Table 1. Subject Exposure to Omadacycline in Clinical Studies

Abbreviations:  ABSSSI = acute bacterial skin and skin structure infection; CABP = community-acquired bacterial pneumonia; cSSSI = complicated skin and skin structure infections; IV = intravenous; PO = oral.

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Pivotal ABSSSI Phase 3 Clinical Study with IV and Oral Omadacycline

Study Design . As part of the development program agreed with FDA, we conducted a randomized (1:1), double blind, active comparator controlled, Phase 3 study comparing omadacycline and linezolid for the treatment of adults with ABSSSI that was known or suspected to be due to a Gram-positive pathogen(s). Subject randomization was stratified across treatment groups by type of infection (wound infection, cellulitis/erysipelas, and major abscess) and geographic region. All subjects were expected to present with ABSSSI severe enough to require a minimum of at least 3 days of IV treatment. The study consisted of 3 phases:  Screening, Double Blind Treatment, and Follow Up.  All Screening evaluations were performed within 24 hours prior to randomization, except Screening blood cultures, which were collected within 24 hours prior to the first dose of test article.  Subjects who met inclusion criteria and did not meet exclusion criteria were randomly assigned to a treatment group, and received their first dose of test article within 4 hours after randomization.  The FDA primary outcome measure was Clinical Success at the Early Clinical Response, or ECR, at 48 to 72 hours after the first dose of test article in the modified intent-to-treat, or mITT, population.  Clinical Success was defined as; the subject was alive, the size of the primary lesion had been reduced ≥ 20% compared to Screening measurements, without receiving any rescue antibacterial therapy, and the subject did not meet any criteria for clinical failure or indeterminate.  Secondary endpoint for FDA and European Medicines Agency, or EMA, co-primary endpoints included investigator assessment of clinical response at post therapy evaluation, or PTE,visit in the mITT and clinically evaluable PTE, or CE-PTE, populations.

Study Efficacy Results. A total of 655 subjects were randomized (the intent to treat, or ITT population), 329 subjects in the omadacycline group and 326 subjects in the linezolid group (See Table 2).  There were 10 randomized subjects (6 omadacycline, 4 linezolid) who did not receive test article; thus 98.5% subjects received test article (the safety population).  The mITT population included 95.7% subjects because 4.3% subjects had only Gram-negative ABSSSI causative pathogens at Baseline.  The micro-mITT population included 69.5% subjects (228 and 227 subjects in the omadacycline and linezolid groups, respectively), which included subjects with a Gram-positive pathogen alone or in combination with other pathogens. Overall, 80.8% subjects were included in the CE‑PTE population.  

Percentages were based on the ITT population.

ABSSSI = acute bacterial skin and skin structure infection; CE = clinically evaluable; ITT = intent-to-treat; mITT = modified intent-to-treat; micro‑mITT = microbiological modified intent-to-treat; PTE = Post Therapy Evaluation.

Table 3 summarizes ABSSSI lesion area size and other baseline characteristics for the mITT population.  In both groups the baseline lesion sizes were similar (median 299.5 cm ² for omadacycline and 315.0 cm ² for linezolid) and well above the inclusion criteria minimum of 75 cm ² .  

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P-values for differences between treatment groups were from Fisher’s exact test (for categorical variables) or Wilcoxon Rank Sum test (for continuous variables).

max = maximum; min = minimum; mITT = modified intent-to-treat; SD = standard deviation

Table 4 summarizes the primary ABSSSI infection type in the mITT population.  Randomization was stratified by type of infection and the number of subjects with major abscess was limited to no more than 30% of randomized subjects.  The type of primary infections including cellulitis/erysipelas (38.9% omadacycline, 37.9% linezolid), wound infection (32.3% omadacycline, 33.4% linezolid), and major abscess (28.8% omadacycline, 28.6% linezolid) were comparable between treatment groups.  

Percentages were based on the number of subjects with the specific parameter assessed.

ABSSSI = acute bacterial skin and skin structure infection; mITT = modified intent-to-treat.

The primary outcome measure for FDA was ECR at 48 to 72 hours (defined as 48 hours to < 73 hours) after the first dose of test article in the mITT population.  A summary is provided in Table 5.  Omadacycline was found to be non-inferior to linezolid for ECR in the mITT population.  Clinical success rates were high (84.8% omadacycline, 85.5% linezolid) and comparable between both treatment groups (difference [95% CI]:  -0.7 [-6.3, 4.9]).  Given that the lower limit of the 95% confidence interval, or CI for the treatment difference (omadacycline – linezolid) was within the 10% margin, therefore omadacycline was considered non-inferior to linezolid.  The percentages of subjects assessed as either clinical failure or indeterminate were similar between treatment groups.  Reasons for clinical failure at 48 to 72 hours included lack of reduction in lesion size by at least 20% (5.1% omadacycline, 4.5% linezolid), AE requiring discontinuation of test article (1.6% omadacycline, 0.6% linezolid), discontinuation of test article with need for rescue antibacterial therapy (1.3% in both groups), and receipt of potentially effective systemic antibacterial therapy for a different infection than the ABSSSI under study (0.6% omadacycline, 0% linezolid).

Difference was observed difference in early clinical success rate between the omadacycline and linezolid groups.

95% CI was constructed based on the Miettinen and Nurminen method without stratification.

Percentages were based on the number of subjects in each treatment group.

CI = confidence interval; ECR = Early Clinical Response; mITT = modified intent-to-treat.

The number and percentage of subjects classified as clinical success by the investigator’s assessment at PTE in the mITT, and CE-PTE populations calculated for each treatment group is summarized in Table 6.  Clinical success rates were high and similar between the treatment groups at PTE, meeting statistical non-inferiority.  In the mITT population, clinical success at PTE was 86.1% for omadacycline and 83.6% for linezolid.  Reasons for clinical failure at the PTE visit for the mITT population included clinical

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failure at the End of Treatment, or EOT, visit (4.7% omadacycline, 5.8% linezolid), discontinuation of test article with need for rescue antibacterial therapy (3.2% for both groups), and receipt of potentially effective systemic antibacterial therapy for a different infection than the ABSSSI under study (1.9% omadacycline, 1.6% linezolid).  Clinical success rates were also high and similar between treatment groups in the CE population.

Difference was observed difference in overall clinical success rate at PTE between the omadacycline and linezolid groups.

Overall clinical response at PTE was based on the investigator assessment at the EOT and PTE visits.

Percentages were based on the number of subjects in each treatment group.

CE = clinically evaluable; CI = confidence interval; mITT = modified intent-to-treat; PTE = Post Therapy Evaluation.

^b         95% CI was adjusted for type of infection and geographic region based on the Miettinen and Nurminen method with stratification, using Cochran-Mantel-Haenszel weights as stratum weights.  The 4 geographic regions were combined into 1 group.  Infection type was not combined.

Study Safety Results. As seen in Table 7, overall, 48.3% of omadacycline subjects and 45.7% of linezolid subjects had at least 1 Treatment-emergent Adverse Event, or TEAE.  The most commonly reported TEAEs (≥ 5%) were nausea (12.4% omadacycline, 9.9% linezolid), infusion site extravasation (8.7% omadacycline, 5.9% linezolid), subcutaneous abscess (5.3% omadacycline, 5.9% linezolid), and vomiting (5.3% omadacycline, 5.0% linezolid).  A total of 19 subjects (11 omadacycline, 8 linezolid) had serious TEAEs.  No subjects experienced a drug-related serious TEAE.  A total of 13 subjects (6 omadacycline, 7 linezolid) had a TEAE that led to premature discontinuation of test article.  The frequency of drug related TEAEs was comparable between the 2 treatment groups (18.0% omadacycline, 18.3%, linezolid).  The most commonly reported drug-related TEAEs (≥ 2% for any group) were nausea (9.6% omadacycline, 6.5% linezolid), vomiting (4.0% omadacycline, 2.8% linezolid), alanine aminotransferase, or ALT, increased (2.5% omadacycline, 2.8% linezolid), diarrhea (2.2% omadacycline, 2.2% linezolid), and aspartate aminotransferase, or AST, increased (1.9% omadacycline, 2.5% linezolid).  

