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Edited Transcript of ATNX earnings conference call or presentation 7-Aug-19 12:00pm GMT

Q2 2019 Athenex Inc Earnings Call

BUFFALO Aug 8, 2019 (Thomson StreetEvents) -- Edited Transcript of Athenex Inc earnings conference call or presentation Wednesday, August 7, 2019 at 12:00:00pm 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

* 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, LLC, Research Division - Co-Head of 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

* Matthew Lee Kaplan

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

* Peter Richard Lawson

SunTrust Robinson Humphrey, Inc., Research Division - Director

* Timothy McCarthy

LifeSci Advisors, LLC - MD & Relationship Manager

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Presentation

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Operator [1]

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Greetings and welcome to the Athenex Second Quarter 2019 Earnings and Clinical Data Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Tim McCarthy of 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' business and a review of financial results for the second quarter 2019. The company issued 2 separate news releases earlier this morning detailing the top line Phase III results for oral paclitaxel and encequidar in metastatic breast cancer as well as the second quarter results. Both are available on the company's website, and a replay of this call will also be archived on-site.

During the course of this conference call, the company will discuss top line data from the clinical study, 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, specifically the company's quarterly report on Form 10-Q for the quarter ended June 30, 2019, which identify specific factors that may cause the actual results or events to differ materially from those described in the forward-looking statements. You can find our SEC filings in the EDGAR database at www.sec.gov or in the Investor Relations section 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; and Mr. Randoll Sze, Chief Financial Officer.

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. I'm pleased to provide an update on Athenex' second quarter operating results and, very importantly, to be able to share with you today the positive top line results achieved in our Phase III trial of oral paclitaxel and encequidar, also known as oral paclitaxel in metastatic breast cancer.

Our Chief Medical Officer, Dr. Rudolf Kwan, will discuss the results in a few minutes, but it highlights that our Phase III study successfully met its primary endpoint, showing a statistically significant and clinically meaningful improvement versus IV paclitaxel. We also saw evidence of potential benefits in terms of progression-free survival as well as overall survival.

Taken together with oral paclitaxel's improved safety profile, which had lower incidence of neuropathy compared to IV paclitaxel, we believe, if approved, we will have a new class of oral anticancer drugs with a differentiated and competitive profile.

The successful outcome in this trial is a potentially transformative event for Athenex. We are currently analyzing the full data set, but we believe that they are supportive of an NDA filing in metastatic breast cancer. We plan to request a pre-NDA meeting as soon as possible and plan to present the data at a major upcoming scientific meeting.

Before we provide more details, we'd like to express our thanks to all the patients who participated in this important study as well as their families. Your participation is essential to our progress in developing treatments for cancer with improved outcomes. We would also like to thank the clinicians, investigators, nurses, and other healthcare practitioners as well as our colleagues here at Athenex, who worked diligently to advance this product and make this study a success.

By demonstrating a benefit over conventional IV paclitaxel, we now have conclusive evidence from a large randomized study that our technology allows for optimal therapeutic levels of drug exposure with oral delivery, and the results of this is better outcomes for patients. Furthermore, the strong safety profile for oral paclitaxel that we have demonstrated in numerous studies have again been reaffirmed.

These positive results serve as a validation for our Orascovery approach, which we believe will establish a new paradigm in the use of oral anticancer drugs for cancer treatments. We believe the results have implications now only for oral paclitaxel and encequidar, but for our broader Orascovery program. They add to the body of clinical evidence that our Orascovery technology is working and highlight the potential value of our pipeline of oral chemotherapy -- therapies as effective therapeutics for a range of cancers.

We are working to expand the indications for oral paclitaxel and to explore more combination therapies with immuno-oncology drugs and biologics. An important advantage of our technology is that, by achieving better tolerability of standard chemotherapies delivered orally, combination with immuno-oncology and targeted anticancer treatments can potentially be optimized. This way, it should be possible to achieve greater therapeutic benefit compared to current combination treatments, and especially to build upon our potential benefit on progression-free survival and overall survival.

We also continue to advance other clinical candidates such as oral docetaxel and oral irinotecan. In parallel with other activities around oral paclitaxel and encequidar, we are preparing to file an NDA for tirbanibulin ointment, previously called KX2/391, our sub-kinase/tirbanibulin polymerization inhibitor for treating actinic keratosis with our partner, Almirall, supported by a very strong clinical data package, including positive Phase III results that we announced in March this year. So assuming all goes to plan, we expect to be filing 2 NDAs on our most advanced clinical candidates by early 2020.

We have also made significant strides in terms of building out our sales and marketing capabilities to support the launch of these proprietary drugs under our new Athenex Oncology brand, which Mr. Jeff Yordon, our President and Chief Operating Officer, will discuss.

We are also pleased to announce today that we are raising our guidance for product sales in 2019. We are now forecasting that product sales this year will increase by between 30% to 35% year-over-year from $56.4 million we reported in 2018. This is compared with previous guidance of 25% to 30% year-over-year growth.

To conclude, Athenex is rapidly making progress on all fronts, and we are continuing to invest in our future. Our drug development platforms have been further validated by continued positive clinical data in late stage studies, notable this morning's announcement for oral paclitaxel and encequidar in metastatic breast cancer, which put us in a very strong position for advancing multiple potentially successful therapies in the future. As we expand our global clinical and manufacturing infrastructure and bring our proprietary drugs to market, we believe we will be in position to deliver substantial growth and maximum value for our stakeholders.

I will now turn the call over to our Chief Medical Officer, Dr. Rudolf Kwan, to provide an overview of the Phase III data and other updates on our clinical pipeline. Rudolf?

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

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Thank you, Johnson. We are very excited to announce today that oral paclitaxel and encequidar met the primary endpoint, showing significant improvement over IV paclitaxel in a Phase III pivotal study in metastatic breast cancer. This represents an important milestone in the development of a new class of oral anticancer drugs. As Johnson mentioned, we are now moving ahead toward our first NDA submission from our oral discovery platform.

A total of total of 402 typical metastatic breast cancer patients were enrolled in a 2-to-1 ratio of oral paclitaxel and IV paclitaxel in the intent-to-treat population. Patient demographics were balanced in the 2 treatment groups. The primary efficacy endpoint is confirmed overall tumor response rate at 2 consecutive time points using RECIST 1.1 criteria.

Blinded assessment of tumor responses were made by 2 independent radiologists with an independent adjudicator and the use of a computer algorithm to assign responses. We are pleased to report that our study matched its primary efficacy endpoint, showing a statistically significant improvement compared to IV paclitaxel, with an overall response rate of 36% compared to 24% in the intent-to-treat analysis.

There was also statistically significant improvement compared to IV paclitaxel based on other analysis on populations excluding non-evaluable patients, which would give higher response rates and greater improvements in responses versus control. P-values were less than or equal to 0.01 in all analysis.

