Good morning, and welcome to the Assembly Biosciences Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session after the prepared remarks. As a reminder, this conference call is being recorded. I would now like to hand the call over to Lauren Glaser, Senior Vice President of Investor Relations and Corporate Affairs for Assembly.
Please go ahead.
Thank you, Bridget. Good morning and thank you for joining us on such short notice. Today's announcement of our strategic collaboration with BeiGene is an exciting and significant milestone for assembly. This collaboration provides a strong foundation to accelerate the development in China of our hepatitis B portfolio, which currently consists of 3 clinical stage core inhibitors, ABI H-seven thirty one and ABI H2158, which are an ongoing Phase 2 clinical trials and ABI H3,733, which is in Phase 1 development. The press release and the slides we will refer to during the call are available in the News and Events section of our corporate website at www.assemblybio.com.
Please note that a replay of today's call and webcast will also be available from our website. In a moment, I will turn the call over to Doctor. John McCutcheson, Assembly's Chief Executive Officer and President, who will discuss the important and strategic benefits of our collaboration with BeiGene. Then, Tom Russo, Chief Financial Officer, will review the financial terms and economics of this collaboration for Assembly. Finally, John, Tom and Jason Okazaki, our Chief Legal and Business Officer, will be available for the Q and A portion of the call.
Before we begin, I want to remind you that we will be making forward looking statements, such as statements regarding the potential of collaboration with BeiGene, future milestones and royalties that may result from the collaboration, our future research and development plans, the timing of clinical trials, trial results and therapeutic potential of our development programs as well as financial estimates and guidance. All statements other than statements of historical fact are statements that could be deemed forward looking statements, and we caution you not to rely on these statements. We intend any forward looking statements to be covered by the Private Securities Litigation Reform Act of 1995. They involve certain assumptions, risks and uncertainties that are beyond our control, and actual results may differ materially from those forward looking statements. A description of these risks can be found in our latest SEC disclosure documents and press releases.
Assembly does not undertake any obligation to update any forward looking statements made during this call. I'll now hand the call over to Assembly's CEO, Doctor. John McCutcheson.
Thank you, Lauren, and thanks to everyone who is joining us this morning. During our recent call in early May, we talked about the significant pipeline progress we have made with our hepatitis B portfolio and our acceleration of activities over the last 6 months. As a company that is focused on advancing new therapeutic options for patients with hepatitis B, China has always been and is a priority for us. The People's Republic of China has an enormous burden due to this disease and it is home to 1 third of the world's population living with chronic hepatitis B infection. Addressing this significant unmet need in China has always been a critical component of our strategy.
Today, we are thrilled to announce our collaboration with Beijing, a partner that shares our mission and is well positioned to help us achieve it. As we have previously stated, establishing a collaboration in and for China has been one of our top priorities this year also. It was important to us that we identify a partner that shares our commitment to scientific and clinical excellence and has deep expertise and experience in bringing products to patients in China. In Beijing, we are fortunate to have a partner that shares our values, commitment and priorities. BeiGene is ideally positioned to deliver on the high expectations we place on addressing the disease burden in China.
I'd like to step back and discuss what we were focusing on in the China partnering process and why BeiGene is the premier and best choice for our partner. First, we were looking for a company with world class and well established operational infrastructure in China with strong capabilities spanning clinical development, regulatory and commercial. BeiGene has over 3,200 employees in China, including approximately 700 professionals in clinical development and around 1300 in its science based commercial group. Hepatitis B is a significant unmet need in China as I've said and BeiGene has an extensive network of investigators and sites that we can additionally leverage for this important liver disease indication. BeiGene's network offers the capability to enroll large numbers of patients quickly in clinical trials also.
