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

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

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 ☒

As of ~~October 31, 2017~~April 30, 2020, there were ~~27,941,015~~43,132,044 shares of the registrant's common stock, par value $0.001 per share, outstanding.

							March 31,			December 31,
	September 30, 2017			December 31, 2016			2020			2019
Assets
Current assets
Cash and cash equivalents	$	32,995		$	52,962		$	124,624		$	102,302
Available-for-sale securities		130,445			75,076
Marketable securities								70,166			113,077
Restricted cash		162			817			630			324
Other receivable		—			323
Accounts receivable, net								10,887			8,475
Inventories, net								13,472			11,579
Other receivables								1,383			1,108
Prepaid and other current assets		2,604			2,922			5,844			6,489
Total current assets		166,206			132,100			227,006			243,354
Restricted cash		250			250
Long-term restricted cash								2,261			3,007
Fixed assets, net		1,922			1,188			1,094			1,227
Intangible assets, net		229			1,015
Goodwill		829			829			829			829
Right-of-use assets								2,322			2,514
Other long-term assets		298			350			148			148
Total assets	$	169,734		$	135,732		$	233,660		$	251,079
Liabilities and stockholders’ equity
Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable	$	2,858		$	4,418		$	663		$	4,116
Other accrued expenses		8,340			6,428
Accrued contract research		4,599			9,566
Accrued expenses								18,100			16,696
Current portion of long-term debt								20,751			—
Other current liabilities								3,595			3,388
Total current liabilities		15,797			20,412			43,109			24,200
Long-term debt		49,079			38,974			240,299			260,728
Contingent obligations		84			655
Long-term lease liabilities								1,838			2,095
Other liabilities		4,902			4,099			3,652			3,703
Total liabilities		69,862			64,140			288,898			290,726
Commitments and contingencies (Note 15)
Stockholders’ equity
Commitments and contingencies (Note 17)
Stockholders’ deficit
Preferred stock:
Undesignated preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.001 par value; 100,000,000 shares authorized; 27,892,040 and 23,358,637 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		28			23
Undesignated preferred stock: $0.001 par value; 5,000,000 authorized; no shares issued and outstanding								—			—
Common stock, $0.001 par value, 100,000,000 shares authorized, 42,374,026 and 39,827,749 issued and outstanding at March 31, 2020 and December 31, 2019, respectively								42			40
Additional paid-in capital		548,144			451,947			683,124			671,497
Accumulated other comprehensive loss		(80	)		(16	)
Accumulated other comprehensive income								471			74
Accumulated deficit		(448,220	)		(380,362	)		(738,875	)		(711,258	)
Total stockholders’ equity		99,872			71,592
Total liabilities and stockholders’ equity	$	169,734		$	135,732
Total stockholders’ deficit								(55,238	)		(39,647	)
Total liabilities and stockholders’ deficit							$	233,660		$	251,079

See accompanying notes to unaudited condensed consolidated financial statements.

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

License and royalty revenue

$
12

$
—

$
7,544

$
—

Operating expenses:

Research and development

12,112

17,334

45,847

63,757

General and administrative

8,219

5,949

25,299

19,896

Impairment of intangible asset

—

—

682

—

Changes in fair value of contingent consideration

(22
)

(170
)

(571
)

(50
)
Total operating expenses

20,309

23,113

71,257

83,603

Loss from operations

(20,297
)

(23,113
)

(63,713
)

(83,603
)
Other income and expenses:

Interest expense

(1,408
)

(820
)

(3,666
)

(2,368
)
Interest income

389

309

979

788

Other loss, net

(8
)

(4
)

(23
)

1

Loss before income taxes

$
(21,324
)

$
(23,628
)

$
(66,423
)

$
(85,182
)
Provision for income taxes

—

—

753

—

Net loss

$
(21,324
)

$
(23,628
)

$
(67,176
)

$
(85,182
)
Other comprehensive income:

Unrealized (loss) gain on available-for-sale securities, net of tax

16

(20
)

(64
)

14

Comprehensive loss

$
(21,308
)

$
(23,648
)

$
(67,240
)

$
(85,168
)
Net loss per share - basic and diluted

$
(0.77
)

$
(1.04
)

$
(2.54
)

$
(4.39
)
Weighted average common shares outstanding

Basic and diluted

27,776,218

22,627,711

26,453,219

19,391,443

	Three Months Ended March 31,
	2020			2019
Product revenue, net	$	7,303		$	1,347
Government contract service revenue		337			—
Collaboration and royalty revenue		280			251
Net revenue	$	7,920		$	1,598
Expenses:
Cost of product revenue		1,471			206
Research and development		6,389			11,392
Selling, general and administrative		23,638			23,316
Total operating expenses		31,498			34,914
Loss from operations		(23,578	)		(33,316	)
Other income and expenses:
Interest income		705			946
Interest expense		(4,826	)		(3,226	)
Other gains (losses), net		82			(14	)
Net loss	$	(27,617	)	$	(35,610	)
Other comprehensive loss
Unrealized gain on available-for-sale securities, net of tax		397			200
Comprehensive loss	$	(27,220	)	$	(35,410	)
Basic and diluted net loss per common share	$	(0.66	)	$	(1.10	)
Weighted average common stock outstanding
Basic and diluted		41,641,203			32,334,563

See accompanying notes to unaudited condensed consolidated financial statements.

	For the Nine Months Ended September 30,						For the Three Months Ended March 31,
	2017			2016			2020			2019
Net loss	$	(67,176	)	$	(85,182	)	$	(27,617	)	$	(35,610	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		979			941
Depreciation, amortization and accretion								70			(485	)
Stock-based compensation expense		13,018			8,102			2,535			3,863
Noncash interest expense		354			772			4,542			2,748
Noncash interest income		—			(107	)
Impairment of intangible asset		682			—
Change in fair value of contingent consideration		(571	)		(50	)
Changes in operating assets and liabilities
Accounts receivable and other current assets		1,109			4,621			(2,079	)		(2,348	)
Purchase of prepaid interest - marketable securities		(288	)		—			21			—
Inventories								(137	)		(1,379	)
Operating lease right-of-use asset								192			173
Accounts payable and accrued expenses		(5,094	)		1,474			(7,758	)		(1,776	)
Operating lease liability								(256	)		(990	)
Other liabilities and other assets		798			(438	)		161			48
Net cash used in operating activities		(56,189	)		(69,867	)		(30,326	)		(35,756	)
Investing activities
Purchase of fixed assets, net		(1,165	)		(314	)
Purchase of fixed assets								(253	)		(11	)
Purchase of marketable securities		(149,356	)		(93,250	)		(19,631	)		—
Proceeds from maturities of marketable securities		93,750			24,966			63,000			70,000
Increase (decrease) in restricted cash		655			(1,197	)
Net cash used in investing activities		(56,116	)		(69,795	)
Net cash provided by investing activities								43,116			69,989
Financing activities
Proceeds from issuance of long-term debt, net of costs		9,915			—
Proceeds from exercise of stock options		321			11
Proceeds from sale of common stock		82,102			61,287
Proceeds from sale of common stock, net of costs								9,092			—
Net cash provided by financing activities		92,338			61,298			9,092			—
Net decrease in cash and cash equivalents		(19,967	)		(78,364	)
Cash and cash equivalents at beginning of period		52,962			131,302
Cash and cash equivalents at end of period	$	32,995		$	52,938
Net increase in cash, cash equivalents and restricted cash								21,882			34,233
Cash, cash equivalents and restricted cash at beginning of period								105,633			47,502
Cash, cash equivalents and restricted cash at end of period							$	127,515		$	81,735
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	2,338		$	—		$	2,463		$	1,471
Purchases of equipment included in accrued expenses							$	87			—

See accompanying notes to unaudited condensed consolidated financial statements.

	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Income (Loss)			Deficit			Equity (Deficit)
Balances at December 31, 2019		39,827,749	$	40	$	671,497	$	74		$	(711,258	)	$	(39,647	)
Issuance of common stock, net of expenses		2,334,107		2	$	9,092		—			—			9,094
Vesting of restricted stock unit awards		212,170		—		—		—			—			—
Employee stock purchase plan expense		—		—		35		—			—			35
Unrealized gain on available-for-sale securities, net of tax		—		—		—		397			—			397
Stock-based compensation expense		—		—		2,500		—			—			2,500
Net loss		—		—		—		—			(27,617	)		(27,617	)
Balances at March 31, 2020		42,374,026	$	42	$	683,124	$	471		$	(738,875	)	$	(55,238	)
	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Income (Loss)			Deficit			Equity (Deficit)
Balances at December 31, 2018		32,259,363	$	32	$	630,142	$	(128	)	$	(582,468	)	$	47,578
Vesting of restricted stock unit awards		156,614		—		—		—			—			—
Employee stock purchase plan expense		—		—		24		—			—			24
Unrealized gain on available-for-sale securities, net of tax		—		—		—		200			—			200
Stock-based compensation expense		—		—		3,839		—			—			3,839
Net loss		—		—		—		—			(35,610	)		(35,610	)
Balances at March 31, 2019		32,415,977	$	32	$	634,005	$	72		$	(618,078	)	$	16,031

Paratek Pharmaceuticals, Inc., or the Company or Paratek, is a Delaware corporation with its corporate office in Boston, Massachusetts and an office in King of Prussia, Pennsylvania.

The Company is a ~~clinical stage~~commercial-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. The Company has used its expertise in biology and tetracycline chemistry to create chemically diverse and biologically distinct small molecules derived from the minocycline core structure. The Company has 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 propertiesCompany’s United States, or U.S., Food 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. The Company’s two lead~~Drug Administration, or FDA, approved commercial product, ~~candidates are the antibacterials omadacycline and sarecycline. Omadacycline and sarecycline are examples of molecules that were synthesized from this chemistry discovery platform.~~

~~If approved, omadacycline will be the first in a new class of aminomethylcycline antibiotics. Omadacycline~~NUZYRA^® (omadacycline) is a ~~broad-spectrum, well-tolerated,~~ once-daily oral and intravenous ~~or IV, antibiotic. The Company believes that omadacycline has the potential to become the primary antibiotic choice of physicians for use as a broad-spectrum monotherapy~~ antibiotic for the treatment of adult patients with community-acquired bacterial pneumonia, or CABP, and 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~~caused by susceptible pathogens. SEYSARA^® (sarecycline) is ~~of concern. The~~an FDA-approved product with respect to which the Company ~~believes omadacycline, if approved, will be used~~has exclusively licensed in the ~~emergency room, hospital~~U.S. and ~~community care settings. The Company has designed omadacycline~~the People’s Republic of China, or the PRC, Hong Kong and Macau, or the greater China region, certain rights 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 known drug interactions, and a favorable safety and tolerability profile.

~~The Company’s second antibacterial product candidate, sarecycline, also known~~Almirall, LLC, or Almirall. SEYSARA is currently being marketed by Almirall in the U.S. as ~~WC3035, is~~ a new once-daily tetracycline-derived compound designed for use in the treatment of acne and rosacea. The Company believes 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, or PK, properties that the Company believes make it particularly well-suited~~therapy for the treatment of ~~inflammatory~~moderate to severe acne invulgaris. With respect to the ~~community setting. The Company has exclusively licensed U.S. development and commercialization rights~~Company’s technology as it relates to sarecycline, ~~for~~ the ~~treatment of acne to Allergan plc, or Allergan, while retaining~~Company retains development and commercialization rights in all countries other than the ~~rest~~U.S. and the greater China region, and in February 2020, the Company 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 ~~world.~~

~~Prior~~U.S. Almirall plans to ~~October 30, 2014,~~develop sarecycline for acne in China, with a submission to the ~~name of the Company was Transcept Pharmaceuticals, Inc.,~~China National Medical Products Administration, or ~~Transcept. On October 30, 2014, Transcept completed a business combination, or the Merger, with privately held Paratek Pharmaceuticals, Inc., or Old Paratek,~~NMPA, expected 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., Tigris Acquisition Sub, LLC and Old Paratek, or the Merger Agreement.2023.

The Company has incurred significant losses since ~~its~~ inception in 1996. The Company has generated an accumulated deficit of ~~$448.2~~$738.9 million through ~~September 30, 2017~~March 31, 2020 and ~~will~~may require substantial additional funding in connection with the Company’s continuing operations to support ~~commercial~~clinical development and commercialization activities associated with ~~its lead product candidate, omadacycline. Based~~NUZYRA. Based upon the Company’s current operating plan, ~~the Company~~it anticipates that its ~~existing~~ cash, cash equivalents and available for sale marketable securities of $194.8 million as of March 31, 2020 will enable the Company to fund ~~its~~ operating expenses and capital expenditure requirements through at least the next twelve months from the ~~filing date~~issuance of the financial statements included in this Quarterly Report on Form ~~10-Q.~~ 10-Q. The Company expects to finance future cash needs primarily through a combination of product sales, royalties, public ~~and~~or private equity offerings, debt or other structured financings, strategic collaborations and ~~strategic collaborations.~~grant funding. The Company is subject to risks common to companies in the biopharmaceutical industry, including, but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain additional financing to fund the future development of the Company’s product candidates, the need to obtain compliant product from third party manufacturers, the need to obtain marketing approval for the Company’s product candidates, the need to successfully commercialize and gain market acceptance of product candidates, the risks of manufacturing product with an external supply chain, dependence on key personnel, and compliance with government regulations as well as ~~those~~the risks discussed in the “~~Risk Factors~~”“Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019, as filed with the U.S. Securities and Exchange Commission, or the SEC, on March ~~2, 2017,~~10, 2020, or the 2019 Form 10-K, and ~~elsewhere~~ in the Company’s other filings with the SEC and in the “Risk Factors” section of this ~~report.~~ Quarterly Report on Form 10-Q.

The significant accounting policies and estimates used in preparation of the condensed consolidated financial statements are described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2016, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on March 2, 2017.

~~As of January 1, 2017, the Company adopted ASU No. 2016-09,~~ ~~Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, or ASU 2016-09~~. Upon adoption, the Company adjusted retained earnings for amendments related to an entity-wide accounting policy election to recognize the impact of share-based award forfeitures only as they occur rather than by applying an estimated forfeiture rate as previously required. ASU 2016-09 requires that this change be applied using a modified-retrospective transition method by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is adopted. The following table summarizes the impact to the Company’s consolidated balance sheet, including the amount charged to retained earnings as of January 1, 2017 (in thousands):

~~There have been no other material changes in the Company’s significant accounting policies during the nine months ended September 30, 2017.~~

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, ~~of the United States of America,~~ or U.S. GAAP, as found in the Accounting Standards Codification, or ASC, and Accounting Standards ~~Update,~~Updates, or ASU, of the Financial Accounting Standards Board, or FASB, and pursuant to the rules and regulations of the SEC.

The accompanying condensed consolidated financial statements are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, ~~2016,~~2019, and, in the opinion of management, reflect all normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2020 and December 31, 2019, results of operations for the three month periods ended March 31, 2020 and March 31, 2019, cash flows for the ~~interim~~three month periods ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~March 31, 2019 and changes in stockholders’ deficit for the three month periods ended March 31, 2020 and March 31, 2019.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the year ending December 31, ~~2017.~~2020. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, ~~2016,~~2019, and notes thereto, which are included in the Company’s ~~Annual Report on~~2019 Form 10-K.

As of Mach 31, 2020, the Company’s significant accounting policies and estimates, which are detailed in the Company’s 2019 Form 10-K, ~~for the year ended December 31, 2016, as filed with the SEC on March 2, 2017.~~have not changed.

The accompanying unaudited condensed consolidated financial statements include the results of operations of Paratek Pharmaceuticals, Inc. and its wholly-owned subsidiaries, Paratek Pharma, LLC, Paratek Securities Corporation, Transcept Pharma, Inc., Paratek UK ~~Ltd~~Limited, Paratek Royalty Corporation, and Paratek ~~Bermuda Ltd.~~Ireland Limited. All significant intercompany accounts and transactions have been eliminated in consolidation.

The preparation of the accompanying unaudited condensed consolidated financial statements, in conformity with U.S. GAAP, requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent liabilities in the Company’s financial statements. On an ongoing basis, the Company evaluates its estimates and judgments, including those related to, among other items, ~~intangible assets,~~accounts receivable and related reserves, inventory and related reserves, goodwill, ~~contingent liabilities,~~net product revenue, government contract service revenue, collaboration and royalty revenue, leases, stock-based compensation arrangements, manufacturing and clinical accruals, useful lives for depreciation and amortization of long-lived assets and valuation allowances on deferred tax assets. Actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become known by the Company’s management.

Operating segments are defined as components of an enterprise engaging in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment.

Financial instruments that subject the Company to credit risk consist primarily of cash, restricted cash, and accounts receivable. The Company places its cash in an accredited financial institution and this balance is above federally insured amounts. The Company has no off-balance sheet concentrations of credit risk such as foreign currency exchange contracts, option contracts or other hedging arrangements.

Accounts receivable as of March 31, 2020 represents $7.2 million due from customers on sales of NUZYRA, net of prompt payment discounts, chargebacks, rebates and certain fees, as well as a $3.0 million milestone earned during the year ended December 31, 2019, but not yet received, under the Zai Collaboration Agreement (as defined below). The balance of accounts receivable as of March 31, 2020, includes revenue earned, but not yet received, of $0.4 million of royalties on SEYSARA sales under the Almirall Collaboration Agreement (as defined below) and XERAVA^TM (Eravacycline) sales under the Tetraphase License Agreement (as defined below), and $0.3 million of government contract service revenue earned, but not yet received, under the BARDA contract (as defined below). Refer to Note 8, Government, License and Collaboration Agreements, for further information on these agreements.

The following is a summary of available-for-sale securities as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 (in thousands):

No available-for-sale securities held as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 had remaining maturities greater than ~~one year.~~twelve months.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated statement of cash flows that sum to the total of the same such amounts shown in the condensed consolidated statement of cash flows (in thousands):

On May 1, 2019, the Company deposited $4.0 million into an interest reserve account in conjunction with the funding of a royalty-backed loan agreement, or the Royalty-Backed Loan Agreement, executed with Healthcare Royalty Partners III, L.P. Payments of interest under the Royalty-Backed Loan Agreement are made quarterly using royalty payments received since the immediately preceding payment date under the Almirall Collaboration Agreement, as defined in Note 8, Government, License and Collaboration Agreements. On each interest payment date, if the royalty payments received do not equal the total interest due for the respective quarter, the Company will cover the balance of the interest payment due from the interest reserve account. Refer to Note 13, Long-Term Debt, for further details. As of ~~September 30, 2017,~~March 31, 2020 and December 31, 2019, restricted cash of ~~$0.2~~$0.6 million ~~represents royalty income received but not yet~~and $0.3 million, respectively, represented the estimated amount that is expected to be paid to ~~former Transcept stockholders as part~~Healthcare Royalty Partners III, L.P. out of the ~~royalty sharing agreement, or~~interest reserve account within the Royalty Sharing Agreement, executed by the Company on October 28, 2016 with the Special Committee of the Company’s Board of Directors, or the Special Committee, a committee established in connection with the Merger. See Note 11, ~~Fair Value Measurements~~, for more information on the Royalty Sharing Agreement. Included in the balance as of December 31, 2016, was the remainder of the Intermezzo reserve of $0.1 million, established in accordance with the Merger Agreement, which was comprised of unpaid legal fees.

During the year ended December 31, 2016, the Company obtained a letter of credit in the amount of $0.8 million, which was collateralized with a bank account at a financial institution, to secure value-added tax registration in certain foreign countries. The letter of credit was cancelled by the Company during the first quarter of 2017.next twelve months.

The Company leases its Boston, Massachusetts office space under a non-cancelable operating lease. Refer to Note ~~15,~~14, ~~Commitments and Contingencies~~Leases, for further details. In accordance with the lease, the Company has a cash-collateralized irrevocable standby letter of credit in the amount of $0.3 million as of ~~September 30, 2017~~both March 31, 2020 and December 31, ~~2016,~~2019, naming the landlord as beneficiary.

As of March 31, 2020 and December 31, 2019, long term restricted cash of $2.0 million and $2.7 million, respectively, represented the remaining balance in the interest reserve account that is expected to be paid to Healthcare Royalty Partners III, L.P. after March 31, 2021.

When recorded, inventory reserves reduce the carrying value of inventories to their net realizable value. The Company reviews inventories on hand at least quarterly and records provisions for estimated excess, slow-moving and obsolete inventory, as well as inventory with a carrying value in excess of net realizable value.

~~Intermezzo product rights and the TO-2070 license rights were acquired through the Merger. Refer to Note 8,~~ ~~License and Collaboration Agreements,~~ for further detail concerning Intermezzo and TO-2070. Intangible assets are reviewed when events or circumstances indicate that the assets might be impaired. An impairment loss would be recognized when the estimated undiscounted cash flows to be generated by those assets are less than the carrying amounts of those assets. If it is determined that the intangible asset is not recoverable, an impairment loss would be calculated based on the excess of the carrying value of the intangible asset over its fair value.

