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Athenex, Inc. (NASDAQ:ATNX)
Q4 2017 Earnings Conference Call
March 26, 2018 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Q4 and full-year 2017 Athenex Inc. Earnings Conference Call. At this time all participants are in a listen-only mode.

Following management's prepared remarks, we will hold a question-and-answer session and our instructions will be given at that time. [Operator instructions]. As a reminder, this conference call is being recorded for replay purposes. It is my pleasure to hand the conference over to Jim Polson, investor relations.

Sir, you may begin.

Jim Polson -- Investor Relations

Good morning and thank you for joining our conference call to provide an update on Athenex's business as well as a review of financial results of the 2017 fiscal fourth quarter. The news release detailing the fourth-quarter results crossed the wire earlier this morning. It is available on the company's website. A replay of this call will also be archived on the company's website.

During the course of this conference call, the company will make projections or forward-looking statements regarding future events, including statements about financial and clinical milestones anticipated in the fiscal year 2018 and beyond. We encourage you to review the company's past and future filings with the SEC which identify specific factors that may cause the actual results or events to differ materially from those described in the forward-looking statements. You can find our SEC filings in the EDGAR database at www.SEC.gov or in the Investor Relations section of our website at www.Athenex.com.This morning we're joined by Dr. Johnson Lau, chief executive officer; Jeffrey Yordon, chief operating officer; Dr.

Rudolf Kwan, chief medical officer; Li Shen, acting chief accounting officer; and several other executives who will be available to answer questions after our prepared remarks.With that, I'll turn the call over to Johnson for introductory comments.

Johnson Y.N. Lau -- Chief Executive Officer and Chairman

Good morning and thanks, everyone, for joining us today. I'm pleased to be reporting to you yet another strong quarter across our business to close this very successful first year as a public company. Let me first start by briefly speaking to some recent highlights and then handing it over to my colleagues for a detailed review of the progress we have made across the business. In our Orascovery platform, we recently announced that we received positive feedback from the U.S.

Food and Drug Administration on the clinical trial design and also met our enrollment target for the Phase III clinical trials o Oraxol for the second interim analysis in metastatic breast cancer. The trial enrolled more than the target of 180 patients and we expect results on the second interim analysis in the third quarter of 2018. These developments, along with positive comments from the Data and Safety Monitoring Board, or DSMB, in October of last year and the receipt of a Promising Innovative Medicine, or PIM, designation for Oraxol by the U.K. Medicines and Healthcare products Regulatory Agency, or MHRA, in late fourth quarter of last year underscore our confidence in the efficacy and safety profile of Oraxol.

In addition, we were excited that the Chinese FDA allowed us an IND in China to start clinical trials in less than six months, which is a record time. Dr. Rudolf Kwan, our chief medical officer, will speak to further developments in the Orascovery platform later in the call.In the Src Kinase platform, we were very pleased to announce a strategic partnership with Almirall, a global leader in dermatology, in particular in actinic keratosis. For the commercialization of KX2-391, or KX01 as it's also known, for the treatment actinic keratosis.

Under the terms of the agreement, we granted an exclusive license to research, develop, commercialize KX2-391 in the United States and European countries for an upfront fee, development and sales milestones, and royalty payments with a scheme that will incentivize a strong partnership. Additionally, we announced patient enrollment is well ahead of schedule for the two Phase III clinical studies of KX2-392 ointment for actinic keratosis indications. To be able to enroll more than 600 patients in just over four months represents quite an achievement, and I would like to congratulate our clinical team in achieving this important milestone. We are very excited to continue working with Almirall to develop our joint strategy as we move forward.

Our partnership has been great.In our commercial segment, we generated fourth-quarter revenue of $14.9 million, up from $9.8 million, or 191%, year over year. Note that our previous guidance for the full year of 2017 was $33 million to $35 million in November last year, which was already up from $30 million to $34 million in the previous quarter in August and with the [Inaudible] $38 million revenue full year thanks to the hard work of our commercialization team. I would also like to highlight that our revenue exceeded our R&D expenses for the quarter, which is fairly atypical for an early stage company in our industry. We are continuing to progress according to plan on our new Dunkirk facility and expect construction of the facility to be completed by the first quarter of 2019.

