Earnings Call: H1 2020

Aug 18, 2020

Okay. Thank you for your patience, ladies and gentlemen. Good morning, ladies and gentlemen. Thank you for joining Hua Medicine's 2020 interim results investor presentation, hosted by Institutional Capital Advisory, the company's investor relations advisor. On the call today are Dr. Li Chen, founder, Chief Executive Officer, Chief Scientific Officer, and Executive Director, and Mr. George Lin, JD, Chief Financial Officer and Executive Director, Ms. Emily Ye, Director of Corporate Finance. Dr. Li Chen will give an overview of the company's highlights, including clinical trials and recognitions. He will also share updates regarding Hua Medicine's R&D pipeline. Mr. George Lin, JD, will go through the company's financials and analysis. Dr. Li Chen, Mr. George Lin, and Ms. Emily Ye will be available to answer your questions during the Q&A session that follows. During the presentation, you will be able to submit your questions in written format in Zoom's chat box or Q&A channel. Alternatively, you could virtually raise your hand on Zoom for an opportunity to speak with the management team during the Q&A session. I will remind you that this call may contain forward-looking statements. For details, please refer to the disclaimer on today's presentation deck. With that, I will now turn the call over to Dr. Chen. Dr. Chen, please go ahead. Thank you. Thank you, everyone. Good morning. Good evening. I am very excited to share Hua Medicine's progress in the last six months or so. We have been focused on diabetes, and we know it is a silent killer and has a major impact on the diabetes complications, not only just the blood glucose fluctuation, which lead to very serious medical conditions, diabetes, kidney disease, cardiovascular disease, foot ulcer, loss your body functions. It is also lack of a good way of treat diabetes, not only from the medical point of view, but also from the medical practice. Over the last 10 years, Hua Medicine has been focused on to resolve this issue and working with our partners, Roche, WuXi AppTec, Tigermed, Decino, and Covance and so on, to build this powerful engine to drive our product discovery and development. You have been reported over the last 12 months or so, very exciting results from our regulatory filing and registration trial, HMM0301 and HMM0302. All this very important aspect have been showing dorzagliatin has the potential to improve the glucose sensitivity and the protection of the beta cell, at the same time, reduce the insulin resistance. This is the fundamental underlying cause of all type 2 diabetes. Now we have a very good solution to it. Of course, things get me cannot sleep at night is how can we make this medical innovation to the hands of our physician, and let our patient benefit in the broader way. We are dealing with 100 million plus diabetes in China with the poor awareness and a control situation. We have been dealing with over 400 million diabetics around the world. How can Hua Medicine be able to bring this medical innovation to our patient, let them benefit from this in a fast, broader way? Well, that apparently has resolved with the signing a contract with Bayer. This established the partnership that we can advance this medical innovation to our patient in the border in a fast way in China. This is, again, I think we spent 10 years shooting for cure of diabetes, and I am very glad that Bayer share the common value on the same way, because Bayer want to develop China into a diabetes-free condition. We also share very common practice, that is follow the high standard, high quality, and then create a high value. At the same time, we developing the first-in-class diabetes medicine shooting for beta cell protection, and Bayer has been able to advance acarbose as the best seller in China over the last 10 years. We are working glucose homeostasis, and Bayer recently just brought in a technology allow us to better understand the diabetic situation and the blood glucose fluctuation, and then managing the timing range in the clinical practice. This gave us the confidence that we can, working together with Bayer, and also our shared common connection, the Chinese KOLs, Dr. Yang Ying, Dr. Zhu Dalong, Dr. Li Xiaoyi, who are the leaders to help us to understand the medical needs, to build the understanding around the medical community, and able to drive this great medicine. Then having Bayer as a powerful navigation system, be able to guide this powerful missile targeted on a diabetes-free nation. That is so important and so exciting to me. Then I think, George will tell you more about the deals and deal structures on this, but I just want to say this, again, reflecting the philosophy in Hua Medicine, that is, we innovate healthcare, not only developing a novel concept and then getting to the novel breakthrough technology in the medicine, but also leading the way of the business development and the business commercial model. Hua Medicine established with ourself using the VIC model, the VIC model plus the high quality in our operation. Now, when we working with Bayer, now if you want to see the slide, the slide number 4 now. We working with Bayer. This is the shared profit model. Very different from the common out-licensing model. We are shooting for a long-term benefit on how Hua Medicine working with Bayer together as a partner. We continue be the MAH holder. We will take care of the manufacturing, drug distribution channel, and then Bayer will use this vast force and a network in the medical community working together with Hua Medicine's team, where we have been working with over 100 plus clinical science and developing dorzagliatin, and be precisionally position the medical