In April 2016, the first generic equivalent of Intermezzo was launched. Although the generic was off the market for a short period, it re-entered in September 2016. Since the generic launch, a recoverability test has been performed each reporting period and the Company determined that the summation of the undiscounted cash flows through the year of patent expiration, or the estimated useful life of the asset, exceeded the carrying value of the asset in periods up to and including March 31, 2017. During the quarter ended June 30, 2017, Intermezzo product sales projections significantly declined. As such, the Company performed a recoverability test and it was determined that the summation of the undiscounted future cash flow of the Intermezzo product rights were less than its carrying value. As a result, the Company recorded an impairment charge during the three months ended June 30, 2017 of $0.7 million. No impairment was recorded during the three months ended September 30, 2017 or the year ended December 31, 2016.

Basic net loss per share ~~available to common stockholders~~ is calculated by dividing the net loss ~~available to common stockholders~~ by the weighted-average number of common ~~shares~~stock outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share ~~available to common stockholders~~ is computed by dividing the net loss ~~available to common stockholders~~ by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method or the if-converted method, as applicable. For purposes of this calculation, shares of common stock issuable upon conversion of convertible debt, stock options, restricted stock units, ~~and~~ warrants to purchase common stock, and shares issuable under the employee stock purchase plan are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share ~~available to common stockholders~~ when their effect is dilutive.

The following outstanding shares subject to stock options and restricted stock units, ~~and~~ warrants to purchase shares of common stock, common stock issuable upon conversion of convertible debt and shares issuable under the employee stock purchase plan were antidilutive due to a net loss in the periods presented and, therefore, were excluded from the dilutive securities computation as of the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 as indicated below:

On December 18, 2019, the Company entered into a five-year contract with the Biomedical Advanced Research and Development Authority, or BARDA, a division of the U.S. Department of Health and Human Services’ Office of the Assistant Secretary for Preparedness and Response, herein referred to as the BARDA contract, with an option to extend up to ten years, to support the development of NUZYRA for the treatment of pulmonary anthrax, FDA post-marketing requirements, or PMRs, associated with the initial NUZYRA approval, and with an option for BARDA to procure up to 10,000 treatment courses of NUZYRA for the Strategic National Stockpile, or SNS.

The BARDA contract could result in payments to the Company 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, the Company 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 New Drug Application, or 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 additional staged funding, including approximately $76.8 million for existing FDA PMR commitments that began in April 2020 and approximately $20.4 million for manufacturing-related requirements, which also began in April 2020. BARDA exercised the options to award the initial funding in December 2019 and the additional staged funding in April 2020. The additional staged funding will support all FDA PMRs associated with the approval of NUZYRA, including CABP and pediatric studies as well as a five-year post-marketing bacterial surveillance study, and support the U.S. onshoring and security requirements of Paratek manufacturing activities for NUZYRA.

The remaining funding under the BARDA contract 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.

The Company recognized $0.3 million of government contract service revenue under the BARDA contract during the three months ended March 31, 2020.

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, Paratek 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, 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 Paratek 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 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.

The Company recognized an insignificant amount of royalty revenue for the three months ended March 31, 2020 and 2019 under the Tetraphase License Agreement.

On April 21, 2017, Paratek Bermuda Ltd., a wholly-owned subsidiary of Paratek Pharmaceuticals, Inc., and Zai ~~Lab (Shanghai) Co., Ltd., or 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,~~PRC, 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, and is eligible to receive up to $14.0 million~~ in ~~potential regulatory milestone payments and $40.5 million in potential commercial milestone payments,~~ ~~the next being~~April 2017, $5.0 million upon approval by the ~~U.S. Food & Drug Administration, or~~ 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 PRC in December 2019. The Center for Drug Evaluation of China’s NMPA granted priority review status to the NDA submitted by Zai for the treatment of CABP and ABSSI in May 2020. Paratek is eligible to receive up to $6.0 million in potential future regulatory milestone payments and $40.5 million in potential future commercial milestone payments, the next being $6.0 million upon regulatory approval for a licensed product in the PRC. The terms of the Zai ~~will~~Collaboration 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.

The Company evaluated the Zai Collaboration Agreement under ASC ~~Subtopic 605-25, “~~Topic 606, ~~Multiple Element Arrangements”~~Revenue from Contracts with Customers.The Company determined that there were ~~five deliverables~~six material promises under the Zai Collaboration Agreement: (i) an exclusive license to develop, manufacture and commercialize omadacycline in the ~~territory;~~Zai territory, (ii) an the initial technology transfer, ~~of technology~~; (iii) a transfer of certain materials and materials know-how, (iv) ~~an additional~~optional manufacturing services, (v) optional regulatory support and (vi) optional commercialization support. The Company determined that the exclusive license and initial technology transfer were not distinct from one another, as the license has limited value without the transfer of ~~materials;~~the Company’s technology; which will allow Zai to develop the manufacturing process and commercialize omadacycline in the Zai territory in the timeline anticipated under the agreement~~(v) participation~~. Without the technology transfer, Zai would incur additional costs to recreate the Company’s know-how. Therefore, the license and initial technology transfer are combined as a single performance obligation. The transfer of materials is a single distinct performance obligation. The Company evaluated the option rights for manufacturing services, regulatory support and commercialization support to determine whether they represent or include material rights to Zai and concluded that the options were not issued at a discount, and therefore do not represent material rights. As such, they are not considered performance obligations at the outset of the arrangement.

Based on ~~a joint steering committee, or JSC,~~these assessments, the Company determined that two performance obligations existed at the outset of the Zai Collaboration Agreement: (i) the exclusive license combined with the initial technology transfer and ~~joint development committee, or JDC.~~(ii) the transfer of certain materials.

The ~~consideration allocable to~~Company satisfied both performance obligations and recognized the ~~delivered unit or units~~upfront payment of ~~accounting is limited to~~$7.5 million as revenue in the ~~amount that is not contingent upon the delivery of additional items or meeting other specified performance conditions. Therefore, the Company~~year ended December 31, 2017. Future potential milestone payments were excluded from the ~~allocable consideration~~transaction price as they are fully constrained as the ~~milestone payments and royalties, regardless~~risk of significant reversal has not yet been resolved. The achievement of the ~~probability that such~~future potential milestones is not within the Company’s control and is subject to certain research and development success or regulatory approvals and therefore carry significant uncertainty. The Company will reevaluate the likelihood of achieving future milestones at the end of each reporting period. As all performance obligations have been satisfied, if the risk of significant reversal is resolved, any future milestone ~~and royalty payments will be made, until~~revenue from the ~~events that give rise to such payments occur. In addition,~~ all regulatory milestones in the Zai Collaboration Agreement are considered substantive on the basis of the contingent nature of the milestone, including factors such as regulatory and other risks that must be overcome to achieve each milestone as well as the level of effort and investment required. Accordingly, such amountsarrangement will be recognized as revenue in the period ~~in which~~ the ~~associated milestone~~risk is ~~achieved, assuming all other revenue recognition criteria are met. All commercial milestones will be accounted for in~~relieved.

As FDA approval was not within the ~~same manner as royalties~~control of the Company and ~~recorded as revenue upon~~was not obtained until October 2018, the achievement of the milestone ~~assuming all other~~was not deemed probable and the risk of significant reversal of revenue ~~recognition criteria are met.~~

was not resolved until that time. Upon the FDA approval, the uncertainty related to this milestone was resolved and a significant reversal of revenue would not occur in future periods. As such, the $5.0 million milestone payment was recognized as revenue at the time of FDA approval in the fourth quarter of 2018.

~~The Company determined that all five deliverables listed above had value to~~As submission of the first regulatory approval application for a licensed product in the PRC is not within the control of the Company ~~on a stand-alone basis~~ and ~~therefore five units of accounting were identified. The Company determined, however, that~~was not obtained until December 2019, the ~~best estimate for the selling price~~achievement of the ~~initial transfer~~milestone was not was not deemed probable and the risk of ~~technology, transfer~~significant reversal of ~~certain materials~~revenue was not resolved until that time. Upon submission, the uncertainty related to this milestone was resolved and ~~materials know-how, the additional transfer~~a significant reversal of ~~materials and participation on the JSC and JDC were all inconsequential.~~revenue would not occur in future periods. As such, the ~~Company~~$3.0 million milestone payment was recognized ~~the total arrangement consideration~~ as revenue ~~during~~at the ~~quarter ended June 30, 2017.~~

~~Under~~time of the ~~Zai Collaboration Agreement, Zai will pay taxes incurred~~regulatory approval application submission in the ~~territory by Paratek on Paratek’s behalf~~fourth quarter of 2019.

As regulatory approval in the PRC is not within the control of the Company, the achievement of the milestone was not deemed probable and ~~deduct these taxes from~~ the ~~payments due to Paratek. Withholding and other value-added taxes~~risk of ~~$0.8 million were incurred on the $7.5 million upfront payment.~~significant reversal of revenue was not resolved as of March 31, 2020. As such, the ~~Company received $6.7 million, net of taxes, during~~next milestone payment was not recognized as revenue in the ~~nine months~~year ended ~~September 30, 2017. These taxes were paid by Zai on behalf of the Company.~~

~~During the nine months ended September 30, 2017, the Company recognized revenue under the Zai Collaboration Agreement of $7.5 million, which represents the upfront payment. During~~December 31, 2019 or the three months ended ~~September 30, 2017, the Company did not recognize revenue under the Zai Collaboration Agreement.~~March 31, 2020.

In July 2007, the Company and Warner Chilcott Company, Inc. ~~(now~~(which became a part of Allergan plc, or Allergan), entered into a collaborative research and license agreement ~~or the Allergan Collaboration Agreement,~~ under which the Company 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 Allergan Collaboration Agreement, the Company and Allergan 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, the Company may conduct certain additional development activities to the extent the Company determines in good faith that the Company has the necessary resources available for such activities. Allergan has agreed to reimburse the Company for its costs and expenses, including third-party costs, incurred in conducting any such development activities.

Under the terms of the ~~Allergan~~Almirall Collaboration Agreement, ~~Allergan~~Almirall 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. The Company has agreed during the term of the ~~Allergan~~Almirall 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 Allergan~~Almirall has agreed during the term of the ~~Allergan~~Almirall 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.

In February 2020, the Company finalized a license agreement with Almirall granting the Company exclusive rights to develop, manufacture and commercialize sarecycline outside of the U.S., including rights of reference to Almirall’s clinical data thus formalizing the Company’s rights to develop, manufacture and commercialize sarecycline in the rest of the world. In connection with that license, the Company then exclusively licensed Almirall pursuant to the Almirall China License Agreement, the rights to develop, manufacture and commercialize sarecycline in the greater China region. Almirall currently holds a nonexclusive license to develop and commercialize sarecycline for the treatment of rosacea in the U.S., and in the U.S., Paratek cannot grant rights on back-up compounds, lead candidate(s), or products licensed to Almirall for rosacea.

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. As the performance obligation to deliver the license was satisfied in 2007 and research and development services were 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.

The Company ~~earned~~received an upfront fee in the amount of $4.0 million upon the execution of the ~~Allergan~~Almirall Collaboration Agreement, $1.0 million upon filing of an Investigational New Drug Application in 2010, ~~and~~ $2.5 million upon initiation of Phase 2 trials in ~~2012. In December 2014, the Company also earned~~2012 and $4.0 million upon initiation of Phase 3 trials associated with the ~~Allergan~~Almirall Collaboration ~~Agreement.~~ Agreement in December 2014.

In ~~addition, Allergan may be required to pay~~December 2017, the ~~Company~~FDA’s acceptance of the NDA for sarecycline was received, triggering a milestone payment of $5.0 million earned upon acceptance of an ~~aggregate~~NDA for a product licensed under the Almirall Collaboration Agreement.

In October 2018, the FDA’s regulatory approval of ~~approximately $17.0 million upon~~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 ~~specified future regulatory milestones,~~ the ~~next being $5.0 million upon acceptance by~~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 significant reversal of ~~a NDA submission. Allergan~~revenue would not occur in future periods. As such, the $12.0 million milestone payment was recognized as revenue at the time of FDA approval in the fourth quarter of 2018.

Almirall is also obligated to pay the Company tiered royalties, ranging from the mid-single digits to the low double digits, based on net sales of tetracycline compounds developed under the ~~Allergan~~Almirall Collaboration Agreement, with a standard royalty reduction post patent expiration for such product for the remainder of the royalty term. ~~Allergan’s~~Almirall’s obligation to pay the Company royalties for each tetracycline compound it commercializes under the ~~Allergan~~Almirall 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.

Royalty payments are recognized when the sales occur. The Company recognized $0.2 million of royalty revenue recognized for sales of SEYSARA in the U.S. by Almirall for the three months ended March 31, 2020 under the Almirall Collaboration Agreement. During the first quarter of 2020, royalty revenue recognized for sales of SEYSARA in the U.S. was estimated using third party data and an approximation of discounts and allowances to calculate net product sales, to which the Company then applied the applicable royalty percentage specified in the Almirall Collaboration Agreement. Differences between actual and estimated royalty revenues will be adjusted for in the period in which they become known, which is expected to be the following quarter. During the three months ended March 31, 2020, the Company recorded an adjustment of $0.1 million to decrease the estimated royalty revenue to the actual royalty revenue payment received for sales that occurred during the three months ended December 31, 2019.

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

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, including requirements to (i) file an Investigational New Drug Application (or analogous foreign submission) for sarecycline for the treatment of acne in the greater China region in calendar year 2020, (ii) receive regulatory approval for sarecycline for the treatment of acne in the greater China region within seven years following such submission and (iii) commercialize sarecycline for the treatment of acne in the greater China region within eighteen months after obtaining regulatory approval. If Almirall does not satisfy the diligence requirements set forth in subclauses (ii) or (iii) above, the Company may terminate the China License.

The Company has agreed during the term of the Ex-U.S. License to use commercially reasonable efforts to not, ~~received any amounts~~directly or ~~recognized any revenue under this arrangement since 2014.~~indirectly, make sarecycline products commercialized by the Company, its affiliates or its sublicensees available for resale in the U.S., and Almirall has agreed during the term of the Ex-U.S. License to use commercially reasonable efforts to not, directly or indirectly, make sarecycline products commercialized by Almirall, their affiliates or their sublicensees available for resale outside of the greater China region. Similarly, the Company has agreed during the term of the China License to use commercially reasonable efforts to not, directly or indirectly, make sarecycline products commercialized by the Company, its affiliates or its sublicensees available for resale in the greater China region, and Almirall has agreed during the term of the China License to use commercially reasonable efforts to not, directly or indirectly, make sarecycline products commercialized by Almirall, their affiliates or their sublicensees available for resale outside of the greater China region, other than as provided in the Almirall Collaboration Agreement.

In connection with the Ex-U.S. License, the Company pays Almirall, on a country-by-country and product-by-product basis, (i) for eight years following the first commercial sale of a sarecycline product in a country, a royalty in the middle-single digits on its or its affiliates’ nets sales of sarecycline products outside of the U.S., subject to certain standard reductions, and (ii) 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 sublicensees in connection with developing and commercializing sarecycline outside of the U.S., which ranges from one-fifth to one-half of such consideration, 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 the Company 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.

In February 1997, the Company and Tufts University, or Tufts, entered into a license agreement under which the Company 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. The Company subsequently entered into ~~ten~~eleven amendments to that agreement, 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 the Company to Tufts under sublicense agreements with specified sublicensees. The Company is obligated under the Tufts License Agreement to provide Tufts with annual diligence reports and a business plan and to meet certain other diligence milestones. The Company has 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. The Company is 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 its sole expense. The Company has the first right, but not the obligation, to enforce the licensed intellectual property against infringement by third parties.

The Company issued Tufts 1,024 shares of the Company’s common stock on the date of execution of the original license agreement, and the Company ~~may be~~was required to make certain payments of up to $0.3 million to Tufts upon the achievement by products developed under the ~~agreement~~Tufts License Agreement of specified development and regulatory approval milestones. The Company ~~has already~~ made a payment of $50,000 to Tufts for achieving the first milestone following commencement of the Phase 3 clinical trial for ~~omadacycline.~~omadacycline and a payment of $100,000 to Tufts for achieving the second milestone following its first marketing application submitted in the U.S. The third, and final, payment of $150,000 became due upon FDA approval of omadacycline in October 2018. The Company is also obligated to pay Tufts a minimum royalty payment in the amount of $25,000 per year. In addition, the Company is 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 the Company enters into a sublicense under the Tufts License Agreement, based on the applicable field of use for such product, the Company ~~agreed~~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 the Company that are reasonably attributable to the sublicense of the rights granted to the Company 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 the Company by the sublicensee or (b) the amount of royalty payments that would have been paid by the Company to Tufts if the Company had sold the product. The Company paid $0.1 million, or 1.5%, of a sublicense issue fee to Tufts during the nine months ended September 30, 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 the Company under the agreement and after any such expiration the Company 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 the Company 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 the Company has started to commercialize a product under the Tufts License Agreement, the Company ceases to carry on its business for a period of 90 consecutive days. The Company has the right to terminate the Tufts License Agreement at any time upon 180 days’ notice. Tufts has the right to convert the Company’s exclusive license to a non-exclusive license if the Company does not commercialize a product licensed under the ~~agreement~~Tufts License Agreement within a specified time period.

~~Purdue Pharma L.P.~~The Company incurred $0.1 million and an insignificant amount of royalty expense for the three months ended March 31, 2020 and March 31, 2019, respectively.

In ~~July~~September 2009, the Company and ~~Purdue Pharma L.P.~~Novartis International Pharmaceutical Ltd., or ~~Purdue Pharma,~~Novartis, entered into a ~~license~~Collaborative Development, Manufacture and ~~collaboration agreement,~~Commercialization License Agreement, or the ~~Purdue Collaboration~~Novartis Agreement, ~~that grants an~~which provided Novartis with a global, exclusive patent and technology license ~~to Purdue Pharma to commercialize Intermezzo~~for the development, manufacturing and marketing of omadacycline. The Novartis Agreement was terminated by Novartis without cause in June 2011 and the ~~United States~~termination was effective 60 days later. The Company and Novartis subsequently entered in a letter agreement in January 2012, or the Novartis Letter Agreement, as amended, pursuant to ~~which:~~

~~Purdue Pharma is obligated~~also agreed to pay Novartis a 0.25% royalty, to be paid from net sales received by the Company ~~tiered base royalties on net sales~~in any country following the launch of ~~Intermezzo~~omadacycline in the United States ranging from the mid-teens up to the mid-20% level, with each such royalty tiers subject to an increase by a percentage in the low single digits upon a specified anniversary of regulatory approval of Intermezzo. The base royalty is tiered depending upon the achievement of certain fixed net sales thresholds by Purdue Pharma, which net sales levels reset each year for the purpose of calculating the royalty. The royalty tiers are subject to reductions upon generic entrythat country and ~~patent expiration. Purdue Pharma is obligated to pay royalties~~continuing until the later of 15expiration 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 first royalty payment became payable as of March 31, 2019. The amended Novartis Letter Agreement resulted in a long-term liability in the ~~United States~~amount of $3.4 million and $3.4 million as of March 31, 2020 and December 31, 2019, respectively, included within “Other liabilities” on the Company’s consolidated balance sheet. In addition, a short-term liability of $0.1 million, included within “Other current liabilities” on the Company’s consolidated balance sheet, exists as of March 31, 2020 that represents the portion of royalty payments due to Novartis within twelve months. There are no other payment obligations to Novartis under the Novartis Agreement or the ~~expiration of patent claims related to Intermezzo; and~~amended Novartis Letter Agreement.

~~Purdue Pharma is obligated to pay~~9. Capital Stock

In July 2019, the Company entered into an At the Market Sales Agreement, or the 2019 Sales Agreement, with Jefferies LLC, or Jefferies, and BTIG, LLC, or BTIG, under which it may offer and sell its common stock having aggregate sales proceeds of up to ~~an additional $70.0~~$50.0 million ~~upon the achievement of certain net sales targets for Intermezzo in the United States.~~

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 be terminated by the Company upon Purdue Pharma commencing an action that challenges the

validity of Intermezzo related patents or if Purdue Pharma is excluded from participation in federal healthcare programs. The Purdue Collaboration Agreement may be terminated by either party in the event of a material breach by or insolvency of the other party.

The Company 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.

~~During the first quarter of 2014, Purdue Pharma discontinued use of the Purdue Pharma sales force to actively market Intermezzo to healthcare professionals.~~

In October 2014, the Company announced that its 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 the Company 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 the Company’s payment obligation of the proceeds of sale or disposition of the Intermezzo assets to the former Transcept stockholders under the Merger Agreement, the Company executed the Royalty Sharing Agreement pursuant to which the Company agreed to pay to the former Transcept stockholders fifty percent of all royalty income received by the Company 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 former Transcept stockholders.

~~Shin Nippon Biomedical Laboratories Ltd.~~

In September 2013, the Company and Shin Nippon Biomedical Laboratories Ltd., or SNBL, entered into a license agreement, or the SNBL License Agreement, pursuant to which SNBL granted the Company an exclusive worldwide license to commercialize SNBL’s proprietary nasal drug delivery technology to develop TO-2070. The Company was developing TO-2070 as a treatment for acute migraine using SNBL’s proprietary nasal powder drug delivery system. Under the SNBL License Agreement, the Company was required to fund all development and regulatory approval with respect to TO-2070. Pursuant to the SNBL License Agreement, the Company paid an upfront nonrefundable technology license fee of $1.0 million, and the Company was also obligated to pay up to an aggregate of $41.5 million upon the achievement of certain development, regulatory and sales milestones, and tiered, low double-digit royalties on annual net sales of TO-2070.

