UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

For the fiscal year ended: December 31, 20172019

or

Commission file number: 001-36066

PARATEK PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

75 Park Plaza

Boston, MA 02116

(617) 807-6600

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive office)

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

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

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

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

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  ☒    No  ☐

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐.

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☒

The aggregate market value of the common stock of the registrant held by non-affiliates of the registrant on June 30, 2017, the last business day of the registrant’s second fiscal quarter was: $600,690,355.$127,549,862.

As of February 28, 20182020, there were 31,443,14942,219,278 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for the registrant’s 20182020 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A within 120 days of the registrant’s year ended December 31, 20172019 are incorporated herein by reference into Part III of this Annual Report on Form 10-K.

TABLE OF CONTENTS

i

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements that are based upon current expectations within the meaning of the Private Securities Litigation Reform Act of 1995. Paratek Pharmaceuticals, Inc. intends that such statements be protected by the safe harbor created thereby. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions intended to identify forward-looking statements. Examples of such forward-looking statements include, but are not limited to, statements about or relating to:  

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Forward-looking statements are neither historical facts nor assurances of future performance. . These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, time frames or achievements to be materially different from the information set forth in these forward-looking statements. While we believe that we have a reasonable basis for each forward-looking statement, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. We discuss many of these risks in the “Risk Factors” section and elsewhere in this Annual Report on Form 10-K. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Any of the events anticipated by the forward-looking statements may not occur or, if any of them do, the impact they will have on our business, results of operations and financial condition is uncertain. We hereby qualify all of our forward-looking statements by these cautionary statements.

Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

PARATEK^® and NUZYRA^® are registered trademarks of Paratek Pharmaceuticals, Inc. is our registered and unregistered trademark in the United States and other jurisdictions. IntermezzoSEYSARA^® is a U.S. registered and unregistered trademark of Purdue Pharmaceutical Products L.P.Almirall, LLC. and associated companies in the United States and other jurisdictions and is a registered and unregistered trademark of oursParatek in certain otherforeign jurisdictions. Other trademarks and trade names referred to in this Annual Report on Form 10-K are the property of their respective owners. Solely for convenience, we only use the ^® or ™ symbol the first time any trademark is mentioned.

All references to “Paratek,” “we,” “us,” “our” or the “Company” in this Annual Report on Form 10-K mean Paratek Pharmaceuticals, Inc. and its subsidiaries.

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PART I

Overview

We are a clinical stagecommercial-stage biopharmaceutical company focused on the development and commercialization of innovative therapeutics based upon tetracycline chemistry.novel life-saving therapies for life-threatening diseases or other public health threats for civilian, government and military use. We have used our expertise in biology and tetracycline chemistry to create chemically diverse and biologically distinct small molecules derived from the minocycline core structure. Our two leadUnited States, or U.S., Food and Drug Administration, or FDA, approved commercial product, candidates are the antibacterials omadacycline and sarecycline.

We have generated innovative small molecule therapeutic candidates based upon medicinal chemistry-based modifications, according to structure-based activity, of all positions of the core tetracycline molecule. These efforts have yielded molecules with broad-spectrum antibiotic properties and narrow-spectrum antibiotic properties, and molecules with potent anti-inflammatory properties to fit specific therapeutic applications. This proprietary chemistry platform has produced many compounds that have shown interesting characteristics in various in vitro and in vivo efficacy models. Omadacycline and sarecycline are examples of molecules that were synthesized from this chemistry discovery platform. The following table summarizes the primary therapeutic applications for our product candidates: 

Omadacycline

If approved, omadacycline will be the first in a new class of aminomethylcycline antibiotics. OmadacyclineNUZYRA^® (omadacycline) is a broad-spectrum, well-tolerated once-daily oral and intravenous antibiotic for the treatment of adult patients with community-acquired bacterial pneumonia, or IV, antibiotic. CABP, and acute skin and skin structure infections, or ABSSSI, caused by susceptible pathogens. SEYSARA^® (sarecycline) is an FDA-approved product with respect to which we have exclusively licensed in the U.S. and the People’s Republic of China, Hong Kong and Macau, or the greater China region, certain rights to Almirall, LLC, or Almirall. SEYSARA is currently being marketed by Almirall in the U.S. as a new once-daily oral therapy for the treatment of moderate to severe acne vulgaris. With respect to our technology as it relates to sarecycline, we retain development and commercialization rights in all countries other than the U.S. and the greater China region, and in February 2020, we exclusively licensed from Almirall certain technology owned or in-licensed by Almirall or its affiliates that is necessary or useful to develop or commercialize sarecycline outside of the U.S.

NUZYRA

We believe that omadacyclineNUZYRA has the potential to become the primary antibiotic choice of physicians for use as a broad-spectrum monotherapy antibiotic for acute bacterial skin and skin structure infections, or ABSSSI, community-acquired bacterial pneumonia, or CABP urinary tract infection, or UTI, and other serious community-acquired bacterial infections where resistance is of concern.  We believe omadacycline, if approved,NUZYRA will be used in the emergency room, hospital and community care settings. We have designed omadacyclineNUZYRA to provide potential advantages over existing antibiotics, including activity against resistant bacteria, broad-spectrum antibacterial activity, oral and IV formulations with once-daily dosing, no dosing adjustments for patients on concomitant medications and a generally safe and well toleratedwell-tolerated profile.

In NUZYRA also has the fall of 2013, the U.S. Food and Drug Administration, or the FDA, agreedpotential to the design of our omadacycline Phase 3 studies for ABSSSI and CABP through the Special Protocol Assessment, or SPA, process. In addition, the FDA confirmed that positive data from the individual studies for ABSSSI and CABP would be sufficient to support approval of omadacycline for each indication and for bothused as an oral and IV formulations in the United States.  In addition to Qualified Infectious Disease Product, or QIDP, designation, on November 4, 2015, the FDA granted Fast Track designation for the development of omadacycline in ABSSSI, CABP, and complicated urinary tract infections, or  complicated UTI. Fast Track designation facilitates the development, and expedites the review of drugs that treat serious or life-threatening conditions and that fill an unmet medical need. In February 2016, we reached agreement with the FDA on the terms of the omadacycline pediatric program associated with the Pediatric Research Equity Act, or

PREA. The FDA has granted Paratek a waiver for conducting studies with omadacycline in children less than eight years old due to the risk of teeth discoloration, a known class effect of tetracyclines.  In addition, the FDA has granted a deferral on conducting studies in children eight years and older until safety and efficacy is established in adults. In May 2016, we received confirmation from the FDA that the oral-only ABSSSI study design was acceptable and consistent with the currently posted guidance for the industry.   In September 2017, both the oral and IV formations of omadacycline were granted an additional QIDP designation by the FDAantibiotic for the treatment of uncomplicated urinary tract infection, or uncomplicated UTI.pulmonary anthrax and may be suitable for prophylactic use as a priority medical countermeasure.  

To date, we have conducted more than 2030 Phase 1 studies of omadacycline to characterize the effects of the drug on humans, including how it is absorbed, metabolized, and excreted. These Phase 1 studies also included evaluation in special populations like hepatic and renal failure patients. We have also conducted and completed three successful Phase 3 clinical studies. Our first two Phase 3 clinical studies were for the treatment of ABSSSI (OASIS-1) and CABP (OPTIC). Both studies utilized initiation of IV therapy with transitions to oral-based treatment on clinical response. Our third Phase 3 clinical study (OASIS-2) was an oral-only administration of omadacycline in ABSSSI compared to oral-only linezolid. All three Phase 3 clinical studies resulted in omadacycline demonstrating positive efficacy results and a generally safe and well tolerated profile.  We plan to include these clinicalThese data formed the basis of approval for NUZYRA in the U.S.  

In October 2018, we submitted a Market Authorization Applications, or MAA, submission to the European Medicines Agency, or the EMA, for the treatment of adults with ABSSSI and CABP caused by susceptible bacteria.  Based on the review of the data and the application, the EMA recommended approval for NUZYRA for the treatment of ABSSSI but not for CABP. The EMA stated that a second study is required for the CABP indication, which we plan to submitis consistent with EU guidance that typically requires two Phase 3 studies per indication for approval. In the EU, the ten-year market exclusivity for NUZYRA would begin with the first approval. As a result, in the second halffourth quarter of 2018. 2019, we withdrew our submission of the MMA to the EMA for NUZYRA to preserve exclusivity until such time as both the ABSSI and CABP indications can be approved concurrently in an effort to maximize the value of NUZYRA in the EU.  The EU represents only a modest market opportunity compared to the U.S.  Our goal to partner in the EU once both indications are approved remains unchanged.

In December 2019, we entered into a five-year contract with an option to extend to ten years with the Biomedical Advanced Research and Development Authority, or BARDA, a division of the U.S. Department of Health and Human Services, or HHS, Office of the Assistant Secretary for Preparedness and Response, or ASPR, herein referred to as the BARDA contract. The BARDA contract supports the development of NUZYRA for the treatment of pulmonary anthrax, FDA post-marketing requirements, or PMRs, associated with the initial NUZYRA approval, and an option for BARDA to procure up to 10,000 treatment courses of NUZYRA for the Strategic National Stockpile, or SNS, for use against potential biothreats.  Under the terms of the BARDA contract, we have been awarded initial funding of approximately $59.4 million for the development of NUZYRA for the treatment of pulmonary anthrax and the purchase of an initial 2,500 treatment courses of NUZYRA to add to the current SNS. The BARDA contract provides for additional potential staged funding including approximately $76.8 million for existing FDA PMRs scheduled to begin in April 2020 and approximately $20.4 million for manufacturing-related requirements scheduled to begin in June 2020. The remaining staged, milestone-based funding includes the potential for approximately $12.7 million to support the development of NUZYRA for the prophylaxis of anthrax and a maximum of approximately $115.3 million to provide for three additional purchases of NUZYRA for the SNS, each of which will be triggered upon us demonstrating continued progress in the anthrax development program.

We have initiated discussions with the FDA to explore potential regulatory registration paths to determine the efficacy and safety of omadacycline in patients afflicted with non-tuberculous mycobacteria, or NTM, which are workingenvironmental organisms that can be found in soil, dust, and water, including natural and municipal water sources. Infection occurs when a person is exposed to scheduleNTM organisms.  NTM can form difficult-to-eliminate biofilms, which are collections of microorganisms that stick to each other, and adhere to surfaces in moist environments.  Although severe infection can affect the lymph nodes, skin, soft tissues, bones, and joints, the vast majority of NTM infection cases are pulmonary. The diagnosis of NTM infection is often delayed due to non-specific symptoms and a datelack of disease state awareness by clinicians.

Mycobacterium abscessus, or M. abscessus, complex comprises a group of rapidly growing, multidrug-resistant, nontuberculous mycobacteria that are responsible for a wide spectrum of skin and soft tissue diseases, central nervous system infections, bacteremia, and ocular and other infections.  Infections caused by the M. abscessus complex are notoriously difficult to treat due to intrinsic resistance to many classes of antibiotics. Few oral antibiotics demonstrate in vitro activity against the M. abscessus complex, making long-term treatment of this infection extremely complicated. The M. abscessus complex is frequently resistant to antibiotics that are used in the treatment of other NTM species such as rifamycins, ethambutol, and fluoroquinolones. There is currently only one FDA-approved antibiotic for the treatment of NTM species; Arikayce, an inhaled liposomal amikacin, has been approved for treatment of refractory pulmonary disease caused by Mycobacterium avium complex. There are no FDA-approved treatments for pulmonary disease caused by M. abscessus complex.

One of the key components of M. abscessus complex treatment is the use of three or more antimicrobials in most treatment regimens to increase drug efficacy and decrease the development of antibiotic resistance.   Currently available treatment options for M. abscessus complex pulmonary infection are lengthy and require complex, multi-antibiotic regimens and are generally not tolerated and have significant safety challenges.  General treatment principles that should be followed include:

Omadacycline has several key characteristics that may prove beneficial to patients with M. abscessus complex pulmonary infection.  These include:

Omadacycline has demonstrated potent activity against M. abscessus complex species in three separate studies. In two published reports (Kaushik 2019 and Shoen 2019), the MIC50 and MIC90 values obtained were 1 and 2 µg/mL, respectively. In a third ongoing study, the preliminary MIC50 and MIC90 values were 0.12 and 0.5 µg/mL, respectively (Brown-Elliot; preliminary data on file at Paratek). Differences in the results of these studies are likely due to experimental methodology or isolate selection; nonetheless, in all cases omadacycline and tigecycline had similar, if not identical, minimum inhibitory concentration, or MIC, values.

Initial discussions have occurred with the FDA on a program to support registration on NUZYRA for M. abscessus complex.  Additional discussions are planned during the second quarter of 20182020 to meet with our rapporteurs and the EMA as the last regulatory interaction step before the MAA filing.

Scientific advice received through the centralized procedure in Europe confirmed general agreement on the design and choice of comparators of the Phase 3 clinical program for ABSSSI and CABP and noted that approval based on a single study in each indication could be possible but would be subject to more stringent statistical standards than MAA programs that conduct two pivotal Phase 3 studies per indication. We believe that the inclusion of the second Phase 3 oral-only study in ABSSSI strengthens the data package for submission of an MAA filing for approval in European Union, or EU. 

In February 2018, we completed our New Drug Application, or NDA, submissions to the FDA. The NDAs included all the data from the clinical program described above. We anticipate, based on our experience with the FDA, that the applications will be accepted in early April 2018.  The FDA review process includes a 60-day evaluation to accept applications for filing.  That acceptance will start the final review period of our applications and set the final Prescription Drug User Fee Act, or PDUFA, action date.  Assuming a priority review designation, we expect our PDUFA action date to be set eight months from the completed submission, in early October 2018.

In October 2016, we announced that we entered into a Cooperative Research and Development Agreement with the U.S. Army Medical Research Institute of Infectious Diseases to study omadacycline against pathogenic agents causing infectious diseases of public health and biodefense importance. These studies are designed to confirm humanized dosing regimens of omadacycline in order to study the efficacy of omadacycline against biodefense pathogens, including Yersinia pestis, or plague, and Bacillus anthracis, or anthrax. Funding support for the trial has been made available through the Defense Threat Reduction Agency, or DTRA/ Joint Science and Technology Office and Joint Program Executive Office for Chemical and Biological Defense / Joint Project Manager Medical Countermeasure Systems / BioDefense Therapeutics.further refine this program.

Sarecycline

Our second antibacterial product candidate, sarecycline,

Sarecycline, also known as Seysara™SEYSARA in the U.S,U.S., is a new, once-daily, tetracycline-derived compoundnovel, next generation, narrow spectrum tetracycline designed specifically for use in the treatment of acne and rosacea. We believe that, based upon the data generated to-date, sarecycline possesses favorable anti-inflammatory activity, plus narrow-spectrum antibacterial activity relative to other tetracycline-derived molecules, oral bioavailability, does not cross the blood-brain barrier, and favorable pharmacokinetic properties thatdermatological use. In July 2007, we believe make it particularly well-suited for the treatment of inflammatory acne in the community setting. We have exclusively licensed U.S. developmentthe right to develop and commercialization rights tocommercialize sarecycline for the treatment of acne to Warner Chilcott Company, Inc. (which was acquired by Actavis PLC in October 2013 and became Allergan plc,in October 2015) and, September 2018, Allergan assigned such rights to Almirall. In February 2020, we exclusively licensed to Almirall certain technology owned or Allergan, while retaining developmentin-licensed by us or our affiliates in order to research, develop and commercialization rights in the rest of the world.

In March 2017, Allergan announced that two Phase 3 studies ofcommercialize sarecycline for the treatment of moderate to severe acne vulgaris met their 12-week primary efficacy endpoints. In addition, a nine-month long-term safety extension study was completed. The safety results fromin the long-term study are generally consistentgreater China region. Almirall is responsible for all costs associated with results from the two 12-week studies. Based on these clinical data, Allergan submitted an NDA to the FDA, which was accepted in December 2017,developing and commercializing sarecycline for the treatment of moderate to severe acne. As a result, we earned a $5.0 million milestone payment from Allergan under the terms of our collaboration for the development of Seysara™ for the treatment of moderate to severe acne which became payable upon the FDA’s acceptance of Allergan’s NDA for Seysara™. We received the milestone payment in January 2018. Allergan plans to commercialize Seysara™ in the U.S. Paratek retains all ex-U.S.and the greater China region. In exchange for such license rights, we have the right to sarecycline. We are anticipatingreceive (i) milestone payments upon the FDA’s decision on approvalachievement of sarecyclinecertain development- and regulatory-based events in the second halfU.S. and (ii) a royalty on U.S.-based and greater China region-based net sales. With respect to our technology as it relates to sarecycline, we retain development and commercialization rights outside of 2018.the U.S. and the greater China region and, with respect to certain technology owned or in-licensed by Almirall or its affiliates necessary or useful to develop or commercialize sarecycline outside of the U.S. and the greater China region, we exclusively licensed such technology from Almirall in February 2020, all of which is available for licensing to other partners in key international markets, such as the EU, Japan, the rest of Asia (excluding the greater China region), Canada and Latin America. In the event we directly commercialize or sublicense a third party to commercialize sarecycline outside of the U.S. and the greater China region, we owe Almirall (i) a royalty on our or our affiliates’ net sales and (ii) a percentage of the consideration (e.g., milestones, royalties) we receive from our sublicensees in connection with their development and commercialization of sarecycline.

