BeOne Medicines AG (ONC) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining the BeiGene session at Goldman Sachs Global Healthcare Conference. This is Ziyi Chen, China Healthcare Analyst. For this session, joining us are John Oyler, Chairman, Co-Founder and CEO of BeiGene; Howard Liang, CFO and Chief Strategy Officer; and Eric Hedrick, Chief Advisor. So thank you all for attending the call. To start with -- start our session, actually, 2020 marks the 10th-year anniversary for BeiGene. So it has been a tremendous decade for BeiGene growing from a smaller biotech start-up to a well-established pharma company. And particularly, we already bear our footprint in 2 largest pharma markets in China and also U.S.

So what is your expiration (sic) [ expectation ] for BeiGene in the upcoming decades? How should we think of BeiGene's scale in operation and also global footprint like 10 years from now? John?

Thank you so much. It's a pleasure to be here. I think that we're excited to get to the 10th year at our company. It's a big landmark. When Xiaodong and I founded the company, we really wanted to build a company that would do great science, bring medicine to patients and have that medicine be science-based and impactful and affordable. And I think at this point, the beginning of that vision has started to be materializing. We wanted to build a transformational company, and we really did think about how the world was evolving when we started. Our view was there were major changes happening in China through access to clinical patients with clinical reform and through potential reimbursement in the market, which really would change dramatically the size and the scale of patients you could help and we believed would transform fundamentally the entire industry. And I think that -- that was our vision, and we tried to build the right capabilities to succeed in a world that look like that. One of the things we thought we had to do was build great science and medicine, and I think we've done that. The second, though, was really build a unique capability to run China-inclusive global trials that could accelerate the approval of innovative medicines and reduce the cost in getting to the market. 90% of the time and 90% of the energy in our industry is spent in clinical, and we're not very good at it. And this was something that we thought make a huge impact, and we wanted to be a leader in that area. We also believe that commercial teams in China were not science- and medicine-based, and they were small. You only had to cover the top hospitals if you had an innovative drug, maybe the top 100. And we needed to build a new science- and medicine-based team with scale that could really talk about and help educate innovative drugs as they were launched. So I think that was our vision. To be honest, I don't think we understood we needed manufacturing and how important it was and lots of other elements. But 10 years in, we're a fully integrated company. We have a very deep pipeline internally. We have a deeper pipeline with our partnerships. And certainly, this is an introspective time where we ask ourselves what's the next 10 year is going to look like for the industry? How do we continue to build upon what we have and perhaps build some other unique strategic advantages that can be sustainable? We do believe that our clinical capability at this point for China-inclusive trials is unmatched. But I think we've set a goal in the team to become one of the true world leaders in excellence in clinical trials in the next several years, and that's something we're striving for. And it's not just about China-inclusive trials, it's really around excellence in clinical. I think in addition to that, we hope to continue to build our commercial product pipeline inside oncology, and we're even looking more broadly than oncology. I think we've had the incredible good fortune to bring to our team, Wu Xiaobin, who is an exceptional commercial leader that's -- for over 20 years, has been in China and has been running 3 of the major organizations there, really, from inception. And I think that, again, it's very important that we build that capability and continue to be successful there. And aside from that capability-wise, we think it's important for us to have excellence in biologic manufacturing in a number of other areas. So we're working on that vision. Really 10 years from now, we think we have the opportunity, given the industry changes and given the unique capabilities we have today to further push what we're doing in these areas and in others and to really grow ourselves into one of the innovative leading companies for the biopharmaceutical company in the world, and that's what we're striving to do.

I think what's very important is that since last year, I mean, we got the first drug, BTK inhibitor got approved in the States. And also recently, we got it approved in China, and we got -- already launched our PD-1 drug in China. So now BeiGene is, I will say, officially transforming into a commercial-stage company. So how should we think of Beijing's commercial strategy compared with some of the multinationals in China, some big players, global players in the U.S. and also local players in China? How should we look at the commercial strategy differentiation in different markets for BeiGene?