In September 2014, the Company and SNBL entered into a termination agreement and release, or the SNBL Termination Agreement, pursuant to which, among other things, the SNBL License Agreement was terminated and the Company assigned all of its rights, interest and title to the TO-2070 asset to SNBL in exchange for a portion of certain future net revenue received by SNBL as set forth in the SNBL Termination Agreement, up to an aggregate of $2.0 million.

~~9. Capital Stock~~

~~In October 2015 and February 2017, Paratek Pharmaceuticals, Inc. entered into Controlled Equity Offering~~^SM Sales Agreements, or the 2015 Sales Agreement and 2017 Sales Agreement, respectively, and collectively, the Sales Agreements, with Cantor Fitzgerald & Co., or Cantor, under which the Company could, at its discretion, from time to time ~~sell shares of~~through Jefferies or BTIG as its ~~common stock, with a~~ sales value of up to $50 million under each Sales Agreement through Cantor. The Company provided Cantor with customary indemnification rights, and Cantor was entitled to a commission at a fixed rate of 3% of the gross proceeds per share sold.agents. Sales of the ~~shares under the Sales Agreements were to~~Company’s common stock through Jefferies or BTIG, if any, will be made ~~in transactions~~by any method permitted by law deemed to be an “at the market ~~offerings”,~~offering” as defined in Rule ~~415~~415(a)(4) under the Securities Act of 1933, as ~~amended.~~amended, including without limitation sales made directly on the Nasdaq Global Market or any other existing trading market for its common stock. Jefferies and BTIG will use commercially reasonable efforts to sell the Company’s common stock from time to time, based upon instructions from the Company (including any price, time or size limits or other customary parameters or conditions we may impose). The Company will pay Jefferies or BTIG, as applicable, a commission of 3% of the gross sales proceeds of any common stock sold through Jefferies and BTIG under the 2019 Sales Agreement. The Company has ~~sold all $50 million~~also provided Jefferies and BTIG with customary indemnification rights.

The Company is not obligated to make any sales of ~~shares of its~~ common stock under the ~~2015~~2019 Sales Agreement. The Company ~~received $36.9~~sold 2,334,107 shares of common stock pursuant to the 2019 Sales Agreement for $9.1 million in proceeds, after deducting commissions of ~~$1.1~~$0.3 million, ~~from the sale of 2,326,119 shares of common stock under the 2015 Sales Agreement~~ during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2020. ~~The Company received $45.9 million in proceeds, after deducting commissions of $1.4 million, from the sale of~~ ~~2,006,007~~ ~~shares of common stock, as of November 1, 2017, under the 2017 Sales Agreement.~~ As of ~~November 1, 2017, $2.7~~May 6, 2020, $9.3 million ~~remain~~remains available for sale under the ~~2017~~2019 Sales Agreement.

The offering of shares of the Company’s common stock pursuant to the 2019 Sales Agreement will terminate upon the earlier of (i) the sale of all common stock subject to the 2019 Sales Agreement, or (ii) termination of the 2019 Sales Agreement in accordance with its terms.

Warrants to Purchase Common Stock

Warrants to purchase preferred stock with intrinsic value issued to HBM Healthcare Investments (Cayman) Ltd., Omega Fund III, L.P., and K/S Danish BioVenture, all beneficial owners of more than 5% of the Company’s common stock, were exchanged for 9,614 warrants to purchase common stock in connection with the with the business combination between privately-held Paratek Pharmaceuticals, Inc. and Transcept Pharmaceuticals, Inc. in October 2014, or theMerger. These 9,614 warrants to purchase common stock have an exercise price of $0.15 per share and will, if not exercised, expire in 2021.

~~As described in Note 13,~~ ~~Long-term Debt, in~~In connection with athe Loan and Security Agreement, dated September 30, 2015, as amended from time to time, or the Hercules Loan Agreement, into which the Company entered with Hercules Technology II, L.P. and Hercules Technology III, L.P., together, Hercules, and certain other lenders and Hercules Technology Growth Capital, Inc. (as agent), the Company issued to each of Hercules Technology II, L.P. and Hercules Technology III, L.P. a warrant to purchase 16,346 shares of its common stock (32,692 shares of common stock in total) at an exercise price of $24.47 per share, or the Hercules Warrants, on September 30, 2015, which expire five years from issuance or at the consummation of a Public Acquisition, as defined in each of the Hercules Warrant agreements.

~~As described in Note 13,~~ ~~Long-term Debt, in~~In connection with the second amendment to the Hercules Loan Agreement ~~Amendment (as defined in Note 13,~~ ~~Long-term Debt~~), on December 12, 2016, the Company issued to each of Hercules Technology II, L.P. and Hercules Technology III, L.P. a warrant to purchase 18,574 shares of its common stock (37,148 shares of common stock in total) at an exercise price of $13.46 per share, or the ~~Loan~~Second Amendment Warrants. ~~Additionally, in~~

In connection with the borrowing ofunder the ~~Third Tranche (as defined in Note 13,~~ ~~Long-term Debt~~)Hercules Loan Agreement on June 27, 2017, the Company issued an additional warrant to Hercules Capital, Inc. to purchase 5,374 shares of its common stock at an exercise price of $23.26 per share, or the Additional Warrant.~~The Additional Warrant’s total relative fair value of $0.1 million was determined using a Black-Scholes option-pricing model~~

In connection with the ~~following assumptions:~~fifth amendment to the Hercules Loan Agreement, on August 1, 2018, the Company issued to Hercules Capital, Inc. a warrant to purchase up to 19,627 shares of its common stock at an exercise price of $10.19 per share, or the Fifth Amendment Warrant.

	~~June 30,~~ ~~2017~~
~~Volatility~~		~~67.8~~	%
~~Weighted average risk-free interest rate~~		~~1.8~~	%
~~Expected dividend yield~~		~~0.0~~	%
~~Expected life of options (in years)~~		~~5.0~~

~~Each Loan~~The Hercules Warrants, Second Amendment Warrants, Additional Warrant and the Fifth Amendment Warrant, collectively referred to as the Warrants, may be exercised on a cashless basis. The ~~Loan Amendment~~ Warrants are exercisable for a term beginning on the date of issuance and ending on the earlier to occur of five years (or seven years, in the case of the Fifth Amendment Warrant) from the date of issuance or the consummation of certain acquisitions of the Company as set forth in the ~~Loan Amendment~~various agreements for the Warrants.

10. ~~Other~~ Accrued Expenses

~~Other accrued~~Accrued expenses consist of the following (in thousands):

	September 30, 2017		December 31, 2016		March 31,		December 31,
					2020		2019
Accrued interest					$	4,221	$	2,264
Accrued compensation						3,632		7,580
Accrued sales allowances						2,188		1,492
Accrued commercial						1,874		1,445
Accrued inventory						1,756		125
Accrued manufacturing						1,713		1,026
Accrued contract research						1,226		1,612
Accrued professional fees						968		876
Accrued legal costs		218		358		394		181
Accrued compensation		2,595		2,609
Intermezzo payable		93		105
Accrued professional fees		1,468		1,118
Accrued contract manufacturing		3,760		1,940
Accrued other		206		298		128		95
Total	$	8,340	$	6,428	$	18,100	$	16,696

Financial instruments, including cash, cash equivalents, restricted cash, money market funds, U.S. treasury ~~and government agency~~ securities, accounts receivable, accounts payable, and accrued expenses ~~contingent obligations and the Intermezzo reserve~~ are carried on the condensed consolidated financial statements at amounts that approximate fair value. The fair value of the Company’s long-term debt is determined using current applicable rates for similar instruments as of the balance sheet date. The ~~carrying~~fair value of the ~~long-term~~Company’s debt ~~approximates its fair value~~(including the Notes as ~~the interest rate~~defined in Note 13, Long-Term Debt), is ~~near current market rates.~~$175.7 million as of March 31, 2020. The fair value of the Company’s ~~long-term~~ debt was determined using Level 3 inputs. Fair values are based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates, reflecting varying degrees of perceived risk.

The following table presents information about the Company’s financial assets and liabilities that have been measured at fair value as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019 and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities or other inputs that are observable market data. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability (in thousands):

Description

Quoted
Prices in
Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total

September 30, 2017

Assets:

U.S. treasury securities

$
128,649

$
—

$
—

$
128,649

Government agencies

—

$
1,796

—

1,796

Total Assets

$
128,649

$
1,796

$
—

$
130,445

Liabilities:

Contingent obligations

$
—

$
—

$
84

$
84

Total Liabilities

$
—

$
—

$
84

$
84

December 31, 2016

Assets:

U.S. treasury securities

$
62,556

$
—

$
—

$
62,556

Government agencies

—

12,520

—

12,520

Total Assets

$
62,556

$
12,520

$
—

$
75,076

Liabilities:

Contingent obligations

$
—

$
—

$
655

$
655

Total Liabilities

$
—

$
—

$
655

$
655

Description	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
March 31, 2020
Assets:
U.S. treasury securities	$	70,166	$	—	$	—	$	70,166
Total Assets	$	70,166	$	—	$	—	$	70,166
December 31, 2019
Assets:
U.S. treasury securities	$	113,077	$	—	$	—	$	113,077
Total Assets	$	113,077	$	—	$	—	$	113,077

U.S. treasury securities fair values can be obtained through quoted market prices in active exchange markets and are therefore classified as Level 1. The pricing on government agency securities was primarily sourced from independent third party pricing services, overseen by management, and is based on valuation models that consider standard input factor such as deal quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment spreads, credit information and the bond’s terms and conditions, among other things, and are therefore classified as Level 2.

On October 28, 2016, in satisfaction of the Company’s payment obligation of the proceeds of sale or disposition of the Intermezzo product rights to the former Transcept stockholders under the Merger Agreement, the Company executed the Royalty Sharing Agreement with the Special Committee. Under the Royalty Sharing Agreement, the Company agreed to pay to the former Transcept stockholders fifty percent of all royalty income received by the Company 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 former Transcept stockholders. The Company determined that the Royalty Sharing Agreement represents a modification to the original contingent obligations established under the Merger Agreement in accordance with ASC 805, ~~Business Combinations.~~

The significant unobservable inputs used in the fair value measurement of the contingent obligation to former Transcept stockholders with respect to the Intermezzo product rights as of September 30, 2017 and December 31, 2016 were estimated future Intermezzo product revenues and associated royalties due to the Company as well as the appropriate discount rate given consideration to the market and forecast risk involved. The results of this valuation yielded a decrease in the contingent obligation to former Transcept stockholders of $22,000 and $0.6 million during the three and nine months ended September 30, 2017, respectively. Significant increases or decreases in any of those inputs would result in a substantially lower or higher fair value measurement.

~~The following table provides a roll forward of the fair value of contingent obligations categorized as Level 3 instruments, for the nine months ended September 30, 2017 (in thousands):~~12. Stock-Based and Incentive Compensation

~~As described in Note 2,~~ ~~Summary of Significant Accounting Policies and Basis of Presentation~~, the Company adopted ASU 2016-09. ASU 2016-09 requires the Company to recognize compensation expense of stock-based awards over the vesting periods of the awards, and realize forfeitures when they occur. The following table presents stock-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive loss (in thousands):

Stock-based compensation expense is estimated as of the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which generally represents the vesting period. The Company estimates the fair value of its stock options using the Black-Scholes option-pricing model. The weighted-average assumptions used to determine the fair value of the stock option grants is as follows:

The ~~number~~Company’s Board of ~~shares of the Company’s common stock available for issuance under~~Directors adopted the Paratek Pharmaceuticals, Inc. 2015 Equity Incentive Plan, or the 2015 Plan, which was ~~initially~~approved by Company stockholders at the annual meeting of shareholders held on June 9, 2015, reserving 1,200,000 ~~shares.~~shares of common stock for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, RSU awards, performance stock awards, performance cash awards and other stock awards to directors, officers, employees and consultants. The ~~initial number of shares authorized under the~~ 2015 Plan ~~may~~is intended to be ~~increased by~~ the ~~number~~successor to and continuation of shares that again become available for grant as a result of forfeited or terminated awards or shares withheld in satisfaction of the exercise price or tax withholding obligations associated with awards under the Paratek Pharmaceuticals, Inc., 2006 Incentive Award Plan ~~as amended,~~ and the Paratek Pharmaceuticals, Inc. 2014 Equity Incentive Plan, ~~with~~or collectively, the ~~total amount~~Prior Plans. When the 2015 Plan became effective, no additional stock awards were granted under the Prior Plans, although all outstanding stock awards granted under the Prior Plans will continue to be subject to the terms and conditions as set forth in the agreements evidencing such stock awards and the terms of the ~~initial~~Prior Plans. On January 1, 2020, 1,991,387 shares ~~plus~~of common stock were automatically added to the ~~forfeited or terminated shares not to exceed 2,000,000 shares. In addition, the number of~~ shares authorized for issuance under the 2015 Plan ~~will be automatically increased each year~~ pursuant to ~~an “evergreen”~~a “Share Reserve” provision contained in the 2015 Plan. The ~~number of shares available for issuance will~~Share Reserve automatically ~~increase~~increases on January 1 of each year, for the period commencing on (and including) January 1, 2016 and ending on (and including) January 1, 2025, in an amount equal to 5% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year. Notwithstanding the foregoing, the Board of Directors of the Company may act prior to January 1 of a given year to provide that there will be no January 1 increase in the ~~number of shares available for issuance~~Share Reserve for such year or that the increase in the ~~number of shares available for issuance~~Share Reserve for such year will be a lesser number of shares of common stock than would otherwise automatically occur. ~~On January 1, 2017, 1,167,931~~Total shares ~~of common stock were automatically added to the shares authorized~~available for future issuance under the 2015 Plan ~~pursuant~~are 82,749 shares as of March 31, 2020.

The Company recognizes the stock-based compensation expense of awards subject to performance-based vesting conditions over the requisite service period, to the ~~evergreen provision.~~

extent achievement of the performance condition is deemed probable relative to targeted performance using the accelerated attribution method. If achievement of the performance condition is not probable, but the award will vest based on the service condition, the Company recognizes the stock-based compensation expense over the requisite service period. A change in the requisite service period that does not change the estimate of the total stock-based compensation expense (i.e., it does not affect the grant-date fair value or quantity of awards to be recognized) is recognized prospectively over the remaining requisite service period.

~~In June 2017,~~ the Company’s Board of Directors adopted the Paratek Pharmaceuticals, Inc. 2017 Inducement Plan, or the 2017 Inducement Plan, in accordance with NASDAQ Rule 5635(c)(4), reserving 550,000 shares of common stock solely for the grant of inducement stock options to employees entering into employment or returning to employment after a bona fide period of non-employment with the Company. During the ~~nine~~three months ended ~~September 30, 2017,~~ March 31, 2020, the Company’s Board of Directors granted ~~176,000~~61,300 stock options and ~~35,000 restricted stock unit awards, or~~2,495,950 RSUs to employees of the Company under the 2017 Inducement Plan. The stock option awards are subject to time-based vesting over a period of one to four years. The RSU awards made to an employee of the Company is subject to time-based vesting, with 100% of the shares of common stock subject to the RSUs vesting three years from the grant date. ~~Although the Company does not currently anticipate the issuance of additional stock options under the 2015 Inducement Plan,~~ ~~73,167 shares remain available for grant under the 2015 Inducement Plan.~~

~~During the nine months ended September 30, 2017, the Company’s Board of Directors granted 735,400 stock options and 867,800 restricted stock units~~ to directors, executives and employees of the Company under the 2015 Plan. The stock option awards are subject to time-based vesting over a period of one to four years. The RSU awards ~~made~~granted to ~~directors of the Company~~executives in February 2020 are subject to time-based vesting, with ~~100%~~1/3 of the shares vesting on December 10, 2020, or the Initial Vest Date, and an additional 1/3 of ~~common stock~~the shares vesting on the succeeding two anniversaries of the Initial Vesting Date. The RSU awards granted to non-executive employees of the Company in February 2020 are subject to time-based vesting and vest in three equal installments commencing on each of the ~~RSUs vesting one year from~~one-year anniversaries of the grant date.The grants also included performance-based RSU, or PRSU, awards to certain executives and employees of the Company. The PRSU awards ~~issued~~granted in February 2020 will vest as follows: (a) 25/55 on certain net product revenue achievements, (b) 15/55 on achievement of certain clinical milestones related to NUZYRA and (c) 15/55 on achievement of certain regulatory milestones related to NUZYRA. No stock-based compensation expense has been recognized related to the milestones above as the Company does not deem the achievement of the events to be probable as of March 31, 2020.

During the year ended December 31, 2019, the Company’s Board of Directors granted PRSU awards to certain executives and employees of the Company in February 2019 and July 2019 under the 2015 Plan that will vest as follows: (a) 25/60 and (b) 25/60, each, on certain net product revenue achievements and (c) the remaining 10/60 on certain other business achievements. Since the Company believes it is probable that milestones (a) and (b) above will be achieved, the Company recognized stock-based compensation expense for a total of $0.4 million for the performance conditions during the ~~quarter~~three months ended ~~June 30, 2017~~March 31, 2020 using the accelerated attribution method. During the three months ended March 31, 2020, the Company’s Board of Directors modified the vesting terms related to the PRSUs that were expected to time vest on attainment of certain other business achievements. The modification resulted in the recognition of an insignificant amount of stock-based compensation expense during the three months ended March 31, 2020.

During the year ended December 31, 2018, the Company’s Board of Directors granted PRSU awards to certain executives and employees of the Company and those awards have vested or will vest as follows: ~~20% of the PRSUs vested upon~~(a) 10/55 shall be earned and time vest on achievement of ~~data lock for Study 16301 (oral only ABSSSI),~~European Medicines Agency, or EMA, filing preliminary validation, which occurred in ~~July 2017, or the First Milestone; 30% of the PRSUs~~October 2018, (b) 20/55 shall be earned and time vest ~~upon~~on achievement of ~~IV and oral NDA filing acceptances, or the Second Milestone; and 50% of the PRSUs shall vest upon FDA~~EMA approval of omadacycline, ~~or the Third Milestone, provided, that, each of the First Milestone, the Second Milestone~~ and the Third Milestone must occur no later than the fifth anniversary of the date of grant for the applicable portion of the PRSUs to vest. The PRSU awards issued during the quarter ended September 30, 2017(c) 25/55 shall ~~become~~be earned ~~upon FDA approval of omadacycline, or the Milestone, and shall, upon~~on achievement of the ~~Milestone, be eligible~~launch of omadacycline in the U.S. and time vest on the date that is 15 months following such launch date. During the year ended December 31, 2019, the Company’s Board of Directors modified the vesting terms related to the PRSUs in (b) above which were expected to time vest on achievement of EMA approval of omadacycline. The Company determined the awards were probable of vesting under the modified conditions. The modification resulted in 136,000 shares vesting during the year ended December 31, 2019 and the recognition of stock-based compensation expense of $0.5 million during the year ended December 31, 2019.

The Company’s Board of Directors adopted the Paratek Pharmaceuticals, Inc. 2015 Inducement Plan, or the 2015 Inducement Plan, in accordance with Nasdaq Rule 5635(c)(4), reserving 360,000 shares of common stock solely for the grant of inducement stock options to employees entering into employment or returning to employment after a bona fide period of non-employment with the Company. The Company has not made any grants under the 2015 Inducement Plan since December 31, 2015. Although the Company does not currently anticipate the issuance of additional grants under the 2015 Inducement Plan, as of March 31, 2020, 306,500 shares remain available for grant under that plan, as well as any shares underlying outstanding stock options that may become available for grant pursuant to ~~100%~~the plan’s terms. It is therefore possible that the Company may, based on the business and recruiting needs of the ~~PRSUs subject~~Company, issue additional stock options under the 2015 Inducement Plan.

In June 2017, the Company’s Board of Directors adopted the Paratek Pharmaceuticals, Inc. 2017 Inducement Plan, or the 2017 Inducement Plan, in accordance with Nasdaq Rule 5635(c)(4), reserving 550,000 shares of common stock solely for the grant of inducement stock options and RSU awards to employees entering into employment or returning to employment after a bona fide period of non-employment with the ~~award on~~Company. In October 2018, the ~~first anniversary~~Company’s Board of Directors approved the ~~Milestone achievement date.~~

~~The Company recognizes compensation cost~~reserve of an additional 500,000 shares for ~~awards with performance conditions if and when~~ the ~~Company concludes that it is probable that the performance condition will be achieved over the requisite service period. Since the First Milestone was achieved during the quarter ended September 30,~~ 2017 ~~and the Company believes it is more likely than not that the Second Milestone will be achieved prior to the fifth anniversary of the date of grant, the Company recognized compensation cost,~~Inducement Plan, for a total of ~~$0.6 million and $3.0 million, for both performance conditions during the three and nine months ended September 30, 2017, respectively, using the accelerated attribution method.~~

~~As of September 30, 2017, no additional~~1,050,000 shares ~~remained available~~reserved for issuance under ~~either~~it. During the ~~Paratek Pharmaceuticals, Inc. 2006 Equity Incentive~~three months ended March 31, 2020, the Company’s Board of Directors granted 21,100 stock options and 17,600 RSUs to employees of the Company under the 2017 Inducement Plan. The stock option awards are subject to time-based vesting over a period of one to four years. The RSU awards are generally subject to time-based vesting, with 100% of the shares of common stock subject to the RSU award vesting three years from the grant date. As of March 31, 2020, 379,666 shares remain available for grant under the 2017 Inducement Plan, as ~~amended, or the Paratek Pharmaceuticals, Inc. 2014 Equity Incentive Plan.~~

~~Total~~well as any shares underlying awards that may become available for ~~future issuance under~~grant pursuant to the ~~2015 Plan are 688 shares as of September 30, 2017.~~plan’s terms.

