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Edited Transcript of ATNX.OQ earnings conference call or presentation 1-Mar-21 1:00pm GMT

·44 min read

Q4 2020 Athenex Inc Earnings Call BUFFALO Mar 1, 2021 (Thomson StreetEvents) -- Edited Transcript of Athenex Inc earnings conference call or presentation Monday, March 1, 2021 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. - Chief Medical Officer * Steven Rubis Athenex, Inc. - Senior Director of IR * Yiu-Nam Lau Athenex, Inc. - Chairman & CEO ================================================================================ Conference Call Participants ================================================================================ * I-Eh Jen Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst * Kennen B. MacKay RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research * Kevin Michael DeGeeter Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst * Raymond Wu Ladenburg Thalmann Financial Services Inc. - Biotechnology Equity Research Associate * Robyn Kay Shelton Karnauskas Truist Securities, Inc., Research Division - Research Analyst * Umer Raffat Evercore ISI Institutional Equities, Research Division - Senior MD & Senior Analyst of Equity Research * Wei Ji Chang SVB Leerink LLC, Research Division - MD of Emerging Oncology & Senior Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Greetings, and welcome to the Athenex, Inc. Fourth Quarter and Fiscal Year 2020 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Steve Rubis, Senior Director of Investor Relations for Athenex. Thank you. You may begin. -------------------------------------------------------------------------------- Steven Rubis, Athenex, Inc. - Senior Director of IR [2] -------------------------------------------------------------------------------- Good morning, and thank you for joining our conference call. This morning, we published 2 press releases. The first announces that we received a complete response letter from the FDA for Oral Paclitaxel. The second announces our fourth quarter and full year 2020 financial results. These news releases crossed the wire earlier this morning and are available on our website. Today, we will provide an update on Athenex's business as well as a review of financial results for the fourth quarter and full year 2020. A replay of this call will also be archived on the company website. During the conference call, the company will make projections or forward-looking statements regarding future events, including statements about financial, business and clinical milestones anticipated in fiscal year 2021 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 www.sec.gov or in the Investor Relations section at our website at www.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. Randall Sze, Chief Financial Officer, who all will be available to answer questions after the prepared remarks. I will now turn the call over to Johnson for introductory comments. -------------------------------------------------------------------------------- Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [3] -------------------------------------------------------------------------------- Thank you, Steve. I will provide an update regarding the complete response letter we received from Oral Paclitaxel and our first FDA-approved product Klisyri and it's launch before turning the call over to our Chief Medical Officer, Dr. Rudolf Kwan. This morning, we announced that the FDA issued a complete response letter related to the new application for Oral Paclitaxel. We are surprised and disappointed with the FDA's decision. We believe that Oral Paclitaxel demonstrated a superior efficacy and safety profile in a well-controlled Phase III trial setting, and we remain committed to exploring all options to unlock value from this asset. I will give a quick recap of the issues raised in the complete response letter, and Dr. Kwan will provide additional details later in the call. The FDA expressed concerns about safety risks associated with the increase in neutropenia-related sequelae. The agency also expressed uncertainty with regard to the primary endpoint assessment conducted by the blinded independent central review in the Phase III trial. The FDA recommends we submit results from a new clinical trial, and Dr. Kwan will elaborate on all of these later. The Athenex team is actively working to analyze and respond to the complete response letter. We will request a meeting with the FDA to discuss its concerns as soon as possible. During the meeting, we hope to align with the FDA on the path forward required to obtain approval. The complete response letter represents a disappointing outcome, not only for us, but also for our colleagues, clinicians and patients who helped facilitate development of Oral Paclitaxel in metastatic breast cancer patients. As a company, we are working to identify and undertake the appropriate internal organizational adjustments accordingly. We will be able to communicate more about this adjustment once we gain clarity on the path forward for Oral Paclitaxel from the FDA. Despite the disappointing outcome with Oral Paclitaxel, our team achieved regulatory success with the FDA approval for Klisyri late last year. Let me provide you with an update. The product has been approved for the treatment of actinic keratosis of the face or scalp, and has already been launched in the United States with our partner, Almirall. The launch of Klisyri in the United States provides physicians with our compelling new product that can benefit patients. Klisyri is a novel topical, best-in-class microtubule inhibitor indicated for the topical treatment of actinic keratosis of the face or scalp. In 2 Phase III clinical trials, Klisyri demonstrated both efficacy and a favorable side effect program. The short treatment protocol is unique as Klisyri requires once daily application for only 5 days. These demonstrated efficacy and safety profile positions Klisyri as a compelling new treatment option for patients with actinic keratosis, the second most common condition picked by dermatologists in the United States. In mid-February, the New England Journal Medicine published the results of our 2 Phase III trials that serve as the foundation for FDA approval of Klisyri. The publication of this data reinforce the innovation and clinical significance of Klisyri and further raises the profile and awareness of Klisyri as a possible shipment option for physicians. In terms of launch, Almirall intends to reinforce its U.S. sales force to support the marketing sales force effort. A marketing authorization application is also currently under review by the European Medicines Agency. Athenex maintains attractive economics around the company's partnership with Almirall. In addition to the $50 million in upfront and additional milestone payments already received, Athenex is eligible to receive up to an additional $65 million in aggregate milestone payments associated with the Klisyri launch and expansion into additional indications. Additionally, the company is eligible to receive additional sales milestone payments and is eligible to receive monthly payments starting at 15% of annual net sales. In conclusion, we had record success for Klisyri. For Oral Paclitaxel, I want to reiterate our belief in this superior efficacy and safety profile of Oral Paclitaxel. Athenex remains focused on unlocking maximum value around not only Oral Paclitaxel, but also the