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Edited Transcript of ATNX earnings conference call or presentation 7-Nov-19 1:00pm GMT

Q3 2019 Athenex Inc Earnings Call

BUFFALO Nov 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Athenex Inc earnings conference call or presentation Thursday, November 7, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jeffrey M. Yordon

Athenex, Inc. - COO & President of Athenex Pharmaceutical Division

* Randoll Sze

Athenex, Inc. - CFO

* Rudolf Kwan

Athenex, Inc. - Executive VP & Chief Medical Officer

* Timothy McCarthy

LifeSci Advisors, LLC - MD & Relationship Manager

* Yiu-Nam Lau

Athenex, Inc. - Chairman & CEO

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Conference Call Participants

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* Chad Jason Messer

Needham & Company, LLC, Research Division - Senior Analyst

* I-Eh Jen

Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst

* Kennen B. MacKay

RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research

* Kevin Michael DeGeeter

Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst

* Ling Wang

JP Morgan Chase & Co, Research Division - Executive Director & Senior Greater China Healthcare Analyst

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Presentation

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Operator [1]

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Greetings and welcome to the Athenex, Inc. Third Quarter 2019 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)

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Tim McCarthy with LifeSci Advisors. Please go ahead, sir.

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Timothy McCarthy, LifeSci Advisors, LLC - MD & Relationship Manager [2]

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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 third quarter of 2019.

The news release detailing the third 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; Mr. Jeff Yordan, Chief Operating Officer; Dr. Rudolf Kwan, Chief Medical Officer; Mr. 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 to Johnson for introductory comments.

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Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [3]

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Thank you, Tim. Hello, and welcome. We have continued to make strong progress across the board, bringing us closer to becoming a fully integrated global pharmaceutical company. For the second time this year, we are pleased to be raising full-year product sales guidance for 2019. We have several major catalysts upcoming, including an oral presentation of oral paclitaxel and encequidar data at the upcoming San Antonio Breast Cancer Meeting and two anticipated NDA filings in early 2020, which we expect to follow with regulatory filings in additional global markets.

We are also in the very strong position to advance multiple potentially successful therapies in the future. We have been strategic in building our operations and managing our resources to maximize the potential commercial opportunity of drug candidates in development. As our broader pipeline continues to advance, we're looking beyond current indications and for ways to get the best labels and marketing outcomes for our products.

As we prepare to market our first proprietary oncology product, oral paclitaxel and encequidar, we are making significant progress to expand and optimize our commercial infrastructure. We expect to be well prepared to make a significant impact with this product in (inaudible) once it's approved.

As our Chief Operating Officer, Mr. Jeff Yordon will discuss a major part of our ongoing commercial preparation as it continues raising the profile of our new Athenex oncology brand, and become a recognized commercial player with differentiated products with target -- that target cancer.

Oral paclitaxel will become our flagship product to build our global brand upon approval. Currently, we are preparing to discuss the Phase III data with the FDA who previously indicated that this study, if successful, could be adequate as a single comparative trial to support registration of oral paclitaxel and encequidar in the U.S. for metastatic breast cancer. The positive data we reported in August was a major milestone for Athenex, adding to the strong body of clinical evidence that our oral discovery platform is working as designed. This significantly de-risks the clinical programs that follow, including oral docetaxel, oral oratecan, oral topotecan and oral eribulin. Based on the successful outcome of the Phase III study, oral paclitaxel has demonstrated a very strong clinical profile from both efficacy and safety perspectives.

This study met its primary endpoint showing statistically significant improvement in overall response rate compared to IV paclitaxel. There were also strong trends in progression-free survival and overall survival of oral paclitaxel compared to IV paclitaxel, as well as a greater proportion of confirmed responders on oral paclitaxel with duration of response greater than 150 days versus IV paclitaxel. Neuropathy was much less frequent with oral paclitaxel, which we believe is an important differentiating factor. Importantly, this clinical outcome highlights the potential of our oral chemotherapy pipelines, which we expect to develop for a range of cancers and combination approaches as part of product life cycle management.

Our second NDA is for our tirbanibulin ointment for treating Actinic keratosis, for which we report positive Phase III top line results in March this year. We completed pre-NDA consultation with the FDA and are in the process of finalizing the submission with an anticipated filing in the first quarter of 2020. Our partner Almirall is also preparing to submit the market authorization application in Europe. We and our partner Almirall are very excited to launch this product for patients with actinic keratosis who are in serious need of effective therapy. Under our agreement with Almirall, we are eligible for development and sales milestone payments and commercial royalties.

