10-Q

f

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended: September 30, 2017 or

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

For the transition period from to

Commission file number: 001-36066

PARATEK PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

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

75 Park Plaza

Boston, MA 02116

(617) 807-6600

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of October 31, 2017 there were 27,941,015 shares of the registrant's common stock, par value $0.001 per share, outstanding.

TABLEOF CONTENTS

		Page
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2017 and 2016	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 6.	Exhibits	34
	SIGNATURES	37

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Paratek Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

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

(unaudited)

	September 30, 2017			December 31, 2016
Assets
Current assets
Cash and cash equivalents	$	32,995		$	52,962
Available-for-sale securities		130,445			75,076
Restricted cash		162			817
Other receivable		—			323
Prepaid and other current assets		2,604			2,922
Total current assets		166,206			132,100
Restricted cash		250			250
Fixed assets, net		1,922			1,188
Intangible assets, net		229			1,015
Goodwill		829			829
Other long-term assets		298			350
Total assets	$	169,734		$	135,732
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	2,858		$	4,418
Other accrued expenses		8,340			6,428
Accrued contract research		4,599			9,566
Total current liabilities		15,797			20,412
Long-term debt		49,079			38,974
Contingent obligations		84			655
Other liabilities		4,902			4,099
Total liabilities		69,862			64,140
Commitments and contingencies (Note 15)
Stockholders’ equity
Preferred stock:
Undesignated preferred stock, $0.001 par value; 5,000,000 shares authorized;    no shares issued and outstanding		—			—
Common stock, $0.001 par value; 100,000,000 shares authorized; 27,892,040 and    23,358,637 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		28			23
Additional paid-in capital		548,144			451,947
Accumulated other comprehensive loss		(80	)		(16	)
Accumulated deficit		(448,220	)		(380,362	)
Total stockholders’ equity		99,872			71,592
Total liabilities and stockholders’ equity	$	169,734		$	135,732

See accompanying notes to unaudited condensed consolidated financial statements.

2

Paratek Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)

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

See accompanying notes to unaudited condensed consolidated financial statements.

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Paratek Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	For the Nine Months Ended September 30,
	2017			2016
Net loss	$	(67,176	)	$	(85,182	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		979			941
Stock-based compensation expense		13,018			8,102
Noncash interest expense		354			772
Noncash interest income		—			(107	)
Impairment of intangible asset		682			—
Change in fair value of contingent consideration		(571	)		(50	)
Changes in operating assets and liabilities
Accounts receivable and other current assets		1,109			4,621
Purchase of prepaid interest - marketable securities		(288	)		—
Accounts payable and accrued expenses		(5,094	)		1,474
Other liabilities and other assets		798			(438	)
Net cash used in operating activities		(56,189	)		(69,867	)
Investing activities
Purchase of fixed assets, net		(1,165	)		(314	)
Purchase of marketable securities		(149,356	)		(93,250	)
Proceeds from maturities of marketable securities		93,750			24,966
Increase (decrease) in restricted cash		655			(1,197	)
Net cash used in investing activities		(56,116	)		(69,795	)
Financing activities
Proceeds from issuance of long-term debt, net of costs		9,915			—
Proceeds from exercise of stock options		321			11
Proceeds from sale of common stock		82,102			61,287
Net cash provided by financing activities		92,338			61,298
Net decrease in cash and cash equivalents		(19,967	)		(78,364	)
Cash and cash equivalents at beginning of period		52,962			131,302
Cash and cash equivalents at end of period	$	32,995		$	52,938
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	2,338		$	—

See accompanying notes to unaudited condensed consolidated financial statements.

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ParatekPharmaceuticals, Inc.

Notesto UnauditedCondensedConsolidatedFinancial Statements

(unaudited)

1.   Description of the business  

Paratek Pharmaceuticals, Inc., or the Company or Paratek, is a Delaware corporation with its corporate office in Boston, Massachusetts and an office in King of Prussia, Pennsylvania. The Company is a clinical stage biopharmaceutical company focused on the development and commercialization of innovative therapeutics based upon tetracycline chemistry.  The Company has used its expertise in biology and tetracycline chemistry to create chemically diverse and biologically distinct small molecules derived from the minocycline core structure. The Company has generated innovative small molecule therapeutic candidates based upon medicinal chemistry-based modifications, according to structure-based activity, of all positions of the core tetracycline molecule. These efforts have yielded molecules with broad-spectrum antibiotic properties and narrow-spectrum antibiotic properties, and molecules with potent anti-inflammatory properties to fit specific therapeutic applications. This proprietary chemistry platform has produced many compounds that have shown interesting characteristics in various in vitro and in vivo efficacy models. The Company’s two lead product candidates are the antibacterials omadacycline and sarecycline. Omadacycline and sarecycline are examples of molecules that were synthesized from this chemistry discovery platform.

If approved, omadacycline will be the first in a new class of aminomethylcycline antibiotics. Omadacycline is a broad-spectrum, well-tolerated, once-daily oral and intravenous, or IV, antibiotic. The Company believes that omadacycline has the potential to become the primary antibiotic choice of physicians for use as a broad-spectrum monotherapy antibiotic for acute bacterial skin and skin structure infections, or ABSSSI, community-acquired bacterial pneumonia, or CABP, urinary tract infection, or UTI, and other serious community-acquired bacterial infections where resistance is of concern. The Company believes omadacycline, if approved, will be used in the emergency room, hospital and community care settings. The Company has designed omadacycline to provide potential advantages over existing antibiotics, including activity against resistant bacteria, broad-spectrum antibacterial activity, oral and IV formulations with once-daily dosing, no known drug interactions, and a favorable safety and tolerability profile.

The Company’s second antibacterial product candidate, sarecycline, also known as WC3035, is a new, once-daily, tetracycline-derived compound designed for use in the treatment of acne and rosacea. The Company believes that, based upon the data generated to-date, sarecycline possesses favorable anti-inflammatory activity, plus narrow-spectrum antibacterial activity relative to other tetracycline-derived molecules, oral bioavailability, does not cross the blood-brain barrier, and favorable pharmacokinetic, or PK, properties that the Company believes make it particularly well-suited for the treatment of inflammatory acne in the community setting.  The Company has exclusively licensed U.S. development and commercialization rights to sarecycline for the treatment of acne to Allergan plc, or Allergan, while retaining development and commercialization rights in the rest of the world.

Prior to October 30, 2014, the name of the Company was Transcept Pharmaceuticals, Inc., or Transcept. On October 30, 2014, Transcept completed a business combination, or the Merger, with privately held Paratek Pharmaceuticals, Inc., or Old Paratek, in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of June 30, 2014, by and among Transcept, Tigris Merger Sub, Inc., Tigris Acquisition Sub, LLC and Old Paratek, or the Merger Agreement.

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

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2.   Summary of Significant Accounting Policies and Basis of Presentation

Summary of Significant Accounting Policies

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

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

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

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

Basis of Presentation

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

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

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2017. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2016, and notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on March 2, 2017.

Principles of Consolidation

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

Use of Estimates

The preparation of the accompanying unaudited condensed consolidated financial statements, in conformity with U.S. GAAP, requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent liabilities in the Company’s financial statements. On an ongoing basis, the Company evaluates its estimates and judgments, including those related to, among other items, intangible assets, goodwill, contingent liabilities, stock-based compensation arrangements, useful lives for depreciation and amortization of long-lived assets and valuation allowances on deferred tax assets. Actual results could differ from those estimates.

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Segment and Geographic Information

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

3.   Cash and Cash Equivalents and Marketable Securities 

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

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
September 30, 2017
U.S. treasury securities	$	128,728	$	—	$	(79	)	$	128,649
Government agencies		1,797		—		(1	)		1,796
Total	$	130,525	$	—	$	(80	)	$	130,445
December 31, 2016
U.S. treasury securities	$	62,574	$	—	$	(18	)	$	62,556
Government agencies		12,518		2		—			12,520
Total	$	75,092	$	2	$	(18	)	$	75,076

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

4.   Restricted Cash

Short-term restricted cash

Intermezzo Reserve

As of September 30, 2017, restricted cash of $0.2 million represents royalty income received but not yet paid to former Transcept stockholders as part of the royalty sharing agreement, or the Royalty Sharing Agreement, executed by the Company on October 28, 2016 with the Special Committee of the Company’s Board of Directors, or the Special Committee, a committee established in connection with the Merger. See Note 11, Fair Value Measurements, for more information on the Royalty Sharing Agreement. Included in the balance as of December 31, 2016, was the remainder of the Intermezzo reserve of $0.1 million, established in accordance with the Merger Agreement, which was comprised of unpaid legal fees.  

Letter of Credit

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

Long-term restricted cash

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

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5.   Fixed Assets

Fixed assets, net, consists of the following (in thousands):

	September 30, 2017			December 31, 2016
Office equipment	$	928		$	443
Computer equipment		548			251
Computer software		787			787
Leasehold improvements		873			137
Construction-in-progress		—			391
Gross fixed assets		3,136			2,009
Less: Accumulated depreciation and amortization		(1,214	)		(821	)
Net fixed assets	$	1,922		$	1,188

6.   Intangible Assets, Net

Intangible assets consist of the following (in thousands):

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

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

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

7.   Net Loss Per Share Available to Common Stockholders

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

8

The following outstanding shares subject to stock options, restricted stock units and warrants to purchase common stock were antidilutive due to a net loss in the periods presented and, therefore, were excluded from the dilutive securities computation as of the three and nine months ended September 30, 2017 and 2016 as indicated below:

	September 30,
	2017		2016
Excluded potentially dilutive securities (1):
Shares subject to outstanding options to purchase    common stock		3,575,633		2,786,882
Unvested restricted stock units		1,186,503		440,500
Shares subject to warrants to purchase common stock		84,828		42,306
Shares issuable under employee stock purchase plan		36,539		36,539
Totals		4,883,503		3,306,227

(1) The number of shares is based on the maximum number of shares issuable on exercise or conversion of the related securities as of September 30, 2017 and 2016. Such amounts have not been adjusted for the treasury stock method or weighted average outstanding calculations as required if the securities were dilutive.

8.   License and Collaboration Agreements

Zai Lab (Shanghai) Co., Ltd.

On April 21, 2017, Paratek Bermuda Ltd., a wholly-owned subsidiary of Paratek Pharmaceuticals, Inc., and Zai Lab (Shanghai) Co., Ltd., or Zai, entered into a License and Collaboration Agreement, or the Zai Collaboration Agreement. Under the terms of the Zai Collaboration Agreement, Paratek Bermuda Ltd. granted Zai an exclusive license to develop, manufacture and commercialize omadacycline, or the licensed product, in the People’s Republic of China, Hong Kong, Macau and Taiwan, or the territory, for all human therapeutic and preventative uses other than biodefense. Zai will be responsible for the development, manufacturing and commercialization of the licensed product in the territory, at its sole cost with certain assistance from Paratek Bermuda Ltd.

Under the terms of the Zai Collaboration Agreement, Paratek Bermuda Ltd. earned an upfront cash payment of $7.5 million, before taxes, and is eligible to receive up to $14.0 million in potential regulatory milestone payments and $40.5 million in potential commercial milestone payments, the next being $5.0 million upon approval by the U.S. Food & Drug Administration, or FDA, of a New Drug Application, or NDA, submission in the CABP indication. Zai will also pay Paratek Bermuda Ltd. tiered royalties at a low double digit to mid-teen percent on net sales of the licensed product in the territory.

The Zai Collaboration Agreement will continue, on a region-by-region basis, until the expiration of and payment by Zai of all Zai’s payment obligations, which is until the later of: (i) the abandonment, expiry or final determination of invalidity of the last valid claim within the Paratek patents that covers the licensed product in the region in the territory in the manner that Zai or its affiliates or sublicensees exploit the licensed product or intend for the licensed product to be exploited; or (ii) the eleventh anniversary of the first commercial sale of such licensed product in such region.

The Company evaluated the Zai Collaboration Agreement under ASC Subtopic 605-25, “Multiple Element Arrangements”. The Company determined that there were five deliverables under the Zai Collaboration Agreement: (i) an exclusive license to develop, manufacture and commercialize omadacycline in the territory; (ii) an initial transfer of technology; (iii) a transfer of certain materials and materials know-how (iv) an additional transfer of materials; and (v) participation on a joint steering committee, or JSC, and joint development committee, or JDC.

The consideration allocable to the delivered unit or units of accounting is limited to the amount that is not contingent upon the delivery of additional items or meeting other specified performance conditions. Therefore, the Company excluded from the allocable consideration the milestone payments and royalties, regardless of the probability that such milestone and royalty payments will be made, until the events that give rise to such payments occur. In addition, all regulatory milestones in the Zai Collaboration Agreement are considered substantive on the basis of the contingent nature of the milestone, including factors such as regulatory and other risks that must be overcome to achieve each milestone as well as the level of effort and investment required.  Accordingly, such amounts will be recognized in the period in which the associated milestone is achieved, assuming all other revenue recognition criteria are met.  All commercial milestones will be accounted for in the same manner as royalties and recorded as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met.

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The Company determined that all five deliverables listed above had value to the Company on a stand-alone basis and therefore five units of accounting were identified. The Company determined, however, that the best estimate for the selling price of the initial transfer of technology, transfer of certain materials and materials know-how, the additional transfer of materials and participation on the JSC and JDC were all inconsequential. As such, the Company recognized the total arrangement consideration as revenue during the quarter ended June 30, 2017.

Under the Zai Collaboration Agreement, Zai will pay taxes incurred in the territory by Paratek on Paratek’s behalf and deduct these taxes from the payments due to Paratek. Withholding and other value-added taxes of $0.8 million were incurred on the $7.5 million upfront payment. As such, the Company received $6.7 million, net of taxes, during the nine months ended September 30, 2017. These taxes were paid by Zai on behalf of the Company.

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

Allergan plc

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

Under the terms of the Allergan 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. The Company has 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.

The Company 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 in 2010, and $2.5 million upon initiation of Phase 2 trials in 2012. In December 2014, the Company 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 the Company 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 the Company tiered royalties, ranging from the mid-single digits to the low double digits, based on net sales of tetracycline compounds developed under the Allergan 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 the Company 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.

The Company has not received any amounts or recognized any revenue under this arrangement since 2014.

Tufts University

In February 1997, the Company and Tufts University, or Tufts, entered into a license agreement under which the Company acquired an exclusive license to certain patent applications and other intellectual property of Tufts related to the drug resistance field to develop and commercialize products for the treatment or prevention of bacterial or microbial diseases or medical conditions in humans or animals or for agriculture. The Company subsequently entered into ten amendments to that agreement, collectively the Tufts License Agreement, to include patent applications filed after the effective date of the original license agreement, to exclusively license additional technology from Tufts, to expand the field of the agreement to include disinfectant applications, and to change the royalty rate and percentage of sublicense income paid by the Company to Tufts under sublicense agreements with specified sublicensees. The Company is obligated under the Tufts License Agreement to provide Tufts with annual diligence reports and a business plan and to meet certain other diligence milestones. The Company has the right to grant sublicenses of the licensed rights to third parties, which will be subject to the prior approval of Tufts unless the proposed sublicensee meets a certain net worth or market

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capitalization threshold. The Company is primarily responsible for the preparation, filing, prosecution and maintenance of all patent applications and patents covering the intellectual property licensed under the Tufts License Agreement at its sole expense. The Company has the first right, but not the obligation, to enforce the licensed intellectual property against infringement by third parties.

The Company issued Tufts 1,024 shares of the Company’s common stock on the date of execution of the original license agreement, and the Company may be required to make certain payments of up to $0.3 million to Tufts upon the achievement by products developed under the agreement of specified development and regulatory approval milestones. The Company has already made a payment of $50,000 to Tufts for achieving the first milestone following commencement of the Phase 3 clinical trial for omadacycline. The Company is also obligated to pay Tufts a minimum royalty payment in the amount of $25,000 per year. In addition, the Company is obligated to pay Tufts royalties based on gross sales of products, as defined in the agreement, ranging in the low single digits depending on the applicable field of use for such product sale. If the Company enters into a sublicense under the Tufts License Agreement, based on the applicable field of use for such product, the Company agreed 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 the Company that are reasonably attributable to the sublicense of the rights granted to the Company 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 the Company by the sublicensee or the amount of royalty payments that would have been paid by the Company to Tufts if the Company had sold the product. The Company paid $0.1 million, or 1.5%, of a sublicense issue fee to Tufts during the nine months ended September 30, 2017 upon earning the $7.5 million upfront payment under the Zai Collaboration Agreement.

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

Purdue Pharma L.P.

In July 2009, the Company and Purdue Pharma L.P., or Purdue Pharma, entered into a license and 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:

• Purdue Pharma paid the Company a $25.0 million non-refundable license fee in August 2009, and non-refundable intellectual property milestone payments of $10.0 million in each of December 2011 and August 2012;

• The Company transferred the Intermezzo NDA to Purdue Pharma, and Purdue Pharma is obligated to assume the expense associated with maintaining the NDA and further development of Intermezzo in the United States, including any expense associated with post-approval studies;

• Purdue Pharma is obligated to commercialize Intermezzo in the United States at its expense using commercially reasonable efforts;

• Purdue Pharma is obligated to pay the Company tiered base royalties on net sales of Intermezzo in the United States ranging from the mid-teens up to the mid-20% level, with each such royalty tiers subject to an increase by a percentage in the low single digits upon a specified anniversary of regulatory approval of Intermezzo. The base royalty is tiered depending upon the achievement of certain fixed net sales thresholds by Purdue Pharma, which net sales levels reset each year for the purpose of calculating the royalty. The royalty tiers are subject to reductions upon generic entry and patent expiration. Purdue Pharma is obligated to pay royalties until the later of 15 years from the date of first commercial sale in the United States or the expiration of patent claims related to Intermezzo; and

• Purdue Pharma is obligated to pay the Company up to an additional $70.0 million upon the achievement of certain net sales targets for Intermezzo in the United States.

The Purdue Collaboration Agreement expires on the expiration of Purdue Pharma’s royalty obligations. Purdue Pharma has the right to terminate the Purdue Collaboration Agreement at any time upon advance notice of 180 days. The Purdue Collaboration Agreement is also subject to termination by Purdue Pharma in the event of FDA or governmental action that materially impairs Purdue Pharma’s ability to commercialize Intermezzo or the occurrence of a serious event with respect to the safety of Intermezzo. The Purdue Collaboration Agreement may be terminated by the Company upon Purdue Pharma commencing an action that challenges the

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

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

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

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

Shin Nippon Biomedical Laboratories Ltd.

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

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

9.   Capital Stock

In October 2015 and February 2017, Paratek Pharmaceuticals, Inc. entered into Controlled Equity Offering^SM Sales Agreements, or the 2015 Sales Agreement and 2017 Sales Agreement, respectively, and collectively, the Sales Agreements, with Cantor Fitzgerald & Co., or Cantor, under which the Company could, at its discretion, from time to time sell shares of its common stock, with a sales value of up to $50 million under each Sales Agreement through Cantor. The Company provided Cantor with customary indemnification rights, and Cantor was entitled to a commission at a fixed rate of 3% of the gross proceeds per share sold.  Sales of the shares under the Sales Agreements were to be made in transactions deemed to be “at the market offerings”, as defined in Rule 415 under the Securities Act of 1933, as amended. The Company has sold all $50 million of shares of its common stock under the 2015 Sales Agreement. The Company received $36.9 million in proceeds, after deducting commissions of $1.1 million, from the sale of 2,326,119 shares of common stock under the 2015 Sales Agreement during the nine months ended September 30, 2017. The Company received $45.9 million in proceeds, after deducting commissions of $1.4 million, from the sale of 2,006,007 shares of common stock, as of November 1, 2017, under the 2017 Sales Agreement. As of November 1, 2017, $2.7 million remain available for sale under the 2017 Sales Agreement.

