CASI Pharmaceuticals, Inc. (CASI) on Q2 2021 Results - Earnings Call Transcript
Operator: Good morning, ladies and gentlemen, thank you for standing by, and welcome to the CASI Pharmaceuticals Second Quarter 2021 Financial Results Conference Call. I would now like to hand the call over to Cynthia Hu from company for a preliminary statement.
Cynthia Hu: Thank you, operator. Good morning, and welcome to CASI second quarter conference call. Earlier today, CASI issued a press release providing the details of the company's financial results for the quarter ended June 30, 2021. The press release is available on the Investor Relations section of the company's website. Today's call will be led by our Chairman and CEO, Dr. Wei-Wu He. Our President, Larry Zhang; Chief Medical Officer, Dr. Alex Zukiwski; and our Senior VP of Business Development, Dr. Jim Goldschmidt will also be available to answer any questions during the Q&A portion of this 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 a guarantee of future performance, and therefore, you should not put undue reliance upon them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from those projected or implied in our forward-looking statements. For a description of important factors that could cause actual results to differ, we refer you to our statements in our SEC filings. Now it is my pleasure to turn the call over to our Chairman and CEO, Dr. Wei-Wu He.
Wei-Wu He: Thank you, Cynthia. Good morning, everyone, and thank you for joining us. I will begin the call with a general update, focusing on our lead programs and near-term catalysts, followed by our second quarter financial highlights. That said, we are happy to answer any questions during the Q&A session not covered in our remarks. Our press release contains details of our financial results for the second quarter of 2021. We are very pleased with the progress we have made in the second quarter, and I'm proud of all functions of our team for their continued dedication and focus. There's no doubt in my mind that we are well on our course in building a leading and financially strong pharmaceutical company. I will address our financial highlights in the major section of this call, but I would preface it by sharing my optimism in our financial performance. Revenues from EVOMELA, our first commercial drug, continued to increase while cost of goods sold goes down. With that experience, our commercial and medical marketing team is ready to start preparations and pre-marketing activities for the anticipated launch of CNCT19, our CAR-T 19 program. While we move forward with our commercial and late-stage assets, we continue to progress with our product pipeline and continue to pursue additional assets to grow our company. Our business model is build based on a few key assumptions for innovative pharmaceutical product development. First of all, China represents a fast-growing, innovative pharmaceutical market due to the vast population size and rapid income growth. Secondly, China has a vast patient population, which can add a significant value to global pharmaceutical innovations, thanks to many recent government reforms, Lastly, there are an explosion of global life science innovations, which can be accelerated commercially using our business model. We are interested in products that fit our core competencies in global drug development, allowing us to leverage the large patient population and the clinical development opportunities in China. Our business development execution typically includes an investment component in our partners. We believe this additional layer of investment deepens our collaboration with our partners and signals our confidence and conviction. It also provides our shareholders additional upside in the potential return on equity. For example, we use this venture approach in our in-license of the CD19 CAR-T and the entire Fc gamma RIIb antibody and the VCP/p97 inhibitor from our partners. We will now address more specifically EVOMELA, our commercial products and our pipeline for EVOMELA. We recorded EVOMELA revenue of $7.1 million for the second quarter. It is a 173% increase from a year ago quarter. For the full year 2021, based on the current trends, we are revising our guidance for 2021 revenue growth to exceed 80% over 2020. As you will recall, EVOMELA is approved in China for use as a high-dose conditioning treatment prior to hemoprotein stem cell transplant in patients with multiple myeloma. It is the only form of injectable melphalan commercially available in China. Prior to EVOMELA's entry into the Chinese market, an average of only 800 stem cell transplant per year were conducted in the multiple myeloma treatment setting. Following EVOMELA's launch, we worked closely with KOLs to drive market awareness and exceeded adaptation in Chinese market. In 2020, our first 4 year launch, more than 2,600 patients were treated with EVOMELA. EVOMELA