BeOne Medicines AG (ONC) Earnings Call Transcript & Summary

Good afternoon, and good morning, everyone, and welcome to the JPMorgan Healthcare Conference. My name is Ling Wang. I'm a senior China healthcare analyst here at JPMorgan. So our next presenting company is BeiGene, a leading biotech companies in China that is dual-listed on NASDAQ and Hong Kong Stock Exchange. So presenting for the company is the CEO and Chairman, Mr. John Oyler. Before I turn it over to John, I just wanted to remind everyone, there will be a Q&A session right after his presentation at this same Zoom meeting. [Operator Instructions] So with that, John, thank you so much for being with us today. Let me turn this over to you.

Thank you, Ling. Hello, everyone, and welcome to BeiGene's presentation. I'm John Oyler, the CEO and Co-Founder. Thank you to JPMorgan for having us here today. We've heard from many investors that our story is complex, and it can be hard to understand. I understand that. I get it. My goal today isn't to provide the details that are already existing in many presentations on our website. My goal is to provide a much broader context to help our stakeholders understand what we're trying to accomplish and why our unique features as a company are critical for the future. Could you please turn to Slide 2. Before we continue, please be reminded that I'll be making forward-looking statements in today's presentation, and our business carries certain risks. Some of these are discussed in our filings with the SEC and the Hong Kong Stock Exchange. Please turn to Slide 3. Our industry is undergoing a once-in-a-lifetime transformation. It's dramatically changing the key success factors, and it's creating new leadership opportunities. BeiGene has been building sustainable competitive advantages since our inception that meet the key success factors for the future of our industry. The industry transformation is going to be fast, and it's going to be furious. And we're aggressively investing and working relentlessly at the forefront of these changes to become one of the most impactful oncology companies in the world. Please turn to Slide 4. As I said, we're a different type of company. We've been built fit-for-purpose for the future or not like any of the other companies you're seeing at this meeting. I'm not going to focus on what we're not, but let me focus on what we are. We are a headquarter-less global biotech company. We have a 500-plus research team that has delivered and is growing to more than 700 by year-end, and this makes us one of the largest oncology research teams in the world. We're commercializing our own internally developed medicines in the world's 2 largest markets, and we have a fully integrated 5,200-plus team. We're free from relying on CROs to do our clinical development globally. We have a leading science and medicine-based oncology commercial team in China that's at scale, and it has approved medicines and a deep and promising pipeline. Can you please turn to Slide 5. That said, it's still early in BeiGene's journey. Our mission is to build the first next-generation biotech company, one that brings the highest quality therapies to billions more people rapidly around the globe. We're proud of what we have accomplished, but we're certainly not complacent. The time for change in our industry is now. An investor and a mentor of mine who I deeply respect recently suggested that we should relax. BeiGene has a substantial market cap, lots of cash and generally has been more successful than he could have imagined. But I'm here to say, we're living in the greatest time of opportunity ever in our industry. Change is coming fast and furious. It's going to dramatically change the key success factors, and it's going to create new leadership opportunities. Our BeiGene team knows this. We're redoubling our efforts, and we're not resting on our laurels. We wake up early and we stay up late. We're excited, and we remain committed to affordably bringing impactful medicines to billions more patients around the world. We're willing to invest the time, the money and the effort right now that's required to become one of the world's most impactful oncology companies, and we're just getting started. Please turn to the -- we're investing in a promising pipeline that continues to build on our unique strategic advantages. And it realizes new opportunities for the industry as it rapidly transitions. Our aspirations for 2025 are to be recognized for the strength of our research pipeline in internally developed medicines, to be a top 3 commercial oncology company in China, to have the best global clinical organization in the world full stop, and to keep a strong commercial presence in the United States and global commercialization that includes often neglected parts of the world. Lastly, we want to be a partner of choice to biotech, pharma and scientists and other entrepreneurs. We're fighting cancer together. And we should be doing that as best we can. Please turn to Slide 6. The biotech industry is more impactful than ever. Yet we still have massive issues to address. It still takes 10 years to get