Nabriva Therapeutics plc - Quarter Report: 2018 March (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-37558

Nabriva Therapeutics plc

(Exact name of registrant as specified in its charter)

Ireland		Not applicable
(State or jurisdiction of organization)		(I.R.S. Employer Identification No.)

25-28 North Wall Quay
IFSC, Dublin 1, Ireland		Not applicable
(Address of principal executive offices)		(Zip Code)

+353 1 649 2000

(Registrant’s telephone number, including area code)

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 x 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 x No 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.

Large accelerated filer o		Accelerated filer x

Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)
		Emerging growth company x

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 7(a)(2)(B) of the Securities Act. x

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

As of April 30, 2018, the registrant had 40,306,924 ordinary shares outstanding.

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NABRIVA THERAPEUTICS plc

INDEX TO REPORT ON FORM 10-Q

		Page
	PART I — FINANCIAL INFORMATION

Item 1:	Financial Statements	5

	Consolidated balance sheets as of December 31, 2017 and March 31, 2018 (unaudited)	5

	Consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2017 and 2018 (unaudited)	6

	Consolidated statements of cash flows for the three months ended March 31, 2017 and 2018 (unaudited)	7

	Notes to the unaudited consolidated financial statements	8

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3:	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4:	Controls and Procedures	25

	PART II — OTHER INFORMATION

Item 1:	Legal Proceedings	26

Item 1A:	Risk Factors	26

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	61

Item 3:	Defaults Upon Senior Securities	62

Item 4:	Mine Safety Disclosures	62

Item 5:	Other Information	62

Item 6:	Exhibits	62

SIGNATURES		64

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements contained in this Quarterly 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:

· 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;

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

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

· the potential receipt of revenues from future sales of lefamulin;

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

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

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

· our sales, marketing and distribution capabilities and strategy;

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

· the potential advantages of lefamulin and our other product candidates;

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

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

· our ability to establish and maintain collaborations;

· the future development or commercialization of lefamulin in the greater China region;

· the potential benefits under our license agreement with Sinovant Sciences, Ltd.;

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

· our future intellectual property position;

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

· our ability to effectively manage our anticipated growth;

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

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

· competitive factors;

· compliance with current or prospective governmental regulation;

· general economic and market conditions;

· 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-Q.

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.

You should refer to the “Risk Factors” section of this Form 10-Q for a discussion of important factors 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. We do not assume any obligation to update any forward-looking statements, except as required by applicable law.

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.

Throughout this Quarterly Report on Form 10-Q, unless the context requires otherwise, all references 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. FINANCIAL STATEMENTS

NABRIVA THERAPEUTICS plc

Consolidated Balance Sheets (unaudited)

(in thousands, except share data)	As of December 31, 2017			As of March 31, 2018

Assets
Current assets:
Cash and cash equivalents	$	86,769		$	89,441
Short-term investments	110			110
Other receivables	5,402			6,436
Contract asset	—			1,500
Prepaid expenses	1,558			1,016
Total current assets	93,839			98,503
Property, plant and equipment, net	1,327			1,376
Intangible assets, net	172			155
Long-term receivables	425			428
Total assets	$	95,763		$	100,462

Liabilities and equity
Current liabilities:
Accounts payable	$	5,136		$	3,807
Accrued expense and other current liabilities	8,124			7,577
Total current liabilities	13,260			11,384
Non-current liabilities
Long-term debt	232			411
Other non-current liabilities	203			225
Total non-current liabilities	435			636
Total liabilities	13,695			12,020
Commitments and contingencies (Note 10)
Stockholders’ Equity:
Ordinary shares, nominal value $0.01, 1,000,000,000 ordinary shares authorized at March 31, 2018; 36,707,685 and 40,233,867 issued and outstanding at December 31, 2017 and March 31, 2018, respectively	367			402
Preferred shares, par value $0.01, 100,000,000 shares authorized at March 31, 2018; None issued and outstanding	—			—
Additional paid in capital	360,872			380,553
Accumulated other comprehensive income	27			27
Accumulated deficit	(279,198		)	(292,540		)
Total stockholders’ equity	82,068			88,442
Total liabilities and stockholders’ equity	$	95,763		$	100,462

The accompanying notes form an integral part of these consolidated financial statements.

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NABRIVA THERAPEUTICS plc

Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited)

	Three Months Ended March 31,
(in thousands, except per share data)	2017			2018
Revenues:
Collaboration revenue	$	—		$	6,500
Research premium and grant revenue	1,678			1,051
Total Revenue	1,678			7,551

Operating expenses:
Research and development	(12,660		)	(10,279		)
General and administrative	(4,218		)	(10,136		)
Total operating expenses	(16,878		)	(20,415		)
Loss from operations	(15,200		)	(12,864		)
Other income (expense):
Other income, net	206			23
Interest income	121			9
Interest expense	(1		)	(4		)
Loss before income taxes	(14,874		)	(12,836		)
Income tax expense	(349		)	(506		)
Net loss	(15,223		)	(13,342		)
Other comprehensive income (loss), net of tax
Unrealized losses on available-for-sale securities	(16		)	—
Reclassification to net income	—			—
Other comprehensive income (loss), net of tax	(16		)	—
Comprehensive loss	$	(15,239	)	$	(13,342	)

Loss per share
Basic and Diluted	$	(0.56	)	$	(0.36	)

Weighted average number of shares:
Basic and Diluted	27,204,230			36,911,604

The accompanying notes form an integral part of these consolidated financial statements.

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NABRIVA THERAPEUTICS plc

Consolidated Statements of Cash Flows (unaudited)

	Three Months Ended March 31,
(in thousands)	2017			2018
Cash flows from operating activities
Net loss	$	(15,223	)	$	(13,342	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash other expense, net	(266		)	(112		)
Non-cash interest income	(30		)	(10		)
Depreciation and amortization expense	76			133
Stock-based compensation	684			1,244
Deferred income taxes	178			—
Other, net	86			(6		)
Changes in operating assets and liabilities:
Changes in long-term receivables	(5		)	(3		)
Changes in other receivables and prepaid expenses	(1,586		)	(1,992		)
Changes in accounts payable	1,789			(1,413		)
Changes in accrued expenses and other liabilities	(383		)	(1,311		)
Changes in other non-current liabilities	6			22
Changes in income tax liabilities	(10		)	451
Net cash used in operating activities	(14,684		)	(16,339		)
Cash flows from investing activities
Purchases of plant and equipment and intangible assets	(25		)	(160		)
Proceeds from sales of property, plant and equipment	2			—
Proceeds from sales of available-for-sale securities	10,000			—
Net cash provided by (used in) investing activities	9,977			(160		)
Cash flows from financing activities
Proceeds from sale of ordinary shares	—			19,388
Proceeds from long-term debt	229			189
Proceeds from exercise of stock options	10			—
Equity transaction costs	(1,410		)	(518		)
Net cash provided by (used in) financing activities	(1,171		)	19,059

Effects of foreign currency translation on cash and cash equivalents	266			112
Net (decrease) increase in cash and cash equivalents	(5,612		)	2,672
Cash and cash equivalents at beginning of period	32,778			86,769
Cash and cash equivalents at end of period	$	27,166		$	89,441

The accompanying notes form an integral part of these consolidated financial statements.