needs in China. Then in this way, we will collectively generate profit for both company for the long term. Right. So I will not go into all the deals and the terms. This is very exciting, I think, where we are all looking forward at our signing ceremony, and then the marriage will go on, and then will be a happy marriage. Many of you may think about why I am so optimistic and so happy, excited about this partnership. Some of you probably already know Bayer is main, then most importantly, Bayer in China, in the medical care, especially in the primary care area, has established itself as the best partner for Hua Medicine. First of all, you can see that Bayer has established their product. Here we talk about Glucobay, also their other hypertension product, then aspirin, the three A's, used to be the top seller in China. Then if you just look at the diabetes area, then in the last 20 years or so, if you see that Glucobay have accumulated treated over 30 million patients, then they have over CNY 40 billion net sale in the last 10 years. That's where, I mean, the long term, the shared profit, where Hua and Bayer can join again. But that's not just the profit. Think about 13,000 hospital, over 10,000 retail pharmacy. That make our China patients be able to reach access this innovation. That's where our patient will benefit from the medical innovation to maintain their health. What is more important is as we're moving along, as we fully establish the glucose homeostasis control concept using dorzagliatin in the clinic, we are working on trying to control our patients' blood glucose in the range where is the healthy defined homeostatic range. The best technology to do that, to mirror that, to control that, is the way using continuous glucose monitoring technology then really addressing the time that is not in the range, that's bad. Then we are going to address that. Both Bayer and Hua Medicine share the common understanding that will reduce the peak of the meal and reduce the trough when you are fasted and hungry. Okay? That's the healthy range, that's the way to prevent all the diabetic complications then reduce the burden of the healthcare, and also very important, the harmless to our life. So I think this is a very important milestone in my Hua Medicine history. Similarly, I think it's also very important to our partner, Bayer, that after their success with the Glucobay, then they are now working with a super Glucobay, not only be able to control the blood glucose fluctuation, but also treat the underlying cause of the disease then really be able to do the diabetes free. Now, let me give you a quick update, on slide 6, what we have done in the first half of the year. Very important, I think, this is three major breakthroughs or advancement on this first half. First of all, we have two clinical phase III trials, the pivotal registration trial ongoing in China. Then we have been able to complete the HMM0301, the monotherapy treat drug-naive patients in China. The whole 52-week study during the COVID condition, and with very high quality of the trial management and excellent data and results, which we have been reported in the last couple of months. Then also, we have successfully completed the first half of this HMM0302 trial, which is the double-blind, placebo-controlled study on metformin failed type 2 diabetes patients. Adding our drug and showing the drug is superior over metformin used alone, then to the patients who had used the full dose, 1.5 to 2 gram of metformin, still cannot control their blood glucose. Now they can. What is, to me, very important is when I talk to the physician, go to the hospital, and the physician asking me, "Li," the patient's asking, "When your drug can be on the market, and then they can continue to use it." Because once they get out of the treatment, when they're using other drug add-on to metformin, it's hard to control the blood glucose. That's why Hua team is working very hard day and night with a high standard in driving our clinical study and then working on the regulatory paths, and hopefully we can get the drug approved and our patient can use it. Now, the two pivotal trial is doing very well, and then we expect that in third quarter, we complete the patient in-hospital study, and then we spend some time and clean up the data, and then give you the report on the 52-week result on 302, which I expect and continue to be excellent. The other point I think is very important is early this year, we reported that in our HMM0110 study, and this is the study we conducted in the chronic kidney disease at an end stage where the eGFR is less than 15%, and this is the patient has no drug treatment, and then only way to maintain their life is through the dialysis. Very late stage of the patients. As you know, all the anti-diabetic therapy, oral or injectable, have a hard time to control the blood glucose for the diabetics who has kidney dysfunction. Dorzagliatin have shown that in the end stage kidney disease patients compare with the paired health volunteers, and its pharmacokinetic property maintain the same, which means for all stage of diabetic kidney disease patients, dorzagliatin can help them control their blood glucose level. This is very important because in China, at least 30% of the diabetics have the kidney dysfunction. In the U.S., it's roughly over 40% of the diabetic has the kidney dysfunction. There's no drug can be effectively managing the diabetic kidney function and then control their blood glucose. That's where Hua Medicine will launch in the future, the clinical studies, and then focus on this area, and then able to help patients desperately need a good way to control blood glucose. Also along the line of life