Thank you for joining the session. This is Ziyi Chen, China Healthcare Analyst, Goldman Sachs. And for this session with Everest, we have the President of Everest, Ian, joining us. To start with, Ian, we understand that there has been, in the past two years, you know, Everest been kind of pivoting from multiple therapeutic areas now, more focusing on renal diseases and focusing on some of the new technology platforms, including mRNA. So in the past two years, what have you learned about this kind of a new strategic pivoting, in terms of the organization, in terms of the for a biotech industry, set up in China, and also in, in terms of the operation-wise, you know, what, what you have learned in the past two years?
Thank you, Ziyi, and many thanks for the invitation again this year. Always happy to participate in these events. I think that's a very good question and one that we think about all the time. I think several things have changed since we set up the company and since we went public in 2020. I think the capital markets reality and our ability to access capital is different from four to five years ago. I think the China commercial model is probably also different, you know, for a lot of investors. And I think what we have decided to do is that we want to focus on therapeutic areas that meet the following criteria. Number one, significant amount of unmet medical needs. And by the way, unmet medical needs may be different in China versus the U.S.
I think we think we have the right level of expertise to figure out what the demands are in China. Number two, we want to play in areas that are not as competitive and as crowded. So, you know, we believe especially renal disease and also infectious disease meet those criteria. You know, whereas, you know, as, as you know, we got out of the oncology commercial space for the time being, we believe that is a much more competitive area, right? So number three, I think we also wanted to make sure that we are able to build a commercial team to tackle these therapeutic areas in a relatively efficient way, so because, you know, the capital markets reality means that we don't have the same access to capital that we had expected when we first started the company.
So I think it's really from these, you know, areas, these considerations, that we decided to go all in on the renal space and the infectious disease space. But at the same time, we also felt that the in-licensing model, if you were to focus on these areas and be, you know, pretty aggressive on meeting these high standards, it is a business case that makes sense. But to complement that, we felt that we need to set up our own discovery engine as well, which is, you know, an effort that we started about three years ago, that we enhanced with the licensing of the mRNA platform. And we're pivoting, you know, to therapeutic vaccines, after spending a couple years on the COVID-19 vaccine.
We think that combination of in-licensing and internal discovery, you know, is the formula that's worked in other parts of the world. We think it's also, you know, sets up the company well for sustainable growth.
Yeah. Well, just follow up to the follow up to the licensing models.
Mm-hmm.
'Cause there has been a lot of discussion around this kind of business model in China now. 'Cause starting back in 2018, 2017, I believe there has been a lot of companies looking into licensing models.
Mm-hmm.
getting assets from the U.S., from Europe, into China.
Mm-hmm.
Proved to be a very successful model.
Mm-hmm.
But now, in the environment, we see a lot of uncertainties in terms of geopolitics perspective.
Mm-hmm.
Does that affect then your collaboration with your partners? And how should we think about the licensing model, the China pricing environment, the profitability of this type of model in China for China biotech?
We, you know, I think the short answer is, we don't think so, right? But I recognize that, you know, our view, you know, there may be a selection bias, right? The people that we talk to are, you know, more likely to be less concerned about these sort of things, right? I think, at least the, you know, we just had a new partner, right? You know, Kezar Life Sciences, which that licensing deal was signed in September of last year. So in the thick of all of these, you know, new geopolitics, you know, realities, they had no concerns about, you know, partnering with us. For them, it's really two key rationales. Number one, working with a credible party that could help them accelerate the clinical enrollment of their phase III study or phase II- B study.
And I think, you know, they view us, you know, to fit that criteria. So, you know, there was, and there was also, you know, we are paying them, right? So I think that's perhaps less, you know, challenging. I do think, you know, the kind of conversation that we hear is that, hey, we wanna make sure that the supply chain, you know, can be independent. So that means, you know, at some level, to create supply chains that are independent of China. But on the other hand, I think it's also the same, right? You know, you wanna make sure that the supply chain for China may be, you know, set up a redundant, you know, options, if you're just sourcing from the, from the West.
Our cadence and the pace of discussions with potential partners has also changed, right? Because I think, you know, three years ago, we were talking to, you know, a lot of oncology companies and autoimmune companies. These days, we're pretty focused on what we speak to in the renal space. And also, you know, we're starting to talk to a lot more companies about what we're doing in mRNA and, you know, getting, but that's very different, right? That's collaborations and potentially platform level, you know, partnerships or type some kind of out-licensing type of discussion.
