Beigene Ltd

HKEX:6160

Earnings Call Analysis

Earnings Call Transcript 2018-Q4

[Operator]

Good day, ladies and gentlemen, and welcome to the Q4 2018 BeiGene Earnings Conference Call.

[Operator Instructions]

I would now like to introduce your host for today's conference, Dr. Howard Liang, Chief Financial Officer and Chief Strategy Officer.

Dr. Liang, you may begin.

[Heng Liang, executive]

Thanks very much. Good evening and good morning. Welcome to our 2018 Fourth Quarter and Annual Results Conference Call.

At the next slide, as a reminder, we'll be making forward-looking statements during today's events, and our business carries certain risks. Some of these are discussed in our filings with the SEC and Hong Kong Stock Exchange.

Next slide. The agenda for today's presentation will start with the opening remarks by our Founder, CEO and Chairman, John Oyler; followed by commercial operation highlights by Dr. Xiaobin Wu, our General Manager of China and President of the company; Dr. Eric Hedrick, our Chief Adviser, will provide an update on our clinical programs on our -- for our clinical assets and I'll take you through our full year and fourth quarter financial results before Q&A.

So with that, I would like to turn it over to John.

[John Oyler, executive]

Great. Good morning, everyone, and thank you for joining us for our first annual results review.

The year of 2018 was the year of unparallel growth and advancement at BeiGene in all areas. We have enrolled more than 2,000 patients in our clinical programs this year and reported exciting data and initiated regulatory filings based on those results.

During the last year, we've also strengthened our team, which included bringing in our President and GM, Dr. Wu Xiaobin; and the recent appointment of Chief Medical Officer and Immuno-Oncology, Dr. Yong Ben. And we've also grown the team to over 2,200 people.

We built significant capabilities in our clinical, commercial and manufacturing groups, always with the utmost commitment to patients and to quality. And we've continued to expand our research capabilities. We believe that BeiGene has now become uniquely positioned to integrate and leverage the opportunities created by newly introduced China reimbursement and clinical trial reforms. Specifically, we're well positioned to continue to execute the broad development of tislelizumab with our partner Celgene or independently. We continue to make good progress with our broad program, and we're announcing a couple of enrollment completions today. We've also grown dramatically our product-related revenue. Our commercial products are performing very well. We're now preparing for the potential approvals in China of our 2 internally discovered and developed products for potentially 3 indications in 2019. We believe that BeiGene is very well positioned for what we believe is likely to be a highly transformational year.

Next slide, please. Slide 6 provides some of the details of our 2018 accomplishments that I just mentioned. The compelling clinical data reported here for both tisle and zanu warrant your attention. We're very excited when we see the potential of these drug candidates to help people.

Slide 7. I would also like to highlight the expansion of our manufacturing capabilities. As you can see on this slide, we have added highly experienced leaders for our manufacturing operations. We're committed to and investing heavily in building truly world-class-level manufacturing. We're working with exceptional partners such as BI and Catalent, and we're building our own world-class facilities. We're always committed to ensuring patients across the globe receive product of the highest quality. There's no shortcuts to be taken here.

Next slide, please. All of this has been done in support of our vision to build a transformational, leading global biotech company that's strongly entrenched in China, with a commitment to the highest global standards. In 2019, we will continue to work towards this end by the following. First, we're going to try to realize our 2 near-term commercial opportunities that we have in our BTK inhibitor globally and our PD-1 inhibitor, which are currently focused for us in Asia but we may regain global rights in the near future. Secondly, by continuing to strengthen our overall capabilities, especially in global clinical development, our commercial footprint, manufacturing; and third, capturing the opportunities created and enabled by the recent significant regulatory reforms in China and continuing to leverage them to expand our existing portfolio.

BeiGene is certainly a new and a different type of organization. We're pursuing a truly global model that differentiates us from other local Chinese companies and from big multinational pharma, and we're doing so by leveraging our strong clinical resources and commercial capabilities in China.

Next slide, please. We believe that we're part of a once-in-a-lifetime opportunity that will positively and fundamentally change how drugs are developed globally and in the future. BeiGene was created with this opportunity in mind, and it is indelibly imprinted in our DNA. We have grown into a unique and different company and a true leader at the forefront of this opportunity, having built a clinical organization of over 800 that is a world leader in running China-inclusive global trials and executing at the highest global standards and with great efficiency. We have initiated 6 of these global pivotal studies and have 21 pivotal or potential registration-enabling studies up and running, over 50 studies ongoing or planned. It's truly remarkable.

Slide 10, please. We are also actively engaged in establishing collaborations to enter other compelling drug candidates to leverage our capabilities to help accelerate their global programs. We've expanded our portfolio by in-licensing regional rights to Sitra from Mirati and 2 new bispecific antibodies therapeutics from Zymeworks that we're quite excited about. We will continue to look for the highest-quality opportunities to add other compelling therapies for patients through our business development and also to complement our internal research.

Next slide, which is 11. The confluence of China with regard to global clinical trial development and the introduction of reimbursement in China enable new, improved models for our industry. This is a model that recognizes the unique opportunity that China represents; and will expand access to high-quality, innovative medicines globally. BeiGene is different, and it was built fit for this opportunity. We're on the forefront of pursuing this truly global model; and committed to never sacrificing our quality, innovation or science.

And with that brief introduction to BeiGene and review of 2018, I'd like to turn the podium over to Dr. Wu Xiaobin, our General Manager of China and the President of BeiGene.

Thank you.

[Xiaobin Wu, executive]

So thank you, John. Hello, everyone. Thank you for joining us today.

