Description

BeyondSpring Inc (BYSI)

Overview

BeyondSpring Inc. (BYSI) is a small cap global clinical-stage biopharmaceutical company focused on immuno-oncology cancer therapies. The company’s main product (plinabulin) is in late stage approval for its first indications. The company is valued below similar drugs with less growth potential that have transacted over the past few years. In addition, one of BYSI’s largest holders (Decheng Capital) has a 13D filed and a history of getting its portfolio companies sold. Recent changes to the board and CFO indicate BYSI is at a crucial turning point. An additional positive is the way the corporate structure is split between US and China, setting up the stage for a potential IPO of the China segment via the Hong Kong market.

BYSI’s main product (plinabulin) is directed at chemo-induced febrile neutropenia (FN) in high-risk patients. Chemotherapy-induced neutropenia (CIN) is the primary dose-limiting toxicity in patients with cancer treated with chemotherapy. CIN can lead to febrile neutropenia (FN), and is associated with increased morbidity and early mortality, increased medical costs, and disruptions in potentially curative treatments.

Today oncologists struggle with chemo-induced febrile neutropenia (FN) and plinabulin would be added to AMGN’s Neulasta (pegfilgrastim, or biosimiliar competitors) in terms of treatment. Neulasta is widespread drug but patients on it are still vulnerable to CIN, especially patients that experience high grade neutropenia. Furthermore, the combination of the two drugs reduces the odds of having FN by 41% (SABCS 2020).

As shown below, BYSI is currently in Phase 3 of approval for CIN (all cancer, all chemo / Plinabulin + Pegfilgrastim program / PROTECTIVE-1 study 105 and PROTECTIVE-2 study 106) and non-small cell lung cancer (NSCLN) indications (2nd / 3rd line / the plinabulin +docetaxel program / DUBLIN-3 study 103). The latest data for both indications is very strong and milestones for CIN are in Q1’21 (both China and US NDA) and NSCLN global Ph3 data in H1’21.

CIN is a $9bn market in total (BYSI is targets nearly half of this market) and the global NSCLC market is a $11bln market. Furthermore, success in CIN and NSCLC could support a broader label and use expansion across other cancer types. Recent Plinabulin CIN data (PROTECTIVE-2) shows positive results; with BTD granted by both FDA and NMPA, a great signal for Plinabulin’s approval pathway.

November Prospectus, page S-3

Opportunity

Chemotherapy Induced Neutropenia (CIN) Opportunity

Disease:

Neutropenia is a condition defined by an abnormally low number of neutrophils, a type of white blood cell. Neutropenia weakens the body’s ability to fight infections, thereby increasing the risk of infection. Neutropenia is a common side effect of chemotherapy. Fighting CIN is critical to the successful application of chemotherapy, as if CIN develops, chemotherapy dosages must be lowered (or delayed), to prevent infection. Lowering chemotherapy dosages significantly decreases the effectiveness of chemotherapy though, leading to significantly worse patient outcomes. Profound neutropenia leads to 80% death in first week of infection, 48% FN and 50% infection.

Standard of care (SOC):

The current standard of care is to administer granulocyte colony-stimulating factor (G-CSF) to at risk patients with their chemotherapy cycle before CIN develops, as well as during CIN if it develops. G-CSF treatment was pioneered by Amgen, first with Neupogen (filgrastim) in 1991 and then with Neulasta (pegfilgrastim) in 2002. Neulasta is a long-acting improvement on Neupogen, requiring only one treatment per chemotherapy cycle compared to multiple for Neupogen. For many years, Neupogen and Neulasta were the only G-CSF treatments on the market, and thus, the only effective treatment for CIN.

While G-CSF treatments are very effective at preventing and treating CIN, they have significant side effects, most notably bone pain, which can limit their usage. Chemo’s anti-cancer effectiveness is linear to dose. With lower G-CSF, chemo must be lowered. BYSI mgmt. claims 15% reduction in relative dose intensity in chemo results in 50% reduction in OS. Plinabulin indirectly helps with effective chemo deployment while limiting CIN as a result of G-CSF intake.

Biosimilars for Neupogen first arrived on the market in 2015. Biosimilars of Neulasta first arrived on the market in 2018. Prior to 2015, sales of Neupogen and Neulasta combined were selling $6.5bln per year. Biosimilars have resulted in decreased pricing, however Neulasta still produced $2.8bn in US sales in 2019 despite biosimilar competitors. Plinabulin would also be used in conjunction with Neulasta’s biosimilar competitors for a similar purpose.

Drug:

Plinabulin is the first fundamentally new treatment for CIN since Neupogen’s introduction. BeyondSpring has conducted trials with it, and intends to market it, both as a monotherapy and in conjunction with pegfilgrastim.

While full Phase 3 trials are yet to finish, Phase 2 and interim Phase 3 results have been very promising. Plinabulin alone appears to be as effective at preventing CIN as pegfilgrastim alone, but with much fewer side effects, particularly bone pain. Plinabulin and pegfilgrastim together appears to be more effective than pegfilgrastim alone, and with fewer side effects.  Other than Plinabulin and more Neupogen/Neulasta biosimilars, there are no other major new therapies targeting CIN which will enter the market in the near term.