Allergan

Almirall currently also holds a non-exclusivenonexclusive license to develop and commercialize sarecycline for the treatment of rosacea in the United States. There are currently no clinical trials with sarecyclineU.S., and in rosacea underway.the U.S., Paratek cannot grant rights on back-up compounds, lead candidate(s), or products licensed to Almirall for rosacea.

Corporate History

Merger of Novacea, Inc. and Transcept Pharmaceuticals, Inc.

We are a Delaware corporation that was incorporated in February 2001 as D-Novo Therapeutics, Inc., which later changed its corporate name to Novacea, Inc., or Novacea. Novacea previously traded on The Nasdaq Global Market under the ticker symbol “NOVC.” On January 30, 2009, Novacea completed a business combination with privately-held Transcept Pharmaceuticals, Inc., or Old Transcept, pursuant to which Old Transcept became a wholly-owned subsidiary of Novacea, and the corporate name of Novacea was changed to Transcept Pharmaceuticals, Inc., or Transcept. In connection with the closing of such transaction, Transcept common stock began trading on The Nasdaq Global Market under the ticker symbol “TSPT” on February 3, 2009.

Merger of Transcept Pharmaceuticals, Inc. and Paratek Pharmaceuticals, Inc.

We are incorporated under the laws of the State of Delaware.  On October 30, 2014, Transcept Pharmaceuticals, Inc., or Transcept, completed a business combination with privately-held Paratek Pharmaceuticals, Inc., or Old Paratek, in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of June 30, 2014, by and among Transcept, Tigris Merger Sub, Inc., or Merger Sub, Tigris Acquisition Sub, LLC, or Merger LLC, and Old Paratek, or the Merger Agreement, pursuant to which Merger Sub merged with and into Old Paratek, with Old Paratek surviving as a wholly-owned subsidiary of Transcept, followed by the merger of Old Paratek with and into Merger LLC, with Merger LLC surviving as a wholly-owned subsidiary of Transcept (we refer to these mergers together as the Merger). Immediately following the Merger, Transcept changed its name to “Paratek Pharmaceuticals, Inc.”, and Merger LLC changed its name to “Paratek Pharma, LLC.” In connection with the closing of the Merger, our common stock began trading on The Nasdaq Global Market under the ticker symbol “PRTK” on October 31, 2014.

The Antibiotics Market and Limitations of Current Therapies

Physicians commonly prescribe antibiotics to treat patients with acute and chronic infectious diseases that are either known, or presumed, to be caused by bacteria. The World Health Organization has identified the development of worldwide resistance to currently available antibacterial agents as being one of the three greatest threats to human health in this decade. In a press release announcing the release of a study titled “Hospital and Societal Costs of Antimicrobial Resistant Infections in a Chicago Teaching Hospital: Implications for Antibiotic Stewardship,” it was estimated that antibiotic-resistant infections cost the U.S. healthcare system in excess of $20 billion annually. In addition, these infections result in more than $35 billion in societal costs and more than 8 million additional days spent in the hospital. Historically, the majority of life-threatening infections resulting from antibiotic-resistant bacteria were acquired in the hospital setting. According to AMR data from 2015 projected to 2028, approximately 6.7 million antibiotic treated events occur annually in the two combined indications of ABSSSI and CABP in U.S. hospitals. Furthermore, research conducted by Paratek suggests that in these same indications of ABSSSI and CABP there are approximately 890 thousand patients treated in U.S hospitals who fail to respond or are intolerant to the existing generic options. Paratek estimates this could yield approximately $2.6 billion in potential sales by 2028. In the U.S. community setting, IMS NDTI data (2014-2015) projected to 2028 suggests there are approximately 23.7 million prescriptions for ABSSSI and CABP. Additionally, research conducted by Paratek suggests that approximately 2.1 million patients fail to respond or are intolerant to the existing oral generics in the U.S. community setting. Paratek estimates this could yield approximately $5.4 billion in potential sales by 2028. The emergence of multi-drug resistant pathogens, coupled with limitations in terms of intolerance to existing generic options, emphasizes the need for novel agents capable of overcoming antibiotic resistance.

Bacteria are often broadly classified as gram-positive bacteria, including antibiotic-resistant bacteria such as methicillin-resistant Staphylococcus aureus, or MRSA, and multi-drug resistant Streptococcus pneumoniae, or MDR-SP; gram-negative bacteria, including antibiotic-resistant bacteria such as extended-spectrum beta-lactamases, or ESBL, producing Enterobacteriaceae; atypical bacteria, including Chlamydophila pneumoniae and Legionella pneumophila; and anaerobic bacteria, including Bacteroides and Clostridia. Antibiotics that are active against both gram-positive and gram-negative bacteria are referred to as “broad-spectrum,”“broad-spectrum”, while antibiotics that are active only against a select subset of gram-positive or gram-negative bacteria are referred to as “narrow spectrum”. Today, because many of the currently prescribed antibiotics that have activity against resistant organisms typically are “narrow spectrum,” they cannot be used as an empiric monotherapy treatment of serious infections where gram-negative, atypical or anaerobic bacteria may also be involved. Empiric monotherapy refers to the use of a single, antibacterial agent to begin treatment of an infection before the specific pathogen causing the infection has been identified. We believe omadacycline if approved, will be used in the emergency room, hospital and community care settings.  Based on studies published by the Cleveland Clinic Foundation, the National Institutes of Health, or NIH, and American Academy of Family Physicians, rates of infections involving organisms other than gram-positive bacteria have been found to be as much as 15% in ABSSSI and up to 40% in CABP and 70% to 90% in UTI.CABP.

When a patient goes to the emergency room or hospital for treatment of a serious infection, the physician’s selection of which IV antibiotic to use is often based on the severity of infection, the pathogen(s) believed most likely to be involved and the probability of a resistant pathogen(s) being present. After initial IV therapy and once the infection begins to respond to treatment, hospitals and physicians face strong pressures to discharge patients from the hospital to reduce costs, limit hospital-acquired infections and improve the patient’s quality of life. In order to transition patients out of the hospital and home to complete the course of therapy, physicians typically prefer to have the option to prescribe a bioequivalent oral formulation of the same antibiotic.

Antibiotics used to treat ABSSSI, CABP UTI and other serious, community-acquired bacterial infections must satisfy a wide range of criteria on a cost-effective basis. For example, we believe that existing treatment options for ABSSSI, including vancomycin, linezolid, daptomycin, piperacillin tazobactam, oritavancin, dalbavancin, tigecycline and delafloxacin; and for CABP, including levofloxacin, moxifloxacin, azithromycin, ceftriaxone, clarithromycin, ceftaroline, delfaloxacin, lefamulin and tigecycline; and for UTI, including levofloxacin, ciprofloxacin, and trimethoprim/sulfamethoxazole, have one or more of the following significant limitations:

These limitations can ultimately lead to longer hospital stays, greater healthcare costs and increased morbidity and mortality due to lower cure rates and additional side effects. While certain antibiotics address some of these outcomes, we do not believe there is one superior treatment option that satisfies all outcomes. We believe that it is essential for the treatment of patients with serious, community-acquired bacterial infections that physicians prescribe the right antibiotic the first time, as ineffective antibiotics can quickly lead to progressively more severe and invasive infections or even death.

Attributes of Omadacycline as a Product CandidateNUZYRA

Completed Omadacycline Clinical Studies

In the two pivotal Phase 3 studies in ABSSSI (OASIS-1 and OASIS-2), omadacycline successfully met the primary endpoint for the FDA by demonstrating statistical non-inferiority based upon the Early Clinical Response, or ECR, assessment at 48 to 72 hours after the first dose of study medication in the modified intent‑to‑treat, or mITT, population (all randomized subjects without a baseline sole gram‑negative causative pathogen). In the same two pivotal Phase 3 studies in ABSSSI, omadacycline also successfully met the primary endpoint for the EMA by demonstrating statistical non-inferiority based upon the investigator’s assessment of clinical outcome at the post therapy evaluation, or PTE, visit (7 to 14 days after the subject’s last day of study therapy), in the mITT and the clinically evaluable, or CE, population (defined as all mITT subjects who received study medication, had a qualifying ABSSSI, an assessment of outcome, and met all other evaluability criteria).  Clinical success at the PTE assessment was based on resolution of the infection such that further antibacterial therapy was not needed, and the subject was alive and did not meet any clinical failure or indeterminate criteria. 

Omadacycline OASIS-1 Study Results

Clinical Success at PTE by Baseline Pathogen (OASIS-1)

MRSA, methicillin-resistant Staphylococcus aureus; MSSA, methicillin-susceptible Staphylococcus aureus; VSE, vancomycin-susceptible enterococci.

Omadacycline OASIS-2 Study Results

Clinical Success at PTE by Baseline Pathogen (OASIS-2)

In a single pivotal Phase 3 study in CABP (OPTIC), omadacycline successfully met the primary endpoint for the FDA by demonstrating statistical non-inferiority based upon the ECR assessment at 72 to 120 hours after the first dose of study medication in the intent‑to‑treat, or ITT, population.  In the same pivotal Phase 3 study in CABP, omadacycline also successfully met the primary endpoint for the EMA by demonstrating statistical non-inferiority based upon clinical success, as assessed by the investigator at the PTE visit in both the ITT and CE populations.   

Omadacycline OPTIC Study Results

Clinical Success at PTE by Baseline Pathogen (OPTIC)

Overall, omadacycline demonstrated a generally safe and well tolerated profile. The percentage of all subjects from the pivotal Phase 3 studies who had at least 1 Treatment Emergent Adverse Events, or TEAEs, was similar in the omadacycline, linezolid, and moxifloxacin subjects. Gastrointestinal events were the most frequent type of TEAEs across all pools, consistent with the known adverse effect profiles of the tetracycline, oxazolidinone, and fluoroquinolone antibiotic classes. A higher frequency of nausea and vomiting events occurred in the omadacycline group compared to the moxifloxacin and linezolid groups. This was most notable in oral-only OASIS-2 study where higher rates were noted with the loading dose on Days 1 and 2. The most common TEAEs not associated with the disease under study in subjects treated with omadacycline were nausea, vomiting, diarrhea, increased transaminases, and headache.

Most Frequent Treatment Emergent Adverse Events (TEAEs) in the OASIS-1, OASIS-2 and OPTIC studies

In Vitro Microbiology Studies

The tables below compare the in vitro activity of omadacycline and various antibiotics for ABSSSI, CABP and UTI pathogens against various strains of bacteria, including those resistant to current antibiotics.

Key Pathogens—ABSSSI

“N/A” indicates that the antibiotic was not tested against this organism and/or has no useful therapeutic activity

Key Anaerobe Pathogens—ABSSSI

Key Typical Pathogens—CABP

“N/A” indicates that the antibiotic was not tested against this organism and/or has no useful therapeutic activity

Key Atypical Pathogens—CABP

“N/A” indicates that the antibiotic was not tested against this organism and/or has no useful therapeutic activity.

Key Pathogens—UTI

“N/A” indicates that the antibiotic was not tested against this organism and/or has no useful therapeutic activity.

Ongoing Omadacycline UTI Program

We conducted a Phase 1b proof-of-principle study last year that provides the evidence to continue to explore the development of omadacycline in UTI. The Phase 1b study results are highlighted below.

Phase 1 Clinical Study to Evaluate the Safety and Pharmacokinetics of Omadacycline in Female Adults with Cystitis (uncomplicated UTI):

Study Design. The primary objectives were to evaluate the urine and plasma concentrations of omadacycline.  The secondary objectives were to evaluate the safety and efficacy of omadacycline in female adults with cystitis.  This study was a randomized (1:1:1), open-label, parallel-designed Phase 1b study evaluating three dosing regimens of omadacycline in the treatment of female adults with cystitis. Following a Screening period of up to 48 hours, eligible subjects were randomly assigned to 1 of 3 groups and received dosing regimens of omadacycline.  Dosing was as follows:

Study Results. Overall, 31 subjects (11 in Group 1 and 10 in each of Groups 2 and 3) were randomized and received the study drug at three study sites. All but one subject completed the intended five days of study treatment (1 subject in Group 1 withdrew consent). Subjects were females and they ranged in age from 19 to 75 years (mean 42 years overall).  Plasma PK results on Day 1 showed the highest omadacycline exposure following the 200-mg IV dose in Group 1 (geometric mean AUC_0-24 15557 h*ng/mL). The Day 1 geometric mean AUC_0-12 value for Group 2 was 6152 h*ng/mL (following the first 300 mg po dose) and, for Group 3, the value was 6686 h*ng/mL (following the first 450 mg po dose). By Day 5 the geometric mean AUC_0-24 values for Groups 1 and 2 were 9555 h*ng/mL and 12375 h*ng/mL, respectively following 300 mg po doses, and for Group 3 the value was 18693 h*ng/mL following the 450 mg po dose.  At steady state (Day 5), the geometric mean cumulative amount of drug excreted in urine from time t0 to t24 (Ae0-24) values for Groups 1, 2, and 3 were 21.72 mg, 31.46 mg, and 43.60 mg, respectively. Relative to the absorbed amount of omadacycline, this corresponds to geometric mean fraction of the dose excreted unchanged in urine from 0 to 24 hours after dosing (Fe0-24) for Groups 1, 2, and 3 on Day 5 of 20.7%, 30.0%, and 27.7%, respectively. The highest mean omadacycline urine concentration value (65360 ng/mL [65.4 µg/mL]) was observed in Group 1 over 0 to 4 hours after the 200 mg IV dose on Day 1. The mean values across all other intervals/Groups ranged from 11699 to 48117 ng/mL (i.e., 11.7 to 48.1 µg/mL).  The most common TEAEs in all groups were gastrointestinal, most notably nausea (60% to 73% per group) and vomiting (20% to 40% per group), all of which were of mild or moderate intensity. No subjects in the study discontinued study treatment because of these TEAEs. No subjects in this study experienced severe TEAEs or serious adverse events, leading to premature discontinuation of the study drug.  

Mean (± SD) Plasma Concentrations of Omadacycline Three  Dose  Levels  on  Days  1 (Left Panel) and 5 (Right Panel)

Mean  (± SD)  Urine Concentrations of Omadacycline Three Dose Levels on Days 1 (Left Panel) and 5 (Right Panel)

Study Conclusions. Omadacycline is partially excreted in urine in adult female subjects with cystitis. With the treatment regimens studied, observed urine concentrations of omadacycline compared favorably with minimum inhibitory concentration values for common UTI pathogens, and a high percentage of subjects achieved clinical success and favorable microbiological response. There was a higher than expected incidence of gastrointestinal, or GI, TEAEs (particularly nausea and vomiting), which contrasts with the notably lower rates of nausea and vomiting observed in other clinical studies using comparable dosing regimens. Omadacycline may be a useful treatment for certain UTIs and warrants evaluation in larger controlled studies, with continued close monitoring of GI tolerability.  

Based on the above data results, in December 2017, we initiated sites for the first of two planned Phase 2 clinical studies evaluating omadacycline for the potential treatment of UTI. The firstsinusitis, also known as an acute sinus infection or rhinosinusitis.

Omadacycline Post-Approval Requirements in the U.S.

Under the Pediatric Research Equity Act (21 U.S.C. 355c), or PREA, all applications for new active ingredients are required to contain an assessment of the safety and effectiveness of the product for the claimed indication in pediatric patients unless this requirement is waived, deferred, or inapplicable.  As part of the approval for NUZYRA, the FDA has waived the pediatric study will evaluaterequirement for ages 0 to < 8 years and deferred submission of pediatric studies for ages 8 to < 18 years.  Specifically, the FDA has requested that we develop an age appropriate formulation, and complete three pediatric studies, including a pediatric PK study followed by safety and efficacy safety, tolerability and pharmacokinetics of omadacyclinestudies in femalepediatric patients with cystitis,both CABP and ABSSSI.  In addition to pediatric requirements, as with all antibiotic approvals, the FDA has also required a common uncomplicated UTI. TheU.S. surveillance study for five years from the date of marketing to monitor for the development of resistance to NUZYRA (omadacycline) in those organisms specific to the indications in the label.  Lastly, FDA has required a second study which we plan to initiate later this year, will evaluate the efficacy, safety, tolerability and pharmacokinetics of omadacyclinebe conducted in patients with acute pyelonephritis, a common complicated UTI. CABP.  

NUZYRA Commercialization Strategy

We plan to enroll approximately 200 patients in each study at multiple sites. The results of the Phase 2 UTI program are expectedcurrently market NUZYRA in the second half of 2019.   The following illustration highlights the adaptive design we plan to employ in the cystitis and acute pyelonephritis studies.

Sarecycline

Sarecycline, also known as Seysara™ in the U.S, is a novel, next generation, narrow spectrum tetracycline that we designed specifically for dermatological use. We exclusively licensed the U.S. rights to sarecycline for the treatment of acne to Allergan, who funds all U.S. development costs for this program. In exchange for license rights, we have the right to receive (i) milestone payments upon the achievement of development and regulatory progress; and (ii) a royalty on eventual net sales, if any. We retain development and commercialization rights outside of the United States, which are available for licensing to other partners in key international markets, such as the EU, Japan, the rest of Asia, Canada, and Latin America.

