BeOne Medicines Ltd. (ONC) Q4 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the Q4 2018 BeiGene Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] I would now like to introduce your host for today's conference, Dr. Howard Liang, Chief Financial Officer and Chief Strategy Officer. Dr. Liang, you may begin.

Thanks very much. Good evening and good morning. Welcome to our 2018 fourth quarter and annual results conference call. Next slide, as a reminder, we'll be making forward-looking statements during today's event and our business carries certain risks. Some of these are discussed in our filings with SEC and Hong Kong Stock Exchange. Next slide, the agenda for today's presentation will start with opening remarks by our Founder, CEO and Chairman, John Oyler, followed by commercial operation highlights by Dr. Xiaobin Wu, our General Manager Of China and President of the Company; Dr. Eric Hedrick, our Chief Advisor, who will provide an update on our clinical programs for our clinical assets; and I'll take you through our full year and fourth quarter financial results before Q&A. So with that, I'd like to turn it over to John.

Great. Good morning, everyone, and thank you for joining us for our first annual results review. The year of 2018 was the year of unparalleled growth and advancement at BeiGene in all areas. We've enrolled more than 2,000 patients in our clinical programs this year and reported exciting data and initiated regulatory filings based on those results. During the last year, we've also strengthened our team, which included bringing in our President and GM, Dr. Wu Xiaobin, and the recent appointment of Chief Medical Officer in Immuno-Oncology, Dr. Yong Ben. And we've also grown the team to over 2,200 people. We built significant capabilities in our clinical, commercial and manufacturing groups, always with the at most commitment to patients and to quality. And we continue to expand our research capabilities. We believe that BeiGene has now become uniquely positioned to integrate and leverage the opportunities created by newly introduced China reimbursement and clinical trial reform. Specifically, we're well positioned to continue to execute the broad development of tislelizumab with our partner, Celgene, or independently. We continue to make good progress with our broad program and we're announcing a couple of enrollment completions today. We've also grown dramatically our product related revenue. Our commercial products are performing very well. We're now preparing for the potential approvals in China of our two internally discovered and developed products for potentially three indications in 2019. We believe that BeiGene is very well positioned for what we believe is likely to be a highly transformational year. Next slide please. Slide 6 provides some of the details of our 2018 accomplishments that I just mentioned. The compelling clinical data reported here for both tisle and zanu warrant your attention. We're very excited when we see the potential of these drug candidates to help people. Slide 7, I would also like to highlight the expansion of our manufacturing capabilities. As you can see on this slide, we have added highly experienced leaders for our manufacturing operations. We're committed to and investing heavily in building truly world-class level manufacturing. We're working with exceptional partners such as BI and Catalent, and we're building our own world-class facilities. We're always committed to ensuring patients across the globe receive product of the highest quality. There are no shortcuts to be taken here. Next slide, please. All of this has been done in support of our vision to build a transformational leading global biotech company, that's strongly entrenched in China with the commitment to the highest global standards. In 2019, we will continue to work towards this end by the following. First, we're going to try to realize our two near-term commercial opportunities that we have in our BTK inhibitor globally and our PD-1 inhibitor, which are currently focused for us in Asia. But we may regain global rights in the near future; secondly, by continuing the strength in our overall capabilities, especially in global clinical development, our commercial footprint, manufacturing; and third, capturing the opportunities created and enabled by the recent significant regulatory reforms in China and continuing to leverage them to expand our existing portfolio. BeiGene is certainly a new and a different type of organization. We're pursuing a truly global model that differentiates us from other local Chinese companies and from big multinational pharma. And we're doing so by leveraging our strong clinical resources and commercial capabilities in China. Next slide, please. We believe that we're part of an once-in-a-lifetime opportunity that will positively and fundamentally change how drugs are developed globally and in the future. BeiGene was created with this opportunity in mind and it is indelibly imprinted in our DNA. We have grown into a unique and different company and a true leader at the forefront of this opportunity, having built a clinical organization of over 800 that is a world leader in running China-inclusive global trials and executing at the highest global standards and with great efficiency. We have initiated 6 of these global pivotal studies, and have 21 pivotal or potential registration-enabling studies up and running, over 50 studies ongoing or planned. It's truly remarkable. Slide 10, please. We are also actively engaged in establishing collaborations to enter other compelling drug candidates to leverage our capabilities to help accelerate their global programs. We've expanded our portfolio by in-licensing regional rights to sitra for Mirati and two new bispecific antibodies therapeutics from Zymeworks that we're quite excited about. We will continue to look for the highest quality opportunities to add other compelling therapies for patients through our business development and also to complement our internal research. Next slide, which is 11. The confluence of China with regard to global clinical trial development and the introduction of reimbursement in China enable new improved models for our industry. This is a model that recognizes the unique opportunity that China represents and will expand access to high quality innovative medicines globally. BeiGene is different and it was built fit for this opportunity. We're on the forefront of pursuing this truly global model and committed to never sacrificing our quality, innovation or science. And with that brief introduction to BeiGene and review of 2018, I'd like to turn the podium over to Dr. Wu Xiaobin, our General Manager of China and the President of BeiGene. Thank you.

