CASI Pharmaceuticals Inc

NASDAQ:CASI

Earnings Call Transcript 2022-Q2

[Operator]

Good day everyone and welcome to the CASI Pharmaceuticals' Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would like to hand the call over to Wei Zhang, Vice President of CASI Pharmaceuticals. Please go ahead ma’am.

[Wei Zhang, Vice President]

Thank you, Welsh. Good morning. Welcome to CASI's second quarter 2022 conference call.

Earlier today, CASI issued a press release providing the details of Company’s business update and financial results for the quarter ended June 30, 2022. The press release is available in the Investor Relations section of the Company’s website.

Today's call will be led by Dr. Wei-Wu He, our Chairman and CEO; along with Mr. Larry Zhang, our President; Dr. Alex Zukiwski. Our Executive Vice President and Chief Medical Officer; Dr. James Goldschmidt, Chief Business Development Officer, they will also be available to answer the questions during the Q&A Session.

As a reminder, we will be making forward-looking statements, including our business plans, objectives and milestones. These forward-looking statements are not a guarantee of future performance and therefore you should not put undue reliance upon them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from those projected or implied in our forward-looking statements. For a description of important factors that could cause actual results to differ, we refer you to the statements in our SEC filings.

It is now my pleasure to turn the call over to our Chairman and CEO, Dr. Wei-Wu He. Dr. He?

[Wei-Wu He, Chairman and Chief Executive Officer]

Thank you, Wei. Thank you, Ray. Good morning everyone. And thank you for joining us. I will begin the call with an update on the business followed by our lead programs and near term catalysts, concluding with our financial highlights.

In the second quarter of 2022 COVID-related lockdowns and associated restrictions, limited access to hospitals in several large cities in China, which had an impact on the sales of EVOMELA. Our sales and marketing team is proven to be resilient, rapidly adapting strategies to address these challenges, to ensure that our priority remain on track. Revenues from sales of EVOMELA increased by 19%, compared to the same period last year.

Equipped with experience from EVOMELA and the ability to adapt to a changing environment, I believe our commercial and medical marketing team can efficiently execute the anticipated launch of CNCT19 in China.

Our strategic focus in 2022 will continue to be to advance the development and commercialization of the portfolio. We anticipate the start of BI-1206 Phase 1 trial in China very soon. We expect a CB-5339 to receive clinical trial application, CTA approval from the NMPA during 2022. Meanwhile, our CID-103 Phase 1 study continues. We are excited by our momentum and will continue to execute on several key milestones across our broad portfolio in the quarters ahead.

In May, we effectuated a ten to one reverse split of the company's common shares. As a result of the reverse split, the number of shares of outstanding common stock will be plus approximately 13.6 million shares. The objective of the reverse stock split is to satisfy the minimum bid price requirement for continued listing on The Nasdaq Capital Market and will not affect our value and shareholders’ ownership percentage of CASI’s share.

In the second quarter, we entered into a sub-license agreement with Precision Autoimmune Therapeutics, a Chinese incorporated company, previously known as Beijing Tianshi Tongda Pharmaceuticals Technology. We granted Precision Therapeutics – Precision Autoimmune Therapeutics, an exclusive worldwide license for the anti-CD38 monoclonal antibody for the treatment, prevention, and diagnosis of autoimmune diseases. Precision Autoimmune Therapeutics will make an upfront payment of $10 million, equivalent in two equal installments upon completion of its first and second financing, respectively, plus potential future payments of development and sales milestones, and royalties to CASI.

Upon completion of equity financing CASI through its wholly own Chinese subsidiary will hold 15% equity is the newly established company. Sub-license agreement will allow CASI to remain focused on the malignant hematology-oncology market, while allowing the clinical entity of CID-103 to be explored for the potential treatment of autoimmune diseases.

