ContraFect (CFRXQ) 10-Q2021 Q3 Quarterly report

Lysins are recombinantly-produced enzymes, that when applied to bacteria cleave a key component of the target bacteria’s peptidoglycan cell wall, resulting in rapid bacterial cell death. In addition to the speed of action and potent cidality, we believe lysins are differentiated by their other hallmark features, which include the demonstrated ability to eradicate biofilms and synergistically boost the efficacy of conventional antibiotics in animal models. Lysins that targetand other gram-positive pathogens tend to have a “targeted spectrum,” meaning they kill only specific species of bacteria or closely related bacteria. Amurin peptides are a new class of direct lytic agents, discovered in our laboratories, which disrupt the outer membrane of gram-negative bacteria, resulting in rapid bacterial cell death, offering a distinct mechanism of action from lysins. Amurins have shown potent “broad spectrum”activity against a wide range of gram-negative pathogens in, including deadly, drug-resistant(“),andbacteria species as well as difficult to treat pathogens such asand somespecies. The highly differentiated properties of DLAs have shown these agents to be complementary to and synergistic with conventional antibiotics enabling the potential use of these agents in addition to traditional antibiotics with the goal of improving clinical outcomes compared to conventional antibiotics alone. The development of these compounds involves a novel clinical and regulatory strategy, using superiority design clinical trials with the goal of delivering significantly improved clinical outcomes for the treatment of serious, antibiotic-resistant bacterial infections, including biofilm-associated infections. This approach affords potential clinical benefits to patients as well as the potential ability to mitigate against further development of antibiotic resistance.

We have not generated any revenues and, to date, have funded our operations primarily through our initial public offering (“IPO”), ourpublic offerings, private placements of securities, and grant funding received. On March 22, 2021, we completed an underwritten public offering of 11,500,000 shares of our common stock, including shares sold pursuant to the fully exercised overallotment option granted to the underwriters in connection with the offering, at a public offering price of $5.00 per share of common stock, resulting in net proceeds of approximately $53.8 million after underwriting discounts and commissions and offering expenses payable by us.

The pandemic has had an impact, both directly and indirectly, on the Company. We adjusted our business operations, with a majority of our employees working remotely. We have continued to enroll patients in our Phase 3 DISRUPT superiority study of exebacase throughout the entire ongoingpandemic. However, as the situation worsened across the country earlier this year with new variants circulating and the number ofinfections and hospitalizations increased rapidly, we experienced effects on our trial, and our patient enrollment rate slowed during certain months. We continue with efforts to increase the rate of patient enrollment, such as providing additional site monitoring support and allowing patients the option of conducting certainstudy visits remotely. These efforts may not be effective and the progress of the study may be adversely affected. As the pandemic continues to evolve, we will continue to evaluate the impact of variable monthly patient enrollment rates on the timing of conducting the interim futility analysis and fully completing the trial. The full extent of the impact on our business, results of operations, financial condition and liquidity, including expenses, research and development, manufacturing costs and timelines, and clinical trial progress, depends on future developments that remain highly uncertain.

We expense research and development costs to operations as incurred. We account foradvance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received, rather than when the payment is made.

We completed a Phase 2 superiority study of exebacase that evaluated its safety, tolerability, efficacy and pharmacokinetics (“PK”) when used in addition to background SOC antibiotics compared to SOC antibiotics alone for the treatment ofbacteremia, including endocarditis in adult patients. The results from this study showed clinically meaningful improvement in clinical responder rates among patients treated with exebacase in addition to SOC antibiotics compared to SOC antibiotics alone. In the primary efficacy analysis population of 116 patients with documentedbacteremia, including endocarditis, who received a single intravenous (“IV”) infusion of blinded study drug, the clinical responder rate at Day 14 was 70.4% for patients treated with exebacase and 60.0% for patients dosed with SOC antibiotics alone (p=0.314). The clinical responder rate at Day 14 in the subset of patients with bacteremia including right-sided endocarditis was 80.0% for patients treated with exebacase compared to 59.5% for patients treated with SOC antibiotics alone, an increase of 20.5% (p=0.028). In the subset of patients with bacteremia alone, the clinical responder rate at Day 14 was 81.8% for patients treated with exebacase compared to 61.5% for patients treated with SOC antibiotics alone, an increase of 20.3% (p=0.035).