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NABRIVA THERAPEUTICS plc

Notes to the Unaudited Consolidated Financial Statements

(in thousands, except per share data)

1. Organization and Business Activities

Nabriva Therapeutics plc (“Nabriva Ireland”), together with its wholly owned and consolidated subsidiaries, Nabriva Therapeutics GmbH (“Nabriva Austria”), Nabriva Therapeutics US, Inc., Nabriva Therapeutics Ireland DAC, and Nabriva Therapeutics One DAC (In Voluntary Liquidation) (collectively, “Nabriva”, the “Nabriva Group” or the “Company”) is 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. The Company’s headquarters are located at 25-28 North Wall Quay, Dublin, Ireland.

On March 1, 2017, Nabriva Ireland was incorporated in Ireland under the name Hyacintho 2 plc, and was renamed to Nabriva Therapeutics plc on April 10, 2017, in order to effectuate the change of the jurisdiction of incorporation of the ultimate parent company of the Nabriva Group from Austria to Ireland. Nabriva Ireland replaced Nabriva Austria as the ultimate parent company on June 23, 2017, following the conclusion of a tender offer (the “Exchange Offer”) in which holders of 98.5% of the outstanding share capital of Nabriva Austria exchanged their holdings for ordinary shares, $0.01 nominal value per share, of Nabriva Ireland (the “Redomiciliation Transaction”). The ordinary shares of Nabriva Ireland were issued on a one-for-ten basis to the holders of the Nabriva Austria common shares (“Nabriva Austria common shares”) and on a one-for-one basis to the holders of the Nabriva Austria American Depositary Shares (“Nabriva Austria ADSs”) participating in the Exchange Offer. On June 26, 2017, the ordinary shares of Nabriva Ireland began trading on the Nasdaq Global Market under the symbol “NBRV,” the same symbol under which the American Depositary Shares of Nabriva Austria were previously traded. This transaction was accounted for as a merger between entities under common control; accordingly, the historical financial statements of Nabriva Austria for periods prior to this transaction are considered to be the historical financial statements of Nabriva Ireland. As of August 18, 2017, 100% of Nabriva Austria share capital had been exchanged for ordinary shares of Nabriva Ireland.

Nabriva Austria was incorporated in Austria as a spin-off from Sandoz GmbH in October 2005 and commenced operations in February 2006 as Nabriva Therapeutics AG. On October 19, 2017, Nabriva Austria was converted into a private limited liability company under Austrian law and renamed Nabriva Therapeutics GmbH. Nabriva Therapeutics US, Inc. was founded and began operations in the United States in August 2014. In February 2017, Nabriva Austria purchased all shares issued in the capital of Hyacintho DAC, a designated activity company incorporated by a nominee company in December 2016; it renamed the company to Nabriva Therapeutics Ireland DAC on April 10, 2017 and renamed the company again to Nabriva Therapeutics One DAC on October 13, 2017 (“One DAC”). From April 2017, One DAC held a license of all of the intellectual property rights of the Nabriva Group from Nabriva Austria. In October 2017, the Company purchased all shares issued in the capital of a new Irish designated activity company, Nabriva Therapeutics Ireland DAC (“Nabriva DAC”) from a nominee company. On October 19, 2017, Nabriva Austria terminated the intellectual property rights license in place with One DAC and put in place a new intellectual property rights license with Nabriva DAC in respect of all of the intellectual property rights of the Nabriva Group. On February 8, 2018, Nabriva Austria passed a shareholder resolution to approve the voluntary and solvent liquidation of One DAC.

Certain share and per share amounts have been retrospectively adjusted to reflect the Exchange Offer and the Redomiciliation Transaction.

Liquidity

Since its inception, the Company has incurred net losses and generated negative cash flows from its operations. To date, it has financed its operations through the sale of equity securities, including its initial public offering of Nabriva Austria ADSs, public offerings of our ordinary shares and private placements of its Nabriva Austria common shares, convertible debt financings and research and development support from governmental grants and loans. As of March 31, 2018, the Company had cash, cash equivalents and short-term investments of $89.6 million.

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern (“ASC 205-40”), which requires management to assess the Company’s ability to continue as a going concern for one year after the date the financial statements are issued. As of December 31, 2017, in accordance with the requirements of ASC 205-40, the Company’s management had concluded that substantial doubt existed about the Company’s ability to continue as a going concern for one year from the date the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2017, were issued.

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NABRIVA THERAPEUTICS plc

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands, except per share data)

In March 2018, the Company entered into a Controlled Equity OfferingSM Sales Agreement (the “ATM Agreement”), with Cantor Fitzgerald & Co. (“Cantor”), pursuant to which, from time to time, the Company may offer and sell our ordinary shares having aggregate gross proceeds of up to $50.0 million through Cantor. As of March 31, 2018, the Company has issued and sold an aggregate of 3,517,511 ordinary shares under the ATM Agreement, for gross proceeds of $19.4 million, and net proceeds of $18.9 million, after deducting commissions.

Since the filing of the Company’s Annual Report, the Company has re-evaluated the need for the previously planned expansion of its commercial organization, medical education, and supply chain activities and anticipates that the Company’s expenses for 2018 will decrease as compared to its expenses for 2017 as the Company winds down its Phase 3 clinical trial program for lefamulin for the treatment of community-acquired bacterial pneumonia (“CABP”). The Company expects to continue to invest in critical pre-commercialization activities prior to receiving marketing approval and making lefamulin available to patients.

As of March 31, 2018, management assessed the Company’s ability to continue as a going concern and determined that it now expects that its existing cash, cash equivalents and short-term investments will be sufficient to enable the Company to fund its operating expenses and capital expenditure requirements into the first quarter of 2020. The Company has based this estimate on assumptions that may prove to be wrong, and the Company could use its capital resources sooner than it currently expects.

The Company’s expenses will increase if it suffers any delays in its Phase 3 clinical program, including regulatory delays, or is required to conduct additional clinical trials to satisfy regulatory requirements. If the Company obtains marketing approval for lefamulin or any other product candidate that it develops, it expects to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing.

The Company expects to seek additional funding in future periods for purposes of investment in its commercial and medical affairs organization, including the expansion of a targeted hospital based sales force and related infrastructure, as well as investing in its supply chain, in an effort to enhance the potential commercial launch of lefamulin.

2. Summary of Significant Accounting Policies

Basis of Preparation

The unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and U.S. Securities and Exchange Commission (“SEC”) regulations for quarterly reporting. The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying consolidated financial information as of March 31, 2018 and for the three months ended March 31, 2017 and 2018 is unaudited. The December 31, 2017 balance sheet was derived from audited consolidated financial statements but does not include all disclosures required by US GAAP. The interim unaudited consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2018 and for the three months ended March 31, 2017 and 2018. The financial data and other information disclosed in these notes related to the three months ended March 31, 2017 and 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018, any other interim periods or any future year or period. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2017 contained in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 16, 2018.

The Company’s significant accounting policies are described in Note 2 of the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Since the date of those financial statements, there have been no changes to the Company’s significant accounting policies.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date.

