Hua Medicine (Shanghai) Ltd. (2552) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Thank you for joining Hua Medicine's 2019 Annual Results Investor Presentation. On the call today are Dr. Li Chen, Founder, Chief Executive Officer, Chief Scientific Officer and Executive Director; and Mr. George Lin, J.D., Chief Financial Officer and Executive Director. Dr. Li Chen will give an overview of the company's highlights, including clinical trials and recognitions. He will also share updates regarding Hua Medicine's R&D pipeline. Mr. George Lin, J.D. will go through the company's financials and analysis. They will both be available to answer your questions during the Q&A session that follows. I will remind you that this call today may contain forward-looking statements. For details, please refer to the disclaimer on Slide 2 of today's presentation. With that, I will now turn the call over to Dr. Chen. Dr. Chen, please go ahead.

Thank you. Good morning. Thank you for taking the time to attend this Hua Medicine 2019 Annual Results Call. And I hope you all stay safe and healthy. I would like to start the presentation on Slide #4 of our PowerPoint presentation, which states our mission at Hua Medicine. And our goal is to achieve the medical care and then to treat diabetes. The mission is to stop diabetes. We will achieve this objective by establishing our leading candidate, dorzagliatin, as a cornerstone therapy for diabetes treatment. Through dorzagliatin, we aim to restore glucose homeostasis in type 2 diabetes patients. We plan to launch dorzagliatin in China first, then globally as a monotherapy and in combination with the other diabetes drugs. With the heterogenic nature of type 2 diabetes worldwide, we have been engaging the artificial intelligence technology to develop personalized treatment protocols and advance the diabetes care. We are continuing leveraging Hua Medicine's excellent internal teams and a strong partner network to continue advance our current pipeline. We will partner with either China-based or international pharmaceutical companies to make dorzagliatin available to the patients in both China and the regions outside China. In Slide #5, you can see that in 2019, we have made many breakthroughs. We have achieved the primary efficacy endpoint in our pivotal Phase III trial that treated drug-naïve type 2 diabetes patients in China in 24 weeks, with a very good efficacy, very low hypoglycemia and very good safety profile. And this further validated the concept of restoring homeostasis and stop diabetes. We also completed the enrollment of our metformin combination trial with dorzagliatin. And then this trial -- both trials are going very well. I will give you an update later on the current status. We also completed our HMM0110 trial. This is the trial we conducted in the severe kidney disease patients and then showing there is no pharmacological PK interaction, which indicates dorzagliatin can be used in the type 2 diabetes patients with moderate, severe, end stage of chronic kidney disease. This is a very important indication. As many of you know, in the coronavirus situation, a lot of patients have the kidney function impaired, and then hypoglycemia of this impaired kidney function can do a very harm -- damage. And our drug, in this case, will be able to treat diabetes patients with severe kidney dysfunction. We also completed HMM0111. This is the trial investigating the PK/PD interactions between dorzagliatin and sitagliptin. And we are very glad to see there is very limited and no PK interactions between these 2 drugs, indicating they can use together. And also, we have shown a very good synergistic effect of glucose reduction and improved beta cell functions when combined dorzagliatin with sitagliptin, one of the best sellers in oral antidiabetic medicine. At the same time, we worked over several other milestones. We were granted a formulation patent for dorzagliatin and also filed 6 additional patent applications, covering fixed-dose combinations of dorzagliatin and other oral anti -- other antidiabetic drugs, extending and strengthening our IP portfolio. We initiated formal collaboration with Dr. Franz Matschinsky, the Godfather of glucokinase at University of Pennsylvania to further study the glucokinase activator and the glucose homeostasis. He was just recently awarded the Rolf Luft Award, which recognizes breakthrough discovery that glucokinase plays a central role in glucose homeostasis. And this is the key scientific hypotheses at Hua Medicine, and that Dr. Matschinsky has dedicated whole life, and over last 50 years, to work in this field and define the physiological functions of glucose homeostasis play the role that in the diabetes. And this is also very important milestone for Hua Medicine, where we collaboratively identified the opportunities to developing a glucokinase activator as a potential treatment for diabetes. We also show our results of a nonbiased machine learning algorithm-based artificial intelligence technology used for type 2 diabetes patient subclassification, which offers an opportunity for us to further developing this personalized medicine approach in diabetes treatment. In December, we announced our global operation headquarter and R&D center will be established in Shanghai's ZhangJiang Science City and of course where Hua Medicine was founded. And then during this year, we have fully validated our commercial manufacturing process that supports China launch of our drug. And finally, we recruited a former U.S. FDA Officer, Dr. Fuxing Tang, as Chief Scientific Officer this February. On Slide 6, we are proud to share with you the picture of our top line data from the Phase III study presented at Annual Chinese Diabetes Society conferences holding in the last November, which was hosted by our leading principal investigator, Dr. Dalong Zhu, the Chairman of the Chinese Diabetes Society, and our leaders, leading PIs and partners, including Dr. Yang Wenying, the former Chairwoman of Chinese Diabetes Society and who is leading our metformin add-on combination trials. In the Slide #7, I just want to give you an update of what's going