BeOne Medicines AG (ONC) Earnings Call Transcript & Summary

And good morning, everybody, or good afternoon or even good evening in this case. Thank you once again for joining us for the 42nd Annual Cowen Healthcare Conference. I'm Yaron Werber, biotech analyst, and it's a great pleasure to moderate the next fireside chat with BeiGene. Today, we have with us John Oyler, who is the CEO; Julia Wang, who is the CFO; Lai Wang, who is the Global Head of R&D; and Kevin Mannix as well, who's VP of IR. So ladies and gentlemen, thanks for joining us. Always good to see you.

Thank you. Pleasure to be here.

So we have a half hour and BeiGene is becoming obviously a fairly big company with a huge pipeline and now 2 or actually 3 marketed products that you got approved and then a few other from your partners as well. So I think you have about 7 or 8 drugs now in China. Let's start with Baize'an or tislelizumab, your PD-1. And I want to double-click on a couple of things. One, I want to talk about the emerging dynamic commercially in China. But maybe before we get to that, let's talk about FDA recently hosted an AdCom for Innovent and Lilly's sintilimab. They're really shaping a little bit about how the FDA is thinking about approvals in the U.S. And essentially, in this case, I think the stance they are taking on PD-1s is that China-only studies are probably not going to be sufficient because of differences geographically and in patient population, the standard of care with respect to garnering approval in the U.S. Now of course, BRUKINSA was actually the first drug approved ever, largely based on Chinese data, on efficacy for MZL, but of course, there was a lot of data from both the U.S. and Australia and safety from other indications. But maybe, John, for you, how is that changing your thinking about what it's going to take to get approval in the U.S?

Sure. Well, I think there's 2 parts of what you're going to ask. One is commercial, about the market; the other is regulatory. Maybe Lai, our R&D Head, can talk about our views on the regulatory topics.

Thanks, John. Thanks, Yaron, for the question. BeiGene, we are not surprised by the outcome of this old deck and we find that this is actually quite consistent with FDA's President. FDA has always been consistent with their requirements. We have not seen much change in the position from before. Usually, FDA requires data representative of the U.S. population. So usually, you need a multiregional clinical trial applicable to the U.S. patient population. And also the trial needs to be designed in a way to be relevant to the U.S. medical practice. Also, FDA always strongly requests the sponsor to have a pre-pivotal trial meeting with the agency. In addition to that, they also want the statistical plan with a relevant pre-specified endpoint. BeiGene has been running and will continue to conduct those kind of multiregional clinical trials to have a diversified patient population qualified for global clients. To date, our tislelizumab program has enrolled around 9,000 patients around the globe and 3,000 outside of China. There are 11 global pivotal studies involving Tisle in common indications, including lung cancer, esophageal cancer, gastric cancer and liver cancer. Our broad program will support Novartis filing in that term.

And Lai, to your point, you are running global pivotal studies. Is that totality of experience, which, when you're applying for an X, Y, Z indication, in this case, it's lung cancer, I think it looks like we're going to move to second-line lung cancer in the U.S., and of course, that's based on the global study. It looks like in Europe, obviously, with your partner, Novartis, you're going to be filing for first and second line, and that's based on the Chinese first-line studies and global second-line studies. So reading between the lines, at least based on your filing plan, there's a slight difference between EMA and FDA so far. Is FDA going to require efficacy data, including U.S. populations from now on? Or is it going to depend on the indications. For example, NPC, where it's fairly rare, maybe preponderance of data out of China is okay, but maybe for lung, where there's plenty of patients in the U.S., they are going to mandate first-line U.S. patients.

I think you're absolutely correct. FDA has mentioned very clearly, it's really dependent on several different dimensions within the histology, the patient population, distribution between the different ethnical background as well as the unmet medical need. So we do believe there are certain flexibilities and it probably varies from one indication to indication. Lung is clearly going to be different from nasopharyngeal or liver, HCC. But I don't think that there is a very clear buy in terms of what exactly percent of patients will be reported. But we do believe BeiGene has run a broad program with representation from different ethnical background, which will help us not only register in the United States, but also in other countries and regions around the globe.