is not just melphalan, it is a proprietary reformulation with patent protection until at least 2030. The post-marketing study of EVOMELA in China has completed accrual and is in the follow-up phase. So far as expected the data we are seeing is consistent with published studies of EVOMELA. Through EVOMELA as our beachhead, we have built a commercial group of more than 100 hematology cells and medical marketing specialists in China. This commercial franchise is extremely valuable since it brings us closer to all the KOLs in the Chinese hematology/oncology space. It also is a key reason many global innovators choose to partner with us due to our access to the market and the local clinical development resources. Now I'm going to turn to our CAR-T 19 cell therapy. With regards to our CD19 CAR-T, our partner Juventus continues to make excellent progress with its current ongoing trials. As you may recall, CNCT19 is an autologous CD19 CAR-T investigated product, to which CASI has global commercial and profit sharing rights. CNCT19 is being developed by Juventus as a potential treatment for patients with hematological malignancies, which express CD19, including the B-ALL and non-Hodgkin's lymphoma. CNCT19 will be developed and manufactured locally in China, which greatly distinguishes it from other CAR-T 19 therapies developed and manufactured in part outside of China. Pricing is a very important issue for patients in China, particularly for premium and innovative products. Comparable CD19 therapies that are developed and components manufactured outside of China are subject to certain ex China CMC and high cost of goods sold, making the price point significantly higher than where we believe CNCT19 can be priced. Next, I will address our other key asset, BI-1206. In October 2020, we acquired BI-1206, a novel anti-Fc gamma RIIb antibody for the Greater China market. BI-1206 has a novel mode of action, blocking the single inhibitory antibody checkpoint receptor, Fc gamma RIIb, to unlock anticancer community in both liquid and solid tumors. Fc gamma receptors are antibody checkpoints that modulate the efficacy of tumor cell directed targeting antibodies and immune checkpoint targeting antibodies used in cancer immunotherapy. BI-1206 can potentially be used with all therapeutic monoclonal antibodies that rely on ADCC, CDC for efficacy. BI-1206 a BioInvent lead drug candidate and is being investigated by BioInvent in a Phase I/II trial in combination with PD-1 therapy KEYTRUDA in solid tumors. And in a phase -- and also, it is in a Phase I/IIa trial in combination with RITUXAN for the treatment of non-Hodgkin lymphoma. On the IP front, BioInvent recently received a notice of allowance from the Chinese National Intellectual Property Administration, further securing China IP protection for this asset. This China IP is an important milestone for BI-1206 program. And together with BioInvent, we plan to continue to develop BI-1206 in both liquid and solid cancers with CASI responsible for development and commercialization in Greater China. Our lead indications will be BI-1206 in combination with rituximab in patients with relapsed and refractory NHL, non-Hodgkin lymphoma. CASI intends to file an R&D for BI-1206 with the NMPA in 2021. Now a word about CB-5339. In March of 2021, we acquired CB-5339, a first-in-class VCP/p97 inhibitor from Cleave Therapeutics for the Great China market. CB-5339 is an oral, second-generation small molecule VCP/p97 inhibitor. This novel approach to inhibiting VCP/p97 in hematological malignancy is supported by extensive preclinical research and early clinical data. CB-5339 represents a promising new agent for selectively targeted VCP/p97 in cancers and is a complementary addition to our pipeline of hematology/oncology assets. CB-5339 is currently being evaluated by our partner in a Phase I clinical trial in patients with AML and MDS. Together with Cleave we plan to jointly develop CB-5339 in AML as an initial indication with CASI responsible for development and commercialization in Greater China. CASI intends to file an R&D for CB-5339 with NMPA in 2022. With that, I will turn to our global asset, CID-103, our anti-CD38 monoclonal antibody. CID-103 is a fully human IgG1 anti-CD38 monoclonal antibody, recognizing a unique isotope. It is selected to have strong ADCC activity against CD38-positive malignant cells and with reduced CDC activities with a potential reduction of infusion reactions observed with existing anti-CD38 treatments. In June, we celebrated our first patient in our Phase I study. This is a dose escalation and expansion study in patients with previously treated relapsed or refractory multiple myeloma. CID-103 has previously shown encouraging preclinical efficacy, a favorable preclinical phasing profile and greater antibody-dependent cellular cytotoxicity activity and other anti-CD38 monoclonal antibodies. We are hopeful this will