Athenex, Inc. (ATNX) on Q3 2021 Results - Earnings Call Transcript
Operator: Good day, ladies and gentlemen, and welcome to the Third Quarter 2021 Athenex Inc. Earnings Conference Call. As a reminder, this conference call is being recorded. I would now like to hand the conference over to Caileigh Dougherty, Director of Investor Relations. You may begin.
Caileigh Dougherty: Good morning and thank you for joining our conference call. Today, we will provide an update on Athenex’s business as well as a review of financial results for the third quarter of 2021. 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 the fiscal year 2021 and beyond. We encourage you to review the company’s past and future filings with the SEC, which 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.sec.gov or in the Investor Relations section on our website at www.athenex.com. This morning, we are joined by Dr. Johnson Lau, Chief Executive Officer; Mr. Jeff Yordon, Chief Operating Officer; Dr. Rudolf Kwan, Chief Medical Officer; and Dr. Dan Lang, President of Athenex Cell Therapy; and Steve Adams, Chief Accounting Officer. The management team will be available to answer questions after the prepared remarks. I will now turn the call over to Johnson for introductory comments.
Johnson Lau: Thank you, Katie. There have been several important developments in Athenex in the third quarter that I would like to cover this morning. I will give a brief update on oral paclitaxel before spending some time discussing our cell therapy programs, where we have had some very positive news. Beginning with oral paclitaxel and encequidar in metastatic breast cancer, in October, we held a Type A meeting with the U.S. FDA regarding our new drug application. Unfortunately, we could not reach alignment with the FDA on the U.S. regulatory pathway in metastatic breast cancer. After careful consideration, we determined that another large, randomized control study for the metastatic breast cancer indication would not be an optimal use of time or resources. Instead, we intend to prioritize the other ongoing studies of oral paclitaxel, which have shown encouraging results, in particular, the combination of anti-PD-1 and oral paclitaxel for patients with non-small-cell lung cancer, who had previously failed at anti-PD-1 monotherapy and the other programs in our pipeline. Ultimately, our goals are to serve patients and maximize value for our shareholders. We will however continue to explore paths to approval for oral paclitaxel in regions outside the U.S. Our regulatory team has been in discussions with MHRA regarding a potential filing. As before, it is Athenex policy to make a formal announcement only once the filing has been accepted. Separately, there has also been some positive news from the UK regarding a new program called the Innovative Licensing and Assess Pathway or ILAP, which aims to accelerate a drug’s time to market, facilitating patient access to innovative medicines. We have received notice from the ILAP program that encequidar in combination with oral anti-cancer medicines have been accepted into the first stage of this program. Dr. Rudolf Kwan will expand on this in a few minutes. Another part of Athenex strategy is to enhance and expand our other technology platforms. On this front, I am very pleased with the continued positive momentum in our cell therapy programs. Dr. Dan Lang, President of Athenex Cell Therapy will provide a detailed update, but there are several positive developments I want to highlight specifically. Early this year, we acquired Kuur Therapeutics, providing us with a first-in-class NKT cell therapy technology platform for the treatment of both hematologic and solid malignancies. One of the two clinical-stage assets we acquired in this transaction is KUR-502, an allogeneic product that’s being evaluated in the ANCHOR trial, a Phase 1 study in patients with CD19 positive relapse or refractory lymphoma and leukemia. There will be an important update on this study at the forthcoming American Society of Hematology or ASH meeting in December. The asset became public this morning, and we are pleased to report that out of a total of 5 patients, there have been two complete responses and two partial responses with the low dose of the infused engineered NKT cells. Our clinical program is very encouraged by this data, and we look forward to providing more details at ASH. Also regarding cell therapy, we received notice from the U.S. Patent and Trademark Office, allowing patent claims around our NKT’s cell therapy platform. Similar claims had already been granted in the EU, but these are the first to be allowed in the U.S. We believe this will boost the protection around our technology and strengthened Athenex position as one of the leaders in the NKT cell therapy. As for Klisyri or tirbanibulin ointment, our first-in-class microtubule inhibitor for the treatment of actinic keratosis of the face or scar, it was launched in the U.S. in February this year, led by our partner, Almirall. In September, Almirall announced the launch of Klisyri in Europe, following approvals in both the European Union and the United Kingdom over the summer. The UK and Germany are the