BeOne Medicines AG (ONC) Earnings Call Transcript & Summary

Great. Thank you for joining this session with BeiGene management team, and we're glad to have CFO, Julia; and Chief Business Executive, Angus, with us to discuss business -- recent business updates for BeiGene. So before we get into any detailed questions, what about give us a recap about state of the business for now?

Of course, good morning. Thank you for having us, and we are delighted to be here. It is truly an exciting time to be at BeiGene right now. As a global science-based commercial stage and fully integrated biotech company, we now have over 8,500 colleagues, operating on 5 continents fighting against cancer. The commercial team, in particular, has over 3,400 people operating in 9 of the 10 largest pharmaceutical markets, providing broader access to our medicines for the patients. And also last year, our total revenue was almost $1.2 billion. Building upon the strong business momentum from last year, BeiGene is poised for significant revenue uptake, including from 2 internally developed cornerstone assets: the BTK inhibitor BRUKINSA and the PD-1 antibody tislelizumab, both targeting the large and growing treatment class. For perspective, in the case of the BTK inhibitor, the global market is projected to be reaching about $15 billion by 2026. For the PD-1 -- PD-L1, market is projected to be reaching over $50 billion by 2025. Our business momentum continued into this year. In the first quarter, our total product revenue growth has been almost 150% versus the same period last year, and we closed the first quarter with a strong cash position of $6.3 billion. So overall, we are fairly pleased with the progress we've made. We are also excited about the strength of our clinical development programs and our upcoming catalyst, which Angus can provide an update about.

Any color from you, Angus?

Sure. So we're really excited about the data that we've been creating around BRUKINSA. And in any application, you have to make a choice when to file and then sometimes while you filed, you get additional data. And we felt that this additional data was as assessed by an independent review committee was sufficiently compelling to submit it to the FDA, while under review that led to a fairly normal response by the FDA to extend it. But our hope is that this gets into the label because we think it's very compelling data. The comparison to go head-to-head against ibrutinib, is someone who's been on oncology trials for many years, you don't see many people going for superiority claims, but BeiGene did, which was a bold move, and the data is very encouraging. So we decided, it was the right move to submit it, even if we had a chance of getting a delay of the review.

Got it. So yes, specific on the PDUFA delay, so any reason for that? Because you just put out the press release yesterday about that. So I think a lot of investors are trying to understand, why the delay? And now it's lead by [indiscernible].

If you look at the FDA regulations, this is a pretty standard response. They have the ability to -- if it's considered a major amendment and a major amendment would be something that would be included in labeling, something that would change the ultimate label. So that -- we believe this is exciting data that could enhance the label. So it's of -- actually a mutual sort of expectation when you put in a major amendment that you would get a delay. They can give one delay, [ one ] extension for 3 months and that's what they've done. So this is actually not really a surprise.

Got it. And on the BRUKINSA, particularly for an indication you already got approved in the U.S., MCL, as one of the major indications. So tell us a bit more about the color, physicians' feedback when they use BRUKINSA compared to Imbruvica, conference in the U.S.? And also new patient share, probably some of the data can support the argument?

Well, we're getting very positive feedback from physicians. We do believe BRUKINSA is a very good molecule for patients with CLL, with mantle cell, with Waldenstrom's. We believe with the BTK inhibitors that it has a better receptor occupancy rate, and it's leading to positive data. As you know, in the field of oncology, you've got to convince investigators that you have a drug that they want to prescribe to their patients. You start off, obviously, generating the clinical trial data, but then there has to be that experience level. And the more physicians you get to use your drug, the more experience they get. And if they find that they've used the other drugs and they've used your drug and their patients did well and they have fewer side effects, you build that positive brand momentum. And we believe we're doing that and building that positive brand momentum. It does help to keep adding labels. I think, in oncology, the more labels and indications you build for product, there's more confidence that the drug doesn't just work in one niche indication, but the drug can work in multiple patient types.

Got it. So well, in terms of getting to the U.S. market BRUKINSA is definitely the first step. We're also talking about the PD-1 BLAs. Well, this year, we do see there has been some of the China PD-1s, including adolescents, [ just as when ] you got the complete response later from FDA. So what has been the communication with FDA for now for specifically for your PD-1s?

