BeOne Medicines AG (ONC) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. I'm Cici Chen, China health care analyst here at JPMorgan. And it is my honor today to welcome Mr. John Oyler, BeiGene's CEO and Co-Founder. And with that, I'll pass it away to John.

Terrific. Good afternoon, everyone. I'm John Oyler. As was just mentioned, I'm the CEO and the co-founder of BeiGene. It's great to be here with all of you in person, and I'd like to thank JPMorgan for hosting us today. I want to start with one thought. BeiGene is a strong global science-driven company that's delivering on our vision to transform or redefine the biotech industry. We're doing this by creating impactful medicines that are affordable and accessible to far more cancer patients around the world. So today, I don't want to talk so much about the company we're going to become. Instead, I want to talk about the company we are today and what we're doing. In doing so, I want to make a few points clear. First, BeiGene's progress is only accelerating. Second, BRUKINSA's success shows the value and the commitment we have as a company to following science, and our unique approach to clinical development and also our broad ability to run global Phase III oncology programs. And third, BeiGene is more strongly positioned than ever to fulfill our tremendous global potential in oncology. As I've said before, BeiGene's perspectives on the industry are different. Our vision is different and the strategic competitive advantages that we built as a company are quite different. And those differences today are really paying off for cancer patients and for BeiGene. We're really redefining global biotech. Before we continue, of course, please be reminded, I'll be making forward-looking statements today in the presentation, and our business carries certain risks. Some of these risks are discussed in filings with the SEC, the Hongkong Exchange and the Shanghai Stock Exchange. So be aware. 12 years ago, Xiaodong Wang, my co-founder, my dear friend and a truly exceptional scientist, and I founded BeiGene together. At this time, we realized only 1/6 of the world's cancer patients had affordable access to the latest oncology medicines. And even here in the United States, only 3 out of 8 patients with cancer could afford their copayments. To us, this was simply unacceptable. So we started with a concept at BeiGene, cancer has no borders, neither do we. We shared the belief that there was the opportunity to build a truly transformational company, one that would translate exceptional science into impactful medicines and do things everything differently, to enable more rapid, and of course, much more cost-effective clinical development. And we'll talk about why that's so important later. We believe that we could transform the industry, redefine it and still profitably bring medicines, but affordably to billions more patients all around the world. Although the last decade has clearly brought some of the greatest advancements ever in cancer treatment, one thing has not changed. Cancer remains a formidable enemy and a tremendous threat to global health. We still lose 10 million people a year to cancer. That's why we stand by our long-held position that succeeding in this fight for life requires both innovation and collaboration across industry, across academia and across government to set an industry that will bring medicines to patients quickly and affordably. In today's presentation, I'm going to walk you through how we're translating this vision into results and into the strategic competitive advantages that truly set our company apart. Today, BeiGene is a truly global company. We're over 9,000 people. We're operating in 5 continents. The past year, we had our first year with $1 billion in product revenue. Our company is backed by more than 950 scientists, 2,700 global clinical development and medical affairs people and a commercial team globally that's over 3,500 people, and we're marketing 16 commercial products. We have over 60 preclinical programs, the majority of which have first-in-class potential. And we have a robust pipeline of internally developed potential medicines as well as many medicines that we're working with that came from great partners, which we'll talk about later. We continue to attract the best talent globally and to build capabilities internally. And we're really excited about the major expansion that we're doing in the West Princeton Innovation Center in Hopewell, New Jersey, around biologics manufacturing. So I want to start with 5 key areas of strategic competitive advantage for BeiGene. They demonstrate how we're different and how we think different, but they're very important to our company. The first, as I mentioned, is that we have one of the largest and certainly one of the most cost-effective oncology research teams in the world. We have more than 950 scientists and their strength has been validated by commercial approvals, by clinical data and validated by collaborations that have brought in $1.4 billion in cash already to the company. Second, we have a unique clinical development approach. It meaningfully reduces clinical cost and time without sacrificing quality. Since clinical development is by far the largest component of the cost of an oncology medicine delivered to a patient, this is absolutely critical if you want affordable medicine. Third, we're building a very strong portfolio. It begins with 2 cornerstone commercial medicines that are becoming major revenue sources and support the development of our future therapies, including great platforms for combination medicines. They're complemented by an ever-growing robust, compelling pipeline of first and best-in-class medicines. Fourth, we've been creating this truly global commercial team. It's already over 3,500 people. We're expanding our commercial reach beyond the