Good day, everyone, and welcome to BeyondSpring Inc.'s Second Quarter 2017 Investor Call. Today's call is being recorded. At this time, I would like to turn the conference call over to Mr. Garth Russell of KCSA Strategic Communications. Please go ahead, sir.

Thank you. Before turning the call over to management, I'd like to advise that during today's call, management may make certain forward-looking statements relating to such matters as its clinical and preclinical research, research and development, industry trends and collaborative initiatives. 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 are cautioned not to place undue reliance on these forward-looking statements. The company's actual results may differ materially from those discussed during this 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 on BeyondSpring's Investor Relations website. With those comments complete, it is my pleasure to turn the call over to Dr. Lan Huang, Co-Founder, Chairman and Chief Executive Officer of BeyondSpring. Lan, the floor is yours.

Thank you, Garth, and thank you, everyone, for joining our call today. With me are Richard Brand, our Chief Financial Officer; and Dr. Ramon Mohanlal, our Chief Medical Officer, who will be available for the Q&A portion of the call. We are pleased to present to you an update of our business. BeyondSpring is a late-stage global clinical development company with a robust immuno-oncology pipeline. Our lead asset, plinabulin, is a first-in-class immuno-oncology agent. Plinabulin is in 2 registrational trials in prevention of chemotherapy-induced neutropenia and in lung cancer, both run by world-renowned investigators. In our view, plinabulin is a pipeline in a drug with tremendous market potential across multiple indications. There are 3 key points that I would like to share with you today. Number one, our plinabulin clinical studies continue to progress across multiple indications. Number two, BeyondSpring's time and cost-efficient U.S./China clinical strategy remains a competitive advantage for the company. Number three, our preclinical pipeline of IO agents is maturing with an additional candidate expected to enter the clinic in 2018. We are also very excited about the market's recent validation of the ubiquitination degradation pathway, which is a key focus area for our company. It is an emerging area of drug development research in a field of biology that I have been studying for over 20 years. So starting with our first key point. Our plinabulin clinical studies continue to progress across a variety of indications. Let me first talk about the registrational trial of prevention of chemotherapy-induced neutropenia or CIN. Current treatment for CIN, a type of low white blood cell, is G-CSF, a human growth factor. But this treatment are limited by safety concerns and dosing limitations. Even with this limitation, G-CSF's annual global sales are over $8 billion. And G-CSF only targets high-risk…

Thank you, Lan. I would also like to thank everyone for participating on today's call and to wish a happy birthday to Phil. Thanks for your continued support. As of June 30, 2017, our cash and cash equivalents totaled $49 million, which compares to $54.6 million at the end of the first quarter of 2017. We view this modest $5.6 million quarterly cash burn as impressive for a biotech company such as ours with 3 ongoing clinical programs, including 2 in late-stage development. Research and development expenses for the 6 months ended June 2017 were $58.9 million, which includes a $42.3 million patent cost expense. And that compares to $4.7 million for the same period in 2016. The increase in R&D expenses over our 2016 period was primarily due to increased costs related to our ongoing clinical stage -- late-stage programs in neutropenia and advanced NSCLC, including a higher number of patients, additional investigator sites and additional drug cost as well as that patent cost that was expensed. The R&D figure also includes other noncash accruals for accounting purposes. General and administrative expenses for the first half of 2017 were $3.9 million compared to $0.9 million for the quarter for the same period 2016. The increase in G&A expenses was primarily due to an increase in costs resulting from being a public company following our March 2017 IPO and costs associated with the runup to that IPO. For the first half of 2017, we reported a net loss attributable to BeyondSpring of $60.7 million compared to $5.4 million for the same period in 2016. A few of the factors that contribute to our operating efficiency and that we believe underscore the strength of our model include, first, the opportunity to enroll patients for our clinical programs in China. We have discussed previously how we intend to leverage our unique strength in China to conduct clinical studies, yielding clinical data that will support regulatory approvals around the world. Second is our network of collaborators that are conducting clinical studies on BeyondSpring candidates. Both UCSD and the University of Washington/Fred Hutch are studying plinabulin in combination with PD-1 inhibitor nivolumab. Pending favorable results, BeyondSpring would assume developmental responsibilities of a more derisked asset, which will play a significant role in how we maximize resource allocation across our pipeline. Lastly, through our status in China, BeyondSpring has received non-dilutive capital, as Lan mentioned. We were able to deploy these additional resources to help fund preclinical pipeline studies. Successfully managing our cash position will enable BeyondSpring to advance these early-stage programs towards IND-enabling studies, where the company can benefit from enhanced economic terms in any partnering relationship we may enter into in the future. Based on our current operating plan, BeyondSpring believes it has sufficient cash resources necessary to file the NDA for plinabulin for the prevention of neutropenia and the NDA for [ NC ] NSCLC in combination with docetaxel. With that, allow me to turn the call back over to Lan.