A summary of stock option activity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 is as follows:

In April 2020, certain executives voluntarily forfeited 1,073,891 outstanding stock options with exercise prices significantly above the current trading price of the Company’s common stock in order to make additional shares available for future grants to Company employees subsequent to the quarter ended March 31, 2020 under the Company’s 2014 Equity Incentive Plan, 2015 Equity Incentive Plan, and the 2017 Inducement Plan. The Company recognizes the effect of forfeitures as stock-based compensation expense as they occur.

A summary of ~~restricted stock unit~~RSU activity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 is as follows:

Total unrecognized stock-based compensation expense for all stock-based awards was ~~$22.3~~$14.0 million as of ~~September 30, 2017.~~March 31, 2020. This amount will be recognized over a ~~weighted average~~weighted-average period of ~~2.04~~1.78 years.

On June 3, 2009, at the annual meeting of stockholders, the stockholders of the Company approved the 2009 Employee Stock Purchase Plan, or the 2009 ESPP. The Company’s 2009 ESPP is designed to allow eligible employees of the Company to purchase shares of common stock through periodic payroll deductions and during specified offering periods under the plan. The price of common stock purchased under the 2009 ESPP is equal to 85% of the lower of the fair market value of the common stock on the commencement date of each offering period or the specified purchase date. As of March 31, 2020, 36,539 shares were available for issuance under the 2009 ESPP. Since the Merger, the Company has not made the 2009 ESPP available to employees.

The Company’s Board of Directors adopted, and in June 2018 Company’s stockholders approved, the Paratek Pharmaceuticals, Inc. 2018 Employee Stock Purchase Plan, or the 2018 ESPP. The 2018 ESPP was amended in October 2018 to change the commencement dates of the offering periods. The maximum aggregate number of shares of the Company’s common stock that may be purchased under the 2018 ESPP is 943,294 shares, or the ESPP Share Pool, subject to adjustment as provided for in the 2018 ESPP. The 2018 ESPP allows eligible employees to purchase shares during certain offering periods, which will be six-month periods commencing June 1 and ending November 30 and commencing December 1 and ending May 31 of each year. The first offering under the 2018 ESPP occurred on December 1, 2018. As of March 31, 2020, 761,648 shares remain available for issuance. During the three months ended March 31, 2020, the Company recognized an insignificant amount in related stock-based compensation expense.

On ~~September 30, 2015,~~October 4, 2018, the Company adopted the Revenue Performance Incentive Plan, or the Plan, to grant performance-based cash incentive awards to key employees and consultants of the Company. The Plan provides for an incentive pool of up to $50.0 million, plus accrued interest during the period between the awards’ vesting date and payment dates. Each participant will be allocated a percentage of the incentive pool.

The incentive pool will be divided into two equal tranches with the first tranche vesting upon the Company’s achievement of cumulative net product revenues over $300.0 million by December 31, 2025, or Tranche 1, and the second tranche vesting upon the Company’s achievement of cumulative product revenues over $600.0 million by December 31, 2026, or Tranche 2. Participants will vest annually in each tranche of their awards in four equal installments on December 31, 2019, December 31, 2020, December 31, 2021, and December 31, 2022, subject to their continued employment with the Company through the applicable vesting date. If a participant’s employment terminates prior to December 31, 2022 due to death or disability, the participant will automatically vest in an additional 25% of each tranche of his or her award. Upon the achievement of a Tranche 1 or Tranche 2 milestone (but not a deemed achievement in connection with a change of control), each participant who has remained in continuous employment with the Company through December 31, 2022 will be 100% vested in the applicable tranche. In the event of a change of control of the Company prior to December 31, 2026, participants whose employment has terminated prior to such date will be eligible for payouts under the Plan based on the then-vested portion of their awards, and participants who have remained employed through the change of control will be deemed to have time vested in full in each tranche of their awards.

Upon the achievement of a Tranche 1 or Tranche 2 milestone (but not a deemed achievement in connection with a change of control), each participant’s payout in respect of the applicable tranche of his or her award will equal (a) the participant’s then-vested percentage, multiplied by (b) $25 million, multiplied by (c) the participant’s individual percentage allocation of the incentive pool.

If a change of control occurs prior to December 31, 2026, and the Tranche 1 milestone was not achieved prior to the change of control, the Tranche 1 milestone will be deemed to be achieved at a percentage equal to the greater of (1) 50% and (2) the cumulative product revenues as of the change of control, divided by $300.0 million. If a change of control occurs prior to December 31, 2026, and the Tranche 2 milestone was not achieved prior to the change of control, the Tranche 2 milestone will be deemed to be achieved at a percentage equal to the greater of (1) 30% and (2) the cumulative product revenues as of the change of control, divided by $600.0 million. A participant’s payout in respect of each tranche of his or her award in a change of control will equal (1) the participant’s then-vested percentage of such tranche, multiplied by (2) the percentage of that tranche’s milestone that has been achieved or is deemed to have been achieved, multiplied by (3) $25.0 million, multiplied by (4) the participant’s individual percentage allocation of the incentive pool.

Amounts that become payable upon achievement of the Tranche 1 milestone will be paid in a lump-sum in the first quarter of 2026 and amounts that become payable upon achievement of the Tranche 2 milestone will be paid in a lump-sum in the first quarter of 2027. In the event of a change of control, any portion of the incentive pool that is earned, but unpaid, or deemed earned in connection with the change of control will be paid at the time of the change of control.

If a change of control occurs prior to the achievement of either or both of the Tranche 1 and Tranche 2 milestones, the awards will remain outstanding and the remaining unpaid portion of the incentive pool applicable to the Tranche 1 or Tranche 2 milestone, as applicable, will be paid following the achievement of either such milestone at the time or times the bonuses would otherwise be paid out. Any successor in interest to the Company upon or following a change of control will be required to assume all obligations under the Plan.

Awards may be paid out in cash or in a combination of cash and registered securities of equal value (based on the Company’s 20-day trailing average closing common stock price), with the portion paid in registered securities not to exceed 50% of the aggregate payment amount with respect to each tranche; provided, however, that any amounts payable with respect to an award in connection with a change in control will be paid in cash.

The Company will recognize the compensation cost over the requisite service period, to the extent achievement of the performance condition is deemed probable relative to targeted performance. The performance condition is not yet deemed probable; as such, no amounts were accrued under the Plan during the three months ended March 31, 2020.

On June 27, 2019, the Company entered into an Amended and Restated Loan and Security Agreement, or the Loan Agreement, with Hercules ~~and~~Technology III, L.P., certain other lenders, together, the Lenders, and Hercules ~~Technology Growth~~ Capital, Inc. (as agent)~~. Under~~, under which the Company may borrow up to $100.0 million in multiple tranches, each, a Term Loan Tranche. The Loan Agreement amends and restates in its entirety the Company’s prior Loan and Security Agreement with the Lenders dated as of September 30, 2015 to, among other things, provide for an extension of the scheduled 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 Loan Agreement, ~~Hercules provided~~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 Loan Agreement. The 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) that may be available to the Company, ~~with access~~subject to ~~term loans with an aggregate principal amount of up~~approval by Hercules, in its sole discretion, whether to ~~$40.0 million,~~provide such tranches. As such there can be no assurance as to whether or ~~collectively,~~not the Term Loan. The Company initially drew a principal amount of $20.0 million, which was funded on September 30, 2015. The remaining $20.0 million under the Loan Agreement was available to be drawn at the Company’s option in minimum increments of $10.0 million through December 31, 2016, or the Draw Period. Theadditional Term Loan ~~was repayable in monthly installments commencing on April 1, 2018 through maturity on September 1, 2020.~~ Tranches shall be funded.

The interest rate ~~was~~with respect to the First Tranche is a floating per annum rate equal to the greater of (i) ~~8.5%, or (ii) the sum of 8.5%,~~8.50% plus the ~~“prime rate”~~prime rate as reported from time to time in The Wall Street Journal minus 5.75%, and (ii) 8.50%. The interest rate with respect to the Second Tranche is, and the interest rate with respect to additional Term Loan Tranches (if any) will be, a floating per ~~annum.~~annum rate equal to the greater of (i) 7.85% plus the prime rate as reported from time to time in The Wall Street Journal minus 5.75%, and (ii) 7.85%. An end of term charge equal to 4.5% with respect to $50.0 million of the First Tranche and equal to 2.25% with respect to the remaining $10.0 million of the First Tranche of the issued principal balance of the term loans is payable in September of 2020, and an end of term charge equal to 6.95% of the Second Tranche, and the Additional Term Loan ~~was~~Tranches (if any), of the issued principal balance of the term loans is payable at maturity, including in the event of any prepayment, and ~~was~~is being accrued as interest expense over the term of the ~~loan~~term loans using the effective interest method. ~~Borrowings~~Payments under the Loan Agreement ~~were~~with respect to the First Tranche are interest only until January 1, 2021, followed by equal monthly payments of principal and interest through the scheduled maturity date. Payments under the Loan Agreement with respect to the Second Tranche are, and with respect to additional Term Loan Tranches (if any) will be, interest only until January 1, 2021 (which can be extended to May 1, 2021 or September 1, 2021, upon certain events set forth in the Loan Agreement), followed by equal monthly payments of principal and interest through the scheduled maturity date. The Company’s obligations under the Loan Agreement are secured by a security interest in substantially all of its and Paratek Pharma, LLC’s assets, other than intellectual property.

Under the Amended and Restated Loan Agreement, prepayment fees equaling 1.0% to 2.5% will apply to principal amounts prepaid prior to dates between September 1, 2020 and January 1, 2021, varying depending on the applicable tranche.

The Loan Agreement includes customary affirmative and restrictive covenants, including a liquidity covenant and a covenant against suffering a “change of control,” and also includes customary events of default, including payment defaults, breaches of covenants following any applicable cure period, a material impairment in the perfection or priority of Lenders’ security interest or in the value of the collateral, cross acceleration to the debt and certain events relating to bankruptcy or insolvency. Upon the occurrence of an event of default, a default interest rate of an additional 5% may be applied to the outstanding loan balances, and the Lenders may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Loan Agreement.

Borrowings under the Hercules Loan Agreement are collateralized by substantially all of the assets of the Company.

Upon an Event of Default, an additional 5.0% interest would be applied, and Hercules could, at its option, accelerate and demand payment of all or any part of the ~~loan~~term loans together with the prepayment and end of term charges. An Event of Default is defined in the Hercules Loan Agreement as (i) failure to make required payments; (ii) failure to adhere to financial, operating and reporting loan covenants; (iii) an event or development occurs that would be reasonably expected to have a material adverse effect; (iv) false representations in the Hercules Loan Agreement; (v) insolvency, as described in the Hercules Loan Agreement; (vi) levy or attachments on any of the Company's assets; and (vii) default of any other agreement or subordinated debt greater than $1.0 million. In the event of insolvency, this acceleration and declaration would be automatic. In addition, in connection with the Hercules Loan Agreement, the Company agreed to provide Hercules with a contingent security interest in the Company's bank accounts. The Company's control of its bank accounts is not adversely affected unless Hercules elects to obtain unilateral control of the Company's bank accounts by declaring that an Event of Default has occurred. The principal of the ~~Term Loan,~~term loans, which ~~was~~is not due within 12 months of ~~September 30, 2017,~~March 31, 2020, has been classified as long-term asdebt.

The Company recognized interest expense of $1.7 million on the ~~Company determined that a material adverse effect resulting in~~ Hercules ~~exercising its rights under the subjective acceleration clause is remote.~~

~~Subject to certain terms, pursuant to the~~ Loan Agreement ~~Hercules was also granted~~for the ~~right to participate in an amount of up to $2.0 million in subsequent sales and issuances~~three months ended March 31, 2020.

The following table summarizes the impact of the ~~Company's equity securities to one or more investors for cash for financing purposes in an offering that is broadly marketed to multiple investors~~Hercules Loan Agreement on the Company’s consolidated balance sheets at March 31, 2020 and at the same terms as the other investors. On September 30, 2015, Hercules Technology Growth Capital, Inc. entered into a Stock Purchase Agreement with the Company to purchase 44,782 shares of common stock resulting in proceeds to the Company of approximately $1.0 million. The excess of proceeds received by the Company over the fair value of the common stock issued was allocated as a reduction of the fees paid to Hercules in conjunction with obtaining the initial $20.0 million draw of the Term Loan.December 31, 2019 (in thousands):

Debt issuance costs ~~of $511,000 were ratably allocated to the initial $20.0 million draw and the remaining unfunded $20.0 million. Debt issuance costs related to the initial $20.0 million draw were~~are presented on the consolidated balance sheet as a direct deduction from the related debt ~~liability. Issuance costs related to the unfunded amount were~~liability rather than capitalized as ~~prepaid~~an asset ~~and were to be amortized ratably through~~in accordance with ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the ~~end~~Presentation of ~~the Draw Period.~~

In connection with the Loan Agreement, the Company issued to each of Hercules Technology II, L.P. and Hercules Technology III, L.P., a warrant to purchase 16,346 shares of the Company’s common stock (32,692 shares of common stock in total) at an exercise price of $24.47 per share. The Hercules Warrants’ total relative fair value of $288,000 at September 30, 2015 was determined using a Black-Scholes option-pricing model. The relative fair value of the Hercules Warrants was included as a discount to the Term Loan and also as a component of additional paid-in capital. See Note 9, Debt Issuance Costs~~Capital Stock, for further description of the Hercules Warrants.~~

In addition to the Hercules Warrants, the Company paid fees to Hercules in conjunction with obtaining the Term Loan. The Hercules Warrants fair value and fees paid to Hercules, an aggregate of $572,000, were ratably allocated to the initial $20.0 million draw and the remaining unfunded $20.0 million. The $208,000 of costs allocated to the initial $20.0 million draw were recorded as a debt discount and are being amortized as additional interest expense over the term of the loan using the effective interest method. The $364,000 of costs allocated to the unfunded $20.0 million was recorded as prepaid expenses and were being amortized ratably through the end of the Draw Period. In the event the Company exercised its option to borrow additional funds, the remaining unamortized prepaid asset balance related would be reclassified and recorded as debt discount based upon a ratable allocation of the amount drawn compared to the remaining unfunded amount available to the Company and would amortize over the remaining life of the term loan using the effective interest method.

On December 12, 2016, the Company and Hercules entered into a second amendment to the Loan Agreement, or the Second Amendment, which extended the date on which the Company must begin making amortization payments under the Loan Agreement from April 1, 2018 to January 1, 2019, or the Amortization Date. Upon commencement of the Amortization Date, the Company will make amortization payments based upon an amortization schedule equal to thirty consecutive months, with the balance of outstanding loans due on the original maturity date of the Loan Agreement. The Second Amendment also increased the amount that the Company may borrow by $10.0 million, from up to $40.0 million to up to $50.0 million in multiple tranches. In connection with the Second Amendment the Company paid Hercules a $0.4 million amendment fee. In connection with the Second Amendment, the Company issued to each one of Hercules Technology II, L.P. and Hercules Technology III, L.P. a warrant to purchase 18,574 shares of its common stock (37,148 shares of common stock in total) at an exercise price of $13.46 per shares.

Under the Second Amendment, discussed above, the end of term charge was equal to 4.5% of the issued principal balance of the Loan Agreement, and was payable at maturity, including in the event of any prepayment, and is being accrued as interest expense over the term of the loan using the effective interest method. Borrowings under the Loan Agreement are still collateralized by substantially all of the assets of the Company.

On June 27, 2017, the Company and Hercules entered into a third amendment to the Loan Agreement, or the Third Amendment. The Third Amendment increased the amount that the Company may borrow by $10.0 million, from up to $50.0 million to up to $60.0 million, in multiple tranches. The additional $10.0 million tranche, or the Fourth Tranche, is available at the Company’s option through December 15, 2017. If drawn, the Fourth Tranche shall bear interest and have the same maturity as all other loans outstanding under the Loan Agreement.

The Company borrowed the first tranche of $20.0 million upon the closing of the Loan Agreement on September 30, 2015, and the second tranche of $20.0 million on December 12, 2016, or collectively, the Initial Tranches. Concurrently with the closing of the Third Amendment, the Company borrowed a third tranche of $10.0 million, or the Third Tranche. The Third Amendment extended the date on which the Company is required to begin making monthly principal installments under the Loan Agreement from January 1, 2019 to January 1, 2020, subject to the Company’s receipt of marketing approval for the Company’s lead product candidate, omadacycline, or the Interest Only Period Extension Event. Beginning on January 1, 2019, or, if the Company achieves the Interest Only Period Extension Event, January 1, 2020, the Company will make payments in equal monthly installments of principal and interest, with the balance of outstanding loans due on the original maturity date of the Loan Agreement. In connection with the Third Amendment, the Company paid Hercules a $0.1 million amendment fee.

The Third Amendment reduced the end of term charge due with respect to the Third Tranche from to 4.5% to 2.25% if the obligations under the Loan Agreement are repaid in full on or prior to September 30, 2017, following Hercules’ election not to consent to a proposed third-party, non-equity financing arrangement (excluding any stock issuance). The end of term charge with respect to the Fourth Tranche, if drawn, is 2.25%.

If the Company prepays the loan prior to maturity, it will pay a prepayment charge, based on a percentage of the then outstanding principal balance, equal to (i) 1% with respect to the Third Tranche and the Fourth Tranche (if drawn) or (ii) 2% with respect to the Initial Tranches if the prepayment occurs prior to April 1, 2019, or equal to 0% if the prepayment occurs on or after April 1, 2019.

In connection with the borrowing of the Third Tranche, on June 27, 2017, the Company issued the Additional Warrant to Hercules Capital, Inc. that is exercisable for an aggregate of 5,374 shares of Common Stock at an exercise price of $23.26 per share. The Additional Warrant may be exercised on a cashless basis. The Additional Warrant is exercisable for a term beginning on the date of issuance and ending on the earlier to occur of five years from the date of issuance or the consummation of certain acquisitions of the Company as set forth in the Additional Warrant.

~~As of September 30, 2017, the Company has recorded a long-term debt obligation of $49.0 million, net of debt discount of $1.0 million.~~

Future principal payments, which exclude the ~~4.5%~~ end of term charge, ~~of $0.7 million included within other liabilities on the balance sheet,~~ in connection with the Hercules Loan Agreement as of ~~September 30, 2017,~~March 31, 2020 are as follows (in thousands):

On April 18, 2018, the Company entered into a Purchase Agreement, or the Purchase Agreement, with several initial purchasers, or the Initial Purchasers, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated and Leerink Partners LLC acted as representatives, relating to the sale of $135.0 million aggregate principal amount of 4.75% Convertible Senior Subordinated Notes due 2024, or the Notes, to the Initial Purchasers. The Company also granted the Initial Purchasers an option to purchase up to an additional $25.0 million aggregate principal amount of Notes, which was exercised in full on April 20, 2018.

The Purchase Agreement includes customary representations, warranties and covenants. Under the terms of the Purchase Agreement, the Company agreed to indemnify the Initial Purchasers against certain liabilities.

In addition, J. Wood Capital Advisors LLC, the Company’s financial advisor, purchased $5.0 million aggregate principal amount of Notes in a separate, concurrent private placement on the same terms as other investors.

The Notes were issued by the Company on April 23, 2018, pursuant to an Indenture, dated as of such date, or the Indenture, between the Company and U.S. Bank National Association, as trustee, or the Trustee. 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. The Company will settle conversions of the Notes through delivery of shares of common stock of the Company, in accordance with the terms of the Indenture. The initial conversion rate for the Notes is 62.8931 shares of common stock (subject to adjustment as provided for in the Indenture) per $1,000 principal amount of the Notes, which is equal to an initial conversion price of approximately $15.90 per share, representing a conversion premium of approximately 20% above the closing price of the common stock of $13.25 per share on April 18, 2018.

Holders of the Notes may convert all or any portion of their Notes, in multiples of $1,000 principal amount, at their option at any time prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date.

The Company may not redeem the Notes prior to May 6, 2021. The Company may redeem for cash all or part of the Notes, at its option, on or after May 6, 2021 if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

If the Company experiences a fundamental change, as described in the Indenture, prior to the maturity date of the Notes, holders of the Notes will, subject to specified conditions, have the right, at their option, to require the Company to repurchase for cash all or a portion of their Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but not including, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date of the Notes and following a notice of redemption of the Notes, the Company will increase the conversion rate for a holder who elects to convert its Notes in connection with such corporate event or redemption.

The Indenture provides for customary events of default. In the case of an event of default with respect to the Notes arising from specified events of bankruptcy or insolvency, all outstanding Notes will become due and payable immediately without further action or notice. If any other event of default with respect to the Notes under the Indenture occurs or is continuing, the Trustee or holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare the principal amount of the Notes to be immediately due and payable.