Got it. Well, it comes down to the renal disease.
Yep.
You got a first product that officially launched in March, so just about a month.
Mm-hmm.
Tell us a bit more about, you know, team buildup and access.
Sure. Yeah. Early days, but, you know, we are off to a good start. As you know, we had done quite a bit of preparation. IgA nephropathy, so, you know, Nefecon product for treating IgA nephropathy. And, you know, we believe that there are a lot more IgA nephropathy patients in China than there are in the US or in Europe where it's an orphan indication, right? So we've started about a year ago, working with the foundation to, in an effort to, create a patient and that, you know, at the time of the launch was about 23,000 patients. Not all of them are going to convert to, you know, prescribing patients, but we are working on converting these patients. Number two is that we have done two EAP programs. One, as you probably know, in Hainan Boao, right?
The second is when our product, Nefecon, was approved in Macau, which is also one of our territories. We started a second EAP to bring Chinese patients to Macau for treatment. In total, I think it was quite interesting. You know, we had probably about 1,000 patients sign up for both of these programs, and we treated about 200, about 150 in Boao. And that's important because we now have most of these patients, you know, who started on the EAP program about, you know, sort of a year ago, right? And it's really interesting for us that 92% of those Boao EAP patients have used their entire nine months of treatment course. And this involves, I mean, you know, obviously it's at a relatively high price.
They have to fly to Hainan three times, right, to, you know, get the drugs 'cause every time they can only get 3 months' supply, and the full course of treatment is 9 months. So we think that this is a very positive sign that, you know, clearly Nefecon is working for them, right? So, the formal launch in China, you know, we're focusing on a combination of online and offline strategies, online converting those 23,000 patients to prescribing patients and adding to those 23,000. And, you know, offline is the sort of the traditional method. We're still expanding the sales and marketing team, but, you know, we are engaging with KOLs. You know, we are about 400 hospitals. The way we get to the 400 is that in China, as you, as most of you probably know, IgA nephropathy is definitively diagnosed with a kidney biopsy.
In China, there are about 1,000 hospitals that are able to do kidney biopsies, right? So we think that is our core, you know, focus group of hospital. These all tend to be larger hospitals in cities and provinces. It's about 400 of what we believe are the most attractive to expand that to 600 to 800 and eventually to, you know, the entire, you know, 1,000. So, that combination of approach, you know, the traditional on-the-ground, right, sales reps, approach combined with the, the online, you know, we think is the, the right way to go, for this product prior to, you know, NRDL inclusion, right? So it's off to a good start. You know, I guess, you know, the, the first sign of, how we're doing, will be made public when we disclose our, mid-year results in August.
But I say we are, you know, we're at a place that we're, you know, pretty happy about. And of course, the, you know, the other part of the commercial, you know, effort right now is very much focused on preparing the company and the market for NRDL negotiations.
Got it. Well, you're showing, well, of course, you already got some of the patients in, you know, for early prescriptions.
Yeah.
If you look at a patient profile coming from the EAP and also coming from those early prescriptions, could you help us understand the profile of those patients?
Mm-hmm.
You know, it's early stage patients, at what stage, what kind of affordability we're talking about there? 'Cause currently, I think before they've been covered by national reimbursement, that's still pretty expensive drug in China.
Yeah. No, it is. It is. You know, arguably a lot more expensive than those drugs are in the U.S., right? Because it's mostly covered. So the EAP program, just as a reminder, it's priced at CNY 18,600, so roughly $2,500. You know, those 150 patients, the full data, this is done with one hospital, Ruijin Hospital in Shanghai. And the EAP program data will be published in a journal, but I can say that, you know, it's actually mostly younger patients, probably in their 30s and 40s and some in their 50s. I think those patients have, you know, both the financial wherewithal as well as the willingness and the interest in treating their disease aggressively.
Their eGFR, I would say CKD probably level 2 or 3. eGFR is a range from 30-90 mL/min. Most of them are sort of between 30-60 mL/min
Mm-hmm.
UPCR is probably, you know, the cutoff is 0.5 grams a day, but I would say probably more of them are over 1 gram.
Mm-hmm.
Yeah. So, I mean, it's pretty, you know, that has been our sort of core patient group, right? And clearly from the compliance track record, it shows that, you know, Nefecon is probably working pretty well for them.
Yeah. If we look at the age group, you know, in their 20s, 30s, 40s.
Mm-hmm.