In March 2017, Allergan announced that two Phase 3 studies of sarecycline for the treatment of moderate to severe acne vulgaris met their 12-week primary efficacy endpoints. In addition, a 9-month long-term safety extension study was completed. The safety results from the long-term study are generally consistent with results from the two 12-week studies. Based on these clinical data, Allergan submitted an NDA to the FDA in the fourth quarter of 2017 for the treatment of moderate to severe acne.   Development and regulatory milestones we have earned as a result of Allergan’s progress include a $4.0 million milestone payment for the initiation of the Phase 3 acne vulgaris clinical studies in December 2014 and a $5.0 million milestone payment for acceptance by the FDA of Allergan’s NDA for sarecycline in December 2017, with $12.0 million remaining to be achieved.

We have also granted Allergan an exclusive license to develop and commercialize sarecycline for the treatment of rosacea in the United States, which converted to a non-exclusive license in December 2014 after Allergan did not exercise its development option with respect to rosacea. There are currently no clinical trials in rosacea underway.

Market

Both acne and rosacea can be disfiguring conditions with significant social and medical costs. According to IMS sales data, over $3.0 billion was spent on treatments for acne in 2013. In excess of $1.3 billion was spent in 2011 on various oral formulations of doxycycline or minocycline to treat these conditions. Periostat, reformulated doxycycline, and Solodyn, reformulated minocycline, recorded peak sales of approximately $300 million in 2012 and $750 million in 2011, respectively. In November 2015, at an investor day conference, Allergan estimated peak U.S. revenue for sarecycline to potentially reach $250 to $300 million.

The most common oral treatments prescribed by dermatologists are generic tetracycline derivatives, which dermatologists widely accept as a therapy for moderate to severe acne. A common side effect associated with the use of any broad-spectrum antibacterial agent is gastrointestinal upset and antibiotic-associated infections caused by the destruction of the normal bacterial flora. In addition, we believe there is a growing concern and awareness of the development of antibiotic-resistant bacteria from the heavy use of broader-spectrum antibiotics, such as these older-generation tetracyclines, when broad-spectrum antibacterial therapy is not necessary.

Similarly, for patients with severe acne, we believe that oral retinoid drugs remain a leading option, but these drugs do carry potentially serious side effects. Therefore, we believe there is an unmet need for an improved narrow spectrum tetracycline.

Development

In the treatment of acne, we believe a new product that targets a narrower spectrum of bacterial types, including Propionibacterium acnes, a key bacterium associated with acne, would offer advantages over the existing therapies, including older tetracycline derivatives. As compared to existing tetracyclines being used for the treatment of acne, preclinical studies suggest that sarecycline may have an improved profile that includes a narrow spectrum of antibacterial activity, oral bioavailability, anti-inflammatory activity, favorable GI tolerability, and favorable PK properties.

Omadacycline Commercialization Strategy

Assuming approval from regulatory authorities, we currently intend to market omadacycline as an empiric monotherapy that willand plan for NUZYRA to be commercialized worldwide for the treatment of serious, community-acquired bacterial infections. We retain worldwide commercial rights to omadacycline, with the exception of the People’s Republic of China, Hong Kong, Macau and Taiwan, where we have entered into a collaboration agreement with Zai Lab (Shanghai) Co., Ltd., or Zai.  In the United States U.S. and Europe, we continue to reserve the right to either commercialize omadacycline alone, through one or more pharmaceutical companies that have established commercial capabilities, or some combination thereof.

If the FDA approves our NDA for omadacycline on the projected timeline, we anticipate a launch by the first quarter of 2019. In preparation for the commercial launch we are building out our sales and marketing infrastructure, including key hires in marketing, market access, medical affairs, sales management, and compliance. Recently2018 we entered into an arrangement with a third party to provide a contract field sales force of betweenup to 80-85 sales representatives with associated training and other services. TheseIn February 2019, we launched NUZYRA with 40 sales representatives will callthrough a third party provider calling on approximately 400 hospitals across the U.S. By the end of 2019 we were at approximately 50 representatives. By the first quarter of 2020 we anticipate a full complement of between 50-60 representatives calling on approximately 850 hospitals.  In addition, we plan on conducting research for pricing and adoption, as well as conduct payer reimbursement and trade discussions starting after acceptance of our NDAs.

We believe that there is a similar rapidly growing need in other markets throughout the world, including Europe, established Asian markets such as Japan and Korea, and emerging markets, such as Russia, South America and India. We plan to pursue expansion of omadacycline to these markets through collaboration or distribution arrangementsarrangements.

Competition

Competition

NUZYRA 100 mg for injection and 150 mg tablets are distributed in the U.S. exclusively through a limited network of specialty pharmacy providers and distributors. This distribution process is designed to provide the best possible provider and patient experience and improve patient adherence to the indicated dosing.  

We have contracted with the Lash Group, a third-party organization with extensive experience in delivering patient support services to help healthcare providers and patients access our network of specialty pharmacies and navigate the insurance process.

Paratek also employees Market Access Account Managers who educate payors and hospital formulary committee members about NUZYRA and a Trade Team that works with our network of specialty pharmacies and distributors to assist in the execution of our distribution plan.

Three of the nation’s largest Pharmacy Benefit Managers, CVS Caremark, Express Scripts and OptumRx, have listed NUZYRA 150 mg tablets on their commercial formulary.  Approximately 85% of insured commercial lives in the U.S. have no or limited prior authorizations for NUZYRA 150 mg tablets. We define limited prior authorizations as those where prescribing NUZYRA is based on the package insert, which is consistent with the label indication for use approved by the FDA.  The majority of state Medicaid programs cover NUZYRA 150 mg tablets.

On October 1, 2019, NUZYRA 100 mg for injection was issued a permanent J-code under the Healthcare Common Procedure Coding System, which is a standardized code system necessary for medical providers to submit healthcare claims to Medicare and other health insurances in a consistent and orderly manner.  NUZYRA 100 mg for injection, has also received transitional pass-through status from the Centers for Medicare and Medicaid Services, or the CMS, which is intended to encourage the use of newly FDA-approved medical devices, drugs, and biologics to increase Medicare patients’ access to these innovative therapies by paying hospital outpatient departments more than the established facility fees. Pass-through status is temporary lasting at least two but not more than three years.

Our potential competitors include large pharmaceutical and biotechnology companies, specialty pharmaceutical companies and generic drug companies. We believe that our product candidates offer key potential advantages over competitive products that could enable our product candidates if approved, to capture meaningful market share from our competitors.

If approved by the FDA, omadacycline will competeNUZYRA competes with other antibiotics in the serious bacterial skin infection market. These include, but are not limited to, vancomycin, marketed as a generic by Abbott Laboratories and others; linezolid, marketed as Zyvox by Pfizer Inc. and available as a generic; daptomycin, marketed as Cubicin by Merck Pharmaceuticals, Inc. and available as a generic; dalbavancin, approved in May 2014 and marketed as Dalvance by Allergan; tedizolid, marketed as Sivextro by Merck Pharmaceuticals, Inc.; oritavancin, approved in August 2014 and marketed as Orbactiv and delafloxacin marketed as Baxdela by Melinta Therapeutics, Inc.; quinupristin/dalfopristin, marketed as Synercid by Pfizer, Inc.; tigecycline, marketed as Tygacil by Pfizer Inc. and available as a generic; telavancin, marketed as Vibativ by Theravance,Cumberland Therapeutics Inc.; ceftaroline, marketed as Teflaro by Allergan; lefamulin marketed as Xenleta by Nabriva Therapeutics and generic trimethoprim/sulfamethoxazole and clindamycin.

Further, we expect that product candidates currently in review with the FDA, or in Phase 3 clinical development, or that could enter Phase 3 clinical development in the near future, may represent significant competition if approved. These include, but are not limited to, delafloxacin for CABP, submitted for FDA review in October 2016 by Melinta Therapeutics, Inc.; CG-400549, under development by Crystal Genomics; GSK2140944, under development by GSK; nemonoxacin, under development by TaiGen Biotechnology; avarofloxacin, under development by Allergan; brilacidin, under development by Cellceutix; and radezolid, under development by Melinta Therapeutics Inc.

If approved by the FDA, omadacycline willNUZYRA also competecompetes with other antibiotics in the community-acquired pneumonia market. These include azithromycin, marketed as Zithromax and Z-PAK by Pfizer Inc. and available as a generic; clarithromycin, marketed as Biaxin by Abbott Laboratories and available as a generic; moxifloxacin, marketed as Avelox by Bayer AG and available as a generic; levofloxacin, marketed as Levaquin by Johnson & Johnson and available as a generic; tigecycline, marketed as Tygacil by Pfizer Inc. and available as a generic; linezolid, marketed as Zyvox by Pfizer Inc. and available as a generic; ceftriaxone, marketed as Rocephin by F. Hoffman-La Roche Ltd and available as a generic; and ceftaroline, marketed as Teflaro by Allergan.Allergan, delafloxacin marketed as Baxdela by Melinta Therapeutics Inc; lefamulin marketed as Xenleta by Nabriva Therapeutics. We are also aware of various drugs that are or may eventually be under development for the treatment of CABP, delafloxacin and radezolid, under development by Melinta Therapeutics; solithromycin, under development by Cempra, Inc.; GSK2140944, under development by GSK; lefamulin, under development by Nabriva Therapeutics;GSK and nemanoxacin, under development by TaiGen Biotechnology; and avarofloxacin, under development by Allergan.Biotechnology.

A number of competitors exist in the UTI indication. Generic potential competitors include levofloxacin, ciprofloxacin, trimethoprim/sulfamethoxazole, ceftriaxone and amoxicillin/clavulanic acid. Several branded and generic injectable-only antibiotics are also used in hospitals, including imipenem/cilastatin, piperacillin/tazobactam, and gentamicin . A limited number of companies are developing new oral antibiotics for the treatment of UTI infections, finafloxacin by MerLion Pharmaceuticals and sulopenem by Iterum Therapeutics.

Many of our potential competitors have substantially greater financial, technical and human resources than we do, as well as greater experience in the discoverymarketing products, discovering and development ofdeveloping product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Our competitors’ drugs may be more effective, or more effectively marketed and sold, than our products or any other product candidate we may commercialize and may render our products or product candidates obsolete or non-competitive before we can recover the expenses of our development and commercialization. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. Finally, the development of new treatment methods for the diseases we are targeting could render our products or product candidates non-competitive or obsolete.

Manufacturing

We do not own or operate current Good Manufacturing Practices, or cGMP, manufacturing facilities for the production of any of our product candidates,products, nor do we have plans to develop our own manufacturing operationsfacilities in the foreseeable future. We generally develop the initial synthesis routes for our compounds and partner with third-party manufacturers to scale-up and develop these processes, analytical methods and formulations. Our product candidates have to date been organic compounds of low molecular weight, commonly referred to as small molecules. Theyproducts are manufactured in synthetic processes from starting materials that have to date been generally available. We currently rely on a small number of third-party contract manufacturers for all of our required raw materials, drug substance and finished product for our preclinical research and clinical trials. We have entered into agreements with third-party contract manufacturers for the commercial production of those product candidates to ensure that commercial supply is available should those product candidates be approved.

For omadacycline, theThe manufacturing process of omadacycline tosylate has been refined tovalidated at commercial scale. The active pharmaceutical ingredient manufacturing process is an efficienta three-step synthesis followed by purification and salt formation.  The starting material is minocycline, which is a well characterized generic active ingredient. We have produced stable IV and oral drug product formulations.readily available. In 2017,2018, we completed three registrationprocess validation batches each for the IV and oral formulations of omadacycline, which have subsequently been put on stability testing.stability.  We have entered into commercial supply agreements with qualified commercial manufacturers,manufacturing organizations as described below, that also provided omadacycline for Phase 3 clinical use,to manufacture and we intend to use these same manufacturers to complete process validation, which has now initiated,  in support of potential market authorization filing, approvalsupply the drug substance, drug product and launch.finished packaged product.

CIPAN

In November 2016, we entered into a manufacturing and services agreement with CIPAN – Companhia Industrial Produtora de Antibióticos, or CIPAN. The agreement, as subsequently amended, provides the terms and conditions under which CIPAN will manufacture and supply to us increased quantities of minocycline starting material and crude omadacycline, or the CIPAN Products, for purification into omadacycline and, subsequently, for use in our products that contain omadacycline tosylate as the active pharmaceutical ingredient. Under this agreement, we are obligated to pay a CIPAN Product price in the high three-digitfour-digit U.S. Dollardollar range per kilogram for minocycline starting material and in the four-digit or five-digit U.S. Dollardollar range per kilogram for crude omadacycline, based on the annual volume of crude omadacycline that we order, subject to adjustments as set forth in the agreement. CIPAN will also perform certain services related to development, technology transfer and manufacturing of the CIPAN Products as provided in one or more statements of work, which shall set forth the fees payable by us to CIPAN for such services.

Our agreement with CIPAN will remain in effect for a fixed initial term, after which the agreement will continue, with respect to each CIPAN Product, for successive renewal terms unless either we or CIPAN have given written notice of termination within a certain period prior to the expiration of either the initial or then-current renewal term. The agreement may also be terminated under certain other circumstances, including by either party due to a material uncured breach by the other party or the other party’s insolvency.

Carbogen

In December 2016, we entered into an outsourcinga manufacturing and services agreement with CARBOGEN AMCIS AG, or Carbogen. The agreement, as subsequently amended, provides for the terms and conditions under which Carbogen will manufacture and supply to us the active pharmaceutical ingredient for our omadacycline productdrug products in bulk quantities, or the Carbogen Product. Under this agreement, we are responsible for the cost and supply of crude omadacycline that Carbogen requires to manufacture the Carbogen Products and perform related services. We are obligated to initially pay Carbogen an amount in the low seven-digit U.S. Dollardollar range per batch of Carbogen Product that we order, depending on the size of the campaign, and the price may be adjusted in accordance with the terms of the agreement. We may also request that Carbogen perform certain services related to the Carbogen Product, for which we will pay reasonable compensation to Carbogen.

Our agreement with Carbogen will remain in effect for a fixed initial term and bothsubsequent renewal terms.  Both parties, however, are obligatedrequired to use diligent efforts to come toreplace the existing agreement with a subsequent long-term agreement to replace this agreement no later than the end of such initial term. If we have not executed a replacement agreement with Carbogen by such time, this agreement will automatically be extended for a fixed period of time.agreement. We may terminate this agreement by delivering notice of termination to Carbogen prior to the expiration of the initial or subsequent term.Carbogen. The agreement may also be terminated under certain other circumstances, including by either party due to a material uncured breach by the other party or the other party’s insolvency.

Almac

In December 2016, we entered into a manufacturing and services agreement with Almac Pharma Services Limited, or Almac. The manufacturing agreement provides for the terms and conditions under which Almac will manufacture, package and supply to us omadacycline oral solid dosage tablets in bulk form, or the Almac Products. Under this manufacturing agreement, we are required to use commercially reasonable efforts to timely provide Almac with the active pharmaceutical ingredient needed to manufacture the Almac Products and perform related services. We are obligated to pay a supply price in the five-digit range in Great Britain Pounds, or GBP, per batch of the Almac Products, subject to adjustments as provided in the manufacturing agreement. Beginning in February 2020, we are also subject to an annual minimum revenue commitment in the six-digit GBP range. We will also negotiate with Almac, as part of each individual scope of work, the reasonable costs for the services to be performed for us by Almac.

OurIn July 2019, we entered into a separate packaging and supply agreement with Almac to expand the packaging services performed by Almac. This packaging agreement provides for the terms and conditions under which Almac will deliver primary packaging, labelling, storage and related services for the Almac Products and secondary packaging, labelling, storage and related services for injectable omadacycline in vials, which are manufactured and supplied by a third party to Almac. Under this packaging agreement, we are required to provide certain intermediate materials necessary for Almac to perform these packaging services. We are obligated to pay a supply price in the five to six-digit U.S. dollar range per batch of packaged products, subject to adjustments as provided in the packaging agreement. We will also negotiate with Almac the reasonable costs for any additional services to be performed for us by Almac as set forth in individual scopes of work; such services are governed by the packaging agreement.

Each of our agreements with Almac will remain in effect for a fixed initial term, after which theeach agreement will continue for successive renewal terms unless either weus or Almac have given written notice of termination within a certain period prior to the expiration of the initial or then-current renewal term. The manufacturing agreement or packaging agreement may also be terminated under certain other circumstances, including by either party due to a material uncured breach of the other party or the other party’s insolvency.

Patheon

In July 2017, we entered into a master manufacturing services agreement and corresponding product agreement with Patheon UK Limited, or Patheon.  The product agreement was amended in January 2019 to reflect exchange rate and pricing updates.  The agreements provide for the terms and conditions under which Patheon will manufacture, package and supply to us, omadacycline in injectable form, or the Patheon Products. Under these agreements, we are required to deliver to Patheon the active pharmaceutical ingredient needed to manufacture the Patheon Products. We are obligated to pay a supply price in the six-digit dollar range per batch of the Patheon Products, subject to adjustments as provided in the agreements. IfNow that our omadacycline product ishas been approved, we willare also be subject to an annual minimum purchase requirement in the six-digit euroU.S. dollar range. If we desire for Patheon to conduct additional services other than those expressly set forth in the agreements, those would be subject to additional fees.

Our agreements with Patheon will remain in effect for a fixed initial term, after which they will continue for successive renewal terms unless either we or Patheon have given written notice of termination within a certain period prior to the expiration of the applicable initial or then-current renewal term. The agreements may also be terminated under certain other circumstances, including by either party due to a material uncured breach of the other party or the other party’s insolvency.

Research and Development

We have and will continue to make substantial investments in research and development. Our research and development expenses totaled $60.1 million, $83.5$39.6 million and $50.8$57.5 million in 2017, 20162019 and 2015,2018, respectively.