We remain excited about our strong partnership with the State of New York in building a state-of-the-art facility that will provide key jobs and resources to the region and ultimately help develop innovative and effective oncology-focused therapies. Early this year we were pleased to raise approximately $68 million in a second stock offering on the NASDAQ Global Select Market. We believe that our current capital leaves us well-positioned to invest in and grow our business.Looking back at 2017, we were pleased to achieve all our clinical and commercial guidance at or ahead of schedule, a testament to the strength of our team and hard work across the Athenex organization. We are very grateful to all of our committed employees.

Heading into the second year as a public company, we remain focused on advancing our clinical oncology and [Inaudible], leveraging our global research and development capabilities in extending our oncology product pipeline, and building out our commercial platform that can achieve and support global sales, marketing, and distribution. We have set some equally aggressive goals to move Athenex forward in the year ahead and I'm confident that our team is up to the challenge and will continue to exceed expectations. We'll continue to update all of you as we make further progress on our clinical and commercial efforts. Thank you all for your support in this very successful inaugural year in our public-company life.With that, I'll turn the call over to our chief operating officer, Mr.

Jeff Yordon, for a more detailed overview of our accomplishments during the fourth quarter. Jeff?

Jeffrey Yordon -- Chief Operating Officer and President

Thank you, Johnson, and good morning, everybody. We had a strong fourth quarter, in which we made significant progress across both of our proprietary platforms. We signed a strategic partnership with Almirall and generated very strong revenues in our commercial segment. I'd like to start by providing a bit more detail on the progress we've made in our clinical programs this quarter.

As previously mentioned, we met our 180-patient enrollment target and received positive feedback from the U.S. FDA on our Phase III clinical trial for Oraxol for metastatic breast cancer. We also received a Promising Innovative Medicine designation from U.K. Medicines and Healthcare products Regulatory Agency for Oraxol, which qualifies us to apply to the second step of the U.K.'s Early Access to Medicines Scheme.

If received, this would allow us to provide patients early access to Oraxol, prior to receiving marketing authorization, a very, very interesting situation for us. Across the Orascovery platform we also received encouraging preliminary results for Oraxol in Phase I-II clinical trial of 24 patients in Taiwan, initiated the development of a new IND for oral eribulin, and submitted an IND for Oraxol to the Chinese FDA. As a reminder, Oraxol is the lead candidate in our Orascovery platform, which relies on a PGP pump-inhibitor molecule intended to reduce peak plasma levels and increase effective drug exposure and tolerability in breast and gastric cancer patients through oral administration.Now, turning to our Src Kinase inhibitor platform, this quarter we're pleased to announce a strategic partnership agreement with Almirall, a leading dermatology company, to research, develop, and market KX2-391 or KX-01 ointment for actinic keratosis in the United States and Europe. Under the terms of the agreement, Athenex has received $30 million in the first quarter of 2018, out of near-term payments which will total $55 million, with additional indications, milestone payments, and a royalty payment starting at 15% based on annual net sales, with incremental increases in royalty rates with increased sales.As a reminder, actinic keratosis is a common skin condition affecting more than 50 million people in the United States.

It is characterized by scaly, crusty patches in sun-exposed areas, of which up to 10% to 15% of cases will develop into cancer if left untreated. Early clinical trial results of KX-01 demonstrated excellent activity and a much better adverse-event profile with a dramatic increase in the frequency of severe local skin reactions compared with the historical data of the current standard of topical therapy for actinic keratosis. We believe the partnership with Almirall is a landmark deal and we look forward to collaborating with them as we move forward. Also in our Src Kinase platform, we announced that we have completed enrollment for both of our Phase III clinical studies for KX2-391 ointment and had Phase II clinical data presented at the prestigious American Academy of Dermatology annual meeting.Let me also add a few comments on our commercial platform, which includes our specialty pharmaceuticals business, our 503(b) outsourced pharmacy business, and global API manufacturing businesses.

