U.S. Markets closed

Edited Transcript of ATNX earnings conference call or presentation 14-Nov-18 1:00pm GMT

Q3 2018 Athenex Inc Earnings Call

BUFFALO Nov 14, 2018 (Thomson StreetEvents) -- Edited Transcript of Athenex Inc earnings conference call or presentation Wednesday, November 14, 2018 at 1:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* 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

* Tim McCarthy

* Yiu-Nam Lau

Athenex, Inc. - Chairman & CEO

================================================================================

Conference Call Participants

================================================================================

* 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

* Justin Hayward Burns

RBC Capital Markets, LLC, Research Division - Senior Associate

* Matthew Lee Kaplan

Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Greetings, and welcome to Athenex Third Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to Tim McCarthy, with LifeSci Advisors. Please go ahead.

--------------------------------------------------------------------------------

Tim McCarthy, [2]

--------------------------------------------------------------------------------

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 2018. 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 2018 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 Yordon, Chief Operating Officer; Dr. Rudolf Kwan, Chief Medical Officer; Mr. Randoll Sze, Chief Financial Officer and several other executives will be available to answer questions after the prepared remarks. With that, I'll turn the call over to Johnson for introductory comments.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Thank you, Tim, and good morning, everyone. So far 2019 has been a busy year for Athenex. And in the third quarter, we continued to mix substantial progress in both our commercial business as well as research and development programs.

Beginning with Oraxol, we were very pleased to announce that the DSMB or Data and Safety Monitoring Board focusing our ongoing Phase III trial of Oraxol in metastatic breast cancer recommend unanimously that the study continue recruiting patients as planned. We currently expect to announce top line data from this trial in mid-2019.

If successful, this study will serve a major validation for our proprietary Orascovery program, and we believe it has the potential to be a transformative event for Athenex.

Our pipeline of Orascovery products also continues to work. We identify suitable dosing regimens for both oral irinotecan and oral docetaxel for advancement to Phase II studies based on recent pharmacokinetics data. At the end of October, the FDA also accepted our IND application for Eribulin ORA, which is our oral version of the chemotherapy Eribulin. Our plan is to commence chemical trials with this product in 2019. This represents the eighth IND that has been accepted on Athenex products, and we are very proud of our team in their excellent on-time or ahead of time execution.

Our commercial business continues to perform well. Revenue for the third quarter was $18.4 million, an increase of 32% as compared to $14 million for the same period last year. This beats the research as consensus by $1.4 million.

Our reported net loss per diluted share was $0.70 in the third quarter. However, if you exclude a noncash item of $24.5 million the net loss was only $0.33 per diluted share, which is $0.18 below the research consensus of $0.51 per diluted share. In our Src Kinase program, together with our partner Almirall, we reported positive chemical data from 2 pivotal studies of KX2-391 in actinic keratosis earlier in the third quarter. Actinic keratosis is a large and underserved market, and based on the data both we and our partner Almirall believe that 391 could potentially be a game changer in the treatment of this disease. The economics in a deal we have with Almirall are very favorable, and we see this product is potentially creating a lot of value for Athenex.

We undertook an important strategic initiative to add an immunotherapy platform to Athenex through the establishment of Axis Therapeutics, which is a joint venture with Xiangxue Life Sciences in China. Axis is developing a technology called T-cell receptor affinity enhancing specific T-cell therapy. In a way, that is somehow -- somewhat similar to CAR-T. The concept of being explored is to manipulate the tumor-killing properties of patients' own T-cells in order to recognize the tumors. We believe that our TCR-T technology could offer important advantages over CAR-T in this potential to target solid tumors in the larger population of patients. We have recently reported the first set of very encouraging clinical data generated using this technology. Dr. Rudolf Kwan, our Chief Medical Officer, will provide more details on this.

As Athenex moves forward, it's important that we have the right people managing the organization. We were pleased to announce that we promoted Mr. Randoll Sze to Chief Financial Officer in August. We have known Randoll, who is a former investment banker, since our IPO. He is already integrated fully into the leadership team across our various business units.

