CASI Pharmaceuticals, Inc. (CASIF) Earnings Call Transcript & Summary

Good day, everyone, and welcome to the CASI Pharmaceuticals Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Rui Zhang, Vice President of CASI Pharmaceuticals. Please go ahead, ma'am.

Thank you, Vas. Good morning. Welcome to CASI's Second Quarter 2022 Conference Call. Earlier today, CASI issued a press release providing the details of the company's business updates and financial results for the quarter ended June 30, 2022. This press release is available in the Investor Relations section of the company's website. Today's call will be led by Dr. Wei-Wu He, our Chairman and CEO; along with Mr. Larry Zhang, our President. Dr. Alex Zukiwski, our Executive Vice President and Chief Medical Officer; Dr. James Goldschmidt, Chief Business Development Officer, they will also be available to answer the questions during the Q&A session. As a reminder, we will be making forward-looking statements, including our business plans, objectives and milestones. These forward-looking statements are not a guarantee of future performance, and therefore, you should not put undue reliance upon them. These statements are subject to numerous risks and uncertainties that could cause results to differ materially from those projected or implied in our forward-looking statements. For a description of the important factors that could cause actual results to differ, we refer you to the statements in our SEC filings. It is now my pleasure to turn the call over to our Chairman and CEO, Dr. Wei-Wu He. Dr. He?

Thank you, Rui. Good morning, everyone, and thank you for joining us. I'll began the call with an update on the business followed by our lead programs and near-term catalysts, concluding with our financial highlights. In the second quarter of 2022, COVID-related lockdowns and associated restrictions limited access to hospitals in several large cities in China, which had an impact on the sales of EVOMELA. Our sales and marketing team is proven to be resilient, rapidly adapting strategies to address these challenges to ensure that our priorities remain on track. Revenues from sales of EVOMELA increased by 19% compared to the same period last year. Equipped with experience from EVOMELA and the ability to adapt to a changing environment, I believe our commercial and medical marketing team can efficiently execute the anticipated launch of CNCT19 in China. Our strategic focus in 2022 will continue to be to advance the development and commercialization of the portfolio. We anticipate the start of BI-1206 Phase I trial in China very soon. We expect CB-5339 to receive clinical trial application CTA approval from the NMPA during 2022. Meanwhile, our CID-103 Phase I study continues. We are excited by our momentum, and we'll continue to execute on several key milestones across our broad portfolio in the quarters ahead. In May, we effectuated a 10:1 reverse split of the company's common shares. As a result of the reverse split the number of shares of outstanding common stock will be approximately 13.6 million shares. The objective of the reverse stock split is to satisfy the minimum bid price requirement for continued listing on the NASDAQ Capital Market and will not affect our value and shareholders' ownership percentage of CASI's share. In the second quarter, we entered into a sublicense agreement with Precision Autoimmune Therapeutics, a Chinese incorporated company, previously known as Beijing Tianshi Tongda Pharmaceuticals Technology. With a granted Precision Therapeutics, Precision Autoimmune Therapeutics an exclusive worldwide license for the anti-CD38 monoclonal antibody for the treatment, prevention and diagnosis of autoimmune diseases. Precision Autoimmune Therapeutics will make an upfront payment of $10 million equivalent in 2 equal installments upon completion of its first and second financing, respectively, plus potential future payments of development and sales milestones and royalties to CASI. Upon completion of equity financing CASI, through its wholly-owned Chinese subsidiary, will hold 15% equity in a newly established company. The sub-license agreement will allow CASI to remain focused on the malignant hematology/oncology market, while allowing the clinical entity of CID-103 to be explored for the potential treatment of autoimmune diseases. Now let's move to CASI's first commercialized product, EVOMELA. We are pleased to report $8.6 million in revenue in EVOMELA sales for the second quarter of 2022. EVOMELA is approved in China for use as a high-dose conditioning agent prior to hematopoietic stem cell transplant patients. In patients with multiple myeloma, EVOMELA is a proprietary formulation with patent protection until at least 2030, and is currently the only cyclodextrin-enabled formulation of injectable melphalan commercially available in China. Our experienced specialty sales and marketing teams in the hem-oncology market in China is a major competitive advantage. We have established access to a substantial number of key opinion leaders who can advise us on the unmet medical needs of our patient population. CASI continues to pursue a similar strategy with respect to marketing efforts and physician business to further the adoption of stem cell transplantation as a standard of care in the multiple myeloma treatment study, and we'll continue working to address the persistent high unmet medical needs in this patient population. Now I will have Alex address our upcoming pipelines. Alex?