Sure. Well, maybe if we start with China, I think in China, we are on the vein of the newer companies. We're not a multinational that's been there for tens of years. We're not a Chinese domestic company that launched with generics. We're a built-from-scratch company that's 10 years old. I think from that perspective, we benefit by not having a set of legacy products that aren't attractive to a commercial team when you're trying to recruit them. I think that we benefit from having brought in Xiaobin and brought in a number of other great people to that team to really be able to build a unique thing. And I think that as you think about commercial capabilities in China, everyone wants to work with the best people, with the best current products, with the best future pipeline. And I think in general, this is a time when companies like ours are growing. And so the opportunity for career, the opportunity for equity build and other things like that is very large in an organization like ours. So the relative attractiveness of our organization to a multinational, I think, is different. In terms of the relative attractiveness for our organization to some of the newer local companies or the older local companies, the fact that we're doing everything in a global way, we're working and executing based on global standards for all the products, whether it's quality, whether it's the level of science, whether it's where we're running clinical trials, our products will earn a global label. We're not pursuing products that wouldn't -- or a clinical path that wouldn't result in that for anything that we're doing because we think it's science that should be everywhere in the world. And so I think that it's a unique and different infrastructure. We're truly this multinational headquarterless company with all sorts of people from all over the world, 4 different continents, offices everywhere. And I think it's really a unique blend and kind of a newer, different type of company than others. And I think it enables us to scale not only in China, but from a global perspective. And it really enables us to attract the best resources to our company wherever they might be in the world to address certain problems. So I think it's a different and unique situation. There's over 1,300 people on the commercial team in the U.S. and China. And I think that we're very good at applying the latest technology there. I think we're very good at focusing on the science- and medicine-based messaging, which is so important from that perspective. So we'll continue to work on those capabilities. And as we get the U.S. label, this does enable our medicines to reach patients in other countries, too. So we've begun a process through distributors and through ourselves to try to figure out how to get launched in the rest of the countries around the world. And for programs like BTK and for Tesla and for BRUKINSA, these are substantial markets across the rest of the world.

Yes, sure. Well, if -- when we talk about BRUKINSA, actually in ASCO, we just presented some of the updated full set of data from ASPEN trial. So this is the first head-to-head comparison for zanubrutinib, BRUKINSA versus ibrutinib. So what is the plan next, including the regulatory discussion and potential work around to try to get into potential like NCCN guideline? Is that possible? If the -- even though the trial is probably not a successful trial, but we do get some of the positive data from it. Now how should we work around the commercial strategy with those new data?

Yes. John, if you're okay, maybe I'll take that one, you can chime in, thumbs up. All right. Yes. So I guess I'll start off by saying, we don't view that trial as an unsuccessful trial, right? We think that it was a highly informative trial that shows that zanubrutinib is a different drug than ibrutinib and has a better efficacy safety profile than ibrutinib. And that was sort of the take-home from the presentation at ASCO. By the primary measure, that trial did not meet statistical significance. But if you look at virtually every other efficacy measure and certainly every safety measure comparing the 2 drugs, that was all in favor of zanubrutinib, so we see that as a successful trial. To that end, getting to the other parts of your question, we're in active discussion with both the FDA and the EMA regarding filing strategies. And in parallel, we're also exploring a listing in guidelines like at CCN. So that result, even though it's a little bit atypical for embarking on that kind of strategy, since it missed the primary endpoint statistically, we feel as though there's more than sufficient data there to distinguish a drug from ibrutinib. And so we're exploring both the regulatory and guidelines route at this point very actively.

Yes. Thank you, Eric. Anything from you, John?

No. I mean I think as -- I think Eric said it quite well, which is, we think, there's enough data there that people who have knowledge in the field and look at it can distinguish the 2 drugs from each other, and it's an important study. And we just -- we look forward to the next readouts that we get for the rest of our studies. And we're excited about the prospects of that class of drug, and we're excited to have the molecule we have as opposed to one of the others.

Yes. I think BTK now becoming one of the, I would say, cornerstone kind of therapies in the hematological cancer space. So around that, I think BTK is definitely one major step forward for us to build a really strong pipeline and also portfolio in that space. And also in addition to that, we have REVLIMID, we have VIDAZA pushed for Celgene. We're also going to get some of the drugs from Amgen also into these areas. How are we going to plan our product development plan, clinical development plan around BTK, not only BTK, but also some other assets? How should we think of the potential combinations, think of BeiGene's positioning in the hematological cancer in China and also in the U.S.?

Please, Eric.