new medicines to patients, 3 in 10 Americans and 8 and 10 patients worldwide cannot afford their needed medicines. The key challenge for our industry is how we can work more quickly and more affordably to get these impactful medicines in the hands of patients. Please turn to Slide 7. Our industry is going through a transformation of time. There are shocks to the industry that I'd like to talk about in the next few slides. When we started, the industry was entirely U.S. price centric, value was predominantly captured in the top 10 markets, fragmented regulatory processes worldwide created delays in duplications and there was a view that science just wasn't working. There were high prices, which increased annually. China was largely absent from the worldwide landscape of research, clinical science and commercial, and clinical science in our industry was predominantly outsourced despite the fact that it accounts for 90% of the time and 90% of the capital required to bring a medicine to market, and capital was hard to come by 10 years ago. Let's take a minute to talk about the so what’s behind each of these forces of change. Please turn to Slide 8. And I'm going to turn quickly. Science is working better than ever, and it's helping patients. This means there's more attractive research opportunities than ever. Please turn to Slide 9. Regulatory reform, global regulators understood that it was taking too long to get new medicines approved. And they made a tremendous series of changes that have accelerated the time frame and reduced the cost of getting medicines to patients and reduced duplicative work. Please turn to Slide 10. We'll take a little longer on this slide because it's important. China removed long-standing clinical barriers and joined ICH. This had a profound impact. It promises to accelerate and reduce the cost of development dramatically. Clinical trials, again, account for 90% of the time and 90% of the cost in developing new medicines. We're an upfront cost industry by nature. And when you factor in that patients in China are many times more likely to enroll in clinical trials, this more than doubles our patient proof and can dramatically reduce overall trial time lines. It's possible to shorten the clinical development time line by accessing China clinical centers, and that leads to reduced costs, not only in China, but across all sites globally. Please turn to Slide 11. China is also now reimbursing innovative medicine. They've become the #2 market, but reimbursement is at a very different price point. Lower price points in China versus the U.S. bifurcates the industry between its 2 largest markets. This effect has worldwide ramifications, including enabling affordability for billions more people globally. And for the first time, there is a need for large-scale science and medicine-based commercial presence in China. Please turn to Slide 12. I think as we all know, it's a time of capital inflows like the industry has never seen before. This is wonderful for research, wonderful for patients, but it creates competitive dynamics that our industry has never seen before, speed and scale will matter in the future. Please turn to Slide 13. And of course, there's global pricing pushback, and it's not going away. We read about it all the time in publications from [ Force ] to JCO to [ Staff ] and many others. Affordability is our industry's key issue. Please turn to Slide 14. So, what's the implication of these shocks that we just talked about? Highly inclusive China clinical trials are now enabling profound speed and cost advantages. But there's a very limited talent pool, and this constrains the ability to ensure global quality and access to this great promise. There's a bifurcation of pricing in the 2 largest commercial markets, which presents challenges for industry leaders to meet China NRDL pricing without jeopardizing U.S. pricing. And there's readily available funding, which is creating tremendous competition, and affordability continues to be challenging. So how do these implications change the keys to success moving forward? First, you must always be excellent at internal research. This is the heart of our industry. And since science is working, it's more important than ever. Second, clinical excellence, again, the key thing our industry needs to do well. 90% of the money and time. It's very important to be able to run China inclusive global programs. And again, the talent pool makes it challenging. It's hard to do this with CROs. They have all the same challenges with talent. And in-sourcing for this function, whether it's in China or globally, enables the company to maintain operational excellence. This is the key function where we must be excellent, and there's lots of room for improvement. Most players outsource this, although we think it is truly the key competency you need as a medicine developer. We think it's essential to own and optimize it. Global market access matters. It's no longer enough to be a regional player. Going forward, you must have science and medicine-based China commercial team that can help your medicine get to market, and it has to be at scale. Lastly, speed and scale with the competition that's occurring and internal capabilities are critical. Agile decision-making and a culture of great communication within and across teams and trust is necessary. The white circles on this slide show you where BeiGene is on these metrics today. And as we move to Slide 15, I'll explain how we have competitive advantages that we've built that map to these success factors. Please move to the next slide. Today, our research organization has delivered more than 10 molecules into the clinic in the company's first 10 years. 