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Athenex, Inc. (NASDAQ:ATNX)
Q2 2018 Earnings Conference Call
Aug. 14, 2018, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Athenex Second Quarter Earnings and Update Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. I would now like to turn the conference over to your host today, Tim McCarthy, Managing Director of LifeSci Advisors. Please proceed, sir.

Tim McCarthy -- Managing Director

Good morning Latania. Good morning. Thank you for joining our conference call, as we provide an update on Athenex's business as well as a review of financial results for the second quarter 2018. A news release detailing the second quarter results crossed the wire earlier this morning and is available on the company's website. A replay of this call will also be archived on the company website.

During the call -- 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 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, at our website at www.athenex.com. This morning we are joined by Dr. Johnson Lau, Chief Executive Officer; Jeff Yordon, Chief Operating Officer; Dr. Rudolph Kwan, Chief Medical Officer; and Li Shen, acting Chief Accounting Officer, who will be available to answer questions after the prepared remarks.

With that, I'll turn the call over to Johnson for introductory comments.

Johnson Lau -- Chief Executive Officer

Thank you, Tim and good morning everyone. We had a busy and productive second quarter at Athenex, with significant progress across clinical, operational and financial fronts. We announced very positive Phase 3 data with our lead Src Kinase inhibitor KX2-391.

Our Proprietary Orascovery platform, Oraxol as a lead molecule continues to advance well in the clinic and we add significantly to our oncology portfolio with two very exciting technologies. The highly positive Phase 3 results, that we announced on KX2-391 confirm that the product is very active as a field treatment of actinic keratosis and is extremely well tolerated.

Our commercial partner, Almirall, shares our enthusiasm with these results. Jeff and Rudolph will each go into more details on this very compelling, commercial opportunity. Oraxol, our oral formulation for paclitaxel is in Phase 3 in metastatic breast cancer, and we are pleased with the rapid pace of enrollment.

This product is also in the clinic for gastric cancer, and we are preparing to move into new oncology indications, including angiosarcoma, following recent receipt of orphan drug indication by the US Food and Drug Administration. Our commercial business continued to perform well.

Revenue for the second quarter was $11.6 million compared to $4.6 million in the same period last year. We also received $5 million from our partner Almirall, however due to our current procedure, this will be recorded later before the end of the year.

In total, including this $5 million, we'll have $16.6 million in revenue in the second quarter. And we are also reaffirming our full-year 2018 guidance in the range of $100 million to $125 million inclusive of licensing fee revenue from our partners. We are continuously seeking new opportunities to expand our oncology pipeline and announced on July 2, the licensing of two new technologies; an immunotherapy platform based on T-cell receptor-engineered T cells or TCR-T and a metabolic based oncology biologic candidate.

The immunotherapy platform will be developed through a joint venture with Xiangxue Pharmaceuticals, a long-term partner of ours. TCR-T technology, similar to CAR T or CRP can manipulate the tumor killing properties of patients on T-cells to recognize the tumors through the tumor antigens.

While CAR T targets tumor antigens on the surface and surface antigens only represent a small portion of the tumor antigens, our TCR-T attacks intra-cell [ph] antigens process and presented with the HLA molecules. And this represent a majority of the tumor antigens that can be presented to the immune system. We have seen the preliminary data in patients and we are encouraged and we have shown -- we have seen a very good safety profile of the TCR-T technology in patients.

Our T-cell team may have the potential to offer important advantages over CAR T in its potential to target solid tumors in a large proportion of patients. We are establishing a new joint venture, Axis Therapeutics Limited to develop the TCR-T technology globally apart from China. With 55% owned by Athenex and 45% by Xiangxue Life Sciences, a wholly owned subsidiary of Xiangxue Pharmaceuticals.

Athenex will be leading the global execution of the development. The second technology is a pegylated, genetically modified human arginase. Certain cancer types, around 60% of all cancers, lack the enzymes in the urea cycle and cannot synthesize arginine on its own. These tumors depend on circulating arginine for tumor cell's survival and needless to say tumor progression.

A long-acting therapeutic arginine, arginase enzyme could deplete circulating arginine and therefore will starve the tumor cells, while not affecting the normal cells, which can make their own arginine. Our product uses genetically modified human arginase that has high potency and also, only has one single positional isomer upon percolation, which is ideal as a commercial product.

We plan to file an IND before the middle of 2019. Additionally, we are optimistic for the potential to develop combination therapy with T-cell T and other immunotherapies such as Anti-PD1, or Anti-PD-L1 based on our own portfolio.

We believe that some of the pipeline top candidates including Oraxol, oral docetaxel, pegylated arginase and KX-01 may all create synergy both from a mechanistic standpoint as well as from clinical application perspective for cancer therapy going forward.