Thank you, Richard. In conclusion, we are pleased to report that, number one, our plinabulin clinical studies continue to progress across a multitude of indications with catalyst in 6 months or 12 months. Over the second half of 2017, we look forward to reporting efficacy data from the Phase II portion of our registrational neutropenia study 105, and reporting initial safety data from investigators from the PD-1 combination study. Number two, our time and cost-efficient U.S./China clinical strategy remains a competitive advantage for the company. Our team has brought around 30 innovative agents to the global market. With our business model, we can bring drugs to the market much faster and cheaper. Number three, our preclinical pipeline of IO agents is maturing with several candidates advancing towards IND-enabling studies. And we are very excited about the market's recent interest about the ubiquitination degradation pathway as an emerging area of drug development research. Our company's philosophy is to support sound science with solid execution. With those comments complete, operator, we are now ready to open the call for questions.

[Operator Instructions] Our first question is Joe Pantginis with H.C. Wainwright.

Lan, I want to see if we could get a little more color on some of the prepared comments that you had. So first, with regard to the Phase II interim data for study 105. You -- as you mentioned, data are expected by the end of the year and they should be efficacy data. Are we looking at just sort of a press release around DSN data? Or will there be additional types of data looks that we can look towards?

Yes. So let me start, and then Ramon can probably add a few words. Yes, we are looking at the DSN, which is the primary endpoint of the study. That is the primary endpoint for Phase II and for Phase III. And that will be evident to show the efficacy of plinabulin. For the secondary endpoint, we're also looking at other safety benefits of plinabulin. And Ramon will add a few words.

This is Ramon Mohanlal. So just one point of clarification. We have -- at the end of the Phase II portion, we have the -- it's called the Phase II PK/PD analysis, which is separate from the interim analysis, which actually comes in Phase III. So those are 2 separate analyses. We certainly will have a fairly good and a fairly reliable opportunity to have a readout for DSN with plinabulin, and that will give us also an initial sense of how plinabulin compares with G-CSFs, with Neulasta in this case. That data, we expect in the end of this year.

Got it. That's helpful. And then with regard to -- since these Phase III programs are ramping up in earnest now, and I know this is pretty -- this is a forward-looking statement here. But can you provide any commentary on how your business development discussions might be going?

Yes, we are able to attract a significant amount of serious interest from pharmaceutical companies. As we speak, we are in fairly advanced stages with several companies for partnering purposes. The program, as we see, will be able, if all goes well, to advance very quickly between this year and next year. And that implies that we will need to get ready timely also for commercialization. With commercialization, at this time we will rely on partnering with our very strong pharmaceutical partners, who will be able to advance the commercial and marketing efforts. So as we speak, we are in advanced stages with -- talking with several pharmaceutical companies on the CDA. And also -- I can also disclose that the discussions are between this year and next year. And -- so from our perspective, things are on track.

Got it. No, that's helpful. And my last question, if you don't mind, is on the front end with regard to ramping up in China, you've realized very, I guess, good efficiencies, especially with regard to the rapidity of your CTA approvals. So can you discuss, say then, how you're going to be able to leverage these rapid approvals with regard to, say, the clinical network that exists in China and how rapidly these clinical sites might be able to then come online?