Next slide, 13. China is a country with larger population. And combined with regulatory reform, reimbursement and a high incidence of cancer, this has resulted in reordering of the world's largest ESCC product to market by revenue, and such, China is now the second largest market behind the United States.

If we look at the majority of the market share, excluding TCM, it is still dominated by generic product today. Top-selling brands in China are quite different from those in United States. You can see the slide, on the right side.

So next page, Slide 14. From the hospital market channel, which makes 80% of the entire pharmaceutical market, the overall pharma market continue to grow. And we see the growth driver is therapeutical treatment medicine, which has strong, consecutive growth in the past 3 years. The growth of the overall market slowing down over the past years; and traditional Chinese medicine, auxiliary that's advanced drug are now in declining. In contrast to that, the therapeutical category is growing substantially faster. The market is shifting toward evidence-based medicine and now therapeutical treatment. This market accounts almost 60% of the entire market by value.

So next slide, 15. Within the large Chinese pharmaceutical market, oncology is one of the largest TAs, accounting for nearly 10% of the market in 2017 and percentage wise is expected to grow further. They had the highest growth rate among all other therapeutical areas.

There are over 4 million new cancer patient in China each year. And the number is larger than the combined total cancer incidents of U.S., EU-5 countries and Japan. In addition, there are specific tumor types, like lung cancer, gastric, liver and esophageal cancer, which are more prevalent in China compared to other countries. We believe the medical unmet needs, the regulatory reform and the new reimbursement scale for innovative oncology drug means the oncology therapeutical market will grow strongly for some time going forward in China.

Next slide, 16. Since the -- taking over the Celgene commercial operation in China, we have grown the team substantially from this size of originally 130 people. And now in the last year, the team has reached 4x of the original size. As of today, we have over 600 people in our commercial team. We have hired into all functions, from sales to market access. The majority of all commercial talent comes from the best multinational operations in China. The ultimate goal for us is to cover hospitals where the majority of the patients get treated in China. We are building a specialized oncology commercial team that will cover 800 to 1,000 hospitals. And our commercial efforts go beyond sales and as we believe you must build a dedicated team with support in several functions such as government affairs, regulatory affairs, sales, marketing, medical affair, key account payers, payers management and market access because, in China market, this market is complex with multiple layers and many stakeholders that you need to address to deal with and to interact with them.

The next slide, Slide 17. The investment in our commercial organization has generated excellent growth from our marketed inline product. The overall portfolio has grown to be well over doubled of its original revenue level. This was made up of substantial growth from all 3 products. Our sales performance has proven that our commercial strategy is working. And revenue has grown despite of the generic competition our market now facing in China.

Growth of the inline product demonstrated the capability of our successful "go to the market" model and our capabilities. Those 3 products are integral parts of our business. And this enable us to gain real-world experience establishing market access [ in action ], interacting with key opinion leaders and the build out of our commercial network, laying the groundwork for our anticipated new launch of zanubrutinib and tislelizumab. There are different level of interaction with external stakeholders in preparation of commercial launches of our internal-developed candidates, which I will show you in the next slide.

Slide 18. What differentiated us is that we can leverage our existing marketed products to pave the way for our commercial launch of new product. As we -- as I previously mentioned, we have built our infrastructure and network because of the current inline product. REVLIMID and VIDAZA overlap with hem doctors. ABRAXANE allows us interaction with solid tumor, oncologists and hospitals, and we are building access experience with hospital listing and reimbursement. Through those interactions with different stakeholders, we understand the market inside interaction with treating oncologists and key opinion leaders, which help us to build our brand name.

With those 3 products, inline product, we have been actively engaged with oncologists, oncology community and with like -- such like CSCO as well as BeiGene-sponsored events throughout the whole last year. In addition, we held commercial launches of VIDAZA and the newly approved indication for REVLIMID, as well as our patient assistant program launch for newly diagnosed multiple myeloma patients. And the list goes on. We believe we are positioned to play an important role in shaping and building the ecosystem system in China for oncology treatment and become a significant player.

So next slide, Slide 19. Our commercialization strategy for zanubrutinib and tislelizumab begin with our hypothesis that those products are differentiated assets and are generating -- and we are generating data that we believe is consistent with that differentiation. In addition, we are pursuing a broad program of development so that we have extensive labels. This is particularly important in China, where reimbursement and even the utilization of patient assistance program are only allowed to occur when the product is used for labeled indication.

Finally, we are putting a high, energetic commercial effort behind those assets that is already beginning to provide visibility and build our revenue upon the established infrastructure we have in both solid tumor and hematology area.

Next slide. So let's shift a little bit from China to the global, for our global commercial preparation.

As we strive to become a global player, we are preparing for the launch of zanubrutinib with potential filing in the United States this year or early next year. We have also hired senior leadership for key commercial functions. Our plan in the U.S. is at a minimum to substantially participate in the commercialization of our new product. As for Europe, we are evaluating our commercial strategy and we are open to partner, to potential partnership in certain regions with a local player maybe more efficient.

And finally, our broad clinical program and also program in China are also potentially a leverage for our commercial strategy in emerging market.

So with that, I will end my presentation. I turn over to Dr. Hedrick, Eric Hedrick, to review our clinical program.

Eric?

[Eric Hedrick, executive]

Okay, thanks, Dr. Wu. And good morning, everyone on the call.