translate into greater patient benefits. This Phase I trial will generate valuable information and have the potential to provide early evidence of clinical activity in the treatment of patients with multiple myeloma. Thiotepa. As a note, our Thiotepa asset is continuing to progress. We expect to submit regulatory applications for 2 indications to the NMPA in 2021 with the Thiotepa registration studies starting as quickly as possible after NMPA approval. Thiotepa, a chemotherapeutic agent, has multiple potential indications, including as a conditioning treatment for use prior to hematopoietic stem cell transplantation. With that, a few words on our financial highlights for our second quarter. Our press release contained more details of our financial results. Rather than reading through all of these details, my comments today will address the key highlights. We recorded EVOMELA revenues of $7.1 million for the second quarter, a 173% increase from a year ago quarter. For the full year 2021, based on the current trends, we're revising our guidance of 2021 revenue growth to exceed 80% over 2020. Cost of revenues was $2.9 million for the 3 months ending June 30, 2021, compared to $2.5 million for the 3 months ended June 30, 2020, which include royalty payments of $1.4 million and $0.5 million for the same period. Cost of revenues, excluding royalty as a percentage of revenues decreased significantly in the 3 months ended June 30, 2021, compared within the 3 months ended June 30, 2020. This was largely due to the new automatic manufacturer -- the new manufacturer now in place, resulting in a considerable increase in the unit cost of inventories of EVOMELA. As of June 30, 2021, CASI had cash and cash equivalents of $60.4 million compared to $57.1 million as of December 31, 2020. At the current run rate, the company has sufficient resources to fund its operations beyond 2022. We continue to be extremely thoughtful on how we deploy our cash position with a focus on building shareholder value. Before we turn the call back to the operator, we hope to have conveyed to you our optimism and CASI's positive outlook. The bottom line is: One, we are committed to build -- to building a major integrated biopharmaceutical company, using China as our foundation and delivering to our capability eventually. We intend to launch products and increase our pace of acquiring assets. And we will be technical and entrepreneur about it, coupling clinical development partnerships with venture investments in our partners. And we will continue to build and strengthen our R&D capabilities, further strengthen our sales and marketing team and expand the reach of our business development activities. It is an exciting time for to be part of CASI. And we look forward to future updates as we hit our milestones. I will now turn it over to the operator for questions. Operator?
Operator: Our first question comes from Trevor Allred.
Trevor Allred: Congrats on the great quarter. I wanted to ask if there was any pull-through from Q1 seasonality with the Q2 results? Or should we anticipate similar reported growth in the second half? And then also, can you just talk a little bit about your expectations for the CID-103 based on enrollment and how many sites you have open now and where they're geographically located?
Wei-Wu He: I apologize. I kind of didn't quite catch your first question. Can you repeat it?
Trevor Allred: Yes, of course. So I was asking if there's any pull-through from the Q1 seasonality with the Q2 results. Or should we anticipate similar quarter-over-quarter growth into the second half?
Wei-Wu He: We are definitely expecting quarter-to-quarter growth. This drug in the U.S. is being viewed as a generic drug. But because it's proprietary formulation and we are also the only injectable melphalan in China, we are actually an innovative drug in China. This is really -- it's kind of a unique situation. Some drugs in the U.S. may be perceived as generic, but in a different market, it's actually a brand-new, innovative market. So we expected -- we are expecting quarter-to-quarter growth. That's why we're giving an overall 2021 guidance of 80% growth over 2020. Does that answer your question?
Trevor Allred: Yes. I want to more focus on about 25% range like Q1 was.
Wei-Wu He: Yes. So we are -- because it is still only the second year of this product launch, so we actually expect -- during the first year, there's a lot of things and also because of COVID-19 and all that. So we actually manufacture, for instance. I think moving forward, you will see much smoother revenue growth for this drug. Right now, we stabilize the manufacturing. Well, God forbid, if the COVID-19 doesn't come back in China, we expect -- we are expecting the revenue growth to be much -- going to be predictable.
Trevor Allred: Okay. Great. And then on CID-103?
Wei-Wu He: Alex, our CMO -- Alex, would you like to answer that question?
