BeOne Medicines AG (ONC) Earnings Call Transcript & Summary

We're going to get started with BeiGene session. For this session, we have Mark, the CMO of Solid Tumors at BeiGene. And also, we have Michael Schoen, the Strategic Advisor to the CEO, to join the session.

We're going to start with one broader question, which is R&D model because throughout the year, we're talking about BeiGene running clinical trials, global trials and you're using a CRO-free model, which on the one hand, they give you a lot of control in terms of how you're going to run the trial, but on the other hand, it requires a lot of commitment and investment to the team infrastructure. So how should we think about the model and why you come up with this kind of model to start with?

Yes. Great. Thank you for the question. Thank you for having us today, very happy to speak on behalf of the R&D organization. So I think it starts by going all the way back to our mission and vision where we're committed to innovative first-in-class, best-in-class molecules, but we're also deeply committed to fairness and access globally. And we think that the CRO-free model helps us to meet both of those objectives. We have worked very diligently to build a global development organization that allows us to deliver studies on 5, and now 6 continents. It has taken time to build that. Some of that is just the timing effort that goes into establishing human relationships with sites and investigators, regulatory authorities. But at this point, that's largely in place. We do feel that this has a number of advantages. Certainly, it is lower cost to have an internal delivery model. It is faster to have an internal delivery model. And then the other thing we found when we transitioned from CRO delivery to an in-house delivery around 4 to 5 years ago was that our quality metrics also improved. So it's really been a win-win-win. For example, our time to detection of a protocol deviation dropped by almost 100 days. So tremendous improvement in quality. And maybe if I can give you an example of one molecule that we're excited about and moving into randomized Phase II studies is our LAG-3 targeting antibody. All this information is extractable from clinicaltrials.gov. But in Phase II, we can really move quickly. So we ran a study in frontline esophageal cancer. The study enrolled its first patient last November. We have already completed enrollment, having randomized 118 patients and we will read out the top line data before the end of this year. So literally one year for randomized Phase II data, which enables us to make extremely high-quality decisions about what we take to Phase III.

Is this going to be higher cost trials? Or is it going to be actually lowering your cost significantly by using CRO-free model?

It substantially reduces our cost. The number that I've heard John use is we believe that it reduces our cost basis by about 30%. And then the other piece that I think is really important is it enables very high-quality decision-making. So we don't have to guess, we don't have to extrapolate single-arm data. We can have randomized data that can enable us to go into Phase III with confidence that ultimately, we're going to hopefully, our intention is to have a higher success rate in Phase III because we're making decisions based upon higher quality Phase II data.

Yes. And I would just add, I think if you think about the cost, yes, there's clearly a cost savings. You're not paying a markup to CRO to do the business. But I think, critically important to think about that whole time component, right? The fact of the matter is that -- 6 months to get that trial enrolled, whether that's time spent at the beginning working with your CRO, whether it's time in the middle that they're slow on the sites or the enrollment, everybody -- the cost of that trial is building and building with the population you have in it, your readout is going to be later. So compressing that timeframe while doing it actually on a cheaper basis, it's kind of a double combination. And I think, Mark's going to be modest, but if you look at what him and the team have done in the CDK4 program of running speed at which we're getting those cohorts, it just gives us the ability to be responsive to what the science takes us and where the opportunities arise.

Is that specific to BeiGene? Or do you believe this is going to be a bigger trend in running clinical trials in the Biotech and the Pharma space? I believe there might be some other companies trying to do that, but not everyone can able to do that.

Hard to start now. I mean, to be honest, we talked about, it took a lot of time and effort. It's not as though there's a lot of people that have done it in-house. The only one that comes to mind is actually not in our space. I know Novo Nordisk is almost entirely in-house. So, a, if you try and do it now, the resources in terms of great people is going to be challenging. I think as the world continues to have more and more trials that stretch on resource, it's going to be tough. So I think people might look at it, but we're glad we started it a bunch of years ago because it would be hard to start now.

We have 3,000 people in our development organization. So it's a substantial build to create this organization. But now that we have it, it's really a joy to be in my role because it's extremely powerful in terms of our ability to generate data.