After deducting costs incurred of $6.0 million, the Company raised net proceeds from the issuance of long-term convertible debt of $159.0 million in April 2018. All costs were deferred and are being amortized over the life of the Notes at an effective interest rate of 5.47% and recorded as additional interest expense.

The Company has evaluated the Indenture for derivatives pursuant to ASC 815, Derivatives and Hedging, or ASC 815, and identified an embedded derivative that requires bifurcation as the feature is not clearly and closely related to the host instrument. The embedded derivative is a default provision, which could require additional interest payments. The Company determined in the prior year that the fair value of this embedded derivative was nominal.

The Company evaluated the conversion feature and determined it was not within the scope of ASC 815 and therefore is not required to be accounted for separately. The Company concluded that the embedded conversion option is not subject to separate accounting pursuant to either the cash conversion guidance or the beneficial conversion feature guidance. Under the general conversion guidance in ASC 470, Debt, all of the proceeds received from the Notes was recorded as a liability on the condensed consolidated balance sheet.

The following table summarizes how the issuance of the Notes is reflected in the Company’s consolidated balance sheets at March 31, 2020 and December 31, 2019:

The Company recognized coupon interest expense of $2.0 million and amortization expense on the debt issuance costs of $0.2 million on the Notes for the three months ended March 31, 2020.

On February 25, 2019, the Company, through its 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, upon the satisfaction of the conditions precedent set forth therein, the Subsidiary borrowed a $32.5 million loan, which was secured by, and will be repaid based upon, royalties from the Almirall Collaboration Agreement. On May 1, 2019, the Company received $27.8 million, net of $0.5 million lender discount, $0.2 million in lender expenses incurred, and $4.0 million that was deposited into an interest reserve account. The Company also paid $1.2 million in other lender fees related to the Royalty-Backed Loan Agreement. During the three months ended March 31, 2020, the Company paid $1.0 million to HCRP based upon royalties earned from the Almirall Collaboration Agreement and outstanding interest payments due to HCRP.

Under the Royalty-Backed Loan Agreement, the outstanding principal balance will bear interest at an annual rate of 12.0%. Payments of interest under the Royalty-Backed Loan Agreement are made quarterly out of the Almirall Collaboration Agreement royalty payments received since the immediately preceding payment date. On each interest payment date, any royalty payments in excess of accrued interest on the loan will be used to repay the principal of the loan until the balance is fully repaid. In addition, the Subsidiary made up-front payments to HCRP of (i) a 1.5% fee and (ii) up to $300,000 for HCRP’s expenses. 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. The Company has entered into a Pledge and Security Agreement in favor of HCRP, pursuant to which the Subsidiary’s obligations under the Loan Agreement are secured by a pledge of all of the Company’s holdings of the Subsidiary’s capital stock.

The Royalty-Backed Loan Agreement contains certain customary affirmative covenants, including those relating to: use of proceeds; maintenance of books and records; financial reporting and notification; compliance with laws; and protection of Company intellectual property. The Royalty-Backed Loan Agreement also contains certain customary negative covenants, barring the Subsidiary from: certain fundamental transactions; issuing dividends and distributions; incurring additional indebtedness outside of the ordinary course of business; engaging in any business activity other than related to the Almirall Collaboration Agreement; and permitting any additional liens on the collateral provided to HCRP under the Royalty-Backed Loan Agreement.

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 the Company’s 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.

The Company recognized interest expense of $1.0 million on the Royalty-Backed Loan for the three months ended March 31, 2020.

The following table summarizes the impact of the Royalty-Backed Loan Agreement on the Company’s consolidated balance sheets at March 31, 2020 and December 31, 2019 (in thousands):

The short-term portion of long-term debt on the Company’s consolidated balance sheet at March 31, 2020 includes the carrying value of payments due under the Hercules Loan Agreement within 12 months of March 31, 2020. Long-term debt on the Company’s consolidated balance sheets at March 31, 2020 and December 31, 2019 includes the carrying value of the Hercules Loan Agreement, the Notes and the Royalty-Backed Loan Agreement.

The Company leases its Boston, Massachusetts and King of Prussia, Pennsylvania office spaces under non-cancelable operating leases expiring in 2021 and 2024, respectively.

The Company entered into the original King of Prussia and Boston leases in January 2015 and April 2015, respectively. The lease terms under the original agreements were for six and four years, respectively. Each agreement had one renewal option for an extended term, which are not included in the measurement of these leases as these options are not reasonably certain to be exercised. The King of Prussia and Boston lease terms under the original agreements began in June 2015 and July 2015, respectively.

The Company executed an amended lease agreement on its Boston office space in July 2016. The amended lease agreement added 4,153 rentable square feet of office space and extended the original lease term by two years. In accordance with the amended lease agreement, the Company paid a security deposit of $0.1 million. Subsequent to the amended lease agreement, the Company records monthly lease expense of approximately $49,000 for the Boston office space. In applying the transition guidance under ASU No. 2016-02, Leases, or ASC 842, the Company retained the classification of this lease to be operating and recorded a lease liability and a right-of-use asset on the ASC 842 effective date.

The Company executed an amended lease agreement on its King of Prussia office space in October 2016. The amended lease agreement is for 19,708 rentable square feet of office space and the Company took control of this office space during the first quarter of 2017. The amended lease agreement contains rent escalation and a partial rent abatement period, which is accounted for as rent expense under the straight-line method. In applying the ASC 842 transition guidance, the Company retained the classification of this lease to be operating and recorded a lease liability and a right-of-use asset on the ASC 842 effective date.

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the three months ended March 31, 2020:

Future minimum operating lease obligations under non-cancelable operating leases with initial terms of more than one-year as of March 31, 2020, are as follows:

The total operating liability is presented on the Company’s condensed consolidated balance sheet based on maturity dates. $1.0 million of the total operating liabilities is classified under “other current liabilities” for the portion due within twelve months, and $1.8 million is classified under “long-term lease liability”.

The Company is party to a manufacturing and services agreement for which space within the manufacturing facility will be leased. This lease has not yet commenced as of the reporting date and is not included in the maturity table above.

The Company recorded ano provision for income taxes infor the three ~~and nine~~ months ended ~~September 30, 2017 of $0~~March 31, 2020 and $0.8 million, respectively. The provision for income taxes consists of current tax expense, which represents China withholding taxes on the upfront payment earned under the Zai Collaboration Agreement.March 31, 2019.

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax bases of assets and liabilities using statutory rates. Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of net operating loss carryforwards and research and development credits. Under the applicable accounting standards, management has considered the Company’s history of losses and concluded that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets. Accordingly, a full valuation allowance has been established against the Company’s otherwise recognizable net deferred tax assets.

Previously, a component of the Company’s net operating losses related to tax deductions for the stock based compensation in excess of book compensation, or additional paid-in-capital net operating losses, would have been credited to additional paid-in-capital if they became utilizable in future periods. Under ASU 2016-09, any such excess deductions will be added to the existing net operating losses. This is not expected to have a material impact on the Company’s deferred tax assets or related disclosures.

The Company’s contractual obligations and commitments were reported in its Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on March 2, 2017. The Company leases its Boston, Massachusetts and King of Prussia, Pennsylvania office spaces under non-cancelable operating leases expiring in 2021 and 2024, respectively.

The Company executed the third amendment to the lease agreement on its King of Prussia office space in October 2016. The lease agreement, as amended, is for 19,708 rentable square feet of office space, for a total commitment of $3.3 million with respect to which lease payments became due beginning once Paratek took control of such office space during the first quarter of 2017. The total lease commitment is over a seven-year and seven-month lease term. The lease contains rent escalation and a partial rent abatement period, which is being accounted for as rent expense under the straight-line method. The Company is required to make additional payments under the operating leases for taxes, insurance, and other operating expenses incurred during the operating lease periods.

~~As of September 30, 2017, future minimum lease payments under operating leases are as follows:~~16. Product Revenue

To date, the Company’s only source of product revenue has been from NUZYRA product sales beginning in February 2019 when NUZYRA was launch in the U.S. The following table summarizes balances and activity in each of the product revenue allowance and reserve categories (in thousands):

~~In July 2017, the Company entered into a master manufacturing services agreement~~17. Commitments and corresponding product agreement with Patheon UK Limited, or Patheon. The agreements provide for the terms and conditions under which Patheon will manufacture, package and supply to the Company omadacycline in injectable form, or the Patheon Products. Under these agreements, the Company is required to deliver to Patheon the active pharmaceutical ingredient needed to manufacture the Patheon Products. The Company is 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. If the Company’s omadacycline product is approved, the Company will also be subject to an annual minimum purchase requirement in the six-digit euro range. If the Company desires for Patheon to conduct additional services other than those expressly set forth in the agreements, those would be subject to additional fees.

The Company’s agreements with Patheon will remain in effect for a fixed initial term, after which they will continue for successive renewal terms unless either the Company 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.

In July 2012, the Company received notifications from three companies, Actavis Elizabeth LLC, or Actavis Elizabeth, Watson Laboratories, Inc.—Florida, or Watson, and Novel Laboratories, Inc., or Novel, in September 2012, from each of Par Pharmaceutical, Inc. and Par Formulations Private Ltd., together, the Par Entities, in February 2013 from Dr. Reddy’s Laboratories, Inc. and Dr. Reddy’s Laboratories, Ltd., together, Dr. Reddy’s, and in July 2013 from TWi Pharmaceuticals, Inc., or Twi, stating that each has filed with the FDA an ANDA, that references Intermezzo. Refer to Item 3, Legal Proceedings, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC on March 9, 2016, for a full description of the history of this litigation.

The United States District Court for the District of New Jersey, or the New Jersey District Court, held a consolidated trial between December 1, 2014 and December 15, 2014 involving Paratek, Purdue Pharma, and their patent infringement claims against Actavis Elizabeth, Novel, and Dr. Reddy’s. The New Jersey District Court then received post-trial briefing and held a February 13, 2015 post-trial hearing. On March 27, 2015, the New Jersey District Court issued an order and accompanying opinion finding that: (a) the asserted claims of U.S. Patent Nos. 7,682,628, 8,242,131, and 8,252,809, are invalid as obvious; (b) Actavis Elizabeth, Novel, and Dr. Reddy’s infringe the ‘131 patent; (c) Novel infringes the ‘628 patent; and (d) Novel and Dr. Reddy’s infringe the ‘809 patent. On April 9, 2015, the New Jersey District Court entered final judgment consistent with the March 27, 2015 opinion and order referenced above.

The Company and Purdue Pharma jointly appealed the New Jersey District Court’s final judgment as to the '131 patent to the United States Court of Appeals for the Federal Circuit on May 6, 2015. On January 8, 2016, the United States Court of Appeals for the Federal Circuit affirmed the decision of the New Jersey District Court, and no opinion accompanied the judgment. On September 14, 2016, the defendants filed a warrant of satisfaction of judgment in the New Jersey District Court for the costs having been fully paid to the defendants.

In January 2013, the Company filed suit in the Eastern District of Virginia against the United States Patent and Trademark Office, or the USPTO, seeking recalculation of the patent term adjustment of the ’131 Patent. Purdue Pharma has agreed to bear the costs and expenses associated with this litigation. In June 2013, the judge granted a joint motion to stay the proceedings pending a remand to the USPTO, in which the USPTO is expected to reconsider its patent term adjustment award in light of decisions in a number of appeals to the Federal Circuit, including Novartis AG v. Lee 740 F.3d 593 (Fed. Cir. 2014), or the Novartis decision. Since having issued final rules implementing the Novartis decision, the USPTO has been working through the civil action cases and issuing remand decisions. The Company’s case was on remand until the USPTO made its decision on the recalculation of the patent term adjustment. On September 28, 2016, the USPTO issued a decision that the patent term adjustment is 1,038 days, from which the ‘131 Patent expiration would be March 26, 2029.

In the ordinary course of business, the Company is from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to intellectual property, commercial arrangements, employment and other matters. While the outcome of these proceedings and claims cannot be predicted with certainty, as of ~~September 30, 2017,~~March 31, 2020, the Company was not party to any ~~other~~ legal or arbitration proceedings that may have, or have had in the recent past, significant effects on the Company’s financial position. No governmental proceedings are pending or, to the Company’s knowledge, contemplated against the Company. The Company is not a party to any material proceedings in which any director, member of executive management or affiliate of the Company is either a party adverse to the Company or the Company’s subsidiaries or has a material interest adverse to the Company or the Company’s subsidiaries.

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

~~Between May 2014 and May 2016, the FASB issued three ASUs changing the requirements for recognizing and reporting revenue, or together, herein referred to as the revenue ASUs: (i) ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers, or ASU 2014-09, (ii) ASU No. 2016-08,~~ ~~Principal versus Agent Considerations (Reporting Revenue Gross versus Net), or ASU 2016-08, and (iii) ASU No. 2016-12,~~ ~~Narrow-Scope Improvements and Practical Expedients~~, or ASU 2016-12. ASU 2014-09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2016-12 provides practical expedients and improvements on the previously narrow scope of ASU 2014-09.

In August ~~2015,~~2018, the FASB issued ASU No. ~~2015-14,~~2018-13, ~~Revenue from Contracts with Customers~~Fair Value Measurement (Topic ~~606)~~820): ~~Deferral of~~Disclosure Framework - Changes to the ~~Effective Date~~Disclosure Requirements for Fair Value Measurement,, or ASU ~~2015-14. ASU 2015-14 defers~~2018-13. This standard modifies certain disclosure requirements on fair value measurements. The Company adopted the ~~effective date~~standard on January 1, 2020. The adoption of ASU 2014-09 by one year to fiscal years beginning, and interim periods after, December 15, 2017. All subsequent ASUs related to ASU 2014-09, including ASU 2016-08 and ASU 2016-12, assumed the deferred effective date enforced by ASU 2015-14. Early adoption of the revenue ASUs is permitted for annual periods beginning, and interim periods after, December 15, 2016. A reporting entity may apply the amendments in the revenue ASUs using either a modified retrospective approach, by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or full retrospective approach. The Company expects to elect the full retrospective application as its transition method.

~~The Company has~~2018-13 did not yet completed its assessment of the impact of the adoption of this standard on its consolidated financial statements. The Company is in the process of evaluating its collaboration agreements with Zai, Allergan and Purdue to determine the impact the adoption of this standard may have on its consolidated financial statements and internal control over financial reporting. The new revenue ASUs may have a material impact on ~~future revenue to be recognized under~~ the Company’s Allergan Collaboration Agreement and Zai Collaboration Agreement. The Company does not believe the new revenue ASUs will have a material impact on revenue recognized related to its Purdue Collaboration Agreement.

~~The Company expects the accounting for contingent milestone payments under its collaboration agreements to change under ASC 606,~~ ~~Revenue from Contracts with Customers,~~ or ASC 606. ASC 606 does not contain guidance specific to milestone payments, thereby requiring contingent milestone payments to be considered in accordance with the overall model of ASC 606 as variable consideration. Revenue from contingent milestone payments may be recognized earlier under ASC 606 than under ASC 605, ~~Revenue Recognition~~, based on an assessment at each reporting date of the probability of achievement of the underlying milestone event. This assessment may, in certain circumstances, result in the recognition of revenue related to a contingent milestone payment before the milestone event has been achieved.

ASC 606 requires more robust disclosures than required by previous guidance, including disclosures related to disaggregation of revenue into appropriate categories, performance obligations, the judgments made in revenue recognition determinations, adjustments to revenue which relate to activities from previous quarters or years, any significant reversals of revenue, and costs to obtain or fulfill contracts.

The Company may identify additional differences as it completes its assessment. Expected impacts from the adoption of this standard could differ upon the final adoption and implementation of the standard. In connection with the adoption of the standard, the Company is implementing several new internal controls, including controls to monitor the probability of achievement of contingent milestone payments.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~. The amendment requires a lessee to recognize assets and liabilities for leases with a maximum possible term of more than 12 months. A lessee would recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the leased asset (the underlying asset) for the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including those interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of ASU 2016-02 will have on its consolidated financial statements.

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230),~~ or ASU 2016-15, which simplifies certain elements of cash flow classification. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017. The Company is currently evaluating the impact the adoption of ASU 2016-15 will have ~~on its consolidated financial statements.~~

~~In October 2016, the FASB issued ASU No. 2016-16,~~ ~~Intra-Entity Transfers of Assets Other Than Inventory~~, or ASU 2016-16. The amendments in ASU 2016-16 require an entity to recognize the income tax consequences of intra-entity transfers of assets other than inventory at the time that the transfer occurs. Current guidance does not require recognition of tax consequences until the asset is eventually sold to a third party. ASU 2016-16 is effective for fiscal years beginning, and interim periods after, December 15, 2017. Early adoption is permitted as of the first interim period presented in a year. A reporting entity must apply the amendments in ASU 2016-16 using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. The Company is evaluating the impact of the adoption of ASU 2016-16 to its consolidated financial position and results of operations. The Company does not expect the adoption of ASU 2016-16 to have a material impact to its consolidated financial position or results of operations.

~~In November 2016, the FASB issued ASU No. 2016-18,~~ ~~Restricted Cash~~, or ASU 2016-18. ASU 2016-18 requires an entity to reconcile and explain the period-over-period change in total cash, cash equivalents and restricted cash within its statements of cash flows. ASU 2016-18 is effective for fiscal years beginning, and interim periods after, December 15, 2017. Early adoption is permitted. A reporting entity must apply the amendments in ASU 2016-18 using a full retrospective approach. The Company is currently evaluating the impact the adoption of the ASU will have on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, or ASU 2017-04. The amendments in ASU 2017-04 ~~eliminates~~eliminate the current two-step approach used to test goodwill for impairment and ~~requires~~require an entity to apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. ASU 2017-04 is effective for fiscal years ~~beginning, including~~and interim periods beginning after December 15, 2019 (upon the first goodwill impairment test performed during that fiscal year). Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. A reporting entity must apply the amendments in ASU 2017-04 using a prospective approach. The Company ~~does not expect the~~adopted this guidance effective January 1, 2020. The adoption of ASU 2017-04 todid not have a material impact ~~to its~~on the Company’s consolidated financial position or results of operations.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2023. These standards require that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, these standards now require allowances to be recorded instead of reducing the amortized cost of the investment. These standards limit the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. Based on the composition of our investment portfolio, accounts receivable and other financial assets, current market conditions and historical credit loss activity, the adoption of these standards is not expected to have a material effect on the Company’s consolidated balance sheet, consolidated statements of operation and comprehensive loss and related disclosures.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q. All references to “Paratek,” “we,” “us,” “our” or the “Company” in this Quarterly Report on Form 10-Q mean Paratek Pharmaceuticals, Inc. and our subsidiaries.

This discussion contains certain forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Forward-looking statements are identified by words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potential,” “potentially” or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward- looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019, as filed with the SEC on March ~~2, 2017, our~~10, 2020, or the 2019 Form 10-K, and this Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2017, as filed with the SEC on May 4, 2017, and elsewhere in this report.~~2020. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and except as required by law, we undertake no obligation to update or revise these statements in light of future developments. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

We are a ~~clinical stage~~commercial-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. 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 propertiesOur United States, or U.S., Food 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. Our two lead~~Drug Administration, or FDA, approved commercial product, ~~candidates are the antibacterials omadacycline and sarecycline~~

~~If approved, omadacycline will be the first in a new class of aminomethylcycline antibiotics. Omadacycline~~NUZYRA^® (omadacycline) is a ~~broad-spectrum, well-tolerated,~~ once-daily oral and intravenous ~~or IV, antibiotic. We believe that omadacycline has the potential to become the primary antibiotic choice of physicians for use as a broad-spectrum monotherapy~~ antibiotic for the treatment of adult patients with community-acquired bacterial pneumonia, or CABP, and 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~~caused by susceptible pathogens. SEYSARA^® (sarecycline) is ~~of concern. We believe omadacycline, if approved, will be used~~an FDA-approved product with respect to which we have exclusively licensed in the ~~emergency room, hospital~~U.S. and ~~community care settings. We have designed omadacycline~~the People’s Republic of China, Hong Kong and Macau, or the greater China region, certain rights 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 known drug interactions, and a favorable safety and tolerability profile.

~~In the fall of 2013,~~Almirall, LLC, or Almirall. SEYSARA is currently being marketed by Almirall in the U.S. Food and Drug Administration, or the FDA, agreed 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 both 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 omadacycline Fast Track designation for the development of omadacycline in ABSSSI, CABP, and complicated Urinary Tract Infections, or cUTIs. 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 a pediatric program associated with the Pediatric Research and Equity Act. The FDA has granted Paratek a waiver from conducting studies with omadacycline in children less than eight years old due the risk of teeth discoloration, a known class effects 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 industry.

Scientific advice received through the centralized procedure in Europe confirmed general agreement on the design and choice of comparators of the Phase 3 trials 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 Market Authorization Applications, or 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 the European Union, or EU.

We held two pre-NDA meetings with the FDA. The first meeting was to discuss clinical and non-clinical topics and the second meeting was to discuss the CMC data components of our proposed submission package, the result of which was confirmation that we have a clear path towards our NDA submission. Following these regulatory meetings, we plan to begin a rolling submission of our NDAs to the FDA in December 2017. The final NDA submissions for both formulations are expected to be submitted during the first quarter of 2018.