We are delighted to have such a strong pipeline with this synergy in this exciting field. To finance these two initiatives, we are very delighted to have the support of Perceptive Advisors, Perceptive invested $100 million in our company in conjunction with these two deals.

Perceptive as you know, is a well-established and respected institutional healthcare investor with a long history of supporting bio-technology companies. We are very grateful for their support. I also want to mention three important appointments.

The addition of Mr. Benson Tsang to our Board of Directors, Mr. Tsang will serve as the Chairman of the audit and risk management committee as well as a member of the Nominating and Corporate Governance Committee. His previous positions include Chief Financial Officer of WuXi Pharmatech where he played a crucial role in WuXi's successful IPO in 2007.

The appointment of Mr. Timothy Cook to head the global commercial oncology is also important to us. Tim was formally in charge of Eli Lilly's oncology franchise in North America. Also the appointment of Ms. Christina Wang, a veteran of clinical research and the co-founder of Choice Pharma, a reputable full-service CRO in Asia to lead the clinical operation efforts in Asia Pacific and will support the global clinical operation, including data management and bio statistics.

Heading into the balance of the year, we will have a number of important milestones. The interim analysis of the Oraxol Phase 3 trial is expected in September. We plan to file an IND for our Oral Eribulin in the fourth quarter of this year. And we will also have additional updates on our new TCR-T and pegylated genetically modified human arginase program later this year.

With that, I'll turn the call over to our Chief Operating Officer, Mr. Jeff Yordon for a more detailed overview of our progress during the second quarter. Jeff?

Jeff Yordon -- Chief Operating Officer

Thank you, Johnson and good morning everybody. Let me begin with KX2-391, formerly known as KX01. By now hopefully, you've had a chance to review the positive Phase 3 clinical data in actinic keratosis, we announced with our partner Almirall at the end of July.

Both clinical trials achieved their primary endpoints and importantly, the safety profile for this product continues to look very good. On the strength of these results, we believe that KX2-391 has the potential to change the standard of care for actinic keratosis. I can say that in my 40-plus years in the pharmaceutical industry, I have never seen a market that's more underserved.

The unmet need is very significant. The disease is estimated to affect over 50 million Americans alone and is the most common pre-cancerous condition in Dermatology. It is estimated that it accounts for somewhere between 14% and 29% of dermatologist visits in the United States.

We're very excited to be partnering with Almirall, as we prepare to commercialize this product. Almirall has strong franchise in Dermatology and has already established itself as the leader in the field of medical treatment of actinic keratosis both in Europe and in the United States. As a reminder, we signed this agreement last December. We received an upfront payment and are entitled to near-term payments of up to $55 million.

We are also eligible to receive additional indication milestones, as well as sales performance milestones. In addition, we will receive tiered royalties starting at 15% based on annual net sales with incremental increases in these royalty rates as sales increase. There was an additional $5 million payment by Almirall that could be reported as revenue by year-end.

We plan to submit a request to the United States FDA for a pre-FDA submission meeting in order to discuss the data and regulatory submission timelines for KX2-391. Almirall will employ its expertise to support the development in Europe and also to commercialize the product in the defined territories. You probably have seen the news earlier in August that Almirall has also agreed to acquire Allergan's US Dermatology portfolio.

This is a very significant deal that will increase Almirall's US commercial footprint even further, and obviously that has the potential to benefit KX2-391.

In our commercial business, we continue to launch significant new products in both our 503(b) business, Athenex Pharma Solutions and our specialty injectable business, Athenex Pharmaceutical Division. We added to our 503(b) portfolio with the launch of compounded Vasopressin Injection in ready-to-use premix IV bags in connection with this launch of compounded Vasopressin products yesterday. This product is greater than $400 million in revenue.

Athenex has commenced a lawsuit in the United States District Court, Western District of New York against Par Pharmaceutical and its affiliates in which Athenex seeks a declaratory judgment that Athenex's compounded Vasopressin products do not infringe patents covering Par's Vasostrict product, as well as the in validity of Par's patents.

We also filed a motion to intervene as a defendant in an existing lawsuit between Par Pharmaceutical and the FDA in the United States District Court, District of Columbia. In this action, we will seek to establish, that the FDA appropriately permits Vasopressin to be compounded in accordance with 503(b).

In our U.S. Specialty Pharmaceutical business, an important launch for us was potassium chloride injection, which is on the FDA shortage list and the FDA is allowing us to import and distribute this product in the United States. The product is used to prevent low blood levels of potassium or hypokalemia, which can adversely impact normal heartbeat.

Athenex Pharmaceutical Division now currently markets a total of 21 products with 36 SKUs and are planning on launching 5 additional new products before year-end with an additional 12 new SKUs. Our Pharma Solutions business currently markets 5 products with 27 SKUs and we plan on launching another two products before the end of the year with an additional 11 SKUs.