Also, we welcome Mr. Tim Cook, the former head of worldwide commercial oncology at Eli Lilly to be our Senior Vice President of Global Oncology. I would now turn the call over to our Chief Medical Officer, Dr. Rudolf Kwan for a more detailed overview of our clinical progress during the third quarter. Rudolf?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Thank you, Johnson. And now for review of our clinical development activities. Starting with KX2-391, we announced in July that KX2-391 Ointment was effective and safe for actinic keratosis in 2 Phase III clinical studies conducted in the U.S. Both studies match the primary endpoint of a 100% clearance of AK lesions at day 57 within the treatment area and the results were highly statistically significant of a p-value of each study less than 0.0001. The clinical results have been consistent between Phase II and the 2 Phase III studies, highlighting the consistency of this treatment in patients with AK. We believe KX2-391 has the potential to change the paradigm of topical therapy for this disease.

Additionally, we announced that we received that from Hanmi pharmaceuticals, the rights to KX-01 oral formulation for Korea, China and other Asian territories. This will allow us to explore the potential of KX-01 oral formulation raw body.

For Oraxol, we reached an important milestone with announcement that the planned second interim analysis of the ongoing Phase III clinical trial in metastatic breast cancer have been conducted and reviewed and that the independent Data Safety Monitoring Board recommended unanimously that the study continue. The DSMB congratulated Athenex on the rapid patient recruitment and the promising results achieved.

The Oraxol 001 Phase III clinical trial is a randomized controlled clinical trial comparing Oraxol monotherapy against intravenous Paclitaxel monotherapy in patients with metastatic breast cancer. As Johnson mentioned, we plan to announce top line results in mid-2019.

At the European Society for medical oncology meeting in October, we presented our encouraging efficacy and safety data of Oraxol in the treatment of metastatic breast cancer patients who failed previous chemotherapies in a pharmacokinetic and Phase II clinical trial conducted in Taiwan. The encouraging PK profile and the positive clinical efficacy and safety data highlight the excellent potential of Oraxol.

We are also evaluating Oraxol as a treatment for gastric cancer and have been conducting a phase I study in combination of ramucirumab in patients that have failed previous chemotherapies. The results from the first cohort announced earlier in the year. We were pleased to see that Oraxol ramucirumab combination was well tolerated with encouraging tumor response. The second cohort, which is evaluating higher dose of Oraxol is near completion, and we plan to have results in the coming weeks.

Our oral irinotecan -- Oratecan and Oradoxel candidates are both well advanced in Phase I development. We have identified our dosing regimens for Phase II, which we are planning to initiate in the first half of 2019.

Moving on to Eribulin ORA, we announced that FDA have allowed IND application for this candidate, which is an oral version of chemotherapy agent Eribulin, the currently available IV drop is active in Paclitaxel-resistant tumor and is approved for treatment of metastatic breast cancer patients who have received at least 2 prior chemotherapies for late stage disease as well as in liposarcoma. We expect that this profile will create a number of synergistic opportunities with the other drug candidates in our oral discovery clinical pipeline. We plan to initiate clinical trial in the first half of 2019.

Finally, on our immuno-oncology development pipeline, we announced preliminary results of our prior study in China in which patients who receive our TCR-T therapy should encouraging positive clinical signals in terms of efficacy and safety. The pilot studies are being conducted by Xiangxue Life Sciences with whom we have partnered to form a joint venture Axis Therapeutics. This technology will also allow a number of combination treatment potential that strategies without current portfolio going forward. We intend to file the first IND in the U.S. and initiate Phase I studies with this technology during 2019. With that, I will turn the call over to to Jeff for an overview of our operations. Jeff?

--------------------------------------------------------------------------------

Jeffrey M. Yordon, Athenex, Inc. - COO & President of Athenex Pharmaceutical Division [5]

--------------------------------------------------------------------------------

Thank you, Rudolf, and good morning, everybody. In our commercial business, we continue to launch significant new products in both our 503B business, Athenex Pharma solutions and our specialty injectable business, Athenex Pharmaceutical Division. We added to our 503B portfolio in August with the launch of compounded Vasopressin injection and ready-to-use premix IV bags. Vasopressin is currently on the FDA's Class 1 list of APIs that may be used in compounding under section 503B of the Federal Food, Drug and Cosmetic Act. The branded product has been marketed by Endo, and the current run rate is approximately $450 million annually. It's not completely clear whether the product will continue to be on the FDA's list. Clearly, Endo would prefer if there were no competitors, and they brought a lawsuit against the FDA to try to force them to remove the product from the list. That lawsuit is currently stayed until December 31, while the FDA considers the issue and finalizes its compounding drug list.