Yes. So I think that we're thinking about this in a similar way to what you described particularly around BTK, in indolent B-cell malignancies, certainly that's a foundational therapy, right? And so if you had to pick an asset within the B-cell malignancies to have to build sort of a franchise around, that would be the one that you pick. You mentioned some of the assets in the Amgen portfolio that might be a good fit with that. And that's certainly true. I would add that we also, to that end, have our own highly potent Bcl-2 inhibitor that's just entered Phase I testing. And so that's sort of an indication of our interest in building a true hematology portfolio rather than having a single asset play there. I think -- and that's a global proposition. That doesn't apply strictly to China. And I think, again, in other heme malignancies, if you look at myeloma, for example, certainly, in China, we're marketing REVLIMID already as part of the Amgen agreement. We'll be marketing KYPROLIS that gives us a nice foundation in terms of franchise within myeloma. And then VIDAZA provides that opportunity in China, I think, within the AML space and certainly several assets of the Amgen portfolio potentially round out a sort of franchise opportunity there. So we think we're really well positioned, not only in B-cell malignancies, but a more holistic hematologic malignancy franchise, we think we have a lot of the foundational pieces there, and we're evaluating more.

Yes. That's promising. Well, let's turn to another key assets we have, tislelizumab. I think the reason the first quarter sales is very impressive. And we also have filed some of the critical NDAs in China for large indications, lung cancer. So there's 2 things I would like to get your thoughts. One is that what is the latest updates on the PD-1 competition in China? Compared with last year, when we met in our Goldman Healthcare Conference. At that time, I think there are a few players and people have not get into a national reimbursement list yet. And now I think the dynamics are getting a little bit different. So could you please provide us more updates on the compound landscape in China for PD-1? And also, second question is about -- in the second half, some investors might worry about potential more players going to get into the national reimbursement list. What is your expectation on BeiGene's participating in that negotiation? And also, what is your expectation on the potential pricing trend for that in China?

Sure. Let me start by saying, I think if there's one thing we try to be consistent unless the world changes, and we try to be honest with ourselves when it changes and it's different than we thought. At the same time, in the PD-1 space, what we've been saying for 5 years is the market's bigger and lower priced than people understand, but it's going to be very large. I think we're a couple of years into this experiment, I think we believe that's true. It is bigger, and it is lower priced than most people writing about it thought. And I think that the data coming in for us and for others clearly shows that. And we're not on any real reimbursement yet. There's one company reimbursed in CHL and CHL is tiny. So to us, the game has always been how do you get broad reimbursement because reimbursement only occurs where you have a label. And this is about running the clinical trials and having the clinical data to get the label in those indications so you can qualify for reimbursement. The second thing is, when you run those clinical trials, you're going to have data, and your data could look spectacular and it could look mediocre. And certainly, Merck and BMS both have data, but in lung, the way that played out with trials, the vast majority of lung is going to Merck. And so is it a better molecule? Isn't it? That's a long-standing debate. It wasn't the way the trial was run. It's hard to say, but we believe that it's very likely, over the course of time, not every IO trial is going to work in China. And it's nice to see that our first 2 lung readouts or bladder, or CHL, that we've had attractive data from this perspective. I think that we'll see more data over time, but you need to get reimbursement to succeed commercially in China. So we understand that, and you need a broad label. And I think if you look at what we're doing, it's investing in a very broad program associated with doing that. And so far, the data we've read out has met our expectations and been data that we're proud and we stand behind. I think that we also believe, for us in China, we're quite different. BI has helped us develop the process. We've taken longer to get to market, but we've done that to ensure our quality. I think that's something of who BeiGene is. And every vial that we're releasing right now, it's not just BeiGene's reputation, it's not just mine and Xiaodong. BI's 300-year reputation is on every vial that's released. BI is -- the family behind BI is one of the wealthiest families in the world. Their reputation is on every vial. So I think from a quality perspective, this is one of the very, very top biologic manufacturers in the world. We can stand behind the quality. We're not a first-time biologic manufacturer, which the other local companies are. This has been developed in conjunction with one of the very top players in the world. I think the second thing is on our clinical trials, we're running clinical trials with this asset all across the world. All the regulatory agencies are seeing all of the safety data. If there's issues, we're reporting them. We're active everywhere. And we are on a path to get a global approval. We're running trials to do that in several indications. And from that perspective, we think that is a different strategy that does create a more credible, broader, more applicable data set behind this asset. So I think those things are choices we made from an early perspective. We do actually think that they matter. And we hope that the data, as it continues to come in, will look favorable. But we think that there's a lot left in the industry. In terms of next year's national reimbursement cycle, we were not surprised this year that the multinational companies were unwilling to price to reach it. It's a pretty big price discount, and it jeopardizes your core business in other markets. I think we also believe that PD-L1s require a lot more drug, many times more drug, and the cost structure is fundamentally very different. So as you are in China in a lower price market, the attractiveness of the PD-L1s is quite different, and the amount of drug that you would need, from a manufacturing capability perspective to be able to support that, is quite different. So I think that we've never viewed those as similar, independent of the scientific conversation, which one is more robust, which a lot of people believe PD-1 is. So I think that -- we think this is -- has evolved really pretty close to the way we predicted. We think competition next year will be between people who are on reimbursement and the indications at which they're on reimbursement. And it will be a little more of a wild west in the nonreimbursed indications. But even in that perspective, the following year, that space is going to get closed up over time as people work to those indications. And really, this is about broad clinical program and clinical execution. And really, it's not about this year. It's not about next year. It's probably the following year when a few companies are very broadly reimbursed across the vast majority of these indications, and that's when you'll see the true size of the market, and you'll really see where people are.