On Slide 24 (sic) [ 22 ]. This depicts our robust product portfolio and pipeline, which includes 3 marketed projects in China, 3 late-stage drug candidates and 6 early-stage programs, which are evenly split between internally developed and collaborative programs. We currently have more than 50 ongoing or planned clinical trials. And with respect to our 2 lead programs, the BTK inhibitor zanubrutinib and the PD-1 inhabitor tislelizumab, both programs are broad in nature, addressing multiple indications contemporaneously, with the intent to support multiple labeled indications across the globe, including China, U.S. and Europe.

Turning specifically to zanubrutinib on Slide 25 (sic) [ 23 ]. We are running a broad registration-enabling program across various B cell malignancies. This includes chronic lymphocytic leukemia, mantle cell lymphoma, Waldenström macroglobulinemia, marginal zone lymphoma and follicular lymphoma, noting that follicular lymphoma indication would be unique amongst BTK inhibitors. We have filed an application in China based on pivotal data in CLL and MCL that have been granted priority review by the CDE. In the U.S., we've been granted Fast Track designation for Waldenström and breakthrough designation in mantle cell lymphoma. In the next few slides, I will review in greater detail the ongoing trials which are intended to support global filings in multiple indications for zanubrutinib.

Moving to Slide 26 (sic) [ 24 ]. Our lead indication globally is Waldenstrom's macroglobulinemia, where we are conducting a head-to-head Phase III trial of zanubrutinib versus ibrutinib, the currently approved BTK inhibitor in this indication. This trial completed enrollment in July 2018, and we're anticipating a data readout in the second half of this year. As shown here, the trial randomized patients with MYD88 mutation, which defines about 90% of Waldenström's patients, in the 1:1 ratio to treatment with either zanubrutinib or ibrutinib.

The study is designed to detect superiority for zanubrutinib with respect to response quality, in this case defined as the proportion of patients achieving at least a 90% reduction in disease burden. Patients lacking the typical MYD88 mutation, who have traditionally not been responsive to ibrutinib, received zanubrutinib on a third nonrandomized arm. It should be noted that the data from this nonrandomized arm has been submitted to a major conference this year for a presentation.

Moving to CLL on Slide 27 (sic) [ 25 ]. 2 Phase III trials intended to support approval globally are currently being conducted. The initial registration trial is the comparison to zanubrutinib to the BR regimen in patients with previously untreated disease. This is a PFS primary endpoint trial in which patients who do not harbor a 17p deletion, which is a marker of resistance to traditional chemoimmunotherapy, were randomized to receive either zanubrutinib or BR. There was a separate nonrandomized arm looking at patients with the 17p deletion. The trial as a whole should complete enrollment this year. One other note about this design: A similar Phase III study comparing the first-generation BTK inhibitor ibrutinib to BR was presented at last year's ASH meeting, showing a highly significant PFS advantage for the BTK inhibitor-treated patients. This certainly raises our confidence in the outcome of our Phase III trial.

On this slide you also see a second Phase III trial, this in patients with relapsed or refractory CLL. This is an ongoing study, and we plan to enroll 400 patients. The primary endpoint of this trial is overall response rate defined as complete plus partial response. And the study is powered to detect superiority for zanubrutinib in a hierarchial analysis plan which will first test noninferiority.

On Slide 28 (sic) [ 26 ], we'd like to provide an update today that the nonrandomized deletion 17p arm in the first-line study has completed enrollment with 110 patients. Importantly, this is the largest cohort of treatment-naive 17p-deleted CLL patients who have been prospectively studied. And we should be able to analyze the response data from the study arm this year.

On Slide 29 (sic) [ 27 ]. We are also investigating zanubrutinib in combination with obinutuzumab in relapsed or refractory follicular lymphoma based on Phase Ib data that was presented in 2017 which showed high rates of overall and complete response with the combination. As noted previously, no BTK inhibitor has been approved to date in this indication.

Slide 30 (sic) [ 29 ], summarizes the effects of zanubrutinib that may ultimately be able to address specific limitations that presently exist with BTK inhibitor therapy. We believe that improvement and continuous target occupancy may ultimately translate to differences in response quality. And this is being tested in the 2 head-to-head Phase III trials, as I mentioned earlier. However, in practice, particularly in studying CLL, toxicity and tolerability issues are for more commonly treatment limiting, more so than limitations in efficacy. In this regard, we've been encouraged by the low rates of toxicity-related treatment discontinuation and cumulative off-target events such as myalgia, arthralgia, hypertension that have been observed to date in zanubrutinib clinical trials. Additionally, we believe that a comparatively favorable drug-drug interaction profile for zanubrutinib, particularly in lack of a CYP3A liability, will translate well into practice studying such CLL, will come with the disease and requirement for concomitant medications can be challenging with ibrutinib.

On Slide 31 (sic) [ 29 ], we move on to our next significant near-term development opportunity that is tislelizumab, our PD-1 antibody.

Tislelizumab is an Fc engineered antibody that does not bind Fc receptor on macrophages and thereby potentially avoids macrophage-driven TF factor self-suppression.

The broad registration trial's program for tislelizumab is summarized here. And as you can see it focuses largely on opportunities in the most prevalent cancers in Asian patients, including non-small cell lung cancer, hepatocellular cancer, esophageal cancer and gastric cancer. The global registration program is being conducted in collaboration with Celgene, though BeiGene is presently sponsoring and operating the vast majority of the global clinical trials and all of the China-focused registration trials. Tislelizumab is also a backbone as an expanding roster of combination development efforts. Listed here are the combinations of internally developed agents. And I will mention shortly the evolving combination development program was partnered at, such as sitravatinib.