first two European countries, where Klisyri will be available for prescription to be followed by other EU countries. We are very encouraged to see strong execution by Almirall in making this product available to patients in licensed territories. And in the U.S., we are pleased to note an acceleration in script trends after Labor Day. As of September 30, Athenex had cash, cash equivalents, restricted cash and short-term investments of $105 million. After receiving the CRL earlier this year, we immediately initiated cash preservation measures, which includes significant reduction in our commercialization activities and expenses, reduction of our supply chain activities and expenses and slowing down of certain clinical programs. Our current projected cash run-rate is through fourth quarter 2022. We will look for additional measures to further extend the runway. We will continue considering very carefully our priorities and overall strategy as well as how to optimize the use of our resources while pursuing initiatives to unlock value for the long-term. We do not believe the full value of our assets is appreciated by the marketplace. This includes the oncology-focused small molecule Orascovery platform, our cell therapy business, the growing royalty and milestone stream we are generating from Klisyri, and our specialty pharma business, which includes significant property, plant and equipment assets. Our mission continues to be a biotech focused company working to serve patients in the health care community. We remain focused on advancing the portions of our pipeline that we believe could transform standard of care and will continue to explore options to increase the overall value of our business. I will now turn it over to Dr. Rudolf Kwan to provide an R&D update on our oral paclitaxel programs and the Orascovery platform.
Rudolf Kwan: Thank you, Johnson. As Johnson mentioned, we announced last month that we held a Type A meeting with FDA to discuss a proposed design for a new clinical trial that was intended to address the issues outlined in the CRL received for our oral paclitaxel NDA in metastatic breast cancer. This was an informative meeting and after careful consideration, we determined that prudently deploying our resources towards the existing ongoing studies of oral paclitaxel as well as our cell therapy programs in CAR-T NKT and TCRT would be a better way to maximize the value for all our stakeholders. Therefore, we do not plan to pursue a new pivotal study in metastatic breast cancer at this time. As for our oral paclitaxel program in angiosarcoma, we have a meeting scheduled with the FDA later this month to seek their guidance on the potential registration pathway. We will provide an update once we have more clarity from the agency as well as internal agreement on next steps. We have completed enrollment in our ongoing Phase 2 trial. Angiosarcoma is a disease with limited treatment options and for which oral paclitaxel has received orphan drug destination. In September, we presented Phase 1 dose-finding results of a study combining oral paclitaxel with pembrolizumab in solid tumors at ESMO. The data was highly encouraging and demonstrated promising anti-cancer activity for the combination of oral paclitaxel and pembro in lung cancer patients who have progressed on PD-1/PDL-1 therapies. There were a total of 10 non-small cell lung cancer patients enrolled of which each were evaluable for response. 4 of these patients achieved partial response and 4 others achieved stable disease. Notably, these lung cancer patients had all discontinued previous checkpoint inhibitor therapy due to progressive disease. So, this data is highly encouraging. As PD-1/PD-L1 therapies continue to dominate therapy choices for lung cancer patients, our approach would potentially address an unmet medical need for patients that eventually failed these PD-1/PDL-1 therapies. We are currently proceeding into the expansion phase of this study. As a reminder, oral paclitaxel is also being investigated in combination with GSK’s dostarlimab and carboplatin for neo-adjuvant treatment in breast cancer in the I-SPY 2 trial. This study is progressing well and the data readout is expected 2022. Lastly, as we consider the broader oral discovery platform, there is a potential opportunity to participate in the Innovative Licensing and Access Pathway, or ILAP in the UK. This is a new program that was established by the MHRA and other UK government agencies to efficiently accelerate a drug’s time to market and facilitate patient access to innovative medicines. We have received confirmation that the ILAP Steering Committee has awarded the innovative medicine destination, namely the Innovation Passport to encequidar, our novel P-gp pump inhibitor in combination with oral anti-cancer medicines. The Passport is the entry point for the program. The next step will be the meeting of the groups in the ILAP Steering Group to define the roadmap to facilitate the best approach for developing the Orascovery platform in the UK. We will provide a further update when we have more news here. I will now turn it over to Dr. Dan Lang to provide an update on our cell therapy programs. Dan?
