On August 14, 2018 Athenex, Inc. (NASDAQ:ATNX), a global biopharmaceutical company dedicated to the discovery, development and commercialization of novel therapies for the treatment of cancer and related conditions, reported its financial results and business highlights for the three and six months ended June 30, 2018 (Press release, Athenex, AUG 14, 2018, View Source;p=RssLanding&cat=news&id=2363558 [SID1234528919]).
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"The second quarter was marked by notable achievements across clinical, operational and financial fronts," stated Dr. Johnson Lau, Chief Executive Officer of Athenex. "We announced positive Phase 3 data with our lead Src Kinase inhibitor KX2-391 in actinic keratosis and, together with our commercial partner Almirall, we are now planning regulatory submissions in the major markets. We continue to seek opportunities to expand our oncology pipeline and announced, in July, the licensing of two very exciting technologies, an immunotherapy platform based on T-cell receptor-engineered T cells or TCR-T, and a metabolic based oncology candidate."
Dr. Lau continued, "Our commercial business continues to perform well and grow, with both Athenex Pharmaceutical Division and Athenex Pharma Solutions launching new products. We also continue to invest in our global supply chain platform, with the goal of having the right infrastructure in place in advance of commercializing our Oncology Innovation Products."
Second Quarter 2018 and Recent Business Highlights:
Second quarter revenue increased to $11.6 million as compared to $4.6 million in the same period last year.
Clinical Platforms:
Announced positive data from two Phase 3 studies of KX2-391 in actinic keratosis (AK). Each study achieved the primary endpoint of 100% clearance of AK lesions in patients following treatment, at high statistical significance (p<0.0001).
Received Orphan Drug Designation from the US FDA for Oraxol in angiosarcoma, a rare form of malignant blood vessel cancer
Presented Phase 1 data evaluating the safety, tolerability, pharmacokinetics and activity of Oraxol in patients with advanced malignancies, and a bioavailability study of oral paclitaxel and HM30181 compared with weekly intravenous (IV) paclitaxel in patients with advanced solid tumors, at the American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) annual meeting.
Commercial Business:
Launched 5 new products and 12 new SKUs during the second quarter.
Athenex Pharmaceutical Division ("APD") currently markets 21 products in the U.S. with 36 SKUs.
Athenex Pharma Solutions ("APS"), our 503(b) facility, currently markets 5 products with 27 SKUs.
Business Development and Strategic Highlights:
Received a strategic investment of $100 million from Perceptive Advisors
Establishing a joint venture with Xiangxue Life Sciences for the research, development, and commercialization of T-cell Receptor-Engineered T Cells (TCR-T), a next generation cancer immunotherapy technology.
In-licensed worldwide rights to pegylated genetically modified human arginase from Avalon Polytom (HK) Limited.
Strengthened Company leadership and Board with the appointments of Timothy Cook as Senior Vice President of Global Commercial Oncology; Christina Wang as Vice President of Clinical Operations and Corporate Development, Asia Pacific; and Benson Tsang to the Board of Directors.
Second Quarter 2018 Financial Results:
Revenue for the second quarter ended June 30, 2018 was $11.6 million as compared to $4.6 million in the same period last year. The increase was primarily attributable to a $5.2 million increase in specialty products sold through the Company’s Commercial Platform, a $1.4 million increase in API and medical device sales, and $0.6 million in sales of its 503B products. This increase was offset by decreases in contract manufacturing revenue of $0.1 million and a decrease in grant revenue of $0.1 million.
Cost of sales for the second quarter ended June 30, 2018 totaled $9.4 million, as compared to $4.1 million for the three months ended June 30, 2017. This was primarily due to the increase of $4.1 million cost of sales from the recently launched specialty products and $1.2 million cost of sales from 503B and API products
R&D expenses for the second quarter ended June 30, 2018 were $26.6 million, an increase of $9.0 million from a year ago. The increase was primarily due to an increase in clinical operations and included a $6.5 million increase in clinical trial costs related to the progression of the Phase 3 trials of KX-01 Ointment and Oraxol.
SG&A expenses for the second quarter ended June 30, 2018 were $12.8 million, a decrease of $0.8 million compared to $13.6 million in the same period last year. The decrease was primarily due to a decrease in employee compensation of $2.8 million from stock-based compensation incurred in the prior year in connection with the Company’s IPO, offset by a $1.9 million increase in other office expenses and professional fees for legal, consulting, and audit services related to operating as a public company.
