Q2 2020 CASI Pharmaceuticals Inc Earnings Call
Good question, please pick up handsets to allow for optimal sound quality I would like to hand, the call over disappeared Houston Kathy for preliminary statement. Please go ahead.
Thank you operator.
Good afternoon, and welcome to Kathy second quarter Conference call.
Earlier today, Kathy issued a press release, providing details about financial results for the quarter ended June Thirtyth 2020, as well as a corporate and clinical update.
The press release is available in the Investor Relations section about web site at Kathy Pharmaceuticals Dot com.
Todays call will be led by all chairman and CEO Dr. Wheatley so.
He along with a doctor Alex to keep ski our Chief Medical Officer, and I will be available during the Q when a portion of the call.
As a reminder, our remarks today will include forward looking statements, including our business plans objectives and milestones.
These forward looking statements are not guarantees of future performance and therefore, you should not put undue reliance upon them.
Statements are subject to numerous risks and uncertainties that could cause actual results could differ materially from those projected or implied.
A description of important factors that could cause actual results to differ we refer you child statements in today's press release, and you know FCC filings.
It is now might to think pleasure to turn the call over to our chairman and CEO Dr. way with her dr. Her. Please proceed.
Thank you since he Oh goodness good afternoon, everyone and thank you for joining us today.
Well begin to coal was a general update followed with an update on our lead program.
And conclude with a second quarter financial highlights.
Let me begin by saying that despite the cobot 19 disruption were incredibly pleased with the progress we have made in the second quarter.
<unk> from both clinical and corporate perspective, I'm extremely proud of all current team.
Across all functions for that dedication resilience and focus.
Hi building a company team is always the most important army and I'm really really pleased with our team. Its you know we have really.
You know in just a difficult time and there's no doubt in my mind that we are well on our way to build a fully integrated biopharmaceutical company, which is always our vision.
Which is to impact as many patients as humanly possible with high quality innovative pharmaceuticals.
From a corporate perspective.
I'm pleased to recently announced the closing of an underwritten public offering of over 40 million Dollarss new capital to Kathy.
Specialty pleased to have a number of new wonderful fundamental long term health care investors joining us as our new investors I might also very pleased to see that part of our management team also participated in this financing.
Which is really speaks to volume that we as a team really but leaving out on company.
Well, thank you to our investors we really appreciate your trust.
With additional resources, we are interested in licensing im more products that fit our corporate corporate core competency in global drug development.
Especially leveraging China clinical development and patient population and China market as all first beachhead, we have to deal with a commercial scale cells team that hasn't been tested with the successful launch of people Maaleh.
We will leverage our established a commercial infrastructure to launch additional products in China, one at a time.
So with that say you know I will turn to the update on you have all my life. So if I'm not really is our first.
<unk> being approved being approved and commercialized southwest commercial product you've all my life. It is upright tour reformulated melphalan.
Although mel falling as a generic drug in many countries. It was not available in China. Kathy currently markets. The on email 14, China and its proprietary formulation patent wall last the beyond 2030. So the product. We are launching is really not that the jeanette.
Eric version of them all fully.
You have a maaleh hasn't received strong support.
And endorsement from our kill else and physicians, we have built a cells and marketing team of over 70 people with deep experience in hematology oncology, including previous experiencing launch in some of the top oncology products in China.
I'll just add if you watch I think I can never I can never be more proud of our sales team. It's a global standard commercial team that were building a target in the hematology oncology space.
And our medical Affairs team has done a lot of medical education and outreach to the cable al.
And the physician networks Province by Province City by City and continue to gain significant market insight as a result, our team's efforts and the availability of Eva Maaleh, we expect that the autologous.
Stem cell transplant market will continue to be a continued to be increasingly adopt it as the standard first line treatment for multiple myeloma.
One of 'em major developments with respect to give a malice. This quarter was the successful transition to a new manufacturer for the commercial supply in China. This was a key component accomplishment for us as.
We expect it to be significantly reduce our cost of goods so moving forward.
To provide some context the previous manufacturer has decided to eliminate their cytotoxic production line. So we inventory write a big batch of the.
Drug which is at much higher cost.
In order to get the drug approval in China and launch as a drug.
Why we what we then we immediately started to walk ways, our license or two of the Dan regulatory approval for a change in manufacturer.
Keep in the previous production line open and walking out the manufacturers.
Production issues impacted our cost cost of goods goods sold.
