Q3 2022 Athenex Inc Earnings Call
[music].
Good day, ladies and gentlemen.
And welcome to be at the next third quarter 2022 earnings conference call.
All participants will be in listen only mode.
Should you need assistance. Please signal a conference specialist by pressing stocky followed by Seattle.
After todays presentation there.
It'll be an opportunity to ask questions.
To ask a question you May press Star then one on your telephone keypad.
The withdraw your question. Please press Star then two.
Seasonal.
Is being recorded.
I would now like turn the conference over to Tim Mccarthy.
<unk> director of Investor Relations at lifestyle advisors. Thank.
Thank you and over to you.
Good morning, and thank you for joining our conference call today, an update on our Phoenix. This business will be provided as well as a review of financial results for the third quarter 2022.
The news release detailing the results crossed the wire earlier. This morning and is available on the company's website. A replay of this call will also be archived on the company website.
During the conference call the company will make projections or forward looking statements regarding future events.
Including statements about financial business and clinical milestones anticipated in fiscal year 'twenty to 'twenty two and beyond.
We encourage you to review the company's past and future filings with the SEC.
To identify specific factors that may cause the actual results or events to differ materially from those described in the forward looking statements.
You can find our SEC filings in the Edgar database at Www Dot FCC dot Gov or in the Investor Relations section at our website at Www Dot dot.
Dot com.
Speaking on the call. This morning will be Dr. Johnson Lau, Chief Executive Officer, Dr. Dan <unk> President of our Phoenix cell therapy, Dr. Dao Cohen, Chief Medical officer of cell therapy.
Mr. Jeff Gordon Chief operating Officer and me.
Mr Joe and Tony Chief Financial Officer.
I will now turn the call over to Johnson for introductory remarks.
Thank you Tim and thank you everyone for joining our conference call. This morning.
He has been another productive quarter for your Phoenix system to transform the company into a pure play leader E N P T cell therapy.
First we raised 30 million, we are an equity offering in August .
Also we're pleased to announce that we are tracking well to achieve the plot to the 50% reduction in operating expenses compared to last year.
We also remain on track with our financial guidance.
Internal expense pockets and all financial parties remain unchanged.
We continue to strengthen our balance sheet by monetizing non core assets and identifying potential sources of value within the business, while staying focused on prudent capital allocation.
To date, we have deployed it all combined proceeds to pay down a significant portion of our debt.
150 million at the end of last year to $47 5 million as of September 30th 'twenty to 'twenty two.
We previously announced our intention to divest our China E. P. I discussed in July .
Due to COVID-19 related restrictions.
Our ministry of procedures have been delayed.
However, I'm pleased to say that we have met all closing conditions.
In the final stages of closing the transaction.
We are confident that we can complete the closing and we see 70% of the proceeds from the sale as soon as the Covid restrictions are lifted by the government.
What do we mean amongst you'll be received over the following few months.
I would now like to provide an update about our NASDAQ listing.
Assuming no. We asked do we see a second on the 18th day kind of extension to weak income points with the one dollar trading rule in September .
This request was we checked it by NASDAQ and.
We subsequently appealed the gnostic decision.
We haven't seen the leaching with non stick on the pole, but 'twenty and I'm delighted to announce that our appeal was successful.
The NASDAQ hearings panel granted our request to continue lifting and extended our peers to regain compliance until March 14 2023.
We are now planning to hold a virtual special show this meeting on the one bench in the second at 930, a M. Eastern time and do you usually a proxy fighting on October 11 that provides additional details.
This meeting is being held to authorize a potential reverse split the stock.
A lot of things.
A favorable outcome, who watched the board with Gulfport heat to effect a reverse split.
In a case study share price that's not we bought over a dollar by March 14th 20 tenancy.
We encourage you to review the proxy and vote in favor of the outlined proposals.
Now, let me turn to a few pipeline updates.
We continue executing our strategic pivot to transform into a leading N P. T cell therapy company and remain well positioned to evolve into a competitive player in the attractive and growing E mute effective cell therapy sector.
Our top priorities are to advance our innovative NK T cell therapy platform through dose escalation in continued patient enrollment.
He said the results to scientific and Investor communities.
With respect to our UK regulatory submission of oral paclitaxel in metastatic breast cancer.
We remain on track with all regulatory interactions with the epic Charlie.
And have helped me to comprehensive responses to their questions in September .