So, thank you, John. Hello, everyone. Thank you for joining us today. Next Slide 13. China is a country with large population. And combined with regulatory reform, reimbursement and a high incidence of cancer, this has resulted in re-ordering of the world's largest ESCC product market by revenue and such China is now the second largest market behind the United States. If we look the majority of the market share, excluding TCM, it is still dominated by generic product today. Top selling brands in China are quite different from those in the United States. You can see the slide on the right side. So next page, Slide 14, from the hospital market channel, which makes 80% of the entire pharmaceutical market, the overall pharma market continue to grow, and we say the growth driver is therapeutic treatment medicine, which has strong consecutive growth in the past three years. The growth of the overall market slowing down over the past years and the traditional Chinese medicine, auxiliary, that's advanced drug, now in declining. In contrast to that, the therapeutic category growing substantially faster. The market is shifting toward evidence-based medicine and now therapeutic treatment. This market accounts almost 60% of the entire market by value. So next Slide 15. Within the large Chinese pharmaceutical market, oncology is one of the largest TAs, accounting for nearly 10% of the market in 2017. And it percentage-wise is expected to grow further. It has the highest growth rate among our other therapeutic area. There are over 4 million new cancer patients in China each year and the number is larger than the combined total cancer incidents of U.S., EU5 countries and Japan. In addition, there are specific tumor-type like lung cancer, gastric, liver, and esophagi cancer, which are more prevalent in China compared to other countries. We believe the medical unmet needs, the regulatory reform and the new reimbursement scheme for innovative oncology drug, means, the oncology therapeutic market will grow strongly for sometime going forward in China. Next Slide 16. Since taking over the Celgene commercial operation in China, we have grown the team substantially from the size of originally 130 people. And in the last year, the team has reached four times of the original size. As of today, we have over 600 people in our commercial team. We have hired into all functions, from sales to market access, the majority of commercial talent come from the best multinational operations in China. The ultimate goal for us is to cover hospitals where the majority of the patients get treated in China. We are building a specialized oncology commercial team that will cover 800 to 1,000 hospitals. And our commercial effort goes beyond sales. And as we believe, you must build a dedicated team with support in several functions such as government affairs, regulatory affairs, sales and marketing, medical affair, key account payers, payers management and the market access, because in China market, this market is complex with multiple layers and many stakeholders that you need to address to deal with, and to interact with them. The next slide, Slide 17. The investment in our commercial organization has generated excellent growth from our marketed inland product. The overall portfolio has grown to be well over doubled of its original revenue level. This was made up of substantial growth from all three products. Our sales performance has proven that our commercial strategy is working and the revenue has grown despite of the generic competition or market analysis in China. Growth of inland product demonstrated the capability of our successful go-to-the market model and or capability. Those three products are integral parts of our business and this enabled us to gain rewarding experience, establishing market access interaction, interacting with key opinion leaders and a build out of our commercial network, laying the ground work for our anticipated new launch of Zanubrutinib and Tislelizumab. There are different level of interaction with external stakeholders in preparation of commercial launches of our internal developed candidate, which I will show you in the next slide. Slide 18. What is differentiated as is that we can leverage our existing market product to pace the way for our commercial launch of new product. As I previously mentioned, we have built all infrastructure and network because of the current in line product REVLIMID and VIDAZA overlap with hem doctors. ABRAXANE allows us interaction with solid tumor, oncologist and hospitals and we are building access experience with hospital listing and reimbursement through those interactions with different stakeholders. We understand the market inside interaction with treating oncologist and key opinion leaders which help us to build our brand name. With those three products in line product we have been actively engaged with oncology community and with such like, CSCO as well as BeiGene sponsored even throughout the whole last year. In addition, we held a commercial launch of the VIDAZA and the newly approved indication for REVLIMID as well as our Patient Assistance Program launch for newly diagnosed multiple myeloma patient. And the list goes on. We believe we are positioned to play an important role in shaping and building the ecosystem in China for oncology treatment and become a significant player. So next slide, Slide 19. Our commercialization strategy for zanubrutinib and tislelizumab begin with our hypothesis that those product are differentiated assets and are generating - and we are generating data that we believe is consistent with that differentiation. In addition, we are pursuing our broad program of development, so that we have extensive labels - this is particularly important in China, where reimbursement and even the utilization of patient assistance program are only allowed to occur when the product is used for labeled indication. Finally, we are putting a high energetic commercial effort behind those assets that is already beginning to provide a visibility and built our revenue, upon the established infrastructure we have in both solid tumor and hematology area. Next slide. So let's shift a little bit from China to the global. For our global commercial preparation. As we strive for becoming a global player, we are preparing for the launch of zanubrutinib with potential filing in the United States this year or early next year. We have also hired senior leadership for key commercial functions, applied in the U.S. at a minimum to substantially participate in the commercialization of our new product. As for Europe we are evaluating our commercial strategy and we are opened to partner to potential partnership in certain regions with our local player maybe more efficient. And finally, our broad clinic program and also program in China are also potentially is a leverage for our commercial strategy in emerging market. So with that I will end my presentation. I turn over to Dr. Eric Hedrick to review our clinical program a bit.