CKD stage 2, 3.
Mm-hmm.
What percent of the total patient population we're talking about here in terms of number of patients in China addressable market for Nefecon?
Yeah. I mean, that's a very, very good question. And, you know, we have done a lot of work on this, but, you know, I think, you know, because there really hasn't been any, you know, drugs that are effective, right? So it's a little bit hard to say. So it's all modeling. What we are pretty certain about is that, you know, every year there are about between 300,000-350,000 kidney biopsies done. And we're also pretty certain that about 30%-35% of those kidney biopsies are diagnosed positive for IgA Nephropathy. So that means there are roughly 100,000 newly diagnosed patients. So what kind of patients will actually go to get a kidney biopsy? Well, you know, ordinarily these are patients who are of, maybe 0.75, maybe even a little bit higher, right?
You know, otherwise, you know, people don't wanna go for a.
Biopsy.
Very invasive procedure, right? So if you look at that and saying, you know, that's, you know, and patients, these are, you know, for Chinese patients, I think what we have seen in our phase III study as well as the wealth of, you know, academic data available, actually the disease progresses pretty fast for, you know, Chinese patients. That said, you know, it is chronic disease, right? So over time, we do think that, you know, our modeling is there about like, you know, 1-1.2 million patients who are definitively diagnosed, so they meet this criteria, right? But we think there are about 4-5 million patients. So, you know, 20% of the total, the others are not diagnosed. We don't know if they are not diagnosed and they actually also have these, you know, high levels of proteinuria.
but we hope that the fact that, you know, when they are, you know, when Nefecon, you know, with Nefecon on the market and with other products coming onto the market and more education and the marketing, and, you know, as you know, we're working on a Gd-IgA1, you know, diagnostic as well. The combination of all of these factors will, you know, will convert, will help us to bring more of these patients out. Yeah.
Sure. Well, given the size of the patient population in China and, what could potentially be the best market access strategy? Well, you mentioned about online, offline, you know, combination type of strategy in terms of penetration. And also we are thinking about potentially reimbursement coverage. So, what should potentially be the best timing to get into the national reimbursement? 'Cause we know that we're gonna have to compromise on the pricing side.
Yeah.
Getting more penetrations for the broader patient. How should we think about, you know, the best timing, best combination of that strategy?
Yeah. You know, we actually think it's important to try to get reimbursement as soon as possible. This is for a few reasons. I mean, you know, affordability, as you say, is an issue. So what we're doing now is we did launch at CNY 18,600, the same price as the EAP, but we are offering a patient assistance program. It's buy four, get one free. So it's essentially a, you know, 20% discount if you use the full course of treatment. So that's still 14,600. So it's still quite expensive for out-of-pocket.
Yeah.
You know, we do think that, you know, with reimbursement, you're looking at not only, you know, the price, the gross price declining rapidly, but the out-of-pocket pay for the patients declines significantly as well, right? So we think that's important to drive the number of, you know, patients. So, you know, look, I mean, we're doing everything you would expect us to be doing, you know, doing the pharmacoeconomic analysis, engaging with KOLs, all with a view of trying to have a successful negotiation with the national payer, towards the end of this year.
Got it.
Well, and another factor is really about, you know, getting to NRDL have a bit of a price cut.
Mm-hmm.
To potentially erode into the margin profile.
Mm-hmm.
This really hinges on, you know, how you're gonna negotiate with your partner in terms of supply and in terms of strengthening your gross profit margin.
Mm-hmm.
profile. So how should we think about that? Are we thinking about potentially local manufacturing for Nefecon going forward?
Yeah. I mean, supply is, it's something that we think about all the time and actually spend, you know, a lot of time on this, you know, as well. So, currently Nefecon is manufactured at a CDMO in the U.S. It's one of the largest in the world. You know, so we are partnered with the originator of the product, which is a Swedish company called Calliditas, you know? So Calliditas and us work together with the CDMO in, you know, helping us meet our supply needs. And for us, it's really twofold, right, that are important for us. Number one, to ensure the stability of supply.
Mm-hmm.
and to meet the volume that we expect the market, you know, requires in our territories. And number two is to ensure that we have, you know, a pathway to reducing the COGS for us as well, right? So, you know, I think there are a number of efforts underway. Number one, at our current CDMO, they are working on a scale-up of the manufacturing process where, you know, I think the capacity will probably quadruple from where it is currently, and COGS will probably decline by about 25%.