on, on this COVID-19 situation. But before doing that, I think I'd like to give you the update on our Phase III study design. As you all remember, we are conducting 2 Phase III studies. One is the monotherapy for the drug-naïve patients, and that's the 301. We have completed, despite of this COVID-19, the 52-week observation in the clinic, and then the clinical operation part is finally finished in March 2, 2020. And then also due to a very good preparation work and engagement by our investigators and our partners, the combination trial, HMM02 (sic) [ HMM0302 ], a 24-week study, also completed in February 16. And in this case, we can see that with this very important milestones we have achieved in our 2 pivotal clinical studies, and then we will advance to the next step in the clinical center, where our team will conduct quality evaluation and inspections on the clinical data, and then the performance and the compliance. This is going to be taking some time as we're moving along as the COVID virus control situation, and we will continue to managing the trial according to the national guidelines, and Hua Medicine internally have enforced additional pharmacovigilance on quality control and ensure our data quality stay high and also our results shows the standard scientific and high quality. Other activities, just to report to you. Due to the virus outbreak, Hua Medicine has communicated with our employees and then maintained a very good healthy condition and control. And by February 3, Hua Medicine employees had returned to work remotely. And then by March 2, our employees began to return to office -- returning to our office in Shanghai. And the current situation is good. And we are all -- stay healthy and then the operation is moving smoothly. With the outbreak of this COVID-19 globally and the controlling situation uncertainty, we anticipate that there's delays when we go into the hospital, where we have the controls by the COVID combat team and then control by the regulatory that access to the hospitals and then files and then data in our clinical study. So that may have a potential delay related to the data cleaning, database log and then eventually, the top line results. And the filing that -- we will do our best in this situation and then keep you posted as we're moving along. So in the Slide #8, we basically just remind you that our monotherapy trial has been completed. And then this year, we'll report this Phase III, 52-week results to you and then also the 24-week study of this combination study. And the 52-week result on this 24-week study, we'll communicate with you as they're coming along. And then the additional combination study of dorzagliatin with empagliflozin, a Phase I trial now currently ongoing in the U.S., and we are expecting -- give you an update on that in this year. Also, here, we have initiated dorzagliatin combination studies with the other potential indications. And we are in the process of prepare and finalizing the dossiers with [indiscernible] for the NDA submission preparation. At this time, we are expanding and preparing our market entry and then to health education and then partner development to engage or launch our product in 2021. We are also engaging international partners and -- which helping us to leverage the capabilities and then to bring the drug in China and then ex China. So let's give you a refresh on what we have been doing on the dorzagliatin. And I think I'd like to go to the Slide #11, which I want to reinforce our understanding, that diabetes is a terrible disease and there's a huge unmet medical need. Not only with 500 million people with diabetes now globally, 1/4 is in China, and we spend over $80 billion to treat those diabetes and the diabetes complications, the kidney disease, the heart disease, the stroke, and all those cost additional financial and economical burden to our community. And so far, no drug, no approved drug used in the current treatment can stop the progression of the disease and from the early stage towards late stage, and then generally the complications. And then the most important thing for this area in the last decade is lack of investment because of this CVOT study where it was imposed in late 1990s. And then now, the good news is realizing it as such bad disease and then has such big impact and the economic burden. And then U.S. FDA recently has waived the post-marketing CVOT study. That, I think, is a good news for the type 2 diabetes patients, for the medical community and for a company like Hua Medicine that allow us to advance the medicine faster to the patients. Now the reason the current medicine cannot stop the type 2 diabetes and advancing to the complication is the current drug cannot repair the lost glucose sensitivity and it cannot repair the impaired glucose homeostasis. This require new therapy and glucokinase activator is just doing that. And over the last 10 years' study at Hua Medicine, together with global leader, such as Franz Matschinsky, we have firmly established that dorzagliatin works in the way of repairing the glucose sensor and also be able to restore the glucose homeostasis. That makes a very strong potential to stop type 2 diabetes. This is our goal in maintaining glucose homeostasis in a healthy range, and then achieving the glucose homeostasis, in this case, will be able to stop diabetes. By lowering blood glucose level alone it's not be able to do that. And then many of the medicines and medical practice have shown that the current medicine focused on blood glucose lowering will not be able to stop the progressive nature of the diabetes. So that's the slide in -- #13, we're showing that with the current -- on the left side, you can see with the monotherapy used and none of them can stop the diabetes progression, the A1c keep up going as you're taking the drug. And on the right side, it explains that when your body lose the first phase insulin secretion, they cause all the problems in the beta cell stress and then leading to the progressive degenerative nature of beta cell dysfunction, and eventually lead to the diabetes. And in the diabetic conditions, the disease is