Well, one of the differences, our PD-1 program was designed early on to come to the FDA. And I won't speak for other companies that ran trials that were intended for the Chinese regulators. BeiGene is a global company and has run multinational trials. In fact, if you look at our PD-1, we have 9,000 patients enrolled worldwide. 3,000 of those patients were enrolled outside of China. So we actually have a massive database for our PD-1 in multiple indications and multiple multinational trials. And the other piece to success with the regulators is going to them early and often. You go to them for pre-IND meetings, for end of Phase II meetings, for pre-BLA meetings, it's really important with the different regulators to have that interface with them. So when you plan and run your trials, you're running them to accommodate the multiple regulators around the world. It's not easy, and it does take a lot of effort to meet with all the regulators and satisfy them. I mean even here we are sitting in the United States and even satisfying the EMA and the FDA in a single pivotal trial is difficult. Satisfying CDE, FDA, EMA, [ MPH ] I mean it's complicated, but BeiGene has made that effort to meet with the regulators and to run trials that are multinational trials that hopefully collect the diversity of patients that are needed by the various regulators.

How should we think about a commercial potential here or probably, the strategy to get into the U.S. market, if the BLA is passed? So particularly, as some of the leading players in the space dominating the market, and what could potentially be the strategy for BeiGene to get into the market as a latecomer?

So one of the strategies was to partner with Novartis. The original strategy was to partner with Celgene, and you know and others may not know that I was at Celgene and did the deal between BeiGene and Celgene in 2017, and BeiGene looked to Celgene to help develop and commercialize Tisle. Once the rights came back following the Bristol merger, the same rationale was in place to find a multinational partner to help the solid tumors. The checkpoint space is extremely competitive and to be a newcomer in the U.S. market in solid tumors is a very high bar. We were busy doing it with BRUKINSA and felt we could do that, but to take on solid tumors as well was a lot for a young company. So we've enlisted the help of Novartis, but that's not really where the strategy ends. The other piece of the strategy we're partnering with Novartis and is the combinatorial strategies. Checkpoint is a platform, right? It's -- the PD-1s, the PD-L1s are the basis for so many treatment paradigms right now and more coming in the future. We felt that tislelizumab was going to benefit by Novartis' combinatorial strategies. They've had a PD-1 that had less successful results, and so they had a program ready for a strong PD-1. So Tisle is the combination partner for a number of Novartis programs. We have our own programs that are in combination with Tisle like the TIGIT program, OX40. We've been licensed to LAG-3. We've got HPK1. We had a number of immuno-oncology assets that we're also developing in combination. As you know, many cancers respond to checkpoint with maybe a 30% or 35% response rate. That means 65%, 70% of the patients are not getting a meaningful response. So we're looking at those mechanisms to turn those sort of cold tumors to hot or to find ways to enhance the response of a checkpoint inhibitor, sometimes with multiple checkpoint inhibitors, like the combination of Tisle and TIGIT.

Got it. So then what is the status now? I mean, in terms of the BLA reviewing process?

So the BLA is under review. It has a PDUFA date coming up. And as we've said previously, we're waiting for the report from the FDA on the inspection, but we've not heard anything from the FDA lately. So we're sitting on pins and needles like everybody else.

Got it. Got it. And also BTK plus PD-1 is now becoming a very important commercial franchise for BeiGene. So in terms of commercial, we're actually looking at about $1 billion-plus sales milestone this year, which is quite significant for a young company, and I think the commercial infrastructure now becoming a really big component BeiGene call it global strategy. So Julia, updates us on the commercial front. In terms of infrastructure, let's say, how many sales reps you have recruited across different countries? And what kind of new companies and new markets you're trying to penetrate?