This is Alex Zukiwski, I'm the Chief Medical Officer for CASI. I'd like to first speak about the CNCT19 CAR-T product. Our partner Juventas Cell Therapy continues the development of CNCT19, an autologous CD19-directed CAR-T investigational product for which CASI has co-commercial and profit-sharing rights. CNCT19 is being developed as a potential treatment for patients with hematological malignancies, which express CD19, including B-cell acute lymphoblastic leukemia and B-cell non-Hodgkin's lymphoma. In January, CNCT19 received orphan drug designation by the U.S. FDA. CNCT19 is being locally developed in China and will be locally manufactured, which distinguishes this program from other CAR-T 19 therapies developed and manufactured in part outside of China. The pricing of cell therapy and other innovative drugs in China is a crucial issue for patients. Similar, CD19 CAR-T developed and manufactured utilizing imported components are subject to certain ex China CMC at higher cost of goods, making the price point significantly higher than we believe the price of CNCT19 will be. Juventas in China is currently undertaking the Phase II registrations in both the B-ALL and B-NHL indications. Starting in mid-2021, our commercial franchise has thoroughly prepared for the anticipated China NDA filing of the CNCT19 CAR-T program, which we currently expect to be in the second half of 2022. Now let me address the other product candidates in our pipeline. BI-1206. Along with our partner, BioInvent, we continue to progress the development and regulatory framework for BI-1206 in China. We licensed BI-1206 as first-in-class human monoclonal antibody that targets the Fc gamma RIIb receptor for the Greater China market. BI-1206 has a novel mode of action, blocking the single inhibitory antibody checkpoint inhibitor, Fc gamma RIIb, to unlock the anticancer immunity in both liquid and solid tumors. The Fc gamma receptors are antibody checkpoints that modulate the efficacy of tumor-directed -- tumor cell directed targeted antibodies and immune checkpoint targeting antibodies used in cancer immunotherapy. BI-1206 can potentially be used in all therapeutic monoclonal antibodies that rely on ADCC and/or CDC for efficacy. BI-1206 is currently being investigated outside of China in 2 Phase I/II. One is evaluating BI-1206 in combination with rituximab for the treatment of non-Hodgkin's lymphoma, which includes patients with molecular mantle cell and marginal zone lymphomas, who have lapsed or are refractory to rituximab. A second Phase I/II study is investing in BI-1206 in combination with the anti-PD-1 therapy, KEYTRUDA, otherwise known as pembrolizumab, in solid tumors. The NMPA granted BI-1206 -- granted the BI-1206 CTA approval in December of 2021. Earlier this year, the U.S. FDA granted orphan drug status for BI-1206 for the treatment of follicular lymphoma, the most common form of slow-growing lymphoma, slow-growing non-Hodgkin's lymphoma. Together with BioInvent, we plan to continue to develop BI-1206 in both the hematological malignancies and solid tumors with CASI responsible for the development of commercialization in Greater China. Our lead indication will be BI-1206 in combination with rituximab in patients with relapsed/refractory non-Hodgkin's lymphoma. The BI-1206 trial has been initiated, and we expect to dose the first patient in the second half of this year. Now a word about CB-5339. CB-5339 represents a promising new agent for selectively targeting the VCP/p97 target in cancers and is a complementary addition to our pipeline of hematology/oncology assets. Together with our partner, Cleave Therapeutics, we plan to develop CB-5339 in acute myelogenous leukemia as the potential initial indication with CASI responsible for development and commercialization in Greater China. The CB-5339 CTA application for multiple myeloma indication is in progress after receiving initial input on the IND package from the China Center for Drug Evaluation. Our partner, Cleave Therapeutics, is responsible for the ex China development of CB-5339 and is evaluating the molecule in a Phase I clinical trial of patients with AML and myelodysplastic syndrome. We are excited by the joint development of CB-5339 with our focus on helping to accelerate the development program by initiating trials for the current and potential new indications in China. Now for a short discussion on CID-103. CID-103 is a short -- is a fully human IgG1 anti-CD38 monoclonal antibody, recognizing a unique epitope that has demonstrated encouraging preclinical and safety profile compared to other anti-CD38 monoclonal antibodies. CASI maintains exclusive global rights and is developing CID-103 for the treatment of patients with multiple myeloma. In June 2021, we enrolled our first patient in a Phase I dose escalation study. The Phase I study in patients with previously treated relapsed or refractory multiple myeloma is currently ongoing in France and in the U.K. The Phase I trial is to generate valuable information and has the potential to provide early evidence of clinical activity in the treatment of patients with multiple myeloma. Lastly, on Thiotepa. We're in the process of responding to the China Center for Drug Evaluation response to regulatory submissions for 2 indications. This completes the update of our key pipeline assets. I will now turn it over to Rui to provide an update on the financials. Rui?