We launched several new products in both our 503(b) and specialty-injectable business units, including epinephrine, norepinephrine, caspofungin, doxorubicin, etomidate, gemcitabine, and paclitaxel injections. As a whole, APD now currently markets 17 products with 30 SKUs, and Athenex Pharma Solutions business, or APS, our 503(b) outsourced facility, currently markets five products with 21 SKUs. We also continue to take steps to strengthen our supply chain by continuing as planned with the development of a large-scale CGMP manufacturing plants in both the United States and China. As a result of our strong private-public partnerships with the state of New York, we have secured the necessary funding for the development of our new facility in Dunkirk and continues as planned and we expect construction in the facility to be completed by the first quarter of next year.

This partnership continues to be critical to our mission of developing innovative and effective oncology-focused therapies.Before turning to call over to Rudolf Kwan, our chief medical officer, for some additional commentary on our clinical programs, I'd like to take the opportunity to reiterate how our commercial business is intended to support the clinical platform. The aforementioned achievements and milestones in our clinical program during the quarter underscore the capabilities of our clinical-development platforms, which are primarily focused on Athenex. As a company, we are acutely focused on the discovery, development, and commercialization of novel and efficacious treatment of cancer and related conditions. Our commercial platform will become critical to supporting our proprietary drug candidates when they are approved.

In the interim, we are laying an extremely solid foundation of commercial capabilities, as exhibited by strong revenue performance this fiscal year.While sodium bicarbonate is still expected to contribute revenue in 2018, we are also pleased to be helping to provide a solution to the current shortage of vancomycin, a key antibiotic in the U.S. market with $9 million in sales already to date. Additionally, we are off to a strong start in 2018, six product launches to date and several additional storage products being marketed currently. We continue to view the commercial platform as both an important opportunity to generate revenue to fund our R&D efforts on the clinical platform and vital to the eventual commercialization of those platforms as we work to make Athenex a leading provider of proprietary oncology treatments and build a bridge to future decision-makers for our proprietary products.

Lastly, our 2018 revenue guidance of $100 million to $125 million is close to a 200% increase over 2017.With that, I'll turn the call over to Rudolf for some additional commentary on our clinical candidates. Rudolf?

Rudolf Kwan -- Chief Medical Officer

Thanks, Jeff. Let me highlight some additional details on our clinical program. I'll start with Oraxol, the lead candidate in our oral discovery platform. In November, we presented positive interim analysis results of an Oraxol pharmacokinetic study at ESMO Asia 2017 in Singapore.

In January, we announced encouraging preliminary efficacy and safety data of Oraxol in the treatment of metastatic breast cancer in a clinical trial of 24 patients in Taiwan. Among the first trial [Inaudible] patients, we saw 50% positive response and another 50% stable disease, meaning no progressive disease and there were no neuropathy reported. On the Oraxol regulatory front, the Chinese FDA allowed an IND for Oraxol, which enables Athenex to commence a clinical-trial program in China. This represents Athenex's second China FD IND allowance after KX-02 in 2017 for glioblastoma multiforme.

Additionally, the United Kingdom MHRA granted a Promising Innovative Medicine designation for Oraxol in the treatment of paclitaxel-responsive cancer. Promising Innovative Medicine drugs must address life-threatening or seriously debilitating conditions, must have a high unmet need, and demonstrate a positive benefit-risk balance. This designation is the first step of Early Acess to Medicines Scheme and now qualifies Athenex to apply for Step 2 to provide U.K. patients early access to Oraxol, prior to receiving marketing authorization.