Coding of SOCs and PTs were based on MedDRA Version 17.1.

Percentages were based on the safety population.

A TEAE was defined as an AE occurring after first dose of active test article.

A subject with multiple occurrences of an AE under 1 treatment was counted only once in the AE category for that treatment.

AE = adverse event; ALT = alanine aminotransferase; AST = aspartate aminotransferase; TEAE = treatment-emergent adverse event.

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Overall, the TEAEs ALT increased (2.8% omadacycline, 4.3% linezolid) and AST increased (2.5% omadacycline, 3.7% linezolid) occurred at a higher percentage in the linezolid group compared to the omadacycline group.  Treatment releated TEAEs of ALT increased occurred in 2.5% omadacycline subjects and 2.8% linezolid subjects.   Treatment-related TEAEs of AST increased occurred in 1.9% omadacycline subjects and 2.5% linezolid subjects.  All such TEAEs were considered mild or moderate in severity and no AE resulted in discontinuation of test article.

Other TEAEs of potential interest regarding liver chemistry values showed comparable incidence between treatment groups and included blood bilirubin increased (0.9% omadacycline subjects, 0.3% linezolid subjects), gamma glutamyl transferase, or GGT, increased (0.6% subjects in each treatment group), and blood alkaline phosphatase increased (0.3% subjects in each treatment group).  Table 8 shows the ALT, AST and Bilirubin outliers, which appear to similar between omadacycline and linezolid.  No Hy’s law cases occurred in this study on either omadacycline nor linezolid.  

Baseline was defined as the value closest to but prior to the initiation of test article administration.

Percentages were based on number of subjects with a normal level at Baseline and had an assessment at that visit.

Local lab results were used when central lab assessments were not available.

ALT = alanine aminotransferase; AST = aspartate aminotransferase; EOT = End of Treatment; PTE = Post Therapy Evaluation; ULN = upper limit normal.

Table 9 summarizes the protocol-specified Clinically Notable, or CN, values for HR, systolic blood pressure, or systolic BP, and diastolic blood pressure, or diastolic BP, at any post-Baseline time point.  Across all of these analysis criteria, there were only minor differences between the treatment groups.  Only 11 subjects (5 omadacycline, 6 linezolid) had a HR ≥ 120 bpm at any post-Baseline time point.

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Baseline was defined as the value closest to but prior to the initiation of test article administration.

Percentages were based on the number of subjects with the specific parameter assessed.

BP = blood pressure; bpm = beats per minute; CN = clinically notable; HR = heart rate.

Figure F-1 presents the mean values over time for HR, shown as change from Baseline.  Because the decline in HR generally was more rapid for the linezolid subjects compared to omadacycline subjects, at any given post‑Baseline time point, the mean HR in omadacycline subjects was slightly higher than linezolid subjects (difference of < 5 bpm at all time points).

Of note, during the study, sinus tachycardia was reported as a TEAE in only 1 omadacycline subject (mild severity and not related to test article) and no linezolid subjects.  No subjects in either group reported palpitations.

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Figure  F-1. Change from Baseline HR (bpm) Mean Results Over Time (Safety Population)

The EOT visits were summarized with the study day of the visit up to Day 10.  The EOT values on Day 2 were summarized under Day 2 Pre.

BL = Baseline; bpm = beats per minute; D = Day; LZD = linezolid; OMC = omadacycline; SE = standard error.

Study Conclusions. Overall, the efficacy of omadacycline was comparable to linezolid in the treatment of adults with ABSSSI and omadacycline was determined to be non-inferior to linezolid (based on a predefined 10% non-inferiority margin) for the FDA and EMA primary endpoints.  In addition, both omadacycline and linezolid were found to be safe and well tolerated.

Early Terminated (truncated) cSSSI Phase 3 Clinical Study

Study Design . We designed our Phase 3 clinical trial pursuant to the then-current 1998 FDA guidance on developing antimicrobial drugs for the treatment of complicated skin and skin structure infections, or cSSSI. The primary objective of the clinical trial was to establish that omadacycline as a monotherapy was not inferior to linezolid, with or without moxifloxacin, as a treatment for patients with serious skin infections. Following randomization, patients initially received either IV therapy with 100 mg of omadacycline every 24 hours with the ability to switch to 300mg of oral omadacycline, or 600 mg of linezolid every 12 hours, with the ability to switch to 600mg oral linezolid. For patients with infections suspected or documented as involving gram-negative bacteria, the blinded physician had the option of providing additional antibiotic therapy to patients, with patients assigned to the linezolid arm receiving 400 mg of moxifloxacin every 24 hours and patients assigned to omadacycline receiving a placebo, since omadacycline has activity against some of the most common gram-negative bacteria that commonly cause these infections, to match the dosing regimen of linezolid-treated patients.  This study had 143 subjects randomized, 140 patients received at least one dose of study drug. Of those 140 subjects, 68 were randomized to omadacycline and 72 were randomized to linezolid. Cellulitis was present in 92 of the 140 patients who received at least one dose of study drug. Although we terminated this trial before reaching its enrollment goal due to the evolving regulatory landscape, and therefore precluding any statistical conclusions with regard to non-inferiority, the overall clinical success rates were similar between omadacycline- and linezolid. The overall incidence of adverse events was similar in both treatment groups. There were no clinically significant alterations of cardiovascular, renal or hepatic safety laboratory values. One death occurred in a patient randomized to omadacycline who presented with undiagnosed metastatic lung cancer after being assessed as cured following the test of care, or TOC, visit. Study investigators did not consider any of the serious adverse events reported to be related to either omadacycline or linezolid.

cSSSI Phase 2 Clinical Study

We designed, conducted and completed a randomized Phase 2 clinical trial with the primary objective of comparing the safety and tolerability of omadacycline to linezolid in patients with cSSSI. Our key secondary objectives involved comparing the efficacy of omadacycline to linezolid and assessing the PK properties of omadacycline.

Following randomization, patients initially received IV therapy with 100 mg of omadacycline every 24 hours, or 600 mg of linezolid every 12 hours. For patients with infections suspected or documented as involving gram-negative bacteria, the blinded physician had the option of providing additional IV antibiotic therapy to patients, with patients assigned to the linezolid group also

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receiving two grams of aztreonam every 12 hours, and patients assigned to the omadacycline group receiving a placebo to match the dosing regimen of linezolid-treated patients. Based on a blinded physician’s assessment of the appropriateness of hospital discharge and continuation of oral therapy, most patients then transitioned to oral therapy. For oral therapy, patients randomized to omadacycline received 200 mg of omadacycline (dosed as two 100 mg capsules) every 24 hours. Patients randomized to linezolid received one 600 mg tablet of linezolid every 12 hours. Patients in both groups received an average of five to six days of oral therapy following an average of 4.3 days of IV therapy.  219 patients received at least one dose of the study drug in our Phase 2 clinical trial, 111 patients were randomly selected to be treated with omadacycline and 108 were randomly selected to be treated with linezolid. Clinical response was measured in two study populations, ITT and clinically evaluable, or CE. The ITT population in this clinical trial refers to all enrolled subjects who received at least one dose of study drug, and the CE population refers to all ITT subjects who had a qualifying infection and were treated and evaluated as defined in the protocol.  Although not powered to demonstrate statistical non-inferiority, results from this Phase 2 study demonstrated that the efficacy of omadacycline was comparable to linezolid for both the ITT and CE populations. The observed safety results of the study among the 111 omadacycline-treated patients, 46 (41.4%) experienced one or more TEAEs and 24 (21.6%) experienced one or more adverse events assessed as potentially treatment-related. By comparison, among the 108 linezolid-treated patients, 55 (50.9%) experienced one or more TEAEs and 33 (30.6%) experienced adverse events assessed as potentially treatment-related. In both arms of the clinical trial, the most frequently involved organ system was the gastrointestinal tract, with adverse events reported in 21 (18.9%) omadacycline-treated patients and 18 (16.7%) linezolid-treated patients. There were three serious adverse events reported in this clinical trial, one in an omadacycline-treated patient and two in linezolid-treated patients. The study investigator considered the event in the omadacycline-treated patient, which involved worsening confusion, to be unrelated to the study therapy.  There were no significant alterations of cardiovascular, renal or hepatic safety laboratory values.