Thank you for this great question. Yes, I think currently for the 105, 106 study, we actually received the CFDA's approval to start CTA within a few months, which really underscores our regulatory efficiency in China. And not only just our status there, but also the CFDA's -- really, support of this clinical program because plinabulin for the CIN is really treating an unmet medical need. And our data from Phase II with p-value of 0.0003 is really very highly statistically significant. So it really underscores their support. But as far as the clinical community in China, we -- for all the trials, we are using the best of the sites and also the best investigators. So for the 105, 106 studies, the China PI, Dr. Shi Yuankai, actually he actually developed all the G-CSFs in China. So he's highly regarded in China. And already, there's a few centers up running for the [ RV ] already approved in China. So we are getting great support in opening the sites and also great support from the KOLs in China as well. So in our expectation, the enrollment in China is also going to be as expected.

Our next question is from Gabrielle Zhou of Maxim Group.

So just for the 105 and 106 studies, can you just give more color on what delta in duration do you expect to see versus the G-CSF?

Okay. So that's a great question as well. So basically, for the 105 study, we are looking at docetaxel, which is an intermediate-risk, FN risk drug. So the DSN for that is probably -- is not that long. But let's just say for the Neulasta, it is a perfect drug, right? For the 105 study, it gives 0 day of DSN. Then our drug basically has to beat the 0.65 day, which is the non-inferiority margin the U.S. FDA gave us. Actually, from our Phase II study, we did estimation of our DSN from Phase II. In the non-small cell lung cancer docetaxel study, we actually come with 0.65 day, so it's around 0.1 day. So you can see that from that estimation potentially the 105 study, we should be able to meet the DSN non-inferiority primary endpoint in Phase II and in Phase III. And then for 106 study, we are working with TAC, which is a high-risk febrile neutropenia. There's a risk regimen. So there, actually without any use of G-CSF, the DSN should be around 7 days. With the use of G-CSF, it decreases to around 1.4 days. That's from the publication. So in all our calculation, we project the DSN for the TAC plus Neulasta is around 1.2 days. And we have other data from our clinical study in Phase II. And from publication, we presume plinabulin is twice as good. So that, we basically calculated to be around 0.6 day. And with that, actually with the only 60 pair of patients in the Phase III design, we should be able to show the priority in the DSN. So that's how we see the current design.

Great. That's very detailed explanation. But can you just provide more color on the utility of plinabulin beyond docetaxel and tell us a little bit if you have other data from plinabulin in combination with other chemo? And can physicians use plinabulin with new types of therapies, like co-inhibitors, to prevent neutropenia?

Yes, thanks for this excellent question. Yes, so we actually found plinabulin's effect as a really effective agent to reduce severe neutropenia in docetaxel from our Phase II trial, as we just discussed. And then later, actually we were looking into the plinabulin's mechanism and also its potential in reducing neutropenia in the other agents. And we found that in the preclinical models, we have shown plinabulin not only reducing neutropenia of docetaxel but also in other chemotherapy agents with different mechanisms, such as cyclophosphamide, doxorubicin and cisplatin. And also in our mechanism studies, we have shown that plinabulin can prevent neutrophil from breakdown, which is really a universal mechanism. So that basically give us the confidence that plinabulin is not only working in docetaxel-induced neutropenia but in a variety of chemo agents and -- in solid tumor. And that's how we designed the 105, 106 study to show that, so that the indication, which is later to be approved, is a broad indication. It's plinabulin in preventing of severe neutropenia induced by old chemo and in solid tumor and in hematological tumor. And this is the label which we are aiming to get. And that's what's in discussion with the U.S. FDA and the CFDA.

Got it. So let me shift gears to a little bit on China. You mentioned that you're running a 103 study and it would be cost and time efficient. So can you provide more details in terms of where you are regarding the patient enrollment? And what would you expect the costs associated with the trial?

Yes, thanks. So actually, we currently have enrolled around 100 patients in China, so -- and then this month, these few months, basically with the trial just started in China last August. In the beginning of the trials, we were trying very hard to control the quality of the trials of every site. The first few patients, we have a strict eye on them, so the initial speed was a little slow. Now everything is ramping up. So we're still in a good time line to get all 550 patients enrolled globally to first half of 2018. Are you also asking for cost efficiency?

Yes.