In June, I attended the CPhI China conference with some of my colleagues. This is the leading networking Conference in all of Asia. We were able to uncover some significant new opportunities several of which have been consummated already. We will provide a further update in the near future.

Turning to manufacturing. We continue to make progress on our facility in Dunkirk, New York. All of the prep work and the foundations are complete and the exterior should be finished by year-end. We expect the whole facility to be complete by the first half of 2019. Dunkirk is being constructed with substantial grant funding through a private-public partnership with the state of New York, and we are very happy for their support. Our oral proprietary products, injectable and compounded products will be manufactured there.

We are also in the process of a significant expansion to our Clarence, New York facility following a successful U.S. FDA inspection in the first quarter. This is the headquarters for our 503(b) product manufacturing, and is also where we will manufacture Oraxol for the clinical trials. This expansion is on target and we should meet our objectives by the end of the year.

All these activities are important strategically as we establish Athenex as a fully integrated oncology company. We believe that we can create more value for shareholders by using our resources to commercialize products in the major markets, but in order to be successful, we need to create both manufacturing and commercial infrastructure far in advance of proprietary product launches.

The sales force in our 503(b) and Specialty Pharmaceuticals divisions are already building strong relationships and tremendous goodwill with both gatekeepers and influencers in the oncology community. And we have already completed the marketing plan for Oraxol and we'll definitely be ready to launch the product when it is approved.

In parallel, with our development and manufacturing work, we continue to build out our senior management team, and as Johnson mentioned, we were very pleased to announce in July the appointment of Timothy Cook as Senior VP of Global Commercial Oncology. Tim is exceptionally well qualified for this position. He was previously the Head of North American Oncology at Lilly, where he played a critical role in the launch and commercialization of 3 oncology products in the US, Europe and Japan.

Under his leadership, Lilly became a major player in the global oncology market. Having Tim on board at this juncture will allow Athenex to focus and advance our commercialization efforts specifically in the oncology market as our pipeline of innovative proprietary products advances toward launch.

I will now turn the call over to Dr. Rudolf Kwan to discuss our clinical development activities.

Rudolf Kwan -- Chief Medical Officer

Thank you, Jeff. Let me begin by providing more detail on the two positive pivotal trials of KX2-391 in Actinic Keratosis. Both Phase 3 studies, which were designed to support the global registration of KX2-391 as a field therapy for Actinic Keratosis of the face and scalp, each study achieved their primary objectives of efficacy and safety.

The primary endpoint of 100% clearance of lesions at day 57 were met with high statistical significance of p<0.0001 for each study. In addition to meeting the primary endpoint, high statistical significance were also achieved for clearance of lesions in both the face and scalp subgroups. And very importantly, KX2-391 appeared well tolerated with local skin reactions that were mostly mild and transient and confirmed the excellent profile we reported for the Phase 2 study.

We plan to submit this data for publication, so we can't provide a whole lot more detail at this time, but I will say that the response rate in the Phase 3 were better than the Phase 2 data we reported at American Academy of Dermatology earlier in the year. Current treatment for actinic keratosis include cryotherapy, laser surgery and topical medication.

Generally, these are either not practical for multiple lesions on the face or scalp and not effective, or take a long time to administer or in the case of topicals, such as 5-FU, also have severe side effects. The (inaudible) is associated with pain, ulceration, burning, and inflammation that can last up to several weeks. It is partly for this reason that the market remains relatively underpenetrated.

And this is why we believe that KX2-391 which is efficacious has a good safety profile and can be administered as a 5-daily application has the potential to be a game changer and standard of care in the treatment of this disease.

Turning to Oraxol, the lead candidate in our Orascovery platform, it is in a Phase 3 clinical trial for metastatic breast cancer. Recruitment in this trial is advancing very well. We have been hitting our enrollment targets and the next data point will be the second interim analysis by the DSMB in September. This analysis has stopping rules based on positive and negative outcomes, we continue to believe that the profile for Oraxol from this study would mirror the encouraging preliminary efficacy and safety data, we announced in January in a PK and Phase I/II clinical trial in Taiwan.

In that study, among the first 12 evaluable patients, we saw 50% partial response and another 50% stable disease. There was no progressive disease and no report of the peripheral neuropathy that is frequently seen with paclitaxel. We strongly believe in Oraxol's potential and the excellent target profile with the convenience of no need for infusion, no need for intravenous steroid, no need for intravenous antihistamines, reduction of painful peripheral neuropathy, and more importantly better efficacy.

In the gastric cancer indication for Oraxol, our study in combination with Eli Lilly's, ramucirumab is progressing well and showing good tolerability and activity thus far.