Phase 1 Clinical Studies

We assessed omadacycline in over 20 single-dosing and multiple-dosing Phase 1 clinical trials for both the IV and oral formulations, involving more than 600 healthy volunteer subjects.

We have also recently completed clinical Phase 1 studies with omadacycline that are needed for inclusion in the planned NDA regulatory filing with the FDA.  These studies include PK, studies in special populations (ESRD subjects) and PK-lung penetration studies in healthy volunteers.  In addition, we conducted a Phase 1b study in female patients with cystitis (uUTI) to evaluate the PK in plasma and urine to demonstrate the proof of principal of omadacycline at a potential treatment in UTI.  

Phase 1 Clinical Study in End-Stage Renal Disease patients, and Matched Controls:

Study Design. This study was designed as an open-label, single-dose, two-period, parallel group study to compare the PK and safety of single IV doses of omadacycline in adult subjects with ESRD on a stable hemodialysis regimen and healthy adult subjects.  Healthy adult subjects were matched to adult subjects with ESRD based on gender, age (± 5 years), and weight (± 10 kg).  Subjects were screened for enrollment into the study within 28 days (Days -28 to -2) prior to administration of omadacycline on Day 1 of Period 1. Those who met eligibility criteria at screening were admitted to the clinical research unit on Day -1 for baseline assessments.  Subjects were enrolled into the following two treatment groups:  ESRD subjects on stable hemodialysis (n=8) received a single dose of omadacycline 100 mg IV infusion post-dialysis; after a washout period of 10 to 20 days they received an additional dose of omadacycline 100 mg IV infusion pre-dialysis and matched healthy subjects (n=8) received a single dose of omadacycline 100 mg IV infusion.  Blood samples were collected for determination of plasma test article concentrations at specified times up to 68 hours after dose administration.  Healthy subjects had PK urine samples collected at specified times up to 72 hours post dose.  Dialysate samples were collected from ESRD subjects at specified times during Period Two.  Approximately one week (± 3 days) after the last test article administration, subjects underwent study completion evaluations and were discharged from the study.  Safety assessments included physical examinations, electrocardiograms, or ECGs, vital signs, standard clinical laboratory evaluations (hematology, chemistry, urinalysis [healthy subjects]), pregnancy assessments, and AE monitoring.  

Study PK Results. A total of 16 subjects were enrolled in the study (8 assigned to each cohort) and all subjects completed the study.  All subjects were included in both the Safety Population and the PK Population.  Mean plasma concentration-time profiles of omadacycline following single IV doses of 100 mg are presented in Figure F‑2.

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Figure F ‑ 2 Arithmetic Mean (+/-SD) Plasma Omadacycline Concentration vs Time Plots Overlaid by Cohort and Treatment Period (PK Population) (Linear and Semi-log) (N = 8 per cohort)

Following a single IV dose of 100 mg in ESRD subjects and healthy subjects, plasma omadacycline concentration time profiles declined in a biphasic manner.  The mean plasma omadacycline concentration time profiles were visually superimposable in the ESRD subjects (Period 1 and 2) and healthy control subjects. The profiles indicate that omadacycline exposure was similar between the subjects with ESRD (dosed after or prior to hemodialysis) and matched healthy control subjects.  During dialysis in ESRD subjects, the mean percentage of the omadacycline cleared by hemodialysis compared to the total clearance of omadacycline was 47.8%. However, due to its low total systemic clearance (10.1 to 10.6 L/h) and large volume of distribution (194 to 214 L), the actual percent of the omadacycline dose in the dialysate during dialysis was only 7.89% (7.89 mg).  The results indicate that renal impairment did not have an impact on the overall extent of exposure (AUC0-last and AUC0-inf) and total clearance, or CL, and a relatively small effect on the Cmax comparison.

Study Safety Results. Overall, 5 of 16 subjects (31.3%) experienced a total of 8 TEAEs during the study.  The TEAEs included upper respiratory infection (2), viral upper respiration infection, dizziness, headache, infusion site erythema, bronchospasm, and rash papular. One additional subject had an AE of injection site hematoma that was not treatment emergent.  The bronchospasm and one of the upper respiratory infections were moderate in severity, all others were mild in severity.  Only the dizziness and rash were considered related to the study drug.  There were no Serious Adverse Events, or SAEs, or deaths reported.  No subjects withdrew from the study due to an AE.

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Study Conclusions. The results indicate that renal impairment did not have an effect on the overall extent of exposure (AUC0-last and AUC0-inf) nor on its CL Vd or t1/2. The effect on Cmax was considered small and not clinically relevant.  The mean t1/2 following IV administration of 100 mg of omadacycline ranged from 17.1 to 18.9 hours across the cohorts and periods.  The mean CL ranged from 10.1 to 10.6 L/h.  Despite 27% of dose being eliminated in urine of healthy subjects, a similar overall CL was observed between ESRD subjects and healthy subjects.  Hemodialysis had little to no effect on exposure.  No dose adjustment is required for ESRD subjects relative to healthy subjects.  No dose adjustment is required for ESRD subjects on days receiving hemodialysis.  Single, IV injections of 100 mg omadacycline were safe and well tolerated in normal healthy volunteers and in ESRD subjects.

Phase 1 Clinical Study Multiple Dose Administration of Oral Tablets of Omadacycline (MDPO):

Study Design. The primary objective of the study was to assess and compare the pharmacokinetics of 300, 450, and 600 mg doses of oral omadacycline administered daily over five days.  The secondary objective of the study was to evaluate the safety and tolerability of multiple doses of omadacycline in healthy adult subjects.  This was a Phase 1, randomized, double-blind, 3-period, crossover study in healthy adult subjects. The study consisted of a screening period (Day ⎼ 21 through Day ⎼ 2), 3 baseline periods (Day ⎼ 1 of each period), 3 treatment periods (Day 1 through Day 6 of each period), and a study completion visit (within six to 10 days after the last dose of study drug in Period 3). There was a washout of at least 5 days between the last dose in 1 period and the first dose in the next period.  On Day 1 through Day 5 of each period, subjects received, after a fast of 6 hours, one of the following treatments according to the randomization schedule:  A. 300 mg omadacycline (2 × 150 mg tablets) or placebo for 300 mg omadacycline (2 × placebo tablets); B. 450 mg omadacycline (3 × 150 mg tablets) or placebo for 450 mg omadacycline (3 × placebo tablets); C. 600 mg omadacycline (4 × 150 mg tablets) or placebo for 600 mg omadacycline (4 × placebo tablets).  

Study PK Results. A total of 30 subjects were planned, and 33 subjects were enrolled in the study. In total, 28 subjects (84.8%) completed the study and 5 subjects (15.2%) discontinued from the study.  All 33 subjects (100.0%) were included in the safety population, of which, 25 omadacycline treated subjects (96.2%) were included in the PK population.  Mean (+ SD) plasma concentrations of omadacycline versus time by dose group for Day 1 and Day 5 are presented in Figures F-3 and F-4, respectively.