cycle management, as you already know, dorzagliatin fix the underlying cause of the disease and then can work together with the existing therapy, and then creating the synergy of the different therapies based on the different mechanisms of action, and then collectively provide a better care to the patients. We have showing you the HMM0111, which is the combination of sitagliptin, Januvia, still currently the best seller of oral antidiabetics globally. We see the benefit not only in the blood glucose control, but also improve the beta cell function and then endogenous GLP-1. Now, consider that the opportunity to have a combination of dorzagliatin and sitagliptin orally as a GLP-1 therapy. That is where the uniqueness of this drug, the ability in combination with existing therapies, and then make it better, make it more beneficial for our patients. The other very important clinical advancement is obviously the success in combination with empagliflozin, a leading SGLT2 inhibitor for treating diabetes. Recently, the medical community and U.S. ADA has started recommending SGLT2 inhibitors to be used potentially even in the first line to treat diabetes patients with cardiovascular risk. Giving the mechanism of actions, SGLT2 certainly has its potential risks in the acidic ketoacidosis and other infections, and especially in the blood glucose control area. Now, working with dorzagliatin, the blood glucose control synergy has very well established in the patients in the U.S. Also, very importantly, the synergy of balancing the insulin and the glucagon secretion in the patients who use the SGLT2 inhibitors that rising the glucagon that is leading to the acidic ketoacidosis. Very important clinical findings, very important advance in terms of understanding the mechanism of action and then creating a synergy with a novel therapy moving forward. The three area in the pivotal trial, we are making huge progress and excellent data supporting the drug for the NDA filing and approval. Excellent opportunity in the diabetes kidney disease and provide a unique solution for those patients with the blood glucose control. Third, dorzagliatin working with the existing leaders in the diabetes area, bring in additional benefit to the patients that making them have a better blood glucose control and working away from the side effects. That keep us very excited. Slide seven, let us just remind you, our mission is to cure diabetes through restore the glucose sensing function and repair the glucose homeostasis, and keep the blood glucose fluctuation within the healthy range so that we can prevent and stop the progression of the disease and prevent it advancing to the diabetes complication. Timing in range technology certainly is add on benefit and is very important for us. Slide number eight is basically telling you where as we developing dorzagliatin, we always keep in mind why we need dorzagliatin and how this is clinically differentiated from existing therapy. This is how in our last 12 months, the data showing that those questions has been addressed by the very solid clinical study results. Also now, I think with the joint force from Bayer and bringing the continued blood glucose monitoring and also addressing time in range, we will all be able to provide a comprehensive solution in the diabetes care. Now, slide number nine showing that our current pipelines and how dorzagliatin alone or through the combination with existing therapies, and helping our patients in a broad way, right? Not only this, the trials we have been showing and additional trials, combination with GLP-1, insulin, and PPAR and AGIs are in the planning. Soon after we complete 302 clinical operation, we will start launching our new clinical studies. But that is not the only part of dorzagliatin. Consider in the impaired glucose tolerance and in pre-diabetic patients, there is significant defect on the glucokinase. Repairing their glucokinase function will have a prevention opportunity to prevent those pre-diabetics advancing to diabetes situation. That is the treatment of IGT. Who has the experience to get IGT as an indication approved in China? It is Bayer. As a matter of fact, Bayer got acarbose approved as an IGT drug, and then later on as a type 2 diabetes drug. Our KOL, Dr. Yang Ming, is a part of that process. We are very happy that we are able to again join force to expand the horizon where dorzagliatin is just a diabetes therapy, but also it is a technology that allows us to advance the diabetes care. Again, slide number 10 shows the portfolios. You can see that the plan is ongoing, and we will report to you more about the progress on that. Again, you can see I am very excited about our progress in the clinical study, further validating dorzagliatin as a novel therapy with a novel mechanism and formulation able to address the underlying cause of the disease and then bring the benefit to the patients. Even broader when we are working together and in combination with the existing anti-diabetics, anti-dyslipidemia and metabolic syndrome, and then eventually can continue to expand to the area in the hypertension and cardiovascular. It is a platform that Hua Medicine has been established and has through the clinical study, further again, delivered on what we have said, in this area. Obviously, it is a great milestone for Hua Medicine that can partner with Bayer and then bring the medical innovation to our patients in China and the rest of the world faster and more effective. I will stop here and then let George give you an update on our financial situation, and then we can answer your questions. Thank you. Thank you again. Great. Thanks, Dr. Chen. I will now provide the quick summary of the first half financial