traditional U.S., Europe and Japan and have already built a true leadership position in China, the second largest oncology market in the world and are, as you will see, soon to commercialize in over 60 countries. And our fifth strategic competitive advantage is our financial strength, which provides us the ability to continue to pursue our vision and to invest opportunistically to create long-term value. So let me talk about each of these. I'll start with the competitive advantage of research and our strength in oncology. We've always been science-driven. That comes from Xiaodong and we've built this as the very core of our culture from our inception. We follow the science. It's easy to say, it's hard to do. We have one of the largest, most productive and cost-efficient oncology research teams in the world, and our strength has been validated, as I said: results, approvals and partnerships. And we expect next year, we will have 10 INDs a year on a moving forward basis. From the beginning, we insisted that every program either have a differentiated biological hypothesis or be first-in-class. Each of our programs has this. We're not a me-too company with me-too programs. For example, our BTK inhibitor leverage the biologic hypothesis from day one that ibrutinib did not inhibit BTK sustainably in the disease compartments, such as lymph nodes, spleen and bone marrow, and that a more efficacious BTK inhibitor could be developed, one that would sustainably inhibit BTK in all of these disease compartments all the time. As we know now, the ALPINE trial results that were recently reported have demonstrated BRUKINSA's superiority for both PFS and ORR versus ibrutinib and relapsed/refractory CLL/SLL. Another promising program in our pipeline is our BCL-2 inhibitor. It has the potential to be best-in-class, given its higher potency, it's increased selectivity as well as a shorter half-life compared to venetoclax. It could lead to improved efficacy and safety. The half-life may also enable us to overcome the challenges that are faced with the venetoclax dosing regimen. With over 300 patients treated to date in Phase I studies, we've not seen any safety concerns. We also have 2 trials with registrational intent in relapsed/refractory MCL and relapsed/refractory CLL after the failure of a BTK inhibitor. From a first-in-class approach, let me mention our HPK1 program. This is an intercellular checkpoint. We validated this target with extensive in-house biology but it's also a target that's very difficult to hit due to low ATP Km. We were able, though, to make an exceptional inhibitor with balanced pharmacological properties using high-throughput screening and computer-aided design. Another program is our BTK CDAC. This is a targeted protein degradator that continues to demonstrate its potential in early data. This has the benefit of eliminating both the kinase activity and the nonkinase activity and promises to be effective in resistant populations. Protein degradation is an exciting field in which BeiGene is a major player and well suited to take a leading position. Our pipeline also includes a lot of early-stage assets for targets like OX40, TIGIT, LAG-3 and TIM-3. Some of these medicines should position us well to take a leading role in the future of immuno-oncology. And looking at our whole oncology pipeline, today, we're covering over 80% of all cancers. We're taking a broad agnostic approach to better medicines and trying to get them to far more cancer patients worldwide. With that in mind, I can't underscore any more that we're in a new era for the whole industry of cancer discovery, one that favors companies with technology platforms, including CDAC protein degradators, bispecific, trispecific antibodies, ADC, CAR NK and mRNA. BeiGene has made the necessary technology investments to ensure that we're able to bring the next generation of these therapies forward. In our first 12 years, we put 16 potential medicines in the clinic. Currently, we have over 60 preclinical programs, again, the majority with first-class potential and starting next year, we expect over 10 new INDs a year. We're certainly on the path to becoming one of the most prolific oncology research teams in the world. So I want to talk about our second strategic competitive advantage, which is clinical development. So people say, "Why are you doing this yourself? You have 2,700 people. What are you doing?" Well, the biggest constraint in our industry is very clear, it's clinical trials. This accounts for over 75% of the cost for small molecules and antibodies at least, of a total cost of a medicine that's delivered to a patient. It accounts for the vast majority of the time to get a medicine through the market and approved. It's not the cost of goods sold, it's not the research cost. It's not the sales and marketing cost. It's all about clinical trials. The primary reason is Phase III registration trials are hard. They're global by nature. They take a long time to enroll and very few companies have the capabilities to do this themselves well. This is the place in the industry where we spend all the money, where the complexity is. It has to be a core competency if you want to be a great, sustainable company. Today, nearly all companies in our industry rely on third-party CROs. They're paid based on activity, so they don't have the biggest incentive structure to make the most efficient process. They also have many, many clients, so they have a system that is hard to adapt and change over time. I think it's widely recognized in our industry that the satisfaction levels of pharmaceutical companies, biotech companies and the clinics, in which these centers are run with a handful of CROs that exist, is extremely low. Another reason that clinical trials are so expensive is that they're often delayed and many of the centers in which we historically