In April, we secured a US FDA Orphan Drug Designation for Oraxol for treatment of angiosarcoma. This is a parallel development program with our metastatic breast cancer and gastric cancer indications. We expect to launch the clinical trial for angiosarcoma this year. We also plan to explore the potential of paclitaxel's stimulatory characteristics, in induced cell death in the context of co-development with immunotherapy in cancer treatment. Finally, our other clinical studies in Oratecan, Oradoxel and other programs are all progressing well.

With that, I'll turn the call over to Li Shen, our Acting Chief Accounting Officer, for an overview of our second quarter financial results. Li?

Li Shen -- Acting Chief Accounting Officer

Thanks, Rudolf. Let me start with the results for the second quarter ended June 30th, 2018. Revenue for the second quarter was $11.6 million compared to $4.6 million in the same period last year. The increase was primarily attributable to a $5.2 million increase in specialty products sold through our commercial platform. Revenues this quarter, do not reflect the additional $5 million milestone payment by Almirall which will be included by year end.

Cost of sales for the second quarter were $9.4 million as compared to $4.1 million for the comparable period in 2017. This was primarily due to the increase of $4.1 million cost of sales for the recently launched specialty products and $1.2 million cost of sales from 503(b) and the API products.

The increase in gross profit was primarily due to the impact of the increase in shortage specialty product sales, which carry a high margin than other product line. R&D expenses for the quarter were $26.6 million, an increase of $9 million compared with the same period last year. The largest component of this was $6.5 million in clinical trial costs associated with the progression of the Phase 3 trials of KX2-391 Ointment and Oraxol.

SG&A expenses were $12.8 million compared to $13.6 million in the same period last year. Net loss for the second quarter ended June 30th, 2018 was $37.4 million or $0.58 per share. Cash, cash equivalents and short-term investments were $80.7 million in June 30th, 2018 compared to $51 million at December 31st, 2017. Subsequent to the end of the quarter, in July, we closed a privately placed debt and equity financing deal with Perceptive Advisors, for gross proceeds of $100 million.

The company entered into a five-year senior secured loan for $50 million of this financing and issued approximately 2.7 million shares of common stock at price of $18.66 per share for the remaining $50 million.

As Johnson mentioned earlier, we established Axis Therapeutics, based in Hong Kong to manage our TCR engineered TC technology. This joint venture will be owned 55% by Athenex and 45% by Xiangxue Life Sciences. We will make a capital contribution of $30 million to the JV, as well as an upfront payment in the form of a $5 million issuance of our common stock.

For more details on our financials, including results for the 6 months ended June 30th, 2018, please refer to our Form 10-Q filed with the SEC this morning.

With that, I'll now turn it back to Johnson for some final comments.

Johnson Lau -- Chief Executive Officer

Thank you to all of you, your continuous support of Athenex, and we look forward to sharing upcoming milestones across our business when available. I would like to thank our team around the globe whose hard work, mix of the operational and clinical capabilities, 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. At this time, we will conduct a question-and-answer session. (Operator Instructions). Our first question comes from Kennen MacKay with RBC. Please proceed with your question.

Kennen MacKay -- RBC -- Analyst

Hi, thank you for taking the question and congrats on the progress. And it was great seeing the team the other week. First maybe one for Dr. Kwan, wondering if you could elaborate a little bit onto your comments on positive enrollment in the Phase 3 metastatic breast cancer trials of Oraxol and reaching your goals there.

Is there any sense as to how many patients have been enrolled into this trial following your prior announcement that you had reached the 180 patients enrollment number that obviously will see some hopefully data from -- in September?

Rudolf Kwan -- Chief Medical Officer

Thank you, Kennen. We have already announced that we have achieved 180 patients for the second interim analysis early on this year. And as we speak, we have already enrolled more than 300 patients in the study.

Kennen MacKay -- RBC -- Analyst

Wow! Okay, congratulations on that. Thanks for the increased granularity there. And then just a couple more questions relating to sort of the business as well as on Vasopressin. Firstly, wondering how much API manufacturing capacity currently is going for clinical trial supply for Oraxol or any of your other Orascovery products that are in early development, maybe it could be helpful if it either is presented either as a percent of your API business or what this could represent if it was recognized as commercial sales?

And then on the Vasopressin launch, I was just wondering if you could help us understand any interactions you'd had with the FDA ahead of this surprise announcement yesterday that could help us sort of gain comfort that there isn't sort of a warning letter coming with the FDA's updating of 503(a) and 503(b) being [ph] less, which could really sort of define the legality of compound in here. Thank you.