2 are now in the market. This is an amazing feat. Today, our team, again, is 500, and we're running about 12 full-time preclinical programs. The team is growing through the opening of a new research center in Shanghai, and we'll double the size of the programs we can run and the organization will grow to roughly 700 people. Our team has delivered a whole new set of interesting candidates that we've just started talking about, including our TIGIT antibody and a potent BCL-2 inhibitor. We're making strategic moves beyond oncology, as I think you've seen with some of our recent collaborations. And finally, we've built our research capabilities. We've taken the opportunity for the organization to add cutting-edge technologies like bispecifics and PROTAC. Please turn to Slide 16. On clinical development differentiation, clinical development, of course, is critical. Excellent in the area is a key differentiator and a strategic competitive advantage for our company. It's the core of things. And in the new world, you have to be global, internal and scalable. Again, this is the core part of the time and energy needed to develop a new medicine. And we believe the only way to do this is to have China inclusive clinical trials in their development. We have built this capability internally, and our competition in China has not done this yet. This is a key differentiator. We're faster, more efficient and we enjoy advantages because of these capabilities. Our team in this area is 1,600 people strong. Over 12,000 subjects have been rolled on our clinical studies. Nearly half of these are outside of China. We've had over 60 studies ongoing around the world, and zanubrutinib is emblematic of our approach, with approvals in 2 countries and 19 more filings that are already covering 43 countries and more to come. These capabilities are difficult to replicate, and even if one could, BeiGene would be far ahead of some of its competition. Please turn to Slide 17. By maintaining our clinical platform internally, BeiGene can conduct world-class quality studies faster, more efficiently and at lower costs. Some of the benefits of building internal global clinical team at scale, as we have, are evident here in this chart. You can see our efficiencies enabled us to go faster than companies of much greater size as we develop BRUKINSA and tisle. We've done this without sacrificing quality, which we believe is validated by our approvals and our high-quality collaborators, Amgen and Novartis. The cost savings in China inclusive studies are highly variable, but they can reduce clinical investment anywhere from 10% to 70%. And that's real money anywhere in that broad range. Please turn to Slide 18. BRUKINSA is our second-generation BTK inhibitor. It's been consistently exhibiting safety and efficacy profile that we believe is best-in-class. We believe this is based on attributes of the molecule, such as a full 24-hour coverage of BTK and minimal off-target binding. We have a broad program for the medicine, including head-to-head studies, one of which ASPEN has already read out. I'll show some of that data shortly. The asset is approved in the United States, and that's also approved in China. Please turn to Slide 19. We ran this bold head-to-head study that most of you may be aware of. And the primary endpoint here is VGPR plus CR. In that area, we had a VGPR plus CR rate of 28.9 for BRUKINSA and 19.8 for the first-generation molecule, ibrutinib. This didn't meet statistical significance. But what has been striking about the overall program is the consistency with which BRUKINSA shows strong numbers, often stronger than ibrutinib. You can see that for PFS OS results here BRUKINSA is also showing better data on the safety front. And one example shown here is the chart on the right, showing that there was far more afib seen in the ibrutinib arm than in the BRUKINSA arm. Could you please turn to Slide 20. This is the overall safety profile from the study, and we're sharing that so you know we're not cherry picking data. Please turn to Slide 21. We want to talk for a moment about tisle. I think both BRUKINSA and tisle really show the power of our research organization and the power of our clinical development organization and demonstrate using these keys to success. Turning tisle. This asset, which we see as a clear advantage, including differentiated mechanism and binding epitope. We've run a large global program. It includes over 7,700 subjects, of whom greater than 2,500 who are participating outside of China. You can see brief summaries of some of the