prtk-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________

Form 10-Q

____________________________________________________


x			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: June 30, 2023 or


o			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____________ to ____________

Commission file number: 001-36066

____________________________________________________

PARATEK PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

____________________________________________________


Delaware			33-0960223
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

____________________________________________________

75 Park Plaza

Boston, MA 02116

(617) 807-6600

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

____________________________________________________

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


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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No o

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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. o

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

As of July 31, 2023, there were 57,322,358 shares of the registrant's common stock, par value $0.001 per share, outstanding.

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TABLE OF CONTENTS


		Page
PART I FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	2

	Condensed Consolidated Balance Sheets as of June 30 , 2023 and December 31, 2022	2

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended June 30 , 2023 and 2022	3

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30 , 2023 and 2022	4

	Condensed Consolidated Statements of S tockholders ’ Equity (Deficit) for the Three Months Ended March 31, 2 023 a n d 2022 and Three Months Ended June 30 , 2023 and 2022	5

	Notes to Unaudited Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42

Item 4.	Controls and Procedures	42

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	43

Item 1A.	Risk Factors	43

Item 6.	Exhibits	45

SIGNATURES		47

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Paratek Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except for share and par value amounts)

(unaudited)


	June 30, 2023		December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	42,685	$	34,248
Restricted cash	125		125
Accounts receivable, net	42,291		74,657
Inventories, net	11,413		16,565
Other receivables	220		3,381
Prepaid and other current assets	8,493		7,866
Total current assets	105,227		136,842
Fixed assets, net	554		616
Goodwill	829		829
Right-of-use assets	1,645		1,782
Long-term inventories, net	36,382		31,314
Other long-term assets	1,155		1,155
Total assets	$	145,792	$	172,538
Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable	$	2,951	$	5,308
Accrued expenses	34,803		31,210
Short-term debt	164,042		—
Other current liabilities	823		870
Total current liabilities	202,619		37,388
Long-term debt	94,285		256,946
Long-term lease liabilities	1,429		1,468
Accrued long-term compensation	46,565		45,325
Other liabilities	2,259		2,453
Total liabilities	$	347,157	$	343,580
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; 200,000,000 shares authorized; 57,282,239 shares issued and outstanding as of June 30, 2023; and 200,000,000 shares authorized; 56,651,559 shares issued and outstanding as of December 31, 2022	57		56
Additional paid-in capital	763,723		759,351

Accumulated deficit	(965,145)		(930,449)
Total stockholders’ deficit	(201,365)		(171,042)
Total liabilities and stockholders’ deficit	$	145,792	$	172,538

See accompanying notes to unaudited condensed consolidated financial statements.

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Paratek Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Product revenue, net	$	33,800	$	25,082	$	60,013	$	45,000
Government contract service revenue	3,620		1,896		5,301		4,068
Government contract grant revenue	1,931		2,082		4,084		4,182
Collaboration and royalty revenue	642		577		1,831		1,248
Net revenue	$	39,993	$	29,637	$	71,229	$	54,498
Expenses:
Cost of product revenue	4,368		4,878		10,612		8,372
Research and development	8,772		7,592		16,080		15,069
Selling, general and administrative	36,264		30,335		69,753		57,937
Total operating expenses	49,404		42,805		96,445		81,378
Loss from operations	(9,411)		(13,168)		(25,216)		(26,880)
Other income and expenses:
Interest income	252		133		473		240
Interest expense	(5,287)		(4,546)		(9,763)		(9,025)
Other (losses) gains, net	(56)		(38)		(78)		138
Net loss before provision for income taxes	$	(14,502)	$	(17,619)	$	(34,584)	$	(35,527)
Provision for income taxes	(51)		—		(111)		—
Net loss	(14,553)		(17,619)		(34,695)		(35,527)
Other comprehensive (loss)
Unrealized (loss) on available-for-sale securities, net of tax	—		(53)		—		(224)
Comprehensive loss	$	(14,553)	$	(17,672)	$	(34,695)	$	(35,751)
Basic and diluted net loss per common share	$	(0.25)	$	(0.33)	$	(0.61)	$	(0.67)
Weighted average common stock outstanding
Basic	57,282,239		53,023,350		57,093,876		53,310,091
Diluted	57,282,239		53,023,350		57,093,876		53,310,091

See accompanying notes to unaudited condensed consolidated financial statements.