To date, we have conducted more than 20 Phase 1 studies for omadacycline to characterize the effects of the drug on humans including how it is absorbed, metabolized, and excreted. These Phase 1 studies also included this 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 clinical data in the NDA submission to the FDA for the treatment of ABSSSI and CABP in the first quarter of 2018 and to the European Medicines Agency, or EMA, in the second half of 2018.

In the two pivotal Phase 3 studies in ABSSSI, omadacycline successfully met the primary endpoint for 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). Clinical success at the ECR assessment was based on reduction of the size of the primary lesion ≥ 20% without receiving any rescue antibacterial therapy. Clinical success was achieved in 84.8% of omadacycline subjects and in 85.5% of linezolid subjects in the IV-to-oral study (OASIS-1) and in 87.5% of omadacycline subjects and in 82.5% of linezolid subjects in the oral-only study (OASIS-2).

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. In the mITT population, clinical success at the PTE was achieved in 86.1% of omadacycline subjects and in 83.6% of linezolid subjects in the IV-to-oral study (OASIS-1) and in 84.2% of omadacycline subjects and in 80.8% of linezolid subjects in the oral-only study (OASIS-2). The corresponding efficacy results for the CE population were 96.3% of omadacycline subjects and 93.5% of linezolid subjects in the IV-to-oral study (OASIS-1) and 97.9% of omadacycline subjects and 95.5% of linezolid subjects in the oral-only study (OASIS-2).

In a single pivotal Phase 3 study in CABP (OPTIC), omadacycline successfully met the primary endpoint for 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. Clinical success at the ECR assessment, defined as survival and improvement in at least two of four symptoms (cough, sputum production, pleuritic chest pain, dyspnea) without deterioration in any of the symptoms, was achieved in 81.1% of omadacycline subjects and in 82.7% of moxifloxacin subjects.

In a single pivotal Phase 3 study in CABP (OPTIC), omadacycline also successfully met the primary endpoint for 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. Clinical success was achieved in 87.6% of omadacycline subjects and in 85.1% of moxifloxacin subjects in the ITT population and in 92.9% of omadacycline subjects and in 90.4% of moxifloxacin subjects in the CE population.

Across the entire Phase 3 pivotal study program, we have observed the following selected adverse events with the following incidence ranges: nausea (2.4% to 30.2%), vomiting (2.6% to 16.8%), headache (2.1% to 3.5%), alanine aminotransferase, or ALT, increased (2.8% to 5.2%), aspartate transaminase, or AST, increased (2.1% to 4.6%), and diarrhea (1.0% to 4.1%). Importantly, we have not had any reported cases of ~~clostridium difficile~~ ~~colitis or infection in patients treated with omadacycline in the entire safety database to date.~~

In May 2016, we initiated our first oral-only and IV-to-oral study of omadacycline dosed for five days in a Phase 1b clinical study in patients with a UTI. This Phase 1b UTI study was completed. Data from this study showed that omadacycline achieved proof of principle, by demonstrating high concentration levels of omadacycline in urine, across IV-to-oral and oral-only dosing regimens. In September 2017, we announced that omadacycline has been granted an additional QIDP designation by the FDA for the treatment of

uncomplicated urinary tract infections, or uUTI, for both the oral and the intravenous formulations. The QIDP designation, which is designed to speed the development of novel antibiotics for the treatment of pathogens with the potential to pose a serious threat to public health, provides an opportunity for more frequent interactions with the FDA, and a priority review of the supplemental new drug application for omadacycline in uUTI once submitted. We plan on initiating a Phase 2 UTI program, which consists of two studies, one in uUTI and one cUTI study. The Phase 2 UTI program will initiate as early as December 2017.

In October 2016, we announced that we entered into a Cooperative Research and Development Agreement, or CRADA, with the U.S. Army Medical Research Institute of Infectious Diseases, or USAMRIID, 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.

~~Our second Phase 3 antibacterial product candidate, sarecycline, also known as WC3035, is~~ a new once-daily tetracycline-derived compound designed 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 PK properties that we believe make it particularly well-suited for the treatment of inflammatory acne in the community setting. We have exclusively licensed U.S. development and commercialization rights to sarecycline for the treatment of acne to Allergan plc, or Allergan, while retaining development and commercialization rights in the rest of the world. Allergan currently holds a non-exclusive license to develop and commercialize sarecycline for the treatment of rosacea in the United States. There are currently no clinical trials with sarecycline in rosacea underway. In March 2017, Allergan announced that two Phase 3 studies of sarecyclinetherapy for the treatment of moderate to severe acne ~~vulgaris met their 12-week primary efficacy endpoints. In addition,~~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. Almirall plans to develop sarecycline for acne in China, with a ~~9-month long-term safety extension study was completed. The safety results from~~submission to the ~~long-term study are generally consistent with results from the two 12-week studies. Based on these clinical data, Allergan intends to file an NDA with the FDA~~China National Medical Products Administration, or NMPA, expected in ~~the fourth quarter of 2017 for the treatment of acne.~~2023.

To date, we have devoted a substantial amount of our resources to research and development efforts, including conducting clinical trials for omadacycline, protecting our intellectual property and providing selling, general and administrative support for these operations. We have not yet submitted any product candidates for approval by regulatory authorities, and we do not currently have rights to any products that have been approved for marketing in any territory. We have not generated anybegan generating revenue from product sales ~~and to date~~in February 2019; as such, we have historically financed our operations primarily through ~~sale~~sales of our common ~~and convertible preferred~~ stock, debt financings, strategic collaborations, and grant funding.

In April 2017, Paratek Bermuda Ltd., a wholly-owned subsidiary of Paratek Pharmaceuticals, Inc., and Zai Lab (Shanghai) Co., Ltd., or Zai, entered into a License and Collaboration Agreement, or the Zai Collaboration Agreement. Under the terms of the Zai Collaboration Agreement, the Company granted Zai an exclusive license to develop, manufacture and commercialize omadacycline in the People’s Republic of China, Hong Kong, Macau and Taiwan, or the 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 territory, at its sole cost with certain assistance from the Company. Under the terms of the Zai Collaboration Agreement, Paratek Bermuda Ltd. earned an upfront, nonrefundable license payment of $7.5 million during the nine months ended September 30, 2017.

We have incurred significant losses since our inception in 1996. Our accumulated deficit at ~~September 30, 2017~~March 31, 2020 was ~~$448.2~~$738.9 million and our net loss for the ~~nine months~~quarter ended ~~September 30, 2017~~March 31, 2020 was ~~$67.2~~$27.6 million. A substantial amount of our net losses resulted from costs incurred in connection with our research and development programs and selling, general and administrative costs associated with our 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’ 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 offsetting revenue, if any. We expect to continue to incur significant expenses and operating losses for the ~~foreseeable future.~~next several years.

~~We do not expect~~While our contract with the Biomedical Advanced Research and Development Authority, or BARDA, a division of the U.S. Department of Health and Human Services’ Office of the Assistant Secretary for Preparedness and Response, herein referred to as the BARDA contract, is expected to significantly strengthen our cash position, unless we can generate a sufficient amount of revenue from ~~product sales unless and until~~our commercial products, we ~~or either of our partners, Allergan or Zai, successfully complete development and obtain marketing approval for one or more of our product candidates. Accordingly, we anticipate that we will~~may need to raise additional capital in order to ~~complete~~support and accelerate the ~~development and~~ commercialization of omadacycline and to advance the development of our other indications for omadacycline, such as nontuberculous mycobacteria, or NTM, or other product candidates. ~~Until~~If we ~~can~~cannot generate a sufficient amount of product or royalty revenue to finance our cash requirements, we expect to finance our future cash needs primarily through a combination of public ~~and~~or private equity offerings, debt or other structured financings, strategic collaborations and ~~strategic collaborations.~~grant funding. We may be unable to raise capital when needed or on attractive terms, which would force us to delay, limit, reduce or terminate our development programs or commercialization efforts. We will need to generate significant revenue to achieve and sustain profitability, and we may never be able to do so.

The current COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, patients, communities and business operations, as well as the U.S. economy and financial markets. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.

To date, we and our partners have been able to continue to supply our products to our patients worldwide and currently do not anticipate any interruptions in supply, for the foreseeable future. However, we are continuing to assess the potential impact of the COVID-19 pandemic on our business and operations, including our sales, expenses, supply chain and clinical trials.

Our office-based employees have been working from home since early March 2020 and we have suspended in-person interactions by our customer-facing personnel in healthcare settings. We are engaging with our customers remotely as we seek to continue to support healthcare professionals and patient care. We have and may continue to benefit in the near term from precautionary measures taken by our customers due to the COVID-19 pandemic, such as increasing their levels of stock in anticipation of any further interruptions from the pandemic, but over the longer term we may or may not see reduced demand as a result of advance sales or fewer patients visiting their healthcare provider to initiate, change or receive therapy.

Our third-party contract manufacturing partners continue to operate their manufacturing facilities at or near normal levels. While we currently do not anticipate any interruptions in our supply chain, it is possible that the COVID-19 pandemic and response efforts may have an impact in the future on our and/or our third-party suppliers and contract manufacturing partners' ability to manufacture our products or the products of our partners.

For additional information on the various risks posed by the COVID-19 pandemic, refer to Item 3. Quantitative and Qualitative Disclosures About Market Risk and Item 1A. Risk Factors included in this report.

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. Pursuant to the terms of the Royalty-Backed Loan Agreement, upon the satisfaction of the conditions precedent set forth therein, we borrowed a $32.5 million loan, which was secured by, and will be repaid based upon, royalties from the Almirall Collaboration Agreement. On May 1, 2019, we received $27.8 million, net of $0.5 million lender discount, $0.2 million in lender expenses incurred, and $4.0 million that was deposited into an interest reserve account. We also paid $1.2 million in other lender fees related to the Royalty-Backed Loan Agreement.

~~In October 2015 and February 2017,~~On July 2, 2019, we entered into ~~Controlled Equity Offering~~^SM ~~Sales Agreements, or~~an At the ~~2015~~Market Sales Agreement, ~~and 2017~~or 2019 Sales Agreement, ~~respectively,~~with Jefferies LLC, or Jefferies, and ~~collectively, the Sales Agreements, with Cantor Fitzgerald & Co.,~~BTIG, LLC, or ~~Cantor,~~BTIG, under which we ~~could, at~~may offer and sell our ~~discretion,~~common stock having aggregate sales proceeds of up to $50.0 million from time to time ~~sell shares~~through Jefferies and BTIG as our sales agents. Sales of our common stock ~~with a sales value of up to $50 million under each Sales Agreement~~ through ~~Cantor. We provided Cantor with customary indemnification rights,~~Jefferies and ~~Cantor was entitled to a commission at a fixed rate of 3% of the gross proceeds per share sold. Sales of the shares under the Sales Agreements were to~~BTIG, if any, will be made ~~in transactions~~by any method permitted by law deemed to be an “at the market ~~offerings”,~~offering” as defined in Rule ~~415~~415(a)(4) under the Securities Act of 1933, as ~~amended.~~amended, including without limitation sales made directly on the Nasdaq Global Market or any other existing trading market for its common stock. Jefferies and BTIG will use commercially reasonable efforts to sell our common stock from time to time, based upon our instructions (including any price, time or size limits or other customary parameters or conditions we may impose). We ~~received $36.9~~will pay Jefferies and BTIG, as applicable, a commission of 3% of the gross sales proceeds of any common stock sold through Jefferies and BTIG under the 2019 Sales Agreement. We have also provided Jefferies and BTIG with customary indemnification rights. During the three months ended March 31, 2020, we sold 2,334,107 shares of our common stock pursuant to the 2019 Sales Agreement for $9.1 million in proceeds, after deducting commissions of $1.1 million, from the sale of 2,326,119 shares of common stock under the 2015 Sales Agreement during the nine months ended September 30, 2017. We received an additional $45.9 million in proceeds, after deducting commissions of $1.4 million, from the sale of 2,006,007 shares of common stock, as of November 1, 2017, under the 2017 Sales Agreement.$0.3 million. As of ~~November 1, 2017, $2.7~~May 6, 2020, $9.3 million ~~remain~~remains available for sale under the ~~2017~~2019 Sales Agreement.

~~We have not yet generated any~~Product revenue, ~~from~~net, is recognized when earned on sales of NUZYRA, which was approved by the FDA in October 2018 and launched in the U.S. in February 2019. NUZYRA is sold principally to a limited number of specialty distributors and specialty pharmacy providers in the U.S. These customers subsequently resell our product ~~sales. All~~to health care providers or dispense the product to patients. In addition to distribution agreements with customers, we enter into arrangements with health care providers and payers that provide for government mandated and/or privately negotiated rebates, chargebacks and discounts with respect to the purchase of our product. Product revenue is recognized net of reserves for all variable consideration, including rebates, chargebacks, discounts and product returns.

Government contract service revenue is recognized when earned under our BARDA contract and represents the reimbursement by BARDA of costs incurred by us for work performed to ~~date has been derived from license fees, milestone payments,~~develop NUZYRA for the treatment of pulmonary anthrax plus a small fixed administrative fee. Refer to Note 8, Government, License and Collaboration Agreements to the interim condensed consolidated financial statements for further discussion of the BARDA contract and related revenue recognition.

Collaboration and royalty ~~income, reimbursements for research, development and manufacturing activities under licenses and collaborations, grant payments received~~revenue represents revenue earned from the ~~National Institute~~Almirall Collaboration Agreement, the Zai Collaboration Agreement, and the Tetraphase License Agreement. Refer to Note 8, Government, License and Collaboration Agreements to the interim condensed consolidated financial statements for further discussion of ~~Health, or NIH,~~the collaboration agreements and ~~other non-profit organizations. We do not expect to generate~~the related revenue ~~from~~recognition.

~~License~~ revenue represents ~~upfront fees~~the cost of the product itself, labor and ~~milestone payments received in connection with our Collaboration Agreements. Royalty revenue represents fifty percent of Intermezzo~~overhead, and any reserve for excess or obsolete inventory, as well as stability studies, inventory scrap and royalty ~~income received pursuant to the royalty sharing agreement, or the Royalty Sharing Agreement, entered into by us in October 2016 with the Special Committee of our Board of Directors.~~expense.

Research and development expenses consisted primarily of costs directly incurred by us for the development of our product candidates, which include:

Research and development costs are expensed as incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites.

We cannot determine with certainty the duration and completion costs of the current or future clinical trials of our product candidates or if, when, or to what extent we will generate revenues from the commercialization and sale of any of our products or product candidates for which we or any partner obtain regulatory ~~approval. We~~approval, such as NUZYRA and SEYSARA. Aside from the FDA approval of NUZYRA and SEYSARA in the U.S., we or our partners may never succeed in achieving regulatory approval for any of our other product candidates. The duration, costs and timing of clinical trials and development of our product candidates ~~will~~ depend on a variety of factors, including:

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that therapeutic candidate. For example, if the FDA, or

another regulatory authority, were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of the clinical development of product candidates, or if we experience significant delays in the enrollment in any clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

We are using available cash, cash equivalents, and marketable securities on hand and borrowings under our Loan Agreement (as defined below), as amended, with Hercules (as defined below) to complete our clinical studies of omadacycline as well as activities required to support an NDA submission for omadacycline for the treatment of ABSSSI and CABP, the manufacture of validation batches and commercial supply, to build our commercial and medical affairs teams, and for working capital and other general corporate purposes.

We manage certain activities, such as clinical trial operations, manufacture of clinical trial material, and preclinical animal toxicology studies, through third-party contract organizations. The only costs we track by each product candidate are external costs such as services provided to us by CROs, manufacturing of preclinical and clinical drug product, and other outsourced research and development expenses. We do not assign or allocate to individual development programs internal costs such as salaries and benefits, facilities costs, lab supplies and the costs of preclinical research and studies. Our external research and development expenses for omadacycline and other projects during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 are as ~~follows (in thousands):~~ follows:

~~General~~Selling, general and administrative ~~expense consists primarily~~expenses consist principally of ~~salaries~~compensation costs associated with our contract sales force, commercial support personnel, and medical affairs professionals, as well as personnel in executive and other ~~related~~administrative functions. Other selling, general and administrative expenses include marketing, trade, and other commercial costs ~~for personnel~~and distribution fees necessary to support the launch of NUZYRA and professional fees for legal, consulting and ~~consulting fees.~~accounting services.

Interest expense ~~represents~~represents interest incurred on the Hercules ~~Term~~ Loan Agreement, the Notes, and the Royalty-Backed Loan Agreement as well as the adjustment of our marketable securities to amortized cost.

Interest income ~~represents~~represents interest earned on our money market funds and marketable securities.

Comparison of the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019

Net product revenue recognized on sales of NUZYRA in the U.S. was $7.3 million and $1.3 million for the three months ended March 31, 2020 and March 31, 2019, respectively. The increase in net product revenue is primarily the result of an increase in sales volume due to higher customer demand.

Government contract service revenue earned under our BARDA contract was $0.3 million during the three months ended March 31, 2020. No such government contract service revenue was earned during the three months ended March 31, 2019 as the BARDA contract was not executed until December 2019.

Collaboration and royalty revenue was $0.3 million for the three months ended March 31, 2020 and March 31, 2019. Royalty revenue recognized for sales of SEYSARA in the U.S. was estimated using third party data and an approximation of discounts and allowances to calculate net product sales, to which the Company then applied the applicable royalty percentage specified in the Almirall Collaboration Agreement. Differences between actual and estimated royalty revenue will be adjusted in the period in which they become known, which is expected to be the following quarter.

Cost of product revenue was $1.5 million for the three months ended March 31, 2020, compared to $0.2 million for the three months ended March 31, 2019. The $1.3 million increase is primarily the result of an increase in NUZYRA product sales, royalties owed on net sales of NUZYRA, and certain period costs. Based on our policy to expense costs associated with the manufacture of our products prior to regulatory approval, certain of the costs of NUZYRA units recognized as revenue during the three months ended March 31, 2020 and March 31, 2019 were expensed prior to FDA approval in October 2018, and therefore are not included in cost of product revenue during the period. We expect cost of product revenue to increase in relation to net product revenues as we deplete these inventories, which we anticipate will occur in 2020.

Research and development expenses were ~~$12.1~~$6.4 million for the three months ended ~~September 30, 2017~~March 31, 2020, compared to ~~$17.3~~$11.4 million for the ~~same period in 2016.~~ three months ended March 31, 2019. The $5.0 million decrease ~~was driven~~is primarily bythe result of lower clinical study costs associated with ~~the completion of our Phase 3 program for omadacycline.~~

~~We anticipate that our research and development expenses will increase in future periods as a result of~~ our Phase 2 UTI program ~~payment of prescription drug user fees~~completed in 2019 and other operational efficiencies.

We anticipate research and development expenses to be lower in future periods while stay-at-home orders and travel restrictions associated with the COVID-19 pandemic remain imposed. Once those restrictions begin to lift, we anticipate an increase in research and development expenses as we continue development of NUZYRA for the treatment of pulmonary anthrax, initiate work on our ~~NDA submissions, manufacturing of validation batches of omadacycline~~FDA post-marketing commitments, and ~~expansion~~begin onshoring of our ~~medical affairs team prior to launch.~~manufacturing process, the majority of which is reimbursable under the BARDA contract. We will also incur additional spend as we continue exploring pathways for NTM indications.

~~General~~Selling, general and administrative expenses were ~~$8.2~~$23.6 million for the three months ended ~~September 30, 2017~~March 31, 2020, compared to ~~$5.9~~$23.3 million ~~for the same period in 2016. The increase was driven primarily by higher employee compensation costs as we continue to expand our team and engage in pre-commercial activities.~~

~~We anticipate that our general and administrative expenses will increase in future periods as we expand our pre-commercialization efforts.~~

During the three months ended September 30, 2017 and 2016, we recorded a $22,000 decrease and $0.2 million decrease, respectively, in the fair value of our contingent obligation to former Transcept stockholders. The decrease in the fair value of our contingent obligation for the three months ended ~~September 30, 2017~~March 31, 2019. The modest increase is primarily the result of personnel-related costs in support of the commercialization of NUZYRA, additional contract sales force costs, and ~~2016 reflects~~higher trade and distribution fees, partially offset by lower sales and marketing costs due to COVID-19-related travel restrictions that prohibited in-person training events and sales meetings from taking place during the first quarter of 2020.

We anticipate selling, general and administrative expenses to be lower in future periods while stay-at-home orders and travel restrictions associated with the COVID-19 pandemic remain imposed. Once those restrictions begin to lift, we anticipate an increase in selling, general and administrative expenses in support of our commercial activities related to NUZYRA as well as the continued costs of operating as a ~~corresponding decline in projected Intermezzo sales.~~public company. These increases will likely include costs related to the hiring of additional personnel, executing marketing and promotional programs, and engaging consultants, legal and other professional fees, and other expenses.

Interest expense for the three months ended ~~September 30, 2017~~March 31, 2020 represents interest incurred on the Notes of $2.2 million, the Hercules Loan Agreement ~~as amended,~~ of ~~$1.4~~$1.7 million and the Royalty-Backed Loan Agreement of $1.0 million, partially offset by the net accretion of our marketable securities of $0.1 million. Interest income for the three months ended ~~September 30, 2017~~March 31, 2020 represents interest earned on our money market funds and marketable ~~securities of $0.4 million.~~ securities.