broader Orascovery program. We are committed to breast cancer patients and are focused on bringing this agent to the market. Rudolf? -------------------------------------------------------------------------------- Rudolf Kwan, Athenex, Inc. - Chief Medical Officer [4] -------------------------------------------------------------------------------- Thank you, Johnson. This morning, we announced that the FDA issued a complete response letter for Oral Paclitaxel. A complete response letter stated that agency cannot approve the application in its present form. We are surprised and extremely disappointed with this outcome and are analyzing the details of this complete response letter. The agency expressed 2 main concerns. The first concern concern was around safety risk associated with an increase in neutropenia-related sequelae. It is well-established that neutropenia represents a non-pharmacological effect of paclitaxel, especially in patients with hepatic impairment, which is in the paclitaxel label. We believe the FDA is particularly concerned on the early myelotoxicity-related death despite the overall survival benefit trend that we had reported in the study. The second concern expressed by the FDA revolved around uncertainty over the results of the primary endpoint of objective response rate, or ORR, at week 19, conducted by Blinded Independent Central Review, BICR. The agency stated that the BICR reconciliation and the unique process may have introduced unmeasured bias and inference on the BICR. Our Phase III trials use the industry-recognized gold standard of BICR which is a completely independent and totally blind process for the primary endpoint of ORR. All procedures were prespecified and followed. The FDA all did at the process within Athenex as a sponsor, the clinical trial sites, an imaging lab conducting the BICR and we were inform that no Form 483s were issued. We hope to gain clarity on the BICR concern when we meet with the FDA. Lastly, the agency requests that we submit results from a new adequate and well-conducted clinical trial in a patient population with metastatic breast cancer, representative of the population in the United States. The agency further stated that additional risk mitigation strategies to improve toxicity, which may involve dose optimization and/or exclusion of patients deemed to be at high-risk of toxicity are required to support potential approval of the FDA. Throughout the review process, we engaged in a robust dialogue with the FDA regarding our package. As with any FDA review, the agency made information request and raised questions during the process. We provided a significant amount of information and clinical data to address the agency's questions. During one of these routine exchanges, the company even suggested limiting the population of patients in the label, the dose without hepatic impairment -- and would potentially avoid excess early mortality due to myelotoxicity. The agency did not accept this proposal. We'll request a meeting as soon as possible to discuss the complete response letter and to align with the FDA on the pathway forward to obtain approval. We continue to have strong conviction in the superior efficacy and safety profile associated with Oral Paclitaxel as demonstrated in our Phase III trial. The higher response rate, lower neuropathy and strong trend in overall survival, coupled with oral delivery, suggests Oral Paclitaxel could be a meaningful treatment alternative for breast cancer patients. We are committed to creating maximum value around not only Oral Paclitaxel, but also our entire oral discovery program. I will now turn the call over to Jeff. -------------------------------------------------------------------------------- Jeffrey M. Yordon, Athenex, Inc. - COO & President of Athenex Pharmaceutical Division [5] -------------------------------------------------------------------------------- Thank you, Rudolf. I will provide an update on current developments with our infrastructure and supply chain and the existing commercial business. The supply chain for our Klisyri launch is in excellent shape. Athenex is responsible for the manufacturing of Klisyri. Our Clarence New York facility shipped launch quantities to Almirall, 2 weeks ahead of schedule and positioned Almirall for a successful launch. Furthermore, we are able to supply as much inventory as needed and will far exceed the current forecast. The performance of our Clarence facility underscores the high-efficiency of our integrated business model. We have recently received approval from the Chinese government to begin manufacturing at our new larger API facility in Xiangxue. The new API facility will allow us to manufacture a portfolio of raw materials, and we expect to generate revenues from these products in 2021. Construction of our facility in Dunkirk, New York is nearly complete. The facility will serve the commercial needs of our specialty pharmaceutical business and ultimately, those of our proprietary products. Beginning in the second half of this year, we plan to dedicate a portion of the facility to manufacturing 503B products. The increased manufacturing capacity will allow us to more than double our capacity for these segments of the business. Currently, we sell every unit we can manufacture. And clearly, our goal is to substantially increase our capacity to increase our revenue. Our specialty pharma business performed well in 2020 and as a result, we recorded $105.3 million in product sales, up 31% year-over-year. The COVID-19 pandemic drove both positive and negative effects in performance last year. While elective surgeries are down significantly, the demand for specific drugs used to treat COVID-19 hospitalized patients increased. The biggest contributors to sales growth in 2020 included products such as dexamethasone, azithromycin, piperacilllin/tazobactam and levothyroxine. Athenex Pharmaceutical division currently markets 34 products, with 63 SKUs, and Athenex Pharma Solution market 6 products and 19 SKUs. We have just recently launched the room temperature stable, cyclophosphamide, and We will continue to launch new products in 2021. We have identified over 60 products that we can potentially add to our portfolio, many of which are high-margin products. I will now turn the call over to Randoll to discuss our financials in more detail. -------------------------------------------------------------------------------- Randoll Sze, Athenex, Inc. - CFO [6] -------------------------------------------------------------------------------- Thank you, Jeff. I will highlight a few key financial items in fourth quarter and for the full year 2020. For more details, please refer to the earnings press release published earlier this morning. Revenues from product sales in the fourth quarter were $21.8 million, a 54% year-over-year increase. For the full year 2020, product sales were $105.3 million, a 31% increase year-over-year. Quarter sales growth is attributable to significant increase in specialty product sales, driven by increased demand for COVID-19-related drugs and the launch of additional products. Product sales growth was partially offset by decreases in API and 503B products. On the expense side, SG&A expenses have gone up year-over-year. Increases in SG&A expenses were primarily due to increasing commercial preparation costs associated with the possible approval of Oral Paclitaxel and workforce expansion at our manufacturing plants. In