Now let's move to CASI's first commercialized product EVOMELA. We are pleased to report $8.6 million in revenue in EVOMELA sales for the second quarter of 2022. EVOMELA is approved in China for use as a high dose conditioning agent prior to hematopoietic stem cell transplant patients. In patients with multiple myeloma EVOMELA is a proprietary formulation with patent protection until at least 2030, and is currently the only cyclodextrin enabled formulation of injectable melphalan commercially available in China. Our experienced specialty sales and marketing teams in the hem-oncology market in China is a major competitive advantage. We have established access to a substantial number of key opinion leaders who can advise us on the unmet medical needs of our patient population. CASI continues to pursue a similar strategy with respect to marketing efforts and physician visits, to further the adoption of stem cell transplantation as a standard of care in the multiple myeloma treatment setting, and will continue working to address the persistent high-unmet medical needs in this patient population.

Now I will have Alex address our upcoming pipelines. Alex?

[Alex Zukiwski]

Good morning. This is Alex Zukiwski. I'm the Chief Medical Officer for CASI. I'd like to first speak about the CNCT19 CAR-T product. Our partner, Juventas Cell Therapy continues the development of CNCT19, an autologous CD19 directed CAR-T investigational product for which CASI has co-commercial and profit sharing rights. CNCT19 is being developed as a potential treatment for patients with hematological malignancies, which express CD19, including B-cell acute lymphoblastic leukemia, and B-cell non-Hodgkin's lymphoma.

In January CNCT19 received orphan drug designation by the U.S. FDA. CNCT19 is being locally developed in China and will be locally manufactured, which distinguishes this program from other CAR-T19 therapies developed and manufactured in part outside of China. The pricing of cell therapy and other innovative drugs in China is a crucial issue for patients.

Similar, CD19 CAR-T developed and manufactured utilizing imported components are subject to certain ex-China CMC and higher cost of goods, making the price point significantly higher than we believe the price of CNCT19 will be.

Juventas in China is currently undertaking the Phase 2 registrations in both the B-ALL and B-NHL indications. Starting in mid-2021, our commercial franchise has thoroughly prepared for the anticipated China NDA filing of the CNCT19 CAR-T program, which we currently expect to be in the second half of 2022.

Now let me address the other product candidates in our pipeline. BI-1206, along with our partner, BioInvent, we continue to progress the development and regulatory framework for BI-1206 in China. We licensed BI-1206 as first-in-class human monoclonal antibody that targets the Fc gamma RIIB receptor for the greater China market. BI-1206 has a novel mode of action blocking the single inhibitory antibody checkpoint inhibitor Fc gamma RIIB to unlock the anti-cancer immunity in both liquid and solid tumors. The Fc gamma receptors are antibody checkpoints that modulate the efficacy of tumor-cell directed-targeted antibodies and immune checkpoint-targeting antibodies used in cancer immunotherapy. BI-1206 can potentially be used in all therapeutic monoclonal antibodies that rely on ADCC and/or CDC for efficacy.

BI-1206 is currently being investigated outside of China in two Phase 1/2 studies. One is evaluating the BI-1206 combination with rituximab for the treatment of non-Hodgkin’s lymphoma which includes patients with follicular, mantle cell and marginal cell lymphomas, who have relapsed or are refractory to rituximab. A second Phase 1/2 trial is investigating BI-1206 in combination with anti-PD1 therapy Keytruda, otherwise known as pembrolizumab in solid tumors.

The NMPA granted BI-1206 CTA approval in December of 2021. Earlier this year, the U.S. FDA granted orphan drug status for BI-1206 for the treatment of follicular lymphoma, the most common form of slow growing lymphoma – slow growing non-Hodgkin's lymphoma. Together with BioInvent, we plan to continue to develop BI-1206 in both the hematological malignancies and solid tumors with cancer responsible for the development and commercialization in greater China.

Our lead indication will be BI-1206 in combination with rituximab in patients with relapsed/refractory non-Hodgkin lymphoma. The BI-1206 trial has been initiated, and we expect to dose the first patient in the second half of this year.