In the ordinary course of business, we enter into agreements with third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories, to conduct our clinical studies and aspects of our research and preclinical testing. These third parties provide project management and monitoring services and regulatory consulting and investigative services.

Intellectual Property

The proprietary nature of, and protection for, our proprietary drug development platform, our product candidates and our discovery programs, processes and know-how are important to our business. We seek patent protection in the United States U.S. and internationally for areas such as composition of matter and the chemistries that allow for the synthesis of novel, substituted tetracycline compounds that exhibit significant antibacterial and/or anti-inflammatory activity, and any other technology to which we have rights, where available and when appropriate. Our policy is to pursue, maintain and defend patent rights, whether developed internally or licensed from third parties, and to protect the technology, inventions and improvements that are commercially important to the development of our business. We also rely on trade secrets that may be important to the development of our business.

Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of our proprietary technologies and compounds, our current product and future product candidates and the methods used to develop and manufacture them, as well as successfully defending these patents against third-party challenges. Our ability to prevent third parties from making, using, selling, offering to sell or importing our products and technology depends on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities. We cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our technology.

As of December 31, 2017,2019, our patent portfolio of owned or exclusively licensed patents and applications includes 6266 issued U.S. patents, 2720 pending U.S. patent applications and corresponding foreign national or regional counterpart patents or applications. We expect that the patents and patent applications in this portfolio, if issued, and if the appropriate maintenance, renewal, annuity or other government fees are paid, would expire between 2020 and 2037,2039, excluding any additional terms from patent term adjustments or patent term extensions under the Hatch-Waxman Amendments.

OmadacyclineNUZYRA (omadacycline)

The patent portfolio for omadacycline is directed to cover compositions of matter, formulations, salts and polymorphs, manufacturing methods, methods of use, dosing regimens, and modes of administration..administration. The patents and patent applications covering omadacycline include patents and patent applications owned by us. In some corresponding foreign patents and patent applications, omadacycline is covered along with other compounds in patents and patent applications that are owned jointly by us and Tufts University, or Tufts, that are subject to a license agreement we have with Tufts. The issued composition of matter patent in the United States (U.S.U.S. (U.S. Patent No. 7,553,828), if the appropriate maintenance, renewal, annuity, or other governmental fees are paid, iswas expected to expire in 2023. We2023, however, we believe that an additional term  of potentially up to five years for one of ourcertain omadacycline patents may result from the patent term extension provision of the Hatch-Waxman Amendments of 1984.1984, including the composition of matter patent which is anticipated to be extended until May 2028 and a method of use patent (U.S. 9,265,740) is expected to be extended until October 2030. Filings for both patent term extensions have been made with the U.S. Patent & Trademark Office.  Omadacycline has receivedQualified Infectious Disease Product, or QIDP, designation under the Generating Antibiotic Incentives Now Act, or the GAIN Act. This may provide up to an additional five years of market exclusivity layered with protection provided by the Hatch-Waxman Amendments, which GAIN also enables exclusivity to 2028. We expect that the other patents and patent applications in this portfolio, if issued, and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, would expire between 2021 and 2037,2039, excluding any additional terms from patent term adjustments or patent term extensions under the Hatch-Waxman Amendments.

SarecyclineSEYSARA (sarecycline)

The patent portfolio for our acne and rosacea program is directed to cover compositions of matter, methods of use, methods of manufacturing, as well as salts and polymorphs of sarecycline. As of December 31, 2017,Amongst other patent filings and granted patents, our patent portfolio includes issued U.S. Patent No. 8,318,706, or the ‘706 Patent, which covers composition of matter of sarecycline and issued U.S. Patent No. 8,513,223, or the ‘223 Patent,, which covers methods of use for sarecycline, and corresponding foreign national or regional counterpart applications. The ‘706 Patent is expected to expire in 2031,2032 (this expiry taking into account the expected patent term extension as provided by the Hatch-Waxman Amendments) and the ‘223 Patent is expected to expire in 2029, if the appropriate maintenance, renewal, annuity or other governmental fees are paid. We may also be entitled to an extension of the patent termFiling for one of the patents covering sarecycline pursuant to the patent term extension provisionhas been made with the U.S. Patent & Trademark Office. In February 2020, we finalized a license agreement with Almirall granting us exclusive rights to certain technology owned or in-licensed by Almirall or its affiliates that is necessary or useful to develop or commercialize sarecycline outside of the Hatch-Waxman Amendments..U.S., including exclusive rights in joint intellectual property and certain Almirall solely-owned intellectual property.

Intermezzo

As of December 31, 2017,2019, our patent portfolio of owned or exclusively licensed patents and applications includes four issued U.S. patents two pending U.S. patent applications and corresponding foreign national or regional counterpart patents and applications which are directed to formulations and methods of use. The issued U.S. patents expire between 2025 and 2029.

Trade Secrets

In addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. Trade secrets and know-how can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and commercial partners. These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party. We also seek to preserve the integrity and confidentiality of our data, trade secrets and know-how by maintaining physical security of our premises and physical and electronic security of our information technology systems.

Trademarks

We have registered trademarks and service marks or pending trademark and services mark applications in a number of countries for PARATEK, PARATEK & HEXAGON DESIGN, NUZYRA and PARATEK POSITIVE PATIENT STORIES,its design logo, and other marks which we presently use or may use in connection with our pharmaceutical research and development as well as with our product candidates.  SEYSARA is a trademark for which Almirall has registered in the U.S. and for which Paratek has applied for in a number of foreign countries. Paratek has registered SEYSARA in China and, as part of the China License (as defined below) may assign such registration to Almirall in connection with Almirall’s development and commercialization of sarecycline in the greater China region. In connection with the ongoing development and advancement of our products and services in the United States U.S. and in various international jurisdictions, we routinely seek to create protection for our marks and enhance their value by pursuing trademarks and service marks where available and when appropriate.    

Collaborations and License Agreements

Our commercial strategy is to partner with established pharmaceutical companies to develop and market products for the larger community markets, while retaining certain rights to products aimed at concentrated markets, such as hospital-based products, where we may seek to participate in development and commercialization.

Biomedical Advanced Research and Development Authority

On December 18, 2019, we entered into a contract with BARDA, a division of the U.S Department of Health and Human Services’ Office of the Assistant Secretary for Preparedness and Response, to support the development of NUZYRA for the treatment of pulmonary anthrax, FDA PMR associated with the initial NUZYRA approval, and with an option for BARDA to procure up to 10,000 treatment courses of NUZYRA for the SNS for use against potential biothreats.

The BARDA contract could result in payments to us of up to approximately $284.7 million and consists of a five-year base period-of-performance and a total contract period-of-performance (base period plus option exercises) of up to ten years. Under the base period-of-performance, we will conduct activities necessary to (i) allow the product to be used under an Emergency Use Authorization, (ii) obtain licensure of NUZYRA through a supplemental NDA submission for anthrax, and (iii) provide up to 2,500 treatment courses of the drug product to be stored as vendor managed inventory and subsequently delivered to the SNS. The contract options may be exercised to perform additional studies necessary for licensure, support post-licensure commitments as required by the FDA, additional security requirements, and procure additional treatment regimens.  

Under the terms of the agreement, BARDA awarded initial funding of approximately $59.4 million for the development of NUZYRA for the treatment of pulmonary anthrax and the purchase of an initial 2,500 treatment courses of NUZYRA to add to the current SNS. The contract provides for potential additional staged funding including approximately $76.8 million for existing FDA PMR commitments scheduled to begin in April 2020 and approximately $20.4 million for manufacturing-related requirements scheduled to begin in June 2020. The remaining funding includes the potential for approximately $12.7 million to support the development of NUZYRA for the prophylaxis of anthrax and a maximum of approximately $115.4 million to provide for three additional purchases of NUZYRA, each of which will be triggered upon development milestones related to the anthrax treatment development program.

The BARDA contract contains a number of terms and conditions that are customary for government contracts of this nature, including provisions giving the government the right to terminate the contract at any time for its convenience.

Tetraphase Pharmaceuticals, Inc.

On March 18, 2019, Paratek and Tetraphase Pharmaceuticals, Inc., or Tetraphase, entered into a License Agreement, or the Tetraphase License Agreement. Under the terms of the Tetraphase License Agreement, we granted to Tetraphase a non-exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses, under certain Paratek patents, to develop, make, have, use, import, offer for sale and sell the licensed product, or XERAVA^TM, which is a drug for the treatment of complicated, intra-abdominal infections caused by bacteria, which was approved by the FDA in August 2018.

The terms of the Tetraphase License Agreement provide for Tetraphase to pay royalties at a low single digit percent on net product revenues of the licensed product sold in the U.S. Tetraphase’s obligation to pay royalties with respect to the licensed product shall be retroactive to the date of the first commercial sale of the licensed product in the U.S., which occurred in February 2019. Tetraphase is currently selling XERAVA^TM (Eravacycline) in the U.S.

The Tetraphase License Agreement will continue until the expiration of and payment by Tetraphase of all Tetraphase’s payment obligations, which is when there are no longer any valid claims of the licensed Paratek patents that would be infringed, in the absence of a license, by a manufacture, use, or sales of the licensed product.  The principal licensed patent under the Tetraphase License Agreement is expected to expire in October 2023.

Zai Lab (Shanghai) Co., Ltd.

On April 21, 2017, Paratek Bermuda Ltd., a wholly-ownedwholly owned subsidiary of Paratek Pharmaceuticals, Inc., and Zai entered into a License and Collaboration Agreement, or the Zai Collaboration Agreement. On December 18, 2019 Paratek Bermuda Ltd. assigned its rights under the Zai Collaboration Agreement to Paratek Pharmaceuticals, Inc. Under the terms of the Zai Collaboration Agreement, Paratek Bermuda Ltd. granted Zai an exclusive license to develop, manufacture and commercialize omadacycline, or the licensed product, in the People’s Republic of China, Hong Kong, Macau and Taiwan, or the Zai territory, for all human therapeutic and preventative uses other than biodefense. Zai will be responsible for the development, manufacturing and commercialization of the licensed product in the Zai territory, at its sole cost with certain assistance from Paratek Bermuda Ltd.Paratek.

Under the terms of the Zai Collaboration Agreement, Paratek Bermuda Ltd. earned an upfront cash payment of $7.5 million before taxes,in April 2017, $5.0 million upon approval by the FDA of a New Drug Application, or NDA, submission in the CABP indication, in October 2018 and $3.0 million upon submission of the first regulatory approval application for a licensed product in the People’s Republic of China in December 2019.  Paratek is eligible to receive up to $14.0$6.0 million in potential future regulatory milestone payments and $40.5 million in potential future commercial milestone payments, the next being $5.0$6.0 million uponregulatory approval by the FDA of an NDA submissionfor a licensed product in the CABP indicationPeople’s Republic of China.  The terms of the Zai willCollaboration Agreement also provide for Zai to pay Paratek Bermuda Ltd. tiered royalties at a low double digit to mid-teen percent on net sales of the licensed product in the Zai territory.

The Zai Collaboration Agreement will continue, on a region-by-region basis, until the expiration of and payment by Zai of all Zai’s payment obligations, which is until the later of: (i) the abandonment, expiry or final determination of invalidity of the last valid claim within the Paratek patents that covers the licensed product in the region in the Zai territory in the manner that Zai or its affiliates or sublicensees exploit the licensed product or intend for the licensed product to be exploited; or (ii) the eleventh anniversary of the first commercial sale of such licensed product in such region.

Allergan plcAlmirall, LLC

In July 2007, we and Warner Chilcott Company, Inc. (now(which became a part of Allergan), entered into a collaborative research and license agreement, or the Allergan Collaboration Agreement, under which we granted Allergan an exclusive license to research, develop, manufacture and commercialize tetracycline products for use in the United States U.S. for the treatment of acne and rosacea. In September 2018, Allergan assigned to Almirall, its rights under the collaboration agreement, or the Almirall Collaboration Agreement. Since Allergan did not exercise its development option with respect to the treatment of rosacea prior to initiation of a Phase 3 trial for the product, the license grant to Allergan, which was assigned to Almirall, converted to a non-exclusive license for the treatment of rosacea as of December 2014. Under the terms of the AllerganAlmirall Collaboration Agreement, we and AllerganAlmirall are responsible for, and are obligated to use, commercially reasonable efforts to conduct specified development activities for the treatment of acne and, if requested by Allergan,Almirall, we may conduct certain additional development activities to the extent we determine in good faith that we have the necessary resources available for such activities. Allergan has agreed to reimburse us for its costs and expenses, including third-party costs, incurred in conducting any such development activities.

Under the terms of the AllerganAlmirall Collaboration Agreement, AllerganAlmirall is responsible for and is obligated to use commercially reasonable efforts to develop and commercialize tetracycline compounds that are specified in the agreement for the treatment of acne. Allergan failed to elect to advance the development of sarecycline for the treatment of rosacea in accordance with the terms of the agreement so the license granted to Allergan was converted to a non-exclusive license for the treatment of rosacea as of December 2014. We have agreed during the term of the AllerganAlmirall Collaboration Agreement not to directly or indirectly develop or commercialize any tetracycline compounds in the United States U.S. for the treatment of acne, and rosacea, and AllerganAlmirall has agreed during the term of the AllerganAlmirall Collaboration Agreement not to directly or indirectly develop or commercialize any tetracycline compound included as part of the agreement for any use other than as provided in the agreement.Almirall Collaboration Agreement.

The Almirall Collaboration Agreement contains two performance obligations: (i) an exclusive license to research, develop and commercialize tetracycline products for use in the U.S. for the treatment of acne and rosacea and (ii) research and development services. The performance obligation to deliver the license was satisfied upon execution of the Almirall Collaboration Agreement in July 2007.  All research and development services were completed by December 2010.  The options provided to Almirall for additional development services do not provide Almirall with a material right as these services will not be provided at a significant or incremental discount.  As such, the option services are not performance obligations.

We earnedreceived an upfront fee in the amount of $4.0 million upon the execution of the AllerganAlmirall Collaboration Agreement, $1.0 million upon filing of an Investigational New Drug Application, or IND,NDA in 2010, and $2.5 million upon initiation of Phase 2 trials in 2012. In December 2014, we also earned2012 and $4.0 million upon initiation of Phase 3 trials associated with the AllerganAlmirall Collaboration Agreement in December 2014.

In December 2017, the FDA’s acceptance of the NDA for sarecycline was received, triggering a milestone payment of $5.0 million earned upon acceptance of an NDA for a product licensed under the Almirall Collaboration Agreement. As the performance obligation to deliver the license was satisfied in 2007 and research and development services completed by December 2010, all subsequent milestone payments are recognized as revenue when the risk of significant reversal is resolved, generally when the milestone event occurs.  Therefore, the $5.0 million milestone payment was recognized in December 2017 we earnedand subsequently collected in the first quarter of 2018.

In October 2018, the FDA’s regulatory approval of sarecycline, under the tradename SEYSARA, triggered the last milestone payment under the Almirall Collaboration Agreement of $12.0 million. Since FDA approval of SEYSARA was outside of the Company’s control and not obtained until October 2, 2018, the achievement of the milestone was not deemed probable and the risk of significant reversal of revenue was not resolved until such time.  Upon the FDA approval, the uncertainty related to this milestone was resolved and a $5.0 million payment for NDA acceptance bysignificant reversal of revenue would not occur in future periods.  As such, the FDA. In addition, Allergan may be required to pay us $12.0 million uponmilestone payment was recognized as revenue at the receipttime of commercialization regulatory approval from the FDA. AllerganFDA approval. Almirall is also obligated to pay us tiered royalties, ranging from the mid-single digits to the low double digits, based on net sales of tetracycline compounds developed under the AllerganAlmirall Collaboration Agreement, with a standard royalty reduction post patent expiration for such product for the remainder of the royalty term. Allergan’sAlmirall’s obligation to pay us royalties for each tetracycline compound it commercializes under the AllerganAlmirall Collaboration Agreement expires on the later of the expiration of the last to expire patent that covers the tetracycline compound in the United States U.S. and the date on which generic drugs that compete with the tetracycline compound reach a certain threshold market share in the United States.U.S.

Either we or AllerganAlmirall may terminate the AllerganAlmirall Collaboration Agreement for certain specified reasons at any time after AllerganAlmirall has commenced development of any tetracycline compound, including if AllerganAlmirall determines that it would not be commercially viable to continue to develop or commercialize the tetracycline compound and/or that it is unlikely to obtain regulatory approval of the tetracycline compound, and, in any case, no backup tetracycline compound is in development or ready to be developed and the parties are unable to agree on an extension of the development program or an alternative course of action. Either we or AllerganAlmirall may terminate the AllerganAlmirall Collaboration Agreement for the other party’s uncured breach of a material term of the agreement on 60 days’ notice (unless the breach relates to a payment term, which requires a 30-day notice) or upon the bankruptcy of the other party that is not discharged within 60 days. Upon the termination of the AllerganAlmirall Collaboration Agreement by AllerganAlmirall for our breach, Allergan’sAlmirall’s license will continue following the effective date of termination, subject to the payment by AllerganAlmirall of the applicable milestone and royalty payments specified in the agreement unless our breach was with respect to certain specified obligations, in which event the obligation of AllerganAlmirall to pay us any further royalty or milestone payments will terminate. Upon the termination of the AllerganAlmirall Collaboration Agreement by us for Allergan’sAlmirall’s breach or the voluntary termination of the agreement by Allergan, Allergan’sAlmirall, Almirall‘s license under the agreement will terminate.