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Paratek Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2023		2022
Operating activities
Net loss	$	(34,695)	$	(35,527)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and accretion	93		275
Stock-based compensation expense	4,372		6,354
Noncash interest expense	2,226		2,725
Changes in operating assets and liabilities
Accounts receivable, other receivables, prepaid, and other current assets	34,901		187
Inventories	84		(6,958)
Operating lease right-of-use asset	137		404
Accounts payable and accrued expenses	1,236		(923)
Operating lease liability	(39)		(455)
Accrued long-term compensation	1,241		—
Other liabilities and other assets	(242)		309
Net cash provided (used) by operating activities	9,314		(33,609)
Investing activities
Purchase of fixed assets	(32)		(36)
Purchase of marketable securities	—		(15,160)
Net cash used in investing activities	(32)		(15,196)
Financing activities
Proceeds from sale of common stock, net of costs	—		7,330

Proceeds from the employee stock purchase plan and stock options	—		488
Principal payments on long-term debt	(845)
Net cash (used) provided by financing activities	(845)		7,818
Net increase (decrease) in cash, cash equivalents and restricted cash	8,437		(40,987)
Cash, cash equivalents and restricted cash at beginning of period	34,373		80,617
Cash, cash equivalents and restricted cash at end of period	$	42,810	$	39,630
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	6,791	$	5,739

SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES

Paid in-kind interest included in accrued expenses	$	1,461	$	2,011

See accompanying notes to unaudited condensed consolidated financial statements.

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Paratek Pharmaceuticals, Inc.

Condensed Consolidated Statements of Stockholders’ Deficit

(in thousands, except share amounts)

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ Deficit
	Shares	Amount
Balances at December 31, 2022	56,651,559	$	56	$	759,351	$	(930,449)	$	(171,042)
Vesting of restricted stock unit awards	630,680	1		—		—		1
Stock-based compensation expense	—	—		2,146		—		2,146
Net loss	—	—		—		(20,143)		(20,143)
Balances at March 31, 2023	57,282,239	$	57	$	761,497	$	(950,592)	$	(189,038)
Stock-based compensation expense	—	—		2,226		—		2,226
Net loss	—	—		—		(14,553)		(14,553)
Balances at June 30, 2023	57,282,239	$	57	$	763,723	$	(965,145)	$	(201,365)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Deficit
	Shares	Amount
Balances at December 31, 2021	51,711,809	$	52	$	739,053	$	(9)	$	(866,883)	$	(127,787)
Exercise of stock options	729	—		6		—		—		6
Issuance of common stock, net of expenses	884,230	1		3,090		—		—		3,091
Vesting of restricted stock unit awards	426,582	—		—		—		—		—
Employee stock purchase plan expense	—	—		36		—		—		36
Unrealized (loss) on available-for-sale securities, net of tax	—	—		—		(171)		—		(171)
Stock-based compensation expense	—	—		2,433		—		—		2,433
Net loss	—	—		—		—		(17,910)		(17,910)
Balances at March 31, 2022	53,023,350	$	53	$	744,618	$	(180)	$	(884,793)	$	(140,302)
Issuance of common stock, net of expenses	1,455,156	2		4,237		—		—		4,239
Employee stock purchase plan expense	—	—		29		—		—		29
Issuance of stock under the employee stock purchase plan	300,132	—		483		—		—		483
Unrealized gain on available-for-sale securities, net of tax	—	—		—		(53)		—		(53)
Stock-based compensation expense	—	—		3,856		—		—		3,856
Net loss	—	—		—		—		(17,619)		(17,619)
Balances at June 30, 2022	54,778,638	$	55	$	753,223	$	(233)	$	(902,412)	$	(149,367)

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Paratek Pharmaceuticals, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(unaudited)

1. Description of the business

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 commercial-stage biopharmaceutical company focused on the development and commercialization of novel life-saving therapies for life-threatening diseases or other public health threats for civilian, government and military use. The Company’s United States, or U.S., Food and Drug Administration, or FDA, approved commercial product, NUZYRA® (omadacycline), is a once-daily oral and intravenous antibiotic for the treatment of adult patients with community-acquired bacterial pneumonia, or CABP, and acute skin and skin structure infections, or ABSSSI, caused by susceptible pathogens. The Company retains worldwide commercial rights to omadacycline, with the exception in the People’s Republic of China, Hong Kong, Macau and Taiwan, where it has entered into a collaboration agreement with Zai Lab (Shanghai) Co., Ltd., or Zai. The National Medical Products Administration, or NMPA, of China approved NUZYRA for the treatment of adult patients with CABP and ABSSSI in December 2021. China’s National Healthcare Security Administration added the intravenous formulation of NUZYRA to the country's National Reimbursement Drug List for the treatment of CABP and ABSSSI in January 2023, resulting in millions of patients gaining access to this once daily broad-spectrum antibiotic.