Now we’re worried about CB-5339. CB-5339 represents a promising new agent for selectively targeting the VCP/p97 target in cancers, and is a complimentary addition to our pipeline of hematology/oncology assets. Together with our partner, Cleave Therapeutics, we plan to develop CB-5339 in acute myeloid leukemia as the potential initial indication with CASI responsible for development and commercialization in greater China. The CB-5339 CTA application for the multiple myeloma indication is in progress after receiving additional input on the IND package from the China Center for Drug Evaluation. Our partner Cleave Therapeutics is responsible for the ex-China development of CB-5339 and is evaluating the molecule in a Phase 1 clinical trial in patients with AML and myelodysplastic syndrome. We are excited by the joint development of CB-5339 with our focus on helping to accelerate the development program by initiating trials for the current and potential new indications in China.

Now for a short discussion on CID-103. CID-103 is a short – is a fully human IGT1, anti-CD38 monoclonal antibody recognizing a unique epitope that has demonstrated encouraging preclinical and safety profile, compared to other anti-CD38 monoclonal antibodies.

CASI maintains exclusive global rights in developing CID-103 for the treatment of patients with multiple myeloma. In June 2021, we enrolled our first patient in Phase 1 dose escalation study. The Phase 1 study patients with previously treated relapsed or refractory multiple myeloma is currently ongoing in France and in the UK. The Phase 1 trial is expected to generate valuable information and has the potential to provide early evidence of clinical activity in the treatment of patients with multiple myeloma.

Lastly, on final Thiotepa we are in the process of responding to the China Center for Drug Evaluation response to the regulatory submissions for two indications.

This completes the update of our key pipeline assets. I will now turn it over to Rui to provide an update on the financials. Rui?

[Rui Zhang, Vice President-Business Development]

Thank you, Alex. Today I will briefly summarize our financial results and provide key highlights for the second quarter of this year. Revenue is consistent with product sales of EVOMELA. Revenue was $8.6 million for the quarter ended June 30, 2022, 19% of increase compared to $7.2 million for quarter ended June 30, 2021. Secondary to the COVID-19 lockdowns in the few of the major cities in China, the EVOMELA second quarter revenue was slight compares to the first quarter of $9 million in 2022.

Costs of revenues was $3.6 million for the quarter ended June 30, 2022, compared to $3 million for the same period last year, which includes royalty payment of $1.7 million and $1.4 million for the same period in 2021.

We closed this quarter with $18.9 million cash and cash equivalents.

In May, we entered into a business loan agreement with East West Bank to borrow a revolving line of credit up to US$10 million for working capital purpose. By implementing management and budgetary control, we continue to be thoughtful on how we deploy our cash with the focus on creating shareholders' value.

With that, I would like to now turn the call back over to the operator to open up the line for questions. Welsh?

[Operator]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Justin Zelin with BTIG. Please go ahead.

[Unidentified Analyst]

Hi, Wei-Wu, this is [indiscernible] on for Justin. Thank you for taking our questions.

[Wei-Wu He, Chairman and Chief Executive Officer]

Hi, Justin.

[Unidentified Analyst]

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

[Wei-Wu He, Chairman and Chief Executive Officer]

Yes. Well actually Justin the COVID situation, because Shanghai is a major part of our revenue. May be after I finish Larry can address this more specifically. Shanghai literally was shut down for two months and that's probably is a major impact for our second quarter revenues. We don't really know hundred percent for sure that this won't happen again. But so far, at least in Shanghai, some of the major cities, the revenue is coming back. The COVID situation is obviously quite unpredictable in this regard, with the China policy on COVID control.

So, Larry, do you want to add a little bit on this question, the impact of COVID on our revenue?

[Larry Zhang, President]

Absolutely. Hi, Justin [ph]. As we mentioned, I think, the COVID-19 policy is a pretty unpredictable in China and it is something that can happen again in Shanghai, even though it not impacted our business further yet. But sometimes, we are ready and any time and anything happened and again, it's locked down. And it's summer in big city it's like in Guangzhou and Shenzhen is still is alert. And for new wave of COVID-19, that is always and we are ready to deal with.