run clinical trials, they're at capacity. It takes far too long to enroll patients. McKinsey reported one of the biggest issues facing oncology companies is the delays associated with clinical trials. The increasing cost of clinical trials was the next. In 2022, this is much further exacerbated with the conflict in Ukraine, which has removed Ukraine and Russia as clinical trial sources from the global clinical science field. To address these issues, BeiGene built our own internal team. We have over 2,700 people. We're largely CRO-free, and there's clear reasons why we did this. It enables us to increase enrollment speed. Enrollment can be 2.5 years on a 3.5-year trial. It enables us to lower cost, and this is important. To do this, we're able to work more broadly, more globally and with centers locally in which CROs are either not present or they're not as strong, and we can work closely with these centers to develop quality. Secondly, we're adopting the latest technology. And as I said, when you control your own technology, you can put in the latest advancements, you can be as efficient as possible, and we're doing that to improve quality and speed and cost. Lastly, there's clear cost advantages. You're not paying a margin on a clinical trial that has a cost to a CRO of tens of millions of dollars, if not more. Now we're seeing the results of the work. It's very clear from a speed perspective, we can move more quickly. TIGIT is an example of this, for sure, and it enabled us to be in a position where we were second or third in class that enabled us to do a very large collaboration, which has helped us generate substantial cash and derisk the program for BeiGene. Regarding cost advantages, I think in the history of the large trials we've run and small, we're able to have already about 30% cost savings, and we aspire for this to be 50%. Regarding quality, our quality is high. We've had regulatory inspections from the U.S., from Europe, from Switzerland, from China, from all over. And we have many pharmaceutical partners you'll see later. They're all inspecting us too and we're very successful from that point of view. I think the ability of any company to be excellent in clinical science is a core competency and being able to run these large global Phase III trials, it's very unique. Outside of pharmaceutical companies, there's probably only a handful of biotech companies in the world that have run more than 15, which is the boat that we're in. The third competitive advantage BeiGene has is around our strong portfolio. It's centered around our 2 cornerstone commercial medicines that are becoming major revenue sources and that will support the development of our future pipeline, including many combinations around them. It's complemented by the deep pipeline we've talked about of first and best-in-class potential medicines, which have been mentioned. But I do want to profile BRUKINSA. It's a true game changer for patients, and it's a true game changer for BeiGene. As I said before, it was built on this best-in-class hypothesis. Better efficacy could be achieved if you sustainably inhibit the disease. To me, if you're fighting a disease, who doesn't want to fight it everywhere and always throughout your body. Why in the world would you let it recover anywhere at any moment? That's what we designed for. We ran a very broad clinical program. It's not one study. It's 4,800 patients in 35 trials in 28 different markets. We also ran 2 very unusual and bold head-to-head studies versus ibrutinib. We enrolled over 800 patients in those studies. And in the end, we very successfully demonstrated our clinical advantages. We're the first and only BTK inhibitor to demonstrate superior efficacy versus ibrutinib. We've done that both in ORR and in PFS. And we also have a very favorable safety profile specifically with respect to ibrutinib on cardiovascular profile. This slide is our tremendously exciting ALPINE results. They were presented as a late breaker at ASH and concurrently published in the New England Journal of Medicine. On the left, you can see the clear separation from a PFS perspective between ibrutinib and BRUKINSA. The hazard ratio is 0.65. The p-value is 0.0024. On the right-hand side, you can see how BRUKINSA performed versus ibrutinib in a deletion 17p population. At 24 months, you have a 77% versus a 55% non-progression rate. To that end, this is the patient population in which acalabrutinib ran their head-to-head against ibrutinib that had a hazard ratio of 1. In other words, showed no statistical difference. Did any of this surprise us? No, not really. It was consistent with the hypothesis in the lab. Remember, we'd also run a head-to-head trial in Waldenstrom. This is the PFS curve from that, and you can also see separation in PFS. We also saw a deeper response from a VGPR. That's a very good partial response perspective of 36% versus 25%. We always believed we could have a deeper response. This is exactly what we expected when we developed the medicine. And when we looked at all the other populations and caveat, these are all single-arm trials, and I know it's not ideal to make comparisons versus historic controls, and you certainly won't see them on the slide. But when you compare these to your expectations of what you should have saw versus ibrutinib or versus acalabrutinib, the data was very impressive in CLL, in MCL, in marginal zone and in follicular lymphoma, all across the board, impressive responses, impressive progression-free survival curves. They compare favorably to ibrutinib, and they compare favorably to acalbrutinib. From a safety perspective, BRUKINSA was built to be highly selective. And here, you can see the head-to-head data from the ALPINE trial. Again, the data looks very favorable on safety, especially in the cardiovascular area. We had no fatal cardiac events reported