Thank you, Alex. Today, I will briefly summarize our financial results and provide key highlights for the second quarter of this year. Revenues consisted of product sales of EVOMELA. Revenue was $8.6 million for the quarter ended June 30, 2022. 19% of the increase compared to $7.2 million for the quarter ended June 30, 2021. Secondary to the COVID-19 lockdowns in a few of the major cities in China, EVOMELA second quarter revenue was flat compared to the first quarter of $9 million in 2022. Cost of revenues was $3.6 million for the quarter ended June 30, 2022, compared to $3 million for the same period last year, which includes royalty payment of $1.7 million and $1.4 million for the same period in 2021. We closed this quarter with $18.9 million cash and cash equivalent. In May, we entered into a business loan agreement with East West Bank to borrow a revolving line of credit up to USD 10 million for working capital purpose. By implementing management and budgetary control, we continue to be thoughtful on how we deploy our cash with a focus on creating shareholders' value. With that, I would like to now turn the call back over to the operator to open up the line for questions. Vas?

[Operator Instructions] Our first question comes from Justin Zelin with BTIG.

This is Vishal on for Justin. I had 2 questions. The first is, if you could provide additional clarity on the challenges you are seeing due to COVID and if you believe this will be resolved in the near future? And the second question is, obviously, congrats on the deal recently struck with Precision Autoimmune Therapeutics. What did you find attractive about this deal and why did you choose Precision Autoimmune as a partner?

Well, actually, Justin, the COVID situation because Shanghai is a major part of our revenue -- maybe after I finished, Larry can address this more specifically. Shanghai literally was shut down for 2 months and that's probably is a major impact for our second quarter revenues. We don't really know 100% for sure that this won't happen again. But so far, at least in Shanghai, some of the major cities, the revenue is coming back. So -- but the COVID situation is obviously quite unpredictable in this regard with the China policy on COVID control. So Larry, do you want to add a little bit on this question, the impact of COVID on our revenue?

Absolutely. Justin, as we mentioned, I think in the -- the COVID-19 pandemic is pretty unpredictable in China. And it's something that can happen again in Shanghai, even though it's not impacted our business further yet. But sometimes, we are ready and any time and anything happened, and again, it's locked down. And some other big cities, it's like Guangzhou and Shenzhen, is still is alert. And there's a new wave of COVID-19 that is -- always, and we are ready to deal with. This is one of the key challenges, I would say for our -- the rest of the year and our predict or forecast and our sales and revenues, but the team is ready. And for the cities, we can do that. So that's way -- and for the second quarter, and our business continually can grow 19% compared to same period the last few years. But it's lots of challenges ahead, we are ready to deal with. Justin?

Yes. In the second question -- Justin, do you think we satisfy your question for the first question?

Yes, that was great.

Yes. Because, Justin, China is a big country, so even we still beat the quarter the previous year, that just means that it -- although it's one country, but the country itself is diversified enough to sustain the business. So to answer your second question, why do we do the Precision Autoimmune Therapeutics? We have -- the Board and the senior management team, we have made a commitment that CASI is going to focus on hematology/oncology market because we have a wonderful commercial team. We have marketing, sales. We have wonderful connection with KOLs. But we are still a very small company with very limited financial resources. So we are just going to focus on hematology/oncology space. So in the autoimmune disease, we actually all know that CD38 have been used to treat many different autoimmune indications off label. And the data is really, really quite encouraging. So we just found -- a local venture capital fund is willing to finance a Precision Autoimmune company, and they kind of fall in love with the CD38 story on the autoimmune space. And we believe autoimmune diseases are just like cancer. For instance, like diseases like lupus, ITP, they are really not one diseases, they are actually driven by totally different biology. Some of them are driven by B-cell biology, some of them are driven by T-cell biology, some of them are driven by early B-cells, some of them are driven by more later-stage plasma cell. We think actually the major technology breakthrough in this space is the genomic sequencing technology and also the next the single cell technology. So we teamed up with professors in [indiscernible] University, who is really, really at the bleeding edge of single cell analysis technology. So by contributing our CD38, we are being part of this brand-new Precision Autoimmune indications. We think this is an extremely exciting blue ocean. Since the single cell technology really opens up a lot of new potential segments for autoimmune cell treatment. And clearly, our CD38 is almost finishing Phase I studies. And we so far like our data. So we have no infusion reaction even at pretty high dose. And so with additional financing from new investors, CASI does not need to see -- bear the burden of clinical development for this drug -- for CD38 in autoimmune diseases. But the new core will spend the money to develop autoimmune indication, which could actually help our hematology/oncology indication. That's why we decided to do this deal. And we also will receive about $10 million upfront payment, which is significant for CASI today's depressed capital market. And with this $10 million, we actually got a very low interest rate loan from East West Bank, and we have existing cash. We think we are pretty well financed well into 2023.

Our next question comes from Leland Gershell with Oppenheimer.

