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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________
Form 10-Q
____________________________________________________
xQuarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended: September 30, 2022 or
oTransition 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)
____________________________________________________
Delaware33-0960223
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per sharePRTKThe 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 fileroAccelerated filero
Non-accelerated filerxSmaller reporting companyx
Emerging growth companyo
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 October 31, 2022, there were 55,549,466 shares of the registrant's common stock, par value $0.001 per share, outstanding.

Table of Contents
TABLE OF CONTENTS
Page
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Table of Contents
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)
September 30,
2022		December 31,
2021
Assets
Current assets
Cash and cash equivalents$27,087 $80,367 
Marketable securities29,922 15,107 
Restricted cash125 125 
Accounts receivable, net29,407 29,438 
Inventories20,750 11,020 
Other receivables3,332 3,679 
Prepaid and other current assets10,718 12,364 
Total current assets121,341 152,100 
Long-term restricted cash— 125 
Fixed assets, net663 794 
Goodwill829 829 
Right-of-use assets1,128 1,757 
Long-term inventories33,117 27,767 
Other long-term assets243 497 
Total assets$157,321 $183,869 
Liabilities and Stockholders’ Deficit  
Current liabilities  
Accounts payable$8,107 $5,394 
Accrued expenses28,520 23,446 
Other current liabilities2,349 2,457 
Total current liabilities38,976 31,297 
Long-term debt258,482 254,428 
Long-term lease liabilities621 1,308 
Accrued long-term compensation22,874 21,846 
Other liabilities2,520 2,777 
Total liabilities$323,473 $311,656 
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; 55,438,716 shares issued and outstanding as of September 30, 2022; and 200,000,000 shares authorized; 51,711,809 shares issued and outstanding as of December 31, 2021
55 52 
Additional paid-in capital757,202 739,053 
Accumulated other comprehensive income(117)(9)
Accumulated deficit(923,292)(866,883)
Total stockholders’ deficit(166,152)(127,787)
Total liabilities and stockholders’ deficit$157,321 $183,869 
See accompanying notes to unaudited condensed consolidated financial statements.
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Table of Contents
Paratek Pharmaceuticals, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
(unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Product revenue, net$25,455 $19,432 $70,455 $85,441 
Government contract service revenue2,060 1,467 6,128 4,553 
Government contract grant revenue2,368 3,011 6,550 6,712 
Collaboration and royalty revenue330 537 1,578 1,659 
Net revenue$30,213 $24,447 $84,711 $98,365 
Expenses:    
Cost of product revenue4,372 4,289 12,744 16,817 
Research and development8,486 7,920 23,555 19,977 
Selling, general and administrative33,846 25,955 91,784 75,420 
Total operating expenses46,704 38,164 128,083 112,214 
Loss from operations(16,491)(13,717)(43,372)(13,849)
Other income and expenses:    
Interest income186 25 425 61 
Interest expense(4,536)(4,367)(13,561)(13,019)
Other gains (losses), net(39)(143)99 (24)
Net loss$(20,880)$(18,202)$(56,409)$(26,831)
Other comprehensive income (loss)    
Unrealized gain (loss) on available-for-sale securities, net of tax116 — (108)(4)
Comprehensive loss$(20,764)$(18,202)$(56,517)$(26,835)
Basic and diluted net loss per common share$(0.38)$(0.37)$(1.05)$(0.56)
Weighted average common stock outstanding
Basic55,166,491 49,213,986 53,933,408 47,676,365 
Diluted55,166,491 49,213,986 53,933,408 47,676,365 
See accompanying notes to unaudited condensed consolidated financial statements.
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Table of Contents
Paratek Pharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September 30,
20222021
Operating activities
Net loss$(56,409)$(26,831)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and accretion404 312 
Stock-based compensation expense10,334 9,481 
Noncash interest expense4,056 996 
Changes in operating assets and liabilities
Accounts receivable, other receivables, prepaid, and other current assets2,023 (9,368)
Inventories(15,080)(9,435)
Operating lease right-of-use asset629 194 
Accounts payable and accrued expenses7,787 7,866 
Operating lease liability(688)(153)
Other liabilities and other assets916 (1,527)
Net cash used in operating activities(46,028)(28,465)
Investing activities
Purchase of fixed assets(36)(373)
Purchase of marketable securities(15,160)— 
Proceeds from maturities of marketable securities— 20,000 
Net cash (used) provided by investing activities(15,196)19,627 
Financing activities
Payment of long-term royalty-backed loan agreement debt issuance costs— (397)
Proceeds from sale of common stock, net of costs7,330 14,078 
Proceeds from the employee stock purchase plan and stock options489 358 
Net cash provided by financing activities7,819 14,039 
Net (decrease) increase in cash, cash equivalents and restricted cash(53,405)5,201 
Cash, cash equivalents and restricted cash at beginning of period80,617 106,048 
Cash, cash equivalents and restricted cash at end of period$27,212 $111,249 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION  
Cash paid for interest$6,779 $7,664 
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES
Paid in-kind interest included in accrued expenses$3,002 $1,801 
See accompanying notes to unaudited condensed consolidated financial statements.
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Table of Contents
Paratek Pharmaceuticals, Inc.
Condensed Consolidated Statements of Stockholders’ Deficit
(in thousands, except share amounts)
(unaudited)
Common StockAdditional
Paid-in
Capital 		Accumulated
Other
Comprehensive
Income (Loss) 		Accumulated
Deficit 		Total
Stockholders’
Deficit
SharesAmount
Balances at December 31, 2021
51,711,809 $52 $739,053 $(9)$(866,883)$(127,787)
Exercise of stock options729 — 6 — — 6 
Issuance of common stock, net of expenses884,230 1 3,090 — — 3,091 
Vesting of restricted stock unit awards426,582 — — — — — 
Employee stock purchase plan expense— — 36 — — 36 
Unrealized gain (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 expenses1,455,156 2 4,237 — — 4,239 
Employee stock purchase plan expense— — 29 — — 29 
Issuance of stock under the employee stock purchase plan300,132 — 483 — — 483 
Unrealized gain (loss) 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, 202254,778,638 $55 $753,223 $(233)$(902,412)$(149,367)
Exercise of stock options917 — — — — — 
Unrealized gain on available-for-sale securities, net of tax— — — 116 — 116 
Vesting of restricted stock unit awards659,161 — — — — — 
Employee stock purchase plan expense— — 15 — — 15 
Stock-based compensation expense— — 3,964 — — 3,964 
Net loss— — — — (20,880)(20,880)
Balances at September 30, 2022
55,438,716 $55 $757,202 $(117)$(923,292)$(166,152)
Common StockAdditional
Paid-in
Capital 		Accumulated
Other
Comprehensive
Income (Loss) 		Accumulated
Deficit 		Total
Stockholders’
Deficit
SharesAmount
Balances at December 31, 2020
46,516,567 $46 $705,489 $4 $(807,799)$(102,260)
Exercise of stock options961 — 3 — — 3 
Vesting of restricted stock unit awards389,700 1 (1)— — — 
Employee stock purchase plan expense— — 27 — — 27 
Unrealized gain (loss) on available-for-sale securities, net of tax— — — (4)— (4)
Stock-based compensation expense— — 1,572 — — 1,572 
Net loss— — — — (18,346)(18,346)
Balances at March 31, 2021
46,907,228 $47 $707,090 $— $(826,145)$(119,008)
Issuance of common stock, net of expenses649,022 1 4,644 — — 4,645 
Vesting of restricted stock unit awards376,301 — — — — — 
Employee stock purchase plan expense— — 29 — — 29 
Issuance of stock under the employee stock purchase plan63,920 — 352 — — 352 
Stock-based compensation expense— — 4,974 — — 4,974 
Net income— — — — 9,717 9,717 
Balances at June 30, 202147,996,471 $48 $717,089 $— $(816,428)$(99,291)
Issuance of common stock, net of expenses1,657,802 2 9,615 — — 9,617 
Vesting of restricted stock unit awards365,096 — — 
Employee stock purchase plan expense— 37 37 
Stock-based compensation expense— 2,842 2,842 
Exercise of stock options848 4 4 
Net loss— — (18,202)(18,202)
Balances at September 30, 202150,020,217 $50 $729,587 $— $(834,630)$(104,993)
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Table of Contents
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 of 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 CABP and ABSSSI in December 2021.
SEYSARA® (sarecycline) is an FDA-approved product with respect to which the Company has exclusively licensed in the U.S. and the People’s Republic of China, or the PRC, Hong Kong and Macau, or the greater China region, certain rights to Almirall, LLC, or Almirall. SEYSARA is currently being marketed by Almirall in the U.S. as a 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, according to Almirall, expected in 2023.
The Company has incurred significant losses since inception in 1996. The Company has generated an accumulated deficit of $923.3 million through September 30, 2022 and may require substantial additional funding in connection with the Company’s continuing operations to support clinical development and commercialization activities associated with NUZYRA. Based upon the Company’s current operating plan, it anticipates that its cash, cash equivalents and marketable securities of $57.0 million as of September 30, 2022 will enable the Company to fund operating expenses and capital expenditure requirements through at least the next twelve months from the issuance of the financial statements included in this Quarterly Report on Form 10-Q. 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 collaborations, grant funding and government 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 the risks discussed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the U.S. Securities and Exchange Commission, or the SEC, on March 14, 2022, or the 2021 Form 10-K, and in the Company’s other filings with 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
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of and for the year ended December 31, 2021, and, in the opinion of management, reflect all normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2022 and December 31, 2021, results of operations for the three and nine month periods ended September 30, 2022 and September 30, 2021, cash flows for the nine month periods ended September 30, 2022 and September 30, 2021 and changes in stockholders’ deficit for the three and nine month periods ended September 30, 2022 and September 30, 2021.
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, 2022. 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, 2021, and notes thereto, which are included in the Company’s 2021 Form 10-K.
Summary of Significant Accounting Policies
As of September 30, 2022, the Company’s significant accounting policies and estimates, which are detailed in the Company’s 2021 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.
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Accounts receivable as of September 30, 2022 includes $26.4 million due from customers for sales of NUZYRA, net of prompt payment discounts, chargebacks, rebates and certain fees. Accounts receivable as of September 30, 2022 also includes $0.8 million of government contract service revenue earned under contract with the Biomedical Advanced Research and Development Authority, or the BARDA contract, $0.5 million of government contract grant revenue earned under the BARDA contract, and estimated revenue earned of $0.3 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). 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 Almirall Collaboration Agreement and the Tetraphase License Agreement.
3.    Marketable Securities
The following are summaries of available-for-sale securities as of September 30, 2022 and December 31, 2021 (in thousands):
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
September 30, 2022
U.S. treasury securities$30,039 $— $(117)$29,922 
Total$30,039 $— $(117)$29,922 
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
December 31, 2021
U.S. treasury securities$15,116 $— $(9)$15,107 
Total$15,116 $— $(9)$15,107 
As of September 30, 2022, the Company had securities with a total fair market value of $29.9 million in an unrealized loss position, of which none were in a continuous unrealized loss position for more than twelve months. The Company believes that any unrealized losses associated with the decline in value of its securities is temporary and primarily related to the change in market interest rates since purchase. Therefore, the Company anticipates a full recovery of the amortized cost basis of its securities at maturity.
Securities are evaluated for impairment at the end of each reporting period. The Company did not record any impairment related to its available-for-sale securities during the three and nine months ended September 30, 2022.
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):
September 30,
2022		September 30,
2021
Cash and cash equivalents$27,087 $110,999 
Short-term restricted cash125 125 
Long-term restricted cash— 125 
Total cash, cash equivalents and restricted cash shown on the condensed consolidated statement of cash flows$27,212 $111,249 
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 December 31, 2021 naming the landlord as beneficiary. The $0.3 million letter of credit was refunded to the Company in
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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 September 30, 2022. Refer to Note 14, Leases, for further details.
Long-term restricted cash
As of December 31, 2021, long-term restricted cash included the insignificant cash-collateralized irrevocable standby letter of credit described above.
5.    Inventories
The following table presents inventories, net (in thousands):
September 30,
2022		December 31,
2021
Raw materials$903 $1,082 
Work in process32,863 24,675 
Finished goods20,101 13,030 
Total inventories$53,867 $38,787 
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 September 30, 2022 and December 31, 2021.
6.    Net Income (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, 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 restricted stock units, 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). In addition, the assumed proceeds under the treasury stock method include the average unrecognized compensation expense of stock options that are in-the-money. This results in the “assumed” buyback of additional shares, thereby reducing the dilutive impact of stock options. 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 September 30, 2022 and 2021. The following outstanding shares 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 nine months ended September 30, 2022 and 2021 as indicated below:
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September 30, 2022September 30, 2021
Excluded potentially dilutive securities (1):
Common stock issuable under outstanding convertible notes10,377,361 10,377,361 
Shares subject to outstanding options to purchase common stock1,384,476 2,059,453 
Unvested restricted stock units6,588,271 5,677,110 
Shares subject to warrants to purchase common stock426,866 469,388 
Shares issuable under employee stock purchase plan159,738 542,896 
          Totals18,936,712 19,126,208 
(1) The number of shares is based on the maximum number of shares issuable on exercise or conversion of the related securities as of September 30, 2022 and 2021. 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 original 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 an option 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.
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 second quarter of 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 $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 Companies manufacturing activities for NUZYRA.
BARDA initiated the amended option in September 2021 that awarded the Company additional funding to expand 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 approximately $31.6 million.
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The remaining government options under the amended BARDA contract include a maximum of approximately $115.4 million to provide for three additional purchases of NUZYRA anthrax treatment courses, each of which may be exercised at BARDA’s discretion upon achievement of development milestones related to the anthrax treatment development program. The amended BARDA contract formalized the triggers for BARDA’s option to purchase the second NUZYRA procurement upon BARDA's receipt of positive top-line data from our pilot efficacy treatment study of inhalation anthrax in rabbits, which we anticipate will be available as early as the end of 2022. The third procurement will be triggered by BARDA's receipt of positive top-line data in PEP and treatment of inhalation anthrax from a combination of pilot and pivotal efficacy studies in animal models, which the Company anticipates will be available in 2024. The fourth procurement will be triggered by the Company’s receipt of sNDA approval from the FDA for treatment of inhalation anthrax, which is anticipated to follow the third procurement by approximately 18-24 months.
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 2,500 treatment courses of NUZYRA, (iii) an option for services performed for the supplemental late-stage development of NUZYRA for treatment and prophylaxis of pulmonary anthrax, (iv) an option for services related to U.S. manufacturing onshoring and security requirements, which includes shelf-life stability extension work and regulatory activities that will benefit the manufacturing processes that support NUZYRA for the treatment of pulmonary anthrax, and (v) options to procure up to three tranches of up to 2,500 anthrax treatment courses of NUZYRA each.
In December 2019, the Company determined material promises (i) and (ii) above were performance obligations since they were distinct within the context of the contract as the services are separately identifiable from other promises within the arrangement. The Company also determined that for (i) and (ii) the transaction price included within the BARDA contract was equivalent to the standalone selling price of the services and the cost of the procurement.
The Company evaluated the material promises that contained option rights ((iii), (iv), and (v) above). The Company determined that (iii) and (iv) were not offered at a discount that is incremental to the range of discounts typically given for these goods and services, and therefore do not represent material rights. As such, options for additional services in (iii) and (iv) were not considered performance obligations at the outset of the arrangement. The Company also evaluated the future procurement option rights (v) and determined that those option rights represent a material right. As such, the optional additional NUZYRA procurements in (v) were considered performance obligations at the outset of the arrangement. The Company concluded that three performance obligations existed at the outset of the BARDA contract.
As the BARDA contract is partially within the scope of ASC 606 and partially within the scope of other guidance, the Company applied the guidance of ASC 606 to initially measure the parts of the contract to which ASC 606 is applicable. The total transaction price of the parts of the BARDA contract that existed at the outset of the contract that fall under ASC 606 was determined to be $63.6 million, inclusive of $4.2 million in variable consideration and was allocated to each of the three performance obligations based on the performance obligation’s estimated relative stand-alone selling prices. As of September 30, 2022, the Company reevaluated the variable consideration of $4.2 million that is included in the transaction price and determined that the variable consideration should not be constrained as it is not probable that a significant reversal in the amount of the cumulative revenue recognized will occur in a future period. The transaction price was allocated as follows: $21.5 million to research and development services performed for the treatment of pulmonary anthrax in (i), which will be classified as government contract service revenue when recognized, $37.9 million to the procurement of 2,500 treatment courses of NUZYRA in (ii), which was classified as product revenue when recognized, and a total of $4.2 million to the options to procure up to three 2,500 treatment courses of NUZYRA in (v), which will be included within product revenue when recognized upon exercise and transfer of control of related treatment courses. The Company estimated the stand-alone selling price of the research and development services performed for the treatment of pulmonary anthrax based on the Company’s projected cost of providing the services plus an applicable profit margin commensurate with observable market data for similar services. The Company estimated the stand-alone selling price of the procurement of 2,500 treatment courses of NUZYRA based on historical pricing of the Company’s commercial products to similar customers. The Company estimated the stand-alone selling price of the future procurement options based on the discount that the customer would obtain when exercising the option, adjusted for any discount that the customer could receive without entering into the contract, and the likelihood that the option will be exercised.
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The Company’s performance obligations are either satisfied over time as work progresses or at a point in time.
The Company concluded that research and development services performed for the treatment of pulmonary anthrax in (i) would be recognized as government contract service revenue over time as the performance obligation is satisfied. Costs incurred represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Types of contract costs include labor, material, and third-party services.
The product procurement performance obligations ((ii) and, if any optional additional procurements are exercised from (v) above), generate revenue at a point in time, upon transfer of control of the product. As such, the related revenue for these performance obligations is recognized at a point in time as product revenue within the Company’s consolidated statement of operations. As of December 31, 2021, the product procurement performance obligation (ii) was completed and $37.9 million of product revenue was earned and recognized due to the delivery and acceptance of the first procurement under the BARDA contract.
In April 2020, BARDA exercised its option to obtain manufacturing-related services under material promise (iv) and the Company is treating these services as a separate $20.4 million contract for accounting purposes since manufacturing-related services were determined at the contract outset to be optional services that did not represent a material right. The Company’s manufacturing-related services are satisfied over time as work progresses.
In September 2021, BARDA exercised the amended option under the amended BARDA contract, to fund an FDA Animal Rule development program to support an sNDA to include PEP in addition to the treatment of pulmonary anthrax. The Company is treating these services as a separate $31.6 million contract for accounting purposes since the completion of a late-stage development program was determined at the contract outset to be optional services that did not represent a material right. The additional services added as part of the amended option were distinct and the increased transaction price is reflective of the entity’s standalone selling prices of the additional promised services. The Company’s late-stage development program obligations are satisfied over time as work progresses. Research and development services performed under the amended option will be recognized as government contract service revenue over time as the performance obligation is satisfied.
The Company recognized $6.1 million and $4.6 million of government contract service revenue under the BARDA contract during the nine months ended September 30, 2022 and September 30, 2021, respectively. The Company recognized $2.1 million and $1.5 million of government contract service revenue under the BARDA contract during the three months ended September 30, 2022 and September 30, 2021, respectively.
As of September 30, 2022, the aggregate amount of transaction price allocated to remaining performance obligations, excluding unexercised contract options, was $61.8 million. The Company expects to recognize this amount as revenue over the next three to six years.
The Company concluded that BARDA’s reimbursement for existing FDA PMRs associated with the initial NUZYRA approval was not within the scope of ASC 606 as BARDA is not receiving services as the Company’s customer. The Company estimated the consideration to be allocated to government contract grant revenue based on the consideration under the BARDA contract in excess of the estimated standalone selling prices for components of the BARDA contract accounted for under ASC 606. The Company recognizes the allocated consideration for BARDA’s reimbursement of existing FDA PMRs associated with the initial NUZYRA approval of $72.6 million as government contract grant revenue as the related reimbursable expenses are incurred.
The Company recognized $6.6 million and $6.7 million of government contract grant revenue under the BARDA contract during the nine months ended September 30, 2022 and September 30, 2021, respectively. The Company recognized $2.4 million and $3.0 million of government contract grant revenue under the BARDA contract during the three months ended September 30, 2022 and September 30, 2021, respectively.
Contract Balances
Contract assets (i.e., unbilled accounts receivable) and/or contract liabilities (i.e., customer advances and deposits) may exist at the end of each reporting period under the BARDA contract. When amounts are received prior to performance obligations being satisfied, the amounts allocated to those performance obligations are reflected as contract liabilities on the consolidated balance sheets, as deferred revenue, until the performance obligations are satisfied.
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As of September 30, 2022, $1.3 million of unbilled accounts receivable was recorded and is a component of accounts receivable, net on the Company’s condensed consolidated balance sheet. As of December 31, 2021, $0.8 million of unbilled accounts receivable was recorded and is a component of accounts receivable, net on the Company’s condensed consolidated balance sheet.
As of September 30, 2022 and December 31, 2021, $1.2 million and $0.8 million, respectively of deferred revenue was recorded and is a component of other current liabilities on the Company’s condensed consolidated balance sheet.
8.    License and Collaboration Agreements
Tetraphase Pharmaceuticals, Inc.
On March 18, 2019, Paratek and Tetraphase Pharmaceuticals, Inc., or Tetraphase, which is now a subsidiary of La Jolla Pharmaceutical Company, 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, a drug for the treatment of complicated, intra-abdominal infections caused by bacteria that 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 its 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.
In accordance with the Company’s revenue recognition policy, the Company recognized an insignificant amount and $0.2 million of royalty revenue during the three and nine months ended September 30, 2022, respectively, under the Tetraphase License Agreement.
Zai Lab (Shanghai) Co., Ltd.
On April 21, 2017, Paratek Bermuda Ltd., a former 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 Agreement to Paratek Pharmaceuticals, Inc. Under the terms of the Zai Collaboration Agreement, Paratek granted Zai an exclusive license to develop, manufacture and commercialize omadacycline, or the licensed product, in the People’s Republic of China, Hong Kong, Macau and Taiwan, or the Zai territory, for all human therapeutic and preventative uses other than biodefense. Zai is responsible for the development, manufacturing and commercialization of the licensed product in the Zai territory, at its sole cost with certain assistance from Paratek.
Under the terms of the Zai Collaboration Agreement, Paratek earned an upfront cash payment of $7.5 million in April 2017, $5.0 million upon approval by the FDA of a NDA submission in the CABP indication in October 2018 and $3.0 million upon submission of the first regulatory approval application for a licensed product in the People’s Republic of China in December 2019, and a $6.0 million milestone payment upon regulatory approval for a licensed product in the People’s Republic of China on December 16, 2021. Paratek is eligible to receive up to $40.5 million in potential future commercial milestone payments. The terms of the Zai Collaboration Agreement also provide for Zai to pay Paratek 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) 2032, the eleventh anniversary of the first commercial sale of such licensed product in such region.
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The Company evaluated the Zai Collaboration Agreement under ASC 606. The Company determined that there were six material promises under the Zai Collaboration Agreement: (i) an exclusive license to develop, manufacture and commercialize omadacycline in the Zai territory, (ii) the initial technology transfer (iii) a transfer of certain materials and materials know-how, (iv) 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 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. 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 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 (ii) the transfer of certain materials. The Company has recognized $21.5 million in milestone revenue, as described above, under the Zai Collaboration Agreement as of September 30, 2022. As the performance obligation to deliver the license was satisfied in 2017 and research and development services completed by December 2021, all milestone payments are recognized as revenue when the risk of significant reversal is resolved, generally when the milestone event occurs. Therefore, the $6.0 million milestone payment upon regulatory approval of NUZYRA in the People’s Republic of China was recognized in December 2021.
There was no deferred revenue as of September 30, 2022 and December 31, 2021 under the Zai Collaboration Agreement.
Almirall, LLC
In July 2007, the Company and Warner Chilcott Company, Inc. (which became a part of Allergan plc, or Allergan), entered into a collaborative research and license agreement under which the Company granted Allergan an exclusive license to research, develop, manufacture and commercialize tetracycline products for use in the 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 Almirall Collaboration Agreement, 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 Almirall Collaboration Agreement not to directly or indirectly develop or commercialize any tetracycline compounds in the U.S. for the treatment of acne, and Almirall has agreed during the term of the 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 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
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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 recognized all Almirall milestones in prior years. There are no milestones left to be recognized under the Almirall Collaboration Agreement.
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 Almirall Collaboration Agreement, with a standard royalty reduction post patent expiration for such product for the remainder of the royalty term.
Royalty payments are recognized when the sales occur. During the nine months ended September 30, 2022 and September 30, 2021, the Company recognized $1.0 million and $1.5 million of royalty revenue, respectively, for sales of SEYSARA in the U.S. by Almirall under the Almirall Collaboration Agreement. During the three months ended September 30, 2022 and September 30, 2021, the Company recognized $0.1 million and $0.5 million of royalty revenue, respectively, for sales of SEYSARA in the U.S. by Almirall under the Almirall Collaboration Agreement. Royalty revenue recognized for sales of SEYSARA in the U.S. is estimated using third-party data and an approximation of discounts and allowances to calculate net product sales, to which the Company then applies the applicable royalty percentage specified in the Almirall Collaboration Agreement. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known, which is expected to be the following quarter.
In February 2020, we entered into (i) an ex-U.S. license agreement with Almirall, or the Ex-U.S. License, under which Almirall granted to us an exclusive license 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 we granted to Almirall an exclusive license in and to certain technology owned or in-licensed by us or our affiliates in order to research, develop and commercialize sarecycline for the treatment of acne in the greater China region.
Under the terms of the 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, we may terminate the China License.
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.
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Tufts University
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 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 was required to make certain payments of up to $0.3 million to Tufts upon the achievement by products developed under the agreement of specified development and regulatory approval milestones. The Company made a payment of $50,000 to Tufts for achieving the first milestone following commencement of the Phase 3 clinical trial for omadacycline and a payment of $100,000 to Tufts for achieving the second milestone following 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 agreement, based on the applicable field of use for such product, the Company 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 it had sold the product.
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 within a specified time period.
During the nine months ended September 30, 2022 and September 30, 2021, the Company incurred $1.1 million and $1.3 million of royalty expense, respectively, under the Tufts License Agreement. During the three months ended September 30, 2022 and September 30, 2021, the Company incurred $0.4 million and $0.3 million of royalty expense, respectively, under the Tufts License Agreement.
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Past Collaborations
Novartis International Pharmaceutical Ltd.
In September 2009, the Company and Novartis International Pharmaceutical Ltd., or Novartis, which merged into Novartis Pharma AG, a wholly owned subsidiary of Novartis AG, entered into a Collaborative Development, Manufacture and Commercialization License Agreement, or the Novartis Agreement, which provided Novartis with a global, exclusive patent and technology license for the development, manufacturing and marketing of omadacycline. The Novartis Agreement was terminated by Novartis without cause in June 2011 and the termination was effective 60 days later. The Company and Novartis subsequently entered in a letter agreement in January 2012, or the Novartis Letter Agreement, as amended, pursuant to which we reconciled shared development costs and expenses and granted Novartis a right of first negotiation with respect to commercialization rights of omadacycline following approval of omadacycline from the FDA, European Medicines Agency, or EMA, or any regulatory agency, but only to the extent the Company had not previously granted such commercialization rights related to omadacycline to another third-party as of any such approval. The Company also agreed to pay Novartis a 0.25% royalty, to be paid from net sales received by the Company in any country following the launch of omadacycline in that country and continuing until the later of expiration of the last active valid patent claim covering such product in the country of sale and 10 years from the date of first commercial sale in such country. The first royalty payment became payable as of March 31, 2019. The amended Novartis Letter Agreement resulted in a long-term liability in the amount of $2.5 million and $2.8 million as of September 30, 2022 and December 31, 2021, respectively, included within “Other Liabilities” on the Company’s consolidated balance sheet. In addition, short-term liabilities of $0.5 million and $0.4 million included within “Other Current Liabilities” on our consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively, represent the portion of royalty payments due to Novartis within twelve months of each balance sheet date. There are no other payment obligations to Novartis under the Novartis Agreement or the amended Novartis Letter Agreement.
For additional information related to these agreements, as well as the Company’s other significant collaborative agreements, please read Note 6, License and Collaboration Agreements, to the consolidated financial statements included within the Company’s 2021 Form 10-K.
9.    Capital Stock
On May 17, 2021, the Company entered into an At-the-Market Sales Agreement, or the Sales Agreement, with BTIG, LLC, or BTIG, under which it may offer and sell its common stock having aggregate sales proceeds of up to $50.0 million from time to time through BTIG as its sales agent. Sales of the Company’s common stock through 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 of 1933, as amended, including without limitation sales made directly on the Nasdaq Global Market or any other existing trading market for its common stock. 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 the Company may impose). The Company will pay BTIG a commission of 3% of the gross sales proceeds of any common stock sold through BTIG under the Sales Agreement. The Company has also provided BTIG with customary indemnification rights.
The Company is not obligated to make any sales of common stock under the Sales Agreement. The offering of shares of the Company’s common stock pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all common stock subject to the Sales Agreement, or (ii) termination of the Sales Agreement in accordance with its terms.
The Company sold $2.3 million shares of common stock pursuant to the Sales Agreement for $7.3 million in proceeds, after deducting an insignificant amount of commissions, during the nine months ended September 30, 2022. As of October 31, 2022, $23.3 million remains available for sale under the Sales Agreement.
On May 11, 2020, the Company filed a registration statement on Form S-3 with the SEC, as amended on June 19, 2020, and declared effective on July 9, 2020, to sell certain of its securities in an aggregate amount of up to $250.0 million. As of October 31, 2022, $223.3 million remains available on this shelf registration statement, with $23.3 million reserved for potential sales under the Sales Agreement.
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10.    Accrued Expenses
Accrued expenses consist of the following (in thousands):
September 30,December 31,
20222021
Accrued sales allowances$8,096 $7,012 
Accrued compensation8,491 8,935 
Accrued interest4,360 2,365 
Accrued commercial2,915 1,654 
Accrued inventory806 307 
Accrued contract research1,232 1,019 
Accrued professional fees1,111 781 
Accrued manufacturing917 670 
Accrued other446 361 
Accrued legal costs146 342 
Total$28,520 $23,446 
11.    Fair Value Measurements
Financial instruments, including cash, cash equivalents, restricted cash, money market funds, U.S. treasury securities, accounts receivable, accounts payable, and accrued expenses 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 fair value of the Company’s debt (including the Notes as defined in Note 13, Long-Term Debt), is $232.9 million as of September 30, 2022 and $238.3 million as of December 31, 2021. The fair value of the Company’s debt was determined using Level 2 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, 2022 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)
September 30, 2022
Assets:
U.S. treasury securities$29,922 $— $— $29,922 
Total Assets$29,922 $— $— $29,922 
Description
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
December 31, 2021
Assets:
U.S. treasury securities$15,107 $— $— $15,107 
Total Assets$15,107 $— $— $15,107 
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12.    Stock-Based and Incentive Compensation
Stock-based Compensation
The following table presents stock-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive income (loss) (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Research and development expense$510 $520 $1,202 $1,637 
Selling, general and administrative expense3,469 2,359 9,132 7,844 
Total stock-based compensation expense$3,979 $2,879 $10,334 $9,481 
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:
Nine Months Ended September 30,
20222021
Volatility62.5 %63.2 %
Risk-free interest rate2.5 %0.7 %
Expected dividend yield0.0 %0.0 %
Expected life of options (in years)5.95.9
Stock Plan Activity
The Company’s Board of Directors adopted the Paratek Pharmaceuticals, Inc. 2015 Equity Incentive Plan, or the 2015 Plan, which was approved by Company stockholders at the annual meeting of shareholders held on June 9, 2015. As of September 30, 2022, there are 1,093,545 shares available for future issuance under the 2015 Plan.
The Company recognizes the stock-based compensation expense of awards subject to performance-based vesting conditions over the requisite service period, to the extent achievement of the performance condition is deemed probable relative to targeted performance using the accelerated attribution method. 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.
During the nine months ended September 30, 2022, the Company’s Board of Directors granted 103,860 stock options and 2,737,840 RSUs 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 granted to executives in March 2022 are subject to time-based vesting, with 1/3 of the shares vesting on December 10, 2022, and an additional 1/3 of the shares vesting on the succeeding two anniversaries of such date. The RSU awards granted to non-executive employees of the Company during March 2022 are subject to time-based vesting, with 1/3 of the shares vesting on February 16, 2023, and an additional 1/3 of the shares vesting on the succeeding two anniversaries of such date.
The March 2022 grants also included performance-based RSU, or PRSU, awards to certain executives and employees of the Company, which will vest as follows: (a) 35/55 on certain net product revenue achievements, (b) 10/55 upon BARDA's purchase of the second NUZYRA procurement, and (c) 10/55 on certain business achievements. Since the Company believes it is probable that milestone (a) and (b) above will be achieved, the Company recognized $1.7 million of stock-based compensation expense for the performance condition during the nine months ended September 30, 2022 using the accelerated attribution method.
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
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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 September 30, 2022, 341,500 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 the plan’s terms. It is therefore possible that the Company may, based on the business and recruiting needs of the 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 Company. In October 2018 and March 2022, the Company’s Board of Directors approved the reserve of an additional 500,000 shares and 750,000 shares, respectively, for the 2017 Inducement Plan, for a total of 1,800,000 shares reserved for issuance under it. During the nine months ended September 30, 2022, the Company’s Board of Directors granted 132,000 stock options and 255,400 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 September 30, 2022, 754,489 shares remain available for grant under the 2017 Inducement Plan, as well as any shares underlying awards that may become available for grant pursuant to the plan’s terms.
Stock Options
A summary of stock option activity for the nine months ended September 30, 2022 is as follows:
Number
of Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 2021
2,051,484 $10.92 5.12$303 
Granted235,860 $2.84 
Exercised(1,646)$3.51 
Cancelled or forfeited(901,222)$8.53 
Outstanding at September 30, 2022
1,384,476 $11.10 6.11$— 
Exercisable at September 30, 2022
1,034,887 $13.51 5.13$— 
During the nine months ended September 30, 2022, certain executives voluntarily forfeited 750,947 outstanding stock options with exercise prices 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 September 30, 2022 under the Company’s 2006 Incentive Award Plan, 2014 Equity Incentive Plan and 2015 Equity Incentive Plan. On the dates of forfeiture, the total amount of unrecognized stock-based compensation expense of each award was accelerated and recognized, which resulted in the recognition of an insignificant amount stock-based compensation expense during the nine months ended September 30, 2022.
The total intrinsic value of stock options exercised was insignificant for the nine months ended September 30, 2022.
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Restricted Stock Units
A summary of RSU activity for the nine months ended September 30, 2022 is as follows:
Number
of Shares
Weighted
Average
Grant Date
Fair Value
Unvested balance at December 31, 2021
4,920,063 $5.82 
Granted2,993,240 3.08 
Released(1,085,743)4.63 
Forfeited(239,289)5.39 
Unvested balance at September 30, 2022
6,588,271 $4.78 
Total unrecognized stock-based compensation expense for all stock-based awards was $15.2 million as of September 30, 2022. This amount will be recognized over a weighted-average period of 1.5 years.
2009 Employee Stock Purchase Plan
In June 2009, at the annual meeting of stockholders, the stockholders of the Company approved the 2009 Employee Stock Purchase Plan, or the 2009 ESPP. As of September 30, 2022, 36,539 shares were available for issuance under the 2009 ESPP. Since the merger involving privately-held Paratek Pharmaceuticals, Inc. and Transcept Pharmaceuticals, Inc., the Company has not made the 2009 ESPP available to employees.
2018 Employee Stock Purchase Plan
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 ESPP Share Pool represented 3% of the total number of shares of our common stock outstanding as of March 31, 2018. The 2018 ESPP allows eligible employees to purchase shares during certain offering periods, which will be 6 -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 was December 1, 2018. As of September 30, 2022, 123,199 shares remained available for issuance under the 2018 ESPP. During the nine months ended September 30, 2022, the Company recognized an insignificant amount of stock-based compensation expense related to the 2018 ESPP.
Revenue Performance Incentive Plan
On 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
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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 awards 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 that are immediately payable on closing with respect to an award in connection with a change in control will be paid in cash.
The Company recognizes 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 under the first tranche of the Plan was deemed probable during 2021. Approximately $1.0 million of compensation expense was recognized during the nine months ended September 30, 2022. No such compensation expense was recognized during the nine months ended September 30, 2021. Compensation cost of $22.9 million and $21.8 million is included in accrued long-term compensation in the Company’s consolidated balance sheet as of September 30, 2022 and December 31, 2021, respectively.
13.    Long-Term Debt
R-Bridge Loan Agreement
On December 31, 2020, or the Closing Date, the Company, through its wholly-owned subsidiary PRTK SPV2 LLC, a Delaware limited liability company, or the Subsidiary, entered into a royalty and revenue interest-backed loan agreement, or the R-Bridge Loan Agreement, with an affiliate of R-Bridge Healthcare Investment Advisory, Ltd., or the R-Bridge Lender. Pursuant to the terms of the R-Bridge Loan Agreement, the Subsidiary borrowed a $60.0 million term loan, secured by, and repaid with proceeds from, (i) royalties from the Zai Collaboration Agreement, and such royalties, or the Royalty Interest, and (ii) a revenue interest based on the Company’s U.S. sales of NUZYRA in an initial amount of two and a half percent (2.5%), which amount may adjust under certain circumstances up to five percent (5%), of the Company’s net U.S. sales, subject to an annual cap of $10.0 million, which may adjust under certain circumstances to $12.0 million, or the Revenue Interest.
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Under the R-Bridge Loan Agreement, the outstanding principal balance will bear interest at an annual rate of 7.0%, increasing to an annual rate of 10% during the continuance of any event of default. Payments of the obligations outstanding under the R-Bridge Loan Agreement are made quarterly out of the Royalty Interest payments and Revenue Interest payments received by the Subsidiary during such quarter, or the Collection Amount. On each payment date, after payment of certain expenses, the Collection Amount shall be applied first to accrued interest, with any excess up to $15.0 million per annum applied to repay principal until the balance is fully repaid, and any shortfalls being capitalized and added to the principal balance of the loan. Amounts in excess of the $15.0 million annual cap shall be shared between the Company and the R-Bridge Lender based on a formula set out in the R-Bridge Loan Agreement. Following repayment in full of the loan, the first $15.0 million per annum in Collection Amount shall be paid to the Company and any amounts in excess shall be shared between the Company and the R-Bridge Lender based on a formula set out in the R-Bridge Loan Agreement.
Prior to the eighth (8th) anniversary of the Closing Date, the R-Bridge Loan Agreement will automatically terminate once the Subsidiary has paid to the R-Bridge Lender, in the form of regularly scheduled payments or as a voluntary prepayment, a capped amount of $114.0 million, less principal, interest and certain fee payments through the date of such prepayment, or the Capped Amount. From and after the eighth (8th) anniversary of the Closing Date, the Revenue Interest can be terminated by payment of the Capped Amount, but the Royalty Interest payments shall continue until maturity of the R-Bridge Loan Agreement on December 31, 2032, at which time, the outstanding principal amount of the loan, if any, together with any accrued and unpaid interest, and all other obligations then outstanding, shall be due and payable in cash by the Subsidiary.
The Company’s subsidiary, PRTK SPV1 LLC, a Delaware limited liability company and owner of the Subsidiary’s capital stock, has entered into a Pledge and Security Agreement in favor of the R-Bridge Lender, pursuant to which the Subsidiary’s obligations under the R-Bridge Loan Agreement are secured by PRTK SPV1 LLC’s pledge of all of the Subsidiary’s capital stock.
The R-Bridge 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 R-Bridge 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 Zai Collaboration Agreement; and permitting any additional liens on the collateral provided to the R-Bridge Lender under the R-Bridge Loan Agreement. As of September 30, 2022, the Company was in compliance with all covenants under the R-Bridge Loan Agreement.
An ancillary agreement executed by the Company and the Subsidiary in respect of the Revenue Interest, contains negative covenants applicable to the Company, including restrictions on the sale or transfer of our assets related to NUZYRA and giving rise to the Revenue Interest, each subject to the exceptions set forth therein.
The R-Bridge Loan Agreement contains customary defined events of default, upon which any outstanding principal, unpaid interest, and other obligations of the Subsidiary, shall be immediately due and payable by the Subsidiary. These include: failure to pay any principal or interest when due; failure to pay the Capped Amount when due following a non-qualified change of control of the Company, any uncured breach of a representation, warranty or covenant; any uncured failure to perform or observe covenants; any uncured breach of our representations, warranties or covenants under an ancillary agreement executed by the Company and the Subsidiary in respect of the Royalty Interest; any termination of the Zai Collaboration Agreement; and certain bankruptcy or insolvency events. No events of default had occurred under the R-Bridge Loan Agreement through September 30, 2022.
The Company raised approximately $58.3 million in net proceeds in connection with the R-Bridge Loan Agreement, comprised of the $60.0 million term loan funded at execution, net of $1.1 million in lender fees accounted for as debt discount and $0.6 million in direct and incremental third-party expenses accounted for as debt issuance costs. The net proceeds of the term loan, together with cash on hand, was used to prepay in full all obligations outstanding under our loan arrangement with Hercules Capital, Inc.
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The accounting for the R-Bridge Loan Agreement requires the Company to make certain estimates and assumptions, particularly about future royalties under the Zai Collaboration Agreement and sales of NUZYRA in the U.S. Such estimates and assumptions are utilized in determining the expected repayment term, amortization period of the debt discount and issuance costs, accretion of interest expense and classification between current and long-term portions of amounts outstanding. The Company amortizes the debt discount and issuance costs to interest expense over the expected term of the arrangement using the interest method based on projected cash flows. Similarly, the Company classifies as current debt for the R-Bridge Loan Agreement, amounts that are expected to be repaid during the succeeding twelve months after the reporting period end. However, the repayment of amounts due under the R-Bridge Loan Agreement is variable because the cash flows to be utilized for periodic payments is a function of amounts received by the Company with respect to the Royalty Interest and the Revenue Interest. Accordingly, the estimates of the magnitude and timing of amounts to be available for debt service are subject to significant variability and thus, subject to significant uncertainty. Therefore, these estimates and assumptions are likely to change, which may result in future adjustments to the portion of the debt that is classified as a current liability, the amortization of debt discount and issuance costs and the accretion of interest expense.
The amount of principal to be repaid in each of the five succeeding years is not fixed and determinable.
Other amounts that may become due and payable under the R-Bridge Loan Agreement, including amounts shared between the parties with respect to cash flows received in excess of pre-defined thresholds, are recognized as additional interest expense when they become probable and estimable.
The following table summarizes the impact of the R-Bridge Loan Agreement on the Company’s condensed consolidated balance sheets at September 30, 2022 and December 31, 2021 (in thousands):
September 30,
2022		December 31,
2021
Principal debt including paid-in-kind interest$62,376 $61,256 
Unamortized debt discount and issuance costs(1,276)(1,443)
Carrying value$61,100 $59,813 
During the nine months ended September 30, 2022, $1.1 million of paid-in-kind interest was capitalized and added to the principal balance of the loan, which represents the shortfall between the interest owed and the Collection Amount.
The Company recognized interest expense of $1.1 million and $3.3 million, and an insignificant amount of amortization expense on the debt issuance costs, on the R-Bridge Loan Agreement for the three and nine months ended September 30, 2022, respectively.
Convertible Senior Subordinated Notes
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
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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 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 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 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 the impact of the Notes on the Company’s condensed consolidated balance sheets at September 30, 2022 and December 31, 2021 (in thousands):
September 30,
2022		December 31,
2021
Principal debt$165,000 $165,000 
Unamortized debt issuance costs(1,782)(2,572)
Carrying value$163,218 $162,428 
The Company recognized coupon interest expense of $2.0 million and $5.9 million, and amortization expense on the debt issuance costs of $0.3 million and $0.8 million, on the Notes for the three and nine months ended September 30, 2022, respectively.
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Royalty-Backed Loan Agreement
On February 25, 2019, the Company, through its wholly-owned subsidiary Paratek Royalty Corporation, or the Subsidiary, entered into the Royalty-Backed Loan Agreement with 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.
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 and any royalty shortfalls will be capitalized and added to the principal balance of the loan. 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 Royalty-Backed 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 following table summarizes the impact of the Royalty-Backed Loan Agreement on the Company’s condensed consolidated balance sheets at September 30, 2022 and December 31, 2021 (in thousands):
September 30,
2022		December 31,
2021
Principal debt including paid-in-kind interest$35,741 $33,860 
Unamortized debt issuance costs(1,577)(1,673)
Carrying value$34,164 $32,187 
During the nine months ended September 30, 2022, $1.9 million of paid-in-kind interest was capitalized and added to the principal balance of the loan, which represents the shortfall between the interest owed, and the Almirall Collaboration Agreement royalty payments received.
The Company recognized interest expense of $1.1 million and $3.2 million and an insignificant amount of amortization expense on the debt issuance costs on the Royalty-Backed Loan Agreement for the three and nine months ended September 30, 2022, respectively.
Debt issuance costs are presented on the consolidated balance sheet as a direct deduction from the related debt liability rather than capitalized as an asset in accordance with ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.
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Long-term debt on the Company’s consolidated balance sheets at September 30, 2022 and December 31, 2021 includes the carrying value of the R-Bridge Loan Agreement, the Notes and the Royalty-Backed Loan Agreement.
14.    Leases
Operating Leases
The Company leases its Boston, Massachusetts and King of Prussia, Pennsylvania office spaces under non-cancelable operating leases expiring in 2023 and 2024, respectively.
The Company executed an amendment to the existing lease agreement on its Boston office space in April 2021. The amended lease agreement released 8,104 rentable square feet of office space and extends the lease term for the remaining 4,153 rentable square feet of office space through August 2023 for an additional commitment of $0.4 million. In accordance with the amendment, the Company will be refunded the insignificant security deposit paid in July 2016.
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 total lease commitment is over a seven-year and seven-month lease term. 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.
The Company has also identified an embedded lease in its manufacturing and services agreement with CIPAN – Companhia Industrial Produtora de Antibióticos, or CIPAN, which was later amended and restated in April 2018, and further amended and restated in February 2019, December 2019, July 2020, and December 2020. For additional details relating to these agreements, refer to Note 18, Commitments and Contingencies of the 2021 Form 10-K.
The total operating lease liability is presented on the Company’s condensed consolidated balance sheet based on maturity dates. Approximately $0.7 million of the total operating leases liabilities is classified under “other current liabilities” for the portion due within twelve months of September 30, 2022, and $0.6 million is classified under “long-term lease liability”.
15.    Income Taxes
The Company recorded no provision for income taxes for the three or nine months ended September 30, 2022 and September 30, 2021.
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.
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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 launched in the U.S. The following table summarizes balances and activity in each of the product revenue allowance and reserve categories (in thousands):
Chargebacks,
discounts and
fees
Government
and other
rebates
Returns
Patient
assistance
Total
Balance at December 31, 2021
$1,006 $5,198 $469 $339 $7,012 
Provision related to current period sales5,568 18,479 950 816 25,813 
Adjustment related to prior period sales(52)(782)(585)— (1,419)
Credit or payments made during the period(5,396)(16,392)(746)(776)(23,310)
Balance at September 30, 2022
$1,126 $6,503 $88 $379 $8,096 
17.    Commitments and Contingencies
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, 2022, the Company was not party to any 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.
In July 2021, the Company entered into a supply agreement with CARBOGEN AMCIS AG, or Carbogen, that provides for the terms and conditions under which Carbogen will manufacture and supply to the Company the active pharmaceutical ingredient for the Company’s omadacycline product in bulk quantities, or the Carbogen Product. Under this agreement, the Company is responsible for the cost and supply of crude omadacycline that Carbogen requires to manufacture the Carbogen Product and perform related services. The Company is obligated to initially pay Carbogen an amount in the high six-digit U.S. dollar range per batch of Carbogen Product that the Company orders, and the price may be adjusted in accordance with the terms of the agreement. The Company may also request that Carbogen perform certain services related to the Carbogen Product, for which the Company will pay reasonable compensation to Carbogen.
The agreement will remain in effect for a fixed initial term. If neither party has provided notice of its intent to terminate the agreement prior to the end of the initial term, then the Agreement will automatically be extended for a fixed period of time. The agreement may be terminated under certain circumstances, including by either party delivering notice of termination following the initial term, or by either party due to a material uncured breach by the other party or the other party’s insolvency.
In November 2016, the Company entered into a manufacturing and services agreement, or MSA, with CIPAN, which was later amended and restated in April 2018, and further amended in February 2019, December 2019, July 2020, December 2020, and January 2022, collectively, the CIPAN Agreements. The CIPAN Agreements provide the terms and conditions under which CIPAN will manufacture and supply to the Company increased quantities of minocycline starting material and crude omadacycline, or the CIPAN Products, for purification into omadacycline and, subsequently, for use in the Company’s products that contain omadacycline tosylate as the active pharmaceutical ingredient.
Additionally, the CIPAN Agreements included an investment by the Company in a new facility area to increase the manufacturing capacity for production of crude omadacycline. The Company was required to make advance payments to CIPAN upon completion of certain milestones within the CIPAN Agreements.
The term of the CIPAN Agreements will continue throughout the term that the Company receives benefit from the new facility area. The Company may renew the CIPAN Agreements for additional periods and can terminate the CIPAN Agreements at any time by delivery, within a certain time period, of prior written notice to CIPAN. Following the first renewal term, CIPAN may terminate the MSA in its entirety by delivery, within a certain time period, of prior written notice to the Company.
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Under the CIPAN Agreements, the Company will purchase product in batches from CIPAN in quantities to be set forth on purchase orders submitted to CIPAN, within a certain time period, prior to the requested date of delivery. The Company will provide CIPAN with a rolling forecast with a best estimate of the quantities that will be ordered each month. Upon execution of the CIPAN Agreements, the Company determined that the CIPAN Agreements contain an embedded lease because the Company has the right to direct the use of the facility and related equipment therein. The lease commenced during the fourth quarter of 2020, the point at which the new facility area and the related equipment was available for use by the Company.
18.    Recent Accounting Pronouncements
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.
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.
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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations 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, 2021, as filed with the U.S. Securities and Exchange Commission, or the SEC, on March 14, 2022, or the 2021 Form 10-K. 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.
Company Overview
We are 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. Our 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. We retain worldwide commercial rights to omadacycline, with the exception in the People’s Republic of China, Hong Kong, Macau and Taiwan, where we have entered into a collaboration agreement with Zai Lab (Shanghai) Co., Ltd., or Zai. The National Medical Products Administration, or NMPA, of China approved NUZYRA for the treatment of CABP and ABSSSI in December 2021. 
SEYSARA® (sarecycline) is an FDA-approved product with respect to which we have exclusively licensed in the U.S. and the People’s Republic of China, Hong Kong and Macau, or the greater China region, certain rights to Almirall, LLC, or Almirall. SEYSARA is currently being marketed by Almirall in the U.S. as a once-daily oral therapy for the treatment of moderate to severe acne vulgaris. With respect to our technology as it relates to sarecycline, we retain development and commercialization rights in all countries other than the U.S. and the greater China region, and in February 2020, we exclusively licensed from Almirall certain technology owned or in-licensed by Almirall or its affiliates that is necessary or useful to develop or commercialize sarecycline outside of the U.S. Almirall plans to develop sarecycline for acne in China, with a submission to the China National Medical Products Administration, or NMPA, according to Almirall, expected in 2023.
We believe that NUZYRA has the potential to become the primary choice of physicians for use as a once-daily broad-spectrum monotherapy oral and IV antibiotic for ABSSSI, CABP and other serious community-acquired bacterial infections where resistance is of concern. NUZYRA is used in the emergency room, hospital, and community care settings. We have designed NUZYRA to provide potential advantages over existing antibiotics, including activity against resistant bacteria, broad-spectrum antibacterial activity, oral and IV formulations with once-daily dosing, no dosing adjustments for patients on concomitant medications and a generally safe and well-tolerated profile. NUZYRA also has the potential to be used as a once-daily oral and IV antibiotic for the treatment of NTM and pulmonary anthrax, where it could be suitable for both the treatment and post-exposure prophylaxis of anthrax as a priority medical countermeasure.