In the meantime, we continue to sell the Vasopressin product. If it stays on the list, then we think Athenex could potentially taking meaningful portion of the market in 2019 and beyond. If it is removed from the list, we will still have had the benefit of being able to market our version in at least Q3 and Q4 of 2018.

For Athenex Pharmaceutical Division, one of the key products is ondansetron hydrochloride, which is an antiemetic drug that is widely used by oncologists.

At one point, there was glut of this product in the market and most of the suppliers have exited the market and it is consistently been in the FDA shortage list.

We have been able to establish ourselves as a leading supplier of ondansetron, and we sell our version at a reasonable price. Other spot-shortage products that we sell include sodium bicarbonate, vancomycin and potassium chloride.

Athenex Pharma Solutions currently markets 6 products in total with 16 SKUs. Athenex Pharmaceutical Division markets a total of 25 products with 48 SKUs. We are planning on launching 2 new products before year-end with an additional 4 new SKUs.

On the manufacturing front, we are very happy with the progress we've been making on our facility in Dunkirk, New York. The exterior of the plan should be finished by the first half of 2019, and we expect the whole facility to be complete by the end of 2019 and operational by mid-2020.

Please go to our website to see a drone-generated video for a regular video update on our progress in Dunkirk. Our oral proprietary products specialty injectables and 503B compounded products will all be manufactured in this facility. Dunkirk is being constructed with substantial grant funding through a private public partnership with the state of New York, and we're very, very grateful for their support. We're also happy to report that our API facility or raw material in Chongqing, China is on target. The exterior of the building will be finished by the end of 2018 and the facility is expected to be completed by mid-2019. This facility will give our API subsidiary a great deal, more capacity and will result in more sales and a better ability to supply key APIs to Athenex.

Both the existing commercial business and our manufacturing infrastructure are important strategically as we establish Athenex as a fully integrated global oncology company. We believe that we can create more value for shareholders by using our resources to commercialize products in the major markets.

In order to be successful, the commercial and manufacturing elements must be in place well in advance of proprietary product launches. Some of the key accomplishments of the APD and APS divisions this year include the successful branding of the company and the establishment of key relationships in all facets of the oncology, clinic and hospital markets in advance of our planned proprietary launches.

We've been able to create massive goodwill in the market by supplying key products at reasonable prices, such as ondansetron, which is the largest shortage oncology product. We have also substantially lowered our distribution cost through centralized wholesaler agreements.

Looking at our portfolio proprietary products, the 1 that's most likely closest to market is KX2-391 formerly known as KX-01. On the strength, the positive Phase III clinical, we announced earlier in the year, we and our partner Almirall believe that KX2-391 has the potential to change the standard of care for actinic keratosis. We are now awaiting the 12-month follow-up data from the Phase III trial.

We've completed the marketing plans for both KX2-391 and Oraxol and are working to have all facets of the business established that will allow a seamless launch of these proprietary products.

We have secured all state licenses and completed all GSA agreements both of these licensing activities could take up to 3 years to complete and we have already completed this. We have strong relationships with all 27 comprehensive cancer hospitals including the P&T committee members and have the staffing plan in place to quickly prepare for the first launch. I will now turn the call over to Randoll for an overview of our financials.

--------------------------------------------------------------------------------

Randoll Sze, Athenex, Inc. - CFO [6]

--------------------------------------------------------------------------------

Thank you, Jeff. Let me start with the results for the quarter. Revenue for the third quarter was $18.4 million compared to $14 million last year. The increase was primarily a result of an increase in licensing revenue of $5 million, together with increases in sales of the company's 503B product and an increase in medical device sales. Each were offset by decreases in API sales, contract manufacturing revenue, grant revenue and other product sales. Cost of sales for the third quarter totaled $12 million compared to $8.1 million in the same period in 2017. This was primarily due to the increase of cost of sales of $1.9 million from the recently launched specialty products and 2.1 -- $2.0 million from 503B products and API products.

