated for the fasted IR tablet and the IV dose, exposure was slightly lower for the fed IR tablet than the IV dose.

Absorption

        Lefamulin is absorbed rapidly after oral dosing with or without food. In our Phase 1 clinical trials, steady state blood levels were achieved after two days of dosing every 12 hours, irrespective of the route of administration, and the variability after oral dosing was similar to the variability after IV infusion. Because the ability of pleuromutilin antibiotics to kill bacteria is dependent on the AUC, or total lefamulin exposure over time, to MIC ratio, and IV doses of 150 mg every 12 hours and oral doses of 600 mg every 12 hours achieve similar AUCs, we believe that both regimens are capable of providing a similar therapeutic benefit.

Distribution

        Following IV infusion, lefamulin is rapidly distributed throughout the body over approximately 30 minutes. We have observed rapid distribution of lefamulin into tissues, including the skin and ELF of the lung. In CABP, the lung is the target organ where pathogens replicate and cause inflammation that results in mucous production, cough and shortness of breath. Therefore, in 2010, we conducted a Phase 1 clinical trial to assess the pharmacokinetics of lefamulin in 12 healthy subjects. After a single IV administration of 150 mg of lefamulin over 60 minutes, we performed a bronchoalveolar lavage, or BAL, a medical procedure to collect fluid from the lung. We performed BAL analyses in groups of three subjects at 1, 2, 4 and 8 hours after the start of the lefamulin infusion and measured lefamulin concentrations in the ELF, the muscle tissue, soft tissue and blood plasma. In this trial, the exposure of free lefamulin, or the amount of lefamulin not bound to proteins and therefore available to inhibit bacterial growth, achieved in the ELF was approximately six times greater than free lefamulin exposure observed in blood plasma.

Metabolism

        The average half-life, or the time it takes the body to eliminate one-half of the concentration of lefamulin present, is 9 to 12 hours. The major route lefamulin is eliminated from the body is the gastrointestinal tract, with limited metabolism of lefamulin occurring mainly through a liver and gut wall enzyme called CYP3A4, which is responsible for the metabolism of a wide variety of medication. We have identified only one metabolite, called BC-8041, as exceeding 10% of lefamulin concentrations in the plasma and only when lefamulin was given orally. None of the metabolites of lefamulin have any antibacterial properties.

Drug Interaction Potential

        We continue to perform studies recommended by regulatory authorities to assess the drug-drug interaction potential of new drug products, including the assessment of the impact of potent P-glycoprotein and CYP3A4 inducers on the PK of lefamulin, and the impact of lefamulin on drugs metabolized via CYP3A4. Six drug-drug interaction studies have been completed to date.

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Safety and Tolerability

        Lefamulin has been well tolerated in all Phase 1 trials completed to date. We did not observe any systemic adverse events of clinical concern or any drug-related serious adverse events in these trials. In addition, we did not observe any changes of clinical concern in laboratory safety parameters or vital signs in any subject in any of the trials. The most commonly observed adverse effects with oral administration of lefamulin were related to the gastrointestinal tract, including nausea and abdominal discomfort, while the most commonly observed adverse effects related to IV administration were related to irritation at the infusion site. In addition, lefamulin produced a transient, predictable and reproducible prolongation of the QT interval based on the maximum concentration of the drug in the blood plasma. At therapeutic doses, we expect that the drug will not produce large effects on the QT interval that would be of clinical relevance. We did not observe any drug-related cardiac adverse events, such as increase in ectopic ventricular activity or other cardiac arrhythmia, or clinically relevant ECG findings during the conduct of any of our Phase 1 clinical trials.

Intravenous Formulation

        We have administered IV lefamulin as single and repeat doses every 12 hours for up to 14 days. The most frequently reported adverse events in our Phase 1 clinical trials were pain or erythema at the site of the IV infusion. To further assess local tolerability, we conducted a Phase 1 clinical trial in 2013 to evaluate the local tolerability of two different IV formulations of lefamulin dosed every twelve hours for 7.5 days. In this trial, we compared lefamulin infusions given in normal saline solution, a sterile sodium chloride solution commonly used to administer IV medications, with lefamulin infusions given in a sterile saline solution buffered by a citrate salt that adjusted the pH, or level of acidity, of the solution. We enrolled 60 healthy subjects in the trial, of which 25 received the normal saline solution, 25 received the citrate buffered solution and ten received a matching placebo solution. Although we did not observe any difference between treatment arms over the first three days of study infusions, over the entire treatment period, the incidence of local pain or redness of at least moderate severity was statistically higher with lefamulin in the saline solution (84%), as compared to the citrate buffered infusions (36%) or placebo (10%). There was no statistical difference between citrate buffered infusions and placebo at any time period during the trial. As a result, we will administer lefamulin IV infusions in a citrate buffered saline solution in our Phase 3 clinical trials for CABP.