Interest expense for the three months ended ~~September 30, 2016 represented~~March 31, 2019 represents interest incurred on the Notes of $2.2 million and the Hercules Loan Agreement of ~~$0.6~~$1.7 million, ~~and~~partially offset by the net ~~amortization~~accretion of our marketable securities of ~~$0.2~~$0.6 million. Interest income for the three months ended ~~September~~ ~~30, 2016~~March 31, 2019 represents interest earned on our money market funds and marketable ~~securities of $0.3 million.~~

~~During the nine months ended September 30, 2017, we recognized revenue of $7.5 million under the Zai Collaboration Agreement, which represents the upfront license payment.~~ ~~Revenue also represents~~ ~~fifty percent of net royalties received pursuant to the Intermezzo Royalty Sharing Agreement entered into in October 2016. We did not earn revenue during the nine months ended September 30, 2016.~~

Research and development expenses were $45.8 million for the nine months ended September 30, 2017 compared to $63.8 million for the same period in 2016. The decrease was driven primarily by lower clinical study costs associated with the completion of our Phase 3 program for omadacycline. The decrease is also attributable to reduced manufacturing production costs for omadacycline since fewer production runs fell within the nine months ended September 30, 2017 compared to the same period in prior year.

General and administrative expenses were $25.3 million for the nine months ended September 30, 2017 compared to $19.9 million for the same period in 2016. The increase was driven primarily by higher employee compensation costs as we continue to expand our team and engage in pre-commercial activities.

~~We recorded an impairment charge of $0.7 million during the nine months ended~~ ~~September~~ ~~30, 2017. No such impairment was recorded during the nine months ended~~ ~~September~~ ~~30, 2016. The impairment charge was recorded in connection with an expected decline in Intermezzo sales.~~

During the nine months ended September 30, 2017 and 2016, we recorded a $0.6 million decrease and $0.1 million decrease, respectively, in the fair value of our contingent obligation to former Transcept stockholders. The decrease in the fair value of our contingent obligation for the nine months ended September 30, 2017 and 2016 reflects a corresponding decline in projected Intermezzo sales.

Interest expense for the nine months ended September 30, 2017 represents interest incurred on the Loan Agreement, as amended, of $3.5 million and the net amortization of our marketable securities of $0.2 million. Interest income for the nine months ended September 30, 2017 represents interest earned on our money market funds and marketable securities of $1.0 million. Interest expense for the nine months ended September 30, 2016 represents interest incurred on the Term Loan entered into with Hercules on September 30, 2015 of $1.9 million and the net amortization of our marketable securities of $0.4 million. Interest income for the nine months ended September 30, 2016 represents interest earned on our money market funds and marketable securities of $0.8 million.

Provision for income taxes for the nine months ended September 30, 2017 represents China withholding taxes on the upfront license payment we received under the Zai Collaboration Agreement. We recorded no provision for income taxes for the nine months ended September 30, 2016.securities.

On July 2, 2019, we entered into the 2019 Sales Agreement with Jefferies and BTIG, under which we may offer and sell our common stock having aggregate sales proceeds of up to $50.0 million from time to time through Jefferies and BTIG as our sales agents. Sales of our common stock through Jefferies and BTIG, if any, will be made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act. For the three months ended March 31, 2020, we sold 2,344,107 shares of its common stock pursuant to the 2019 Sales Agreement for $9.1 million in proceeds, after deducting commissions of $0.3 million. As of May 6, 2020, $9.3 million remains available for sale under the 2019 Sales Agreement.

On February 25, 2019, we, through our wholly-owned subsidiary Paratek Royalty Corporation, entered into the Royalty-Backed Loan Agreement with Healthcare Royalty Partners III, L.P. Pursuant to the terms of the Royalty-Backed Loan Agreement, upon the satisfaction of the conditions precedent set forth therein, we borrowed a $32.5 million loan, which was secured by, and will be repaid based upon, royalties from the Almirall Collaboration Agreement. On May 1, 2019, we received $27.8 million, net of $0.5 million lender discount, $0.2 million in lender expenses incurred, and $4.0 million that was deposited into an interest reserve account. We also paid $1.2 million in other lender fees related to the Royalty-Backed Loan Agreement.

On April 18, 2018, we entered into a Purchase Agreement, or the Purchase Agreement, with several initial purchasers, or the Initial Purchasers for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated and Leerink Partners LLC acted as representatives, relating to the sale of $135.0 million aggregate principal amount of 4.75% Convertible Senior Subordinated Notes due 2024, or the Notes. We also granted the Initial Purchasers an option to purchase up to an additional $25.0 million aggregate principal amount of Notes, which was exercised in full on April 20, 2018. In addition, J. Wood Capital Advisors LLC, our financial advisor, purchased $5.0 million aggregate principal amount of Notes in a separate, concurrent private placement on the same terms as other investors. After deducting costs incurred of $6.0 million, we received proceeds from the sale of the Notes of $159.0 million in April 2018.

On January ~~12, 2015,~~22, 2018, we completed an underwritten public offering of 3,205,128 shares of our common stock, resulting in total proceeds of $50.0 million. Offering expenses incurred were $0.2 million.

On December 1, 2017, we filed a registration statement on Form S-3 with the SEC, ~~as amended on April 24, 2015 and~~which was declared effective on ~~April 27, 2015,~~December 8, 2017, to sell ~~shares~~certain of our ~~common stock, par value $0.001 per share,~~securities in an aggregate amount of up to ~~$200.0~~$250.0 million. As of March 31, 2020, $213.2 million ~~to the public in one or more registered offerings. Under~~remains available on this shelf registration statement, we completed an underwritten offering on May 5, 2015 of 3,089,000 shares of common stock at a public offering price of $24.50 per share, which includes 229,000 shares of common stock issued upon the exercise, in part, by the underwriters of an option to purchase additional shares. The aggregate proceeds received by us, after underwriting discounts and commissions and other offering expenses, were $70.4 million. We completed an underwritten offering in June 2016 of 4,887,500 shares of common stock at a public offering price of $13.00 per share, which includes 637,500 shares of common stock issued upon the exercise, in full, by the underwriters of an option to purchase additional shares from us. The net proceeds received by us, after underwriting discounts and commissions and other estimated offering expenses, were $59.3 million.

~~On September 30, 2015, we entered into a Loan and Security Agreement, or the Loan Agreement,~~ with Hercules Technology II, L.P. and Hercules Technology III, L.P., together, Hercules, and certain other lenders and Hercules Technology Growth Capital, Inc. (as agent). We executed three amendments to the Loan Agreement subsequent to September 30, 2015, providing access to term loans with an aggregate principal amount of up to $60.0 million. As of September 30, 2017, we have drawn down on $50.0$13.2 million of the $60.0 million available to us. An additional $10.0 million tranche is available at our option through December 15, 2017. The last amendment executed during the quarter ended June 30, 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 approvalreserved 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, January 1, 2020, we will make payments in equal monthly installments of principal and interest, with the balance of outstanding loans due on the original maturity date of the Loan Agreement. To date, we have issued to each of Hercules Technology II, L.P. and Hercules Technology III, L.P., a warrant to purchase 16,346 shares of our common stock (32,692 shares of common stock in total) at an exercise price of $24.47 per share and a warrant to purchase 18,574 shares of our common stock (37,148 shares of common stock in total) at an exercise price of $13.46 per share. We also have issued a warrant to Hercules Capital, Inc. that is exercisable for an aggregate of 5,374 shares of common stock at an exercise price of $23.26 per share.

In October 2015 and February 2017, we entered into the 2015 Sales Agreement and 2017 Sales Agreement, respectively, with Cantor, under which we could, at our discretion, from time to time sell shares of our common stock, with apotential sales value of up to $50 million under each Sales Agreement through Cantor. We provided Cantor with customary indemnification rights, and Cantor was entitled to a commission at a fixed rate of 3% of the gross proceeds per share sold. Sales of the shares under the Sales Agreements were to be made in transactions deemed to be “at the market offerings,” as defined in Rule 415 under the Securities Act of 1933, as amended. We received $36.9 million in proceeds, after deducting commissions of $1.1 million, from the sale of 2,326,119 shares of common stock under the 2015 Sales Agreement during the nine months ended September 30, 2017. We received an additional $45.9 million in proceeds, after deducting commissions of $1.4 million, from the sale of 2,006,007 shares of common stock, as of November 1, 2017, under the 20172019 Sales Agreement. ~~As of November1, 2017, $2.7 million remain available for sale under the 2017 Sales Agreement.~~

We have used and we intend to continue to use the net proceeds from the ~~above-described~~above offerings of our common stock and the Notes, as well as from the Hercules Loan Agreement ~~as amended,~~ and ~~anticipated regulatory and commercial milestone payments from our collaborations with Allergan and Zai~~,the Royalty-Backed Loan Agreement, together with our existing capital resources and future NUZYRA product sales, government contract service revenue and royalty revenue, to ~~complete~~fund our ongoing company operations, including clinical studies of omadacycline, ~~as well as activities required to support an NDA submission for omadacycline for the treatment of ABSSSI and CABP, the manufacture of validation batches and~~NUZYRA commercial ~~supply, to build our commercial and medical affairs teams,~~operations, and for working capital and other general corporate purposes. Refer to Note 13, Long-Term Debt, for further details on the Royalty-Backed Loan Agreement and the Hercules Loan Agreement.

As of ~~September 30, 2017,~~March 31, 2020, we had cash, cash equivalents and marketable securities of ~~$163.4~~$194.8 million.

The following table summarizes our cash provided by and used in operating, investing and financing ~~activities (in thousands):~~activities:

~~Cash~~Net cash used in operating activities was $30.3 million for the ~~nine~~three months ended ~~September 30, 2017 of $56.2~~March 31, 2020, compared to $35.8 million ~~is primarily~~for the result of our $67.2 million net loss, a $4.6 million net decrease in other current liabilities and a $0.6 million decrease in contingent obligations to former Transcept stockholders. This is offset by $15.0 million in non-cash items, including $14.0 million in depreciation, amortization and stock-based compensation expense and a $0.7 million impairment charge on our intangible asset. Cashthree months ended March 31, 2019. Net cash used in operating activities ~~for the nine months ended September 30, 2016 of $69.9 million is primarily the~~has decreased period over period as a result of ~~our $85.2 million net loss~~increased NUZYRA sales during 2020, offset ~~in part~~ by ~~a $1.5 million~~an increase in ~~accounts payable and accrued~~ expenses ~~and a decrease of $4.3 million~~for commercial activities in ~~prepaid expenses mainly associated~~conjunction with the ~~clinical development~~commercial launch of ~~omadacycline.~~NUZYRA in February 2019. The ~~remainder is the~~change in net ~~impact~~cash used in operating activities primarily consists of ~~$9.8 million in~~our net losses adjusted for non-cash items ~~including $9.7 million~~and changes in ~~depreciation, amortization~~components of operating assets and stock-based compensation expense, $0.2 million in non-cash interest expense, a $0.1 million decrease in contingent obligations to former Transcept stockholders offset by $0.1 million of interest earned on our marketable securities.liabilities as follows:

Net cash ~~used in~~provided by investing activities during the ~~nine~~three months ended ~~September 30, 2017 consisted~~March 31, 2020 consists of ~~$149.4~~$63.0 million ~~investment~~

in ~~short-term marketable securities (U.S. treasury~~ ~~and government agency securities) offset by~~ proceeds from maturities of marketable securities, ~~of $93.8 million. We also purchased $1.2~~partially offset by $19.6 million of ~~fixed assets for our new offices~~investments in ~~Boston and King of Prussia and received a refund for an existing letter of credit of $0.8 million. During the nine months ended September 30, 2016, we invested $93.3 million of our cash in short-term~~ marketable securities (U.S. treasury securities) and ~~government agency securities) partially offset~~$0.3 million in purchases of fixed assets.

Net cash provided by investing activities during the three months ended March 31, 2019 consists of $70.0 million in proceeds byfrom maturities of marketable securities of $25.0 million. The net cash used in investing activities for the nine months ended September 30, 2016 is also the result of an increase in restricted cash primarily representing a letter of credit of $0.8 million.securities.

Net cash provided by financing activities during the ~~nine~~three months ended ~~September 30, 2017 primarily represents~~March 31, 2020 consists of $9.1 million in net proceeds ~~of $82.1 million received from~~raised through the sale of shares of our common stock ~~under~~through the 2019 Sales ~~Agreements, $9.9 million drawn under the Third Tranche under the Loan Agreement, as amended, and $0.3 million from the exercise of stock options. Net~~Agreement.

There was no change in net cash provided by financing activities ~~for~~during the ~~nine~~three months ended September 30, 2016 is the result of net proceeds of $2.0 million received as a result of our sales of shares of common stock under the Sales Agreement, net proceeds of $59.3 million from an underwritten public offering of 4,887,500 shares of common stock in June 2016 and the exercise of stock options.March 31, 2019.

We ~~have not generated any~~began generating revenue from product ~~sales. We do not know~~sales when ~~if ever,~~ we launched NUZYRA in the U.S. in February 2019 and from royalties on sales of SEYSARA in the U.S. when Almirall launched the product in January 2019. Our future funding requirements will depend on our ability to generate ~~any~~ revenue from ~~product sales.~~sales of NUZYRA, and our partner, Almirall’s, ability to generate revenues from sales of SEYSARA, with respect to which we are entitled to tiered royalties in the U.S. and flat royalties in the greater China region. We do not expect to generate any other revenue ~~from product sales~~ unless and until ~~either we or either of~~ our ~~partners, Allergan or~~partner, Zai, ~~obtain~~obtains regulatory approval of and ~~commercialize~~commercializes one or more of our product ~~candidates. Subject to obtaining~~candidates in the Zai territory. Zai submitted the first regulatory approval application for a licensed product in the People’s Republic of ~~any~~China in December 2019, which was accepted by the China NMPA in February 2020. Additional resources will also be needed to support and accelerate the commercialization of ~~our~~NUZYRA, fund the development of omadacycline in other indications, including NTM, and to advance the development of potential other product candidates, ~~we anticipate that we will need substantial additional~~and such funding ~~in connection with our continuing operations to support pre-launch and commercial activities associated with our lead product candidate, omadacycline.~~may not be available on favorable terms or at all.

~~We have not completed development of any product candidates.~~ We expect to continue to incur significant ~~expenses~~expenditures and ~~increasing~~ operating losses for the ~~foreseeable future. We anticipate that our expenses will increase substantially~~next several years as we:

Based upon our current operating plan, which includes estimated NUZYRA product sales and expense reimbursement of activities related to the BARDA contract, we anticipate that our existing cash, cash equivalents and marketable securities of $194.8 million as of March 31, 2020, will extend our cash runway through the ~~remaining $10.0 million~~end of 2023 with a pathway to cash flow break even. This anticipated pathway assumes we ~~may borrow under~~will be able to fund all company operating expenses, anticipated capital expenditures, and debt service, including repayment in full of the Hercules Loan Agreement as amended, and anticipated regulatory and commercial milestone payments from our collaborations with Allergan and Zai will enable us to fund our operating expenses and capital expenditure requirements through the second quarter of 2019.under its existing terms.

We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our ~~product candidates,~~pharmaceutical products, especially given the constraints on in-person promotion of NUZYRA and lack of access to prescribers due to restrictions in access to hospitals during the COVID-19 pandemic, and the unknown extent to which we will maintain existing or enter into new collaborations with third parties to participate in the development and commercialization of our product and product candidates, we are unable to estimate with certainty the amounts of increased capital outlays and operating expenditures ~~associated with~~that we will require to fund our ~~current~~continuing operations, including for our clinical development programs and ~~anticipated clinical trials.~~commercialization efforts for NUZYRA. Our future capital requirements will depend on many factors, including:

our need to implement additional internal systems and infrastructure, including financial and reporting systems;

•

~~our need to implement additional internal systems and infrastructure, including financial and reporting systems; and~~

resources required to develop and implement policies and processes to promote ongoing compliance with applicable healthcare laws and regulations;

costs required to ensure that our and our partners’ business arrangements with third parties comply with applicable healthcare laws and regulations;

the economic and other terms, timing and success of our existing collaboration and licensing arrangements and any collaboration, licensing or other arrangements into which we may enter in the future, including the timing of receipt of any milestone or royalty payments under such ~~arrangements.~~arrangements; and

the effect of the COVID-19 pandemic on the economy generally and on our business and operations specifically, including our sales of NUZYRA, sales by our collaboration partners with respect to which we are entitled to royalties, our third party manufacturers and supply chain, our research and development efforts, our clinical trials and our employees.

Until we can generate a sufficient amount of product and royalty revenue to finance our cash requirements, if ever, we expect to finance our future cash needs primarily through a combination of public ~~and~~or private equity offerings, debt or other structured financings, strategic collaborations and ~~strategic collaborations.~~grant funding. We do not have any committed external sources of funds other than the rights under the BARDA contract and the rights to contingent milestone payments ~~and~~and/or royalties under the ~~Allergan~~Almirall Collaboration Agreement, the Almirall China License, the Tetraphase License Agreement and the Zai Collaboration Agreement, which are terminable by ~~Allergan~~Almirall, Tetraphase and Zai, respectively, upon prior written ~~notice, and the undrawn balance of $10.0 million on the Third Amendment, available to use through December 15, 2017.~~notice. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect stockholders’ rights. ~~Additional~~Future debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Additionally, future equity or debt financing may be difficult to obtain on favorable terms, if at all, in light of increased volatility within the global financial markets as a result of the COVID-19 pandemic. If we raise additional funds through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, NUZYRA, sarecycline, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market NUZYRA, sarecycline or our other product candidates that we ~~would~~may otherwise prefer to develop and market ourselves.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with generally accepted accounting principles of the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to, among other items, ~~intangible assets,~~accounts receivable and related reserves, inventory and related reserves, goodwill, ~~contingent liabilities,~~accrued sales allowances, net product revenue, government contract service revenue, collaboration and royalty revenue, leases, stock-based compensation arrangements, manufacturing and clinical accruals, useful lives for depreciation and amortization of long-lived assets and valuation allowances on deferred tax assets. Actual results could differ from those estimates.

~~As of January 1, 2017, we adopted ASU No. 2016-09,~~ ~~Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, or ASU 2016-09~~. In connection with the adoption, we made an accounting policy change. Prior to adoption, we estimated forfeitures at the time of grant and revised those estimates in subsequent periods if actual forfeitures differed from the estimates. We used historical data to estimate pre-vesting option forfeitures to the extent that actual forfeitures differed from our estimates, the difference was recorded as a cumulative adjustment in the period the estimates were revised. Upon adoption, we recognize the effect of forfeitures in compensation cost when they occur. We recorded a cumulative-effect catch-up adjustment to equity of $0.7 million upon adoption.

~~There have been no other material changes in our critical accounting policies during the nine months ended September 30, 2017, as compared to those disclosed in the~~ ~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates”~~ ~~in our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on March 2, 2017.~~

Recent Accounting Pronouncements

Refer to Note ~~16,~~18, Recent Accounting Pronouncements, to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

During the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and the year ended December 31, ~~2016~~2019 we did not engage in any off-balance sheet financing activities, including the use of structured finance, special purpose entities or variable interest entities.

Contractual Obligations and Commitments

We executed the third amendment to the lease agreement on our King of Prussia office space in October 2016. The lease agreement, as amended, was for 19,708 rentable square feet of office space, for a total commitment of $3.3 million, with respect to which lease payments became due beginning once we took control of such office space during the quarter ended March 31, 2017. The total lease commitment is over a seven-year and seven-month lease term. The lease contains rent escalation and a partial rent

abatement period, which will be accounted for as rent expense under the straight-line method. We are required to make additional payments under the operating lease for taxes, insurance, and other operating expenses incurred during the operating lease period.

In July 2017, we entered into a master manufacturing services agreement and corresponding product agreement with Patheon UK Limited, or Patheon. 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. If our omadacycline product is approved, we will also be subject to an annual minimum purchase requirement in the six-digit euro 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.

~~For further details, refer to Note 15,~~ ~~Commitments and Contingencies, to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.~~

~~Other than as described above, there~~There have been no ~~other~~ material changes in our contractual obligations and commitments as of ~~September 30, 2017,~~March 31, 2020, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Contractual Obligations and Commitments” in our ~~Annual Report on~~2019 Form ~~10-K for the year ended December 31, 2016, as filed with the SEC on March 2, 2017.~~10-K.

Item 3.

Quantitative and Qualitative Disclosures about Market Risks

Our cash, cash equivalents and investments balance as of ~~September 30, 2017~~March 31, 2020 consisted of cash and cash equivalents, and U.S. treasury ~~securities~~ ~~and government agency~~ securities. The goals of our investment policy are preservation of capital, fulfillment of liquidity needs and fiduciary control of cash and investments. We also seek to maximize income from our investments without assuming significant risk. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of interest rates, including interest rate changes resulting from the impact of the COVID-19 pandemic, particularly because our investments are in short-term marketable securities. Due to the short-term duration of our investment portfolio and the low-risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio. We have the ability and intention to hold our investments, although they are available for immediate sale, until maturity and, therefore, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on our investment portfolio.