R&D expenses for the quarter were $51 million, an increase of $39 million compared to last year. This was primarily due to an increase in licensing fees and clinical expenses. What we would like to highlight here is there was a $29.5 million noncash license fee related to the purchase of our TCR-T technology in connection with the establishment of Axis Therapeutics.

Out of these $29.5 million, $24.5 million related to the fair value of the IPR&D, and $5 million related to the company's common stock issued to Xiangxue Life Sciences, our partner in China.

SG&A expenses were $11.5 million compared to $10.4 million in the same period last year. Net loss for the third quarter was $46.2 million or $0.70 per diluted share compared to a net loss of $23.3 million or $0.41 per diluted share last year.

For people who have been looking at our earnings or EPS, we would like to provide a more comprehensive picture and reiterate that. Excluding the noncash licensing fee of $24.5 million, the net loss would have been $21.6 million or $0.33 per diluted share.

In July, we closed a privately placed debt and equity financing transaction with Perceptive Advisors for gross proceeds of $100 million. We were very honored to have them as our capital and strategic partner and see as validation of our approach and our product pipeline.

As part of the trends of the transaction, we entered into a 5-year senior secured loan for $50 million of this financing and issued approximately 2.7 million shares common stock for the remaining $50 million.

Our cash, cash equivalents and short-term investments were $141 million at the end of -- as of September 30, 2018.

Based on our current operating plan, we expect that our cash, cash equivalents, short-term investments together with the cash to be generated from our operating activities will enable us to fund our operating expenses and CapEx requirements into the fourth quarter of 2019.

For more details on our financials including results for the 9 months ended September 30, 2018, please refer to our Form 10-Q filed with the SEC earlier this morning.

In terms of revenue guidance, due to the timing of our collaborative payment from our partner, we are currently looking, or we're currently expect our full year 2018 revenue to be in the lower end of the guidance range of $100 million to $125 million inclusive of licensing fee revenue. Our operational business is on track, and we expect to receive this collaborative payment in the first half of next year. With that, I will turn it back to Johnson for some final comments. Johnson?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Thank you, Randoll. Thank you to all your continuous support. I would like to thank our team around the globe, whose hard work drives operational and clinical progress. Their execution continues to be strong. Importantly, the company has met all the milestones that we previously set out to achieve. We do not believe that the current market cap will affect the fundamental value of Athenex, and our team will continue executing our plan according to schedule. Given all the milestones and new developments in our R&D execution, I would like to mention that we plan to hold an R&D day for the investment community on Monday, December 17.

This will take place in New York City from noon to 3 p.m. on that day. And we would like to invite all of you to attend. Our goal is to provide investors a deeper dive on our programs and an opportunity to gain additional perspective on the indications and markets we plan to target. We'll provide everyone with full details surely. With that, we'll now open up the call for questions. Operator?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) First question will be coming from the line of Kennen MacKay with RBC.

--------------------------------------------------------------------------------

Justin Hayward Burns, RBC Capital Markets, LLC, Research Division - Senior Associate [2]

--------------------------------------------------------------------------------

This is Justin on for Kennen. The first one is around enrollment into the Phase III MBC Oraxol trial. Was wondering if you had an estimation for when that might be complete? And then additionally on that trial, if you have any anticipation for when medium progression for your survival could be mature versus the guidance of mid-year 2019 for the primary endpoint?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Our Chief Medical Officer, Dr. Rudolf Kwan, will address these questions.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Justin, thank you for the question. We expect the target enrollment for this study to be completed by the end of 2018. And we -- as you said, we expect the top line result be in middle 2019. The progression free survival is a secondary endpoint, and so we will expect the result will come in as data mature. We did not power into the study, and I cannot estimate that whether the data will come up with the top line data this time point. But as you know very well, survival analysis is different from response rate. So we will continue to monitor and give the guidance as we see the data.

--------------------------------------------------------------------------------

Operator [5]

--------------------------------------------------------------------------------

The next question is from the line of Chad Messer with Needham & Company.