Slide 32 (sic) [ 30 ], depicts the ongoing registrational trials for tislelizumab, including those in trials intended to support approval in multiple regions and those focused on enabling registration in China. We're investigating tislelizumab in registrational trials in both solid tumor indications and hematologic malignancies. Notably, the study is intended to support global approval or for a significant proportion of patients from China and representing BeiGene's focus on conducting single trials that are global in the truest sense of the word. Most of the trials in the program were initiated in late 2017 to 2018. And this includes programs in hepatocellular cancer both in the relapse and first-line setting, in gastric cancer in the first-line setting, in esophageal cancer of squamous cell [ regime ] in second- and first-line settings and in non-small cell lung cancer in the first- and second-line settings; and the Phase III program in patients with locally advanced disease in combination with radiation therapy.

Listed at the bottom are the ongoing studies meant to support registration predominantly in China. One of these studies, a pivotal trial in patient for classical Hodgkin's disease, has been filed with the CDE and is currently under review. A second pivotal trial in later-line bladder cancer has completed enrollment, with a plan to file with the CDE in 2019. 2 Phase III non-small cell lung cancer trials are also actively enrolling.

On Slide 33 (sic) [ 31 ]. We are announcing here today that the Phase II study in second- or later-line HCC has completed enrollment of approximately 250 patients after being initiated in April of 2018.

Moving to Slide 34 (sic) [ 32 ]. Our late-development portfolio also includes the PARP inhibitor pamiparib. It is currently being evaluated in 2 registrational trials in China, one in later-line BRCA mutated ovarian cancer. And one is a maintenance agent for patients with second-line platinum-sensitive ovarian cancer. The global program is focused on using the maintenance setting in gastric cancer that is responsive to platinum-based regimens; and exploratory trials in the setting of glioblastoma, where we believe the CNS quality of pamiparib could be important.

Lastly, Slide 35 (sic) [ 33 ] summarizes our expanding early-development pipeline. Included is sitravatinib, a multi-kinase inhibitor which we inlicensed from Mirati for development and commercial rights in Asia, Australia and New Zealand last year. We're evaluating sitravatinib in combination with our PD-1 inhibitor tislelizumab in non-small cell lung cancer, renal cell carcinoma, ovarian cancer, hepatocellular cancer and gastric cancer in Phase Ib and Phase II studies. Combinational studies of lifirafenib, a RAF dimer inhibitor, with a MEK inhibitor from SpringWorks in solid tumors; and a zanubrutinib in combination with a PI3K delta inhibitor from MEI Pharma in B cell malignancies are also being initiated. We also have a PD-L1 antibody, BGB-A333; and a TIM-3 antibody, BGB-A425, in early clinical development as single agent and in combination with tislelizumab.

And with that, I will turn the call over to Howard, who'll review the financial results and the upcoming events.

Howard?

[Heng Liang, executive]

Thanks so much, Eric.

Now I'm on Slide 35.

So I'd like to provide a financial summary for our 2018 results, starting with cash resources. We closed the year with $1.8 billion in cash and short-term investments. In 4Q, the total cash decrease was $292 million. And key components of this included operating cash burn of $194 million, licensing payment of $60 million to Zymeworks, capital expenditures of $54 million primarily for our Guangzhou manufacturing facility construction and Beijing research facility purchase. Excluding proceeds from financing and equity issuances, outbound licensing and debt proceed, cash burn totaled $736 million in 2018. And this included cash used in operations of $548 million, payments for inlicensing and business development of $70 million and capital expenditures of $109 million.

Next slide and turning to a summary of income statement. Our total revenues for 2018 were $198 million, including $131 million in product sales. And this is -- represents a [ $106 million ] year-over-year increase offset by a decrease in collaboration revenues, which included onetime upfront payment from the Celgene collaboration in 2017. Our 4Q product revenue was relatively flat compared to the third quarter. In RMB currency -- in RMB we had increase of 1.5% quarter-over-quarter. In -- when translating to dollars, U.S. dollars, it's a 1.8% decrease. This is impacted by seasonal patterns in 4Q that I will explain in the next slide. Year-over-year 4Q product sales -- portfolio product revenues was 2.5-fold of the prior year, of 4Q in 2017.

On the expense side, R&D expense was $679 million in 2018 and $257 million in the fourth quarter. The sequential growth, relative to the third quarter of $110 million was contributed in large part by expenses related to business development activities, including for Zymeworks $60 million and $19 million for the transaction with Merck KGaA. SG&A expense was $195 million in 2018 and $72 million in the fourth quarter. Increases over 2017 and prior quarters primarily relate to the expansion of our commercial organization in China to support the growth and the current product portfolio and to prepare for our upcoming launches. The -- and as well as establishment of our commercial organization in the U.S. and expanded global operations. Expenses included $78 million (sic) [ $87 million ] of stock-based compensation expense compared to in 2018 compared to $43 million in 2017.

We had a net loss of $674 million for 2018.

Next slide. Dr. Wu talked about our 3 inlicensed products previously. I want to provide more color on our -- on their performance in 2018.

The sales of ABRAXANE, REVLIMID and VIDAZA in China totaled about $38 million and $131 million respectively for the fourth quarter and 2018. If we look at the year-over-year performance compared to our fourth quarter last year, as just mentioned, there's a growth of -- sequential growth of about 150% in revenues. Historically, fourth quarter sales for both ABRAXANE and REVLIMID tend to be slow. There have been similar patterns of slower sales in the fourth quarter in China among other oncology brands. To give you a sense of the historical pattern: In the 3 years between 2015 and 2017, Q4 ABRAXANE sales on average were down by 25% versus Q3. We had a 14% sequential decline in Q4 of 2018. For REVLIMID, sales declined on average by 19% Q4 versus Q3 for 2015 through 2017. We actually had a 15% sequential growth in the fourth quarter of 2018.