Importantly, at the cutoff date of July 25, 2019, there were strong trends in both progression-free survival and in overall survival that favored oral paclitaxel over IV paclitaxel, with p-values of 0.077 and 0.011 respectively.

There was also benefit in terms of duration of response. More than twice as many patients on oral paclitaxel had confirmed responses that surpassed 150 days compared to those with confirmed responses of this duration on IV paclitaxel. As we are still continuing to monitor patients, we expect the PFS and OS trends may continue to improve upon follow up.

Finally, and in line with our previous studies, oral paclitaxel and encequidar was well tolerated by patients. Compared to IV paclitaxel, the oral paclitaxel arm had a lower incidence and severity of neuropathy, only 17% versus 57% in patients on IV paclitaxel. Furthermore, grade 3 neuropathy was observed in only 1% of oral paclitaxel patients versus 8% of IV paclitaxel patients.

This is a very important result, as neuropathy is the major dose limiting side effect of paclitaxel. Mitigating neuropathy with oral dosing will confer a significant potential advantage for our product in the marketplace, as it will allow some patients to stay on treatment longer and potentially improve outcomes.

The safety results also showed a lower incidence of alopecia, arthralgia and myalgia in the oral paclitaxel group. The incidence of neutropenia was similar in both groups, and there was slightly more grade 4 neutropenia and a slightly higher infection rate in the oral paclitaxel group. There were also more gastrointestinal side effects in the oral paclitaxel group. Overall, we are very pleased with the safety profile for oral paclitaxel.

Based on the results of this Phase III study, other Phase I, II and PK studies, and the preliminary results generated in the angiosarcoma monotherapy study, we project the profile of oral paclitaxel and encequidar, as a new class of oral anticancer drugs, to have the following characteristics; first, efficacy profile as monotherapy, statistically significant improvement over IV paclitaxel in metastatic breast cancer; early onset of activity as observed within 1 to 2 weeks in angiosarcoma; long duration of response in confirmed responders in metastatic breast cancer; strong trends in better PFS and OS in metastatic breast cancer, which may continue to improve over longer follow up.

Second, improved safety profile, lower incidence of neuropathy, which currently is the major reason to discontinue IV paclitaxel, and much lower incidence of alopecia, arthralgia, and myalgia. Third, convenience, oral paclitaxel does not require IV infusion, the use of intravenous steroids, or anti (inaudible) pre-medications, hospital visits, and it can be taken at home.

As we have discussed, we are reserving the full results of the clinical study for presentation at a major upcoming scientific meeting, and we will also submit for publication in the future. We are currently working diligently to complete our NDA submission so that we may file as soon as possible.

As a reminder, we announced in January last year the FDA previously provided positive feedback to Athenex that they would accept the results of this one pivotal trial for license application in the U.S. if the primary endpoint is met. Importantly, these positive pivotal trial results add to a growing body of clinical evidence supporting oral paclitaxel and encequidar, which is characterized by high response rates and a strong safety profile.

In addition to the successful study in metastatic breast cancer we announced today, we have also seen promising results with this product in unresectable cutaneous angiosarcoma and in gastric cancer which serve to further validate the potential for our novel regimen to transform the way these cancers are treated. We are working to develop oral paclitaxel for additional indications and exploring potential combination with biologics, for example anti-PD1/anti-RhoGEF receptor therapies.

Our study of oral paclitaxel in combination with pembrolizumab is enrolling well. We'll provide further details as we continue to refine our pipeline expansion strategy.

We believe our oral discovery platform will establish a new paradigm for oral anticancer drugs. Building upon oral paclitaxel, we are looking forward to launching Phase II studies for additional oral discoveries of assets, including oral irinotecan and oral docetaxel. These studies will broaden our oral discovery pipeline and firmly establish Athenex as the leader in oral chemotherapies.

We also announced this quarter that the FDA allowed IND application for the clinical investigation of PT01, also known as pegtomarginase, for the treatment of patients with advanced malignancies. As a reminder, PT01 is a novel biologic product candidate designed to provide a metabolic approach to the treatment of cancer through arginine deprivation.

We are pleased to advance this program toward the clinic and believe it may offer a step forward for metabolic therapies in oncology and other potential combinations. We are planning to initiate clinical studies of PT01 soon.

Finally, in June we announced a major expansion to our global clinical operations specifically in Europe and Latin America. In Europe, which is the second largest healthcare market in the world, we formed a UK-based subsidiary. And in Latin America, we are going to acquire certain assets of CIDAL Limited, a contract research organization with operations in various Latin American countries.

Together, these initiatives strengthen our global clinical research and operations and represent an important step in our ongoing strategic effort to expand our development capabilities worldwide, with the potential for increased efficiencies and cost effectiveness across our pipeline development. Of course, this strategic expansion fits into our broader mission of becoming a fully integrated global pharmaceutical company.

I will now turn the call over to our CFO, Randoll Sze, to discuss our financials. Randoll?

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

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Great. Thank you, Rudolf. Product sales for the 3 months ended June 30, 2019 were $22 million compared with $11.5 million for the comparable period in 2018, an increase of $10.6 million or 92%. This increase was primarily attributable to an increase in 503B products of $6 million, an increase in the specialty product revenue of $4.6 million, and increase in API sales of $0.6 million. We received a $20 million milestone payment from Almirall. However, in terms of revenue recognition, it won't be booked as revenue until the second half of 2019.

I want to briefly discuss the legal case regarding vasopressin. You will recall that the FDA issued a decision in March this year not to include vasopressin on the list of bulk drug substances that are permitted to be compounded under Section 503B of the Federal Food, Drug, and Cosmetic Act. Athenex then subsequently filed a lawsuit against the FDA. And in the decision announced last week, the court found in favor of the FDA.

While we are disappointed by the court's decision, it was not completely unexpected. We continue to believe our vasopressin product helps to address an important clinical need. So while we'll comply with the court's and FDA's decision, we have requested a stay of the court's decision and may explore additional actions, including an appeal.

Vasopressin is part of the portfolio of specialty pharmaceutical and 503B products sold by Athenex. We will continue to seek opportunities to add to this portfolio. Our team has unique commercial expertise in this area, and we are confident we can find additional products to drive future growth. And as always, our focus remains on our proprietary oncology pipeline, which continues to track extremely well.

With respect to our guidance for 2019, we are now forecasting that product sales this year will increase by between 30% and 35% year-over-year from the $56.4 million reported in 2018. Previous guidance was for 25% to 30% year-over-year growth. Importantly, this revenue guidance has taken into account the court's latest decision in the vasopressin proceeding and the suspension of operations at our Taihao API plant. The guidance excludes license and collaboration fees.