--------------------------------------------------------------------------------

Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [6]

--------------------------------------------------------------------------------

With regards to KX2-391, in the past, you've discussed the possibility of enrolling NDA submission for this. Just wondering if you've had the opportunity to discuss that possibility with the FDA? And if there's any other guidance -- additional guidance you can give us on potential timing for an NDA filing?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Dr. Kwan will address this question.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

We are currently in evaluation and discussion of approaching health agencies both the FDA and EMA, I think we will provide guidance as this discussion mature.

--------------------------------------------------------------------------------

Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [9]

--------------------------------------------------------------------------------

Okay, great. And then I'm very interested in learning more about the broad reflectability of the Orascovery platform across various chemotherapies. Just wondering if you have a plan to publish some of the Oratecan and Oradoxel PK data at some point.

--------------------------------------------------------------------------------

Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [10]

--------------------------------------------------------------------------------

Yes. Let me address this question. We are delighted to see the data of the Phase I PK studies of oral Oratecan and oral docetaxel. And we're also delighted to see the data and confirming the platform as a very good platform for a number of drugs that are P-glycoprotein substrate. Our current plan is to provide additional insights on the R&D day on December 17 in New York City in our R&D day. And we also plan to submit a number of abstracts to the ASCO meeting next year. So that will be able to provide a more comprehensive overview with regard to the entire platform starting from Oraxol or oral Paclitaxel to oral Oratecan to oral docetaxel as well to oral Eribulin, so that the scientific community as well as the investment community will be able to see the potential of this platform in a very comprehensive fashion. I hope I answer your question.

--------------------------------------------------------------------------------

Operator [11]

--------------------------------------------------------------------------------

Next question from the line of a I-Eh Jen with Laidlaw.

--------------------------------------------------------------------------------

I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [12]

--------------------------------------------------------------------------------

And maybe just a follow-up with previous question a little bit. In terms of Oratecan and Oradoxel although, there is more information to come out but what might be the potential cancer indications going forward you may be tackle for either one of these drugs?

--------------------------------------------------------------------------------

Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [13]

--------------------------------------------------------------------------------

Thank you for your question. Dr. Kwan will be able to provide you more details.

--------------------------------------------------------------------------------

Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [14]

--------------------------------------------------------------------------------

Right. The interesting thing in our portfolio, if you see our Oraxol clinical development is we go after both recognized indications where IV Paclitaxel works, and also the opportunity to go into new areas like combination with ramucirumab, combination with anti-PD-1 and certainly orphan drug indications like angiosarcoma. And we certainly will take the same approach towards irinotecan and docetaxel, the details of those will be discussed further in the R&D day, give you a hint for example, irinotecan definitely works well in colorectal cancer. So this is an obvious indication we will consider, and certainly it has been looked into other indications in the literature where the IV formulation was high to be used as an oral formulation without success, nevertheless the indication are possible for us to explore. So we'll discuss that further in R&D day.

--------------------------------------------------------------------------------

I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [15]

--------------------------------------------------------------------------------

Yes, also to provide you a little bit more insight is the fact that the important part is for any new platform is to have the first product to improve that the platform works and also is effective and safe. And I think that part of the -- our job is to ensure that we are having the most streamlined process in terms of getting additional products to go for the regulatory path after the regulatory of 40s are convinced about the whole platform and therefore timing is very important. I am glad to say that we have a lot of experience in our company to time all the programs and the progress according to schedule to ensure that we have the most streamlined process in getting additional products going for the regulatory process right after the first one is approved. And that is part of our job and our strength, which we will be able to review to the investment community in R&D day as well as in the next couple of years.

--------------------------------------------------------------------------------

I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [16]

--------------------------------------------------------------------------------

Okay, great. And maybe just one more question here that you mentioned the Chongqing facility is in process of finishing. Is this -- that's mainly just about API? Or that's also related to the API of Paclitaxel, the raw material that ultimately could be used in the Oraxol?