Yes. I think the follow-up question on that is in terms of the China market dynamics because there are different views from different players, multinational think probably they're going to be larger players in the market, while domestic player think, probably they are going to take 80% of the market share. So what's your view on that in terms of the competition between multinational versus domestic players, particularly like BeiGene as innovative company in China, like emerging with established commercial platform? So what is your view on the split of the market share in the future?

Well, I mean I think it's pretty consistent with what's happening right now. I mean we never -- a lot of people were writing that multinationals were going to take 80% of the market in this space, and we were very surprised by that and didn't understand it. And I think it just was not consistent with what our beliefs were. And I think the way things have played out is very consistent with our beliefs. With the caveat, there's great drugs that are multinational -- there's great medicines that are multinational medicines and their medicines that do have a broader data set, do have a broader quality data set, and there's going to be some market for them at any price point. And I think that they have a place and they have a role, and they're medicines that people will take, and it's good to have them in the market.

Ziyi, this is Howard. Can I just add…

Howard, yes. Sure.

Add a point. So obviously, when you look at the actual data, so let's say, for fourth quarter, last year, this is where we have probably the most complete data in terms of actual sales. That's when I would say that for example, the domestic market -- domestic companies have not necessarily fully participated in the market yet because we're not -- we're not launched yet and some of the big players, which is starting to get into the market and compared to the larger companies for multinationals, Merck and Bristol, had been more entrenched. But even in the fourth quarter last year, the domestic companies had over 60% of the market by value. So I would think that, that's -- it were already a pretty, pretty good indicator that I think there's some advantages. As John talked about, there's an advantage in the domestic industry.

Yes. I think in the China part, I think we -- BeiGene has a really good start. So what is the progress now moving towards potential like regulatory filings in the U.S. and Europe for tislelizumab? I think this is also a very important market and I think a lot of investors are also interested in. Is there any chance we are getting to discussion with potential global partners on that again in overseas in the ex-China market for potential commercialization cooperations?

Yes. I mean I can start and people can jump in if they want. I think that we've had a broad program that was announced at the ASH after we originally partnered this asset with Celgene, BMS. And we're running a lot of studies that we think are globally relevant for that asset. From that perspective, we haven't commented on what our filing time would be. But there's lots of studies going on. People can snoop around and come up with their own conclusions. But clearly, we're on a path for U.S. label and assuming the studies read out positive, which, again, it's IO, we should never assume everything does. But assuming the studies read out positive, basically, we'd have multiple labels from that perspective. I think this is an asset with a very broad publication opportunity, which could also enable guideline inclusion pretty broadly. So from that perspective, we're very interested in the market. We've been on a path, which is pursuing this and having the capabilities to be able to pursue it on our own. Certainly, people haven't estimated a lot for us outside of China, probably, in their models. But it's a huge market in the U.S. and in other places. And I think we're doing the things to enable ourselves from a global perspective. And from the second point of view related to third-party companies, there's a number of large companies that don't have a PD-1 that could be interested. And of course, we talk to them all the time because it's our job to understand what the best option is to get the medicine we're developing to patients and to do the right thing for shareholders. And we think about and entertain creative ideas with people all the time, but certainly, there's opportunity from that perspective. If it's a path that we think is the most optimal, we'd look at it. It is not to be taken lightly, commercializing a broadly applicable, solid tumor drug across any of those places. At the same point in time, some of the indications that we're talking about that our studies are running in are a much more finite set of -- an addressable set of clinicians to call on were you to begin with an approval in that area. But if you're able to get a broad guideline and broad label, it's a lot to build that and to be successful and finding someone to help you could be the best thing for an asset, but we are always prepared to do things on our own, and we think that's a very attractive option, and we like it for a lot of reasons. But of course, we have those conversations and the details thereof are confidential.

