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Athenex, Inc. (ATNX) Q4 2018 Earnings Conference Call Transcript

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Athenex, Inc.  (NASDAQ: ATNX)
Q4 2018 Earnings Conference Call
March 11, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to Athenex Incorporated Fourth Quarter and Fiscal 2018 Earnings Call.

At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) Please note, this conference is being recorded.

I will now turn the conference over to your host, Tim McCarthy, with LifeSci Advisors. Thank you. You may begin.

Tim McCarthy -- IR

Good morning, and thank you for joining our conference call, as we provide an update on Athenex's business as well as a review of financial results for the fourth quarter and full year 2018. The news release detailing the fourth quarter 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 course of this conference call, the company will make projections or forward-looking statements regarding future events, including statements about financial and clinical milestones anticipated in fiscal year 2019 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 sec.gov or in the Investor Relations section at our website at athenex.com.

This morning, we are joined by Dr. Johnson Lau, Chief Executive officer; Jeff Yordon, Chief Operating Officer; Dr. Rudolf Kwan, Chief Medical Officer and Randoll Sze, Chief Financial Officer and several other executives who will be available to answer questions after the prepared remarks.

With that, I'll turn the call over Johnson for introductory comments.

Johnson Lau -- Chairman & CEO

Thank you, Tim, and good morning, everyone. We're still early in 2019, but this is already shaping up to be another very exciting year for Athenex with potential for further transformation of the company and value creation. We have important Phase III clinical announcements from both our Orascovery and Src Kinase programs.

Our pipeline is advancing and continues to generate very promising data that validates our technology. Beginning with Orascovery; the most important milestone for Athenex in 2019 will most likely be the planned announcement of top line results from our ongoing Phase III trial for Oraxol for the treatment of metastatic breast cancer.

We announced that we reached the target enrollment of 360 patients in early January and the results should be available mid-year. We believe that a successful outcome will serve as a major validation for our technology and will potentially set us on a path to commercialize our first Orascovery product.

Besides breast cancer, we are testing Oraxol in other indications and in combination with targeted therapy and immunotherapy. We are also making important progress in our other Orascovery programs. The data with generally so far provide additional evidence that our technology works and is capable of delivering various chemotherapy agents orally.

Importantly, we believe that if we demonstrate the safety and effectiveness of our oral absorption technology with Oraxol, we'll be able to advance the other drug candidates paired with this technology in a more efficient and expedited the development process. We have submitted a number of abstracts on our Orascovery program and other pipeline programs to ASCO, the American Society of Clinical Oncology meeting and in fact, this is ASCO, will probably be the thesis one that Athenex had today. We will be presenting data on six of our products at this meeting.

The second Phase III clinical announcement this year, which occurred just over a week ago at the beginning of March was the presentation of positive top line results from our two Phase III studies of KX2-391 Ointment and the treatment of Actinic Keratosis. The results were featured in late breaking oral presentation at 2019 American Academy of Dermatology Annual Meeting in Washington, D.C. These studies both met their primary endpoints with statistical significance demonstrating excellent activity for 391in a treatment of actinic keratosison on a face or scalp.

The safety profile of this product is excellent. It has been shown to be well tolerated and compliance rate was over 99%. We believe that once approved, this will serve to differentiate 391 from existing treatments. Our medical officer Dr. Rudolf Kwan will provide you with details of the results, but suffice to say, this product has demonstrated what we believe to be a very competitive efficacy and safety profile in the clinic.

We are commercializing this product in collaboration with Almirall. We think that Almirall is the ideal partner. They are the one that least -- the independent dermatology companies in the US and Europe and their leader in the AK market. They have recently increased their US footprints by acquiring the dermatology assets of elegance in the U.S. The economics of this partnership are very favorable to Athenex with development and sales milestone payment that could potentially be in the hundreds of millions of dollars in addition to commercial royalties.

I want to mention briefly a strategic agreement that was signed with Chongqing Jingdong Pharmaceutical in December 2019 to license and commercialize KX2-391 in China. You will probably have seen our announcement last week that we have decided not to proceed with this collaboration and have regained the rights to commercialize 391 in Mainland China. The excellent profile of 391 in Athenex in ethnic keratosis, and the additional dermatology and oncology indications that we are planning will better position us to capture the market opportunity in China.

Full year revenue for 2018 was $89.1 million up significantly from the $38 million we reported in 2017. Although this was below our most recent guidance, this shortfall was due to us not receiving an expected licensing fee of $14.5 million from Chongqing Jingdong Pharmaceutical at the end of the year. Importantly, our operating business continues to perform well, with product sales up 56% year-over-year. Our CFO, Mr. Randoll Sze will expand on our financials as well as provide update guidance for 2019.

I will now turn the call over to our Chief Medical Officer, Dr. Rudolf Kwan, to provide you with an update on our clinical pipeline. Rudolf?