In the United States, we received feedback from the U.S. FDA that if the current Phase III clinical trial meets the primary endpoint of overall response rate with an acceptable benefit-risk profile, it could be adequate as a single comparative trial to support registration of Oraxol for metastatic breast cancer in the U.S.In February, we announced meeting our enrollment target for the Oraxol Phase III clinical trial for metastatic breast cancer, putting us on schedule for a second interim analysis in the third quarter of 2018. We also announced completion of the first cohort of patients in the Phase Ib clinical trial for Oraxol plus ramucirumab in gastric cancer patients that failed previous chemotherapy. Of the six patients, two patients had positive responses and another three patients had stable disease with no neuropathy recorded.

Our collaboration with Eli Lilly for Oraxol and ramucirumab highlight the strength of our partnerships and our ability to collaborate with major players in the pharmaceutical industry.Coming to our Src Kinases inhibition platform, we were pleased to announce Phase II clinical results for KX2-391 ointment in San Diego at the American Academy of Dermatology annual meeting. Treatment with a five-day course achieved a high overall 100% clearance of AK lesions at Day 57 in 52% [ph] of subjects with AK on the face. Local skin reactions were mild. Majority of the local skin reactions caused were [Inaudible] two or less and all resolved rapidly.

Treatment-related adverse events were few. There were no treatment-related serious adverse events or discontinuations, and plasma levels were low to undetectable. We continue to believe that this ointment has the potential to change the paradigm for the treatment of actinic keratosis. As a reminder, Athenex and the FD previously had an annual Phase II meeting regarding the program for the design of the Phase III studies of KX-2391 ointment, and two placebo-controlled Phase III studies with a total target of 600 patients -- 300 patients for each study -- were initiated in September of 2017 and the enrollment was completed rapidly, ahead of an already aggressive schedule.

We expect top-line data of the Phase III studies to be available in the first quarter of 2018. Other oral discovery programs, including Oratecan, Oradoxel, Oratopo, are all proceeding well in the clinic. Finally, we are planning for oral eribulin IND to be filed by the end of 2018. Overall, we are very proud of the excellent planning and execution of our clinical team.With that, I'll hand the call over to Li Shen, our acting chief accounting officer, who will review our financials.

Li?

Li Shen -- Vice President, Financial Planning and Treasury

Thanks, Rudolf. I'm going to walk through the fourth-quarter financial results as well as our balance-sheet position at the end of 2017 and the revenue expectations for 2018. Revenue for the fourth quarter was $14.9 million, compared to $5.1 million in the same period last year. The revenue increase was primarily attributable to our specialty platform, which contributed revenue of $7.9 million during the period with the launch of 12 specialty products since inception.

API sales increased by $1.2 million over the prior period. Research and development expenses for the quarter were $20.8 million, a decrease of $6.3 million from a year ago. The decrease in R&D expenses reflects the decreased spending on drug licensing for our specialty products in the last quarter and a shift in focus of some employees to sales and marketing functions, offset by an increase in clinical spending as our Phase III trials progress. Selling, general, and administrative expenses were $12.3 million, compared to $10.3 million for the three months ended December 31, 2016.

The increase in SG&A expenses was primarily attributable to the expansion of our sales and marketing force, the increase in professional fees, and other expenses associated with operating as a public company. This was offset by a decrease in stock-based compensation.Now, turning to balance sheet, cash, cash-equivalent, and short-term investment was $51 million as of December 31, 2017, compared to $41.8 million at the end of the prior year. For the 12 months, cash used in operations were $81.5 million, compared to $47.9 million in the year-ago period. The increase was primarily due to the increased spending on clinical trials and the payment of [Inaudible] licensing fees related to the launch of our specialty drug business and also higher operating expenses I just discussed.

We remain focused on using our cash position to fund our clinical pipeline as well as working capital costs associated to the commercial platform and general corporate purposes.Looking toward 2018, we expect our licensing fee revenue will increase as a result of the partnership agreement with Almirall, and the strength in our commercial platform will continue to drive product sales revenu growth, and we expect full-year revenues in the range of $100 million to $125 million, compared to $38 million actual for 2017, an increase of close to 200%.With that, I'll now turn it back to Johnson for some final comments.