So I wouldn't you manufacture will reduce our cost them so to be less than 30%. So we will after the transition this manufacturer or some of the investor always crashing nurse you launched a drug it but it looks like you have no margin and so.
Iran August we finally transitioned the.
Matson low a cost a manufacturer during this period. This is actually one of the reason why our second quarter revenue is is low so we'd recorded Eva mallow revenue of 2.6 milling for the second quarter.
And 3.4 milling for the first quarter for a total of $6 million for the first half of the year.
And the did decrease as I stayed in the second quarter was primary due to the Chandra manufacturer.
We are pleased to report that the shipment of Eva MELA from the new lower cost supply has been received in China and is expected to be released to our distribution channels. This month August well in mid August we actually our drug finally, well be a much lower cost.
You know a cost of goods so.
We expect to our revenue.
Oh, you have a molla will resume its normal projected cost in the second half of 2020 with much better gross margin.
With that say today, we issued Eva Mallard revenue guidance of at least $10 million, which personally I think that were being conservative. We also expect significant improvement in our gross margin fought you've all my life due to our recent manufacture a chance.
Strip CIT strategically.
The launch of Eva Marla is really helping Kathy two if establish a commercial cheap.
And a focused hematology oncology commercial channel, which you will enable us to launch at many products to calm.
So now let me you know we have quite a number of drugs in the pipeline. So today, we will actually emphasize to lead compound we think that if these compounds.
Complete the key milestones of clinical development.
Got you will have tremendous value inflection for Kathy shareholders. Let me give you a little bit update for our car T. 19th see NCT 19, which is currently in phase one trial for B B B b cell non hodgkin lymphoma and <unk> out.
Conducted by our local development pop in the joint ventures.
And this drug is currently enrolling patients and the expects to complete the phase one trials and to initiate the pivotal registration trial by Q1 2021.
With end da firing expected in 2022.
Now a few factors to highlight our C N Cici 19.
First they are currently no approved Cdnineteen car T therapy product in China.
We believe this therapy has the potential to meet a critical unmet need in this population in patient population.
And see NCT 19, well be locally developed and manufacture.
Great to distinguish it from other copy 19 therapy developed and manufactured outside of China.
Josh pricing is still a huge issue for patients in China particular for premium an innovative products U.S. developed a car T. 19th therapy has a very high drug cost each dose of drug is well over $300000 per treatment. This price tag it.
Beyond that rich of many average Chinese patients with this in mind Juventus has designed a partner with much lower cost of manufacturing. We believe that we can provide a car T 19 therapy in China at a much reduced a car.
Cost.
Compared to that of the drugs developing the U.S.
Secondly, we already have a trend hematology oncology focused south team.
That has been in place since with our first launch of each of them out.
So it's really a great strategic fit.
By the time, our car T. Nine Ting is approved in China, We will probably have one of the vast hematology oncology achieved commercial team in China to commercialize a car T 19 therapy.
So the the efficacy of this July is actually very well documented that in the most recent ash report by the lead investigator at the Institute of Hematology and blood disease Hospital of the Chinese.
Academy of medical Sciences.
This institute, we in China, we Nick when nickname called changing Hematology Institute is the number one hematology oncology Institute in China. They by the way had been working on the clinical development of this drug for over almost 10 years and so far the data.
Presenters showed a 90% complete response rate, which is very consistent with other car T. 19, directed car T therapy that has been published in literature. The follow up an overall survival data showing was also very consistent with other data that has been published.
So did you know there's very little doubt in our mind the cocky nine King a drug we are developing has similar efficacy and safety profile as the U.S. approved the coffee 19 therapy.
But I walk our drug well be at a significantly reduce cost of goods sold we think this drug will have a have a very reasonable market Shia in China or the two trials currently conducted by our popping into Ventas, our single arm open label.
Non randomized dose escalating phase one studies to determine safety and efficacy in adult patients with relapsed and refractory acute.
Yeah, now and in adult patients with relapsed refractory non Hodgkin lymphoma.
So far complete response has been observed in the lower dose cohort.
And we are seeing a level activity that is very encouraging such that we expect that the find all complete complete response overall response and durability will be consistent with the previous data reported in the invested investigator initiated institutional study.
Our development pop in the Geoventures remains on track to complete phase one trials and to initiate the registration trials by early 2021.
The registration trials to be conducted by our partner are expected to be single arm open label, a non randomized with expected enrollment of approximately 35 to 40.