Okay, thanks Dr. Wu. And good morning everyone on the call. On Slide 24, the statistics are robust product portfolio in pipeline, which includes three marketed products in China, three late stage drug candidates and six early stage programs, which are evenly split between internally developed and collaborative programs. We currently have more than 50 ongoing or planned clinical trials and with respect to our two lead programs, the BTK inhibitor zanubrutinib and the PD-1 tislelizumab. Both programs are broad in nature addressing multiple indications contemporaneously with the intent to support multiple labeled indications across the globe, including China, U.S. and Europe. Turning specifically to zanubrutinib on Slide 25. We are running a broad registration enabling program across various T-cell malignancies, which includes chronic lymphocytic leukemia, Mantle cell lymphoma, Waldenstrom macroglobulinemia, marginal zone lymphoma and follicular lymphoma. Noting that follicular lymphoma indication would be unique amongst BTK inhibitors. We have filed an application in China based on pivotal data in CLL and MCL that have been granted priority review by the CDE. In the U.S. we've been granted Fast Track Designation for Waldenstrom and breakthrough designation in mantle cell lymphoma. In the next few slides, I will review in greater detail, the ongoing trials which are intended to support global filings in multiple indications for zanubrutinib. Moving to Slide 26. Our lead indication globally is Waldenstrom macroglobulinemia where we are conducting a head-to-head Phase 3 trial of zanubrutinib versus ibrutinib, the currently approved BTK inhibitor in this indication. This trial completed enrollment in July 2018 and we are anticipating a data readout in the second half of this year. As shown here, the trial randomized patients with MYD88 mutation, which defines about 90% of Waldenstrom's patients in the one-to-one ratio to treatment with either zanubrutinib or ibrutinib. The study is designed to detect superiority for zanubrutinib with respect to response quality - in this case defined as the proportion of patients achieving at least 90% reduction in disease burden. Patients lacking the typical MYD88 mutation who have traditionally not been responsive to ibrutinib received zanubrutinib on a third nonrandomized arm. It should be noted that the data from this nonrandomized arm has been submitted to a major conference this year for presentation. Moving to CLL on Slide 27. Two Phase 3 trials intended to support approval globally are currently being conducted. The initial registration trial is the comparison to zanubrutinib to the BR regimen in patients with previously untreated disease. This is the PFS primary endpoint trial in which patients who do not harbor a 17p deletion, which is a marker resistant to traditional chemo immunotherapy randomized to receive either zanubrutinib or BR. There is a separate nonrandomized arm looking at patients with the 17p deletion. The trial as the whole should complete enrollment this year. One other note about this design, a similar Phase 3 study comparing the first generation BTK inhibitor ibrutinib to BR was presented at last year's ASH meeting, showing a highly significant PFS advantage for the BTK inhibitor to the patient. This certainly raises our confidence and the outcome of our Phase 3 trial. On this slide, you also see a second Phase 3 trial, this in patients with relapsed or refractory CLL. This is an ongoing study and we plan to enroll 400 patients. The primary endpoint to this trial is overall response rate defined as complete plus partial response. And the study is powered to detect superiority for zanubrutinib in a hierarchical analysis plan, which will first test non-inferiority. On Slide 28, we would like to provide an update today that the non-randomized deletion 17p arm in the first length study is completed enrollment with 110 patients. Importantly, this is the largest cohort of treatment i.e. 17p deleted CLL patients have been prospectively studied. And we should be able to analyze the response data from the study on this year. On Slide 29, we are also investigating zanubrutinib, in combination with obinutuzumab in relapsed/refractory follicular lymphoma based on Phase 1b data was presented in 2017, which showed high rates of overall in complete response with the combination. As noted previously, no BTK inhibitor has been approved to date in this indication. Slide 30, summarizes the effects of zanubrutinib. Zanubrutinib that may ultimately be able to address specific limitations that presently exist with BTK inhibitor therapy. We believe that improvement and continuous target occupancy may ultimately translate the differences in response quality, and this is being tested in the two head-to-head Phase 3 trials, as I mentioned earlier. However, in practice, particularly in studying the CLL, toxicity and tolerability issues are for more commonly treatment-limiting most so than limitations in efficacy. In this regard, we've been incurred by the low rates of toxicity related treatment discontinuation and cumulative off-target events, such as myalgia, arthralgia, hypertension that have been observed to date in zanubrutinib clinical trial. Additionally, we believe that comparatively favorable drug-drug interaction profile for zanubrutini, particularly in lack of CYP3A liability will translate well into practice setting such as CLL, [will come with the] [ph] disease and requirement for contaminant medications can be challenging with ibrutinib. On Slide 31, we move onto our next significant near-term development opportunity for tislelizumab or PD-1 antibody. Tislelizumab is Fc engineered antibody that does not bind Fc receptor on macrophages and thereby potentially macrophage driven TF factor self-suppression. The broad registration trials program for tislelizumab is summarized here. And as you can see it focuses largely on opportunities in most prevalent cancers in Asian patients, including non-small cell lung cancer, hepatocellular cancer, esophageal cancer and gastric cancer. The global registration for the program is being conducted and collaboration with Celgene. BeiGene is presently sponsoring and operating the vast majority of the global clinical trials and all of the China focused registration trials. Tislelizumab is also a backbone with an expanding roster of combination development efforts, listed here on the combinations that internally developed agents, now we're mentioned shortly of the evolving combination development program was partnered that such as zanubrutinib. Slide 32 depicts the ongoing registration trials for tislelizumab, including these trials intended to support approval in multiple regions and there is focused on enabling registration in China. We're investigating tislelizumab in registrational trials in both solid tumor indications and hematologic malignancies. Notably, the studies intended to support global approval are required a significant proposition of patients from China and representing BeiGene focused on conducting single trials with a global in the truest sense of word. Most of the trials in the program were initiated in late 2017 to 2018, and this includes programs in the hepatocellular cancer both in the relapse of first-line setting and gastric cancer in first-line setting and the esophageal cancer squamous in the second and first line setting, and then non-small cell lung cancer in the first and second line settings. In the Phase 3 program in patients with locally advanced disease in combination with radiation therapy. Listed at the bottom where the ongoing studies commenced its support registration predominately in China. One of these studies a pivotal trial in patient for classical Hodgkin's diseases has been filed with CDE in this currently under review. The second pivotal trial in urothelial bladder cancer has completed enrollment with the plans filed with the CDE in 2019. Two Phase III non-small cell lung cancer trials are also actively enrolling. On Slide 33, we are announcing here today that the Phase 2 study in second or later line HCC has completed enrollment of approximately 250 patients after being initiated in April of 2018. Moving to Slide 34 for late development portfolio also includes the PARP inhibitor pamiparib. This is currently being evaluated in two registrational trials in China. One in later line, RAS-mutated ovarian cancer and one is the maintenance agent for patient with second-line platinum-sensitive ovarian cancer. The global program is focused on use in the maintenance setting gastric cancer, it is responsive to platinum-based regimen and exploratory trials in the setting of glioblastoma, where we believe the CNS [quality] [ph] is something that could be important. Lastly, Slide 35 summarizes our expanding early development pipeline, including sitravatinib, a multi-kinase inhibitor, which we can licensed from Mirati for development and commercial rights in Asia, Australia and New Zealand last year. We are evaluating sitravatinib in combination with our PD-1 inhibitor tislelizumab in non-small cell lung cancer, renal cell carcinoma, ovarian cancer, hepatocellular cancer and gastric cancer in Phase 1b and Phase 2 studies. Combination studies of lifirafenib, a Raf Dimer inhibitor with the MEK inhibitor with SpringWorks and solid tumors, and sitravatinib combination with PI3K delta inhibitor for MEI Pharma B-cell malignancies, we are also being initiated. We also have PD-L1 antibody, BGB-A333 and TIM-3 antibody, BGB-A425, in early clinical development in the single agent and in combination with tislelizumab. And with that, I'll turn the call over to Howard to review the financial results and the upcoming event. Howard?