Johnson Y.N. Lau -- Chief Executive Officer and Chairman

Thank you, Li. I'll conclude our prepared remarks before we open the call to questions. We're extremely pleased with all of the positive developments in our business during this first year as a public company. We remain committed to using our strong cash position, supplemented by revenue generated by licensing fees and the commercial segment, to progress our clinical [Inaudible] candidates for clinical trials focusing on the current Phase III trials under way in both of our lead clinical programs.

I would like to thank the team around the globe, whose hard work makes up the operational and clinical abilities I'm so proud to be a part of.With that, I'll turn the call over to questions. Operator?

Questions and Answers:

Operator

Thank you, sir. [Operator instructions]. And our first question will come from the line of Chad Messer with Needham & Company. Your line is now open.

Chad Messer -- Needham & Company -- Managing Director

Good morning and thanks for taking my question. I guess if I'm asking just one and a follow-up, I'll start with Oraxol. So you've talked about this feedback you got from FDA in your trial design. I know I was very positively surprised when you were first able to announce that and also appreciating there's only so much one could say about FDA interactions, maybe just walk us through it in more detail the importance of that for the program.

And if I could put my follow-up out there, it would be on what to expect from interim data in third Q, both investors, what should we expect to hear, and then also is that interim something you expect to have further FDA discussions about? Thanks.

Johnson Y.N. Lau -- Chief Executive Officer and Chairman

Thank you for your encouragements and your question. I'll turn it to Dr. Rudolf Kwan, our chief medical officer, to answer your question.

Rudolf Kwan -- Chief Medical Officer

Hi, Chad. Rudolf here. The response from the FDA is extremely positive. They basically agree that the ongoing Phase III clinical trial can be sufficient for the purpose of benefit-risk assessment as a single [Inaudible] study for the indications of metastatic breast cancer.

It also addressed all the questions that has been asked regarding: Did we select the right dose for the Phase III for Oraxol? Was the endpoint, the primary endpoint of overall response rate acceptable to the FDA? Was the comparator of 175 milligrams per meter squared of IV Paclitaxel once every three weeks an appropriate comparator? What the power [ph] calculation based on the two interim analyses and 360 patients total adequate? And the fact that there were no U.S. sites [ph] wasn't a concern to the FDA. I think the response from the FDA clearly shows that we are on track to deliver the projected profile we have for Oraxol.

Chad Messer -- Needham & Company -- Managing Director

The expectation.

Rudolf Kwan -- Chief Medical Officer

Our expectation is to have the second interim analysis on track for the first quarter of this year. We have already achieved the number of patients enrolled adequate for that purpose, and we are waiting for those patients to complete the treatment period to clean up the data, and we're on track for that analysis. Thank you.

Chad Messer -- Needham & Company -- Managing Director

Just one final one there, do you expect to have any further FDA interactions over that interim analysis?

Rudolf Kwan -- Chief Medical Officer

We will not comment on that. We will await the DSMB guidance on how to address the communication of the second interim analysis.

Chad Messer -- Needham & Company -- Managing Director

OK. Thanks a lot. I'll get back in the queue.

Operator

Thank you. And our next question will come from the line of Kennen MacKay with RBC Capital Markets. Your line is now open.

Kennen MacKay -- RBC Capital Markets -- Managing Director

Hi. Thanks for taking the question. Again, one on Oraxol, on the Phase III going on metastatic breast cancer. Just wanted to get a sense from you as to what type of patients we should be expecting here, sort of in terms of the biomarkers.

Given the trial's enrolling patients eligible for single [Inaudible] Paclitaxel, should I sort of be thinking that is mostly going to be triple-negative breast cancer? Maybe can you help us understand the standard of care in Latin America in metastatic breast cancer versus what's going on in the U.S. for these patients? Like, in Lat-Am do they stop aromatase inhibition, so could we see some HR-positive patients here or do they stop Kir2 therapies post-progression, so could we see some Kir2-positive patients? Anything you can comment on maybe what we should be anticipating the, again, biomarker population of these patients could be?