Rudolf Kwan -- Chief Medical Officer

Thank you. Johnson. Now for a review of our clinical development activities. We begin with our KX2-391 program for take ethnic keratosis. We presented positive data from our two pivotal Phase III studies in the late breakout session at the American Academy of Dermatology Association Conference in Washington D.C. on March 2nd.

We had previously announced that both studies successfully matched their primary endpoints, which was 100% clearance of AK lesions by day 57. The results presented at AAD showed for the first time, the percentage of patients in each trial who achieved 100% clearance that was 44% and 54% of patients respectively in Studies 003 and study 004. This resulted were both higher than the 43% we reported in Phase II.

Also presented were the data of various patient subgroups, and again for each subgroup, there were statistical significant clearance rates in favor of KX2-391 versus the vehicle. Safety results shows that KX2-391 ointment was well tolerated and based on the data appears to have a very clean safety profile. This is particularly important and we believe, it may become a key competitive advantage for this drug given that the existing field treatment for AK, associated with very troublesome side effects. Of note was a very high compliance rate with over 99% of patients completing treatment. Our discussion with dermatologists indicate that this is something they care about.

Last Monday, we hosted a conference call to discuss this data and were joined on a call by Dr. Seth Forman, a highly regarded dermatology expert and major contributor to the AK program, having been involved as an investigator in our Phase II and Phase III studies. Dr. Forman, gave an overview of the current treatment landscape for AK and stated that, in his opinion and based on the clinical data, KX2-391 had the potential to change the clinical practice and treatment of AK, if approved.

Both Phase III studies are still ongoing to complete the one year follow-up of the patients who had complete responses. We will be submitting a request to the FDA, for a pre-neutral application or NDA submission meeting to discuss the data and regulatory submission timeline.

Next, we turn to our oral discovery platform, where our leading candidate, Oraxol is currently in an ongoing Phase 3 trial for metastatic breast cancer. As Johnson stated, we successfully completed target enrollment of 360 patients in the trial in January. The study is designed to compare the safety and demonstrate the superiority of Oraxol over IV paclitaxel and the primary endpoint is based on confirmed response rate as assessed by the resist criteria.

It has already passed two independent Data Safety Monitoring Board reviews, where in each case the Board recommended unanimously that the study continued. We expect that the top line results from this study will be available mid-year. As we hope to submit this status of presentation at a major medical meeting and for peer reviewed publications, we may limit the announcement to the primary endpoint at that time.

In October we presented encouraging efficacy and safety data of Oraxol in the treatment of metastatic breast cancer patients obtained from our Phase 2 clinical trial. With results from 24 patients reported, 11 patients achieved partial remission and then another 10 patients at stable disease. There were no those dose limiting neuropathies observed. This data provides further confidence in our Oraxol Phase III clinical program.

We were granted Orphan Drug Designation for angiosarcoma for Oraxol last year and have commenced Phase 1 clinical trail. Our abstract summarizing the Preclinical Oraxol data in angiosarcoma has been accepted for post therapy session at the forthcoming American Association for Cancer Research or AACR Meeting in May.

Moving on to our combination studies with Oraxol. In November, we initiated Phase I/II clinical study to assess the safety, tolerability and activity of Oraxol in combination with anti-PD1 antibody pembrolizumab in patients with advanced solid malignancies in collaboration with the Mayo Clinic. In December last year, our global Phase Ib clinical trial of Oraxol plus ramucirumab, a monoclonal antibody to VEGF-R2 in gastric cancer patients who failed previous chemotherapies completed a second cohort of patients and we are progressing well with the third cohort.

In our Oratecan and Oradoxel programs, we have identified our dosing regimen for Phase II development and plan to initiate these studies in the first half of 2019. For Oratecan, we believe that we can identify Phase II dose that will produce a similar exposure as IV irinotecan. And for Oradoxel,which is the oral formulation of Docetaxel, we believe that we can achieve similar exposure to IV Docetaxel, with one or two days of dosing every three weeks. Our other oral discovery programs are continuing as planned.

In summary, we believe our oral discovery platform will establish a new paradigm in the use of oral anticancer drugs for cancer treatments. Not to be overlooked, we have several other early stage programs in Phase I development, including our TCR-T program, which has the potential to provide a potent and selective directive response to cancer cells. We're very pleased to report that our partner in China for the TCR-T program has successfully submit their company sponsored IMD with the China Healthcare Regulatory Authorities, setting the stage superbly for our planned US IMD submission before the middle of this year.

We are also on track to file an IMD for Pegtomarginase in the first half of 2019. Pegtomarginase is an enzyme capable of depleting tumors of the amino acid arginine, a key resource for the cell cancer cell growth and survival. Therefore, by mid this year, we may potentially expand our pipeline to include 10 Clinical Oncology candidates.

We see our early programs as an important part of our long-term strategy. As Jonathan mentioned, we have submitted a number of abstracts to ASCO for consideration for presentation in the forthcoming annual meeting in early June. These abstracts cover all of our platforms, not only our discovery including our early stage programs.