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In December 2019, we entered into the original 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 original BARDA contract supports the development of NUZYRA for the treatment of pulmonary anthrax, FDA post-marketing requirements, or PMRs, associated with the initial NUZYRA approval, and an option for BARDA to procure up to 10,000 treatment courses of NUZYRA for use against anthrax and other potential biothreats. In September 2021, we 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.
Under the terms of the original BARDA contract, approximately $59.4 million was awarded to us 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, the $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 second quarter of 2021. The Company has been periodically invoicing against 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 us approximately $76.8 million for reimbursement of existing FDA Post-Marketing Requirements, PMRs, and approximately $20.4 million for reimbursement of manufacturing-related requirements, which the Company has been invoicing against based on costs incurred. This additional funding is projected 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 the U.S. onshoring and security requirements of our manufacturing activities for NUZYRA.
BARDA initiated the amended option in September 2021 that awarded us additional funding to expand the development of NUZYRA under an FDA Animal Efficacy Rule development program to support an sNDA that will include post-exposure prophylaxis, or PEP, in addition to the treatment of pulmonary anthrax for approximately $31.6 million.
The remaining contractual options under the original and amended BARDA contract include a maximum of approximately $115.4 million to provide for three additional purchases of NUZYRA anthrax treatment courses, each of which will be exercised at BARDA’s discretion upon achievement of development milestones related to the anthrax treatment development program. The amended BARDA contract formalized the triggers for BARDA’s option to purchase the second NUZYRA procurement upon BARDA's receipt of positive top-line data from our pilot efficacy treatment study of inhalation anthrax in rabbits, which we anticipate will be available as early as the end of 2022. The third procurement will be triggered by BARDA's receipt of positive top-line data in PEP and treatment of inhalation anthrax from a combination of pilot and pivotal efficacy studies in animal models, which the Company anticipates will be available in 2024. The fourth procurement will be triggered by the Company’s receipt of sNDA approval from the FDA for treatment of inhalation anthrax, which is anticipated to follow the third procurement by approximately 18 to 24 months.
We continue to make significant progress in the pulmonary anthrax development program under the amended BARDA contract. Several omadacycline PK studies have been completed in rabbits and in non-human primates to derive the doses to be tested in upcoming pilot efficacy, or dose range finding, studies for the treatment of inhalation anthrax in both rabbits and non-human primates. The first oral omadacycline PK study in non-human primates was also completed marking the initiation of the development program for the post exposure prophylaxis indication. In addition, we have evaluated minimum inhibitory concentrations, or MICs, of omadacycline against more than 130 anthrax strains. In these in vitro studies, omadacycline continued to demonstrate potent MICs and is considered effective against all anthrax isolates that were tested. The collection of isolates included a strain resistant to doxycycline and a strain resistant to ciprofloxacin. Omadacycline demonstrated potent in vitro activity and its MIC values were not impacted in either of these resistant anthrax strains.