Mm-hmm.
Okay? That scale-up process is going to. We expect it to be, you know, approved by the U.S. FDA before the end of this year, probably even in the third quarter of this year. Then we'll, you know, very quickly do a, you know, SNDA in China and, you know, get this new scale-up, you know, process, you know, added. Calliditas has been working on a second source and a third source, you know, also in the U.S. and in Europe. We are, of course, thinking about local manufacturing options.
Right.
And, you know, actually at the moment, our most advanced option that we will probably execute on is actually working with a, you know, one of the most credible, you know, China-based CDMOs, because they actually have quite a bit of expertise, not all of the expertise, but part of the expertise, in helping us, you know, do this. And, you know, they can quite frankly move a lot faster than.
Mm-hmm.
Any of their, you know, global, counterparts. So it's all of these, you know, efforts together that we'll be undertaking to ensure that we, you know, have the supply for the volume that we expect in our territories. And, you know, our gross margin, you know, our guidance has been 80%, right?
Right.
And I think we, you know, with all of these efforts, we can get to 80%. And this, by the way, is inclusive of our royalty burden, burden to Calliditas, which increases, right? It's, it's ratchet up. It starts at 9%, you know, and it ratchets up. But we believe that, you know, given our sales, you know, assumptions, right, you know, we can, we can get to, you know, our, our long-term, gross margin guidance is 80%. You know, right now we're probably above that.
Got it. Well, how should we think about the IgA nephropathy space competition?
Mm-hmm.
'Cause, increasingly we see, you know, there has been global biotech, China biotech, pharma are working on the pipeline for IgA nephropathy. Apparently, you know, this is a really big market and, there has been a lot of new development here. So when you think about the potential competition, when you think about how you're gonna expand your pipeline for IgA nephropathy, so how, how is the future strategy for that?
Yeah. I mean, I think that's something that we, you know, think about all the time. And, you know, I think we probably, you know, spoken to most of the players in the field. We do think that this is a disease that's amenable for multiple lines of therapies, and potential combination therapies, right? You know, to achieve the desired efficacy. You know, if you can stabilize the decline of kidney function for as long as possible so that you don't end up in, you know, going into end-stage renal disease, that would be a desired outcome, right? So I do think that there are a number of mechanisms that make sense, right?
So this is a disease that we believe starts in the gut with the overproduction of an aberrant form of Gd-IgA1, galactose-deficient IgA1, that forms immune complexes that's, you know, drives autoimmune effect and that manifests primarily in the kidney. So, you know, pathways to reduce the B-cell mediated immune response also makes a lot of sense, right? But I think, you know, for us, Nefecon is really the only product that acts at the origin of the product. This is also why, by the way, our diagnostics strategy is so important, right?
Yeah.
Because if you believe that Gd-IgA1 is the primary culprit for IgA nephropathy, if we can demonstrate reductions of Gd-IgA1, you know, that should be a very good marker for disease control, right? And it can also bring out patients who don't want to go through a kidney biopsy, but they can test their Gd-IgA1 levels, right? You know, we can suspect that they have a high likelihood that they have, you know, IgA nephropathy. So, but I think the competition in China is probably a few years behind the global, right? And it's, let's go, just go through these, right? You know, so number one, the ERAs, right? sparsentan is not in China. atrasentan is owned by Novartis. sparsentan data, I think, left a lot to be desired.
It's unclear if atrasentan is going to be better.
Mm-hmm.
In any case, those two products don't have IP protection in China. So as soon as they launch, there may be generics that come onto the market. So it's questionable and interesting to see what Novartis wants to do with atrasentan. And number two, the anti-APRIL, which we like, right? But we think the right product is one that can be dosed subcu and can be dosed at home and probably, you know, ideally once a month, but you know, at least every two weeks.
Yeah.
I think that, you know, takes some of the competitors out of that equation. Right now, I think they're being used because there are no other drugs.
Mm-hmm.
But I think over time, you know, they will, we don't think they will be the preferred option. The only product that fits the criteria that I mentioned potentially is Alpine's, you know, product. But that's also one of the earliest, you know, anti-APRILs, right?
Yeah.
So we'll see. I mean, you know, the BION-1301 that Novartis acquired, you know, actually, uses a lot of antibody. It's 1 gram of antibody for 1 month. So the COGS is also, you know, quite high, right? So there are, you know, every product is a little bit different, but we like the anti-APRIL approach. The complement inhibitors, I think maybe a little bit, you know, the therapeutic window is a question. The efficacy that we saw from Novartis is, I would say, marginal, but the safety, you know, signal is quite significant. There's also a pricing issue because, you know, clearly globally they want to maintain the pricing for PNH.