Cost of sales for the 3 months ended June 30, 2019 totaled $6.9 [sic - $16.9, see press release] million, an increase of $7.5 million, or 79%, as compared to $9.4 million for the 3 months ended June 30, 2018. This was primarily due to an increase of $5.8 million in cost of sales from the sale of specialty products and $1.7 million from 503B and API products.

Gross margin attributable to product sales increased from 17.7% in the 3 months ended June 30, 2018 to 23.1% in the 3 months ended June 30, 2019, primarily as a result of change in product mix.

R&D expenses for the 3 months ended June 30, 2019 were $18.5 million as compared to $26.6 million for the 3 months ended June 30, 2018. This increase was primarily due to a decrease in licensing fees, clinical operations, and product development, offset by the increase in clinical development costs related to the arginase and T-cell platforms and increase in R&D related compensation.

SG&A expenses for the 3 months ended June 30, 2019 were $17.2 million as compared to $12.8 million for the 3 months ended June 30, 2018. This increase was primarily due to an increase in pre-launch sales and marketing costs of our proprietary products and an increase in general administrative expenses, including legal fees and other professional service fees, offset by a decrease in administrative related compensation expense.

Net loss attributable to Athenex for the 3 months ended June 30, 2019 was $32 million or $0.44 per diluted share, compared to a net loss of $36.9 million or $0.58 per diluted share in the same period last year.

I want to make a quick point on 2 further items, the $20 million milestone payment from Almirall and the shares outstanding, as these both affect the estimates published by the analysts who currently provide research on Athenex. It appears that 2 analysts still had the $20 million milestone payment included in their forecast for the second quarter 2019, despite that we had communicated to the investor in May that this revenue won't come until the second half of the year.

However, we issued 10 -- also we issued 10 million shares in the PIPE transaction we completed in May, and this raised our total outstanding share count to 77.3 million as of June 2019. For the per share numbers on the second quarter 2019 income statement, we used a weighted average share count of 73.1 million. Looking at the published estimates, it appears that a couple of the analysts have not yet updated their share outstanding numbers this quarter. Together, these factors are affecting the consensus loss per share. But if we adjust for them, our actual results reported were in line with Street expectations.

At June 30, 2019, Athenex had cash, cash equivalents, restricted cash and short-term investments of $165.9 million, compared to $107.4 million at December 31, 2018. Based on the current operating plan, we expect that our cash, cash equivalents, restricted cash and short-term investments as of June 30, 2019, together with cash to be generated from our operating activities, will enable us to fund our operations into the third quarter in 2020. As we're getting close to the NDA submissions, we do plan on spending a bit more on both pre-launch marketing and on our manufacturing infrastructure.

For a more detail discussion on our financials, including results for the 6 month period ended June 30, 2019 as well as those specific factors that contributed to the changes in line items on our income statement, please refer to the Form 10-Q that was filed with the SEC earlier today.

With that, I will hand the call over to Jeff to provide an update on our commercial and manufacturing capabilities.

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

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Thank you. The positive Phase III outcome we announced today is a major milestone in the oral paclitaxel and encequidar program, and brings us a step closer to potential approval of our first proprietary product.

As our regulatory and clinical teams now make preparations to file the NDA, we will continue to expand and optimize our commercial infrastructure and develop the market in anticipation of commercial launch. Our goal is to capture significant market share by establishing oral paclitaxel and encequidar as the chemotherapy of choice for metastatic breast cancer.

As we announced in our May 30 press release, this year's ASCO annual meeting served as the forum for the launch of our new brand, Athenex Oncology, and corresponding website, Athenexoncology.com. ASCO is the largest gathering of the worldwide oncology community. And over its first weekend live, Athenexoncology.com had over 1,000 visitors.

We were a gold sponsor for the Giants of Cancer Care awards ceremony, which took place at this year's meeting, during which Tim Cook delivered a presentation on behalf of Athenex. Our clinical team led an investigator meeting, and numerous other meetings were held with advocacy organizations and innovators, ultimately advancing the awareness and interest in Athenex Oncology and our differentiated oncology pipeline.

We were able to gather feedback on our commercialization plans for oral paclitaxel and encequidar for MBC, metastatic breast cancer, in one-on-one meetings and through a clinical style poster session.

Most recently, to advance our patient centric market readiness plans, Athenex Oncology commercial leadership held separate multi-disciplined advisory councils with experts in the access, distribution, and patient adherence area, and with metastatic breast cancer patients and executive leadership, representing many of the best and most respected metastatic breast cancer patient advocacy organizations.

These customer advisory councils, along with the 40 plus HCP and MBC KOL advisory councils that were gathered at ASCO, will continue to engage with and advise Athenex Oncology as together we shape our unique patient centric approach in preparing for the launch. We plan to continue building on this momentum throughout 2019 and into next year, raising our profile among key audiences to support our pre-commercial efforts.

A key event for us in the second half of the year will likely be the San Antonio Breast Cancer Symposium, which takes place in mid-December. We are assembling a team of highly accomplished executives to lead our commercialization efforts. We appointed Tim Cook as Senior VP of Global Commercial Oncology in 2018.

We have since hired our VP of Marketing and Senior Director of Market Access. There are 4 other key positions for which we are actively recruiting. Additionally, we will hire the full sales team closer to potential launch when we have identified the exact types of experience and skill sets we'll need.

In parallel with our efforts around oral paclitaxel and encequidar, we are also preparing to submit an NDA for tirbanibulin, formerly KX2-391 or KX-01 ointment, in the U.S. with our partner, Almirall. Tirbanibulin is a novel treatment for actinic keratosis which, as I have said before, represents one of the most underserved therapeutic markets I have ever seen.

Almirall will be leading the commercialization efforts for the United States and eventually Europe. Outside of the U.S. and Europe, Athenex retains rights for tirbanibulin in significant markets such as Japan, Canada, Australia, Israel, and many Asian markets, which we plan to access with new partners or directly with our own resources.

In addition to the progress on our pipeline, we are very pleased to report strong year-over-year revenue growth for our existing commercial business. Once again, much of this growth was driven by products that experienced significant shortages that we were able to fulfill as well as new product launches.

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.

With exterior construction of the plant complete, we are continuing to build out the 409,000 square foot interior with state of the art equipment to support our needs. We have a strong partnership with the State of New York and are pleased that they've continued to deliver on their financial commitments to building this facility. We look forward to completing construction and bringing this facility online.

Ex United States, as we previously announced we continue to await inspection of our current API manufacturing facility in Chongqing, China following our voluntary suspension of production activities in the second quarter of 2019. We took this decision in order to ease concerns from the Department of Emergency Management of Chongqing after the occurrence of some incidents at other unrelated facilities in the region.

We continue to be cooperative with the authorities and hope to reach a resolution as quickly as possible. In the meantime, we've continued selling our existing API inventories to our customers and expect to do so through the third quarter.