Thanks so much, Eric. I'm on Slide 35, I'd like to provide financial summary for 2018 results studying with cash resources. We close the year with $1.8 billion in cash and short-term investments in 4Q. Total cash decrease was $292 million, a key component of this included operating cash burn of $194 million, licensing payment of $60 million to Zymeworks. Capital expenditures of $54 million, primarily for Guangzhou manufacturing facility construction and Beijing research facility purchase. Excluding proceeds from financing/equity issuances, outbound licensing and debt proceeds, cash burn totaled $736 million in 2018, and this included cash used in operations of $548 million, payments for in-licensing and business development of $70 million, and capital expenditures of $109 million. Next slide. Turning to the summary of income statement. Our total revenues for 2018 were $198 million, including $131 million in product sales. This is represents a $106 million year-over-year increase offset by the decrease in collaboration revenues, which included one-time upfront payment from the Celgene collaboration in 2017. Our 4Q product revenue was relatively flat compared to the third quarter. In RMB, we have increased of 1.5% quarter-over-quarter, and when translate to dollars - U.S. dollars, it's a 1.8% decrease. This is impacted by seasonal patterns in 4Q that I'll explain in the next slide. Year-over-year 4Q product sales - portfolio product revenues was 2.5 fold of the prior year of 4Q 2017. On the expense side. R&D expense was $679 million in 2018 and $257 million in the fourth quarter. The sequential growth relative to the third quarter of $110 million was contributed in large part by expenses related to business development activities, including for Zymeworks $60 million and $19 million for the transaction with Merck KGaA. SG&A expense was $195 million in 2018 and $72 million in the fourth quarter, increases over 2017 and prior quarters primarily related to expansion of our commercial organization in China to support the growth and the current product portfolio and to prepare for our upcoming launches, the establishment - as well as establishment of our commercial organization in the U.S. and expanded global operations. Expenses included $78 million of stock-based compensation expense compared to - in 2018 compared to $43 million in 2017. We had a net loss of $674 million for 2018. Next slide. Dr. WU will talk about our three in-license products previously, I want to provide more color on the performance in 2018. The sales of ABRAXANE, REVLIMID and VIDAZA in China totaled of $38 million and $131 million respectively for the fourth quarter and 2018. If you look at year-over-year performance compared to our fourth quarter last year, I just mentioned this is a growth of - sequential growth of 150% in revenues. Historically, fourth quarter sales for both ABRAXANE and REVLIMID tend to be slow. There have been similar patterns of slower sales in fourth quarter in China among other oncology brand. To give you a sense of the historical pattern in the three years between 715 and 717 Q4 ABRAXANE sales on average or down by 25% versus Q3. We had a 14% sequential decline in Q4 2018. For REVLIMID sales declined on average by 19% Q4 versus Q3 for 2015 and - through 2017. We actually had a 15% sequential growth in the fourth quarter of 2018, we continue to be excited about the growth project of our commercial portfolio. On this slide, we also provide more details about the revenue makeup, the three - this is also presented during the Dr. Wu's presentation ABRAXANE continue to grow and it's on our largest products contributing 50% of our product revenue among the REVLIMID has been the fastest growing products contributing over 40% by the end of the year, by data has shown very strong growth since its first commercial availability in February of 2018. Next slide on Slide 38. Let me close today's presentation by highlighting some of the key milestones and catalysts for 2019. This will be an important year for BeiGene, in which we expect approvals for internally developed product candidates zanubrutinib and tislelizumab. In China, we expect to announce data from our first Phase 3 head-to-head study of zanubrutinib versus ibrutinib in Waldenström. We expect to submit our first NDA filing in the U.S. this year or early 2020. For tislelizumab, we expect data from potentially registration-enabling trials and we expect to complete enrollment of key Phase 3 trials for lung cancer and liver cancer. In addition, we will see to expand the label for our commercial products in China of REVLIMID and ABRAXANE. We expect to complete the construction of our biologic manufacturing facility in Guangzhou in preparation for the growth - in the long-term for the growth of tislelizumab in China. We expect it will be a full year of execution across different teams at BeiGene and we're excited about 2019. So with that, I'll open the floor for questions from analysts. Operator, can you please give instructions?