Warrants to Purchase Common Stock

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

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

As described in Note 13, Long-term Debt, in connection with the Loan Agreement Amendment (as defined in Note 13, Long-term Debt), on December 12, 2016, the Company issued to each of Hercules Technology II, L.P. and Hercules Technology III, L.P. a warrant to purchase 18,574 shares of its common stock (37,148 shares of common stock in total) at an exercise price of $13.46 per share, or the Loan Amendment Warrants. Additionally, in connection with the borrowing of the Third Tranche (as defined in Note 13, Long-term Debt) on June 27, 2017, the Company issued an additional warrant to Hercules Capital, Inc. to purchase 5,374 shares of its common stock at an exercise price of $23.26 per share, or the Additional Warrant. The Additional Warrant’s total relative fair value of $0.1 million was determined using a Black-Scholes option-pricing model with the following assumptions:

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

Each Loan Amendment Warrant may be exercised on a cashless basis. The Loan Amendment Warrants are exercisable for a term beginning on the date of issuance and ending on the earlier to occur of five years from the date of issuance or the consummation of certain acquisitions of the Company as set forth in the Loan Amendment Warrants.

10.   Other Accrued Expenses

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

	September 30, 2017		December 31, 2016
Accrued legal costs		218		358
Accrued compensation		2,595		2,609
Intermezzo payable		93		105
Accrued professional fees		1,468		1,118
Accrued contract manufacturing		3,760		1,940
Accrued other		206		298
Total	$	8,340	$	6,428

11.   Fair Value Measurements

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

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

Description	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
September 30, 2017
Assets:
U.S. treasury securities	$	128,649	$	—	$	—	$	128,649
Government agencies		—	$	1,796		—		1,796
Total Assets	$	128,649	$	1,796	$	—	$	130,445
Liabilities:
Contingent obligations	$	—	$	—	$	84	$	84
Total Liabilities	$	—	$	—	$	84	$	84
December 31, 2016
Assets:
U.S. treasury securities	$	62,556	$	—	$	—	$	62,556
Government agencies		—		12,520		—		12,520
Total Assets	$	62,556	$	12,520	$	—	$	75,076
Liabilities:
Contingent obligations	$	—	$	—	$	655	$	655
Total Liabilities	$	—	$	—	$	655	$	655

Marketable Securities

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

Contingent Consideration

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

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

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The following table provides a roll forward of the fair value of contingent obligations categorized as Level 3 instruments, for the nine months ended September 30, 2017 (in thousands):

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

12.   Stock-Based Compensation

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Research and development expense	$	1,258	$	871	$	4,312	$	2,530
General and administrative expense		2,824		1,788		8,706		5,572
Total stock-based compensation expense	$	4,082	$	2,659	$	13,018	$	8,102

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

	Nine Months Ended September 30,
	2017			2016
Volatility		75.8	%		73.5	%
Weighted average risk-free interest rate		2.0	%		1.4	%
Expected dividend yield		0.0	%		0.0	%
Expected life of options (in years)		5.8			5.8

Stock Option Plan Activity

The number of shares of the Company’s common stock available for issuance under the Paratek Pharmaceuticals, Inc. 2015 Equity Incentive Plan, or the 2015 Plan, was initially 1,200,000 shares. The initial number of shares authorized under the 2015 Plan may be increased by the number of shares that again become available for grant as a result of forfeited or terminated awards or shares withheld in satisfaction of the exercise price or tax withholding obligations associated with awards under the Paratek Pharmaceuticals, Inc. 2006 Incentive Award Plan, as amended, and the Paratek Pharmaceuticals, Inc. 2014 Equity Incentive Plan, with the total amount of the initial shares plus the forfeited or terminated shares not to exceed 2,000,000 shares.In addition, the number of shares authorized for issuance under the 2015 Plan will be automatically increased each year pursuant to an “evergreen” provision contained in the 2015 Plan. The number of shares available for issuance will automatically increase on January 1 of each year, for the period commencing on (and including) January 1, 2016 and ending on (and including) January 1, 2025, in an amount equal to 5% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year. Notwithstanding the foregoing, the Board of Directors of the Company may act prior to January 1 of a given year to provide that there will be no January 1 increase in the number of shares available for issuance for such year or that the increase in the number of shares available for issuance for such year will be a lesser number of shares of common stock than would otherwise occur. On January 1, 2017, 1,167,931 shares of common stock were automatically added to the shares authorized for issuance under the 2015 Plan pursuant to the evergreen provision.

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

During the nine months ended September 30, 2017, the Company’s Board of Directors granted 735,400 stock options and 867,800 restricted stock units to directors, executives and employees of the Company under the 2015 Plan. The stock option awards are subject to time-based vesting over a period of one to four years.  The RSU awards made to directors of the Company are subject to time-based vesting, with 100% of the shares of common stock subject to the RSUs vesting one year from the grant date. The grants also included performance-based RSU, or PRSU, awards to certain executives and employees of the Company. The PRSU awards issued during the quarter ended June 30, 2017 have vested or will vest as follows: 20% of the PRSUs vested upon achievement of data lock for Study 16301 (oral only ABSSSI), which occurred in July 2017, or the First Milestone; 30% of the PRSUs shall vest upon achievement of IV and oral NDA filing acceptances, or the Second Milestone; and 50% of the PRSUs shall vest upon FDA approval of omadacycline, or the Third Milestone, provided, that, each of the First Milestone, the Second Milestone and the Third Milestone must occur no later than the fifth anniversary of the date of grant for the applicable portion of the PRSUs to vest. The PRSU awards issued during the quarter ended September 30, 2017shall become earned upon FDA approval of omadacycline, or the Milestone, and shall, upon achievement of the Milestone, be eligible to vest as to 100% of the PRSUs subject to the award on the first anniversary of the Milestone achievement date.

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

As of September 30, 2017, no additional shares remained available for issuance under either theParatek Pharmaceuticals, Inc. 2006 Equity Incentive Plan, as amended, or the Paratek Pharmaceuticals, Inc. 2014 Equity Incentive Plan.

Total shares available for future issuance under the 2015 Plan are 688 shares as of September 30, 2017.

Stock options

A summary of stock option activity for the nine months ended September 30, 2017 is as follows:

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

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Restricted Stock Units

A summary of restricted stock unit activity for the nine months ended September 30, 2017 is as follows: 

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

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

13.   Long-term Debt

On September 30, 2015, the Company entered into the Loan Agreement with Hercules and certain other lenders, and Hercules Technology Growth Capital, Inc. (as agent).  Under the Loan Agreement, Hercules provided the Company with access to term loans with an aggregate principal amount of up to $40.0 million, or collectively, the Term Loan. The Company initially drew a principal amount of $20.0 million, which was funded on September 30, 2015. The remaining $20.0 million under the Loan Agreement was available to be drawn at the Company’s option in minimum increments of $10.0 million through December 31, 2016, or the Draw Period. The Term Loan was repayable in monthly installments commencing on April 1, 2018 through maturity on September 1, 2020. The interest rate was equal to the greater of (i) 8.5%, or (ii) the sum of 8.5%, plus the “prime rate” as reported in The Wall Street Journal minus 5.75% per annum. An end of term charge equal to 4.5% of the issued principal balance of the Term Loan was payable at maturity, including in the event of any prepayment, and was being accrued as interest expense over the term of the loan using the effective interest method. Borrowings under the Loan Agreement were collateralized by substantially all of the assets of the Company.

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

Subject to certain terms, pursuant to the Loan Agreement, Hercules was also granted the right to participate in an amount of up to $2.0 million in subsequent sales and issuances of the Company's equity securities to one or more investors for cash for financing purposes in an offering that is broadly marketed to multiple investors and at the same terms as the other investors. On September 30, 2015, Hercules Technology Growth Capital, Inc. entered into a Stock Purchase Agreement with the Company to purchase 44,782 shares of common stock resulting in proceeds to the Company of approximately $1.0 million.  The excess of proceeds received by the Company over the fair value of the common stock issued was allocated as a reduction of the fees paid to Hercules in conjunction with obtaining the initial $20.0 million draw of the Term Loan.

Debt issuance costs of $511,000 were ratably allocated to the initial $20.0 million draw and the remaining unfunded $20.0 million. Debt issuance costs related to the initial $20.0 million draw were presented on the consolidated balance sheet as a direct deduction from the related debt liability. Issuance costs related to the unfunded amount were capitalized as prepaid asset and were to be amortized ratably through the end of the Draw Period.  

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

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

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

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

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

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

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

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

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

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

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

Fiscal Year
2017	$	—
2018		—
2019		27,616
2020		22,384
2021 and Thereafter		—
Total	$	50,000

14.   Income Taxes

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

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

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

15.   Commitments and Contingencies

Leases

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

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

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As of September 30, 2017, future minimum lease payments under operating leases are as follows:

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

Commercial Supply Agreements

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

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

Intermezzo Patent Litigation

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

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

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

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Patent Term Adjustment Suit

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

Other Legal Proceedings

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

16.   Recent Accounting Pronouncements

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

Between May 2014 and May 2016, the FASB issued three ASUs changing the requirements for recognizing and reporting revenue, or together, herein referred to as the revenue ASUs: (i) ASU No. 2014-09, Revenue from Contracts with Customers, or ASU 2014-09, (ii) ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), or ASU 2016-08, and (iii) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients, or ASU 2016-12. ASU 2014-09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2016-12 provides practical expedients and improvements on the previously narrow scope of ASU 2014-09. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, or ASU 2015-14. ASU 2015-14 defers the effective date of ASU 2014-09 by one year to fiscal years beginning, and interim periods after, December 15, 2017. All subsequent ASUs related to ASU 2014-09, including ASU 2016-08 and ASU 2016-12, assumed the deferred effective date enforced by ASU 2015-14. Early adoption of the revenue ASUs is permitted for annual periods beginning, and interim periods after, December 15, 2016. A reporting entity may apply the amendments in the revenue ASUs using either a modified retrospective approach, by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or full retrospective approach. The Company expects to elect the full retrospective application as its transition method.

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

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

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

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

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

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

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

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

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

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

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

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

Company Overview

We are a clinical stage biopharmaceutical company focused on the development and commercialization of innovative therapeutics based upon tetracycline chemistry.  We have used our expertise in biology and tetracycline chemistry to create chemically diverse and biologically distinct small molecules derived from the minocycline core structure. We have generated innovative small molecule therapeutic candidates based upon medicinal chemistry-based modifications, according to structure-based activity, of all positions of the core tetracycline molecule. These efforts have yielded molecules with broad-spectrum antibiotic properties and narrow-spectrum antibiotic properties, and molecules with potent anti-inflammatory properties to fit specific therapeutic applications. This proprietary chemistry platform has produced many compounds that have shown interesting characteristics in various in vitro and in vivo efficacy models. Omadacycline and sarecycline are examples of molecules that were synthesized from this chemistry discovery platform. Our two lead product candidates are the antibacterials omadacycline and sarecycline

If approved, omadacycline will be the first in a new class of aminomethylcycline antibiotics. Omadacycline is a broad-spectrum, well-tolerated, once-daily oral and intravenous, or IV, antibiotic. We believe that omadacycline has the potential to become the primary antibiotic choice of physicians for use as a broad-spectrum monotherapy antibiotic for acute bacterial skin and skin structure infections, or ABSSSI, community-acquired bacterial pneumonia, or CABP, urinary tract infection, or UTI, and other serious community-acquired bacterial infections where resistance is of concern. We believe omadacycline, if approved, will be used in the emergency room, hospital and community care settings. We have designed omadacycline to provide potential advantages over existing antibiotics, including activity against resistant bacteria, broad-spectrum antibacterial activity, oral and IV formulations with once-daily dosing, no known drug interactions, and a favorable safety and tolerability profile.

In the fall of 2013, the U.S. Food and Drug Administration, or the FDA, agreed to the design of our omadacycline Phase 3 studies for ABSSSI and CABP through the Special Protocol Assessment, or SPA, process. In addition, the FDA confirmed that positive data from the individual studies for ABSSSI and CABP would be sufficient to support approval of omadacycline for each indication and for both oral and IV formulations in the United States.  In addition to Qualified Infectious Disease Product, or QIDP, designation, on November 4, 2015, the FDA granted omadacycline Fast Track designation for the development of omadacycline in ABSSSI, CABP, and complicated Urinary Tract Infections, or cUTIs. Fast Track designation facilitates the development and expedites the review of drugs that treat serious or life-threatening conditions and that fill an unmet medical need. In February 2016, we reached agreement with the FDA on the terms of a pediatric program associated with the Pediatric Research and Equity Act. The FDA has granted Paratek a waiver from conducting studies with omadacycline in children less than eight years old due the risk of teeth discoloration, a known class effects of tetracyclines.  In addition, the FDA has granted a deferral on conducting studies in children eight years and older until safety and efficacy is established in adults.  In May 2016, we received confirmation from the FDA that the oral-only ABSSSI study design was acceptable and consistent with the currently posted guidance for industry.  

Scientific advice received through the centralized procedure in Europe confirmed general agreement on the design and choice of comparators of the Phase 3 trials for ABSSSI and CABP and noted that approval based on a single study in each indication could be possible but would be subject to more stringent statistical standards than Market Authorization Applications, or MAA, programs that

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conduct two pivotal Phase 3 studies per indication. We believe that the inclusion of the second Phase 3 oral-only study in ABSSSI strengthens the data package for submission of an MAA filing for approval in the European Union, or EU. 

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

To date, we have conducted more than 20 Phase 1 studies for omadacycline to characterize the effects of the drug on humans including how it is absorbed, metabolized, and excreted. These Phase 1 studies also included this evaluation in special populations like hepatic and renal failure patients.  We have also conducted and completed three successful Phase 3 clinical studies. Our first two Phase 3 clinical studies were for the treatment of ABSSSI (OASIS-1) and CABP (OPTIC).  Both studies utilized initiation of IV therapy with transitions to oral-based treatment on clinical response. Our third Phase 3 clinical study (OASIS-2) was an oral-only administration of omadacycline in ABSSSI compared to oral-only linezolid. All three Phase 3 clinical studies resulted in omadacycline demonstrating positive efficacy results and a generally safe and well tolerated profile. We plan to include these clinical data in the NDA submission to the FDA for the treatment of ABSSSI and CABP in the first quarter of 2018 and to the European Medicines Agency, or EMA, in the second half of 2018.

In the two pivotal Phase 3 studies in ABSSSI, omadacycline successfully met the primary endpoint for FDA by demonstrating statistical non-inferiority based upon the Early Clinical Response, or ECR, assessment at 48 to 72 hours after the first dose of study medication in the modified intent‑to‑treat, or mITT, population (all randomized subjects without a baseline sole Gram‑negative causative pathogen).  Clinical success at the ECR assessment was based on reduction of the size of the primary lesion ≥ 20% without receiving any rescue antibacterial therapy.  Clinical success was achieved in 84.8% of omadacycline subjects and in 85.5% of linezolid subjects in the IV-to-oral study (OASIS-1) and in 87.5% of omadacycline subjects and in 82.5% of linezolid subjects in the oral-only study (OASIS-2).  

In the same two pivotal Phase 3 studies in ABSSSI, omadacycline also successfully met the primary endpoint for the EMA by demonstrating statistical non-inferiority based upon the investigator’s assessment of clinical outcome at the post therapy evaluation, or PTE, visit (7 to 14 days after the subject’s last day of study therapy), in the mITT and the clinically evaluable, or CE, population (defined as all mITT subjects who received study medication, had a qualifying ABSSSI, an assessment of outcome, and met all other evaluability criteria).  Clinical success at the PTE assessment was based on resolution of the infection such that further antibacterial therapy was not needed, and the subject was alive and did not meet any clinical failure or indeterminate criteria.  In the mITT population, clinical success at the PTE was achieved in 86.1% of omadacycline subjects and in 83.6% of linezolid subjects in the IV-to-oral study (OASIS-1) and in 84.2% of omadacycline subjects and in 80.8% of linezolid subjects in the oral-only study (OASIS-2). The corresponding efficacy results for the CE population were 96.3% of omadacycline subjects and 93.5% of linezolid subjects in the IV-to-oral study (OASIS-1) and 97.9% of omadacycline subjects and 95.5% of linezolid subjects in the oral-only study (OASIS-2).

In a single pivotal Phase 3 study in CABP (OPTIC), omadacycline successfully met the primary endpoint for FDA by demonstrating statistical non-inferiority based upon the ECR assessment at 72 to 120 hours after the first dose of study medication in the intent‑to‑treat, or ITT, population.  Clinical success at the ECR assessment, defined as survival and improvement in at least two of four symptoms (cough, sputum production, pleuritic chest pain, dyspnea) without deterioration in any of the symptoms, was achieved in 81.1% of omadacycline subjects and in 82.7% of moxifloxacin subjects.    

In a single pivotal Phase 3 study in CABP (OPTIC), omadacycline also successfully met the primary endpoint for EMA by demonstrating statistical non-inferiority based upon clinical success, as assessed by the investigator at the PTE visit in both the ITT and CE populations.  Clinical success was achieved in 87.6% of omadacyclinesubjects and in 85.1% of moxifloxacin subjects in the ITT population and in 92.9% of omadacyclinesubjects and in 90.4% of moxifloxacin subjects in the CE population.  

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

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

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

In October 2016, we announced that we entered into a Cooperative Research and Development Agreement, or CRADA, with the U.S. Army Medical Research Institute of Infectious Diseases, or USAMRIID, to study omadacycline against pathogenic agents causing infectious diseases of public health and biodefense importance. These studies are designed to confirm humanized dosing regimens of omadacycline in order to study the efficacy of omadacycline against biodefense pathogens, including Yersinia pestis, or plague, and Bacillus anthracis, or anthrax. Funding support for the trial has been made available through the Defense Threat Reduction Agency, or DTRA/ Joint Science and Technology Office and Joint Program Executive Office for Chemical and Biological Defense / Joint Project Manager Medical Countermeasure Systems / BioDefense Therapeutics.

Our second Phase 3 antibacterial product candidate, sarecycline, also known as WC3035, is a new, once-daily, tetracycline-derived compound designed for use in the treatment of acne and rosacea. We believe that, based upon the data generated to-date, sarecycline possesses favorable anti-inflammatory activity, plus narrow-spectrum antibacterial activity relative to other tetracycline-derived molecules, oral bioavailability, does not cross the blood-brain barrier, and favorable PK properties that we believe make it particularly well-suited for the treatment of inflammatory acne in the community setting. We have exclusively licensed U.S. development and commercialization rights to sarecycline for the treatment of acne to Allergan plc, or Allergan, while retaining development and commercialization rights in the rest of the world. Allergan currently holds a non-exclusive license to develop and commercialize sarecycline for the treatment of rosacea in the United States. There are currently no clinical trials with sarecycline in rosacea underway. In March 2017, Allergan announced that two Phase 3 studies of sarecycline for the treatment of moderate to severe acne vulgaris met their 12-week primary efficacy endpoints. In addition, a 9-month long-term safety extension study was completed. The safety results from the long-term study are generally consistent with results from the two 12-week studies.  Based on these clinical data, Allergan intends to file an NDA with the FDA in the fourth quarter of 2017 for the treatment of acne.

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

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

We have incurred significant losses since our inception in 1996. Our accumulated deficit at September 30, 2017 was $448.2 million and our net loss for the nine months ended September 30, 2017 was $67.2 million. A substantial amount of our net losses resulted from costs incurred in connection with our research and development programs and general and administrative costs associated with our operations. The net losses and negative operating cash flows incurred to date, together with expected future losses, have had, and likely will continue to have, an adverse effect on our stockholders’ equity and working capital. The amount of future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate offsetting revenue, if any. We expect to continue to incur significant expenses and operating losses for the foreseeable future.

We do not expect to generate revenue from product sales unless and until we or either of our partners, Allergan or Zai, successfully complete development and obtain marketing approval for one or more of our product candidates. Accordingly, we anticipate that we will need to raise additional capital in order to complete the development and commercialization of omadacycline and to advance the development of our other product candidates. Until we can generate a sufficient amount of product revenue to finance our cash requirements, we expect to finance our future cash needs primarily through a combination of public and private equity offerings, debt or other structured financings and strategic collaborations. We may be unable to raise capital when needed or on attractive terms, which would force us to delay, limit, reduce or terminate our development programs or commercialization efforts. We will need to generate significant revenue to achieve and sustain profitability, and we may never be able to do so.

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Recent Financing Activities

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

Financial Operations Overview

Revenue

We have not yet generated any revenue from product sales. All of our revenue to date has been derived from license fees, milestone payments, royalty income, reimbursements for research, development and manufacturing activities under licenses and collaborations, grant payments received from the National Institute of Health, or NIH, and other non-profit organizations. We do not expect to generate revenue from product sales prior to 2018, at the earliest.