getting worse because of the further stress and then the beta cell function deteriorating over the time and then cause the loss of control of the disease. Now in Slide 14, basically, further showing, with the recent study, that current therapy, including metformin, liraglutide, the leading GLP-1 compound, glargine is the leading insulin compound, alone or through the combination, would not be able to stop the progression of the beta cell dysfunction. And then the ability to control the blood glucose with those therapies or the combination of the therapies will not be able to repair the beta cell function at the end. So this is saying why we need to fix the sensor and then restore the glucose hemostasis. Now as shown in Slide 15, many of you have seen this many times. Our body is fully automated to control blood glucose. Glucose control the blood glucose through the glucokinase, acting as the sensor showing the functions in the left side of the globe. And then those managing the hormones, insulin, glucagon and then GLP-1 in response to glucose and allow our body to store the glucose in our liver, muscle or fat. And the glucose storage and the production function on the right-hand side of the globe showing that glucokinase also plays an important role in storing the glucose and producing glucose in the liver. And this all working together, forming the glucose homeostasis. And then glucokinase here is -- plays a central role in managing the whole process. And in this way, you can see in the Slide #16, in the therapeutic area, that's why it's easy to understand why the current medicine, which targeted only on the regional operation organs in the blood glucose control. And then their functions in those organs is eventually managed by insulin, GLP-1 and glucagon, which was finally controlled by the glucose and managing by the dorzagliatin. So in this case, dorzagliatin serves the cornerstone therapy to treat diabetes, in combination with the existing therapy, have a very solid scientific foundation. And in Slide 17, we use that analogy for the automated control of the temperature in the building, the thermostat is the key in the whole automation. And then the other coolers, ventilators and heaters are in the operation is managed by the thermostats. And then in our body, our automation of the blood glucose control is managed by the glucose stats. And the glucokinase is the key element in the glucose stats, and then that controls the whole automated system of glucose homeostasis. Then you can easily understand if the sensor breaks down and then the automation control is lost, and then you will get either elevated temperature or very low temperature. Similarly, in our body in a diabetic situation, the blood glucose fluctuates after you take a meal. And then it goes down to hypoglycemia when you are hungry. So that fluctuation in the diabetic function led to the complication has a lot of things to do with the dysfunction of the glucokinase and then the glucose stats. The good news is that 50 years ago, Franz Matschinsky started looking into this. And then roughly about 20 years ago, Dr. Matschinsky, together with Roche colleagues, discovered the first glucokinase activator, and it's showing that the glucokinase activator is able to managing the blood glucose and it has the potential to become a diabetes therapy. Owning to his work and this establishing the key function of the glucokinase and the glucose homeostasis and become -- proposing the discovery of glucokinase activator, he has got this Rolf Luft Award. And we have been very lucky working with Dr. Matschinsky over the years to advance our dorzagliatin. And then now, we can see many of the preclinical and clinical data showing dorzagliatin is working in the way of repair the glucose sensor, improve the beta cell function. And that brings us to Slide #19, where on the left top corner, this is the data comes from the diabetes rat's pancreas. We can show dorzagliatin improved the beta cell mass and it improved the beta cell function of this treatment. And then in the top right and then bottom left are the studies conducting in the diabetes patients, showing dorzagliatin has improved the glucose sensitivity, measured by the left shift of the C-peptide secretion curve and also measured by the early insulinogenic index. In the bottom right, the panel showing that the diabetes patients after treatment for 3 months, and their glucose disposition index gets very good -- improved. And the -- this index is showing the ability of our body to control the glucose homeostasis. And then this effect also lasted in a week without a treatment. In week 13, the disposition index maintains, showing the glucose homeostasis control continue working very well. All those elements was basically showing that dorzagliatin, as a fourth-generation of glucokinase activator, is able to performing fixing blood glucose sensor that is the glucokinase function and improve the beta cell function in the diabetes patients. Obviously, our studies in our current Phase III trial, the data we have been published in last November, firmly showing that the concept of fix the sensor and then treat diabetes with underlying cause is really working in the large Phase III trial. And then the 24-week top line showing that this is the first drug candidate now be able to treat underlying cause of type 2 diabetes, and are now achieving the primary endpoint efficacy in the 24-week study. And then the A1c reduction is very profiled, 1.07%, very good statistic significance compared with the placebo group. Very good patient response rate. And then those response rate means the patient after taking the drug not only just dropped the blood glucose, but also getting their blood glucose into the healthy range, that is the A1c below 7%. And in addition, those patients have no hypoglycemia, and that's where the glucose homeostasis is in working, is in functioning. So I think this is very exciting not only from the fundamental basic science translating to the clinical study and animal models validating dorzagliatin is able to repair the glucose sensor and then restore the homeostasis. And now we