Figure F-3 Mean (+ SD) Plasma Concentrations of Omadacycline Versus Time by Dose Group ‑ Day 1 (Pharmacokinetic Population)

Abbreviations = PK, pharmacokinetic; SD = standard deviation

Treatment A: 300 mg omadacycline (2 × 150-mg tablets)

Treatment B: 450 mg omadacycline (3 × 150-mg tablets)

Treatment C: 600 mg omadacycline (4 × 150-mg tablets)

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Figure F-4 Mean (+ SD) Plasma Concentrations of Omadacycline Versus Time by Dose Group ‑ Day 5 (Pharmacokinetic Population)

Abbreviations: PK = pharmacokinetic; SD = standard deviation

Treatment A: 300 mg omadacycline (2 × 150-mg tablets); Treatment B: 450 mg omadacycline (3 × 150-mg tablets); Treatment C: 600 mg omadacycline (4 × 150-mg tablets)

Study Safety Results. TEAEs were reported by 10 of 26 (38.5%) omadacycline-treated subjects and 2 of 7 (28.6%) placebo-treated subjects. The TEAEs were mild in 7 of 10 omadacycline treated subjects and 1 of 2 placebo-treated subjects. The remaining subjects with TEAEs had at least 1 moderate TEAE; there were no severe TEAEs reported. Three omadacycline-treated subjects (11.5%) and 1 placebo-treated subject (14.3%) discontinued from the study due to TEAEs.  There were no clinically meaningful changes over time or differences between groups in hematology or urinalysis parameters. Serum chemistry results were notable only for a small dose-dependent increase in median ALT values. Between baseline and Day 5 of each omadacycline dosing period, the median change in ALT was ⎼ 2.0 IU/L for 300 mg, +5.0 IU/L for 450 mg, and +19.5 IU/L for 600 mg. The corresponding changes for the placebo groups ranged from ⎼ 5.0 to ⎼ 1.0 IU/L. There were no clinically meaningful changes in median AST, bilirubin, alkaline phosphatase, or other chemistry parameters.

Study Conclusions . Omadacycline exposure increased with increases in once-daily oral dosing from 300 mg to 600 mg. Across this dose range, the increase in omadacycline exposure (based on AUC) on Day 5 was approximately 88% of that predicted if exposure were perfectly dose proportional. Statistical analyses showed that both AUC and Cmax exhibited less than dose proportional increases over this dose range.  Based on AUC, omadacycline total exposure on Day 5 was approximately 1.4- to 1.6-fold the total exposure observed on Day 1.  Single oral doses of 300, 450, and 600 mg omadacycline were generally well tolerated by healthy adult subjects in the current study.  There were no deaths, SAEs or severe TEAEs reported. Four subjects discontinued from the study due to TEAEs: 1 subject in each of the 3 omadacycline dose groups and 1 subject in the placebo group.  There were no clinically significant findings in vital sign measurements, physical examination findings, and 12-lead ECG results for this study.  Laboratory analyses identified a small median increase in ALT values, particularly for the omadacycline 600 mg group. Three subjects had out-of-range serum chemistry values (ALT, AST, amylase, and/or lipase) that were considered clinically significant and reported as TEAEs during the study.

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Phase 1 Clinical Study Multiple Dose Administration of IV omadacycline Lung Concentration Study (BAL):

Study Design. The objectives of the study were to determine concentrations of omadacycline in pulmonary epithelial lining fluid, or ELF, and alveolar macrophages, or AM, define time course of pulmonary distribution relative to plasma PK, and determine PK of omadacycline in pulmonary and plasma compartments compared to tigecycline.  62 subjects were randomized in this open-label study to multiple IV doses (four days) of omadacycline (100 mg IV at 0, 12, 24, 48, and 72 hours) or tigecycline (100 mg IV, then 50 mg IV at 12, 24, 36, 48, 60, and 72 hours).  After the last dose, bronchoscopy with BAL was performed at 1 of 7 time points (n=6 per time point) for omadacycline or at 1 of 4 time points (n=5 per time point) for tigecycline.  

Study PK Results. 42 subjects received omadacycline (69% male, median age 36 y, median BMI 27 kg/m2). Of these 42 subjects, six subjects had BAL at each of the 7 time points. One subject had a BAL sampling error and was not included in BAL analyses. Mean (± SD) plasma pharmacokinetic parameters after the fifth omadacycline dose included maximum concentration of 2.12 ± 0.68 µg/mL, volume of distribution of 190 ± 53 L, clearance of 8.79 ± 2.21 L/h, and elimination half-life of 16.0 ± 3.5 h. Mean (± SD) omadacycline concentrations (µg/mL) at time of bronchoscopy and BAL were:

 Figure F-5 depicts the mean concentration time curves for the Alveolar Cell, ELF, and plasma.

Figure F-5 Mean (± SD) Concentrations of Omadacycline versus Time (PK Population) for Plasma, ELF, and AM

Penetration ratios based on AUC0-24 values of mean and median ELF and plasma concentrations were 1.47 and 1.42, respectively, whereas ratios of AM to plasma concentrations were 25.8 and 24.8, respectively.

Study Safety Results. TEAEs were reported in 29% of omadacycline subjects. The most common TEAE in omadacycline subjects was headache (12%). No severe or serious TEAEs and no discontinuations due to TEAEs were reported in omadacycline

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subjects. There were no clinically significant changes in vital signs, laboratory or ECG parameters. Omadacycline demonstrated a favorable tolerability profile for gastrointestinal, or GI, events such as nausea and vomiting compared to tigecycline.  

Study Conclusions - The in vitro activity against common typical and atypical pathogens and the sustained ELF and AM concentrations for 24 hours suggest that omadacycline has the potential to be a useful antibacterial agent for the treatment of lower respiratory tract bacterial infections caused by susceptible pathogens.

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

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

Study Results . Overall, 31 subjects (11 in Group 1 and 10 in each of Groups 2 and 3) were randomized and received the study drug at three study sites. All but one subject completed the intended five days of study treatment (1 subject in Group 1 withdrew consent). Subjects were females and they ranged in age from 19 to 75 years (mean 42 years overall).  Plasma PK results on Day 1 showed the highest omadacycline exposure following the 200-mg IV dose in Group 1 (geometric mean AUC _0-24 15557 h*ng/mL). The Day 1 geometric mean AUC _0-12 value for Group 2 was 6152 h*ng/mL (following the first 300 mg po dose) and, for Group 3, the value was 6686 h*ng/mL (following the first 450 mg po dose). By Day 5 the geometric mean AUC _0-24 values for Groups 1 and 2 were 9555 h*ng/mL and 12375 h*ng/mL, respectively following 300 mg po doses, and for Group 3 the value was 18693 h*ng/mL following the 450 mg po dose.  At steady state (Day 5), the geometric mean cumulative amount of drug excreted in urine from time t0 to t24 (Ae0-24) values for Groups 1, 2, and 3 were 21.72 mg, 31.46 mg, and 43.60 mg, respectively. Relative to the absorbed amount of omadacycline, this corresponds to geometric mean fraction of the dose excreted unchanged in urine from 0 to 24 hours after dosing (Fe0-24) for Groups 1, 2, and 3 on Day 5 of 20.7%, 30.0%, and 27.7%, respectively. The highest mean omadacycline urine concentration value (65360 ng/mL [65.4 µg/mL]) was observed in Group 1 over 0 to 4 hours after the 200 mg IV dose on Day 1. The mean values across all other intervals/Groups ranged from 11699 to 48117 ng/mL (ie, 11.7 to 48.1 µg/mL).  The most common TEAEs in all groups were gastrointestinal, most notably nausea (60% to 73% per group) and vomiting (20% to 40% per group), all of which were of mild or moderate intensity. No subjects in the study discontinued study treatment because of these TEAEs. No subjects in this study experienced severe TEAEs or SAEs, leading to premature discontinuation of the study drug.  