License revenue represents upfront fees and milestone payments received in connection with our Collaboration Agreements. Royalty revenue represents fifty percent of Intermezzo royalty income received pursuant to the royalty sharing agreement, or the Royalty Sharing Agreement, entered into by us in October 2016 with the Special Committee of our Board of Directors.

Research and Development Expense

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

● expenses incurred under agreements with clinical research organizations, or CROs, and investigative sites that conduct our clinical trials;

● the cost of acquiring and manufacturing preclinical and clinical study materials and developing manufacturing processes;

● direct employee-related expenses, including salaries, benefits, travel and stock-based compensation expense of our research and development personnel;

● allocated facilities, depreciation, and other expenses, which include rent and maintenance of facilities, insurance and other supplies; and

● costs associated with preclinical activities and regulatory compliance.

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

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

● the scope, rate of progress, and expense of our ongoing, as well as any additional, clinical trials and other research and development activities;

● future clinical trial results;

● potential changes in government regulation; and

● the timing and receipt of any regulatory approvals.

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

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

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

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Omadacycline costs	$	7,982	$	14,362	$	32,087	$	55,028
Other research and development costs		4,130		2,972		13,760		8,729
Total	$	12,112	$	17,334	$	45,847	$	63,757

General and Administrative Expense

General and administrative expense consists primarily of salaries and other related costs for personnel and professional, legal and consulting fees.

Interest Expense

Interest expense represents interest incurred on the Hercules Term Loan and the adjustment of our marketable securities to amortized cost.

Interest Income

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

Results of Operations

Comparison of the three months ended September 30, 2017 and 2016

	Three Months Ended September 30,
(in thousands)	2017			2016			$ Change
License and royalty revenue	$	12		$	—		$	12
Operating expenses:
Research and development		12,112			17,334			(5,222	)
General and administrative		8,219			5,949			2,270
Changes in fair value of contingent consideration		(22	)		(170	)		148
Total operating expenses		20,309			23,113			(2,804	)
Loss from operations		(20,297	)		(23,113	)		2,816
Other income and expenses:
Interest expense		(1,408	)		(820	)		(588	)
Interest income		389			309			80
Other loss, net		(8	)		(4	)		(4	)
Net Loss	$	(21,324	)	$	(23,628	)	$	2,304

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Research and Development Expense

Research and development expenses were $12.1 million for the three months ended September 30, 2017 compared to $17.3 million for the same period in 2016. The decrease was driven primarily by lower clinical study costs associated with the completion of our Phase 3 program for omadacycline.

We anticipate that our research and development expenses will increase in future periods as a result of our Phase 2 UTI program, payment of prescription drug user fees associated with our NDA submissions, manufacturing of validation batches of omadacycline and expansion of our medical affairs team prior to launch.

General and Administrative Expense

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

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

Changes in Fair Value of Contingent Obligations

During the three months ended September 30, 2017 and 2016, we recorded a $22,000 decrease and $0.2 million decrease, respectively, in the fair value of our contingent obligation to former Transcept stockholders. The decrease in the fair value of our contingent obligation for the three months ended September 30, 2017 and 2016 reflects a corresponding decline in projected Intermezzo sales.

Other Income and Expenses

Interest expense for the three months ended September 30, 2017 represents interest incurred on the Loan Agreement, as amended, of $1.4 million. Interest income for the three months ended September 30, 2017 represents interest earned on our money market funds and marketable securities of $0.4 million. Interest expense for the three months ended September 30, 2016 represented interest incurred on the Loan Agreement of $0.6 million and the net amortization of our marketable securities of $0.2 million. Interest income for the three months ended September 30, 2016 represents interest earned on our money market funds and marketable securities of $0.3 million.

Results of Operations

Comparison of the nine months ended September 30, 2017 and 2016

	Nine Months Ended September 30,
(in thousands)	2017			2016			$ Change
License and royalty revenue	$	7,544		$	—		$	7,544
Operating expenses:
Research and development		45,847			63,757			(17,910	)
General and administrative		25,299			19,896			5,403
Impairment of intangible asset		682			—			682
Changes in fair value of contingent consideration		(571	)		(50	)		(521	)
Total operating expenses		71,257			83,603			(12,346	)
Loss from operations		(63,713	)		(83,603	)		19,890
Other income and expenses:
Interest expense		(3,666	)		(2,368	)		(1,298	)
Interest income		979			788			191
Other loss, net		(23	)		1			(24	)
Loss before income taxes	$	(66,423	)	$	(85,182	)	$	18,759
Provision for income taxes		753			—			753
Net Loss	$	(67,176	)	$	(85,182	)	$	18,006

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Revenue

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

Research and Development Expense

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

General and Administrative Expense

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

Impairment of Intangible Assets

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

Changes in Fair Value of Contingent Obligations

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

Other Income and Expenses

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

Provision for Income Taxes

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

Liquidity and Capital Resources

On January 12, 2015, we filed a registration statement on Form S-3 with the SEC, as amended on April 24, 2015 and declared effective on April 27, 2015, to sell shares of our common stock, par value $0.001 per share, in an aggregate amount of up to $200.0 million to the public in one or more registered offerings. Under this shelf registration statement, we completed an underwritten offering on May 5, 2015 of 3,089,000 shares of common stock at a public offering price of $24.50 per share, which includes 229,000 shares of common stock issued upon the exercise, in part, by the underwriters of an option to purchase additional shares. The aggregate proceeds received by us, after underwriting discounts and commissions and other offering expenses, were $70.4 million. We completed an underwritten offering in June 2016 of 4,887,500 shares of common stock at a public offering price of $13.00 per share, which includes 637,500 shares of common stock issued upon the exercise, in full, by the underwriters of an option to purchase additional shares from us. The net proceeds received by us, after underwriting discounts and commissions and other estimated offering expenses, were $59.3 million.

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On September 30, 2015, we entered into a Loan and Security Agreement, or the Loan Agreement, with Hercules Technology II, L.P. and Hercules Technology III, L.P., together, Hercules, and certain other lenders and Hercules Technology Growth Capital, Inc. (as agent). We executed three amendments to the Loan Agreement subsequent to September 30, 2015, providing access to term loans with an aggregate principal amount of up to $60.0 million. As of September 30, 2017, we have drawn down on $50.0 million of the $60.0 million available to us. An additional $10.0 million tranche is available at our option through December 15, 2017. The last amendment executed during the quarter ended June 30, 2017 extended the date on which we are required to begin making monthly principal installments from January 1, 2019 to January 1, 2020, subject to our receipt of marketing approval for our lead product candidate, omadacycline, or the Interest Only Period Extension Event.  Beginning on January 1, 2019, or, if we achieve the Interest Only Period Extension Event, January 1, 2020, we will make payments in equal monthly installments of principal and interest, with the balance of outstanding loans due on the original maturity date of the Loan Agreement. To date, we have issued to each of Hercules Technology II, L.P. and Hercules Technology III, L.P., a warrant to purchase 16,346 shares of our common stock (32,692 shares of common stock in total) at an exercise price of $24.47 per share and a warrant to purchase 18,574 shares of our common stock (37,148 shares of common stock in total) at an exercise price of $13.46 per share. We also have issued a warrant to Hercules Capital, Inc. that is exercisable for an aggregate of 5,374 shares of common stock at an exercise price of $23.26 per share.

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

We have used and we intend to continue to use the net proceeds from the above-described offerings, as well as the Loan Agreement, as amended, and anticipated regulatory and commercial milestone payments from our collaborations with Allergan and Zai, together with our existing capital resources, to complete our clinical studies of omadacycline as well as activities required to support an NDA submission for omadacycline for the treatment of ABSSSI and CABP, the manufacture of validation batches and commercial supply, to build our commercial and medical affairs teams, and for working capital and other general corporate purposes.

As of September 30, 2017, we had cash, cash equivalents and marketable securities of $163.4 million.

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

	Nine Months Ended September 30,
(in thousands)	2017			2016
Net cash used in operating activities	$	(56,189	)	$	(69,867	)
Net cash used in investing activities	$	(56,116	)	$	(69,795	)
Net cash provided by financing activities	$	92,338		$	61,298

Operating Activities

Cash used in operating activities for the nine months ended September 30, 2017 of $56.2 million is primarily the result of our $67.2 million net loss, a $4.6 million net decrease in other current liabilities and a $0.6 million decrease in contingent obligations to former Transcept stockholders. This is offset by $15.0 million in non-cash items, including $14.0 million in depreciation, amortization and stock-based compensation expense and a $0.7 million impairment charge on our intangible asset. Cash used in operating activities for the nine months ended September 30, 2016 of $69.9 million is primarily the result of our $85.2 million net loss offset in part by a $1.5 million increase in accounts payable and accrued expenses, and a decrease of $4.3 million in prepaid expenses mainly associated with the clinical development of omadacycline. The remainder is the net impact of $9.8 million in non-cash items, including $9.7 million in depreciation, amortization and stock-based compensation expense, $0.2 million in non-cash interest expense, a $0.1 million decrease in contingent obligations to former Transcept stockholders offset by $0.1 million of interest earned on our marketable securities.

Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2017 consisted of $149.4 million investment

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in short-term marketable securities (U.S. treasury and government agency securities) offset by proceeds from maturities of marketable securities of $93.8 million. We also purchased $1.2 million of fixed assets for our new offices in Boston and King of Prussia and received a refund for an existing letter of credit of $0.8 million. During the nine months ended September 30, 2016, we invested $93.3 million of our cash in short-term marketable securities (U.S. treasury and government agency securities) partially offset by proceeds by maturities of marketable securities of $25.0 million. The net cash used in investing activities for the nine months ended September 30, 2016 is also the result of an increase in restricted cash primarily representing a letter of credit of $0.8 million.

Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2017 primarily represents net proceeds of $82.1 million received from the sale of shares of our common stock under the Sales Agreements, $9.9 million drawn under the Third Tranche under the Loan Agreement, as amended, and $0.3 million from the exercise of stock options. Net cash provided by financing activities for the nine months ended September 30, 2016 is the result of net proceeds of $2.0 million received as a result of our sales of shares of common stock under the Sales Agreement, net proceeds of $59.3 million from an underwritten public offering of 4,887,500 shares of common stock in June 2016 and the exercise of stock options.

Future Funding Requirements

We have not generated any revenue from product sales. We do not know when, if ever, we will generate any revenue from product sales. We do not expect to generate any revenue from product sales unless and until either we or either of our partners, Allergan or Zai, obtain regulatory approval of and commercialize one or more of our product candidates. Subject to obtaining regulatory approval of any of our product candidates, we anticipate that we will need substantial additional funding in connection with our continuing operations to support pre-launch and commercial activities associated with our lead product candidate, omadacycline.

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

• conduct additional clinical trials of omadacycline;

• seek regulatory approvals for omadacycline;

• establish a sales, marketing and distribution infrastructure and increases to our manufacturing demand and capabilities to commercialize omadacycline; and

• add personnel to support our product development and planned commercialization efforts.

Based upon our current operating plan, we anticipate that our existing cash, cash equivalents and marketable securities, the remaining $10.0 million we may borrow under the Loan Agreement, as amended, and anticipated regulatory and commercial milestone payments from our collaborations with Allergan and Zai will enable us to fund our operating expenses and capital expenditure requirements through the second quarter of 2019. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, and the unknown extent to which we will enter into collaborations with third parties to participate in the development and commercialization of our product candidates, we are unable to estimate with certainty the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical trials. Our future capital requirements will depend on many factors, including:

• the progress of clinical development of omadacycline;

• the number and characteristics of other product candidates that we pursue;

• the scope, progress, timing, cost and results of research, preclinical development and clinical trials;

• the costs, timing and outcome of seeking and obtaining FDA and non-U.S. regulatory approvals;

• the costs associated with manufacturing and establishing sales, marketing and distribution capabilities;

• our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make in connection with the licensing, filing, defense and enforcement of any patents or other intellectual property rights;

• our need and ability to hire additional management, scientific and medical personnel;

• the effect of competing products that may limit market penetration of our product candidates;

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

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

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

Critical Accounting Policies and Estimates

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

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

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

Recent Accounting Pronouncements

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

Off-Balance Sheet Arrangements

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

Contractual Obligations and Commitments

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

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

In July 2017, we entered into a master manufacturing services agreement and corresponding product agreement with Patheon UK Limited, or Patheon.  The agreements provide for the terms and conditions under which Patheon will manufacture, package and supply to us omadacycline in injectable form, or the Patheon Products. Under these agreements, we are required to deliver to Patheon the active pharmaceutical ingredient needed to manufacture the Patheon Products. We are obligated to pay a supply price in the six-digit dollar range per batch of the Patheon Products, subject to adjustments as provided in the agreements. If our omadacycline product is approved, we will also be subject to an annual minimum purchase requirement in the six-digit euro range. If we desire for Patheon to conduct additional services other than those expressly set forth in the agreements, those would be subject to additional fees.

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

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

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

Item 3. Quantitative and Qualitative Disclosures about Market Risks

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

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

Item 4. Controls and Procedures

Management’s Evaluation of our Disclosure Controls and Procedures

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

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

33

Changes in Internal Control over Financial Reporting

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

PART II

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes from the risk factors set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on March 2, 2017 and in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, as filed with the SEC on May 4, 2017.

Item 6. Exhibits

34

EXHIBIT INDEX

		Incorporated by Reference
Exhibit No.	Exhibit Description	Schedule/ Form	File Number	Exhibit	Filing Date
3.1	Amended and Restated Certificate of Incorporation.	Form 8-K	001-36066	3.1	October 31, 2014
3.2	Certificate of Amendment of Amended and Restated Certificate of Incorporation.	Form 8-K	001-36066	3.2	October 31, 2014
3.3	Amended and Restated Bylaws.	Form 8-K	001-36066	3.1	April 16, 2015
4.1	Specimen Common Stock Certificate.	Form S-3	333-201458	4.2	January 12, 2015
4.2	Form of Warrant Agreement issued to Hercules        Technology II, L.P. and Hercules Technology III, L.P.	Form 8-K	001-36066	4.1	October 5, 2015
4.3	Form of Warrant Agreement issued to Hercules Technology II, L.P. and Hercules Technology III, L.P.	Form 8-K	001-36066	4.1	December 13, 2016
4.4	Warrant, dated as of April 7, 2014 issued to HBM Healthcare Investments (Cayman) Ltd.	Form 10-K	001-36066	10.22	April 2, 2015
4.5	Warrant, dated as of April 18, 2014 issued to K/S Danish BioVenture.	Form 10-K	001-36066	10.23	April 2, 2015
4.6	Warrant, dated as of April 7, 2014 issued to Omega Fund III, L.P.	Form 10-K	001-36066	10.24	April 2, 2015
10.1*+	Employment Agreement, as amended, by and between the Company and Michael F. Bigham dated as of August 4, 2017.
10.2*+	Employment Agreement, as amended, by and between the Company and William M. Haskel dated as of August 4, 2017.
10.3*+	Employment Agreement, as amended, by and between the Company and Evan Loh, M.D. dated as of August 4, 2017.
10.4*+	Employment Agreement, as amended, by and between the Company and Douglas W. Pagán dated as of August 4, 2017.
10.5*+	Employment Agreement, as amended, by and between the Company and Adam Woodrow dated as of August 4, 2017.

35

		Incorporated by Reference
Exhibit No.	Exhibit Description	Schedule/ Form	File Number	Exhibit	Filing Date
31.1*	Certification of the Company’s Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act of 1934, as amended, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Company’s Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act of 1934, as amended, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Taxonomy ExtensionLabelsLinkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith.

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

+ Management contract or compensatory plan, contract or arrangement.

36

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 7^th day of November, 2017.

Paratek Pharmaceuticals, Inc.
By:	/s/ Michael F. Bigham
	Michael F. Bigham
	Chairman and Chief Executive Officer (Principal Executive Officer)
By:	/s/ Douglas W. Pagán
	Douglas W. Pagán
	Chief Financial Officer (Principal Financial and Accounting Officer)

37

EX-10.1

Exhibit 10.1

PARATEK PHARMACEUTICALS paratekpharma.com 75 Park Plaza Boston, MA 02116 617.807.6600 617.275.0039 fax

August 4, 2017

Michael F. Bigham

By Hand

Re:Amended and Restated Employment Agreement

Dear Michael:

On behalf of the Board of Directors (the “Board”) of Paratek Pharmaceuticals, Inc. (“Paratek” or the “Company”), I am pleased to offer you continued employment under the terms of this Amended and Restated Employment Agreement (the “Agreement”).  In this Agreement, you and the Company hereby further amend, supersede, and restate in its entirety that certain amended and restated employment agreement between the Company and you dated June 16, 2017 (the “Employment Agreement”).

Employment Position and Duties

You will continue to be employed in the position of Chairman of the Board and Chief Executive Officer (“CEO”).You will be expected to perform the customary duties of your position, duties specified in the Bylaws of the Company, and as may be required by the Board.  You will report to the Board, and work at the Company’s corporate headquarters in Boston, Massachusetts.  The Company reserves the right to reasonably require you to perform your duties at places other than its corporate headquarters from time to time, and to require reasonable business travel, including international travel, at the Company’s expense.

You will generally devote at least ninety percent (90%) of your business time and attention to the business of the Company.  At all times, the Company shall provide you with full-time executive secretarial support based at your Company office.

Your employment relationship with the Company will also be governed by the general employment policies and practices of the Company, except that if the terms of this Agreement conflict, this Agreement will control.  The Board reserves the right to change your position, duties, and work location, from time to time in its discretion.

Board Membership

You agree to continue to serve as a director of the Company and as Chairman of the Board while you remain employed as the CEO of the Company.  You agree that, unless otherwise requested by the Board, in the event your employment with the Company is terminated for any reason, either voluntarily or involuntarily, with or without Cause, you shall resign as a member of the Board and as its Chairman simultaneously with the termination of your employment.

Base Salary

You will earn a salary at the rate of $19,166.67 semi-monthly ($460,000 annualized), less payroll deductions and withholdings (“Base Salary”), payable on the Company’s regular payroll schedule.

The Base Salary will be reviewed on an annual or more frequent basis by the Board (or any authorized committee thereof), and may be subject to increase in the discretion of the Board (or any authorized committee thereof).

Michael F. Bigham

Page 2

Discretionary Performance Bonus

You will be eligible to earn a discretionary performance bonus of up to fifty percent (50%) of your Base Salary, subject to applicable payroll deductions and withholdings (“Bonus”), based upon the Board’s assessment of your performance, and the Company’s attainment of written targeted goals as determined by the Board in its sole discretion.  Following the close of each calendar year, the Board will determine in its discretion whether you have earned a Bonus, and the amount of any Bonus.  You will be eligible to earn a Bonus for any full calendar year provided that you remain employed by the Company as of December 31 of that year.  The Bonus, if earned, will be paid no later than March 15 of the calendar year after the year to which it relates.

Employee Benefits

As a regular employee, you will be eligible to participate in the Company’s standard employee benefits, pursuant to the terms and conditions of the benefit plans and applicable policies, and for any additional benefits provided to the Company’s executive employees generally.  You will also be entitled to four (4) weeks of paid vacation each calendar year, in accordance with the terms of the Company’s vacation policy.  The Company may change employee benefits from time to time in its discretion.  Details about these benefits are provided in the employee handbook and Summary Plan Descriptions, available for your review.

Business Expenses

The Company will pay or reimburse you for all reasonable business expenses incurred or paid by you in the performance of your duties and responsibilities for the Company, subject to such reasonable substantiation and documentation as may be required by the Company, and subject to any maximum annual limit and other restrictions on or policies governing such expenses as set by the Company from time to time.

Equity Compensation

You will be eligible for future equity awards granted in accordance with the Company’s plans as in effect from time to time at levels commensurate with your position and responsibilities and subject to such terms as shall be determined by the Board or one of its committees in its or their sole discretion.

Notwithstanding the foregoing, the options and any other equity awards that may be granted to you by the Company after June 26, 2014 (collectively, the “Company Equity”) will be subject to earlier vesting upon your termination by the Company without Cause or by you with Good Reason, or upon a Change in Control, under the conditions described below.  For the avoidance of doubt, any award agreement granting you Company Equity shall provide that the award cannot be amended without your consent.