Oral Formulation

        Initially, we administered lefamulin orally in capsules as single and repeat doses for up to five days. Oral administration of lefamulin was generally well tolerated with infrequent reports of mild gastrointestinal findings, such as nausea, abdominal pain and diarrhea. We subsequently developed 600 mg IR tablets that we have investigated in single and repeat dose studies. These tablets have been well tolerated and shown favorable pharmacokinetics. We will utilize the 600 mg tablets in our Phase 3 clinical trials.

Electrocardiogram Measurements

        In our Phase 1 clinical trials, lefamulin was associated with a Cmax-dependent, transient, predictable, reversible and reproducible prolongation of the QT interval. We have closely monitored ECG measurements in all our trials. We did not observe any drug-related cardiac adverse events, such as increase in ectopic ventricular activity or other cardiac arrhythmia, or clinically relevant ECG findings during the conduct of any of our Phase 1 clinical trials. None of the ECG stopping criteria defined in the trial protocols was reached in any clinical trial. We plan to continue to assess the effects of lefamulin on the QT interval in our planned clinical trials.

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Preclinical Development

        In our preclinical studies, administration of lefamulin was well tolerated in a variety of animal models. Lefamulin was active against a broad range of bacteria, suggesting possible use as monotherapy for CABP with a low propensity for development of bacterial resistance.

Nonclinical Safety

        In several nonclinical safety studies, including repeat dose toxicity, local tolerance, genotoxicity, development and reproductive toxicity, and safety pharmacology testing in both rodent and non-rodent species, lefamulin was well tolerated. When we treated rats or monkeys for up to three months with either oral or IV lefamulin, we did not identify any systemic target organ toxicity. Lefamulin was not associated with genetic damage, effects on fertility or teratogenicity. We are also conducting toxicity studies in juvenile animals. A potential for QT/QTc interval prolongation was noted in nonclinical studies. The nonclinical safety package to support an NDA for lefamulin in the treatment of CABP in adults has been completed.

Antimicrobial Spectrum of Lefamulin

        We have extensively studied the in vitro antimicrobial activity of lefamulin against a variety of respiratory, or aerobic, and non-respiratory, or anaerobic, bacterial pathogens representing more than 22,500 clinical isolates collected from patients worldwide. A summary of our observations is presented in the table below. MIC9₀ indicates the concentration of drug that inhibits 90% of the pathogens in vitro, while MIC5₀ indicates the concentration of drug that inhibits 50% of the pathogens in vitro.

Antimicrobial Activity of Lefamulin Against Gram-Positive, Gram-Negative and Atypical Bacteria

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        The tables below compare the in vitro activity of lefamulin and various antibiotics for CABP and ABSSSI pathogens against various strains of bacteria, including those resistant to current antibiotics. Unlike other CABP antibiotics, such as ß-lactam/ß-lactamase inhibitor combinations, glycopeptides and oxazolidinones, lefamulin was active against the vast majority of potential respiratory pathogens collected in 2010, 2015 and 2016. When an alternative antibiotic from the same drug class was utilized, it is footnoted within the table and below.

Lefamulin in vitro Activity Against CABP Bacteria

        Lefamulin displayed potent antibacterial activity against bacterial pathogens predominantly causing skin and blood stream infections, such as S. aureus, coagulase-negative staphylococci, ß-hemolytic and viridans group streptococci, as well as E. faecium, including vancomycin-resistant strains, or VRE. Isolates were collected in the SENTRY surveillance study in 2010.

Lefamulin in vitro Activity Against ABSSSI Bacteria and Pathogens Causing Bacteremia

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Activity Against Resistant Strains and Low Propensity for Development of Bacterial Resistance

        When tested against bacterial organisms resistant to macrolides, tetracyclines, quinolones, trimethoprim/sulfamethoxazole, vancomycin, mupirocin or ß-lactams, we did not observe any cross-resistance with lefamulin. Lefamulin displayed activity in vitro against drug-resistant N. gonorrhoeae, VRE, MRSA, multi-drug resistant S. pneumoniae, VISA/hVISA, erythromycin-resistant group A Streptococcus species and clindamycin-resistant group B Streptococcus species, all of which are listed as urgent, serious or concerning threats by the CDC. We utilized the interpretative criteria of the Clinical and Laboratory Standards Institute, or CLSI, to categorize the in vitro activity of each comparator against the organisms listed in the table below as sensitive (%S), intermediate (%I) or resistant (%R).

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Lefamulin in vitro Activity Against Resistant Bacterial Pathogens Listed as Urgent, Serious or Concerning Threats According to CDC

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