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Figure F-6 Mean (± SD) Plasma  Concentrations  of  Omadacycline Three  Dose  Levels  on  Days  1 (Left Panel) and 5 (Right Panel)

Figure F-7 Mean  (± SD)  Urine Concentrations of Omadacycline Three Dose Levels on Days 1 (Left Panel) and 5 (Right Panel)

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

We believe that the results of the recently and previously completed Phase 1 clinical studies appeared to show that omadacycline:

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From our End-of-Phase 2 meeting with the FDA regarding omadacycline, the FDA stated that our anticipated preclinical package for this product candidate could be acceptable to support the submission and review of an NDA. We have initiated the normal pre-NDA activities to confirm with the FDA the completeness of our preclinical, clinical, and CMC package to be included in the NDA submission. Based on preliminary discussions with the FDA, we believe that as a result of the implementation of new pregnancy labeling guidelines at the FDA, additional preclinical studies may need to be conducted to ensure complete data is available for the pregnancy section of label. We also intend to initiate a pediatric PK study following the submission of the omadacycline NDA in order to meet Pediatric Research Equity Act, or PREA, requirements. On February 16, 2016 we reached agreement with the FDA on the terms of the pediatric program associated with PREA. FDA has granted Paratek a waiver from conducting studies with omadacycline in children less than 8 years old and a deferral in conducting studies in children 8 years and older until safety and efficacy is established in adults.  

Preclinical Studies

We have conducted preclinical studies to assess the safety of omadacycline, including 13-week IV and oral studies in rats and monkeys to assess for efficacy in animal models of bacterial infections. In vitro and in vivo testing indicated the potential clinical utility of omadacycline in ABSSSI, CABP and UTI. The following table in the Microbiology sections shows the in vitro activity of omadacycline against a broad range of bacterial pathogens found in ABSSSI, CABP and UTI, as assessed in independent laboratories using bacteria isolated from clinical specimens.

Clinical bacterial isolate minimum inhibitory concentration, or MIC, data from Phase 3 clinical trials will determine the susceptibility or resistance breakpoint levels of omadacycline for the bacteria noted in the following tables in the Microbiology sections. MIC values are indicative of a bacterium’s susceptibility or resistance to a particular antibiotic. A lower MIC value indicates potentially greater potency in vitro . Susceptibility and resistance data from other tetracycline-like compounds provide some guidance with regard to expected results for omadacycline. Historically, with older tetracyclines, MIC values for gram-positive bacteria were considered susceptible up to two micrograms per milliliter, or µg/mL, and for most gram-negative bacteria up to four µg/mL. Traditionally, bacteria considered resistant had MIC values for gram-positive bacteria of eight µg/mL and above, while gram-negative bacteria were considered resistant with MIC values of 16 µg/mL and higher.

Pharmacodynamic Characteristics Supporting Omadacycline Clinical Development in CABP

The microbiologic attributes of omadacycline, its effectiveness in non-neutropenic animal infection models, and its human pharmacokinetics suggest that omadacycline will be efficacious in CABP. Omadacycline has demonstrated in vitro activity against the most common bacterial pathogen, Streptococcus pneumoniae (MIC90=0.06 to 0.12 µg/ml) and against H. influenzae (MIC90= 1.0 µg/ml) and Legionella pneumophila (MIC90= 0.25 µg/ml). Based on pharmacodynamics modeling using animal infection models, and taking into consideration an intact immune system, the projected efficacious plasma area under the curve, or AUC, to be attained in pneumonia would be between 0.5 and 1.1 µg*hr/ml. This would correspond to an AUC/MIC ratio between 4.3-8.9. In humans, omadacycline has been shown to have a steady-state plasma AUC of approximately 10 µg*hr/ml.  Utilizing a MIC90 of 0.125 µg/ml for S. pneumoniae (the principle pathogen in CABP), the calculated AUC/MIC ratio is approximately 80 —well above the expected

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AUC required for projected clinical efficacy based upon these animal models. Other factors may also contribute to efficacy, including low protein binding (< 20% in humans) and high lung tissue concentrations (in rats, omadacycline concentrations are 5.8 times greater than plasma concentrations).  Finally, the BAL ELF levels in humans further amplified the projected exposure of omadacycline in human lung.  

The microbiologic and pharmacokinetic attributes of omadacycline also compare favorably to tigecycline, which was approved for the treatment of moderate to severe CABP (IV-only) with robust clinical efficacy in two pivotal Phase 3 registration CABP studies. Whereas the activity of omadacycline against S. pneumoniae is similar (0.06-0.125 µg/ml compared to 0.06 for tigecycline), the human plasma AUC (approximately 4.7 µg*hr/ml for tigecycline versus approximately 10 µg*hr/ml for omadacycline) and human protein binding (>80% for tigecycline and <20% for omadacycline) suggests greater free drug concentrations of omadacycline in human plasma. Human lung concentration ratios above plasma for tigecycline are approximately similar to the human lung concentration ratios above plasma of omadacycline. These data, in totality, suggest that the pharmacodynamics characteristics of omadacycline compare favorably to tigecycline and support the clinical development of omadacycline in CABP.

(1)      Vancomycin-sensitive enterococcus, or VSE

(2)      Vancomycin-resistant enterococcus, or VRE

(3)      Penicillin-resistant S. pneumonia , or PRSP

a         Jones et al. Surveillance 2015.  Data on file.

b         Jones et al. Surveillance 2011.  Data on file

c         Micromyx report (Anaerobic Bacterial Pathogens) 2016.

d         DuBois, J. et al. 2016. In vitro Bacterial and Intracellular Activity of Omadacycline Against Legionella pneumophila . 26th ECCMID. Poster P1323

e         Waites, K. In Vitro Activities of Paratek Investigational Compound Omadacycline (PTK 0796) and Other Antimicrobial Agents Against Human Mycoplasmas. 2016

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

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

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

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

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

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In a U.S. Medacorp survey issued in 2013, 97.1% of the 103 surveyed physicians believed that their patients with a resistant E.coli could benefit from a new well tolerated bioequivalent IV/oral antibiotic. Furthermore, surveyed physicians suspected high levels of multi-drug resistant E- coli, or MDR-E, resistant to oral antibiotics in community UTIs. Almost half of the physicians surveyed suspected a MDR-E in 10-20% of community UTIs and 12% suspect MDR-E in greater than 20% of community UTIs. The U.S. Medacorp survey confirmed MDR-E resistant to oral antibiotics in the treatment of community UTIs is high, with 19% resistance to trimethoprim/sulfamethoxazole, 16% to beta-lactams (ESBL +ve) only, 18% to quinolones only, 14% to at least two of the three traditional classes, and 10% resistant to all three classes of antibiotic.

Omadacycline may provide a potential treatment option in patients with MDR-E. Further clinical trial investigation is planned given omadacycline’s renal clearance >40% with parent compound and potentially well-tolerated once-daily IV/oral profile.

Ongoing Studies

Phase 3 Oral-Only ABSSSI Study

The Phase 3 clinical trial of omadacycline for the treatment of ABSSSI is designed to be a randomized, controlled and double-blinded multi-center study targeting the enrollment of approximately 700 patients in the United States, in which we will compare oral omadacycline to oral linezolid. The clinical trial design contemplates two days of 450mg once daily of omadacycline, followed by one 300 mg orally of omadacycline every 24 hours on subsequent days, compared to one 600 mg oral dose of linezolid every 12 hours. All subjects may be treated for up to 14 days. All medications will follow a double-blinded and double-dummy blinding design.

The primary endpoint for this clinical trial is non-inferiority of omadacycline compared to linezolid in the mITT population using a 10% non-inferiority margin. The mITT population refers to all randomized subjects without a potentially causative gram-negative causative pathogen at baseline. The primary endpoint for FDA purposes in this clinical trial will be ECR, which, according to the most recent FDA guidance issued in October 2013, refers to a greater than or equal to 20% reduction in lesion size compared to baseline assessed at 48 to 72 hours after initiation of treatment. For European Medicines Agency, or EMA, purposes, the primary endpoint will be clinical response at TOC, determined 16 to 20 days after the initial dose. Secondary endpoints include microbiological response and safety. In addition, drug levels in plasma will be assessed in a subset of the patients enrolled in the clinical trial. Major skin infection subclasses that will be allowed in the study include cellulitis, wound and major abscesses, all with a minimum infection lesion total surface area of contiguous involvement of greater than or equal to 75 square centimeters, or cm. The proportion of patients enrolled with major abscesses will not exceed 30% of the total enrolled population. Patients who have previously taken effective long half-life (24 hours or greater) antibiotics for the treatment of an infection within 72 hours of receiving the first dose of study medication will be excluded from enrollment.