Yes. Great. I think it's definitely -- people are looking at overseas market, looking at ex-China market as one of the key differentiation points for BeiGene compared with other China biotechnics because we are much better positioned in U.S. and the Europe market versus other names. It also comes down to the manufacturing part, because you mentioned that BI is working closely with BeiGene on manufacturing PD-1 antibody. But going forward, we are -- I think BeiGene is also building your own manufacturing capability in Guangzhou. So is there any upgrade -- progress on that? And in the future, I mean, what is the balance between using the CMO and also using your own facility? How we're going to look at the potential of the capacity allocation in-house and out, so using external partners for that?

Sure. So maybe I'll answer vaguely and Howard can be prepared to answer more specifically what we're allowed to say specifically because I'm not sure what we've said and we haven't said. But basically, we started with BI, and it's great to have somebody with that reputation and that expertise for the first thing you're doing. We have built a state-of-the-art manufacturing facility in Guangzhou for biologics. And that facility is operational and has an initial set of capacity, a stage-2 set of capacity and a stage-3 set of capacity but actually will be a very large manufacturing facility for biologics that is functional in the next 2-year time frame. It will be functional much more quickly for stage 1 and stage 2, but all of those stages are either complete or near complete or in progress, from the manufacturing perspective, from the building perspective. In terms of how we felt there, we've kind of fallen into the ability to build a truly exceptional team. And I think we do believe that at the price point that exists in China, not just being able to manufacture, but being able to manufacture with excellence is a really important capability. And I think it's an important capability for ourselves. I think it can be an important capability for companies that we want to partner with. And I think that it's a good asset to have in your organization at this point in time when potentially, there's a lot of pressure on biologics manufacturing from many of the things associated with COVID. So we're really happy that we've built that capability. I think that given the current state of the world, it's probably important for organizations that have global aspirations to have supply sources in multiple places. So an obvious follow-on question is what are we thinking of doing in other parts of the world to make sure we have manufacturing capability internally or externally there. And I think that's a good question that I wouldn't answer. But I think I've set it up. So Howard, I don't know if you want to add any specific details. I just don't know what we've said or not said.

Yes. I think we've said that we started our biologic manufacturing for tislelizumab with Boehringer Ingelheim in their facility is 2,000 liters. We're working with them to expand that capacity at BI, doubling that. So that's ongoing. We're also -- we have a Guangzhou manufacturing facility that's already up and running with 8,000-liter capacity. So it's already running. We had the opening ceremony at the end of September last year. So we're -- so they're producing. Obviously, there's a process of getting the regulatory approval to be able to source that commercially. And so we were very much actively involved in that. And that -- also, the Guangdong facility also is being expanded, I would say, ultimately to around 50,000-liter capacity. So obviously, it will be a very large facility that will supply not only tislelizumab, but also potentially other biological -- biologic candidates that we have in the pipeline or where the substantial pipeline were ready. So I think generally, as John said there, the goal is to have good capacity to be able to support the commercial market certainly as seen in China potentially elsewhere in the world as well.

Yes. Thank you, Howard. I think that question is more on our early-stage programs because BeiGene now, we got some of the core products and near commercial -- the commercialized products, but given we're more positioned, BeiGene, still has R&D engine. So what are the key focus in early-stage discovery works in BeiGene now? And particularly, the world evolving -- the oncology market is evolving with more and more like specific new targets and then mechanism-like actions coming up. So what are some of the targets you find is promising in the space that BeiGene is probably looking at?