At-Will Employment Relationship

You may terminate your employment with the Company at any time, with or without Good Reason, and with or without advance notice, and for any reason whatsoever simply by notifying the Company.  Likewise, the Company may terminate your employment at any time, with or without Cause, and with or without advance notice.  Your employment at-will status can only be modified in a written agreement approved by the Board and signed by you and a duly authorized Member of the Board.

Payments upon Termination other than without Cause or with Good Reason

Upon termination of your employment for any reason other than by the Company without Cause or by you with Good Reason, you shall be paid all accrued but unpaid Base Salary, any earned but unpaid Bonus, reimbursement for business expenses incurred by you but not yet paid to you as of the date your employment terminates, and all accrued but unused vacation (collectively, the “Accrued Payments”).  Your outstanding and unvested Company Equity shall terminate as of your termination date.

Michael F. Bigham

Page 3

Termination without Cause or with Good Reason

Upon termination of your employment at any time (whether before, in connection with, or following a Change in Control) by the Company without Cause or by you with Good Reason, you will receive the Accrued Payments.  In addition, subject to your fulfillment of the Release Obligation, as defined below, you will be eligible for the following severance benefits:

1.Cash Severance Payments.  You will be eligible to receive cash severance equal to twelve (12) months of Base Salary following the termination date, subject to payroll withholding and deduction (“Severance Payments”), and paid according to the Company’s regular payroll procedures.  Payment of Severance Payments shall commence on the sixtieth (60th) day following your employment termination, which initial payment shall include a lump sum payment equal to the aggregate semi-monthly installments that would otherwise have been due during the period between the termination date and the sixtieth (60^th) day, but for the sixty (60)-day delay in this provision.  Thereafter, the remaining installments shall be paid on the Company’s regular paydays.

2.Pro-Rata Severance Bonus.  You will also be eligible to receive an amount (the “Pro-Rata Bonus”) equal to the Bonus you would have earned for the year in which your employment terminates, prorated by multiplying the Bonus that you would have earned if you had remained employed through December 31 by the portion of the year that you had actually remained employed, and subject to payroll withholding and deduction.  The determination by the Board of the Bonus amount you would have earned shall be based on actual performance for the full calendar year, except that any applicable subjective performance conditions will be disregarded in determining actual performance, and the entire amount of the Bonus, if any, will be determined based on applicable objective performance conditions.  Any Pro-Rata Bonus will be paid at the same time bonuses are paid to the other executives of the Company, but in no event later than March 15 of the calendar year after the year to which it relates.

3.Paid Health Care Coverage; Other Benefits Continuation.

a.If at the time of your employment termination you participate in health care coverage through the Company’s plan, then provided that you timely elect continued coverage under COBRA, the Company will pay your COBRA premiums (less your standard employee contribution) to continue your coverage (including coverage for eligible dependents, if applicable) (“COBRA Premiums”) through the period (the “COBRA Premium Period”) starting on the termination date and ending on the earliest to occur of the date: (i) twelve (12) months after the termination date; (ii) you become eligible for group health insurance coverage through a new employer; or (iii) you cease to be eligible for COBRA continuation coverage for any reason, including plan termination.  In the event you become covered under another employer’s group health plan or otherwise cease to be eligible for COBRA during the COBRA Premium Period, you must immediately notify the Company of such event.

b.Notwithstanding the foregoing, if the payment by the Company of the COBRA Premiums will subject or expose the Company to taxes or penalties, you and the Company agree to renegotiate the provisions of paragraph 3(a) in good faith and enter into a substitute arrangement pursuant to which the Company will not be subjected or exposed to taxes or penalties and you will be provided with payments or benefits with an economic value that is no less than the economic value of the COBRA Premiums.

4.Equity Acceleration.  All outstanding unvested Company Equity shall vest in full, effective as of the termination date of your employment; provided, however, that any Company Equity that is subject to performance-based vesting conditions will be deemed to have been achieved at target.

Michael F. Bigham

Page 4

Definitions

For purposes of this Agreement, the following definitions shall apply:

1.“Cause” shall mean the occurrence of any of the following events:  (a) your indictment for any felony or any crime involving fraud, embezzlement, dishonesty or moral turpitude under the laws of the United States or any state thereof; (b) your attempted commission of, or participation in, a fraud, embezzlement or act of material dishonesty against the Company or a Company affiliate; (c) your intentional, material violation of any contract or agreement between you and the Company or a Company affiliate or of any statutory duty owed to the Company or a Company affiliate which, if curable, remains uncured after a period of thirty (30) days following your receipt of notice from the Company that it deems such conduct Cause for termination of your employment; (d) your intentional unauthorized use or disclosure of the Company’s or a Company affiliate’s confidential information or trade secrets; (e) the refusal or willful omission by you to perform any duties required of you by the Board, which continues after a period of thirty (30) days following your receipt of notice from the Company that it deems such conduct Cause for termination of your employment hereunder; or (f) your gross misconduct, which continues after a period of thirty (30) days following your receipt of notice from the Company that it deems such conduct Cause for termination of your employment.

Notwithstanding anything to the contrary in this Agreement or any other agreement between the Company and you, “Cause” shall not include or be predicated upon any act or omission by you, which is taken or made (a) in good faith, under your reasonable belief that the act or omission was in the best interests of the Company; (b) to comply with a lawful court order, directive from a federal, state or local government agency or industry regulatory authority, or subpoena; or (c) at the direction of the Board or upon the advice of counsel for the Company.

2.“Good Reason” shall exist for resignation from employment with the Company if any of the following actions are taken by the Company without your prior consent: (a) a reduction in your Base Salary or Bonus target percentage of Base Salary, unless the salaries or bonus target percentages of all other senior executive officers of the Company are correspondingly and proportionately reduced; (b) any loss of or change in your position and title as both Chairman of the Board and CEO, or any other reduction in your title, authority, duties, or responsibilities to a level materially inconsistent with the position and titles you hold; (c) a change in your reporting structure such that you no longer report directly to the Company’s Board; or (d) a relocation of your principal place of employment to a place that increases your one-way commute by more than thirty-five (35) miles as compared to your then-current principal place of employment immediately prior to such relocation.  In order for you to resign for Good Reason, each of the following requirements must be met: (w) you must provide written notice to the Board within thirty (30) days after first becoming aware of the first occurrence of the event giving rise to Good Reason setting forth the basis for your resignation, (x) you must allow the Company at least thirty (30) days from receipt of such written notice (the “Cure Period”) to cure such event, (y) such event is not reasonably cured by the Company within the Cure Period, and (z) you must resign from all positions you then hold with the Company not later than sixty (60) days after the expiration of the Cure Period.

3.“Release Obligation” means that: (a) you have signed a general release and waiver of claims in favor of the Company and its affiliates, as part of a termination agreement reasonably acceptable to you and to the Company, and (b) you have allowed the release and waiver to become fully effective without revocation during any applicable revocation period.

Michael F. Bigham

Page 5

Change in Control

Upon a Change in Control, all outstanding unvested Company Equity will either be accelerated or assumed consistent with the terms of the Company equity plan under which it was granted, and as the award agreements for such Company Equity will so provide; provided, however, that if in connection with a Change in Control, the vesting of any incentive equity issued by the Company to any other employee, director or service provider will be accelerated, then any outstanding unvested Company Equity which you hold shall also vest in full immediately prior to such Change in Control; provided, however, that any Company Equity that is subject to performance-based vesting conditions will be deemed to have been achieved at target.

Upon the termination of your employment by the Company without Cause, or by you with Good Reason, in either case during a time period starting on the date three (3) months before the closing of a Change in Control and ending on the date twenty-four (24) months after the closing of a Change in Control, provided that you meet the Release Obligation and provide continued services through your termination date, then all outstanding unvested Company Equity shall vest in full, effective as of the termination date of your employment; provided, however, that any Company Equity that is subject to performance-based vesting conditions will be deemed to have been achieved at target.

A “Change in Control” shall mean any of the following: (a) a merger or consolidation in which the Company is a constituent party (or if a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation), other than a merger or consolidation in which the voting securities of the Company outstanding immediately prior to such merger or consolidation continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation, or (b) any transaction or series of related transactions in which in excess of fifty percent (50%) of the Company’s voting power is transferred, other than the sale by the Company of stock in transactions the primary purpose of which is to raise capital for the Company’s operations and activities, or (c) a sale, lease, exclusive license or other disposition of all or substantially all (as determined by the Board in its sole discretion) of the assets of the Company.

Section 280G

If all, or any portion, of the payments provided to you under this Agreement, either alone or together with other payments or benefits that you receive or are entitled to receive from the Company would constitute an “excess parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), then the Company shall pay you an additional amount  (the “Additional Amount”) equal to the sum of (i) all taxes payable by you under Section 4999 of the Code with respect to all such excess parachute  payments (the “Excise Tax”) and the Additional Amount, plus (ii) all federal, state and local income taxes payable by you with respect to the Additional  Amount.

Indemnification; D&O Insurance

You will be entitled to the indemnification and liability insurance coverage as described in the indemnification agreement that you entered into with the Company on October 30, 2014 (the “Indemnification Agreement”).

Compliance with Proprietary Information Agreement and Company Policies

As a condition of employment, you have signed and must continue to comply with the Company’s standard form of Employee Proprietary Information, Inventions Assignment, Non-Competition and Non-Solicitation Agreement (the “Proprietary Information Agreement”, a copy of which is attached hereto as Exhibit A) which prohibits unauthorized use or disclosure of the Company’s proprietary information, among other obligations.  As a Paratek employee, you will be expected to abide by Company policies and practices, as may be changed from time to time in the Company’s discretion, and acknowledge in writing that you have read the Company’s employee handbook.

Michael F. Bigham

Page 6

Protection of Third Party Information

In your work for the Company, you will be expected not to use or disclose any confidential information, including trade secrets, of any former employer or other person to whom you have an obligation of confidentiality.  Rather, you will be expected to use only that information which is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company.  You agree that you will not bring onto Company premises, or use in the performance of your duties, any unpublished documents or property belonging to any former employer or other person to whom you have an obligation of confidentiality.  You hereby represent that you have disclosed to the Company any contract you have signed that may restrict your activities on behalf of the Company.

Outside Activities

Provided that such activities do not interfere with your duties for Paratek and your agreed time commitments to Paratek, the Company has no objection to your conducting the business activities specified on Exhibit B, while you are the CEO of Paratek.  You may also engage in any other business, civic and not-for-profit activities so long as such activities do not materially interfere with the performance of your duties under this Agreement and are not otherwise in conflict with the Proprietary Information Agreement.  You may purchase or otherwise acquire up to one percent (1%), or any higher percentage if agreed to by the Board, of any class of securities of any enterprise if such securities are listed on any national or regional securities exchange, provided that you refrain from participating in the business activities of such enterprise.

Agreement to Arbitrate

To ensure the rapid and economical resolution of disputes that may arise in connection with your employment with the Company, you and the Company both agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this Agreement, your employment with the Company, or the termination of your employment with the Company, will be resolved pursuant to the Federal Arbitration Act, 9 U.S.C. §1-16, and to the fullest extent permitted by law, by final, binding and confidential arbitration conducted in Boston, Massachusetts by JAMS, Inc. (“JAMS”) or its successors.

Both you and the Company acknowledge that by agreeing to this arbitration procedure, you each waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding.

Any such arbitration proceeding will be governed by JAMS’ then applicable rules and procedures for employment disputes, which can be found at http://www.jamsadr.com/rules-employment-arbitration/, and which will be provided to you upon request.  In any such proceeding, the arbitrator shall: (i) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (ii) issue a written arbitration decision including the arbitrator’s essential findings and conclusions and a statement of the award.  You and the Company each shall be entitled to all rights and remedies that either would be entitled to pursue in a court of law.  Nothing in this Agreement is intended to prevent either the Company or you from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration pursuant to applicable law.

Section 409A

1.Specified Employee.  Notwithstanding anything to the contrary in the Agreement, if at the time your employment terminates, you are a “specified employee,” as defined below, any and all amounts payable under the Agreement on account of such separation from service that would (but for this provision) be payable within six (6) months following the date of termination, shall instead be paid on the next business day following the expiration of such six (6) month period or, if earlier, upon your death; except (A) to the extent of amounts that do not constitute a deferral of compensation within the meaning of Treasury regulation Section 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in Section 1.409A-1(b)(9)(iii), as determined by the Company in its

Michael F. Bigham

Page 7

reasonable good faith discretion); (B) benefits which qualify as excepted welfare benefits pursuant to Treasury regulation Section 1.409A-1(a)(5); or (C) other amounts or benefits that are not subject to the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”).

2.Termination of Employment.  For purposes of the Agreement, all references to “termination of employment” and correlative phrases shall be construed to require a “separation from service” (as defined in Treasury regulation Section 1.409A-1(h) after giving effect to the presumptions contained therein), and the term “specified employee” means an individual determined by the Company to be a specified employee under Treasury regulation Section 1.409A-1(i).

3.Reimbursement for Expenses.  Any reimbursement for expenses that would constitute nonqualified deferred compensation subject to Section 409A shall be subject to the following additional rules: (i) no reimbursement of any such expense shall affect your right to reimbursement of any such expense in any other taxable year; (ii) reimbursement of the expense shall be made, if at all, promptly, but not later than the end of the calendar year following the calendar year in which the expense was incurred; and (iii) the right to reimbursement shall not be subject to liquidation or exchange for any other benefit.

4.Separate Payments.  Each payment made under the Agreement shall be treated as a separate payment and the right to a series of installment payments under the Agreement is to be treated as a right to a series of separate payments.

5.Limitation on Liability.  In no event shall the Company have any liability relating to the failure or alleged failure of any payment or benefit under the Agreement to comply with, or be exempt from, the requirements of Section 409A.

Entire Agreement; Contingencies

This Agreement, together with your Proprietary Information Agreement and the Indemnification Agreement, forms the complete and exclusive statement of your employment agreement with the Company.  It supersedes any other prior agreements or promises made to you by anyone, whether oral or written, including the Employment Agreement.  Changes in your employment terms, other than those changes expressly reserved to the Company’s or Board’s discretion in this Agreement, require a written modification approved by the Board and signed by a duly authorized Member of the Board.

This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns.  If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of this Agreement and the provision in question shall be modified so as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible under applicable law.

This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Massachusetts without regard to conflicts of law principles.  Any waiver of a breach of this Agreement, or rights hereunder, shall be in writing and shall not be deemed to be a waiver of any successive breach or rights hereunder.  This Agreement may be executed in counterparts which shall be deemed to be part of one original, and pdf or other facsimile signatures shall be equivalent to original signatures.

[Remainder of this page is intentionally left blank]

Please sign and date this Agreement to indicate your acceptance of continued employment at Paratek under the terms described above.  We look forward to a continued productive and enjoyable work relationship.  

Sincerely,

Paratek Pharmaceuticals, Inc.

/s/ Jeffrey Stein

Jeffrey Stein, Director on behalf of the Board

Accepted:

/s/ Michael F. Bigham

Michael F. Bigham

August 4, 2017

Date

Exhibit A

EMPLOYEE PROPRIETARY INFORMATION, INVENTIONS ASSIGNMENT, NON-COMPETITION

AND NON-SOLICITATION AGREEMENT

In consideration of my employment or continued employment by Paratek Pharmaceuticals, Inc., its subsidiaries, parents, affiliates, successors and assigns (together, the “Company”) and the compensation now and hereafter paid to me, I hereby enter into this Employee Proprietary Information, Inventions Assignment, Non-Competition and Non-Solicitation Agreement (the “Agreement”) and agree as follows:

1.Nondisclosure.

1.1Recognition of Company’s Rights; Nondisclosure.  I understand and acknowledge that my employment by the Company creates a relationship of confidence and trust with respect to the Company’s Proprietary Information (defined below) and that the Company has a protectable interest therein.  At all times during my employment and thereafter, I will hold in strictest confidence and will not disclose, use, lecture upon or publish any of the Company’s Proprietary Information, except as such disclosure, use or publication may be required in connection with my work for the Company, or unless an authorized officer of the Company expressly authorizes such in writing.  I will obtain the Company’s written approval before publishing or submitting for publication any material (written, verbal, or otherwise) that relates to my work at the Company and/or incorporates any Proprietary Information.  I hereby assign to the Company any rights I may have or acquire in such Proprietary Information and recognize that all Proprietary Information shall be the sole property of the Company and its assigns.  I will take all reasonable precautions to prevent the inadvertent or accidental disclosure of Proprietary Information.  

1.2Proprietary Information.  The term “Proprietary Information” shall mean any and all confidential and/or proprietary knowledge, data or information of the Company, its affiliates, parents and subsidiaries, whether having existed, now existing, or to be developed during my employment.  By way of illustration but not limitation, “Proprietary Information” includes (a) trade secrets, inventions, ideas, processes, formulas, assay components, biological materials, cell lines, and clinical data, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques and any other proprietary technology and all Proprietary Rights

therein (hereinafter collectively referred to as “Inventions”); (b) information regarding research, development, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, margins, discounts, credit terms, pricing and billing policies, quoting procedures, methods of obtaining business, forecasts, future plans and potential strategies, financial projections and business strategies, operational plans, financing and capital-raising plans, activities and agreements, internal services and operational manuals,  methods of conducting Company business, suppliers and supplier information, and purchasing; (c) information regarding customers and potential customers of the Company, including customer lists, names, representatives, their needs or desires with respect to the types of products or services offered by the Company, proposals, bids, contracts and their contents and parties, the type and quantity of products and services provided or sought to be provided to customers and potential customers of the Company and other non-public information relating to customers and potential customers; (d) information regarding any of the Company’s business partners and their services, including names; representatives, proposals, bids, contracts and their contents and parties, the type and quantity of products and services received by the Company, and other non-public information relating to business partners; (e) information regarding personnel, employee lists, compensation, and  employee skills; and (f) any other non-public information which a competitor of the Company could use to the competitive disadvantage of the Company.  Notwithstanding the foregoing, it is understood that, at all such times, I am free to use information which is generally known in the trade or industry through no breach of this Agreement or other act or omission by me, and I am free to discuss the terms and conditions of my employment with others to the extent expressly permitted by Section 7 of the National Labor Relations Act.

Michael F. Bigham

Page 2

1.3Third Party Information.  I understand, in addition, that the Company has received and in the future will receive confidential and/or proprietary knowledge, data, or information from third parties (“Third Party Information”).  During my employment and thereafter, I will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than Company personnel who need to know such information in connection with their work for the Company) or use, except in connection with my work for the Company, Third Party Information unless expressly authorized by an authorized officer of the Company in writing.

1.4Term of Nondisclosure Restrictions.  I understand that Proprietary Information and Third Party Information is never to be used or disclosed by me, as provided in this Section 1.  If, however, a court decides that this Section 1 or any of its provisions is unenforceable for lack of reasonable temporal limitation and the Agreement or its restriction(s) cannot otherwise be enforced, I agree and the Company agrees that the two (2) year period after the date my employment ends shall be the temporal limitation relevant to the contested restriction, provided, however, that this sentence shall not apply to trade secrets protected without temporal limitation under applicable law.  

1.5No Improper Use of Information of Prior Employers and Others.  During my employment by the Company I will not improperly use or disclose any confidential information or trade secrets, if any, of any former employer or any other person to whom I have an obligation of confidentiality, and I will not bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any other person to whom I have an obligation of confidentiality unless consented to in writing by that former employer or person.  

2.Assignment of Inventions.

2.1Proprietary Rights.  The term “Proprietary Rights” shall mean all trade secrets, patents, copyrights, trademarks and other intellectual property rights throughout the world.