Clinically Completed Phase 3 CABP Study

The Phase 3 clinical trial of omadacycline for the treatment of CABP, pursuant to our SPA agreement with the FDA, is designed to be a randomized, controlled and double-blinded multi-center study targeting the enrollment of approximately 750 patients globally, in which we compare IV and oral forms of omadacycline to moxifloxacin. The clinical trial design contemplates two 100 mg IV doses of omadacycline (dosed at a 12 hour interval) on the first day of treatment, followed by one 100 mg IV dose of omadacycline every 24 hours on subsequent days, with a potential switch to one 300 mg oral dose (two 150 mg tablets) of omadacycline every 24 hours, compared to one 400 mg IV dose of moxifloxacin every 24 hours, with a potential switch to one 400 mg oral dose every 24 hours. All subjects may be treated for up to 14 days. All medications will follow a double-blind and double-dummy blinding design.

The primary endpoint for this study is non-inferiority of omadacycline compared to moxifloxacin in the ITT population using a 10% non-inferiority margin. The ITT population in this clinical trial refers to all randomized patients. The primary endpoint for FDA purposes in this clinical trial will be the improvement in at least two of four patient-reported symptoms (cough, sputum production, chest pain and shortness of breath) without deterioration in any of the four symptoms at 72 to 120 hours after initiation of treatment, which is referred to as ECR in relation to CABP. For EMA purposes, the primary endpoint will be clinical response at TOC, determined 16 to 20 days after the initial dose. Key secondary endpoints include microbiological response, safety and all-cause mortality. At least 85% of the patients in the study will be required to have moderate-to-severe CABP, as defined by the protocol. Patients who have previously taken a dose of a short acting, potentially effective antibiotic for the treatment of an infection within 72 hours of receiving the first dose of study medication will be allowed for enrollment but only up to 25% of the total ITT population. While we anticipate that all patients will be initiated on IV treatment in a hospital setting, depending on physician assessment, patients may be subsequently discharged to oral therapy for both treatment arms.

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Sarecycline

Sarecycline is a novel, next-generation tetracycline that we designed specifically for dermatological use. We exclusively licensed the U.S. rights to sarecycline for the treatment of acne to Allergan, who funds all U.S. development costs for this program. In exchange for license rights, we earn milestone payments upon the achievement of development and regulatory progress, of which a $4.0 million payment for the initiation of the Phase 3 acne vulgaris clinical studies in December 2014, and was received in January 2015, with $17.0 million remaining to be achieved, and a royalty on eventual net sales, if any. The next milestone is $5.0 million upon NDA submission. Allergan has recently reported that they expect top-line data from the Phase 3 studies in the first half of 2017.  We retain development and commercialization rights outside of the United States, which are available for licensing to other partners in key international markets, such as the European Union, Japan, the rest of Asia, Canada, and Latin America. Allergan completed a Phase 2 clinical trial in early 2013 of sarecycline for the treatment of acne, the results of which were presented at an Allergan investor day conference in February 2015. In addition, we granted Allergan an exclusive license to develop and commercialize sarecycline for the treatment of rosacea in the United States, which converted to a non-exclusive license in December 2014 after Allergan did not exercise its development option with respect to rosacea. There are currently no clinical trials in rosacea underway.

Market

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

The most common oral treatments prescribed by dermatologists are tetracycline derivatives, which dermatologists widely accept as a therapy for moderate to severe acne. A common side effect associated with the use of any broad-spectrum antibacterial agent is gastrointestinal upset and antibiotic-associated infections caused by the destruction of the normal bacterial flora. In addition, we believe there is a growing concern and awareness of the development of antibiotic-resistant bacteria from the heavy use of broader-spectrum antibiotics, such as the older-generation tetracyclines, when broad-spectrum antibacterial therapy is not necessary. Similarly, for patients with severe acne, we believe that oral retinoid drugs are the leading option, but these drugs are not universally effective and also can carry potentially serious side effects. Therefore, we believe there is an unmet need for an improved tetracycline for this market.

Development

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

Other Product Candidates

We also have discovered and developed a series of product candidates through to proof-of-concept stage in animal models. Some of these tetracycline-derived, novel molecular entities were designed to utilize the recognized immune-modulation, anti-inflammatory and other beneficial properties of the tetracycline class. These research stage programs include potential product candidates for multiple sclerosis, spinal muscular atrophy, systemic inflammatory diseases such as rheumatoid arthritis and inflammatory bowel diseases, and an oral, narrow-spectrum, tetracycline-derived compound with activity against Clostridium difficile in vitro and in a rodent model of Clostridium difficile-associated diarrhea . We are currently evaluating which of these programs, if any, we may elect to develop further.

Commercialization Strategy

Assuming approval from regulatory authorities, we currently intend to market omadacycline as an empiric monotherapy that will be commercialized worldwide for the treatment of serious, community-acquired bacterial infections. We retain worldwide commercial rights to omadacycline. In the United States and Europe, we continue to reserve the right to either commercialize omadacycline alone, through one or more pharmaceutical companies that have established commercial capabilities, or some combination thereof.

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

We exclusively licensed U.S. rights to Allergan to develop and commercialize sarecycline for the treatment of acne. In addition, we granted Allergan an exclusive license to develop and commercialize sarecycline for the treatment of rosacea in the United States, which converted to a non-exclusive license in December 2014 after Allergan did not exercise its development option with respect to rosacea. There are currently no clinical trials in rosacea under way. We retain development and commercialization rights to sarecycline in all other regions of the globe. We plan to leverage the existing development and commercialization infrastructure of one or more potential partners to advance sarecycline through registration and commercialization outside of the U.S.

Competition

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

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

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

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

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

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

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Manufacturing

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

For omadacycline, the manufacturing process has been refined to commercial scale. The active pharmaceutical ingredient manufacturing process is an efficient three-step synthesis followed by purification and salt formation.  The starting material is minocycline, which is a well characterized generic active ingredient. We have produced stable IV and oral drug product formulations. Clinical production of omadacycline has yielded room temperature stability through at least three years. In 2016 we completed three registration batches each for the IV and oral formulations of omadacycline, which have subsequently been put on stability testing.  We have entered into commercial supply agreements with qualified commercial manufacturers that also provided omadacycline for phase 3 clinical use, and we intend to use these manufacturers to complete process validation in support of potential market authorization filing, approval and launch.

CIPAN

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

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

Carbogen

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

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

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Almac

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

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

Research and Development

We have and will continue to make substantial investments in research and development. Our research and development expenses totaled $83.5 million, $50.8 million and $5.0 million in 2016, 2015 and 2014, respectively.

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

Intellectual Property

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

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

As of December 31, 2016, our patent portfolio of owned or exclusively licensed patents and applications includes 61 issued U.S. patents, 32 pending U.S. patent applications and corresponding foreign national or regional counterpart patents or applications. We expect that the patents and patent applications in this portfolio, if issued, and if the appropriate maintenance, renewal, annuity or other government fees are paid, would expire between 2020 and 2037, excluding any additional terms from patent term adjustments or patent term extensions under the Hatch-Waxman Amendments.