Alexander Zukiwski: Yes. I can address that. Regarding the number of sites, currently, there are 3 sites that are up and active. They're located in France and the U.K. And we are expanding the number of investigative sites as we get through their IRBs, et cetera. So we anticipate bringing at least 2 to 3 additional sites on in France and elsewhere potentially in a year. The accrual is going as predicted. With this dose escalation study, we anticipate that August, as always, will have a lull because of the European vacation season.
Operator: And our next question comes from the line of Justin Zelin.
Justin Zelin: Congrats on the solid performance in EVOMELA sales this quarter. Quite impressive from my end. I wanted to ask a question about your cell therapy, CNCT19. We recently saw approval for Yescarta in China. And I was hoping you can just put into context how you're seeing the commercial market evolving for cell therapy in China and where you see CNCT19 falling into place within that paradigm.
Wei-Wu He: Yes. Thank you, Justin. Now actually, we are actually very excited about the first approval of CAR-T 19 in China. To give it some perspective, this is really the first cell therapy ever approved in the Chinese history. And -- but it is now really imported drug. And the first drug is actually priced at RMB 1.2 million, which is a little bit less than USD 200,000, which we believe it's quite expensive for Chinese patients in China. So with that said, having the first drug on the market to pave the way for cell therapy is extremely exciting in China. So because our CAR-T 19 is a Chinese domestically produced CAR-T 19, our cost of goods sold will be significantly lower than the imported version of CAR-T 19. So we believe there's a differentiated market of cell therapy -- of CAR-T 19 cell therapy in China. And we are at the very leading edge of being the first domestically produced CAR-T 19 in China. We are in the very end of the pivotal trial of CAR-T 19. For B-ALL, we have the breakthrough designation in China, which -- for that indication, the Kite's drug is not approved yet for B-ALL. So we believe we might -- we will be the first B-ALL approval in China. And because of the price differentiation, we believe that we can capture significant market share in China. Especially, CASI already have over 100 people in the same channel within EVOMELA. The market for EVOMELA is the same as CAR-T 19 therapy, the percent of physicians and KOLs. So -- and we are also expanding our sales team so by the time our CAR-T 19 is approved, we have a real -- a ready commercial franchise to commercialize this product. And it's truly exciting because we believe there's actually over -- close to 50,000 patients needing this product.
Justin Zelin: Excellent. Well, congrats on all the progress.
Wei-Wu He: Yes. Thank you, Justin.
Operator: And our next question comes from the line of Sean Lee.
Sean Lee: Congrats on the good quarter. My first is on the CNCT19. So with the Phase II coming to a conclusion -- it looks like it is coming to a conclusion, so what are the next steps in the regulatory process that you need to do? And what are the preparations that you're doing for the commercialization of the product?
Wei-Wu He: Well, I think the -- what we can do, obviously, is to complete the Phase II patient data. And it looks like in B-ALL, we will advance faster for B-ALL than non-Hodgkin's lymphoma because we actually have the breakthrough designation for B-ALL and there's -- no drug has been approved in China for B-ALL yet for CAR-T 19. So -- and we are at the -- almost at the tail end of completing the enrollment of the patients. And after we generated data, meeting the NMPA's agreed upon endpoint obviously, they will -- Juventus will be submitting an NDA to the NMPA. And we expect, obviously, a speedy approval that -- which is quite unpredictable. So we are at the mercy of NMPA to -- in terms of what -- how long it will take to get this drug approved. But we still expect to submit our NDA for B-ALL by end of the year or at the beginning of next year. So meanwhile, we are already doing a lot of preparative work for the launch of this drug. So first of all, maybe Larry can actually update you, Sean, on the commercial preparation of our launch of CAR-T 19. Because we have reached to more than 260 hospitals, hematology/oncology hospitals in China already through EVOMELA. But we are hiring more people to prepare for the CAR-T 19 launch. So Larry, maybe you can chime in on this question, how we are preparing for the commercial launch of CAR-T 19?