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NABRIVA THERAPEUTICS plc

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands, except per share data)

Adopted as of the current period:

· In May 2014, the FASB issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, an updated standard on revenue recognition. ASU 2014-09 provides enhancements to the quality and consistency of how revenue is reported by companies while also improving comparability in the financial statements of companies reporting using International Financial Reporting Standards or US GAAP. The main purpose of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which a company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced revenue disclosures, provide guidance for transactions that were not previously addressed comprehensively and improve guidance for multiple-element arrangements. The effective date of ASU 2014-09 for the Company is the first quarter of fiscal year 2018. The adoption of ASU 2014-09 did not have an impact on the consolidated financial statements of the Company.

· In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation: Scope of Modification Accounting. ASU 2017-09 clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718, Compensation—Stock Compensation. ASU 2017-09 is effective for annual periods beginning after December 15, 2017. An entity should apply the amendments prospectively to a modification that occurs on or after the adoption date. The impact of adopting this standard did not have a material effect on the Company’s financial position, results of operation or cash flow and related disclosures.

To be adopted in future periods:

· In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. A modified retrospective transition approach is required for lessees of capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact that the standard will have on its financial position, results of operation or cash flow and related disclosures.

3. Fair Value Measurement

US GAAP establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

· Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (as exchange rates).

· Level 3: Valuation techniques that include inputs for the asset or liability that are not based on observable market data (those are unobservable inputs) and significant to the overall fair value measurement.

The following table presents the financial instruments measured at fair value and classified by level according to the fair value measurement hierarchy:

(in thousands)	Level 1		Level 2		Level 3		Total
December 31, 2017
Assets:
Short-term investments:
Available-for-sale securities	$	—	$	50	$	—	$	50
Term deposits	60		—		—		60
Total Assets	$	60	$	50	$	—	$	110

(in thousands)	Level 1		Level 2		Level 3		Total
March 31, 2018
Assets:
Short-term investments:
Available-for-sale securities	$	—	$	50	$	—	$	50
Term deposits	60		—		—		60
Total Assets	$	60	$	50	$	—	$	110

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NABRIVA THERAPEUTICS plc

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands, except per share data)

As of March 31, 2018 and December 31, 2017, the Company held short-term investments classified as both Level 1 and Level 2, and the Company did not hold any Level 3 financial instruments measured at fair value. There were no transfers between Level 1 and 2 in the three months ended March 31, 2018 or the year ended December 31, 2017. There were no changes in valuation techniques during the three months ended March 31, 2018.

As of March 31, 2018 and December 31, 2017, the Company did not hold any financial instruments as liabilities that were held at fair value. Other receivables and accounts payable are carried at their historical cost which approximates fair value due to their short-term nature.

4. Accrued Expenses and Other Liabilities

(in thousands)	As of December 31, 2017		As of March 31, 2018
Research and development related costs	$	2,308	$	2,479
Payroll and related costs	4,426		2,651
Accounting, tax and audit services	231		586
Other	1,159		1,861
Total other current liabilities	$	8,124	$	7,577

5. Revenue

	Three Months Ended March 31,
(in thousands)	2017		2018
Collaboration revenue	$	—	$	6,500
Research premium	1,505		770
Government grants	147		281
Grants from WWFF	26		—
Total	$	1,678	$	7,551

The collaboration revenue for the three months ended March 31, 2018 reflects the amounts recorded from the Sinovant License Agreement (see Note 9) and includes the $5.0 million non-refundable upfront payment received as consideration for entering into the license agreement with Sinovant as well as $1.5 million of variable consideration related a future milestone payment that the Company believes is probable to be met and received.

6. Share-Based Payments

Stock Option Plan 2015

On April 2, 2015, the Company’s shareholders, management board and supervisory board adopted the Stock Option Plan 2015 (the “SOP 2015”) and the shareholders approved an amended and restated version of the SOP 2015 on June 30, 2015. An amendment to the amended and restated SOP 2015 was approved by the shareholders on July 22, 2015. SOP 2015 became effective on July 3, 2015 upon the registration with the commercial register in Austria of the conditional capital increase approved by the shareholders on June 30, 2015. The SOP 2015 initially provided for the grant of options for up to 95,000 Nabriva Austria common shares to the Company’s employees, including members of the management board, and to members of the supervisory board. Following the closing of the initial public offering of the Company, the overall number of options increased to 177,499 Nabriva Austria common shares. Following approval by the Company’s shareholders at its 2016 annual general meeting, the number of shares available for issuance under the SOP 2015 was increased to 346,235 Nabriva Austria common shares. In connection with the Redomiciliation Transaction, the SOP 2015 was amended to take account of certain requirements under Irish law and assumed by Nabriva Ireland, with each option to acquire one Nabriva Austria common share becoming an option to acquire ten ordinary shares of Nabriva Ireland on the same terms and conditions.

Each vested option grants the beneficiary the right to acquire one share in the Company. The vesting period for the options is four years following the grant date. On the last day of the last calendar month of the first year of the vesting period, 25% of the options attributable to each beneficiary are automatically vested. During the second, third and fourth years of the vesting period, the remaining

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NABRIVA THERAPEUTICS plc

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands, except per share data)

75% of the options vest on a monthly pro rata basis (i.e. 2.083% per month). Options granted under the SOP 2015 have a term of no more than ten years from the beneficiary’s date of participation.

The following table summarizes information regarding our stock option awards under the SOP 2015 for the three months ended March 31, 2018:

Stock Option Plan 2015	Options		Weighted average exercise price in $ per share	Aggregate intrinsic value
Outstanding as of January 1, 2018	3,044,899		8.35
Granted	—		—
Exercised	—		—
Forfeited	(29,050	)	7.49
Outstanding as of March 31, 2018	3,015,849		8.35	$	3
Vested and exercisable as of March 31, 2018	1,337,202		7.88	$	1

Stock-based compensation expense under the SOP 2015 was $0.7 million and $0.9 million for the three months ended March 31, 2017 and 2018, respectively.

The weighted average remaining contractual life of the options as of March 31, 2018 is 8.2 years.

As of March 31, 2018, there was $8.9 million of total unrecognized compensation expense, related to unvested options granted under the SOP 2015, which will be recognized over the weighted-average remaining vesting period of 1.2 years.

2017 Share Incentive Plan

On July 26, 2017, the Company’s board of directors adopted the 2017 Share Incentive Plan (the “2017 Plan”) and the shareholders approved the 2017 Plan at the Company’s Extraordinary General Meeting of Shareholders on September 15, 2017. Following shareholder approval of the 2017 Plan, the Company ceased making awards under the SOP 2015, and future awards will be made under the 2017 Plan. However, all outstanding awards under SOP 2015 will remain in effect and continue to be governed by the terms of the SOP 2015. The 2017 Plan permits the award of share options (both incentive and nonstatutory options), share appreciation rights (“SARs”), restricted shares, restricted share units (“RSUs”), and other share-based awards to the Company’s employees, officers, directors, consultants and advisers. The 2017 Plan is administered by the Company’s board of directors.

Under the 2017 Plan, the number of ordinary shares that will be reserved for issuance will be the sum of (1) 3,000,000 ordinary shares; plus (2) a number of ordinary shares (up to 3,438,990 ordinary shares) which is equal to the sum of the number of the Company’s ordinary shares then available for issuance under the SOP 2015 and the number of ordinary shares subject to outstanding awards under the SOP 2015 that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right; plus (3) an annual increase, to be added on the first day of each fiscal year beginning in the fiscal year ending December 31, 2018 and continuing until, and including, the fiscal year ending December 31, 2027, equal to the least of (i) 2,000,000 ordinary shares, (ii) 4% of the number of outstanding ordinary shares on such date and (iii) an amount determined by the board of directors.