Dan Lang: We continue to make strong progress on building out and strengthening our cell therapy program and have had a number of positive updates in the quarter. We believe this portfolio represents a key value driver for Athenex moving forward. Earlier today, we put out a press release disclosing interim data from our allogeneic CD19 CAR-NKT clinical trial anchored, which were published this morning on the ASH website. We have treated a total of five patients, four in the NHL cohorts and one in the ALL cohorts. We are excited to announce that we have observed two PRs and two CRs out of five patients, 2 PRs and 1 CR out of 4 patients in the NHL cohorts and one CRI or complete response with incomplete hematological recovery in the ALL cohorts. These responses were observed following single IV infusions at the very low doses of 10 million and 30 million CAR-NKT cells per meter square, which are a fraction of the average dose of commercial CAR-T products. In addition, these patients were heavily pretreated with multiple prior lines of therapies and two responses were seen in patients who failed prior CAR-T therapies. While we didn’t see in-vivo expansion in the peripheral blood in the first three patients at the lowest dose, we did see in-vivo expansion of donor-derived CAR-NKT cells in the NHL patient at the second dose cohort as well as the patients in the ALL cohort at the first dose cohort that peaked at week 1. More importantly, we’re able to detect allogenic CAR-NKT cells in tumor biopsies that persisted up to 5 weeks in two patients, which support the homing abilities of these CAR-NKT cells to tissues and tumors. In the NHL patient with a CR, we saw a 2,000 full expansion of the patient’s NKT cells that peaked at week 6, suggesting the induced allo-CAR-NKT cells stimulated and activated the patient’s own immune system. This is an interesting observation only in one patient and requires further validation with more patients. The most common adverse events observed were nausea and Grade 3 for hematological toxicities related to lymphodepletion chemotherapy. The only adverse events attributable to KUR-502 was Grade 1 solid syndrome in one patient. In summary, we have two PRs and two CRs out of five patients following a single low dose infusion, a well-tolerated side effect profile, and a product that is administered in the outpatient setting. We believe an attractive clinical profile is emerging that stacks up well against the commercial autologous products as well as other allogeneic products in development. We look forward to expanding our current single center study at Baylor to a multicenter study in order to accelerate enrollment and replicate these early promising data in the CD19 relapsed/refractory lymphoma and leukemia. I would also like to report that our Phase 1 study testing our high affinity autologous TCR-T cell therapy targeting NY-ESO antigen in solid tumors has begun screening patients for enrollment. We are using our own proprietary immunohistochemistry test to identify high expressers of NY-ESO in patients with lung cancer, breast cancer, head and neck cancer, liver cancer and synovial sarcoma, who are more likely to benefit from our NY-ESO TCR-T cellular therapy. We hope to present interim data next year at an appropriate medical conference. Longer term, we are excited about the opportunities for inserting TCRs onto the NKT cells to generate an allogeneic cell therapy approach for solid tumors. As many of you know, solid tumors represent 90% of the oncology markets, and there remains significant unmet medical need. We believe having an allogeneic approach that allows for cost-effective repeat dosing will be an important element of success to target solid tumors. We look forward to continuing to innovate and maximize the value of NKT cell platform. Areas of research focus include additional targets, improving the persistence and antigen activity of NKT cells, as well as further characterization of healthy donors and scale-up of our manufacturing process. Lastly, we recently received our first U.S. allowance on one of our foundational patents on NKT cells. This patent includes a pharmaceutical competition claim that comprises genetically modified CD62L positive human NKT cells that also express at least one CAR. We discovered that under certain conditions, NKT cells acquired CD62L, which is a marker of central memory T cells, which have enhanced expansion, persistence, and antitumor activity, and we have designed our manufacturing process to enrich for CD62L positive CAR-NKT cells. We believe that this allowance solidifies our already strong IP position and firmly establishes Athenex as one of the leading companies in NKT cell therapy. I will now turn it over to Jeff.