results. This will be rather quick. We ended cash for the period at RMB949 million, as contrasted with RMB1.1 billion as of year-end 2019. Net cash used in operating activities was approximately RMB167 million, of which about RMB91.3 million was used for R&D purposes. Administrative expenses comprised the second-largest expenditure of RMB76 million. Next slide. Loss before tax was RMB173 million for the period, as contrasted with RMB235 million for the same period last year. R&D expenses was about RMB112 million in the first half of 2020, compared to RMB166 million for the same period last year. The decline in expenses can be attributed to 2 principle factors. One is winding down of both our phase III trials as we reduced also expenses from CMC-related costs that were incurred in the first half of 2019. Next slide. Administrative expenses was CNY 66 million in the first half of 2020, as compared to CNY 74 million in the first half of 2019. A decrease in share-based compensation and consulting fee in 2020 are the principal factors for the decline of administrative expenses in 2020, adjusted by a corresponding rental increase as we establish our global headquarters and R&D center in Shanghai this year. For the expected forecast, it is fairly consistent with what we have told you. We have had some cost savings, but our expected cash burn for the second half of 2020 will be approximately RMB 450 million. This partnership that we just announced will definitely, in a very positive way, impact our financials going forward. Four takeaways that you really should think about how this partnership really impacts us. From the very beginning, right? There will be a non-refundable, non-dilutive cash injection of RMB 300 million that we will receive this year. That is the first easy thing. That would increase our cash position back up. We have a huge cost savings, and it is due to the massive investment that Bayer is going to put into this partnership by the fact that we no longer will have to go and spend a lot of money in building our own sales force from the ground up and covering these 13,000 hospitals, this massive group of retail pharmacies. These are people that are proven at Bayer. They bear all the cost of that. That will be completely eliminated from us. One of the big reasons why we are so excited about choosing the right partner is somebody that has done it before and has had a drug that, in 2019, had sales in excess of RMB 5 billion and total sales in the last 10 years alone of RMB 40 billion. Of which, if you think about our drug as being a version 2.0 of Glucobay, a better version of what they have done, they have generated RMB 40 billion of cash over the last 10 years. We get 50% starting from day one of that, and it would be adjusted as normal contract for commercial agreements. We are the owner of this compound, and we are investing in the additional enhancements through labels. There is another RMB 4.1 billion of milestones up for play for us. If you think about our company, the RMB 4.1 billion of milestones, what would they be? They would be obviously for very simple things, which are low-hanging fruit of approval milestones, also commercial milestones, and other label expansions with these various combinations. Those all seem very achievable given what you have seen of our execution abilities. We have already talked about it. The big point is actually the 50% of all the future upside. If you think about our drug as being the first in class with this novel concept, third generation, it is very exciting from that perspective that we do have a very long-term agreement with Bayer, who actually has been selling Glucobay as a generic drug and was able to achieve such massive sales. This is something that is of high value to us. I think with that, we will conclude the remarks from management and maybe leave the remaining time for any Q&A. Okay. Thanks, Dr. Chen and Mr. Lin. This concludes our prepared remarks. We will open the call up for Q&A. Dear investors and analysts, feel free to submit your questions in written format in Zoom's chat box or Q&A channel, or you could virtually raise your hand on Zoom for an opportunity to speak with the management team during this Q&A session. I see from the audience that we have two questions. I will allow Ziyi Chen from Goldman Sachs to raise his questions. Ziyi, could you hear us? Yes. Can you hear me? Yes. Great. Thank you very much for taking my questions, and congratulations to Hua Medicine, Dr. Chen, and George on this great partnership with Bayer. I think this is more like a new milestone for the company to move into the next stage. A few questions, trying to get more sense on this deal. First of all, in terms of revenue split, because you mentioned in the announcement that the sales percentage will be adjusted. Going forward when the sales is going to ramp up, for Hua's part, will that percentage is going to be bigger than 50%, or it is going to be smaller? Yeah. That's a very important point, and we are bound by confidentiality, so I don't want them suing us the second day after we announce. Right. It starts with 50%. The idea is they will make that commitment. It was very important for us that they commit to a certain number of army and sales force, right, which they have, and they know. They know how to go to the hospital. That would be a big cost for us, especially the first couple years. So they would bear that cost, and in return, we would give them 50%, and then we would bear all the other costs. We're the owner, right? Dr. Chen is the MAH holder. So we have to invest in our baby, if you will, all the label expansion. We know what to do with that. That's our expertise. So we bear those costs as well as