In February 2020, we entered into (i) the Ex-U.S. License, under which Almirall, or the Ex-U.S. License, granted to us an exclusive license in and to certain technology owned or in-licensed by Almirall or its affiliates in order to research, develop, manufacture and commercialize sarecycline in all countries other than the U.S. and (ii) a license agreement with Almirall that is specific to the greater China region, or the China License, under which we granted to Almirall an exclusive license in and to certain technology owned or in-licensed by us or our affiliates in order to research, develop and commercialize sarecycline for the treatment of acne in the greater China region.

Under the terms of the Ex-U.S. License, at our request, and subject to certain limitations, Almirall will provide us, our affiliates and our sublicensees with reasonable assistance in connection with our efforts to (i) source commercial supplies of sarecycline products, (ii) implement the then-current process for manufacturing sarecycline products at our facilities or at the facilities of our contract manufacturers, including any updates to such manufacturing process, and (iii) qualify commercial suppliers of sarecycline products.

Under the terms of the China License, Almirall is responsible for and is obligated to use commercially reasonable efforts to develop and commercialize sarecycline for the treatment of acne and has certain time-based diligence requirements.

We and Almirall have each agreed during the term of the Ex-U.S. License and the term of the China License to use commercially reasonable efforts to not, directly or indirectly, make sarecycline products commercialized by us, our respective affiliates or our respective sublicensees available for resale in the other’s respective territory or territories.  

No upfront fees or milestones are owed in connection with either the Ex-U.S. License or the China License.

In connection with the Ex-U.S. License, we pay Almirall, on a country-by-country and product-by-product basis, (i) for fifteen years following the first commercial sale of a sarecycline product in a country, a percentage of the consideration (e.g., milestones, royalties) we receive from third party sublicensees in connection with developing and commercializing sarecycline outside of the U.S., which ranges from one-half of such consideration for sarecycline products for the treatment of acne to one-fifth of such consideration for sarecycline products for the treatment of other indications, in each case subject to a 50% reduction for any sarecycline product not in a solid oral tablet formulation for which Paratek or its affiliates have incurred significant development costs and (ii) for eight years following the first commercial sale of a sarecycline product in a country, a royalty in the middle-single digits on our or our affiliates’ net sales of sarecycline products outside of the U.S., subject to certain standard reductions. In connection with the China License, for fifteen years following the first commercial sale of a sarecycline product in China, Almirall pays us a royalty in the high-single digits on their, their affiliates’ or their sublicensees’ net sales of sarecycline products in the greater China region, subject to certain standard reductions.    

Both the Ex-U.S. License and the China License terminate upon full satisfaction and expiration of a party’s payment obligations under the relevant agreement. We may terminate the Ex-U.S. License for convenience upon sixty days’ notice. Almirall may terminate the China License for convenience upon sixty days’ notice. Either we or Almirall may terminate the Ex-U.S. License or the China License for the other party’s uncured breach of a material term of the agreement on sixty days’ notice (unless the breach relates to a payment term, which requires thirty days’ notice) or upon the bankruptcy of the other party that is not discharged within sixty days. Upon the termination of the Ex-U.S. License by us for Almirall’s breach or insolvency, our license will continue following the effective date of termination, subject to the payment by us of the applicable royalty payments specified in the Ex-U.S. License (unless Almirall’s breach relates to a certain specific obligation, in which case, our license survives royalty-free). Upon the termination of the Ex-U.S. License by Almirall for our breach or insolvency or upon our voluntary termination of the Ex-U.S. License, our license under the Ex-U.S. License will terminate. Upon the termination of the China License by Almirall for our breach or insolvency, Almirall’s license will continue following the effective date of termination, subject to the payment by Almirall of the applicable royalty payments specified in the China License (unless our breach relates to a certain specific obligation, in which case, Almirall’s license survives royalty-free). Upon the termination of the China License by us for Almirall’s breach or insolvency or upon Almirall’s voluntary termination of the China License, Almirall’s license under the China License will terminate.

Tufts University

In February 1997, we and Tufts entered into a license agreement under which we acquired an exclusive license to certain patent applications and other intellectual property of Tufts related to the drug resistance field to develop and commercialize products for the treatment or prevention of bacterial or microbial diseases or medical conditions in humans or animals or for agriculture. We subsequently entered into eleven amendments to that agreement, or collectively the Tufts License Agreement, to include patent applications filed after the effective date of the original license agreement, to exclusively license additional technology from Tufts, to expand the field of the agreement to include disinfectant applications, and to change the royalty rate and percentage of sublicense income paid by us to Tufts under sublicense agreements with specified sublicensees. We are obligated under the Tufts License Agreement to provide Tufts with annual diligence reports and a business plan and to meet certain other diligence milestones. We have the right to grant sublicenses of the licensed rights to third parties, which will be subject to the prior approval of Tufts unless the proposed sublicensee meets a certain net worth or market capitalization threshold. We are primarily responsible for the preparation, filing, prosecution and maintenance of all patent applications and patents covering the intellectual property licensed under the Tufts License Agreement at our sole expense. We have the first right, but not the obligation, to enforce the licensed intellectual property against infringement by third parties.

We issued Tufts 1,024 shares of our common stock on the date of execution of the original license agreement, and we may be required to make certain payments of up to $0.3 million to Tufts upon the achievement by products developed under the agreement of specified development and regulatory approval milestones. We have already made a payment of $50,000 to Tufts for achieving the first milestone following commencement of the Phase 3 clinical trial for omadacycline and a payment of $100,000 to Tufts for achieving the second milestone following our first marketing application (NDA) submitted in the United States.U.S. We are also obligated to pay Tufts a minimum royalty payment in the amount of $25,000 per year. In addition, we are obligated to pay Tufts royalties based on gross sales of products, as defined in the agreement, ranging in the low single digits depending on the applicable field of use for such product sale. If we enter into a sublicense under the Tufts License Agreement, based on the applicable field of use for such product, we will be obligated to pay Tufts (i) a percentage, ranging from 10% to 14% (ten percent to fourteen percent) for compounds other than omadacycline, and a percentage in the single digits for the compound omadacycline, of that portion of any sublicense issue fees or maintenance fees received by us that are reasonably attributable to the sublicense of the rights granted to us under the Tufts License Agreement and (ii) the lesser of (a) a percentage, ranging from the low tens to the high twenties based on the applicable field of use for such product, of the royalty payments made to us by the sublicensee or (b) the amount of royalty payments that would have been paid by us to Tufts if we had sold the products.  We paid a sublicense issue fee in the low six figures to Tufts during the year ended December 31, 2017 upon earning the $7.5 million upfront payment under the Zai Collaboration Agreement.

Unless terminated earlier, the Tufts License Agreement will expire at the same time as the last-to-expire patent in the patent rights licensed to us under the agreement and after any such expiration we will continue to have an exclusive, fully-paid-up license to such intellectual property licensed from Tufts. Tufts has the right to terminate the agreement upon 30 days’ notice should we fail to make a material payment under the Tufts License Agreement or commit a material breach of the agreement and not cure such failure or breach within such 30-day period, or if, after we have started to commercialize a product under the Tufts License Agreement, we cease to carry on its business for a period of 90 consecutive days. We have the right to terminate the Tufts License Agreement at any time upon 180 days’ notice. Tufts has the right to convert our exclusive license to a non-exclusive license if we do not commercialize a product licensed under the agreement within a specified time period.

Purdue Pharma L.P.

In July 2009, we and Purdue Pharma L.P., or Purdue Pharma, entered into a collaboration agreement, or the Purdue Collaboration Agreement, which grants an exclusive license to Purdue Pharma to commercialize Intermezzo in the United States and pursuant to which:

We had an option to co-promote Intermezzo to psychiatrists in the United States and such option was terminated as a result of the Merger.

The Purdue Collaboration Agreement expires on the expiration of Purdue Pharma’s royalty obligations. Purdue Pharma has the right to terminate the Purdue Collaboration Agreement at any time upon advance notice of 180 days. The Purdue Collaboration Agreement is also subject to termination by Purdue Pharma in the event of FDA or governmental action that materially impairs Purdue Pharma’s ability to commercialize Intermezzo or the occurrence of a serious event with respect to the safety of Intermezzo. The Purdue Collaboration Agreement may also be terminated by us upon Purdue Pharma commencing an action that challenges the validity of Intermezzo related patents. We also have the right to terminate the Purdue Collaboration Agreement immediately if Purdue Pharma is excluded from participation in federal healthcare programs. The Purdue Collaboration Agreement may also be terminated by either party in the event of a material breach by or insolvency of the other party.

We also granted Purdue Pharma and an associated company the right to negotiate for the commercialization of Intermezzo in Mexico in 2013 but retained the rights to commercialize Intermezzo in the rest of the world.

In December 2013, Purdue Pharma notified us that it intended to discontinue use of the Purdue Pharma sales force to actively market Intermezzo to healthcare professionals during the first quarter of 2014.

In October 2014, we announced that our Board of Directors had approved a special dividend of, among other things, the right to receive, on a pro rata basis, 100% of any royalty income received by us pursuant to the Purdue Collaboration Agreement and 90% of any cash proceeds from a sale or disposition of Intermezzo, less fees and expenses incurred in connection with such activity, to the extent that either occurred prior to the second anniversary of the closing date of the Merger. On October 28, 2016, in satisfaction of our payment obligation of the proceeds of sale or disposition of the Intermezzo assets to the former Transcept stockholders under the Merger Agreement, we executed a royalty sharing agreement, or the Royalty Sharing Agreement, with the Special Committee of the Company’s Board of Directors, or the Special Committee, a committee established in connection with the Merger. Under the Royalty Sharing Agreement, we agreed to pay to the former Transcept stockholders fifty percent of all royalty income received by us pursuant to the Purdue Collaboration Agreement, net of all costs, fees and expenses incurred by the Company in connection with the Purdue Collaboration Agreement, related agreements, the Intermezzo product and the administration of the royalty income to the Transcept stockholders.

U.S. Army Medical Research Institute of Infectious Diseases

In October 2016, we announced that we entered into a Cooperative Research and Development Agreement with the U.S. Army Medical Research Institute of Infectious Diseases to study omadacycline against pathogenic agents causing infectious diseases of public health and biodefense importance. These studies arewere designed to confirm humanized dosing regimens of omadacycline in order to study the efficacy of omadacycline against biodefense pathogens, including Yersinia pestis, or plague, and Bacillus anthracis, or anthrax. Funding support forThe Cooperative Research and Development agreement expired on February 24, 2020. All future biothreat work will be completed under the trial has been made available through the Defense Threat Reduction Agency, or DTRA/ Joint Science and Technology Office and Joint Program Executive Office for Chemical and Biological Defense / Joint Project Manager Medical Countermeasure Systems / BioDefense Therapeutics.BARDA contract.

Past Collaborations

Novartis International Pharmaceutical Ltd.

In September 2009, we and Novartis International Pharmaceutical Ltd., or Novartis, entered into a Collaborative Development, Manufacture and Commercialization License Agreement, or the Novartis Agreement, which provided Novartis with a global, exclusive patent and technology license for the development, manufacturing and marketing of omadacycline. The Novartis Agreement was terminated by Novartis without cause in June 2011 and the termination was effective 60 days later. We and Novartis subsequently entered ininto a letter agreement in January 2012, or the Novartis Letter Agreement, as amended, pursuant to which we reconciled shared development costs and expenses and granted Novartis a right of first negotiation with respect to commercialization rights of omadacycline following approval of omadacycline from the FDA, EMA, or any regulatory agency, but only to the extent we had not previously granted such commercialization rights related to omadacycline to another third party as of any such approval. We also agreed to pay Novartis a 0.25% royalty, to be paid from net sales received by us in any country following the launch of omadacycline in that country and continuing until the later of expiration of the last active valid patent claim covering such product in the country of sale and 10 years from the date of first commercial sale in such country. The amended Novartis Letter Agreement resulted in a long-term liability in the amount of $3.4 million as of December 31, 2019 and $3.6 million for the year endedas of December 31, 2017 and 20162018 included within “Other Long-Term Liabilities” on our consolidated balance sheet. In addition, a short-term liability of $0.1 million included within “Other current liabilities” on our consolidated balance sheet as of December 31, 2019 represents the portion of royalty payments due to Novartis within twelve months. No short-term portion existed as of December 31, 2018. There are no other payment obligations to Novartis under the Novartis Agreement or the amended Novartis Letter Agreement.

Purdue Pharma L.P.

In July 2009, we and Purdue Pharma L.P., or Purdue Pharma, entered into a collaboration agreement, or the Purdue Collaboration Agreement, which granted an exclusive license to Purdue Pharma to commercialize Intermezzo in the U.S. in exchange for a non-refundable license fee, certain milestone payments and tiered royalties on net sales of Intermezzo.

In December 2013, Purdue Pharma notified us that it intended to discontinue use of the Purdue Pharma sales force to actively market Intermezzo to healthcare professionals during the first quarter of 2014.

In October 2014, we announced that our Board of Directors had approved a special dividend of, among other things, the right to receive, on a pro rata basis, 100% of any royalty income received by us pursuant to the Purdue Collaboration Agreement and 90% of any cash proceeds from a sale or disposition of Intermezzo, less fees and expenses incurred in connection with such activity, to the extent that either occurred prior to the second anniversary of the closing date of the Merger. On October 28, 2016, in satisfaction of our payment obligation of the proceeds of sale or disposition of the Intermezzo assets to the former Transcept stockholders under the Merger Agreement, we executed a royalty sharing agreement, or the Royalty Sharing Agreement, with the Special Committee of the Company’s Board of Directors, or the Special Committee, a committee established in connection with the Merger. Under the Royalty Sharing Agreement, we agreed to pay to the former Transcept stockholders 50% of all royalty income received by us pursuant to the Purdue Collaboration Agreement, net of all costs, fees and expenses incurred by us in connection with the Purdue Collaboration Agreement, related agreements, the Intermezzo product and the administration of the royalty income to the Transcept stockholders. The NDA for Intermezzo was then withdrawn from the FDA by Purdue Pharma as of December 31, 2018 and further sales of the drug are not planned.  Neither us nor the former shareholders of Transcept will receive future cash payments pursuant to the Royalty Sharing Agreement.  As such, we wrote off the remaining balance of the Intermezzo product rights during the fourth quarter of 2018.

Government Regulation

Government authorities in the United States,U.S., at the federal, state and local level, andas well as those of other countries extensively regulate, among other things, the research, development, testing, manufacture, labeling, packaging, advertising, promotion, storage, advertising, distribution, marketing and export and import of products such as those we are developing. Our drugs must be approved byour products.  The process of obtaining regulatory approvals and the FDA throughsubsequent compliance with applicable federal, state, local and foreign statutes and regulation require the NDA process before they may be legally marketed in the United States.expenditure of substantial time and financial resources.

U.S. Government Regulation

NDA Approval Processes

In the United States,U.S., the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act, or the FDCA, and implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulation require the expenditure of substantial time and financial resources. Failure to comply with the FDCA and other applicable U.S. requirements at any time during the product development process, approval process or after approval may subject us to a variety of administrative or judicial sanctions, any of which could have a material adverse effect on us. These sanctions could include:

The process required by the FDA before a drug may be marketed in the United StatesU.S. generally involves the following:

Once a pharmaceutical candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND. Some preclinical or nonclinical testing may continue even after the IND is submitted. In addition to including the results of the preclinical studies, the IND will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the first phase lends itself to an efficacy determination. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the IND on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin. A clinical hold may occur at any time during the life of an IND and may affect one or more specific studies or all studies conducted under the IND.

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with cGCP. They must be conducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteria to be evaluated. Each protocol and any amendments must be submitted to the FDA as part of the IND, and progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently in other situations, including the occurrence of serious adverse events. An IRB at each institution participating in the clinical trial must review and approve the protocol and any amendments before a clinical trial commences or continues at that institution, approve the information regarding the clinical trial and the informed consent form that must be provided to each trial subject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations. Information about certain clinical trials must be submitted within specific timeframes to the NIH for public dissemination on their ClinicalTrials.gov website.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

Phase 1, Phase 2 and Phase 3 testing may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical trial at any time for a variety of reasons, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points, may beincluding prior to submission of an IND, at the end of Phase 2 and before an NDA is submitted. Meetings at other times may also be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice and for the sponsor and the FDA to reach agreement on the next phase of development. Sponsors typically use the End-of-Phase 2 meeting to discuss their Phase 2 clinical results and present their plans for the pivotal Phase 3 clinical trial or trials that they believe will support approval of the new drug. If this type of discussion occurred, a sponsor may be able to request ana special protocol assessment, or SPA, agreement, a voluntary process the purpose of which is to reach agreement with the FDA on the design of thea Phase 3 clinical trial protocol and analysis that will form the primary basis of an efficacy claim.