SEYSARA® (sarecycline) is an FDA-approved product which the Company has exclusively licensed in the U.S. and the People’s Republic of China, Hong Kong and Macau, and Taiwan, certain rights to Almirall, LLC, or Almirall. SEYSARA is currently being marketed by Almirall in the U.S. as a once-daily oral therapy for the treatment of moderate to severe acne vulgaris. With respect to the Company’s technology as it relates to sarecycline, the Company retains development and commercialization rights in all countries other than the 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 U.S. Almirall plans to develop sarecycline for acne in China, with a submission to the NMPA expected in 2023, according to Almirall.

On June 6, 2023, the Company announced it had entered into a definitive agreement, or the Merger Agreement, to be acquired by Gurnet Point Capital, or Gurnet Point, and Novo Holdings A/S, or Novo Holdings, in a transaction valued at approximately $462.0 million, including the assumption of debt and assuming full payment of a Contingent Value Right, or CVR. This transaction is referred to herein as the Merger. Debt financing of $175.0 million for the Merger will be provided by funds managed by Oaktree Capital Management, L.P.

Under the terms of the Merger Agreement, Gurnet Point, a leading healthcare investment firm, and Novo Holdings, a holding and investment company responsible for managing the assets and wealth of the Novo Nordisk Foundation, will acquire all outstanding shares of Paratek for $2.15 per share in cash, plus a CVR of $0.85 per share payable upon the achievement of $320.0 million in U.S. NUZYRA net sales (excluding certain permitted deductions, payments under Paratek's contract with ASPR-BARDA, certain government payments and certain royalty revenue) in any calendar year ending on or prior to December 31, 2026.

The transaction, which our Board of Directors has unanimously approved, is subject to customary closing conditions, including approval by our stockholders and receipt of regulatory approvals. Following completion, Paratek will become a private company and will no longer be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, nor be traded on Nasdaq Global Market.

Between July 11, 2023 and July 27, 2023, the Company received eight demand letters, or the Demand Letters, each from a purported stockholder of the Company alleging to have identified purportedly materially misleading and incomplete statements in the preliminary proxy statement filed by the Company on June 30, 2023. Certain of the Demand Letters also purport to raise issues with aspects of the process that led to the Merger. Certain of those Demand Letters were served pursuant to Section 220 of the Delaware General Corporation Law and seek books and records of the Company related to the Merger. The Company believes the allegations asserted in the Demand Letters are without merit. Additional demand letters or lawsuits relating to the Merger may also be received and/or filed in the future.

The Company has incurred significant losses since inception in 1996. The Company has generated an accumulated deficit of $965.1 million through June 30, 2023 and may require substantial additional funding in connection with the

Company’s continuing operations to support clinical development and commercialization activities associated with NUZYRA. As of June 30, 2023, the Company had cash and cash equivalents of $42.7 million on hand.

The Company's current level of cash and cash equivalents may not be sufficient to fund operations for the next twelve months following the issuance of these financial statements. As a result, substantial doubt is deemed to exist regarding the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.

If the transaction with Gurnet Point and Novo Holdings is not consummated, the Company expects to finance future cash needs primarily through a combination of product sales, royalties, public or private equity offerings, debt or other structured financings, strategic partnership opportunities, government funding and active management of cash and expenses through operational efficiencies. With the Company’s convertible notes coming due on May 1, 2024, the Company believes it will need to successfully execute one or more financing transactions prior to that date or otherwise risk bankruptcy. The Company anticipates that any such financing transactions, if they could be completed, would likely be substantially dilutive to current Company stockholders. Further, to fund our future cash needs in absence of the transaction with Gurnet Point and Novo Holdings, the Company’s plans would require it to significantly reduce its workforce, including substantial reductions among the sales force, without materially negatively impacting the Company’s ability to generate sales of NUZYRA or to otherwise successfully operate its business. The Company also anticipates that an amendment to the convertible notes would likely require the grant of a security interest, thereby restricting the Company’s ability to raise debt financing in the future. There can be no assurance that the Company would be successful in securing additional funds on acceptable terms, or at all. If additional funds are not available, the Company may be forced to cease operations, significantly reduce operating expenses or delay, curtail, or eliminate one or more of its development programs or its business operations.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

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 commercialization of NUZYRA as well as the 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 the risks discussed in the "Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, or the 2022 Form 10-K, and in the Company’s other filings with the U.S. Securities and Exchange Commission, or the SEC.