Together with BARDA, we also continue to advance our efforts to onshore the manufacturing of NUZYRA to the U.S. We have completed the knowledge transfer and development stage of our manufacturing process for the active pharmaceutical ingredient, or API, of omadacycline to our U.S. onshoring partners and are currently in the engineering stage of the initiative. We have completed knowledge transfer and the initiation of the process development work for production of vials. Tablet validation and manufacturing has been completed and, as a result, U.S. manufactured NUZYRA tablets are now commercially available.
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Tablet validation and manufacturing now complete. As a result, U.S. manufactured NUZYRA tablets are now commercially available.
The breadth of the utility of NUZYRA as a countermeasure against bioterrorism was affirmed when NUZYRA was added to the Center for Disease Control and Prevention's updated report, "Antimicrobial Treatment and Prophylaxis of Plague: Recommendations for Naturally Acquired Infections and Bioterrorism Response" in July 2021. NUZYRA was added as an alternative agent for the treatment, pre-exposure prophylaxis, and postexposure prophylaxis of primary bubonic and pharyngeal plague infections in adults 18 years of age and over.
We continue to pursue a number of other life-cycle opportunities for NUZYRA. In May 2021, the FDA approved our supplemental new drug application, or sNDA, for the oral-only loading dose regimen for patients diagnosed with CABP, based upon the results of a study that demonstrated an oral-only loading dose regimen has a comparable PK profile to the approved IV loading dose regimen in patients with CABP that was established in the Phase 3 CABP registration study.
Additionally, we have also discussed trial designs and potential registration pathways with the FDA to determine the efficacy and safety of omadacycline in patients afflicted with non-tuberculous mycobacteria, or NTM, which are environmental organisms that can be found in soil, dust, and water, including natural and municipal water sources. Infection occurs when a person is exposed to NTM organisms. NTM can form difficult-to-eliminate biofilms, which are collections of microorganisms that stick to each other, and adhere to surfaces in moist environments. Although severe infection can affect the lymph nodes, skin, soft tissues, bones, and joints, the vast majority of NTM infection cases are pulmonary. The diagnosis of NTM abscessus infection is often delayed due to the constellation of non-specific symptoms and a lack of disease state awareness by clinicians.
NTM is a rare and orphan disease with no FDA-approved therapies in the U.S. In August 2021, the FDA granted orphan drug designation for NUZYRA for the treatment of infections caused by NTM Mycobacterium abscessus, or MAB, and Mycobacterium avium complex, or MAC. In October 2021, we initiated a a double-blinded, placebo-controlled, randomized monotherapy Phase 2b clinical study for the treatment of MAB patients who are not receiving other treatments. The study size will be approximately 75 subjects randomized in a 1.5 to 1 ratio and therapy will last for 12 weeks with an efficacy endpoint assessment at that time point. Due to the small numbers of patients with this rare disease, we expect this study will complete enrollment within approximately two years from commencement.
The FDA subsequently granted Fast Track designation for the oral and IV formulations of NUZYRA for the treatment of NTM caused by both MAB and MAC in July 2022. The company has since hosted a successful Investor Day in October 2022 that updated investors on the global market opportunity for NTM in both MAB and MAC, which highlighted the significant global unmet medical need for patients suffering from this chronic, rare and life-threatening pulmonary disease, summarized key takeaways from the company's ongoing scientific program in NTM that includes the first randomized, placebo-controlled Phase 2b study being conducted in patients with NTM pulmonary disease caused by MAB, and to lay the foundation for ex-U.S. partnering discussions.
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 began generating revenue from product sales in February 2019; as such, we have historically financed our operations primarily through sales of our common stock, debt financings, strategic collaborations, and grant funding.
We have incurred significant losses since our inception in 1996. Our accumulated deficit at September 30, 2022 was $923.3 million and our net loss for the nine months ended September 30, 2022 was $20.9 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’ 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. We expect to continue to incur significant expenses and operating losses for the next several years.
While our BARDA contract is expected to significantly strengthen our cash position, unless we can generate a sufficient amount of revenue from our commercial products, we may need to raise additional capital in order to support and accelerate the commercialization of omadacycline and to advance the development of our other indications for omadacycline, such as NTM, or other product candidates. If we cannot generate a sufficient amount of product or royalty
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revenue to finance our cash requirements, we expect to finance our future cash needs primarily through a combination of public or private equity offerings, debt or other structured financings, strategic collaborations, grant funding and government 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.
Business Update Regarding COVID-19
The COVID-19 pandemic continues to present a substantial public health and economic challenge around the world and is continuing to affect our employees, health care institutions, patients, communities and business operations, as well as the U.S. economy and financial markets. The COVID-19 related restrictions on in-person promotional access to health care institutions and the overall impact of COVID-19 restrictions on the health care and hospital environments continue to ebb and flow and could limit the full potential of NUZYRA’s growth. The length of time and 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 the duration, spread and severity of the outbreak, new information that may emerge concerning COVID-19, any resurgence of COVID-19 cases, including as a result of variant strains of the underlying virus, the actions taken to contain the virus or treat its impact, the availability and efficacy of vaccines against COVID-19 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. We continue to assess the potential impact of the COVID-19 pandemic on our three on-going clinical studies, our BARDA anthrax development program, as well as on our business and operations, including our sales, expenses, supply chain and other clinical studies. Our office-based employees have been permitted to work from home since early March 2020 and have now adopted a hybrid approach with in-person business meetings and collaboration. Our customer-facing personnel are operating through a hybrid model of both virtual and in-person engagement in a manner compliant with guidance issued by the Centers for Disease Control and Prevention and other state and local mandates, with in-person engagement increasing during severe periods of the pandemic in the U.S.
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. During the first half of the year, our technical service, quality assurance and collaboration teams began to travel for the first time in the pandemic to our third party contract manufacturing partners in Europe, after being largely prevented during the COVID-19 pandemic.
Business Update Regarding Geo-Political Events
Russia’s invasion of Ukraine has caused us to suspend enrollment in both countries for a post-marketing required clinical study for adult patients with CABP. The cost of this trial is being reimbursed under our BARDA contract. Identification and preparation of alternative countries and sites is ongoing and will delay the study completion and could result in significant additional costs.
Additionally, Russia’s invasion of Ukraine has affected manufacturing and supply chains abroad. Although we have not been materially impacted by these disruptions to date, it could impact our ability to timely obtain materials, supplies or medical equipment to conduct our research and development or manufacturing work.
For additional information on the various risks posed by the COVID-19 pandemic and geo-political events, refer to Item 3. Quantitative and Qualitative Disclosures About Market Risk and Item 1A. Risk Factors included in the 2021 Form 10-K.
Financial Operations Overview
Product Revenue, Net
Product revenue, 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 to health care providers or
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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.
Under the terms of the BARDA contract, BARDA can procure up to 10,000 anthrax treatment courses of NUZYRA. As of September 30, 2022, an initial 2,500 treatment courses of NUZYRA were purchased by BARDA. The product procurement performance obligations generate revenue at a point in time, which is upon transfer of control of the product. As such, the related revenue for these performance obligations is recognized at a point in time as product revenue within our consolidated statement of operations. Refer to Note 7, Government Contract Revenue to the interim condensed consolidated financial statements included in this report for further discussion of the BARDA contract and related revenue recognition.
Government Contract Service Revenue
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 develop NUZYRA for the treatment of pulmonary anthrax and for the U.S. onshoring of NUZYRA manufacturing plus a small fixed administrative fee. Refer to Note 7, Government Contract Revenue to the interim condensed consolidated financial statements included in this report for further discussion of the BARDA contract and related revenue recognition.
Government Contract Grant Revenue
The allocated consideration of government contract grant revenue is recognized when earned under our BARDA contract and represents the reimbursement by BARDA of costs incurred by us for FDA post-marketing requirements, or PMRs, associated with the approval of NUZYRA, including CABP and pediatric studies, as well as a five-year post-marketing bacterial surveillance study. Refer to Note 7, Government Contract Revenue to the interim condensed consolidated financial statements included in this report for further discussion of the BARDA contract and related revenue recognition.
Collaboration and Royalty Revenue
Collaboration and royalty revenue are recognized when revenue earned under our collaboration and license agreements. Refer to Note 8, License and Collaboration Agreements to the interim condensed consolidated financial statements included in this report for further discussion of the collaboration agreements and the related revenue recognition.
Cost of Product Revenue
Cost of product revenue represents the cost of the product itself, labor and overhead, and any reserve for excess or obsolete inventory, as well as stability studies, and inventory scrap. Cost of product revenue also represents royalties owed on net sales of NUZYRA.
Research and Development Expense
Research and development expenses consisted primarily of costs directly incurred by us for the development of our product candidates, which include:
•expenses incurred under agreements with clinical research organizations, or CROs, and investigative sites that conduct our clinical trials;
•the cost of acquiring and manufacturing preclinical and clinical study materials and developing manufacturing processes;
•direct employee-related expenses, including salaries, benefits, travel and stock-based compensation expense of our research and development personnel;
•allocated facilities, depreciation, and other expenses, which include rent and maintenance of facilities, insurance and other supplies; and
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•costs associated with preclinical activities and regulatory compliance.
Research and development expenses also include gross reimbursable costs incurred related to research and development services performed for the treatment of pulmonary anthrax, services performed for U.S. manufacturing onshoring and security requirements, and services performed for FDA PMRs under the BARDA contract.
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, 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 depend on a variety of factors, including:
•the scope, rate of progress, and expense of our ongoing, as well as any additional, clinical trials and other research and development activities;
•future clinical trial results;
•potential changes in government regulation; and
•the timing and receipt of any regulatory approvals.
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 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 except as required by the BARDA contract. Our research and development expenses for omadacycline and other projects during the three and nine months ended September 30, 2022 and 2021 are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Omadacycline costs$5,998 $5,567 $16,065 $12,540 
Other research and development costs2,488 2,353 7,490 7,437 
Total$8,486 $7,920 $23,555 $19,977 
Selling, General and Administrative Expense
Selling, general and administrative expenses consist principally of compensation costs for our sales force, commercial support personnel, and medical affairs professionals, as well as personnel in executive and other administrative functions. Other selling, general and administrative expenses include marketing, trade, and other commercial costs and distribution fees for the sale of NUZYRA and professional fees for legal, consulting and accounting services.
Interest Income
Interest income represents interest earned on our money market funds and marketable securities.
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Interest Expense
Interest expense represents interest incurred on the R-Bridge Loan Agreement, the Notes, and the Royalty-Backed Loan Agreement (each as defined in Note 13, Long-Term Debt to the interim condensed consolidated financial statements), as well as the adjustment of our marketable securities to amortized cost.
Results of Operations
Comparison of the three months ended September 30, 2022 and 2021
Three Months Ended
September 30,
(in thousands)20222021$ Change
Product revenue, net$25,455 $19,432 $6,023 
Government contract service revenue2,060 1,467 593 
Government contract grant revenue2,368 3,011 (643)
Collaboration and royalty revenue330 537 (207)
Net revenue$30,213 $24,447 $5,766 
Expenses:
Cost of product revenue4,372 4,289 83 
Research and development8,486 7,920 566 
Selling, general and administrative33,846 25,955 7,800 
Total operating expenses46,704 38,164 8,540 
Loss from operations(16,491)(13,717)(2,774)
Other income and expenses:
Interest income186 25 161 
Interest expense(4,536)(4,367)(169)
Other gains (losses), net(39)(143)104 
Net loss$(20,880)$(18,202)$(2,678)
Product Revenue, Net
Net product revenue recognized on sales of NUZYRA in the U.S. was $25.5 million and $19.4 million for the three months ended September 30, 2022 and September 30, 2021, respectively. The increase in net product revenue is primarily the result of an increase in sales volume due to higher customer demand during the three months ended September 30, 2022.
Government Contract Service Revenue
Government contract service revenue earned under our BARDA contract was $2.1 million and $1.5 million for the three months ended September 30, 2022 and September 30, 2021, respectively. The increase is primarily due to the timing of activities for the U.S. onshoring of NUZYRA manufacturing and additional work completed under the anthrax development program.
Government Contract Grant Revenue
Government contract grant revenue earned under our BARDA contract was $2.4 million and $3.0 million for the three months ended September 30, 2022 and September 30, 2021, respectively. The decrease is primarily due to the suspension of enrollment in our post-marketing required clinical study for adult patients with CABP at all clinical sites in Russia and Ukraine as a result of Russia’s invasion of Ukraine in early 2022. Identification and preparation of alternative countries and sites is ongoing, which will delay the study completion and could result in significant additional costs that will be reimbursed under the BARDA contract.
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Collaboration and Royalty Revenue
Collaboration and royalty revenue was $0.3 million for three months ended September 30, 2022, which decreased slightly from $0.5 million for the three months ended September 30, 2021. 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 we 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
Cost of product revenue was $4.4 million for the three months ended September 30, 2022, compared to $4.3 million for the three months ended September 30, 2021. The $0.1 million increase is primarily the result of an increase in NUZYRA product sales and royalties owed on net sales of NUZYRA during the three months ended September 30, 2022. 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 September 30, 2022 and September 30, 2021 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 as product revenue increases.
Research and Development Expense
Research and development expenses were $8.5 million for the three months ended September 30, 2022, compared to $7.9 million for the three months ended September 30, 2021. The $0.6 million increase in research and development expenses was primarily the result of costs incurred under our BARDA contract, including the timing of activities for the U.S. onshoring of NUZYRA manufacturing and additional work completed under the anthrax development program, and for other non-clinical studies, partially offset by lower clinical study costs associated with our post-marketing required clinical study for adult patients with CABP due to the suspension of enrollment at all clinical sites in Russia and Ukraine as a result of Russia’s invasion of Ukraine in early 2022.
We anticipate an increase in research and development expenses in future periods as we continue development of NUZYRA for the treatment of and PEP against pulmonary anthrax, continue the work on our FDA post-marketing requirements, and continue the onshoring of our 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.
Selling, General and Administrative Expense
Selling, general and administrative expenses were $33.8 million for the three months ended September 30, 2022, compared to $26.0 million for the three months ended September 30, 2021. The $7.8 million increase is primarily the result of an increase in compensation expense and costs incurred for the expansion of NUZYRA promotion into the primary care setting.
We anticipate an increase in selling, general and administrative expenses in support of our expansion into the community setting and other commercial activities, as well as the continued costs of operating as a public company. These increases will likely include costs for travel, in-person training events and sales meetings, the hiring of additional personnel, executing marketing and promotional programs, and engaging consultants, legal and other professional fees, and other operating expenses.
Other Income and Expenses
Interest expense for the three months ended September 30, 2022 represents interest incurred on the Notes of $2.2 million, the R-Bridge Loan Agreement of $1.2 million, the Royalty-Backed Loan Agreement of $1.1 million. Interest income for the three months ended September 30, 2022 represents interest earned on our money market funds and marketable securities.
Interest expense for the three months ended September 30, 2021 represents interest incurred on the Notes of $2.2 million, R-Bridge Loan Agreement of $1.1 million, and the Royalty-Backed Loan Agreement of $1.0 million. Interest income for the three months ended September 30, 2021 represents interest earned on our money market funds and marketable securities.

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Comparison of the Nine Months Ended September 30, 2022 and 2021
Nine Months Ended September 30,
(in thousands)20222021$ Change
Product revenue, net$70,455 $85,441 $(14,986)
Government contract service revenue6,128 4,553 1,575 
Government contract grant revenue6,550 6,712 (162)
Collaboration and royalty revenue1,578 1,659 (81)
Net revenue$84,711 $98,365 $(13,654)
Expenses: 
Cost of product revenue12,744 16,817 (4,073)
Research and development23,555 19,977 3,578 
Selling, general and administrative91,784 75,420 16,364 
Total operating expenses128,083 112,214 15,869 
Loss from operations(43,372)(13,849)(29,523)
Other income and expenses: 
Interest income425 61 364 
Interest expense(13,561)(13,019)(542)
Other gains (losses), net99 (24)123 
Net loss$(56,409)$(26,831)$(29,578)
Product Revenue, Net
Net product revenue recognized on sales of NUZYRA in the U.S. was $70.5 million and $85.4 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. The decrease in net product revenue is primarily the result of the delivery and acceptance of the first procurement under the BARDA contract of $37.9 million during the nine months ended September 30, 2021, partially offset by an increase in sales volume due to higher customer demand during the nine months ended September 30, 2022.
Government Contract Service Revenue
Government contract service revenue earned under our BARDA contract was $6.1 million and $4.5 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. The increase is primarily the result of activities for the U.S. onshoring of NUZYRA manufacturing and additional work completed under the anthrax development program.
Government Contract Grant Revenue
Government contract grant revenue earned under our BARDA contract was $6.6 million and $6.7 million during the nine months ended September 30, 2022 and September 30, 2021, respectively. The slight decrease is a result of the timing of post-marketing required activities that are reimbursed under the BARDA contract.
Collaboration and Royalty Revenue
Collaboration and royalty revenue was $1.6 million for the nine months ended September 30, 2022, compared to $1.7 million for the nine months ended September 30, 2021. 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 we 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.
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Cost of Product Revenue
Cost of product revenue was $12.7 million for the nine months ended September 30, 2022, compared to $16.8 million for the nine months ended September 30, 2021. The $4.1 million decrease is primarily the result of the delivery and acceptance of the first procurement under the BARDA contract of $37.9 million during the nine months ended September 30, 2021, partially offset by an increase in sales volume due to higher customer demand during the nine months ended September 30, 2022. 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 nine months ended September 30, 2022 and nine months ended September 30, 2021were 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 as product revenue increases.
Research and Development Expense
Research and development expenses were $23.6 million for the nine months ended September 30, 2022, compared to $20.0 million for the nine months ended September 30, 2021. The $3.6 million increase in research and development expenses was primarily the result of costs incurred under our BARDA contract, including the timing of activities for the U.S. onshoring of NUZYRA manufacturing and additional work completed under the anthrax development program. The remainder of the increase in costs is due to incremental enrollment in our Phase 2 NTM study and other non-clinical study activity.
We anticipate an increase in research and development expenses in future periods as we continue development of NUZYRA for the treatment of and PEP against pulmonary anthrax, continue the work on our FDA PMRs, and continue the onshoring of our 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.
Selling, General and Administrative Expense
Selling, general and administrative expenses were $91.8 million for the nine months ended September 30, 2022, compared to $75.4 million for the nine months ended September 30, 2021. The $16.4 million increase is primarily the result of an increase in compensation expense and costs incurred for the expansion of NUZYRA promotion into the primary care setting.
We anticipate an increase in selling, general and administrative expenses in support of our expansion into the community setting and other commercial activities, as well as the continued costs of operating as a public company. These increases will likely include costs for travel, in-person training events and sales meetings, the hiring of additional personnel, executing marketing and promotional programs, and engaging consultants, legal and other professional fees, and other operating expenses.
Other Income and Expenses
Interest expense for the nine months ended September 30, 2022 represents interest incurred on the Notes of $6.7 million, the R-Bridge Loan Agreement of $3.5 million, the Royalty-Backed Loan Agreement of $3.2 million. Interest income for the nine months ended September 30, 2022 represents interest earned on our money market funds and marketable securities.
Interest expense for the nine months ended September 30, 2021 represents interest incurred on the Notes of $6.6 million, R-Bridge Loan Agreement of $3.4 million, and the Royalty-Backed Loan Agreement of $3.0 million. Interest income for the nine months ended September 30, 2021 represents interest earned on our money market funds and marketable securities.
Liquidity and Capital Resources
On May 11, 2020, we filed a registration statement on Form S-3 with the SEC, as amended on June 19, 2020 and declared effective on July 9, 2020, to sell certain of our securities in an aggregate amount of up to $250.0 million. As of October 31, 2022, $223.3 million remains available on this shelf registration statement, with $23.3 million reserved for potential sales under our Sales Agreement (as defined below).On May 17, 2021, we entered into an At-the-Market Sales Agreement, or the Sales Agreement, with BTIG, LLC, or 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 BTIG as our sales agent. Sales of our common stock through BTIG, if any, will be made by any method permitted by law deemed to be an “at the market
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offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended, including without limitation sales made directly on the Nasdaq Global Market or any other existing trading market for its common stock. BTIG will use commercially reasonable efforts to sell our common stock from time to time, based upon instructions (including any price, time or size limits or other customary parameters or conditions we may impose). We will pay BTIG a commission of 3% of the gross sales proceeds of any common stock sold through BTIG under the Sales Agreement. During nine months ended September 30, 2022, we sold $2.3 million shares of our common stock pursuant to the Sales Agreement for $7.3 million in proceeds, after deducting an insignificant amount of commissions. As of October 31, 2022, $23.3 million remains available for sale under the Sales Agreement.
We have used and we intend to continue to use the net proceeds from the above offerings of our common stock and the Notes, as well as other current and retired long-term debt agreements, together with our existing capital resources and future NUZYRA product sales, government contract revenue and royalty revenue, to fund our ongoing company operations, including clinical studies of omadacycline, NUZYRA commercial operations, and for working capital and other general corporate purposes. Refer to Note 13, Long-Term Debt, for further details on our loan agreements, which include the R-Bridge Loan Agreement, the Notes, and the Royalty-Backed Loan Agreement.
As of September 30, 2022, we had cash, cash equivalents and marketable securities of $57.0 million.
The following table summarizes our cash provided by and used in operating, investing and financing activities:
Nine Months Ended September 30,
(in thousands)20222021
Net cash used in operating activities$(46,028)$(28,465)
Net cash (used) provided by investing activities$(15,196)$19,627 
Net cash provided by financing activities$7,819 $14,039 
Operating Activities
Net cash used in operating activities was $46.0 million for the nine months ended September 30, 2022, compared to $28.5 million for the nine months ended September 30, 2021. The change in net cash used in operating activities primarily consists of our net losses adjusted for non-cash items and changes in components of operating assets and liabilities as follows:
–for the nine months ended September 30, 2022, a net loss of $56.4 million was adjusted for non-cash items, including stock-based compensation expense of $10.3 million, non-cash interest expense of $4.1 million, and a net increase of $4.4 million due to changes in operating assets and liabilities. The significant items in the change in operating assets and liabilities include a net increase in accounts payable and accrued expenses, inventories, and other liabilities and other assets of $7.1 million, offset by a decrease in accounts receivable, other receivables, prepaid, and other current assets of $2.0 million.
–for the nine months ended September 30, 2021, a net loss of $26.8 million was adjusted for non-cash items including stock-based compensation expense of $9.5 million and non-cash interest expense of $1.0 million and a net decrease of $12.4 million due to changes in operating assets and liabilities. The significant items in the change in operating assets and liabilities include an increase in accounts receivable, other receivables, prepaid, and other current assets of $9.4 million, offset by a decrease in inventories of $9.4 million, decrease in other liabilities and other assets of $1.5 million and a decrease in accounts payable and accrued expenses of $7.9 million.
Investing Activities
Net cash used by investing activities during the nine months ended September 30, 2022 consists of $15.2 million in purchases of marketable securities.
Net cash provided by investing activities during the nine months ended September 30, 2021 consists of $20.0 million in proceeds from maturities of marketable securities, offset by $0.4 million in purchases of fixed assets.
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Financing Activities
Net cash provided by financing activities during the nine months ended September 30, 2022 consists of $7.3 million in net proceeds raised through the sale of shares of our common stock under the Sales Agreement and $0.5 million in proceeds received from the ESPP.
Net cash provided by financing activities during the nine months ended September 30, 2021 consists of $14.0 million in net proceeds raised through the sale of shares of our common stock under the Sales Agreement and $0.4 million in net proceeds raised through the 2018 ESPP, offset by $0.4 million in payments of debt issuance costs under the R-Bridge Loan Agreement.
Future Funding Requirements
We began generating revenue from product sales when we launched NUZYRA in the U.S. in February 2019. We also began earning royalties on net sales of SEYSARA in the U.S. when Almirall launched the product in January 2019 and on net sales of NUZYRA in the greater China region when Zai launched the product in December 2021. Our future funding requirements will depend on our ability to generate continued revenue from sales of NUZYRA, and our partners, Almirall and Zai's, ability to generate continued revenue from sales of SEYSARA and NUZYRA, respectively. We do not expect to generate any other revenue unless and until our SEYSARA greater China region partner, Almirall, obtains regulatory approval of and commercializes its respective product in the greater China region. We will require substantial additional funding to meet FDA PMRs for NUZYRA, which we expect to continue to be funded through the BARDA contract. Additional resources will also be needed to support and accelerate the commercialization of NUZYRA, fund the development of omadacycline in other indications, including NTM, and to advance the development of potential other product candidates, and such funding may not be available on favorable terms or at all. BARDA’s procurements of NUZYRA will also be an important component to satisfying future funding requirements.
We expect to continue to incur significant expenditures and operating losses for the next few years as we:
•conduct additional clinical trials of omadacycline;
•seek regulatory approvals for additional indications for omadacycline, such as omadacycline for the treatment of NTM;
•continue to augment our sales, marketing and distribution infrastructure to commercialize NUZYRA and increase our manufacturing capacity and capabilities to satisfy demand;
•add personnel to support our planned commercialization efforts;
•build product inventory; and
•service and pay down our debt.
Based upon our current operating plan, we anticipate that our existing cash, cash equivalents and marketable securities of $57.0 million as of September 30, 2022 will extend our cash runway through the end of 2023 with a pathway to cash flow break even.
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 pharmaceutical products, especially given the constraints on in-person promotion of NUZYRA and reduced 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 that we will require to fund our continuing operations, including for our clinical development programs and commercialization efforts for NUZYRA. Our future capital requirements will depend on many factors, including:
•the progress of clinical development of omadacycline in additional indications, including NTM and pulmonary anthrax;
•the costs and timing of commercialization activities for NUZYRA;
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•product revenue received from commercial sales of NUZYRA;
•royalty revenue received from commercial sales of SEYSARA by Almirall;
•timing and amount of actual reimbursements and NUZYRA purchases under the BARDA contract;
•the ability of Zai to develop, manufacture and commercialize omadacycline in the Zai territory;
•the number and characteristics of other product candidates that we may pursue;
•the scope, progress, timing, cost and results of research, preclinical development and clinical trials;
•the costs, timing and outcome of seeking, obtaining, maintaining and expanding FDA and non-U.S. regulatory approvals;
•the costs associated with manufacturing and maintaining high quality sales, marketing and distribution capabilities;
•the number and characteristics of other product candidates that we may pursue;
•our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make in connection with the licensing, filing, defense and enforcement of any patents or other intellectual property rights;
•our need and ability to hire additional management, scientific, commercial, operations and medical personnel;
•the effect of competing products that may limit market penetration of our products;
•our need to implement additional internal systems and infrastructure, including financial and reporting systems;
•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; 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 or private equity offerings, debt or other structured financings, strategic collaborations, grant funding and government 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/or royalties under the Almirall Collaboration Agreement, the Almirall China License, the Tetraphase License Agreement and the Zai Collaboration Agreement, which are terminable by Almirall, Tetraphase and Zai, respectively, upon prior written 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. 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, complicated by the 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
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technologies, NUZYRA, sarecycline, future revenue streams, research programs, 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 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, accounts receivable and related reserves, inventory and related reserves, goodwill, accrued sales allowances, 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, 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.
Recent Accounting Pronouncements
Refer to Note 18, Recent Accounting Pronouncements, to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Item 3.    Quantitative and Qualitative Disclosures about Market Risks
Our cash and cash equivalents balance as of September 30, 2022 consisted solely of cash and cash equivalents. 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. However, a sudden change in market interest rates would not be expected to have a material impact on the fair market value of our cash and cash equivalents balance. Accordingly, 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 cash and cash equivalents balance.
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 5.0% of total liabilities as of September 30, 2022.
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, 2022, 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, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.
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Changes in Internal Control over Financial Reporting
During the three months ended September 30, 2022, 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.
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PART II – OTHER INFORMATION
Item 1.    Legal Proceedings
Information in response to this Item is incorporated herein by reference from Note 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 our 2021 Form 10-K.

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Item 6.    Exhibits
EXHIBIT INDEX
Incorporated by Reference
Exhibit
No.		Exhibit DescriptionSchedule/
Form		File NumberExhibitFiling Date
3.1Form 8-K001-360663.1October 31, 2014
3.2Form 8-K001-360663.2October 31, 2014
3.3Form 8-K001-360663.1July 24, 2015
3.4Form 10-Q001-360663.4August 9, 2021
3.5Form 8-K001-360663.1April 16, 2015
4.1Form S-3333-201458 4.2January 12, 2015
4.2Form 8-K001-36066 4.1June 29, 2017
4.3Form 10-Q001-36066 4.5August 2, 2018
4.4Form 10-Q001-360664.9August 10, 2020
10.1*^
10.2*^
31.1*
31.2*
32.1*
32.2*
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Incorporated by Reference
Exhibit
No.		Exhibit DescriptionSchedule/
Form		File NumberExhibitFiling Date
101.INS*Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*Inline XBRL Taxonomy Extension Schema Document.
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*
Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*Cover Page Interactive Data File (embedded within the Inline XBRL document)
_____________________________________

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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 3rd day of November 2022.
Paratek Pharmaceuticals, Inc.
By:/s/ Evan Loh M.D.
Evan Loh M.D.
Chief Executive Officer
(Principal Executive Officer)
By:/s/ Sarah Higgins
Sarah Higgins
Vice President, Finance
(Principal Financial and Accounting Officer)
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Exhibit 10.1 CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED WITH [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL Execution Copy COLLABORATIVE RESEARCH AND LICENSE AGREEMENT between WARNER CHILCOTT COMPANY, INC. and PARATEK PHARMACEUTICALS, INC. July 2, 2007

 
-i- TABLE OF CONTENTS Article 1 : DEFINITIONS .............................................................................................................. 1 Article 2 : GOVERNANCE .......................................................................................................... 12 Article 3 : DEVELOPMENT; BACKUP COMPOUND RESEARCH PROGRAM ................... 14 Article 4 : COMMERCIALIZATION OF PRODUCTS .............................................................. 19 Article 5 : CONSIDERATION AND FUNDING ........................................................................ 20 Article 6 : TREATMENT OF CONFIDENTIAL INFORMATION; PUBLICITY; NON- SOLICITATION ........................................................................................................................... 22 Article 7 : EXCLUSIVITY; LICENSE GRANTS; ROYALTIES ............................................... 24 Article 8 : INTELLECTUAL PROPERTY RIGHTS ................................................................... 28 Article 9 : FILING, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS ............. 29 Article 10 : TERMINATION........................................................................................................ 33 Article 11 : REPRESENTATIONS AND WARRANTIES ......................................................... 39 Article 12 : INDEMNIFICATION ............................................................................................... 40 Article 13 : DISPUTE RESOLUTION ......................................................................................... 43 Article 14 : MISCELLANEOUS .................................................................................................. 44 List of Exhibits and Schedules Exhibit A Development Plan Exhibit B Tufts License Agreement Schedule 1 Lead Candidate List Schedule 2 Backup Compound List Schedule 3 Joint Press Release

 
COLLABORATIVE RESEARCH AND LICENSE AGREEMENT This Collaborative Research and License Agreement (this “Agreement”) is made and entered into as of July 2, 2007 (the “Effective Date”) between Paratek Pharmaceuticals, Inc., a Delaware corporation with offices at 75 Kneeland Street, Boston, MA 02111 (“Paratek”), and Warner Chilcott Company, Inc., a corporation organized and existing under the laws of Puerto Rico with offices at Union Street, Road 195 Km 1.1, Fajardo, PR 00738 (“WCCI”). Each of WCCI and Paratek is sometimes referred to individually herein as a “Party” and WCCI and Paratek are sometimes collectively referred to herein as the “Parties.” WITNESSETH: WHEREAS, Paratek has developed expertise in the design, synthesis and characterization of novel and improved classes of tetracycline derived compounds for use as human pharmaceuticals and owns or otherwise controls certain technology related thereto; WHEREAS, WCCI has developed expertise in the development and commercialization of human pharmaceuticals and is engaged in the development and commercialization of pharmaceutical compounds for the treatment, prevention, and diagnosis of acne vulgaris and rosacea; and WHEREAS, both Parties desire to enter into a development program with the objective of having WCCI develop and commercialize tetracycline derived compounds for the treatment of acne vulgaris and rosacea. NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the Parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE 1 : DEFINITIONS Whenever used in this Agreement with an initial capital letter, the terms defined in this Article 1 shall have the meanings specified. 1.1 “Adverse Event” means any serious untoward medical occurrence in a patient or subject who is administered a Lead Candidate or Product, but only if and to the extent that such serious untoward medical occurrence is required under Applicable Law, rules or regulations to be reported to the FDA or any other Regulatory Authority. 1.2 “Affiliate” means any corporation, firm, partnership or other entity, which directly or indirectly controls or is controlled by or is under common control with a Party to this Agreement. For purposes of this definition, “control” means ownership, directly or through one or more Affiliates, of (a) fifty percent (50%) or more of the shares of stock entitled to vote for the election of directors, in the case of a corporation, or (b) fifty percent (50%) or more of the equity interests in the case of any other type of legal entity or status as a general partner in any partnership, or (c) any other arrangement whereby a Party controls or has the right to control the Board of Directors or equivalent governing body of a corporation or other entity.