And how does that fit in back into the commercial question, the commercial opportunity than in the U.S. and Europe? How are you thinking about it? Because it looks like there's going to be a fair amount of PD-1s at least trying to move to the market. The breadth of the label is going to be important. When you look at TECENTRIQ, TECENTRIQ is cheaper than KEYTRUDA. KEYTRUDA by virtue of not taking price increases. So price alone has not really driven uptake as much. So do you think Tisle is going to be a real commercial opportunity? Or is it going to be an opportunity to then layer on TIGIT on top of it and that combo will be really a winning combo commercially?

Sorry, maybe I can comment on that one. I think we believe both. We think there's a substantial commercial opportunity on its own. In addition to that, of course, this is one of the fundamental building blocks of everything you're going to do in cancer, especially in IO in the future. So we're looking at it both ways. Specifically in the U.S. and in Europe, we have the benefit of having a really strong partner that knows the market incredibly well, also has a good combination pipeline to help us build the right solutions for the future. But I think in that area, it's hard for us to be specific because they're our partner and we have restrictions. But we are looking at it both ways, commercial opportunity on its own and to layer on more for sure.

Yes. And John, what's the -- obviously, there's 3 or 4 major brands in China: you; Innovent; obviously, Hengrui; and KEYTRUDA. KEYTRUDA is at premium pricing, does not have NRDL placement. You just went on the NRDL with a broader access now. How are you thinking of pricing for the next 2 years and especially given that you are expecting approval for ESCC MSI-high and NPC this year? Would you want to get on NRDL next year for those 3 indications or does that depend on timing?

Yes. Look, I think that -- it's always perspective. So take it all with a grain of salt when you hear CEOs talk about what's going to happen in the future involving regulators. But I think we strongly have always felt that there's been a watermark in China, which was RMB 100,000 per year. And for years, that's been talked about as, as long as you're below that, no one's going to complain you're not affordable. While PD-1s broke through that barrier a long time ago, it's my personal opinion that government didn't drive them there. Companies drove themselves there. And I think at this point, there is a lot of I think sentiment in the industry and broader including a lot of the government constituencies that really, we need to be building an industry that makes sense from an economic perspective. And I think there's a lot of concern about where pricing has gone from that perspective. And I don't think there's a desire to drive that further lower over time in a dramatic fashion. I think indication expansions are going to have token price reductions associated with them, and companies will think about how to group them together and then take a price reduction at the appropriate time. But I think our expectation is that's likely to be minor, not major. And I think from the other perspective, really our view of this market is when you jump back 5 years ago, there really was barely reimbursement. Oncology teams selling innovative medicines of thousands of people didn't exist in China, you didn't need them. And it was a land grab space for who was going to build the commercial teams and had the scale to really become the first leaders. And that's part of the reason I think for PD-1 you saw this behavior. I strongly believe that in China, just like everywhere in the world, you're going to have a highly concentrated industry commercially and that's true in the U.S., it's true in Europe, it's true in Japan, it's true in Korea in oncology. And when you look at other industries in China, it's true in every other industry in China. So I think for a while, there was this thought that there were going to be hundreds and hundreds of innovative companies, all that had thousands of commercial people. It just never really added up or made a lot of sense. I think at this point it's very clear there's going to be a few players that are the A players. There's going to be a few players that are the B players. And then other people are going to struggle, but have minor successes here and there. And I think that's largely playing out at this moment. And I think it's clear who's in those driver seats, who's in the first seat, the second seat, the third seat? I think maybe there's a little bit of debate around that. But I think what you need to be successful, you need great current products. And I think you are saying maybe we have 8 products or something. We actually have 15 plus ABRAXANE in China that we're commercializing today with the new Novartis collaboration. And I think on top of that, we have this incredible pipeline that Lai's teams put together and many, many more things coming from that. And at the same time, we've been very active in BD and will continue to be. So I think to be successful in this space, you need a great pipeline, you need the scale of the team, you need to really know science and innovation. And then on top of that, you need to be able to continue to fill up this pipeline with the great innovations that are making the solutions of the future for patients. So I think we're really focused on that, and we've got that in space from a research perspective.