data here, and the program broadly encompasses many studies in many countries, including lung, liver and bladder cancers. We announced just yesterday, our latest approval of the asset in first-line lung cancer in China, and I'll show you some of the data shortening. This adds to the 2 indications that are already approved in China, and there's many more filings coming. We expect the first ex China regulatory filing this year, and I'll discuss that in a bit. Could you please turn to Slide 22. This is the efficacy data from the frontline study that was the basis for the approval in this indication announced yesterday. The study and the study in non-squamous were both stopped at their interim analysis. And you can see the clear separation between tisle containing arms and the control arms that led to these studies being stopped early. This was announced in January of last year at data, and the NDA was accepted in April of last year, and as I said, it was approved yesterday in China. Please turn to Slide 23. This is the safety profile associated with the study and again, shows on the quality of this PD-1 antibody. Please turn to Slide 24. In addition to the clinical capabilities, providing access to patients globally is really the third key success factor, and BeiGene has built a robust science and medicine-based team in China that's creating a strategic competitive advantage for the company. China is a market where scale is a must, and we're feeding one of the largest commercial teams of the oncology companies in China, and it's complemented by our R&D organization of over 2,100 people globally. We believe that our science and medicine-based team sets us apart from the competition. The quarterly product revenue growth that you see on the left was powered by the 5 successful launches that we've had in the last 4 years. This includes the launch of BRUKINSA, which set a new record for speed launching just 12 days after approval. The tisle launch, which was also very successful with our differentiated PD-1 achieving mid share rank already. This is despite launching during the global pandemic. And by the end of 2021, we could be commercializing up to 12 products. Can you please turn to Slide 25. Another strategic competitive advantage for BeiGene is our global reach. We are a truly global company, which sets us apart from many other biotechs. We have 23 offices in 5 countries, a team of over 5,200 in 14 countries. We're running trials in 28 countries that have enrolled over 12,000 patients, almost half of whom are outside in China. And BRUKINSA, our first internally developed medicine to be approved is on the market in both U.S. and China, and the subject of 19 other filings covering 43 countries and growing. We believe that global reach is absolutely critical in the future, and we're going there. Please turn to Slide 26. Moving to manufacturing. It's become increasingly apparent that if you want to move at speed and control your costs, you must own your own manufacturing. We have built a state-of-the-art facility in Guangzhou that has 54,000 liters of capacity in the ground today and is being built out to be sized anywhere from 120,000 liters to 200,000 liters. We also have a facility in Suzhou that's multifunctional. With these 2 facilities, we have the capability to manufacture antibodies and small molecules, and we're planning to expand into cell and gene therapy and other modalities. These facilities have or are planned to have a full suite of downstream capabilities such as lyophilization, fill, finish and packaging, and we believe that we're in a leadership position to moving to a paperless system in China of all the biotech companies. We're working deeply with partners to collaborate with the best in the world, and we always have a multiple supply source strategy for our key assets such as BRUKINSA and tisle. Please turn to Slide 27. I hope it's clear that BeiGene is well positioned to be the partner of choice for firms that wish to gain a foothold in the opportunity in China's biopharmaceutical market and also utilize China as a meaningful part of their development programs. We've built a lot of hard-to-replicate capabilities, and we want to leverage them. We want to leverage them for our assets, but also for our partners for anything that can ultimately help patients. We have a long track record of working with some of the best companies in the industry, including Amgen, and most recently, Novartis. But we're not done. We expect to continue to be a collaborator and to do many more collaborations and are confident that we have the capacity and the capabilities to help companies with great potential medicines, bring them more quickly and more effectively and more cost effectively to patients. Please turn to Slide 28. This brings us to the collaboration with Novartis. And I'm sure a lot of people want to hear about it. It was announced earlier this week. So let me just hit a few highlights on that subject. The rationale for the deal was to provide truly excellent combination opportunities across our portfolio and Novartis's. It was to accelerate the rate at which we could bring