BeOne Medicines AG (ONC) Earnings Call Transcript & Summary

Yes, my name is Ling Wang. I'm one of the senior health care -- China health care analyst at JPMorgan, and welcome to our conference this year. The next presenting company is BeiGene, which is a leading biopharmaceutical company in China. The stock was still listed on Nasdaq and also Hong Kong Stock Exchange. And presenting for the company is Mr. John Oyler, who is the Chief Executive Officer for the company. So John, welcome, and thank you.

Hi, everyone. As said, I'm John Oyler. I'm the Chairman, Co-Founder, CEO of BeiGene. I'd really like to thank JPMorgan for having us at the conference this year. Thank you. Before I get into the presentation, I have to remind you all the wonderful things. That we might be making forward-looking statements. Our business carries certain risks. Some of these are discussed in our filings with the SEC in Hong Kong. So please refer to those filings, read them in huge detail. And I am happy to discuss them and you can understand our businesses and risks. And with that, let me actually jump to sharing a few thoughts with you. I want to start not on BeiGene but with the kind of summary of my view of the industry. I moved to China 15 years ago and started building a business because I'm passionate about fighting cancer. And I thought that, that would be an intelligent thing to do. And hello to friends I'm seeing as I look around the room. I thought it was the right thing to do and the right place to do it, and there were reasons for that. I think that our vision since starting this company, Wang Xiaodong and myself 10 years ago, we always believed science would work. And 10 years ago, this was a depressing meeting. People weren't as excited. And a lot of people thought the easy stuff was done, science was hard, financing was hard. Now if you sneeze, you get funded, I think. But we believed in the science, but we thought the industry would increasingly face an issue around affordability and around cost. And we thought that there were a lot of things happening that were going to change the world and change the world potentially in a positive way, and we could build an organization that was really fit for our view of how we thought developing medicines would change over time. Our vision has been largely correct. We've grown an organization to 3,400-plus team. And the capabilities that we build are the capabilities we think all organizations in medicine development should have for the future. 2019 was full of things that validated our vision. We did a partnership with Amgen, which is the fifth-largest biopharmaceutical company in the world, a great science-driven organization. And this collaboration is really around working together to help accelerate their oncology portfolio clinically globally and also help get their great medicines to patients in China more broadly and more quickly. And that is something that was not taken into lightly, is transformational for our company, but it's also a validation of this belief we had. And we were able to get BRUKINSA approved here in the United States. It's on a data set that has a lot of Chinese data in it, which we thought was important for the future. We were able to run a large Phase III trial, develop some assets that are very promising and able to get tisle approved in China and hopefully, on an ongoing basis, from a global perspective. These things showed that what we were thinking really was the way the world was evolving. And we've built a very unique clinical and commercial capability that we think are important, and we're going to leverage that to bring internally and externally developed medicines that are impactful as quickly as we can and as affordably as we can and as broadly as we can to patients in need across the globe. So that's where we came from and who we are. I'm borrowing this from Jim Greenwood, who I have a lot of respect for and I'm sad to hear is retiring. It's the best of times and it's the worst of times in our industry. There is breakthroughs of understanding disease. There is tremendously impactful medicines that are lengthening the lives of many cancer patients. Capitals flowing, this enables innovation. And global collaboration around research has already had huge impact in making us better, faster and lower cost in developing medicines. And this is wonderful. The tools, the platforms, the equipment, the data sets exist for future breakthroughs and they're there for us as we start new programs. But it's also the worst of times. We have the all-time worst perception as an industry ever. Many of the patients that we have in the world are left behind. They're unable to access critical medicines in the United States, and it's much more exacerbated in other places in the world. We bankrupt families. And there's a continued escalation of clinical cost and delays in developing medicines due to clinical constraints and finding the patients to enroll on studies. So clearly, it's a time of unprecedented change and opportunity in our industry. The changes, affordability is the issue now. 10 years ago, it was just the science work. Regulators are addressing this. They've shortened paths, accelerated approval, breakthrough, let's do one set of trials globally that you can use for registration across the world instead of running multiple trials and increasing the costs. China joined the ecosystem. And this is the thing that Xiaodong and I believed was going to have a huge impact years ago. There's 2 major impacts. The first is China is helping pay for all this innovation. AstraZeneca in year-to-date through the third quarter of last year, I think, did USD 3.7 billion in revenue. This didn't use to flow into the industry to help pay for innovation. That's about 65% of all the revenue they generate in the United States. And that matters because we're an industry of upfront cost. So this is hugely impactful. It helps us all across the world either be more affordable or have more funds for innovation. And secondly, by joining the ICH, by joining and changing regulation, you can now run clinical trials in China. And this really matters because there's a huge patient pool, especially in oncology, that can be brought to bear on clinical science to help understand and bring drugs more quickly and much more affordably to patients. This changes the world, and you need different success factors. You need clinical excellence. This is the single biggest cost in our industry. 