2.2Prior Inventions.  Inventions, if any, patented or unpatented, which I made prior to the commencement of my employment with the Company are excluded from the scope of this Agreement.  To preclude any possible uncertainty, I have set forth on Exhibit 1 (Prior Inventions) attached hereto a complete list of all Inventions that I have, alone or jointly with others, conceived, developed or reduced to practice or caused to be conceived, developed or reduced to practice prior to the commencement of my employment with the Company, that I consider to be my property or the property of third parties, and that I wish to have excluded from the scope of this Agreement (collectively referred to as “Prior Inventions”).  If disclosure of any such Prior Invention would cause me to violate any prior confidentiality agreement, I understand that I am not to list such Prior Inventions in Exhibit 1 but am only to disclose a cursory name for each such invention, a listing of the party(ies) to whom it belongs and the fact that full disclosure as to such inventions has not been made for that reason. A space is provided on Exhibit 1 for such purpose.  If no such disclosure is attached, I represent that there are no Prior Inventions.  If, in the course of my employment with the Company, I incorporate a Prior Invention into a Company product, process or machine, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, fully-paid, worldwide license (with rights to sublicense through multiple tiers of sub-licensees) to make, have made, modify, make derivative works of, publicly perform, use, sell, import, and exercise any and all present and future rights in such Prior Invention.  Notwithstanding the foregoing, I agree that I will not incorporate, or permit to be incorporated, Prior Inventions in any Company Inventions without the Company’s prior written consent.

2.3Assignment of Inventions.  Subject to Subsection 2.4, I hereby assign, grant and convey to the Company all my right, title and interest in and to any and all Inventions (and all Proprietary Rights with respect thereto) whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or learned by me, either alone or jointly with others, during the period of my employment with the Company.  Inventions assigned to the Company or its designees are hereinafter referred to as “Company Inventions.”  

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Michael F. Bigham

Page 3

2.4Unassigned or Nonassignable Inventions.  I recognize that this Agreement will not be deemed to require assignment of any Invention that I developed entirely on my own time without using the Company’s equipment, supplies, facilities, trade secrets, or Proprietary Information, except for those Inventions that either (i) relate to the Company’s actual or anticipated business, research or development, or (ii) result from or are connected with work performed by me for the Company.  In addition, this Agreement does not apply to any Invention which qualifies fully for protection from assignment to the Company under any specifically applicable state law, regulation, rule, or public policy (“Specific Inventions Law”).

2.5Obligation to Keep Company Informed.  During the period of my employment and for six (6) months after termination of my employment with the Company, I will promptly disclose to the Company fully and in writing all Inventions authored, conceived or reduced to practice by me, either alone or jointly with others.  In addition, I will promptly disclose to the Company all patent applications filed by me or on my behalf within a year after termination of employment.  At the time of each such disclosure, I will advise the Company in writing of any Inventions that I believe fully qualify for protection under the provisions of a Specific Inventions Law; and I will at that time provide to the Company in writing all evidence necessary to substantiate that belief.  The Company will keep in confidence and will not use for any purpose or disclose to third parties without my consent any confidential information disclosed in writing to the Company pursuant to this Agreement relating to Inventions that qualify fully for protection under a Specific Inventions Law.  I will preserve the confidentiality of any Invention that does not fully qualify for protection under a Specific Inventions Law.

2.6Ownership of Work Product.  I agree that the Company will exclusively own all work product that is made by me (solely or jointly with others) within the scope of my employment, and I hereby irrevocably and unconditionally assign to the Company all right, title, and interest worldwide in and to such work product.  I acknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of my employment and which are protectable by copyright are “works made for hire,” pursuant to United States Copyright Act (17 U.S.C., Section 101). I understand and agree that I have no right to publish on, submit for publishing, or use for any publication any work product protected by this Section, except as necessary to perform services for the Company.

2.7Enforcement of Proprietary Rights.  I will assist the Company in every proper way to obtain, and from time to time enforce, United States and foreign Proprietary Rights relating to Company Inventions in any and all countries.  To that end I will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof.  In addition, I will execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee, including the United States or any third party designated by the Company.  My obligation to assist the Company with respect to Proprietary Rights relating to such Company Inventions in any and all countries shall continue beyond the termination of my employment, but the Company shall compensate me at a reasonable rate after my termination for the time actually spent by me at the Company’s request on such assistance.

In the event the Company is unable for any reason, after reasonable effort, to secure my signature on any document needed in connection with the actions specified in the preceding paragraph, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, which appointment is coupled with an interest, to act for and in my behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph with the same legal force and effect as if executed by me.  I hereby waive and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have for infringement of any Proprietary Rights assigned under this Agreement to the Company.

3.Records.I agree to keep and maintain adequate and current records (in the form of notes, sketches, drawings and in any other form that may be required by the Company) of all Proprietary Information developed by me and all Inventions made by me during the period of my employment at the Company, which records shall be available to and remain the sole property of the Company at all times.

4.Duty of Loyalty During Employment.  I agree that during the period of my employment by the Company I will not, without the Company’s express written consent, directly or indirectly engage in any employment or business activity which is directly or indirectly competitive with, or would otherwise conflict with, my employment by the Company.    

A-3

Michael F. Bigham

Page 4

5.No Solicitation of Employees, Consultants, Contractors, or Customers or Potential Customers.  I agree that during the period of my employment and for the one (1) year period after the date my employment ends for any reason, including but not limited to voluntary termination by me or involuntary termination by the Company, I will not, as an officer, director, employee, consultant, owner, partner, or in any other capacity, either directly or through others, except on behalf of the Company:

5.1solicit, induce, encourage, or participate in soliciting, inducing, or encouraging any employee of the Company to terminate his or her relationship with the Company;

5.2hire, employ, or engage in business with or attempt to hire, employ, or engage in business with any person employed by the Company or who has left the employment of the Company within the preceding three (3) months of any such prohibited activity or discuss any potential employment or business association with such person, even if I did not initiate the discussion or seek out the contact;

5.3solicit, induce or attempt to induce any Customer or Potential Customer, or any consultant or independent contractor with whom I had direct or indirect contact during my employment with the Company or whose identity I learned as a result of my employment with the Company, to terminate, diminish, or materially alter in a manner harmful to the Company its relationship with the Company; or

5.4solicit, perform, provide or attempt to perform or provide any Conflicting Services (as defined in Section 6 below) for a Customer or Potential Customer. The parties agree that for purposes of this Agreement, a “Customer or Potential Customer” is any person or entity who or which, at any time during the one (1) year prior to the date my employment with the Company ends, (i) contracted for, was billed for, or received from the Company any product, service or process with which I worked directly or indirectly during my employment by the Company or about which I acquired Proprietary Information; or (ii) was in contact with me or in contact with any other employee, owner, or agent of the Company, of which contact I was or should have been aware, concerning any product, service or process with which I worked directly or indirectly during my employment with the Company or about which I acquired Proprietary Information; or (iii) was solicited by the Company in an effort in which I was involved or of which I was or should have been aware.  

6.Non-Compete Provision.  I agree that for the one (1) year period after the date my employment ends for any reason, including but not limited to voluntary termination by me or involuntary termination by the Company, I will not, directly or indirectly, as an officer, director, employee, consultant, owner, manager, member, partner, or in any other capacity solicit, perform, or provide, or attempt to perform or provide Conflicting Services anywhere in the world where the Company conducts business, including but not limited to locations where the Company performs research or development activities related to the Company’s products, services or processes (such locations the “Restricted Territory”), nor will I assist another person to solicit, perform or provide or attempt to perform or provide Conflicting Services in the Restricted Territory.

The parties agree that for purposes of this Agreement, “Conflicting Services” means any product, service, or process or the research and development thereof, of any person or organization other than the Company that has antibiotics as its principal business, unless otherwise expressly excluded from this definition in advance by the Company’s Board of Directors.

7.Reasonableness of Restrictions.

7.1I agree that I have read this entire Agreement and understand it.  I agree that this Agreement does not prevent me from earning a living or pursuing my career and that I have the ability to secure other non-competitive employment using my marketable skills.  I agree that the restrictions contained in this Agreement are reasonable, proper, and necessitated by the Company’s legitimate business interests, including without limitation, the Company’s Proprietary Rights, Proprietary Information and the goodwill of its customers.  I represent and agree that I am entering into this Agreement freely and with knowledge of its contents with the intent to be bound by the Agreement and the restrictions contained in it.

7.2In the event that a court finds this Agreement, or any of its restrictions, to be ambiguous, unenforceable, or invalid, the Company and I agree that the court shall read the Agreement as a whole and interpret the restriction(s) at issue to be enforceable and valid to the maximum extent allowed by law.

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Michael F. Bigham

Page 5

7.3If the court declines to enforce this Agreement in the manner provided in subsection 7.2, I and the Company agree that this Agreement will be automatically modified to provide the Company with the maximum protection of its business interests allowed by law and I agree to be bound by this Agreement as modified.

8.No Conflicting Agreement or Obligation.  I represent that my performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any agreement or obligation of any kind to keep in confidence information acquired by me in confidence or in trust prior to my employment by the Company.  I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict with this Agreement.

9.Return of Company Property.  Upon termination of my employment or upon Company’s request at any other time, I will deliver to Company all of Company’s property, equipment, and documents, together with all copies thereof, and any other material containing or disclosing any Inventions, Third Party Information or Proprietary Information and certify in writing that I have fully complied with the foregoing obligation.  I agree that I will not copy, delete, or alter any information contained upon my Company computer or Company equipment before I return it to Company.  In addition, if I have used any personal computer, server, or e-mail system to receive, store, review, prepare or transmit any Company information, including but not limited to, Proprietary Information, I agree to provide the Company with a computer-useable copy of all such Proprietary Information and then permanently delete and expunge such Proprietary Information from those systems; and I agree to provide the Company access to my system as reasonably requested to verify that the necessary copying and/or deletion is completed.  I further agree that any property situated on Company’s premises and owned by Company is subject to inspection by Company’s personnel at any time with or without notice.  Prior to the termination of my employment or promptly after termination of my employment, I will cooperate with Company in attending an exit interview and certify in writing that I have complied with the requirements of this section.  

10.Legal and Equitable Remedies.

10.1  I agree that it may be impossible to assess the damages caused by my violation of this

Agreement or any of its terms.  I agree that any threatened or actual violation of this Agreement or any of its terms will constitute immediate and irreparable injury to the Company and the Company shall have the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach or threatened breach of this Agreement.  

10.2  I agree that if the Company is successful in whole or in part in any legal or equitable action against me under this Agreement, the Company shall be entitled to payment of all costs, including reasonable attorney’s fees, from me.

10.3  In the event the Company enforces this Agreement through a court order, I agree that the restrictions of Sections 5 and 6 shall remain in effect for a period of twelve (12) months from the effective date of the Order enforcing the Agreement.

11.Notices.  Any notices required or permitted under this Agreement will be given to the Company at its headquarters location at the time notice is given, labeled “Attention Chief Executive Officer,” and to me at my address as listed on the Company payroll, or at such other address as the Company or I may designate by written notice to the other.  Notice will be effective upon receipt or refusal of delivery.  If delivered by certified or registered mail, notice will be considered to have been given five (5) business days after it was mailed, as evidenced by the postmark.  If delivered by courier or express mail service, notice will be considered to have been given on the delivery date reflected by the courier or express mail service receipt.

12.Publication of This Agreement to Subsequent Employers or Business Associates of Employee.

12.1  If I am offered employment or the opportunity to enter into any business venture as owner, partner, consultant or other capacity while the restrictions described in Sections 5 and 6 of this Agreement are in effect I agree to inform my potential employer, partner, co-owner and/or others involved in managing the business with which I have an opportunity to be associated of my obligations under this Agreement and also agree to provide such person or persons with a copy of this Agreement.

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Michael F. Bigham

Page 6

12.2  I agree to inform the Company of all employment and business ventures which I enter into while the restrictions described in Sections 5 and 6 of this Agreement are in effect and I also authorize the Company to provide copies of this Agreement to my employer, partner, co-owner and/or others involved in managing the business with which I am employed or associated and to make such persons aware of my obligations under this Agreement.

13.General Provisions.

13.1  Governing Law; Consent to Personal Jurisdiction.  This Agreement will be governed by and construed according to the laws of the Commonwealth of Pennsylvania as such laws are applied to agreements entered into and to be performed entirely within the Commonwealth of Pennsylvania between Pennsylvania residents.  I hereby expressly consent to the personal jurisdiction and venue of the state and federal courts located in the Commonwealth of Massachusetts for any lawsuit filed there against me by Company arising from or related to this Agreement.  

13.2  Severability.  In case any one or more of the provisions, subsections, or sentences contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained in this Agreement.  If moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.

13.3  Successors and Assigns.  This Agreement is for my benefit and the benefit of the Company, its successors, assigns, parent corporations, subsidiaries, affiliates, and purchasers, and will be binding upon my heirs, executors, administrators and other legal representatives.  

13.4  Survival.  The provisions of this Agreement shall survive the termination of my employment, regardless of the reason, and the assignment of this Agreement by the Company to any successor in interest or other assignee.  I understand that my obligations under this Agreement will continue in accordance with its express terms

regardless of any change in my title, position, status, role, duties, salary, compensation or benefits or other terms and conditions of employment or service.

13.5  Employment At-Will.  I agree and understand that nothing in this Agreement shall change my at-will employment status or confer any right with respect to continuation of employment by the Company, nor shall it interfere in any way with my right or the Company’s right to terminate my employment at any time, with or without cause or advance notice.

13.6  Waiver.  No waiver by the Company of any breach of this Agreement shall be a waiver of any preceding or succeeding breach.  No waiver by the Company of any right under this Agreement shall be construed as a waiver of any other right.  The Company shall not be required to give notice to enforce strict adherence to all terms of this Agreement.

13.7  Advice of Counsel.  I ACKNOWLEDGE THAT, IN EXECUTING THIS AGREEMENT, I HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND I HAVE READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT.  THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION OF THIS AGREEMENT.

13.8  Entire Agreement.  The obligations pursuant to Sections 1 and 2 (except Subsection 2.6) of this Agreement shall apply to any time during which I was previously engaged, or am in the future engaged, by the Company as a consultant if no other agreement governs nondisclosure and assignment of inventions during such period.  This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter of this Agreement and supersedes and merges all prior discussions between us.  No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged.  Any subsequent change or changes in my title, position, status, role, duties, salary, compensation or benefits or other terms and conditions of employment or service will not affect the validity or scope of this Agreement.

A-6

This Agreement shall be effective as of the first day of my employment with the Company.

Name I have read, understand, and Accept this agreement and have been given the opportunity to Review it with independent legal counsel.	Paratek Pharmaceuticals, Inc. Accepted and agreed:
	(Signature)
	By:
(Signature)	Title:
	Date:
Date:
	Address:	75 Park Plaza, 4th Floor, Boston, Massachusetts 02116
	:

Michael F. Bigham

Page 8

Exhibit 1

Prior Inventions

TO:	Paratek Pharmaceuticals, Inc.
FROM:
DATE:
SUBJECT:	Prior Inventions

1.Except as listed in Section 2 below, the following is a complete list of all inventions or improvements relevant to the subject matter of my employment by Paratek Pharmaceuticals, Inc. (the “Company”) that have been made or conceived or first reduced to practice by me alone or jointly with others prior to my engagement by the Company:

☐	No inventions or improvements.
☐	See below:

☐ Additional sheets attached.

2.Due to a prior confidentiality agreement, I cannot complete the disclosure under Section 1 above with respect to inventions or improvements generally listed below, the proprietary rights and duty of confidentiality with respect to which I owe to the following party(ies):

	Invention or Improvement	Party(ies)	Relationship
1.
2.
3.

☐ Additional sheets attached.

A-8

Exhibit B

MICHAEL F. BIGHAM OUTSIDE BUSINESS ACTIVITIES

Mr. Bigham will be spending approximately 10% of his time on non-Paratek activities which will include efforts on behalf of Abingworth LLP, a venture capital firm where he is an Executive Partner.

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael F. Bigham, certify that:

1. I have reviewed this Form 10-Q of Paratek Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision; to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ MICHAEL F. BIGHAM

Michael F. Bigham

Chief Executive Officer

November 7, 2017

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Douglas W. Pagán, certify that:

1. I have reviewed this Form 10-Q of Paratek Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision; to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ DOUGLAS W. PAGAN

Douglas W. Pagán

Chief Financial Officer

November 7, 2017

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Michael F. Bigham, Chief Executive Officer of Paratek Pharmaceuticals, Inc. (the “Company”), hereby certifies that, to the best of his knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2017 (the “Quarterly Report”), to which this Certification is attached as Exhibit 32.1 fully complies with the requirements of Section 13(a) or Section 15(d), of the Exchange Act; and

2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations the Company.

In Witness Whereof, the undersigned has set his hand hereto as of the 7^th day of November, 2017.

/s/ MICHAEL F. BIGHAM

Michael F. Bigham

Chief Executive Officer

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Paratek Pharmaceuticals, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Douglas W. Pagán, Chief Financial Officer of Paratek Pharmaceuticals, Inc. (the “Company”), hereby certifies that, to the best of his knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2017 (the “Quarterly Report”), to which this Certification is attached as Exhibit 32.2 fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

In Witness Whereof, the undersigned has set his hand hereto as of the 7^th day of November, 2017.

/s/ DOUGLAS W. PAGÁN

Douglas W. Pagán

Chief Financial Officer

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Paratek Pharmaceuticals, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Oct. 31, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Trading Symbol	PRTK
Entity Registrant Name	PARATEK PHARMACEUTICALS, INC.
Entity Central Index Key	0001178711
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		27,941,015

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Condensed Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Current assets
Cash and cash equivalents	$ 32,995	$ 52,962
Available-for-sale securities	130,445	75,076
Restricted cash	162	817
Other receivable		323
Prepaid and other current assets	2,604	2,922
Total current assets	166,206	132,100
Restricted cash	250	250
Fixed assets, net	1,922	1,188
Intangible assets, net	229	1,015
Goodwill	829	829
Other long-term assets	298	350
Total assets	169,734	135,732
Current liabilities
Accounts payable	2,858	4,418
Other accrued expenses	8,340	6,428
Accrued contract research	4,599	9,566
Total current liabilities	15,797	20,412
Long-term debt	49,079	38,974
Contingent obligations	84	655
Other liabilities	4,902	4,099
Total liabilities	69,862	64,140
Commitments and contingencies (Note 15)
Stockholders’ equity
Undesignated preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding
Common stock, $0.001 par value; 100,000,000 shares authorized; 27,892,040 and 23,358,637 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	28	23
Additional paid-in capital	548,144	451,947
Accumulated other comprehensive loss	(80)	(16)
Accumulated deficit	(448,220)	(380,362)
Total stockholders’ equity	99,872	71,592
Total liabilities and stockholders’ equity	$ 169,734	$ 135,732

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Condensed Consolidated Balance Sheets (Parenthetical) (unaudited) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Statement Of Financial Position [Abstract]
Undesignated preferred stock, par value	$ 0.001	$ 0.001
Undesignated preferred stock, shares authorized	5,000,000	5,000,000
Undesignated preferred stock, shares issued	0	0
Undesignated preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	27,892,040	23,358,637
Common stock, shares outstanding	27,892,040	23,358,637

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Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
License and royalty revenue	$ 12		$ 7,544
Operating expenses:
Research and development	12,112	$ 17,334	45,847	$ 63,757
General and administrative	8,219	5,949	25,299	19,896
Impairment of intangible asset			682
Changes in fair value of contingent consideration	(22)	(170)	(571)	(50)
Total operating expenses	20,309	23,113	71,257	83,603
Loss from operations	(20,297)	(23,113)	(63,713)	(83,603)
Other income and expenses:
Interest expense	(1,408)	(820)	(3,666)	(2,368)
Interest income	389	309	979	788
Other loss, net	(8)	(4)	(23)	1
Loss before income taxes	(21,324)	(23,628)	(66,423)	(85,182)
Provision for income taxes	0		753
Net loss	(21,324)	(23,628)	(67,176)	(85,182)
Other comprehensive income:
Unrealized (loss) gain on available-for-sale securities, net of tax	16	(20)	(64)	14
Comprehensive loss	$ (21,308)	$ (23,648)	$ (67,240)	$ (85,168)
Net loss per share - basic and diluted	$ (0.77)	$ (1.04)	$ (2.54)	$ (4.39)
Weighted average common shares outstanding Basic and diluted	27,776,218	22,627,711	26,453,219	19,391,443

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Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Statement Of Cash Flows [Abstract]
Net loss	$ (67,176)	$ (85,182)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	979	941
Stock-based compensation expense	13,018	8,102
Noncash interest expense	354	772
Noncash interest income		(107)
Impairment of intangible asset	682
Changes in fair value of contingent consideration	(571)	(50)
Changes in operating assets and liabilities
Accounts receivable and other current assets	1,109	4,621
Purchase of prepaid interest - marketable securities	(288)
Accounts payable and accrued expenses	(5,094)	1,474
Other liabilities and other assets	798	(438)
Net cash used in operating activities	(56,189)	(69,867)
Investing activities
Purchase of fixed assets, net	(1,165)	(314)
Purchase of marketable securities	(149,356)	(93,250)
Proceeds from maturities of marketable securities	93,750	24,966
Increase (decrease) in restricted cash	655	(1,197)
Net cash used in investing activities	(56,116)	(69,795)
Financing activities
Proceeds from issuance of long-term debt, net of costs	9,915
Proceeds from exercise of stock options	321	11
Proceeds from sale of common stock	82,102	61,287
Net cash provided by financing activities	92,338	61,298
Net decrease in cash and cash equivalents	(19,967)	(78,364)
Cash and cash equivalents at beginning of period	52,962	131,302
Cash and cash equivalents at end of period	32,995	$ 52,938
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$ 2,338

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Description of the Business

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Description of the Business

1.   Description of the business  

Paratek Pharmaceuticals, Inc., or the Company or Paratek, is a Delaware corporation with its corporate office in Boston, Massachusetts and an office in King of Prussia, Pennsylvania. The Company is a clinical stage biopharmaceutical company focused on the development and commercialization of innovative therapeutics based upon tetracycline chemistry.  The Company has used its expertise in biology and tetracycline chemistry to create chemically diverse and biologically distinct small molecules derived from the minocycline core structure. The Company has generated innovative small molecule therapeutic candidates based upon medicinal chemistry-based modifications, according to structure-based activity, of all positions of the core tetracycline molecule. These efforts have yielded molecules with broad-spectrum antibiotic properties and narrow-spectrum antibiotic properties, and molecules with potent anti-inflammatory properties to fit specific therapeutic applications. This proprietary chemistry platform has produced many compounds that have shown interesting characteristics in various in vitro and in vivo efficacy models. The Company’s two lead product candidates are the antibacterials omadacycline and sarecycline. Omadacycline and sarecycline are examples of molecules that were synthesized from this chemistry discovery platform.