We continue to be excited about the growth product of our commercial portfolio.

On this slide we also provide more details about revenue makeup, the three - this was also presented during Dr. Wu's presentation. ABRAXANE continue to grow and is our largest product, contributing 50% of our product revenue among the REVLIMID has been the fastest-growing product, contributing over 40% by the end of the year. And VIDAZA has shown a very strong growth since its first commercial availability in February of 2018.

Next slide, Slide 38. Let me close today's presentation by highlighting some of the key milestones and catalyst efforts for 2019.

This will be an important year for BeiGene, a year in which we expect approvals for our internally developed product candidates zanubrutinib and tislelizumab. In China, we expect to announce data from our first Phase III head-to-head study of zanubrutinib versus ibrutinib in Waldenström. We expect to submit our first NDA filing in the U.S. this year or early 2020. For tislelizumab, we expect data from potentially registration-enabling trials and expect to complete enrollment of key Phase III trials for lung cancer and liver cancer. In addition, we will seek to expand the label for our commercial products in China of REVLIMID and ABRAXANE.

We expect to complete the construction of our biologic manufacturing facility in Guangzhou in preparation for the growth -- long-term further growth of tislelizumab in China.

We expect it will be a full year of execution across different themes at BeiGene, and we're excited about 2019.

So with that, I'll open the floor for questions from analysts. Operator, can you please give instructions?

[Operator]

[Operator Instructions] Our first question comes from Matthew Harrison with Morgan Stanley.

[Vikram Purohit, analyst]

This is Vikram on for Matthew. So we had a question about the commercial landscape for PD-1 antibodies in China. Could you provide us your updated view on what the current commercial dynamics are and how that might be impacting your strategy when it comes to a potential launch, especially with regards to pricing?

[John Oyler, executive]

Sure, sure. Thanks for the question. This is John. I think that there's really little that's changed from our perspective. The PD-1 opportunity is really an opportunity that is going to require reimbursement in China. And I think, as we've stated consistently over time, our strategy has been to pursue a very broad label in the important indications. Reimbursement in China is label based. And I think that, as we've experienced with our Celgene portfolio, being able to have a broad label dramatically helps you from a commercial perspective. It's really necessary. So we continue to work aggressively clinically to reach labels in the important indications and the important lines of those indications and the important combinations as quickly as possible, believing that, that is one of the key elements to the commercial opportunity in China. I think the second opportunity associated with things is ensuring that you have robust commercial manufacturing and that it's reliable and issue free. And I think, from that perspective, BeiGene has chosen to work with BI since day 1, one of the most experienced and reputable companies in the world. And they have a facility in Shanghai that we're working with. And that -- as we have provided some update, we're building our own facility that's quite substantial in Guangzhou. And I think, through those high-quality efforts and initiatives, we believe the second issue is making sure you have substantial capacity in couple years down the road when reimbursement kicks into place and that it's of the highest quality. And I think the last thing is we do believe that we're going to have to price in a way that we can be reimbursed. And I think we have been sharing over time the historic reimbursement numbers and, I think I have slides that have been made available for us before related to that, that show a reimbursement range in China for oncology drugs. And I think we've always felt that's where the pricing will land. And I don't think that that's changed nor is out of our expectations. I think we do continue the comment which is all companies that are China domestic are capacity constrained in the short term versus the immense demand that exists. So our expectation has been people are going to be able to commercialize substantially to their capacity but be capacity gated. From the other perspective, we do believe that it's very, very important, as I said, to work through the label. And that's what we're doing.

[Operator]

Our next question comes from Yaron Werber with Cowen.

[Yaron Werber, analyst]

I had a question about the Waldenström's Phase III, the head-to-head study of zanu against ibrutinib. Maybe can you give us a little bit of a sense, how are you thinking about the powering, and response rates to primary here, in terms of what you might want to see and also whether the response rate endpoint is limited or it's capped by a certain duration? Or is it open ended to sort of best response?

[Eric Hedrick, executive]

Yes. This is Eric. Thanks for the question. I think, in regard to the powering, the initial powering of the study was around very good partial response or complete response. And looking for professionally a doubling of that rate compared to the historical rate for ibrutinib, which is around 15%. Keep in mind that we overenrolled that trial a bit so there's a bit more power around that. In terms of the specific definition or response, the best overall response endpoint, so it's not particularly time gated. In discussions with regulators, it's typical, we agreed to a certain minimum follow-up for all patients because the agencies will be looking for not only response rate but response durability. But it's a "best overall response" trial.

[Yaron Werber, analyst]

And Eric, like how long is the follow-up that you're going to be doing?

[Eric Hedrick, executive]

Yes, I don't know if we commented specifically on the follow-up, but we completed enrollments to the trial here, and we expect the readout to be sometime in the second half of this year.

[Operator]

And our next question comes from Ziyi Chen with Goldman Sachs.

[Unknown Analyst]

All right. This is Dave from Goldman. I got a question regarding the liver cancer indication because per the presentation that we have already completed the patient enrollment for liver cancer HCC second-line, third line-setting. However, earlier this month, I think KEYTRUDA reported the KEYNOTE-240 results. And it felt to me that total primary endpoint is quite similar trial compared with our trial in that indication. So what is our take of that result? And how should we look at potential outcome of our trial on this?