Yes. You mentioned about the number. Actually, I think some of the investors might not be aware that BeiGene has one of the largest oncology research team globally. And with that team, actually, if we look at the platform you have been building, starting with small molecules. Well, I think probably because BRUKINSA has been really successful. So there has been a perception about, well, BeiGene has been really good at small molecules. And -- but actually, if we look at the pipeline across different modalities, you have actually a pretty comprehensive toolbox for different drugs. How actually BeiGene come up with this kind of comprehensive toolbox for all those trip discovery technology?

Yes. So I'd be happy to shift even earlier from the Development Group to the Research & Discovery Group. So as you say, we do have almost 1,200 preclinical research scientists. There are discovery engine. This is one of the largest clinical discovery groups in oncology of any sponsor globally. And the way that they think about where we would like to go next, what our targets are that we would like to innovate is actually they start by thinking about what our targets that are new or underexplored or could be hit in a new way in our priority tumor type is lung, GI and breast cancer. And of course, we have a major focus in hematology, specifically B-cell malignancies as well. But I speak to the solid tumor side.

So the first question is what are the targets that we would like to go after those focus areas? And then the second question is, what's the best way to hit that target? It could be a conventional small molecule, but maybe it's a small molecule. The greater, it could be a monoclonal antibody, but maybe it's a conjugated antibody like an ADC. And in the future, cell therapies, mRNA. So I think the organization has really been very interested in utilizing novel and emerging technologies to hit either established targets or new targets. And again, this has given us a really robust internal discovery pipeline. 2024 is a very exciting year for us because it's the first year where we're delivering 10 NMEs into the clinic, and we likely will deliver slightly more than 10 new starts this year. But what's important is it's not just quantity, it's also quality. We really believe that we are 10 potentially differentiated molecules. We have over 60 pre-clinical programs [Technical Difficulty] stopped 20 programs last year, preclinical programs that were not hitting our preclinical target characteristics.

Well, I think one of the reasons that you actually can move pretty fastest because BeiGene, I would say, is very well funded. And in turn how you can allocate resources, particularly getting to solid tumor pipeline build-out because in the first quarter, you mentioned about it's going to be a PD-1 centered pan tumor strategy. So tell us a bit more about your solid tumor pipeline build-out?

So within the solid tumor organization in 2024, we have essentially 3 areas of focus this year and I'll go through this piece quickly. So the first is we've got a number of Phase III studies with tislelizumab, which we're very excited about. We already have 11 different indications in China. We're working very hard to bring tislelizumab to patients with cancer around the world. So regulatory submissions are ongoing in a number of different markets. We have a broad and innovative immuno-oncology portfolio, like I alluded to before, LAG-3, OX40, TIM-3, HPK1, those molecules have emerged from Phase I and are now entering into proof-of-concept studies. And then we're extremely excited about the innovative portfolio with our first in-house ADCs, additional small molecules targeting CDK4, PanKRAS, our first solid tumor degrader targeting EGFR.

Got it. Well, you mentioned about ADCs because just definitely coming back from ASCO, there has been a lot of ADC data coming out. And BeiGene is not the front running in the ADC space. But you still decided to get into the space. How are you going to compete? What kind of new technologies and new direction you're going to be moving forward?

So this is, in my view, a very BeiGene story and so far as we wanted to have the end-to-end capabilities and to do something that was truly innovative to bring this forward, and now we're going to try to bring this forward at scale. And so far as what we have developed in terms of what's different, of course, we have a very strong protein engineering group that can build the antibody backbone. But from there, we have developed intellectual property around site-specific conjugation, we have a hydrophilic linker, which should improve intratumoral penetration of our warhead. And then the warhead is exatecan derivative, a Topo I inhibitor that is somewhat more potent than the Daiichi Sankyo molecule, [indiscernible]. So we think that this combination of characteristics is innovative and is reasonably likely to convey clinical differentiation. From there, how we think about targets, we're trying to explore under explored or novel targets. So there are now some other CEA or CEACAM5 ADCs that are entering the clinic, but it's really very, very early for that molecule. We believe that we're bringing the first FGFR2b ADC into the clinic. And then that's what you'll see from us going forward as we bring more ADCs into the clinic in '25, are novel targets and multi-specific ADCs.