Yes, definitely. I think, as you mentioned, we certainly believe our global commercial infrastructure is a key strategic competitive advantage has as a company. In the last few years, we've invested significantly in creating a global science-based commercial organization. Overall, we have a team of over 3,400 people around the world operating in largest pharmaceutical markets, driving broader access to our medicines while generating substantial and rapidly growing revenue. In terms of geographical breakdown, starting with China, we are a clear leader with a commercial team of over 3,100 people. They provide extensive coverage in both the core markets and the bond markets, while managing a robust commercial portfolio of 16 products, which include 2 internally developed cornerstone assets, which is the BTK inhibitor BRUKINSA as well as the PD-1 antibody tislelizumab. I would also add that in the last few years, we were able to demonstrate market leadership. For example, if you look at the BTK inhibitor BRUKINSA, we -- despite the fact we were the second to market, we expect to become the market leader in 2022. In the case of PD-1 tislelizumab, despite the fact that we were #7 to market, we've already advanced to top 3 position based on the latest market data provided by IQVIA. So if we step back and look at the marketplace in China, we believe that there are a few success factors in order to compete effectively from a commercial perspective. And in that front, we are also optimistic that BeiGene has what it takes to really compete effectively. Specifically speaking, we believe you've got to have a scale with strong leadership at the top for the commercial organization. You have to have a sizable team that covers both the core markets and the broad markets from a reach perspective. Of course, you would want to have a commercial portfolio that is broad and robust with large indications in the broad labels. Last but not least, you want to make sure that your major products are part of the national reimbursement list so that you could indeed accelerate your hospital listing and your access to the patients. So all in all, we are pleased with the progress we've made in China. We certainly aspire to become a very top oncology player in China in the next few years. Outside China, we have over 300 commercial colleagues covering the space of the U.S., Europe, Asia Pacific, excluding China and new markets, with the majority of that team being in the United States. And the goal we have is, we are going to really resource properly as we continue to get more approvals for more indications as it relates to BRUKINSA. And if you look at the global approval, for example, we just announced this week that BRUKINSA has achieved approval in 50 markets in the world. As a matter of fact, by the end of the first quarter, we have commercially launched in 13 countries and markets, including the U.S., China, Germany, Australia, Singapore, et cetera. And from Q2 to Q4 this year, we have planned to launch in another 20-plus markets. With that, we believe we are on the pathway to truly make BRUKINSA a global brand.

Got it. Well, that's interesting. And I think another topic we're trying to touch upon is definitely TIGIT because this year, we have seen data coming from Roche is disappointing to a lot of people. And what's going to be the implication to BeiGene's TIGIT program? So are you going to really wait for more data coming out from Roche before you're going to push forward your program? Or any different strategy you're going to be using for your TIGIT program?

So we have a very large program in TIGIT. We actually have over 1,000 patients that have been enrolled in trials around the world, and we've got multiple indications we've been studying. We have a Phase I that's got multiple indications in it. We've got Phase IIs that are underway and then Phase IIIs that are underway. When you look at the Roche reports, they have to be dissected to really understand what's going on. We had a meeting with our colleagues from Novartis while we were at ASCO. We're having follow-up meetings with them to determine what we think we should do next based on that data, but we are continuing ahead with TIGIT. We've seen sufficient data in our Phase I and Phase II trials that give us reason to believe that there's activity between the 2 molecules in treating cancer patients. Now you can often go through these sort of moments in mid-stage development where you say, especially when you have a broad program, is there a combinatorial strategy? Is there a patient subset that is most likely to drive clinical benefit from this combination? So we're going through that assessment, but we are continuing with our trials. We're continuing with our collaboration with Novartis, and we're watching the landscape and Roche is continuing their trial and so are a number of other companies. So it's -- there's sometimes an overreaction to one data readout, and I think cool heads need to prevail, look at the data and determine where this combination has its best play.

And also remind us how different is BeiGene's TIGIT compared to Roche? The TIGIT...

They're both Fc-enabled. So they are similar in that regard. There's some that are not Fc-enabled. One of the differences, though, that we're looking into is the difference between a PD-L1 and a PD-1. And as you've seen in the field, not even all PD-1s perform the same in the clinic, and there are differences in the way PD-L1s perform versus PD-1s. So there's a number of datasets that need to be dissected. But if you do development for a long time, you see one negative dataset, you don't throw everything up in the air. You dig deeper and try to look into your own data, and you try to understand what you're seeing, and we have a sufficiently large dataset already in-house that we can look at that. May not be ready for publication, but it may be good enough for our scientists to take a look and say, "This is how we think we might want to refine the studies or full speed ahead as is." So we're working very closely with our colleagues at Novartis to look at what to do next.