manufacturing, and we get 50%. The view for all these commercial agreements, without spelling out more, is as the owner. That's the key. We're the owner here of the compound. We're making investments and deciding how to expand and enhance this over the next 10 plus years of this agreement, right? As it increases, the owner typically would get more of the incremental revenues enhanced because we are the ones investing in it, and we are actually the owner. So I'll pretty much leave it at that, but that's fairly consistent with commercial arrangements as opposed to some of these other rights that other companies are doing where they in-license China rights exclusively, and they handle everything. That's a different situation. Effectively, we are renting their sales force, but the partnership is that we will leverage all of their know-how and all of their access and their reputation, all of that stuff. The Bayer logo will be right there next to ours on the package. All of that will just really eliminate a big execution and other sort of risks that a small company like Hua Medicine would face without such a partner. Thank you, George. Just to follow up here, because you mentioned that Bayer have a very strong commitment to keep the team size and expand the commercial team for dorzagliatin. Can I get a sense of how big the team is for now? Because the reason I am asking is that Glucobay has been cut. The price of Glucobay has been cut significantly in the volume-based procurement. I guess, there potentially be some team changes in the first half. Trying to have a better understanding of the team size and how that team is going to expand over the next few years. Very good question. Dr. Chen's number one question with the numerous meetings that we had. The reality is it will for sure be impacted. They are a rational organization. Acarbose pricing was cut significantly. What is important, though, is not their current size. What is important is actually probably about 6 months before we launch, what their size will be. The agreement is very clear about the sort of commitment. We have kind of given people a sense of what kind of size we would target our own sales force and when we were talking with people, right? Initially, before reimbursement and you have to go around and access all these hospitals. We would be doing that from scratch. They already have these access. What is in the agreement is that they will commit to a specific number, and that number was bigger than we would be willing to spend for our own, and they know how to do it. They are completely incentivized to launch this drug in the proper way. They are a big pharma. They are not looking for small number incremental sales. They see this as something that will certainly be bigger than Glucobay. What gives them that confidence is our shared KOL and shared mission, right? Having Wenying Yang as the person who made acarbose number one, having run that SMART trial in 2011 and published it and really proving that this drug really works in China, is what gave them that confidence, which we really love. That is the essence of this partner. I just want to add a comment on this. Think about when we work with WuXi, right? Over the years, the capability of having our APIs and then products supporting phase I, II to where we are now supporting the commercialization. The capability expansion is followed very well with our market projection. Again, that is another very important synergy that Bayer have is all the know-hows and capability in the fields. The connections over the KOLs, key opinion leaders, very important. Their brand name, very well recognized with our leaders in the diabetes and endocrines community. I just hear my news to our investigator group last night. Everyone just say, "Ha, well, that is the best way," right? Because with the reputations and understanding and it is a lot of things, so you can work together. That's where I think the expectations from our investigators and the physicians. Remember, we have 110 clinical sites around China, and the investigators are the local leaders in diabetes and endocrinology. That's where I think the synergy come together. Most importantly, the benefit that we generate and create are going to be shared among ourselves, and the bigger we go, both party benefit more. This is just an excellent business model. I think the way in this environment, in the diabetes area, in the primary care, where the major market leaders come from the foreign companies, multinationals. Now with this Fortune 500 company, with Hua Medicine, and just like we have WuXi on our back in the manufacturing and technology development. This is just a great win-win opportunity. I guess, Zhi, again, to add on this. It's so important to know this is that one of the key things as an investor of Hua Medicine, if we can do what we're going to do, then we would need to go sell. You just look at this slide, right? 