So I want to add is we also did that in classic BeiGene form. On the other side, we've developed [Technical Difficulty] abilities. So as we develop these, we're not having to go out and negotiate agreements to start the programs. We can do it all in-house and therefore, move quickly towards the program.

Got it. [Audio Gap] In of all manufacturing, right? So BeiGene is very unique about building a lot of the manufacturing facilities, not only in China but also outside of China and U.S. Why is that? Because this is also, again, it takes a lot of resources and it takes time. And also, in some other sense, it might potentially increase the burden in terms of CapEx. So how should we think about that and why we are going to do that?

Well, I mean, the good news is we've done that. I would say, we're actually going to have a grand opening of our Hopewell facility in New Jersey next month. So from a CapEx perspective, it's done. A couple of reasons. I think number one is, as we talked about, we are a firm that's very -- a company that's focused on access and affordability. And while, yes, in the grand scheme of things, the cost of goods sold is not huge in our world. There are big differences. [Audio Gap] constantly be working to be more efficient, to increase the volume, reduce the cost is quite important. And I also do think it plays into what we talked about and your ability to move quickly to have to sit there and go line up a CMO every time you want to think about a new program is not probably the best way to drive it quickly, efficiently. And then I also think, importantly, if you're going to develop these great medicines, you got to be comfortable in your own supply chain and so the ability to have multiple sites to be able to make medicine available is quite important.

Got it. Well, I think start with [indiscernible] and also start with BRUKINSA, so you work with CDMOs for manufacturing. Now for the future pipeline, you're more thinking about in-house manufacturing. Is that because in the past couple of years, you start to sense that internal control of those manufacturing become increasingly important?

I'm not sure I would say that. And if you talk about BRUKINSA, we do use [indiscernible] United States, and in Europe, that's Catalent out of Kansas City. The API is produced separately, but we have a couple of sources for that. So that, I think, on the small molecule side, we do have our own small molecule manufacturing for the China market. I think Catalent does a great job for us. I'm not sure there needs to be a change in how we do things. [Technical Difficulty] to make sure that we had a really good world-class manufacturer, those can help us make a world-class medicine. But what we built in Guangzhou increasingly on the biologics side, we'll be able to do our own stuff in-house as well as with the ADC.

And at the risk of making us a, what, commercial point. Michael can correct that. I think that a really important ingredient is the manufacturing because it is aligned to our mission of access and affordability, ultimately having control of the cost of goods is centrally important there. So yes, having in-house manufacturing allows us to control quality, control timelines. We're not waiting for slots. But importantly, it allows us to optimize, optimize, optimize and really drive down the COGS.

Yes, 100%.

Got it. We'll talk a little bit more about some of the selective candidates, right? For example, CDK4. I think the breast cancer, if we look at BeiGene's pipeline or portfolio, we haven't had very strong footprint in breast cancer yet. CDK4 might give you access there. So tell us a bit more about the asset and why you're going to be focusing on that one? Because there has been CDK4/6, there has been CDK4, there has been CDK2. So why you are picking this specific asset?

So again, from a very high level, our aspiration is to be a global leader in oncology and something that I have felt strongly about is that to be a global leader in oncology, you also have to be a leader in breast cancer and gynecologic malignancies and be a leader in women's cancers. CDK4 is likely our foundational molecule in that space. CDK4/6 inhibitors have been transformational in the management of women with hormone receptor positive breast cancer with a substantial improvement in overall survival over aromatase inhibitor monotherapy. Despite being a huge step forward or not perfect, due to hematologic toxicity and in some cases, GI toxicity, about 1/3 of women will down dose. And the preclinical data is fairly clear that most of the cell cycle inhibition that you want that is anti-proliferative comes from CDK4, and CDK6 mostly drives that hematologic toxicity. So having a molecule that has improved selectivity for 4 over 6 actually has the potential to improve efficacy because you can hit 4 harder, but also improve safety by not hitting CDK6. So that molecule, as Michael mentioned earlier, entered the clinic last December. There has been tremendous investigator enthusiasm for that program. We have moved very, very quickly progressing through 4 or 5 cohorts of monotherapy dose escalation in a very short period of time. I'd like to say that we have not lost a day in that program. And you cannot progress cohorts much faster than we have. We've already initiated combinations with fulvestrant and letrozole. And we have a clear path to regulatory intent studies, both in second line and in frontline in hormone receptor positive breast cancer with CDK4.