We'll pull why ended updates on our progress.
So great point.
Our oral Paclitaxel is being studied in the I spy two trial.
A phase III program evaluating oral paclitaxel in combination with dos ballroom at plus or minus Carboplatin, Indeed, Neil excellent treatment of breast cancer patients.
These studies being conducted by the quantum leap health care collaboration with <unk>.
Conjunction with flex So Smith, calling.
You see all rent manufacturer.
This study is expected to be completed before year end.
We hope to be able to share detail on this program when its available.
If we saw some positive then our next step will likely be to advance oral paclitaxel into a pivotal study.
And we would seek to do so in collaboration with a development partner.
Our a P D business is tracking in line with our internal targets for the third quarter.
We are maintaining the previously issued a product sales growth guidance in the range of 20% to 25%.
We continue to advance new product launches and maximize revenue opportunities by par.
Our hiseq products listed on the F D drug shortage list.
At the same time, we are steadily working to improve our profit margins.
With that I'll turn the call over to talk to Tim Lange to provide some updates on our 8-K T cell therapy program.
Please go ahead.
Thank you Jonathan and good morning, everyone.
We remain focused on advancing our first in class NK T cell therapy platform with potential to overcome the limitations of current immune effector cell therapy approaches.
Our combined innate and adaptive immune properties a bank a T cell together with the ability of car T cells.
Bulk tumor and tumor microenvironment, and maybe what the potential for a highly effective off the shelf treatment that.
That is slower in toxicity tomorrow, that's a boat to a broader patient population.
Our ongoing clinical trials in both solid tumors and Hematological malignancies have demonstrated early promise.
And we remain highly encouraged by the therapeutic potential of this novel cell therapy approach.
This past quarter, we continued to advance our two lead investigational programs.
Pure fivefold, one an autologous T D. Two car NK T cell therapy for patients with relapsed refractory high risk neuroblastoma.
And cure fivefold to an allogeneic CD 19 car NK T cell therapy for patients with relapsed refractory b cell malignancies.
We provided interim phase one dose escalation data updates from the <unk> two study of cure a hyper one I E. S. G C. G in may.
And from the anchor study of purified hold U S. T C T in April .
Data from both studies support a consistent findings, including encouraging responses at low dose levels.
Provoke kinetic profile demonstrating that ability of car T cells to safely and pose adoptive transfer in all patients and peaking about one or two weeks post infusion.
Also promising but the fact that car NK T cells home to tumor sites.
Both programs have maintain a favorable safety profile without any infusion related reactions.
It was limiting toxicities neurotoxicity.
Last question is host disease or severe side effects related to car NK and T cells.
There are a few cases of low grade southern cargo lease syndrome that did occur were manageable and reversible.
Overall those data support.
Hi, therapeutic windows for bulk pure 501, and purify bow to when a potential cause dose escalate further to help safely drive deeper more durable responses.
As a reminder.
The interim data point, you get to study I'll clarify Beaumont in heavily pretreated patients with relapsed refractory high risk neuroblastoma included three objective responses in 12 patients with two of these three patients achieving responses at dose level four that included a durable complete.
Sponsor persisting for over 12 months.
Predictors of response included here are five one exposure and see these 60 to Alan's question.
Given the encouraging data with <unk> 501 in high risk Neuroblastoma, we continue to explore Judy to car NK T cell therapy opportunities and more prevalent in solid tumor indications.
Exports.
As another reminder results from the interim anchor study of purified, though too in heavily pretreated patients with relapsed refractory B cell malignancies also shows encouraging responses.
Out of the five evaluable patients with non Hodgkin lymphoma.
Doses, 860% overall response rate was observed.
Including two complete responses persisting over six months and complete or partial responses.
Two of four patients who were previously treated with CD 19, directed car T cell therapy.
Our 50% owned bar response rate was also observed in two patients with a L. L. A the first dose level.
Holding one complete response lasting until the patient died at six weeks later due to related causes.
The clinical efficacy of cheap it's early phase one clinical trial.
A single infusion of <unk> at the low doses of $10 million and 30 million cells per meter square or kind of a high probability of technical success moving forward with dose escalation.
Lastly for our QR 503 program and Allogeneic G. P C to be car T cell therapy for patients with advanced G. P. C three expressing solid tumors.
Scented early preclinical data at <unk> in June .