At March 31, 2018, 4,891,442 ordinary shares were available for issuance under the 2017 Plan.

Options and SARs granted will be exercisable at such times and subject to such terms and conditions as the board may specify in the applicable option agreement; provided, however, that no option or SAR will be granted with a term in excess of ten years. The board will also determine the terms and conditions of restricted shares and RSUs, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any.

The following table summarizes information regarding our stock option awards under the 2017 Plan for the three months ended March 31, 2018:

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NABRIVA THERAPEUTICS plc

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands, except per share data)

2017 Plan	Options	Weighted average exercise price in $ per share	Aggregate intrinsic value
Outstanding as of January 1, 2018	294,100	6.92
Granted	1,543,400	6.18
Exercised	—	—
Forfeited	—	—
Outstanding as of March 31, 2018	1,837,500	6.29	$	—
Vested and exercisable as of March 31, 2018	—	—	—

Stock-based compensation expense under the 2017 Plan was $0.4 million for the three months ended March 31, 2018. The weighted average fair value of the options granted during the three months ended March 31, 2018 was $3.60 per share. The options granted in the three months ended March 31, 2018 were valued based on a Black Scholes option pricing model using the following assumptions. The significant inputs into the model were as follows:

Input parameters
Range of expected volatility		60.9% - 61.0%
Expected term of options (in years)		6.1
Range of risk-free interest rate		2.6% - 2.7%
Dividend yield		—

The expected price volatility is based on historical trading volatility for the publicly traded peer companies under consideration of the remaining life of the options. The risk-free interest rate is based on the average of five and seven-year market yield on U.S. treasury securities in effect at the time of grant.

The weighted average remaining contractual life of the options as of March 31, 2018 is 9.8 years.

As of March 31, 2018, there was $6.3 million of total unrecognized compensation expense, related to unvested options granted under the 2017 Plan, which will be recognized over the weighted-average remaining vesting period of 1.9 years.

Restricted Stock Units

During the three months ended March 31, 2018, the Company granted 339,550 RSUs with a grant date fair value of $6.47 per share, which was the closing price of the Company’s shares on the grant date. Vesting of the RSUs is subject to U.S. Food and Drug Administration (“FDA”), approval of a new drug application (“NDA”), for lefamulin. Fifty percent (50%) of each RSU award will vest upon FDA approval of an NDA for lefamulin, and the remaining fifty percent (50%) will vest on the one-year anniversary of such approval. If the FDA does not approve an NDA for lefamulin within two years of the grant date, the RSU award will terminate in full. The award of 67,500 RSUs to our chief executive officer is contingent upon shareholder approval of an amendment to the 2017 Plan. No compensation expense was recognized for the RSUs as vesting is not probable at March 31, 2018.

7. Income tax (expense) benefit

In accordance with the FASB Accounting Standard Codification (ASC) Topic No. 270 “Interim Reporting” and ASC Topic No. 740 “Income Taxes” (Topic No. 740) at the end of each interim period, the Company is required to determine the best estimate of its annual effective tax rate and then apply that rate in providing for income taxes on a current year-to-date (interim period) basis. For the three months ended March 31, 2017 and 2018, the Company recorded income tax expense of $349,000 and $506,000, respectively.

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax bases of assets and liabilities using statutory rates. Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, including the Company’s history of losses and concluded that it is more likely than not that the Company will not recognize the benefits of its deferred tax assets. On the basis of this evaluation, as of March 31, 2018 and December 31, 2017, the Company has recorded a valuation allowance of $81.3 million and $80.1 million, respectively. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as the Company’s projections for growth.

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NABRIVA THERAPEUTICS plc

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands, except per share data)

8. Earnings (Loss) per Share

Basic and diluted loss per share

For the three months ended March 31, 2017 and 2018, basic and diluted net loss per share was determined by dividing net loss attributable to shareholders by the weighted average number of shares outstanding during the period. Diluted net loss per share is the same as basic net loss per share during the periods presented as the effects of the Company’s potential common stock equivalents are antidilutive and thus not included in the calculation.

	Three Months Ended March 31,
(in thousands, except per share data)	2017			2018
Net loss for the period	$	(15,223	)	$	(13,342	)
Weighted average number of shares outstanding	27,204,230			36,911,604
Basic and diluted loss per share	$	(0.56	)	$	(0.36	)

The following common stock equivalents were excluded from the calculations of diluted earnings per share as their effect would be anti-dilutive:

	Three Months Ended
	March 31,
(in thousands)	2017	2018
Stock options	278,579	4,853,349
Restricted stock units	—	339,550

9. License Agreement

In March 2018, the Company entered into a license agreement (the “License Agreement”), with Sinovant Sciences, Ltd. or Sinovant, an affiliate of Roivant Sciences, Ltd., to develop and commercialize lefamulin in the greater China region. As part of the License Agreement, Nabriva Therapeutics Ireland DAC and Nabriva Therapeutics GmbH, our wholly owned subsidiaries, granted Sinovant an exclusive license to develop and commercialize, and a non-exclusive license to manufacture, certain products containing lefamulin (the “Licensed Products”), in the People’s Republic of China, Hong Kong, Macau, and Taiwan (together the “Territory”).

Under the License Agreement, Sinovant and the Company’s subsidiaries will establish a joint development committee (the “JDC’), to review and oversee development and commercialization plans in the Territory. The Company received a non-refundable $5.0 million upfront payment pursuant to the terms of the License Agreement and will be eligible for up to an additional $91.5 million in milestone payments upon the achievement of certain regulatory and commercial milestone events related to lefamulin for CABP, plus an additional $4.0 million in milestone payments if any Licensed Product receives a second or any subsequent regulatory approval in the People’s Republic of China. The first milestone is a $1.5 million payment for the submission of a clinical trial application (“CTA”), by Sinovant to the Chinese Food and Drug Administration, which is planned for the third quarter of 2018. The remaining milestone payments are tied to additional regulatory approvals and annual sales targets. In addition, the Company will be eligible to receive low double-digit royalties on sales, if any, of Licensed Products in the Territory.

Sinovant will be solely responsible for all costs related to developing, obtaining regulatory approval of and commercializing Licensed Products in the Territory and is obligated to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize Licensed Product in the Territory. The Company is obligated to use commercially reasonable efforts to supply, pursuant to supply agreements to be negotiated by the parties, to Sinovant sufficient supply of lefamulin for Sinovant to manufacture finished drug products for development and commercialization of the Licensed Products in the Territory.

Unless earlier terminated, the License Agreement will expire upon the expiration of the last royalty term for the last Licensed Product in the Territory, which the Company expects will occur in 2033. Following the expiration of the last royalty term, the license granted to Sinovant will become non-exclusive, fully-paid, royalty-free and irrevocable. The License Agreement may be terminated in its entirety by Sinovant upon 180 days’ prior written notice at any time. Either party may, subject to specified cure periods, terminate the License Agreement in the event of the other party’s uncured material breach. Either party may also terminate the License Agreement under specified circumstances relating to the other party’s insolvency. The Company has the right to terminate the License Agreement immediately if Sinovant does not reach certain development milestones by certain specified dates (subject to specified cure periods). The License Agreement contemplates that the Company will enter into ancillary agreements with Sinovant, including clinical and commercial supply agreements and a pharmacovigilance agreement.