Net loss for the second quarter ended June 30, 2018 was $36.9 million, or $0.58 per diluted share, compared to a net loss of $38.6 million, or $0.88 per diluted share, in the same period last year.
Cash, cash equivalents and short-term investments were $80.7 million at June 30, 2018, compared to $51 million at December 31, 2017. The company remains focused on using its cash position to fund development of the clinical pipeline, as well as working capital costs associated with the commercial platform and general corporate purposes.
In July 2018, Athenex closed a privately placed debt and equity financing deal with Perceptive Advisors, LLC for gross proceeds of $100.0 million and aggregate net proceeds of $97.1 million, net of fees and offering expenses. The Company entered into a 5-year senior secured loan for $50.0 million of this financing and issued 2,679,528 shares of its common stock at a purchase price of $18.66 per share for the remaining $50.0 million. The Company is required to make monthly interest-only payments with a bullet payment of the principal at maturity. In connection with the loan agreement, the Company also granted Perceptive a warrant for the purchase 425,000 shares of common stock at a purchase price of $18.66 per share.
In July 2018, Athenex executed a subscription agreement to establish, operate, and manage a limited liability company, Axis Therapeutics Limited, based in Hong Kong. This joint venture will be owned 55% by the Company and 45% by Xiangxue Life Sciences. The Company will make a capital contribution of $30.0 million to the joint venture. Subsequently, Axis Therapeutics Limited entered into a license agreement with the minority partner to license its TCR-T immunotherapy technology to develop and commercialize products for oncology indications. The Company will make an upfront payment for this license in the form of a $5.0 million issuance of its common stock.
First Half 2018 Financial Results
Revenue for the six months ended June 30, 2018 was $49.4 million compared to $9.2 million in the same six month period of last year. The increase was primarily attributable to $25.0 million of upfront license fees related to the collaboration agreement with Almirall, S.A. and a $13.8 million increase in specialty products sold through the Company’s Commercial Platform.
Cost of sales for the six months ended June 30, 2018 was $20.8 million, as compared to $7.0 million for the six months ended June 30, 2017. This was primarily due to the increase of $11.3 million cost of sales from the recently launched specialty products and $2.5 million cost of sales from 503B and API products.
R&D expenses for the first six months of 2018 were $47.9 million, an increase of $3.9 million from the $44.0 million from the year ago period. This was primarily due to an increase in clinical operations and included a $13.4 million increase in clinical trial costs related to the progression of the Phase 3 trials of KX-01 Ointment and Oraxol.
SG&A expenses were $25.9 million, an increase of $2.5 million compared to $23.4 million in the same period last year. This increase was primarily due to a $3.3 million increase of other office expenses and professional fees for legal, consulting, and audit services related to operating as a public company.
Net loss for the six months ended June 30, 2018 was $44.2 million, or $0.71 per diluted share, compared to a net loss of $79.6 million, or $1.89 per diluted share, for the six months ended June 30, 2017.
Outlook and Upcoming Milestones:
The Company is reaffirming its full year 2018 revenue guidance in the range of $100 million to $125 million, inclusive of licensing-fee revenue from Almirall.
Clinical Platforms:
A second interim analysis by the Data and Safety Monitoring Board (DSMB) for the ongoing Phase 3 trial of Oraxol in metastatic breast cancer is expected in September
IND filing for Oral Eribulin is planned for Q4-2018
Corporate Updates:
Construction on the Dunkirk facility is expected to be complete by the first quarter of 2019.
Conference Call and Webcast Information:
The Company will host a conference call and audio webcast on Tuesday, August 14, 2018 at 9:00 a.m. Eastern Time. To participate in the call, dial 877-407-0784 (domestic) or 201-689-8560 (international) fifteen minutes before the conference call begins and reference the conference passcode 13682063.
A replay of the call will be accessible two hours after its completion through August 21 by dialing 844-512-2921 (in the U.S.) or 412-317-6671 (outside the U.S.) and entering passcode 13682063. The live conference call and replay can also be accessed via audio webcast at the Investor Relations section of the Company’s website, located at www.athenex.com.