I'll now turn the call over to our Chief Operating Officer, Mr. Jeff Yordon. Jeff?

Jeff Yordon -- Chief Operating Officer, President-Athenex Pharmaceutical Division

Thank you, Rudolf. Given the great progress of our clinical programs, our plan at Athenex is to continue building a fully integrated pharmaceutical company, and we believe that the groundwork we've established today in terms of creating a global supply chain and building capabilities on the commercial side will ultimately give us a competitive advantage and help us maximize value.

Our proprietary products address large markets and if they are successful in the clinic, we believe they will have enormous commercial potential, but in order to really capitalize on these opportunities, it is critical that the commercial and manufacturing elements are in place, well in advance of product approvals and launches.

Our marketing plan for Oraxol is now well advanced under the leadership of Mr. Tim Cook, who joined us as Senior Vice President, Global Oncology in 2018. Tim joined us from Eli Lilly, where he was formerly Vice President and Chief Operating Officer of Oncology. As we work on this plan, the operations of our APT subsidiary have been instrumental in developing relationships with the healthcare community, specifically with various gatekeepers, influencers and prescribers. Our commercial and clinical groups are closely aligned and are already conducting work with payers and advocacy groups.

Almirall is leading the marketing initiatives for KX2-391 and we are supporting them. We are in charge of the regulatory submission in the U.S. and we look forward to sharing the clinical data with the FDA in a pre-NDA meeting. We believe that the timing of the NDA filing will likely be in early 2020. Almirall will be responsible for seeking approval in the EU and other territories.

On the manufacturing front, the exterior construction work on our 415,000 square foot biopharma production plant in Dunkirk, New York is now substantially complete. This is the facility we intend to use for cGMP compliant drug manufacturing. We will eventually be manufacturing proprietary products there. The next stage will be completion of the interior, and while this interior work is in progress, equipment will be installed and the validation process including an inspection by the FDA will take place.

As a reminder, this plant is being funded through a strategic, public-private partnership with the State of New York. Empire State Development has agreed to fund the cost of construction and all equipment for the facility, as well as our corporate headquarters including our state-of-the-art lab, up to an aggregate of $225 million.

We have also made progress with our API facility in China, which has received similar financial support from the Chongqing Government. This will be critical for ensuring sufficient capacity to support our clinical trials and eventual product launches assuming regulatory approval. APD currently markets 28 products with 53 skews. APS markets six products with 16 SKUs. We expect that our commercial platform will launch an additional 12 products in 2019. Ondansetron was probably our most important product in 2018, this is the highest unit oncology product in the United States and we were the principal supplier during a nine-month shortage in 2018. This is a very good example of a product that is helping us build very strong relationships with oncology providers.

We have also been one of the major suppliers for vancomycin, which was on the shortage list for most of the year, and is a critical antibiotic used in acute situations throughout the hospital.

Other key products include levothyroxine, which we expect to be a significant contributor in 2019, and sodium bicarbonate, which is a significant shortage product, which we will continue to supply through at least the end of Q2 2019. We learned on March 1st that the FDA has indicated, not to include Vasopressin on the 503(B) API bulk list. In response to the FDA's decision, we have filed a complaint against the FDA, the Department of Human and Health Services and certain government officials requesting that the FDA be enjoined from not including Vasopressin on the 503 (B) API bulk list.

On March 7, the FDA agreed that it won't take any action against Athenex's compounded Vasopressin product until the court decides, if the FDA was wrong in deciding not to include Vasopressin on the 503 (B) API bulk list. The court is expected to hold a hearing in late April or May, and we expect to have the court's decision in June, unless the judge rules from the bench, which we believe is highly unlikely. We intend to continue selling Vasopressin till then and if the court decides, the FDA was wrong, in not including Vasopressin on the list, we will continue to sell it indefinitely.

I will now turn the call over to Mr. Randoll Sze to discuss our financials in more depth.

Randoll Sze -- Chief Financial Officer

Thank you. Jeff. I will now go through our fourth quarter financials first. Revenue for Q4 2018 was $21.3 million, as compared to $14.9 million for Q4 2017, an increase of $6.4 million. Product sales were $19 million and $14.1 million in Q4 2018 and Q4 2017 respectively. There was a $2 million licensing fee revenue in Q4 2018 pursuant to a licensing arrangement we're entering to with PharmaEssentia in December 2018 for rights to oral docetaxel in certain Asian territories. Cost of sales increased from $10.1 million in Q4 2017 to $14.3 million in Q4 2018, primarily as a result of change in our product mix.

As we continue to develop our product portfolio, our gross margin might fluctuate over time. R&D expenses for Q4 2018 totaled $20.8 million. Our various clinical programs accounted for a majority of our R&D expenses. The R&D expenses in Q4 2018 was in line with the $20.8 million reported for the same period in 2017. SG&A expenses for Q4 2018 totaled $11.6 million, slightly lower than the $12.3 million for the same period in 2017.