addition, in the fourth quarter of 2020, we recorded a provision for potential credit loss of $8.9 million, which included an outstanding balance due from Xiangxue and associated expenses related to currency conversion. This provision is related to the $10 million license revenue we recognized in the third quarter of 2020 in connection with our partnership with Xiangxue. Net loss attributable to Athenex for the fourth quarter and full year 2020 were $49.5 million and $146.2 million, respectively, or $0.53 and $1.72 per diluted share, respectively. Excluding the credit loss provision of $8.9 million, net loss attributable to Athenex for the quarter was $40.6 million or $0.43 per diluted share. Excluding a onetime debt extinguishment expenses of $10.3 million and $8.9 million credit loss provision, net loss attributable to Athenex for the full year 2020 was $127 million or $1.49 per diluted share. As of December 31, 2020, Athenex had cash, cash equivalents and restricted cash of $86.1 million and short-term investments of $138.6 million. In terms of product sales guidance, we're limiting financial guidance to only the existing product portfolio, which excludes any proprietary products until meaningful cell data from Klisyri become available. In 2020, we recorded a significant amount of such revenues for international customers as a result of the global pandemic. However, we do not see these revenues as recurring in nature or we have been continuing to expand our product portfolio. We currently expect our product sales in 2021, excluding any sales from Klisyri, to be in line with what we have achieved in 2020. I would like to reiterate our cash run rate guidance provided in November. Based on our current operating plan, we expect our cash, cash equivalents, restricted cash structure investments as of December 31, 2020, will get us into the second quarter of 2022. We believe with additional cash preservation measures, our cash runway will get further extended. Please note that our estimates are based on conditions that are known and reasonably notable to us and subject to change due to changes in, industry and macroeconomic conditions. I will now turn the call back to Johnson. -------------------------------------------------------------------------------- Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [7] -------------------------------------------------------------------------------- Thank you, Randoll. I will now open the call for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from the line of Umer Raffat with Evercore ISI. -------------------------------------------------------------------------------- Umer Raffat, Evercore ISI Institutional Equities, Research Division - Senior MD & Senior Analyst of Equity Research [2] -------------------------------------------------------------------------------- Johnson, as I think about the issues you guys have talked about from the complete response letter, it almost feels like either there could have been exclusionary language for hepatic impairment. Or on the response rate side, presumably, OS has no bias, irrespective of what metrics are using. It was at least not inferior, if not trending in favor. So I guess my question is, and we've seen United Therapeutics try this. Why can't you resubmit without any new data, but this time, with a lot more resources thrown at it, number one, especially, again, in the context of COVID and some of the challenges with travel for patients? And secondly, if you were to perhaps in parallel start a trial either single-arm or like a KEYNOTE 21G 100 patients, 120 patients, could you have interim data by first half '22? And finally, Johnson -- finally, if I may, curious if you guys or FDA did that stringent assessment of response rates and what that look like? -------------------------------------------------------------------------------- Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [3] -------------------------------------------------------------------------------- Thank you. Rudolf, do you want to address this clinical questions? -------------------------------------------------------------------------------- Rudolf Kwan, Athenex, Inc. - Chief Medical Officer [4] -------------------------------------------------------------------------------- Umer, thank you for the question. You have quite a number of components on that. So please repeat some of those if I did not answer all of those, okay? So the question regarding the -- excluding patients with hepatic impairment, we already make that proposal to the FDA, and the FDA did not accept that proposal. Regarding overall survival, as you know, we update the overall survival based on around 65% response rate on the -- presented in San Antonio in December. We continue to follow-up those patients. So that is a good point that we will raise with the FDA at the upcoming planned request for meeting as whether there's any merit in providing a further update when the data has become even more mature. So can you remind me what other questions I may have missed? -------------------------------------------------------------------------------- Umer Raffat, Evercore ISI Institutional Equities, Research Division - Senior MD & Senior Analyst of Equity Research [5] -------------------------------------------------------------------------------- I was also just curious, if you could run a trial like KEYNOTE 21G and have interim data by first half '22, which could be used towards filing? And/or why can't you just resubmit without new data and more resources going at it? -------------------------------------------------------------------------------- Rudolf Kwan, Athenex, Inc. - Chief Medical Officer [6] -------------------------------------------------------------------------------- I think the first question will depend on what the FDA will address -- will require in their complete response letter. They clearly want a study. So that is a subject for discussion, and we will elaborate on that once we got clarity following the meeting. We certainly will want to go in making a suggestion. So your proposal is not an unreasonable one. We'll take that into consideration. Regarding resubmitting without new -- additional new data, certainly, this is a venue we'll discuss at the meeting as well. I would consider perhaps reinforcing the overall survival analysis as we -- as I mentioned earlier on, rather than resubmitting without new data that may be more convincing argument just in my view. Does that answer your question? -------------------------------------------------------------------------------- Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [7] -------------------------------------------------------------------------------- Just to clarify a bit further for you, Umer. When we were having discussions with our key opinion leaders, some of them actually were highlighting that the overall survival that we measure in clinical studies will be more reflective because there will be not that mainly other interventional therapies to be applied to patients in our -- in the geographic areas that we perform our clinical studies and the comment at that time was that our overall survival analysis should be more clean compared to a lot of the studies conducted in geographic areas that they are a lot more like our treatment therapies are being tested in terms of creating confusion with regard to the analysis. So we felt that, that was a very important point. And certainly, we'll include all these opinions in our response and our the U.S. FDA during our meeting. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Our next question comes from the line of Jonathan Chang with SVB Leerink. -------------------------------------------------------------------------------- Wei Ji Chang, SVB Leerink LLC, Research Division - MD of Emerging Oncology & Senior Research Analyst [9] -------------------------------------------------------------------------------- First question, can you provide more color around the regulatory comments suggesting a new study in patients representative of the U.S. population? What specifically is the FDA taking issue with? And what implications does this have in a potential future study? I guess what geographic locations besides the U.S. does this comprise of? -------------------------------------------------------------------------------- Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [10] -------------------------------------------------------------------------------- Rudolf? -------------------------------------------------------------------------------- Rudolf Kwan, Athenex, Inc. - Chief Medical Officer [11] -------------------------------------------------------------------------------- Yes. Thank you for the question. The reference to a U.S. population is very, obviously, subject to interpretation, what they mean, and we certainly would want to clarify that with the FDA. From our perspective, we can see that the patient population in terms of receptors of type the presentation representative of the U.S. population. Whether they have additional concerns about representation of geographic location that none of the centers were done in the U.S., that will be a discussion point. They did not mention the geographic location as a specific issue all along the interaction with the FDA. So whether it require the whole study to be done in the U.S. or not, we will have to clarify with them in the meeting. -------------------------------------------------------------------------------- Wei Ji Chang, SVB Leerink LLC, Research Division - MD of Emerging Oncology & Senior Research Analyst [12] -------------------------------------------------------------------------------- Got it. And second question, it seems like the CRL sites multiple issues here how should we be thinking about the relative waiting of the FDA's concerns over each of these issues? I can't help but wonder if it's in the reverse order of how it's listed in the press release? Any color here would be helpful? -------------------------------------------------------------------------------- Rudolf Kwan, Athenex, Inc. - Chief Medical Officer [13] -------------------------------------------------------------------------------- I think it is an interesting observation because each of those true issue on its own rather not as clear-cut as we would like to hear from the agency, the risk issue of the myelotoxicity. Bear in mind, myelotoxicity is a known pharmacological effect of paclitaxel. The IV that hepatic impaired patients are more sensitive. It's also well documented in the labeling of IV Paclitaxel. So those are not a surprising things, and clinicians genuinely can handle it, knowing that it's a pharmacological effect and having more available -- GCSF available in the nowadays. And so certainly, it's a surprise to us that they did not accept that by limiting the labeling on the hepatic impaired patients that would address their concern. The other issue of the radiological concern is even more complex. We use industry standard, blinded independent center review and -- which is completely independent. And totally, the readers are totally blinded, and the process are well-documented. And it's frustrating for us to hear that they are concerned about the process, especially having witness them, so all our process, including process in the -- in this aspect, having all the clinical sites conducting the study and having all the bioimaging lab that conduct this independent blinded process and still feels that they are unmeasured bias that they cannot articulate clearly. So clearly, we have to clarify with the agency what constitute unmeasured bias after a dose rigorous inspection of the process and the independency of the read. So we will certainly try to get an explanation from the agency on their view on that during our discussion with them. -------------------------------------------------------------------------------- Wei Ji Chang, SVB Leerink LLC, Research Division - MD of Emerging Oncology & Senior Research Analyst [14] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Rudolf Kwan, Athenex, Inc. - Chief Medical Officer [15] -------------------------------------------------------------------------------- Okay, about the trial. I think the third item. Really, the third item is the trial, and the trial is, as indicated, will be discussed with them what would they see as an adequate and well conducted trial. -------------------------------------------------------------------------------- Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [16] -------------------------------------------------------------------------------- Jonathan, let me provide you some data and some color in addition to Dr. Kwan's comment. So the first point that they brought up was the neutropenia-related sequelae in terms of the effect that in the partner study, there were some early myelotoxicity. So just for your information, within the first 19 weeks of the trial, here, we have the ORR of the response rate first, the death rates were actually very similar, roughly around 9% for IV Paclitaxel and 8% for the Oral Paclitaxel in terms of mortality. So basically, I think that there are 2 ways to look at it. The myotoxicity-related side effect due to neutropenia and also the overall benefit for the patients. I mean -- in fact, the first 19 weeks in terms of mortality, there was not much difference or impact, I mean, a little bit higher for Paclitaxel . Now to -- when we mind you about the neutropenia, in our presentation in San Antonio meetings, we already presented that the Grade 3 and 4 neutropenia for Oral Paclitaxel was 30% and for IV Paclitaxel was 28.2%, so a difference of 1.8%. So these are the information we want to share with you. Certainly, in a risk-benefit ratio analysis, we need to obviously look for every single risk involved, I guess it's highly appropriate. At the same time, the other sorts of benefits related to reduced neuropathy and then a substantial or significant increase in the response rate and also the survival should also be considered, and we are going to bring these points for discussion with the FDA in terms of the overall assessment of the risk benefit ratio. -------------------------------------------------------------------------------- Operator [17] -------------------------------------------------------------------------------- Our next question comes from the line of Kennen MacKay with RBC Capital Markets. -------------------------------------------------------------------------------- Kennen B. MacKay, RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research [18] -------------------------------------------------------------------------------- A couple of questions here. Johnson, just sort of first and foremost, would love to understand how is it that you plan to maximize shareholder value from here? It seems like the FDA has requested another randomized