This is one of the key challenges, I would say, for the rest of the year and for predict, forecast and our sales and revenue. But the team is ready and for the cities we can do. So, that's why, and for the second quarter our businesses continually can grow 19% compared to same period last three years. But there’s a lot of the challenges ahead. We're ready to deal with. Justin [ph]?

[Unidentified Analyst]

Great.

[Wei-Wu He, Chairman and Chief Executive Officer]

I think the second question, Justin [ph], do you think we satisfy your question for the first question?

[Unidentified Analyst]

Yes, that was great.

[Wei-Wu He, Chairman and Chief Executive Officer]

Yes. The good thing Justin is China is a big country. So, we still beat the quarter the previous year, that just means that although it's one country, but the country itself is diversified enough to sustain the business.

So to answer your second question, why do we do the Precision Autoimmune Therapeutics? We have the board and the senior management team, we have made a commitment that CASI is going to focus on hematology-oncology market, because, we have a wonderful commercial team. We have marketing cells, we have wonderful connection with KOLs, but we are still a very small company with very limited financial resources.

So we are just going to focus on hematology-oncology space. So, in the autoimmune disease, we actually all know that CD38 have been used to treat many different autoimmune indication off-label. And the data is really, really quite encouraging. So we just found a local venture capital fund is willing to finance a precision autoimmune company, and they kind of fall in love with the CD38 story on the autoimmune space. And we believe autoimmune diseases are just like cancer. For instance, like diseases like lupus, ITT, they're really not one disease, they are actually driven by totally different biology. Some of them are driven by D-cell biology, some of them are driven by T-cell biology, some of them are driven by early D-cell, some of them are driven by more, later stage plasma cell.

We think actually the major technology breakthrough in this space is the genomic sequencing technology, and also the single cell technology. So we teamed up with professors in Peking University who is really, really at the leading edge of single cell analysis technology. So, by contributing our CD38, we are being part of this brand new precision autoimmune indications. We think this is extremely exciting blue ocean since the single cell technology really opened up a lot of new, potential settlements for autoimmune cell treatment.

And clearly, our CD38 is almost finishing Phase 1 studies, and we so far like our data. So we have no infusion reaction even at pretty high dose. And so, with additional financing from new investors, CASI does not need to bear the burden of clinical development for these drugs for CD38 in autoimmune diseases. But the NewCo will spend the money to develop autoimmune indication, which could actually help our hematology-oncology indication. That's why we decided to do this deal.

[Unidentified Analyst]

Great, thank you so much.

[Wei-Wu He, Chairman and Chief Executive Officer]

And we also will receive about $10 million upfront on payment, which is significant for CASI today's depressed capital market. And with this $10 million, we actually got a very low interest rate loan from East West Bank. And we have existing cash. We think we are pretty well financed well into 2023.

[Unidentified Analyst]

Right. Makes sense. Thank you.

[Wei-Wu He, Chairman and Chief Executive Officer]

Yes.

[Operator]

Our next question comes from Leland Gershell with Oppenheimer. Please go ahead.

[Leland Gershell, Oppenheimer]

Hi, good morning.

[Wei-Wu He, Chairman and Chief Executive Officer]

Hi, Leland.

[Leland Gershell, Oppenheimer]

Hi Wei-Wu. Hi. Yes, congratulations on the progress. And thank you for taking the questions. Two questions for me first, is as we anticipate the availability of CNCT19, wanted to ask Wei-Wu to the extent that you would have any visibility, what the timing could be on potential NDRL listing. Is this something – does the NDRL consider additions only once a year or is there a certain frequency, or can these be made ad hoc? Is there any activities you can do to increase the expediency or the likelihood of CNCT on the NDRL?

And then my second question would be if you look in the literature there is evidence of many, many anti-CD19 CAR-T cell therapies that are being looked at in China. I think many of them probably academically, in addition to yours and the pharmas. I'm just wondering what the status of those are in terms of commercial application. Should we think about those as being also competitive with yours at some point, or do you think Chinese government would maybe shut down the ability of those to be used once we have CNCT19 on the market? Thank you.