Mm-hmm. Got it. Got it. Well, I think there's probably enough question for IgA nephropathy.
Yeah.
Let's talk a little bit about other products in your pipeline.
Yeah.
Portfolio. So antibiotics.
Mm-hmm.
I think this is one of the areas, you know, a lot of times being underestimated.
Yeah.
the potential in China.
Mm-hmm.
Particularly, you know, the commercialization has been really impressive actually since second half 2023 when you launched.
Mm-hmm.
The products. So could you please update a bit more about, you know, how you have been commercializing the products moving forward?
Mm-hmm.
How should we think about the antibiotics, anti-infection portfolio strategy moving forward?
Yeah. No, thanks. And, you know, we fully agree. The dynamics in China are very different from the US. And it really starts with the medical needs, right?
Right.
Just the level of multi-drug resistant infections is just much higher in China, you know? And that, you know, drives the demand for products that can actually treat those infections. And this is why, you know, products like, you know, Avycaz, you know, and the polymyxins actually have a very decent price.
Mm-hmm.
in China. Our pricing for eravacycline is CNY 5,500 , you know, a day. That's $800. That's 4x the level in the US.
Right.
This may be the only product where that dynamic holds true. Most of the time is reversed and maybe, you know, much more, right? Much, much lower prices, much lower in China. And so, you know, look, and we're, again, we have a very focused commercial strategy. We're only focused on the top 300 hospital entity territories. It's really 100 hospitals that will get the lion's share of our, you know, focus and marketing. And these are some of the largest hospitals that can really drive a lot of volume. Look, I mean, you know, Pfizer's Avycaz, right? You know, I think they stayed out of the NRDL. Their pricing is, you know, relatively, you know, it's a little bit lower than us.
Mm-hmm.
But also pretty high. They've demonstrated that you can have a reasonable business, you know, that there, right? You know, but of course for us, we do believe that we want to make sure that patients more broadly can have access to this product. But we're not going to build our the sales team to do it ourselves, right? So I think we did talk about using contract sales organizations to help us go broader. And that is a strategy that we are executing on right now. I think the first CSO came online about a month ago and we may bring on another for this year.
Got it. Got it. Well, lastly, I think, you know, there's one technological platform you have is on mRNA, right? We have been working on mRNA for COVID.
Yeah.
a couple of years ago. And now, you know, the post-COVID era, how should we think about your mRNA platform?
Yeah.
And particularly not only you have R&D platform, but also, you know, facilities for manufacturing. So how should we think about you're gonna be allocating resources, utilizing all those investments into the facilities, into those, R&D capabilities?
Yeah. We have a lot of investments that are sunk cost.
Yeah.
That's already, you know, made, you know, for COVID, right? Today, I think, you know, the COVID experience is really that we were actually able to validate the mRNA platform. We know it works, right? We know we can develop a COVID-19 vaccine that drives the similar amounts of, you know, immunogenicity and safety as common RNA. But the efforts over the last 18 months has really pivoted entirely to therapeutic vaccines. And that's going quite well. You know, we're going to the clinics, right, in the second half of this year with our first mRNA program. And it is a personalized cancer vaccine, neoantigen, you know, program. So next year this time, we should have some clinical data to talk about, right? And that's pretty exciting. At the same time, I think we're working on a couple of additional programs.
You know, what's really exciting to us is, you know, our efforts in the in vivo CAR-T space. So, you know, what we are using, you know, we've not disclosed the targets, but you can assume that we will be first going after the more validated CAR-T targets. But what we are doing is using antibodies conjugated to LNPs to deliver mRNA coding CAR, right? With the idea of being able to, you know, turn T- cells into CAR-T cells in vivo, right? So that's pretty exciting. We can do this in mice pretty well.
Mm-hmm.
We need to be able to demonstrate this in non-human primates. If we're able to do that, which we believe will be the end of this year, that could unlock, you know, a significant amount of optionality for us.
Got it. So August, we're gonna have the Nefecon first set of commercial data coming out.
Yep.
Second half of the year, next six months, we're gonna have more data coming out from the mRNA platform. Of course, more commercial execution.
That's it.
With that, thank you so much, Ian.
Thank you very much.
Thank you.