clinical trial could be prohibitively expensive. So just wondering, one, what other funding options are to pursue continued development beyond more debt? I would certainly think there would be value and potentially strategic interest in your generics or manufacturing business or other remaining Klisyri geographies? And then I have a subsequent question on the FDA feedback in the CRL. -------------------------------------------------------------------------------- Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [19] -------------------------------------------------------------------------------- Certainly, we have to -- we believe in the data. We believe we have very good data with regard to the benefit and also the recent all within our expectations because neutropenia is a (inaudible) -based side effect due to (inaudible). Certainly, we will go ahead and then talk about discuss with FDA. We will be presenting the data and then try to seek their feedback. We believe that we are going to provide more data. Hopefully, they will consider that's sufficient in terms of changing their view already. But it's not then -- I mean, they did not specify with regard to the nature of the study more did they use the word control study actually in their recommendation. So we would like to see the feedback with regard to what type of study will be needed to set aside them as demand by a former sort of question in terms of whether a of a smaller nature, showing the same direction, but at the same time, showing certain directions that recommended by FDA will be able to provide data to their satisfaction. This remains to be discussed. Now if it's a small study, we'll be in a position -- we will be in a position to support it. But certainly, if it's a big study, we are compassionate. We'll have to reconsider with regard to how big the study, the financial implications, the time involved and also the competing nature of our other programs as well as the competitive landscape before we can make a firm decision. So I apologize, I'm giving you a long answer, but there are many factors to consider, in particular, the response from the FDA before we can have some clarity after our analysis with regard to how to sort of push this program forward. -------------------------------------------------------------------------------- Kennen B. MacKay, RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research [20] -------------------------------------------------------------------------------- Sure. And maybe then, that's a segue to my second question. It seems like that FDA feedback in the CRL, it was certainly a huge surprise to me, given your prior interactions and even some of theirs such as granting that shortened priority review. So maybe for you, Jonathan as well as Rudolph, how do you reconcile your prior apparently positive reactions and communications with the FDA on this trial design? And I mean, gosh, your 2018 press release literally titled, Athenex received positive feedback from FDA on design a Phase III clinical trial paclitaxel. And also the FDA granting that prestigious priority review and lack of an Advisory Committee Meeting, or an ODAC. With this CRL requesting a trial representative of the U.S. patient population and U.S. standard of care, it seems like somewhere very mixed messaging or cross wires? -------------------------------------------------------------------------------- Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [21] -------------------------------------------------------------------------------- Thank you. Rudolf, do you want to address this question? -------------------------------------------------------------------------------- Rudolf Kwan, Athenex, Inc. - Chief Medical Officer [22] -------------------------------------------------------------------------------- Absolutely. I think the -- we clearly have discussed with the FDA about the study design and the fact that is not conducted in the U.S. because of the comparator arm with the FDA and clearly received written documentation from them confirming that one single study as we proposed is sufficient, should the results be positive and that the second considering really the benefit risk as shown by the data. And certainly, when we submit the NDA package, all the information we are talking that they have seen include in the submission. So all those safety data, neutral data that we present in San Antonio in the survival analysis were all in the submission package. And we waited for their standard 60 days to announce acceptance of the submission and gave us the priority review. So all those were very positive. And certainly, along the way, I cannot explain there are a lot of those. For example, the myelotoxicity risk is known, well-documented, and we come up a proposal that we can minimize that. And the central lab, the hangup is on a golden standard in the industry. We don't know what those hangup is. And to a certain extent that we also offer to say that even if you take into the worst-case scenario that there were only a minimal number which were 2, and 1 of them change our results. And if you incorporate that result change in there, it actually favors Athenex more. So we don't know what the hang up is. we're really completely confused by this change. So we will clarify that with the agency going forward. I think I suspect reading the letter is purely my suspicion that are focusing on the U.S. population in their letter that they perhaps are looking for some more U.S. data. That's purely my speculation at this time point. -------------------------------------------------------------------------------- Kennen B. MacKay, RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research [23] -------------------------------------------------------------------------------- And Rudolf, one follow-up on that. It seems like some of the concern around bias in the blinded review or introduction of bias there could be mitigated by just looking at some of the overall survival data, which obviously be biased. Just wondering on FDA's perspective on that overall survival data? And then secondary to that, just thinking about the U.S. population, to your point, obviously, much more use of GCSF growth factors to prevent some of the neutropenia. If you were thinking about running a trial, whether it's single arm or double arm, in the U.S., again, building off the experience that you've gained from this trial, what kind of things could you add to the protocol to limit some of these adverse events like neutropenia that we saw and some of the even GI tox that we've seen at least in the first half of the prior Phase III? -------------------------------------------------------------------------------- Rudolf Kwan, Athenex, Inc. - Chief Medical Officer [24] -------------------------------------------------------------------------------- Yes. This is very interesting. The -- we have -- obviously, we have ongoing studies in the U.S., for example, the I-SPY 2; for example, the angiosarcoma program, which we are collecting more and more experience in the U.S. patient population, even as we speak. And certainly, with the U.S. way of practice, we haven't encountered the similar level of myelotoxicity in the early stage as seen in the study. So perhaps the U.S. population may give us a handle how the U.S. clinician can handle this better. Now this is early stage. So I'll be cautious about it, but certainly, you expect to hear more about