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NABRIVA THERAPEUTICS plc

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands, except per share data)

The Company has identified two performance obligations at inception: (1) the delivery of the licenses to Sinovant; and, (2) the participation in the JDC. The $5.0 million non-refundable upfront payment was allocated to the delivery of the licenses as the JDC deliverable was deemed to be de minimis. In addition, since the first $1.5 million milestone payment related to the submission of the CTA is within the control of the parties and is scheduled for submission in the third quarter of this year, the Company recorded such milestone as variable consideration allocated to the licenses at the inception of the arrangement as the Company believes it is probable to be met and received. The future regulatory and commercial milestone payments will be accounted for on an “as incurred basis” and recorded during the period the milestones are achieved.

10. Commitments and Contingencies

During the three months ended March 31, 2018, there were no material changes outside the ordinary course of the Company’s business to its contractual obligations as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

The Company has no contingent liabilities in respect of legal claims arising in the ordinary course of business.

11. Subsequent Events

The Company evaluated all events or transactions that occurred subsequent to March 31, 2018 through the date the unaudited consolidated financial statements were issued, and have not identified any such events material to an understanding of the unaudited consolidated financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our historical consolidated financial statements and the related notes thereto appearing in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission on March 16, 2018. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

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 fourth quarter 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.

On March 1, 2017, Nabriva Therapeutics plc, or Nabriva Ireland, was incorporated in Ireland under the name Hyacintho 2 plc, and was renamed to Nabriva Therapeutics plc on April 10, 2017, in order to effectuate the change of the jurisdiction of incorporation of the ultimate company of the group from Austria to Ireland. Nabriva Ireland replaced Nabriva Therapeutics AG, or Nabriva Austria, as the ultimate parent company on June 23, 2017, following the conclusion of a tender offer, or the Exchange Offer, in which holders of 98.6% of the outstanding share capital of Nabriva Austria exchanged their holdings for ordinary shares, $0.01 nominal value per share, of Nabriva Ireland, which we refer to as the Redomiciliation Transaction. The ordinary shares of Nabriva Ireland were issued on a one-for-ten basis to the holders of the Nabriva Austria common shares and on a one-for-one basis to the holders of the Nabriva Austria American Depositary Shares, or Nabriva Austria ADSs, participating in the Exchange Offer. On June 26, 2017, the ordinary shares of Nabriva Ireland began trading on the Nasdaq Global Market under the symbol “NBRV,” the same symbol under which the Nabriva Austria ADSs were previously traded. This transaction was accounted for as a merger between entities under common control; accordingly, the historical financial statements of Nabriva Austria for periods prior to this transaction are considered to be the historical financial statements of Nabriva Ireland. As of August 18, 2017, 100% of Nabriva Austria share capital had been exchanged for ordinary shares of Nabriva Ireland.

Nabriva Austria was incorporated in October 2005 in Austria under the name Nabriva Therapeutics Forschungs GmbH, a limited liability company organized under Austrian law, as a spin-off from Sandoz GmbH and commenced operations in February 2006. In 2007, Nabriva Austria transformed into a stock corporation (Aktiengesellschaft) under the name Nabriva Therapeutics AG. On October 19, 2017, Nabriva Austria was converted into a limited liability company under Austrian law and renamed Nabriva Therapeutics GmbH. In 2014, we established our wholly owned U.S. subsidiary, which began operations in August 2014.

Since inception, we have incurred significant operating losses. As of March 31, 2018, we had an accumulated deficit of $292.5 million. To date, we have financed our operations primarily through our 2018 “at-the-market” equity offering, our 2017 equity offering, our 2016 rights offering, our 2015 initial public offering, private placements of our

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equity securities, convertible loans and research and development support from governmental grants and loans. We have devoted substantially all of our efforts to research and development, including clinical trials. Our ability to generate profits from operations and remain profitable depends on our ability to successfully develop and commercialize drugs that generate significant revenue.

We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. However, we have re-evaluated the need for the previously planned expansion of our commercial organization, medical education, and supply chain activities and we now anticipate that our expenses for 2018 will decrease as compared to our expenses for 2017 as we wind down our Phase 3 clinical trial program for lefamulin for the treatment of CABP. We expect to continue to invest in critical pre-commercialization activities prior to receiving marketing approval and making lefamulin available to patients.

Our expenses will increase if we suffer any delays in our Phase 3 clinical program, including regulatory delays, or are required to conduct additional clinical trials to satisfy regulatory requirements. If we obtain marketing approval for lefamulin or any other product candidate that we develop, in-license or acquire, we expect to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing.

Based on our current plans, we do not expect to generate significant revenue unless and until we obtain marketing approval for, and commercialize, lefamulin. We do not expect to obtain marketing approval before 2019, if at all. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. Adequate additional financing may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization effort.

Financial Operations Overview

Revenue

To date we have not generated any revenues from product sales. and we do not expect to generate any revenue from the sale of products in the near future. We do not expect to generate significant revenue unless and until we obtain marketing approval for, and commercialize, lefamulin. We do not expect to obtain marketing approval before 2019, if at all. If our development efforts result in clinical success and regulatory approval, we may also enter into collaboration agreements with third parties and we may generate revenue from those agreements.

Our revenue consists principally of the collaboration revenues recorded from the Sinovant License Agreement entered into in March 2018, discussed more fully below, and includes a $5.0 million non-refundable upfront payment received as consideration for entering into the license agreement with Sinovant as well as $1.5 million of variable consideration related a future milestone payment that we believe is probable to be met and received. Revenue also includes governmental research premiums, non-refundable government grants and the benefit of government loans at below-market interest rates, which are more fully described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2017.

Research and Development Expenses

Research and development expenses represented 75.0% and 50.4% of our total operating expenses for the three months ended March 31, 2017 and 2018, respectively.

For each of our research and development programs, we incur both direct and indirect expenses. Direct expenses include third party expenses related to these programs such as expenses for manufacturing services, non-clinical and clinical studies and other third party development services. Indirect expenses include salaries and related costs, including stock-based compensation, for personnel in research and development functions, infrastructure costs allocated to research and development operations, costs associated with obtaining and maintaining intellectual property associated with our research and development operations, laboratory consumables, consulting fees related to research and development activities and other overhead costs. We utilize our research and development staff and infrastructure resources across multiple programs, and many of our indirect costs historically have not been specifically attributable to a single program. Accordingly, we cannot state precisely our total indirect costs incurred on a program-by-program basis.

The following table summarizes our direct research and development expenses by program and our indirect costs.

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	Three Months Ended March 31,
(in thousands)	2017		2018
Direct Costs
Lefamulin	$	9,491	$	6,507
Other programs and initiatives	13		29
Indirect Costs	3,156		3,743
Total	$	12,660	$	10,279

We expect to continue to incur research and development expenses in connection with our activities related to our ongoing LEAP 2 clinical trial of lefamulin for the treatment of CABP which is winding down as we expect top-line date in the spring of 2018, our subsequent NDA and MAA filings and the pursuit of the clinical development of lefamulin for additional indications and engage in earlier stage research and development activities. It is difficult to estimate the duration and completion costs of our research and development programs.