I also want to highlight our ongoing effort to integrate our core functions and capture value across the supply chain. We are pleased that Athenex has continued to expand our global capabilities and footprint, both in terms of clinical and manufacturing for our proprietary products and for our customers around the world, which Jeff will discuss.

Our new and larger API plant in China completed construction and is anticipated to commence operation in first half of next year. We have also expanded our global clinical R&D capacity in Europe with the establishment of a subsidiary in the U.K., and we are growing the number of trial sites in the region. And we are delighted to report that the acquisition of CIDAL assets in Latin America closed on October 31. These initiatives have been taken with the goal of enhancing Athenex's capacity to conduct clinical studies and support our regional marketing decision process.

Competition for patients globally has become fierce. Having a high quality, Latin American clinical operation allows us to draw from a population for clinical development that's been overlooked by traditional big pharma. Moreover, many of our new colleagues CIDAL were in fact trained by U.S. big pharma companies, so they bring strong expertise. Because of this enhanced global infrastructure, we believe we'll be in the position to deliver substantial growth and maximum value over the years to come.

On the management front, during the quarter, we announced the appointment of Dr. Daniel Lang as President of Axis Therapeutics Limited to lead the operations of our T-cell immunotherapy platform and also act as a Senior Director of Corporate Development for Athenex. Dr. Lang was previously the Chief Investment Officer of RS Investments. He has over 35 years of medicine, healthcare investment, as well as leadership and business experience. We are delighted to welcome him and look forward to his leadership and insight for this important and exciting part of our business.

Finally, before I turn the call over, I want to discuss the issue of several (inaudible) reports from the same source that were published recently on our company. These reports contain unfounded and inaccurate information, and as well as misleading conclusions. We remain focused on execution, and if you look at our track record so far, we have been making significant accomplishments, including successful delivery of two Phase III programs and increasing our revenue guidelines twice in 2019. We take pride in the integrity and vast experience of the entire Athenex and management team, and importantly, we are committed to strong corporate governance. At this point, we do not intend to comment further on this subject, as we want to put our focus on what really matters, which is our pipeline value, clinical developments and business progress.

I will now turn the call over to our Chief Medical Officer, Dr. Rudolf Kwan to provide an overview of our clinical programs. Rudolf?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [4]

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Thank you, Johnson. We are moving ahead confidently towards our first NDA submission for our oral discovery platform based on the strong data we previously reported for our lead candidate, oral paclitaxel and encequidar. As a reminder, the randomized multicenter study involved 402 patients and compared our product to intravenous paclitaxel in patients with confirmed metastatic breast cancer and for whom paclitaxel monotherapy is recommended.

We were very excited to announce that the study met its primary endpoint, showing statistically significant improvement over IV paclitaxel in confirmed overall tumor response rate based on ITT analysis, oral paclitaxel showed an overall response rate of 36% compared to 24% for IV paclitaxel patients. This endpoint was based on the RECIST 1.1 criteria with a p-value of 0.01. There was also benefit in terms of duration of response.

As we detailed on our last call, we also saw strong trends for both progression-free survival and overall survival that favored oral paclitaxel. We are also very pleased with the safety profile for oral paclitaxel. In particular, we saw a much lower neuropathy compared to IV paclitaxel, 17% versus 57% overall, and for grade free neuropathy, 1% versus 8%. Neuropathy is the major dose limiting toxicity for IV paclitaxel treatment and can be chronic and irreversible.

Collectively, the results of this pivotal study represent an important milestone in the development of this new class of oral anti-cancer drugs. Based on the Phase III results, we see compelling evidence in terms of the efficacy and safety of oral paclitaxel's clinical benefit for patients with metastatic breast cancer. We believe it will be competitive and has the potential to become a cornerstone in the treatment of metastatic breast cancer.

As we disclosed, we are scheduled to deliver an oral presentation of our Phase III results at the San Antonio Breast Cancer Symposium on December 13. We plan to share additional information around the top line efficacy and safety results that we reported in August. We believe the physician community will find the data compelling and look forward to this important update.