Maybe, John, as a follow-up. How big is the PD-1 market now in China? And again, the last 3 years has been launch years, NRDL placement, price concession and kind of jockeying for positioning and label expansion at the same time. What are you expecting in the year ahead? I know you don't give guidance, but maybe kind of give us broad thinking? As price is now stabilizing, you have the indications you need. How do you look at the next 2, 3 years?

Yes. Well, I think that the market estimates from third parties are that like China PD-1 revenue last year was around $2.3 billion. It doesn't account for the adjustments in inventory. So if you make those adjustments and you look at what the real market probably was, it's probably closer to $2.5 billion. I think from that perspective, we expect it to continue to grow. Last year, the growth was 30%. And there's arguments it will grow at that rate, there's arguments it will grow faster, there's arguments it will grow slower. We'll watch and we'll see. There's certainly -- we're very optimistic because it's still at an early stage of clinical use compared to any of the other developed markets. And it certainly is becoming a backbone therapy, and there's combos for IO, there's combos for IO plus chemo and targeted therapy. And it's just beginning to move in China to frontline neoadjuvant. And I think the other point is the lower price really broadens the access and it lets patients stay on treatment a lot longer. The duration of treatment has been very short in China relative to what you would expect. And so I think all of these things, although price goes down, increase the market size from a different perspective. So we haven't changed dramatically our view of the market. And we also probably would point out that Tisle is really a premium medicine in this space. It's run a global program. We should get global labels, and we've manufactured with BI from the beginning. It's really a quality premium PD-1. From that perspective, we think it's a reimbursed alternative to KEYTRUDA. And actually, if you look at last year and even the beginning of this year, KEYTRUDA has done, I think, better than anyone expected even without reimbursement. And certainly, these are life-saving and changing medicines. And I think people are interested and are willing, when they can, to pay a premium. And I think that we believe there's a real space in this and you're going to start to see the market segment into some different types of opportunities and types of people making different decisions. So -- at any rate, that's our view.

Yes. Great. Julia, maybe over to you, there's a lot going on right now in the U.S./China relationship broadly. And one of the important connotations to all of us and you, obviously, is the impact on the Chinese-listed companies and the new bills moving through Congress to require that all Chinese-listed companies in the U.S. will align with the PCAOB SEC standards for accounting and audit by potentially 2024, 2 years from the bill. What do you think the CSRS, the Chinese Securities Regulatory Commission, what is their stance? And what are you doing to align and be ready?

Hey, Yaron. Thank you for the question. As we know, BeiGene is a global company, and we are confident that we can and will remain active participants on all 3 exchanges and continue to create value for our shareholders. Our ADS on NASDAQ and our ordinary shares on Hong Kong Exchange are fully fungible. Therefore, the investors can trade on both markets. Now as a global company, we have substantial organizational capabilities and footprint outside China. So in that regard, we had evaluated, designed, and are implementing additional business processes and control changes, which we believe will enable us to satisfy the PCAOB requirements prior to the deadline of the HFCA Act.

And maybe a question for you, Julia. We're not doubtful at all that you'll be ready and you're doing what you need to do. But at the end of the day, this is going to require a buy-in from the CSRS and an alignment and a license to get audited in line with those auditing standards. Do you think there's going to be sort of 1 broad policy that covers all companies? Or is it going to be differentiation? If you're a company working in tech and working in a military complex or working on maybe in other areas of biotech that are maybe more weaponry related? There's going to be 1 standard for companies who are doing drug development for broad markets is going to be different standards? So how do you think about it?

Yes. Yaron, so our understanding is a couple of dimensions. Number one, from a macro perspective, the regulators from both countries have been working very closely. And the Chinese regulators have been proactive in wanting to find a solution that works. But obviously, we are not really positioned to necessarily comment on what the regulators might design from a strategy and execution perspective, but in the case of BeiGene, we are working very hard to ensure that we satisfy the PCAOB requirements prior to the deadline.

Okay. In case, Julia, I mean, I know it's early to tell, but in case that there's not going to be alignment at the government level, what happens at that point?

Well, so from our standpoint, once again, we are working very closely with regulators to ensure that we are on our pathway to really meet the PCAOB requirements. And also, as we mentioned earlier, our shares are fully fungible between the ADS on NASDAQ and on Hong Kong Exchange, so investors indeed could trade on both markets.