Thank you. [Operator Instructions] Our first question comes from Matthew Harrison with Morgan Stanley.

Hi, this is Vikram on for Matthew. So we had a question about the commercial landscape for PD-1 antibodies in China. Could you provide us your updated view on what the current commercial dynamics are and how that might be impacting your strategy when it comes to a potential launch, especially with regards to pricing? Thanks.

Sure. Thanks for the question. This is John. I think that there is really little that's changed from our perspective. The PD-1 opportunity is really an opportunity that is going to require reimbursement in China and I think as we've stated consistently, over time our strategy has been to pursue a very broad label in the important indications. Reimbursement in China is label based. And I think that as we've experienced with our Celgene portfolio, being able to have a broad label dramatically helps you. From a commercial perspective, it's really necessary. So we continue to work aggressively clinically to reach labels and the important indications, and the important lines of those indications and the important combinations as quickly as possible, believing that that is one of the key elements to the commercial opportunity in China. And I think the second opportunity associated with things is ensuring that you have robust commercial manufacturing, and that it's reliable and issue free. And I think from that perspective, BeiGene has chosen to work with BI since day one, one of the most experienced and reputable companies in the world. And they have a facility in Shanghai that we're working with. And as we have a provided some update, we're building our own facility that's quite substantial in Guangzhou. And I think through those high quality efforts and initiatives, we believe the second issue is making sure you have substantial capacity couple of years down the road when reimbursement kicks into place. And then, it's of the highest quality. And I think the last thing is we do believe that we're going to have to price in a way that we can be reimbursed. And I think we have been sharing over time the historic reimbursement numbers. I think I have slides that have been made available for us before related to that, that show our reimbursement range in China for oncology drugs. And I think we've always felt that's where the pricing will land. And I don't think that that's changed nor is out of our expectations. I think we do continue the comment, which is all companies that are China domestic are capacity constrained in the short-term versus the immense demand that exists. So our expectation has been, people are going to be able to commercialize substantially to their capacity, but be capacity-gated. From the other perspective, we do believe that it's very, very important as I said to work through the label. And that's what we're doing.

Okay. Thank you.

Thank you. Our next question comes from Yaron Werber with Cowen.

Yeah, hi. Good morning your time, good evening our time. I had a question about the Waldenström Phase 3, the head-to-head study of zanu against ibrutinib. And maybe can you give us a little bit of a sense, how are you thinking about the powering and response rates to primary here in terms of what you might want to see and also whether the response rate endpoint is limited or it's capped by certain duration or is it open-ended to sort of best response? Thank you.

Yeah, hi, this is Eric. Thanks for the question. I think in regard to comparing, initial comparing of the study was around very good partial response or complete response in looking for essentially a doubling of that rate compared to the historical rate for REVLIMID, which is around 15%. Keep in mind that we enrolled that trial, that with a bit more power around that. In terms of the specific definition or response, the best overall response endpoint, so it's not particularly time-gated. In discussions with regulators, that it's typical, we agreed to a certain minimum follow-up for all patients, because the agencies will be looking for not only response rate, but response durability. But it's the best overall response trial.

And, Eric, and how long is the follow-up that you're going to be doing?

Yeah, I don't know if we commented specifically on the follow-up, but we completed enrollments to the trial - here and we expect the readout to be sometime in the second half of this year.

Great, terrific. Thank you.

You're welcome.

Thank you. And our next question comes from Ziyi Chen with Goldman Sachs.

All right. Thank you very much for taking my questions. This is Ziyi from Goldman. I got a question regarding the liver cancer indication. You guys gave a presentation that we have already completed patient enrollment for liver cancer HCC second line, third line setting. However, earlier this month [indiscernible] reported the KEYNOTE-240 results. And it felt to me that total primary endpoint is quite similar trial compared with our file in that indication. So what is our take of that result? And then how should we look at the potential outcome of our trial on this? Thank you.