[Eric Hedrick, executive]

It's Eric again. Thanks for the question. One thing I'll note is that the KEYNOTE-240 trial, which I think you have alluded to, was a randomized trial versus best supportive care in second-line patients and had had co-primary endpoints of overall survival and progression-free survival. And I suspect that one of the reasons why it missed on those endpoints statistically was by virtue of having a co-primary endpoint rather than just a overall survival primary endpoint. Our trial in the second- and third-line setting is a single-arm trial. So as is typical for single-arm pivotal trials, we're looking at response rate and response durability as the approval endpoints. And so we don't expect there to be a significant impact of the KEYNOTE-240 trial on our study. It will all depend on what we see in terms of response rate activity and response durability. I think we do acknowledge that it may raise some questions or some level of doubt amongst regulators, but in that regard it's also important to keep in mind that there's a second pembrolizumab Phase III trial in HCC that is in Asian patients. And so we'll certainly be interested in the readout of that trial, and I suspect that regulators will be as well before really making any further determination or action on pembrolizumab indication.

[Unknown Analyst]

Great. If I may, I've got a follow-up question on -- it's probably a little more bigger picture question on our overseas strategy for tislelizumab, the trials in the future. Given that Celgene support -- we'll probably get Celgene's support on the funds, so is there any change that we should be aware of in the clinical development strategy in our overseas market?

[Eric Hedrick, executive]

Sure. It's Eric again here, Dave. I'll take the first shot at this and others can chime in late. One thing that's important to remember, and I mentioned it during the presentation, operationally, even though we're collaborating with Celgene, BeiGene is sponsoring and operationalizing the vast majority of the global trials as is. And so in a scenario where the Celgene acquisition by BMS goes through, in that scenario, we would likely get back global rights to the program. And in terms of strictly the study program or operation from study program, we'd expect that to have just modest impact, not a significant impact, since we're operationalizing the vast majority of the trials at this point. And maybe others can comment.

[John Oyler, executive]

Yes. I mean, Eric, the only thing I'd throw in is the reason we structured the deal that way as we've talked about, we believe right now there's a new opportunity from a clinical trial perspective to really run these China-inclusive global registration trials. And that's what we're doing with PD-1. And that's how we've been able to become a leader, and it's helped us build and support this very large and capable clinical trial team. So that's why we're operationalizing so much of that deal. It's just made sense for us. And it's a capability that we like for the rest of our portfolio and we like for partnerships. So as you said, that's the way the deal was structured. And in either scenario that comes out whether that deal goes through or doesn't go through, I think we're very, very comfortable with our ability to bring this drug as effectively as possible to patients across the globe.

[Operator]

Our next question comes from Katherine Xu with William Blair.

[Y. Katherine Xu, analyst]

Since IMBRUVICA, KEYTRUDA and OPDIVO have been approved and launched in China, and of course priced, can you just comment on how the pricing has been effecting the sales, commercial launches so far and how things are generally going for these sort of products; and how you are considering pricing strategy for zanubrutinib and tislelizumab. And then for tislelizumab, if the BMS-Celgene deal goes through, are you going to look for another partner? And finally, there are some antagonistic reports on BTK inhibitor and PD-1. I'm just curious about your views on that. You have a study -- at least one study ongoing as well.

[John Oyler, executive]

Okay, we got to parse those out. So I think the first question was around just the pricing of both PD-1 and BTK in China and reimbursement. To that end...

[Y. Katherine Xu, analyst]

Yes.

[John Oyler, executive]

As you mentioned, yes, we've seen in the last year or plus the approval and launch of ibrutinib, OPDIVO and KEYTRUDA. And I think, from that perspective, some of the PD-1 numbers are out and shared, but I think that the growth has been well received, the numbers that are public. And from our perspective, there continues to be strong growth for those multinational launches. And so I think that has been a success. Clearly, they're not on national reimbursement at this point, nor are they priced in the ranges that we've shared and that are public for historic reimbursements. From the other perspective, ibrutinib has launched and is on national reimbursement. And it is priced at the very high end of that range. And so they have been able to achieve that, and that should be reflected in the future in their commercial numbers. To us, in terms of -- and I think we've heard that the local companies are beginning to launch Junxure has that pricing. And in event has signaled that they'll price somewhere between Junxure and multinationals in public statements. From our perspective, we're less worried about the competitors. We're more worried about -- not worried, but we understand where reimbursement needs to be, through the historic data. And I think, from a BTK perspective there's a clear signal ibrutinib was able to get on national reimbursement at the high end of that range. So I think that tells us something as we think about bringing our BTK to market there, which as we've always said we feel is a molecule that will be better for patients. In terms of PD-1, I think we view ourselves as needing to price to be reimbursed. And that's necessary. At the same point in time again, pricing when you're on reimbursement is only an issue when you have label. And a much more important issue is to work through to have the label and the appropriate settings for the big indications, and so that's the focus of our time and energy. I would also point out with our PD-1 we have reported our data and we're likely to have the most attractive initial label, which is nice from a commercial perspective. In addition to that, we have manufactured with a partner that gives, I think, comfort around the quality of our product. And in addition to that, we're running trials in over 20 countries and we have those regulatory bodies reviewing all of our data, our safety data, our protocol, everything we're doing. So we have a lot of eyes, including regulators across the globe, including Celgene and their reputation, including BI and their reputation, on everything we're doing with our product. And we do believe that, that will give comfort to a lot of people about the quality of our product. And ultimately, we're running these global trials to get a global label, and I think that provides an additional amount of validation which helps us position our product. I do think we're very different than the other alternatives, and the opportunity exists. And I think that will be relatively clear as the next couple years play out. But it's a great question.