in patients with BRUKINSA; wherein, ibrutinib, there were 6 events. That's 1.9% in patients treated with ibrutinib. It also should be noted that half of these events didn't occur in the early days of treatment, they occurred after 2 to 3 years of treatment on ibrutinib, and one of these patients had no cardiovascular history. Was this consistent? Yes, it was consistent with the pooled data that we have for our safety database that includes Waldenstrom data and all the other studies we've run, 1,550 patients on the left-hand side. You can actually see, for our safety set the median follow-ups longer. But even with a longer follow-up, you see lower vest rates an Afib, ventricle arrhythmia, hypertension and other factors. The pooled safety is very favorable for BRUKINSA again. That's our BRUKINSA story. I want to jump to our pipeline now. It's wonderful to come to JPMorgan, and I have a pipeline that's so damn big no one can read it. I've been waiting years to do that. More legible versions are on our website, you can look there. I encourage you to take a look. And what you can tell is we have a huge investment and a huge pipeline and the depth and breadth is really one of the differences in our company and positions us for long-term success. That was our internal pipeline. This is our collaboration pipeline. And of course, we're not trying to fight cancer alone. We're trying to do it with our partners, great companies, and we've been working together to do this, and I think you'll continue to see us broaden this over time. So let me move to our commercial medicines, another large list. We now have 16 approved oncology medicines with 24% of the world's cancer diagnoses in China, our large portion of in-line medicines, our business continues to grow rapidly. Commercially for innovative medicines we view ourselves as the clear leader in China, the world's second largest market. We're also fortunate to have these terrific partners who we are working with at all stages to expand our research in cancer patients and to fundamentally help us fight cancer and grow our business, and we plan on a lot more partnerships. Cancer is hard, we want to work together. So moving to our next strategic advantage. I want to talk about our commercial team. It started small but mighty like research, but now we build an international powerhouse. For the first 9 months of 2022, the total product revenue more than doubled. We grew 109% versus the previous year. As we look forward to 2023, we can see our commercial team of 3,500 plus continuing to drive really rapid revenue growth all around the globe. In North America, we expanded to Canada, while our U.S. team has continued to grow BRUKINSA sales as we launch new indications here, and our heme focus is very strong, but we also can expand into solid tumors through our Novartis collaboration. In China, the team expanded significantly and is actively driving the uptake of both our internally developed and partnered medicines across solid tumors and hematology. We have achieved the #1 positions in China, both for our BTK and for our PD-1 and great success with all the products we're commercializing there. In Europe, we have recently gained approval, in November, for CLL, for BRUKINSA. And we're complementing the other 2 indications that are already approved there, marginal zone and Waldenstrom. And our presence in APAC is very much expanding with a focus on Japan, Korea and Australia, and we're also building very unique commercial capabilities in new markets all across the globe. We're now one of the few biotech companies that actually could help any company in the world commercialize in major markets and far beyond. A tribute to our commitment to being global and helping as many patients as we can is that as a company that was launching its first product, in just 3 years, we've been approved in more than 60 markets for BRUKINSA. The team worked super hard to do this, and I'm so proud of them, and it's all about speed and efficiency, not just for development but in distribution so that we can get medicines faster to patients in need all around the world. 2023 promises to be a year of exceptional growth for BeiGene. Today, our BRUKINSA label only captures roughly 15% of the market that's available globally. Our anticipated approval of CLL in the U.S. and the approvals that we hope to continue to get in other indications globally will help us be able to reach the rest of the market and open up 5, 6 of that global BTK market to us, and it's a market that's projected to grow up to $20 billion by 2026. I would like to mention Tisle, our PD-1. PD-1, I think we all know, represents the largest growing oncology class. It has projected revenue globally for the class of $55 billion by 2026. Our view is PD-1 has been great as a monotherapy, but in the future, this isn't the PD-1 market, it's the IO combination market and combinations will drive this success. Having a base label lets you be a player, but you also need the right agents to combine with this. And between our very strong IO and targeted therapy portfolio and Novartis, we expect to be able to be a major player in this space. We do expect Tisle to achieve a broad global label and become a cornerstone medicine for these combinations. Already in 2022, we achieved the leading position in the China PD-1 market. Our value share of the market, even though we were the seventh entrant, is 25%. We're the #1 player. We expect now with the easing of the COVID restrictions in China, the pending inspections we're waiting for, for U.S. approval, should be possible. And I think as you can see, the global opportunity is growing. PD-1 is no longer about just the U.S. and EU and Japan. A substantial portion of the opportunity is going to be the rest of the world where BeiGene in 66% of the world's population holds the commercial rights. With