Okay. Maybe I'm going to move on to BRUKINSA. The brand is doing very well, both in the U.S. now and in China, with a still very much, at least in the U.S., a partial label you filed now for first-line and second-line CLL. Obviously, that's the big indication. I think last time we looked, your share was about 3%, CALQUENCE has low 20s. The remaining is IMBRUVICA, and IMBRUVICA is of ceiling share. Maybe to ask, as you are getting closer to getting a broader label for CLL in the U.S., what's the differentiation, not so much against IMBRUVICA, which is fairly tangible, but against CALQUENCE? How do you compete against that brand?

I might suggest we start with the science behind that, which is Lai, and then we can talk commercially about it. Go ahead, Lai.

So for the BRUKINSA side of it, we always believe we have truly a differentiated angle associated with our complete target inhibition and also the specificity we have demonstrated, this has crossed the -- with 2 large Phase III studies, which had in fact head-to-head fashion to demonstrate in the CLL, we have seen last year. This year has a better overall response rate and also with the interim analysis, we're also seeing a trend in the PFS as well as overall survival. And in terms for the versus acala side of that, if you look at the data, which we have from this head-to-head trial, we also enrolled patients with 17p and q. If you look at our last year's EHA presentation, in that patient population, we're actually seeing a bigger advantage versus in the general CLL population. Whereas acala, in their head-to-head fashion they have shown in ELEVATE-RR study, the PFS hazard ratio was 1.00. Of course, we are still waiting for the final analysis on the PFS side of that, which will be triggered by the events once it hits. We're very excited about it. And ultimately, what we believe what's really driven this differentiation, probably versus IMBRUVICA versus Calquence is really about this deep target inhibition and also that leading to sustained suppression of the BTK signaling and leading to eventually the clinical benefit.

Yes. Thanks, Lai. So if I just elaborate a little bit on that, I think, to that point, we designed the molecule to be 24/7 in the tumor and try to inhibit anything that it encountered and that was the intention. It's very different than acala, it's different than ibrutinib, because both of those have PK properties where they're not at the appropriate levels, even in the blood, much less the tumor, to be able to achieve what you're really trying to do from that perspective. So this was the goal. And I think when we look at the data, there's such a broad set of data for this program. There's many, many single-arm trials. There's the head-to-head trials we've talked about. And across the board, when you look at the data set, it's very compelling. And it's very compelling, although it has not been run head-to-head against acala, we've both been around head-to-head against ibrutinib. And I think when you look at that, when you look at single agent in all these different indications, all these different trials, just numerically on everything, we look better, and there's no statistics and there's all the issues with cross-trial comparisons. But you look at the wealth of data and things you're looking at, it's tens and tens and tens of things. And everywhere you look, safety and efficacy makes you feel really, really good and strong about this asset, and it's all clinical data. So I think from that perspective, we feel very strongly this is going to be the best-in-class asset, and we're commercially doing well, but we're excited to try to work in to, of course, get the label in CLL, which is so important. The NCCN guidance in January is nice, and it's a tribute to our data. And I think we look very strong in that, if you read it, and it's comparative, too. At the same time, the other advantage in running this broad program is, we've been able to get a label in Waldenström and a label and marginal zone. And we just run a broader program. And I think that this is important to a clinician because it gives them an opportunity to experience our medicine in those indications. And I think with that success, it really helps you across the board. And hopefully, we can really become the 1 go-to for clinicians for all their patients in all of those indications. So at the moment, we're only approved in relatively small indications. If you look at our previous launch curve, we're pretty comparable to CALQUENCE despite the fact we're the third market entrants when you adjust for timing. And in relapsed/refractory MZL, we've continued to grow in the fourth quarter, and now our new patient share is nearly equal to CALQUENCE with IMBRUVICA, lagging both. So the first quarter for Waldenström and marginal zone launches, the initial uptake gives us a lot of confidence that we're on the way of becoming a leading BTK for these indications. And again, we really just believe this is best-in-class and the more time people have to see the clinical data, the more experienced people get with it really is just going to help people understand that. And at the end of the day, the way a medicine performs in oncology has a lot to do with the success of the medicine. And I think that we're happy with what we have. Of course, that has to be combined with an excellent commercial team, and I think that we've built that out and been launched for a couple of years now. And I think we've got a great team in place in the U.S. and have started to build that in Europe, also Canada, Australia and starting to be all over the globe. So we're excited.