Net loss attributable to Athenex for Q4 2018 was $27.1 million or $0.41 per diluted share compared to net loss of $28.3 million or $0.49 per diluted share in the same period last year.

Next; I'm going to go through a few major P&L items for the full year 2018. There is a significant increase in revenue from $38 million in 2017 to $89.1 million in 2018. As mentioned earlier, product sales increased significantly from $36.1 million in 2017 to $56.4 million in 2018. The increase was also attributable to out-licensing of KX2-391 to Amro, in which we received a $30 million upfront payment in 2018.

Net loss attributable to Athenex for the full year 2018 with $117.4 million or a $1.82 per diluted share compared to a net loss of $131.2 million or $2.63 per diluted share for 2017. Excluding the non-cash licensing fee of $24.5 million in connection with the establishment of access Therapeutics which is our TCR-T entity in July 2018, the net loss attributable to Athenex for 2018 was $92.9 million and $1.44 per diluted share.

At the end of year 2018, we had cash, cash equivalents and short term investment aggregating $107.4 million compared to $51 million at the end of our 2017. Based on the current operating plan, we expect our cash, cash equivalents and short-term investments at December 31, together with cash to be generated from operating activities will enable us to fund our operations through at least the fourth quarter of 2019.

For more detailed discussion on our financials, including those specific factors that contributed to the changes in line items on our income statement, please refer to Form 10-K that was filed with the SEC earlier this morning.

Now turning to our guidance, going forward, the company's revenue guidance will be on product sales only, and will exclude estimates for license and collaborative fees. More importantly, we will provide regular updates on our clinical progress and results and business activities, which remain to be the core value drivers of our company.

Product sales have exceeded guidance. As mentioned earlier on the call, we had previously provided guidance for full-year 2018 revenue to be close to $100 million, and this was inclusive of licensing fee revenue. In our licensing fee revenue guidance, we accounted for an upfront payment of $14.5 million from Chongqing Jingdong Pharmaceutical. These discussions had started two quarters ago. However, as announced last week, the agreement with Chongqing Jingdong Pharmaceutical was terminated by mutual consent, leading to our 2018 reported revenue. In 2019, we anticipate there will be a year-over-year increase of 25% to 30% for product sales from $56.4 million in 2018.

With that, I'll turn it back to Johnson for some final comments. Johnson?

Johnson Lau -- Chairman & CEO

Thank you. Our mission at Athenex is to build a global biopharmaceutical company that will improve the lives of cancer patients by bringing more effective, safer and tolerable treatments to market. As we built our business and think about the best way to create value there are four important components of our strategy that we need to consider.

The first is our exclusive focus on oncology. The second is this synergy we are able to create both in our R&D efforts and operations. The third component is the team that we have assembled. In addition to our scientists, we are hiring an experienced product commercialization team, who are building infrastructure that leverages both our global facilities and collaborative relationships in order to achieve global distribution of any approved products.

We're making excellent progress on building this commercial and manufacturing infrastructure, which we believe will allow us to capture the entire value chain. And finally it's important to understand the market and trends. Combination therapy is now becoming the standard for cancer treatment and through our clinical development efforts, we're exploring how best to combine our products with immunotherapy. We are also thinking about macroeconomic dosing or maintenance therapy, which remains a largely untapped opportunity. If we can be successful on the different components of our strategy, we see a great opportunity to serve the oncology community and at the same time creating value for our shareholders.

With that, I'll conclude the presentation and open the floor for Q&A. Thank you.

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question is from Kennen MacKay with RBC Capital Markets. Please proceed.

Kennen MacKay -- RBC Capital Markets -- Analyst

Hi, thank you for taking the questions and congrats on the quarter. Maybe first just a couple of housekeeping questions. Was wondering on the pre-NDA for KX2-391, was that something that you had said was filed or is that planning to be scheduled in Q2?

And then a question again just housekeeping for Jeff, was wondering if you could help us understand how much came from Vasopressin sales? And NDP had put out some pretty solid growth numbers here. So it hadn't seemed like a major impact, but just wondering if that's because you're currently not marketing this heavily because of the ongoing litigation or if there was any color you could help us with there.

And then lastly I have a question for Randoll, I was just wondering if you could help us understand what we could think about as a revenue number from milestones and fees if everything sort of does go according to plan especially as it relates to the relationship with Amro. I certainly understand excluding that given for instance what we saw in Q4 and that milestone not getting recognized, but that would be terrific. Thank you.

Johnson Lau -- Chairman & CEO

Kennen, let me answer the question regarding the KX2-391 pre MDA meeting question. We are completing the follow-up of the 12 month follow-up for the complete responders, and that is targeted toward second quarter, and once that is completed, then we will submit the pre-NDA request.

So the pre-NDA request will be submitted following the completion of the 12-month follow-up some time around the end of the second quarter or the third quarter.