Okay. So the cost efficiency in China is, as you see that in the U.S., around -- for each patient, the cost is around $100,000 a patient with everything included, right? In China, it's around 1/3 of that cost. So currently, we -- for the 103 study, we are enrolling 80% of patients in China, so you can calculate that cost saving. And in addition, in China, all the major campus centers which we are employing are in major cities, such as Beijing, Shanghai and Guangzhou area. So in that sense, our manpower can be very concentrated in those areas. So that's also a very good cost and time saving for the company. So that's why, as you see, we raised $54 million from the IPO. And with that amount of money and our previous fundraising, we could have some money reserved to finish both of the 103 study for the lung cancer and also the 105, 106 study for the neutropenia. So this is our cost efficiency as well.

[Operator Instructions] Our next question is from Jason McCarthy with Maxim.

Can you guys talk a little bit about the pricing strategy for plinabulin, particularly if you're going to need 3, 4, 5 cycles of chemotherapy per patient, some differences in pricing strategy between China and the U.S.? As well as how do you factor in being able to expand the market beyond the 20% that biologics have currently, to that 40% or 50% of patients that have moderate risk for neutropenia? And how does that factor into pricing?

So thanks for the great questions as well. So as you see from our 105, 106 study, we are going to show the superiority, so that's what we plan to show in the DSN in plinabulin versus the Neulasta. So -- and also from the safety point of view, we are also looking to show better safety, such as bone pain and also less use probably of antibiotics and of less hospitalization. All those are pharmacoeconomic benefits. So you can see we are designing the trial to show superiority, not only in efficacy but also in safety. Of course, plinabulin is a small molecule, it's 3-step synthesis, also the cost for manufacturing is not that much. But from a pricing point of view, we did have IMS research done. And with the superior profile in the U.S., potentially we could go for the -- a little bit of the premium price against Neulasta to start with. But then later, with this drug potentially also getting into intermediate risk market, which is a large market, and also just based on the benefit for the patient, potentially in the future, we could lower down a little bit so that everybody benefits for this very important drug. From a China point of view, it's, of course, China is the cost -- it's a little bit -- should be a little bit lower than the U.S., so -- and it will be significantly lower in the cost than the U.S. But even with that, China has a huge market. So we will still reap a lot of benefit from a financial point of view but also to benefit the patients in China.

Yes, this is Ramon. So just to add to that, Jason, because that's also a question you asked. So currently, the G-CSF market is relatively underserved, only 20% of patients today receives G-CSF. Only 20% of oncology patients with chemotherapy receive G-CSF. The true market, as we see, is much bigger than that. We have an intermediate risk segment, which is around 60% of all oncology patients. We have G-CSF currently it's either not used or only rarely used. So we see that 50% of the intermediate risk market as an opportunity for plinabulin to expand into, as Lan pointed out. That is going to be an important part of our strategy and that will also relate with the pricing strategy.

And our next question is from Jason Kolbert with Maxim.

I want to talk a little bit about changing paradigms in the China timeline. One of the things that became a little bit more clear to me in our discussion was that it's possible you could see approval in China before you see approval in the U.S. And given the price difference between a biologic like G-CSF and a small molecule like this, I could see the potential for very significant market penetration in the China oncology paradigm. And so could you drop back for a minute and just help me understand kind of how you are viewing the Chinese market and how this molecule might be positioned in China itself?

Thank you for this wonderful question. Yes, as you see that we are well positioned in China. In China, we're a China-based company. And I was very honored to receive the Thousand Talent Innovator Award from the Chinese President. So any project I lead gets regulatory speed in China, and as you see evidenced from the current 105, 106 studies, CTA approval. So in China, as you still -- chemotherapy is still widely used in China. And meanwhile, China has over 4 million, 4.2 million new cancer patients. And usually for cancer patients, up to 60% of the patients are [ just ] still use chemotherapy. So you can see how big this market is. But as you see, chemotherapy is -- one of the severe side effects is the severe neutropenia, which limits its use and use dosing, and also that limits its potential of benefit to the patient. So with plinabulin, as you see for the neutropenia indications, this is in combination with all chemo in all cancers. So with that premise, with so many -- over millions of patients in China, so our drug combining with the current chemo regimen will be beneficial to those millions of patients in China. And as we just discussed, our drug is a small molecule, only 3-step synthesis, so really on the cost-wise, it's a high advantage against biologics. So for these Chinese millions of patients so the market, potentially if we could penetrate that, we could have a very favorable pricing strategy because this way, it's not only benefiting the patients from a pricing point of view and also the efficacy and safety and quality of life point of view, but also benefiting the government because they potentially will pay for the drug for millions of patients in China. And so in that sense, I think it's a triple-pronged attack that we are benefiting patients, stakeholders and the government and also, of course, our investors.