2. Summary of Significant Accounting Policies and Basis of Presentation

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, as found in the Accounting Standards Codification, or ASC, and Accounting Standards 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, 2022, and, in the opinion of management, reflect all normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of June 30, 2023 and December 31, 2022, results of operations for the three and six month periods ended June 30, 2023 and June 30, 2022, cash flows for the six month periods ended June 30, 2023 and June 30, 2022 and changes in stockholders’ deficit for the three month periods ended March 31, 2023 and 2022 and three month periods ended June 30, 2023 and 2022.

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, 2023. These unaudited interim condensed consolidated financial statements

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should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2022, and notes thereto, which are included in the Company’s 2022 Form 10-K.

Summary of Significant Accounting Policies

As of June 30, 2023, the Company’s significant accounting policies and estimates, which are detailed in the Company’s 2022 Form 10-K, have not changed.

Principles of Consolidation

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 Ireland Limited, Paratek Royalty Corporation, Paratek Royalty Corporation II, PRTK SPV1 LLC and PRTK SPV2 LLC. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

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 in the Company’s financial statements. On an ongoing basis, the Company evaluates its estimates and judgments, including those related to, among other items, accounts receivable and related reserves, inventory and related reserves, goodwill, net product revenue, government contract service revenue, government contract grant revenue, collaboration and royalty revenue, leases, stock-based compensation arrangements, amortization of the debt discount and issuance costs under the R-Bridge Loan Agreement (as defined below), manufacturing and clinical accruals, useful lives for depreciation 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.

Segment and Geographic Information

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.

Concentration of Credit Risk

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 June 30, 2023 includes $38.8 million due from customers for sales of NUZYRA, net of prompt payment discounts, chargebacks, rebates and certain fees. Accounts receivable as of June 30, 2023 also includes $1.8 million of government contract service revenue earned under contract with the Biomedical Advanced Research and Development Authority, or the BARDA contract, $0.9 million of government contract grant revenue earned under the BARDA contract, and estimated revenue earned of $0.8 million of royalties on NUZYRA sales under the Zai Collaboration Agreement (as defined below), SEYSARA sales under the Almirall Collaboration Agreement (as defined below) and XERAVA TM (eravacycline) sales under the Tetraphase License Agreement (as defined below). Refer to Note 7, Government Contract Revenue for further information on the BARDA contract and to Note 8, License and Collaboration Agreements for further information on the Zai Collaboration Agreement, Almirall Collaboration Agreement and the Tetraphase License Agreement.

3. Marketable Securities

The Company did not hold any marketable securities as of June 30, 2023 or December 31, 2022.

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4. Cash and Cash Equivalents and Restricted Cash

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):


	June 30, 2023		June 30, 2022
Cash and cash equivalents	$	42,685	$	39,505
Short-term restricted cash	125		—
Long-term restricted cash	—		125
Total cash, cash equivalents and restricted cash shown on the condensed consolidated statement of cash flows	$	42,810	$	39,630

Short-term restricted cash

The Company leases its Boston, Massachusetts office space under a non-cancelable operating lease. In accordance with the lease, the Company had a cash-collateralized irrevocable standby letter of credit in the amount of $0.3 million at March 31, 2022, naming the landlord as beneficiary. The $0.3 million letter of credit was refunded to the Company in April 2022 under the terms of the original lease agreement. The Company executed an amendment to the existing lease agreement in April 2021. In accordance with the amendment, the cash-collateralized irrevocable standby letter of credit was reduced to an insignificant amount as of June 30, 2023. Refer to Note 14, Leases, for further details.

5. Inventories

The following table presents inventories, net (in thousands):


	June 30, 2023		December 31, 2022
Raw materials	$	903	$	903
Work in process	35,670		30,007
Finished goods	11,222		16,969
Total inventories	$	47,795	$	47,879

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. No inventory reserves existed as of June 30, 2023 and December 31, 2022.

6. Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common stock outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is computed by dividing the net loss 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, or RSUs, 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 when their effect is dilutive.

Common equivalent shares result from stock options and RSUs, warrants to purchase shares of common stock, common stock issuable upon conversion of convertible debt and shares issuable under the employee stock purchase plan (the proceeds of which are then assumed to have been used to repurchase outstanding stock using the treasury stock method). The two-class method is used for outstanding warrants as it is considered to be a participating security, and it is more dilutive than the treasury stock method.