What about the time line? When we should be expecting the data readout for your TIGIT program?

I don't have the date that I want to put on the table when we're going to wrap up the studies because they are very large multinational studies dealing with multiple regulators. And I think you want to sort of look at the time line to registration as we're closer to the end of a Phase III trial. This news doesn't help the environment because now we have to sort of spend more time with investigators, showing them data and saying, we still think there's a benefit in this combination, and so that's what we have in front of us right now. We're waiting for the digest from ASCO and EHA to get our teams together to decide, are there any changes we need to make to the programs. But right now, our plans are to still keep moving forwards with the TIGIT Tisle combos.

Got it. So beyond the first-line non-small cell lung cancer indication, what kind of other indications you are exploring in the earlier efforts on the TIGIT program?

Well, I think -- with the TIGIT program?

Yes.

So we've got programs in non-small cell, in small cell, in hepatocellular and other indications. I think one of the questions that's out there will be the PD-L1 high expression and how much that makes a difference in your patient population? And then are there differences in prior treatment regimens, prior treatment with chemo? Does that do something to kind of make the tumor more susceptible to a dual attack with the checkpoint combos.

Got it. So well, unfortunately, I mean, the market expectation for TIGIT probably turned lower and people definitely would like to look into some of the candidates in the pipeline from BeiGene. So what will be the next key critical assets you'll be putting more resources on? And when should we expect [ similar ] updates?

We're very fortunate to have a really deep and rich pipeline. It's one of the core elements of BeiGene. The value drivers for the company is the labs. It's sort of how it was formed with Xiaodong Wang coming out with the labs. And so we have -- in the I/O combo space, we've got an OX40 that's in development. We've got an HPK1. We've got a TIM-3. We in-licensed to LAG-3. And so we're looking at a variety of additional combinations to increase that I/O combo response rate in a number of patient groups. In the heme side, we've also got a BCL-2 that's going into Phase III. We're very excited about that molecule. That is difficult to make. We believe it's differentiated, and we believe it's a very good molecule and that could be a combinatorial partner for BRUKINSA. And then we've got a very rich pipeline in general. One of the things that's interesting, if you look at the history of biotech, they often start with a platform and then they build upon that platform. They're a small molecule company. They're an antibody company. BeiGene is modality agnostic. If you think about it, it's unusual to have a company that's 11.5 years old that has both an antibody on market and a small molecule on market and in multiple countries and territories. The PD-1 is behind BRUKINSA in the number of territories, but it's got multiple applications now being worked through in other territories beyond China. But the labs are working on more antibodies bifunctionals, ADCs, targeted protein degraders. We've set up a collaboration with Shoreline to look at iPSC NK CARs. We built our own cell therapy group in Taipei. And so we have a very large internal research program and now with my BD team complementing that with in-licensing other molecules that will especially be good commentatorial partners to what we have in the pipeline.

Sure. Well, since you mentioned about BD because for BeiGene, you guys already got a really good pipeline there of 50-plus commercial programs, including clinical programs. So then what's going to be your BD strategy? Are you going to be more selective? And what kind of forecast will be in the future?