 
1.3 “Alliance Manager” means the person appointed by each Party to serve as such Party’s principal coordinator and liaison for the conduct of the Backup Compound Research Programs and the Development of Lead Candidates and Products. The Alliance Manager appointed by WCCI is referred to as the “WCCI Alliance Manager,” and the Alliance Manager appointed by Paratek is referred to as the “Paratek Alliance Manager.” 1.4 “Annual Net Sales” means the aggregate Net Sales during a particular Calendar Year. 1.5 “Applicable Law” means all Federal, state, local national and supra-national laws, statutes, rules and regulations, including any rules, regulations, guidelines or requirements of Regulatory Authorities, national securities exchanges or securities listing organizations that may be in effect from time to time during the term and applicable to a particular activity hereunder. 1.6 “Backup Compounds” means the Paratek Compounds that are listed on the Backup Compound List attached hereto as Schedule 2, as amended from time to time. 1.7 “Backup Compound Research Plan” means the written plan describing the research activities to be carried out by each Party during each Contract Year during the Backup Compound Research Program Term in conducting the Backup Compound Research Program pursuant to this Agreement, as such written plan may be amended, modified or updated. Each Backup Compound Research Plan shall be prepared by, or at the direction of, the Alliance Managers and approved by the JSC as soon as practicable after WCCI determines to conduct research on, or to identify, any Backup Compound pursuant to Section 3.5 and shall be attached to the minutes of the meeting of the JSC at which such plan was approved by the JSC. 1.8 “Backup Compound Research Program” means the collaborative research program conducted by Paratek and WCCI for the purpose of identifying or further researching or developing Backup Compounds pursuant to Article 3 of this Agreement and reflected in the Backup Compound Research Plans. 1.9 “Backup Compound Research Program Term” means the date of approval by the JSC of a Backup Compound Research Plan and shall continue for such period as the Parties shall mutually agree in the Backup Compound Research Plan, subject to earlier termination upon termination or expiration of this Agreement pursuant to Article 10 hereof. 1.10 “Calendar Quarter” means the period beginning on the Effective Date and ending on the last day of the calendar quarter in which the Effective Date falls, and thereafter each successive period of three (3) consecutive calendar months ending on March 31, June 30, September 30 or December 31. 1.11 “Calendar Year” means each successive period of twelve (12) months commencing on January 1 and ending on December 31. 1.12 “Clinical Trials” means, collectively, any Phase I Clinical Trial, Phase II Clinical Trial, and/or Phase III Clinical Trial.

 
1.13 “Clinical Trial Data” means all data, results and information produced in the conduct by or on behalf of WCCI of any Clinical Trials. 1.14 “Commercialization” or “Commercialize” means, with respect to a Product, any and all activities directed to the pre-marketing, marketing, detailing, promotion, distribution and sale of such Product after the date of filing of an NDA with respect to such Product. When used as a verb, “Commercializing” means to engage in Commercialization and “Commercialized” shall have a corresponding meaning. 1.15 “Commercially Reasonable Efforts” or “Commercially Reasonable” means the efforts and resources comparable to those undertaken by [***], as applicable, [***] of similar products that are not subject to this Agreement, taking into account the [***]. 1.16 Commercially Reasonable Justification” means, with respect to WCCI’s obligations to use Commercially Reasonable Efforts, the [***]or [***]of (a) [***] (such as a [***], or [***], by [***]) that could be [***] to [***] and [***] and/or [***]; (b) [***]; (c) [***]; (d) [***] with respect to the [***] (including, without limitation, a [***]) that is [***]; or (e) [***] with respect to [***]. 1.17 “Commercialization Regulatory Approval” means, with respect to any Product, the Regulatory Approval required by Applicable Laws in the Territory to sell such Product for use in the Field in such Territory. “Commercialization Regulatory Approval” shall include, without limitation, the approval of any NDA, sNDA or other Drug Approval Application. 1.18 “Confidential Information” means (a) with respect to Paratek, all tangible embodiments of Paratek Technology, (b) with respect to WCCI, all tangible embodiments of WCCI Technology and (c) with respect to each Party, (i) all tangible embodiments of Joint Technology and (ii) with respect to a Party (the “receiving Party”), all information and Technology which are disclosed by the other Party or any of its Affiliates (the “disclosing Party”) to the receiving Party hereunder or to any of its employees, consultants, Affiliates or sublicensees, whether orally, visually, in writing or by way of any other media, that if disclosed in tangible form is marked “confidential,” or if disclosure is not in tangible form, the disclosing Party has notified the receiving Party at the time of disclosure that such disclosure is confidential and summarized such disclosure in writing, marking the summary “confidential” and submitting it to the receiving Party (or, if applicable, to such of the receiving Party’s Affiliates or sublicensees to whom disclosure has been made) within thirty (30) days of the disclosure; provided, however, that the term “Confidential Information” shall not mean or include any such Technology or information, or any portion thereof, that (A) as of the date of productions development or disclosure is known to the receiving Party, its Affiliates or sublicensees, as demonstrated by credible written documentation, other than by virtue of a prior confidential disclosure by the disclosing Party to such receiving Party or any of its Affiliates or sublicensees; (B) as of the date disclosure is in, or subsequently enters, the public domain, through no fault or omission of the receiving Party or any of its Affiliates or sublicensees; (C) is obtained from a Third Party having a lawful right to make such disclosure free from any obligation of confidentiality to the disclosing Party; or (D) is independently developed by or for the receiving Party, its Affiliates or its sublicensees without reference to or reliance upon any Confidential Information of the disclosing Party as demonstrated by credible written documentation. For purposes of clarity, any technical or financial information

 
of a disclosing Party disclosed at any meeting of the JSC, or disclosed through an audit report shalt constitute Confidential Information of such disclosing Party. 1.19 “Contract Year” means the period beginning on the Effective Date and ending on the first anniversary thereof, and each succeeding twelve (12) month period thereafter. 1.20 “Control” or “Controlled” means (a) with respect to Technology (other than Proprietary Materials) and/or Patent Rights, the possession by a Party or any of its Affiliates of the ability to grant a license or sublicense of such Technology and/or Patent Rights as provided herein without violating the terms of any legally binding agreement between such Party or any of its Affiliates and, any Third Party, and (h) with respect to Proprietary Materials, the possession by a Party or any of its Affiliates of the ability to supply such Proprietary Materials to the other Party as provided herein without violating the terms of any legally binding agreement between such Party or any of its Affiliates and, any Third Party. 1.21 “Derived” means obtained, developed, created, synthesized, designed, derived or resulting from, based upon, containing, incorporating or otherwise generated from (whether directly or indirectly, or in whole or in part). 1.22 “Development” or “Develop” means, with respect to a Lead Candidate and/or Product, all clinical and other activities set forth in the applicable Development Plan undertaken to obtain Regulatory Approval of such Lead Candidate and/or Product in the Territory in accordance with this Agreement. When used as a verb, “Developing” means to engage in Development and “Developed” shall have a corresponding meaning. 1.23 “Development Plan” means the written plan describing the Development activities to be carried out during each Contract Year with respect to the Lead Candidates as such written plan may be amended, modified or updated. The initial Development Plan, which will describe the Development activities to be carried out during the first Contract Year is attached hereto as Exhibit A. Each amendment and/or update to the Development Plan shall be set forth in a written document prepared by, or at the direction of, the Alliance Managers and approved by the JSC, shall specifically state that it is an amendment, modification or update to the Development Plan and shall be attached to the minutes of the meeting of the JSC at which such amendment, modification or update was approved by the JSC. Without limiting the nature or frequency of any other amendments, modifications or updates of the Development Plan that may be approved by the JSC, the Development Plan shall be updated at least once prior to the end of each Contract Year to describe the Development activities to be carried out during the next Contract Year in conducting the Development pursuant to this Agreement. 1.24 “Development Timelines” means the written schedule of the Development activities to be performed and the Development milestones to be achieved, for each Lead Candidate by WCCI during each Contract Year during the Term. The initial Development Timelines applicable to the Lead Candidates until an IND is filed with respect to a Product shall be included as part of the initial Development Plan to be attached hereto as Exhibit A. Any amendment and/or update to the Development Timelines shall be set forth in a written document prepared by, or at the direction of, the Alliance Managers and approved by the JSC and shall be attached to the minutes of the meeting of the JSC at which such amendment, modification or update

 
is approved by the JSC. For purposes of clarity, the term Development Timelines shall include, collectively, the Phase II Development Timelines, the NDA Development. Timelines and the Launch Development Timelines. 1.25 “Drug Approval Application” means any application for Regulatory Approval required before commercial sale or use of a Product as a drug or to treat a particular indication in a regulatory jurisdiction in the Territory, including without limitation: (a) an NDA and any counterpart of an NDA in the Territory; and (b) all supplements and amendments that may be filed- with respect to the foregoing. 1.26 “Effective Date” means the date set forth in the preamble of this Agreement. 1.27 “Excluded Indications” means any self-limited or other infectious conditions other than acne vulgaris and rosacea, including without limitation impetigo, uncomplicated and complicated skin and skin structure infections and other non-infectious inflammatory skin conditions. 1.28 “Executive Officers” means the Chief Executive Officer of WCCI (or an executive officer of WCCI. designated by such Chief Executive Officer) and the Chief Executive Officer of Paratek (or an executive officer of Paratek designated by such Chief Executive Officer). 1.29 “External Preclinical Activity Costs” means the costs or expenditures incurred by Paratek (or for its account by an Affiliate) in connection with the engagement by Paratek or such Affiliate of any Third Party Laboratory to conduct any Development activities. 1.30 “FDA” means the United States Food and Drug Administration or any successor regulatory agency. 1.31 “FDCA” means the United States Federal Food, Drug and Cosmetic Act, as amended. 1.32 “Field” means the treatment of acne vulgaris and rosacea. For purposes of clarity, the Field shall not include any Excluded Indications. 1.33 “First Commercial Sale” means, with respect to any given Product, the date of the first commercial transfer or disposition for value to a Third Party of such Product by WCCI, an Affiliate of WCCI or a Sublicensee. 1.34 “Force Majeure” means any occurrence beyond the reasonable control of a Party that (a) prevents or substantially interferes with the performance by such Party or such Party’s Affiliates of any of its obligations hereunder, and (b) occurs by reason of any act of God, flood, fire, explosion, earthquake, strike, lockout, labor dispute, casualty or accident, or war, revolution, civil commotion, act of terrorism, blockage or embargo, or any injunction, law, order, proclamation, regulation, ordinance, demand or requirement of any government or of any subdivision, authority or representative of any such government. 1.35 “Full-Time Equivalent” or “FTE” means the equivalent of the work of a full- time scientist based upon a total of 1,880 hours per year of scientific work. For purposes of clarity, the

 
portion of an FTE year devoted by a scientist to Development activities shall be determined by dividing: (a) the number of hours during any twelve-month period devoted by such employee to the Development activities by (b) 1,880. 1.36 “FTE Rate” means [***] US Dollars (US $[***]) per year, subject to increase no more than once annually by the percentage increase, if any, in the Consumer Price Index for all Urban Consumers, as published by the U.S. Department of Labor, Bureau of Statistics. 1.37 “GLP” means current good laboratory practice standards promulgated or endorsed by the FDA, including those procedures expressed or implied in the Regulatory Filings made with respect to a Product with the FDA. 1.38 “GIVIP” means current good manufacturing practices under Title 21 of the United States Code of Federal Regulations, as amended from time to time. 1.39 “ICH Guidelines” means the applicable guidelines of the International Conference on Harmonization of Technical Requirements for the Registration of Pharmaceuticals for Human Use. 1.40 “IND” means an Investigational New Drug Application (as defined in the FDA, and the regulations promulgated thereunder) that is required to be filed with the FDA before beginning clinical testing of a Product in human subjects, or any successor application or procedure. 1.41 “Initiation” means, with respect to any clinical trial, the first date that a human subject is dosed in such clinical trial. 1.42 “Joint Patent Rights” means Patent Rights that contain one or more claims that cover Joint Technology. 1.43 “Joint Technology” means any Program Invention that is (a) conceived or first reduced to practice jointly by or on behalf of both WCCI (or any of its Affiliates) and Paratek (or any of its Affiliates) or (b) conceived or first reduced to practice by or on behalf of one Party or any of its Affiliates as a result of its use in any material respect of the Technology of the other Party or any of its Affiliates. 1.44 “Lead Candidate” means up to ten (10) Paratek Compounds that are listed on the Lead Candidate List attached hereto as Schedule 1, as amended from time to time. 1.45 “Licensed Patent Rights” means any Paratek Patent Rights or Joint Patent Rights that (a) contain one or more claims that cover any Backup Compound, Lead Candidate or Product or (b) are necessary or useful for WCCI to exercise the licenses granted to it pursuant to Sections 7.2.1. 1.46 “Licensed Technology” means any Paratek Technology that (a) relates to any Backup Compound, Lead Candidate or Product and (b) is necessary or useful for WCCI to exercise the licenses granted to it pursuant to Sections 7.2.1.

 
1.47 “NDA” means a New Drug Application, as defined in the FDCA and applicable regulations promulgated thereunder. 1.48 “Net Sales” means the gross amount billed by WCCI or its Affiliates or Sublicensees to Third Parties in the Territory for sales of each Product during the period in which royalties are payable hereunder less the following deductions from such gross amounts to the extent actually applied or taken: (a) [***]; (b) [***]; (c) [***]; (d) [***]; (e) [***] and (f) [***]. In addition, Net Sales hereunder are subject to the following: (a) In the case of any sale or other disposal of a Product by WCCI or any of its Affiliates to any WCCI Affiliate or Sublicensee for resale, the Net Sales shall be calculated as above on the value charged or invoiced on the first arm’s length sale to a Third Party who is not an Affiliate or Sublicensee. For purposes of clarification, amounts received by WCCI and its Affiliates for the sale of Products among WCCI and its Affiliates and Sublicensees for resale shall not be included in the computation of Net Sales hereunder. (b) In the event of a sublicense as to any Products, Net Sales will be calculated with respect to sales of Products by the Sublicensee, except for sales by a Sublicensee to another Sublicensee for resale. For purposes of clarification, amounts received by WCCI and its Affiliates and Sublicensees for the sale of Products among WCCI and its Affiliates and Sublicensees for resale shall not be included in the computation of Net. Sales hereunder. (c) Use of Products in clinical or pre-clinical trials or other research or development activities or disposal of Products for purposes of a commercially reasonable sampling program shall not give rise to any deemed sale for purposes of this definition. (d) In the event that a Product is sold as a component of a combination or bundled product that consists of Product together with another therapeutically active product for the same indication, then Net Sales shall be determined by multiplying the Net Sales of the combination or bundled product by the fraction A/(A+B) where A equals the average selling price of such Product sold separately in finished form and B equals the aggregate average selling price of the relevant other product(s) sold separately in finished form, in each case during the same royalty reporting period and in similar volumes. In the event that no separate sale of either Product or the relevant other product is made during the applicable royalty reporting period in similar volumes and in the relevant country in which the sale of the combination or bundled product was made, then Net Sales shall be determined by multiplying the Net Sales of the combination or bundled product by a fraction (C/(C+D)), where C equals the fair market value of Product and D equals the fair market value of the relevant other product(s), in each case determined by good faith negotiation of the Parties. If the Parties cannot agree on such fair market value, the matter will be resolved in accordance with Article 13. If the relevant other product is sold separately in finished form and Product is not, then Net Sales shall be determined by multiplying the Net Sales of the combination or bundled product by the fraction (E – B)/E, where E equals the average selling price of the combination or bundled product in the Territory. (e) If WCCI or its Affiliates or Sublicensees effect a sale or other disposal of a Product to a customer in the Territory other than in an arm’s length transaction (except as may be otherwise set forth in clauses (a) through (d) above), the Net Sales of that Product shall be deemed to be “the

 
fair market value” of such Product (i.e., the value that would have been derived had said Product been sold as a separate product to a similar customer in the Territory in an arm’s length transaction at the time of such transaction). 1.49 “Paratek Background Technology” means any Technology that is useful in the Field and that is Controlled by Paratek as of the Effective Date and/or during the Term, including any such Technology that is conceived or first reduced to practice during the Term by employees of, or consultants to, Paratek without the use in any material respect of any WCCI Technology, WCCI Program Technology or Joint Technology. 1.50 “Paratek Competitive Compound” means any Paratek Compound (including any Abandoned Compound) (a) that Paratek develops or commercializes itself for use in the Field and/or (b) to which Paratek grants any Third Party the right to develop or commercialize for use in the Field. For purposes of clarity, any Paratek Compound that is developed or commercialized by Paratek or any Third Party for rosacea pursuant to Section 3.7 shall not be deemed to be a Paratek Competitive Compound for purposes of this Agreement. 1.51 “Paratek Compound” means any Tetracycline Compound that is Controlled by Paratek or any of its Affiliates at any time during the Term. 1.52 “Paratek Internal Costs” means the aggregate costs incurred by Paratek in connection with its performance of (a) its tasks and obligations set forth in the Backup Compound Research Plan and/or (b) any Development activities. For purposes of clarity, Paratek Internal Costs (a) shall be determined by Paratek on an FTE basis and (b) shall not include any External Preclinical Activity Costs. 1.53 “Paratek Patent Rights” means any Patent Rights that contain one or more claims that cover Paratek Technology. 1.54 “Paratek Program Technology” means any Program Invention conceived or first reduced to practice by employees, contractors or consultants of Paratek or any of its Affiliates, alone or jointly with Third Parties, without the use in any material respect of any WCCI Technology or Joint Technology. 1.55 “Paratek Technology” means, collectively, Paratek Background Technology and Paratek Program Technology. 1.56 “Paratek Total Cost” means the sum of the External Preclinical Activity Costs and the Paratek Internal Costs. 1.57 “Party” means Paratek or WCCI. 1.58 “Patent Rights” means the rights and interests in and to issued patents and pending patent applications (which for purposes of this Agreement shall be deemed to include certificates of invention, applications for certificates of invention and priority rights) in the Territory, including all provisional applications, substitutions, continuations, continuations-in- part, divisions, and renewals, all letters patent granted thereon, and all reissues, reexaminations and extensions thereof.

 
1.59 “Phase I Clinical Trial” means a human clinical trial in any country which provides for the introduction into humans of a Lead Candidate or Product with the purpose of determining human toxicity, metabolism, absorption, elimination and other pharmacological action as more fully defined in 21 C.F.R. 312.21(a). 1.60 “Phase II Clinical Trial” means a human clinical trial in any country that is intended to initially evaluate the effectiveness of a Lead Candidate or Product for a particular indication or indications in patients with the disease or indication under study, as more fully defined in 21 C.F.R. 312.21(b), and to establish an appropriate dose for use in a Phase III Clinical Trial. 1.61 “Phase III Clinical Trial” means a pivotal human clinical trial in the Territory the results of which could be used to establish safety and efficacy of a Lead Candidate or Product as a basis for an NDA submitted to an applicable Regulatory Authority, as more fully defined in 21 C.F.R. 312.21(c). 1.62 “Product” means any pharmaceutical composition, compound or product that consists of, incorporates, is comprised of, or is otherwise Derived from, a Lead Candidate for use in the Field, including different salts, formulations, combinations, other presentations or Pharmaceutical Alternatives (as defined in the 22nd edition of Approved Drug Products with Therapeutic Equivalence Evaluations issued by the United States Department of Health and Human Services). For purposes of clarity, the term “Derived from” for purposes of this definition shall not refer to any compound that (a) is generated from any Tetracycline Compound that is not a Lead Candidate; (b) is being developed for any use outside of the Field; and/or (c) constitutes a new compound with a different chemical structure. 1.63 “Product Trademark” means any trademark and trade name, whether or not registered, and any trademark application, renewal, extension or modification thereto used for Products in the Territory, together with all goodwill associated therewith. 1.64 “Program Invention” means any Technology (including, without limitation, any new and useful process, method of manufacture or composition of matter) that is conceived or first reduced to practice (actively or constructively) in the conduct of the Backup Compound Research Program or in connection with the Development of any Lead Candidate or Product. 1.65 “Proprietary Materials” means any tangible chemical, biological or physical research materials (including, without limitation, molecules, compounds and other chemical compositions) that are furnished by or on behalf of one Party or any of such Party’s Affiliates to the other Party or any of such other Party’s Affiliates in connection with this Agreement, regardless of whether such materials are specifically designated as proprietary by the transferring Party. 1.66 “Regulatory Approval” means any approval, product and establishment license, registration or authorization of any Regulatory Authority necessary for the manufacture, use, importation, export, reimbursement, marketing, promotion and sale by WCCI of a Product in the Territory. “Regulatory Approval” shall include, without limitation, approval of any NDA or any other Drug Approval Application.

 
1.67 “Regulatory Authority” means the FDA or any counterpart of the FDA outside the United States, or other national, supra-national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity in the Territory with authority over the distribution, importation, exportation, manufacture, production, use, storage, transport, reimbursement, or clinical testing and/or sale of a Product. 1.68 “Regulatory Filings” means, collectively, any and all INDs, establishment license applications and drug master files, Drug Approval Applications, applications for designation of a Product as an “Orphan Product(s)” under the Orphan Drug Act or any other similar filings (including any comparable foreign filings), and all data contained therein, as may be required by any Regulatory Authority for the Development, manufacture or Commercialization of a Product. 1.69 “Sublicensee” means any Third Party to which WCCI, any WCCI Affiliate or any other Third Party grants a sublicense of some or all of the rights granted to WCCI under Section 7.2.1 hereof in accordance with Section 7.2.2 hereof. 1.70 “Technology” means and includes all inventions, discoveries, improvements, trade secrets, works of authorship, and proprietary methods and materials (including, without limitation, Proprietary Materials), whether or not patentable or otherwise protectable under copyright, trade secrecy of similar laws, including but not limited to (a) samples of, methods of production or use of, and structural and functional information pertaining to, chemical compounds, proteins or other biological substances and (b) data, designs, formulations, techniques and know-how (including any negative results). 1.71 “Territory” means the United States and its territories and possessions. 1.72 “Tetracycline Compound” means a [***] or [***] that consists of, incorporates, is comprised of, or is otherwise derived from any [***] (such as, but not limited to, [***] and [***]), including (a) [***]; (b) [***] in which one or several [***] have been replaced by [***], such as (but not limited to) [***], and [***] or any [***] of such [***]; (c) [***] in which one or several [***] have been chemically opened and/or removed producing [***], or [***] with or without functional or reactive chemical groups; and (d) [***] or structures in which one or several suitable [***] have been used to [***], which can be either [***] to the [***] to form a [***], or directly attached to the [***] via a [***]. For purposes of this definition, a [***] or [***] shall be deemed to be derived from a [***] if (i) the person deriving such [***] or [***] has actual knowledge that such [***] or [***] has been derived from a [***] or (ii) an analysis of the [***] of such [***] or [***] by any person that is reasonably skilled in the art would lead such person to conclude that such [***] or [***] has been derived from a [***] or [***] or [***] ([***] to [***]). 1.73 “Third Party” means any person or entity other than WCCI and Paratek and their respective Affiliates. 1.74 “Third Party Laboratory” means any Third Party contract research organization and/or laboratory engaged by a Party to provide Development activities. 1.75 “Tufts IP Infringement” means an Infringement of Patent Rights in the Field of Use as the terms “Patent Rights” and “Field of Use” are defined in the Tufts License Agreement.