13,000 hospitals, 10,000 plus retail pharmacies. Over the last 20 years, they've been selling this drug with the Bayer logo. With acarbose, with Wenying Yang, and all these conferences. For us to kind of replicate that would be very, very difficult. Even if we could do it just by physical activity and covering, and showing that our people were doing it, would you have that sort of same impact as Bayer? The answer is definitely not. If you look at another great company in China focused on diabetes, Gan & Lee, right? They do insulin. It's a great company, but that company, its revenue is still not $3 billion in sales, I don't think, in 2019, which was actually the sales of acarbose in 2009. So you just think about that muscle and power that we have. From them in the agreement was that in time for the launch, we definitely need them to help us establish that sales force to go. We don't really need it right now. In fact, you need it right now, you have all these people that are not really doing anything. We haven't submitted the NDA. But definitely in preparation for a great launch to overtake the trajectory of acarbose, and to be the most successful launch ever in China. They are very incentivized, and they have the economics to get it, but we will too, which is what, we're very long, I guess, long-term, very greedy with this deal with now the commercialization risk effectively removed. When I was a banker, I would drop this discount rate on this company tremendously because of this deal. From our perspective, that's really exciting. Thank you. Thank you so much. A final question, a small one, is more about pricing. When it comes to pricing after we launch it, we are trying to get access to national reimbursement list. Who is going to have the final say on the pricing? Is it going to be Hua or is it going to be Bayer? Well, again, it is confidential. It is not in the press release, but as the owner, as the MAH, and just from the fact that this is a commercial contract, you would think that we would be smart enough, and then you would be correct in thinking that. We would never agree to a price that would not be profitable for us. As the manufacturer and as the owner, we just would not do that. Both sides are very incentivized to price this properly, and that was a lot of discussion. But at the end, as the owner, you would think that, if push came to shove, that would be an important thing for us. Got it. Thank you so much. It will be very collaborative. I think initially- Yeah There's two ways to think about that to me. The initial price, which obviously I don't think there'll be a fight about that. It's when the third party, the government comes in with the NRDL, and then that's when the pressure comes and that comes with all pharmaceutical companies in China. But as the owner, and that's why Dr. Li Chen insisted on being the MAH owner and we bear some of the cost associated with that, but we're not going to give up that. That would also impact global pricing implications for us in our view. It's a very important point. Yeah, I think very important that Hua Medicine as a leader of a China innovation company and also bring the benefit to the Chinese patients with the global first-in-class launch in China. That's very important to our people, to our government. The most important thing at the end of the day is whether you can quickly expand the patient population that getting the treatment. Then that's where for the primary care, think initially, and then we have the price strategy, and then once we get an NRDL, that's another way of doing that, considering this is the, in our business term, and then this opportunity. But this is over next 50 years within our patent life. It's a lot of things that we can really build up. Then actually is now is in action, and that's what I'm getting excited about this. It's not on the paper anymore. It's in action with the partner. Dr. Li Chen, there's a question, and it kind of leads to this, from one of our investors that, how does Bayer fit into the long-term plan for customized diabetes care? That's a great question and just how they think about it holistically. Even before the announcement of our deal, they had actually done a medical device deal that Dr. Li Chen was talking about with WaveForm. WaveForm provides a medical device for continuous glucose monitoring. If you think about it, especially with COVID-19 impact and all these various things, and the ADA now really focusing on time and range. Well, with time and range, you need to fix the person through the glucokinase fixing. But then actually to verify, you really need a CGM. Then the benefit is kind of a cure. That's how they think about it, is holistically, this is all very wonderful. I think from that perspective, later on with our personalized medicine approach and all this stuff, it is just going to fit very well into how they think about it with the shared mission and shared view. Can we cure everybody? The answer I think everybody knows is not. What current drug even tries? That is the sad part. If you can get 5% or 10%, or pre-diabetic IGT, why would you not do that? Why would you not take dorzagliatin first, especially with its wonderful safety and tolerability profile? Try to give people a chance to fix and restore glucose homeostasis. If you cannot, then go further on. Dr. Li Chen was talking about it. We are seeing amazing differences between HMM0301 and HMM0302 outcomes. HMM0301 is very different from HMM0302, where people have taken other drugs, and after they finish HMM0302, they really need to go on some other drugs. In HMM0301, we are not seeing the same. These are the wonderful kind of things that is very consistent, I think, with our science, but it is not just, "Let us lower blood sugar," like everybody else. Yes, certainly a very important aspect to changing the standard of the care. Many years ago, when I worked at Roche, we come out with personalized medicine in cancer care, and then now become the standard of the industry. I think diabetes will be treated in the same way, into more precisional or personalized treatment, and then algorithm that Hua Medicine has developed, to classify type 2 diabetes and in working with the existing therapy. Dorzagliatin alone be able to control the disease and then not letting the complication to happen, not letting the disease to progress or hold it down. That create a huge value to the patients and the medical community. I think that using dorzagliatin earlier, using the combination