Novartis as our partner in North America, Europe and Japan and us focused on the rest of the world, we do believe we're going to be a major player here. Our fifth competitive advantage, as I mentioned, is our financial strength. In a time when the cost of capital has risen, BeiGene is well positioned with over $5 billion at the end of the third quarter. We already have substantial revenue from our cornerstone assets, and we expect to continue to grow our product revenue significantly in 2023 and beyond. We also expect product revenue growth to meaningfully outpace our operating expense growth, and therefore, provide us with a lot of operating leverage. All in all, we're going to continue to be thoughtful and strategic in how we deploy our capital, and we're committed to generating long-term value. The year ahead is full of milestones. Most important, of course, is the FDA approval decision for BRUKINSA and CLL, PDUFA date is January 20. We're going to support it by submitting the final results for ALPINE PFS afterwards to both U.S. and Europe. And turning to Tisle, we're waiting for a lot of regulatory decisions, including U.S. and EU, and at the same time, we have multiple submissions ongoing globally. Regarding the BCL2, we're very excited. We're initiating a global pivotal trial in first-line CLL in combination with BRUKINSA and the early programs, we'll see 15 novel IO combinations across 6 trials with Tisle, including LAG-3, OX40, TIM-3, TIGIT and HPK1, and they target multiple tumor types. As you can see, there's a lot to share with you folks in the coming months. We had a great 2022. The team has produced more milestones in the past year than I could ever list. We built terrific momentum that positions us for a great year. We're going to concentrate on ensuring the successful rollout of BRUKINSA in the U.S. and European CLL markets, and we're going to continue to advance our pipeline on all fronts and work with partners. We remain committed to managing the business responsibly with financial discipline to drive success over the long term. BeiGene is indeed a different company. We're well positioned to make a meaningful difference in the lives of patients. We're redefining the global biotech industry, and we have a very unique role to play in the sector. The keys to our success are the ones I listed, incredible internal research, cost and time advantages of clinical trials through a largely internal team, a very strong commercial portfolio and pipeline, our global commercial footprint and commitment to bringing medicines more affordably to billions more people and our financial strength. These keys have not only accelerated our growth but they have allowed us to reach far more patients than we hope to. Today, patients have seen -- more than 0.5 million patients have seen BRUKINSA medicine, and that's just the beginning. So I just would like to leave the conversation with a few following thoughts. First, we're here fighting cancer. Cancer doesn't recognize borders. It doesn't watch our stock price and 10 million people are dying a year. Our industry is only addressing today a fraction of the true need. There's so much more to do. Some of it is geographic reach. Some of it is mechanistic discoveries. But that said, the science is working better now than it's ever been. The biotech industry continues to make huge impactful breakthroughs that help patients. The impact of many of the companies presenting here today on cancer patients is truly inspiring to all of us and is a godsend. No individual facing cancer can fight it alone. No company can fight it alone. No country can possibly fight it alone and no organization can. We need to work together, and we need to design an industry and an ecosystem that can rapidly get our medicines to patients in a cost-effective way. With that said, I'd like to really thank our patients, the doctors, investors, collaborators, regulatories, agencies, our fellow oncology companies and our families for everything they do to support us in this fight. Thank you so much.

Great. Thank you so much, John, for the awesome presentation. We'll kick away with Q&A. [Operator Instructions] All right. Maybe I'll start with a question from me. So as we all know, there's an incredibly high COVID infection wave right now in China. Can you just talk about how it's impacting your business there?

I think our Head of R&D said it best, which was I think when we were heading towards ASH at the beginning of December, "No one had COVID." And as we talk to every day of it, it was 10%, 20%, 30%, 40% and he said, "COVID is like everything in China. It's a China speed." And I think one week into it, I think half of our team in BeiGene had COVID. And I think 2 weeks into it, 80% of our team had COVID. By the way, 60% of our team at this point has had COVID and recovered. And I think it hit Beijing, it hit Shanghai, Guangzhou was pretty early. And I think in the rural areas, it's just delayed a little bit from that perspective. The good news in our organization, knock on wood, is the people in our organization have been healthy to date and have not had issues. There clearly are issues in the elderly population from that perspective. But for us, essentially in Beijing, it's almost back to business as usual. In Shanghai, it's pretty close. In Guangzhou, it's pretty close. And I think as we see some of the smaller areas in which we're accessing hospitals for clinical trials or from a commercial perspective, you're now seeing the wave sweep through. But I think depending on who you talk to in our organization, they think it will be over in anywhere from 2 to 3 weeks to 2 to 3 months and the wave will have passed. So at the moment, knock on wood for everyone their sake, it seems like it's going to be quick and still tragic, but manageable.

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