I don't know if I could add. I mean, I think getting our footprint into breast cancer is important for who we are as a company. It's not just CDK4, we've got 3 other assets we're advancing. I don't know if you want to tell that...

Yes. So we in-licensed a highly selective and potent CDK2 inhibitor from ENSEM last year. We have licensed B7H4 targeting ADC from Duality. We licensed that because we like their technology, and the target was highly complementary to our internal pipeline. And then we have an additional BCL2 inhibitor that is even higher potency than sonrotoclax and covers some specific mutations in BCL2. So we thought that, that would be a sensible molecule to retest the BCL2 and breast cancer hypothesis. So in a short period of time, we'll have a full portfolio of work in breast cancer.

Got it. That's impressive. And well, since you mentioned about Duality, there's one unique thing about BeiGene. We have done -- you have done a lot of the BD deals in the past couple of years. We'll start with some of the major ones like Amgen ones, BeiGene ones, which basically give you a China franchise, and then Novartis ones which also give you a lot of access to global market. So going forward, we also see some of the bottom acquisitions or being more aggressive in terms of licensing more assets to expanding your pipeline be one of the top priorities of the overall R&D strategy or increasingly, you're going to be more focusing on in-house while those BD deals, licensing deals becoming more opportunistic instead of an essential strategy of your business?

I would say, I think it will be where the science takes us. It's always been kind of our mindset. If you put aside the big collaborations that had, perhaps, more strategic views. I mean if you look at the things that we've done over the last couple of years, it's usually something that's incremental to our pipeline or where there's a breakthrough that we haven't done yet and it makes sense because it's going to help patients. So I think you can see us continuing to do that. Acquisition versus licensing is kind of going to be driven by the opportunity. And we're in a position we could look at anything that makes sense. I think that, specifically, if you look at what we've done in China to date, incremental assets that we can commercialize there, both on solid tumor and on the heme side, continue to be something that is good for us, and I think good for patients. If you look at the success we've had with the Amgen assets in China, before that with the BMS/Celgene assets, what we're doing with Novartis in the broad markets. We think we have an incredible team there on the commercial side, so we can add things there that will make sense. But I think from a -- and you can talk to this probably better than I can. But if you think about it, there's no not-invented-here mindset. If there's something that's out there that we should have in our portfolio, and we're not -- it's not where we want it to be in our own preclinical team, we will do the work to try and find it and add it.

I would agree with all of that. And just back to your framing of your original question, yes, we're extremely happy with our internal portfolio and are excited to deliver all of these medicines, PanKRAS, EGFR degrader, what have you. So again, we have a very active research team that is thinking about, oh, maybe we could combine this to potentially a KRAS, for example. And then we'll go and see what the landscape looks like. There's a lot of innovation out there. So really, I would say, the main theme is just complementarity.

Got it. Well, we have to touch on the hematology part to the extent you can comment. And BRUKINSA has been doing very well, now trending towards -- our estimate is it's going to be above $2 billion this year. And in the first quarter numbers, if I look at the prescription, it's already getting close to 20% market share. So if we look at BRUKINSA, what's next? We got a B-cell to running 3 Phase II studies and one Phase III studies and a couple more in early stage. We have BTK CDAC, which is a protein degrader. So how should we think about the overall hematology strategy being mapped out over the next few years with BRUKINSA as a cornerstone with multiple assets adding to that?