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Omadacycline

The patent portfolio for omadacycline is directed to cover compositions of matter, formulations, salts and polymorphs, manufacturing methods and methods of use. The patents and patent applications covering omadacycline include patents and patent applications owned by us. In some corresponding foreign patents and patent applications, omadacycline is covered along with other compounds in patents and patent applications that are owned jointly by us and Tufts University that are subject to a license agreement we have with Tufts University. The issued composition of matter patent in the United States (U.S. Patent No. 7,553,828), if the appropriate maintenance, renewal, annuity, or other governmental fees are paid, is expected to expire in 2023. We believe that an additional term of potentially up to five years for one of our omadacycline patents may result from the patent term extension provision of the Hatch-Waxman Amendments of 1984. Omadacycline has received QIDP designation under the Generating Antibiotic Incentives Now Act, or the GAIN Act. This may provide up to an additional five years of market exclusivity layered with protection provided by the Hatch-Waxman Amendments, which enables exclusivity to 2028. We expect that the other patents and patent applications in this portfolio, if issued, and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, would expire between 2021 and 2037, excluding any additional terms from patent term adjustments or patent term extensions under the Hatch-Waxman Amendments.

Sarecycline

The patent portfolio for our acne and rosacea program is directed to cover compositions of matter, methods of use, as well as salts and polymorphs of sarecycline. As of December 31, 2016, our patent portfolio includes issued U.S. Patent No. 8,318,706, or the ‘706 Patent, which covers composition of matter of sarecycline and issued U.S. Patent No. 8,513,223, or the ‘223 Patent, and corresponding foreign national or regional counterpart applications. The ‘706 Patent is expected to expire in 2031, and the ‘223 Patent is expected to expire in 2029, if the appropriate maintenance, renewal, annuity or other governmental fees are paid. We may also be entitled to an extension of the patent term for one of the patents covering sarecycline pursuant to the patent term extension provision of the Hatch-Waxman Amendments, as described in the section “U.S. Government Regulation – Patent Term Restoration and Marketing Exclusivity.”

Intermezzo

As of December 31, 2016, our patent portfolio of owned or exclusively licensed patents and applications includes four issued U.S. patents, two pending U.S. patent applications and corresponding foreign national or regional counterpart patents and applications which are directed to formulations and methods of use. The issued U.S. patents expire between 2025 and 2029.

Trade Secrets

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

Trademarks

We have registered trademarks and service marks for PARATEK and PARATEK & HEXAGON DESIGN, which we presently use or may use in connection with our pharmaceutical research and development as well as with our product candidates, in the United States, European Union, Japan, Korea, Taiwan, and Singapore, and pending applications in other international jurisdictions.  In addition, we have registered the trademark and service mark PARATEK POSITIVE PATIENT STORIES in the European Union, Japan, Korea, and Australia, and pending applications in the United States and other international jurisdictions, which we presently use or may use in connection with the research and development of pharmaceuticals, drugs and antibiotics and the test, evaluation research and development of antibiotics and other pharmaceutical products, respectively.  In connection with the ongoing development and advancement of our products and services in the United States and in various international jurisdictions, we routinely seek to create protection for our marks and enhance their value by pursuing trademarks and service marks where available and when appropriate.    

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Collaborations and License Agreements

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

Allergan plc

In July 2007, we and Warner Chilcott Company, Inc. (now part of Allergan), entered into a collaborative research and license agreement, or the Allergan Collaboration Agreement, under which we granted Allergan an exclusive license to research, develop and commercialize tetracycline products for use in the United States for the treatment of acne and rosacea. 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 converted to a non-exclusive license for the treatment of rosacea as of December 2014. Under the terms of the Allergan Collaboration Agreement, we and Allergan are responsible for, and are obligated to use, commercially reasonable efforts to conduct specified development activities for the treatment of acne and, if requested by Allergan, we may conduct certain additional development activities to the extent we determine in good faith that we have the necessary resources available for such activities. Allergan has agreed to reimburse us for its costs and expenses, including third-party costs, incurred in conducting any such development activities.

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

We earned an upfront fee in the amount of $4.0 million upon the execution of the Allergan Collaboration Agreement, $1.0 million upon filing of an Investigational New Drug Application, or IND, in 2010, and $2.5 million upon initiation of Phase 2 trials in 2012. In December 2014, we also earned $4.0 million upon initiation of Phase 3 trials associated with the Allergan Collaboration Agreement. In addition, Allergan may be required to pay us an aggregate of approximately $17.0 million upon the achievement of specified future regulatory milestones, the next being $5.0 million upon acceptance by the FDA, of a NDA submission. Allergan is also obligated to pay us tiered royalties, ranging from the mid-single digits to the low double digits, based on net sales of tetracycline compounds developed under the Allergan Collaboration Agreement, with a standard royalty reduction post patent expiration for such product for the remainder of the royalty term. Allergan’s obligation to pay us royalties for each tetracycline compound it commercializes under the Allergan Collaboration Agreement expires on the later of the expiration of the last to expire patent that covers the tetracycline compound in the United States and the date on which generic drugs that compete with the tetracycline compound reach a certain threshold market share in the United States.

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

Tufts University

In February 1997, we and Tufts University, or Tufts, entered into a license agreement under which we acquired an exclusive license to certain patent applications and other intellectual property of Tufts related to the drug resistance field to develop and commercialize products for the treatment or prevention of bacterial or microbial diseases or medical conditions in humans or animals

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

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

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

Purdue Pharma L.P.

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

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

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

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

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

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

Shin Nippon Biomedical Laboratories Ltd.

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

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

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Past Collaborations

Novartis International Pharmaceutical Ltd.

In September 2009, we and Novartis International Pharmaceutical Ltd., or Novartis, entered into a Collaborative Development, Manufacture and Commercialization License Agreement, or the Novartis Agreement, for the co-development and commercialization of omadacycline, which included a $70 million upfront payment from Novartis to us, future development and sales milestone payments and future royalty payments, depending on the success of omadacycline. Under the agreement, Novartis was to have led development activities for omadacycline, and we were to have co-developed omadacycline and contributed a share of our development expense.

The Novartis Agreement provided that Novartis would bear the majority of all direct development costs incurred in connection with omadacycline and would assume all responsibility for the manufacturing of omadacycline. The agreement provided Novartis with a global, exclusive patent license for the development, manufacturing and marketing of omadacycline.

Novartis had the right to terminate the agreement without cause upon providing 60 days’ advance written notice. Novartis provided us with a notice of intent to terminate the agreement on June 29, 2011, and the termination became effective 60 days later. While Novartis terminated the agreement without cause, Novartis indicated that it elected to terminate the agreement due to the then-existing delays and uncertainties experienced in connection with the regulatory pathway for approval of omadacycline in two core indications, ABSSSI and CABP.

In January 2012, we and Novartis entered into a letter agreement, or the Novartis Letter Agreement, in 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, the EMA, or any regulatory agency, but only to the extent that we have not previously granted such commercialization rights for omadacycline to another third party as of any such approval.

Under the Novartis Letter Agreement, we agreed to pay Novartis $2.9 million as reconciliation of development costs and expenses. In June 2014, we amended the Novartis Letter Agreement, as amended, and Novartis agreed to convert the full amount of development cost share plus any accrued interest into a 0.25% royalty, to be paid from net sales received by us in any country following the launch of omadacycline in that country and continuing until the later of expiration of the last active valid patent claim covering such product in the country of sale and 10 years from the date of first commercial sale in such country. The amended Novartis Letter Agreement resulted in a long-term liability in the amount of $3.6 million for the year ended December 31, 2016 and 2015 included within “Other Long Term Liabilities” on our consolidated balance sheet. There are no other payment obligations to Novartis under the Novartis Agreement or the Novartis Letter Agreement.

Global Animal Health Provider

In May 2014, we and a leading global animal health provider terminated an existing collaborative research, license and commercialization agreement. We have no future obligations under this agreement, and the leading global animal health company retains no rights to our technology. As a result of this termination, in 2014, we recognized the remaining $0.3 million of deferred revenue related to the upfront and milestone payments received in 2007 and 2008.

Government Regulation

Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, labeling, packaging, promotion, storage, advertising, distribution, marketing and export and import of products such as those we are developing. Our drugs must be approved by the FDA through the NDA process before they may be legally marketed in the United States.