Yeah. Hi, it's Eric again. Thanks for the question. One thing on that is that the KEYNOTE-240 trial, which I think you had alluded to, was a randomized trial versus best supported care in second line patients, and had co-primary endpoints of overall survival and progression free survival. And I suspect that one of the reasons why it missed on its endpoints, statistically was by virtue of having a co-primary endpoint rather than to stay overall survival primary endpoint. Our trial in the second and third line setting is the single arm trial. So it's typical for a single arm pivotal trial. We're looking at response rate and response durability of the approval endpoints. And so, we don't expect there to be a significant impact of the KEYNOTE-240 trial on our study. It will all depend on what we see in terms of response rate activity and response durability. I think we did now and that it may raise some questions or some level of doubt amongst regulators. But in that regards also important to keep in mind that there is a second pembrolizumab Phase 3 trial in HCC that is in aging patient since that will certainly be interested in the readout of that trial. And I expect that regulators will be as well before really making any further determination or action on pembrolizumab indication.

Great. Thank you. If I may, I got a follow-up question on - it's probably a more bigger picture question on our overseas strategy for tislelizumab, the trials in the future. Given that Celgene support a way we probably get an Celgene support in the front, so is there any change that we should be aware of in the clinical development strategy in the overseas market? Thank you.

Sure, it's Eric again. Maybe I'll take the first shot at this and others can chime in late. One thing that's important to remember and I mentioned that during the presentation, operationally, even though we're collaborating with Celgene, BeiGene is sponsoring and operationalizing the vast majority of the global trials, as is. And so, in a scenario where the Celgene acquisition by BMS goes through, in that scenario we would likely get back global rights to the program. And in terms of strictly - the study program or operations from the study program, we'd expect that to have just modest impact of significant impact since we're operationalizing the best majority in trials at this point and maybe others can comment.

Yeah, I mean, Eric, the only thing I drove in is the reason we structured the deal that way as we've talked about we believe right now and there is a new opportunity from a clinical trial perspective to really run the China inclusive global registration trials. And that's what we're doing with PD-1 and that's how we've been able to become a leader. And it's helped us build and support this very large and capable clinical trial team. So that's why we're operationalizing so much of that deal. It's just made sense for us. And it's a capability of that we like for the rest of our portfolio and we like for partnerships. So as you said that's the way the deal was structured and in either scenario that comes out whether that deal goes through or doesn't go through, I think, we are very, very comfortable with our ability to bring this drug as effectively as possible to patients across the globe.

Okay. Thank very much, John and Eric. Thank you.

Thank you. Our next question comes from Katherine Xu with William Blair.

Yeah, hi, good morning or evening to everyone. So since - with regard to Keytruda and Opdivo have been approved and launch in China, and of course, price. Can you just comment on how the pricing has been effecting the sale of commercial launches so far. And how things that generally going for these - for those products and then how you're considering the pricing strategy for obinutuzumab. And then for tislelizumab is the BMS' Celgene deal goes through. Are you going to look for another partner? And finally, there are some antagonistic reports on BTK inhibitor and PD-1. I'm just curious about your views on that? You have the study, at least one study ongoing as well? Thank you.

Okay. We have to parse this out. So I think the first question was around just the pricing of both PD-1 and BTK in China and reimbursement. To that end - as you mentioned - we've seen in the last year or plus approval in launch of ibrutinib, Opdivo and Keytruda. And I think, from that perspective some of the PD-1 numbers are out and share, but I think that the growth has been well received the numbers that are public and from our perspective for continues to be strong growth for those multinational launches. And so I think that has been a success, clearly, there are not on national reimbursement at this point or the price in the ranges that we shared in that are public for historically investments. From the other perspective, ibrutinib has launched and is on national reimbursement. And it is priced at the very high end of that range, and so they have been able to achieve that and that should be reflected in the future in their commercial numbers. To us in terms of - I think, we've heard that the local companies are beginning to launch [Junsure] [ph] has that pricing. And then [event] [ph] has signaled that they'll price somewhere between [Junsure] [ph] and multinationals in public statements. From our perspective, we're less worried about the competitors or more worried about - but we understand where reimbursement needs to be through the historic data. And I think from BTK perspective, there is a clear signal and it was able to get on national reimbursement with high-end of that range. So I think that tells us something as we think about bringing our BTK to market there, which as we've always said, we feel is a molecule that will be better for patients. In terms of PD-1, I think, we view ourselves as needing the price to be reimbursed, and that's necessary. At the same point in time again, pricing when you are on reimbursement is only initiate when you have labeled. And the much more important issue is to work through to have the label in the appropriate settings for the big indications. And so that's the focus of our time and energy. I would also point out with our PD-1, we have reported our data and we're likely to have most attractive initial label, which is nice from a commercial perspective. In addition to that, we have manufactured with the partner that gives, I think, comfort around the quality of our product. And in addition to that, we're running trials in over 20 countries and we have those regulatory bodies, reviewing all of our data or safety data, a protocol, everything we're doing. So we have a lot of eyes, including regulators across the globe, including Celgene and their reputation, including BI and their reputation on everything we're doing with that product. And we do believe that that will give comfort to a lot of people about the quality of our products. And ultimately, we're running these global trials to get a global label and I think that provides an additional amount of validation, which helps us position our product. I do think, we are very different than the other alternatives and the opportunity exists, and I think that will be relatively clear as the next couple of years play out. That's a great question. So that was PD-1. The second question was would we look for another partner, I think, we always have discussions with everyone around everything we do, because that's our - we want to do what's best for patients, we want to do what's best for the assets and we want to do what's best for our investors. So of course, we'll entertain and have those conversations with people. Do we feel like that's necessary or the most desirable not necessarily. We're building global capabilities to launch our zanubrutinib anyway. And I think that will listen, but we feel like we can certainly get this approved. From the third perspective, you asked about the BTK and PD-1 combination work that we're doing. And you referred to something, I didn't quite hear to you clicked out. But maybe you can answer that, Eric.