 
1.76 “Tufts License Agreement” means the license agreement dated as of February 7, 1997, as amended, by and between Paratek and the Trustees of Tufts, a copy of which is attached hereto as Exhibit B, as the same may be amended from time to time in accordance with the provisions of Section 7.4. 1.77 “Valid Claim” means a claim in an issued, unexpired patent within the Paratek Patent Rights or Joint Patent Rights that (a) has not been finally cancelled, withdrawn, abandoned or rejected by any administrative agency or other body of competent jurisdiction, (b) has not been revoked, held invalid, or declared unpatentable or unenforceable in a decision of a court or other body of competent jurisdiction that is unappealable or unappealed within the time allowed for appeal, (c) has not been rendered unenforceable through disclaimer or otherwise, and (d) is not lost through an interference proceeding. 1.78 “WCCI Background Technology” means any Technology that is useful in the Field and that is Controlled by WCCI as of the Effective Date and/or during the Term, including any such Technology that is conceived or first reduced to practice during the Term by employees of, or consultants to, WCCI without the use in any material respect of any Paratek Technology, Licensed Technology or Joint Technology. 1.79 “WCCI Patent Rights” means any Patent Rights that contain one or more claims that cover WCCI Technology. 1.80 “WCCI Program Technology” means (a) any Program Invention conceived or first reduced to practice by employees, contractors or consultants of WCCI or any of its Affiliates, alone or jointly with Third Parties, without the use in any material respect of any Paratek Technology or Joint Technology and (b) any Clinical Trial Data. 1.81 “WCCI Technology” means, collectively, WCCI Background Technology and WCCI Program Technology. Additional Definitions. In addition, each of the following definitions shall have the respective meanings set forth in the section of this Agreement indicated below: Definition Section AAA 13.1.2 Abandoned Compound 3.6.1 Acquiror 14.9 Additional Compound 3.6.2 Additional Compound Notification 3.6.2 Chair 2.2 Code 7.2.4 Diligence Failure Notice 3.9.3(a) Discontinued Product 5.3.1 Filing Party 9.1.2 Generic Product 7.5.3 Infringement 9.2.1(a) Infringement Notice 9.2.1(a) Indemnified Party 12.3

 
Indemnifying Party 12.3 IND Milestone Date 2.2 JSC 2.1 Launch Development Timelines 2.2 Licensed Product 12.8.1 Losses 12.1 NDA Development Timelines 2.2 Paratek Diligence Obligation 3.9.1 Paratek Indemnities 12.2 Patent Coordinator(s) 8.3 Phase II Development Timelines 2.2 Recipient Party 3.11 Rosacea Option Notice 3.7 Royalty Term 7.5.3 Term 10.1 Termination Event 10.2.2 Transferring Party 3.11 Tufts 7.3 WCCI Diligence Failure 3.9.3(a) WCCI Indemnities 12.1 ARTICLE 2 : GOVERNANCE 2.1. Establishment and Function of JSC. Paratek and WCCI shall establish a Joint Steering Committee (the “JSC”) to plan, administer and monitor the Backup Compound Research Program and the Development. The JSC shall approve all Backup Compound Research Plans and Development Plans, review and monitor the progress of the Backup Compound Research Program and the Development, and recommend necessary adjustments to the Backup Compound Research Program and the Development as the research and/or Development activities thereunder take place. 2.2. Composition; Responsibilities. The JSC will be comprised of three (3) representatives of Paratek and three (3) representatives of WCCI and will continue in effect throughout the Term. Each Party will designate its JSC representatives within thirty (30) days of the Effective Date and shall have the right to replace any of its JSC representatives from time to time by giving prior notice of such replacement to the other Party. The JSC will be chaired by one of the WCCI designated representatives during the Term (the “Chair”). During the period commencing on the Effective Date and continuing until the payment by WCCI of the milestone payment associated with the filing of an IND with respect to a Product pursuant to Section 5.3.1 (the “IND Milestone Date”), the JSC will (a) meet at least four (4) times per Calendar Year and (b) be responsible for (i) reviewing the efforts of the Parties in the conduct of the Backup Compound Research Program, if any, and the Development activities, (ii) reviewing and approving the Backup Compound Research Plans, if any, the Development Plan and/or any amendments, modifications and updates to any such Backup Compound Research Plan and Development Plan, (iii) addressing such other matters as either Party may bring before the JSC, (iv) determining the Development Timelines applicable to the Development of any Lead Candidate during the period from (A) the IND Milestone Date with respect to such Lead Candidate or Product to the completion of Phase II Clinical Trials with respect to such Lead Candidate or Product (the “Phase II

 
Development Timelines”), (B) the Initiation of Phase III Clinical Trials with respect to such Lead Candidate or Product to the filing of an NDA with respect to such Lead Candidate or Product (the “NDA Development Timelines”) and (C) the filing of an NDA with respect to such Lead Candidate or Product to the First Commercial Sale of a Product Derived from such Lead Candidate or Product (the “Launch Development Timelines”) and (v) performing such other tasks and undertaking such other responsibilities as may be set forth in this Agreement, including, without limitation, the responsibilities set forth in Article 3 hereof. The JSC shall determine the Phase II Development Timelines, the NDA Development Timelines and the Launch Development Timelines promptly upon the substantial completion of the material Development activity specified in the immediately preceding Development Timeline. Following the IND Milestone Date (a) at Paratek’s request, which shall not be made more frequently than twice per Calendar Year, the JSC will meet for the sole purpose of serving as a forum for WCCI to update Paratek as to clinical Development and Commercialization progress with respect to Lead Candidates and Products, (b) each Party may continue to exercise its right under this Section 2.2 to replace its JSC representatives from time to time by giving prior notice of such replacement to the other Party and (c) each Party may continue to exercise its right under Section 2.3.2 hereof to have representatives of such Party or of its Affiliates who are not members of the JSC attend JSC meetings as observers at the invitation of such Party with the approval of the other Party, which shall not be unreasonably withheld. At each such meeting of the JSC after the IND Milestone Date, the representatives of WCCI on the JSC shall provide an update to the JSC as to WCCI’s general strategy for the Development and Commercialization of each Product in the Field, including, without limitation, to the extent applicable, (i) an update to each Development Plan concerning the applicable Development Timelines for the Development of each Lead Candidate and Product and Regulatory Filings with respect thereto in the Field in the Territory, (ii) an update concerning the anticipated timelines on a region-by region basis for the commercial launch of each Product and (iii) sales forecast guidance for each Product in the Field in the Territory. If there is a material change in such timelines or guidance after any such meeting, WCCI will promptly notify Paratek thereof. 2.3. Meetings. 2.3.1. Schedule of Meetings. Within sixty (60) days of the Effective Date, the JSC shall meet and shall establish a schedule of times for meetings, taking into account, without limitation, the planning needs of the Development and the obligations of the JSC to consult and/or render decisions on matters before it. Meetings shall also be convened upon the determination of any JSC representative, by written notice thereof to the remaining representatives of the JSC, that a meeting of the JSC is required to discuss and/or resolve any matter or matters with respect to the Backup Compound Research Program and/or the Development. In any event, prior to the IND Milestone Date, any Paratek representative to the JSC may call a meeting of the JSC not more than once each Calendar Quarter and after the IND Milestone Date, may call a meeting not more than twice per Calendar Year. Meetings shall be held at the offices of WCCI or another mutually agreed upon location; provided, however, that the Parties may mutually agree to meet by teleconference or video conference or may act by a written memorandum signed by each JSC representative or its designee. 2.3.2. Quorum; Voting; Decisions. At each JSC meeting, at least two (2) members designated by each Party shall constitute a quorum. Each JSC member shall have one vote on all matters before the JSC; provided, that, the member or members of each Party present

 
at a JSC meeting shall have the authority to cast the votes of any of such Party’s members on the JSC who are absent from the meeting. Except as otherwise provided in Section 2.4 hereof, all decisions of the JSC shall be made by majority vote of the members. Whenever any action by the JSC is called for hereunder during a time period in which the JSC is not scheduled to meet, the Chair shall cause the JSC to take the action in the requested time period by calling a special meeting or by action without a formal meeting by written memorandum signed by the Chair and one of the other Party’s members. Representatives of each Party or of its Affiliates who are not members of the JSC may attend JSC meetings as non-voting observers at the invitation of either Party with the approval of the other Party, which shall not be unreasonably withheld. 2.3.3. Minutes. The JSC shall keep accurate minutes of its deliberations, which record all proposed decisions and all actions recommended or taken. Drafts of the minutes shall be delivered to the members of the JSC within a reasonable time not to exceed ten (10) days after the meeting. The Chair shall be responsible for the preparation and circulation of the draft minutes. Draft minutes shall be edited by the Chair and shall be issued in final form within a reasonable time not to exceed twenty (20) days after the meeting only with the approval of both Alliance Managers, as evidenced by their signatures on the minutes. 2.3.4. Expenses. Paratek and WCCI shall each bear all expenses of their respective JSC members related to their participation on the JSC and attendance at JSC meetings. 2.4. JSC Decisions. The JSC members shall use reasonable efforts to reach agreement on any and all matters. In the event that, despite such reasonable efforts, agreement on a particular matter cannot be reached by the JSC, then, subject to the remainder of this Section 2.4, the Chair of the JSC shall have the right to make the final decision on such matter, but shall only exercise such right in good faith after full consideration of the positions of both Parties. Notwithstanding the foregoing, the unanimous approval of all JSC members shall be required for any of the following matters: (a) any change to the Development Plan or any Backup Compound Research Plan that would require Paratek to incur material additional costs and expenses to perform research or hire additional personnel or develop capabilities that Paratek does not have at such time; (b) the adoption of, or change to, any patent strategy with respect to Joint Technology; (c) the determination of the Phase II Development Timelines, NDA Development Timelines and the Launch Development Timelines and (d) any change to any such Development Timelines that would result in such Development Timeline being delayed in excess of six (6) months. If the JSC fails to reach unanimous agreement on any of the matters set forth above in the foregoing sentence, then the matter shall be referred by any member thereof to the Executive Officers for resolution by good faith negotiations within thirty (30) days after notice thereof is received. ARTICLE 3 : DEVELOPMENT; BACKUP COMPOUND RESEARCH PROGRAM 3.1. Development. Each Party shall be primarily responsible for those tasks and obligations in connection with the Development that are assigned to it pursuant to this Article 3 and the Development Plan. The initial Development Plan shall be attached hereto as Exhibit A. 3.2. Management of Development. Paratek and WCCI will each appoint an Alliance Manager on the Effective Date. Each Party will have the right, upon written notice to the other Party, to designate a different Alliance Manager. The Alliance Managers will be members of the

 
JSC, will jointly oversee the conduct of the Development until the later of the IND Milestone Date and the expiration of the Backup Compound Research Program Term. Following such date, the Alliance Managers will continue to meet either in person or telephonically for the purpose of serving as a forum for WCCI to update Paratek as to Development and Commercialization progress with respect to Lead Candidates and/or Products. In connection therewith, WCCI shall provide the Paratek Alliance Manager with the updates described in Section 3.3.2; provided, that, in providing each such update, WCCI shall be entitled to omit discussion of Confidential Information of WCCI that WCCI reasonably determines to be materially sensitive. If there is a material change in such timelines or guidance in between such updates, WCCI will endeavor to notify Paratek thereof through the Alliance Managers. The role and responsibilities of the Paratek Alliance Manager and the WCCI Alliance Manager shall terminate on the later of the termination of the Term and the date on which no Lead Candidate or Product is being Developed. 3.3. Records; Reports. 3.3.1. Record Keeping. Paratek and WCCI shall each maintain records in sufficient detail and in accordance with GLP and as will properly reflect all work performed and results achieved in the performance of their respective activities in connection with the Development of Lead Candidates and the conduct of the Backup Compound Research Program (including all data in the form required under any applicable governmental regulations) in a manner appropriate for purposes of supporting the filing of potential patent applications. Paratek and WCCI shall each provide the other the right to inspect and copy such records to the extent reasonably required for the exercise of its rights or the performance of its obligations under this Agreement; provided, that, such records shall be Confidential Information of the disclosing Party and subject to Article 6 hereof. 3.3.2. Development Updates. WCCI shall keep the Paratek Alliance Manager regularly informed of the progress of the conduct of Development activities under this Agreement. Without limiting the generality of the foregoing, WCCI shall, at least once per Calendar Quarter (a) provide updates to the Paratek Alliance Manager in reasonable detail regarding the status of the conduct of all Development activities and shall present to the Paratek Alliance Manager all data and results generated in connection with such activities, and (b) provide the Paratek Alliance Manager with such additional information regarding the conduct of such Development activities that it has in its possession as may be reasonably requested from time to time by the Paratek Alliance Manager. 3.4. Information Exchange. Scientists at Paratek and WCCI shall cooperate in the performance of the Development and, subject to any confidentiality obligations to Third Parties, shall exchange information and materials as necessary to carry out the Development. The Parties expect that such exchange of information and materials may involve short-term on-site visits by scientists of one Party to the facilities of the other Party. 3.5. Paratek Development Activities. If WCCI wishes Paratek to conduct research as part of the Backup Compound Research Program or any Paratek Development activities as part of the Development, other than the research or Development activities specified in the Development Plan, it shall provide Paratek with written notice, which notice shall describe in reasonable detail the research or Development activities it wishes Paratek to conduct and the estimated budget and

 
timeframe applicable thereto. Upon receipt of such notice, Paratek will determine in good faith whether it has the resources available, and whether in its sole discretion it wishes, to conduct the Backup Compound Research Program and/or the Development activities. To the extent Paratek agrees to conduct the Backup Compound Research Program and/or the Development activities, it shall provide WCCI with written notice of same, which notice shall include an estimate of the Paratek Total Cost applicable thereto and the Alliance Managers will prepare and execute a Backup Compound Research Plan and/or an amendment to the Development Plan to reflect the research or Development activities, as the case may be, and such estimated Paratek Total Cost applicable thereto. All such research and/or Development activities will be conducted at WCCI’s sole cost and expense. 3.6. Abandoned Compounds; Additional Compounds. 3.6.1. Abandoned Compounds. If, at any time and from time to time during the Term, the JSC determines in good faith that further Development and/or Commercialization, as the case may be, of any Backup Compound, Lead Candidate or Product in accordance with the provisions of this Agreement has ceased to be scientifically, technically or commercially viable, it will promptly provide written notice thereof to Paratek (each, an .”Abandoned Compound”). Following an Abandoned Compound designation or at any time a Lead Candidate or Product otherwise becomes an Abandoned Compound pursuant to any of the other provisions of this Agreement (a) Paratek or any of its Affiliates may thereafter proceed with development and commercialization of such Abandoned Compound for any and all uses outside of the Field, either alone or in conjunction with Third Parties; (b) all licenses granted by Paratek to WCCI with respect to such Abandoned Compound shall immediately terminate; provided, that, any. abandonment by WCCI pursuant to this Section 3.6.1 shall not constitute a breach of this Agreement; and (c) WCCI may, in its discretion, designate a Backup Compound to replace such Lead Candidate (which shall be reflected in an amendment to Schedule 1 hereto) in the Development, whereupon the JSC shall promptly direct the Alliance Managers to prepare an amendment to the Development Plan to describe the activities to be conducted, and the applicable Development Timelines, with respect to such Lead Candidates. 3.6.2. Additional Compounds. If, at any time during the Term, Paratek reasonably determines in good faith that a Paratek Compound is potentially more suitable for Development and Commercialization than the then specified Lead Candidates (such compound, an “Additional Compound”), Paratek shall promptly inform WCCI (the “Additional Compound Notification”) of such determination and WCCI shall have the right to designate such Additional Compound as a Lead Candidate hereunder (which shall be reflected in an amendment to Schedule 1 hereto), it being understood that WCCI must notify Paratek in writing of such designation within forty-five (45) days of receipt of the Additional Compound Notification in order to exercise its rights under this Section 3.6.2. For the avoidance of doubt, Paratek shall have no obligation under this Section 3.6.2 to engage in research activities it would not otherwise conduct in the ordinary course of its research and development with respect to Paratek Compounds. 3.7. Rosacea Development Option. If at any time during the period commencing on the Effective Date and continuing until the Initiation of a Phase III Clinical Trial with respect to a Product, WCCI determines in good faith that it intends to use Commercially Reasonable Efforts to Develop one or more Lead Candidates for rosacea, WCCI shall give written notice to the JSC

 
specifying such Lead Candidate (the “Rosacea Option Notice”). On or before ninety (90) days from the date of receipt of the Rosacea Option Notice, WCCI shall prepare, for approval by the JSC pursuant to Section 2.2, a Development Plan covering the Development of such Lead Candidate for rosacea. Notwithstanding the foregoing, if WCCI fails to provide the Rosacea Option Notice within the period described in this Section 3.7 or the JSC fails to approve a Development Plan for such Lead Candidate for rosacea in accordance with Section 2.2, the grant to WCCI of the right to Develop and Commercialize Products for rosacea under this Agreement shall convert to a non-exclusive right and Paratek shall thereafter have the unencumbered right to grant one or more Third Parties the non-exclusive right to develop and commercialize any Paratek Compound that is not a Backup Compound, Lead Candidate or Product for rosacea. 3.8. Exclusive Periods. 3.8.1. Development of Lead Candidates. During the period commencing on the Effective Date and continuing for so long as WCCI is Developing at least one Lead Candidate in accordance with its obligations under Section 3.9.2, (i) Paratek and its Affiliates shall not grant any rights (whether by license or otherwise) to any Third Party to any Backup Compound or Lead Candidate in the Territory that has not become an Abandoned Compound, and (ii) Paratek and its Affiliates shall not research, develop or commercialize any Backup Compound or Lead Candidate in the Territory that has not become an Abandoned Compound in collaboration with, at the request of, or for the benefit (in whole or in part) of any Third Party (other than pursuant to non- commercial collaborations in accordance with Section 7.1.3 hereof). 3.8.2. Commercialization of Products. During the period commencing on the Effective Date and continuing for so long as WCCI is Commercializing a Product in accordance with its obligations under Section 3.9.2, (i) Paratek and its Affiliates shall not grant any rights (whether by license or otherwise) to any Third Party to such Product in the Territory (including, without limitation, any rights to the Lead Candidate from which such Product is Derived) and (ii) Paratek and its Affiliates shall not research, develop or commercialize such Product in the Territory (including, without limitation, any rights to the Lead Candidate from which such Product is Derived) in collaboration with, at the request of, or for the benefit (in whole or in part) of any Third Party. 3.9. Due Diligence. 3.9.1. Paratek Obligations. Paratek agrees that it will (a) undertake the responsibilities assigned to it, as set forth in this Article 3 and in the Development Plan and any Backup Compound Research Plan, if any; including, but not limited to, the dedication of resources to such efforts as set forth in the Development Plan and such Backup Compound Research Plan; and (b) use Commercially Reasonable Efforts to perform the activities assigned to Paratek in this Article 3 and in the Development Plan and such Backup Compound Research., Plan in a professional and timely manner (collectively, the “Paratek Diligence Obligation”). Paratek may satisfy its obligations under this Section 3.9.1 either itself or through Paratek Affiliates and/or Third Party Laboratories. 3.9.2. WCCI Obligations. WCCI agrees that it will (a) use Commercially Reasonable Efforts to undertake those responsibilities assigned to it, as set forth in this Article 3

 
and in the Development Plan in a professional and timely manner; (b) use Commercially Reasonable Efforts to Develop Lead Candidates for Commercialization as a Product in the Field in the Territory in accordance with the Development Timelines; and (c) use Commercially Reasonable Efforts to Develop and Commercialize at least one Product in the Field in the Territory. WCCI may satisfy its obligations under this Section 3.9.2 either itself or through WCCI Affiliates, Sublicensees and/or contract research organizations. For the avoidance of doubt, WCCI shall be deemed to have satisfied its obligations under this Section 3.9.2 if it uses Commercially Reasonable Efforts to Develop and Commercialize a Product solely with respect to an acne indication until such time as the JSC approves a Development Plan with respect to rosacea in accordance with Section 3.7. 3.9.3. Breach of WCCI Diligence Obligation. (a) Paratek may provide WCCI with written notice of any material breach by WCCI of its covenants set forth in Section 3.9.2 hereof that is not caused by Paratek’s failure to meet a Paratek Diligence Obligation pursuant to Section 3.9.1 above (a “WCCI Diligence Failure”), at any time Paratek reasonably believes a WCCI Diligence Failure has taken place. Such written notice (a “Diligence Failure Notice”) shall set forth in reasonable detail the nature of the alleged failure and shall request written justification, in the form of detailed reasons, that would support the proposition that WCCI is meeting such diligence obligations. in such event, WCCI shall provide such written justification to Paratek within thirty (30) days after such Diligence Failure Notice is given and shall identify any Commercially Reasonable Justification applicable thereto. If Paratek does not receive a Commercially Reasonable Justification from WCCI within such thirty (30) day period or if Paratek and WCCI are not able to resolve any disagreement with respect to a WCCI Diligence Failure within sixty (60) days after WCCI’s receipt of the Diligence Failure Notice, then either Paratek or WCCI, acting alone, may at any time following WCCI’s receipt of such Diligence Failure Notice by delivery to the. other Party of a written notice indicating such Party’s election to have the disagreement resolved by arbitration, cause the matter to be submitted to binding arbitration under Section 13.1.2 hereof; provided that (i) the arbitrators shall be entitled to review and resolve only whether or not a WCCI Diligence Failure occurred during the applicable reporting period of time that is the subject of such disagreement, and (ii) the arbitrators shall be individuals who are knowledgeable in the field of the development, manufacture, and sale of drugs and drug products, and shall have no current or prior business relationships with Paratek, WCCI or any of their respective Affiliates. (b) If the arbitrator determines that a WCCI Diligence Failure occurred, then Paratek’s sole and exclusive remedy shall be, on a Product-by-Product basis as to the Product with respect to which such WCCI Diligence Failure occurred to (i) terminate any or all of the licenses and rights granted under Section 7.2.1 hereof and the restrictions of Sections 3.8 and 7.1.1, or (ii) convert the licenses and rights granted under any or all of Section 7.2.1 from exclusive licenses to non-exclusive licenses and terminate the restrictions of Sections 3.8 and 7.1.1, in either case only as such licenses and rights apply to such Product, which termination and/or conversion, as the case may be, shall be at the discretion of Paratek and he effective sixty (60) days after Paratek gives written notice to WCCI specifying the remedy that Paratek is electing to exercise under this Section 3.9.3.

 
(c) The Parties agree that Paratek’s sole and exclusive remedy, with respect to a WCCI Diligence Failure shall be as set forth in this Section 3.9.3, and Paratek shall not bring, commence, continue or prosecute any claim, legal action or proceeding under, in relation to, arising out of or in connection with a WCCI Diligence Failure except as set forth in this Section 3.9.3. 3.10. Compliance with Laws. Each Party agrees to carry out all work assigned to such Party in the Backup Compound Research Plan and the Development Plan as well as all Development and Commercialization obligations hereunder in compliance with all Applicable Laws. For the avoidance of doubt, each activity performed by a Party under the Development Plan or Backup Compound Research Plan that will or would reasonably be expected to be submitted to a Regulatory Authority in support of a Regulatory Filing or Drug Approval Application, shall comply in all material respect with ICH Guidelines (or other comparable regulation and guidance of any Regulatory Authority in the Territory), and, if and as applicable, the regulations and guidance of the FDA that constitute GLP and GMP. 3.11. Supply of Proprietary Materials. From time to time during the Term, either Party (the “Transferring Party”) may supply the other Party (the “Recipient Party”) with Proprietary Materials of the Transferring Party for use in the Development and/or the Backup Compound Research Program. In connection therewith, the Recipient Party hereby agrees that (a) it and its Affiliates shall not use such Proprietary Materials for any purpose other than exercising any rights granted to it or reserved by it hereunder or for performing its obligations hereunder; (b) it and its Affiliates shall use such Proprietary Materials only in compliance with all Applicable Law; (c) it and its Affiliates shall not transfer any such Proprietary Materials to any Third Party without the prior written consent of the Transferring Party, except as expressly permitted hereby and except in connection with the exercise of any rights granted to the Recipient Party or reserved by it hereunder; (d) as between the Transferring Party and the Receiving Party, the Transferring Party shall retain full ownership of all such Proprietary Materials, subject to any licenses granted by the Transferring Party to the Recipient Party pursuant to this Agreement; and (e) upon the expiration or termination of this Agreement, the Recipient Party shall, at the instruction of the Transferring Party, either destroy or return any such Proprietary Materials which are not the subject of the grant of a continuing license hereunder. In addition, each of Paratek and WCCI agrees that, during the Term, neither Party nor any of their respective Affiliates shall transfer to any Third Party, without the approval of the other Party, any Proprietary Materials that constitute or are part of Joint Technology. ARTICLE 4 : COMMERCIALIZATION OF PRODUCTS 4.1. Commercialization of Products. Subject to the remainder of this Article 4, WCCI shall have the sole right and responsibility for all aspects of Commercializing Products in the Territory. 4.2. Compliance. WCCI shall perform its obligations described in Section 4.1 in good scientific manner and in compliance with all Applicable Laws. 4.3. Information; Updates. WCCI shall keep Paratek regularly informed of the progress of its efforts to Commercialize Products in the Field in the Territory, by providing

 
periodic updates which shall summarize WCCI’s efforts to Commercialize Lead Candidates and Products in the Field and identify the Regulatory Filings and Drug Approval Applications with respect to such Lead Candidates and Products that WCCI or any of its Affiliates or Sublicensees have filed; provided, that, in providing each such update, WCCI shall be entitled to omit discussion of Confidential Information of WCCI that WCCI reasonably determines to be materially sensitive. 4.4. Product Recalls. In the event that any Regulatory Authority issues or requests a recall or takes similar action in connection with a Product, or in the event WCCI reasonably believes that an event, incident or circumstance has occurred that may result in the need for a recall, market withdrawal or other corrective action regarding a Product, WCCI shall promptly advise Paratek thereof by telephone or facsimile. Following such notification, WCCI shall decide and have control of whether to conduct a recall or market withdrawal (except in the event of a recall or market withdrawal mandated by a Regulatory Authority, in which case it shall be required) or to take other corrective action in the Territory and the manner in which any such recall, market withdrawal or corrective action shall be conducted; provided, that, WCCI shall keep Paratek regularly informed regarding any such recall, market withdrawal of corrective action. WCCI shall bear all expenses of any such recall, market withdrawal or corrective action (including, without limitation, expenses for notification, destruction and return of the affected Product and any refund to customers of amounts paid for such Product). 4.5. Adverse Event Information. WCCI shall provide notice to Paratek of any Adverse. Events that occur during the Term, including without limitation, all filings made with Regulatory Authorities with respect to Adverse Events promptly after making such filings. WCCI shall make available to Paratek for review and copy at Paratek’s expense, upon reasonable request, all Adverse Event information and product complaint information relating to Lead Candidates and Products as compiled, prepared and filed by WCCI with the FDA or similar Regulatory Authorities in the normal course of business in connection with the Development, Commercialization or sale of any Lead Candidates or Products. Paratek acknowledges and agrees that such information shall be the Confidential Information of WCCI and subject to the provisions of Article 6 hereof. 4.6. Manufacture of Products for Commercial Sale. Unless otherwise agreed to by the Parties, WCCI shall have the sole obligation and responsibility for the manufacture of all Products (including without limitation the active pharmaceutical ingredient in any Product) for commercial sale. ARTICLE 5 : CONSIDERATION AND FUNDING 5.1. Upfront Fee. As reimbursement for research conducted by Paratek, WCCI hereby agrees to pay Paratek a non-refundable, non-creditable fee in the amount of Four Million U.S. Dollars (US $4,000,000) payable in immediately available funds on the Effective Date. 5.2. R&D Reimbursement. In consideration of the conduct by Paratek of (a) any activities under the Backup Compound Research Program agreed to by Paratek and/or (b) any Development activities under the Development agreed to by Paratek, WCCI shall reimburse Paratek for one hundred percent (100%) of the Paratek Total Cost incurred by Paratek as part of such activities. Paratek shall invoice WCCI on a quarterly basis with respect to such Paratek Total

 
Cost within fifteen (15) days of end of each Calendar Quarter and WCCI shall pay all such invoices within thirty (30) days of receipt of each such invoice. 5.3. Development Milestone Payments. 5.3.1. Milestones. In further consideration of the grant of the rights and licenses by Paratek hereunder, WCCI will make the following nonrefundable, non-creditable (other than as provided in this Section 5.3.1) milestone payments to Paratek within [***] ([***]) [***] after the achievement by WCCI and/or WCCI’s Affiliates and Sublicensees of each such milestone event for each Product: Milestone Event Milestone Payment Filing of IND with respect to a Product $1 million Initiation of Phase II Clinical Trials with respect to a Product $2.5 million Initiation of Phase III Clinical Trials with respect to a Product $4 million Acceptance of NDA in the Territory for a Product $5 million Receipt of Commercialization Regulatory Approval from FDA for each Product $12 million For the avoidance of doubt, WCCI shall only be obligated to make each milestone payment set forth in this Section 5.3.1 upon the first occurrence of the milestone event relating to such payment for a given Product and shall have no obligation to make any milestone payment as a result of any subsequent filing, clinical trial initiation, NDA filing or Regulatory Approval with respect to an alteration of the dosage, formulation or any other variation of such Product, so long as such Product continues to be Derived from the same Lead Candidate. In addition, if the JSC determines to discontinue Development of a Product (the “Discontinued Product”), then WCCI shall he entitled to deduct the amount of all milestone payments made with respect to the Discontinued Product from any milestone payments that become due hereunder with respect to the next Product that is Developed by WCCI that achieves the applicable milestones. 5.3.2. Determination That Payments Are Due. WCCI shall provide Paratek with prompt written notice upon its achievement of each of the milestones set forth in Section 5.3.1 of this Agreement. In the event that, notwithstanding the fact that WCCI has not given any such notice, Paratek believes any such milestone payment is due, it shall so notify WCCI in writing, and shall provide to WCCI the data and information demonstrating that the conditions for payment have been achieved. Within thirty (30) days of its receipt of such notice, WCCI shall review the data and information and shall certify in writing whether or not the conditions for payment have been achieved. Any negative determination shall be accompanied by a detailed explanation of the

 
reasons therefor. Any dispute under this Section 5.3.2 that relates to whether or not a milestone has been achieved shall be submitted to arbitration under Article 13 of this Agreement. 5.4. Payments. All payments made by WCCI to Paratek hereunder shall be made by wire transfer to the account specified below, or such other account as specified in writing by Paratek from time to time: Bank Name: [***] Bank Address: Boston, MA Account Name: Paratek Pharmaceuticals, Inc. Account Number: [***] ARTICLE 6 : TREATMENT OF CONFIDENTIAL INFORMATION; PUBLICITY; NON-SOLICITATION 6.1. Confidentiality 6.1.1. Confidentiality Obligations. Paratek and WCCI each recognize that the other Party’s Confidential Information constitute highly valuable and proprietary confidential information and materials. Paratek and WCCI each agrees that during the Term and for an additional five (5) years thereafter, it will keep confidential, and will cause its employees, consultants, Affiliates and Sublicensees to keep confidential, all Confidential Information of the other Party, and to limit the use of the Confidential Information of the other Party to those purposes permitted under this Agreement. Each receiving Party shall take such action, and shall cause its Affiliates and Sublicensees to take such action, to preserve the confidentiality of the disclosing Party’s Confidential Information as it would customarily take to preserve the confidentiality of its own Confidential Information, using a level of care that shall not under any circumstances be less than reasonable care. Each receiving Party, upon the request of the disclosing Party, will return all the Confidential Information and Proprietary Materials disclosed or transferred to it by the disclosing Party pursuant to this Agreement, including all copies and extracts of documents and all manifestations in whatever form, within sixty (60) days of such request or, if earlier, the termination or expiration of this Agreement; provided, however, that the receiving Party may retain Confidential Information of the disclosing Party relating to any license which survives such termination and one copy of all other Confidential Information may be retained in inactive archives solely for the purpose of establishing the contents thereof. 6.1.2. Limited Disclosure. Paratek and WCCI each agree that any disclosure of the disclosing Party’s Confidential Information to any officer, employee, consultant, agent, Affiliate or sublicensee of a receiving Party, as the case may be, shall be made only if and to the extent necessary to carry out its rights and responsibilities under this Agreement, shall be limited to the maximum extent possible consistent with such rights and responsibilities and shall only be made to persons who are bound by written confidentiality obligations (including such provision as contained in employment agreements) to maintain the confidentiality thereof and not to use such Confidential Information except as expressly permitted by this Agreement. Paratek and WCCI each further agree not to disclose or transfer the disclosing Party’s Confidential Information to any Third Party under any circumstance without the prior written approval from the disclosing Party, except as otherwise expressly permitted by this Agreement. Notwithstanding, the foregoing, each

 
receiving Party may disclose information to the extent such disclosure is reasonably necessary to (a) file and prosecute Patent Rights which are filed or prosecuted in accordance with the provisions of this Agreement, (b) file, prosecute or defend litigation in accordance with the provisions of this Agreement or (c) comply with Applicable Law, regulations or court orders; provided, however, that if a receiving Party is required to make any such disclosure of a disclosing Party’s Confidential Information in connection with any of the foregoing, it will give reasonable advance notice to the disclosing Party of such disclosure requirement and will use reasonable efforts to assist such disclosing Party in efforts to secure confidential treatment of such information required to be disclosed. The Parties hereby agree that a copy of this Agreement may be provided by Paratek to Tufts pursuant to Paratek’s obligations under the Tufts License Agreement. 6.1.3. Employees and Consultants. Paratek and WCCI each hereby represents that all of its employees, and all of the employees of its Affiliates, and any consultants to such Party or its Affiliates, in any case that participate in the activities of the Backup Compound Research Program and/or the Development and Commercialization and who shall have access to Confidential Information of the other Party or any of its Affiliates shall be bound by written obligations (including such provision as contained in employment agreements) to maintain such information in confidence and not to use such information except as expressly permitted herein. Each Party agrees to enforce confidentiality obligations to which its employees and consultants (and those of its Affiliates) are obligated. 6.2. Publicity. Neither Party nor any of its Affiliates may publicly disclose the existence or terms of this Agreement without the prior written consent of the other Party; provided, however, that either Party may make such a disclosure (a) to the extent required by law or by the requirements of any nationally recognized securities exchange, quotation system or over-the- counter market on which such Party has its securities listed or traded or (b) to any investors, prospective investors, lenders and other potential or current financing sources who are obligated to keep such information confidential. In the event that such disclosure is required under clause (a) as aforesaid, the disclosing Party shall make reasonable efforts to provide the other Party with notice beforehand and to endeavor to coordinate with the other Party with respect to the wording and timing of any such disclosure. The Parties, upon the execution of this Agreement, will publicly issue a joint press release, in the form of Schedule 3 attached hereto, with respect to this Agreement and the Parties relationship hereunder. Once such press release or any other written statement is approved for disclosure by both Parties, either Party or any of such Party’s Affiliates, may make subsequent public disclosure of the contents of such statement without the further approval of the other Party. Additionally, from time to time, the Parties may make additional press releases with regard to events occurring under this Agreement, including achievement of milestones, with the prior written consent of both Parties. 6.3. Prohibition on Solicitation. Without the written consent of the other Party, neither Party nor its Affiliates shall, during the Term of this Agreement or for a period of one (1) year following the expiration or termination of the Term, whichever is shorter, solicit any employee of such Party or its Affiliates who participated in the Backup Compound Research Program and/or the Development activities. This provision shall not restrict either Party or its Affiliates from advertising employment opportunities in any manner that does not directly target the other Party or its Affiliates.