We believe their infrastructure, their network and experience will accelerate our clinical development efforts and the data generated will support our registration in China and potentially other geographies as well. BeiGene's team currently markets 5 approved therapies in China with plans for more in the future. They are a trusted partner to global biopharmaceutical companies including Amgen, Bristol Myers, Seattle Genetics and others. Its collaboration with Amgen which just closed in January is a proof point in the transformative potential of BeiGene's unique clinical development capabilities to accelerate global drug development. With that deal, Amgen, widely recognized as an industry leader, has entrusted 3 commercial products and joint development of a deep pipeline of its oncology products to BeiGene.
Secondly, we were looking for attractive financial terms that reflect the potential value of our hepatitis B product portfolio, which we believe we have achieved, and Tom will go over those details in a few minutes. Finally, we were looking for a partner with good chemistry with assembly's business philosophy and teams. From our first discussion at the highest level of the company's many months ago, it was clear that we were aligned both at the executive levels as well as across the working teams. We share a view about the importance of treating patients with this disease in China and the need for new treatment options. Through the diligence process also BeiGene showed us that they are clearly a world class organization from the leadership again and from top to bottom across the organization and in China also.
Already we have seen great synergies and alignment between our company's research, development, manufacturing corporate teams. Together, we share that commitment to executing a critical mission to deliver not only a chronic suppressive therapy, but also a potential finite duration therapy as we drive towards a cure for patients with chronic hepatitis B infection. Now that we've signed the agreement, what are we focused on next? Our key priority is advancing the development of our lead core inhibitor 731. We continue to conduct Study 211, our ongoing Phase 2 open label extension trial.
As we have talked about previously, we are beginning to transition patients off combination therapy with 731 and standard of care Nuke therapy to then monitor them for sustained virologic response or SVR. For China specifically, we're in the end of Phase 2 meeting processes with China regulatory authorities. We hope to incorporate data and our learnings from Study 211 into the design of our future Phase 3 programs in China and globally. We could believe we believe we could potentially initiate registration studies in China for 731 as early as the Q1 of 2021 next year. We plan to share more details around our Phase 3 plans after we complete discussions with the regulators.
So stay tuned for more on this, please. For our next generation more potent core inhibitor 2,158, we have initiated a randomized placebo controlled Phase 2 trial that will evaluate 2,158 with Nuc versus placebo with Nuc in approximately 80 treatment naive patients who are e antigen positive chronic hepatitis B infection without cirrhosis. In Phase 1b, 2,158 was well tolerated and demonstrated potent antiviral activity at the 300 milligram dose, the dose we will study in Phase 2. And for our 3rd core inhibitor 3,733, we are conducting a Phase 1 trial in healthy volunteers. I'll now turn the call over to Tom.
Thanks, John. I echo your enthusiasm about our new partner BeiGene, what they bring to this collaboration and the positive fit we've all experienced working together over the past several months. This is an important milestone for assembly and provides valuable operational support and funding for the work we are doing. Let me share some specifics about the financial considerations of the collaboration. The agreement includes development and commercialization of our 3 core inhibitors, 731, 2,158 and 3,733 in China, including Hong Kong, Macau and Taiwan.
Outside of this partner territory, we've retained full worldwide rights for HBV portfolio. The terms include a $40,000,000 upfront payment and approximately $500,000,000 in total potential milestones. These are comprised of up to $114,000,000 in development and regulatory milestones as well as up to $385,000,000 in net sales milestones if all our products are approved. Additionally, BeiGene is contributing the initial $45,000,000 for clinical development in China with costs shared equally by the parties in the territory thereafter. So in total, this represents at least $85,000,000 in near term non dilutive capital, which is significant for our company.
We're also eligible to receive tiered royalties on net product sales with percentages ranging from the mid teens to the low 30s. This enables us to retain a significant stake in the future value of our products in the large China HBB market. It's important to note that this collaboration further strengthens Assembly's cash position and extends our runway. The additional near term sources of funding together with $249,000,000 in cash on our balance sheet as of the end of March are expected to extend our funding of operations into the second half of twenty twenty two. I'll now turn the call back over to John.