Well, BDs always a fun place to be, but you also have to adapt to changing times and to your own portfolio. So we have a multipronged BD strategy. We have a strategy that's a bit more China-focused, and this strategy is a bit more U.S. and European focused. In the case of the U.S. and Europe, we've been looking very, very seriously at assets that would be good assets for the commercial team in hematology because we've built out a nice team hem team with BRUKINSA. We've got reps that are detailing in the U.S. and Europe and other countries around the world. So can we find something bit complementary to the commercial hematology team. But then we also look at all the exciting things that are coming out of biotechs in the U.S. and Europe for innovation to see things that would be a great oncology assets and also assets outside of oncology, especially sort of I&I, It seems to be kind of a natural progression of an oncology company to look there next because modalities and sort of the way you develop drugs. So there's a lot of similarity. So it's a natural stepping off point. When we look at China, we've got, as Julia has described, a large commercial team that can penetrate all of China. And so we're looking at a broader range of opportunities to add to the commercial side in China, but we're also looking at the Chinese biotechs in their early-stage innovation for other molecules that are coming out of biotechs in China, our labs in China. One of the differences, I think, is the investment environment between China and the U.S. that we think there may be some China companies that may struggle. They may have good molecules ready to come towards market, but they kind of build a 3,500-person sales force to detail, as Julia has described, not just the core markets, but the broad markets in China. You need a big sales force and that takes time to build. So we think we're a very attractive partner for other Chinese biotechs to commercialize their assets in China, but also then to commercialize them worldwide, if they're in hematology because we've got a hematology franchise. So we've built a BD team that can take a multipronged strategy to look at opportunities, find things which are a good complement to our portfolio and then act on them.

Sure. Well, a bit more on the China data part because I think BeiGene, one of the key advantage is, definitely, your local savvy in Chinese market. So and China has definitely a really big patient portfolio. You can actually leverage on to accelerate the clinical development globally, but based on your communication with FDA, what is FDA's attitude towards the China data now? And is there any thresholds, but specify threshold about what percentage of patients are going to should be coming from China is acceptable because people are increasingly worried about FDA's attitude towards the China data.

It's an interesting area. I used to be at the FDA a long time ago and dealt with some Chinese companies a long time ago, and the guidance hasn't changed that much. And if you look at the FDA, they're driven by guidance and then points to consider, and of course, the CFR, the Coded Federal Regulations. And then there are things that people at the FDA may see in conferences. But when people saying conferences, doesn't supersede law or guidance, right? And so you have to take it all into context, and the best practices to handle the FDA are really not that different from best practices to work with EMA and CDE, their regulatory best practices. And BeiGene has really worked hard to follow these best practices by meeting with the agencies, getting their advice, developing trials that satisfy those agencies. You raise an interesting question because some territories are a bit more black and white belt. We want 20% of the patients from our country or from certain ethnicities. The FDA is a little bit loose there. They're most -- they are very science-driven. If you look at the constitution of the FDA, a lot of them like myself came out of the NIH and went to the FDA. So we came out as bench scientists or physicians and went to the FDA. So we're science-driven. The FDA is very science-driven, and so they will take sort of the total picture and look at it. Now in the case of Waldenstrom's, we got that approved with a lot of Chinese data. But for that indication, they felt that the data we had was sufficient for them to make a decision how to create a label for the U.S. population. When it comes to other diseases, they may take a different position where they say, "We think we need more patients from the United States." If the practice of medicine is slightly different in the U.S. than say, "Europe or China or Japan." I've been in situations where the EMA and FDA don't agree on the trial design. As many of you know, in Europe, a single-arm study is highly unfavorable. They would prefer an underpowered randomized study than a nonrandomized study or a controlled study. And so if you're going to be good at regulatory affairs, you need to understand each of the agencies and their needs as well as the disease and the current treatment paradigms. And that's why the good communication with the agencies really helps you out because you make sure you hear their understanding of that disease and that treatment paradigm and whether or not your plan is powered and designed to satisfy those agencies.

No. So it's really case by case and you have...

Painfully, yes.

Yes.

[indiscernible] early with FDA. Yes. It's like BD deals and case by case, too.

Yes. That's right. That's right. And you actually mentioned about a lot of modality you're working on, right, in early efforts in terms of your BD efforts and also in-house efforts on the R&D side, ADCs, protein degraders. So any specific new technology you will be interested that BeiGene actually think it's going to be a new trend, a bigger trend or the future R&D way?

Well, we've also -- I didn't mention it. We've also created a collaboration around mRNA, and we're looking at other RNA technologies. We have a couple of deals that we're looking at right now in those technologies. They have an application in some areas and diseases, but other areas, it's very difficult to get the technology to work. So we're looking at those. I think one of the differences, though, when you look at BeiGene's approach to assets is, we really try to think about cost of goods. We want to be able to provide drugs to more patients in more countries around the world. That gets hard to do if you develop drugs that are exceedingly expensive to manufacture. And so we make a cognitive decision when we in-license or develop modalities to try to think about cost of goods manufactured from a global perspective. Can we drive down those COGS so we can sell drugs that are more affordable prices worldwide. So that's something we do a little bit different at BeiGene than a lot of other companies.