--------------------------------------------------------------------------------

Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [17]

--------------------------------------------------------------------------------

Thank you for your question. We -- the government of Chongqing is actually supporting to 2 plants. Actually the first is the API plant and the second one is a dosage form plant. The one that we just mentioned by our Chief Operating Officer is the API plant, which we are scheduled to have everything complete including the renovation and the first installation of equipment by the middle of next year and that is the API plant. We are also contemplating breaking ground with the dosage form plant in the first half of next year, so everything is in progress.

--------------------------------------------------------------------------------

Jeffrey M. Yordon, Athenex, Inc. - COO & President of Athenex Pharmaceutical Division [18]

--------------------------------------------------------------------------------

Yes. Also, the implications that they use a great deal of their capacity currently for our clinical studies. This is going to free up a lot of capacity to generate sales, and they have a large portfolio of products that they're now going to be able to actively sell. So we're really excited about this.

--------------------------------------------------------------------------------

Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [19]

--------------------------------------------------------------------------------

May be also add a little bit more color here is that remember that we have a very strong R&D pipeline, we already have 8 different active INDs in clinical studies. We're contemplating more to come, and therefore to have the API supply in the -- such a non-disruptive fashion is actually very, very important. I also would like to thank the Chongqing government because they are providing more than the -- support that you see in the public domain to support us to continue building what we need to do to ensure a successful operation in China and coupled together with what we are achieving in the Western New York together. So to that, we are very grateful to both governments and will continue executing and building the facts that the facilities to ensure that we capture the maximum value for our stakeholders.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

(Operator Instructions) The next question is from the line of Matt Kaplan with Ladenburg Thalmann.

--------------------------------------------------------------------------------

Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [21]

--------------------------------------------------------------------------------

And I guess as now you're getting close to completing the Oraxol Phase III enrollment and getting closer to the redevelopment data. I wanted to get a sense in terms of if you could dig in a little bit more to the design of that study? And what you are expecting and thinking about in terms of the primary endpoint objective response rate? And how it should differentiate from Paclitaxel, if you could give some more color on that, that will be great.

--------------------------------------------------------------------------------

Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [22]

--------------------------------------------------------------------------------

Thank you, Matt. Dr. Kwan will address your question.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Matt, the study was designed to differentiate Oraxol from the label does of IV Paclitaxel in a monotherapy setting in terms of both efficacy and safety. So going in, we know oral Paclitaxel will not meet infusion with the convenience and will not need the IV steroid and nor the IV antihistamine associated with each infusion. So the safety and the convenience comparison is obviously, an important part and as we keep on reiterating the improved PK profile with oral administration, we're looking forward to translate into further safety and efficacy differentiation in the safety area mainly in the area of neuropathy. We continue to track that with extreme interest how the data set is evolving In terms of efficacy, the PK profile is projected to generate a better efficacy and that in the monotherapy comparison study that is designed using independent radiological read of x-ray response based on recess criteria, a confirmed overall response, a regulatory acceptable endpoint by the FDA is the main differentiating factor and as discussed early on with another question, we do build in progression free survival and overall survival although they are secondary endpoints in the studies. So our study is designed to show all of that. And I think the interim look by the DSMB obvious include both facility and data criteria that -- say that we are on track to generate promising and effective data based on our predefined criteria. I think I was sufficient to leave that at that, and I will be able to elaborate a bit more at the R&D day.

--------------------------------------------------------------------------------

Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [24]

--------------------------------------------------------------------------------

And Matt also -- let me emphasize again that we want to ensure that people understand that our primary objective is to demonstrate superiority in efficacy and we're emphasizing again efficacy followed by having a very good safety profile in terms of major reduction in the incidents of neuropathy. The convenience factor is actually only third online, I mean, convenience is actually not the most critical path here. It is the efficacy being #1, followed by safety and then followed by the convenience.

--------------------------------------------------------------------------------

Operator [25]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [26]

--------------------------------------------------------------------------------

Thank you to all of you for joining our earnings call today. We look forward to another quarter of good execution from our company and our team. We also look forward to seeing all of you on December 17 in New York City for our R&D day from noon to 3 p.m., and we will be delighted to share more with regards to R&D programs and more perspectives during that meeting. Thank you, again for your time. Bye-bye.

--------------------------------------------------------------------------------

Operator [27]

--------------------------------------------------------------------------------

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