Johnson Y.N. Lau -- Chief Executive Officer and Chairman

Ken, thank you for your question. Dr. Kwan will answer your question.

Rudolf Kwan -- Chief Medical Officer

Kennen, the design of the study in Latin America was modeled against the [Inaudible] study. So the patient inclusion-exclusion criteria are very, very similar and that includes mostly patients who have failed some sort of previous treatment but it also includes a small percentage of patients that have, extensive metastatic breast cancer patients that fulfill other criteria. It does not specify whether it's triple-negative, it includes them as well as other types. I'll encourage you to also look at the press release we did on the Taiwan study in January in metastatic breast cancer, also using the same dosing regimen of Oraxol 250 milligrams per meter square, once a day, three days a week, same dosing regimen, similar patient population including criteria of the first-trial patients that we reported primary result.

That'll give you an idea of what kind of patient population and activity we are looking at. Thank you.

Kennen MacKay -- RBC Capital Markets -- Managing Director

OK, thanks Rudolf. And maybe just one follow-up. Wanted to get a sense from you as to how we could anticipate use of Oraxol in the U.S., again, if the drug does show benefit, which we very much think it should in the Phase III? Is this something that you think could really just take the place of IV Paclitaxel here? And there are several studies reading out in the near future [Inaudible] in triple negative combining chemotherapy Paclitaxel as well as nab-paclitaxel with some checkpoints like Roche's IMpassion130 trial and the [Inaudible] and nab-paclitaxel and Merck's Keynote trial combining pembrolizumab with several different chemotherapies, including IV paclitaxel, but wanted to get a sense as to whether Oraxol could become one of the combinations of choice here and whether this could just be substituted. Thank you.

Rudolf Kwan -- Chief Medical Officer

Kennen, thank you for the question. It's very clear. We have ongoing studies, Oraxol studies in the U.S. However, we do not have a dedicated breast cancer center in our [Inaudible] study.

So, we are currently discussing with the breast cancer experts [Inaudible] and we also have started discussions to start combination studies with checkpoint immunoagents in the U.S. to address exactly the question you asked. So stay tuned.

Kennen MacKay -- RBC Capital Markets -- Managing Director

Terrific. Thank you very much, Rudolf, and we are staying tuned. And congrats on the progress.

Operator

Thank you. And our next question will come from the line of Yale Jen with Laidlaw & Company. Your line is now open.

Yale Jen -- Laidlaw & Company -- Managing Director

Hey, good morning. Thanks for taking the questions. I have two here. The first one is you said the KX-01 top-line data will come out in the third quarter of this year.

Let's assume for a moment that will be positive. What would be anticipated the follow-up steps might be in terms of filing and others? Could you give us a little bit color on that?

Johnson Y.N. Lau -- Chief Executive Officer and Chairman

Yes, thank you for your question. Obviously, we are confident with our clinical trial design. The design agreed by FDA is to compare our treatment, KX-01 ointment, which has been demonstrating very good efficacy in the Phase II trial, with placebo, which, as you know, usually will not give rise to any response at all. Obviously, after we complete the Phase III studies, if we get the results as expected, then we will have to complete and clean up the database and then try to prepare the documents, at the same time complete a [Inaudible] studies required for the actual [Inaudible] filing in the U.S.

Our partner Almirall and us actually have an agreement that they will take the lead in the European strategy because they are a very successful dermatology company in Europe and that will complement with regard to our activities in the U.S. And obviously, we're planning for additional activities outside the U.S. an E.U. as well, and that is the game plan.

Yale Jen -- Laidlaw & Company -- Managing Director

OK, great. Thanks a lot. That's helpful. And maybe a little bit financial question here.