Jeff Yordon -- Chief Operating Officer, President-Athenex Pharmaceutical Division

Kennen, Vasopressin, first of all, let me explain to you that it takes about 8 to 10 weeks for a hospital to convert from the previous product to our product. We have been marketing the product, and you should be aware that about 50% of the hospitals before they make the commitment to switch want to make sure that it's going to stay on the list.

The revenue for '18 was about $5.6 million, and we anticipate that we will surpass that easily in the first couple of months of this year.

Johnson Lau -- Chairman & CEO

Hi, Kennen. On the milestone payment, maybe let me just give you a bit more background. So given the advanced stage of this KX2-391 program and since signing Almirall deal in December 2017, we have been exploring different opportunities. And obviously, we've received a lot of very positive interest in various major markets including China over the course of last year.

So Jingdong Pharmaceutical, they demonstrated very strong experience in the pharmaceutical sector with a sizable sales force. And that's why, back then, we considered them to be a very good partner for this potential partnership. But unfortunately, as announced in March, earlier last week, we mutually terminated the agreement as a result of un-seeable events on their end.

And looking out in terms of the milestone -- potential milestone payment, one thing that we would like to talk to The Street about is as you go to the Almirall transaction, there is this $20 million-close to $20 million milestone payment coming in, and that's going to be either coming in this quarter or next quarter. So that will be our, I would say, near term guidance on the milestone payments with regard to the licensing arrangement.

Kennen MacKay -- RBC Capital Markets -- Analyst

Got you. Thank you very much for the help. And then maybe just a couple of questions on Oraxol. I was wondering, maybe for Rudolf, if you could just clarify whether the confirmed overall response rates that or I resist-that is the primary endpoint. Is that a landmark analysis of confirmed response rate at 4 months or is that sort of the best response through 4 months?

And then also on-at least relating to the Oraxol program, I was wondering if you could help us understand sort of what percentage of the current API manufacturing business is going toward manufacturing paclitaxel for the Oraxol trial? Like how much of the capacity there is going toward essentially feeding clinical trial product into that? And maybe what the value of that paclitaxel would be if it were sold commercially?

And then maybe a final question for Johnson. You had sort of concluded the call, sort of hinting that maybe you'd be evaluating some maintenance indications, given the sort of enticing efficacy that could seen-be seen there from metronomic dosing. Can you maybe elaborate on what the first indications that we could see there could be from a maintenance perspective? Thanks so much for taking the question.

Rudolf Kwan -- Chief Medical Officer

Kennen, let me answer the question on Oraxol. Indeed, it is a confirmed overall response rate at least 4 months. So the study design is such that we look for 16 to-16 weeks of response rate.

If the first response occurred in week 16, it will be confirmed at week 19. And if the first response occur at week 19, it can be confirmed at week 21 or week 22, so-but it has to be confirmed one, it's not the best overall response.

Jeff Yordon -- Chief Operating Officer, President-Athenex Pharmaceutical Division

Kennen, this is Jeff. In terms of your question on API paclitaxel, about 1/3 of our capacity is being used for clinical studies. I would value that at about $6 million, which would have been obviously revenue.

With the new facility coming onboard and when it's completely onboard, it will give us significantly more capacity, and we'll be able to contribute much more on the revenue line.

Johnson Lau -- Chairman & CEO

So for your third part of the question, the-you have 2-I believe you have 2 questions. One is additional oncology indications for KX2-391 and also for Oraxol, the potential for metronomic dosing.

To answer the first part of your question is that the KX2-391, obviously, we believe that it has not just activity against actinic keratosis. And based on our preclinical studies and a lot of other sort of studies, we believe that it will have potential for other dermatological oncology indications, and we have been very excited with that, and we see that as another potential opportunity for us to capture, given the advancement of the 391 program that we will be able to extend to other skin oncology indications relatively easily, and we're in the process of doing that.

For the other part of your question with regard to metronomic dosing, obviously, we share with the investment community for that a lot-a fair number of our patients with our Phase III program are receiving therapy well beyond 40 weeks and some patients well beyond a year.

So therefore, obviously, this would translate into potential opportunity for maintenance therapy and metronomic dosing. Dr. Kwan, our Chief Medical Officer, is actively evaluating the best options in terms of proving the point.

And certainly, the follow-up of all the patients that currently are on the drug will be already a very good indicator or important piece of clinical information that can help us pushing forward. And I hope, I answered your questions.

Kennen MacKay -- RBC Capital Markets -- Analyst

Yeah. Sure you did. Thank you very much and congrats on the progress.

Operator

Our next question is from Chad Messer with Needham & Company. Please proceed.

Chad Messer -- Needham & Company -- Analyst

Great, good morning. And thanks for taking my questions. Could we just start-I just wanted to confirm the time lines for KX2-391 going forward. I believe you said we're waiting on safety follow-up data in the second quarter and then you're going to request a pre-NDA meeting. Obviously, if they have that meeting and then filing you expect in early 2020. Is that all complete and accurate?

Rudolf Kwan -- Chief Medical Officer

Yes. That's what is the plan.