Yeah - because - I'm sorry, maybe I'm not addressing this specific question, yes. But - in regard to our combination program, we've really focused that now on a couple of indications Richter's transformation, primarily CNS lymphoma. So we have sort of focused that on more aggressive histology, really no longer exploring that combination in the more end-to-end histology.

Thank you. Our next question comes from the Michael Schmidt with Guggenheim Partners.

Hi, everyone. This is Yige on for Michael. Thanks for taking our questions. We have a question on zanubrutinib. In the global Phase 2 front-line CLL study control arm is BR, bendamustine plus rituximab. However, chlorambucil plus obinutuzumab is used being the competitor trial. So since BR is a newer regimen and is more potent than chlorambucil plus obinutuzumab, does it raise the bar for the study to succeed? Thank you.

Yeah, it's Eric. Thanks for the question. Yeah, I will - the reason we chose BR as comparing regimen is that we wanted to study our drug candidates - as we could [Technical Difficulty] start to balance over in sicker patients. And so we really wanted our study to represent the population, so I will grant you that it's probably more effective [Technical Difficulty] chlorambucil plus obinutuzumab. But I guess I would also refer you to the results for the [Technical Difficulty] to BR that was presented at ASH and started for the Overwhelming statistically significant damage in PFS. And so, our assumption is that, our BTK inhibitor performance that has been in our earlier phase, we are sort of confident in that result.

Great. That's helpful. Thank you.

Sure.

Thank you. Our next question comes from Tyler Van Buren with Piper Jaffray.

Hey guys, thanks for taking the questions. Can you just speak a little bit more towards the launch preparations that still need to be done in terms of both the launches in China and a potential launch of zanu in the States. Eventually on that one slide, you have, I think 600 plus folks of the commercial team and going up into the right. So just curious, how many more people you need to add and how that could affect operating expenses since year-over-year it was I think up 2.7x so just from a modeling perspective it'll be helpful.

Here is Xiaobin Wu. For the commercial launch preparation in China - we have - as I said before we have built so all functions across the border from [tests lab] [ph] marketing. We have all marketing people in place and we have market access, the government has here and payers management, all people are in place and including training. We have marketing for brand planning in place. And we would continue to expand our footprint into the provincial hospitals. And currently we have 600 people. In the commercial we continue with that. By end of this year we will have other people - will hire additional people to cover 800 to 1,000 hospital where we have the - cover 80% of the oncology market. So that is for China. And for the U.S. we are talking near term - so zanubrutinib, we have hired senior leadership for the commercial arm so starting from the marketing, payers management, SFE training and all functions, market access.

Tyler this is Howard, just to…

Yeah, yeah.

All right, just on your expense question, we're obviously - the cost of sales reps in China that's a bit lower than United States, so you can just simply do the math and we're talking about adding 1,000s of people so we are not talking about 100 that should give you an idea, so it's not a dramatic increase.

Okay, that's helpful. And just the follow up was, Eric earlier in response to a question spoke about kind of the modest impact on the global clinical trial strategy if you guys regain full rights to tisle. Is it possible to quantify, what the increase in operating spend or in R&D might be if you guys do get rights back?

Maybe I'll take that. This is Howard. So we are - we've spoken about this in the past that - for example in the - we have 11 Phase 3 or potentially that is facing enabling study up ongoing. So for these studies, for operating 10 of them; Celgene, it's pain for some of these ongoing studies, in the form of reimbursement and R&D reimbursement. So these studies are - there are three studies that Celgene is reimbursing and they are actually the ones that were started earlier in the course of the program and so the - by the time, I mean, the close later this year, most of the study costs have been paid for. So there is some residual amount. There is some left for these studies, but that will also - we expect to get a termination fee if that happens. So I think the cost impact - there is the impact, but overall it's mostly picking up the additional cost of additional study that Celgene is running.

It's very helpful. Thanks for taking the questions.

Thank you. Our next question comes from Wangzhi Li with Ladenburg.

Hi, thanks for taking my questions. I want to expand to the John's point that brought likely the key for reimbursement in China. I guess, two question on that is we see recently the domestic Chinese companies doing to price their PD-1 at above $28,000 a year. And we know if you get into the national reimburse per drug list, usually there is a significant discount, 40% or more so do you think eventually we are talking about like - around $50,000 a year in the price and as before the kind of charity programs or what are your view on kind of price you can get in the reimbursement? So that is the first question. The second question is, just in terms of the process for getting reimbursement, getting into the national drug reimbursement drug list, looks like it's going to become more dynamic, right. So how the broad label or the timing of approval to affect your position in terms of getting reimbursement? And may add a one more is, do you have any insight so far on the off-label use of Keytruda and Opdivo since their approval a few months ago?