So we're very excited about our hematology portfolio. And again, just for everybody's orientation, my role is I'm the CMO for Solid Tumors and [indiscernible], I believe, is the EHA at this time, but I'll do the best I can. So we, of course, have BRUKINSA, but then we also have sonrotoclax which is our novel and best-in-class BCL2 inhibitor. And then we also have our first degrader, in-house degrader, which is a BTK. The data that we're bringing forward in sonrotoclax supports our position and it's also a best-in-class BCL-2, more potent, more selective, shorter half-life, which was a desirable characteristic. And then the BTK degrader, the data that we've shared, we think speaks for itself in terms of having a high response rate with their ability in patients across the spectrum of B-cell malignancies. So I think within B-cell space, the way we're thinking about this is these 3 molecules interplay and give us a really strong franchise that gives optionality to patients and prescribers. We acknowledge in the CLL space, that there is a bit of a preference sometimes for time to limited therapy rather than treatment until progression. So we are addressing that with our frontline study of sonrotoclax plus zanubrutinib. And then well, maybe post BCL-2 plus BTK, you could go on a BTK degrader. If you get frontline BTK, well, then maybe on second line, you could get BCL-2 plus a BTK degrader. So we think that we'll have treatment options for patients across the disease journey, across a number of B-cell malignancies. BCL-2 also, importantly, gives us the opportunity to expand into new indications such as multiple myeloma, MDS, AML and potentially others. So -- and then we're also very excited for BRUKINSA about the recent approval in follicular lymphoma, which we think, again, speaks to BRUKINSA's best-in-class status with the first approval for any BTK in follicular lymphoma. And we have an ongoing confirmatory study that would give us access to earlier lines of therapy in follicular lymphoma as well.

Got it. How should we think about the competition here? Because it's not only about BeiGene is working on that, BCL-2. There has been a couple of players working on the same target and trying to develop this kind of combination regimens there. So how should we think about BeiGene's positioning in the space from a clinical perspective, medical perspective and also potentially commercial perspective?

We do acknowledge that there are, shall we say, smallish Phase II or investigator-initiated concepts that are exploring BTK plus BCL-2. Our internal view on this is that we have a best-in-class BTK, we have a best-in-class BCL-2. Therefore, we're likely to have the best-in-class combination regimen. We're very comfortable with where we'll be with our frontline 301 study which is the combination of sonrotoclax and zanubrutinib ultimately reads out that it has been enrolling really well because investigators are excited about it. So I think that ultimately, we believe that we are in a strong position there in the long term. And then in the near term, the data sort of speaks for itself in terms of what we have with BRUKINSA.

Yes. I mean, I think you hit on the key point there. We are confident we have the best-in-class BTK. It's playing out in a lot of different ways. We're excited about sonrotoclax. And we're actually quite excited about the BTK CDAC. So what's interesting is we've got all phases of the patient journey and options over time available, right? So if you think about it from a line progression, we think we have best assets that will be available, hopefully, if the trial continue to read out as they have, fixed duration or not, we'll have that covered. So we're quite excited, and I just wanted to run this fast as we can to get these medicines to patients.

Has IRA changed your mindset about how you're going to run R&D projects, particularly for BRUKINSA, one of the competing agents that are going to potentially get affected? How should we think about that affecting the overall competitive landscape here?

Look, the only one that's really on the immediate horizon is going to be obviously IMBRUVICA and ibrutinib. We're not really focused on that. The reality is it's not a viable replacement medicine in our perspective. And you're kind of seeing that actually in how the market is playing out. The new patient starts continues to come off quite aggressively. We still continue to see a decent amount of switch. So the idea that it's going to drive a change in prescriber activity is not something we envision. So for us, it's a much later date for us to show up and we're kind of, for the moment, focused on just running the business. Yes, the IRA is part of our overall evaluation of future programs, like any companies. But I think right now, we're focused on really just getting our medicines to patients as best we can.

I would just echo that from an earlier perspective and so far how we're thinking about this in the development organization, of course, we're aware of IRA. We do consider this broadly. I wouldn't say that it's really impacting our plans today. So for example, going back to CDK4, the lead indication there is hormone receptor positive breast cancer. So I think we're just proceeding on as we would have otherwise. There is this question about, well, would you go to market in a niche indication if you have a fast-to-market opportunity there? We'll cross that bridge when we come to it, understanding that there could be additional changes in policy as well.

Got it. Well, there's another question, really regarding [indiscernible] with 10-plus years history. In the past 10 years, I would say, it keeps expanding in terms of infrastructure expanding, headcount expanding, pipeline expanding. But is there are any place that you're actually cutting something, pipeline-wise, focus-wise, becoming more streamlined?