Evaluable patient for each trial. So we believe the phase two registration trial will be a pretty short.
35 to 40 patient trial, so the phase two registration study.
Expected to be completed in 2021, and with India firing potentially by by 2022.
So we know our short term knee a significant product line will be our Chinese version of cotton 19, or an hour commercial team will probably start to prepare for the launch of this drug.
Sometimes now next year.
Now, let me shift a little bit too that our anti CD 38.
To see I'd why most three.
Uh huh.
C C. I'd wells three is a fully human I do you want anti CD 34 monoclonal antibody.
Recognizing a unique epitope. It is selected to have strong ADCC activity against CD, 38, positive, making themselves and with a reduced CDC activities with a potential reduction of infusion reactions observed with existing.
Hi, CD 38 treatment.
Pre pre clinical data demonstrates that see I'd one of those three has enhanced activity against a broad array of malignancies expressing CD 38.
And potentially a better safety profile when compared to other CD 38 monoclonal antibodies in a non GLP noncash human prime primate dose range finding studies.
There were no cytokine release like syndromes symptoms observed in 16 monkeys dosed in a GLP non human primate toxicity studies, there were no clinical observations, suggesting an overly infusion reaction.
Any of the city to monkeys tested.
In addition, the results of in vivo studies have shown promising data that outperformance.
What is currently available on the market, including the current blockbuster drugs Dara the data front in vivo efficacy model have shown higher CD 38, plus killing hi, ADCC activity recognized a unique epitope on CD 38 improve the same.
The profile no overt infusion related reactions last cytokine release decreased buying into human ibcs and the potential for shorter administration time versus competitors.
Based on these data we remain encouraged.
We believe our see idea why mostly.
Potentially a best in class anti CD 38 antibodies.
And were very much looking forward to initiating our clinical studies.
As we guided last quarter, the covert 19 pandemic.
Impacted the target is start date of our see I'd, one those three trial, but our expectations remain on track with what we reported last quarter.
We recently filed our I MPD application with M.H.R.A., the British House Authority and we expect.
To initiate our phase one study in which sites in UK and France as as soon as the institutions are open for clinical activities, which we expect in Q1 2021.
As we reported the phase one study will be an open label dose escalation study with an expansion face to determine the safety and preliminary activity of the idea why most three in patients with relapsed.
Refractory multiple myeloma such high protocol is designed to test a priming dose as well as dose escalation.
With the objective to reduce the infusion duration as recommended by the data review committee and that the UK health authorities.
This completes the uptick paid out to lead assets in our pipeline for the other assets in our pipelines. Please find in Daps information.
Hi, referring to our website and firings of course, we also are happy to address any question during our Q an eighth session.
Before we turn to our financial highlights a few words about the status of our future manufacturing facility. As you may recall as part of our long term strategy to build a fully integrated pharmaceutical company and to support our clinical.
The commercial manufacturing needs, we obtained the rights on extremely favorable terms to develop and youth state land for the construction of a GMP manufacturing facility in Wuxi China.
Although the fullest scale long term development and construction plans are still subject to further discussion with the government we intend to enter into early phase of the construction and land improvements later this year.
Our engineering and design phase is still ongoing our mall Todd is to commercialize drugs and therapy to as many patient as possible using China as our beach head.
Having our own GMP state of art facility to support our supply channels and manage the cost of goods sows is that as an integral part of our future business plan.
So let me turn to our financial highlights well with that said I will now review our financial highlights for the three and six months and ended June Thirtyth 2020.
Our press release content content details of our financial results for the first quarter of 2020.
Rather than read through all of these details my comments today, what you asked the key highlights.
For the three months ending June 30 years 2020, Kathy record recognize 2.7 million dollar revenue.
And we have rich.
Just.
And 2.6 milling of that 2.7 milling attribute is a true attributed a trip to the ball to Eva malice cells.
For the six month ended in ended a total of $6 million revenue was booked for Ebola.
Compared to zero revenue for the same period last year.
As we previously highlighted Eva Maaleh is the only commercial commercially available now hopefully in China and were seeing autologous transplant being adopted as a first line standard of care for multiple myeloma patients in China.
And despite a decline in the second quarter due to manufacture challengers change and the residual residual impact of covert 19 on supply channel.
We expect a strong momentum for the second quarter of 2020.