Additionally, we believe we have sufficient API inventory to support our ongoing and near term clinical studies, though we have taken steps to secure secondary and tertiary sources as a backup. We will provide an update in due course. In parallel, we continue to anticipate our new and substantially larger plant in Chongqing commencing production in the first half of 2020.

So to summarize, Athenex continued to execute successfully across all of our strategic objectives with respect to our commercial operations and readiness. We're making huge strides to establish our oncology brand and marketing infrastructure. We're actively developing the market in advance of the anticipated product launch for oral paclitaxel and encequidar, and we expect to hit the ground running the moment the product is approved.

We're also optimizing our global manufacturing capability in order to meet our current and future drug supply needs with the goal of providing a remarkably efficient and self-sustaining pathway to support our future growth.

I will now hand the call over to our next speaker.

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

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Thank you, Jeff. We remain on track to make 2019 a highly significant year for Athenex and our brands, which we believe will position the company to be a global leader in oncology. As I said, the positive Phase III results we are announcing today for encequidar and oral paclitaxel are potentially transformative for Athenex.

We are actively preparing for the exciting opportunity 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 along the way. We look forward to sharing our achievements with you as we continue to execute our long term growth strategy.

We'll 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) Our first question today is coming from Kennen MacKay from RBC Capital Markets.

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Kennen B. MacKay, RBC Capital Markets, LLC, Research Division - Co-Head of Biotechnology Research [2]

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Congrats on the really impressive, hopefully practice changing data. This morning I've been getting some pushback from investors on concern that overall response rate is lower than what we'd seen in the Phase II trial in Taiwan and that, when looked at in a vacuum, the response rate is sort of numerically more in line with some of the trials of weekly IV paclitaxel or Abraxane. I think this is being grossly misinterpreted, given this is a vastly different patient population. But can you maybe talk a little bit more about the severity of this population, maybe discuss how these data could be interpreted versus standard of care in the USA such as weekly IV paclitaxel and now paclitaxel or Abraxane?

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

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Kennen, thank you for your question. The response rate we saw in this pivotal Phase III study is impressive and is also much higher than the control group.

The IV control arm of paclitaxel behaves really better than most literature reports for IV paclitaxel. Bear in mind the dosing regimen we are using are using the regulatory approved, regulatory assessed data. It's difficult to compare regulatory assessed data versus literature, which are not assessed by regulatory.

Now let me emphasis the way -- the overall response rate that the FDA would accept is a confirmed overall response rate with 2 consecutive scans. And all these scans were sent to a blinded central lab where they used 2, not 1, 2 individual independent radiologists to assess the scan. And if there is disagreement among the 2 readings, a third independent adjudicator assessed the scan.

So this is a very rigorous interpretation of scan on both the IV and the oral arm, and they are completely blinded to treatment assignment. And that's the only way the FDA will accept it. So the way -- if you look at the literature, most of the time they will use one scan. If they use 2 scans, they may use an independent reader, but there still will one, not 2, and not adjudicated. So there's a lot of variability if you don't use the FDA regulatory response.

More importantly, the data we are presenting are intent-to-treat. So basically all the patients randomized in accounted for the IV and oral, and it includes patients that drop out because of IV side effects, because of oral side effects. All those are counted for. So the values you are seeing are extremely pleasing in my eye. And it's very well in line with what we see in our Phase II and the other publications in literature, and really testify the activity of the product.

I also want to take the opportunity to say that, if you look into our June press release in our angiosarcoma, the activity of this molecule using the same dosing, using a visually visible tumor, a very difficult to treat tumor, angiosarcoma, cutaneous angiosarcoma, we announced that we saw response as early as 1 to 2 weeks after treatment.

This is a very active timeline, and we saw complete response as early as 6 weeks on the first scan. And in our press release, we announced 3 out of 7 already saw complete response. So I have no doubt the response rate of this molecule is very, very high.

Kennen, did I address your question?

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Kennen B. MacKay, RBC Capital Markets, LLC, Research Division - Co-Head of Biotechnology Research [4]

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Yes, you did, Rudolf. I agree, incredibly impressive data. And just on that same note, is there anything you can comment around sort of the number of prior therapies that these patients had seen at baseline when they were enrolled?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [5]

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We are still analyzing that. What I can tell you is they are -- both groups are comparable, and they are perhaps around -- at this time point, I don't have the actual number, but about 20% that have not -- have multiple lines of chemotherapy before. But those numbers will come out in the scientific meeting when we finish the data, because as you saw in our press release, we really had the data cutoff only in late July. So further analysis are still ongoing.

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Kennen B. MacKay, RBC Capital Markets, LLC, Research Division - Co-Head of Biotechnology Research [6]

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And maybe just a follow up on the safety profile that you'd mentioned. I've had additional sort of confusion and pushback this morning from investors on the imbalance in grade 4 neutropenia that was mentioned in the press release. That's obviously an on target effect, obviously something that can be managed with growth factor and Neulasta. But can you maybe talk about how the growth factor was utilized in the protocol in the study, and also maybe whether that just sort of coincided with patients staying on drug treatment for a much longer proportion of time?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [7]

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Kennen, very, very good question. We are dealing with a known molecule, paclitaxel. We're using it with a new way, orally. We are changing the PK, as you rightly follow all along, hypothesizing the PK profile will change dramatically the behavior of this molecule, improving the efficacy and lowering certain currently dose limiting side effects.

So the traditional wisdom with IV paclitaxel is that we know all the side effects. And we know it caused neuropathy. We know it caused alopecia. We know it lowers the white cell count. We know it has an effect on the GI tract because -- mostly because these are all turnover targets, in hair follicles, white cell, and the GI tract, and therefore there are certain already management schemes around.

And clinicians on the whole manage the neutropenia and the GI side effect very well using pre-medication, GM-CSF, antiemetics, prophylactics, etc., etc. They could not do anything with neuropathy. They tried to do something with the alopecia, again, a difficult side effect in terms of the women population we're talking about.

So our data shows that when we give paclitaxel orally, the profile changed dramatically in we are able now to control what they cannot control, which is neuropathy. Neuropathy is painful. It's chronic. And it's the number one dose limiting issue with paclitaxel. And we actually have a benefit on alopecia.

Now there is, as you say, on target side effect on the white cell count, neutropenia. Surprisingly, presently surprising to us, there's really not much difference in the overall neutropenia compared to (inaudible), although the on target activity seems to give a higher incidence of the grade 4, more severity. And most oncology will correlate that with activity, and I think our data probably is further evidence that may be the case.

And certainly the better question about the overall side effect profile including GI tolerability, including neutropenia, including neuropathy, alopecia, everything together, is whether they are clinically manageable. And as I said before, we actually deal with a couple of those that are not clinically manageable right now currently and the other, because we are doing ITT analysis.