90% of the time, 90% of the money, typically is spent on clinical. And to do that, we believe you need a global, highly inclusive China clinical trial run at global quality. And you need to adopt next-generation technology, and we need to get much better and operationally excellent in clinical trials. We also believe that you're going to need commercial capabilities that didn't exist before in China. You need a science- and medicine-based commercial organization there. In the past, when a new drug was approved in China, it was -- here's Herceptin, but Herceptin had been around for 7 years. And you were only providing it at the top 100 hospitals and the KOLs there have been begging for it for 100 years. So your commercial organization didn't need to be science- and medicine-based to explain it. And if you were a generic, you just said, "I'm like that, I'm cheaper," you didn't need a science- and medicine-based team. So now as we develop all these innovative medicines and we're launching them in places like China, we need to build a very different type of organization. And as China is nationally reimbursing, we need to build a much deeper organization. A sales team that might have been 100 people to cover innovative drugs in the past needs -- now needs to be 1,000, 2,000 or more. And global business model provides much broader access and supports pricing, and it'll enable the rest of the world. So if you have a lower pricing center in China, if you can get to the rest of the world, to the other countries, and they start paying for innovation, it's a virtuous cycle and it's a self-fulfilling prophecy. And now we have lower cost in developing drugs, we're getting them to many more patients. And because we're an upfront-cost business, the more patients that are contributing even a small amount, it helps us pay for innovation. And the cycle works and the business model works. Pricing issues are addressed, but the industry can be profitable and fund innovation. Okay. That's my view of the world. So who is BeiGene? We're a fully integrated biotech company. There's over 3,400 people. We've dramatically changed. We have a full suite of capabilities: discovery, research, development, manufacturing and commercialization. We're very happy about this. We're an organization with a robust pipeline. We have 6 assets that are approved, 2 filed with regulators, additional indications filed for several of the approved products. We're conducting over 60 clinical trials in more than 35 countries and regions. We have an extensive portfolio of 30 assets in development. Our commercial team in the U.S. is built fit for the purpose of commercializing our BTK inhibitor. And in China, we're launching our recently approved therapy, tisle. The global clinical development team, I'm going to talk about on the next page, but it's over 1,100 people. The commercial team is approaching or over 1,000 in China, and it's over 100 folks in the U.S., and we have a research team of 300. There's a lot going on in our company. You can read all that stuff in this deck. You can read it later. I'd rather talk at the high level. The organization from day 1 is built with a team that's global. We're a global, headquarter-less company. People on this team are all over the world. They're in Europe. They're in U.S. They're in China. They're anywhere they can be, and our business is largely done on Zoom. Xiaodong is my partner and my long lost brother and a wonderful man and a great scientist. Xiaobin is really the godfather of the multinational commercial industry in China. And Howard is probably the godfather of a lot of financial analysts in the community. These are wonderful people, and we're all getting old. But there's a tremendously talented group of people that are really driving everything in the organization. The clinical organization. You've heard about this before, but we've dosed over 7,000 patients enrolled on trials. We've run over 60 trials, all these countries across the world, but 27 potential registration trials, it's incredible. But some of the people that we've added over the course of the last year. Melika Davis is from Novartis, running our operations. Winnie was from Quintiles, senior person there in China. John Freeman just joined us. He was running safety at Celgene. And they're just excellent world-class people that any organization would be just thrilled to have. This was a year of a lot of accomplishments. That collaboration with Amgen, it is global, it is strategic, it brought in $2.8 billion, which is always good for any company; the BRUKINSA, the approval in MCL; we also read out our head-to-head in zanubrutinib in Waldenström's; and our China approval in relapsed/refractory CHL. And we did open a state-of-the-art biologic manufacturing facility towards the end of last year, so we're very excited about that. The collaboration with Amgen, a lot of people wanted to hear about. And we've joined forces, and this really is transformative. We expect that the collaboration will allow accelerated access to important oncology medicines for patients in China and around the globe. As part of the partnership, BeiGene will launch 3 of Amgen's oncology medicines in China: XGEVA, KYPROLIS and BLINCYTO. And together, we're jointly going to develop 20 pipeline assets. BeiGene receives royalties on any sales worldwide from these pipeline assets with the exception of their KRAS inhibitor. And in China, all of the successfully developed assets will be commercialized by BeiGene for a certain period of time, during which we split profits 50-50. And this is followed by a period of time in which we receive royalty from sales in China. Finally, there's this $2.8 billion investment. And as part of that, they are now a substantial shareholder in our company. And we have the help and expertise of Tony Hooper, who's joining our Board. The partnership was absolutely and unquestionably, in our mind, a no-brainer and we're excited to have it. In terms of the company. R&D progress, it's hard to show our products even on a single slide. In broad term, their candidates are in development, the status and the breadth of the trials is obvious. At the top of this are our 3 late-stage internally developed programs: BRUKINSA, tisle and pamiparib. And we're working on a broad array of tumor types, both solid and liquid tumors, in both China and globally. We're advancing just behind these our 8 earlier stage assets, 5 of which are internally developed. And this includes our anti PD-L1, our TIM-3, our Bcl-2 inhibitor, which is newest in the list. And we're very excited about the pipeline and portfolio. It is complemented by these 20 assets from Amgen. So it's hard to digest, but we're very excited about it. And certainly, we're thrilled to have Amgen as a partner. They're an incredible science and impactful organization. Turning to zanubrutinib. It's a potentially best-in-class BTK inhibitor that targets B-cell malignancies. It has several advantages based on its ability to achieve 100% BTK occupancy and to minimize off-target binding. The label for MCL shows a 59% CR rate, which is exceptional; and as well as flexible dosing and the ability, given concomitantly, for example, with PPIs. This also has strong data in several indications, as you can see on the slide, in Waldenström, in CLL. And the U.S. is not the only territory in which we're pursuing regulatory approvals. In China, we filed in MCL, in CLL. And those submissions have both been accepted and we expect decisions in the first half of this year. We've treated over 1,700 patients on clinical trials. We have a safety database of over 600. And we are very excited about the data that we have been generating from this perspective. We recently reported data in our head-to-head study of zanu versus ibrutinib in Waldenström. This is the first-ever reported from a study that explores head-to-head the comparison of 2 BTK inhibitors. Despite missing the primary endpoint, the totality of this data from the study clearly shows a very active molecule. And it's a molecule where response rate in landmark PFS and OS data are numerically superior to ibrutinib. Further, the safety here is also clearly in zanubrutinib's favor, and long-term tolerability is a real issue for patients in this class of drug. We do believe that there remains a path to approval for this molecule in Waldenström and we'll be discussing this with regulators in the future. We also have a pivotal Phase II study ongoing in Waldenström in China that we expect to file there later this year. Our most recent approved drug is our PD-1 inhibitor, tisle, where our development program's targeting Asia-prevalent tumors. There are several aspects of this program that set it apart from the burgeoning PD-1 field. First, it was designed to minimize Fc gamma receptor binding, which independent data has shown can lead to negative effects from T effector cells. Our label in classical Hodgkin's lymphoma is differentiated by its high CR rate. And it's of note to us that this high rate was achieved in a disease rich with macrophages, a classic T effector cell. We're targeting a broad label in the most common tumor types in Asia, which is critical in a country like China, where reimbursement is label-based. We've partnered with Boehringer Ingelheim, a global leader in biological manufacturing, for our initial commercial supply. In our view, the breadth of label is the way to be successful in China, and ensuring your quality is also critical. This molecule is being explored in over 30 countries from a global perspective, and we are pursuing it for global registration. In addition to these products, we also have 3 marketed oncology drugs in China: REVLIMID, ABRAXANE and VIDAZA. The launch of BRUKINSA combined with the substantial commercial operations in China have allowed us to establish a footprint in the 2 largest pharmaceutical markets in the world. We significantly grew the Celgene product revenues immediately upon starting to sell them in our first full quarter in 2017. And sales grew from $15.6 million in that quarter to nearly $60 million in the second quarter of 2019. The third quarter sales were a bit lower than anticipated due to supply disruptions of ABRAXANE. And fueling this growth has been our investment in our commercial team, which, again, is science- and medicine-based and led by Wu Xiaobin. It now has a number of over 900 people. And our U.S. team is led by Josh Neiman and number is over 100 and is in the early days of the launch of BRUKINSA. Our commercial team in China and the U.S. are focused on the product portfolio seen here. 2.5 years ago, this would have been an empty slide, but 2 major collaborations and our first 2 internally derived product approvals later, we've got a growing portfolio of products in liquid and solid tumors. That includes some of the biggest, most exciting drugs in the class and classes in the market today. This portfolio has allowed us to build our commercial capabilities to fully support the growing portfolio and plan for its expansion