Yes, that's right. That's right. So there's one question recently have been discussed now on the biotech a lot, it's the cash burn rate. People in a tough environment like this definitely would like to understand more about the cash you have and how you're going to manage your cash runway. Any updates on that?

Yes. Yes. We clearly appreciate that the cost of capital has increased dramatically, particularly across our competitive landscape. As we chatted earlier, BeiGene was in a strong position, because at the end of the first quarter, we did have cash on hands in the magnitude of $6.3 billion. But with that being said...

That's not the time clock.

Not yet. Okay. I think we can continue.

Yes. So as I was saying, we believe BeiGene is well positioned because we built strong cash reserves. We've also with the help of Angus and the BD team partnered programs, whereby it would allow us to reduce spend downstream, at the same time, enable us to generate the cash payment upfront as well as potential milestone payments in the near and medium term. Now in terms of the cost discipline, I would say, for a company like BeiGene, 11.5 years in the making, it's certainly a journey whereby we continue to make progress. We certainly have raised our bar in terms of the expectation for returning investment both for investments internally and externally. And I think Angus and the team, we've been in constant conversations about how do we continue to evolve our expectation as we evaluate the partnerships and the BD strategies in this environment moving forward. The other thing I would say that we also continue to improve upon the analytics and the real-time data that would help us to enhance our operational efficiencies. So the one example I would give is, at the beginning of this year, we welcomed the new commercial leader, Eva Yin to come and lead our China commercial organization. As you may know, she brings a very unique background for a commercial leader. She actually had her trainings early on in finance, and then she transitioned to compliance before transitioning to commercial, whereby before joining BeiGene, she was managing the oncology business unit for AstraZeneca through tremendous success in China. So with someone like that and her profile in meetings that I have been in with her, it continuously remind me how we continue to grow our sophistication in managing our operations with analytics and transparency and all of that. So last but not least, in terms of the profitability side, we haven't provided guidance on that front, but what I would say is, building upon the tremendous business momentum we had in 2021 as well as the continued business momentum so far this year, we certainly expect that the upcoming potential approval for BRUKINSA in meaningful indications like CLL, in large geographies like U.S. and Europe, will certainly provide a huge catalyst and help us accelerate our path to profitability as a company.

Yes, for sure. Well, I think a big part of the cash burn is coming from R&D. So we're probably talking about $1 billion to $1.5 billion cash burn on the R&D side each year in the past few years. So any guidance on that in the upcoming years? Are we going to see a significant increase in the R&D side? Or we're going to pretty much stay at that level?

I would say something from a BD perspective, but that's kind of a fun question because being able to sort of partner assets is also a way to -- as Julia mentioned, to offload some of the P&L burn and also bring in some partnering revenue. And it's one of the great things about having assets that are really good molecules is, we sort of have a reserve in a sense of an ability to bring in partnerships with our portfolio. If we need to, it's a choice we can make in the future. And so Julia and I have spent a lot of time together looking at the future pipeline growth, the future revenue of the pipeline and then thinking about, are there areas where I need to bring something in or are there other areas where we can monetize our existing pipeline. Does it make more sense to partner one molecule versus another molecule. I mean BeiGene has a massive growth story. It's a global company, becoming a bigger global company, and it's got a tremendous pipeline. And you look at -- again, I've repeated this a little bit earlier, but it's unusual to see a company of this age have this broad of a pipeline. The labs have been extremely productive, and that's a real value driver when you think about the number of really exciting molecules coming out of the labs. And that's what we plan to continue to work together to figure out how to pay for development and sometimes monetize it at the same time.

Great. We're definitely looking forward to more milestones on the coming years.

Yes.

Yes.

So thank you very much, Angus and Julia, for joining this session, and thank you, everyone. Thank you.

Thank you.

Thank you.