In the meantime, we are currently working diligently to complete our NDA submission for oral paclitaxel, which we currently expect in the first quarter of next year. We expect to provide another update after the NDA has been filed. Importantly, we believe this is only the beginning in terms of the way we will expect to demonstrate for oral paclitaxel and our oral discovery platform. We have also high response rates and a strong safety profile for oral paclitaxel in unresectable cutaneous angiosarcoma and gastric cancer in combination with ramucirumab. With respect to the angiosarcoma program, Part II of the study has commenced and is continuing to enroll well, after observing rapid and robust tumor response in Part I. We are planning to expand the study to the U.K. and other countries. We were pleased to announce last week that we received orphan designation from the European Commission for paclitaxel and encequidar in the treatment of soft tissue sarcoma.

In terms of future opportunities for this product, we are working to develop oral paclitaxel for additional indications, and are exploring potential combinations with biologics, for example, anti-PD-1, anti-VEGF therapies. Our Phase I, II study of oral paclitaxel in combination of pembrolizumab or Keytruda is enrolling well.

We are also advancing in the expansion phase of our global Phase I B study of oral paclitaxel and enecquidar with pembrolizumab in patients with advanced gastric cancer. We recently presented encouraging results from this study at the ESMO Conference 2019.

Looking to our other Phase III program, turbanibulin ointment for treating actinic keratosis, we have pre-soft dated that. We have recently completed a pre-NDA consultation with the USFDA and are on track with the preparation of the NDA submission, which is expected to be filed in the first quarter of 2020. We continue to believe that trubanibulin's clean safety profile and high clearance rate, as observed in the Phase III studies, confirms a competitive advantage over existing therapies for AK, which are limited by side effects that negatively impact patient compliance. So we look forward brining this variable treatment option to the market, and Jeff will talk more about that.

Now turning briefly to our early stage clinical programs. This quarter, we announced that our partner, Xiangxue Pharmaceutical, initiated Phase I study of oral KX2-361, formerly known as KX-02. KX2-361 is being developed to treat glioblastoma multiforme or GBM due to its unique ability to cross a blood brain barrier. Treatments are very limited for GBM, so KX2-361 could become a potential variable treatment option for patients who have high unmet needs.

In summary, we are proud of the progress being made across our RND pipeline, and we are continuing to execute all the clinical programs. We look forward to presenting further updates in the future.

With that, I will turn the call to our Chief Financial Officer, Randoll Sze. Randoll?

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Randoll Sze, Athenex, Inc. - CFO [5]

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Thank you, Rudolf. Product sales for the three months ended September 30, 2019 were $19.2 million compared with $13.3 million for the three months ended September 30, 2018, an increase of 45% year-over-year. This increase was primarily attributable to an increase in specialty product revenue and 503B revenue of $4.7 million and $2.5 million respectively. The licensing fees and consulting revenues for the three months ended September 30, 2019 were primarily in relation to the license agreement that we have entered into with Almirall. Cost of sales for the three months ended September 30, 2019 totaled $17.1 million, an increase of $5.1 million or 43%, as compared to $12 million for the three months ended September 30, 2018. This was primarily due to the increase of $4.9 million and cost of sales, resulting from the sale of specialty products. The increase in cost of sales was generally in line with product sales increase.

Research and development expenses for the three months ended September 30, 2019 were $19.6 million, as compared to $51.2 million for the three months ended September 30, 2018. The decrease in R&D expenses was primarily due to a decrease in licensing fees for technology we acquired in July 2018. We booked a non-cash license fee of $29.5 million in the three months ended September 30, 2018 and it was related to the purchase of TCRT technology in connection with the establishment of (inaudible) therapeutics.

Selling, general and administrative expenses for the three months ended September 30, 2019 totaled $16.3 million as compared to $11.5 million for the three months ended September 30, 2018. This was primarily due to an increase in cost of preparing to commercialize our proprietary drugs and increase in general and administrative expenses, including legal fees and other professional service fees.

Net loss attributable to Athenex for the three months ended September 30, 2019 was $34.8 million or $0.45 per diluted share, compared to a net loss of $46.2 million or $0.70 per diluted share in the same period last year. We received a $20 million milestone payment from Almirall during the second quarter of 2019 in connection with the partnership on turbanibulin and expect this payment to be recorded as revenue in the fourth quarter 2019.