[Alex Zukiwski]

Yes, Leland thank you so much. CNCT19 was still, I mean, with all indications Juventas is still on track to file the NDA in 2022. So that's the way we have been always saying that. Before end of 2022, investors should expect to see Juventas NDA filing. The approval is most likely going to happen if the CDE agrees with our data, the approval is most likely going to be happening in 2023.

There are two CAR-T19 approved in China, all imported from U.S.A. One is highest CAR-T19, so sufficient highest, and we see Juno's CAR-T19 is also approved. But they are significantly priced at around RMB 1.2 million it's about close to US$200,000, which at that price point is really only kind of available to the very high end client base. Because our CAR-T19 is a Chinese domestically developed CAR-T19, we believe our data is comparable, if not more competitive. But our cost of manufacturing is significantly lower than U.S. produced CAR-T19 therapies. So, there is a – we think there will be a price advantage in China.

Secondly, because of the collaboration between CASI and Juventas, we already have a very experienced commercial and sales team through the launch of EVOMELA, so because the KOLs for EVOMELA are the same sets of KOLs for CAR-T19 treatment. We do believe that we are much prepared as a commercial channel for CNCT19 in China. So there might be additional drugs coming. The consensus is it's probably not going to be more than four or five CAR-T19 approval in China. And we hopefully will be the number three, but the first domestic CAR-T19 in China. Leland, does that answer your question?

[Leland Gershell, Oppenheimer]

Yes, yes. Thank you. That's helpful.

[Operator]

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

[Sean Lee, H.C. Wainwright]

Good morning guys and thanks for taking my questions. My first question is on the CAR-T19. So with the upcoming results later this year and potentially approval next year, I was wondering, are there any additional steps that need to be taken before you're able to launch this in terms of the manufacturing or in terms of expanding your commercial structure? Thanks.

[Wei-Wu He, Chairman and Chief Executive Officer]

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

[Sean Lee, H.C. Wainwright]

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

[Wei-Wu He, Chairman and Chief Executive Officer]

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

[Sean Lee, H.C. Wainwright]

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

[Alex Zukiwski]

Sean, this is…

[Wei-Wu He, Chairman and Chief Executive Officer]

Alex, would you like to address that?

[Alex Zukiwski]

Yes. So Sean, this is Alex. On the final Thiotepa, we are working with our partner, ESTEVE, to address all of the recently received CDE questions. We anticipate submission shortly. And then it will be a review process to hear back from CDE. We're optimistic that we will be able to address the vast majority of the questions in a timely fashion. Some will take a little longer. Secondary – the complexity of new analytics that have to be done. But I would hope that we will have a submission and feedback within the next four to six months on that. On the BI-1206, that program is moving forward. As I noted, the CTA has been approved in China. We have a very close collaboration with our colleagues at BioInvent. And the goal is to get the first patient in as expeditiously as possible. And our ultimate goal is to participate this BioInvent in the future global registration study for the combination of BI-1206 plus rituximab.

[Sean Lee, H.C. Wainwright]

Thanks for all the clarity…

[Alex Zukiwski]

I apologize but – yes. But to give you firm dates on some of these things, we have not announced and that we'd only do so in collaboration with BioInvent.

[Sean Lee, H.C. Wainwright]

Fair enough. Fair enough. That's all I have. Thanks.

[Operator]

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

[Wei-Wu He, Chairman and Chief Executive Officer]

Well, thank you again for joining today's call. There's no doubt in my mind that we are on the course in building a fundamentally strong biopharmaceutical company. We look forward to leveraging our existing commercial infrastructure, pursue pre-commercial launch activities for the CAR-T19 program, drive expanded pipeline progress and continue to observe steady EVOMELA revenues. We thank each of you for your continued support in CASI during this exciting period. Operator, thank you. You may now conclude this call.

[Operator]

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

[Wei-Wu He, Chairman and Chief Executive Officer]

Thank you.