Larry Zhang: Sure. As you know, cell therapy segment in China is brand-new. And basically, when we are building the launch for EVOMELA, this is beginning of preparation for CAR-T 19 launch. And that means not only we need to pick up the hospital and also we set up the strong connection to support and the KOLs. In terms of the hospitals and the connection and right now we're detailing over 300 hospitals in China, but we definitely will not cover all of them. And for the first couple of years there are some 13 to 15 hospitals, that is a major focus. And from now on -- and we started already to continue for all this. Another preparation is to build up our commercial team. That means from medical and marketing, not mentioning the medical reps that is what we are doing right now. Hopefully, we'll see Juventus file their NDA and we will speed up the preparation and for the launch -- to be ready for the launch. Thanks, Sean.
Sean Lee: Great. On the manufacturing point, is everything set there? Or are there still additional milestones you have to achieve?
Wei-Wu He: You mean the manufacturing of the CAR-T 19?
Sean Lee: Yes, before the CAR-T 19.
Wei-Wu He: Yes -- no. Actually, this is all done, actually Juventus GMP facility is already certified by the NMPA. And so -- and currently, we already have capacity to treat more than 2,000 patients if the demand is there. Now beyond 2,000 patients, we probably need to build additional manufacturing capacity.
Sean Lee: Great. My second question is on the BI-1206. So you mentioned that you guys -- how recently bought the IP in China. So what are your clinical plans there? And what's the expected time line?
Wei-Wu He: Yes. Our current plan is really to piggyback on BioInvent's global trial. So obviously, we are going to submit an IND in China for the relapsed and refractory non-Hodgkin's lymphoma in combination with rituximab. So that's really the beauty of the kind of the synchronization of the Chinese regulatory agency and with a global agency. So we can actually submit using BioInvent data for an R&D in China now. So this is -- we're expecting to submit the IND by -- before the end of 2021 for the same indication that BioInvent is doing clinical trials for now.
Operator: And our next question comes from the line of Difei Yang.
Difei Yang: So just a couple. First on CAR-T, should we see data updates before year-end? And then secondarily, with regards to the CAR-T distribution, do you expect -- now that there are competitive products, do you expect at the hospital level if the hospital will pick one out of, let's say, multiple CAR-T products? Or do you think it will be a -- there will be multiple products for the patients to pick from at the single hospital level?
Wei-Wu He: I'll answer your second question first. So the second question really is picking the CAR-T. We believe that we will price our CART-19 maybe significantly lower than the current approved CAR-T 19. So we do not believe that -- first of all, Chinese government is unlikely going to reimburse a drug for almost USD 200,000 of treatment. So the people who can afford $200,000 treatment is actually very few in China. That's according to our market strategy. So we think there's a huge price differentiation for our product versus the current approved product. So that -- does that answer your question?
Difei Yang: Yes.
Wei-Wu He: So we don't believe that the hospital will take sides because they probably will talk to the patient. And if the patients can't afford a $200,000 drug, let's say -- we have not priced our drug yet, obviously. But let's say, our drug is significantly lower priced, I don't believe that physicians or hospital will discriminate us because of our drug. We actually believe our drug has better vital time property than the competitive product. So for a lot of Chinese hospitals who are not sophisticated about dealing with cytokine storm, we think we are a superior product than the approved product. Does that answer your question?
Difei Yang: Yes.
Wei-Wu He: There's a lot of -- obviously, there's a lot of unpredictable factors. But in the end of the day, we focus on how we can solve a patient's problem, right? So if they got B-ALL, how can we deliver a solution to them at less cost and more -- safer product. And I do believe -- we do believe there's probably going to be some geographic market segmentation for this class of molecule. So since we teamed up with the #1 hematology/oncology institute in China, Tianjin Hematology/Oncology Institute, we believe that Tianjin will probably prefer the product developed by their own institutes, but that may not be true. So in the end, I think it's the cost. It's the efficacy. It's the safety profile will carry the day.
Difei Yang: Yes. That's very helpful. And so turning to EVOMELA. First and foremost, congratulations on the great Q2 performance. And then if we think about the guidance for the full year, can you suggest maybe Q3 and Q4 revenue may be flattening out a little bit? And just wanted to hear your thoughts on whether that's seasonality related and what other things that you can do to further increase market penetration.