The Company was in a net loss position as of June 30, 2023 and June 30, 2022. The following outstanding shares

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subject to stock options and RSUs, warrants to purchase shares of common stock, common stock issuable upon conversion of convertible debt and shares issuable under the Company’s employee stock purchase plan were antidilutive due to a net loss in the periods presented and, therefore, were excluded from the dilutive securities computation for the three and six months ended June 30, 2023 and 2022 as indicated below:


	June 30,
	2023	2022
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	1,347,183	2,119,588
Unvested restricted stock units	4,246,457	7,213,532
Shares subject to warrants to purchase common stock	426,866	426,866
Shares issuable under employee stock purchase plan	907,451	159,738
Totals	17,305,318	20,297,085

(1) The number of shares is based on the maximum number of shares issuable on exercise or conversion of the related securities as of June 30, 2023 and 2022. Such amounts have not been adjusted for the treasury-stock method or weighted-average outstanding calculations as required if the securities were dilutive.

7. Government Contract Revenue

Biomedical Advanced Research and Development Authority

In December 2019, the Company entered into the BARDA contract, which is a five-year contract with an option to extend to ten years. The BARDA contract could result in payments to the Company of up to approximately $303.6 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. The BARDA contract supports the development of NUZYRA for the treatment of pulmonary anthrax, FDA post-marketing requirements, or PMRs, associated with the initial NUZYRA approval, and the ability for BARDA to procure up to 10,000 treatment courses of NUZYRA for use against potential biothreats. In September 2021, the Company and BARDA modified the original BARDA contract, herein referred to as the amended BARDA contract, to provide additional funding to expand the development of NUZYRA under an FDA Animal Efficacy Rule development program to support a supplemental New Drug Application, or sNDA, to the FDA to include post-exposure prophylaxis, or PEP, in addition to the treatment of pulmonary anthrax, herein referred to as the amended option.

In July 2023, the Company and BARDA further modified the amended BARDA contract to provide new development milestones associated with the achievement of specific anthrax development milestones for the next BARDA procurement. BARDA and the Company have agreed the next procurement of NUZYRA anthrax treatment courses will be split into two equal procurements based on the achievement of specific development milestones toward both treatment and PEP indications of pulmonary anthrax.

The first of these procurements will be triggered by the delivery of positive top-line data from a dose-ranging efficacy study for PEP of inhalation anthrax in non-human primates, or NHPs. The second of these procurements will be triggered by BARDA's receipt of positive top-line data from a combination of two studies: a dose-ranging efficacy study in NHPs and a pivotal efficacy study in rabbits for the treatment of inhalation anthrax. The trigger for the final procurement of NUZYRA continues to be the Company's receipt of sNDA approval from the FDA for the treatment of inhalation anthrax.

Under the terms of the original BARDA contract, approximately $59.4 million was awarded to the Company by BARDA in December 2019 for the development of NUZYRA for the treatment of pulmonary anthrax and the purchase of an initial 2,500 treatment courses of NUZYRA. As part of this initial $59.4 million award, a $37.9 million procurement of NUZYRA was delivered to and accepted by BARDA in June 2021, and the amount earned from this procurement was recognized in net U.S. sales of NUZYRA during the three months ended June 30, 2021. The Company has been periodically drawing down the remaining $21.5 million of the initial award based on costs incurred during the development program.

Two additional contractual services under the original BARDA contract were initiated by BARDA in March 2020 that awarded the Company approximately $76.8 million for reimbursement of existing FDA PMRs and approximately

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$20.4 million for reimbursement of manufacturing-related requirements, which the Company has been drawing down based on costs incurred. This additional staged funding is expected to 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 the Company’s manufacturing activities for NUZYRA.

BARDA initiated the amended option in September 2021 that expanded the development of NUZYRA under an FDA Animal Efficacy Rule development program to support an sNDA that will include PEP in addition to the treatment of pulmonary anthrax for a revised total of approximately $31.6 million.

A second procurement, the purchase of an additional 2,500 treatment courses of NUZYRA for a total of $36.4 million, was delivered to and accepted by BARDA in December 2022. The amount earned from this procurement was recognized in net U.S. sales of NUZYRA during the three months ended December 31, 2022.

The remaining options under the amended BARDA contract include a maximum of approximately $79.0 million to provide for additional purchases of NUZYRA anthrax treatment courses, each of which may be exercised at BARDA’s discretion upon achievement of specific 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 evaluated the BARDA contract under ASC, Topic 606, Revenue from Contracts with Customers, or ASC 606, and concluded that a portion of the arrangement represents a transaction with a customer. The Company identified five material promises under the BARDA contract: (i) research and development services performed for the treatment of pulmonary anthrax, (ii) the procurement of

SEC Form 10-Q filed by Paratek Pharmaceuticals Inc.