Thanks, Tom. Before opening up the call to questions, let me share a few additional thoughts on why we have prioritized China for our first partnership. At Assembly, we are focused on providing potential new treatment options for patients suffering with chronic hepatitis B virus. This is a major public health problem with 250,000,000 individuals chronically infected worldwide, 80,000,000 to 90,000,000 of whom are in China. HBV is a leading cause of chronic liver disease and the eventual need for liver transplantation and unfortunately is still responsible for up to 1,000,000 deaths annually on a worldwide basis.
At present, no curative or finite treatment regimens exist. So the standard of care for patients is lifelong suppressive treatment with therapies that reduce but do not eliminate HBV. There are several 1000000 Hepatitis B patients on treatment today in China and we see this as a significant opportunity to treat more patients with better treatment options. We're excited to work on new therapies for this disease with our novel mechanism of action with core inhibitors with 1st and best in class potential because this is the right thing to do for patients and the right path as we drive towards a cure for chronic hepatitis B infection. We will now open the call for questions.
Bridget, you may open the question and answer session, please.
Our first question on the line is from Brian Skorney with Baird. Your line is open.
Hey, good morning guys. Thanks for taking the question. Congrats on a, it looks like a really good deal.
I was hoping maybe you could kind of talk a little
bit about balancing having a partner on the ground with the execution capability in China that BeiGene does to begin development rapidly there versus maybe waiting out until you have some of the cure data there and how you kind of think how we should kind of think some of those clinical development milestones relate to that? Thanks.
Yes. Thanks, Brian for the nice words about the announcement. I'll just start briefly and answer the first part of your question regarding the balance and then I'll hand it on to Tom. Look, without us as a small company having any infrastructure in China and having to build that and now having an opportunity to collaborate with an organization that has clearly been very successful in being able to do things effectively, efficiently and successfully in China. We have saved ourselves years really.
So that was really important to us. And it was important for me because of our ability to start work in China and to have initially a chronic suppressive therapy that we should start this relationship now. And I've said that earlier on that we always wanted to have our partner in place by the middle of this year, so we could potentially start a registrational strategy early next year. So it's for all of those reasons that I thought the balance was important that we start this early, we start it now and we don't wait for further down the line. Tom, would you like to add more flavor?
Yes. No, I think I would just add, Brian, that from a structural perspective, we're very happy with the terms of this collaboration, the upfront, the milestones, the R and D funding that those are near term non dilutive sources of capital, but also equally the downstream portion. The royalty tiers from mid teens up to low 30s, that's really structured such that really the better the product profile is, the better it improves over time, the better we both do. Assembly would share and participate in the upside here. So it's really a combination of the operational and strategic rationale that John went through and then the structure of it is there to benefit both parties down the road.
Great. Thanks, guys. I'll hop back in the queue.
Thank you. And our next question comes from the line of Michael Yee with Jefferies. Your line is open.
Hey, guys. Good morning and congrats on this deal as well. It's fantastic. We had
a question about China hepatitis B market and what if any work you've kind of looked into how many patients you guys think are already getting entecover or generic Viread or talk to the amount of people that you think are treated there with nukes, how to think about that? And what you know about the issues there and how you can drive that with obviously better therapy?
Hey, Michael, this is Tom. So for China, as we mentioned on the call, the prevalence of HBV is generally accepted to be in the 80,000,000 to 90,000,000 range. So that's 1 third of the world's HBV population. In terms of patients treated, there's various estimates out there, but the number is at least several million that are on treatment today, conservatively. So it's a large market today.
There is also enormous potential for more patients to be treated with better therapies and in particular finite treatment and curative regimens. And in terms of what the patients are on, I think it's as you'd expect, it's the nukes you mentioned in entecover, there's tenofovir, Vemlyt, TAF is approved and on the market in China, as well as some interferon, but it's a public pay market. And the trends in terms of regulatory review, reimbursement framework, all of those things are improving and encouraging. So I think we're excited to work with BeiGene and develop and commercialize our products in China.