So I would say that, on that headcount and kind of an infrastructure building, we've kind of reached that point. I mean, if you look at our headcount, it's not growing anywhere near like that. As I mentioned, we're going to finish our manufacturing facility in the United States. That's our last kind of really big project for the time being. So I think we've reached where we are. And part of that's kind of physical infrastructure. Part of that's fully built out. Clinical development team is kind of where it needs to be. Same is true commercially globally. So I don't see us changing that. I think we are where we want to be, and we may incrementally need to grow a little bit as we, for example, launched TEVIMBRA in Europe and the United States, there'll be some incremental hires there, nothing, nothing. We'll do it in BeiGene style, very smart and tactically. On the pipeline, it gets missed at times, but as Mark mentioned, we ended 20 programs over the last year that were in the preclinical stages. And the stuff that Mark is running in some of our Umbrella Studies so we can get a quick look at a number of our exciting assets. And hopefully, they're all going to read out and our problem is going to be -- we've got so much good things to do. But if one isn't giving us the readout we want, then the decision will be to put -- to end those programs. And I think we actually kind of showed how you can do that in the TIGIT space where we've shutdown all the Phase IIs that wasn't coming out. We're still running the Phase III in non-small cell lung. So we'll do that. But I think we're set up now where we can continue to want to do, which is we want to build that pipeline. We're trying to beat cancer. You never really kind of know where it's going to come from until it does. There's a lot of great programs out there that everybody thought would work and didn't work, and there's ones where didn't have a chance, suddenly the data is surprising you to the upside. We want to make sure we're taking as many of those opportunities as we can.

Got it.

I think the reality from a development perspective is that a great majority of development cost is still within Phase III, right? So we believe that we are rightsized at this point to deliver even 10 NMEs a year. We can deliver our Phase I in maybe up to, say, 150, 200 patients at a very reasonable price point. And then at that point, we can appropriately value or stop. So again, we're comfortable that we can deliver 10 NMEs a year, which sounds like a lot with our in-house operational capability and the people that we have. I would love to be in the happy problem of, if we want to take 7 of these 10 medicines in the Phase III, we probably have to think about how we wanted to approach that. But again, maybe a problem for '25.

Yes, that's a high-quality future problem. Look, we've shown our ability to do smart collaborations as needed. So to that point, if the problem is we have too many good things, we'll figure out the right way to take it to the next level.

Yes. Great. Well, I think BeiGene is already actually a global setup, right? You have a team in China, U.S. everywhere basically. So how the team worked together? Particularly, how BeiGene start with cost control kind of mindset in running trials, being efficient, trying to -- reducing the patient's cost? So how you have leveraging the setup, a global setup to really achieve that?

I mean, look, I think, hopefully, it doesn't come across as -- I think we're very much a passion-driven organization. I think people come to BeiGene because of the mission. I think people stay at BeiGene because of the mission to get medicines, great medicines to people everywhere. And I think it allows us to ask a lot of them, and people are okay giving that. I mean, I am 100% of the view that our global model and how we do development, how we do manufacturing, how we do everything is the right model, but I'm never going to say it's an easier one. It's easier to be hub and spoke. But you're not doing as much, you're not doing it as quickly and you're not doing this as cost effectively. So we ask, perhaps, a bit more -- sometimes some of our people, but the reward is broadest label in the BTK class, more countries, more patients treated. We should actually run the numbers, but we've treated over 1 million people with our PD-1 now. I'm not sure who else has done that because of the scale of what we're doing. So if that's what's driving your people, then this structure works. And you're living a day-to-day on development, maybe give your perspective.

So I think that people on the development side are authentically passionate about our mission to bring highly innovative and impactful medicines to patients with cancer wherever they are in the world. Now what does that mean from a practical perspective here in the United States. I mean, sometimes I have lunch with my wife and then I'm on a different call in the evening with my colleagues in China because we really do have an authentic one-team culture where we're working together across the Pacific Ocean, across the Atlantic Ocean, that those demand something of the individuals involved in that. But again, I think people are very passionate about our mission and want to see it come to fruition.

Got it. To wrap up the session, the catalyst over the next 6 months to 12 months, any key readouts that we should be watching out for?

We do have data for sonrotoclax and our BTK degrader at EHA. We're excited about those data. And then we're hopeful planning to share some data for CDK4 inhibitor at San Antonio at the end of the year.

Great. Thanks so much. With that, we're going to close the session. Thank you, Mark, and thank you, Michael. Thank you.

Thank you.

Thank you.