The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:

· the scope, progress, costs and results of clinical trials and other research and development activities;

· the costs, timing and outcome of regulatory review of our product candidates;

· the efficacy and potential advantages of our product candidates compared to alternative treatments, including any standard of care, and our ability to achieve market acceptance for any of our product candidates that receive marketing approval;

· the costs and timing of commercialization activities, including product sales, marketing, distribution and manufacturing, for any of our product candidates that receive marketing approval; and

· the costs and timing of preparing, filing and prosecuting patent applications, maintaining, enforcing and protecting our intellectual property rights and defending against any intellectual property-related claims.

A change in the outcome of any of these variables with respect to the development of our product candidates could result in a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials or other testing beyond those that we have completed or currently contemplate will be required for the completion of clinical development of any product candidate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional resources and time on the completion of clinical development of that product candidate.

General and Administrative Expenses

General and administrative expenses represented 25.0% and 49.6% of our total operating expenses for the three months ended March 31, 2017 and 2018, respectively.

General and administrative expenses consist primarily of salaries and related costs, including share-based compensation not related to research and development activities for personnel in our finance, information technology, commercial, medical affairs and administrative functions. General and administrative expenses also include costs related to professional fees for auditors, lawyers and tax advisors and consulting fees not related to research and development operations, as well as functions that are partly or fully outsourced by us, such as accounting, payroll processing and information technology.

We expect to incur significant marketing, commercial and manufacturing supply chain costs if LEAP 2 data is positive and we obtain marketing approval of lefamulin for the treatment of CABP.

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License Agreement with Sinovant Sciences

In March 2018, we entered into a license agreement, or the License Agreement, with Sinovant Sciences, Ltd. or Sinovant, an affiliate of Roivant Sciences, Ltd., to develop and commercialize lefamulin in the greater China region. As part of the License Agreement, Nabriva Therapeutics Ireland DAC and Nabriva Therapeutics GmbH, our wholly owned subsidiaries, granted Sinovant an exclusive license to develop and commercialize, and a non-exclusive license to manufacture, certain products containing lefamulin, or the Licensed Products, in the People’s Republic of China, Hong Kong, Macau, and Taiwan (together the “Territory”). We retain development and commercialization rights in the rest of the world.

Under the License Agreement, Sinovant and our subsidiaries will establish a joint development committee, or the JDC, to review and oversee development and commercialization plans in the Territory. We received a $5.0 million upfront payment pursuant to the terms of the License Agreement and will be eligible for up to an additional $91.5 million in milestone payments upon the achievement of certain regulatory and commercial milestone events related to lefamulin for CABP, plus an additional $4.0 million in milestone payments if any Licensed Product receives a second or any subsequent regulatory approval in the People’s Republic of China. The first milestone is a $1.5 million payment for the submission of a clinical trial application by Sinovant to the Chinese Food and Drug Administration, which is planned for the third quarter of 2018. The remaining milestone payments are tied to additional regulatory approvals and annual sales targets. In addition, we will be eligible to receive low double-digit royalties on sales, if any, of Licensed Products in the Territory.

Sinovant will be solely responsible for all costs related to developing, obtaining regulatory approval of and commercializing Licensed Products in the Territory and is obligated to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize Licensed Product in the Territory. We are obligated to use commercially reasonable efforts to supply, pursuant to supply agreements to be negotiated by the parties, to Sinovant sufficient supply of lefamulin for Sinovant to manufacture finished drug products for development and commercialization of the Licensed Products in the Territory.

Unless earlier terminated, the License Agreement will expire upon the expiration of the last royalty term for the last Licensed Product in the Territory, which we expect will occur in 2033. Following the expiration of the last royalty term, the license granted to Sinovant will become non-exclusive, fully-paid, royalty-free and irrevocable. The License Agreement may be terminated in its entirety by Sinovant upon 180 days’ prior written notice at any time. Either party may, subject to specified cure periods, terminate the License Agreement in the event of the other party’s uncured material breach. Either party may also terminate the License Agreement under specified circumstances relating to the other party’s insolvency. We have the right to terminate the License Agreement immediately if Sinovant does not reach certain development milestones by certain specified dates (subject to specified cure periods). The License Agreement contemplates that the we will enter into ancillary agreements with Sinovant, including clinical and commercial supply agreements and a pharmacovigilance agreement.

We have identified two performance obligations at inception: (1) the delivery of the licenses to Sinovant; and, (2) the participation in the JDC. The $5.0 million non-refundable upfront payment was allocated entirely to the of the licenses as the JDC deliverable was deemed to be de minimis. In addition, since the first $1.5 million milestone payment related to the as the submission of the CTA is in the control of the parties and is scheduled for submission in the third quarter of this year, we recorded such milestone as variable consideration allocated to the licenses at the inception of the arrangement as we believe it is probable to be met and received. The future regulatory and commercial milestone payments will be accounted for on an “as incurred basis” and recorded during the period the milestone is achieved.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2017. During the three months ended March 31, 2018, there were no material changes to our critical accounting policies.

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Results of Operations

Comparison of Three Months Ended March 31, 2017 and 2018

	Three Months Ended March 31,
(in thousands)	2017			2018			Change
Consolidated Operations Data:
Revenues	$	1,678		$	7,551		$	5,873
Costs and Expenses:
Research and development	(12,660		)	(10,279		)	(2,381		)
General and administrative	(4,218		)	(10,136		)	5,918
Total operating expenses	(16,878		)	(20,415		)	3,537
Loss from operations	(15,200		)	(12,864		)	2,336
Other income (expense):
Other income (expense), net	206			23			(183		)
Interest income (expense), net	120			5			(115		)
Loss before income taxes	(14,874		)	(12,836		)	2,038
Income tax expense	(349		)	(506		)	(157		)
Net loss	$	(15,223	)	$	(13,342	)	$	1,881

Revenues

Revenues increased by $5.9 million from $1.7 million for the three months ended March 31, 2017 to $7.6 million for the three months ended March 31, 2018, primarily due to the $5.0 million upfront payment received from our Sinovant License Agreement as well as $1.5 million of variable consideration related a future milestone payment that we believe is probable to be met and received and a $0.1 million increase in grant income. The increase was partially offset by a $0.7 million decrease in grant revenue from research premiums provided to us by the Austrian government as a result of lower applicable research and development expenses.

Research and Development Expenses

Research and development expenses decreased by $2.4 million from $12.7 million for the three months ended March 31, 2017 to $10.3 million for the three months ended March 31, 2018. The decrease was primarily due to a $3.8 million decrease in research materials and purchased services related to the development of lefamulin, offset by a $0.5 million increase in research consulting fees, a $0.4 million increase in staff costs due to the addition of employees, a $0.2 million increase in stock-based compensation expense and a $0.2 million increase in travel and infrastructure costs.

General and Administrative Expenses

General and administrative expense increased by $5.9 million from $4.2 million for the three months ended March 31, 2017 to $10.1 million for the three months ended March 31, 2018. The increase was primarily due to a $2.7 million increase of advisory and external consultancy expenses primarily related to pre-commercialization activities and professional service fees, a $2.3 million increase in staff costs due to the addition of employees, a $0.3 million increase in share-based compensation expense due to the inclusion of additional employees in our share-based compensation plan, a $0.3 million increase in infrastructure costs and a $0.3 million increase in travel and other corporate costs.