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U.S. Government Regulation

NDA Approval Processes

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

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

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

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

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

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

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

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

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The PREA requires a sponsor to conduct pediatric studies for most drugs and biologic, for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs, biologics license applications, or BLAs and supplements thereto must contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or the FDA may request a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that the drug or biologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected before the pediatric studies begin. The FDA must send a non-compliance letter to any sponsor that fails to submit the required assessment, keep a deferral current or submit a request for approval of a pediatric formulation. On February 16, 2016 we reached agreement with the FDA on the terms of the pediatric program associated with PREA.  The FDA has granted Paratek a waiver from conducting studies with omadacycline in children less than 8 years old and a deferral in conducting studies in children 8 years and older until safety and efficacy is established in adults.  

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

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

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

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

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

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

Expedited Review and Approval

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

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

Beyond GAIN Act

In addition to the GAIN Act, the United States Congress has initiated a significant number of legislative proposals to provide further incentives in anti-infective development. Such legislation includes the following:

Patent Term Restoration and Data Exclusivity

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

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

Pediatric Exclusivity

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

Post-approval Requirements

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval. In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs. The FDA and other authorities also strictly regulate the promotional claims that may be made about prescription products, and our product labeling, advertising, and promotion will be subject to continuing regulatory review. If approved, physicians nevertheless may prescribe our products to their patients in a manner that is inconsistent with the approved label or that is off-label. Positive clinical trial results for any approved products that are also subject to further review for additional indications increase the risk that the approved product may be used off-label. If we are found to have promoted off-label uses, we may be subject to significant liability, including sanctions, civil and criminal fines, and injunctions prohibiting us from engaging in specified promotional conduct.

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

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

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

Other Healthcare Laws

We may be subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which we conduct our business. Such laws include, without limitation, state and federal anti-kickback, false claims, false statements, civil monetary penalties, privacy and security and physician payment transparency laws.

The number and complexity of both federal and state laws continues to increase, and additional governmental resources are being added to enforce these laws and to prosecute companies and individuals who are believed to be violating them. While it is too early to predict what effect these changes will have on our business, we anticipate that government scrutiny of pharmaceutical sales and marketing practices will continue for the foreseeable future and subject us to the risk of government investigations and enforcement actions. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and financial results.

Foreign Regulation

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

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

In light of the United Kingdom’s vote in 2016 to leave the European Union, the so-called Brexit vote, there may be changes forthcoming in the scope of the EU marketing authorization approval procedure, as well as changes to the UK’s national medicines laws, as the terms of that exit are negotiated between the United Kingdom and the European Union.  

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Coverage and Reimbursement

Significant uncertainty exists regarding the coverage and reimbursement status of products approved by the FDA and other government authorities. Sales of our products will depend, in part, on the extent to which our products will be covered by third-party payors, such as government health programs, commercial insurance and managed healthcare organizations. The process for determining whether a third-party payor will provide coverage for a drug product typically is separate from the process for setting the price of a drug product or for establishing the reimbursement rate that the payor will pay for the drug product once coverage is approved. Third-party payors may limit coverage to specific drug products on an approved list, also known as a formulary, which might not include all of the FDA-approved drugs for a particular indication. A decision by a third-party payor not to cover Intermezzo or our product candidates could reduce physician utilization of our products once approved. Moreover, a third-party payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. Additionally, coverage and reimbursement for drug products can differ significantly from payor to payor. One third-party payor’s decision to cover a particular drug product or service does not ensure that other payors will also provide coverage for the medical product or service, or will provide coverage at an adequate reimbursement rate. As a result, the coverage determination process will require us to provide scientific and clinical support for the use of our products to each payor separately and will be a time-consuming process.

These third-party payors are increasingly reducing reimbursements for medical products and services. Additionally, the containment of healthcare costs has become a priority of federal and state governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Decreases in third-party reimbursement for our product candidates or a decision by a third-party payor to not cover our product candidates could reduce physician usage of the product candidate and have a material adverse effect on our sales, results of operations and financial condition. We expect that the pharmaceutical industry will experience pricing pressures due to the increasing influence of managed care (and related implementation of managed care strategies to control utilization), additional federal and state legislative and regulatory proposals to regulate pricing of drugs, limit coverage of drugs or reduce reimbursement for drugs, public scrutiny and the Trump administration’s agenda to control the price of pharmaceuticals through government negotiations of drug prices in Medicare Part D and importation of cheaper products from abroad.  While we cannot predict what executive, legislative and regulatory proposals will be adopted or other actions will occur, such events could have a material adverse effect on our business, financial condition and profitability.

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

Health Care Reform

In the United States, there have been and continue to be a number of significant legislative initiatives to contain healthcare costs. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or MMA, established the Part D to provide a voluntary prescription drug benefit to Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities that will provide coverage of certain outpatient prescription drugs. Unlike the Medicare Part A and Part B programs, Part D coverage is not standardized. Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies which drugs it will cover and at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic committee. Government payment for some of the costs of prescription drugs may increase demand for products for which we receive marketing approval. However, any negotiated prices for Intermezzo or our products covered by a Part D prescription drug plan will likely be lower than the prices we might otherwise obtain. Alternatively, Medicare beneficiaries may obtain prescription drug coverage under a Medicare Advantage plan, administered by a commercial health plan under a contract with the Centers for Medicare & Medicaid Services, or CMS. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own

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payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from non-governmental payors.

The American Recovery and Reinvestment Act of 2009 provided funding for the federal government to compare the effectiveness of different treatments for the same illness. A plan for the research is developed by the U.S. Department of Health & Human Services, the Agency for Healthcare Research and Quality and the National Institutes for Health, and periodic reports on the status of the research and related expenditures are made to Congress. Although the results of the comparative effectiveness studies are not intended to mandate coverage policies for public or private payors, it is not clear what effect, if any, the research will have on the sales of our product candidates if any such products or the conditions that they are intended to treat are the subject of a study. It is also possible that comparative effectiveness research demonstrating benefits in a competitor’s product could adversely affect the sales of Intermezzo or our product candidates. If third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, continues to have a significant impact on the healthcare industry. The ACA requires certain manufacturers to disclose their financial relationships with physicians (and their family members) and teaching hospitals and expands coverage for the uninsured while at the same time containing overall healthcare costs. With regard to pharmaceutical products, among other things, the ACA expanded and increased industry rebates for drugs covered under Medicaid programs and made changes to the coverage requirements under Part D.

Modifications to or repeal of all or certain provisions of the ACA are expected as a result of the outcome of the recent presidential election and Republicans maintaining control of Congress, consistent with statements made by Donald Trump and members of Congress during the presidential campaign and following the election. We cannot predict the ultimate content, timing or effect of any changes to the ACA or other federal and state reform efforts.  There is no assurance that federal or state health care reform will not adversely affect our business and financial results, and we cannot predict how future federal or state legislative, judicial or administrative changes relating to healthcare reform will affect our business.

Other legislative changes have been proposed and adopted in the United States since ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This included aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013 and, due to legislative amendments, will remain in effect through 2024 unless additional Congressional action is taken. In addition, the American Taxpayer Relief Act of 2012 further reduced Medicare payments to several categories of healthcare providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Employees

As of February 28, 2017, we had 50 total employees, 48 of whom are full-time employees, 24 of whom were primarily engaged in research and development activities. A total of 8 employees have an M.D. or Ph.D. degree. None of our employees are represented by a labor union, and we consider our employee relations to be good.

Financial and Segment Information

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

Available Information

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

Our internet web site address is www.paratekpharma.com . We make available, free of charge at the “Investors” portion of our web site, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those

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reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Reports of beneficial ownership filed pursuant to Section 16(a) of the Exchange Act are also available on our web site. Information in, or that can be accessed through, this web site is not part of this Annual Report on Form 10-K.