As September 30, 2019, the company had cash, cash equivalents, restricted cash and short-term investments of $129.2 million compared to $107.4 million at December 31, 2018. Based on the current operating plan, we expect our cash, cash equivalents and restricted cash as of September 30, 2019, together with cash to be generated from our operating activities, will enable us to fund our operations into the third quarter of 2020.

We provide revenue guidance for product sales only. Today, we are raising our product sales guidance for the full-year 2019 to an increase of 35% to 40% year-over-year from $56.4 million in 2018. This is versus prior guidance of 30% to 35% year-over-year ,and this is on top of the previous guidance increase we made in August. This new revenue guidance has taken into account the discontinuation of our vasopressin sales and the suspension of operations at our Taihao API plant. This revenue guidance excludes license and collaboration fees.

For a more detailed discussion on our financials, including those specific factors that contributed to the changes in line items on our income statement as well as financial results for the nine months ended September 30 2019, please refer to the Form 10-Q to be filed with the SEC.

I will now turn to call next to Jeff Yordon.

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Jeffrey M. Yordon, Athenex, Inc. - COO & President of Athenex Pharmaceutical Division [6]

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Thank you. As our regulatory and clinical teams work to prepare for NDA submissions for our two lead product candidates, we have continued to expand and optimize our commercial infrastructure and develop the market in anticipation of commercial launch of oral paclitaxel. We plan to be prepared to capture significant market share as efficiently as possible, establishing this product as the chemotherapy of choice for metastatic breast cancer.

As we have discussed, Tim Cook, our Senior VP of Marketing, has begun assembling his team of highly accomplished executives to lead our commercialization efforts. We've now finalized our staffing and organizational plan and will begin to make additional key hires in early 2020, including medical science liaisons and regional sales leaders with the full sales team coming on board in the months leading up to potential approval.

We have also continued our discussion with experts in the areas of Access Distribution and patient adherence to further understand the market dynamics for metastatic breast cancer that will drive our success upon potential approval. We are conducting payer market research and happy to see a strong positive response to the unique product profile of our oral paclitaxel candidate we are also working to refine the specific target physician and patient segments, so we can have a focused promotion of the product at launch. We're expecting to target physicians and patients who are early adopters of new therapies supportive of an oral option and patients that are generally hands on in terms of working with their doctors to find the right treatment for them.

As highlighted the next key event for us will be the San Antonio Breast Cancer Symposium where we will have a substantial presence. In addition to the presentation on the oral paclitaxel and then second to our Phase 3 results San Antonio will be an opportunity to continue the efforts introduced at ASCO earlier this year and generate further awareness and interest in the Athenex Oncology brand. Our activities around the meeting are designed to ensure strong presence and visibility with KOLs and provide concrete signals of our long-term commitment to oncology. Specifically, we plan to launch our new campaign empowered the theme of which is empowering patients and why it's at the heart of everything that Athenex does.

As with ASCO, we will have a booth staffed with medical affairs and commercial personnel as well as initiatives including a full-page program add to drive attendees to our booth and our website. We look forward to seeing some of you in San Antonio. I would encourage you to visit our booth. In parallel with our efforts around oral paclitaxel and Encequidar we are preparing to submit the NDA for tirbanibulin ointment in the U.S. As Johnson mentioned, we remain on track to file the NDA tirbanibulin ointment is a novel treatment for Actinic Keratosis which is terribly underserved market. Upon approval Almirall will lead the commercialization efforts for the U.S. as well as Europe. As announced by Almirall product launches in the U.S. and in Europe are expected in Q1 2021 and Q2 2021 respectively. Athenex retains the right for tirbanibulin in significant global markets such as Japan, Canada, Australia, Israel and several Asian markets. We plan to access these markets in collaboration with regional partners or directly with our own resources depending on the market conditions and the early commercial experience for tirbanibulin in the United States.

In addition to this late stage pipeline progress, we are once again pleased to report strong revenue growth for our existing commercial business. As Randoll mentioned our product revenue for Q3 beat our projections and this was driven by new and recently launched products, which were led by Levothyroxine. APD currently markets 31 products with 59 SKUs, APS markets 5 products with 13 SKUs. In the third quarter, we launched 1 new product with the goal of launching a total of 3 to 5 new products in the remainder of 2019. As we discussed, the litigation regarding Vasopressin was not decided in Athenex's table. While this was a disappointing result it was certainly not unexpected, and we have now discontinued the litigation proceedings and ceased marketing vasopressin. Vasopressin was a significant driver of revenue growth in 2018. It has also been a contributor to 2019. We will continue to seek opportunities to add to our portfolio especially pharmaceutical and 503B products in order to drive further growth and leverage the brand recognition and relationships we have built in oncology.