This data highlighted enhanced persistence and anti tumor activity with that F. Three compared to IL 15, providing foundational support for clinical development in patients with advanced G. P. C. Three expressing it patents cellular carcinoma.
We remain highly optimistic with these encouraging early data and look forward to providing additional updates as our data matures firm.
With that I will now turn the call over to our Chief Medical Officer for cell therapy Doctor Daragh Colin.
Next steps for NK cell therapy pipeline.
Carol.
Thank you Dan and good morning, everyone.
Our NK T cell therapy programs continued to steadily advance.
Highly enthusiastic by the outpatients potential of NK T cell based treatments and the potential for improved safety efficacy and accessibility over other immune effector cell therapy options.
Our development pipeline supports clinical evaluation of both autologous and allogeneic NK T cell therapy options for solid tumors and Hematological malignancies.
The natural tropism of NK T cells to home towards tumor sites.
Following administration and persists indicates a durable therapeutic potential for these cell types.
It is notable that the potent anti tumor activity that we're seeing in early dose escalation studies of our first two investigational car NK T cell therapy products is occurring at dose levels that are substantially lower and those needed to achieve clinical efficacy with car T cell and car NK cell therapies.
This potency enables the ability to dose escalate and repeat doses to safely drive deeper and more durable responses.
Looking ahead for our current 501 enrollment of additional primarily pediatric patients with relapsed refractory high risk neuroblastoma and the single institution Genesee two study of autologous Judy to car NK T cells at the two highest dose levels, starting with dose level five.
300 million cells per meter square, while still maintaining the opportunity to offer a second cycle of treatment for consolidation is ongoing.
We anticipate providing a data update for this study evaluating the dose escalation safety and preliminary efficacy in the first half of 2023.
Ultimately hope to make a go or no go decision about initiating a pivotal registration directed study soon thereafter, following operational feasibility assessments and health authority feedback.
Well Kirk LIFO to the single institution anchor study, one or two cycles of allogeneic CD 19 car NK T cells presently expanding into a multi center anchored to study in order to expedite enrollment of patients with relapsed refractory b cell non hodgkin lymphoma, chronic lymphocytic leukemia.
Or acute lymphocytic leukemia.
We are also in the process of amending the protocol to explore to higher dose levels as well as a multiple weekly times three dosing regimen that may further enhance the depth and duration of the clinical responses already observed at the lower dose levels.
We expect to have another insurance phase one anchor dose escalation safety and preliminary efficacy data update in the first half of 2023.
Lastly, we plan to file an IND application for current 503, and 2023 for the investigational treatment of patients with advanced G. P. C III expressing cellular carcinoma.
The ability of NK T cell to combine the best of both NK cell in terms of avoiding graft versus host disease without the need for T cell receptor gene editing and T cells in terms of manufacturing, including proliferation post activation and cryo preservation as well as memory and persistence.
To support the best therapeutic potential of NK T cells as the goldilocks cellular therapies.
I will now turn the call over to Jeff to discuss operations Jeff.
Good morning, everyone.
I want to begin by talking about some of the growth drivers of our business.
Let me start with an update on our upcoming myeloma.
Launch.
We currently anticipate launching the first product at the end of 2022.
Or early in the first quarter of 2023.
We are very excited about this launch as this product is consistently on the F. B shortage list and we expect competition to be very limited.
Turning to Glenn pharma.
We just completed a deal what's gland with.
It should enable us to launch.
New exciting products in the first quarter of 2023.
I also wanted to provide more visibility.
On our U S partnership with MTR.
It's injectable company out there.
Our Phoenix already launch the first product from this collaboration in the third quarter.
This product was ISO preparing all.
Otherwise known as Isa Pearl.
Under the Abbott label.
By the end of the year, we plan to launch the same product under the Phoenix label.
We are also on target to launch two additional products from this partnership.
For the end of the year.
Additionally, we have been offered the opportunity to launch one of the most important products in the pipeline.
And we're working with them to potentially launch this product at the beginning of the new year.
The other significant products from our collaboration are anticipated to launch throughout 2023.
I'm sure. There's also back integrated in the API and many of these products, which provides a very competitive transfer price to a Phoenix.
These future launches can be a significant growth driver for our business.
In May we launched two injectable drugs.
Pemetrexed and Bortezomib at market formation.
Both drugs attracted a large number of competitors and as a result of that the price eroded very quickly.
Both of these drugs have very few barriers to entry.