Chad Messer -- Needham & Company -- Analyst

All right. Great. Thank you. And then, can you just remind us of Almirall's commercial presence in the U.S.? And are you aware of any plans to expand that for this product?

Johnson Lau -- Chairman & CEO

Yes. Johnson here. Let me answer your question. Our product has been very aggressive and positioning this product as the key driver for their future value creation going forward. The Almirall's brand in the U.S. is called Aqua, A-Q-U-A, which is actually one of the top 5 in the U.S.

And the other thing that you should be aware of is that we share with the investment community and so as Almirall that when they launch our product, they will try to rebrand Aqua back to Almirall U.S. I mean, that's their plan.

The other piece of information that we can share is that the-Almirall was then very successful advancing their pipeline here by acquiring the dermatology franchise or portfolio from Allergan for $650 million. And if you look into their press release, we were happily surprised when they even indicated in their press release when they were acquiring the Allergan asset that they felt that, that was actually a very important move for them to position the company in the U.S. and with the right team to ensure that they can capture the full opportunity as presented with the KX2-391 that is our compound in that press release.

And they also indicated in their conference call that they feel that this will be the future-the important component of the future product sales in the U.S. And I think all this indicated that Almirall is fully committed in terms of making sure that KX2-391 will become an important product for them, both in EU as well as in the U.S.

Chad Messer -- Needham & Company -- Analyst

All right. Great. Thank you for that. And then just looking for a little help on a P&L item. Cost of sales was a lot higher in 4Q. Is there some -- is there an explanation for that?

Johnson Lau -- Chairman & CEO

Cost of sales.

Randoll Sze -- Chief Financial Officer

Yes. Yes. As I mentioned earlier on the call, obviously, we're still in the process of developing the product portfolio for our commercial platform, and that's why from time to time, the margin might fluctuate.

If you remember, I mean, earlier, last year, we had actually capitalized on some of the very high-margin shortage products. So we will continue to explore opportunities to capitalize on these shortage and high-margin products going forward.

Jeff Yordon -- Chief Operating Officer, President-Athenex Pharmaceutical Division

Yes. Let me also add that we have backloaded some of the payments -- the licensing payments. And -- for example, about 3 years ago, we had purchased 14 products from Amphastar. That was backloaded and the actual upfront payments were made in 2018. So some of that also is a reflection on deals that we've made upfront payments.

Chad Messer -- Needham & Company -- Analyst

All right. Thanks. I appreciate that. Thanks, guys.

Jeff Yordon -- Chief Operating Officer, President-Athenex Pharmaceutical Division

Thank you.

Operator

Our next question is from Yale Jen with Laidlaw & Company. Please proceed.

Yale Jen -- Laidlaw & Company -- Analyst

Good morning. And thanks for taking the questions and congrats on the progress so far. A lot of the questions have been answered, but I have two here. The first one is for KX2-391. You mentioned that you have probably NDA meetings -- End of Phase, Pre-NDA meetings with agency probably in mid-year and file for approval in early 2020. My question is, is there any other gating factors for-before your filing for the approval after the meetings with the agency?

Rudolf Kwan -- Chief Medical Officer

So Yale, we are planning to submit a request for pre-NDA meeting once we get the response 12 month response rate from the completions ongoing follow-up studies. We do not see any additional issues that will limit our filing of an NDA.

Yale Jen -- Laidlaw & Company -- Analyst

Okay. That's good to know. I appreciate that. And Almirall will file for the U.S. as well as the Europe or there's a slight time difference between the two filings?

Rudolf Kwan -- Chief Medical Officer

Yeah. We will-we are responsible for filing in the U.S. and Almirall is responsible for filing in Europe. They are in active discussion with the EMA regarding the filing. I will-I think I will leave it at that.

Yale Jen -- Laidlaw & Company -- Analyst

Okay. Great. And may be last question here is that you have terminated the-mutually terminated the agreement for the China licensing commercialization for 391. Are you seeking any other partnership for this asset going forward or you have other plans?

Rudolf Kwan -- Chief Medical Officer

Thank you, Yale, for the question. The full story was like this. We were in active discussion with a number of potential partners since early third quarter last year. And then through a lot of due diligence, we felt that Chongqing Jingdong would potentially be a good partner because they have a very large sales force. And we felt that for the long-term benefit to the company and also for our overall strategy and also their corporate mentality, we felt that they would be a good partner.

And after that, there were certain challenges that they were facing, which led them to not be able to complete certain of their promises or agreements. And as a result of this and as a result of the fact that we know we have very good data and also the recent piece of information that we may have other very nice dermatological oncology opportunities, we felt that it would be to the best interest of our shareholders to discontinue the contract since they were not able to fulfill certain of their commitments. And that they are very nice to us and they felt that, OK, that they were not able to deliver and they sort of accepted our request with regard to termination of the agreement.