Jeff Yordon -- Chief Operating Officer

Okay, Kennen. This is Jeff. In terms of your first question on API, above 30% of our current capacity is being used for clinical studies. Remember, our facility in Chongqing is almost completed, so at some point next year, it will be substantially bigger in terms of our capacity and will give us the opportunity to not only sell more commercial paclitaxel but also sell a lot of our other products.

In terms of the Vasopressin, I think the best way to look at it, right now everything we are doing is well within the legal limits and FDA guidelines. So we feel comfortable with that, we never would have proceeded, if we didn't feel that we were doing something that was defendable and that the FDA would be supportive. So that's where we're at right now.

Kennen MacKay -- RBC -- Analyst

Thanks, Jeff. And maybe just a couple more then on the clinical development front. Dr. Kwan, you had also talked a little bit about potentially combining Oraxol with some immuno oncology checkpoints, the trial combining Oraxol with pembrolizumab was posted on clinicaltrials.gov. I was wondering if you could discuss this trial collaboration a little bit, help us understand who is running the trial, where, who is paying for pembrolizumab and what's Merck's really involvement here even any sort of corporate interactions you've had with them to date.

And then maybe one additional question for Johnson, on the TCR data that you were describing, could you help us understand the human data that you've seen so far, was this from a clinical trial setting or more of sort of a one-off commercial setting in academic centers in Asia? And then one further quick follow-up on the arginine depletion, wondering sort of, if you could help us understand why a modified arginase with a single peg is ideal? And with that single peg if there's any color on the half life of that product that you could help us with. Thank you very much.

Rudolf Kwan -- Chief Medical Officer

Okay, yeah. Let me start, immuno stimulatory effect of paclitaxel is well described. Basically paclitaxel, when it induce cell death is through a pathway of apoptosis and as such generally is immunogenic. And if you look at the clinicaltrials.gov, you'll find that there are many, many studies that the PD1 -- Anti-PD1, and Anti-PDL1 are conducting and that's not by coincidence.

They have long observed that the combination has a high synergistic effect. Our study is not yet publicly discussed, however, it is already available in clinicaltrials.gov, so you can look into our design, I think sufficient to say, that we intend to explore this pathway along with the other immunotherapy platforms that we have in our pipeline.

So it's not only limiting to PD1 or PDL1. The details of which you can find in clinicaltrials.gov, the study is being done in the US and we do not have to pay for the immunotherapy. Let me pass it back to Johnson.

Johnson Lau -- Chief Executive Officer

So Kennen, obviously you asked a question with regard to corporate discussion, and obviously it would not be appropriate for us to discuss about it in the corporate discussion. But suffice to say, as you can imagine there are five different Anti-PD1 or Anti-PDL1 approved in US and EU by five of the major players in pharmaceutical industry. And therefore from our perspective, we believe that we will be the ideal candidate, on the other side in combination, and therefore, you can imagine that we should not be limiting our discussion to only one potential partner.

I think that's all I can share and discuss with you at this point of time. Now we have two more questions, one is on the TCR-T in the technology and what do we know. Now we did disclose on the July 2nd teleconference that the technology that we now own and a major part of it is that has enhanced binding affinity between the TCR and the target antigen in the context of HLA.

The T cell that we are working right now has a good solubility that it has enhanced expression in the engineered T cells and we also have much better HLA coverage that means covering a larger proportion of patients. So therefore, we are encouraged by all these results in terms of its potential in human patients.

Now, there were already clinical data generated by our partner that we mentioned in our teleconference on July 2nd and we did see some encouraging clinical data, which we also shared. But I do -- but right now, it may not be an ideal situation for us to share all the details of the clinical studies while we are trying to look into it in finalizing the audit data before we share the data. Suffice to say, we did see a very nice clinical signal in our due diligence process.

Now with regard to your question on the arginase depletion, you asked two questions, number one, why is single pegylation slightly important and second question is what is the half life of it.

Let me answer your second question first. In animal studies, the half life is actually more than 7 days which means that in human it is likely to be even better. So we do have a biologic with an ideal profile as an anti-cancer drug. Now suffice to say that when you have such a long half life, you ask the question, is there an antidote with that, and it is relatively straightforward infusing the amino acid, arginine is already the antidote, which means that we do have a long-acting highly potent biologic molecule with an antidote in hand.

Now your question with regard to why is it important to have a single pegylation site, that came from many years of experience. Now let -- allow me to remind you that I was actually leading the effort in the Schering-Plough in developing pegylated interferon called peginterferon and then our Chief Business and Strategy Officer, Dr. Simon Pedder was leading the effort to develop Pegasys in Hoffmann La Roche.

We all know that if you have many, many positional isomers subject after the pegylation, the CMC portion of the manufacturing process will be very challenging and may not be ideal for commercial product, even though it may not be that difficult to push it into clinical studies. What we have right now is a single isomer, a very easy to deal with on a CMC perspective, very potent and at the same time, very long half-life.