So in addition to our 2024, yet if a mallow revenue guidance of exceeding $10 million. We also expect significant improvement in our margins for Eva Mallow with a new manufacturer now in place.
As of June Thirtyth 2020.
Cash and cash equivalents totaled approximately 44.9 million with working capital of approximately 50.4 milling.
Taking into consideration the cash and cash equivalent balance as of June 30 serious.
2020 under the net proceeds from our June July capital raise the company believes that it has sufficient resources to fund its operation at least through 2021, Oh, we continue to be extremely soft for on how we deploy our cash expense.
Expenditures with a focus on building shareholder value.
Our team remained very positive about the financial outlook for the company, we look forward to continuing our execution execute all milestone building our company and driving progresses.
I'll now turn it back to the operator for questions operator.
We will now begin the question answer session to ask the question you will need to press star one on your telephone to withdraw your question, perhaps discount key please stand Bible, we compile takeaway roster.
Your first question will come from the Daniel Callaway with Edison Research. Please proceed.
Hi, I just have a few basic questions out being clear on.
First off I I was just wondering what other preparation stunningly done for the US Jay do you want to three trial to start here at the beginning in 2021.
Uh huh.
So maybe Alex you can chime in.
Alex our CMO is probably better equipped to answer that question.
This is Alex can scan the CMO for Kathy the I MPD has been approved we've submitted a a protocol amendment to the M. HR a that simplify some of the testing.
Nick easier for the patients then there is a ethics committee that we'll need to go through we did not do the combined process.
Because many of the institutions in the UK basically been closed for new studies, we are still working with the investigative sites to see when we will be able to get into the queue to get the protocol.
Reviewed.
At the institutional level, and then with one of the regional ethics committees.
Thanks, that's really helpful.
My next question is just regarding some of the planned.
Studies for CMC 18 19.
So you mentioned for I believe the first time that just the size and scope of the pivotal study that you're planning to do.
Approximately 30 40 patients and open label study is that based on feedback.
Some of the Chinese authorities are where does that come from.
Yes, that's actually you know we had almost 30 meetings with the Chinese authorities and that's the conclusion of the the kind of you can call it negotiation or discussion with the Chinese authorities.
Hi, Thank you very much my last question is just regarding a impairment charges I saw on a cashless payment of approximately one half million.
Can you give me a little bit more clarity into what exactly the reason for the impairment charges.
Maybe things here do you can you answer that question better than me.
Nothing nothing thank you for that question.
Thank you for reading a natural state.
I bought.
Pearman charge, we took in connection with the divestiture of the fuel all banks that we have purchased last year.
Yes, I would not material to operations, we had purchased or that was very interested in taking look to bear a product line. So we are you know jump on the opportunity to to sell it to them I say battling a panic to which resulted in a panel because we'll have a combined ratio is attached to it.
Hi appearance.
All right, which NDS or that were divest it has happened disclosed.
Oh, we have not disclose that needs a four.
They acquire last year about again wed not material too.
Our product line I'm, certainly not top Hong Kong side.
All right. Thank you very much that's all for me.
Good luck.
Thank you.
Your next question will come from Sean Lee with H.C. Wainwright. Please proceed.
Oh.
My question.
My first questions. If you can provide a bit more color.
Okay.
They can also the switch on manufacturers so what exactly.
The teachers for you.
On June 2nd quarter on your marketing efforts and also the switch in an essential to any inventory shortages or difficulties on the supplies.
No. That's a very good question. So you know, obviously coven 19 limit our sales teams ability to detail at the physicians because many of the hospital you know it probably impacted us more in the first quarter because the first quarter actually the government most of the hospital.
Well not see any you know cells person or marketing people.
China is now you know more and more back to normal operation.
And at least in the southern part of China, Northern part is still being a little bit more cautious I would argue that covenant in property had less impact on us than the inventory issue because remember when we get a draw imported drug approved by Chinese authority, we cannot.
In the middle of application chances of manufacturer. So we literally back to our first manufactured to supply us a batch of drug because they were planning to terminate the cytotoxic plan. So we since the way back them to make this plant they charge that's an arm in the lag.
For it and obviously, we didn't want to buy too much because then it would be too much cash impact. So we've we plan that batch is enough.
For us to get approval and then launch do the initial launch.
But our cost of goods sotawall be.
Rick ridiculous.
So as soon as we know that plan is going to discontinue the pilot production. We already worked out with our current supply to trend to trends transition and the cost of goods sold is much much lower and you will see it you know as weight in the next quarter that number will be coming out. So this supply.