Other Income (Expense), net

Other income (expense), net decreased by $0.2 million from $0.2 million income for the three months ended March 31, 2017, to nil for the three months ended March 31, 2018 due to the effects of re-measurements of our foreign currency account balances.

Income Tax Expense

Our income tax expense was $0.3 million for the three months ended March 31, 2017 compared to income tax expense of $0.5 million for the three months ended March 31, 2017. The income tax expense in both periods represents the current tax expense of our foreign subsidiaries.

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Liquidity and Capital Resources

Since our inception, we have incurred net losses and generated negative cash flows from our operations. To date, we have financed our operations through the sale of equity securities, including our initial public offering of ADSs, public offering of our ordinary shares and private placements of our equity securities, convertible debt financings and research and development support from governmental grants and loans.

As of March 31, 2018, we had cash and cash equivalents and short-term investments of $89.6 million.

In March 2018, we entered into a Controlled Equity OfferingSM Sales Agreement, or the ATM Agreement, with Cantor Fitzgerald & Co., or Cantor, pursuant to which, from time to time, we may offer and sell our ordinary shares having aggregate gross proceeds of up to $50.0 million through Cantor. As of March 31, 2018, we issued and sold an aggregate of 3,517,511 ordinary shares under the ATM Agreement, for gross proceeds of $19.4 million, and net proceeds of $18.9 million, after deducting commissions. From March 31, 2018 to the date of this filing, we issued and sold on aggregate of 3,590,568 ordinary shares under the ATM agreement.

Cash Flows

Comparison of Three Months Ended March 31, 2017 and 2018

	Three Months Ended March 31,
(in thousands)	2017			2018
Net cash provided by (used in):
Operating activities	$	(14,684	)	$	(16,339	)
Investing activities	9,977			(160		)
Financing activities	(1,171		)	19,059
Effects of foreign currency translation on cash	266			112
Net (decrease) increase in cash	$	(5,612	)	$	2,672

Operating Activities

Cash flow used in operating activities increased by $1.7 million from $14.7 million for the three months ended March 31, 2017 to $16.4 million for the three months ended March 31, 2018 primarily due to a $2.4 million decrease in net loss, after adjustments for non-cash amounts included in net income, offset by higher working capital of $4.1 million primarily due to changes in accrued expenses and other current liabilities.

Investing Activities

Cash flow generated from investing activities decreased by $10.1 million from cash provided of $10.0 million for the three months ended March 31, 2017 to cash used of $0.1 million for the three months ended March 31, 2018 primarily due to changes in proceeds from sale of available-for-sale financial assets to fund operational cash out flows.

Financing Activities

Cash flow generated from financing activities increased by $20.2 million from a use of $1.2 million for the three months ended March 31, 2017 to cash provided of $19.1 million for the three months ended March 31, 2017 consisting of proceeds, net of commissions, related to our ATM Agreement.

Operating and Capital Expenditure Requirements

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In addition, our expenses will increase if and as we:

· initiate or continue the research and development of lefamulin for additional indications and of our other product candidates;

· seek to discover and develop additional product candidates;

· seek marketing approval for any product candidates that successfully complete clinical development;

· continue to establish a medical affairs, sales, marketing and distribution infrastructure and build up inventory of finished product and its components to commercialize any product candidates for which we receive marketing approval;

· in-license or acquire other products, product candidates or technologies;

· maintain, expand and protect our intellectual property portfolio;

· establish and expand manufacturing arrangements with third parties;

· expand our physical presence in the United States and Ireland; and,

· add operational, financial and management information systems and personnel, including personnel to support our product development, our operations as a public company and our planned future commercialization efforts.

We expect that our existing cash, cash equivalents and short-term investments will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2020. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

We expect to seek additional funding in future periods for purposes of investment in our commercial and medical affairs organization, including the expansion of a targeted hospital based sales force and related infrastructure, as well as investing in our supply chain, in an effort to enhance the potential commercial launch of lefamulin.

Our future capital requirements will depend on many factors, including:

· the progress, costs and results of our clinical trials for lefamulin, including our LEAP 2 trial;

· the costs and timing of process development and manufacturing scale-up activities associated with lefamulin;

· the costs, timing and outcome of regulatory review of lefamulin;

· the costs of commercialization activities for lefamulin if we receive, or expect to receive, marketing approval, including the costs and timing of establishing product sales, marketing, distribution and outsourced manufacturing capabilities, including the costs of building finished product inventory and its components in preparation of initial marketing of lefamulin;

· subject to receipt of marketing approval, revenue received from commercial sales of lefamulin;

· the costs of developing lefamulin for the treatment of additional indications;

· our ability to establish collaborations on favorable terms, if at all;

· the scope, progress, results and costs of product development of any other product candidates that we may develop;

· the extent to which we in-license or acquire rights to other products, product candidates or technologies;

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· the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against intellectual property-related claims;

· the continued availability of Austrian governmental grants;

· the rate of the expansion of our physical presence in the United States and Ireland; and

· the costs of operating as a public company in the United States.

Conducting clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. Our commercial revenues, if any, will be derived from sales of lefamulin or any other products that we successfully develop, in-license or acquire, none of which we expect to be commercially available for more than a year, if at all. In addition, if approved, lefamulin or any other product candidate that we develop, in-license or acquire may not achieve commercial success. Accordingly, we will need to obtain substantial additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, and funding from local and international government entities and non-government organizations in the disease areas addressed by our product candidates and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our shareholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

We enter into contracts in the normal course of business with clinical research organizations for clinical trials and clinical supply manufacturing and with vendors for pre-clinical research studies, research supplies and other services and products for operating purposes. We also lease our office and laboratory facilities. These contracts generally provide for termination on notice and therefore we believe that our non-cancelable obligations under these agreements are not material.

During the three months ended March 31, 2018, there have been no material changes to our contractual obligations and commitments outside the ordinary course of business from those specified in our 2017 Annual Report on Form 10-K.

We have no contingent liabilities in respect of legal claims arising in the ordinary course of business.

Capital Expenditures

Capital expenditures were $25,000 and $160,000 for the three months ended March 31, 2017 and 2018, respectively. We made no significant investments in intangible assets during the three months ended March 31, 2017 and 2018. Currently, there are no material capital projects planned in 2018.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules, other than our operating lease obligations for our facilities in Austria and the United States.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to a variety of financial risks in the ordinary course of our business: market risk, credit risk and liquidity risk. Our overall risk management program focuses on preservation of capital given the unpredictability of financial markets. These market risks are principally limited to interest rate and foreign currency fluctuations.

Market Risk

We do not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds (bank accounts, cash balances, marketable securities and term deposits) is limited because the counterparties are banks with high credit ratings from international credit rating agencies. The primary objective of our investment activities is to preserve principal and liquidity while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes.

We are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the euro and the British pound. Our functional currency is the U.S. dollar, but we receive payments and acquire materials, in each of these other currencies. We have not established any formal practice to manage the foreign exchange risk against our functional currency. However, we attempt to minimize our net exposure by buying or selling foreign currencies at spot rates upon receipt of new funds to facilitate committed or anticipated foreign currency transactions.