Jeff Yordon: Thank you, Dan. Revenue from product sales increased to $27 million in the third quarter. That represents an increase of 9% from the third quarter in 2020 and a 26% increase sequentially from the second quarter this year. As a reminder, during the full year 2020, we had approximately $20.4 million in nonrecurring sales due to COVID. We should be able to make up about $16 million of those nonrecurring sales, which actually represents approximately a 14% increase in our base business revenues compared to 2020. These results were achieved despite significant challenges in 2021. The challenges include COVID related impact on manufacturing in both China and India, inability to secure shipping options to bring our inventory into the United States, shortage of essential materials like stoppers, glass vials and syringes, and challenges to purchase and receive essential APIs for our products in a timely manner. With regard to our financial guidance for product sales in 2021, as a result of the challenges just described, together with the impact of the non-reoccurring sales in 2020, we now expect revenues to decline by 6% to 12% year-over-year. We anticipate that most of these challenges will be much less severe in 2022. For the new products we have recently launched, we’ve been able to achieve meaningful market share in a short period of time. For example, we are now number one in terms of market share for our liquid cyclophosphamide product. There are a number of factors expected to drive the increase in revenues in the remainder of this year and into 2022. These include new product introductions. We have three product launches planned in the third quarter and an additional seven planned in 2022. Two of the planned new product introductions in 2022 are very significant products, and these will be launched at market formation in April and May of next year. The revenues on these two products will enable us to increase revenues and margins. Both of these products have tentative approvals and are scheduled to launch at patent exploration. We also have continued sales improvements in a few key APD products. As previously discussed, our biggest challenge remains our ability to secure essential components and shipping on both ships and . In the first half of 2021, we experienced significant COVID related challenges in our Indian supply chain and to a lesser extent, in China. The labor markets in the regions have improved, but we are still seeing delays. We expect strong increases in revenues and margins in 2022 and beyond, based on a very strong pipeline, particularly for APD. Athenex Pharmaceutical Division, or APD currently markets 33 products with 64 SKUs and a Athenex Pharma Solution markets five products and 16 SKUs. Construction of our facility in Dunkirk, New York is essentially complete. We have now completely installed the Class 2 vault that will eventually allow us to manufacture narcotics. Two large lyophilizers have been delivered in the facility, and we expect the isolator vial filling line to be delivered in February of 2022. We have built eight dedicated days for the expanded 503B business. We had originally planned to commence manufacturing there in Q4 2021. However, there were some delays in securing state licenses. We are now actively going through the licensing process in New York and then with the seven largest states. Therefore, it’s likely going to be well into 2022 before we can fully take advantage of this new capacity. The revenues at EPS remain robust, and we are selling essentially every unit we can manufacture at attractive margins. I will now turn it over to Steve to discuss the financials.
Steve Adams: Thank you, Jeff. Revenue from product sales increased to $27 million in the third quarter compared with $24.8 million in the third quarter of 2020, an increase of 9% year-over-year. This increase was primarily attributable to an increase in 503B product sales of $2.1 million due to increase in demand for certain drugs used to treat patients hospitalized with COVID-19. API product sales and contract manufacturing sales each experienced an increase of $0.4 million. These increases were offset by a decrease in APD product sales, resulting primarily from a significant prior year increase in demand for COVID-19 related drugs and for FDA shortage products during 2020, including some significant nonrecurring orders. License fees and other revenues were $5.3 million for the third quarter 2021 compared to $10.7 million in the comparable period of 2020. This decrease was primarily due to the recognition of $5.1 million in license and royalty revenue from Almirall for the launch of Klisyri in the EU in September 2021. While we recognized $10.4 million in license revenue during the third quarter last year pursuant to license agreements with our Chinese partner, XPH and with PharmaEssentia. Cost of sales in the third quarter of 2021 were $25.6 million as compared to $24.5 million for the comparable period in 2020. The increase was primarily due to an increase in costs of 503B product sales as production levels increased. Additionally, cost of sales related to royalties for license income decreased by $2.5 million from the royalty payment incurred in 2020 on the license revenue for XPH. R&D expenses for the third quarter of 2021 totaled $17.7 million as compared to $18.4 million for the third quarter of 2020, a decrease of 4% year-over-year. This was primarily due to a decrease in costs of clinical operations, oral paclitaxel, product development, and medical affairs and preclinical operations. The decrease in these R&D expenses was partially offset by increases in cell therapy development costs, drug licensing costs related to licenses for specialty drug products and increases in costs of other product development. SG&A expenses for the third quarter of 2021 totaled $22.8 million as compared to $22.2 million for the third quarter of 2020, an increase of 3%. This was primarily due to increases in operating costs, including insurance, IT costs, professional fees, compensation-related costs and site preparation costs relating to the manufacturing facility in Dunkirk, New York, as well as the change in fair value of contingent consideration. These were partially offset by a decrease in costs related to commercializing oral paclitaxel as significant pre-launch activities occurred in 2020 and slowed upon receipt of the CRL in February 2021. Net loss attributable to Athenex for the third quarter was $36.1 million or $0.33 per diluted share as compared to a net loss of $36.8 million or $0.44 per diluted share for the same period in 2020. In terms of product sales guidance, as before, we are limiting financial guidance to the existing Athenex product portfolio only. As discussed by Jeff, we are revising guidance for 2021 and now expect that full year product sales will decline by between 6% and 12% year-over-year. As of September 30, 2021, Athenex had cash and cash equivalents of $73.6 million, restricted cash of $16.5 million and short-term investments of $14.9 million for a total of $105 million. As Johnson mentioned, we are looking for additional opportunities to extend our cash runway beyond Q4 2022. For further details on our financials, including results for the nine months ended September 30, 2021, I would refer you to our Form 10-Q filed with the SEC. I will now return the call back to Johnson.