in the future. And as we always do, we've built what we believe is the right organization for the future, very science- and medicine- and technology-based. I hope it's clear that BeiGene is positioned to be the partner of choice for firms that wish to gain a foothold in China or to accelerate their global clinical programs. We started this journey a decade ago, and that early start means we now enjoy a position that's quite hard to replicate. We have scale, a science-based commercial organization and a growing portfolio of backbone agents with which clear combination potential exists. We believe that Amgen recognized these strengths and validated our position when we became partners last year. But we're far from done. We expect to continue to form collaborations and are confident that we have the capacity for them to be extremely successful. Shown here is our financial summary for the 9 months that ended last September. It shows the growth in our product revenues as well as investment in our assets. And importantly, we note the $2.8 billion from the Amgen collaboration that we recently received. Before we close today's presentation, let me highlight some of the key milestones and catalysts for 2020. This will be an important year for BeiGene, a year in which we plan to continue to launch BRUKINSA in the U.S. and receive approval in China for MCL and CLL. We also expect to have discussions with the FDA and EMA around our ASPEN data and present full results at major medical conference. We're excited to see data from our Phase III clinical trial in first-line CLL as early as this year and complete enrollment of our second Phase III head-to-head trial versus ibrutinib in relapsed/refractory CLL. For tisle, we expect approval in UC in China this year and have regulatory discussions on our Phase II second line, third line in HCC. We also expect data from 2 Phase III trials in front line non-small cell lung cancer and expect to complete enrollment in the global portion of the Phase III second line, third line non-small cell lung and second line esophageal cancer trials. In addition, we plan to continue our progress on pamiparib. And there's so much going on, on this slide, I can't read down the last text that I have. But there's a lot going on in our organization. So I really want to close with saying 2019 for us was an incredible year. It was an incredible year for any biotech company. We got 2 drugs internally developed approved. We did a major partnership. We in-licensed some other very interesting scientific assets. We put a few things in the clinic that we're very, very excited and proud of. But I think most of all, in last year, we were able to see is this [ vision come true ]. And absolutely the promise of China joining the system through our own work and through the external data that you can see, the industry is changing, the model is changing. The capabilities for the future are changing. This was the vision 10 years ago. If you've come here repeatedly, you're tired of hearing me say it. But I think this year when I come here, I can say it's not only a vision, it is real. And the world is changing, and these are the capabilities and the things that are necessary to be a world-leading medicine developer in the future. In terms of 2020, the catalyst and pivotal readouts that we have we do think will help transform the company. The commercial launches, the same thing. And the Amgen collaboration is something we're really focused on. This is an incredible organization. And working together, I think we have a lot to learn from them, and they have a bit to learn from us. And we're really, really excited about it. And I think fundamentally what I'd say is BeiGene is really striving to build a company that's built to last, that we'll become a true leader in the evolving biopharmaceutical industry. And in doing that, we really believe that we can live on the promise of this industry and why we're all here, which is we all want to do great science, turn it into impact for patients that can dramatically change their life for the betterment, and we don't want to leave anyone behind. We want a system that makes sure that we can do that in an affordable way. And all along in that system, we want to make sure that, to the degree it's possible, everyone across the globe is helping and working together and everyone across the globe is funding that innovation. And in doing that, we believe there's a much more affordable, much more proud industry that we can all be part of, and we can help a lot of people get access to great medicines. So that's who BeiGene is, that's what we're trying to do. And I think I'm done, and I have 2 minutes for questions. So thank you.

John, I was wondering whether you can comment on tisle's potential in the ex China market. What will be the regulatory or commercial strategy you guys are thinking about?

Yes, I think from day 1, that's a molecule that is intended to be approved and help patients all over the world. It's manufactured by BI, which is a 130 year old company with, I think, plus 30 approved products across the world. It had to be built for global quality. And everything we're doing clinically is global quality. Everything is meant for registration in every country. So we've been on a broad path. It's seen over 5,000 patients. I can't even know how many registration trials are ongoing because it's a very large, double-digit number. But fully, the intention is to bring that to market. And we do think it's a very special molecule, and we're excited to do that everywhere.

30 seconds. Last question?

So maybe another quick question. With -- maybe not really a question but a comment. I see you say that you have capacity for additional partnerships. So I'm sure we're looking forward to more good news in the future. Thank you.

Thank you. Thanks so much.