Okay, great. And then yes.
Our next question comes from the line of Salim Syed with Mizuho. Your line is open.
Great. Good morning, guys. And I'll add my congrats here to John and Tom and the entire team. A few from me, if I can. One is, could you confirm, John, that as part of the Beijing negotiations, the team there in China did not there wasn't any SVR data at all.
I think SVR 2 weeks or SCR4, I believe you guys start taking patients off by June. Can you just confirm that there wasn't any SVR data that they had access to? 2 is on the standstill agreement. It looks like from the 8 ks that the standstill is only in place for 2 years. I was wondering what the logic was behind that.
Was that something that you guys had suggested? Or maybe alternatively another way to ask is, did Beijing approach you guys or did you approach Beijing on this initial negotiation? And then just lastly, I noticed in the disagreement language in the 8 ks that 731 wasn't included as part of if there was a disagreement on the 731 Phase 3 at the end of the Phase 2 trial, who could terminate, etcetera. How should we be interpreting that? Have you guys already locked in a Phase 3 design for China on 731 or how should we be interpreting that?
Thank you.
Okay. Salim, it's John. I'll start. Thanks for your nice words. Beijing did not have SVR data or access to SVR data and nor do we, okay?
Even though we did as you say start to transition people off therapy last month. I'll let Jason address some of the standstill and some of the other issues that you raised in the 8 ks. Let me just before Jason, let me say a couple of things. I've said for almost 8 months now that we were talking to people about a partnership. So we had reached out to other people and many other people in China as well.
So that would answer one of your questions as well. In terms of the program and whether we've locked in a Phase 3 program for 731. Let me just remind you that we're in the middle of negotiations. I've said we're talking to regulators. I've also said previously that when we've got things locked down about what a strategy would look like, what the patient populations would look like for 2 clinical trials for registration, etcetera.
And as I said today on the call, we'll talk about that. So stay tuned. We're in the middle of that process now with regulators at the CDE. Jason, would you like to address the other questions, please?
Yes. Thanks for the question, Salim. And nice to speak with you for the first time. So on the standstill, as you can imagine, the turn of the standstill was highly negotiated. Obviously, in a collaboration of this type, going to your point about SVR data, we want to obviously make sure the standstill took us well beyond the point we'd have SVR data.
So at the end of the day, 2 years is what we arrived on as part of the negotiation. So I think that's probably all I'd say on that. On your question about 731, I think John covered that really well. As you can imagine, given where 731 is right now, both parties have a better viewpoint on that. Whereas with respect to 2,158, 3,733 being a little bit further off, that's why that option has been there.
Again, that's one of those things like any legal term in a collaboration agreement is really meant to cover a downside scenario that we really don't anticipate happening.
Understood. Super helpful. Thanks so much, guys.
Thank you. Thank you.
Our next question comes from the line of Brad Canino with SVB Leerink. Your line is open.
Thank you and congratulations as well. Really great deal terms here. I had a follow-up on the last question. I understand that no one has access to SVR data, but has BeiGene had access to further open label extension data beyond what we and investors saw last ASLD in November 2019? And then I have a follow-up.
Hey, Brad, this is Tom. I think first we have provided additional data on May 7th, on our May 7th HBV call. So beyond what was that AASLD and obviously the partner has had a chance to see that. John, I don't know if you wanted to make any other comments on the data.
No, I mean, there's been further discussions in diligence and further aspects of the various different programs have been discussed as you would expect in any diligence progress process. So, yes, I mean, Beijing has seen additional data that isn't necessarily in the public sector, but nothing to do with SVR and nothing material that is different from what you've seen in the May timeframe. So thanks, Brett. Thanks for your nice words too.
And if I can have one follow-up, I want to ask how this deal might impact your ability to conduct potential combination studies with other mechanisms that you might partner with other companies? Will BeiGene have a say in this process?