Yes. Congratulations on the progress. Two questions from me. First is, as we anticipate the availability of CNCT19, I wanted to ask Wei-Wu He to the extent that you would have any visibility, what the timing could be on potential NDRL listings? Is this something -- does the NDRL consider additions only once a year? Or is there a certain frequency or can they be made ad hoc? Is there any activities you can do to increase the experience or the likelihood of CNCT19 on the NDRL? And then my second question would be, if you look in the literature, there's evidence many, many anti-CD19. So the CAR-T cell therapies that are being looked at in China, I think many of them probably academically, in addition to yours and the pharmas, I'm just wondering what the status of those would -- are in terms of commercial application? Should we think about those as being also competitive with yours at some point? Or do you think Chinese government would maybe shut down the ability of those to be used once we have CNCT19 on the market?

Yes. Yes, Leland, thank you so much. CNCT was still -- I mean, with all indications, Juventas is still on track to file the NDA in 2022. So that's the way we have been always saying that, before end of '22, investors should be expecting to see a Juventas NDA filing. The approval is most likely going to happen if the CBE agrees with our data. Approval is most likely going to be happening in 2023. There are already 2 CAR-T 19 approved in China. They are all imported from U.S.A. One is highest CAR-T 19, so it's [ sufficiently highest ]. And we see [indiscernible] that CAR-T 19 was also approved but they are significantly priced at around RMB 1.2 million. It's about close to USD 200,000, which at that price point is really only kind of available to the very high-end client base. We -- because our CAR-T 19 is a Chinese domestically developed CAR-T 19. We believe our data is comparable, if not more competitive. But our cost of manufacturing is significantly lower than U.S. produced CAR-T 19 therapy. So there is a -- we think there will be a price advantage in China. Secondly, because of the collaboration between CASI and Juventas, we already have a very experienced commercial and sales team through the launch of EVOMELA, so because the KOLs for EVOMELA are the same sets of KOLs for CAR-T 19 treatment. We do believe that we are much prepared as a commercial channel for CNCT19 in China. So there might be additional drugs coming. The consensus is it's probably not going to be more than 4 or 5 CAR-T 19 approval in China. And we hopefully will be the #3, but the first domestic CAR-T 19 in China. Leland, does that answer your question?

Yes. Yes, that's helpful.

[Operator Instructions] Our next question comes from Sean Lee with H.C. Wainwright.

My first question is on the CAR-T 19. So with the upcoming results later this year and potentially approval next year, I was wondering, are there any additional steps that need to be taken before you're able to launch this in terms of the manufacturing or in terms of expanding your commercial structure?

Sean, can you repeat the last sentence? I couldn't catch it very well.

Yes. I was wondering, assuming that we get positive results this year and approval next year, are there any other steps that you or Juventas need to take before you're able to launch the product? For example, do you have to go through additional manufacturing checks? Or do you have to expand the commercial structure?

My understanding is we have sufficient manufacturing capacity for at least -- for the first year, at least 5 to 1,000 patients, which we don't expect the first year to exceed 1,000 patients in the first 4 years. So we don't anticipate any manufacturing issues at approval. Now if our commercial team did such a great job, it's over 1,000 patients, we might actually have to invest into additional manufacturing capacities.

Great. Then for my second question on the clinical pipeline side. Just could you give us an idea of the time line for data expectations for BI-1206 as well as the timeline for the [indiscernible] development?

Alex, would you like to address that?

Yes. So Sean, this is Alex. On the [indiscernible], we are working with our partner, Steve, to address all of the recently received CDE questions. We anticipate submission shortly. And then it will be a review process to hear back from CDE. We're optimistic that we will be able to address the vast majority of the questions in a timely fashion. Some will take a little longer. Secondary -- the complexity of new analytics that have to be done. But I would hope that we will have a submission and feedback within the next 4 to 6 months on that. On the BI-1206, that program is moving forward. As I noted, the CTA has been approved in China. We have a very close collaboration with our colleagues at BioInvent. And the goal is to get the first patient in as expeditiously as possible. And our ultimate goal is to participate this BioInvent in the future global registration study for the combination of BI-1206 plus rituximab. I apologize but -- yes. But to give you firm dates on some of these things, we have not announced and that we'd only do so in collaboration with BioInvent.

This concludes the question-and-answer session. I would like to turn the conference back over to Wei-Wu for any closing remarks. Please go ahead, sir.

Well, thank you again for joining today's call. There's no doubt in my mind that we are on the course in building a fundamentally strong biopharmaceutical company. We look forward to leveraging our existing commercial infrastructure, pursue pre-commercial launch activities for the CAR-T 19 program, drive expanded pipeline progress and continue to observe steady EVOMELA revenues. We thank each of you for your continued support in CASI during this exciting period. Operator, thank you. You may now conclude this call.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may all now disconnect. Have a good day.