Johnson Lau: Thank you, Steve. We will now open the call for questions.
Operator: Our first question comes from the line of Jonathan Miller with Evercore ISI. Your line is now open.
Jonathan Miller: Hi guys. Thanks so much for the question and congrats on the progress with ANCHOR. I would like to focus my questions on the NK platform, if that’s alright. There is an emerging theme in non-gene edited CAR around cell persistence that we keep hearing about, but the persistence data in the abstract, Dan, and the stuff that you talked about during your prepared remarks wasn’t super clear. Are you going to have more persistence data in the full poster? And do you expect this to matter as much for an NKT product where there is also a feed forward mechanism to adaptive immune system versus a CAR-T product where cell persistence is really critical to impact?
Johnson Lau: Dan?
Dan Lang: Thank you, Jonathan, for the question. So, you you’re right. NKT cells are tissue and tumor-tropic. So, we expect to see more rapid egress of the NKT cells from the periphery into the tissue, like the tumor or lymph node. So, what we see in the peripheral blood for NKT cells may not represent what’s actually happening in the patients, because this is – you want the NKT cells to infiltrate the tumor. And actually, we saw in tumor biopsies, these cells infiltrating the tumors up to several weeks after the first infusion. So, what you see in the peripheral blood in terms of NKT cells may not represent what’s actually happening clinically. And in fact, in our first dose cohort for our three NHL patients, even though we didn’t see in-vivo expansion of the NKT cells, we saw one PR and one CR. So, there needs to be more work to better characterize the PK of these cells. But I am not sure what we learned from the first generation CAR-T PK and persistence could be extrapolated into the NKT cell because of its very unique biology. Lastly, to your question about the adaptive immunity, it’s interesting to point out that in one patient, we saw a 2,000 full expansion of the patient’s own NKT cells, which suggests that the allo-infused NKT cells were able to stimulate and propagate the immune system of the host, the patient’s own NKT cells. So, that’s a very interesting observation. It happened in one patient. So, we need to replicate that. And hopefully, we can validate that in more patients that we enroll.
Jonathan Miller: Thanks so much. That makes sense. The one other thing that I wanted to ask about is something that I have been curious about now for a little while. You and others have discussed the potential for NK cell therapies to actually benefit from being more mismatched to the patient because of NK negative regulation from HLA. I think this is a validation of the idea that you can do an allo therapy using NK-based platforms. How important is that effect? Is it worth selecting for? Is it important enough that it will be a major driver of response or efficacy? And does it suggest that the ideal usage of NK-based products might require some HLA genotyping and like a library of donor products, or is that overcomplicating?
Johnson Lau: That’s a good question, Jonathan. Maybe I will ask Kurt, our Chief Medical Officer on the Cell Therapy Division, to comment on that.
Kurt Gunter: Okay. Thank you for that question. I think the honest answer is we don’t really know how important HLA will be. We are not attempting to match a priority right now. But we are certainly collecting the information and we will examine what the level of matching means in terms of responses, safety, and pharmacokinetics, and pharmacodynamics. But we don’t have all those answers now. Now we do, however, believe it’s very important to properly characterize our donors, not necessarily for HLA, but working with our colleagues at Baylor College of Medicine, we have identified certain donor markers and gene signature patterns that predict good NKT cell products. So, we are focusing on that aspect and planning to a priori select the best owners in that way.