We believe that we have a very good product in pegylated arginase. Now the final question that you asked is the combination and suffice to say, when we had discussion with some of the leading oncologists once they heard that we will be able to deplete arginine that actually cancer cells may not be able to use to synthesize proteins, then, they all realized the potential in conjunction with immunotherapy that we're talking about.

I think that we are assembling a very good pipeline, which will create a lot of synergy and we share all this synergy when we have the appropriate data to share with the investment community. Right now, we are finalizing our data and hopefully in the near future, we'll be able to share with you all the excitements.

And thank you for your questions.

Kennen MacKay -- RBC -- Analyst

Got you. Thanks for the generous and detailed responses and maybe just one final question if I may. I know I've been dominating your time, but this will save me from jumping back in the queue. On actinic keratosis in Australia, you do still own the rights here, this may be sort of the highest concentration of patients with actinic keratosis in the world, it's a very unique market with a concentrated coastal population here, could you maybe talk about how you're thinking about this market, either from a stand-alone basis and potentially launching KX2-391 there yourselves or from a partnering perspective. Thank you.

Johnson Lau -- Chief Executive Officer

Thank you for your question. Australia is a very interesting location because more than 50% of the adults above the age 40 will have actinic keratosis and the other interesting thing about Australia is that all the -- majority of the population are concentrated only in the few big cities.

So if you look into the potential market size of KX2-391 for AK in Australia is actually very attractive. In the same time, with the data that we have, we believe that we can be a leader in this field in Australia. Now coupled together with the fact that the population in Australia are densely populated around cities, we estimated that we only need to take around -- anywhere between 7 to 9 sales force to launch the product in Australia.

Now certainly, I mean, our job as a management team is to ensure that we get the best value for our stakeholders and therefore all options are on table, we shall be more than happy to entertain some very good offers, or we are prepared to launch it ourselves, because that is well within what we can do on our own to ensure that we get the maximum value for our shareholders. And thank you for your question.

Kennen MacKay -- RBC -- Analyst

Thank you and congrats on the progress.

Johnson Lau -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the Yale Jen with Laidlaw. Please proceed with your question.

Yale Jen -- Laidlaw -- Analyst

Good morning and thanks for taking questions. And my congrats to the wonderful developments. My first question is that for the second interim look at the Oraxol data, could you give us little bit of different scenarios there might be so investment group better understood what the -- difference of possibility could be going forward in September.

Johnson Lau -- Chief Executive Officer

Rudolf?

Rudolf Kwan -- Chief Medical Officer

Yes. Yale, the different scenario of DSMB interim analysis will be one, go ahead as planned. That is generally the most common scenario of most interim analysis, two, stop because of fertility, which is built into the study, which I believe is unlikely based on the first interim analysis, and look that the DSMB was fully encouraged about.

All right? And third, it will be -- recommending the stopping the study based on reaching a pre-defined p value, OK, so those on the three scenarios. I will leave the DSMB to come up with the data because we've (inaudible) applying data, that we look at. All I can say is all the data we have seen so far from the studies is very encouraging and our target profile for the Oraxol compound still remains as I said earlier, not only achieving convenience of no IV infusion, no or reduce in pain or neuropathy, and looking forward to a better efficacy.

Jeff Yordon -- Chief Operating Officer

Yeah, Yale, I wanted to also characterize -- the way I want to characterize it is the following. We are all very confident with the fact that this product -- this eventually will be a product and actually a very important product for the cancer patients. The primary objective of us is actually not forcing the disclosure of data, the primary objective is to ensure we follow all the procedures to get the product a -- getting the audit data available and getting the FDAs buy-in and endorsement and approve the product eventually for us to help patients. I think that there is a -- obviously a tendency for people to really want to know the data as soon as possible.

But from our perspective, we are very confident, let me emphasize again that we are all very confident with the product and our objective is to ensure whatever data we get, no matter how good it is, we are looking at the overall picture, with regard to the development process to ensure whatever we do will not jeopardize our path into success. And since we are very confident with -- by this product, the path to success is far more important than a single time plan with regard to a data disclosure.

And I think that provided our opinion, with regard to how we look at the second interim analysis. Thank you, Yale.

Yale Jen -- Laidlaw -- Analyst

Okay, great, that's very, very helpful. And, certainly that's one of the focus of the investors currently. Maybe just to add, the second question here is KX2-391, so I think we estimated that the NDA filing probably over the mid-year next year, so is there a follow-up after your initial data release, the Phase 3 data release to be conducted before you can file -- before it can be filed and also what might be the sort of European strategy at this moment from the partner? By the partner?