tisle to patients in some of the more established markets. It was an external validation of the quality of tisle. It's the first approved therapy to come out of our IO Biologics program. And we are developing it globally as an asset, and it's differentiated by mechanism. And it's an opportunity for both companies to really learn and build together. And we, through the way the deal is structured, can build some commercial capabilities in North America. Describing the terms, the Novartis territories in North America and the EU and Japan and 6 other European countries, and we retain the remainder 70% of the world's population, including Australasia, ex Japan, South America, Middle East, Africa and so on. This means that BeiGene maintains commercial rights for tisle in markets that we care about building capabilities. The deal structure supports this vision. In the deal, BeiGene will receive $650 million upfront. It will receive $1.55 billion in potential regulatory and sales milestones in addition to product sales royalties. The foundation of the arrangement is tisle's attractive features and the depth of its program and support behind it. The molecule's features are highlighted in epitope binding and Fc gamma receptor sparing. There's a broad clinical development program, as we've said, that is quite far along. 8 of 15 registration trials have been completed or are enrolled. Critically, we expect the first ex China regulatory filing this year. And we're supporting the program with dual manufacturing from BeiGene and BI at the moment. Let's move to Slide 29 now, and we'll look at some of our milestones. I'm not going to strain your eyesight, and I don't expect you to read everything on this slide. I'm just showing you it to give you the impression of all the progress we've made and what we have in store. In the past year on the left-hand side, the tenth anniversary of our start, we were filled with tons of achievements. We kicked off 2020 with the Amgen deal, and we closed the year by learning that 100% of our therapies submitted for consideration on the NRDL were added. 2021 has already kicked off with the Novartis and Strand deals, and that's just the beginning. We expect it will be a very exciting year. And just yesterday, we received a wonderful news of our newest approval, as we mentioned, and this shows that tisle has received approval finally in squamous lung in China. We're planning for multiple readouts and filings and potentially adding 5 more commercial products to the current 7 we have approved today by the end of the year. Can you please turn to Slide 30. What we just described to you shows the BeiGene's value proposition is more than what you just see in the pipeline today. We're aiming at where the puck is going. And we're executing across the key success factors that we've talked about. We have an extremely productive and growing research team with a track record of success. We have internalized highly China inclusive clinical development, driven by a large team of 1,600 plus. Like no other company in China, we have a science and medicine-based team at scale and growing. We're currently present in the 2 biggest pharmaceutical markets in the world, and we're expanding rapidly to the rest of the world ourselves and with partners such as Novartis. Finally, we believe that success in the future is going to require speed, which in turn requires that you control your own destiny, particularly in the areas of research, clinical development and manufacturing. We've internalized these critical capabilities. And lastly, BeiGene has the right culture, one built upon next-generation communication, agile decision-making and trust across geographies and functional areas. Could you please turn to Slide 31. The last thing I want to cover is our financials. We're in incredibly strong financial position. We have wonderful investors. We have a growing commercial business with more than $4 billion in cash, and this doesn't include the $650 million expected from the Novartis collaboration. And as most of you know, at this point, we filed for an IPO on the Shanghai Star Board, and this is expected to bring in additional financing to the company. Could you please turn to Slide 32. In summary of the presentation, what I'd like to leave you with today are these key points about BeiGene: First, we've built a transformational strategic model that anticipated once-in-a-lifetime opportunities being created by worldwide industry changes. Secondly, we've built and we continue to build strategic competitive advantages that map to the key success factors required by our evolving industry. Third, we're fighting for life every day against cancer, internally and with partners, and we're striving for exceptional science, quality and impact, but we're also very focused on driving cost effectiveness to enable affordability through operational excellence and efficiency in the new model. Lastly, BeiGene is pursuing the mission that we established on day 1. We're striving to bring better medicines more affordably to billions of more patients around the globe. Thank you, and I look forward to your questions.