 
ARTICLE 7 : EXCLUSIVITY; LICENSE GRANTS; ROYALTIES 7.1. Exclusivity During the Term. 7.1.1. Paratek Restrictions. During the Term, Paratek, for itself and its Affiliates, agrees not to directly or indirectly (a) undertake any research, development, manufacturing, marketing, promotion, sale or other commercialization of any Tetracycline Compound for use in the Field and in the Territory or (b) grant any license or other rights to any Third Party to research, develop, manufacture, market, sell, promote or otherwise commercialize any Tetracycline Compound for use in the Field and in the Territory. 7.1.2. WCCI Restrictions. During the Term, WCCI agrees that, except pursuant to and as permitted by this Agreement, neither WCCI nor its Affiliates shall, either itself or directly or indirectly with or through any WCCI Affiliate or any Third Party, undertake any research, development, manufacturing, marketing, promotion, sale or other commercialization of any product containing a Paratek Compound for any use other than the Development and Commercialization of Products in the Field in accordance with this Agreement. 7.1.3. Non-Commercial Collaboration. Notwithstanding the foregoing, with the prior written consent of the other Party, each Party or any of such Party’s Affiliates may enter into agreements with academic, research, or other non-commercial institutions with the goal of advancing the collaboration between the Parties hereunder; provided that the terms of such agreements provide that such academic, research or other non-commercial institutions do not acquire any exclusive intellectual property rights out of or in connection with the work research and development activities performed under such agreements. 7.2. Development and Commercialization Licenses. 7.2.1. License to WCCI in the Field. Subject to the terms of this Agreement, including, without limitation, Sections 3.7 and 3.9 hereof, Paratek hereby grants (and hereby agrees to cause any of its Affiliates that Controls Licensed Technology, Licensed Patent Rights and/or any interest in Joint Technology or Joint Patent Rights to grant) to WCCI (a) an exclusive (even as to Paratek and its Affiliates, except as provided below, and subject to Section 3.7) royalty- bearing license, including the right to grant sublicenses as provided in Section 7.2.2 below, under Licensed Technology and Licensed Patent Rights and Paratek’s interest in Joint Technology and Joint Patent Rights, (i) to research, have researched, Develop, have Developed, manufacture and have manufactured Lead Candidates and Backup Compounds that are not Abandoned Compounds in the Field and in the Territory in accordance with this Agreement; and (ii) to research, have researched, Develop, have Developed, manufacture, have manufactured, use, have used, sell, distribute for sale, have distributed for sale, offer for sale, have sold, import, have imported, otherwise Commercialize and otherwise have Commercialized Products in the Field and in the Territory and (b) an exclusive (even as to Paratek and its Affiliates) royalty-free license, including the right to grant sublicences as provided in Section 7.2.2 below, to research, have researched, develop, have developed, manufacture and have manufactured Paratek Competitive Compounds in the Field and in the Territory. For the avoidance of doubt, Paratek grants no right or license under the Licensed Technology or Licensed Patent Rights or Paratek’s interest in Joint Technology and Joint Patent Rights to WCCI or its Affiliates to make derivatives of any Backup Compounds,

 
or to commercialize such derivatives, unless any such derivatives become Lead Candidates and/or unless any such derivative would be deemed to have been Derived from a Product for purposes of Section 1.62. WCCI hereby grants Paratek a non- exclusive, worldwide, royalty-free license under the Licensed Technology and Licensed Patent Rights and Paratek’s interest in Joint Technology and Joint Patent Rights solely to perform its obligations under the Backup Compound Research Program, if any, and/or to conduct the Paratek Development activities set forth in the Development Plan with respect to Lead Candidates, if any. 7.2.2. Right to Sublicense. Subject to the provisions of Sections 7.2.1 and 2.3(e) of the Tufts License Agreement, if and to the extent applicable, WCCI shall have the right to (a) extend to its Affiliates, the rights and licenses granted to it under Section 7.2.1 and (ii) grant to Third Parties sublicenses under the rights and licenses granted to it under Section 7.2.1; provided, that, (A) WCCI shall have obtained the prior written approval of Paratek, which approval shall not be unreasonably withheld, delayed or conditioned; (B) it shall be a condition of any such extension or sublicense that such Affiliate or Third Party agrees to be bound by all of the applicable terms and conditions of this Agreement (including without limitation Article 6 hereof) and (C) WCCI shall provide written notice to Paratek of any such extension or sublicense no more than thirty (30) days after such execution, and upon Paratek’s request, provide copies to Paratek of each such executed extension or sublicense. If WCCI, or a Sublicensee, grants a sublicense to a Sublicensee or extends rights to its Affiliates, WCCI shall be deemed to have guaranteed that such Sublicensee or Affiliate will fulfill all of obligations under this Agreement applicable to such Affiliate or Sublicensee; provided, however, that WCCI shall not be relieved of its obligations pursuant to this Agreement as a result of such sublicense or extension of rights. 7.2.3. License to Paratek Outside the Territory. Upon the request of Paratek, the Parties agree to enter into good faith negotiations with respect to the terms of a license agreement containing royalty provisions and other customary terms, pursuant to which WCCI and its Affiliates would grant to Paratek an exclusive license (even as to WCCI and its Affiliates) (including the right to grant sublicenses, under WCCI Technology (including, without limitation, all Clinical Trial Data) and WCCI Patent Rights and WCCI’s interest in Joint Technology and Joint Patent Rights, to research, have researched, Develop, have Developed, manufacture, have manufactured, use, have used, sell, distribute for sale, have distributed for sale, offer for sale, have sold, import, have imported, otherwise Commercialize and otherwise have Commercialized Products, for any and all uses (including, without limitation any and all uses within the Field) outside the Territory, it being understood that Paratek will covenant in any such license agreement to use Commercially Reasonable Efforts to prevent any such Products from being imported into the Territory for resale by any Third Party without WCCI’s prior written consent. WCCI shall cause its Affiliates not to grant any rights (whether by license or otherwise) to any Third Party, or otherwise to take any other action, that would impair or adversely affect the ability of such Affiliates to grant to Paratek a license in accordance with this Section 7.2.3. 7.2.4. Bankruptcy. All the negative covenants set forth in Sections 3.8 and 7.1 hereof and the licenses and rights to licenses granted under or pursuant to Section 7.2 hereof by Paratek to WCCI or by WCCI to Paratek are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code (the “Code”), and any such equivalent law in the United States, licenses of rights to “intellectual property” as defined under Section 101(35A) of the Code. The Parties agree that WCCI or Paratek, as a covenantee and licensee of

 
such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Code, and any such equivalent law, and that upon commencement of a bankruptcy proceeding by or against Paratek or WCCI, as the case may be, under the Code, WCCI or Paratek, as applicable, shall be entitled to a complete duplicate of or complete access to, any such intellectual property and all embodiments of such intellectual property. Such intellectual property and all embodiments thereof shall be promptly delivered to WCCI (i) upon any such commencement of a bankruptcy proceeding upon written request therefor by WCCI, unless Paratek (or the bankruptcy trustee) elects to continue to perform all of its obligations under this Agreement or (ii) if not delivered under (i) above, upon the rejection of this Agreement by or on behalf of WCCI upon written request therefor. The foregoing is without prejudice to any rights WCCI may have arising under the Code or other Applicable Law. 7.3. Tufts License Agreement. Paratek entered into the Tufts License Agreement with the Trustees of Tufts College (“Tufts”) that may cover intellectual property rights that are inter alia claiming methods of synthesis for Lead Candidates. Paratek hereby grants to WCCI an exclusive royalty-free sublicense under the license granted to Paratek pursuant to the Tufts License Agreement solely to the extent such sublicense is required by WCCI in order to exercise the license granted to WCCI pursuant to Section 7.2 of this Agreement, without infringing any of the patent rights licensed to Paratek by Tufts. Without limiting the generality of the foregoing, WCCI and Paratek hereby acknowledge and agree that the provisions of Sections 3.8, 3.9, 3.10, 7.1, 8.1, 8.5 and 9.3 and Articles V, XI, and XII of the Tufts License Agreement shall be binding upon WCCI, as a sublicensee under the Tufts License Agreement and such provisions shall be fully enforceable for all purposes related thereto both by Tufts and Paratek. Paratek shall be responsible for any and all payments and royalties due to Tufts under the Tufts License Agreement. Paratek shall perform all of its obligations under the Tufts License Agreement in accordance with the terms therein, and shall not take any action that would cause or result in the termination of the Tufts License Agreement. Paratek shall not amend, modify, or enter into any agreement contemplating the amendment or modification, of the Tufts License Agreement if such amendment or modification would adversely affect WCCI’s rights under this Agreement. Notwithstanding anything to the contrary in this Agreement, WCCI agrees that it shall not use the name “Tufts University” or any variant thereof, or identify Tufts or any portion of Tufts as a beneficiary of this Agreement without the prior express written consent of Tufts, which may be withheld or withdrawn by Tufts in its complete and uncontrolled discretion. 7.4. No Other Rights. WCCI shall receive no rights to utilize Paratek Technology, or rights with respect to use of Paratek Technology, except as expressly set forth herein. Paratek shall receive no rights to utilize WCCI Technology, or rights with respect to use of WCCI Technology, except as expressly set forth herein. 7.5. Payment of Royalties; Royalty Rates; Accounting and Records. 7.5.1. Payment of Royalties on Products. In further consideration of the grant of the rights and licenses by Paratek hereunder, WCCI shall pay Paratek a royalty based on aggregate Annual Net Sales of all Products sold by WCCI, its Affiliates and its Sublicensees, at the following incremental rates:

 
Annual Net Sales Royalty Rate Annual Net Sales up to $[***] [***]% Portion of Annual Net Sales above $[***] and up to $[***] [***]% Portion of Annual Net Sales above $[***] [***]% 7.5.2. Know-How Royalty Rates. If a Product is not covered by a Valid Patent Claim in the Territory, WCCI shall pay Paratek royalties at [***] percent ([***]%) of the applicable rates specified in Section 7.5.1 until expiration of the Royalty Term applicable to such Product. The Parties hereby acknowledge and agree that royalties that are payable for a Product during the Royalty Term for which no Patent Rights exist shall be in consideration of (a) Paratek’s expertise and know-how concerning the research, manufacture and Development of Compounds in the Field, including development activities conducted prior to the Effective Date; (b) the disclosure by Paratek to WCCI of results obtained in by Paratek in it performance of activities with respect to the Development; and (c) the licenses granted to WCCI hereunder with respect to Licensed Technology and Joint Technology that are not within the claims of any Patent Rights Controlled by Paratek. 7.5.3. Royalty Term. WCCI shall pay royalties with respect to each Product on a Product-by-Product basis during the period (such period, the “Royalty Term”) commencing on the date of First Commercial Sale of such Product in the Territory and continuing for so long as Products are sold in the Territory until the later of the date on which (a) there is no Valid Claim that is included in the Licensed Patent Rights or Joint Patent Rights that cover such Product in the Territory and (b) sales of Generic Products by any Third Party in the Territory are equal to at least [***] percent ([***]%) of WCCI’s unit-based market share of the Product in the Territory (as measured by prescriptions or other similar information available in the Territory). For purposes of this Section 7.5.3, a “Generic Product” means a pharmaceutical product that contains the same active ingredient as a Product and that is an AB Rated equivalent (as defined in the 22nd edition of Approved Drug Products with Therapeutic Equivalence Evaluations issued by the United States Department of Health and Human Services) to the Product. 7.5.4. Payment Dates and Reports. The royalty payments shall be paid by WCCI within forty-five (45) days after the end of each Calendar Quarter in which such Net Sales are made and royalties are owed hereunder. Each such payment shall be made in United States Dollars and shall be accompanied by a report showing the Net Sales of each Product sold by WCCI, any WCCI Affiliate or any Sublicensee, in the Territory, the applicable royalty rate for such Product, and a calculation of the amount of royalty. 7.5.5. Records; Audit Rights. WCCI and its Affiliates and Sublicensees shall keep for three (3) years from the date of each payment of royalties complete and accurate records of sales by WCCI and its Affiliates and Sublicensees of each Product, in sufficient detail to allow the accruing royalties to be determined accurately. Paratek shall have the right for a period of three (3) years after receiving any such report or statement to appoint at its expense an independent certified public accountant (bound by written confidentiality obligations no less protective than those set forth in Article 6 hereof) reasonably acceptable to WCCI to inspect the relevant records of WCCI and its Affiliates and Sublicensees to verify such report or statement. WCCI and its

 
Affiliates and Sublicensees shall each make its records available for inspection by such independent certified public accountant during their regular business hours at such place or places where such records are customarily kept, upon reasonable notice from Paratek, solely to verify the accuracy of the reports and payments. Such inspection right shall not be exercised by Paratek more than once in any Calendar Year nor more than once with respect to sales of any Product in any given period. Paratek agrees to hold in strict confidence, and in accordance with Article 6 hereof, all information concerning such payments and reports, and all information learned in the course of any audit or inspection, except to the extent necessary for Paratek to reveal such information in order to enforce its rights under this Agreement or if disclosure is required by law. The results of each inspection, if any, shall be binding on both Parties, absent manifest error. Paratek shall pay for such inspections, except that in the event there is any upward adjustment in the aggregate royalties, payable for any Calendar Year shown by such inspection of more than five percent (5%) of the amount paid, WCCI shall pay for the reasonable costs of such inspection. 7.5.6. Overdue Royalties. All royalties payments not paid within the time period set forth in this Article 7 shall bear interest at a rate of one percent (1%) per month from the due date until paid in full; provided, that, in no event shall such annual rate exceed the maximum interest rate permitted by law in regard to such payments. Such royalty or milestone payment when made shall be accompanied by all interest so accrued. 7.5.7. Withholding Taxes. All payments made or required to be made by WCCI hereunder shall be reduced by the amount of any taxes (including withholding taxes to the extent applicable), duties, levies, fees or charges imposed thereon, provided, that, WCCI complies with its obligations set forth below in this Section 7.5.7 prior to making any payment to Paratek hereunder. WCCI shall make (or cause to be made) any applicable withholding payments due on behalf of Paratek and shall promptly provide (or cause to be provided) Paratek with written documentation of any such payment sufficient to satisfy the requirements of the United States Internal Revenue Service relating to an application by Paratek for a foreign tax credit for such payment. ARTICLE 8 : INTELLECTUAL PROPERTY RIGHTS 8.1. Disclosure of Program Inventions. Each Party shall promptly provide the other Party with written notice concerning all Program Inventions that are conceived, made or developed by employees or consultants of either of them or their Affiliates, alone or jointly with employees or consultants of the other Party or its Affiliates. 8.2. Ownership. 8.2.1. Paratek Intellectual Property Rights. Paratek shall have sole and exclusive ownership of all right, title and interest on a worldwide basis in and to any and all Paratek Technology and Paratek Patent Rights, with full rights to license or sublicense, subject to the obligations and licenses to WCCI as set forth herein. Without limiting the foregoing and subject to the licenses and other rights granted to WCCI pursuant to this Agreement, Paratek shall be the sole owner of all Patent Rights, all trade secret rights, all know-how and any other intellectual property rights in the Paratek Technology, including the sole and exclusive right to exclude others

 
from making, using, selling, offering for sale or importing the Paratek Technology or any products that consist of, or incorporate, any Paratek Technology. 8.2.2. WCCI Intellectual Property Rights. WCCI shall have sole and exclusive ownership of all right, title and interest on a worldwide basis in and to any and all WCCI Technology and WCCI Patent Rights, with full rights to license or sublicense, subject to the obligations and licenses to Paratek as set forth herein. Without limiting the foregoing, and subject to the licenses and other rights granted to Paratek pursuant to this Agreement, WCCI shall be the sole owner of all Patent Rights, all trade secret rights, all know-how and any other intellectual property rights in the WCCI Technology including the sole and exclusive right to exclude others from making, using, selling, offering for sale or importing the WCCI Technology or any products that consist of, or incorporate, any WCCI Program Technology. 8.2.3. Joint Technology Rights. WCCI and Paratek shall jointly own all Joint Technology and Joint Patent Rights and hereby agree that (a) subject to the rights of, and the licenses granted to, WCCI by Paratek under this Agreement (including, without limitation, under Section 7.2 hereof) and subject to the obligations of Paratek under this Agreement (including, without limitation, Sections 3.8 and 7.1.1 hereof), Paratek may use or license or sublicense to any Affiliate or Third Party all such Joint Technology and Joint Patent Rights, and (ii) WCCI may use or license or sublicense to any Affiliate or Third Party all such Joint Technology and Joint Patent Rights. 8.3. Patent Coordinators. Within thirty (30) days of the Effective Date, Paratek and WCCI shall each appoint a patent coordinator (each, a “Patent Coordinator” and collectively, the “Patent Coordinators”), reasonably acceptable to the other Party, who shall serve as such Party’s primary liaison with the other Party on matters relating to patent filing, prosecution, maintenance and enforcement. Each Party may replace its Patent Coordinator at any time by notice in writing to the other Party. 8.4. Inventorship. In case of a dispute between Paratek and WCCI over inventorship, the Parties, with the advice of the Patent Coordinators, shall make the determination of the inventor(s) by application of the standards contained in United States patent law. If the Parties cannot resolve the dispute, it shall be resolved by independent patent counsel, not otherwise engaged by either of the Parties or any of their respective Affiliates, selected by the Patent Coordinators. Expenses of such independent patent counsel shall be shared equally by the Parties. ARTICLE 9 : FILING, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS 9.1. Patent Filing, Prosecution and Maintenance. The JSC shall determine the jurisdictions within the Territory in which patent applications will be filed with respect to Joint Patent Rights. Subject to the foregoing, the responsibility for filing, prosecution and maintaining Patent Rights shall be as follows: 9.1.1. Patent Filing. During the Term and thereafter during any period of time during which WCCI shall have a license under this Agreement to Paratek Patent Rights or to Joint Patent Rights, with respect to any Patent Rights arising hereunder:

 
(a) Paratek, at its sole expense and acting through patent attorneys or agents of its choice, shall be responsible for the preparation, filing, prosecution and maintenance of all Patent Rights relating to the Paratek Technology. At Paratek’s request, WCCI shall reasonably cooperate with and assist Paratek, at Paratek’s expense, in connection with such activities. (b) WCCI, at its sole expense and acting through patent attorneys or agents of its choice, shall be responsible for the preparation, filing, prosecution and maintenance of all Patent Rights relating to the WCCI Technology. At WCCI’s request, Paratek shall reasonably cooperate with and assist WCCI, at WCCI’s expense, in connection with such activities. (c) Except as expressly provided in Article 11 hereof, neither Party makes any warranty with respect to the validity, perfection or dominance of any patent or other proprietary right or with respect to the absence of rights in Third Parties which may be infringed by the manufacture or sale of any Product. Each Party agrees to bring to the attention of the other Party any patent or patent application it discovers applicable to the subject matter of this Agreement, which relates to the rights of either Party under this Agreement. (d) Unless the Parties otherwise agree, (i) Paratek, acting through patent counsel or agents of its choice, shall be responsible for the preparation, filing, prosecution and maintenance of Joint Patent Rights outside of the Territory; and (ii) WCCI, acting through patent counsel or agents of its choice, shall be responsible for the preparation, filing, prosecution and maintenance of Joint Patent Rights within the Territory. The Parties shall share equally the control and the fees of counsel and the other costs and expenses related to patents and patent applications claiming inventions that are Joint Technology. Should one Party desire not to share in the control, filing, prosecution or maintenance of any such patent or patent applications or shall fail to bear its share of the costs and expenses of filing, prosecuting or maintaining any such patent or patent applications (and, in the case of such failure, if such failure is not cured within thirty (30) days after receipt of written notice of such failure from the participating Party), the non-participating Party hereby assigns (or shall cause to be assigned) to the other Party all right, title and interest in and to such patent or patent application, and the Joint Technology claimed therein, and the participating Party shall gain sole control of the filing, prosecution or maintenance of such patents or patent applications, which shall be deemed to be the Technology of such participating Party. 9.1.2. Information and Cooperation. Each Party responsible for filing patents and any Patent Rights (other than with respect to WCCI Technology) described in this Agreement (the “Filing Party”) shall keep the other Party regularly informed of the status of the Patent Rights for which it is responsible in accordance with this Article 9 (other than with respect to WCCI Technology). The Filing Party shall provide the other Party with (a) copies of all filings and correspondence with the patent offices, administrative boards or courts which the Filing Party sends or receives in connection with filing, prosecution, maintenance and defense of the Patent Rights for which it is responsible (other than with respect to WCCI Technology), and (b) copies of filings and correspondence referred to in the foregoing clause (a) sufficiently in advance of the due date so as to give the other Party sufficient time to comment and shall give good faith consideration to the other Party’s comments. The Filing Party shall seek the advice of the other Party with respect to strategy for the Patent Rights for which it is responsible (other than with respect to WCCI Technology) and shall give reasonable consideration to any suggestions or

 
recommendations of the other Party concerning the preparation, filing, prosecution, maintenance and defense of such Patent Rights. 9.1.3. Abandonment. If Paratek decides to abandon or to allow to lapse any of the Paratek Patent Rights in the Territory, Paratek shall inform WCCI of such decision promptly and, in any event, a reasonable amount of time prior to any applicable deadline that may be necessary to establish or preserve such Paratek Patent Rights. WCCI shall have the right to assume responsibility for continuing the prosecution of such Paratek Patent Rights and paying any required fees to maintain such Paratek Patent Rights in the Territory or defending such Paratek Patent Rights, in each case at WCCI’s sole expense and through patent counsel of its choice. WCCI shall not become an assignee of such Paratek Patent Rights as a result of its assumption of such responsibility under this Section 9.1.3 and such Paratek Patent Rights shall remain subject to this Agreement. Upon transfer of Paratek’s responsibility for prosecuting, maintaining and defending any of the Paratek Patent Rights to WCCI under this Section 9.1.3, Paratek shall promptly deliver to WCCI copies of all necessary files related to the Paratek Patent Rights with respect to which responsibility has been transferred and shall take all actions and execute all documents reasonably necessary for WCCI to assume such prosecution, maintenance and defense. 9.2. Legal Action. 9.2.1. Actual or Threatened Infringement. (a) In the event either Party or any of such Party’s Affiliates becomes aware of any possible infringement or unauthorized possession, knowledge or use of any Technology that is the subject matter of this Agreement, including any Joint Technology, in connection with the discovery, research, development, manufacture, use, sale import or commercialization of (i) a Paratek Compound in the Field, or (ii) a Lead Candidate or Product within or outside of the Field (collectively, an “Infringement”), that Party shall promptly notify the other Party and provide it with full details (an “Infringement Notice”). (b) WCCI shall have the first right and option, but not the obligation, to prosecute or prevent an Infringement as WCCI will consider appropriate. If WCCI does not commence an action to prosecute, or otherwise take steps to prevent or terminate the Infringement within one hundred eighty (180) days from any Infringement Notice, then, except with respect to WCCI Technology, Paratek shall have the right and option to take such action as Paratek will consider appropriate to prosecute or prevent such Infringement unless (i) the Infringement is a Tufts IP Infringement, in which case Tufts shall have the right and option to take such action as Tufts will consider appropriate to prosecute or prevent such Infringement or ii) the provisions of Section 9.2.1(c) below shall not permit Paratek to prosecute or prevent such Infringement. Any and all recoveries from any action for infringement shall be shared as follows: (1) if such Infringement is a Tufts IP Infringement and WCCI is prosecuting such action for Infringement, Tufts shall be paid [***] percent ([***]%) of any and all such recoveries, net of costs incurred by WCCI for prosecuting the action, and WCCI shall retain the remaining balance and such remaining balance (net of costs incurred by WCCI for prosecuting the action) shall be treated as Net Sales, subject to the payment of royalties to Paratek in accordance with this Agreement; (2) if such Infringement is a Tufts IP Infringement and Paratek is prosecuting such action for Infringement, Tufts shall be paid [***] percent ([***]%) of any and all such recoveries, net of costs incurred by

 
Paratek for prosecuting the action, and the net balance remaining (net of costs incurred by Paratek for prosecuting the action) shall be retained by Paratek and [***] between Paratek and WCCI, respectively; (3) if such Infringement is a Tufts IP Infringement and Tufts is prosecuting such action for Infringement, Tufts shall be entitled to retain from such recoveries an amount equal to the costs incurred by Tufts in prosecuting such action plus [***] percent ([***]%) of the remaining balance, and the balance remaining after payment of all amounts due to Tufts shall be retained by WCCI and treated as Net Sales; (4) if such Infringement is not a Tufts IP Infringement and WCCI is prosecuting such action for Infringement, such recoveries shall be allocated first, to reimburse WCCI and Paratek for their reasonable out-of-pocket expenses in making such recovery (which amounts shall be allocated pro rata if insufficient to cover the totality of such expenses) and then WCCI shall treat and all such recoveries as Net Sales for purposes of this Agreement, subject to the payment of royalties to Paratek in accordance with this Agreement; and (5) if such Infringement is not a Tufts IP Infringement and Paratek is prosecuting such action for Infringement, such recoveries shall be allocated first, to reimburse WCCI and Paratek for their reasonable out-of-pocket expenses in making such recovery (which amounts shall be allocated pro rata if insufficient to cover the totality of such expenses) and the balance shall be [***] between Paratek and WCCI, respectively. If either of WCCI or Paratek determines that it is necessary for the other Party or any of its Affiliates to join any such suit, action or proceeding, the necessary Party shall, upon written notice from the prosecuting Party, execute (or cause to be executed) all papers and perform such other acts as may be reasonably required in the circumstances; provided, however, neither Party nor such Party’s Affiliates shall be required to transfer any right, title or interest in or to any property to any other Party or any Third Party to confer standing on a Party hereunder. (c) Notwithstanding anything in Section 9.2.1(b) express or implied to the contrary, but subject to the provisions of Section 10.2.5(b)(iii), in no event shall Paratek have the right to prosecute or prevent the Infringement of or relating to (i) WCCI Patent Rights or WCCI Technology or (ii) Paratek Patent Rights, Joint Patent Rights, Paratek Technology or Joint Technology to the extent they pertain solely to Products, Lead Candidates or rights that have been licensed exclusively to WCCI pursuant to Section 7.2.1. Nothing in this Section 9.2.1(c) is intended to limit the rights of Tufts under the Tufts License Agreement and WCCI hereby acknowledges that Tufts may have the right under the Tufts License Agreement to prosecute or prevent an Infringement that Paratek does not have the right to prosecute or prevent by virtue of the provisions of this Section 9.2.1(c). (d) In any action under this Section 9.2.1, the Parties and their respective Affiliates shall fully cooperate with and assist each other. No suit under this Section 9.2.1 may be settled without the approval of the JSC provided, however, any settlement by which Tufts would incur any obligation or liability, whether for the payment of money, the taking of any action, the refraining from any action, or otherwise, shall require the advance written consent of Tufts, which may be withheld in the sole discretion of Tufts without relieving WCCI or Paratek, as the case may be, of any of its indemnification or other obligations hereunder to Tufts. 9.2.2. Defense of Claims. (a) In the event that any action, suit or proceeding is brought against Paratek or WCCI or any Affiliate or sublicensee of either Party alleging the infringement of the