Now the question will then be, what next? I mean, obviously, now that we have a very good asset, our clinical data looks very good, there are no issue with our clinical data and all these other things. And we now have even additional dermatologic oncology opportunities.

We feel that we are in a very good position to reconsider the best approach in terms of capturing the maximum value of this particular program in Asia, and the management team is an active pursuit of this right now in terms of having discussions and also having internal evaluation as to the best approach to capture the full value of this program in Asia.

Yale Jen -- Laidlaw & Company -- Analyst

Okay. Great. That's very helpful. And maybe just tag along one more question here, which is the Australia rights. I believe you guys retained that. Correct me, if I'm wrong, and just curious what's the future plans there at this moment?

Rudolf Kwan -- Chief Medical Officer

Actually, we're in active discussion with a number of potential partners. But having said that, Australia is -- and New Zealand, they are well known for very high incidence of actinic keratosis in their geographic region to the point that the government considers that to be a major issue for the healthcare of their citizens.

Now, the -- obviously, the easy way out is to engage a partner and trying to create a partnership. But Australia also represent a very interesting opportunity because the major bulk of the population of Australia are focused in 5 major cities. And therefore, even to capture this opportunity, it's actually-I would say, can be within the reach of Athenex in terms of the overall opportunity.

We are still in active discussion, certainly. We are balancing between the terms and-the term sheet based on table versus whether we would like to do it ourselves in terms of having opportunities to extend the geographic outreach of Athenex. So that is actively being considered right now.

Yale Jen -- Laidlaw & Company -- Analyst

Okay, great. Thanks a lot and congrats on the progress and look forward to see top line data shortly.

Rudolf Kwan -- Chief Medical Officer

Thank you.

Operator

Our next question is from Matt Kaplan with Ladenburg Thalmann. Please proceed. Matt, please check and see if your line is muted.

Matt Kaplan -- Ladenburg Thalmann & Co. Inc., Research Division -- Analyst

Hi, good morning. Can you hear me now?

Rudolf Kwan -- Chief Medical Officer

Yes.

Matt Kaplan -- Ladenburg Thalmann & Co. Inc., Research Division -- Analyst

Great. Thank you. Good morning. Just wanted to focus on the pipeline a little bit. I guess, first, with Oraxol beyond the Phase III program. Where are you focused as a company in terms of the continued development of the product?

Rudolf Kwan -- Chief Medical Officer

Yes. Matt, it's Rudolf here. Okay. The continuation of the program is in two directions as we indicated previously. So apart from the Phase III monotherapy, metastatic breast cancer, we're pursuing an orphan drug indication for angiosarcoma. So that study has started as we announced previously.

And the second line of development is in combination therapy. And we have two combination studies ongoing. One is a combination ramucirumab, a targeted therapy in gastric cancer. And the other is a combination with the anti-PD-1. So that is the line of development we are focusing right now.

Matt Kaplan -- Ladenburg Thalmann & Co. Inc., Research Division -- Analyst

Okay. Very good. And then in terms of those programs, should we expect any data from them potentially later this year?

Rudolf Kwan -- Chief Medical Officer

Yes. Both programs are evolving in active recruitment. So we already announced some data regarding the combination ramucirumab in gastric cancer, and we are completing the third cohort as we speak. So stay tuned. The data will come out as soon as we complete that.

The anti-PD-1 combination that's ongoing with Mayo Clinic. We are-we have initiated enrollment in the initial cohorts in the 3 Mayo Clinic centers. So again, stay tuned with data as it come out of that one.

Angiosarcoma study, again, as we announced previously, we'll start enrollment. And we-all of those, you will expect to hear progress and when their results coming out during the course of the year.

Matt Kaplan -- Ladenburg Thalmann & Co. Inc., Research Division -- Analyst

Okay. Great. Thank you. And then with respect to the Orascovery platform, what are the next milestones for products beyond Oraxol in that platform.

Randoll Sze -- Chief Financial Officer

The milestone for Oraxol clearly is to get the top line result for the metastatic breast cancer mid of this year, that will be an important milestone. Regarding the other milestones for the program-the platform, certainly, we want to advance to Phase II, the Oratecan and oral docetaxel program. And we are certainly starting the eribulin, topotecan programs in Phase I as well.

Johnson Lau -- Chairman & CEO

And let me-a little bit of favor here is that I would like to say thank you to Dr. Kwan for very good design of the clinical programs because you can imagine that the most important point that we're to prove is to prove that Oraxol is superior to intravenous paclitaxel and to file an indication that we will be able to do head-to-head comparison, 1-to-1 without -- not as a monotherapy, I think, is really very critical.

And that result, the top line data, will be available in the middle of this year. I think this is very important. And once you prove that this is better-let me emphasize again, this is better, then the combination studies as well as all the other indications will be much easier to conduct because once you prove once and for all that this is better, then when you have combination studies, the confidence of the institutions, the oncologists as well as the investment community will be much higher, and then the speed of progress as well as value creation will be much easier.

