BeyondSpring Inc.  (NASDAQ:BYSI)

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Q4 2018 Earnings Call
April 30, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to BeyondSpring Inc.'s Fourth Quarter and Full-Year 2018 Financial Results Conference Call. My name is Aerial, and I will be the operator on today's call. Please be advised that today's call is being recorded.

At this time, I would like to turn the call over to the host for today, Stephen Kilmer, Investor Relations. Please go ahead.

Stephen Kilmer -- Investor Relation

Thank you, operator, and thank you, everyone for joining today's call. I would like to advise listeners that remarks made on today's call may reflect forward-looking statements relating to such matters as BeyondSpring's clinical and preclinical research and development activities and results, regulatory and commercial plans, industry trends, market potential, collaborative initiatives and financial projections, among others.

These statements are based on currently available information and management's current assumptions, expectations and projections about future events. While management believes that its assumptions, expectations and projections are reasonable in view of the currently available information, you're cautioned not to place undue reliance on these forward-looking statements. The company's actual results may differ materially from those discussed during today's call for a variety of reasons, including those described in the forward-looking statements and risk factors section of the Company's 20-F and other filings with the SEC, which are available from the Investors section of BeyondSpring's website.

Joining us on today's call is Dr. Lan Huang, Chairman and Chief Executive Officer, who will begin the call and provide a brief overview; Dr. Ramon Mohanlal, Executive Vice President of Research and Development and Chief Medical Officer, who will provide the clinical update; Richard Daly, Chief Operating Officer, who will discuss BeyondSpring's marketing and partnership strategy; and Edward Liu, Chief Financial Officer, who will provide a financial update.

And it's now my pleasure to turn the call over to Dr. Lan.

Lan Huang -- Co-founder, Chairman & Chief Executive Officer

Thank you for joining today's call, ladies and gentlemen. 2018 was a truly historic year for BeyondSpring, as we strive to develop transforming medicine for cancer patients with severe unmet medical need. We continue to generate strong flow of data for our lead asset Plinabulin, a first-in-class immune agent. Over 540 patients use Plinabulin globally with good tolerability. The two lead pivotal trials for Plinabulin in non-small cell lung cancer and chemotherapy induced neutropenia or CIN, have well advanced to late stage Phase III development with a steady stream of positive data readout.

In second and third line non-small cell lung cancer with EGFR wild type accounting for 70% to 85% of patients, there are currently only four approved therapies available with limited survival benefit at around eight to 10 months median OS and certain SAEs such as severe neutropenia. Even PD-1 antibody for nivolumab only had 2.8 months median survival benefit compared to docetaxel, the standard of care in this patient population.

In CIN, the current standard of prevention care is G-CSF, such as Neulasta. However, the mass majority of patients with high risk chemotherapy still develop Grade 3 or 4 neutropenia, some over 90% after using Neulasta. Grade 3 or 4 neutropenia requires that chemotherapy dose be reduced, the next cycle be delayed, the regime be downgraded or discontinued altogether, we call them the 4Ds. All of this results in significantly lower survivor outcomes for patients. As a result, both indications present significant unmet medical needs. Plinabulin has the potential to disrupt the current treatment landscape and greatly improve the overall patient outcome. We reached the first pre-specified interim analysis of Study 103 for Plinabulin in the second and third line treatment for non-small cell lung cancer, with EGFR wild type with the Data and Safety Monitoring Board, or DSMB recommending the trial to continue.

During 2018, we generated extensive data suggesting Plinabulin's potential to meaningfully improve patient outcomes in CIN, when combined with G-CSF. In Study 105 and 106, data generated indicates that Plinabulin significantly reduces bone pain, prevents thrombocytopenia, and reverses potential immune suppression of Neulasta. In addition, we generated data characterizing Plinabulin's unique mechanism of action supporting a differentiated product profile in the prevention of CIN, which appears to have a complementary therapeutic effect with G-CSF.

The significant amount of clinical data on Plinabulin enables us to understand fully Plinabulin's target product profile or TPP as an anti-cancer agent and CIN prevention agent, and clinical potentials for additional indications, including triple combo therapies of number one, Plinabulin with PD-1 and CTLA-4 antibodies; and number two, Plinabulin with checkpoint inhibitors and chemotherapy.