So that was PD-1. The second question was would we look for another partner. I think we always have discussions with everyone around everything we do because that's our -- we want to do what's best for patients, we want to do what's best for the assets, and we want to do what's best for our investors. So of course, we'll entertain and have those conversations with people. Do we feel like that's necessary or the most desirable? Not necessarily. We're building global capabilities to launch our zanubrutinib, anyway. And I think that we'll listen, but we feel like we can certainly get this approved. From the third perspective, you asked about the BTK and PD-1 combination work that we're doing and you referred to something I didn't quite hear, you clicked out, but maybe you could answer that, Eric.

[Eric Hedrick, executive]

Yes. I -- and Katherine, I'm sorry. Maybe I'm not addressing the specific question you asked, but in regard to our combination program, we've really focused that now on a couple of indications, Richter's transformations, primary CNS lymphoma. So we've sort of focused that on sort of more aggressive histology, really no longer exploring that combination in the more indolent histologies.

[Operator]

Our next question comes from Michael Schmidt with Guggenheim Partners.

[Yige Guo, analyst]

This is Yige on for Michael. We have a question on zanubrutinib. In the global Phase II front-line CLL study, control arm is BR, bendamustine plus rituximab. However, chlorambucil plus obinutuzumab is used in a competitor trial. So since BR is a newer regimen and is more potent than chlorambucil plus obinutuzumab, does it raise the bar for the study to succeed?

[Eric Hedrick, executive]

This is Eric. Thanks for the question. Yes, I will -- the reason we chose BR as comparing regimen was that we wanted to study our drug

[Technical Difficulty]

instead of restrict it down to over in sicker patients. And so we really want our study to represent that population. I will grant you that it's probably more effective than chlorambucil plus obinutuzumab, but I would also refer you to the results that compare ibrutinib to BR that was presented at ASH and showed through an overwhelmingly, statistically significant advantage in PFS. And so our assumption is that our BTK inhibitor performances have been in our earlier-phase -- we're sort of confident in that result.

[Operator]

Our next question comes from Tyler Van Buren with Piper Jaffray.

[Tyler Van Buren, analyst]

Can you just speak a little bit more towards the launch preparations that still need to be done in terms of both the launches in China and the potential launches of zanu in the States eventually? On that one slide you have, I think, 600-plus folks of the commercial team and going up into the right. So just curious how many more people you need to add; and how that could affect operating expenses since year-over-year it was, I think, up 2.7x. So just from a modeling perspective, it would be helpful.

[Xiaobin Wu, executive]

Yes. So for the -- it's Xiaobin Wu. For the commercial launch preparation in China, we have -- as I said before, we have built all functions across the border, from sales rep, marketing. We have all marketing people in place. And we have market access, government affair and payers management. All people are in place and -- including training. We have marketing brand planning in place. And we will continue to expand our footprint into the provincial hospitals. And currently, we have 600 people in the commercial. We'll continue to build up. By end of this year, we will have other people -- and we will hire additional people to cover 800 to 1,000 hospital, where we have the -- cover the 80% of the oncology market. So that is for China. And for the U.S. we are talking near term. So zanubrutinib, we have hired senior leaderships for the commercial arm. So starting from the marketing, payers management, SFE training and all functions, market access.

[Heng Liang, executive]

And Tyler, this is Howard. Just on your expense questions, the -- we're -- obviously, the cost of sales reps in China is still a bit lower than in United States. So you can just simply do the math. And we're talking about -- we're probably not talking about adding thousands of people, so we are talking about hundreds. So that should give you an idea, so it's not a dramatic increase.

[Tyler Van Buren, analyst]

Okay, that's helpful. And just the follow-up was Eric earlier, in response to a question, spoke about kind of a modest impact on the global clinical trials strategy if you guys regain full rights to tisle. Is it possible to quantify what the increase in operating spend or in R&D might be if you guys do get rights back?

[Heng Liang, executive]

Maybe I'll take that. This is Howard. So we are -- we've always spoken about this in the past, that, for example, in the -- we have 11 Phase III or potential registration-enabling studies ongoing. So for these studies, for operating 10 of them, Celgene is paying for some of these ongoing studies but in the form of reimbursement -- R&D reimbursement. So these are -- there are 3 studies that Celgene is reimbursing, and they are actually the ones that we have started earlier in the course of the program. And so they, by the time, assuming the close later this year, most of the study costs would have been paid for. And there is some residual amount. There are some left for these studies, but that we'll also get -- we expect to get a termination fee if that happens. So I think the cost impact -- there is the impact, but overall it's mostly picking up the additional costs of the additional study that Celgene is running.

[Operator]

Our next question comes from Wangzhi Li with Ladenburg.

[Wangzhi Li, analyst]

I want to expand on the John's point that the broad label is a key for reimbursement in China. I guess, 2 question on that is we see recently the domestic China companies to initially price their PD-1 at about $28,000 a year. And we know, if you get into the national reimbursement drug list, usually there is a significant discount 40% or more. So do you think eventually we are talking about like the around $15,000-a-year enterprise? And that's before the kind of charity programs or what's your view on kind of price you can get in the reimbursement? So that is the first question. The second question is just in terms of the process for getting reimbursement, getting into the national drug -- reimbursement drug list. It looks like it's going to become more dynamic, right? So how the broad label or the timing of approval to affect your position in terms of getting reimbursement. And maybe to add one more is: Do you have any insight, so far, on the off-label use of KEYTRUDA and OPDIVO since their approval a few months ago?