And the clinically unmanageable side effects, whether it be GI, whether it be neutropenia, are all accounted for in the duration of response, in the progression-free survival, in the primary outcome of overall response rate. So my answer to you is look at the efficacy data. That will give you an idea whether those clinical side effects are manageable or not.

But more interesting scientifically -- Kennen, more interesting scientifically, now we are showing a completely different profile. Why is the neuropathy reduced so significantly? It's because of the PK. We have a rationale for it. Why is the alopecia lower? I don't know. It should be going the same as GI tract. Why is the GI tract somewhat increased? Is it because we didn't use IV steroid? Is it because we don't use antiemetic? But the alopecia is lower.

So it's something curious happening. And more interesting enough, what is happening with those joint pain, arthralgia, myalgia, which are much less? So there is a lot of questions we need to ask, and we hope to bring that to the community as we take in the data and understand these differences more.

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Kennen B. MacKay, RBC Capital Markets, LLC, Research Division - Co-Head of Biotechnology Research [8]

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Rudolf, I just had sort of one quick sort of follow up to something you'd mentioned. But I think to your point, looking at the rate of adverse events and severe adverse events in the context of months on treatment or adverse events per week I think would be incredibly helpful since patients are staying on therapy for such a more significant amount of time.

On the adverse events that you mentioned, you'd mentioned sort of the lack of antiemetics. I was just wondering if you could comment on the GI toxicity imbalance a little bit more. My understanding is that there were some changes as it relates to standard of care, [CIND] therapies and antiemetics, that are really part of practice with IV paclitaxel. Can you maybe talk about how that was integrated into the Oraxol arm?

And then final question and I'll let some others jump in the queue, but just wondering if you could give us a ballpark perspective on what percentage of patients still remain on therapy in each arm, and sort of how mature that PFS and OS data that was in the press release is. Should we anticipate that this maybe could deepen into P under 0.045, P under 0.05 in the future?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [9]

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Kennen, very good questions, and it shows that you have been following us very closely, so thank you. Indeed, when we start the study, we want to define the profile scientifically. And we did ask -- we did build in the protocol for the IV arm everyone take pre-medication as prescribed normally, which usually include -- almost 100% will include IV steroid, IV antihistamine, H1 and H2, and IV antiemetics, maybe oral anti-diarrhea in some centers as well.

And in the Oraxol arm, we forbid them to do it until -- so there's no prophylactic, but they only allow it once they have the side effect. So in the first half of the study, we certainly collect more side effects on the GI tract side effect. And it does show up when we analyze the interim analysis. So we amend the protocol. We do encourage antiemetic prophylactic. And we do put in -- just like many of the anticancer chemotherapy, put in aggressive diarrhea treatment once they have diarrhea.

So that regimen is received very well by the doctors and the patients. And I think it does show up in our analysis. We'll complete that analysis when we present the full set of data. And this certainly, in my view, contribute to even better outcome.

Your question about the progression-free survival and overall survival is a very interesting one. I think there were confusions in the past regarding whether response rate correlates with progression-free survival or overall survival. And for a long time there has been some disconnect in the literature.

I think you did a wonderful job in clearing that out, that there were misreporting in certain literature, that indeed overall response rate do and should correlate mostly with survival. And I think our study actually supports that.

Now the study was obviously not designed to show progression-free survival or overall survival. It's not powered to do that. If there are statisticians in the audience or you know, or most of you actually are very good in statistics, you will immediately calculate that with 360 to 400 patients, we are 402 at the moment, at a 2-to-1 randomization it's really not adequately powered to show survival, nor was it intended to show survival. So the strong trends we are seeing in both is extremely pleasing.

Your question is how many patients are still on treatment on both arms. I think I alluded to the fact that, in looking at progression-free duration, the responders, we have 2.5 times more than the IV arm for those who stayed longer than 150 days, which is almost like after the end of the 19 to 21 weeks, the response period. So indeed, you are right. There are a lot more Oraxol patients still under treatment than IV. And for that reason, I would expect the trend that we are seeing, the strong trend that we are seeing, may continue to improve.

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Kennen B. MacKay, RBC Capital Markets, LLC, Research Division - Co-Head of Biotechnology Research [10]

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And Rudolf, just on that point, just clarifying it, of the N equals 402 patients, can you give us any perspective of how many PFS events have been recorded so far and how many OS events have been recorded so far? Are we talking about sort of 100 or are we talking about 50?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [11]

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No, I don't have that number with me right now. We do have the curve, and we used the Kaplan-Meier curve to look at the statistics. So they have since showed the subjects, i.e., that quite a lot of patients still have not reached their endpoint. And as I alluded to, most of them are on Oraxol.

So the data is not mature, and your question is how likely to become -- mature out quickly. It will come very quickly. We'll get an answer to that. But more importantly, we want to take this strong trend to the FDA and ask them to guide us what will be a regulatory acceptable time point to make that cut, because you know it's an open label study.

We could make the cut on an ongoing basis, and we'll be accused of multi-analysis. And we don't want to jeopardize the good outcome that this may bring us. So we want to consult with the FDA and work with the FDA on what's the appropriate time point to cut off for progression-free survival, for overall survival, and so stay tuned.

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Operator [12]

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Our next question is coming from Chad Messer from Needham & Company.

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Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [13]

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Let me add my congratulations on this very important positive result, impressive, particularly the very low incidence of neuropathy. Rudy, is it possible to comment on what the sort of dropout for adverse event or dose reduction kind of rate looked like between the 2 arms?

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

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We are still looking at that. I can tell you broadly that the 2 groups are overall roughly similar. And as I addressed to Kennen earlier on, focus on the strong efficacy result. It's based on intent-to-treat. Everybody is account for. And the clinically meaningful adverse events that need to be managed by dropout, dose withdrawal, will be all accounted for.

If you take dose withdrawal or dose holding that leads to a lower response rate, these will all be accounted for. A dose reduction that does not lead to a lower response rate really is not -- it doesn't matter. It's not clinically meaningful. So I would encourage a focus on the strong efficacy data, which is based on intent-to-treat and therefore accounts for any clinically unmanageable adverse event.

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Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [15]

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Understood. That's a high bar that you're measuring that response rate against. I get that. So in your sort of printed comments in the press release, you mention metronomic dosing and investigating maintenance therapy for Oraxol. Can you comment on that a little bit more?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [16]

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Yes. I think, as I have been saying several times, that the fact that the patients stay on Oraxol for such a long time is very surprising. We have patients staying on well over the 300 days, 1 year, 2 years. And it does raise the question, since we can give it orally, think of it this way. Currently IV paclitaxel, most clinicians will give a course.

They give it a course for 2 different reasons, because of the convenience side of the IV or the -- rather the inconvenience, and secondly because of the worry about neuropathy before it occurs. So maybe 12 weeks, maybe 16 weeks, and they usually stop. There are only a few clinicians that would want to continue, and there will only be a few patients still accept continuous infusion for a year or 2.