If approved, omadacycline will be the first in a new class of aminomethylcycline antibiotics. Omadacycline is a broad-spectrum, well-tolerated, once-daily oral and intravenous, or IV, antibiotic. The Company believes that omadacycline has the potential to become the primary antibiotic choice of physicians for use as a broad-spectrum monotherapy antibiotic for acute bacterial skin and skin structure infections, or ABSSSI, community-acquired bacterial pneumonia, or CABP, urinary tract infection, or UTI, and other serious community-acquired bacterial infections where resistance is of concern. The Company believes omadacycline, if approved, will be used in the emergency room, hospital and community care settings. The Company has designed omadacycline to provide potential advantages over existing antibiotics, including activity against resistant bacteria, broad-spectrum antibacterial activity, oral and IV formulations with once-daily dosing, no known drug interactions, and a favorable safety and tolerability profile.

The Company’s second antibacterial product candidate, sarecycline, also known as WC3035, is a new, once-daily, tetracycline-derived compound designed for use in the treatment of acne and rosacea. The Company believes that, based upon the data generated to-date, sarecycline possesses favorable anti-inflammatory activity, plus narrow-spectrum antibacterial activity relative to other tetracycline-derived molecules, oral bioavailability, does not cross the blood-brain barrier, and favorable pharmacokinetic, or PK, properties that the Company believes make it particularly well-suited for the treatment of inflammatory acne in the community setting.  The Company has exclusively licensed U.S. development and commercialization rights to sarecycline for the treatment of acne to Allergan plc, or Allergan, while retaining development and commercialization rights in the rest of the world.

Prior to October 30, 2014, the name of the Company was Transcept Pharmaceuticals, Inc., or Transcept. On October 30, 2014, Transcept completed a business combination, or the Merger, with privately held Paratek Pharmaceuticals, Inc., or Old Paratek, in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of June 30, 2014, by and among Transcept, Tigris Merger Sub, Inc., Tigris Acquisition Sub, LLC and Old Paratek, or the Merger Agreement.

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

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Summary of Significant Accounting Policies and Basis of Presentation

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies and Basis of Presentation

2.   Summary of Significant Accounting Policies and Basis of Presentation

Summary of Significant Accounting Policies

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

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

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

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

Basis of Presentation

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

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

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2017. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2016, and notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on March 2, 2017.

Principles of Consolidation

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

Use of Estimates

The preparation of the accompanying unaudited condensed consolidated financial statements, in conformity with U.S. GAAP, requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent liabilities in the Company’s financial statements. On an ongoing basis, the Company evaluates its estimates and judgments, including those related to, among other items, intangible assets, goodwill, contingent liabilities, stock-based compensation arrangements, useful lives for depreciation and amortization of long-lived assets and valuation allowances on deferred tax assets. Actual results could differ from those estimates.

Segment and Geographic Information

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

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Cash and Cash Equivalents and Marketable Securities

9 Months Ended

Sep. 30, 2017

Cash And Cash Equivalents [Abstract]

Cash and Cash Equivalents and Marketable Securities

3.   Cash and Cash Equivalents and Marketable Securities 

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

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
September 30, 2017
U.S. treasury securities	$	128,728	$	—	$	(79	)	$	128,649
Government agencies		1,797		—		(1	)		1,796
Total	$	130,525	$	—	$	(80	)	$	130,445
December 31, 2016
U.S. treasury securities	$	62,574	$	—	$	(18	)	$	62,556
Government agencies		12,518		2		—			12,520
Total	$	75,092	$	2	$	(18	)	$	75,076

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

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Restricted Cash

9 Months Ended

Sep. 30, 2017

Restricted Cash And Investments [Abstract]

Restricted Cash

4.   Restricted Cash

Short-term restricted cash

Intermezzo Reserve

As of September 30, 2017, restricted cash of $0.2 million represents royalty income received but not yet paid to former Transcept stockholders as part of the royalty sharing agreement, or the Royalty Sharing Agreement, executed by the Company on October 28, 2016 with the Special Committee of the Company’s Board of Directors, or the Special Committee, a committee established in connection with the Merger. See Note 11, Fair Value Measurements, for more information on the Royalty Sharing Agreement. Included in the balance as of December 31, 2016, was the remainder of the Intermezzo reserve of $0.1 million, established in accordance with the Merger Agreement, which was comprised of unpaid legal fees.  

Letter of Credit

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

Long-term restricted cash

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

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Fixed Assets

9 Months Ended

Sep. 30, 2017

Property Plant And Equipment [Abstract]

Fixed Assets

5.   Fixed Assets

Fixed assets, net, consists of the following (in thousands):

	September 30, 2017			December 31, 2016
Office equipment	$	928		$	443
Computer equipment		548			251
Computer software		787			787
Leasehold improvements		873			137
Construction-in-progress		—			391
Gross fixed assets		3,136			2,009
Less: Accumulated depreciation and amortization		(1,214	)		(821	)
Net fixed assets	$	1,922		$	1,188

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Intangible Assets, Net

9 Months Ended

Sep. 30, 2017

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets, Net

6.   Intangible Assets, Net

Intangible assets consist of the following (in thousands):

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

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

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

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Net Loss Per Share Available to Common Stockholders

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Net Loss Per Share Available to Common Stockholders

7.   Net Loss Per Share Available to Common Stockholders

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

The following outstanding shares subject to stock options, restricted stock units and warrants to purchase common stock were antidilutive due to a net loss in the periods presented and, therefore, were excluded from the dilutive securities computation as of the three and nine months ended September 30, 2017 and 2016 as indicated below:

	September 30,
	2017		2016
Excluded potentially dilutive securities (1):
Shares subject to outstanding options to purchase    common stock		3,575,633		2,786,882
Unvested restricted stock units		1,186,503		440,500
Shares subject to warrants to purchase common stock		84,828		42,306
Shares issuable under employee stock purchase plan		36,539		36,539
Totals		4,883,503		3,306,227

(1) The number of shares is based on the maximum number of shares issuable on exercise or conversion of the related securities as of September 30, 2017 and 2016. Such amounts have not been adjusted for the treasury stock method or weighted average outstanding calculations as required if the securities were dilutive.

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License and Collaboration Agreements

9 Months Ended

Sep. 30, 2017

Text Block [Abstract]

License and Collaboration Agreements

8.   License and Collaboration Agreements

Zai Lab (Shanghai) Co., Ltd.

On April 21, 2017, Paratek Bermuda Ltd., a wholly-owned subsidiary of Paratek Pharmaceuticals, Inc., and Zai Lab (Shanghai) Co., Ltd., or Zai, entered into a License and Collaboration Agreement, or the Zai Collaboration Agreement. Under the terms of the Zai Collaboration Agreement, Paratek Bermuda Ltd. granted Zai an exclusive license to develop, manufacture and commercialize omadacycline, or the licensed product, in the People’s Republic of China, Hong Kong, Macau and Taiwan, or the territory, for all human therapeutic and preventative uses other than biodefense. Zai will be responsible for the development, manufacturing and commercialization of the licensed product in the territory, at its sole cost with certain assistance from Paratek Bermuda Ltd.

Under the terms of the Zai Collaboration Agreement, Paratek Bermuda Ltd. earned an upfront cash payment of $7.5 million, before taxes, and is eligible to receive up to $14.0 million in potential regulatory milestone payments and $40.5 million in potential commercial milestone payments, the next being $5.0 million upon approval by the U.S. Food & Drug Administration, or FDA, of a New Drug Application, or NDA, submission in the CABP indication. Zai will also pay Paratek Bermuda Ltd. tiered royalties at a low double digit to mid-teen percent on net sales of the licensed product in the territory.

The Zai Collaboration Agreement will continue, on a region-by-region basis, until the expiration of and payment by Zai of all Zai’s payment obligations, which is until the later of: (i) the abandonment, expiry or final determination of invalidity of the last valid claim within the Paratek patents that covers the licensed product in the region in the territory in the manner that Zai or its affiliates or sublicensees exploit the licensed product or intend for the licensed product to be exploited; or (ii) the eleventh anniversary of the first commercial sale of such licensed product in such region.

The Company evaluated the Zai Collaboration Agreement under ASC Subtopic 605-25, “Multiple Element Arrangements”. The Company determined that there were five deliverables under the Zai Collaboration Agreement: (i) an exclusive license to develop, manufacture and commercialize omadacycline in the territory; (ii) an initial transfer of technology; (iii) a transfer of certain materials and materials know-how (iv) an additional transfer of materials; and (v) participation on a joint steering committee, or JSC, and joint development committee, or JDC.

The consideration allocable to the delivered unit or units of accounting is limited to the amount that is not contingent upon the delivery of additional items or meeting other specified performance conditions. Therefore, the Company excluded from the allocable consideration the milestone payments and royalties, regardless of the probability that such milestone and royalty payments will be made, until the events that give rise to such payments occur. In addition, all regulatory milestones in the Zai Collaboration Agreement are considered substantive on the basis of the contingent nature of the milestone, including factors such as regulatory and other risks that must be overcome to achieve each milestone as well as the level of effort and investment required.  Accordingly, such amounts will be recognized in the period in which the associated milestone is achieved, assuming all other revenue recognition criteria are met.  All commercial milestones will be accounted for in the same manner as royalties and recorded as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met.

The Company determined that all five deliverables listed above had value to the Company on a stand-alone basis and therefore five units of accounting were identified. The Company determined, however, that the best estimate for the selling price of the initial transfer of technology, transfer of certain materials and materials know-how, the additional transfer of materials and participation on the JSC and JDC were all inconsequential. As such, the Company recognized the total arrangement consideration as revenue during the quarter ended June 30, 2017.

Under the Zai Collaboration Agreement, Zai will pay taxes incurred in the territory by Paratek on Paratek’s behalf and deduct these taxes from the payments due to Paratek. Withholding and other value-added taxes of $0.8 million were incurred on the $7.5 million upfront payment. As such, the Company received $6.7 million, net of taxes, during the nine months ended September 30, 2017. These taxes were paid by Zai on behalf of the Company.

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

Allergan plc

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

Under the terms of the Allergan 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. The Company has 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.

The Company 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 in 2010, and $2.5 million upon initiation of Phase 2 trials in 2012. In December 2014, the Company 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 the Company 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 the Company tiered royalties, ranging from the mid-single digits to the low double digits, based on net sales of tetracycline compounds developed under the Allergan 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 the Company 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.

The Company has not received any amounts or recognized any revenue under this arrangement since 2014.

Tufts University

In February 1997, the Company and Tufts University, or Tufts, entered into a license agreement under which the Company acquired an exclusive license to certain patent applications and other intellectual property of Tufts related to the drug resistance field to develop and commercialize products for the treatment or prevention of bacterial or microbial diseases or medical conditions in humans or animals or for agriculture. The Company subsequently entered into ten amendments to that agreement, collectively the Tufts License Agreement, to include patent applications filed after the effective date of the original license agreement, to exclusively license additional technology from Tufts, to expand the field of the agreement to include disinfectant applications, and to change the royalty rate and percentage of sublicense income paid by the Company to Tufts under sublicense agreements with specified sublicensees. The Company is obligated under the Tufts License Agreement to provide Tufts with annual diligence reports and a business plan and to meet certain other diligence milestones. The Company has the right to grant sublicenses of the licensed rights to third parties, which will be subject to the prior approval of Tufts unless the proposed sublicensee meets a certain net worth or market capitalization threshold. The Company is primarily responsible for the preparation, filing, prosecution and maintenance of all patent applications and patents covering the intellectual property licensed under the Tufts License Agreement at its sole expense. The Company has the first right, but not the obligation, to enforce the licensed intellectual property against infringement by third parties.

The Company issued Tufts 1,024 shares of the Company’s common stock on the date of execution of the original license agreement, and the Company may be required to make certain payments of up to $0.3 million to Tufts upon the achievement by products developed under the agreement of specified development and regulatory approval milestones. The Company has already made a payment of $50,000 to Tufts for achieving the first milestone following commencement of the Phase 3 clinical trial for omadacycline. The Company is also obligated to pay Tufts a minimum royalty payment in the amount of $25,000 per year. In addition, the Company is obligated to pay Tufts royalties based on gross sales of products, as defined in the agreement, ranging in the low single digits depending on the applicable field of use for such product sale. If the Company enters into a sublicense under the Tufts License Agreement, based on the applicable field of use for such product, the Company agreed 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 the Company that are reasonably attributable to the sublicense of the rights granted to the Company 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 the Company by the sublicensee or the amount of royalty payments that would have been paid by the Company to Tufts if the Company had sold the product. The Company paid $0.1 million, or 1.5%, of a sublicense issue fee to Tufts during the nine months ended September 30, 2017 upon earning the $7.5 million upfront payment under the Zai Collaboration Agreement.

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

Purdue Pharma L.P.

In July 2009, the Company and Purdue Pharma L.P., or Purdue Pharma, entered into a license and 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:

• Purdue Pharma paid the Company a $25.0 million non-refundable license fee in August 2009, and non-refundable intellectual property milestone payments of $10.0 million in each of December 2011 and August 2012;

• The Company transferred the Intermezzo NDA to Purdue Pharma, and Purdue Pharma is obligated to assume the expense associated with maintaining the NDA and further development of Intermezzo in the United States, including any expense associated with post-approval studies;

• Purdue Pharma is obligated to commercialize Intermezzo in the United States at its expense using commercially reasonable efforts;

• Purdue Pharma is obligated to pay the Company tiered base royalties on net sales of Intermezzo in the United States ranging from the mid-teens up to the mid-20% level, with each such royalty tiers subject to an increase by a percentage in the low single digits upon a specified anniversary of regulatory approval of Intermezzo. The base royalty is tiered depending upon the achievement of certain fixed net sales thresholds by Purdue Pharma, which net sales levels reset each year for the purpose of calculating the royalty. The royalty tiers are subject to reductions upon generic entry and patent expiration. Purdue Pharma is obligated to pay royalties until the later of 15 years from the date of first commercial sale in the United States or the expiration of patent claims related to Intermezzo; and

• Purdue Pharma is obligated to pay the Company up to an additional $70.0 million upon the achievement of certain net sales targets for Intermezzo in the United States.

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

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

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

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

Shin Nippon Biomedical Laboratories Ltd.

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

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

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Capital Stock

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Capital Stock

9.   Capital Stock

In October 2015 and February 2017, Paratek Pharmaceuticals, Inc. entered into Controlled Equity Offering^SM Sales Agreements, or the 2015 Sales Agreement and 2017 Sales Agreement, respectively, and collectively, the Sales Agreements, with Cantor Fitzgerald & Co., or Cantor, under which the Company could, at its discretion, from time to time sell shares of its common stock, with a sales value of up to $50 million under each Sales Agreement through Cantor. The Company provided Cantor with customary indemnification rights, and Cantor was entitled to a commission at a fixed rate of 3% of the gross proceeds per share sold.  Sales of the shares under the Sales Agreements were to be made in transactions deemed to be “at the market offerings”, as defined in Rule 415 under the Securities Act of 1933, as amended. The Company has sold all $50 million of shares of its common stock under the 2015 Sales Agreement. The Company received $36.9 million in proceeds, after deducting commissions of $1.1 million, from the sale of 2,326,119 shares of common stock under the 2015 Sales Agreement during the nine months ended September 30, 2017. The Company received $45.9 million in proceeds, after deducting commissions of $1.4 million, from the sale of 2,006,007 shares of common stock, as of November 1, 2017, under the 2017 Sales Agreement. As of November 1, 2017, $2.7 million remain available for sale under the 2017 Sales Agreement.

Warrants to Purchase Common Stock

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

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

As described in Note 13, Long-term Debt, in connection with the Loan Agreement Amendment (as defined in Note 13, Long-term Debt), on December 12, 2016, the Company issued to each of Hercules Technology II, L.P. and Hercules Technology III, L.P. a warrant to purchase 18,574 shares of its common stock (37,148 shares of common stock in total) at an exercise price of $13.46 per share, or the Loan Amendment Warrants. Additionally, in connection with the borrowing of the Third Tranche (as defined in Note 13, Long-term Debt) on June 27, 2017, the Company issued an additional warrant to Hercules Capital, Inc. to purchase 5,374 shares of its common stock at an exercise price of $23.26 per share, or the Additional Warrant. The Additional Warrant’s total relative fair value of $0.1 million was determined using a Black-Scholes option-pricing model with the following assumptions:

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

Each Loan Amendment Warrant may be exercised on a cashless basis. The Loan Amendment Warrants are exercisable for a term beginning on the date of issuance and ending on the earlier to occur of five years from the date of issuance or the consummation of certain acquisitions of the Company as set forth in the Loan Amendment Warrants.