On the manufacturing front, work continues on building our New York State funded production plant in Dunkirk New York, which we continue to anticipate becoming operational in the second half of 2021. Once it is online, we will begin with cGMP commercial manufacturing of our injectable and 503B products and eventually our proprietary oncology products as well. Exterior construction of the 409,000 square-foot plant is complete and we are well on our way with the interior construction with the expectation that will order the filling equipment late this year or early next year. We look forward to completing construction and bringing this facility online. x US we announced in September, that we completed construction of our new 440,000 square foot, API facility in Chongqing, China, significantly expanding our API production capacity to support our global clinical development needs and ensure an uninterrupted supply of API to support our future commercial launches.

The opening of this facility is part of Athenex's ongoing strategy for vertical integration in order to capture value across the entire supply chain. The facility will be producing validation batches and we expect to commence operations in the first half of 2020. As you may recall in the second quarter of 2019, we decided to suspend operations at our current manufacturing facility in Chongqing, China after a few incidents occurred at unrelated facilities in the region. However, we believe we will be able to support the requirements for Athenex's ongoing near term clinical studies and registration activities for late-stage clinical products and we have taken steps to secure additional backup sources. We will provide an update in due course. So to summarize, we continue to execute successfully across all of our strategic objectives with respect to our commercial preparedness, vertical integration.

We're continuing to leverage broad opportunities, establish our global oncology brand and build out our marketing infrastructure. We're actively developing the market and honing our sales strategy in advance of the anticipated product launch for oral paclitaxel and (inaudible). Based on the positive feedback and progress we've made to date, we expect to hit the ground running as soon as the first product is approved.

I will now turn the call back to Johnson Lau for his wrap up.

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Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [7]

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Thank you. We remain on-track to mid-2019 transformational year for Athenex, which we believe we have positioned the company as a global leader in oncology. As we advance towards 2 NDA filings in the coming months, we're looking to 2020 to be another important year of growth. We're actively preparing for the exciting opportunities ahead of us in terms of commercialization as well as our expanded capacity to conduct global clinical trials that will help move our development pipeline forward, building substantial value for our stakeholders. We look forward to sharing our achievement with you as we continue to execute our long-term growth strategy. We would now be happy to take your questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Ling Wang with JP Morgan.

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Ling Wang, JP Morgan Chase & Co, Research Division - Executive Director & Senior Greater China Healthcare Analyst [2]

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Congratulations on the progress. So my first question is, can you give us some more clarity on why you might be meeting with the FDA for the Oraxol filing? And secondly, with regard to the San Antonio oral presentation. I think you mentioned you will have full details on the August data. I was wondering whether there are any chances for us to see more updated data especially with regard to PFS or OS. And then maybe lastly, can you comment on -- you mentioned potential filings in other regions. Maybe you can help us to understand the regulatory strategy there and whether you might need to look for partners to explore the further opportunities up there?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [3]

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It's Rudolf here. Let me answer your 3 questions. The first one is regarding to update on the process with the FDA on Oraxol. And I can tell you we are actively engaging with the FDA on oral paclitaxel and we are on track with our preparations for NDA submission first quarter 2020. Your second question is what data regarding the Phase III trial would you expect to see in San Antonio? We definitely intend to present a full dataset from the top line Phase III results announced in August. Some examples of those full dataset would include the standards like demography subgroup analysis, details safety profile, et cetera. We believe we have a very compelling data set to present to the physician community as well as to all of you.

We are planning to -- although you have an asset that you are alluding to, we are looking at further data on OS or PFS, as we previously look into. I'll reinforce what we have set our law, that we are planning to seek guidance from the FDA before defining new PFS and OS data cut-offs, so we cannot comment on when this will be ready for presentation at San Antonio or not at this time point. Our objective is to ensure that the best outcome from a regulatory and commercialization perspective.