Jonathan Miller: That makes sense. Thank you.
Johnson Lau: Thank you.
Operator: Our next question comes from the line of Kennen MacKay with RBC Capital Markets. Your line is now open.
Kennen MacKay: Hi. Thanks for taking the question. Maybe for Johnson or for Rudy, can you speak to plans for global filings outside of the U.S. for Oraxol in metastatic breast cancer. Did I hear you mention a strategy in the UK? And beyond that, I would like to ask on the data from the CD19-directed CAR-NKT cell at ASH. This is KUR-502. Is that correct, or is this product slightly different? Anyway, the data go beyond establishing proof-of-concept for the NKT cells. There is clearly efficacy and significant efficacy. But at the same time, that can be said for a number of other CD19-directed therapies. So, where ultimately do you see NKT cells fitting into a potential treatment paradigm? And what are next steps for this program after this demonstration of early efficacy? Thank you.
Johnson Lau: Thank you. Kennen, you have two questions. The second question is on NKT, which is a continuation of the last discussion. So, why don’t we answer the second question first. Dan, do you want to address the question related to NKT?
Dan Lang: Sure. Thank you for the question, Kennen. So, to your question about basically, CD19 is a relatively competitive area. And where does the NKT cell fit in, I would say that, obviously, this is very promising early data, four responses, two PRs and two CRs out of five patients. But I also would like to point out that we are seeing that these responses at the lowest dose cohort of 1x 10 to 7 per meter square as well as 3x 10 to 7 per meter square. So, the total number of cells that we are infusing is a fraction of what is the average dose right now that’s being used for the first generation in CAR-T therapy. So, there is probably a bit of room for improvement and optimizing on the dose. We believe that we are going to have a pretty wide therapeutic window for our NKT cell therapy. So, we look forward to accelerate the clinical enrollment, see what our clinical profile pans out at the higher doses. In terms of where does this fit in longer term, I would say that because the very unique property of NKT cells to home in onto tissues, whether it’s a tumor or a lymph node, it really amends itself very well to be positioned as a therapy for solid tumors. We already have a high affinity TCR targeting NY-ESO in the Phase 1 development. So, one potential extension of this program would be to insert a TCR onto the NKT cell platform, which will allow us to go after solid tumors with an allogeneic technology that could allow for repeat dosing, which we believe could be a very important element of success when it comes to treating solid tumors. So, I hope I answered your questions there, Kennen.
Kennen MacKay: Yes. Maybe just a follow-up on the NKTs before we jump over to Oraxol, the CRS that was seen, was that at the lower dose or the second dose? And can you maybe talk to what was going on in that patient at all? I know it’s only Grade 1, but would be interested in that? Thank you.
Dan Lang: So, it was a Grade 1 CRS saw in the ALL patient at the lowest dose of 1x 10 to 7 per meter square. This was a self-limiting CRS observation and did not require any. That’s all we have right now. We may provide more information at the ASH conference in December.
Johnson Lau: Kennen, just want to highlight a little bit further with regard to the fact that the fact that we are using a very small fraction of the cells using CAR-T to demonstrate efficacy in conjunction with the fact that this can be allogenic in terms of using donor cells. All this actually is transformational with regard to the approach based on cell therapy using our platform. The effect that we have proven that it has a good therapeutic index with regard to this group patient is an indication that this platform is actually valid clinically. And then at the same time, if we can extend to other molecular targets, this can serve as a very good platform to jump-start the approach in terms of treatment of cancer based on NKT therapy. Any further questions on NKT, Kennen before I move on to…?
Kennen MacKay: No. Hope we can talk more at ASH.
Johnson Lau: Right. I will encourage you to monitor the evolution and the data that – and the updated data we are going to present in ASH. For the first part of your question, Rudolf?
Rudolf Kwan: Kennen, thank you for the question. We believe oral paclitaxel is a useful drug for oncology patients. And the regulatory interaction with the UK MHRA is actually a natural extension of the already completed Phase 3 program in metastatic breast cancer. And it will allow us to extract value of our Phase 3 investment potentially in other geographic areas. We are pleased that the UK regulators are considering the merits of encequidar in combination with chemotherapy. So, we are – as we stated earlier, we are not going to comment on the filing until filings and regulatory authorities has been accepted, which is our practice. So, I will leave it at that. I hope I answered your question.