So thank you for the terrific presentation, very insightful. So thank you very much. Now we can start the Q&A session. [Operator Instructions] So John, I would first let you introduce your team here.

Terrific. I'm going to be joined by Dr. Xiaobin Wu, who's the President of our company and our GM for China; by Howard Liang, who's our CFO and Chief Strategy Officer; and by Angus Grant, who's Head of our business development functions. Welcome, gentlemen.

Welcome, everyone. So I have a few questions here, and we also have a few questions already from the audience. So congratulations on the deal with Novartis. It's really a terrific deal. Can you -- obviously, Novartis see great value for tisle. Can you provide some additional insights on the background of this deal? And also more broadly we've seen several PD-1 antibodies out of China to go abroad now with -- via partners.

Sure. Well, maybe I can start, and Angus could add a little color. We don't speak to the nature of the conversations we have for BD for obvious confidentiality reasons. I think what we can say is the deal that we've done, I think, truly validates the investment that we've been making in this asset. I think a lot of people have asked us questions over time. Why are you doing all this stuff globally? You could just run smaller trials in China, be focused on the China market. And how are you going to compete with the players that are doing that? And I think that with the completion of this deal, it's very obvious the value in developing an asset with global quality with a global development program and scale. And it's very obvious at developing an asset that is very strong and has the potential for differentiation is critically important. I think this asset now has been partnered to Celgene and partnered to Novartis once it was returned when Celgene was bought for BMS. But actually, the funding that the PD-1 program will bring into the company through partnerships is over $1 billion. And I think that more than compensates for any additional expenditure we've had for running a very broad program in a very external to China program. The actual number of patients that are on trials or have been on trials that have read out on this asset, it's one of the largest, most characterized PD-1s out there. Of course, there's more data for KEYTRUDA and OPDIVO, but I'm not sure if any of the other assets have done this widely studied in the clinic. So there's a lot of value in that. And I think people weren't really sure about that. I think this does validate that. Do you want to share a little bit more, Angus?

Sure. I think it's -- obviously, the work that was done between BeiGene and Celgene created additional value in the asset by building this very broad and deep portfolio of clinical trials, but also clinical trials that were designed to support registrations globally. And that may be something that differentiates the program. And obviously, we think Novartis appreciated that effort. We had terrific conversations with them about the collaboration. And I think you'll see in the deal structure also the ability to continue to explore tisle in combination with novel assets in both the BeiGene pipeline and the Novartis pipeline. And I think that's really part of the exciting piece of this deal structure going forward.

Yes. I think the other thing I'd point out is the deal structure. It's -- the other deals that are largely being done from China are ex China deals. That's not the nature of this deal. It's U.S. It's North America, Europe, plus some countries and Japan deal, where we did retain Asia and Latin America and Middle East and a lot of the world. That's important to us. It's a different structure. The other thing about the structure is with co-detailing possibility, that enables us to build capabilities in North America that are helpful to us growing up as a company globally over time. So I think those are also important deal features, which are quite different than -- and they're important to us because of the company we just talked about that we want to be.

Great. We have a few questions from our audience. The first one is, you have a very impressive pipeline. You mentioned that you aspire to reach global commercialization, including often neglected part of the world. The question is, does this include emerging markets, the Mid East or the North Africa area?

I think that we're interested in getting medicine to as many patients as we can globally. And we do think that companies that choose to meet the Chinese NRDL price are at a price that is often not available to patients in the next parts of the world. And from that perspective, at those prices, there probably is a lot more ability for countries and for patients to access those medicines. And that's the best for everyone. Everyone wants that if we can make that happen. So there's great interest in it. And that's an area that I think just hasn't been a predominant part of the innovative section of our industry historically. But I think on a moving forward basis, we believe the world is changing in a way where there can be innovative medicines getting to patients in many of these places, and it can suddenly become an important part of our industry, and we're committed to trying to make that happen.

The next question is, what is the current status of your BCL-2 inhibitor? What's your clinical development strategy on this asset?

Sure, Howard?

Yes, Ling, this is Howard. Maybe I can provide some background. So as you mentioned, we have a BCL-2 inhibitor that we did develop internally. This is currently in clinical trials in dose escalation, and we're starting to combine it with our BTK inhibitor, BRUKINSA. We're -- we presented the preclinical data last year. It shows that the drug has not only good activities, but also potential activity against resistant mutant to venetoclax. So we're -- it's a potentially differentiated BCL-2 inhibitor that will develop the opportunities to develop as monotherapy. But probably even more importantly, there's opportunities to develop it as a in combination with BRUKINSA. We -- as you know, we wholly own both of these assets. And I think that creates an opportunity that's unlike some of the [ associations ] where these -- the assets are entangled by their multiple party interests in those -- in other combinations. So we're -- we'll be -- we're likely be presenting additional data later this year at the upcoming conference. But we're happy with the progress that we've seen to date with this agent. And that is, as your questions implies that, we do believe it is important part of our early-stage pipeline.

Thank you. Although we have more questions from the line, I guess our time is almost up. But -- so congratulations again on the great progress, we will see -- look forward to see additional progress from the company. Thank you.

Thank you.

Thank you.

Thank you. Bye.