Which I mean readily available API.
No manufacturing issues.
No complex formulation puzzles to solve.
And in the future we focus on products that do have significant barriers to entry.
And we expect larger revenues after patent expiration as well as better margins.
We are pleased to report that our Apd and Aps businesses achieved our objectives for the third quarter.
We still expect to meet our previously stated 20% to 25% revenue growth guidance.
I will now turn it over to Joe to discuss our financial performance.
Thank you Chad and good morning, everyone. As we continue in our season of breaking down and building back up I am pleased to report that we are delivering on the plan. We outlined earlier this year on our fourth quarter call to divest noncore assets and reduce operating expenses.
And in the midst of turbulent markets. We have recently also experienced favorable wins that have helped us move forward.
In the first half of 2022 raised $125 million from the sale of assets.
Continuing on that plan in the second half of the year. The closing of the sale of our China API operations will bring in gross proceeds of approximately $18 million over the coming months.
Also over the coming months, we will continue to keep you informed as we execute on additional strategic transactions.
We have used these asset sale proceeds to reduce our debt balance from $150 million at the end of 2021 down to 47 and a half million dollars at the end of September 2022, with more reductions to follow.
We further strengthened our balance sheet with our equity offering in August which generated proceeds of $30 million.
In parallel cash burn remains top of mind, so I want to again highlight I figure that you can think of as a proxy for this metric.
This figure is our cash flows from operating activities and controlling operations.
This number excludes results from of Dunker itself, the close here royalty sale and the pending sale of our China API facility, which are reported under discontinued operations.
For the third quarter of 2022, the cash juice was $15 $7 million.
It compares to the cash used in the third quarter, 'twenty, 'twenty $133.2 million, which represents a year over year decrease of 53%.
And on a sequential basis. This change from the second quarter 2022 represents a 14% decrease.
For the first nine months of 2020 to cashews totaled $52 $5 million down 46% from the $97 million in the first nine months of 2020 one.
Now, let's review the third quarter financials I ask that you. Please refer to our press release that was issued earlier today for a full summary of our results, but I will highlight the following.
Total revenues for the third quarter of 2022 or $33 $5 million compared to $31 $4 million for the same period in 2021.
Product sales revenue increased by $5 million or 19% over the third quarter of 2021.
R&D expenses totaled $9 $2 million for the third quarter, a decrease of $8 $5 million or 48% year over year.
Germany, primarily to a reduction oral paclitaxel development costs as well as other operational costs.
SG&A expenses totaled $9 $4 million for the third quarter, a decrease of $8 $7 million or 48%.
As compared to $18 $1 million in the prior year quarter, which was primarily related to decrease oral paclitaxel commercialization expenses.
Net losses attributable to Phoenix for the third quarter 2022 for $19 7 million or 14 cents per diluted share versus $36 $1 million or <unk> 33 per diluted share in the third quarter 2021.
As of September 30 of 2022, a day makes that cash cash equivalents and restricted cash of $44 million.
I'll now turn the call back to Johnson for closing remarks.
Thank you everyone for joining our investor call today.
We continue to execute on your Phoenix transformation into a streamlined pure play NK T cell therapy company.
This quarter, well make significant progress and continued to strengthen our balance sheet.
As we pursue our goals.
We plan to seek additional opportunities to monetize non core assets.
Operating expenses and extend our cash runway while at the same time appropriately supporting the growth of our exciting NK T cell therapy business.
We are confident that our NK T cell therapy programs have the potential to become market leaders. They can benefit patients with solid tumors and hematological malignancies worldwide.
Thank you for your attention.
Thank you very much.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily.
Our Austin Thank you.
The first question comes from the line of Jonathan Miller with Evercore ISI. Please go ahead.
Hi, guys. Thanks, so much for taking my question and congrats on your progress moving towards a pure play company I'd like to focus my questions on that topic, if I may.
Starting with maybe a oral paclitaxel are obviously, we havent seen I spy two yet, but you you suggested that you would start a pivotal possibly with a partner is that as opposed to outright divestiture of the asset can you maybe give me some updated thoughts on what your plans are for oral paclitaxel and the various cases case scenarios.
For Baidu and then secondly.
Yeah.
Several pieces of commentary on the spec pharma business and growing that out increasing margins.
Are you still planning on divesting that business outright as well and if so what is the gating factor for selling that Oh here.