That's perfect. And dovetailing into that question, can you talk a little bit, as the dynamic of biosimilars starts to become a reality as we shall see the first biosimilars coming to the marketplace, help me understand kind of how that will influence what you foresee of this, the launch of this drug as we approach 2020?

All right, thank you. Let me start, and then Ramon can add. So from a biosimilar point of view, let's just use G-CSF as the example, right? So biosimilar is still G-CSF even though it's probably cheaper. And then usually in the U.S., currently a biosimilar or G-CSF is only 15% cheaper than NEUPOGEN. So from a cost point of view, they're not that much cheaper. But just from a product point of view, G-CSF, that has some limitations. First, it is a growth factor. So even biosimilar, it's still growth factor. So potentially, there's a danger of inducing cancer cell growth to treat cancer patients. So that's why currently, G-CSF is used the second day after chemo. Because if it's used on the first day, the first day, it potentially could induce the cancer cell growth. And secondly, also the neutrophil is generated, if it's on the first day, then the chemo is still in the body, then that could kill the neutrophil. So in that sense, it is given the second day. So plinabulin actually is given within 30 to 60 minutes after the chemo in the first day. So that's really a -- timing-wise, it's a very -- it's a good advantage. So even with biosimilar, it's not going to overcome that growth factor mechanism limitation, right? So secondly is, still biosimilars, they still have the side effect, such as bone pain and short of breath, and spleen disrupture, those types of side effects. And in plinabulin, a clinical trial Phase II study, in clinical trials, we don't have much bone pain, less than 4% of bone pain and also has much shorter hospitalization and some other benefits in the safety. So that's why we think that in other words the biosimilar coming to the market, it's still G-CSF. And plinabulin do have this differentiated mechanism, give it advantage in the efficacy and safety and also a benefit in the timing of [ use ].

Yes, this is Ramon. Thank you. If I can add to that, so G-CSFs, as we know, are biologics. And biologics typically carry a much higher cost of net effect, [ really ] cost of goods. With the arrival of several biosimilars in the G-CSF space, currently the discount that comes with G-CSFs are somewhere in the 50% discount range. With the arrival of more G-CSF biosimilars, I think it's safe to expect that, that discount will become larger. However, G-CSFs being biologics, their bottom is well defined because of the high price of manufacturing. Plinabulin is a much cost-effective manufacturing process with a fraction of the cost of G-CSFs. So from a pricing perspective, we have a distinct advantage because even at lower prices, we can still operate at a high profit margin. In addition to that, as I indicated, currently it is only 20% of cancer patients where G-CSF is being used whereas there is a possibility to increase that into probably 50% to maybe 80% of patients. That expansion, we don't expect that G-CSF will be able to make that expansion. This has been tried before by all of the G-CSF companies. But for a variety of reasons, we are not able to create that expansion. So even if this becomes surprising phenomenon, we see tremendous opportunity for plinabulin to compete well within the existing market. But in addition to that, we see tremendous opportunity for plinabulin to enter those markets that are currently underserved and which in numbers of patients represent the majority of the market, probably 50% of the market or more.

Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call over -- back over to Dr. Huang for closing remarks.

Thank you, everyone, for joining today's call. We remain grateful to all of the company stakeholders for their efforts and support, especially the patients who are participating in our clinical trials that are allowing us to fulfill our mission, to develop novel immunotherapies that provide transformational change to the treatment of cancer. We look forward to sharing additional update as our progress continues. Thank you all.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time, and have a wonderful day.