Kennen MacKay: Yes. Thank you.
Operator: Our next question comes from the line of Yale Jen with Laidlaw & Company. Your line is now open.
Yale Jen: Good morning and thanks for taking the questions. And I am also going to focus on the NKT cell for the first question, which is that what’s the current plans in terms of additional dose expansion for the study? And another one follow-up to that is that at least in theory, do you see any reason that NKT cells could be less – could be safer, I should say, compared maybe to the CAR-T, particularly in terms of CRS and other neurological sort of toxicities? Then I have another follow-up.
Johnson Lau: Thank you. Dan?
Dan Lang: Sure. The ANCHOR study for KUR-502 is a 3 x 3 dose escalation design, starting at the lowest dose of 1x 10 to 7 per meter square. The next dose cohort is 3x 10 to 7. And then the last dose cohort is 1x 10 to the 8 per meter square. So, that is the design. And we already have one patient with NHL in the second dose cohort. To your next question related to potential safety vis-à-vis other modalities based on T-cells and NK cells. We believe there is a potential for NKT cells to be proven to have a lower CRS rates. I would draw your attention to the GINAKIT2 study, which is our KUR-501 program in pediatric neuroblastoma. And in that particular trial, where we have enrolled 11 patients so far, we only saw one Grade 2 CRS. And because we are giving very, very low doses, only 10 million to 20 million cells so far, we believe that these cells are not causing the kind of kind of syndrome that compared to the first generation CAR-Ts that requires hundreds of millions of cells. So, that remains to be determined, but we are very hopeful that over time, we are going to have a better safety profile vis-à-vis the T-cell based technologies.
Yale Jen: Okay. Great. Maybe I will ask one more follow-up question here, which is for the oligonucleotide or at cells at this moment. Basically, there is two parts. First one is that, do you know the reimbursement status in the United States? And secondly, is that in terms of the revenue line that – on the licensing part, you have the revenue – does that include any sales royalties on there, or simply just the licensing fee? Thanks.
Dan Lang: Let me answer the question. With regard to the reimbursement, our partner, Almirall, is working very hard to get into the reimbursement scheme. And according to their webcast, I mean they anticipate that the Medicare reimbursement should be online around a year after the approval. So, they are working very hard on that. And please refer to their webcast because they are in charge of sales and marketing in the U.S. Now, with regard to revenue line, yes, there are other milestones in addition to the royalty. And then we have indicated in the past that the milestones consist both development milestones as well as sales milestones. When we achieve certain sales – target sales, we will also receive additional milestones. And then at the same time, we have other development milestones, and this is in addition to the royalty. I hope I answered your question.
Yale Jen: Sure. Yes. And thanks for that. I appreciate it.
Johnson Lau: Thank you, Yale.
Operator: Our next question comes from the line of Matt Kaplan with Ladenburg Thalmann. Your line is now open.
Matt Kaplan: Hi, good morning and thanks for taking my questions. I guess just to continue on the NKT, can you talk a little bit about where you are in terms of manufacturing the allogeneic products and how it potentially differentiates and add some benefits from a QA/QC point of view differentiating from the CAR-T platform from a factoring perspective?
Johnson Lau: Thank you. Dan?
Dan Lang: I will ask Kurt Gunter to answer that question, if I may. Kurt?
Kurt Gunter: Yes. Well, thank you for the question. There are several aspects of manufacturing that we believe provide a significant advantage for NKT cells. For one thing, since NKT cell type 1, which we use, have an invariant T-cell receptor they will not cause graft-versus-host disease. And so there is no need for us to perform any type of gene editing during the manufacturing. This makes for a simpler process and reduces the potential for genotoxicity and chromosomal breakage. Also, we naturally expand the NKT cells by stimulating them with a synthetic glycolipid. They recognize – their TCRs recognize glycolipids. And in combination with certain cytokines, the cells have a very significant expansion potential. And so that appears to be a very robust process in that respect. So, those are two advantages of the manufacturing that we intend to carry through with. In terms of expansion, we get almost up to over 10,000-fold expansion. We have made enough from our first healthy donor to run our entire Phase 1 program from one healthy donor. And we have lots of plans to optimize the process going forward. I think I will stop there in the interest of time, but it is a very interesting subject, and we are paying very close attention to manufacturing and CMC issues.