Oh. Thank you for your question if we have indicated in the past that we have made the decision to pivot the company into a NK T cell therapy company. So therefore, we will consider all options to unlock value for the shareholders with regard to your old even one coal assets and also see I mean.
They are not where they there's a N K T cell therapy will be can set up as a non core assets that we would like to explore different.
Coach will pick up to unlocking shareholder value. So with regard to your first question. We expect we are expecting.
The completion of the isolated to that study very soon before the end of the year and once we have more information.
Inflammation and then we can get the the Oh social partnerships are interested we'll explore what's the best way to unlock value and all options are on table for consideration not with regard to your second question with regard to the.
Yeah, especially if I'm a asset again, certainly we will consider all strategic options, but then it is a very healthy division are showing very good growth and are therefore, we consider that this has a lot of value Jeff do you want to add on any comments to the question.
Oh, No you said it perfectly.
Certainly we will evaluate.
What's in the best interest of our shareholders.
As we move forward.
Thank you Mr. <unk> you have any other questions.
That's all for now thank you.
Thank you. Thank you.
The next question is from the line of Yale Jen with Laidlaw ankle. Please go ahead.
Good morning, and thanks for taking the questions just a focus to own the NK T cell at this point.
For the final one.
You have two doses two to escalate I'm just curious at this point.
What are you already completed the first dose of the moving to the second one or how should we think about the status of this progress and I have a follow up.
Okay.
Hi, yes, thanks for the question.
Just as a reminder, we presented data on dose level, four where we show our two responses out of three patients and one of the patients once they complete response lasting for about 12 months. So we're very excited about that data.
What we said in the past is that now we're looking to dose escalate into dose level, five and dose level, six which is 300 million cells per meter square and Billy themselves. We don't give them incremental update in terms of patient enrollment, but we look forward to presenting data at the next appropriate medical conference or venue. So please stay tuned.
Yeah.
Okay, Great. That's helpful and maybe one for one five O two which is the anchor study you anticipate to provide interim.
Uh huh.
Sometime next year or first half of next year.
Oh.
Q, how should we think about in terms of the.
Hospital to a number of patients by the time you know.
We have not.
Yeah.
Data report as well as.
Maybe the duration of some patients in other words, what sort of expectation, we should think about the well that are interested in mattresses.
Yeah. Thanks for the question. So I can provide some framework for you to think about the answer to your question again, we don't provide incremental update on patient enrollment and a duration of a response and then a follow up.
But we got a company sponsored R&D back in March of this year.
Which allows us to expand the current single center study at Baylor to a multicenter study.
You know for anchor what we call anchor to our fiber to our product.
So we're working hard to stand up a different sites are we looking to stand up.
Up to eight to 10 sites overtime.
We have.
It's really a function of how many patients are being enrolled as well as the maturity of the data.
So it's gonna be.
Those factors will be inputs into when we presented the data in the appropriate medical conference or a brand new sometimes in the first half of 'twenty three.
Okay, Great that are again very helpful. Maybe just squeezing one more.
In terms of the the API, so they should pharma business.
The Cogs the cost of goods this year and over the last three quarters. It seems to me.
Lower than prior years.
Should we anticipate going forward.
This will improve and though what may be the basis.
Oh Boy improvement.
Just a little bit color on that as well.
Thanks.
Jeff.
Yeah.
Yeah.
Thanks for the question Neil.
The process that we go through on the more mature products is we're constantly looking for alternative suppliers.
That can either reduce the profit shares that we have our most importantly reduce the transfer price.
We've been very successful in that many.
Many of the product moved into the future do not include profit sharing and many of our our partners are back integrated into raw material, which gives us a much lower transfer cost at a much higher margin.
Because for no profit share.
Lastly, when we have now moved forward on the I'm sure.
Uh huh.
Deal we've launched the first product all of these products will have no profit sharing.
M pure is back integrated in almost all of the raw material. So the transfer price is very good. So I think that the trend of higher margins lower transfer price will continue as we move forward.
Okay, great. Thanks, that's very helpful and thanks.
The best of luck for I think more floor.
Yeah.
Thank you.
Again, if you have questions. Please press star and one on you touched on telephone.
This is a reminder to the participants to ask a question you May press star one on your telephone keypad.
Thank you very much for your attention.
Thank you.
France has now concluded.
Thank you for attending today's presentation human out disconnect.