So that is the design of the-created by Dr. Kwan and the clinical team to ensure that we capture the maximum value for this particular process. And then, I think that is the key point I wanted to bring to your attention.

Matt Kaplan -- Ladenburg Thalmann & Co. Inc., Research Division -- Analyst

Great. And then, last question for Dr. Kwan Rudolf. In TCR-T program, can you help us think about 2019 for that program and kind of the next milestones we should look there as well?

Rudolf Kwan -- Chief Medical Officer

Matt, the TCR-T program, we are actively transferring the technology from our China colleagues. And since they already submitted the company-sponsored IND in China, we are actually currently translating all those documentations in the English and planning for submission of the U.S. IND. So stay tuned. You see our plan for submission of the IND in the U.S. announced as soon as we are ready.

Matt Kaplan -- Ladenburg Thalmann & Co. Inc., Research Division -- Analyst

Great. Thanks for taking all the question.

Unidentified Speaker --

Thank you.

Operator

(Operator Instructions) Our next question is from Jack Hu with Deutsche Bank. Please proceed.

Jack Hu -- Deutsche Bank -- Analyst

Hi. Good morning. I have one housekeeping question and then another question for Dr. Kwan. The first one is Oraxol Phase III full data. You mentioned that we are going to see top line data, but when are we going to see actually your present full data actually and also at what venue? And also, when should we expect NDA filing for Oraxol? This is my first question.

My second one is for Dr. Kwan. Can you-maybe in your capacity as an expert-medical expert, can you share your view on MEP (ph) Oraxol, what DHP 107 or another name is I-MAX (ph) 3001, I'm sure you're familiar with. What do-why was this drug approved in Korea in 2016, but still not launched yet? And why wasn't this program got reactivated in China recently? Thank you.

Rudolf Kwan -- Chief Medical Officer

Okay. Let me answer the first question, Oraxol Phase III program. The study has the primary endpoint being confirmed overall response rate and that endpoint is the first readout that we'll anticipate by the middle of this year. Now the full study will continue as you would expect of any oncology compounds that are successful and in terms of the progression-free survival and overall survival. So those data are continued to be collected because the patients are surviving, OK.

And so the full dataset actually will not come out until those data will continue to be improved, but the top line data including the confirmed overall response rate including the safety comparison will be available by mid of this year.

Now we may not disclose more than just the top line result, simply for the reason the medical journals acceptation-acceptance of publication and presentation either in ASCO or ASMO will require that they need new data. So we will be announcing the top line result, but we'll be preserving the data set for acceptance for those meetings.

In terms of NDA filing, obviously, once we got the primary endpoint, we will be planning to discuss with the FDA about the timing of the submission time line. So stay tuned, that will happen in 2019.

Regarding the question on DHP 107, sorry, I forgot about the second question. I think there is obviously a challenge for that compound to move beyond Korea. The fact that it is approved in 2016 and still not making much progress either in clinical-in registration or clinical studies beyond Korea speaks to the challenge of making that compound to be a mainstream development candidate.

Randoll Sze -- Chief Financial Officer

I can give you a little bit more color is that, that-the company was using some type of lipid to dissolve-like oil to dissolve the powder, and then give the oil emotion to the patient orally, which, my understanding, based on what I heard is associated with a lot of nausea and vomiting. And at the same time, the absorption was far below our technology based on the data that is in the literature.

So it was a Korean company and it was a powder mixed with lipid and Korean health authority approve it, but my understanding is that they are facing lots of challenges because of the low absorption, side effects and also that their path in terms of the data -- in terms of data package will not be as comprehensive as what we have. And we have a technology according to the data and the literature, which is far superior in terms of oral bioavailability.

And therefore, we can understand the challenges that they are facing when they are talking or meeting with regulatory authorities in other geographic areas outside Korea. That will be our understanding.

Operator

Ladies and gentlemen, we have reached the end of our question-and-answer session. I would like to turn it back over to management for closing remarks.

Johnson Lau -- Chairman & CEO

Thanks, again, for the time that you spent with us. 2019 will be an exciting year for Athenex. We expect all the exciting data-some of the exciting data that will come out in the middle of the year, and we look forward to sharing all these exciting data with you in the-within the next six months or so. And stay tuned with Athenex. Thanks for your time and your attention.

Operator

Thank you. This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.

Duration: 63 minutes

Call participants:

Tim McCarthy -- IR

Johnson Lau -- Chairman & CEO

Rudolf Kwan -- Chief Medical Officer

Jeff Yordon -- Chief Operating Officer, President-Athenex Pharmaceutical Division

Randoll Sze -- Chief Financial Officer

Kennen MacKay -- RBC Capital Markets -- Analyst

Chad Messer -- Needham & Company -- Analyst

Yale Jen -- Laidlaw & Company -- Analyst

Matt Kaplan -- Ladenburg Thalmann & Co. Inc., Research Division -- Analyst

Unidentified Speaker --

Jack Hu -- Deutsche Bank -- Analyst

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