 
Technology or intellectual property rights of a Third Party by reason of the discovery, development, manufacture, use, sale, importation or offer for sale of a Product or use of WCCI Technology, Paratek Technology or Joint Technology in the discovery, Development, Commercialization, manufacture, use, sale, offer for sale, or importation of a Product, then WCCI shall have the sole right and obligation to defend itself and Paratek in such action, suit or proceeding at its sole expense, unless such action, suit or proceeding alleges that the infringement arises from or otherwise pertains to the use of Paratek Technology by Paratek or WCCI to synthesize, generate, make and develop Paratek Compounds, Lead Candidates or Products in which case WCCI shall have the right (but not the obligation) to defend Paratek in such action, suit or proceeding at its sole expense. Paratek shall have the right to separate counsel at its own expense in any action, suit or proceeding being defended by WCCI pursuant to this Section 9.2.2(a). The Parties and their respective Affiliates shall cooperate with each other in the defense of any such suit, action or proceeding. The Parties will give each other prompt written notice of the commencement of any such suit, action or proceeding or claim of infringement and will furnish each other a copy of each communication relating to the alleged infringement. Neither Party nor such Party’s Affiliates shall compromise, settle or otherwise dispose of any such suit, action or proceeding which involves the other’s Technology or Patent Rights without the other Party’s advice and prior consent if such compromise, settlement or other disposition would impair any rights retained by such other Party or any of its Affiliates to use such Technology or Patent Rights, provided that the Party not defending the suit shall not unreasonably withhold its consent to any settlement. If the defending Party agrees that the other Party or any of its Affiliates should institute or join any suit, action or proceeding pursuant to this Section 9.2.2(a), the defending Party may at its expense, join the other Party or any of its Affiliates as a party to the suit, action or proceeding, and the Party or Affiliate so joined shall execute all documents and take all other actions, including giving testimony, which may reasonably be required in connection with the prosecution of such suit, action or proceeding. (b) To the extent that the allegation of infringement is based principally on the use of Joint Technology, such expenses shall be borne equally by the Parties. (c) If as a consequence of such action, suit or proceeding by a Third Party claiming that the discovery, development, manufacture, use or sale of a Product infringes such Third Party’s intellectual property rights, the Parties shall examine and discuss in good faith the consequences of such prohibition or restriction or other conditions on this Agreement and on possible modifications thereto; provided, however, no action will be taken without the agreement of both Parties. ARTICLE 10 : TERMINATION 10.1. Term. This Agreement shall commence on the Effective Date and shall continue until terminated in accordance with the provisions of this Article 10 (the “Term”). 10.2. Termination. This Agreement may be terminated at any time by either Party as follows: 10.2.1. Unilateral Right to Terminate During the Term. WCCI may terminate this Agreement for convenience effective on the last day of each of the first and second Contract

 
Year, provided that WCCI delivers written notice of termination to Paratek at least ninety (90) days prior to such effective date of termination. 10.2.2. Unilateral Right to Terminate After the Term. If at any time on and after the date on which WCCI has commenced Development of a Product (a) WCCI reasonably determines that (i) it would not be commercially viable to continue to Develop and Commercialize such Product and/or obtain Commercialization Regulatory Approval with respect to such Product and (ii) WCCI is unlikely or unable to obtain Commercialization Regulatory Approval with respect to such Product (each, a “Termination Event”), (b) no Backup Compound is ready to be Developed by WCCI and (c) the Parties have not agreed to extend the Development Plan to conduct Development activities with respect to such Backup Compound pursuant to Section 3.5, WCCI shall provide the JSC with written notice which shall describe the Termination Event in reasonable detail. The JSC shall meet as soon as practicable thereafter to determine the additional actions, if any, to be undertaken by the Parties to fulfill the purposes of this Agreement. If the JSC fails to meet or the Parties are otherwise unable to agree upon any such course of action within ninety (90) days of the date of WCCI’s Termination Event notice, then either Party shall have the right to terminate this Agreement by providing written notice of termination within ten (10) days after the expiration of such 90-day period. 10.2.3. Termination for Breach. In the event that either Party defaults or breaches any material term of this Agreement on its part to be performed or observed, the other Party shall have the right to terminate this Agreement (a) by giving thirty (30) days’ written notice to the defaulting Party in the case of a breach of any payment term of this Agreement and (b) by giving sixty (60) days’ written notice to the defaulting Party in the case of any other breach; provided, however, that in the case of a default or breach capable of being cured, if the said defaulting Party shall cure the said default or breach within such notice period after the said notice shall have been given, then the said notice shall not be effective; and provided, further that the provisions of this Section 10.2.3 shall not apply to any material breach of this Agreement arising from a WCCI Diligence Failure (it being understood that Paratek’s sole and exclusive remedies upon any material breach of this Agreement arising from a WCCI Diligence Failure are set forth in Sections 3.9.3). 10.2.4. Termination for Insolvency. In the event that either Party files for protection under bankruptcy laws, makes an assignment for the benefit of creditors, appoints or suffers appointment of a receiver or trustee over its property, files a petition under any bankruptcy or insolvency act of has any such petition filed against it which is not discharged within sixty (60) days of the filing thereof, then the other Party may terminate this Agreement effective immediately upon written notice to such Party. 10.2.5. Consequences of Terminations Under Section 10.2.1. In the event of the termination of this Agreement by WCCI pursuant to Section 10.2.1: (a) all rights and licenses granted by one Party to the other hereunder shall immediately terminate; (b) each Party shall within thirty (30) days of the termination date, destroy, or at the other Party’s request return, all of such other Party’s Confidential Information

 
(other than with respect to maintaining one (1) archival copy of such Confidential Information related thereto for its legal files, for the sole purpose of determining its obligations under this Agreement) and shall provide such Party with certification that all such Confidential Information have been destroyed or returned to such Party as appropriate; (c) the rights and obligations of the Parties and their respective Affiliates provided in Sections 3.11, 7.5.5, 10.2.5, 10.2.8, 12.1, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7 and 14.2 and Articles 1 and 6 hereof shall survive such termination; and (d) except as expressly set forth in this Section 10.2.5 and Section 10.2.8 hereof, all other rights and obligations under this Agreement shall terminate. 10.2.6. Consequences of Terminations Under Sections 10.2.2. In the event of the termination of this Agreement by either Party pursuant to Sections 10.2.2: (a) The licenses granted to WCCI and its Affiliates pursuant to Section 7.2.1 and 7.2.2 hereof and the restrictions on Paratek and its Affiliates pursuant to Sections 3.8 and 7.1.1 shall immediately terminate. (b) WCCI shall be deemed to have granted to Paratek, as of the date of termination, an exclusive (even as to WCCI), worldwide, royalty-free license, with the right to sublicense, in the Field under the WCCI Program Technology, the WCCI Patent Rights as they pertain to WCCI Program Technology, WCCI’s interest in Joint Technology and Joint Patent Rights, and the Product Trademarks to develop, have developed, commercialize, make, have made, use, sell, have sold, offer for sale, distribute for sale, import and have imported those Lead Candidates and Products being Developed or Commercialized by WCCI as of the date of termination. (c) Each Party shall within thirty (30) days of the termination date, destroy, or at the other Party’s request return, all of such other Party’s Confidential Information (other than with respect to maintaining one (1) archival copy of such Confidential Information related thereto for its legal files, for the sole purpose of determining its obligations under this Agreement) and shall provide such other Party with certification that all such Confidential Information have been destroyed or returned to such other Party as appropriate. (d) WCCI shall, within thirty (30) days of the termination date, at the request of Paratek, assign (if assignable under its terms) to Paratek for no additional consideration (other than Paratek’s assumption of WCCI’s obligations) all of WCCI’s rights and obligations under any then-existing agreement with any Third Party that contains any sublicense to such Third Party of any of the rights licensed by Paratek to WCCI pursuant to this Agreement. Paratek shall indemnify and hold harmless WCCI against any and all Third Party claims, damages, losses, liabilities, costs and expenses arising out of events occurring after the assignment incurred or suffered by WCCI in connection with any such agreement assigned to Paratek pursuant to this Section 10.2.6(d) or in connection with any dispute between such Third Party and Paratek as a result of any action taken or not taken by Paratek. (e) If WCCI is manufacturing, or having manufactured, Lead Candidates or Products on the date of termination, (1) WCCI shall supply, or have supplied,

 
Paratek with those of such Lead Candidates or Products, as applicable, that Paratek may reasonably request until the earlier of (A) the date on which Paratek or its designee validates a manufacturing process for such Lead Candidates or Products, it being understood that Paratek shall use Commercially Reasonable Efforts to complete such validation as promptly as practicable and (B) the date that is thirty six (36) months following such termination, pursuant to a transition plan to be agreed upon by the Parties promptly following such termination, (2) Paratek shall pay WCCI [***], for the supply of Lead Candidate or Product, as applicable and (3) WCCI shall provide to Paratek or its designee all information in its possession with respect to the manufacture of Lead Candidate or Product, as applicable. Any and all costs and expenses that WCCI shall incur to Third Party contract manufacturers as a result of complying with the provisions of this Section 10.2.6(e) shall be paid by Paratek. WCCI shall have no liability or otherwise be responsible for any action taken or not taken by any Third Party contract manufacturer of WCCI or for any Lead Candidate or Products supplied by a Third Party pursuant to this Section 10.2.6(e). Paratek shall indemnify and hold harmless WCCI against any and all Third Party claims, damages, losses, liabilities, costs and expenses incurred or suffered by WCCI in connection with Lead Candidates or Products supplied pursuant to this Section 10.2.6(e) or any action taken or not taken by Paratek in connection with such Lead Candidates or Products. (f) Unless prohibited by any Regulatory Authority or under Applicable Laws, WCCI shall promptly (A) transfer to Paratek all of its right, title and interest in all Regulatory Filings and Regulatory Approvals then in its name for all Lead Candidates and Products identified as of the date of termination and all material aspects of Confidential Information Controlled by it as of the date of termination relating to such Regulatory Filings and Regulatory Approvals, (B) notify the appropriate Regulatory Authorities and take any other action reasonably necessary to effect such transfer of ownership, (C) deliver to Paratek all correspondence between WCCI and such Regulatory Authorities relating to such Regulatory Filings and Regulatory Approvals and (D) transfer control to Paratek of all clinical trials being conducted as of the date of termination which relate to the Products and continue to conduct such trials until the earlier of (Y) completion of the transfer and (Z) six (6) months from the termination effective date. Any and all costs and expenses that WCCI shall incur to third parties as a result of complying with the provisions of this Section 10.2.6(b)(vii) shall be paid by Paratek, and any and all internal costs and expenses that WCCI incurs in complying with its obligations under Clause D of this Section 10.2.6(e) shall be paid by Paratek. WCCI shall have no liability or otherwise be responsible for clinical trials that WCCI continues to conduct pursuant to this Section 10.2.6(e), and Paratek shall indemnify and hold harmless WCCI against any and all Third Party claims, damages, losses, liabilities, costs and expenses (“Trial Claims”) incurred or suffered by WCCI in connection with such clinical trial except to such extent the Trial Claims are attributable to WCCI’s gross negligence or willful misconduct. (g) the rights and obligations of the Parties and their respective Affiliates provided in Sections 3.11, 7.5.5, 10.2.6, 10.2.8, 12.1, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7 and 14.2 and Articles 1 and 6 hereof shall survive such termination. (h) Except as expressly set forth in this Section 10.2.6 and Section 10.2.8 hereof, all other rights and obligations under this Agreement shall terminate.

 
10.2.7. Consequences of Terminations Under Sections 10.2.3 or 10.2.4. In the event of the termination of this Agreement by either Party pursuant to Sections 10.2.3 or 10.2.4: (a) If WCCI is the Party giving notice of termination, the following shall apply: (i) WCCI and its Affiliates shall continue to have the licenses granted pursuant to Section 7.2.1 hereof, subject to its continued payment of the applicable milestone and royalty payments with respect thereto as set forth in Sections 5.3.1 and 7.5.1 hereof, and the restrictions on Paratek and its Affiliates pursuant to Sections 3.8 and 7.1 shall remain in effect in accordance with the respective terms thereof; provided that if such termination is a result of a breach by Paratek of its obligations under Sections 3.8 or 7.1.1 then Paratek shall be deemed to have granted to WCCI as of such termination date an exclusive, fully paid up, perpetual, royalty- free license pursuant to Section 7.2.1 without further obligation to continue to make any milestone or royalty payments hereunder; (ii) all rights and licenses granted to Paratek and its Affiliates by WCCI and its Affiliates pursuant to this Agreement shall immediately terminate; (iii) Paratek shall within thirty (30) days of the termination date, destroy, or at WCCI’s request return, all of WCCI’s Confidential Information (other than with respect to maintaining one (1) archival copy of such Confidential Information related thereto for its legal files, for the sole purpose of determining its obligations under this Agreement) and any Proprietary Materials of WCCI, and shall provide WCCI with certification by an officer of Paratek that all such Confidential Information and Proprietary Materials have been destroyed or returned to WCCI, as appropriate; (iv) the rights and obligations of the Parties and their respective Affiliates provided in Sections 3.11, 7.5.5, 10.2.7, 10.2.8 12.1, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7 and 14.2 and Articles 1 and 6 hereof shall survive such termination; and (v) except as expressly set forth in this Section 10.2.7(a) and Section 10.2.8 hereof, all other rights and obligations under this Agreement shall terminate. (b) If Paratek is the Party giving notice of termination, then the following shall apply: (i) The licenses granted to WCCI and its Affiliates pursuant to Sections 7.2.1 and 7.3.1 hereof and the restrictions on Paratek and its Affiliates pursuant to Sections 3.6.3 and 7.1.1 shall immediately terminate. (ii) WCCI shall be deemed to have granted to Paratek, as of the date of termination, an exclusive (even as to WCCI), worldwide, royalty-free license, with the right to sublicense, in the Field under the WCCI Program Technology, the WCCI Patent Rights as they pertain to WCCI Program Technology, WCCI’s interest in Joint Technology and Joint Patent Rights, and the Product Trademarks to develop, have developed, commercialize, make, have made, use, sell, have sold, offer for sale, distribute for sale, import and have imported those Lead

 
Candidates and Products being Developed or Commercialized by WCCI as of the date of termination. (iii) Each Party shall within thirty (30) days of the termination date, destroy, or at the other Party’s request return, all of such other Party’s Confidential Information (other than with respect to maintaining one (1) archival copy of such Confidential Information related thereto for its legal files, for the sole purpose of determining its obligations under this Agreement), and shall provide such other Party with certification that all such Confidential Information have been destroyed or returned to such other Party as appropriate. (iv) WCCI shall, within thirty (30) days of the termination date, at the request of Paratek, assign (if assignable under its terms) to Paratek for no additional consideration (other than Paratek’s assumption of WCCI’s obligations) all of WCCI’s rights and obligations under any then-existing agreement with any Third Party that contains any sublicense to such Third Party of any of the rights licensed by Paratek to WCCI pursuant to this Agreement. Paratek shall indemnify and hold harmless WCCI against any and all Third Party claims, damages, losses, liabilities, costs and expenses arising out of events occurring after the assignment incurred or suffered by WCCI in connection with any such agreement assigned to Paratek pursuant to this Section 10.2.7(b)(iv) or in connection with any dispute between such Third Party and Paratek as a result of any action taken or not taken by Paratek. (v) If WCCI is manufacturing, or having manufactured, Lead Candidates or Products on the date of termination, (1) WCCI shall supply, or have supplied, Paratek with those of such Lead Candidates or Products, as applicable, that Paratek may reasonably request until the earlier of (A) the date on which Paratek or its designee validates a manufacturing process for such Lead Candidates or Products, it being understood that Paratek shall use Commercially Reasonable Efforts to complete such validation as promptly as practicable and (B) the date that is thirty six (36) months following such termination, pursuant to a transition plan to be agreed upon by the Parties promptly following such termination, (2) Paratek shall pay WCCI [***], for the supply of Lead Candidate or Product, as applicable and (3) WCCI shall provide to Paratek or its designee all information in its possession with respect to the manufacture of Lead Candidate or Product, as applicable. Any and all costs and expenses that WCCI shall incur to Third Party contract manufacturers as a result of complying with the provisions of this Section 10.2.7(b)(v) shall be paid by Paratek. WCCI shall have no liability or otherwise be responsible for any action taken or not taken by any Third Party contract manufacturer of WCCI or for any Lead Candidate or Products supplied by a Third Party pursuant to this Section 10.2.7(b)(v). Paratek shall indemnify and hold harmless WCCI against any and all Third Party claims, damages, losses, liabilities, costs and expenses incurred or suffered by WCCI in connection with Lead Candidates or Products supplied pursuant to this Section 10.2.7(b)(v) or any action taken or not taken by Paratek in connection with such Lead Candidates or Products. (vi) Unless prohibited by any Regulatory Authority or under Applicable Laws, WCCI shall promptly (A) transfer to Paratek all of its right, title and interest in all Regulatory Filings and Regulatory Approvals then in its name for all Lead Candidates and Products identified as of the date of termination and all material aspects of Confidential Information Controlled by it as of the date of termination relating to such Regulatory Filings and Regulatory Approvals, (B) notify the appropriate Regulatory Authorities and take any other action

 
reasonably necessary to effect such transfer of ownership, (C) deliver to Paratek all correspondence between WCCI and such Regulatory Authorities relating to such Regulatory Filings and Regulatory Approvals and (D) transfer control to Paratek of all clinical trials being conducted as of the date of termination which relate to the Products and continue to conduct such trials until the earlier of (Y) completion of the transfer and (Z) six (6) months from the termination effective date. Any and all costs and expenses that WCCI shall incur to third parties as a result of complying with the provisions of this Section 10.2.7(b)(vii) shall be paid by Paratek, and any and all internal costs and expenses that WCCI incurs in complying with its obligations under Clause D of this Section 10.2.7(b)(vii) shall be paid by Paratek. WCCI shall have no liability or otherwise be responsible for clinical trials that WCCI continues to conduct pursuant to this Section 10.2.7(b)(vii), and Paratek shall indemnify and hold harmless WCCI against any and all Trial Claims incurred or suffered by WCCI in connection with such clinical trial except to such extent the Trial Claims are attributable to WCCI’s gross negligence or willful misconduct. (vii) the rights and obligations of the Parties and their respective Affiliates provided in Sections 3.11, 7.5.5, 10.2.7, 10.2.8, 12.1, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7 and 14.2 and Articles 1 and 6 hereof shall survive such termination. (viii) Except as expressly set forth in this Section 10.2.7(b) and Section 10.2.8 hereof, all other rights and obligations under this Agreement shall terminate. 10.2.8. No Impairment of Accrued or Matured Claims. Termination or expiration of this Agreement for any reason shall be without prejudice to any claim either Party may have against the other Party, either at law or in equity that was accrued or matured prior to such termination or expiration. ARTICLE 11 : REPRESENTATIONS AND WARRANTIES 11.1. Representations and Warranties of Both Parties. Paratek and WCCI each represents and warrants to the other, as of the Effective Date, as follows: 11.1.1. Tufts License Agreement. As of the Effective Date, the Tufts License Agreement is in full force and effect and Paratek is not in breach or default in the performance of its obligations under the Tufts License Agreement. To the knowledge of Paratek, there has been no breach, default or non-compliance of Paratek under the terms of the Tufts License Agreement. There have been no amendments or other modification to the Tufts License Agreement, except as have been disclosed to WCCI in writing. Paratek has the requisite right under the Tufts License Agreement to grant to WCCI a sublicense of Paratek’s rights under the Tufts License Agreement and to grant to WCCI the licenses under Section 7.3 of this Agreement with respect to all of the intellectual property rights of Tufts licensed to Paratek pursuant to the Tufts License Agreement. 11.1.2. Litigation. As of the Effective Date, there is no litigation pending or, to the knowledge of Paratek, threatened, against Paratek with respect to Paratek Patent Rights existing as of the Effective Date. 11.2. Additional Representations and Warranties of WCCI. WCCI represents and warrants to Paratek as follows:

 
11.2.1. No Infringement. As of the Effective Date, to the knowledge of WCCI, the use of WCCI Technology in connection with the Backup Compound Research Program and in the manner contemplated under this Agreement does not infringe the intellectual property rights of any Third Party. 11.2.2. Litigation. As of the Effective Date, there is no litigation pending or, to the knowledge of WCCI, threatened, against WCCI with respect to WCCI Patent Rights existing as of the Effective Date that WCCI uses in the conduct of the Development. ARTICLE 12 : INDEMNIFICATION 12.1. Indemnification of WCCI by Paratek. Subject to the provisions of this Article 12, Paratek shall indemnify, defend and hold harmless WCCI and its Affiliates and their respective directors, officers, employees, and agents and their respective successors, heirs and assigns (the “WCCI Indemnitees”), against any liability, damage, loss or expense (including reasonable attorneys’ fees and expenses of litigation) (collectively, “Losses”) incurred by or imposed upon the WCCI Indemnitees, or any one of them, in connection with any claims, suits, actions, demands or judgments of Third Parties or Affiliates of Paratek, including without limitation personal injury and product liability matters and claims of suppliers and Paratek employees (except in cases where such claims, suits, actions, demands or judgments result from a breach of this Agreement, or negligence or willful misconduct, on the part of WCCI or its Affiliates or any of their respective employees, agents, contractors and Sublicensees) arising out of (a) any actions of Paratek or its Affiliates or any of their respective employees, agents, contractors and sublicensees in the performance of the Backup Compound Research Program or the Development Plan, (b) the breach of any representation or warranty of Paratek under Article 11 hereof, or (c) the breach of any covenant, agreement or obligation of Paratek under this Agreement. 12.2. Indemnification of Paratek by WCCI. Subject to the provisions of this Article 12, WCCI shall indemnify, defend and hold harmless Paratek and its Affiliates and their respective directors, officers, employees, agents, contractors and their respective successors, heirs and assigns (the “Paratek Indemnitees”), against any Losses incurred by or imposed upon the Paratek Indemnitees, or any one of them, in connection with any claims, suits, actions, demands or judgments of Third Parties or Affiliates of WCCI, including without limitation personal injury and product liability matters and claims of suppliers and WCCI employees (except in cases where such claims, suits, actions, demands or judgments result from a breach of this Agreement, or negligence or willful misconduct, on the part of Paratek or its Affiliates or any of their respective employees, agents, contractors and sublicensees), arising out of (a) any actions of WCCI or its Affiliates or any of their respective employees, agents, contractors and Sublicensees in the performance of the Backup Compound Research Program or the Development or Commercialization of Lead Candidates or Products, (b) the breach of any representation or warranty of WCCI under Article 11 hereof, (c) the breach of any covenant, agreement or obligation of WCCI under this Agreement, (d) the Development, testing, production, manufacture, promotion, import, Commercialization or use by WCCI or any of its Affiliates or Sublicensees of any Product which is manufactured or sold by WCCI or by an Affiliate, Sublicensee, distributor or agent of WCCI (other than Paratek or its Affiliates, contractors, agents or sublicensees), or (e) the use of any Product referred to in the foregoing clause (d) by any end-user customer that acquires such Product directly or indirectly from WCCI or any Affiliate, Sublicensee, distributor or agent of WCCI (other than Paratek or its

 
Affiliates, contractors, agents or sublicensees). Notwithstanding anything express or implied in the foregoing provisions of this Section 12.2, WCCI shall not indemnify any of the Paratek Indemnitees from any Losses incurred by or imposed upon the Paratek Indemnitees, or any one of them, in connection with any claims, suits, actions, demands or judgments of Third Parties or Affiliates of Paratek asserting that the use of the Paratek Technology or the practice of the licenses granted by Paratek under the Paratek Patent Rights and/or the Paratek Technology hereunder, or any portion thereof, in accordance with the terms and conditions of this Agreement, infringe the Technology or intellectual property rights of Third Parties or Affiliates of Paratek. 12.3. Conditions to Indemnification. A Paratek Indemnitee or a WCCI Indemnitee, as applicable, seeking indemnification under this Article 12 (the “Indemnified Party”) shall give prompt notice of the claim to the WCCI or Paratek as the applicable indemnifying party (the “Indemnifying Party”). Provided that the Indemnifying Party is not contesting the indemnity obligation, the Indemnified Party shall (a) permit the Indemnifying Party to control and dispose of any such claims, actions, suits or demands relating to such claim (except for claims, actions, suits or demands subject to the provisions of Section 9.2.2 to the extent that Section 9.2.2 otherwise provides); provided, that, the Indemnifying Party shall act reasonably and in good faith with respect to all matters relating to the settlement or disposition of any claim as the settlement or disposition relates to Parties being indemnified under this Article 12 and provided, further, that the Indemnifying Party shall not settle or otherwise resolve any claim without prior notice to the Indemnified Party and the consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed); and (b) cooperate with the Indemnifying Party in its defense of any claim for which indemnification is sought under this Article 12. The Indemnified Party shall have the right to participate in all legal proceedings, at the Indemnified Party’s sole cost and expense, giving rise to the right of indemnification. 12.4. Contribution. In the event that there is a claim from a Third Party against either or both Parties with respect to any matter as to which each Party has an indemnification obligation to the other Party pursuant to Section 12.1 or Section 12.2, as applicable, then, in lieu of the indemnification provisions of Section 12.1 and 12.2 hereof, either Party shall have a right of contribution against the other Party or both Parties shall have a right of contribution against each other such that the Losses incurred and suffered by both Parties and their respective Affiliates in connection with the matter that is subject to such Third Party claim are shared by both Parties in proportion to the degree of fault of the Parties and their respective Affiliates in causing or giving rise to such matter. 12.5. Warranty Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY NOR SUCH PARTY’S AFFILIATES MAKES ANY WARRANTY WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE FOREGOING. 12.6. Limited Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, NEITHER PARATEK NOR WCCI WILL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT,

 
NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR (I) ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OR LOST PROFITS OR (II) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES. FOR PURPOSES OF THIS SECTION 12.6, IT IS HEREBY UNDERSTOOD AND AGREED THAT ANY INDEMNIFICATION OR CONTRIBUTION CLAIM BY EITHER PARTY AGAINST THE OTHER PARTY UNDER SECTION 12.1, SECTION 12.2 OR SECTION 12.4, AS APPLICABLE, WITH RESPECT TO AMOUNTS OWED, PAID OR REQUIRED TO BE PAID BY AN INDEMNIFIED PARTY TO A THIRD PARTY SHALL NOT BE LIMITED BY VIRTUE OF THIS SECTION 12.6. 12.7. TUFTS DISCLAIMER. EACH OF THE PARTIES ACKNOWLEDGES THAT TUFTS MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED (INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR PURPOSE), AND ASSUMES NO RESPONSIBILITIES WHATSOEVER, WITH RESPECT TO THE PATENTS OR TECHNOLOGY OR THE USE THEREOF, OR THE MANUFACTURE, POSSESSION, USE, MARKETING, SALE, OR OTHER DISPOSITION BY TUFTS, THE PARTIES, OR ANYONE ELSE, OF LICENSED PRODUCT(S) OR ANY OTHER PRODUCTS OF SERVICES (INCLUDING, WITHOUT LIMITATION, PRODUCTS MADE BY TUFTS, AND TUFTS SERVICES, THAT ARE OR WERE FURNISHED TO A PARTY AT ANY TIME BEFORE, ON, OR AFTER THE EFFECTIVE DATE), EXCEPT ONLY AS EXPRESSLY STATED BELOW IN THIS SECTION 12.7. Without limitation of the foregoing generality, nothing contained herein or in any disclosure of the Patents or Technology (as the terms “Patent Rights” and “Technology” are defined in the Tufts License Agreement) made by or on behalf of Tufts shall be construed as extending any representation or warranty with respect to the Patents or Technology or Products or the results to be obtained by the use of the Patents or Technology or any Products, or that anything made, used, or sold by use of the Patents or Technology or any part thereof, alone or in combination, will be free from infringement of patents of third parties. TUFTS SHALL NOT BE LIABLE TO EITHER PARTY, ITS SUBSIDIARIES, ITS SUBLICENSEES, OR ANY OTHER PARTY, REGARDLESS OF THE FORM OR THEORY OF ACTION (WHETHER CONTRACT, TORT, INCLUDING NEGLIGENCE, STRICT LIABILITY, OR OTHERWISE), FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, OR OTHER EXTRAORDINARY DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT, PATENTS, THE TECHNOLOGY, THE PRODUCTS, OR ANY PRODUCTS OR SERVICES FURNISHED OR NOT FURNISHED BY TUFTS, EVEN IF TUFTS HAS BEEN ADVISED OF THE POSSIBILITY THEREOF. 12.8. Insurance. 12.8.1. Clinical Trial Liability. Paratek and WCCI hereby agree that, if required in order for Paratek to comply with its obligations under the Tufts License Agreement, not later than thirty (30) days prior to WCCI’s commencement of any human clinical trial, if at all, of a Product and at all times thereafter until the expiration of all applicable statutes of limitation pertaining to such trial (whether same occurs or exists during or after the existence of the Tufts License Agreement or during or after the License Period as defined in the Tufts License Agreement), WCCI will, at its own expense, obtain and maintain in full force and effect an insurance program consisting of a combination of a self-insurance and third party insurance

 
coverage as further described below, protecting WCCI, Tufts and Paratek against all claims, suits, obligations, liabilities and damages, based upon or arising out of actual or alleged bodily injury, personal injury, death or any other damage to or loss of persons or property caused by WCCI’s activities in the conduct of such clinical trial. WCCI’s third party insurance coverage portion of such insurance program shall consist of a comprehensive general liability insurance policy or policies that include coverage of clinical trial liability. Such insurance policy or policies shall be issued by companies rated by A. M.. Best as A VIII or better (or other companies acceptable to Tufts), shall name each of Tufts and Paratek as an additional named insured, shall have limits of [***] dollars ($[***]) in the aggregate for all covered claims, shall be non-cancelable except upon thirty (30) days prior written notice to each of Tufts and Paratek and shall provide for coverage only in excess of the limits of WCCI’s self-insurance program and shall provide that as to any loss covered by such policy or policies and also by any policies obtained by any additional named insured under WCCI’s policies, WCCI’s policies shall provide primary coverage for such additional named insured and such additional named insured’s policies shall be considered excess coverage for such additional named insured. Notwithstanding anything express or implied in the foregoing provisions of this Section 12.8.1 to the contrary, the rights of Tufts under this Section 12.8.1 shall only be applicable in the case that WCCI commences a human clinical trial of a Product that is a Licensed Product (as “Licensed Product” is defined in the Tufts License Agreement). 12.8.2. Product Liability. Paratek and WCCI hereby agree that, if required in order for Paratek to comply with its obligations under the Tufts License Agreement, not later than thirty (30) days before WCCI shall make, use, or sell, on a commercial basis, a Licensed Product (as “Licensed Product” is defined in the Tufts License Agreement) and at all times thereafter until the expiration of all applicable statutes of limitation pertaining to any such manufacture, marketing, possession, use, sale or other disposition of a Licensed Product (whether same occurs or exists during or after the existence of the Tufts License Agreement or during or after the License Period as defined in the Tufts License Agreement) by WCCI, WCCI will, at its expense, obtain and maintain in full force and effect Third Party insurance coverage consisting of a combination of a self-insurance and third party insurance coverage as further described below protecting WCCI and Tufts against all claims, suits, obligations, liabilities and damages, based upon or arising out of actual or alleged bodily injury, personal injury, death or any other damage to or loss of persons or property caused by any such manufacture, marketing, possession, use, sale, or other disposition. WCCI’s third party insurance coverage portion of such insurance program, shall consist of a comprehensive general liability insurance policy or policies that include coverage of product liability. Such insurance coverage shall consist of a comprehensive general liability insurance policy or policies that include coverage of product liability. Such insurance policy or policies shall be issued by companies rated by A. M. Best as A VIII or better (or other companies acceptable to Tufts), shall name Tufts as an additional named insured, shall have limits of [***] dollars ($[***]) in the aggregate for all covered claims, shall be non-cancelable except upon thirty (30) days prior written notice to Tufts, and shall provide that as to any loss covered thereby and also by any policies obtained by Tufts itself, WCCI’s policies shall provide primary coverage for Tufts and Tufts’ policies shall be considered excess coverage for Tufts. ARTICLE 13 : DISPUTE RESOLUTION 13.1. Dispute Resolution.