have a solid validation in the larger pivotal trials in the real-world setting, that the drug works very well and then have avoided a lot of potential side effects from the other drugs, for example, the discomforts and the GI side effect. And now in this study, we have less than 1% incidence of hypoglycemia and no severe hypoglycemia. This is also further support our theory and our mechanism of action of dorzagliatin. The -- now, as I mentioned, the quality -- the 301 has a 24-week placebo-controlled double-blinded study, plus a 28-week open-label safety outcome. And now the profile has completed by March 2, 2020. And then now we're getting to the data cleaning and COVID control and management of infections and then get our data ready to tell you later on this year. The other very important study is also showing here that -- this is a study in the patients in U.S., who have taken the diabetes medicine. Now when we co-administered dorzagliatin and sitagliptin together, we can see that there's a very good reduction of their blood glucose when combined together. And this is a synergistic effect. And then this effect is not only showing in a blood glucose reduction, but also in the -- increasing the beta cell function measured by the C-peptide secretion. And additionally, as our previous work has indicated, that dorzagliatin is also be able to regulate GLP-1 secretion in animal space, in healthy volunteers. And also I think it is happening in the type 2 diabetes patients when we treat with dorzagliatin. So the combination of dorzagliatin with sitagliptin or DPP-4 plus may offer us an opportunity to come up with an oral GLP-1. It's not through injection, but it's through our body to produce GLP-1. That is also very important aspect, and Hua Medicine now is moving to work and developing that. So now I'm at Slide 22. Here, again, is talking about the opportunities of taking dorzagliatin into the different patient population. In China, diabetes kidney disease, it consists of about 22% of the type 2 diabetes patients. And those patients have very limited antidiabetic drug to use because many of the oral antidiabetics, including metformin and DPP-4 and sulfonylurea, as such, they require dose adjustments because those drugs get cleared by the kidney, and then if the kidney function gets changed and then the drug cannot be directly used. Otherwise, it will cause hypoglycemia. And this is very dangerous. This is also happening now in the coronavirus patients. So in this patient population, I think, an oral therapy, such as dorzagliatin, which actually now showing that in the late-stage, end-state renal-impaired patients, there is no pharmacokinetic changes, which means that our drug can be used in those diabetes patients with moderate, severe and end-state chronic kidney diseases. This is very important indications, further showing that dorzagliatin is safe and also has the advantage to be a cornerstone therapy to address the whole -- entire type 2 diabetes area. Of course, we'll continue to explore the patient population, and then using Hua algorithm, advancing this into a machine-learning process. And the purpose of this is indeed allow us to better understand the complexity of the type 2 diabetes and then make them into the sub classification, and then we can provide more accurate or personalized treatment to the type 2 diabetes patients, either with dorzagliatin as a monotherapy or dorzagliatin in combination with existing therapeutic drugs. And that allows us to further advance Hua Medicine's portfolio by developing dorzagliatin in combination with metformin, SGLT-2 and then all 9 -- 6 different classes of antidiabetic drugs, which is shown on Slide 24, that we can treat metformin-tolerated or AGI-tolerated patients in China, which is the first line. And then we can treat those diabetes patients with cardiovascular risk, in combination with SGLT-2 inhibitors; and in the DPP-4 area, the combination of dorzagliatin is not only be able to use for the type 2 diabetes treatment, we also consider there is potential of treating neurodegenerative diseases with the endogenous GLP-1 production, managed and then promoted by dorzagliatin and then adding it before. So the new indications are here not only now in the diabetes area and also getting to the neurodegeneration and potentially in the type 1 diabetes and in the NASH population. And those are the activities that are ongoing, either in the preclinical or the clinical settings. And we are very excited, and we are going to be very busy in 2020 to advance those programs and then bring the cure and opportunities to treat diabetes. Now in Slide 25, we basically want to reemphasize how dorzagliatin has become the cornerstone therapy. And then most importantly, I think, it restored glucose homeostasis and then optimized time-in-range and then reduce the glucose fluctuations and then preventing the diabetes complication. And this, obviously, is coming from the protection of the beta cell, beta cell function, and then be able to achieve very solid HbA1c reduction and without hypoglycemia and GI side effect. And then I think those are the very important attributes of the dorzagliatin that can be used as a cornerstone function. And then the second important thing is that how we're expanding our indications in the diabetic kidney disease and potentially in the cardiovascular disease and then also neurodegeneration. And those opportunities are already showing through our initial preclinical and clinical study, and then we will be able to advance those through our portfolios and pipelines, which is showing on Slide 26. And then that basically has already been explained. And then all those is on track to move forward to deliver the results. So just to remind you again, that in the next 12 months, we're going to continue -- update with you on the 2 pivotal Phase III trials and 2 combination trials with the DPP-4 and SGLT-2 inhibitors, and the trials related to expand our patient population with mono and metformin combination. With that, I think I'll turn over the floor to George Lin, our Executive VP and CFO, to give you an update on the financial review.