Sure. Thanks. Those are great questions. I'm not sure if I caught the second one exactly right. I think, I would go back to - there is very clear history and messaging and we've - I think we've tabulated that day and ensured in a way that's nicely presented, but it's public, the past three years of oncology drug reimbursement and the range that's associated with that from a pricing perspective. And I think we clearly view that is where this market winds up in a couple of years. We also view you cannot be reimbursed if you are off-label, because we have that experience with Celgene products. At this moment, the vast majority of use is off-label. We believe that there is a lot of use from that perspective in China. Although it's not our product we don't know, but the labels are in [small-match] [ph] indications at this point in time and the sales are quite substantial. So that is our belief. But I think when you go back to that pricing range from looking at facts and real data, it's clear and it's compelling and it's understandable and markets - products which are niche or products like ibrutinib, like REVLIMID can be at the high end of that range in products that are very big and very broadly used are probably not likely at the highest end of that range. They are probably more in the middle. So from that perspective, that's what we believe. I don't think that the [Junsure] [ph] pricing affects that at all. When you ask a drug to reduce its price, and have - these are drugs that have been historically come in at a very, very high levels, but may or may not be the case when you have a player like [Junsure] [ph] that comes in at a much lower level from day one. I actually think that, when you look at the data it's pretty clear. What matters is your cost per month. And yes, they haven't left and so enough room to negotiate if your paradigm is, you must have a 50% decrease. But when you start at a different point it's hard to believe that Merck, if they reduce their price 50% in this nationally reimbursed that the government would require a drug in the same class to be at a quarter of that price to be reimbursed. So I don't really follow the logic of, when you have a broad - so the things in the class that you are going to require a percentage, I'm not sure that's the right metric. I think the right metric is looking at the actual data and how does that work. And I think from the second perspective, it's very clear that no company has the capacity to serve even a substantial portion of this market so that isn't a scenario where the Chinese government nor the market dynamics would result in something that drives everybody to that price. So I think that's our view from that perspective. And again, in a world where you're reimbursed very substantially, which is the national reimbursement situation in China, when you are not on reimbursement it's all out-of-pocket. So getting to the label is, really, really what matters and it is expensive to get to the label and it's hard. And when you look at the trials that we're running, it's for CHL and for melanoma. These were small single arm trial, which are pretty easy for a biotech company to execute on. There is a long history of biotech companies that are small being able to do that. But when you look at the big indications, you are actually talking about comparator studies that are blinded, that are randomized that have 100's and 100's of patients in many, many sites, this is where it's very, very difficult to execute and to execute in a high quality fashion. And what we're asking all of these companies to do, ourselves included, is execute in a very, very broad program in a high quality fashion on multiple things at the same time and it's hard. It's hard for us. And when you look at the size of our organization, you look at the fact, half of our clinical teams in the United States with a lot of experience from companies like Genentech and the other half is, here in China on the ground and from the best sources, it's a very large, very highly capable team. But what we are talking about to work towards broad-label is very, very hard and it is not inexpensive, it has Celgene helping us. From that, historically, and we're the beneficiary of that but there is a lot to do from the execution perspective. So, I do think you should look at the historic data and where China is reimbursing drugs on a per monthly basis. You should think about this as a big class so it's probably not at the high-end of that range. And you should really spend time and energy trying to understand when people are going to get the labels that matter on that perspective. I didn't answer all of your questions.

Just to add two sentences, so Chinese government will start to update the NRDL in the next few months. And after that that will be dynamic adjustment, so ad hoc. So that will be second class dynamic adjustment.

I hope that answered most of your question, but if it didn't...

Yeah, that's very helpful. Maybe if I can, just one follow up is - I mean, so far looks like the Chinese government always choose one drug for one class in the list, but in PD-1 the application so broad, do you think it's possible to have multiple drug under reimbursement list for different indication or...

Hi, Wangzhi. Sorry. So if you look at the current - currently, for example, each of our inhibitors or three of them, they are all reimbursed.

Okay.

So it's yes.

Thank you. Our next question and our final question will come from [James Yang with Industrial Securities] [ph].

Hi, everyone. This is James for Industrial Securities. I have two questions. This is, why is all strategies for commercial teams, especially for PD-1 and for the PARP publishing for our solid tumor in the U.S. and the worldwide. And the next question is can we expect the [prefix] [ph] data goes out for the solid tumor just like the cHL. [Foreign Language] Thank you.

Howard?

Thank you, James. This is Howard. So the first question on our commercial strategy for PD-1 in solid tumors, we are - obviously, we need to wait until the - to see what happens and deal closes between us and Celgene. But assuming that we get the full worldwide rights back, I think we will have full options of - from going alone in some countries to partner completely with others in certain territories, and then in between some sort of a co-promotion. So all the options are open and it probably depends on different territories. We'll likely have different strategies depending on the local market. We have a [doctor] [ph] who has mentioned in opening remarks. We have been building in the U.S., where I would say very quite - it's early days, but we actually have very good high caliber folks onboard. So we're confident that we can build commercial team successfully in the U.S. And so, that's certainly is a consideration that - certainly is an option that we have. So we're - I think we do have I think lot of options. We'll make decisions specific to different countries. Regarding the solid tumor data that we're expecting, obviously, as you mentioned we expect to have some readouts this year. We are - so we have previously presented some of the data, Phase 2 in some indications in the past. So I think that should give you - that would provide early data points in this indication. So I think, hopefully, that answers your question. And we'd like thank everyone for joining us.

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