Great. Let me move to ociperlimab, TIGIT. There's going to be upcoming data this year that's going to be some of the first Phase III data is expected. It's going to really give us a sense in the class. So far, the Phase II has looked interesting. There was definitely some signals of activity all across the board. Your pivotal study is obviously testing the compound with Tisle in PDL-high greater than 50% head-to-head against KEYTRUDA. Each company has its own strategy. Roche is obviously using TECENTRIQ with the PD-L1. Arcus and Gilead have their own strategy, including with A2A. And Merck, obviously, is doing it with KEYTRUDA, PDL greater than 1%. So there's definitely nuances as to who's doing what and how. Lai, can you talk about how important is it to have a PD-1 and not a PD-L1? And also the big differentiation against Arcus, as they are absolutely silent, everybody else is not. How important is that?

I think everyone probably have a little bit view about PD-1 versus PD-L1, but in general, I think with more and more people using the PD-1/PD-L1 in the real, there has been more data suggesting PD-1 in general probably is a bit more efficacious than PD-L1. So we do believe, with the body of data we have observed, we think that PD-1 in combination with the TIGIT potentially could be a better choice versus a PD-L1 plus TIGIT. As you pointed out, our combination is very similar in the patient population which is PD-L1 greater than 50% and Roche is doing on the same population, but a combination product with PD-1 can perhaps give us advantage over Roche. Anyway, it has to return the data readout to reassure that. And in terms of what Fc stands out of it? We have done quite a bit of work as well as others and have shown Fc function is quite critical to the TIGIT activity in the preclinical setting. It's in many different mechanism of actions including the trogocytosis as well as immune synapse formation, but ultimately, we have to demonstrate this in the clinical setting. But based on the preclinical data, we do believe Fc function is critical.

And Lai, when do you think the first clinical data from you will emanate? Is it next year or is it really some point in '24?

Yes. You're talking about the pivotal or the early study?

Pivotal. Because this year, we'll get some more Phase I data.

Yes, exactly. This year we'll issue some early data, then from the pivotal side of that for Phase III studies in first line, we haven't disclosed, hopefully probably next year or the year after next year.

Okay. And then maybe final question, John. It's also a question from the audience. Recently, there's been a little bit of changes at the management team. Ben Yong is stepping down. He is staying with the company for about a year, consulting. He was the Chief Medical Officer running the IO part of the business. And then Jane Huang is stepping down as well, but she's going to remain through the CLL PDUFA, I believe, in November or so; the PDUFA is October. Can you talk about those changes and what that means for your ability to execute?

Sure. Happy to. First and foremost, Jane and Ben are wonderful people, and they were hugely instrumental in helping us build BeiGene to where we are today. So they're spectacular folks and we're close to them and we wish them the best as they move on in their careers. As we mentioned with Ben, Ben has been moving on, and we've hired Mark Lanasa to fill that role. Mark comes to us from AstraZeneca, where he's done a lot of work in IO. Prior to that, he's actually a CLL expert and has also a bunch of experience in hematology. Jane is moving on and we'll be looking for someone else to fill her shoes as best they can and moving forward. I think as you may have noticed, we've added Alessandro Riva to our Board, who ran all of oncology and is a great clinician from Novartis previously. And also Margaret Dugan, another incredibly strong clinician who was 1 level down from him. And I think we're fully committed to having the best oncology clinical organization around. And it's big and it's like a pharmaceutical company now. And as it gets bigger, the opportunities change and the requirements change and the nature of the job changes and sometimes it just fits better with different people at different times. So we're excited to build this incredible oncology group. The pipeline is spectacular. And I think there's a lot of great people that are interested and you'll see us continue to build and hire in that area over the coming years.

Great. Well, thank you so much for joining us. It was insightful and interesting as usual. We'll continue to follow closely.

Thanks. Have a great day.

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