Johnson Lau -- Chief Executive Officer

Rudolf?

Rudolf Kwan -- Chief Medical Officer

Yes. The Phase 3 data is really highly, highly of statistical significance in both studies. And so the study is still ongoing, because the standard package as you also need to collect the recurrence rate, which is not an end point for efficacy or safety. I think it's just a standard check box for these indications you need to check that box.

So we're not concerned and also our Phase 2 data in the recurrence rate was comforting to us. So we do not see any hurdle in the efficacy and safety package for the FDA. Nevertheless, we still need to complete the job and finish the study. On the other hand, with such highly statistically significant endpoint, we are planning to talk to the FDA, even as we are finishing the study to see, to gauge their reaction through the filing strategy.

On the Europe front, we already -- our partner has already start engaging with the EMA and I think we certainly will continue that dialog with the EMA regarding the filing -- planning in Europe. It should be coordinated closely with the US filing.

Johnson Lau -- Chief Executive Officer

Again, Yale, if you allow me to compliment our team in terms of execution and the data is that, with a such a strong p-value data available in hand, again, our objective is to ensure that we work closely with FDA and according to the recommendation by FDA, and if FDA feels that this data are so significant that they would like to advance the speed of our filing or would like to advance or speed up the process of reviewing, we shall be more than happy to be cooperative to work with FDA, because our objective is the same, is that we want to deliver the best product through the appropriate legal channel and registration channel to make it available to patients as soon as possible.

Now in conjunction with your first question, allow me to also share one more piece of information with Oraxol, second interim analysis. When we announced in February this year, that we are already recruit 180 patients, I think that was very exciting because people saw that the enrollment is getting fast and faster. And reminds you one thing is that this is less than six months after the last announcement of 180 patients, only a little bit more than five months we already recruit well above 120 patients in the last few months.

So you can imagine that the excitement of the research community for our product in the clinical studies are picking up very nicely. And I think all these are pointing to an encouraging sort of signal or encouraging prospect of our product going forward.

I think those are the key points that we'd like to share with you and for you to assess with regard to the potential. Thank you.

Yale Jen -- Laidlaw -- Analyst

And maybe as you mentioned that it's over 300 patients being enrolled in the study. So as you ultimately going forward talking about the final end points and those informations, would you stick to the 180 patients or you maybe add some additional follow-up to talking about this large patient cohort in terms of their clinical outcome?

Johnson Lau -- Chief Executive Officer

Rudolf?

Rudolf Kwan -- Chief Medical Officer

Yale, when you saw you stick to 180 patient, you mean --?

Yale Jen -- Laidlaw -- Analyst

That's the initial. I mean the 360, so that ---

Rudolf Kwan -- Chief Medical Officer

That's it, you're right.

Yale Jen -- Laidlaw -- Analyst

That'll be ultimately the data -- the size of the enrollment, yes.

Rudolf Kwan -- Chief Medical Officer

Yes, I think as most studies we do -- our protocol do allow certain overage. I think you're spot on and there are patients that do drop out in the early stage, so we intend to make sure, we are tracking those enrollment very closely and we intend to make sure that we have enough subject should we continue -- decision from the DSMB is not to stop the study, but continue then we will be very quickly finishing the study in a very short period. And we will make sure that we have enough enrollment to achieve our objective, as defined in the protocol.

Johnson Lau -- Chief Executive Officer

Yes, I think your question it can also be phrased this way, is that is there a hard and fixed rule with regard to what we are thinking, with regard to the enrollment target and even closer the 180 patients tends to be very exciting, are we going to stop the 360? The answer is that, we always want to ensure that this is going to be a product because the profile looks very, very good to both our Chief Medical Officer, our clinical team and myself.

So the decision here is not really based on a financial decision. This decision is based on product development decision, and what we're going to do is that we'll do everything possible to ensure that we have all the data available to answer all the questions by the scientific community and the regulators to ensure that this will be a product. So therefore, the decision is not just a number. It is more in terms of do we have sufficient data in our entire package to ensure that this is a product.

One thing that I have been encouraging the clinical team to do is that we will not respond to just say for example, oh we can save a penny here or there, rather we'll do anything possible to ensure that our data package is very complete as to facilitate the evaluation by FDA to look upon our product and determine whether they like our product or not to be -- to be approved.

I think that remain our primary objective rather than a single time point or single number that will be a, what I have been encouraging to the clinical team and what I would like to share with you and the investment community.

Yale Jen -- Laidlaw -- Analyst

Okay, great, that's very helpful and maybe the last quick question just for Jeff. Is that, you mentioned, I mean in the press release you mentioned the Vasopressin as well as two days before about the potassium chloride. Just maybe give investor a little bit sort of idea in terms of the potential of these two products that seem to be a major products in the pharmaceutical and the pharmaceutical solutions group of the company and so we just are able to maybe see some sort of market potential of those two combined maybe for the earnings [ph]. And thanks for taking the questions.