The last question is regarding regulatory outside the U.S. right? We are in active planning and discussion regarding other territories. Of course, E.U. is the most important one. China, Taiwan and New Zealand are all regulatory authorities we have targeted to discuss with.

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Ling Wang, JP Morgan Chase & Co, Research Division - Executive Director & Senior Greater China Healthcare Analyst [4]

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Okay. Great. And in those regions, do you plan to look for partners or you're going to do it on your own?

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Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [5]

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We are exploring all opportunities. Certainly, there are advantages and pros in terms of having partners. At the same time we want to make sure that we will be able to capture the maximum opportunity of return for our stakeholders. We do have a lot of experience in this region as well and based on the vast experience that our management team have and therefore, we do have different options to explore these territories.

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Operator [6]

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Your next question comes from the line of Kennen MacKay with RBC Capital Markets.

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Kennen B. MacKay, RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research [7]

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Now that we're 3 months to the day actually after year positive Acthar Phase 3 top-line data announcement, can you help us understand what the regulatory interactions have been so far? I really do imagine that at this point you've reached out to the FDA for a meeting, but the FDA has I think 30 days or maybe further to respond in a further window for scheduling, can you just help us understand if an initial meeting has taken place or if one has been scheduled? I ask because to Rudolf's point it sounded like the potential to see unblinded PFS and OS data at San Antonio might be dependent on FDA feedback evaluating some of the secondary endpoints and ways of doing this in a specific statistically rigorous manner moving forward. And then a second question on the regulatory pathway. I just wanted to confirm that the FDA's initial endorsement of this initial trial design being sufficient for regulatory approval was based strictly on the primary endpoint of ORR and not dependent on PFS or OS, given these were secondaries? Then I had a quick follow-up on strategic options as well.

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [8]

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Thank you, Kennen. And as we indicated, we are actively engaging the FDA in communications, in discussion regarding the Oraxol submission and we are on track to file first quarter. I think I will leave it at that point. I will also point you to the fact that we don't normally communicate FDA communications. As you may have noticed for our tirbanibulin program we complete our pre-NDA consultation and we did not announce that. That was just one of the process we take pride in achieving the submission target. We'll announce our submission and definitely will do that. The file or data regarding this San Antonio again, it will depend on the feedback we shall receive from the FDA regarding the endpoint. To put it again on the record our previous dialog with the FDA consultation is based on the primary endpoint of response rate. The PFS and OS are secondary endpoints and they do not -- they are not a requirement for the FDA consideration. Does that answer your question?

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Kennen B. MacKay, RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research [9]

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Yes. Very helpful Rudolf. Thank you very much for that. Maybe just a follow-up then on strategic options here and potential for maybe bringing in non-dilutive capital. You have a lot going on with several regulatory submissions approaching. Can you maybe just remind us of geographies where you retain ownership of KXo1? I think Oceana was one of these were is the most prevalent and one of the largest AK markets. If this could be a potential option for -- if licensing here could be a potential option for bringing in some non-dilutive capital or if there are any other options out there that maybe we should be thinking about. Thank you again for taking the questions. Been looking forward to San Antonio.

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Randoll Sze, Athenex, Inc. - CFO [10]

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The KXO1 tirbanibulin compound was actually discovered and develop by Athenex so we own the global right. Our partnership with Amro, they have acquired the rights to -- license the rights to Europe, to U.S. not excluding Canada and Mexico and also with Russia. So we own all the other global territories apart from these 3 areas. Now and obviously your question with regard to whether there are other opportunities in terms of (inaudible) capital with other geographic regions for this compound, what I would like to say is that we would like to explore all opportunities that are beneficial and creating value for our stakeholders. Now, certainly we have 2 successful Phase 3 results assets and therefore, you can contemplate. There are quite a number of opportunities lying in front of us and our job is to ensure that we capture the value. Certainly it will be inappropriate for us to provide details. Allow this -- we are evaluating these opportunities and discussions are yet to be ongoing and thank you for your question.

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Operator [11]

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Your next question comes from the line of Kevin DeGeeter with Oppenheimer.