earlier, is what the industry is in the practice. Not only in U.S. and also in China, the medical communities and raising the request to having a combination therapy earlier. That is where Hua Medicine, now having dorzagliatin as one of the products, and then we will quickly be able to launch kind of other products in the fixed-dose combination masters together with the existing therapy, and then bring the balance to the personal needs and diabetes care. Bayer certainly has been preparing for that over the last 10 years, not only just selling Accu-Chek, but also think about what is the best way to achieve diabetes free in China. The technologies brought in with the diagnostic and glucose continued monitoring, is the way to enhance our capabilities working together, to bring more value to our investors. Okay. Thank you, gentlemen. I see there are a couple of more questions, and then it is waiting on the line. The next question comes from Tony Ren of CLSA. Hi. Can you guys hear me? Yes. Yes. Great. Yeah. Congratulations, Dr. Chen and George. Yi actually asked a couple of questions that I also had on my list, so I will skip through those. What I want to ask right now is basically just two questions. One is about the regulatory progress for dorzagliatin in China. We are estimating that you guys are going to get data at the end of this year, file a China NDA in 2021, and starting to generate some meaningful revenue together with Bayer in 2022. Does the partnership agreement with Bayer change this at all? Does perhaps the halo effect of Bayer would allow us to move the regulatory filing a little bit earlier? That is question number one. The second one is that right now it appears to be a China-only agreement. Perhaps, could you guys give us a sense about whether you guys are talking about taking it global or how are your discussion with other partners progressing to the extent that you are able to? Yeah. Thank you. Okay. Thanks. This is a very good question. Hua Medicine has working with our advisors in the regulatory and also our internal team preparing the dossiers for this NDA filing and network initiated a couple of years ago with these documents in the CMC and the pre-clinical and early development follow-up and clinical pharma and so on. In place end of the year. What is waiting for the total package to be submitted is the phase III study results. We have agreement, as you know, with the regulatory agencies who will file NDA with the 52-week results. That will happen pretty soon. I think the projection is that this month, we'll have the last patient out for the 52-week, in September, we'll finish up the full 302, the metformin add-on trial. That gave us the time to analyze, clean up the data, and then database log with the top line before end of the year. Have the dose we are ready early next year and file in the first half, roughly timeframe. That's the timelines. I think, will we be more engaged. I think from the partner point of view, from Hua Medicine point of view, I think we all want to get this product to the hands of patients early. I think the timeline mutually agreed, as we previously said. In terms of global partnership, diabetes is a disease, has a lot of factor related to the genetics, lifestyle, food structure, and also co-medical conditions. I think Hua Medicine is always looking for the best partner in a country and the regions that has the medical practice and the policy and the financing may have offered unfair advantage to bring this drug to the market. I think this is kind of a position and philosophy. We do believe Bayer is our best partner in China. There are partners that we believe from people in U.S. and Europe. Those are things that we've been working on, and George is taking the leadership on that. I think, at the end of the day, we would like to consider when launching the product, right? The product itself, the price, efficacy, and safety, and the channels, right? The distributors, and also the business model. All four Ps are very regional and unrelated. To be more precisely define the targeting, define the success of in a commercialization, and the partnership development as based on our company strategy and philosophy, right? We are always looking for a best sourcing strategy instead of outsourcing so that the best partner will be identified, and we can work together for long-term. George, you may have more insight on this, want to share with you. No, I think that is good. Okay. There was one question somebody had posted, which is how long does a patient expected to have to be on dorzagliatin to be cured? I think we only have anecdotal evidence on this, we have shared with people before. It is not how long you are on the GKA, on our dorzagliatin. It is actually what condition and what state that patient is. The more beta cells that they have, the earlier they take it, then obviously, the sensors that we fix there, then they would be on. The only data anecdotally at most is from our phase II, where after 12 weeks in the drug-naive patients, there was a percentage, up to 10% of these drug naive, that after 12 weeks, they have not been taking drug for 2, 3 years. We will be following that after our 52-week, but that is certainly something very exciting and interesting, but it is really after launch that we will see this difference in demographics. It is a great question to ask because that is what we are aspiring for, but you are not going to get everyone, and it is not going to be a fit thing. I think, Dr. Li Chen, some of the doctors were saying to you, "Can some of the patients, instead of taking it twice a day, let us switch to now to once a day because they have gotten better or their conditions and things like that," are