Jeff Yordon -- Chief Operating Officer

Sure, Yale. No problem. The Vasopressin market is well over $400 million. We will go for our market share without causing a major disruption of the market. In terms of potassium chloride, there is a total of about 6 million units, the product is on and off of shortage. We certainly have the potential to take a significant market share and that will all depend on how long the shortage continues.

So we'll be excited about giving you an update at the next earnings call, which will indicate pretty, pretty well how that shortage went. Suffice it to say they are both wonderful opportunities for the company and our shareholders.

Johnson Lau -- Chief Executive Officer

As Jeff has already indicated that the other opportunities that we are also pursuing as well. So our commercial division is setting the pace with regard to ensuring that we will be able to help patients in the US, with US FDA and also building the infrastructure to launch our proprietary product, when the proprietary product is approved by the US FDA and also by other regulatory authorities as well. So we are getting ourselves ready.

Yale Jen -- Laidlaw -- Analyst

Okay, great, thanks a lot. I'll again add my congratulations to the development so far.

Johnson Lau -- Chief Executive Officer

Thank you. Appreciate it.

Operator

Our next question comes from Chad Messer with Needham. Please proceed with your question.

Chad Messer -- Needham -- Analyst

KX2-391, you referenced a meeting with the FDA ahead of NDA filing. I just wonder if you could clarify whether that's a requested or scheduled meeting and maybe a little bit more detail on what you hope to accomplish from that?

Johnson Lau -- Chief Executive Officer

Rudolf?

Rudolf Kwan -- Chief Medical Officer

Yes, we are in the process of planning for scheduling that meeting. As you know that our data is just coming off the analysis shelf and we are in the process of cleaning all the data, we want to present to them as comprehensive a data package as we can, while the recurrent data is being collected, so all I can say at this time point we are rigorously preparing for that, and we probably will make an announcement once we schedule a date with the FDA.

Chad Messer -- Needham -- Analyst

Okay, great, thanks. And then just on the TCR-T program, it sounds like we're going to have to wait a little while before we get a chance to see, the existing data that was previously generated. In the meantime, what should we expect going forward from you guys in terms of clinical development? Do we have any timelines for starting the next study and what might that look like or what indication might that be in?

Jeff Yordon -- Chief Operating Officer

Thank you for your question, Certainly, we are a company that are based on solid foundations and therefore our approach is that when we present data, those are very reproducible, comprehensive and defensible data, that's our position.

So the data as I indicated already, looks that there is a very nice clinical signal, but again we will only be presenting data when we feel comfortable that this data are going to be a very good data at the same time providing the leverage that we have since we know a lot of information that I think are proprietary in terms of giving us this edge of development. So I hope that the shareholders and the stakeholders will understand that talking too early may not be to the best interest of long-term shareholders.

Now with regard to your question, with regard to the milestones and clinical timeline, what I share with you is that, all the SOPs all these sort of things are being translated as we speak, and we already have drawn a timeline and the current timeline is that the clinical data generated so far are based on investigator initial studies in China.

And our partner is planning to file an IND in China later this year or early next year, and we are hoping to also generate sufficient data and package to file to the US FDA in the first half of next year. That is the current timeline, but suffice to say is that, this is not a tablet -- not an pill, this is a process in terms of engineering T-cells for treatment and it's not as easy as one imagine, because there will be a lot of engineering with regard to the lab, the compliance, the procedure, the SOP that will require different set of approval before you can proceed to generate the appropriate clinical data.

And we have a lot of experience in that and we are already in the process of preparing ourselves to that. And I contemplate that in the next earnings call we'll be able to provide more solid timeline to the investment community. Thank you for your question.

Chad Messer -- Needham -- Analyst

Great, thanks.

Operator

Thank you. At this time, I would like to turn the call back over to Athenex management for closing comments.

Johnson Lau -- Chief Executive Officer

Thank you for calling in to listen to us and we are comfortable and happy with what we have delivered so far, and we look forward to communicating with you in the next earnings call in November this year and thank you for calling in. Bye-bye.

Operator

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.

Duration: 59 minutes

Call participants:

Tim McCarthy -- Managing Director

Johnson Lau -- Chief Executive Officer

Jeff Yordon -- Chief Operating Officer

Rudolf Kwan -- Chief Medical Officer

Li Shen -- Acting Chief Accounting Officer

Kennen MacKay -- RBC -- Analyst

Yale Jen -- Laidlaw -- Analyst

Chad Messer -- Needham -- Analyst

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