Great. Thanks, Dr. Chen. I will go through the financial summary very quickly. So as you can see on this Page 29, for the 2019 fiscal year, we spent CNY 337.7 million and ended with a cash position of CNY 1.1 billion, so very strong balance sheet. Of the amount of cash spent, approximately CNY 342 million was used in operations. And of this amount of cash, CNY 238 million was used for R&D activities. On the next slide, we show you the accrued amount of R&D expenses, which includes noncash expenses incurred in 2019 due principally to the increase in activity for Phase III spending in 2019 over 2018, are resulting accrued expenses increase from CNY 269 million in 2018 to CNY 321.9 million in 2019. Our administrative expenses also increased in 2019 from CNY 100 million in 2018 to CNY 146.6 million. These administrative expenses were related to the establishment and growth of the finance and corporate development team and commercial strategy and marketing team, along with a consulting engagement regarding the commercial strategy. On the final slide, in the financial summary, we can provide you other income and gains as well as total year loss in 2019. Other income increased to CNY 29.6 million in 2019, due principally to an increase of CNY 13.1 million in government grants from Chinese government entities and then an increase of CNY 6.1 million in bank interest income. Other gains was only CNY 6.3 million (sic) [ CNY 16.3 million ] in 2019 compared to CNY 63.8 million in 2018 due to the smaller appreciation of the U.S. dollar against the renminbi in 2019. Finally, our total loss before tax was CNY 425 million in 2019, which is a lot less than the corresponding loss in 2018. If you recall, there was a noncash accounting charge we took due to a loss in fair value of convertible preferred shares incurred before our IPO in September 2018. That charge is no longer as of the IPO. And so as a result, that's the main difference. Our adjusted net loss for 2019 was CNY 350.9 million in 2019. I know people will probably ask what 2020 budget looks like. Currently, we are budgeting to spend approximately CNY 700 million. As you recall, as of the end of December 31, 2019, we had CNY 1.1 billion. So we are still in a very strong cash position. So to sum it off, the last 2 slides, I'll go through this quickly. This Slide 33, you've seen many times, but to reemphasize, we've got global rights to our dorzagliatin. We've met our primary efficacy endpoint that we announced for our Phase III monotherapy in November last year. This is a first-in-class drug, and it's a first novel concept, which is very strange for a disease where the first drug insulin was discovered less than 100 years ago. It's a novel concept in actually being the only one to treat the underlying cause of type 2 diabetes. And from our perspective, this is the key point, is that there's a lot of drugs that treat a symptom, right, that lower blood sugar. Why do we care about a first in class? Why do we care about a novel concept? Because the point of this drug is actually to stop diabetes, to stop the progressive degeneration of diabetes, right? This is a very serious thing, if we think about it. Dr. Chen mentioned it, right, 2 weeks ago, the United States removed the CVOT requirement that would cost probably USD 500 million and up post marketing in the U.S., 4 years, 10,000-patient trial. They removed that requirement because they believe that, that requirement has actually stopped innovation, and it truly has. In addition to that, it's not that meaningful. All the CVOT that came out showed positive results, which you would expect with any drugs that lower blood sugar. You also have to thank Dr. Franz Matschinsky who just won the Rolf Luft Award, which is awarded by the Nobel Committee at the Karolinska Institute, and he's going to make a presentation in May. But why was it after 50 years he just received this, and that's because the synchronization of his wonderful hypothesis to treat the underlying has now been matched with actually a viable and safe glucokinase like ours. In addition, if you think about Page 26, our pipeline, right, every single one of our pipeline so far has shown positive, which means that the value of our portfolio, right, which is basically monotherapy and, more importantly, combination to treat each one of the diverse range of type 2 diabetics in the world, is actually going positive. It's advancing. The value is increasing. And then we will increase this in 2 other dimensions, right? We will increase it geographically by finding a partner, and then we will increase it from a product portfolio by advancing our fixed-dose combination. That is why we're very excited about this. And the last slide is all the industry-wide recognition that we've received thus far. Actually, it isn't thus far, it's just the last few years, there's a lot more. But as you can see, the awards keep on coming, and we're expecting that with positive results from our pipeline that we would get a lot more awards as well. So with that, we will conclude our prepared remarks, hand it over to the moderator.