very exciting and how it should properly work, given the diversity and the difference in variability of the patients that are diabetic. Some of them will need combo. That is our whole personalized, and that is why we are a cornerstone, right? We are not looking to completely displace these other drugs. They are good drugs that are there. It just depends on the patient. Yeah, that's a very good point. I think, as we say, diabetes is a very complicated disease, genetic, lifestyle, food structure, and medical conditions and environment. However, in the current clinical setting, we only measure blood glucose, and only measure status base one point, blood glucose, and say, "Your disease is conditioned." Which is not the best way to define the disease, and also it is not to treat a disease factor. So over the years, Hua Medicine has developed in the dynamic measurement, and define the way of understanding on positive disease. We also identify certain sub-patient population will benefit from dorzagliatin immediately, and may have a long-lasting potential. We see this in the phase II study, and now we see this anecdotal evidence in the phase III study, which fit our initial hypothesis for the drug-naive patients. If you treat it early, they will have a remission. On the other side, if we can prevent diabetes patients getting to get over the hill, and into the type 2 diabetes, that's even better. So that's where I think a huge opportunity will start, but it offers the hope. The drug alone is able to treat the diabetes in the relatively short period of time. However, if you have a 5 to 10-year disease history, has been used many other drugs, over the time, still cannot control the diabetes. This is not just the pancreatic beta cell upkeep malfunction, there's multiple malfunctions in the organ. In this situation, I think through the fixed sensor, adding the other therapies, address the systematic issue, so that we can control the disease progression from the diabetes into diabetes complication. That's very valuable. Because at the end of the day, the damage, the irreversible damage to your organ, cause loss of body function, is the diabetes complication. We don't want our patient to get into that. Unfortunately, this is the situation in China when people find they're diabetic, first they want to The other functional disorder, they go to the hospital, and accidentally they found there in the list they now have diabetes. I think with the improved medical environment, the government policy that enforcing the diabetes and hypertension to be taken care of at a community state, while working with Professor Zhu Dalong and the Chinese Diabetes Society, expanding the diabetes day into a diabetes month, increase awareness, I think will increase significantly the market size and market accessibility, especially working with Bayer, has the troops around the territory. Okay. Okay. Thanks management team. Due to some limit, we will allow one last question. I think the question is being partially answered. Maybe Dr. Chen or George, see if you could add more comments to this. The question comes from Kemp Oliver of Cherry Stonehill Capital Management. His questions are, assuming that you find partners for markets outside China, how do you intend to invest in the business? Would you expand the pipeline and/or build an integrated business in China? Yeah. I've already mentioned that, the medical community, in the diabetes world, has a different medical practice, and also the disease and disease, underlying cause of disease, maybe different from the Western and China, Eastern. This has been published by Professor Yong Ming in this New England Journal of Medicine, has been further validated over the last 10 years, that we need more personalized diabetes care for the nations. I think, as I said, we will define the best partners in the region who have access of the patient population and understand the fundamental medical community needs, and then so that working with our own KOL, Dr. Franz Matschinsky, and then Ralph DeFronzo, and our advisory board, collectively find the best partner in the region and especially in the major country, Europe, United States, and Japan. That said, there's other regions in the Southeast Asia and then Middle East, has a increasing diabetes incidence, and then they want to double their diabetes population in the next 10 years. There's a huge unmet medical needs in those areas, and we would like to offer our help to those people. There are going to be a very different strategy of addressing that. If you look at the diabetes care environment, very few multinational company covers their global business. They always partner with the local partners, and then get their medicine to the hand of the patients locally, more effectively, and also be able to have a sustained long-term benefit around the global business. That's what we're thinking. Hua Medicine has been working with our partners over the last 10 years and established where we are today, become a leading biotech in the diabetes care, and then having the breakthrough technology and technology platform, and then more product will come out from here and the technology, diabetes care technology will come out from here. We will continue to working with people like WuXi now, like Bayer, to drive our business forward. Okay. Thank you, Dr. Chen. From our side, I think that completes the Q&A session. In closing, on behalf of Hua Medicine's entire management team, we'd like to thank you again for your participation in today's call. If you have any further inquiries in the future, please feel free to contact Hua Medicine's investor relations team or ICA team. Thank you. Thank you for your time today. Thank you. Thanks.