Wei-Wu He: Well, actually, this product is -- we probably underestimated that the market potential of this product in China. So we -- in general, CASI is pretty conservative when we project our revenue. So we don't like to overpromise and underdeliver. We like to be a company promise a lot but deliver even more. Right now, with our guidance of 80% growth, I think that implies we'll be about $28 million, $27 million, $28 million for the whole year. We might actually beat that for this year, which is actually very significant for a very niche product like EVOMELA. So the second year on the market is almost approaching $30 million in revenue. That's -- actually, in China, it's considered to be a remarkable commercialization achievement. So we are very proud of our commercial team. And that's actually a value of -- personally, I don't believe our investor is valuing CASI properly because the commercial channel in China, especially specialty commercial channel in China, is extremely valuable because we have access to the KOLs. And we -- CASI is a very high standard company. So we have to comply to U.S. FCPA and all the high standard marketing and sales standard. There's actually very few companies in China has this level of high-quality marketing and sales franchise. And we are actually very proud through our first product, in second year, we are doing almost $30 million in this particular market. So when it comes to our product, we believe EVOMELA probably will ultimately be probably a $100 million product. It is a niche product. It is not as big as CAR-T 19. CAR-T 19 probably will be a lot bigger market than EVOMELA. You can calculate it. If we charged $100,000 a patient and we treated 2,000 patients, that would be $200 million right there for CAR-T 19. And EVOMELA, we already are treating -- last year, we treated 2,600 patients last year. So our commercial engine is pretty robust in that regard. So EVOMELA -- to give you a little bit kind of feedback on EVOMELA, it is a niche product. And right now the bottleneck of EVOMELA is not because of our commercial capability. It's actually the transplant unit in the Chinese hospitals is the bottleneck. So by pushing harder, it doesn't mean we will get more revenue because -- but we are seeing that Chinese hospitals are expanding hematology/oncology transplant unit, but that's going to be a gradual process.
Difei Yang: Yes. Got it. That's super helpful. So the bottleneck is really on the transplant center capacity.
Wei-Wu He: Yes. It's also education because I think a lot of companies have done a good job to convince physicians that the more than -- chemotherapy, the CD38 is extremely beneficial for multiple myeloma patients. But people forget that autologous transplant for relatively healthy multiple myeloma patients still is the standard of care. About 14% of patients going through the procedure can live for 20 years. It's literally a functional cure. So if I am a patient and I'm relatively healthy, multiple myeloma patient, I would choose to do stem cell transplant because I have a 14% chance of living over 20 years. But that concept of doing autologous transplant somehow is forgotten by the physicians because the solution was not available -- widely available in China. Now with the EVOMELA launch, we are reeducating the marketplace that the best treatment is autologous treatment. But that is slowly becoming -- we are really -- I think our commercial team is doing a really, really good job of reeducating the multiple myeloma market in China and that EVOMELA treatment is already part of the Chinese multiple myeloma treatment guidelines. So slowly, we're convincing the marketplace that transplant is a better solution for many, many patients.
Operator: We have reached the end of the question-and-answer session. I would like to hand the conference back to CASI Chairman and CEO, Dr. Wei-Wu He, for closing remarks.
Wei-Wu He: Well, thank you very much for everybody joining us and thanks for all the investors supporting us. We are building the company one drug at a time. The ultimate result for a company is how many patients are we truly taking care through our products and services. I mean we are very delighted to see that in the first year of 2021, our first drug already treated more than 2,000 patients compared to 2018, the entire China only treated about 800 patients using autologous transplant. EVOMELA this year alone, in the first 6 months, we have treated over 2,000 patients. So I think this is really what actually drive us to work hard for the company. It's in the end, the patient matters. And we really appreciate everybody's support to build this company. And there will be many, many new drugs coming in our pipeline. And we're going to build this company one drug at a time. By leveraging the resources in China, we truly believe we are developing a unique business model that leveraging the large Chinese market and the Chinese clinical resources to bring innovative global products to all patients in the world. And thank you so much for your support.
Operator: Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
Wei-Wu He: Thank you. Bye-bye.