In terms of Almirall's upfront payment for next year, that's roughly $55 million and I think you mentioned earlier that about $30 million received during the first quarter of this year. How should we sort of, for modeling purpose, to think what are the remaining payments, should those be happening, where those [Inaudible] come out in the second half of this year or how should we think about that?

Johnson Y.N. Lau -- Chief Executive Officer and Chairman

The second payment is tied into the completion of the Phase III studies in addition to some other studies required, which we are already commencing right now, and I think I would guide you to looking into like late this year. There should be potentially another payment sometime late this year.

Yale Jen -- Laidlaw & Company -- Managing Director

OK, great. Thanks a lot and again congrats on the progress.

Operator

Thank you. And our next question will come from the line of Jack Hu with Deutsche Bank. Your line is now open.

Jack Hu -- Deutsche Bank -- Managing Director

Thank you. I actually have three questions here. The first question is just trying to understand actually do you have right now for the pre-clinic Phase I II actually, for date for Oraxol. So let's just say assuming your ongoing Phase III study would have data tomorrow, everything will be done tomorrow, are you ready to file a complete package for FDA approval? And if you're not, what kind of studies are required? Are you planning to complete it before your financial [Inaudible] package? So, that's my first question.

My second question is still on ongoing [Inaudible] Phase III study. Can you remind us the SAP, which is the Statistical Analysis Plan? Especially I recall you had an interim study? So how do you [Inaudible] the p-value [ph]? So that's my second question. My third question is that actually on March 22, which was about four days ago, a Korean company along with their Chinese partner signed another, second oral Paclitaxel in China, actually filed an IND. Do you have any information on that or can you comment on their technology? Thank you.

Johnson Y.N. Lau -- Chief Executive Officer and Chairman

Thank you, Jack. Let me ask Dr. Kwan to answer your first two questions. The first question on the regulatory requirement for Oraxol [Inaudible] submission.

And the second question is on Statistical Analysis Plan. Thank you.

Rudolf Kwan -- Chief Medical Officer

Jack, the first question, the other studies for the FDA submission, we already have a plan to file in countries outside the U.S., all along preparing for submissions in New Zealand and Taiwan as we previously indicated, as the first filing and now we have a U.K. MHRA submission going along. So those studies have already been planned and they will be executed by the end of this year. The second question regarding the interim analysis, the study was built to achieve a p value of .05 at the end of the study.

So the interim analysis would take a small hit along the way and those will be decided upon by the DSMB the FD have reviewed the protocol and agree with that approach.I'll pass it back to Johnson.

Johnson Y.N. Lau -- Chief Executive Officer and Chairman

For the third question, we haven't got a chance to review any information and now we're not sure of what type of oral taxol you mentioned with regard to the Korean-China collaboration, but we are aware of a Korean preparation of oral paclitaxel. That is to mix some oil together with paclitaxel powder, and that is available in Korea. That product, according to our information, has a lot of GI [Inaudible]. In particular, the oil preparation to be swallowed by patients is not really that palatable, and in addition, the absorption in terms of [Inaudible] percentage is far inferior to what we will be able to achieve with regard to our product and is that information and if we get more information, I'll come back to you with more specific answers.

Thank you.

Operator

Thank you. And our next question will come from the line of Serena Shao with Credit Suisse. Your line is now open.

Serena Shao -- Credit Suisse -- Director

Hi. Good evening. Thanks for taking my call. I actually have several follow-on questions on Oraxol.

My first question is actually about your Chinese [Inaudible] plans. I don't know if you guys have mentioned [Inaudible] before but actually the CFDA has a new rule that allows you to do a simultaneously Phase III both overseas and in China. Any plans to use this new rule to accelerating your clinical study in China? That's my first question. And my second question is actually for the 2018, the incoming year, so you have a few Phase III ongoing.

What's that gonna be the impact on your expenses for 2018? That's my question. Thank you.

Johnson Y.N. Lau -- Chief Executive Officer and Chairman

For the first question, Dr. Kwan will address your question with regard to the overall strategy for the Chinese clinical studies as well as registration in China.