Our regulatory strategy includes filing of NDAs for both non-small cell lung cancer and CIN in China in the fourth quarter of 2019, and in the US in 2020. In December, 2018, we completed a positive pre-NDA CMC meeting with the FDA and confirmed our alignment regarding expectations for the CMC section of our planned Plinabulin NDAs. We also continued to strengthen our robust intellectual property portfolio in 2018, with the grant of four new patents in the US and Japan, including a US patent covering Plinabulin's monohydrate composition protected through 2036. The issuance of this patent further extends our proprietary rights and strengthens Plinabulin's global intellectual property position. We now have a total patent portfolio of 76 patents in 36 jurisdictions, including 20 issued US patents with protection until 2036.

We currently are laser focused in developing Plinabulin to NDA's and preparing for its near-term commercialization. With that, we had built a strong leadership and execution team with capabilities from A to Z in preclinical, clinical, quality control, CMC and commercial areas. And we continue to advance three pre-clinical immune agents BPI-002, 003, and 004, and a research platform using ubiquitin mediated degradation pathways, therefore, our excellent team are always very busy.

Finally, we are actively pursuing partnerships for both China and the US, and the rest of the world markets.

I will now turn the call to Ramon, who will provide an update on our clinical developments. Ramon?

Ramon Mohanlal -- Executive Vice President, Research and Development and Chief Medical Officer

Thanks, Lan. We have made significant progress in our clinical trials in 2018. We evaluated Plinabulin's effect of anticancer and prevention of chemotherapy induced neutropenia in three studies, Study 103, Study 105 and Study 106. First, Study 103, is a 554 patient Phase III registrational study, evaluating the anticancer effect of Plinabulin in combination with docetaxel compared to docetaxel alone in the second and third line non-small cell lung cancer with its primary endpoint of median overall survival. To-date, we have enrolled more than 400 patients in the US, Australia and China.

The study has two pre-specified interim analysis: the first at one-third of 146 patient death events; and the second, a two-thirds of 293 patient death events. We reached the first interim analysis and the DSMB recommended the trial to continue. The second interim analysis is expected in the fourth quarter of 2019. If the P value for the median overall survival at the second interim analysis is less or equal to 0.012, the trial may stop early. If the P value is greater than 0.012, the trial will continue and final results of the trial and the death event of 439 patients are expected to be available in 2020. If the P value for median overall survival for the final results is less than or equal to 0.05, the study can be claimed successful.

Second, Study 105 and Study 106 evaluate Plinabulin's effect in the prevention of chemo-induced neutropenia. Study 105 is a Phase II/III registrational trial of Plinabulin after the standard regimen of docetaxel in approximately 160 advanced breast cancer hormone refractory prostate cancer and advanced non-small cell lung cancer patients in the US, China, Russia and the Ukraine. The primary endpoint of this trial is duration of severe neutropenia or DSN in the first cycle of chemotherapy compared to the standard of care Neulasta.

In January 2018, we presented data for Phase II portion of Study 105 at ASCO-SITC that Plinabulin has comparable SITC to Neulasta for docetaxel induced chemo-induced neutropenia showing a similar duration of severe neutropenia and incidence of Grade 4 neutropenia. Having identified the recommended Phase III dose, with a clear dose dependence, the trial met its primary endpoint.

In June, we presented prospective data at ASCO that shows much reduced bone pain in patients treated with Plinabulin compared to patients treated with Neulasta. Plinabulin maintained neutrophil counts within normal range, whereas patients with Neulasta experienced neutrophil counts higher than the normal range, which can potentially cause bone marrow exhaustion and suppression of the immune system.

In September, we presented data at the IASLC World Conference demonstrating that Plinabulin mitigated both docetaxel induced, chemo-induced neutropenia and thrombocytopenia in patients with advanced non-small cell lung cancer, while Neulasta did not show this benefit. In October, we presented data at the Society of Leukocyte Biology, suggesting a differentiated mechanism of action from G-CSF such as Neulasta. The effects of Plinabulin on neutrophil demargination and bone marrow transit time are consistent with Interleukin-6 signaling in the bone marrow and tissue microenvironment, which is a unique mechanism of action and a potentially complementary therapeutic effect with Neulasta.

Also, in October, we presented data at the ESMO demonstrating that in contrast in Neulasta, Plinabulin did not increase the neutrophil-to-lymphocyte ratio, which is a novel marker for immune suppression in the tumor microenvironment. In November at SITC, we presented data suggesting a potentially superior immune enhancing profile for Plinabulin. Compared to Neulasta, Plinabulin did not show neutrophil-to-lymphocyte or lymphocyte-to-monocyte ratios, indicative of immune suppression.