those data that they become more mature. But certainly we -- certainly watch the safety signal. And certainly, we are feeling good about the same dosing regimen being used in a much elderly population. In the angiosarcoma patient population, they are in the 60s, 70s, 80s, and the 90s. And in the I-SPY2 where they're co-administered with multiple other drugs. So we certainly do not see such a worrying signal in those 30 data that we've seen. So we'll continue to follow that up and propose that whether that can be part of the way that we can understand what they mean by collecting more information on the U.S. population. Does that answer your question? -------------------------------------------------------------------------------- Kennen B. MacKay, RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research [25] -------------------------------------------------------------------------------- It does. And one final question that segues off something you had brought up, and that's the angiosarcoma population. This is obviously an area huge -- well, huge unmet need for a small indication and potentially could see a much more accelerated path to market, maybe even a faster path to market than in breast cancer now. Just wondering if you have approached the FDA on a path to market in that population? Or how you could potentially go about that? -------------------------------------------------------------------------------- Rudolf Kwan, Athenex, Inc. - Chief Medical Officer [26] -------------------------------------------------------------------------------- We already obtained the Orphan Drug Designation from the FDA. And we are very actively completing that study. I think we are either completed enrollment, about to complete enrollment of the 43 patient single-arm study. And as you've seen in some of our earlier reports, the results are extremely encouraging, with really dramatic and convincing responses as evidenced by pictures were pretty standard in San Antonio and previously in other medical conferences. And certainly, it's an area where there's no approved treatment and a very rare disease. So that could be an interesting venue to see how the FDA would react to our data that will be collected and present to them. We intend to request a formal meeting with the FDA to discuss the path forward for this indication. Bear in mind, this is a rare disease, but also rare disease may be treated differently than the within the agency. So we certainly will be aggressively progressing the regulatory consultation of that test. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- (Operator Instructions) Our next question comes from the line of Robyn Karnauskas with Truist Securities. -------------------------------------------------------------------------------- Robyn Kay Shelton Karnauskas, Truist Securities, Inc., Research Division - Research Analyst [28] -------------------------------------------------------------------------------- I guess here are my Q. I guess, can we just explore like the worst-case center in the best case scenario? So under a worst-case scenario where you're forced to do in other trials, do you have an estimate as to how long that would take you? Like you're saying you have cast through 2023. If that is a possibility, would you still explore it if they actually ask for like a much more controlled study or a bigger study just because there is a patent expiration for this product? And then second, question is more on the best case scenario. So can you walk us through the time lines for when you're going to speak to the FDA next? I think you have to get documentation together and some proposals together. So it might take some time and then time to request meeting and have the meeting and how you're going to compare to the Street, the outcome, like, for example, would you wait till ask you have the minute? Just help us with some bookends on like best case, worst case and time lines? -------------------------------------------------------------------------------- Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [29] -------------------------------------------------------------------------------- Thank you, Robyn. I think with regards to the first question, based on the 2 later concerns from FDA in terms of the neutropenia-related sequelae. I think we do have data that we believe we can make a case with regard to the fact that this is a mechanism-based side effect that is manageable. And are there some concern whether is would be able address their concern and how this design. Besides the study will be paid a lot with how long it will take and the resources required to handle the particular concern. Now the concern with regard to the Blinded Source of Independent Central review, we already present information together with our -- that the entire process was done in a blinded and also and all the process with document. As mentioned by Dr. Kwan, the reconciliation process and reprocess that they have some concern on the unmeasured bias. It was only 2 patients, and 1 did not have any change or data in the process. And the other one -- actually, if you actually take consideration into that, it actually makes our data look even better. So therefore, I think there's some concern, we got the process. Obviously, we'll try our best in terms of going back to present the independency of the data. We feel that -- I mean, once they understand how independent the process is that they may have a different opinion with regard to the integrity and the quality of our data. So with regard to your question on the study, it is a small study. Then just looking for direction, I'm quite sure that this can be such of a range. And obviously, we'll we try our best to provide data to FDA as soon as possible. The other aspects are already addressed. So therefore, the review process by FDA may be expedited. Now with regard to time line for our submission to FDA and then ask for a Type A meeting, obviously, we need to submit a package before we have a time line. And Dr. Kwan's team is working very hard, and we are trying to prepare the package as soon as possible, hopefully within a couple of weeks and then followed by a request to FDA. And we sincerely hope that FDA will grant us the meeting as soon as possible. But the usual time line -- the meeting will be occurring within 30 days. So we're looking into a couple of weeks together with the time line that the FDA would want to submit the meeting. And I think we will have some clarity very soon. -------------------------------------------------------------------------------- Robyn Kay Shelton Karnauskas, Truist Securities, Inc., Research Division - Research Analyst [30] -------------------------------------------------------------------------------- And one follow-up, if I may. I mean, usually, with like, I think, data points like this, a lot of times people get refused to file because they're -- it's the data integrity question of the ICR question. Did you have any changes with the people you're interacting with between the people that you initially spoke with regarding approval of the trial in 2018, the acceptance of the filing and today? Are there any changes? And any KOL experts, I'm sure you have FDA advisers who advise you on filings, what are they saying about the situation? Because it seems like -- we've seen this happen once before in the space more recently where there's been a surprise on either side. So just maybe some color