However, in our program, we certainly have seen that tolerability over the long term does not appear to be an issue. And therefore, it does open up the question, can we even consider metronomic dosing. We have to identify the dosing, but even at the current dose, it seems to be tolerable over the long term, over many, many months. And therefore, is there a use in continuing suppressing the tumor growth in metronomic dosing? That's number one.

And number two, how do we leverage that to turn some of the targeted immunotherapy, which generally have impressive response rates but don't necessarily always have a good long term survival rate? If we combine the 2, can we lead to even better outcomes and survival? Does that make sense?

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

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It does. I appreciate that. And congratulations again.

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Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [18]

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Chad and Kennen, you asked a question on the response rate ITT. Please bear in mind that ITT is the most stringent criteria in terms of assessing the population, and we are delighted to see that we actually have a very good p-value based on ITT.

If you allow me to refer you to the third paragraph of the press release, noting that when we base on ITT analysis, the p-value was already 0.01. But please refer to our next comment, which we said that oral paclitaxel also shows statistically significant improvement compared to IV paclitaxel based on other analysis, in fact all other analysis, on population excluding non-evaluable patients, which a lot of the other studies may want to use. But since we fulfilled the most stringent criteria, we then would like to (inaudible) disclose more of those data when appropriate that we also bracket, which would give a higher response rate with p-values less than 0.01 or equal to in all analysis.

What I would like to emphasize is that, no matter how you analyze the data, our data is very positive.

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Operator [19]

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Our next question is coming from Yale Jen from Laidlaw & Company.

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I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [20]

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First of all, I add my congratulations to the very outstanding data and a great job you guys have done. So a lot of question has been answered, but I have probably a few here. The first one is that to follow up on Johnson's comment in terms some other analysis which you have, the p-value less than 0.01, I know you want to have a more sort of pristine data to be presented at a medical conference. But still, is there any other sort of general comments you could have on those data, what kind of analysis -- generally what kind of analysis those are?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [21]

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I think it would be obvious that one would do a protocol defined analysis. One would exclude subject that are not evaluable when they go in, and the simple reason is very simple. When you have a central radiological lab, there will be a couple of patients where the independent radiologist may disagree with the investigator on the assessment. So in our analysis, we took that all into account. But in the protocol specified one, if they don't have a lesion to improve on, then those patients, according to protocol, would be excluded.

So all those analysis, standard analysis as per protocol, are what we consider as additional analyses. And as you know, once you use a protocol defined approach, it will increase the response and increase the separation between the 2 arms. So that's what we are alluding to. I'm afraid you have to go to a major conference to hear the details.

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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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Okay, great. That's very helpful.

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Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [23]

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Yes. Let me emphasize again that when you look at certain data in the past, they may not be ITT based. And I had to sort of declare that. I mean, once we see ITT analysis showing statistically significant value, I think all other analysis may dilute the impact with regard to how much we actually can show with the value that we are providing to patients.

And all this analysis is interesting, exciting, but they are a little bit more secondary once you hit the ITT. And for those additional values, we are going to provide them in upcoming scientific meetings. But we want to ensure that whatever we present, those are in accordance with the regulatory expectations. And this is the principle that we are adopting. Once we get really good results, we want to make sure whatever we do, we're in compliance with regard to the most stringent criteria as demanded and mandated by the regulatory authorities.

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [24]

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Let me add to that it's also very important now that we fulfill what the FDA told us to achieve, which is a primary endpoint of 0.045. And we obviously met that nicely. And more importantly, once we saw the amazing trend in overall survival, which not many breast cancer studies for regulatory purpose conduct or use, that is a question that we would like the FDA to answer, is when would they recommend us to do the cutoff or, indeed, whether in their eyes whether the trend is good enough and there's no need to chase other p-value for a secondary endpoint.

So that is the question we want to focus on. I think we already fulfilled what the FDA wants, and the question is how do we really nail down the icing on the cake.

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I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [25]

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Okay, great. That's very, very helpful. I appreciate the color there. Maybe just to reiterate or just confirm that you have said earlier, which is that the treatment naive versus treatment experienced, you say that roughly 20% have multiple lines of therapy. Would that potentially suggest probably more than 70% or greater that are treatment naive, or that's just too early to say?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [26]

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As I said, I don't have the exact numbers, so I am giving you a guesstimate here, and it may not be -- when we do the final cut and final outcome, they may differ a little bit. But my guess is that at least 80% of patients have received previously second line or third line treatment. But that is a guess, so I would like to qualify that.

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I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [27]

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This is probably for Jeff. Given the dataset and given we can probably handicap that this drug potentially will get approved, so in terms of the commercial preparation at this point, could you give us a little bit more color what your work might be over the next 12 or 18 months before a potential launch?

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Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [28]

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Yale, Jeff just asked me to answer this question for him. We are well advanced to prepare for commercialization. We already hired the leader of the marketing team. We are already in preparation. We have been very active in the ASCO during this year. We have already evaluated the how-to approach in terms of the marketing effort.

We even actually start to categorize our potential clients or oncologists into different groups in terms of how to focus our effort in terms of the marketing sort of message. So we are well advanced with regard to preparing for the success of the Phase III results.

We will be acting very active in parallel with the regulatory filings in preparing for the launch. In fact, we are confident that we can launch the drug the day after the approval.

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I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [29]

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What is the European strategy at this point? And again, congrats on the outcome.

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Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [30]

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Yale, thank you very much. We are delighted to see positive results. When you see positive results, obviously we will continue to explore the best strategy in terms of advancing the program.

As you recall, Dr. Kwan's team was able to secure with the UK health authority, the MHRA, with regard to the promising innovative medicine designation. We also have already opened an office in Europe in terms of helping us to evaluate and explore the best option, both with regards to regulatory approval as well as a marketing assessment. So obviously, with the data which was only available in the last 48 hours, I'm quite sure you can understand that we will be in active discussion with various regulatory authorities.

What we would like to share with you is that it is highly unusual for you to see very positive data based on ITT at the same time as having strong trends in both PFS and OS. And I think that those will be important attributes for our clinical and regulatory teams to discuss with various regulatory authorities. And we expect that will be well received, and we expect that we will be getting a lot of encouragements and directions with regard to how to get this important medicine for patients with metastatic breast cancer, to help them as soon as possible.

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Operator [31]

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Our next question today is coming from Peter Lawson from SunTrust Robinson Humphrey.

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Peter Richard Lawson, SunTrust Robinson Humphrey, Inc., Research Division - Director [32]

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Rudolf, I may have missed this, but what were the discontinuation rates for both arms? And then what do you think the discontinuation rate could be for like weekly paclitaxel?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [33]

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Peter, very good questions. The discontinuation rate is actually less important than when do they discontinue, at what time and the reason. So those are actually part of the -- I think if we were only looking at the response rate endpoint, that is one question.