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Other Accrued Expenses

9 Months Ended

Sep. 30, 2017

Payables And Accruals [Abstract]

Other Accrued Expenses

10.   Other Accrued Expenses

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

	September 30, 2017		December 31, 2016
Accrued legal costs		218		358
Accrued compensation		2,595		2,609
Intermezzo payable		93		105
Accrued professional fees		1,468		1,118
Accrued contract manufacturing		3,760		1,940
Accrued other		206		298
Total	$	8,340	$	6,428

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Fair Value Measurements

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

11.   Fair Value Measurements

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

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

Description	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
September 30, 2017
Assets:
U.S. treasury securities	$	128,649	$	—	$	—	$	128,649
Government agencies		—	$	1,796		—		1,796
Total Assets	$	128,649	$	1,796	$	—	$	130,445
Liabilities:
Contingent obligations	$	—	$	—	$	84	$	84
Total Liabilities	$	—	$	—	$	84	$	84
December 31, 2016
Assets:
U.S. treasury securities	$	62,556	$	—	$	—	$	62,556
Government agencies		—		12,520		—		12,520
Total Assets	$	62,556	$	12,520	$	—	$	75,076
Liabilities:
Contingent obligations	$	—	$	—	$	655	$	655
Total Liabilities	$	—	$	—	$	655	$	655

Marketable Securities

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

Contingent Consideration

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

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

The following table provides a roll forward of the fair value of contingent obligations categorized as Level 3 instruments, for the nine months ended September 30, 2017 (in thousands):

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

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

12.   Stock-Based Compensation

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Research and development expense	$	1,258	$	871	$	4,312	$	2,530
General and administrative expense		2,824		1,788		8,706		5,572
Total stock-based compensation expense	$	4,082	$	2,659	$	13,018	$	8,102

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

	Nine Months Ended September 30,
	2017			2016
Volatility		75.8	%		73.5	%
Weighted average risk-free interest rate		2.0	%		1.4	%
Expected dividend yield		0.0	%		0.0	%
Expected life of options (in years)		5.8			5.8

Stock Option Plan Activity

The number of shares of the Company’s common stock available for issuance under the Paratek Pharmaceuticals, Inc. 2015 Equity Incentive Plan, or the 2015 Plan, was initially 1,200,000 shares. The initial number of shares authorized under the 2015 Plan may be increased by the number of shares that again become available for grant as a result of forfeited or terminated awards or shares withheld in satisfaction of the exercise price or tax withholding obligations associated with awards under the Paratek Pharmaceuticals, Inc. 2006 Incentive Award Plan, as amended, and the Paratek Pharmaceuticals, Inc. 2014 Equity Incentive Plan, with the total amount of the initial shares plus the forfeited or terminated shares not to exceed 2,000,000 shares.In addition, the number of shares authorized for issuance under the 2015 Plan will be automatically increased each year pursuant to an “evergreen” provision contained in the 2015 Plan. The number of shares available for issuance will automatically increase on January 1 of each year, for the period commencing on (and including) January 1, 2016 and ending on (and including) January 1, 2025, in an amount equal to 5% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year. Notwithstanding the foregoing, the Board of Directors of the Company may act prior to January 1 of a given year to provide that there will be no January 1 increase in the number of shares available for issuance for such year or that the increase in the number of shares available for issuance for such year will be a lesser number of shares of common stock than would otherwise occur. On January 1, 2017, 1,167,931 shares of common stock were automatically added to the shares authorized for issuance under the 2015 Plan pursuant to the evergreen provision.

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

During the nine months ended September 30, 2017, the Company’s Board of Directors granted 735,400 stock options and 867,800 restricted stock units to directors, executives and employees of the Company under the 2015 Plan. The stock option awards are subject to time-based vesting over a period of one to four years.  The RSU awards made to directors of the Company are subject to time-based vesting, with 100% of the shares of common stock subject to the RSUs vesting one year from the grant date. The grants also included performance-based RSU, or PRSU, awards to certain executives and employees of the Company. The PRSU awards issued during the quarter ended June 30, 2017 have vested or will vest as follows: 20% of the PRSUs vested upon achievement of data lock for Study 16301 (oral only ABSSSI), which occurred in July 2017, or the First Milestone; 30% of the PRSUs shall vest upon achievement of IV and oral NDA filing acceptances, or the Second Milestone; and 50% of the PRSUs shall vest upon FDA approval of omadacycline, or the Third Milestone, provided, that, each of the First Milestone, the Second Milestone and the Third Milestone must occur no later than the fifth anniversary of the date of grant for the applicable portion of the PRSUs to vest. The PRSU awards issued during the quarter ended September 30, 2017shall become earned upon FDA approval of omadacycline, or the Milestone, and shall, upon achievement of the Milestone, be eligible to vest as to 100% of the PRSUs subject to the award on the first anniversary of the Milestone achievement date.

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

As of September 30, 2017, no additional shares remained available for issuance under either theParatek Pharmaceuticals, Inc. 2006 Equity Incentive Plan, as amended, or the Paratek Pharmaceuticals, Inc. 2014 Equity Incentive Plan.

Total shares available for future issuance under the 2015 Plan are 688 shares as of September 30, 2017.

Stock options

A summary of stock option activity for the nine months ended September 30, 2017 is as follows:

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

Restricted Stock Units

A summary of restricted stock unit activity for the nine months ended September 30, 2017 is as follows: 

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

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

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Long-Term Debt

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Long-term Debt

13.   Long-term Debt

On September 30, 2015, the Company entered into the Loan Agreement with Hercules and certain other lenders, and Hercules Technology Growth Capital, Inc. (as agent).  Under the Loan Agreement, Hercules provided the Company with access to term loans with an aggregate principal amount of up to $40.0 million, or collectively, the Term Loan. The Company initially drew a principal amount of $20.0 million, which was funded on September 30, 2015. The remaining $20.0 million under the Loan Agreement was available to be drawn at the Company’s option in minimum increments of $10.0 million through December 31, 2016, or the Draw Period. The Term Loan was repayable in monthly installments commencing on April 1, 2018 through maturity on September 1, 2020. The interest rate was equal to the greater of (i) 8.5%, or (ii) the sum of 8.5%, plus the “prime rate” as reported in The Wall Street Journal minus 5.75% per annum. An end of term charge equal to 4.5% of the issued principal balance of the Term Loan was payable at maturity, including in the event of any prepayment, and was being accrued as interest expense over the term of the loan using the effective interest method. Borrowings under the Loan Agreement were collateralized by substantially all of the assets of the Company.

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

Subject to certain terms, pursuant to the Loan Agreement, Hercules was also granted the right to participate in an amount of up to $2.0 million in subsequent sales and issuances of the Company's equity securities to one or more investors for cash for financing purposes in an offering that is broadly marketed to multiple investors and at the same terms as the other investors. On September 30, 2015, Hercules Technology Growth Capital, Inc. entered into a Stock Purchase Agreement with the Company to purchase 44,782 shares of common stock resulting in proceeds to the Company of approximately $1.0 million.  The excess of proceeds received by the Company over the fair value of the common stock issued was allocated as a reduction of the fees paid to Hercules in conjunction with obtaining the initial $20.0 million draw of the Term Loan.

Debt issuance costs of $511,000 were ratably allocated to the initial $20.0 million draw and the remaining unfunded $20.0 million. Debt issuance costs related to the initial $20.0 million draw were presented on the consolidated balance sheet as a direct deduction from the related debt liability. Issuance costs related to the unfunded amount were capitalized as prepaid asset and were to be amortized ratably through the end of the Draw Period.  

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

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

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

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

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

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

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

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

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

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

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

Fiscal Year
2017	$	—
2018		—
2019		27,616
2020		22,384
2021 and Thereafter		—
Total	$	50,000

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Income Taxes

9 Months Ended

Sep. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

14.   Income Taxes

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

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

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

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

15.   Commitments and Contingencies

Leases

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

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

As of September 30, 2017, future minimum lease payments under operating leases are as follows:

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

Commercial Supply Agreements

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

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

Intermezzo Patent Litigation

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

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

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

Patent Term Adjustment Suit

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

Other Legal Proceedings

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

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2017

New Accounting Pronouncements And Changes In Accounting Principles [Abstract]

Recent Accounting Pronouncements

16.   Recent Accounting Pronouncements

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

Between May 2014 and May 2016, the FASB issued three ASUs changing the requirements for recognizing and reporting revenue, or together, herein referred to as the revenue ASUs: (i) ASU No. 2014-09, Revenue from Contracts with Customers, or ASU 2014-09, (ii) ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), or ASU 2016-08, and (iii) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients, or ASU 2016-12. ASU 2014-09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2016-12 provides practical expedients and improvements on the previously narrow scope of ASU 2014-09. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, or ASU 2015-14. ASU 2015-14 defers the effective date of ASU 2014-09 by one year to fiscal years beginning, and interim periods after, December 15, 2017. All subsequent ASUs related to ASU 2014-09, including ASU 2016-08 and ASU 2016-12, assumed the deferred effective date enforced by ASU 2015-14. Early adoption of the revenue ASUs is permitted for annual periods beginning, and interim periods after, December 15, 2016. A reporting entity may apply the amendments in the revenue ASUs using either a modified retrospective approach, by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or full retrospective approach. The Company expects to elect the full retrospective application as its transition method.

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

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

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

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

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

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

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

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

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

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Summary of Significant Accounting Policies and Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

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

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

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

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

Basis of Presentation

Basis of Presentation

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

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

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2017. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2016, and notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on March 2, 2017.

Principles of Consolidation

Principles of Consolidation

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

Use of Estimates

Use of Estimates

The preparation of the accompanying unaudited condensed consolidated financial statements, in conformity with U.S. GAAP, requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent liabilities in the Company’s financial statements. On an ongoing basis, the Company evaluates its estimates and judgments, including those related to, among other items, intangible assets, goodwill, contingent liabilities, stock-based compensation arrangements, useful lives for depreciation and amortization of long-lived assets and valuation allowances on deferred tax assets. Actual results could differ from those estimates.

Segment and Geographic Information

Segment and Geographic Information

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

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Summary of Significant Accounting Policies and Basis of Presentation (Tables)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Summary of Impact to Consolidated Balance Sheet Including Amount Charged to Retained Earnings

The following table summarizes the impact to the Company’s consolidated balance sheet, including the amount charged to retained earnings as of January 1, 2017 (in thousands):

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

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Cash and Cash Equivalents and Marketable Securities (Tables)

9 Months Ended

Sep. 30, 2017

Cash And Cash Equivalents [Abstract]

Summary of Available for Sale Securities

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

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
September 30, 2017
U.S. treasury securities	$	128,728	$	—	$	(79	)	$	128,649
Government agencies		1,797		—		(1	)		1,796
Total	$	130,525	$	—	$	(80	)	$	130,445
December 31, 2016
U.S. treasury securities	$	62,574	$	—	$	(18	)	$	62,556
Government agencies		12,518		2		—			12,520
Total	$	75,092	$	2	$	(18	)	$	75,076

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Fixed Assets (Tables)

9 Months Ended

Sep. 30, 2017

Property Plant And Equipment [Abstract]

Schedule of Fixed Assets, Net

Fixed assets, net, consists of the following (in thousands):

	September 30, 2017			December 31, 2016
Office equipment	$	928		$	443
Computer equipment		548			251
Computer software		787			787
Leasehold improvements		873			137
Construction-in-progress		—			391
Gross fixed assets		3,136			2,009
Less: Accumulated depreciation and amortization		(1,214	)		(821	)
Net fixed assets	$	1,922		$	1,188

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Intangible Assets, Net (Tables)

9 Months Ended

Sep. 30, 2017

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

Intangible assets consist of the following (in thousands):

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

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Net Loss Per Share Available to Common Stockholders (Tables)

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Antidilutive Shares Excluded from Computation of Diluted Net Income (Loss) Per Share

The following outstanding shares subject to stock options, restricted stock units and warrants to purchase common stock were antidilutive due to a net loss in the periods presented and, therefore, were excluded from the dilutive securities computation as of the three and nine months ended September 30, 2017 and 2016 as indicated below:

	September 30,
	2017		2016
Excluded potentially dilutive securities (1):
Shares subject to outstanding options to purchase    common stock		3,575,633		2,786,882
Unvested restricted stock units		1,186,503		440,500
Shares subject to warrants to purchase common stock		84,828		42,306
Shares issuable under employee stock purchase plan		36,539		36,539
Totals		4,883,503		3,306,227

(1) The number of shares is based on the maximum number of shares issuable on exercise or conversion of the related securities as of September 30, 2017 and 2016. Such amounts have not been adjusted for the treasury stock method or weighted average outstanding calculations as required if the securities were dilutive.

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Capital Stock (Tables)

9 Months Ended

Sep. 30, 2017

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The weighted-average assumptions used to determine the fair value of the stock option grants is as follows:

	Nine Months Ended September 30,
	2017			2016
Volatility		75.8	%		73.5	%
Weighted average risk-free interest rate		2.0	%		1.4	%
Expected dividend yield		0.0	%		0.0	%
Expected life of options (in years)		5.8			5.8

Warrants [Member]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The Additional Warrant’s total relative fair value of $0.1 million was determined using a Black-Scholes option-pricing model with the following assumptions:

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

XML

Other Accrued Expenses (Tables)

9 Months Ended

Sep. 30, 2017

Payables And Accruals [Abstract]

Schedule of Other Accrued Expenses

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

	September 30, 2017		December 31, 2016
Accrued legal costs		218		358
Accrued compensation		2,595		2,609
Intermezzo payable		93		105
Accrued professional fees		1,468		1,118
Accrued contract manufacturing		3,760		1,940
Accrued other		206		298
Total	$	8,340	$	6,428

XML

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Schedule of Financial Assets and Liabilities Measured at Fair Value

Fair values determined by Level 2 inputs utilize observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities or other inputs that are observable market data. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability (in thousands):  

Description	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
September 30, 2017
Assets:
U.S. treasury securities	$	128,649	$	—	$	—	$	128,649
Government agencies		—	$	1,796		—		1,796
Total Assets	$	128,649	$	1,796	$	—	$	130,445
Liabilities:
Contingent obligations	$	—	$	—	$	84	$	84
Total Liabilities	$	—	$	—	$	84	$	84
December 31, 2016
Assets:
U.S. treasury securities	$	62,556	$	—	$	—	$	62,556
Government agencies		—		12,520		—		12,520
Total Assets	$	62,556	$	12,520	$	—	$	75,076
Liabilities:
Contingent obligations	$	—	$	—	$	655	$	655
Total Liabilities	$	—	$	—	$	655	$	655

Rollforward of Fair Value of Contingent Obligations

The following table provides a roll forward of the fair value of contingent obligations categorized as Level 3 instruments, for the nine months ended September 30, 2017 (in thousands):

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

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Stock-Based Compensation Expense Included in Company's Consolidated Statements of Operations

The following table presents stock-based compensation expense included in the Company’s condensed consolidated statements of operations (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Research and development expense	$	1,258	$	871	$	4,312	$	2,530
General and administrative expense		2,824		1,788		8,706		5,572
Total stock-based compensation expense	$	4,082	$	2,659	$	13,018	$	8,102

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The weighted-average assumptions used to determine the fair value of the stock option grants is as follows:

	Nine Months Ended September 30,
	2017			2016
Volatility		75.8	%		73.5	%
Weighted average risk-free interest rate		2.0	%		1.4	%
Expected dividend yield		0.0	%		0.0	%
Expected life of options (in years)		5.8			5.8

Schedule of Share-based Compensation, Stock Options, Activity

A summary of stock option activity for the nine months ended September 30, 2017 is as follows:

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

Schedule of Share-based Compensation, Restricted Stock Unit, Activity

A summary of restricted stock unit activity for the nine months ended September 30, 2017 is as follows: 

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

XML

Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Schedule of Future Principal Payments

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

Fiscal Year
2017	$	—
2018		—
2019		27,616
2020		22,384
2021 and Thereafter		—
Total	$	50,000

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2017

Commitments And Contingencies Disclosure [Abstract]

Schedule of Future Minimum Lease Payments Under Operating Leases

As of September 30, 2017, future minimum lease payments under operating leases are as follows:

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

XML

Description of the Business - Additional Information (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Accumulated deficit	$ (448,220)	$ (380,362)

XML

Summary of Significant Accounting Policies and Basis of Presentation - Summary of Impact to Consolidated Balance Sheet Including Amount Charged to Retained Earnings (Detail) - Accounting Standards Update 2016-09 [Member] $ in Thousands	Jan. 01, 2017 USD ($)
Additional Paid-in Capital [Member]
Change In Accounting Estimate [Line Items]
Cumulative-effect adjustment to additional paid-in capital and accumulated deficit	$ 681
Accumulated Deficit [Member]
Change In Accounting Estimate [Line Items]
Cumulative-effect adjustment to additional paid-in capital and accumulated deficit	$ 681

XML

Summary of Significant Accounting Policies and Basis of Presentation - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2017 Segment
Accounting Policies [Abstract]
Number of operating segments	1

XML

Cash and Cash Equivalents and Marketable Securities - Summary of Available for Sale Securities (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	$ 130,525	$ 75,092
Unrealized Gains		2
Unrealized Losses	(80)	(18)
Fair Value	130,445	75,076
U.S. Treasury Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	128,728	62,574
Unrealized Losses	(79)	(18)
Fair Value	128,649	62,556
Government Agencies [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	1,797	12,518
Unrealized Gains		2
Unrealized Losses	(1)
Fair Value	$ 1,796	$ 12,520

XML

Cash and Cash Equivalents and Marketable Securities - Additional Information (Detail) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Cash And Cash Equivalents [Abstract]
Available for sale securities had remaining maturities greater than one year	$ 0	$ 0

XML

Restricted Cash - Additional Information (Detail) - USD ($) $ in Millions	Sep. 30, 2017	Dec. 31, 2016
Restricted Cash And Cash Equivalents Items [Line Items]
Royalty income received but not yet paid	$ 0.2
Intermezzo Reserve		$ 0.1
Letters of credit amount collateralized		0.8
Letters of Credit [Member]
Restricted Cash And Cash Equivalents Items [Line Items]
Letters of credit amount collateralized	$ 0.3	$ 0.3

XML

Fixed Assets - Schedule of Fixed Assets, Net (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Property, Plant and Equipment [Line Items]
Gross fixed assets	$ 3,136	$ 2,009
Less: Accumulated depreciation and amortization	(1,214)	(821)
Net fixed assets	1,922	1,188
Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Gross fixed assets	928	443
Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Gross fixed assets	548	251
Computer Software [Member]
Property, Plant and Equipment [Line Items]
Gross fixed assets	787	787
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Gross fixed assets	$ 873	137
Construction-in-progress [Member]
Property, Plant and Equipment [Line Items]
Gross fixed assets		$ 391

XML

Intangible Assets, Net - Schedule of Intangible Assets (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Finite Lived Intangible Assets [Line Items]
Gross intangible assets	$ 382	$ 1,580
Less: Accumulated amortization	(153)	(565)
Net intangible assets	229	1,015
Intermezzo Product Rights [Member]
Finite Lived Intangible Assets [Line Items]
Gross intangible assets	212	1,410
TO-2070 Asset [Member]
Finite Lived Intangible Assets [Line Items]
Gross intangible assets	$ 170	$ 170

XML

Intangible Assets, Net - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended	12 Months Ended
	Sep. 30, 2017	Jun. 30, 2017	Sep. 30, 2017	Dec. 31, 2016
Finite Lived Intangible Assets [Line Items]
Impairment of intangible assets			$ 682,000
Intermezzo Product Rights [Member]
Finite Lived Intangible Assets [Line Items]
Impairment of intangible assets	$ 0	$ 700,000		$ 0

XML

Net Loss Per Share Available to Common Stockholders - Antidilutive Shares Excluded from Computation of Diluted Net Income (Loss) Per Share (Detail) - shares	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Excluded potentially dilutive securities	4,883,503	3,306,227
Stock Option [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Excluded potentially dilutive securities	3,575,633	2,786,882
Unvested Restricted Stock Units [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Excluded potentially dilutive securities	1,186,503	440,500
Warrants [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Excluded potentially dilutive securities	84,828	42,306
Employee Stock Purchase Plan [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Excluded potentially dilutive securities	36,539	36,539