[Operator Instructions] The first question comes from David Li from CLSA.

Can you hear me, Dr. George and Dr. Chen?

Yes, very clear.

Okay, cool. I've got 2 questions I would like to discuss with you. So for your clinical trials, it seems like the 301 and 302, the clinical trial has been completed in the first quarter of this year, especially for the 52-week trial for the 301 that has been finished in March 2 this year, and for 302 that has been completed in the -- also in February this year. And I'm wondering why you are going to announce double-blinded results in the third quarter of this year? So given this, will you also adjust your expectation on your -- on the marketing time of your drug? So this is the first question. My second question is that I would -- I'm just wondering to know that is there any development on your potential cooperation with large pharma companies since the interim result? Is there any development, updated development? So this is my first 2 questions.

Li Chen here, let me handle this first, and then George can add on additional comments. I think we announced now that we completed clinical sets...

Dr. Chen, I can't hear you very clearly.

Oh, sorry. It must be the face mask. Now, it's better? Hello?

Yes, it's better now. Yes, it's better now.

Okay, good. So we just announced that we have completed the 2 clinical studies in China, which is conducted in over 110 clinical centers and scattered around the country. And this is -- the one part of the drug development is complete the patient observation and then taking the drug and doing that passing in the hospital. So we call that Last Patient Out milestone, the last patient out of the clinical center and then out of this study. So the study has now been completed. The most important part is in after the last patient out, our management team and our partners and colleagues from TigerMed, our quality control team are going through the clinical site to review all the data and then review all this practice, and then do the quality inspection and then quality control and then quality audit to ensure the trial is run properly, the data is recorded correctly. And then all the data later on, after we freeze, we do the analysis and then come out with the top line data that is accurate and then scientifically sound and then in high quality. So matter to say, after we finish the clinical portion of the study, and there is a significant amount of time and work we need to do as a clinical center, and then to do this quality control and quality insurance and management. And then -- so the reason we anticipate some delay on this is that the outbreak of coronavirus situation in China, and then many of the clinical centers now is in the situation of handling the patients. However, the amount of sites that impact on our own clinical study is less than 10%. That 10% may impact the time line because we need to complete all the sites and the quality and the control. And we are working with the regulatory and also the hospital management team and then closely monitoring the COVID-19 situation. And then the plan, we can do the data validation, quality control as early as we can so that we'll be able to drive the program forward and then reach to the next milestone. George, do you want to add?

Yes. I mean, David, does that answer your question? The very positive good news, as you mentioned, is that the 2 data points, the 52 weeks for 301 and 24-week, those are complete. So those patient visits were done. We've been very diligent about -- talking about enrollment numbers throughout the last 2 years. So if you look at that, the wave of patients that kind of were completed as of the end of January was all done. The issue is for us to have database log with our CROs, we need to get all 110 sites and have access to that, right, and effectively to sign off. But you can imagine, there are some sites, some hospitals that are very, very much focused on other things than clinical trials, getting access, getting their time, just takes time. So the data is waiting there. And our CRO and our quality assurance team just needs to go. So that's to your first question. The discussion with partners, we really can't reveal much more than they continue going. I would say, again, flip to Page 26, David, you have always indicated to us, you guys have a lot of data coming that's great. Make sure it's data that the pharma partner, potential partner, would be interested. So if you look at Slide 26, right, we've got lots of very interesting data with time as it goes. They get more and more excited because the combo potential is now possible. So 301 and 302 will be coming, and then if you look at 110, that's a very important trial, right? We just show that our drug works without dose adjustment in renal-impaired type 2 diabetics, which comprises 21.9% of the Chinese type 2 diabetes patients. And then if you think about it, metformin, sitagliptin, DPP-4 and the top-selling SGLT-2, they don't -- they can't do this. They can't say what we just said. They either need dose adjustment or they're contraindicated, right? And then upcoming data will be SGLT-2. We've already shown DPP-4 is very promising. Knock on wood, that could be very powerful as a competitor to the GLP class as oral. And then potentially because of the drop in price in acarbose, the increase of use of acarbose also makes the combination of dorzagliatin with acarbose very powerful. So why do I mention this in connection with the partners? Because this is all very interesting to the partners, and the data is all pretty much coming from most of these in -- by the third quarter as we kind of said, right? We've said third quarter because we didn't want people to kind of expect it in June because of the access to these various other things. And that will coincide also when the information is shared with these partners.