there would be really helpful for us? -------------------------------------------------------------------------------- Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [31] -------------------------------------------------------------------------------- Right. As far as I recall, when we submit a protocol more than 2 years ago to the FDA, it was a nice upside surprise for us because we expect to have a conversation with FDA with regard to the protocol. And we sent a letter -- I think, in early January that they send us a letter saying that on what we have submitted all protocol. And if I remember correctly, the comment was that if we meet the primary endpoint and demonstrate the risk benefit ratio, the set of design is adequate for FDA to consider approving the product. And it was very simple a 2-sentences letter that we have received, followed by the standard information with regard to the other aspects of Phase I or other requirements to be followed. So that was the basis of the letter that we received and the press release that we received based on the information available in the letter. Now I mean -- again, I mean, with that then -- I mean, will there be -- there not be many names attached in that letter and then followed by a number of developments with regard to the resubmission meeting, followed by the subsequent discussion. But since Dr. Kwan is leading the effort. I'll let Dr. Kwan address the question with regard to whether there's change in personnel from the early stage to recently with regard to the process? Dr. Kwan? -------------------------------------------------------------------------------- Rudolf Kwan, Athenex, Inc. - Chief Medical Officer [32] -------------------------------------------------------------------------------- Certainly. I think it should be fair to say we don't think there's any change in personnel from the submission we had a pre-submission type C meeting with the FDA to discuss the SAP and everything to the process along the way. I cannot remember the 2018 meeting, whether the group were essentially similar, that I cannot answer. -------------------------------------------------------------------------------- Operator [33] -------------------------------------------------------------------------------- Our next question comes from the line of Kevin DeGeeter with Oppenheimer. -------------------------------------------------------------------------------- Kevin Michael DeGeeter, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [34] -------------------------------------------------------------------------------- Rudolf, there's areas of differentiation, at least in our work was the neuropathy profile for the Oral Paclitaxel. Any comment or light you could share just whether that was viewed by FDA as a material consideration in the benefit risk profile for patients? -------------------------------------------------------------------------------- Rudolf Kwan, Athenex, Inc. - Chief Medical Officer [35] -------------------------------------------------------------------------------- I think, Kevin, my interpretation would be when we make the submission, then when they as a parity review. They would have seen and understand that probably is what drives it the neuropathy. And as you see in the San Antonio 2020, we -- I think we probably update continuing sing follow-on show that the neuropathy is clearly differentiating. And -- I still have to see another approach in the taxane area where you can differentiate the neuropathy in such a way despite the neutropenia profile and also in view of the efficacy benefit we have witnessed in the study. So that's truly intriguing differentiating factor, which has been echoed by all the KOLs we have talked with. So your question is whether the FDA acknowledge? I would assume they would acknowledged when they assigned a priority review. But certainly, that has not been raised in the discussion along the way ever since. So it's something we believe we would raise with the FDA when one do a proper benefit risk assessment, perhaps, that should provide more evidence. And we certainly intend to discuss with KOLs in the U.S., how that can be view from the clinician side. So thank you for asking the questions. -------------------------------------------------------------------------------- Kevin Michael DeGeeter, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [36] -------------------------------------------------------------------------------- Great. And my follow-up question, building on the comments from my colleagues that suggest that, at least in my view as well, that this seems to be largely a U.S. data question. Can you remind us with regard to regulatory strategy for jurisdictions outside the U.S.? And as I recognize it is not ideal to have a CRL, well, engagement regulators in other jurisdictions. But the modes of delivery care for patients are different in different jurisdictions. And there would seem to be a strong risk-benefit analysis to take to other regulators in other jurisdictions as well? -------------------------------------------------------------------------------- Rudolf Kwan, Athenex, Inc. - Chief Medical Officer [37] -------------------------------------------------------------------------------- Absolutely. Those will be what we are actively exploring. Within the company, we certainly were exploring the EMA and the MHRA. So MHRA is, by the way, is the U.K. that's recently leave the European Union following Brexit. So those are the venues that we will actively be pursuing. And certainly previously, we -- our partners have interact with the Australian and New Zealand Health agency, and we'll continue to explore that. And also in the other Asia area, Taiwan, we have our partner had an interaction before. And we are expecting our partner in China, essentially to start negotiating with the China FDA, where we have an active IND on Oraxol in China. So those are the venues that we were pursuing, and we certainly will present our case of the FDA response to the health authority to see whether there's different interpretation. Bear in mind, the profile of the drug is actually -- may potentially be ideal for countries that have health care system where the use of an oral taxane may add significant additional benefit of benefit to the health care system. So we will actively explore those options. -------------------------------------------------------------------------------- Operator [38] -------------------------------------------------------------------------------- Our next question comes from the line of Yale Jen with Laidlaw & Company. -------------------------------------------------------------------------------- I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [39] -------------------------------------------------------------------------------- My first question is that given the Abraxane, although that's about more than a decade ago, was approved mainly based on the data from the Russia and Ukraine, which account for more than 2/3 of the population studied, is that -- and is that issue that you think that the FDA will want to have a slightly more U.S. population and that will be the sort of data set they will consider versus they need something completely in the U.S. for a much larger spec? -------------------------------------------------------------------------------- Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [40] -------------------------------------------------------------------------------- Rudolf? -------------------------------------------------------------------------------- Rudolf Kwan, Athenex, Inc. - Chief Medical Officer [41] -------------------------------------------------------------------------------- Yes. I will clearly discuss with them. I think the way they word it, as I read it, is represented of U.S. population, not conducted in the U.S. Now what do they mean by that is certainly a topic for discussion. And certainly, if the representation is acceptable and that it is not a entirely U.S.