Interest rate risk may arise from short-term or long-term debt. As of March 31, 2018, we had no debt that exposed us to interest rate risk. As of March 31, 2018, we had neither significant long-term interest-bearing assets nor significant long-term interest-bearing liabilities, other than a de minimis government loan we have received at a below-market rate of interest from the Austrian Research Promotion Agency (Österreichische Forschungsförderungsgesellschaft, or FFG). Due to the short-term nature of our investment portfolio, we do not believe an immediate 10% increase in interest rates would have a material effect on the fair market value of our portfolio, and accordingly we do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.

Liquidity Risk

Since our inception, we have incurred net losses and generated negative cash flows from our operations. Based on our current operating plans, we believe that our existing cash, cash equivalents and short-term investments will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2020. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

We have re-evaluated the need for the previously planned expansion of our commercial organization, medical education, and supply chain activities and we anticipate that our expenses for 2018 will decrease as compared to our expenses for 2017 as we wind down our Phase 3 clinical trial program for lefamulin for the treatment of CABP. We expect to continue to invest in critical pre-commercialization activities prior to receiving marketing approval and making lefamulin available to patients. We expect to seek additional funding in future periods for purposes of investment in our commercial and medical affairs organization, including the expansion of a targeted hospital based sales force and related infrastructure, as well as investing in our supply chain in an effort to enhance the potential commercial launch of lefamulin.

If we obtain marketing approval for lefamulin or any other product candidate that we develop, in-license or acquire, we expect to incur significant additional commercialization expenses related to product sales, marketing, distribution and manufacturing. Our expenses will increase if we suffer any delays in our Phase 3 clinical program, including regulatory delays, or are required to conduct additional clinical trials to satisfy regulatory requirements. We have developed plans to mitigate this risk, which primarily consist of raising additional capital through a combination of equity or debt financings, new collaborations, and reducing cash expenditures.

However, there can be no assurance that we will be successful in acquiring additional capital at level sufficient to fund our operations or on terms favorable to us. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce to eliminate our research and development programs or any future commercialization effort.

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ITEM 4. CONTROLS AND PROCEDURES

Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures

We have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) under the supervision and the participation of the company’s management, which is responsible for the management of the internal controls, and which includes our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively). The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation of our disclosure controls and procedures as of March 31, 2018, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable level of assurance.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) that occurred during the three months ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

You should consider carefully the risks and uncertainties described below, together with all of the other information in this Form 10-Q. If any of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. The risks described below are not the only risks facing us. Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, results of operations and/or prospects.

Risks Related to Our Financial Position and Need for Additional Capital

We have incurred significant losses since our inception. We expect to incur losses for at least the next several years and may never generate profits from operations or maintain profitability.

Since inception, we have incurred significant operating losses. Our net losses were $13.3 million for the three months ended March 31, 2018, $74.4 million for the year ended December 31, 2017, $54.9 million for the year ended December 31, 2016 and $47.0 million for the year ended December 31, 2015. As of March 31, 2018, we had an accumulated deficit of $292.5 million. To date, we have financed our operations primarily through the sale of our equity securities, convertible loans and research and development support from governmental grants and loans. We have devoted substantially all of our efforts to research and development, including clinical trials. We have not completed development of any drugs. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. The net losses we incur may fluctuate significantly from quarter-to-quarter and year-to-year.

We have re-evaluated the need for the previously planned expansion of our commercial organization, medical education, and supply chain activities and we now anticipate that our expenses for 2018 will decrease as compared to our expenses for 2017 as we wind down our Phase 3 clinical trial program for lefamulin for the treatment of community-acquired bacterial pneumonia, or CABP. We expect to continue to invest in critical pre-commercialization activities prior to receiving marketing approval and making lefamulin available to patients. We initiated the first of our Phase 3 clinical trials, which we refer to as LEAP 1, in September 2015 and initiated the second trial, which we refer to as LEAP 2, in April 2016. In September 2017, we announced positive top-line results for LEAP 1. In December 2017, we announced completion of enrollment for LEAP 2. If the results of LEAP 2 are also favorable, including achievement of the primary efficacy endpoints of the trials, 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 fourth quarter 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 also continue to characterize the clinical pharmacology of lefamulin. If we obtain marketing approval of lefamulin for CABP or another indication, we also expect to incur significant additional sales, marketing, distribution and manufacturing expenses.

In addition, our expenses will increase if and as we:

· initiate or continue the research and development of lefamulin for additional indications and of our other product candidates;

· seek to discover and develop additional product candidates;

· seek marketing approval for any product candidates that successfully complete clinical development;

· continue to establish a medical affairs, sales, marketing and distribution infrastructure and scale up manufacturing capabilities to commercialize any product candidates for which we receive marketing approval;

· in-license or acquire other products, product candidates or technologies;

· maintain, expand and protect our intellectual property portfolio;

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· expand our physical presence in the United States and Ireland;

· establish and expand manufacturing arrangements with third parties; and

Our ability to generate profits from operations and remain profitable depends on our ability to successfully develop and commercialize drugs that generate significant revenue. Based on our current plans, we do not expect to generate significant revenue unless and until we obtain marketing approval for, and commercialize, lefamulin. We do not expect to obtain marketing approval before 2019, if at all. This will require us to be successful in a range of challenging activities, including:

· obtaining favorable results from our LEAP 2 clinical trial of lefamulin for the treatment of CABP;

· subject to obtaining favorable results from our LEAP 2 clinical trial, applying for and obtaining marketing approval for lefamulin;

· expanding medical affairs, sales, marketing and distribution capabilities to effectively market and sell lefamulin in the United States;

· establishing and maintaining collaboration, distribution or other marketing arrangements with third parties to commercialize lefamulin in markets outside the United States;

· protecting our rights to our intellectual property portfolio related to lefamulin;

· contracting for the manufacture of and obtaining commercial quantities of lefamulin; and

· negotiating and securing adequate reimbursement from third-party payors for lefamulin.

We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to generate profits from operations. Even if we do generate profits from operations, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to generate profits from operations and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or continue our operations. A decline in the value of our company could also cause our shareholders to lose all or part of their investment.

We will need substantial additional funding. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our product development programs or future commercialization efforts.

We expect to continue to incur substantial costs in connection with our ongoing activities, particularly as we potentially seek marketing approval for lefamulin and, possibly, other product candidates and continue our research activities. Our expenses will increase if we suffer any delays in our Phase 3 clinical program for lefamulin for CABP, including regulatory delays or are required to conduct additional clinical trials to satisfy regulatory requirements. If we obtain marketing approval for lefamulin or any other product candidate that we develop, in-license or acquire, we expect to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing.

Furthermore, we expect to continue to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

We expect that our existing cash, cash equivalents and short-term investments will be sufficient to fund our operating expenses and capital expenditures into the first quarter of 2020. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. This estimate assume, among other things, that we do not obtain any additional funding through grants and clinical trial support, collaboration agreements, equity or debt financings.

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We expect to seek additional funding in future periods for purposes of investment in our commercial and medical affairs organization, including the expansion of a targeted hospital based sales force and related infrastructure, as well as investing in our supply chain in an effort to enhance the potential commercial launch of lefamulin.