[Operator Instructions] Your next question comes from Jian Gong from Goldman Sachs.

Can you hear me?

Yes.

Yes.

This is Ziyi from Goldman. I've got a couple of questions. Thanks for all the colors and updates. But there's just one important thing about -- because I think, definitely, the combo data plus metformin is one of the critical data that we should be looking at. And this, definitely, the most important data for potential global collaboration discussion. So given that, in our 301 trial, we actually saw a very strong placebo effect in that trial. So that actually makes our placebo-adjusted HbA1c reduction probably weaker than expected. And how do -- how should we think about the potential -- the combo data? Will that placebo effect still be in place? We're going to see that very strong placebo effect again in this trial? Or it's really hard to tell? That's my first question. And second is more about our clinical development plan. Because I still remember that when we released the first half earnings, we were talking about -- we're planning to initiate some of the clinical trials head-to-head comparison versus DPP-4 versus acarbose, and we were planning to initiate those studies in like second half last year or this year. So what are the status of those clinical trials? And are we still going to initiate those trials? Or we are changing our clinical development plans for that? And I think the third question, and also this is one of the questions people really care about, is commercial potential and pricing strategy in China. Because particularly after price cut of Farxiga from AstraZeneca to get into the 2019 national reimbursement list, right, they cut the price quite aggressively. So what's your thoughts on the potential competitive landscape in China after -- if more and more of those novel-patented antidiabetes new generation drugs experience significant price cut? Will that really affect your commercial strategy and pricing strategy?

Okay, thanks. I think I'll address the first 2 questions, and then George will give you the thought on the commercial potential. I think the commercial potential is huge and especially now with our drug that's adding to others' existing therapy and doing really well. For the -- I just want to talk about this placebo effect. Many people are talking about placebo effect because the placebo, you take the placebo and then your disease symptom disappears. In our 301 study, we actually, in compliance with the Chinese Diabetes Society and in compliance with the Society guideline, in the clinical study and the clinicians enforced, we call the 5-pronged approach for the diabetes patient care, which involving dietary control and exercise, self-monitoring, continuing education and the drug, right? And then the difference between the treated group and the placebo group, so-called, is only with or without the drug. So now that's the real-world practice in the diabetes control. And I think we have seen very significant differences between the placebo group treated and then the drug treated. So that I think that's a very good sign showing the drug works really well in the future in a market that the patient and physician will likely use this. So that's one aspect on the placebo effect that people keep talking. And this type of practice is different from the diabetes drug development in the U.S. and a Western country. And then this type of education was not enforced and the patient was let alone so that you will now see the benefit of dietary control, exercise and self-monitoring, which changes your behavior and it make you a healthy person. So that's very important. The second thing about so-called placebo effect is, actually, in any of antidiabetic drug, if you read the drug label, the first one is that under the dietary control and exercise, if you cannot control the blood glucose and then you'll take this drug. And that's the standard part of treatment. Actually, the dietary and exercise is a treatment to the diabetes patients. So I think that -- just to make sure that we are all staying on the same page. We are -- the trial conducted in China is close to the real-world exercise of diabetes control. And then this is what we believe the right thing to do, and how our leading physician, Prof Zhu Dalong and Yang Wenying all believe this is right thing to do and the right way to come back on the trial. So answer your question on this placebo control. Issues in the metformin area. In the metformin trial, in order to make sure that we are not having a difference in patients who are taking the generic metformin or branded metformin, which were used in the clinical study, and then those difference we have seen -- now we have seen in the previous clinical studies. So -- and then to prevent that, and then we have enforced a very good practice and a control and then let patients adapt to the branded metformin and then reach to the stable state and then getting to the placebo running trial practice. So in this way, we believe the trial design was appropriate, and then the control, operation control, has been done very well. So that we need to do -- we basically don't believe that we all have the risk into the -- the placebo control risk in terms of trial quality. And then -- okay? So I think the most important thing is to understand that the placebo, what is the placebo effect and then also what are the impact factors in the real drug versus no drug effect. And then I think, control the patient population using the branded metformin, to standardize them and then getting to a trial is a very good way to control that operation risk. And then for the head-to-head study, I think as we're moving along and the new data came out from the clinical study like 111 and 0112, and then accordingly, we are planning to do the acarbose related studies and so on. I think the initial thought about just doing a head-to-head comparison versus now, I think the benefit by doing the combination and add-on effect that's showing the beneficiary effect. And then the program is still ongoing. And then the physicians and investigators is now working on a protocol and advance to have a better design. And hopefully, we'll be able to address the differentiation we like to see, just like we saw that in one of the slides I presented, by monotherapy comparison and also the benefits with the combination therapy. And those are the type of things we are still ongoing, and then with the -- our investigators and then physicians. So yes, we are continuing in those efforts. And then the -- it is the actions now to study designs. And with more and more data came out, and then we will be able to have a better design that answer the questions, not only by comparing the 2 therapeutic agents but also leveraging and understand its synergistic potential in diabetes treatment and in the potentially the other disease areas. Does that help you on this?