But all those are combined in the progression-free survival. So the fact that you are seeing a difference in favor of Oraxol, a strong trend in that, tells us the discontinuation would -- including discontinuation because of progression of disease would favor Oraxol. So I would leave it at that, and I'm afraid you have to join me in a scientific meeting.

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Peter Richard Lawson, SunTrust Robinson Humphrey, Inc., Research Division - Director [34]

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And just remind us again on the cash runway versus this with this increased guidance on revenue. How long does the cash last?

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Randoll Sze, Athenex, Inc. - CFO [35]

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Sure. As I just mentioned on the earnings call, the latest revenue guidance actually has taken into account the latest situation with regard to vasopressin and our API plant in China. Even with -- or even on the assumption that we are not getting any additional revenue from vasopressin and API for the rest of the year, we will still be able to raise our revenue guidance from the originally announced range, which is 25% to 30%, up to 30% to 35% year-over-year growth.

And with regard to our cash runway, I would say thanks to the 3 investors, namely Perceptive, Avoro and OrbiMed, who put in $100 million in the private placement that we did in May, we actually had a pretty healthy cash -- or I would say balance sheet situation as of June 30. So we're looking at $165 million cash in our bank account as of end of second quarter. And that will get us into the third quarter of 2020.

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Peter Richard Lawson, SunTrust Robinson Humphrey, Inc., Research Division - Director [36]

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And then just back to I guess Rudolf, just on -- could you walk us through the reasons why you think PFS and survival could improve over time?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [37]

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Good question, Peter. The reason is that we have a lot of census of the patients at this time point. The events are still being -- the patients are still ongoing, all right, when they are census because they are still ongoing and we could not determine the eventual outcome event rate, right?

And most of them are on Oraxol, so it does favor the Oraxol group if you look at it in that direction. Does that answer your question?

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Peter Richard Lawson, SunTrust Robinson Humphrey, Inc., Research Division - Director [38]

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Yes, that helps. And I guess also, just a quick question around safety and this encouraging safety profile. Do you think patients would swap from IV chemo just because of the safety profile? And remind us again where you are for doing, say, quality of life studies.

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [39]

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I think it's very interesting. It reminds me that in the angiosarcoma study that we released, the first patient getting to the study is an elderly individual with angiosarcoma who refused to have IV chemotherapy, and therefore would only agree to take part in a trial with oral. And he achieved fantastic results and stayed on the treatment of a long time, really a long time. So there are a lot of patients, especially patients who are adverse to intravenous infusion and the burden of it, that no doubt would want to try oral instead of IV.

Now how are we getting to position in terms of quality of life? And it's quite obvious oral and IV have a completely different profile in terms of quality of life. In our case, it's clearly that you avoid hospital visits. You can take it at home. Think of the hospital visit on its own. To go to an IV infusion center, it depends on how far you live away from the center.

Some catchment area is a really vast area, and the patient has to come perhaps the day before or even be driven the day, early morning, to go to the infusion center, get the blood count done, make sure they are suitable to get the infusion, receive the infusion, and stay until they finish the infusion and feel comfortable and be taken home. Most of those sites, if they're for IV infusion, would not allow a patient to drive home. So it's a whole day event, if not at least a half day, for somebody who may be working, because we are talking about younger age group here, breast cancer.

One of our patients, for example, is a tour guide, and she really took part in the oral therapy. And she continued her job taking the tour group to visit places because she can take her medication with her. Without that, if she were on the IV treatment, she would have to give up her job. So there are a pile of interesting anecdotes we hope to bring to the attention of the community.

But on top of that, you're quite right. We are planning also to perform formal quality of life studies as well. So we will discuss that once we have a firm plan. Thank you, Peter.

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Peter Richard Lawson, SunTrust Robinson Humphrey, Inc., Research Division - Director [40]

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And then just a final question for Johnson. How should we think about kind of the read-through for the rest of the pipeline? Do you think the gastric data could be an easier hurdle, or irinotecan, as you move through to other -- the read-throughs to other molecules in the pipeline?

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Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [41]

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Certainly, Peter. We are thrilled to see the results. In fact, if everybody allows me to remind you, read through our press release, paragraph 3, paragraph 4, and paragraph 5. You are now talking about a new class of drug, which we show better efficacy based on ITT. We also emphasize in paragraph 3 that if you use some other analysis excluding non-evaluable patients, the response rate will be higher and even the delta will be bigger, and also that the drug is more effective and with a much better duration of response, as we mentioned in paragraph 3.

And in paragraph 4, we are showing strong trend in both PFS and OS. And also in paragraph 4, we emphasize that we still have the higher of patients still on oral paclitaxel, when our cutoff data was only on week 22. And you expect that we have more patients on oral paclitaxel, the improvement in PFS and OS is really hiding that the trend will continue to improve, which we mention in paragraph 4.

In paragraph 5, this is also on top of being a very effective drug, also much safer. Bear in mind that, if you look at some other (inaudible), including those (inaudible), the high -- the very severe neuropathy, there was an increase of 5 times of the severe neuropathy when they compare with IV paclitaxel. When we compare with same IV paclitaxel, we have 1/8th of the severe neuropathy. If you then assume that it is comparable, you can see that we have close to 40 times differences in terms of being safer with respect to the most important side effect that limits the use of the drug. So we are very excited.

Now obviously our top priority right now is to ensure that we behave ourselves in terms of only releasing data in a way that is acceptable to regulatory authorities. We will present the data in upcoming scientific meetings. And obviously, it will be very logical for us to be excited with regard to all the products in our pipeline, and we shall be more than happy to expand and also to continue some exploring all the other drugs in our pipeline. In fact, it already validates and also de-risk all the products that we have in our pipeline.

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Operator [42]

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Our next question is coming from Kevin DeGeeter from Oppenheimer & Co.

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Kevin Michael DeGeeter, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [43]

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And Johnson, I want to follow up on that kind of last comment. And specifically, can you walk us through today as to how to think about a read-through of the derisking for the platform as it applies to the other specific chemotherapy programs that you have in development, specifically which combinations? Is it docetaxel, is it irinotecan that you think have the cleanest read-through from kind of a PK and pharmacology perspective based on this really strong data we saw in breast cancer with oral paclitaxel?

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Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [44]

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Thank you for your question. I think the first one that's very obvious is that, for oral paclitaxel, I think that with successful Phase III results, with positive results based on ITT, I think there's a lot of de-risking already with the first product, oral paclitaxel.

Now we disclosed in our R&D day before that we also observe very good profile of oral irinotecan as well as oral docetaxel. And those are also sort of showing a profile that's very much in line with regard to our expectations. Now coupled together with the fact that the PK prediction and also the clinical prediction with the oral paclitaxel, without -- the way we want to be, there's no doubt that our encequidar is actually working very nicely. And together, I think it de-risks all the subsequent projects in a very nice way.