So we basically walk out so after we worked out the second manufacturer we have the re summit to the Chinese regulatory agency for approval of the second manufacturer. So you could change this transition we probably had about a month amongst that month amongst also.
Now has very shortage of of drugs and so originally with or without coven nine king that the shift of the manufacturer of probably won't be completed in may or June but now it's being completed in August so during that period, a with dogs, we did a created a little bit.
Of inventory shortage for us.
But I think now were mostly over so I think you know, we you know I thinking about a week or so.
Our whole drug would be coming from this new manufacturer is already approved and it's already you know it's a so so we're very pleased to share with investors at moving forward After August.
Eva Mallow will be at a much lower cost and we will have a decent very decent gross margin on this drug.
Does that answer your question, Sean Yes, thanks that makes it much clearer Ah. Okay. My second question is on the Cdnineteen car T.
As you mentioned that you expected current studies going well with response rates expected to be line with though what Tony marketing cocky therapies.
I was wondering what we see these results published in the big turnover presenting the conference before but the pivotal studies starts next year.
Oh, we pop yeah. So we probably will publish that but you know you probably wouldn't see it anytime soon because you know the phase one probably will be finished the by end of this year right. So if we submitted an abstract or write a paper you wouldn't see it until sometimes next year.
Right, so, but the that there's data that there's the institutional sponsored data.
Of the Sam drug.
Has been published.
In the ash abstract and all that and that's the exactly Sam Landy protocol.
The Sam process, except the today were building them into a real GMP facility and the GMP facility will be the you know the and M. P approved that GMP facility right.
Okay, I see Oh, yeah. So you do expect published data later on but it's probably not going yeah, absolutely study.
Great.
My questions. You mentioned, you guys always looking to license more products and with.
On the acquisition of more than 80 million you're in good position to do so so I'm just wondering.
What are your preferences and the type of products are going to license.
Can we expect one or more products.
At the end of this year.
Yeah, no it's a im I think.
In the pharmaceutical industry, it's very difficult for a company to be all over the places and because now we have a very good commercial team in hematology oncology space.
We probably will overly focus on.
Innovative drugs in hematology oncology space for now and we will never say never if you. If you find a billion dollar draw a billion dollar billions of dollars drug in lung cancer, we probably are well now turn it down but our focus right now is all hematology oncology.
And I know, there's lots of innovation in that space right. So so you know if you look at GSK just got their multiple myeloma drug approved.
And so there's still a lot of innovation in this space.
You know we are continues we have a very aggressive commercial team business development team.
Well looking over probably you know a half a dozen at the other molecules every months.
Whether we will definitely to cut that youre not you know, it's not always under an hour control. That's put it this way, but you know you know personally I love to see weight cut a few deals before end of the year.
So so we are continuously offer you know working on you know in licensing drugs.
If anything I would like to over answers emphasize to our investors that you know, we probably won't be more aggressive moving forward.
You are in license.
Compounds.
Okay. So.
I understand you are very aggressively looking for one but just because it's a nation deals you can't really.
Predicted I'm sorry.
Yeah, Yeah, well because you know it takes two parties to dance right [laughter] Yep Yep.
Yeah, that's all the questions. Thanks.
Yeah, Yeah. Thank you. Thank you.
We have reached the end of the question and answer session I would like to him the conference back to Kathy Chairman and CEO Dr. for closing remarks.
Well you know again, thank you very much for.
The trust of our shareholders and you know it you know a you know we will really you know you know we are really you know personally I think web on our way to build a fully integrated global pharmaceutical company one drug at a time I'm more confident today than ever.
About the cathy's future because our sales team is wonderful I'll first drug evil Maaleh is the only melphalan a proprietary formulated melphalan the pattern won't expire until two solvent 30, and its is gonna be a reasonable size drug in China and with that drug we are.
You know carved out a beach head in the hematology oncology space.
In China, but with that beach had we have a.
Pretty reasonable pipeline coming you know cotton 19, Sealy cdthirty eight by the way both car T 19, CD 38, we have global rights for it.
So if we indeed commercialize a low cost cutting 19, there's a lot you know a lot more market you don't need a low cost cutting 19. So we're going to continue ex execute finding new innovative drugs continued to launch one drug at a time until we can help millions.
People are Oh on nurse and thank you for your trust and thank you for your continues.
Believing in our company.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[music].