Together, these data suggest that Plinabulin, given as a single dose cycle on the same day of chemotherapy would be as effective as Neulasta, with the benefit of causing less bone pain, offering a superior immune profile compared with Neulasta, having the potential to mitigate thrombocytopenia, while it's unique mechanism of action potentially makes it complementary to Neulasta in preventing CIN.

As I mentioned, we completed the first cycle of Phase II portion Study 105 in late 2017 and while we continued to generate data from this study throughout 2018, we initiated the Phase III portion of Study 105 in March 2018. The study enrolled on the five patients in the US, Europe and China with advanced breast cancer hormone refractory prostate cancer and advanced non-small cell lung cancer, who we're randomized to save docetaxel with either Plinabulin or Neulasta. In December, we announced that in the pre-specified interim analysis, the Phase III portion of Study 105 met its primary endpoint of non-inferiority of Plinabulin versus Neulasta for DSN of the first cycle.

This was confirmed at the DSMB meeting, Chaired by Dr. Crawford, Chairman of NCCN Guidelines for neutropenia management in the US. This data combined with the Phase II data suggests that Plinabulin has a superior product profile and well positions us to file NDAs for Plinabulin for CIN in China in the fourth quarter of this year, followed by the US in 2020 with additional Phase III 106 data. Study 106 evaluate the combination of Plinabulin with Neulasta versus Neulasta alone to prevent CIN and bone pain in patients receiving TAC chemotherapy, which is a triple combination of Taxotere, doxorubicin and cyclophosphamide or TAC in breast cancer patients.

In October, we announced positive top-line Phase II data suggesting a significant improvement in efficacy in treating CIN as well as more than 90% reduction in patients experiencing bone pain when adding Plinabulin to the standard of care. Only 50% of patients treated with Plinabulin combined with 6 milligram Neulasta or Plinabulin/Neulasta combo experienced Grade 3 or 4 CIN for 81% of patients treated with Neulasta monotherapy and only 6% of patients treated with Plinabulin/Neulasta combo experienced at least one day of bone pain versus 95% of patients treated with Neulasta alone.

In December, we presented data from Study 105 and Study 106 at ASH, demonstrating that Plinabulin as a monotherapy treatment is as effective as Neulasta, with minimal bone pain, while Plinabulin/Neulasta combination therapy demonstrates superior CIN treatment efficacy and almost eradicates Neulasta induced bone pain. The data also build on the evidence that Plinabulin has a unique mechanism of action demonstrating that Plinabulin mobilizes CD34+ progenitor cells into the peripheral block potentially presenting a new treatment option for hematopoietic cell transplantation.

Two months ago, we presented new results from Study 106 at the ASCO-SITC demonstrating that combining Plinabulin with Neulasta, not only resulted in patients experiencing better outcomes for CIN treatment, but also reduced Neulasta's potential immune suppressive phenotype. Together, this data suggests that Plinabulin offers a new approach to preventing CIN and bone pain in patients receiving chemotherapy.

Less neutropenia and bone pain would enable more patients to receive a full dose of chemotherapy and complete their full course meaning that the addition of Plinabulin may meaningfully improve the current CIN standard of care and generate better patient outcomes.

Thirdly, let me share with you our update of our clinical trials of Plinabulin with I/O agents. In October, we announced the opening of an investigator-initiated Phase I/II clinical trial, with a triple combination therapy consisting of Plinabulin and Bristol-Myers Squibb's PD-1 antibody Opdivo, and CTLA-4 antibody Yervoy for the treatment of small cell lung cancer. The Phase I/II combined study is being conducted through the Big Ten Cancer Research Consortium and is currently enrolling subjects at Rutgers Cancer Institute of New Jersey and other clinical centers in the US. The trial is expected to enroll approximately 15 patients in the Phase I portion and an additional 40 patients in the Phase II portion. The study will investigate whether the addition of Plinabulin results in efficacy synergy and in a reduction of immune-related side effects of PD-1 and CTLA-4 antibodies.

In summary, we have advanced our program significantly to the point of important data readout, which to-date have all been positive. This represents important derisking of the Plinabulin development programs. The acceptance of this data at major oncology scientific conferences also represents important setting by the external medical and scientific community of our data.

With that, I'll now turn the call to Rich, who will discuss marketing and partnering strategy. Rich?

Richard J. Daly -- Chief Operating Officer

Thanks, Ramon. As you've heard, the data we released in 2018 has only served to increase our confidence and the ability of Plinabulin to positively improve on the standard of care and affect the lives of patients with cancer, those who require the prevention of neutropenia and those seeking options in the treatment of non-small cell lung cancer. And we look to continue to advance the organization toward commercialization.