-based study that allows more flexibility in operation. But it all really boils down in terms of the proposal that may be them, what would they like? So I would probably answer that with better clarity once we have our meeting with the FDA. -------------------------------------------------------------------------------- I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [42] -------------------------------------------------------------------------------- Okay. That's very helpful. And one more follow-up question here is that we certainly recognize the Blinder Review is gold standard. And certainly, it's not that clear why FDA has suggest that there may be introduced. So in your future meetings with the agency, would you be able to ask more specifics what they have seen the so-called potential being introduced, so you will have a better sense of what they really mean? -------------------------------------------------------------------------------- Rudolf Kwan, Athenex, Inc. - Chief Medical Officer [43] -------------------------------------------------------------------------------- Absolutely. And that's an interesting dialogue that I would anticipate because in the whole days, maybe even the study. When the FDA is not certain, they probably would look at the radiograph themselves, right, or refer to essential independent lab when this initiated. In this case, we already use the state of the art, very mind essential process is very straight. We use 2 independent readers that are trained in -- they are especially trainer mind, the investigators are not always fully up today and training within practice versus search. Whereas in the central lab, they were fully trained. And they -- with the following procedures that are completely blinded way, and their reading has to correlate. And if they don't correlate, then a third independent reader completely blind will adjudicate. So all those processes are really state of the art. So I am struggle to find out how we can move away from those unmeasurable bias because in the old days, the FDA, probably one day of time. And obviously, in this case, they didn't have time, would have taken the scans and analyze themselves and probably collaborate with the bring individuals central would have done. And I don't know how one can -- certainly is a question we will explore with the FDA, whether they want to do their task or they want to assign an additional central lab to look at the scan. Those topics will be something that we will raise with them. -------------------------------------------------------------------------------- Operator [44] -------------------------------------------------------------------------------- Our next question comes from the line of Matt Kaplan with Ladenburg Thalmann. -------------------------------------------------------------------------------- Raymond Wu, Ladenburg Thalmann Financial Services Inc. - Biotechnology Equity Research Associate [45] -------------------------------------------------------------------------------- This is Raymond in for Matt. Just a quick question and one more follow-up. I was wondering whether you could provide any additional color on the dose optimization language that the agency provided? -------------------------------------------------------------------------------- Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [46] -------------------------------------------------------------------------------- No. -------------------------------------------------------------------------------- Rudolf Kwan, Athenex, Inc. - Chief Medical Officer [47] -------------------------------------------------------------------------------- No. Certainly not. I think we did discuss -- I think we did discuss early stage when we talk about the -- with the agency about the laboring language for those dosing, then there was a question how dose adjustments should be made in patients with hepatic impairment? And we did propose to use it as in the protocol. That's what we did. And so that was only discussion we had with them. And so I presume this will be a follow-on of what kind of dose optimization would be considered best for those higher risk group just reading the language. Certainly questions that we want to clarify with them. -------------------------------------------------------------------------------- Raymond Wu, Ladenburg Thalmann Financial Services Inc. - Biotechnology Equity Research Associate [48] -------------------------------------------------------------------------------- Okay. Cool. And just maybe a follow-up is, is there perhaps an impact on just the pipeline in general due to the language from the FDA, perhaps provide some additional color on that? -------------------------------------------------------------------------------- Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [49] -------------------------------------------------------------------------------- Let me answer the question. The 2 questions that were asked. One was mainly on architectural specific adverse events or side effects. And the second one was your question on making sure that the blinded independent center review was such appropriate according to their assessment. And I think none of them are really tied to the technology platform that we are working on right now. So therefore, based on this assessment, there should not be impact with regard to the platform and how we're going to pursue other programs. But certainly, I mean, when this is something to tie into a platform, I mean, the image is there, and we -- obviously, we have to work through and ensure that we provide sufficient data to make sure that the confidence is restored for both investors for the regulatory agencies for patients and clinicians. -------------------------------------------------------------------------------- Operator [50] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Dr. Lau for any final comments. -------------------------------------------------------------------------------- Yiu-Nam Lau, Athenex, Inc. - Chairman & CEO [51] -------------------------------------------------------------------------------- Thank you. During the last 3 months, we have had the approval and launch of Klisyri and received a complete response letter from the FDA on Oral Paclitaxel. Our team will continue working towards a path forward with the FDA to address the concerns on the Oral Paclitaxel NDA package. At the same time, we are working to identify and undertake the appropriate internal organizational adjustments accordingly. And we'll communicate information regarding this information when more information is available. Thank you for your time in joining us the call this morning. -------------------------------------------------------------------------------- Operator [52] -------------------------------------------------------------------------------- Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.