[John Oyler, executive]

Sure. Thanks. Those are great questions. I'm not sure if I got the second one exactly right, but I think I would go back to there's very clear history and messaging. And we've -- I think we've tabulated that data and shared it in a way that's nicely presented, but it's public, the past 3 years of oncology drug reimbursement and the range that's associated with that from a pricing perspective. And I think we clearly view that is where this market winds up in a couple years. We also view you cannot be reimbursed if you're off label because we have that experience with the Celgene products. At this moment, the vast majority of use is off label. We believe that there's a lot of use from that perspective in China, although it's not our product we don't know, but the labels are in small bench indications at this point in time and the sales are quite substantial. So that is our belief, but I think, when you go back to that pricing range from looking at facts and real data, it's clear and it's compelling and it's understandable and markets -- products which are nicher products, like ibrutinib, like REVLIMID, can be at the high end of that range and products that are very big and very broadly used are probably not likely to be at the highest end of that range. They're probably more in the middle. So from that perspective, that's what we believe. I don't think that the Junxure pricing affects that at all. When you ask a drug to reduce its price in half -- these are drugs that have been historically coming in at very, very high levels. That may or may not be the case when you have a player like Junxure that comes in at a much lower level from day 1. I actually think that, when you look at the data, it's pretty clear. What matters is your cost per month. And yes, they haven't left themself enough room negotiate if your paradigm is you must have a 50% decrease, but when you start at a very different point, it's hard to believe that -- Merck, if they reduce their price 50% and was nationally reimbursed, that the government would require a drug in the same class to be at 1/4 of that price to be reimbursed. So I don't really follow the logic of, when you have a broad sort of things in that class, that you're going to require a percentage. I'm not sure that's the right metric. I think the right metric is looking at the actual data and how does that work. And I think, from the second perspective, it's very clear that no company has the capacity to serve even a substantial portion of this market. So that is in a scenario where Chinese government nor the market dynamics would result in something that drives everybody to that price. So I think that's our view from that perspective.

And again, in a world where you're reimbursed very substantially, which is the national reimbursement situation in China, when you're not on reimbursement, it's all out of pocket. So getting to the label is really, really what matters. And it is expensive to get to the label. And it's hard. And when you look at the trials that we're running, it's for CHL and for melanoma. These were small single-arm trials which are pretty easy for biotech company to execute on. There's a long history of biotech companies that are small being able to do that, but when you look at the big indications, you're actually talking about comparator studies that are blinded; that are randomized; that have hundreds and hundreds of patients in many, many sites. This is where it's very, very difficult to execute and to execute in a high-quality fashion. And what we're asking all of these companies to do, ourselves included, is execute in a very, very broad program in a high-quality fashion on multiple things at the same time. And it's hard. It's hard for us. And you look at the size of our organization. You look at the back half of our clinical teams in the United States with a lot of experience from companies like Genentech and the other half is here in China, on the ground and from the best sources. It's a very large, very highly capable team. But what we're talking about to work towards broad label is very, very hard and it is not inexpensive. We have Celgene helping us fund that historically. And we're the beneficiary of that, but there's a lot to do from an execution perspective. So I do think you should look at the historic data and where China is reimbursing drugs on a per monthly basis. You should think about this as a big class, so it's probably not at the high end of that range. And you should really spend time and energy trying to understand when people are going to get the labels that matter from that perspective. I didn't answer all of your questions...

[Xiaobin Wu, executive]

I'll just add 2 sentence. So Chinese government will start to update the NRDL in the next few months. And after that, that will be dynamic adjustment, so ad hoc. So that will be cycle plus dynamic adjustment.

[John Oyler, executive]

I hope that answered most of your questions, but if it didn't...

[Wangzhi Li, analyst]

Yes, that's very helpful. Maybe, if I can, just one follow-up is, so far it looks like the China government will choose one drug for one class in the list, but doing PD-1s application so broad, do you think it's possible to have more than one drug on the reimbursement list for different indication or...

[Heng Liang, executive]

Sorry. So if you look at currently, for example, EGFR inhibitors, there's 3 of them, yes, they are reimbursed, yes.

[John Oyler, executive]

So it's yes.

[Operator]

Our next question and our final question will come from James [ Zhang ] with Industrial Securities.

[Unknown Analyst]

This is James from Industrial Securities. I have 2 questions. This is what are our strategies for commercial teams, especially-- for the PD-1 and for the PARP publishing for our solid tumor in the U.S. and worldwide. And the next question is can we expect the [ critics ] data readout for the solid tumor just like the CHL? [Foreign Language]

[John Oyler, executive]

Howard?

[Heng Liang, executive]

Thank you, James. This is Howard. So the first question, on the -- our commercial strategy for PD-1 in solid tumors. We are -- so we -- obviously we need to wait until -- and see what happens if deal closes between BMS and Celgene, but assuming that we get the full worldwide rights back, I think we have full options of -- from -- going along in some countries to partner completely with others in certain territories; and then in between, some sort of a co-promotion in -- so it's all the options are -- that are open and it probably depends on different territories. We'll have -- likely have different strategies, depending on the local target. We have -- as Dr. Wu has mentioned in open remarks, we have been building in the U.S. We're obviously very quite -- it's early days, but we have actually a very good, high-caliber focus on board, so we're confident that we can build a commercial team successfully in the U.S. And so that's certainly is a consideration that -- or certainly is an option that we have. And so we're -- I think we do have, I think, a lot of options. And we'll make decision specific for different countries.

Regarding the solid tumor data that we're expecting, obviously as you mentioned, we'll -- we expect to have some readouts this year. We are -- so we're -- we have previously presented some of the data, Phase II data, in the -- in some indications in the past. So I think that should give you -- that will provide early data point in this indication. So I think that, hopefully, that answers your questions.

And we'd like to thank everyone for joining us.

[Operator]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect, and have a wonderful day.