This morning, I'll be addressing three components of our commercialization prospects: the CIN opportunity; the evolving non-small cell lung cancer market; and our business development strategy that supports the excellent work of our clinical team.

First, CIN. This is a vast global opportunity. 4 million cycles of monotherapy G-CSF are used worldwide each year to prevent CIN. And as we have noted, there is an opportunity to improve on the current standard of care and improve the outcomes for patients. The clinical profile that both Lan and Ramon referred to presents a clear case for superiority in the prevention of CIN and the potential for increasing compliance and persistency with chemotherapeutic regimens with the hope that the outcomes will be improved.

We know that our messages resonate with providers. Our proprietary market research indicates that oncologists have a very favorable response to the Plinabulin product profile, also the physicians quickly grasp the logic of the complementary MOAs of both Plinabulin and G-CSFs. As a result, the oncologist understood the rationale for Plinabulin plus G-CSF combination use for the immediate clinical benefit prevention of neutropenia and bone pain as well as the potential long-term benefits of keeping patients on planned chemotherapy regimens, dosing and cycle time.

Scientific literature indicates that neutropenia is the number one cause of changes in chemotherapy regimens. The combination of Plinabulin plus G-CSF shows great promise in enabling oncologist and the patients to stick to the individualized treatment plan and avoid the four Ds that Lan mentioned earlier. Simply put, our goals go beyond preventing neutropenia and bone pain. We see Plinabulin's clinical benefit as a tool for providers to potentially generate better chemotherapeutic outcomes that is, provide the clinician with the opportunity to choose the most appropriate, most aggressive therapy for the patients and have the confidence that prophylaxis with Plinabulin and G-CSF, neutropenia can be significantly reduced and patients can remain on their targeted chemotherapy.

The data generated to-date by the BeyondSpring clinical team, under Dr. Mohanlal's leadership has produced data that supports, not only this view, but also provides intriguing insights into the potential lifecycle management opportunities for the use of Plinabulin beyond non-small cell lung cancer and the prevention of CIN chemotherapy, only regimens. We reiterate our view that with combination therapy, Plinabulin plus G-CSF, can become the new standard of care for the prophylaxis of neutropenia. Additionally, we believe with continued success of the combination approach that CIN can become a growth opportunity.

The combination approach of Plinabulin plus G-CSF has a significant number of clinical benefits to offer physicians, patients and payers. These include: first, significantly reduced neutropenia with the goal of avoiding the four Ds; second, improved bone pain profile to ensure improved therapeutic experience and potential for greater persistency; third, convenience, first day dosing infusion 30 minutes after chemo ensuring compliance and persistency; fourth, clinical data that suggests anticancer activity; fifth, a differentiated mechanism of action with clinical data demonstrating protection against thrombocytopenia and immune suppression; finally, the increasing availability of biosimilar G-CSFs has the potential to create a powerful health economics outcome narrative for improved care with the combination of Plinabulin plus biosimilar G-CSFs. Plinabulin's positioning is straight-forward. Plinabulin combined with G-CSFs builds on and improves the standard of care in the prevention of CIN.

Next, we'll talk about non-small cell lung cancer. This is a rapidly evolving area of medicine and the recent advancements in care, with the approval of PD-1s and PD-L1s in combination with chemotherapy are indicative of the long-term importance of chemotherapy in the treatment of cancer. This advancement of I/O therapy presents a number of opportunities for BeyondSpring and Plinabulin.

First, as I/O moves to first line therapy, we expect to see greater opportunities for products like Plinabulin. As Lan mentioned in her earlier remarks, the options in second and third line non-small cell lung cancer are not ideal and Plinabulin could represent a significant advancement for these patients.

Second, our early work in combination with I/O compounds may demonstrate benefits over and above that which is currently seen with I/O alone. This may represent an additional significant growth opportunity to help patients and providers struggling to address this devastating disease.

Third, chemotherapy a mainstay of cancer treatment appears to be researching as a topic of great interest in research, when combined with I/O therapies. As discussed earlier, these chemotherapy will likely give rise to CIN, Plinabulin's immunologic data generated to-date demonstrate that Plinabulin unlike G-CSFs, does not cause immune suppression. In this therapeutic paradigm, Plinabulin could be the ideal partner for I/O therapies.

Finally, with a durable response for checkpoint inhibitors, we expect I/O chemotherapy cycles to be significantly expanded thus creating an increased need for products like Plinabulin to be used to protect patients from CIN.