Howard, do you want to start and I'll finish?

Eric, were you -- sorry.

Howard, do you want to start and I'll finish?

Oh, sure. So yes, so I think that this -- we have both in-license and also internal pipeline. So I would say that from an internal perspective, we have TIGIT, obviously, that we -- it's an area that's of high interest. We have a good candidate that's in development. And we'll be -- we're looking to advance that based on the totality of the data. We have also, on IO side, we have a nonligand competing OX40 antibody. So even though OX40, as a class, there's a number of other or OX40 antibodies, but this is -- this, we believe, does not suffer from the issues with other OX40 inhibitors in that they're -- they compete with ligands so therefore, there is a sort of inverse U-shaped dose response. This -- ours is an agonist anybody that does not compete with the ligand. So it's unique and that's in the clinic. We also have a Bcl-2 inhibitor. That is, as you know, that's a very challenging class from a medicinal-chemistry perspective. So we have, we think, a very interesting compound. There's going to be some preclinical data presented via AACR, too, I guess, in the coming couple of weeks or so. So I think certainly the importance there is, is that we will have the ability to combine with our BDK with BRUKINSA. We'll have a wholly owned combination of Bcl-2 BTK inhibitor, which we think will be -- could be important as the treatment landscape, potentially, that is evolving into more finite treatment duration in that for patients. We've shown some data -- or investigators have presented data on some proof of principal data for this type of combination, which we think were quite encouraging. So for -- on the non -- from a partnered assets perspective, there's also other -- a number of other things in our pipe. From partner assets, we have sitravatinib from Mirati. We have ZW25 and ZW49 from Zymeworks. Now obviously, a broad set of assets from Amgen, probably highlighted by the KRAS inhibitor, AMG 510. So there's very, very full early-stage pipeline.

Great. Howard, thank you so much. I think we are running out of the time. So I'm going to turn the call back to John, for you to wrap up. Thank you.

Sure. Thanks so much. I think that it's easy in a forum like this to just go through the assets and the data and the things that are needed to do a quick NPV off of the most current several opportunities. And I think we chose not to do that as much today. I think people do that. I think that the real vision we have for the company has always been to be a transformative company. I think in terms of who we are and where we are today, largely, we've been able to achieve our vision for the first 10 years. And I think that we're thrilled with that. We have some very unique capabilities. And probably, they're 2 of the most important unique capabilities for today. Their excellence in clinical trials given the ability to accelerate global clinical trials through a China-inclusive trial structure with 1,200-plus team, it's hard for anyone else to build that. It took us a long time to build. It's not easy. The second is this science- and medicine-based commercial team led by Xiaobin with an attractive current commercial portfolio and very big pipeline behind it, and it can help build and recruit an incredible team for helping bring these medicines to patients. I think that those things are strong value propositions for our internal assets. They're also strong value propositions that create a really unique opportunity set for us from a business development perspective, where we have sources of value to add that no other companies in the world have. So I think that, that's where we are today. Where we think we're going in the future is we think we really can be the transformative company that we hope to be. We do believe that medicine's going to become more affordable over time. Some of that may be driven by policy, some of it may be driven by competitive landscape. But as that occurs, we're positioned with a cost structure where we can be highly successful in that sort of a world. And I think that where you'll see BeiGene going and is building towards the world that it believes we're going to have in 2030 when we get there. And I think we do have a handful of next steps where we believe we either can further our strategic competitive advantages and the depth and breadth. In clinical, there are several additional things we're working on we're not talking about. But I think as we do that and we build towards these capabilities, we truly believe we're unbelievably uniquely positioned for the major transformation that's occurring right now. And if there's any set of cards we could have in the industry at the moment, we'd like to have ours, and we do. So with that said, I think you'll continue to see us invest in great opportunities. You'll continue to see us invest in great people and build and grow our team in the appropriate ways to do that. And hopefully, you'll see a lot of the science translate into the promise that it has, which is really impactful medicines for patients that are affordable. So thank you for letting us be part of things. It's a real pleasure to be here.

Yes. Thank you very much, John. Thank you, Howard, and thank you, Eric. Thank you for joining the call. Thank you.

Bye-bye.

Thank you.

Bye-bye.