According to FDA guidance for industry on the SPA agreement process, a sponsor that meets the prerequisites may make a specific request for a SPA and must provide information regardingnecessary for discussion and agreement on the design and size of the proposed clinical trial. The FDA has a goal of evaluating the protocol within 45 days of the request to assess whether the proposed trial is adequate, and that evaluation may result in discussions and a requestand/or requests for additional information. AnA SPA agreement request must be made before the proposed clinical trial begins, and all open issues must be resolved before the clinical trial begins. If an agreement is reached, it will be documented in writing and made part of the record. The agreement may not be changed by the sponsor or the FDA after the trial begins, except with the documented written agreement of the sponsor and the FDA or if the FDA determines that a substantial scientific issue essential to determining the safety or efficacy of the drug was identified after the testing began. Also, if the sponsor makes any unilateral changes to the approved protocol, the agreement will be invalidated. AnA SPA agreement is intended to provide greater assurance that if the agreed upon clinical trial protocols are followed, the clinical trial endpoints are achieved, and there is a favorable risk-benefit profile, the data may serve as the primary basis for an efficacy claim in support of NDA approval. However, SPA agreements are not a guarantee of an approval of a product candidate or any permissible claims about the product candidate, and final determinations of approvability will not be made until the FDA completes its review of the entire NDA.

The Pediatric Research Equity Act, or PREA, requires a sponsor to conduct pediatric studies for mostcertain drugs and biologics.  Specifically, PREA requires original NDAs, biologic license applications, or BLAs, and supplements thereto for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs, biologics license applications, or BLAs and supplements thereto mustadministration to contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must assessFDA has waived the safetypediatric study requirement for ages 0 to < 8 years because there is nonclinical evidence strongly suggesting that omadacycline would be unsafe in this pediatric group due to the risk of tetracycline-associated tooth discoloration and effectivenessenamel hypoplasia, and the risk of the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective.tetracycline-associated inhibition of bone growth.  The sponsor or the FDA may request a deferralhas deferred submission of pediatric studies for some or all ofages 8 to < 18 (ABSSSI until 2024 and CABP until 2026) years because the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that the drug or biologic isproduct was ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected before the pediatric studies begin. The FDA must send a non-compliance letter to any sponsor that fails to submit the required assessment, keep a deferral current or submit a request for approval of a pediatric formulation. On February 16, 2016 we reached agreement with the FDA on the terms of the pediatric program associated with PREA. The FDA has granted Paratek a waiver from conducting studies with omadacycline in children less than 8 years old and a deferral in conducting studies in children 8 years and older until safety and efficacy is established in adults.  

Concurrent with clinical trials, companies usually complete additional animal safety studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and the manufacturer must develop methods for testing the quality, purity and potency of the final drugs. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf-life.

The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of ana NDA requesting approval to market the product for one or more indications. The submission of ana NDA is subject to the payment of user fees, but a waiver of such fees may be obtained under specified circumstances. The FDA reviews all NDAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. It may request additional information rather than accept ana NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing.

Once the submission is accepted for filing, the FDA begins an in-depth review. NDAs receive either standard or priority review. A drug representing a significant improvement in the safety or effectiveness of the treatment, prevention or diagnosis of a serious disease or condition may receive priority review. The FDA has agreed to specified performance goals in the review process of NDAs. Under that agreement, 90% of applications seeking approval of New Molecular Entities, or NMEs, are meant to be reviewed within ten months from the date on which FDA accepts the NDA for filing, and 90% of applications for NMEs that have been designated for “priority review” are meant to be reviewed within six months of the filing date. For applications seeking approval of drugs that are not NMEs, the ten-month and six-month review periods run from the date that FDA receives the application.  The review process may be extended by the FDA for three additional months to consider new information or clarification provided bya major amendment to the applicant to address an outstanding deficiency identified by the FDAapplication following the original submission.

The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing complies with cGMP requirements to assure and preserve the product’s safety, identity, strength, quality and purity. The FDA may refer the NDA to an advisory committee for review and recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendation.

Before approving an NDA, the FDA will typically inspect the facility or facilities where the product is manufactured and tested. These pre-approval inspections may cover all facilities associated with NDA submission, including drug component manufacturing (such as active pharmaceutical ingredients), finished drug product manufacturing, and control testing laboratories. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with cGCP. In addition, the FDA may require, as a condition of approval, Risk Evaluation and Mitigation Strategies, or REMS, restricted distribution and use, enhanced labeling, special packaging or labeling, expedited reporting of certain adverse events, pre-approval of promotional materials, restrictions on direct-to-consumer advertising or commitments to conduct additional research post-approval.

On the basis of the FDA’s evaluation of the NDA and accompanying information, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. The FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additional clinical or other data. Even if such data are submitted,If the FDA may ultimately decidedecides that the NDA does not satisfy the criteria for approval, andthe FDA will issue a complete response letter to indicate that the agency will not approve the NDA in its present form. The complete response letter usually describes all of the specific deficiencies in the NDA identified by the FDA. If a complete response letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application.

Expedited Review and Approval

The FDA has various programs, including Fast Track and priority review, which are intended to expedite or simplify the process for reviewing drugs. Even if a drug qualifies for one or more of these programs, the FDA may later decide that the drug no longer meets the conditions for qualification or that the time period for FDA review or approval will not be shortened. Generally, drugs that may be eligible for these programs are those for serious or life-threatening conditions, those with the potential to address unmet medical needs and those that offer meaningful benefits over existing treatments. For example, Fast Track is a process designed to facilitate the development and expedite the review of drugs to treat serious diseases andwith the potential, based on nonclinical or clinical data, to fill an unmet medical need. Priority review is designed to give drugs that offer major advancesa significant improvement in safety or effectiveness of treatment or providefor a treatment where no adequate therapy exists,serious condition an expedited review within eight months from the completed submission (six months from filing) as compared to a standard review time of twelve months from the completed submission (10 months from filing) for a standard new molecular entity NDA. Although Fast Track and priority review do not affect the standards for approval, the FDA will attempt to facilitate early and frequent meetings with a sponsor of a Fast Track-designated drug and expedite review of the application for a drug designated for priority review.

The GAIN Act is intended to provide incentives for the development of new QIDPs. A new drug that is designated as a QIDP after a request by the sponsor that is made before an NDA is submitted will be eligible, if approved, for an additional five years of exclusivity beyond any period of exclusivity to which it would have previously been eligible. In addition, a QIDP will receive priority review and qualify for a Fast Track designation. QIDPs are defined as antibacterial or antifungal drugs intended to treat serious or life-threatening infections, that areincluding those caused by an antibacterial or antifungal resistant to treatment,pathogen or that treat qualifying resistant pathogens identified by the FDA. Examples of pathogens that may be designated as a qualifying pathogen include MRSA, vancomycin-resistant Enterococcus and multi-drug resistant gram-negative bacteria. Omadacycline (both IV and oral formulations) has been designated as a QIDP for complicated UTI, ABSSSI and CABP.

Beyond GAIN Act

In addition to the GAIN Act, the United States21^st Century Cures Act, signed into law in December 2016, established a new FDA limited population pathway for antimicrobial drugs that treat serious or life-threatening infections for which there are unmet medical needs.  The U.S. Congress has initiated a significant number of other legislative proposals in recent years to provide further incentives in anti-infective development.  Such legislation includesFor example, in December 2018, the following:

Patent Term Restoration and Data Exclusivity

Depending upon the timing, duration and specifics of FDA approval of the use of our drugs, some of our U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years for a single patent coveringfor an approved product as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND, and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension, and the extension must beWe have applied for prior to expiration of the patent and within applicable deadlines. The U.S. Patent and Trademark Office, or the USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we intend to apply for restoration of patent term for omadacycline beyond its current composition of matter expiration date, depending on the expected length of clinical trialsNUZYRA and other factors involvedSEYSARA, as detailed in the submission of the omadacycline NDA.Intellectual Property Section.

Data exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent data exclusivity within the United States U.S. to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an Abbreviated New Drug Application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of suchusing the drug whereentitled to data exclusivity as the applicant does not ownreference listed drug, or have a legal right of reference to all the data required for approval.RLD. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of data exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the use or conditions of use associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent.agent for other uses or conditions of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

In addition, as described above, under the GAIN Act a new drug that is designated as a QIDP is eligible for an additional five years of exclusivity to be added to certain other exclusivity periods that the application may qualify for upon approval, specifically five-year exclusivity, three-year exclusivity, and orphan exclusivity.

Pediatric Exclusivity

The Best Pharmaceuticals for Children Act provides for an additional six months of exclusivity, which is added on to patent and exclusivity periods in effect at the time the pediatric exclusivity awareaward is granted, if a sponsor conducts clinical trials in children in response to a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale for not requesting those studies. The FDA may request studies on approved indications in separate Written Requests. The issuance of a Written Request does not require the sponsor to undertake the described studies. To date, we have not received any Written Requests.

Post-approval Requirements

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems, including safety issues, with a product may result in restrictions on the product or even complete withdrawal of the product from the market. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval. In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product

based on the results of these post-marketing programs. The FDA and other authorities also strictly regulate the promotional claims that may be made about prescription products, and our product labeling, advertising, and promotion will be subject to continuing regulatory review. Ifproducts. Under the FDCA the sponsor of an approved physicians neverthelessdrug in the U.S. may not promote that drug for unapproved, or off-label, uses, although a physician may prescribe our products to their patientsa drug for an off-label use in a manner that is inconsistentaccordance with the approved label or that is off-label. Positive clinical trial results for any approved products that are also subject to further review for additional indications increase the risk that the approved product may be used off-label.practice of medicine. If we are found to have promoted off-label uses, we may be subject to significant liability, including sanctions, civil and criminal fines, and injunctions prohibiting us from engaging in specified promotional conduct.

Moreover, any drug products manufactured or distributed pursuant to FDA approvals are subject to continuing regulation by the FDA, including, among other things:

Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and some state agencies for compliance with cGMP requirements and other laws.

Failure to comply with the FDCA and other applicable U.S. requirements at any time during the product development process, approval process or after approval may subject us to a variety of administrative or judicial sanctions, any of which could have a material adverse effect on us. These sanctions could include:

From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether legislative changes will be enacted, or FDA regulations, guidance or interpretations changed or what the impact of such changes, if any, may be.

Other Healthcare Laws

We may be subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which we conduct our business. Furthermore, althoughWithin the U.S., we currently have no products approved for commercial sale, we may beare subject to various federal and state laws pertaining to health care “fraud and abuse,” including anti-kickback laws and false claims laws if any of our product candidates may in the future receive regulatory and marketing approval. Anti-kickback laws generally prohibit a prescription drug manufacturer from soliciting, offering, receiving, or paying any remuneration to generate business, including the purchase or prescription of a particular drug.laws. Although the specific provisions of these laws vary, their scope is generally broad and there may not be regulations, guidance or court decisions that apply the laws to particular industry practices. There is therefore a possibility that our practices might be challenged under such anti-kickback laws. Anti-kickback laws generally prohibit a prescription drug manufacturer from soliciting, offering, receiving, or paying any remuneration to generate business, including the purchase or prescription of a particular drug. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented, any claims for payment for reimbursed drugs or services to third party payors (including Medicare and Medicaid) that are false or fraudulent. Violations of “fraud and abuse” laws may be punishable by criminal or civil sanctions, including fines and civil monetary penalties, and/or exclusion from federal health care programs (including Medicare and Medicaid).

Laws and regulations have also been enacted by the federal government and various states to regulate the sales and marketing practices of pharmaceutical manufacturers with marketed products.manufacturers. The laws and regulations generally limit financial interactions between manufacturers and health care providers providers; require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government; and/or require disclosure to the government and/or public of such interactions.  Other financial interactions (so-called “sunshine laws”). State laws may also affect the activitiesrequire disclosure of pharmaceutical manufacturers, such as laws that protectpricing information and marketing expenditures. Manufacturers must also submit information to the privacyFDA on the identity and securityquantity of patient information.drug samples requested and distributed by a manufacturer during each year. Many of these laws and regulations contain ambiguous requirements or require administrative guidance for implementation. Given the lack of clarity in laws and their implementation, any futureour activities (if we obtain approval and/or reimbursement from federal healthcare programs for our product candidates) could be subject to the penalty provisions of the pertinent federal and state laws and regulations.

Federal and state laws also protect the privacy and security of health information specifically or other personally identifiable information generally.  The laws may apply to us or to healthcare providers and other third parties with which we interact.

Foreign Regulation

In addition to regulations in the United States,U.S., we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain approval by the comparable regulatory authorities of foreign countries or economic areas, such as the EU, before we may commence clinical trials or market products in those countries or areas. The approval process and requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from place to place, and the time may be longer or shorter than that required for FDA approval.

Under EU regulatory systems, a company may submit marketing authorization applications under the centralized, decentralized or mutual recognition procedures, or under the purely national route of approval. The centralized procedure is compulsory for medicinal products produced by biotechnology or those medicinal products containing new active substances for specific indications such as the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, viral diseases, and designated orphan medicines, and is optional for other medicines that are highly innovative. Under the centralized procedure, a marketing application is submitted to the EMA, where it will be evaluated by the relevant scientific committee, in most cases the Committee for Medicinal Products for Human Use, and a favorable opinion typically results in the grant by the European Commission of a single marketing authorization that is valid for all EU member states and, by extension (after national implementing measures), in Norway, Iceland and Liechtenstein. In general, an initial marketing authorization is valid for five years, but once renewed is usually valid for an unlimited period. The decentralized procedure allows marketing authorization applications to be submitted simultaneously in two or more EU member states, whereas the mutual recognition procedure must be used if the product has already been authorized in at least one other EU member state.  Both the decentralized and mutual recognition procedures provide for approval by one or more “concerned” member states based on an assessment of an application performed by one-member state, known as the “reference” member state. Under the decentralized approval procedure, an applicant submits an application, or dossier, and related materials to the reference member state and concerned member states. The reference member state prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. Within 90 days of receiving the reference member state’s assessment report, each concerned member state must approve the assessment report and related materials, unless they identify a serious risk to public health.  Under the mutual recognition procedure, the concerned member states have the same 90-day period to recognize the marketing authorization in the reference member state.  In either case, concerns about serious risks to public health escalate through the relevant EMA scientific committees, and the disputed points may eventually result in a consensus opinion from the Committee for Medicinal Products for Human Use that is referred to the European Commission, whose decision is binding on all member states.  The purely national procedure results in a marketing authorization in a single EU member state.

In light of the United Kingdom’s vote in 2016 to leave the EU, the so-called Brexit vote, there may be changes forthcoming in the scope of the EU marketing authorization approval procedure, as well as changes to the United Kingdom’s national medicines laws, as the terms of that exit are negotiated between the United Kingdom and the EU.  Since the regulatory framework for pharmaceutical products in the United Kingdom relating to quality, safety and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales and distribution of pharmaceutical products is derived from European Union directives and regulations, Brexit will materially impact the future regulatory regime which applies to products and the approval of product candidates in the United Kingdom. In the first instance, a separate United Kingdom authorization from any centralized authorization for the EU would need to be applied for in advance of a hard Brexit or before the end of any agreed transitional period. In the immediately foreseeable future, the process is likely to remain very similar to that applicable in the EU, albeit that the processes for applications will be separate. Longer term, the United Kingdom is likely to develop its own legislation that diverges from that in the EU.

Reimbursement

Significant uncertainty exists regarding the coverage and reimbursement status of products approved by the FDA and other government authorities. Sales of our products will depend, in part, on the extent to which our products will be covered byavailability of coverage and the adequacy of reimbursement from third-party payors. Third-party payors include government authorities or government healthcare programs, such as government or government-sponsored health programs, includingMedicare and Medicaid, and Medicare Part B and Part D,private entities, such as managed care organizations, private health insurers and managed healthcareother organizations. The process for determining whether a third-party payor will provide coverage for a drug product typically ismay be separate from the process for setting the price of a drug product or for establishing the reimbursement rate that the payor will pay for the drug product once coverage is approved.product. Third-party payors may limit coverage to specific drug products on an approved list, also known as aor formulary, which might not include all of the FDA-approved drugsproducts for a decision by aparticular indication. Some third-party payor not to cover our product candidates could reduce physicianpayors may manage utilization of our products once approved. Moreover, a particular product by requiring pre-approval (known as “prior authorization”) for coverage of particular prescriptions (to allow the payor to assess medical necessity).  If the prior authorization (medical necessity) is denied by the payor, the patient may not be able to afford the full cost of the medication without the coverage from the third party payor.  A third-party payor’spayor's decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain net price levels sufficient to realize an appropriate return on our investment in product development. Additionally, coverage and reimbursement for drug products can differ significantly from payor to payor. One third-party payor’s decision to cover a particular drug product or service does not ensure that other payors will also provide coverage for the medical product or service or will provide coverage at an adequate reimbursement rate. As a result, the coverage determination process will require us to provide scientific, clinical support and healthcare pharmacoeconomic rationale for the use of our products to each payor and  or healthcare system separately and will be a time-consuming process.

These third-partyThird-party payors are increasingly reducing reimbursements for medicalchallenging the price and examining the cost-effectiveness of new products and services. services in addition to their safety and efficacy. To obtain or maintain coverage and reimbursement for any current or future product, we may need to conduct expensive pharmacoeconomic studies to demonstrate the medical necessity and cost-effectiveness of our product. These studies will be in addition to the studies required to obtain or maintain regulatory approvals. If third-party payors do not consider a product to be cost-effective compared to other available therapies, they may not cover the product after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its products at a profit. Thus, obtaining and maintaining reimbursement status is complex and costly.

Additionally, the containment of healthcare costs has become a priority of federal and state governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products.