In aanalysis of MRSA-infected patients, the clinical responder rate at Day 14 in patients treated with exebacase was nearlypoints higher than in patients treated with SOC antibiotics alone (74.1% for patients treated with exebacase compared to 31.3% for patients treated with SOC antibiotics alone (p=0.010)). In addition to the higher rate of clinical response, MRSA-infected patients treated with exebacase showed apoint reduction inmortality (p=0.056), a four day lower median length of hospital stay and meaningful reductions in hospital readmission rates. Exebacase was well-tolerated and treatment emergent adverse events, including serious treatment-emergent serious adverse events (“SAEs”) were balanced between the treatment groups. There were no SAEs that we determined to be related to exebacase, there were no reports of hypersensitivity related to exebacase and no patients discontinued treatment with study drug in either treatment group.

We also performed aPhase 3 simulation analysis using the Phase 2 data to evaluate the clinical outcomes for the Phase 2 patient population that would meet the Phase 3 inclusion criteria. In this simulated Phase 3 analysis population of 84 U.S. patients with documentedbacteremia, including right-sided endocarditis, who received a single IV infusion of blinded study drug, the clinical responder rate at Day 14 was 83.7% for patients treated with exebacase and 54.3% for patients dosed with SOC antibiotics alone, an improvement in the responder rate of overpoints. The clinical responder rate at Day 14 in the subset of patients with MRSA bacteremia including right-sided endocarditis was 82.6% for patients treated with exebacase compared to 33.3% for patients treated with SOC antibiotics alone, an improvement in the responder rate of overpoints. In the subset of patients with MSSA bacteremia including right-sided, the clinical responder rate at Day 14 was 84.6% for patients treated with exebacase compared to 66.7% for patients treated with SOC antibiotics alone, an increase of nearlypoints.

We believe these data established proof of concept for exebacase and for DLAs as therapeutic agents. In particular, the data for MRSA-infected patients treated with exebacase, which, in the Phase 2 superiority study, demonstrated superior outcomes in clinical response at Day 14 and inmortality as well as health economics benefits, provided the basis for the FDA to grant Breakthrough Therapy designation to exebacase for the treatment of MRSA bloodstream infections (bacteremia), including right-sided endocarditis, when used in addition to SOC anti-staphylococcal antibiotics in adult patients. Breakthrough Therapy designation is a program designed by the FDA to expedite the development and review of medicines for serious or life-threatening diseases where preliminary clinical evidence suggests that the investigational therapy may demonstrate substantial improvement on at least one clinically significant endpoint over available therapies. The Breakthrough Therapy designation provides additional benefits, such as expedited meetings and interactions with the FDA and the potential for priority review, over the Fast Track designation granted to exebacase in August 2015.

In addition to the ongoing Phase 3 DISRUPT study of exebacase, we initiated an expanded access program to provide exebacase for the treatment of persistent bacteremia caused by MRSA inpatients and continued the investigator-initiated early access program for compassionate use of exebacase for individual named patients with chronic post-operative prosthetic joint infections (“PJIs”) under Temporary Authorizations for Use from the French National Agency for Medicines and Health Products Safety in collaboration with Dr. Tristan Ferry at the Hôpital de la Croix Rousse in Lyon, France.

We have discovered and engineered a new lysin product candidate,which in preclinical studies has demonstrated potent activity against antibiotic-resistantbacteria, a major cause of morbidity and mortality in patients with hospital acquired pneumonia and a major medical challenge for patients with cystic fibrosis. In July 2020, we were awarded up to $18.9 million in funding from(Combating Antibiotic-Resistant Bacteria Biopharmaceutical Accelerator), including initial funding of $4.9 million, in support of the advancement ofthroughactivities toward future Phase 1 clinical trials. We expectto be our next molecule in clinical studies. In April 2021, the United States Patent and Trademark Office issued U.S. Patent No. 10,988,520 forThis patent, which is owned solely by the Company, expires in March 2039, and is the latest U.S. patent to issue from the Company’s DLA patent portfolio.

Beyond our lysin programs, we continue our research to advance potential product candidates from our amurin peptide platform. We are evaluating our most promising amurins in preclinical animal studies with the goals of determining our next product candidate and moving this program towards clinical studies as soon as possible. We have received approximately $1.6 million of funding fromto support the amurin peptide program.

In addition, we have recently completed an initial funding agreement with the Cystic Fibrosis Foundation to investigate the potential utility of DLAs, includingand amurin peptides, against resistant Gram-negative pathogens which afflict Cystic Fibrosis (“CF”) patients. The agreement provided funding for the determination of theactivity ofand amurin peptides against bacterial specimens obtained from CF patients at different stages of disease. Having demonstrated potent activity of its agents against resistant Gram-negative pathogens isolated in samples from the lungs of CF patients, ContraFect is evaluating the potential future clinical development ofand/or amurin peptides as therapeutic candidates for the treatment of pulmonary infections in patients with CF.