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Kevin Michael DeGeeter, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [12]

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Maybe 2 for me. First off, can you just comment on preparations for CMC for the oral paclitaxel, NDA submission in the first quarter of 2020 specifically any outstanding steps that will need to be completed to file that portion of the submission?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [13]

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With regard to your first question, we are actively preparing for the submission of the CMC sections. As indicated to you that we are contemplating that to be a very important product with a substantial market potential. So on top of resolving all the logistics in the API and then the product manufacturing, we are also looking into Plan B and Plan C vis-a-vis, we have both the primary supplier that is ourselves. We also have picked up alternative suppliers to ensure that when we are able to launch a product, there will be no interruptions. All these activities are yet to be ongoing and Mr. Jeff Yordon and myself are actively engaging to ensure that all this are smooth -- process are smooth and there will be no interruptions to our success. I hope that this answered your first question.

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Kevin Michael DeGeeter, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [14]

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Sure. And my second question actually pertains to I believe comments Jeff made in his prepared remarks with regard to initial outreach and payer research. Perhaps you can elaborate a bit more in terms of aspects of the oral paclitaxel product profile that resonated more strongly with some of the payers in that initial outreach.

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Jeffrey M. Yordon, Athenex, Inc. - COO & President of Athenex Pharmaceutical Division [15]

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This would be happy to do that. The feedback we've had in about 3 different forms that we've held was that we were very encouraged that our pricing targets look to be acceptable. We have pricing similar to the original ABRAXANE pricing and the feedback has been very positive. So we're encouraged that based on our forecast and based on the selling price we look like we're in very good shape.

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Operator [16]

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[Operator Instructions] Your next question comes from the line of Chad Messer with Needham & Company.

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Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [17]

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Let me add my congratulations on all the progress and I also I'm certainly very excited for San Antonio. Maybe just one for Rudolf to start. Kind of looking forward, what is your sense of the regulatory strategy for getting Oraxol into other indications? You've got some interesting additional studies run. You're calling rather than Phase 1 or 2. Wondering if you think any of those might support label expansions? And also do you think you have to do this piecemeal in each individual indication or is there some level of evidence you could provide that Oraxol is basically a better paclitaxel and could be used anywhere it's used?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [18]

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Thank you, Chad. You are quite right. Oraxol is based on a known molecule Precortaxol which has been studied intensively and is widely used in multiple type of 10 sub-types and multiple scenarios. So the possibility in the sense it's like -- and if you look at the number of publications on IV paclitaxel, it's probably well over 1,000, 6,000, 7,000. So our strategy as I always have to (inaudible) is to leverage that rather than repeating that, and I think in terms of showing the comparison with IV paclitaxel, we choose the monotherapy as a comparison, and you will be seeing the compelling data from San Antonio when you see the full dataset. And I think we clearly differentiate that from IV paclitaxel with the strong -- no one else have certainly so far with the taxine of a lower neuropathy in the presence of a better efficacy. So this is a very, very compelling piece of data that we will leverage to expand into other indications. The first obvious one is to enhance the image of the efficacy of paclitaxel, and especially Orexo, in where the difficult to treat cancer types like angiosarcoma, cutaneous angiosarcoma. And you are saying that we have been reporting very rapid progress in enrollment in a very, very rare disease. And this is because of the primary investigators, the principal investigators in possession of the data. So I'll leave at that. You've seen some early data. Should expect to see continuing excitement for that indication. We also got the EU approval for orphan drug indication for soft tissue sarcoma, which includes angiosarcoma and therefore everyone is excited about that. So stay tuned. You will see some of those data coming in the future. In terms of other indications we have already alluded to, we have combination of immunotherapy and anti-VEGF products, and those will be announced as the data become more mature. So certainly we are expanding into all other indication and we will leverage whatever has been used for paclitaxel and build further, better than the original IV paclitaxel. In terms of regulatory as gain. We are focusing in the U.S. and then we'll continue to do other indications and also other areas, building on metastatic breast cancer and leveraging angiosarcoma and other indications as they become mature.

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Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [19]

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Great. And then maybe one for Jeff: you've talked about some of the market research you're doing in preparation for the launch and that you think you'll be initially targeting early adopter physicians in sort of hands-on types of patients. Can you talk a little bit more about that? Does this mean we're going to be targeting sort of the larger centers of excellence and maybe trying to get some information out to the consumers? Internet or ads? Or how do you go about getting that segment of sort of early adopter proactive patients and doctors?