Adoption of new price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Decreases in third-party reimbursement for our product candidatesor our partners’ products or a decision by a third-party payor to not cover our product candidatesor our partners’ products could reduce physician usage of the product candidate and have a material adverse effect on our sales, results of operations and financial condition. We expect that the pharmaceutical industry will experience pricing pressures due to the increasing influence of managed care (and related implementation of managed care strategies to control utilization), additional federal and state legislative and regulatory proposals to regulate pricing of drugs, limit coverage of drugs or reduce reimbursement for drugs, public scrutiny and the Trump administration’s expressed desire to address the perceived high cost of pharmaceuticals in the U.S. The report “Reforming Biopharmaceutical Pricing at Home and Abroad” issued by the White House in February 2018 identified a wide range of potential reforms to address the cost of drugs.  While we cannot predict what executive, legislative and regulatory proposals will be adopted or other actions will occur, such events could have a material adverse effect on our business, financial condition and profitability.

Within the United States, if we obtain appropriate approval in the future to market any of our current therapeutic candidates,U.S., we may be required to provide discounts or rebates under government healthcare programs or to certain government and private purchasers in order to obtain coverage under federal healthcare programs such as Medicaid.  Participation in such programs may require us to track and report certain drug prices.  We may be subject to fines and other penalties if we fail to report such priceprices accurately.

In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the EU provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, products launched in the EU do not follow price structures of the United States U.S. and generally tend to be significantly lower.

Health Care and Other Reform

In the United States,U.S., there have been and continue to be a number of significant legislative initiatives to contain healthcare costs. Federal and state governments continue to propose and pass legislation designed to reform delivery of, or payment for, health care, which include initiatives to reduce the cost of healthcare. For example, in March 2010, the United StatesU.S. Congress enacted the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act, or the Healthcare Reform Act, which expanded health care coverage through Medicaid expansion and the implementation of the individual mandate for health insurance coverage and which included changes to the coverage and reimbursement of drug products under government healthcare programs.  Under the Trump administration, there have been ongoing efforts to modify or repeal all or certain provisions of the Healthcare Reform Act. The Trump administration may also take executive action in the absence of legislative action.  For example, in October 2017, the President announced that his administration will withhold the cost-sharing subsidies paid to health insurance exchange plans serving low-income enrollees. Actions by the administration are widely expected to lead to fewer Americans having more comprehensive health insurance compliant with the Healthcare Reform Act, even in the absence of a legislative repeal.  Taxtax reform legislation was also enacted at the end of 2017 that includes provisions that will affect healthcare insurance coverage and payment, such as the elimination ofeliminated the tax penalty established under Healthcare Reform Act for individuals who do not maintain sufficientmandated health insurance coverage beginning in 2019.    The Healthcare Reform Act has also been subject to judicial challenge.  In December 2018, a federal district court, in a challenge brought by a number of state attorneys general, found the Healthcare Reform Act unconstitutional in its entirety because, once Congress repealed the individual mandate provision, there was no longer a basis to rely on Congressional taxing authority to support enactment of the law. In December 2019, (the so-called “individual mandate”).  In a November 2017 report, the Congressional Budget Office estimatesfederal appeals court agreed that the elimination will increaseindividual mandate provision was unconstitutional but remanded the numbercase back to the district court to assess more carefully whether any provisions of uninsuredthe Healthcare Reform Act were severable and could survive.  Pending action by 4 millionthe district court and resolution of any appeals, which could take some time, the Healthcare Reform Act is still operational in 2019 and 13 millionall respects.

There have also been other reform initiatives under the Trump Administration, including initiatives focused on drug pricing.  For example, legislation enacted in 2027.  The Bipartisan Budget Act of 2018 contained various provisions that affect coverage and reimbursement of drugs, including an increase inincreased the discount that manufacturers of Medicare Part D brand name drugs must provide to Medicare Part D beneficiaries during the coverage gap from 50% to 70% starting in 2019.   As another example, in May of 2018, President Trump and the Secretary of the Department of Health and Human Services released a “blueprint” to lower prescription drug prices and out-of-pocket costs.  Certain proposals in the blueprint, and related drug pricing measures proposed since the blueprint, could cause significant operational and reimbursement changes for the pharmaceutical industry.  As another example, in 2019, the CMS revised Medicare Part D regulations to support health plans’ negotiation of lower drug prices with manufacturers and reduce health plan members’ out-of-pocket costs. As another example, legislation enacted in 2019 revised how certain prices reported by manufacturers under the Medicaid drug rebate program are calculated, a revision that the Congressional Budget office had estimated would save the Medicaid program approximately $3 billion over the next ten years.

There have also been efforts by federal and state government officials or legislators to implement measures to regulate prices or payment for pharmaceutical products, including legislation on drug importation. Recently, there has been considerable public and government scrutiny of pharmaceutical pricing and proposals to address the perceived high cost of pharmaceuticals.  There have also been recent state legislative efforts to address drug costs, which generally have focused on increasing transparency around drug costs or limiting drug prices.

General legislative cost control measures may also affect reimbursement for our product candidates. The Budget Control Act, as amended, resulted in the imposition of 2% reductions in Medicare (but not Medicaid) payments to providers in 2013 and will remain in effect through 20252029 unless additional Congressional action is taken. Any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented and/or any significant taxes or fees that may be imposed on us could have an adverse impact on our results of operations.

Adoption of new legislation at the federal or state level could affect demand for, or pricing of, our product candidatescurrent or future products if approved for sale. We cannot, however, predict the ultimate content, timing or effect of any changes to the Healthcare Reform Act or other federal and state reform efforts. There is no assurance that federal or state health care reform will not adversely affect our future business and financial results.

Government Contracts and Regulation

We currently contract with the federal government. The BARDA contract could result in payments to us of up to approximately $284.7 million, and consists of a five-year base period-of-performance and a total contract period-of-performance (base period plus option exercises) of up to ten years for us to complete the studies and manufacturing activities necessary for the FDA to consider emergency use authorization NUZYRA to treat people exposed to anthrax. As a government contractor, we are subject to complex and wide-ranging federal and agency-specific regulations and contractual requirements that not only govern how we perform under the contract but also impose other requirements that affect our operations, including socio-economic obligations such as obligations related to affirmative action or maintaining a drug-free workplace. While many of our employees have been involved in government contracts previously, many of these government contracting requirements are new to Paratek as a company. Failure to comply with government contracting requirements could result in termination of our contract and the imposition of penalties.

Employees

As of February 28, 2018,2020, we had 83102 total employees, 82101 of whom are full-time employees 39and 40 of whom were primarily engaged in research and development activities. A total of seven12 employees have an M.D., Pharm.D, or Ph.D. degree. None of our employees are represented by a labor union, and we consider our employee relations to be good.

Financial and Segment Information

We operate our business as a single segment, as defined by generally accepted accounting principles. Our financial information is included in the consolidated financial statements and the related notes.

Available Information

We are a reporting company under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and file reports, proxy statements and other information with the Securities and Exchange Commission, or the SEC. The public may read and copy any of our filings at the SEC’s Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Because we make filings with the SEC electronically, you may access this information at the SEC’s Internet site: www.sec.gov. This site contains reports, proxies and information statements and other information regarding issuers that file electronically with the SEC.

Our internet web site address is www.paratekpharma.com. We make available, free of charge at the “Investors” portion of our web site, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Reports of beneficial ownership filed pursuant to Section 16(a) of the Exchange Act are also available on our web site. Information in, or that can be accessed through, this web site is not part of this Annual Report on Form 10-K.

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below and all information contained in this report before you decide to purchase our common stock. If any of the possible adverse events described below actually occurs, we may be unable to conduct our business as currently planned and our financial condition and operating results could be harmed. In addition, the trading price of our common stock could decline due to the occurrence of any of the events described below, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business.

Risk Related to Financial Condition

We have incurred significant losses since inception and anticipate that we will incur losses for the foreseeable future. We have no products approved for commercial sale, and toTo date we have not generated anysufficient revenue or profit from product sales. Wesales to cover corresponding expenses and we may never achieve or sustain profitability.

We received FDA approval for NUZYRA in October 2018 and launched NUZYRA in the U.S. in February 2019. Additionally, FDA approval was granted in October 2018 for SEYSARA, which Almirall has rights to commercialize and with respect to which we will be entitled to tiered royalties, on net sales in the U.S. and a flat royalty on net sales in the greater China region. SEYSARA was launched in the U.S. in January 2019. Although NUZYRA and SEYSARA are a clinical stage biopharmaceutical companynow being sold by us and Almirall, respectively, it will take some time to attain profitability and we have not generated any revenue or profit from product sales. We completed the submission of two NDAs to the FDA for our once-daily oral and IV formulations of omadacycline. In addition, our partner Allergan’s NDA was accepted by the FDA for the treatment of moderate to severe acne in December 2017. We have not yet submitted any other product candidates for approval by regulatory authorities and wemay never do not currently have rights to any significant products that have been approved for marketing in any territory.so. Our net loss for the year ended December 31, 20172019 was $89.1$128.8 million. As of December 31, 2017,2019, our accumulated deficit was $470.1$711.3 million. We expect to continue to incur losses for the foreseeable future as we continue our clinical development of,seek to maintain and seekexpand regulatory approvals for our product candidates, prepareproducts, continue to commercialize any approvedNUZYRA, establish our sales, marketing and distribution infrastructure to commercialize products for which we obtain marketing approval, including NUZYRA, and add infrastructure and personnel to support our product development and commercialization efforts and operations. The net losses and negative operating cash flows incurred to date, together with expected future losses, have had, and likely will continue to have, an adverse effect on our stockholders’stockholders’ equity (deficit) and working capital. The amount of future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate future revenue.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to generate any sufficient product revenues orto achieve profitability. For example, our expenses could increase if we are required by the FDA, or other regulatory agencies outside of the United States, U.S. to perform studies in addition to those that we have already performed or currently expect to perform, or if there are any delays in completing our currently planned clinical trials or in the development of any of our product candidates.perform.

To become and remain profitable, we must succeed in developing and commercializing products with significant market potential. This will require us to be successful in a range of challenging activities, for which we are only in the pre-registration, pre-clinical and clinical stages, including developing product candidates, obtaining regulatory approval for them and manufacturing, marketing and commercializing approved products.products, such as NUZYRA, developing product candidates and obtaining regulatory approval for them. We may never succeed in these activities and may never generate revenue from product sales that is significant enough to achieve profitability. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our failure to become or remain profitable would depress the market value of our common stock, could impair our ability to raise capital, expand our business, develop other product candidates or continue our operations and could cause investors to lose all or part of their investments.

We willmay continue to require substantial additional funding, which may not be available to us on acceptable terms, or at all, and, if not available, may require us to delay, scale back or cease our product development programs or operations.commercialization efforts for NUZYRA.

As of December 31, 2017,2019, our cash, cash equivalents and marketable securities were $151.7$215.4 million. We will require substantial additional funding to completemeet FDA post-marketing approval requirements for NUZYRA, which we expect to be funded through the BARDA contract.  Additional funding may also be needed to support and accelerate the commercialization of omadacycline,NUZYRA, to fund the development of omadacycline in other indications, including NTM, and to continue to advance the development of ourpotential other product candidates, and such funding may not be available on favorable terms or at all. Although it is difficult to predict our liquidity requirements, based upon our current operating plan, we anticipate that our existing capital resources as well as the $50.0 million in proceeds from our January 2018 public offering of common stock, future contingent regulatorycash, cash equivalents and commercial milestone payments from our collaborations with Allergan and Zai, anticipated extension of our interest-only period for the Hercules Term Loan as defined in Note 14, Long-term Debt, and estimated omadacycline product salesmarketable securities will enable us to fund our operating expenses and capital expenditure requirements into late 2019. through at least the next 12 months from the filing date of this Annual Report on Form 10-K. Because the profitability of NUZYRA and SEYSARA, and the successful development of ourany other future product candidates, is uncertain, we are unable to estimate the actual funds we will require to complete researchfund our continuing operations, including for our clinical development programs and development and to commercialize our product candidates.commercialization efforts for NUZYRA.

Our future funding requirements will depend on many factors, including but not limited to:

Until we generate a sufficient amount of product and royalty revenue to finance our cash requirements, which we may never do, we expect to finance future cash needs primarily through a combination of public or private equity offerings, debt or other structured financings, strategic collaborations and strategic collaborations.grant funding. There can be no assurance that we would be successful in securing additional funds on acceptable terms. If additional funds are not available, we may be forced to cease operations, significantly reduce operating expenses or delay, curtail or eliminate one or more of our development programs or our business operations.

Raising additional capital or entering into certain other arrangements may cause dilution to our stockholders, restrict our operations or require us to relinquish rights.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs primarily through the sale of additional equity or convertible debt securities, which would dilute shareholder ownership interest. Additionally, theThe terms of these new securities may include liquidation or other preferences that adversely affect shareholders’shareholders’ rights as common stockholders. DebtFuture debt financing, if available at all, 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 licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, NUZYRA, sarecycline, any future product candidates or future revenue streams, or grant licenses on terms that are not favorable to us. We cannot assure you that we will be able to obtain additional funding if and when necessary. If we are unable to obtain adequate financing on a timely basis, we could be required to grant rights to develop and market NUZYRA, sarecycline or any future product candidates that we wouldmay otherwise prefer to develop and market ourselves.

Our level of indebtedness and debt service obligations could adversely affect our financial condition and may make it more difficult for us to fund our operations.

On September 30, 2015,June 27, 2019, we entered into aan Amended and Restated Loan and Security Agreement, or the Amended Hercules Loan Agreement, with Hercules Technology II, L.P. and Hercules Technology III, L.P., together, Hercules, and  certain other lenders, together, the Lenders, and Hercules Technology Growth Capital, Inc. (as agent). We executed three amendments, under which the Company may borrow up to the $100.0 million in multiple tranches, each, a Term Loan Tranche. The Amended Hercules Loan Agreement subsequent toamends and restates in its entirety our prior Loan and Security Agreement dated as of September 30, 2015, providing access to term loans with an aggregate principal amount of up to $60.0 million.as amended. As of December 31, 2017,2019, we have drawn down on $70.0 million. The Amended Hercules Loan Agreement provides for an extension of the full $60.0 million available to us. The last amendment executed in June 2017 extended the date on which we are required to begin making monthly principal installments from January 1, 2019 to January 1, 2020, subject to our receipt of marketing approval for our lead product candidate, omadacycline, or the Interest Only Period Extension Event.  Beginning on January 1, 2019, or, if we achieve the Interest Only Period Extension Event, beginning on January 1, 2020, we will make payments in equal monthly installments of principal and interest, with the balance of outstanding loans due on the originalscheduled maturity date of the $60.0 million Term Loan Tranche, or the First Tranche, from September 1, 2021 to September 1, 2023, upon certain events set forth in the Amended Hercules Loan Agreement, and an extension of the scheduled maturity date of the $10.0 million Term Loan Tranche, or the Second Tranche, and additional Term Loan Tranches (if any), from August 1, 2022 to August 1, 2024, upon certain events set forth in the Amended Hercules Loan Agreement. The Amended Hercules Loan Agreement also provides for an additional $10.0 million of additional Term Loan Tranches (up to a total of $30.0 million of additional Term Loan Tranches), or the Additional Tranches, that may be available to the Company, subject to approval by Hercules, in its sole discretion, whether to provide such tranches. As such there can be no assurance as amended. to whether or not the Additional Tranches shall be funded.  

All obligations under the Amended Hercules Loan Agreement as amended, are secured by substantially all of our existing property and assets, excluding our intellectual property. This indebtedness may create additional financing risk for us, particularly if our business or prevailing financial market conditions are not conducive to paying off or refinancing our outstanding debt obligations at maturity. This indebtedness could also have important negative consequences, including:

In April 2018, we issued $165.0 million aggregate principal amount of 4.75% Convertible Senior Subordinated Notes due 2024, or the Notes. The Notes bear cash interest at the annual rate of 4.75%, payable on November 1 and May 1 of each year, beginning on November 1, 2018, and mature on May 1, 2024 unless earlier repurchased, redeemed or converted.

In addition, on February 25, 2019, we, through our wholly-owned subsidiary Paratek Royalty Corporation, or the Subsidiary, entered into a royalty-backed loan agreement, or the Royalty-Backed Loan Agreement, with Healthcare Royalty Partners III, L.P., or HCRP. Pursuant to the terms of the Royalty-Backed Loan Agreement, the Subsidiary borrowed a $32.5 million loan, which was secured by, and is being repaid based upon, royalties from the Almirall Collaboration Agreement. The Royalty-Backed Loan Agreement matures on May 1, 2029, at which time, if not earlier repaid in full, the outstanding principal amount of the loan, together with any accrued and unpaid interest, and all other obligations then outstanding, shall be due and payable in cash by the Subsidiary.

The Royalty-Backed Loan Agreement contains customary defined events of default, upon which any outstanding principal and unpaid interest shall be immediately due and payable. These include: failure to pay any principal or interest when due; any uncured breach of a representation, warranty or covenant; any uncured failure to perform or observe covenants; any uncured cross default under a material contract; any uncured breach of our representations, warranties or covenants under its Contribution and Servicing Agreement with the Subsidiary; any termination of the Almirall Collaboration Agreement; and certain bankruptcy or insolvency events. 

To the extent additional debt (including without limitation the Additional Tranches) is added to our current debt levels, the risks described above could increase.

We may not have cash available to us in an amount sufficient to enable us to make interest or principal payments on our indebtedness when due.

Failure to satisfy our current and future debt obligations under the Amended Hercules Loan Agreement as amended, could result in an event of default and, as a result, Hercules could accelerate all of the amounts due. In the event of an acceleration of amounts due under the Amended Hercules Loan Agreement as amended, as a result of an event of default, we may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness. In addition, Hercules could seek to enforce its security interests in the assets securing such indebtedness.