So I'll start and then Jason might he's thought about this a lot in various different things. But in terms of combinations, triple combinations, we're free to do whatever we would like outside of the China territory. And in China, we discuss it with Beijing if we're wanting to bring a third mechanism in. Also for pre registrational programs, Phase 2 programs, whether we conduct them in China or elsewhere, we're really free to do what we would like to do. Jason, anything else?
Yes. No, John, I think that covers really well. It's a pretty open collaboration. As you can imagine, we're both incentivized to bring the products forward. So we would anticipate doing that, bringing our HBV expertise to that collaboration, whether that be clinical collaborations or otherwise.
This is the great thing, Brad, that and we've discussed this as companies. These folks have extraordinary depth in China from clinical regulatory and commercialization. And we bring the expertise in the therapeutic area. So I think it's going to be a wonderful collaboration. If we have good ideas for doing something early in development and doing it in China, we'll discuss it at the Joint Development Committee and both sides will provide input and that will hopefully lead to better trials and better products that are more effectively brought forward.
Sorry, thank you. And our next question comes from the line of Raju Prasad with William Blair. Your line is open.
Hi, there. This is Sami on for Raj. Congrats on the update. It seems like a great deal for you guys. Now that you're partnering with Biogen, will they be taking the lead on the interaction, the regulatory interactions with China?
And how should we be thinking about the cadence of trials in the U. S. Going forward now that China is your priority?
Thanks.
Hi, thank you. Best to Raj too. I appreciate your kind words. It is a great deal. We feel the same.
Look, so far we've led the regulatory interactions with the CDE. Beijing will be at the table as well going forward as well, and there'll be a helpful transition period. They have the expertise there. And as I said before, we have the therapeutic expertise. In terms of the cadence in the U.
S, don't expect any change. As I've said, we have a number of other things we want to achieve in the U. S. We'll continue regulatory interactions going forward with the FDA. This year about 731 will accelerate 2,158, which is a global Phase II trial, 3,733 and other programs outside the China territory.
So this doesn't signal a reduction in global activities outside of China. Tom, do you want to say something?
Yes. And I think just to add to that, we feel we have the capability to run the trials outside of China, whether that's U. S. Or other parts of the world. We have a team that's done that before for the last 10 years.
So we can do that work ourselves. And I think just as a reminder, we've retained the program and the full economics worldwide outside of the China territory.
Thanks.
Thank you. And I'm not showing any further questions. So I'll now turn the call. Oh, I'm sorry. We do have a follow-up with Salim Syed with Mizuho.
Your line is open.
Yes. Thanks so much for squeezing
me in. Just one quick follow-up for me. John or Tom or Jason, maybe could you just speak to preliminarily how you're thinking about the pricing differential between the U. S. And China for the core inhibitors in general, so we can help so we can start modeling the China opportunity?
So Salim, this is Tom. I wouldn't want to get into any type of pricing strategy or discussion like that. It wouldn't be appropriate for us to do that, given we have a partner now for the territory. So there is information in the public domain about the prices of nukes and you can look at that. Then LIDI was added to the NRDL list in November at branded type pricing.
So I think we're optimistic about the commercial opportunity. And as I said earlier, the regulatory and reimbursement trends in the China market are positive.
Got it. Thanks, Tom.
Thanks, Salim.
Thank you. And I'm not showing any more questions. I'll now turn the call back to Assembly's CEO and President, Doctor. John Mitch Hutchison for closing remarks.
Thanks, Bridget. Thank you again all for joining our call this morning. In closing, I'd like to thank all our employees including the hepatitis B and the microbiome teams as well as our corporate team that championed the process that resulted in this important partnership. Our progress is the result of their commitment and their great work. I'm proud to lead the team and the progress we are making towards our vision of a cure for hepatitis B.
We look forward to updating you in the future and sharing our continued progress. So again, thank you for your time today and this concludes our call.