Rudolf Kwan -- Chief Medical Officer

Yes, we received the Oraxol IND approval from the China FDA earlier and we are also aware of these new rules that have been put into effect. So our China [Inaudible] team is in close contact with the China FDA as we speak to see whether this new rule has any potential leverage we can take advantage of with the current IND approval. So we will inform you as we get more information. Johnson, back to you.

Johnson Y.N. Lau -- Chief Executive Officer and Chairman

For your second question with regard to the R&D expenses in 2018, obviously, we started to Phase III last year. So, therefore, expenses was already up because of the Phase III studies and we contemplate that the R&D expense this year will go up a little bit further. Having said that, I'm quite sure that we all agree that spending on Phase III clinical trials with promising drug candidates is a very good investment and that will be our position. And thank you for your questions.

Serena Shao -- Credit Suisse -- Director

Thank you so much.

Operator

Thank you. [Operator instructions]. And our next question will come from the line of Leon Chik with J.P.Morgan Hong Kong. Your line is now open.

Leon Chik -- J.P.Morgan -- Executive Director

Hi. I just have one question and follow-up. So, can you walk us through your revenue guidance $100 million to $125 million for the next year, which areas that's coming from? And the follow-up is basically the treatment for the Almirall licensing payments. So, are these payments counted as licensing revenue in the year that they're received and not amortized over several years and that includes the future milestone payments for Almirall licensing, just the revenue accounting treatment? Thanks.

Johnson Y.N. Lau -- Chief Executive Officer and Chairman

Leon, thank you for your question. Mr. Jeff Yordon, our chief operating officer, will open your questions.

Jeffrey Yordon -- Chief Operating Officer and President

The vast majority of the revenue will be generated by the commercial group on both the APD and APS side. The Almirall payments received in 2018 are considered revenue. And, as we have discussed, there's $55 million of that in that number. So, the guidance will be generated by a bunch of products, injectable products on the APD side and our compounding business.

Thank you very much for the question.

Operator

Thank you. And our next question will come from Jack Hu with Deutsche Bank. Your line is now open.

Jack Hu -- Deutsche Bank -- Managing Director

Thanks for taking my follow-up. It's really a housekeeping question. Should we expect any data from [Inaudible]?

Johnson Y.N. Lau -- Chief Executive Officer and Chairman

Dr. Kwan will answer your question.

Rudolf Kwan -- Chief Medical Officer

Yes, we do have the plan to submit PK data in [Inaudible]. We don't have a notification has been accepted or not, so I cannot tell you for sure what has been accepted. We did submit a couple of extracts to [Inaudible] in relation to our Oraxol product and we haven't received notification yet. Once we are notified, we will inform the investment community with regard to the results.

Jack Hu -- Deutsche Bank -- Managing Director

Thank you.

Operator

Thank you. And I'm showing no further question in the queue at this time. So, now I'd like to have the pleasure of handing the conference back over to Mr. Johnson Lau, chief executive officer, for some closing comments and remarks.

Johnson Y.N. Lau -- Chief Executive Officer and Chairman

Thank you again for joining us today and we had a very good first year and now we look forward to have an even more successful second year as a public-traded company. Thank you very much.

Operator

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

Duration: 49 minutes

Call Participants:

Jim Polson -- Investor Relations

Johnson Y.N. Lau -- Chief Executive Officer and Chairman

Jeffrey Yordon -- Chief Operating Officer and President

Rudolf Kwan -- Chief Medical Officer

Li Shen -- Vice President, Financial Planning and Treasury

Chad Messer -- Needham & Company -- Managing Director

Kennen MacKay -- RBC Capital Markets -- Managing Director

Yale Jen -- Laidlaw & Company -- Managing Director

Jack Hu -- Deutsche Bank -- Managing Director

Serena Shao -- Credit Suisse -- Director

Leon Chik -- J.P.Morgan -- Executive Director

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