We are subject to certain restrictive covenants which, if breached, could have a material adverse effect on our business and prospects.

The Hercules Loan Agreement as amended, imposes operating and other restrictions on us. Such restrictions will affect, and in many respects limit or prohibit, our ability and the ability of any future subsidiary to, among other things:

Risks Related to Maintaining and Expanding Regulatory ReviewApproval and Approval of Our Product CandidatesOther Legal Compliance Matters

If we fail to obtain FDA approval of and to commercialize our most advanced product candidate, omadacycline, our business would be materially harmed.

We have invested a significant portion of our time, financial resources and collaboration efforts in the development of our most advanced product candidate, omadacycline. Accordingly, our ability to generate revenue and our future success depend substantially on our ability to successfully obtain regulatory approval for and commercialize omadacycline. Except for our collaboration with Allergan for our product candidate, sarecycline, we are not currently developing any of the other product candidates in our portfolio.  Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy despite having progressed through preclinical studies and initial clinical trials.  If we are unable to obtain FDA approval for and successfully commercialize omadacycline for ABSSSI, CABP or any other indication, or for any other product candidate, we may never realize product revenue. As a result, our business, financial condition and results of operations would be materially harmed.

Although we obtained SPA agreements for our Phase 3 clinical trials of omadacycline, these SPA agreements do not guarantee any particular outcome from regulatory review of these trials of omadacycline.

Although we had SPA agreements with the FDA with respect to our Phase 3 clinical trial designs for omadacycline in both ABSSSI and CABP, SPA agreements are not a guarantee of approval of a product candidate or any permissible claims about the product candidate, and final determinations of approvability will not be made until the FDA completes its review of the entire NDA. Therefore, even if all the conditions of our SPA agreements appear to be met, we cannot predict whether the FDA will interpret the data and results in the same way that we do, nor whether the agency will ultimately approve omadacycline for the treatment of ABSSSI and/or CABP. In addition, the FDA is afforded the ability to modify and ignore a SPA agreement, in light of other factors not necessarily related to omadacycline.

If clinical trials for our product candidate, omadacycline are prolonged, delayed or stopped, we may be unable to obtain regulatory approval and commercialize omadacycline on a timely basis, which would require us to incur additional costs, raise additional capital and delay our receipt of any product revenue.

We conducted and completed three Phase 3 clinical studies. We have initiated sites for the first of two planned Phase 2 clinical studies evaluating omadacycline for the treatment of UTI. The first study will evaluateadditional indications on a timely basis.

In October 2018, the efficacy, safety, tolerability and pharmacokinetics of omadacycline in female patients with cystitis, a common uncomplicated UTI. The second study, which  we intend to initiateFDA approved NUZYRA in the second halfU.S. for the treatment of 2018, will evaluate the efficacy, safety, tolerabilityadults with CABP and pharmacokinetics of omadacycline in patients with acute pyelonephritis, a common complicated UTI.ABSSSI that are proven or strongly suspected to be caused by susceptible bacteria. The completion of these plannedany future clinical trials, including FDA PMRs, could be substantially delayed or prevented by several factors, including:

The completion of our clinical trials could also be substantially delayed or prevented by several factors, including:

In particular, our ability to enroll patients in our clinical trials in sufficient numbers and on a timely basis will be subject to a number of factors, including the size of the patient population needed, the nature of the protocol, the proximity of patients to clinical sites, the availability of effective treatments for the relevant indication and the eligibility criteria for the clinical trial. For example, in the Phase 2 clinical trials of omadacycline in UTI, patients who have previously taken potentially effective antibiotics for the treatment of an infection within 72 hours of receiving the first dose of study medication will be excluded from the clinical trial. Depending upon a region’s or a clinical site’s standard of care for the administration of antibiotics, this could affect our ability to enroll patients in these clinical trials in a timely fashion.

Changes in regulatory requirements and guidance may also occur, and we may need to amend clinical trial protocols to reflect these changes with appropriate regulatory authorities. Amendments may require us to resubmit clinical trial protocols to regulatory agencies/IRBs/ Institutional Review Boards/ethics committees for re-examination, which may impact the costs, timing or successful completion of a clinical trial. For example, we stopped our previous Phase 3 clinical trial of omadacycline after the FDA notified us that its guidance relating to the conduct of studies in complicated skin and skin structure infections, or cSSSI, would be modified to change the eligibility criteria, revise the disease indication from cSSSI to ABSSSI and change the primary efficacy endpoint for clinical trials in this indication from a TOC assessment to an ECR assessment. As a result of these changes, we chose to terminate enrollment in the previous Phase 3 clinical trial and, following discussion with the FDA, designed two new Phase 3 clinical trials, one for ABSSSI and one for CABP, taking into account the revised FDA regulatory guidance. Our clinical trials may be suspended or terminated at any time by the FDA, other regulatory authorities, the IRBInstitutional Review Board overseeing the clinical trial at issue, any of our clinical trial sites with respect to that site or us due to a number of factors, including:

In addition, clinical practices vary globally, and there is a lack of harmonization among the guidance provided by various regulatory bodies of different regions and countries with respect to the data that is required to receive marketing approval, which makes designing global trials increasingly complex. Differing regulatory approval requirements in different countries also make it more difficult for us to conduct unified global trials, which can lead to increased development costs and marketing delays or non-viability of our clinical trials. The approval procedure and the time required to obtain approval also varies among countries. Furthermore, regulatory agencies may have varying interpretations of the same data, and approval by one regulatory authority does not ensure approval by regulatory authorities in other jurisdictions.

Any failure or significant delay in completing clinical trials for our product candidates would adversely affect our ability to obtain regulatory approval and our commercial prospects and ability to generate product revenue will be diminished.

The results of previous clinical trials may not be predictive of future results, and the results of our current and plannedany ongoing or future clinical trials may not satisfy the requirements of the FDA or non-U.S. regulatory authorities.

We currently have no products approved for sale, and we may not ever have marketable products. Clinical failure can occur at any stage of clinical development. Clinical trials may produce negative or inconclusive results, and we or any futureour partners may decide, or regulators may require us, to conduct additional clinical or preclinical testing which wouldcould delay submission of ana supplemental NDA and regulatory approval. We will be required to demonstrate with substantial evidence through well-controlled clinical trials that our product candidates are safe and effective for use in a diverse population before we can seek regulatory approvals for their commercial sale. Success in early stage clinical trials does not mean that future larger registration clinical trials will be successful, because product candidates in later-stage clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA and non-U.S. regulatory authorities despite having progressed through early stage clinical trials. Product candidates that have shown promising results in early-stage (pre-Phase 3) clinical trials may still suffer significant setbacks in subsequent registration clinical trials.

In addition, the design of a clinical trial can determine whether its results will support approval of a product and/or new indications, and flaws in the design of a clinical trial may not become apparent until the clinical trial is underway, well advanced or completed. Further, if omadacycline, sarecycline or our other potentialfuture product candidates are found to be unsafe or lack efficacy, we will not be able to obtain regulatory approval for them and our business would be harmed. A number of companies in the pharmaceutical industry, including those with greater resources and experience than us, have suffered significant setbacks in advanced clinical trials, even after obtaining promising results in earlier stage clinical trials.

ResultsPositive results in our randomized Phase 2 and Phase 3 clinical studies of omadacycline in cSSSI,complicated skin and skin structure infections, ABSSSI and CABP, evaluated omadacycline in serious skin infections and pneumonia, and may not be predictive of the results to be obtained in our on-going Phase 2 clinical studies in any other indications, such as UTI.omadacycline for the treatment of NTM. In some instances, there can be significant variability in safety and/or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in clinical trial protocols, differences in size, type and geographic distribution of the patient populations, adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. We do not know whether any Phase 2, Phase 3 or other clinical trials we or any of our collaborators may conduct, or have conducted in the past, will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to market our future product candidates.

Further, our and our partners’partners’ product candidates may not be approved even if they achieve their primary endpoints in Phase 3 clinical trials or registration trials. The FDA or other non-U.S. regulatory authorities may disagree with our clinical trial design and our interpretation of data from preclinical studies and clinical trials even when we have SPASpecial Protocol Assessment agreements. In addition, any of these regulatory authorities may change requirements for the approval of a product candidate even after reviewing and providing comments or advice on a protocol for a pivotal Phase 3 clinical trial that has the potential to result in FDA or other agencies’agencies’ approval. In addition, any of these regulatory authorities may also approve a product candidate for fewer or more limited indications than we request or may grant approval contingent on the performance of costly post-marketing clinical trials. In addition, the FDA or other non-U.S. regulatory authorities may not approve the labeling claims that we believe would be supported by the clinical data, or be necessary or desirable for the successful commercialization of our product candidates.products. If an unforeseen safety issue arises, the FDA always has the option to initiate a REMS or add additional warnings to thea product label upon approval.

The regulatory approval process is expensive, time consuming and uncertain and may prevent us or our partners from obtaining approvals for the commercialization of our product candidates.

The research, testing, manufacturing, labeling, approval, selling, marketing and distribution of drug products are subject to extensive regulation by the FDA and other U.S. and non-U.S. regulatory authorities. Regulations differ from country to country, which will require us to expend additional resources in each market for which a separate regulatory approval is required. We are not permitted to market our product candidates inoutside of the United States or in other countries U.S. until we receive approval of an NDA from the FDA or marketing approval from applicable regulatory authorities outside of the United States. Our primary product candidates,U.S. Although omadacycline and sarecycline are still in development and arereceived FDA approval, approval of other indications, including treatment of NTM with omadacycline, is subject to the risks of failure inherent in drug development. Neither we nor our partners have received marketing approval for any of our product candidates. Obtaining approval of an NDA can be a lengthy, expensive and uncertain process. In addition, failure

Failure to comply with FDA and non-U.S. regulatory requirements may, either before or after product approval, if any, subject us to administrative or judicially imposed sanctions, including:

The FDA and foreign regulatory authorities also have substantial discretion in the drug approval process. The number of preclinical studies and clinical trials that will be required for regulatory approval varies depending on the product candidate, the disease or condition that the product candidate is designed to address, and the regulations applicable to any particular drug candidate. Regulatory agencies can delay, limit or deny approval of a product candidate for many reasons, including:

Any delay in obtaining or failure to obtain required approvals could materially adversely affect our ability to generate revenue from omadacycline or any other particular product candidate, which likely would result in significant harm to our financial position. Furthermore, any regulatory approval to market a product may be subject to limitations on the indicated uses for which we may market the product. These limitations may limit the size of the market opportunity for the product.

Even if we or our partners obtainthough NUZYRA and SEYSARA have been approved by the FDA in the U.S., they face post-approval development and regulatory approvals for our product candidates, the terms of approvals and ongoing regulation of our productsrequirements, which may limit how we manufacturethey are manufactured and market our product candidates, whichmarketed, and could materially impair our ability to generate revenue.

Once regulatory approval has been granted, anIn October 2018, the FDA approved productNUZYRA in the U.S. for the treatment of adults with CABP and its manufacturerABSSSI that are proven or strongly suspected to be caused by susceptible bacteria, as well as SEYSARA for the treatment of inflammatory lesions of non-nodular moderate to severe acne vulgaris in patients nine years of age and marketerolder. NUZYRA and SEYSARA are subject to, ongoing review and regulation. Any approved product may only be promoted for its approved uses. In addition, if the FDA and/or non-U.S. regulatory authorities approve any of our product candidates, among other things, ongoing FDA requirements governing the manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, recordkeeping and promotionsubmission of safety, efficacy and other post-market information. As part of the FDA approval for NUZYRA, we are required to conduct post-marketing pediatric studies, including a single dose pharmacokinetic and safety study in children ages eight to seventeen who are receiving antibacterial drug therapy for an infectious disease, an active-controlled safety study in children ages eight to seventeen who have acute bacterial skin and skin structure infections, and an active-controlled safety study in children ages eight to seventeen who have CABP. In addition, we are also required to conduct an active-controlled safety and efficacy study in adults with CABP and a U.S. surveillance study for five years from the product will be subjectdate of marketing to extensive regulatory requirements.determine if resistance to NUZYRA has developed in those organisms specific to the indications in the label.  In addition, approved products, manufacturers and manufacturers’manufacturers’ facilities are required to comply with extensive FDA and other regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to cGMPcurrent GMP regulations, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. As such, we and our partners and any of our and their respective contract manufacturers will beare subject to ongoing review and periodic inspections to assess compliance with cGMPs. Additionally, to the extent we want to make certain changes to the approved products, product labeling, or manufacturing processes or manufacturing sites, we will need to submit new applications or supplements to FDA and obtain the agency’s approval.  

Accordingly, assuming regulatory approval for one or more of our product candidates, we and others with whom we work will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control. Further, regulatory agencies must approve these manufacturing facilities before they can be used to manufacture our products. We and our partners willare also be required to report adverse reactions and production problems, if any, to the FDA and to comply with requirements concerning, among other things, advertising and promotion for our products. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label. Although the FDA and other regulatory agencies do not regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict promotional communications from pharmaceutical companies or their sales force with respect to off-label uses of products for which marketing clearance has not been issued. Accordingly, we and our partners will not be able to promote our products for indications or uses for which they are not approved. A company that is found to have promoted off-label use of its product may be subject to significant liability, including civil and criminal sanctions. We intend to comply with the requirements and restrictions of the FDA and other regulatory agencies with respect to off-label promotion, but we cannot be sure that the FDA or other regulatory agencies will agree that we have not violated their restrictions. As a result, we may be subject to criminal and civil liability. If the FDA or any other governmental agency initiates an enforcement action against us or if we are the subject of a qui tam suit and it is determined that we violated prohibitions relating to the promotion of products for unapproved uses, we could be subject to substantial civil or criminal fines or damage awards and other sanctions such as consent decrees and corporate integrity agreements pursuant to which our activities would be subject to ongoing scrutiny and monitoring to ensure compliance with applicable laws and regulations. Even if it is later determined that we were not in violation of these laws, we may be faced with negative publicity, incur significant expenses defending our actions and have to divert significant management resources from other matters.

Notwithstanding the regulatory restrictions on off-label promotion, the FDA and other regulatory authorities allow companies to engage in truthful, non-misleading, and non-promotional scientific exchange concerning their products. We intend to engage in medical education activities and communicate with healthcare providers in compliance with all applicable laws, regulatory guidance and industry best practices. Although we believe we have put in place a compliance program, which is designed to ensure that all such activities are performed in a legal and compliant manner, we cannot be certain that our program will address all areas of potential exposure and the risks in this area cannot be entirely eliminated.

Additionally, if a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, it may impose restrictions on that product, us or our partners, including requiring withdrawal of the product from the market. If we or our partners fail to comply with the regulatory requirements of the FDA and other U.S. and non-U.S. regulatory authorities, or if previously unknown problems with our products, manufacturers or manufacturing processes are discovered, wethe FDA or other regulatory authorities could be subjectimpose significant penalties, such as:

If we and our partners are not able to maintain regulatory compliance, we would likely not be permitted to manufacture and market any future product candidates and may not achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.

Our product candidatesproducts may have undesirable side effects that may delay or prevent marketing approval, or, if approval is received, require them to be taken off the market include safety warnings or otherwise limit their sales.

Although our product candidates, omadacyclineNUZYRA and sarecycline,SEYSARA have undergone or will undergo safety testing in humans and in laboratory animals, not all adverse effects of drugs can be predicted or anticipated from these clinical studies and preclinical safety and toxicology studies. Unforeseen side effects from either of our product candidatesNUZYRA or SEYSARA could arise either during clinical development or, if approved by regulatory authorities, after the approved product has been marketed. Each of omadacycline and sarecycline are still in clinical development, and our other product candidates, which are in the pre-clinical phase, are not currently being further developed. Many of the most widely used antibiotics are associated with treatment-limiting adverse events, including in some instances, kidney damage, allergic reactions or sudden cardiovascular death due to cardiac arrhythmia.  Although, not tested statistically due to the typically small trial size for Phase 1 and Phase 2 trials, these clinical trials to date for omadacycline and sarecycline appear to have shown a favorable safety profile. The results from the Phase 3 registration clinical trials may not confirm these preliminary observations. The results of future clinical trials or from marketing experience may show that ourNUZYRA or SEYSARA, or any other current or future product candidates, including omadacycline and sarecycline,candidate, cause undesirable or unacceptable side effects, which could interrupt, delay or halt clinical trials,effects. Furthermore, even though both NUZYRA and result in delay of, or failure to obtain,SEYSARA have received marketing approval, from the FDA and other regulatory authorities, or result in marketing approval from the FDA and other regulatory authorities with restrictive label warnings or potential product liability claims. If any of our product candidates receive marketing approval andif we or others later identify undesirable or unacceptable side effects caused by such products:NUZYRA or SEYSARA:

Any of these events could prevent us, our current partners or our potential future partners from achieving or maintaining market acceptance of the affected product or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenue from the sale of our products. Furthermore, NUZYRA and SEYSARA are commercially available and each may be used in a wider population and in a less rigorously controlled environment than in clinical studies. As a result, regulatory authorities, healthcare practitioners, third-party payors or patients may perceive or conclude that the use of the product is associated with previously unknown serious adverse effects, undermining commercialization efforts.

Coverage and reimbursement decisions by third-party payors may have an adverse effect on pricing and market acceptance. If there is not sufficient coverage and reimbursement for our products, it is less likely that our products will be widely used.