Our last major topic is business development. We believe Plinabulin has tremendous potential both as a CIN and non-small cell direct anticancer therapy. These markets are significant and there is great opportunity to improve on the standard of care, as we have discussed.

Plinabulin is clearly a differentiated product in its mechanism of action, its clinical data, its clinical effectiveness and its potential to positively effect the care of patients suffering with cancer. As a result, we have garnered a great deal of attention from well-established pharma partners. This is undoubtedly due to the market potential in both CIN and non-small cell lung cancer, the excellent data generated to-date, the derisk profile of Plinabulin's programs and the effectiveness of our business model. Our business development strategy is to leverage Plinabulin to create the greatest value for patients, providers, payers and shareholders.

Well, the number of cases of cancer outside the US exceed those within the borders, the majority of commercial value resides in the US. Consequently, we seek partnerships that will enable BeyondSpring to retain the greatest value here in the US, while enabling us to leverage partner infrastructure to launch abroad. We seek partners who can commercialize Plinabulin outside the US on their own, while we retain significant rights to CIN and non-small cell lung cancer in the US.

We are actively engaged in multiple late-stage discussions with potential partners who are aligned with our strategy. We look forward to updating you in the future on our progress.

With that, I'll now turn it over to Edward, who can provide a financial update. Edward?

Edward Dongheng Liu -- Chief Financial Officer

Thanks, Rich. I'll now briefly review our fourth quarter and the full year 2018 financial results, and for greater details related to our fourth quarter and full year of 2018 financial results, I'll refer you to our press release issued this morning and our 20-F filing, both of which can be accessed at our IR section of our website.

Our R&D expenses decreased by $1.4 million and $37.3 million in the fourth quarter and full year 2018. In 2017, we issued approximately 2.1 million shares to Nereus Trust at our initial public offering in exchange for the termination of the royalty payment obligations in relation to Plinabulin's global rights outside of China. This transaction was recorded as a non-cash expense of $42.3 million. Without this non-cash expense, our R&D expenses in full year 2018 would have increased by $5 million, as a result of increased clinical trial costs

Our G&A expenses increased by $0.4 million in the fourth quarter of 2018 and decreased by $3.2 million in full year 2018. The decrease in G&A expenses in full year 2018 was primarily due to a decrease in non-cash share-based compensation. The net loss attributable to BeyondSpring was $14.7 million and $54.9 million for the fourth quarter and full year 2018, compared to $7.8 million and $91.8 million for the same period in 2017.

Cash and short-term investments were $3.9 million as at the end of 2018, compared to $30.6 million as at the end of 2017. Subsequent to year-end 2018, we entered into loan agreements totaling approximately RMB37 million, and RMB27 million of this loss has been drawn down with the remainder expected to be drawn down during the second quarter of 2019.

BeyondSpring has a unique business model that integrates the clinical resources in both US and China. We believe this dual development strategy provide us the ability to conduct trials in a time and cost efficient manner and to maximize value for shareholders and investors.

With that, I'll now turn the call back to Lan. Lan?

Lan Huang -- Co-founder, Chairman & Chief Executive Officer

Thank you, Edward. I'm extremely proud and grateful to the entire BeyondSpring team who are our family members. I also want to recognize other contributors to our journey, including our investors and Board of Directors, as well as our extended partners, including CROs, CMOs and investment bankers. And last but not least, I would like to thank the patients who participate in our trials.

It truly takes a village to raise a child and Plinabulin is our first child. We name our company BeyondSpring for the following reasons: one, is beyond borders, we strive to integrate global resources to develop transforming medicine in a time and cost efficient manner; the second is beyond seasons, we'll like to go from the sowing and hope season of spring directly into the harvest season of NDA.

Living up to our company name BeyondSpring, we're very pleased with the significant amount of clinical data generated in 2018 to support our planned NDA submissions in China and US in the next 12 to 18 months. Looking ahead, BeyondSpring is poised for significant milestones in the coming months, which would transform BeyondSpring into a commercial stage company and I look forward to keeping you updated.

Finally, I would like to thank you for your interest in our company and your time for listening in. That concludes our call today.

Operator

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Duration: 37 minutes

Call participants:

Stephen Kilmer -- Investor Relation

Lan Huang -- Co-founder, Chairman & Chief Executive Officer

Ramon Mohanlal -- Executive Vice President, Research and Development and Chief Medical Officer

Richard J. Daly -- Chief Operating Officer

Edward Dongheng Liu -- Chief Financial Officer

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