We engage CROs and contract manufacturers on a global scale. We may be subject to fluctuations in foreign currency rates in connection with certain of these agreements. We currently do not hedge any such foreign currency exchange rate risk. Transactions denominated in currencies other than U.S. dollars are recorded based on exchange rates at the time such transactions arise and were less than ~~10%~~2.1% of total liabilities as of ~~September 30, 2017.~~March 31, 2020.

Item 4.

Controls and Procedures

Management’s Evaluation of our Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

As of ~~September 30, 2017,~~March 31, 2020, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of ~~September 30, 2017,~~March 31, 2020, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

During the three months ended ~~September 30, 2017,~~March 31, 2020, there have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, as amended, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1.

Legal Proceedings

Information in response to this Item is incorporated herein by reference from Note ~~15,~~17, Commitments and Contingencies, to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Item 1A.

Risk Factors

There have been no material changes from the risk factors set forth in ~~the Company’s Annual Report on~~our 2019 Form 10-K ~~for~~other than as set forth below.

A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, has and may in the ~~year ended December 31, 2016, as filed with~~future adversely affect our business, results of operations and financial condition.

If a pandemic, epidemic or outbreak of an infectious disease occurs, our business may be adversely affected. Such events may result in a period of business and manufacturing disruption or in an inability to scale our production to meet demand in a cost-effective manner or at all, any of which could materially affect our financial condition and results of operations. For example, U.S residents and businesses in major urban centers have been hit especially hard by the ~~SEC on March 2, 2017~~global spread of COVID-19, which has resulted in disruptions to our business and in the ~~Company’s Quarterly Report~~future may result in additional disruptions. Examples of both include the following:

Health risks. The health and wellbeing of our employees, including our sales representatives and clinical educators who visit our hospital customers, as well as employees of our suppliers, is at risk– if a critical threshold of our personnel, or the personnel of our suppliers, were to be diagnosed with COVID-19, placed in quarantine due to potential exposure to COVID-19, or need to care for family members diagnosed with COVID-19, it may result in significant business disruption.

Limitations on ~~Form 10-Q~~suppliers. Some of our suppliers have been, and may in the future be, limited, and at times, precluded, from delivering to us products, materials, and components in the quantities needed on a timely basis, for a variety of reasons, including an evolving understanding of how international, federal, and/or state authorities define “essential business”, their inability to remain open due to lost business in other parts of their portfolios, or because of international, federal, and/or state prioritization orders requiring our suppliers to produce for governmental entities and/or other manufacturers before they produce for us. We presently maintain a supply chain structure that has allowed us to avoid material disruptions by the current COVID-19 outbreak; however, the future impact of this outbreak on our supply chain is highly uncertain and cannot be predicted. Our demand has increased at the same time as our supply chain has begun to face limitations, which has, and may in the future, result in a shortage of supply, increased costs of products, materials, and components and delays in the timely delivery thereof. The increased demand we are placing on our suppliers at the same time their sub-suppliers face limitations may in the future lead to our suppliers to seek to pass through expenses or otherwise increase pricing for products, materials, and components that we require to meet our production needs. If COVID-19 affects the producers of certain materials required by us for the ~~quarter ended~~production of NUZYRA, or by Almirall for the production of SEYSARA, our business and financial performance could be adversely affected.

Requirements for alternative sourcing. We have had to develop alternate sources of supply for certain products, materials, and components as a result of the limitations, or complete inability, of some of some of our suppliers to meet our production needs. Although we have successfully been able to develop and validate these alternate sources of supply to date, doing so is time consuming, difficult, and costly, and if we need to develop and validate additional alternate sources of supply in the future for any reason, we may not be able to do so in a timeframe acceptable to meet customer demand.

Importation limitations. Federal authorities may restrict our ability to import products into the U.S., which could negatively impact our business, operations, and relationships with our international distributors and customers in a significant and long-term way that we may not be able to rebuild for an extended period of time, or at all.

Shipping delays. While we have priority shipping status with our carriers, we have experienced shipping delays throughout the U.S. and internationally during the COVID-19 outbreak, and as a result, there have been and may continue to be delays in our ability to ship our product to customers and distributors in a timely manner, potentially resulting in returned product, and we have and may continue to face extraordinary freight fees, including air freight fees and expedition fees for all modes of transportation.

Travel and access restrictions. Travel restrictions have impeded our ability to qualify and retain new suppliers or audit our existing suppliers, which might have a negative impact on our quality management system and our product quality in the future. Travel restrictions and hospital limitations or denials of access for non-patients have impacted the ability of our direct sales team and clinical educators in the U.S. to access physicians and clinicians in order to educate them about NUZYRA.

•

Work from home limitations. We have asked all employees to work from home, which could impact our ability to effectively plan, execute, communicate and maintain our corporate culture. The increase in working remotely could increase our cyber security risk, create data accessibility concerns, and make us more susceptible to communication disruptions.

Competition. Our competitors may in the future secure significant purchase agreements from the federal government or various states before we are able to do so, or may be selected instead of us, precluding us from those commercial opportunities.

Debt covenants. A significant disruption to our business resulting in an inability to build and ship product to customers for an extended period of time may impair our ability to maintain compliance with our debt covenants.

Capital markets volatility. Equity and debt markets have experienced significant volatility since the spread of COVID-19 into the U.S. Should significant volatility continue or they experience declines due to the economic impact of COVID-19, we may not be able to raise capital at a reasonable valuation or at all.

Clinical studies. We may be required to delay future clinical studies as a direct or indirect result of the COVID-19 pandemic.

Each of these factors could have a material adverse effect on our business and results of operations. The full extent to which COVID-19 impacts our business and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information about COVID-19 and the actions to treat or contain COVID-19 or to otherwise limit its impact, among others.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, cleared or approved, or commercialized in a timely manner or at all, which could negatively impact our business.

The ability of the FDA to review and clear or approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for marketing applications, clinical trial authorizations or other regulatory submissions related to drugs or dug candidates to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical employees and stop critical activities.

Separately, in response to the global pandemic of COVID-19, on March ~~31, 2017, as filed with~~10, 2020, the ~~SEC~~FDA announced its intention to postpone most foreign inspections of manufacturing facilities and products through April 2020, and subsequently, on ~~May 4, 2017.~~

March 18, 2020, the FDA announced its intention to temporarily postpone routine surveillance inspections of domestic manufacturing facilities. Regulatory authorities outside the U.S. may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our marketing applications, clinical trial authorizations, emergency use applications, or other regulatory submissions, which could negatively impact our business.

Item 6.

Exhibits

EXHIBIT INDEX

Incorporated by Reference

Exhibit
No.

Exhibit Description

Schedule/
Form

File Number

Exhibit

Filing Date

     3.1

Amended and Restated Certificate of Incorporation.

Form 8-K

001-36066

3.1

October 31, 2014

     3.2

Certificate of Amendment of Amended and Restated Certificate of Incorporation.

Form 8-K

001-36066

3.2

October 31, 2014

     3.3

Amended and Restated Bylaws.

Form 8-K

001-36066

3.1

April 16, 2015

     4.1

Specimen Common Stock Certificate.

Form S-3

333-201458

4.2

January 12, 2015

     4.2

Form of Warrant Agreement issued to Hercules        Technology II, L.P. and Hercules Technology III, L.P.

Form 8-K

001-36066

4.1

October 5, 2015

     4.3

Form of Warrant Agreement issued to Hercules Technology II, L.P. and Hercules Technology III, L.P.

Form 8-K

001-36066

4.1

December 13, 2016

     4.4

Warrant, dated as of April 7, 2014 issued to HBM Healthcare Investments (Cayman) Ltd.

Form 10-K

001-36066

10.22

April 2, 2015

     4.5

Warrant, dated as of April 18, 2014 issued to K/S Danish BioVenture.

Form 10-K

001-36066

10.23

April 2, 2015

     4.6

Warrant, dated as of April 7, 2014 issued to Omega Fund III, L.P.

Form 10-K

001-36066

10.24

April 2, 2015

   10.1*+

Employment Agreement, as amended, by and between the Company and Michael F. Bigham dated as of August 4, 2017.

   10.2*+

Employment Agreement, as amended, by and between the Company and William M. Haskel dated as of August 4, 2017.

   10.3*+

Employment Agreement, as amended, by and between the Company and Evan Loh, M.D. dated as of August 4, 2017.

   10.4*+

Employment Agreement, as amended, by and between the Company and Douglas W. Pagán dated as of August 4, 2017.

   10.5*+

Employment Agreement, as amended, by and between the Company and Adam Woodrow dated as of August 4, 2017.

		~~Incorporated by Reference~~
~~Exhibit~~ ~~No.~~	~~Exhibit Description~~	~~Schedule/~~ ~~Form~~	~~File Number~~	~~Exhibit~~	~~Filing Date~~

31.1*	Certification of the Company’s Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act of 1934, as amended, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*	Certification of the Company’s Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act of 1934, as amended, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*	~~Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

32.2*	~~Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

101.INS*	~~XBRL Instance Document.~~

101.SCH*	~~XBRL Taxonomy Extension Schema Document.~~

101.CAL*	~~XBRL Taxonomy Extension Calculation Linkbase Document.~~

101.DEF*	~~XBRL Taxonomy Extension Definition Linkbase Document.~~

~~101~~.LAB*	~~XBRL~~ Ta~~xono~~my Extension Labels Li~~nkb~~a~~se Do~~cument.

101.PRE*	~~XBRL Taxonomy Extension Presentation Linkbase Document.~~

		Incorporated by Reference
Exhibit No.	Exhibit Description	Schedule/ Form	File Number	Exhibit	Filing Date

3.1	Amended and Restated Certificate of Incorporation.	Form 8-K	001-36066	3.1	October 31, 2014

3.2	Certificate of Amendment of Amended and Restated Certificate of Incorporation.	Form 8-K	001-36066	3.2	October 31, 2014

3.3	Certificate of Elimination of Series A Junior Participating Preferred Stock	Form 8-K	001-36066	3.1	July 24, 2015

3.4	Amended and Restated Bylaws.	Form 8-K	001-36066	3.1	April 16, 2015

4.1	Specimen Common Stock Certificate.	Form S-3	333-201458	4.2	January 12, 2015

4.2	Form of Warrant Agreement issued to Hercules Technology II, L.P. and Hercules Technology III, L.P.	Form 8-K	001-36066	4.1	October 5, 2015

4.3	Form of Warrant Agreement issued to Hercules Technology II, L.P. and Hercules Technology III, L.P.	Form 8-K	001-36066	4.1	December 13, 2016

4.4	Warrant Agreement, dated as of June 27, 2017 issued to Hercules Capital, Inc.	Form 8-K	001-36066	4.1	June 29, 2017

4.5	Warrant Agreement, dated as of August 1, 2018 issued to Hercules Capital, Inc.	Form 10-Q	001-36066	4.5	August 2, 2018

4.6	Warrant, dated as of April 7, 2014 issued to HBM Healthcare Investments (Cayman) Ltd.	Form 10-K	001-36066	10.22	April 2, 2015

4.7	Warrant Agreement, dated as of August 1, 2018 issued to Hercules Capital, Inc.	Form 10-Q	001-36066	10.23	April 2, 2015

4.8	Warrant Agreement, dated as of August 1, 2018 issued to Hercules Capital, Inc.	Form 10-Q	001-36066	10.24	April 2, 2015

10.1*+	Non-Employee Director Compensation Policy.

31.1*	Certification of the Company’s Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act of 1934, as amended, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*	Certification of the Company’s Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act of 1934, as amended, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*	Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*	Certification of the Company’s Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*	XBRL Instance Document.

101.SCH*	XBRL Taxonomy Extension Schema Document.

101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

*	Filed herewith.

^	~~Confidential treatment has been requested as to certain portions, which portions have been omitted and submitted separately to the Securities and Exchange Commission.~~

+	Management contract or compensatory plan, contract or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 711^thday of ~~November, 2017.~~May 2020.

Paratek Pharmaceuticals, Inc.

By:		/s/ ~~Michael F. Bigham~~Evan Loh M.D.
		~~Michael F. Bigham~~Evan Loh M.D.
		~~Chairman and~~ Chief Executive Officer (Principal Executive Officer)
By:		/s/ ~~Douglas W. Pagán~~Sarah Higgins
		~~Douglas W. Pagán~~Sarah Higgins
		~~Chief Financial Officer~~Vice President, Finance and Controller (Principal Financial and Accounting Officer)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	PRTK	The Nasdaq Global Market

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐☒
Emerging growth company	☐

	~~Balance sheet reclassification~~	~~Amount ($)~~
~~Increase to additional paid-in capital resulting from the Company's election to recognize forfeitures as they occur rather than applying an estimated forfeiture rate~~	~~Additional paid-in-capital~~		~~681~~
~~Charge to accumulated deficit for cumulative-effect adjustment from adoption of ASU 2016-09~~	~~Accumulated deficit~~		~~681~~

	March 31, 2020		December 31, 2019
Work in process	$	9,598	$	9,330
Finished goods		3,874		2,249
Total inventories, net	$	13,472	$	11,579

	September 30, 2017			December 31, 2016			March 31, 2020			December 31, 2019
Office equipment	$	928		$	443		$	866		$	866
Machinery and equipment								567			567
Computer equipment		548			251			412			412
Computer software		787			787			798			798
Leasehold improvements		873			137			920			920
Construction-in-progress		—			391
Gross fixed assets		3,136			2,009			3,563			3,563
Less: Accumulated depreciation and amortization		(1,214	)		(821	)		(2,469	)		(2,336	)
Net fixed assets	$	1,922		$	1,188
Total fixed assets, net							$	1,094		$	1,227

		Page
PART I FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	2

	Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019	2

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	3

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	4

	Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2020 and 2019	5

	Notes to Unaudited Condensed Consolidated Financial Statements	56

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2327

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3336

Item 4.	Controls and Procedures	3336

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	3437

Item 1A.	Risk Factors	3437

Item 6.	Exhibits	3439

	SIGNATURES	37
		40

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
License and royalty revenue	$	12		$	—		$	7,544		$	—
Operating expenses:
Research and development		12,112			17,334			45,847			63,757
General and administrative		8,219			5,949			25,299			19,896
Impairment of intangible asset		—			—			682			—
Changes in fair value of contingent consideration		(22	)		(170	)		(571	)		(50	)
Total operating expenses		20,309			23,113			71,257			83,603
Loss from operations		(20,297	)		(23,113	)		(63,713	)		(83,603	)
Other income and expenses:
Interest expense		(1,408	)		(820	)		(3,666	)		(2,368	)
Interest income		389			309			979			788
Other loss, net		(8	)		(4	)		(23	)		1
Loss before income taxes	$	(21,324	)	$	(23,628	)	$	(66,423	)	$	(85,182	)
Provision for income taxes		—			—			753			—
Net loss	$	(21,324	)	$	(23,628	)	$	(67,176	)	$	(85,182	)
Other comprehensive income:
Unrealized (loss) gain on available-for-sale securities, net of tax		16			(20	)		(64	)		14
Comprehensive loss	$	(21,308	)	$	(23,648	)	$	(67,240	)	$	(85,168	)
Net loss per share - basic and diluted	$	(0.77	)	$	(1.04	)	$	(2.54	)	$	(4.39	)
Weighted average common shares outstanding
Basic and diluted		27,776,218			22,627,711			26,453,219			19,391,443

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
September 30, 2017
March 31, 2020
U.S. treasury securities	$	128,728	$	—	$	(79	)	$	128,649	$	69,695	$	471	$	—		$	70,166
Government agencies		1,797		—		(1	)		1,796
Total	$	130,525	$	—	$	(80	)	$	130,445	$	69,695	$	471	$			$	70,166
December 31, 2016
December 31, 2019
U.S. treasury securities	$	62,574	$	—	$	(18	)	$	62,556	$	113,003	$	89	$	(15	)	$	113,077
Government agencies		12,518		2		—			12,520
Total	$	75,092	$	2	$	(18	)	$	75,076	$	113,003	$	89	$	(15	)	$	113,077

	March 31, 2020		March 31, 2019
Cash and cash equivalents	$	124,624	$	81,219
Short-term restricted cash		630		266
Long-term restricted cash		2,261		250
Total cash, cash equivalents and restricted cash shown on the condensed consolidated statement of cash flows	$	127,515	$	81,735

	September 30, 2017			December 31, 2016
Intermezzo product rights	$	212		$	1,410
TO-2070 asset		170			170
Gross intangible assets		382			1,580
Less: Accumulated amortization		(153	)		(565	)
Net intangible assets	$	229		$	1,015

	September 30,				Three Months Ended March 31,
	2017		2016		2020		2019
Excluded potentially dilutive securities ⁽¹⁾:
Common stock issuable under outstanding convertible notes						10,377,361		10,377,361
Shares subject to outstanding options to purchase common stock		3,575,633		2,786,882		3,309,900		3,815,951
Unvested restricted stock units		1,186,503		440,500		4,444,454		2,837,588
Shares subject to warrants to purchase common stock		84,828		42,306		104,455		104,455
Shares issuable under employee stock purchase plan		36,539		36,539		798,187		979,833
Totals		4,883,503		3,306,227		19,034,357		18,115,188

	Contingent liability— former Transcept stockholders
Balances At December 31, 2016	$	655
Change in fair value		(571	)
Balances At September 30, 2017	$	84

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2020		2019
Research and development expense	$	1,258	$	871	$	4,312	$	2,530	$	587	$	1,435
General and administrative expense		2,824		1,788		8,706		5,572
Selling, general and administrative expense										1,948		2,428
Total stock-based compensation expense	$	4,082	$	2,659	$	13,018	$	8,102	$	2,535	$	3,863

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2016		2,780,791		$	16.63		8.27	$	8,809
Granted		911,400			17.08
Exercised		(66,455	)		4.83
Expired or Forfeited		(50,103	)		17.04
Outstanding at September 30, 2017		3,575,633		$	16.96		8.01	$	30,210
Exercisable at September 30, 2017		1,957,219		$	16.11		7.45	$	18,236
Vested and expected to vest at September 30, 2017		3,575,633		$	16.96		8.01	$	30,210

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested Balance At December 31, 2016		454,000		$	19.67
Granted		902,800			16.96
Released		(162,797	)		14.71
Cancelled		(7,500	)		13.73
Unvested Balance At September 30, 2017		1,186,503		$	18.33

Fiscal Year
Remainder of 2017	$	177
2018		1,084
2019		1,156
2020		1,178
2021		964
2022 and Thereafter		1,422
Total	$	5,981

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2019		2,305,408		$	7.66
Granted		2,513,550			3.52
Released		(252,670	)		8.42
Forfeited		(121,834	)		9.50
Unvested balance at March 31, 2020		4,444,454		$	5.22

	March 31, 2020			December 31, 2019
Gross proceeds	$	70,000		$	70,000
Unamortized debt issuance costs		(299	)		(361	)
Carrying value	$	69,701		$	69,639

	For the Three Months Ended March 31, 2020
Lease cost (in thousands)
Operating lease cost	$	255
Variable lease cost		36
Total lease cost	$	291
Cash paid for amounts included in the measurement of lease liabilities:	$	292

Other information
Weighted average remaining lease term (in years)		3.4
Weighted average discount rate		8.75	%

Maturity of lease liabilities (in thousands)	As of March 31, 2020
2020	$	885
2021		964
2022		508
2023		518
2024		396
Total lease payments	$	3,271
Less: imputed interest		(449	)
Total operating lease liabilities	$	2,822

	Chargebacks, discounts and fees			Government and other rebates			Returns		Patient assistance			Total
Balance at December 31, 2019	$	299		$	695		$	369	$	129		$	1,492
Provision related to current period sales		652			951			66		64			1,733
Adjustment related to prior period sales		(18	)		59			—		—			41
Credit or payments made during the period		(498	)		(521	)		—		(59	)		(1,078	)
Balance at March 31, 2020	$	435		$	1,184		$	435	$	134		$	2,188

	Three Months Ended September 30,									Three Months Ended March 31,
(in thousands)	2017			2016			$ Change			2020			2019			$ Change
License and royalty revenue	$	12		$	—		$	12
Operating expenses:
Product revenue, net										$	7,303		$	1,347		$	5,956
Government contract service revenue											337			—			337
Collaboration and royalty revenue											280			251			29
Net revenue										$	7,920		$	1,598		$	6,322
Expenses:
Cost of product revenue											1,471			206			1,265
Research and development		12,112			17,334			(5,222	)		6,389			11,392			(5,003	)
General and administrative		8,219			5,949			2,270
Changes in fair value of contingent consideration		(22	)		(170	)		148
Selling, general and administrative											23,638			23,316			322
Total operating expenses		20,309			23,113			(2,804	)		31,498			34,914			(3,416	)
Loss from operations		(20,297	)		(23,113	)		2,816			(23,578	)		(33,316	)		9,738
Other income and expenses:
Interest income											705			946			(241	)
Interest expense		(1,408	)		(820	)		(588	)		(4,826	)		(3,226	)		(1,600	)
Interest income		389			309			80
Other loss, net		(8	)		(4	)		(4	)
Net Loss	$	(21,324	)	$	(23,628	)	$	2,304
Other gains (losses), net											82			(14	)		96
Net loss										$	(27,617	)	$	(35,610	)	$	7,993