 
13.1.1. Escalation to Executive Officers. In the event of any dispute arising between the Parties in connection with this Agreement, the construction thereof, or the rights, duties or liabilities of either Party and such Party’s Affiliates, then such dispute shall be escalated to the respective Executive Officers of the Parties for resolution. If the Executive Officers cannot resolve such dispute within thirty (30) days, then, except as otherwise set forth herein, such dispute shall be resolved by binding arbitration as set forth in Section 13.1.2 below. 13.1.2. Arbitration. Binding arbitration shall occur under the then current Rules for Non-Administered Arbitration and supervision of the American Arbitration Association (the “AAA”), except as otherwise provided herein. If the dispute involves a claim for money in the amount of $[***] ([***] dollars) or less and does not involve any claims relating to ownership, use, or disclosure of intellectual property (other than a claim of unlawful ownership, use or disclosure of intellectual property arising solely from a failure to pay a license fee or royalty), the arbitration shall be before a single neutral arbitrator whom WCCI and Paratek shall select from a panel of persons knowledgeable in the field of drug and pharmaceuticals development and distribution; otherwise, the arbitration shall be before three arbitrators, one selected by WCCI, one selected by Paratek, and the third selected by the two arbitrators selected. Within thirty (30) days after initiation of arbitration, each Party shall select one person to act as arbitrator and the two Party-selected arbitrators shall select a third arbitrator within thirty (30) days of their appointment. If the arbitrators selected by the Parties are unable or fail to agree upon the third arbitrator, the third arbitrator shall be appointed by the AAA. In the event the arbitrators seek the guidance of the law of any jurisdiction, the laws of the State of New York shall govern. All arbitration proceedings will take place in New York, New York. Either Party may apply to the arbitrators for interim injunctive relief until the arbitration decision is rendered or the dispute is otherwise resolved. Either Party also may, without waiving any right or remedy under this Agreement, seek from any court having jurisdiction any injunctive or provisional relief necessary to protect the rights or property of that Party pending resolution of the dispute pursuant to this Section 13.1.2. The arbitrator or arbitrators shall not have the power to award punitive or exemplary damages. The decision and award of the arbitrator or arbitrators shall be final and binding and the award rendered may be entered in any court having jurisdiction. WCCI and Paratek shall each pay its own attorney’s fees associated with the arbitration, and shall pay the other costs and expenses of the arbitration as the rules of the AAA provide. The arbitrators shall make their decision known to both Parties as quickly as possible by delivering written notice of their decision to both Parties. The Parties shall agree in writing to comply with the proposal selected by the arbitration panel within five (5) days of receipt of notice of such selection. The decision of the arbitrators shall be final and binding on the Parties, and specific performance may be ordered by any court of competent jurisdiction. Notwithstanding the provisions of Section 13.1.1 hereof or this 13.1.2, Paratek and WCCI may each petition a court of law for injunctive relief to protect its respective intellectual property or confidential information. ARTICLE 14 : MISCELLANEOUS 14.1. Notices. All notices and communications shall be in writing mailed via certified mail, return receipt requested, courier, or facsimile transmission addressed as follows, or to such other address as may be designated from time to time: If to WCCI: If to Paratek:

 
Warner Chilcott Company Inc. Paratek Pharmaceuticals, Inc. PO Box 1005 75 Kneeland Street Fajardo, Puerto Rico 00738 Boston, MA 02111 Attn: Director, Business Management Attn: Chief Executive Officer Fax: (787) 863 5355 Fax: (617) 275-0039 With a copy to: With a copy to: Warner Chilcott (US), Inc. Mintz, Levin, Cohn, Ferris, Glovsky 100 Enterprise Dr. and Popeo, PC Rockaway, NJ 07866 One Financial Center Attn: General Counsel Boston, Massachusetts 02111 Fax: (973) 443 3310 Attention: Jeffrey M. Wiesen, Esq. Tel: (617) 542-6000 Fax: (617) 542-2241 Except as otherwise expressly provided in this Agreement or in writing by both Parties, any notice, communication or payment required to be given or made shall be deemed given or made and effective (i) when delivered personally; (ii) when delivered by telex or telecopy (if not a payment); or (iii) when received if sent by overnight express or mailed by certified, registered or regular mail, postage prepaid, addressed to parties at their address stated above, or to such other address as such Party may designate by written notice in accordance with accordance with the provisions of this Section 14.1. 14.2. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of New York, without regard to the application of principles of conflicts of law. 14.3. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective legal representatives, successors and permitted assigns. 14.4. Headings. Article, section and subsection headings are inserted for convenience of reference only and do not form a part of this Agreement. 14.5. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original. 14.6. Amendment; Waiver. Except as otherwise expressly provided in this Agreement in connection with the amendment, modification or updating from time to time of certain Exhibits and Schedules to this Agreement, this Agreement may be amended, modified, superseded or cancelled, and any of the terms may be waived, only by a written instrument executed by each Party or, in the case of waiver, by the Party or Parties waiving compliance. The delay or failure of any Party at any time or times to require performance of any provisions shall in no manner affect the rights at a later time to enforce the same. No waiver by any Party of any condition or of the breach of any term contained in this Agreement, whether by conduct, or otherwise, in any one or more instances, shall be deemed to be, or considered as, a further or continuing waiver of any such condition or of the breach of such term or any other term of this Agreement.

 
14.7. No Third Party Beneficiaries. Except as set forth in Sections 7.4 and 12.7 hereof with respect to Tufts and with respect to the WCCI Indemnitees and the Paratek Indemnitees, no Third Party, including any employee of any Party to this Agreement, shall have or acquire any rights by reason of this Agreement. 14.8. Purposes and Scope. Nothing in this Agreement shall be construed (a) to create or imply a general partnership between the Parties, (b) to make either Party the agent of the other for any purpose, (c) to alter, amend, supersede or vitiate any other arrangements between the Parties with respect to any subject matters not covered hereunder, (d) to give either Party the right to bind the other Party or such other Party’s Affiliates, (e) to create any duties or obligations between the Parties except as expressly set forth herein, or (f) to grant any direct or implied licenses or any other right other than as expressly set forth herein. 14.9. Assignment and Successors. Neither this Agreement nor any obligation of a Party hereunder may be assigned by either Party without the consent of the other which shall not be unreasonably withheld, except that each Party may assign this Agreement and the rights, obligations and interests of such Party, in whole or in part, (i) to any of its Affiliates or (ii) to any purchaser of all of its assets and/or all of its assets to which this Agreement relates or to any successor corporation resulting from any merger or consolidation of such Party with or into such corporation (an “Acquiror”); provided, however, that in the case of any Affiliate of a Party, such Affiliate shall be bound by all of the terms and provisions of this Agreement that apply to the rights or obligations assigned to such Affiliate, all to the same extent that the assigning Party is bound, and in the case of any such Acquiror, such Acquiror shall execute a written instrument for the benefit of the non-assigning Party agreeing to become bound by all of the terms and provisions of this Agreement to the same extent that the assigning or selling Party is bound. Whenever any provision of this Agreement expressly provides that any Affiliate or Affiliates of a Party shall be entitled to enjoy any right under this Agreement or shall be burdened or required to be burdened by any obligation under this Agreement, then such Affiliate or Affiliates shall be deemed and treated as permitted assignees of such Party with respect to such right, to the extent that such Affiliate or Affiliates shall actually exercise such right, and shall be deemed and treated as permitted assignees of such Party with respect to such obligation, in either case without any assignment or assumption agreement or any other act being required to be taken by such Party or such Affiliate or Affiliates to evidence the assignment of such right or obligation, as the case may be. Each Party shall be responsible and liable to the other Party for any failure by any Affiliate of such Party to perform any obligation that is expressly provided by the terms of this Agreement to be performed by such Affiliate. Any permitted assignment under this Section 14.9 shall not operate as a release or discharge of any obligations of the assigning Party under this Agreement, and each Party shall be responsible and liable to the other Party for any failure by any permitted assignee of such Party to perform any obligation under this Agreement that has been assigned or deemed to be assigned by such Party to such permitted assignee. Nothing in this Section 14.9 shall be construed to limit in any way the right to grant sublicenses in accordance with the provisions of Section 7.3.4 hereof. 14.10. Force Majeure. Neither WCCI nor Paratek shall be liable for failure of or delay in performing obligations set forth in this Agreement, and neither shall be deemed in breach of its obligations, if such failure or delay is due to a Force Majeure. In event of such Force Majeure

 
event, the Party affected thereby shall use reasonable efforts to cure or overcome the same and resume performance of its obligations hereunder. 14.11. Interpretation. The Parties hereto acknowledge and agree that: (a) each Party and its counsel reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision; (b) the rule of construction to the effect that any ambiguities are resolved against the drafting Party shall not be employed in the interpretation of this Agreement; and (c) the terms and provisions of this Agreement shall be construed fairly as to both Parties and their respective Affiliates and not in a favor of or against either Party or such Party’s Affiliates, regardless of which Party was generally responsible for the preparation of this Agreement. 14.12. Integration; Severability. This Agreement is the sole agreement with respect to the subject matter hereof and supersede all other agreements and understandings between the Parties with respect to the same. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless the absence of the invalidated provision(s) adversely affect the substantive rights of the Parties. The Parties shall in such an instance use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) that, insofar as practical, implement the purposes of this Agreement. 14.13. Further Assurances. Each of Paratek and WCCI agrees to duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including, without limitation, the filing of such additional assignments, agreements, documents and instruments, that may be necessary or as the other Party hereto may at any time and from time to time reasonably request in connection with this Agreement or to carry out more effectively the provisions and purposes of, or to better assure and confirm unto such other Party its rights and remedies under, this Agreement. [Remainder of page intentionally left blank.]

 
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives. PARATEK PHARMACEUTICALS, INC. By: /s/ Thomas J. Bigger Name: Thomas J. Bigger Title: President and CEO WARNER CHILCOTT COMPANY, INC. By: /s/ Anthony D. Bruno Name: Anthony D. Bruno Title: Executive Vice President

 
Exhibit A Development Plan Exhibit A-1

 
[***] Exhibit A pg. 1 of 9

 
[***] Exhibit A pg. 2 of 9

 
[***] Exhibit A pg. 3 of 9

 
[***] Exhibit A pg. 4 of 9

 
[***] Exhibit A pg. 5 of 9

 
[***] Exhibit A pg. 6 of 9

 
[***] Exhibit A pg. 7 of 9

 
[***] Exhibit A pg. 8 of 9

 
[***] Exhibit A pg. 9 of 9

 
Exhibit B Tufts License Agreement [Filed as Exhibit 10.14 with the SEC on March 29, 2021] Exhibit B-1

 
Schedule 1 Lead Candidate List Schedule 1-1

 
[***] Schedule 1 pg. 1 of 1

 
Schedule 2 Backup Compound List Schedule 2-1

 
[***] Schedule 2 pg. 1 of 2

 
[***] Schedule 2 pg. 2 of 2

 
Schedule 3 Joint Press Release Schedule 3-1

 
Warner Chilcott and Paratek Pharmaceuticals Sign Collaboration Agreement for Novel, Narrow-Spectrum Agents for Acne and Rosacea FAJARDO, Puerto Rico and BOSTON, Mass., July 9, 2007 - Warner Chilcott Company, Inc. and Paratek Pharmaceuticals, Inc. announced today that the two companies have entered into an exclusive license agreement for the development and commercialization of novel, narrow- spectrum tetracyclines for the treatment of acne and rosacea. Tetracycline antibiotics are the leading approved systemic treatments of moderate to severe inflammatory acne. Discovered decades ago as broad-spectrum systemic antibiotics, tetracyclines have been shown to be potent anti-acne agents. Paratek has utilized its expertise in chemistry to develop novel narrow-spectrum antibacterial tetracyclines with improved anti- inflammatory activity, tolerability and other properties for the next generation treatment of acne and rosacea. These compounds represent the first tetracycline-derived new molecular entities ever to be synthesized specifically as improved therapeutics for dermatologic diseases. “We look forward to a productive collaboration with Paratek as we work together to progress Paratek’s novel tetracycline products through the development process and into commercialization” said Roger Boissonneault, Chief Executive Officer and President of Warner Chilcott. “We are pleased to announce our collaboration with Warner Chilcott, a proven leader in the development and commercialization of dermatology products,” said Stuart B. Levy, M.D., Co-founder and Chief Scientific Officer of Paratek Pharmaceuticals. “For years, dermatologists have sought therapies with a more targeted spectrum of activity. While effective, currently marketed tetracyclines possess antibacterial activity against a broad number of organisms not associated with acne or rosacea, which can lead to adverse consequences such as resistance development among life-threatening bacteria and persistent side effects. Paratek’s proprietary compounds have been designed to circumvent these issues by better targeting the causative bacteria and retaining potent anti-inflammatory properties.” Under the terms of the agreement, Warner Chilcott will assume responsibility for clinical development of the tetracycline derivative products and will have exclusive rights to market the

 
products in the United States. Paratek received an up-front payment and will be eligible to receive additional payments upon achievement of certain development and regulatory approval milestones. Warner Chilcott will pay a royalty to Paratek on sales of any product under the agreement. The leading candidate under the agreement is in preclinical development and expected to enter clinical development in 2008. Warner Chilcott Company Inc. is a subsidiary of Warner Chilcott Limited (Nasdaq: WCRX). About Warner Chilcott Warner Chilcott is a specialty pharmaceutical company focused on developing, manufacturing, marketing and selling branded prescription pharmaceutical products in women’s healthcare and dermatology in the United States. Read more on www.warnerchilcott.com. About Paratek Pharmaceuticals Paratek Pharmaceuticals, Inc. is engaged in the discovery and commercialization of new therapeutics that treat serious and life-threatening diseases, with a particular focus on the growing worldwide problem of antibiotic resistance. Paratek is advancing novel compounds that can circumvent or block bacterial resistance involving technology initially developed by Paratek co-founder Dr. Stuart Levy’s laboratory at Tufts University School of Medicine, and licensed by Paratek. In addition to its tetracycline-derived antibacterials, Paratek is developing small molecule drugs that can prevent infection by interfering with Multiple Adaptational Response (MAR) mechanisms in bacteria. Outside the antibacterial therapeutic area, Paratek has also established an effort to exploit its novel tetracycline derivatives and their unique mechanism of action in selected anti- inflammatory and neurodegenerative conditions. Paratek has an active chemical synthesis effort to produce novel and diverse small molecules, with the goal of developing non-antibacterial compounds with improved activity in serious inflammatory and neurodegenerative diseases based upon a growing body of clinical and basic research supporting this approach. Paratek is privately held and headquartered in Boston, Massachusetts, USA. For more information, visit Paratek’s website at http://www.paratekpharm.com/. Warner Chilcott’s Forward-Looking Statements

 
This press release contains forward-looking statements, including statements concerning our product development efforts. These statements constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “may,” “might,” “will,” “should,” “estimate,” “project,” “plan,” “anticipate,” “expect,” “intend,” “outlook,” “believe” and other similar expressions are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward- looking statements are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. The following represent some, but not necessarily all, of the factors that could cause actual results to differ from historical results or those anticipated or predicted by our forward- looking statements: our substantial, indebtedness; competitive factors in the industry in which we operate; our ability to protect our intellectual property; a delay in qualifying our manufacturing facility to produce our products or production or regulatory problems with either third party manufacturers upon whom we rely for some of our products or our own manufacturing facility; pricing pressures from reimbursement policies of private managed care organizations and other third party payors, government sponsored health systems, the continued consolidation of the distribution network through which we sell our products, including wholesale drug distributors and the growth of large retail drug store chains; the loss of key senior management or scientific staff; an increase in litigation, including product liability claims and patent litigation; government regulation affecting the development, manufacture, marketing and sale of pharmaceutical products, including our ability and the ability of companies with whom we do business to obtain necessary regulatory approvals; our ability to successfully complete the implementation of a company-wide enterprise resource planning system without disrupting our business; our ability to manage the growth of our business by successfully identifying, developing, acquiring or licensing and marketing new products, obtain regulatory approval and customer acceptance of those products, and continued customer acceptance of our existing products; and other risks detailed from time-to-time in our annual report for 2006 filed with the Securities and Exchange Commission on Form 10-K, our financial statements and other investor communications.

 
We caution you that the foregoing list of important factors is not exclusive. In addition, in light of these risks and uncertainties, the matters referred to in our forward-looking statements may not occur. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as may be required by law. # # # Warner Chilcott Limited Paratek Pharmaceuticals, Inc. Rochelle Fuhrmann Kate Boxmeyer Director, Investor Relations Director of Finance +1-973-442-3200 +1-617-275-0040 ext. 238 rfuhrmann@wcrx.com kboxmever@paratekpharm.com

 
Exhibit 10.2 CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED WITH [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL. PRODUCT AGREEMENT This Product Agreement (this “Product Agreement”) is issued under the Master Manufacturing Services Agreement dated July 28, 2017 and as amended by the First Amendment dated June 1, 2019 and the Second Amendment dated December 18, 2020 between Patheon UK Limited and Paratek Pharmaceuticals, Inc. (the “Master Agreement”), and is entered into as of the date last signed below (the “Effective Date”), between Patheon Pharmaceuticals Inc., a corporation existing under the laws of the State of Delaware, having a principal place of business at 2110 East Galbraith Road, Cincinnati, OH 45237-1625, USA, (“Patheon”) and Paratek Pharmaceuticals, Inc., a corporation existing under the laws of the State of Delaware, of 75 Park Plaza, Boston, MA 02116, USA (“Client” or “Paratek”). The terms and conditions of the Master Agreement are incorporated herein except to the extent this Product Agreement expressly references the specific provision in the Master Agreement to be modified by this Product Agreement. All capitalized terms that are used but not defined in this Product Agreement will have the respective meanings given to them in the Master Agreement. The Schedules to this Product Agreement are incorporated into and will be construed in accordance with the terms of this Product Agreement. 1. Product List and Specifications (See Schedule A attached hereto). 2. Long Term Forecast/ Annual Volume, Pricing [***] (See Schedule B attached hereto). 3. Active Materials, [***] (See Schedule C attached hereto). 4. [***] 5. Territory: [***] 6. Manufacturing Site: [***] 7. Inflation Index: the inflation index is the Producer Price Index for the Pharmaceutical Preparation Manufacturing PCU325412325412, Index Jun 1981=100, Monthly, Not Seasonally Adjusted (“PPI”) published by the United States Department of Labor, Bureau of Labor Statistics. 8. Currency: US Dollars ($) 9. Initial Set Exchange Rate: NA 10. Initial Product Term: per Section 8.1 of the Master Agreement, from the Effective Date until December 31, 2026 11. Key Performance Indicators: Patheon will manufacture and supply Products under this Product Agreement so as to meet the pre-defined performance-based targets and reporting requirements set out in Schedule E and otherwise as mutually agreed by the Parties (“Key Performance Indicators” or “KPIs”). Patheon will provide to Paratek a performance report, which will record Patheon’s performance against each of the KPIs Patheon is responsible for reporting pursuant to Schedule E. Performance reports will be reviewed at meetings of the Supply and Quality Committee. From time to time, and at least once per year, the Supply and Quality Committee will review the KPIs and the performance data collected and reported by Patheon. Upon written agreement of the Parties, the Parties may: a. add new KPIs to permit further measurement or monitoring of the accuracy, quality, cost

 
effectiveness or productivity of Manufacturing Services; b. modify the KPIs to reflect changes in the architecture, standards, strategies, needs or objectives as defined by Paratek; or c. modify the KPIs to reflect agreed upon changes in the manner in which the manufacturing and supply activities are performed. 12. Notices: As stated in Section 13.10 of the Master Agreement 13. Other Modifications to the Master Agreement: [***] Section 2.1(c) of the Master Agreement: For the purposes of this Product Agreement, the Parties agree to substitute the wording in Section 2.1(c) of the Master Agreement by deleting the wording in its entirety and replacing with the following wording: “Components: Patheon will purchase all Components (except for Client-Supplied Components) and will test all Components (including Client-Supplied Components) at Patheon's expense and as required by the Specifications. The Parties will agree in writing on the Specifications for the Components. Incoming testing can be reduced by Patheon and recorded in the Components Specification according to Patheon’s assessment. Full testing of Components will be performed at least once a Year. The Parties acknowledge and agree that the Components (other than Client-Supplied Components) and any Bill Back Items are ancillary or incidental cost components to the Manufacturing Services provided by Patheon and are procured by Patheon only for the Manufacturing Services.” Safety Stock. For the purposes of this Product Agreement, the Parties may discuss in good faith whether to institute a policy for Patheon to keep a safety stock of certain critical Materials in order to facilitate timely Product supply in the quantities ordered by Paratek, such final decision to be made at Patheon’s sole discretion. IN WITNESS WHEREOF, the duly authorized representatives of the Parties have executed this Product Agreement as of the Effective Date set forth above. PATHEON PHARMACEUTICALS INC. By: /s/ Peter Ercoli Name: Peter Ercoli Title: Vice President / General Manager Date: 28 July 2022 5:53 PDT PARATEK PHARMACEUTICALS, INC. By: /s/ Randy Brenner Name: Randy Brenner Title: Chief Development and Regulatory Officer Date: 8/1/2022

 
SCHEDULE A PRODUCT LIST AND SPECIFICATIONS Product List Product Strength [***] Form Packaging Configuration Omadacycline [***] [***] [***] [***] Specifications Prior to the start of commercial manufacturing of Product under this Product Agreement, Client will give Patheon the originally executed copies of the Specifications as approved by the applicable Regulatory Authority, which shall be appropriately referred to in the Quality Agreement. If the Specifications received are subsequently amended, then Client will give Patheon the revised and originally executed copies of the revised Specifications. Upon acceptance of the revised Specifications, Patheon will give Client a signed and dated receipt indicating Patheon’s acceptance of the revised Specifications.

 
SCHEDULE B LONG TERM FORECAST / ANNUAL VOLUME, PRICING [***] Long Term Forecast / Annual Volume Client has provided a non-binding Long Term Forecast of Client’s volume requirements for the Product, as outlined in the tables below. Client will update the forecast in accordance with Section 5.1 of the Master Agreement. Base Volume: [***] Pricing Tables [***] Manufacturing Basis: [***] Packaging Configuration Basis (Assumptions): [***] Testing Assumptions: [***] Supply Chain Assumptions: [***] Costs Included in Price [***] Costs Not Included in Price [***]

 
SCHEDULE C ANNUAL STABILITY TESTING Prior to any stability testing being performed by Patheon on the Products, the Parties all amend this Product Agreement accordingly to include the applicable scope of work and the fees associated with such stability testing.

 
SCHEDULE D ACTIVE MATERIALS Active Materials Supplier Omadacycline Tosylate, PTK0796 (API) [***] [***]

 
Schedule E Paratek-Patheon KPIs Responsible Party # KPI Definition Time of measurement Target Comment Patheon 1 [***] [***] [***] [***] [***] Patheon 2 [***] [***] [***] [***] [***] Paratek 3 [***] [*** ] [***] [***] Patheon 4 [***] [***] [***] [***] Quality Metrics Patheon 5 [***] [***] [***] [***] [***] Patheon 6 [***] [***] [***] [***] Patheon 7 [***] [***] [***] [***] Patheon 8 [***] [***] [***] [***] [***] Paratek 9 [***] [***] [***] [***] Patheon 10 [***] [***] [***] [***] [***]

 

Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Evan Loh, certify that:
1.I have reviewed this Form 10-Q of Paratek Pharmaceuticals, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision; to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ EVAN LOH, M.D.
Evan Loh, M.D.
Chief Executive Officer
November 3, 2022

Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Sarah Higgins, certify that:
1.I have reviewed this Form 10-Q of Paratek Pharmaceuticals, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision; to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ SARAH HIGGINS
Sarah Higgins
Principal Financial Officer
November 3, 2022

Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Evan Loh, M.D., Chief Executive Officer of Paratek Pharmaceuticals, Inc. (the “Company”), hereby certifies that, to the best of his knowledge:
1.The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2022 (the “Quarterly Report”), to which this Certification is attached as Exhibit 32.1 fully complies with the requirements of Section 13(a) or Section 15(d), of the Exchange Act; and
2.The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations the Company.
In Witness Whereof, the undersigned has set his hand hereto as of the 3rd day of November, 2022.
/s/ EVAN LOH, M.D.
Evan Loh, M.D.
Chief Executive Officer
This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Paratek Pharmaceuticals, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Sarah Higgins, Principal Financial Officer of Paratek Pharmaceuticals, Inc. (the “Company”), hereby certifies that, to the best of her knowledge:
1.The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2022 (the “Quarterly Report”), to which this Certification is attached as Exhibit 32.2 fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and
2.The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
In Witness Whereof, the undersigned has set her hand hereto as of the 3rd day of November, 2022.
/s/ SARAH HIGGINS
Sarah Higgins
Principal Financial Officer
This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Paratek Pharmaceuticals, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.