We have also shared with the investment community that we also have the tablet formulation to follow. And certainly right now, the discussion is more with regard to the fact that -- whether the tablet will be better. The fact that the encequidar is going to work is already confirmed. So I think all this coupled together will sort of give you the impression, obviously it impressed me, that the projects are substantially de-risked.

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Kevin Michael DeGeeter, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [45]

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And one, with regard to CMC preparation around oral paclitaxel, can you just sort of remind me kind of where that stands? And is it sort of CMC that may be a gating factor in terms of timeline to submission, or is it just the discussion with FDA with regard to the clinical side?

Then my other question was just around ex U.S. partnering, particularly for oral paclitaxel. The specific question is do you think this is the dataset that gives you the opportunity to capture full value, or do you think you want to see a little more mature data, for example from the gastric study, before maybe moving aggressively for partnering in certain ex U.S. jurisdictions?

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Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [46]

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Thank you for your question. With regard to your question on CMC, we have been working very diligently to ensure that all our efforts with to the successful preparation for the registration of the drug as well as marketing are all in parallel. So I'm delighted to say that all the CMC efforts are all in parallel with the clinical studies to support the success of the program.

Now I am also delighted to say that, on top of having one plan on the CMC, we have Plan B and Plan C. So therefore, we have been working diligently to ensure that there are no factors that could derail our successful application or submission application for approval, and there will also be no factors that would deter our successful launch based on commercialization efforts. So the vertical integration has been completed, and in the way we also have fallback plans to ensure that the launch will be a successful.

Now with regard to partnering, allow me to say that, I mean, I don't think that it is appropriate for me to make a comment, apart from saying the fact that we can launch ourselves. So therefore, if we see good opportunities, obviously we shall be more than happy to entertain. We have fiduciary duties that we have to ensure that we create the best return for our stakeholders. But suffice it to say that we are not at the mercy of partnership. We will be able to either work with a very good partner or we can launch it ourselves.

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Operator [47]

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Our next question is coming from the Ling Wang from JPMorgan.

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Ling Wang, JP Morgan Chase & Co, Research Division - Executive Director & Senior Greater China Healthcare Analyst [48]

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Congratulation on the great data. A lot of questions have been asked; wanted to get your thoughts on the timing to present the data at a future medical conference. Would you wait for the PFS or OS data to become mature to present the data, or you might present the data sooner than that?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [49]

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I think the sequence of presenting the data will be number one to the FDA and get some guidance on to when they would recommend the cutoff for the PFS and for the OS. We are very close, so I think a recommendation from them will be important.

Then the second will be a presentation at a major conference. And it will occur soon. Whether the data of PFS and OS will come in, I mean the follow-on data, will really depend on the FDA. We'll continue to collect the data, but we would want to make a definitive cut in collaboration, in guidance by the FDA. So it may come together. It may not. It depends.

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Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [50]

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Ling, the other way to look at it is that we already fulfill our mutual agreement with U.S. FDA that we already met our primary endpoint. So therefore, the data with regard to a timing endpoint can come out whenever we feel that it's the appropriate time to prepare the product launch.

With regard to PFS and OS, those were not required. And I'm delighted to see these potential upside surprises. And certainly, I would encourage you to think about this as not required. As our mutual discussion agreement with U.S. FDA, this represents potential upside, and we are hoping to see this very soon.

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Ling Wang, JP Morgan Chase & Co, Research Division - Executive Director & Senior Greater China Healthcare Analyst [51]

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Can you remind us, with regard to your communication with the FDA, my understanding is that hitting the primary endpoint of response rate was sufficient for the conditional approval, with the PFS/OS trend to support the full approval. Is that a correct understanding?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [52]

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Actually, they do not even need the PFS and OS. Those are additional. What they request is the ORR, overall response rate, as defined in the protocol to reach statistical significance, and that we use ITT to do the p-value. So we achieved that because it's a single study. So they asked us to use the ITT to use the p-value.

So we achieved already what they have asked for. The PFS and OS is nice additional support that I would think that will make them even more pleased with the data.

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Ling Wang, JP Morgan Chase & Co, Research Division - Executive Director & Senior Greater China Healthcare Analyst [53]

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And lastly, can you remind us the status of the trial of Oraxol in combination with Keytruda and when we might see some data from there? And what might be your further plans for pursuing the combination of this drug with IO therapies?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [54]

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The study is already underway. And all I can say is it's recruiting well. And it's being performed in 3 sites in Mayo Clinic, and they seem to be enrolling fast, so we do not need additional sites. And we will communicate the results as soon as they are available, so be patient on that one.

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Operator [55]

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Our next question is coming from Matt Kaplan from Ladenburg Thalmann.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [56]

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I just wanted to follow up a little bit on the PFS and OS. I guess given the trial design was not powered for showing PFS and OS, can you give us a sense in terms of the kind of numerical delta that you're seeing in terms of initial trends in favor of oral paclitaxel? And I guess secondly, have you hit the median curve for either PFS or OS in either of the arms?

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Rudolf Kwan, Athenex, Inc. - Executive VP & Chief Medical Officer [57]

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Matt, thank you for the question. If you look at the 3 endpoints, we already achieved the primary endpoint of ORR, so that's nailed down.

But bear in mind ORR is a surrogate endpoint approved by the FDA and recommended for us for breast cancer, and then the next one that they would like is PFS. But the really gold standard for all oncology studies accepted by the FDA is overall survival. So I would say that now that we achieved the primary endpoint of the overall response rate, really the focus should be on the overall survival. And we are very pleasantly surprised that we got such a strong trend even at this early stage.

So I would encourage you to check with your statisticians to imagine that for such a small study, 2-to-1 randomization, to achieve such a p-value, we are probably not talking about a base of difference or weeks of difference, or perhaps may not be a few months of difference. So do the homework and work it out, and we hope the result will surprise us.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [58]

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And then just to follow up on Kevin's question in terms of CMC, any of the activity at the Chongqing plant, will that have any effect in terms of CMC for the Oraxol filing of the NDA?

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Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [59]

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That was actually an event unrelated to us. It was happening to a chemical plastic plant. Unfortunately, what happened was that when you have something like this and the government would like to be more cautious. We do have an alternative supply, in fact more than one, so we should have no impact with regard to the CMC advisements.

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Operator [60]

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We have reached the end of our question and answer session. I'd like to turn the floor back over to management for any further and closing comments.

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Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [61]

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Thank you for your time. And we are delighted to see that we have very positive results with our Phase III study that we can share with you today. And we will continue to be pushing the program to ensure that this drug will be available to patients that are in need of this new therapy as soon as possible.

Our team will continuously be working very diligently to ensure that this drug will be helping patients very soon. Thank you for your time.

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Operator [62]

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Thank you. That does conclude today's teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.