Yes.

Okay. And then now...

Okay. And I guess...

Yes, George.

Lee, just to add to Dr. Chen's answer to the #2, right, one of the key things is, as he mentioned, like, for example, when we saw the positive results of 111, there's really no kind of benefit to do a head-to-head with that kind of drug, right? With DPP-4, if it's positive and we again show that GLP-1 endogenous is increased, then this becomes a very formidable combination against oral GLP-1, right? And that's important for the strategy discussion, for example, because what we've been seeing, as you know, we've been in discussion with all the top pharmas and leading Chinese players, they've been following and watching. But then, as you mentioned, this very dramatic cut in prices, both for SGLT-2 class as well as for acarbose, changes the competitive landscape. And what we've seen is that there's actually increased it attention and interest in learning a lot more about how our drug potentially could work with these other drugs, because these other drugs now will become much more available and accessible. We have unverified results, for example, that acarbose, within like 2 to 3 weeks after this huge price cut, the orders are five to tenfold. It's amazing. So a lot of people are going to use it. But the key fundamental is none of these drugs, over time, sustainably, can achieve glycemic control. And all the guidelines, even in the U.S., right, advocate combination. And our unique first-in-class, novel -- only-in-class globally, focused on improving beta cell is a perfect MOA, right, mechanism of action, when combined with the linear PK/PD as a suitable combination, right? You get -- you almost get like a 2-for-1. In the past, acarbose would be 4,500 per year, let's say. Right now, it's around 1,000 something. That's a lot more reimbursement that could be used for actually novel drugs, which is consistent with the Chinese policy. It's too early to talk about pricing, but we would look more like at why Merck with their Keytruda, right, why did they not include themselves in the pricing discussions, right? The reason is they have a lot of data, right? Their data is very, very good, and they want to defend their own. From our perspective, we're only in class, right? And then actually, when we launch, by the time we launch, there will be another launch of a new class, which is an oral GLP-1. And as you know, Rybelsus in the U.S. is priced exactly the same as injectable liraglutide and injectable semaglutide. Right? And from that perspective, you will see an introduction of a new drug in China that will be set, we think, pretty high, right? I mean right now, I think liraglutide is around CNY 14,000, although it's not fully reimbursed, CNY 14,000. That's a huge difference if they maintain kind of that sort of discipline. So again, too early to talk about pricing, but we are excited by partners actually looking at our drug as combos, potentially with some of these other compounds that may have been cut or may not have been cut as they sense that this market will change dramatically. And it will change dramatically with the guidelines that are now being changed. For example, the push on combinations and then the nonrequirement by the only government in the world of CVOT. That's now been removed. So now U.S. is more like every other country. Does that answer your question on the strategy, Ziyi?

Yes, yes.

Yes. Again, Page 26 is very important for that, right? Every single one of these has been positive and has been showing very good results. We just need to continue advancing. And we will spend and adjust the -- our pipeline again to suit what actually gets the best return of money to our investors and to the company, right? So from seeing 111 become positive, we're going to do that combo. And then 112, hopefully, will be coming out shortly as well.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over for any closing remarks.

Thank you, operator. In closing, on behalf of the entire management team, we'd like to thank again for your participation in today's call. If you have any further inquiries in the future, please feel free to contact us. Thank you.