XML

License and Collaboration Agreements - Additional Information (Detail)		1 Months Ended						3 Months Ended	9 Months Ended	12 Months Ended
	Oct. 28, 2016	Dec. 31, 2014 USD ($)	Oct. 31, 2014	Aug. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Jul. 31, 2009	Feb. 28, 1997 shares	Sep. 30, 2017 USD ($)	Sep. 30, 2017 USD ($) Deliverable	Jan. 31, 2012 USD ($)	Jan. 31, 2010 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2013 USD ($)	Aug. 31, 2009 USD ($)
Transcept Pharmaceuticals, Inc. [Member] | Royalty Sharing Agreement [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Percentage of royalty income paid for payment obligation	50.00%
Allergan [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Milestone payments on acceptance of an NDA submission									$ 5,000,000
Aggregated amount payable future regulatory milestones								$ 17,000,000	17,000,000
Tufts [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Shares issued | shares							1,024
Milestone payments, maximum									300,000
Milestone payments, paid									50,000
Royalty, payable								25,000	25,000
License agreement, sublicense issue fee paid									$ 100,000
License agreement, sublicense issue fee percent									1.50%
Purdue Pharma [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Non-refundable license fees														$ 25,000,000
Range of company tier base royalties on net sales of Intermezzo									From the mid-teens up to the mid-20% level
Validity of collaboration agreement						15 years
Advance notice to terminate collaboration agreement									180 days
Rate of royalty receivable			100.00%
Cash proceeds from sale or disposition of intermezzo			90.00%
Purdue Pharma [Member] | Intellectual Property [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Non-refundable milestone payments made				$ 10,000,000	$ 10,000,000
SNBL [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Non refundable license fee													$ 1,000,000
Aggregate amount obligated for achievement of certain development													$ 41,500,000
Maximum [Member] | Tufts [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
License agreement, sublicensing Fees percent									14.00%
Maximum [Member] | Purdue Pharma [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Amount receivable on achievement of net sales criteria								70,000,000	$ 70,000,000
Maximum [Member] | SNBL [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Amount receivable on achievement of net sales criteria												$ 2,000,000
Minimum [Member] | Tufts [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
License agreement, sublicensing Fees percent									10.00%
Zai Lab (Shanghai) Co., Ltd. [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Upfront license fee payment received and recognized as revenue								0	$ 7,500,000
Period of anniversary for first commercial sale of licensed product									11 years
Number of deliverables | Deliverable									5
Withholding and other value-added taxes on upfront payment									$ 800,000
Upfront license fee revenue, net of taxes									6,700,000
Zai Lab (Shanghai) Co., Ltd. [Member] | Paratek Bermuda Ltd [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Upfront license fee payment received and recognized as revenue									7,500,000
Milestone payments on acceptance of an NDA submission									5,000,000
Zai Lab (Shanghai) Co., Ltd. [Member] | Paratek Bermuda Ltd [Member] | Maximum [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Eligible to receive potential regulatory milestone payments								14,000,000	14,000,000
Eligible to receive potential commercial milestone payments								$ 40,500,000	$ 40,500,000
Collaborative Research and License Agreement [Member] | Allergan [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Fees earned											$ 4,000,000
New Drug Application [Member] | Allergan [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Fees earned											$ 1,000,000
Collaborative Research and License Agreement Phase 2 Trials [Member] | Allergan [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Fees earned										$ 2,500,000
Collaborative Research and License Agreement Phase 3 Trials [Member] | Allergan [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Fees earned		$ 4,000,000

XML

Capital Stock - Additional Information (Detail) - USD ($)					1 Months Ended		9 Months Ended		24 Months Ended
	Nov. 01, 2017	Jun. 27, 2017	Dec. 12, 2016	Sep. 30, 2015	Feb. 28, 2017	Oct. 31, 2015	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017
Class Of Stock [Line Items]
Proceeds from issuance of common stock							$ 82,102,000	$ 61,287,000
Beneficial owners minimum required percentage of common stock exchanged for warrant							5.00%
Warrants exercisable description							The Loan Amendment Warrants are exercisable for a term beginning on the date of issuance and ending on the earlier to occur of five years from the date of issuance or the consummation of certain acquisitions of the Company as set forth in the Loan Amendment Warrants.
Term of warrants							5 years
Hercules Capital Inc [Member] | Third Amendment [Member]
Class Of Stock [Line Items]
Exercise price of warrants		$ 23.26
Fair value of warrants		$ 100,000
Hercules Term Loan [Member]
Class Of Stock [Line Items]
Exercise price of warrants			$ 13.46	$ 24.47
Warrants issued to purchase common stock			37,148	32,692
Fair value of warrants				$ 288,000
Hercules Term Loan [Member] | Hercules Technology II, L.P. [Member]
Class Of Stock [Line Items]
Warrants issued to purchase common stock			18,574	16,346
Expected life of options (in years)				5 years
Hercules Term Loan [Member] | Hercules Technology III, L.P. [Member]
Class Of Stock [Line Items]
Warrants issued to purchase common stock			18,574	16,346
Expected life of options (in years)				5 years
Hercules Term Loan [Member] | Hercules Capital Inc [Member] | Third Amendment [Member]
Class Of Stock [Line Items]
Warrants issued to purchase common stock		5,374
Warrants Expires in 2021 [Member]
Class Of Stock [Line Items]
Warrants outstanding							9,614		9,614
Exercise price of warrants							$ 0.15		$ 0.15
Warrants expiration year							2021
2015 Sales Agreement [Member] | Cantor [Member]
Class Of Stock [Line Items]
Percentage of proceeds payable as compensation to underwriter						3.00%
Common stock sold, value									$ 50,000,000
Common stock issued on public offering							2,326,119
Proceeds from issuance of common stock							$ 36,900,000
Proceeds payable as commission to underwriter							$ 1,100,000
2017 Sales Agreement [Member] | Cantor [Member]
Class Of Stock [Line Items]
Percentage of proceeds payable as compensation to underwriter					3.00%
Maximum [Member] | 2015 Sales Agreement [Member] | Cantor [Member]
Class Of Stock [Line Items]
Common stock for sale						$ 50,000,000
Maximum [Member] | 2017 Sales Agreement [Member] | Cantor [Member]
Class Of Stock [Line Items]
Common stock for sale					$ 50,000,000
Subsequent Event [Member] | 2017 Sales Agreement [Member] | Cantor [Member]
Class Of Stock [Line Items]
Common stock for sale	$ 2,700,000
Common stock issued on public offering	2,006,007
Proceeds from issuance of common stock	$ 45,900,000
Proceeds payable as commission to underwriter	$ 1,400,000

XML

Capital Stock - Warrants Fair Value Assumption (Detail) - Warrants [Member]	6 Months Ended
	Jun. 30, 2017
Class Of Stock [Line Items]
Volatility	67.80%
Weighted average risk-free interest rate	1.80%
Expected dividend yield	0.00%
Expected life of options (in years)	5 years

XML

Other Accrued Expenses - Schedule of Other Accrued Expenses (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Payables And Accruals [Abstract]
Accrued legal costs	$ 218	$ 358
Accrued compensation	2,595	2,609
Intermezzo payable	93	105
Accrued professional fees	1,468	1,118
Accrued contract manufacturing	3,760	1,940
Accrued other	206	298
Total	$ 8,340	$ 6,428

XML

Fair Value Measurements - Schedule of Financial Assets and Liabilities Measured at Fair Value (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Assets
Total Assets	$ 130,445	$ 75,076
Liabilities
Total Liabilities	84	655
Contingent Obligations [Member]
Liabilities
Total Liabilities	84	655
Government Agencies [Member]
Assets
Total Assets	1,796	12,520
U.S. Treasury Securities [Member]
Assets
Total Assets	128,649	62,556
Quoted Prices in Active Markets (Level 1) [Member]
Assets
Total Assets	128,649	62,556
Quoted Prices in Active Markets (Level 1) [Member] | U.S. Treasury Securities [Member]
Assets
Total Assets	128,649	62,556
Significant Other Observable Inputs (Level 2) [Member]
Assets
Total Assets	1,796	12,520
Significant Other Observable Inputs (Level 2) [Member] | Government Agencies [Member]
Assets
Total Assets	1,796	12,520
Significant Unobservable Inputs (Level 3) [Member]
Liabilities
Total Liabilities	84	655
Significant Unobservable Inputs (Level 3) [Member] | Contingent Obligations [Member]
Liabilities
Total Liabilities	$ 84	$ 655

XML

Fair Value Measurements - Additional Information (Detail) - USD ($)		3 Months Ended		9 Months Ended
	Oct. 28, 2016	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Changes in fair value of contingent consideration		$ (22,000)	$ (170,000)	$ (571,000)	$ (50,000)
Contingent Obligations [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Changes in fair value of contingent consideration		$ (22,000)		$ (600,000)
Transcept Pharmaceuticals, Inc. [Member] | Royalty Sharing Agreement [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Percentage of royalty income paid for payment obligation	50.00%

XML

Fair Value Measurements - Roll Forward of Fair Value of Contingent Obligations (Detail) - Contingent Obligations [Member] $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balances	$ 655
Change in fair value	(571)
Ending balances	$ 84

XML

Stock-Based Compensation - Summary of Stock-Based Compensation Expense Included in Company's Condensed Consolidated Statements of Operations (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 4,082	$ 2,659	$ 13,018	$ 8,102
Research and Development Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	1,258	871	4,312	2,530
General and Administrative Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 2,824	$ 1,788	$ 8,706	$ 5,572

XML

Stock-Based Compensation - Schedule of Share-based Payment Award, Stock Options, Weighted-Average Valuation Assumptions (Detail) - Employee Stock Option [Member]	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Volatility	75.80%	73.50%
Weighted average risk-free interest rate	2.00%	1.40%
Expected dividend yield	0.00%	0.00%
Expected life of options (in years)	5 years 9 months 18 days	5 years 9 months 18 days

XML

Stock-Based Compensation - Additional Information (Detail) - USD ($) $ in Thousands			1 Months Ended	3 Months Ended		9 Months Ended
	Jan. 02, 2017	Jan. 02, 2016	Jul. 31, 2017	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Jun. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted under plan						911,400
Compensation cost recognized				$ 4,082	$ 2,659	$ 13,018	$ 8,102
Unrecognized compensation cost related to unvested share-based arrangements				$ 22,300		$ 22,300
Weighted average compensation cost recognition period						2 years 15 days
2015 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options reserved for future issuance				1,200,000		1,200,000
Description of annual increase in percentage of share reserved for issuance						The number of shares available for issuance will automatically increase on January 1 of each year, for the period commencing on (and including) January 1, 2016 and ending on (and including) January 1, 2025, in an amount equal to 5% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year.
Share based compensation, increase in shares issued	1,167,931
Percentage of shares		5.00%
Total shares available for future issuance				688		688
2015 Plan [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted under plan						735,400
2015 Plan [Member] | Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted under plan						867,800
Time-based vesting period						1 year
Vesting percentage						100.00%
2015 Plan [Member] | PRSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost recognized				$ 600		$ 3,000
2015 Plan [Member] | PRSUs [Member] | First Milestone [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage			20.00%
2015 Plan [Member] | PRSUs [Member] | Second Milestone [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage						30.00%
2015 Plan [Member] | PRSUs [Member] | Third Milestone [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage						50.00%
2015 Plan [Member] | PRSUs [Member] | First Anniversary of Milestone Achievement Date [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage						100.00%
2015 Plan [Member] | Maximum [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Time-based vesting period						4 years
2015 Plan [Member] | Minimum [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Time-based vesting period						1 year
2015 Equity Incentive Plan Including Prior Plans [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options reserved for future issuance				2,000,000		2,000,000
2017 Inducement Plan [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted under plan						176,000
2017 Inducement Plan [Member] | Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted under plan						35,000
Time-based vesting period						3 years
Vesting percentage						100.00%
2017 Inducement Plan [Member] | Employees Entering into Employment Or Returning to Employment [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options reserved for future issuance								550,000
2017 Inducement Plan [Member] | Maximum [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Time-based vesting period						4 years
2017 Inducement Plan [Member] | Minimum [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Time-based vesting period						1 year
2015 Inducement Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options reserved for future issuance				73,167		73,167
2006 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares remained available for issuance				0		0
2014 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares remained available for issuance				0		0

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Stock-Based Compensation - Schedule of Share-based Compensation, Stock Options, Activity (Detail) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Number of Shares Outstanding, Beginning Balances	2,780,791
Number of Shares Outstanding, Granted	911,400
Number of Shares Outstanding, Exercised	(66,455)
Number of Shares Outstanding, Expired or Forfeited	(50,103)
Number of Shares Outstanding, Ending Balances	3,575,633	2,780,791
Number of Shares Outstanding, Exercisable	1,957,219
Number of Shares Outstanding, Vested and expected to vest	3,575,633
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest [Abstract]
Weighted Average Exercise Price, Beginning Balances	$ 16.63
Weighted Average Exercise Price, Granted	17.08
Weighted Average Exercise Price, Exercised	4.83
Weighted Average Exercise Price, Expired or Forfeited	17.04
Weighted Average Exercise Price, Ending Balances	16.96	$ 16.63
Weighted Average Exercise Price, Exercisable	16.11
Weighted Average Exercise Price, Vested and expected to vest	$ 16.96
Share-based Compensation Arrangement by Share-based Payment Award, Options, Weighted-Average Remaining Contractual Term (in Years)
Options Outstanding, Weighted-Average Remaining Contractual Term (in Years)	8 years 4 days	8 years 3 months 8 days
Options Exercisable, Weighted-Average Remaining Contractual Term (in Years)	7 years 5 months 12 days
Options Exercisable, Vested and expected to vest, Weighted-Average Remaining Contractual Term (in Years)	8 years 4 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Aggregate Intrinsic Value
Options Outstanding, Aggregate Intrinsic Value	$ 30,210	$ 8,809
Options Exercisable, Aggregate Intrinsic Value	18,236
Vested and expected to vest, Aggregate Intrinsic Value	$ 30,210

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Stock-Based Compensation - Schedule of Share-based Compensation, Restricted Stock Unit, Activity (Detail) - Restricted Stock Units [Member]	9 Months Ended
	Sep. 30, 2017 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Unvested Number of Shares, Beginning Balance | shares	454,000
Number of Shares, Granted | shares	902,800
Number of Shares, Released | shares	(162,797)
Number of Shares, Cancelled | shares	(7,500)
Unvested Number of Shares, Ending Balance | shares	1,186,503
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Unvested Weighted Average Grant Date Fair Value, Beginning Balance | $ / shares	$ 19.67
Weighted Average Grant Date Fair Value, Granted | $ / shares	16.96
Weighted Average Grant Date Fair Value, Released | $ / shares	14.71
Weighted Average Grant Date Fair Value, Cancelled | $ / shares	13.73
Unvested Weighted Average Grant Date Fair Value, Ending Balance | $ / shares	$ 18.33

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Long-Term Debt - Additional Information (Detail) - USD ($)				9 Months Ended
	Jun. 27, 2017	Dec. 12, 2016	Sep. 30, 2015	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Debt Instrument [Line Items]
Proceeds from issuance of common stock				$ 82,102,000	$ 61,287,000
Long-term debt				49,079,000		$ 38,974,000
Other Liabilities [Member]
Debt Instrument [Line Items]
End of term charge, amount				$ 700,000
Second Amendment [Member]
Debt Instrument [Line Items]
Principal amount outstanding		$ 50,000,000	$ 40,000,000
End of term charge		4.50%
Amortization payment start date		Apr. 01, 2018
Amortization payment end date		Jan. 01, 2019
Hercules [Member] | Second Amendment [Member]
Debt Instrument [Line Items]
Amendment fee paid		$ 400,000
Hercules Capital Inc [Member] | Third Amendment [Member]
Debt Instrument [Line Items]
Fair value of warrants	$ 100,000
Hercules Term Loan [Member]
Debt Instrument [Line Items]
Principal amount outstanding			40,000,000
Initial principal amount drawn			20,000,000
Remaining available amount under loan agreement			20,000,000
Minimum incremental option to withdraw on loan			$ 10,000,000
Loan agreement description				Under the Loan Agreement, Hercules provided the Company with access to term loans with an aggregate principal amount of up to $40.0 million, or collectively, the Term Loan. The Company initially drew a principal amount of $20.0 million, which was funded on September 30, 2015. The remaining $20.0 million under the Loan Agreement was available to be drawn at the Company’s option in minimum increments of $10.0 million through December 31, 2016, or the Draw Period.
Loan agreement payment terms				The Term Loan was repayable in monthly installments commencing on April 1, 2018 through maturity on September 1, 2020.
Loan repayment commencement date			Apr. 01, 2018
Loan maturity date			Sep. 01, 2020
Loan interest rate description				The interest rate was equal to the greater of (i) 8.5%, or (ii) the sum of 8.5%, plus the “prime rate” as reported in The Wall Street Journal minus 5.75% per annum.
Basis spread on prime rate			5.75%
End of term charge			4.50%
Additional interest rate on default			5.00%
Minimum subordinated debt for event of default			$ 1,000,000
Debt issuance costs			$ 511,000
Warrants issued to purchase common stock		37,148	32,692
Warrants exercise price			$ 24.47
Fair value of warrants			$ 288,000
Aggregate amount of warrant fair and fees paid			572,000
Cost allocated to debt discount amortized as additional interest expense			208,000
Cost allocated to prepaid expenses and are being amortized			364,000
Long-term debt				$ 49,000,000
Debt discount, net				$ 1,000,000
Hercules Term Loan [Member] | Second Amendment [Member]
Debt Instrument [Line Items]
Warrants issued to purchase common stock		37,148
Warrants exercise price		$ 13.46
Hercules Term Loan [Member] | Third Amendment [Member]
Debt Instrument [Line Items]
Principal amount outstanding	60,000,000	$ 50,000,000
Initial principal amount drawn	$ 10,000,000	$ 20,000,000	$ 20,000,000
End of term charge	2.25%	4.50%		2.25%
Amortization payment start date	Jan. 01, 2019
Amortization payment end date	Jan. 01, 2020
Additional principal amount outstanding	$ 10,000,000
Percentage of prepayment				1.00%
Hercules Term Loan [Member] | Third Amendment [Member] | Prior to April 1, 2019 [Member]
Debt Instrument [Line Items]
Percentage of prepayment				2.00%
Hercules Term Loan [Member] | Third Amendment [Member] | On Or After April 1, 2019 [Member]
Debt Instrument [Line Items]
Percentage of prepayment				0.00%
Hercules Term Loan [Member] | Hercules [Member]
Debt Instrument [Line Items]
Rights to purchase common stock, exercised			44,782
Proceeds from issuance of common stock			$ 1,000,000
Hercules Term Loan [Member] | Hercules [Member] | Third Amendment [Member]
Debt Instrument [Line Items]
Amendment fee paid	$ 100,000
Hercules Term Loan [Member] | Hercules Technology II, L.P. [Member]
Debt Instrument [Line Items]
Warrants issued to purchase common stock		18,574	16,346
Hercules Term Loan [Member] | Hercules Technology II, L.P. [Member] | Second Amendment [Member]
Debt Instrument [Line Items]
Warrants issued to purchase common stock		18,574
Hercules Term Loan [Member] | Hercules Technology III, L.P. [Member]
Debt Instrument [Line Items]
Warrants issued to purchase common stock		18,574	16,346
Hercules Term Loan [Member] | Hercules Technology III, L.P. [Member] | Second Amendment [Member]
Debt Instrument [Line Items]
Warrants issued to purchase common stock		18,574
Hercules Term Loan [Member] | Hercules Capital Inc [Member] | Third Amendment [Member]
Debt Instrument [Line Items]
Warrants issued to purchase common stock	5,374
Additional warrants exercisable	5,374
Additional warrants exercise price	$ 23.26
Additional warrants exercisable term	5 years
Hercules Term Loan [Member] | Minimum [Member]
Debt Instrument [Line Items]
Loan interest rate			8.50%
Hercules Term Loan [Member] | Maximum [Member] | Hercules [Member]
Debt Instrument [Line Items]
Rights granted in subsequent sales and issuance of equity securities			$ 2,000,000

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Long-Term Debt - Schedule of Future Principal Payments (Detail) - Hercules Term Loan [Member] $ in Thousands	Sep. 30, 2017 USD ($)
Debt Instrument [Line Items]
2019	$ 27,616
2020	22,384
Total	$ 50,000

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2017
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 0	$ 753

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Commitments and Contingencies - Additional Information (Detail) $ in Millions		1 Months Ended	9 Months Ended
	Sep. 28, 2016	Oct. 31, 2016 USD ($) ft²	Sep. 30, 2017
131 Patent [Member]
Operating Leased Assets [Line Items]
Patent term adjustment	1038 days
Patent expiration period	Mar. 26, 2029
Boston [Member]
Operating Leased Assets [Line Items]
Lease expiration period			2021
King of Prussia [Member]
Operating Leased Assets [Line Items]
Lease expiration period			2024
Operating leases beginning date		2016-10
Operating lease, additional office space rented | ft²		19,708
Operating lease, total commitment | $		$ 3.3
Lease terms		7 years 7 months

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Commitments and Contingencies - Schedule of Future Minimum Lease Payments Under Operating Leases (Detail) $ in Thousands	Sep. 30, 2017 USD ($)
Commitments And Contingencies Disclosure [Abstract]
Remainder of 2017	$ 177
2018	1,084
2019	1,156
2020	1,178
2021	964
2022 and Thereafter	1,422
Total	$ 5,981