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Jeffrey M. Yordon, Athenex, Inc. - COO & President of Athenex Pharmaceutical Division [20]

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Sure, Chad. It's interesting: things are getting so sophisticated now that we have access to incredible data that gives us profiles of these provisions, and really the best way to look at it is we're going after the physicians that we know will be most responsive to this type of therapy, and as we make progress with those physicians, it will trickle down to others. So we have a very specific group of physicians that we've already targeted and identified. And our first marketing programs will be to those positions, and then we move to a second set and then eventually the third set. So I hope that answers your question.

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Operator [21]

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Your next question comes from the line of I-Eh Jen with Laidlaw & Company.

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I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [22]

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The first question I have is that some of the investor has asked whether the oral Taxol, if you compare with let's say the weekly IV Taxol regimens, do you see any benefit of oral Taxol, particularly in the safety side to that?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [23]

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Yes. Clearly the major benefit is they don't have to come for weekly infusion: bigger trip to the infusion center. But since you're asking about safety, then definitely you will see that we have announced already that that is significantly benefit in neuropathy. And if you look at the literature carefully, neuropathy dose limiting neuropathy, we are talking about Grade 3, Grade 4 in the blood, you look at the literature, everywhere you see is those limiting toxicity for all IV paclitaxel, all IV paclitaxel dosing regimen and especially in the weekly infusion. So I think we have a major significant advantage in that -- to differentiate ourselves from weekly IV paclitaxel. So do come to San Antonio. You'll see the whole dataset.

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I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [24]

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Okay, great. That's very helpful. Maybe one follow-up here, which is that it might be a little bit too early, but you have mentioned about the payer research. So is there any additional color you guys might be provide at this sort of early stage of the sort of consolidation process?

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Jeffrey M. Yordon, Athenex, Inc. - COO & President of Athenex Pharmaceutical Division [25]

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Yes. A couple of things. One, the original plan was to be looking at pricing equivalent to Abraxane pricing and also get a very good idea about the argument that the generic Taxol costs this much and would payers, be willing to pay, and because of the advantages, the inherited advantages of our product, we're very encouraged to say that yes, the Abraxane pricing seems to be one that's going to be widely accepted by most payers. So it's early, but we're very encouraged by that data.

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I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [26]

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Okay, great. That's very helpful. And maybe just tackling both questions, that you mentioned that you are seeking the FDA guidance in terms of the cutoff time for the progression-free as well as OS overall survival times. I'm just curious whether you think you might get any feedback from the agency prior to the San Antonio meeting or that's again difficult to tell at this moment?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [27]

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Yes. As I said, we cannot dictate when the FDA will answer that specific secondary endpoint question. The specific question we would want to get clarified is about -- since it's not pre-specified in the protocol, it's pleasant surprise upside as a secondary endpoint that we are seeing a strong trend. What would be acceptable to put it in the final analysis, now to put it into the analysis plan? So we want to have more clarity from the FDA before we actually implement that because that will be very important for our regulatory strategy and the labeling perspective. I will leave it at that.

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I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [28]

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Okay, great. That's very, very helpful. Again, congrats. And I look forward to the next data updates.

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Randoll Sze, Athenex, Inc. - CFO [29]

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I just want to give you an update in terms of your second question. You obviously can anticipate that we will be conducting pharmacokinetic economic study with regard to the value of our product in terms of the value that we are providing to both patients as well as the payers. And all this, obviously I will very much support the proposition that we're proposing to both the patients as well as the payers. So I think all these are important considerations that you may want to have in your mind with regard to how we're going to approach launching our product. And certainly, we have vast experience are in launching products within our team in terms of both clinical development, post approval support as well as marketing and sales. I think that says highly to you with regard to the fact that we are well prepared to launch this product successfully. Thank you.

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Operator [30]

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Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back to Dr. Johnson Lau, CEO, for closing remarks.

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Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [31]

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Thank you, everyone, for your time this morning. We have made significant progress and continuing to advance towards major catalysts. For those quite interested in our oral paclitaxel and Encequidar data, we like to strongly encourage you to join us in upcoming San Antonio Breast Cancer Symposium. The presentation will be in the afternoon on December 13, and we will have a big, a good presence, as well as inviting you to join our booth. For those who will not be able to attend the meeting, we will be able to provide you update after the meeting, and therefore, will ensure that all of you are update with regard to the progress and also the preparation work that we prepare to launch this is very important product. Thank you again for your time.

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Operator [32]

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