Matt Kaplan: Great. Thank you. That’s very helpful. And then just on Oraxol. Can you talk about potential path forward, what you are thinking right now? Maybe it’s premature, given you haven’t met with the FDA, but for the angiosarcoma indication, given the unmet need there?
Johnson Lau: Rudolf?
Rudolf Kwan: Matt, we certainly believe Oraxol is a good oncology drug. There are three programs that are ongoing with Oraxol. The first one is the angiosarcoma, which we have completed enrollment, and we have a meeting scheduled with the FDA later this month to discuss the path forward. And given that we have already received an orphan drug indication for that indication, once we got a clear guidance from the FDA for the path forward, we will make an announcement. So, you can stay tuned on that one. We have two other programs that are also ongoing. One is the one that we announced in ESMO recently, the combination of the anti-PD-1, the Keytruda combination program, where we saw in the Phase 1 of the study that in eight of the variable lung cancer patients, non-small cell lung cancer patients who had previously progressed while on anti-PD-1. Four of them had saw response and the four other were stable disease. This is very encouraging for us and we have opened up the expansion cohort to look to confirm that highly interesting signal. So, we hope to have some results once we get the enrollment going. Then the third program that’s ongoing in the U.S. is a long-running I-SPY2 program. And we are in that program in combination with the GSK dostarlimab and also with combination with carboplatin in the Arm 2, in the U.S. for the new adjuvant treatment of breast cancer. And that study is enrolling well, and we hope that they will finish that study and have some results sometime in 2022. So, we are keeping eyes open on the opportunity for Oraxol. And given that all those programs were either entirely or primarily in the U.S., I think we hope to have better reception of the data for these three programs going forward.
Johnson Lau: Matt, I want to elaborate a bit further to your first question. I think from your question, I can understand that you are asking with regard to the usual QA/QC batch release procedures required for cell therapy, which the infrastructure in Athenex will be more than capable to support all this going on, which is the benefit of the Kuur Therapeutics program within Athenex. Now, I am quite sure that the second part of your question is related to the recent concern from FDA with regard to the chromosomal breakage or the gene rearrangement. And the fact that in our cell therapy approach, we are not using gene editing, I think that should not be a concern. And obviously, the third part will be the course involved. And certainly, it’s allogeneic. The course involved will be far less than the standard autologous cell therapy procedure. We hope we answered your questions.
Matt Kaplan: Perfect. Thank you, Johnson.
Johnson Lau: Thank you, Matt.
Operator: Thank you. Our last question comes from the line of Gil Blum with Needham & Company. Your line is now open.
Gil Blum: Hello everyone and thanks for taking our question. Just a quick one on CD62L positivity in the CAR NKT program, could you provide maybe a little more context as to the benefits of having CD62L positivity? From what I remember, it’s an NK cell marker that assists with motility of cells. But if you could provide a little bit more color, that would be helpful.
Johnson Lau: Dan or Kurt?
Dan Lang: Sure, I can take that. So, we have demonstrated in the preclinical model that CD62L positive cells have enhanced expansion, persistence, and antitumor activity. It’s also a marker for more of a memory like NKT cell population. So, we have demonstrated in the in-vivo model that these cells perform better than the ones that are negative for CD62L. And that’s why in our manufacturing process, we select for the CD62L positive cells that would have better activity and persistence in-vivo.
Gil Blum: Alright. Thanks for taking our question.
Johnson Lau: Thank you.
Operator: Thank you. There are no further questions. I will now turn the call back to Johnson Lau for closing remarks.
Johnson Lau: Thank you, everyone, for joining us today. Now that we have made a decision about the U.S. regulatory pathway of oral paclitaxel in metastatic breast cancer, Athenex is able to fully focus on other programs. We look forward to updating you on progress in our Orascovery program in angiosarcoma in combination with pembrolizumab, our data from I-SPY2, as well as our regulatory updates from Europe soon. We will also continue to be enthusiastic about the potential of cell therapy program. At the same time, Athenex continues to explore strategic opportunities that would allow us to unlock shareholder value. We appreciate your attention and interest and look forward to providing more updates in the coming months. Thank you.
Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