Studies:

CIN – 2 Phase 2/3 clinical trials:

PROTECTIVE-1 (aka. Study 105)

-          Reduction of CIN caused by intermediate risk chemo made of docetaxel in NSCLC, breast cancer, and prostate cancer patients

-          55 NSCLC patients treated Plinabulin reported less bone pain and had comparable absolute neutrophil count profiles (a measure of neutrophils per unit of blood that is calculated from measurement of the total number of white blood cells and bands, or immature neutrophils) and comparable durations of severe neutropenia (DSN) and neutropenia reduction compared to patients treated with Neulasta[1] (pegfilgrastim).

-          Phase 2 portion of PROTECTIVE-1 also observed that Plinabulin alleviated docetaxel-induced thrombocytopenia[2] while Neulasta did not.

-          Data also showed Plinabulin has superior immune profile compared to Neulasta based on promyelocytes and immature neutrophil data from the clinical study.

-          Established Phase 3 recommended dose; plan to enroll 150 patients for Phase 3 PROTECTIVE-1, which met its primary endpoint of non-inferiority vs Neulasta for DSN in first cycle, with statistical significance in pre-specified interim analysis at 105-patient enrollment.[3]

PROTECTIVE-2 (aka. Study 106)

-          Reduction of CIN caused by high risk chemo, a myelosuppressive chemotherapeutic regimen composed of 3 agents, docetaxel, doxorubicin and cyclophosphamide in breast cancer patients.

-          Phase 2 portion of PROTECTIVE-2, in 115 breast cancer patients

-          Plinabulin in combination with 6mg Neulasta (Plinabulin/Neulasta Combo) was shown to lead a clinically meaningful increase in the % of patients with no severe neutropenia (grade 4) in every cycle of chemo, a statistically significant reduction of bone pain, and less immune suppression compared with Neulasta monotherapy.

-          While Plinabulin alone showed neutrophil protection effect in week 1 after chemo, Neulasta showed effect in week 2, which is complementary to Plinabulin’s effect; combination of the 2 could improve prevention of CIN.

o   June 2020: Phase 2 portion of study showed that the combo regimen offered less severe neutropenia, enabling patients to remain more compliant and persistent with chemo, optimizing their care and providing them with best chance of improving overall survival.

-          Finished enrollment of 221 patients for Phase 3 portion of study (n=221; 111 in combination arm and 110 in monotherapy arm)

o   Global, multicenter, randomized, double-blinded study in patients with breast cancer undergoing myelosuppressive chemo with TAC (docetaxel @ 75mg/m2, doxorubicin @ 50mg/m2, and cyclophosphamide @ 500mg/m2). The objective is to evaluate protection against CIN: plinabulin (40mg) + pegfilgrastim (6mg) in 111 patients vs. pegfilgrastim (6mg) in 110 patients

o   Primary endpoint: prevention rate of grade 4 neutropenia in the first cycle of chemo, which correlates with high rates of infection, bacteremia, fever, and mortality.

o   November 2020: final topline data represented confirmatory data (based on absolute neutrophil count (ANC)) from interim analysis in June 2020.

§  Met primary endpoint showing statistically significant improvement in rate of prevention of grade 4 neutropenia in Cycle 1: 31.5% in combo vs. 13.6% pegfilgrastim monotherapy (p=0.0015)

§  All secondary endpoints were met

·       DSN Cycle 1 Day 1-8 (ANC < 0.5 x 109 cells/L): p = 0.0065

·       DSN Cycle 1: p = 0.03

·       Mean ANC nadir Cycle 1 (x 109 cells/L): p = 0.0002

·       Duration of profound neutropenia Cycle 1 (ANC < 0.1 x 109 cells/L): p = 0.0004

§  Safety data:

·       Lower grade 4 AE (58.6%) for combo compared to monotherapy (80%)

o   December 2020: Phase 3 PROTECTIVE-2 Study 106 demonstrated that plinabulin in combo with pegfilgrastim was 53% more effective than pegfilgrastim mono in reducing profound neutropenia incidence (absolute neutrophil count or ANC < 0.1 x 109 cells/L), 21.6% vs. 46.4%, respectively with p=0.0001 in patients going under chemo with TAC[4].

§  Mean duration of profound neutropenia: 0.3 days (combo) vs. 0.6 days (pegfilgrastim only); p=0.0004

§  The combo also reduced FN occurrence by 41% compared to pegfilgrastim monotherapy.

Market opportunity:

BeyondSpring management claims the CIN market is a $4.5bln per year opportunity. As combination therapy, Plinabulin’s base of business is G-CSF units: 1.3mn G-CSF cycles/yr (US); 4mn G-CSF cycles/yr (global). There are ~650k patients in US receiving chemo annually. In the US, unit growth in Aug 2020 went up 1.1% despite pandemic causing a 20% decline in chemo cycles nationwide from March to June. As a result of pandemic, prophylaxis now recommended for both high and intermediate risk patients, increasing the addressable population by 90%.

Alternatively, we can look at yearly G-CSF unit sales, which are 1.4mln in the US and 4mln globally. Each of these unit sales represents an opportunity for treatment with Plinabulin in place of G-CSF, or for the addition of Plinabulin to the G-CSF treatment. Growth beyond these will come from increasing numbers of patients receiving chemotherapy (mostly a global phenomenon) and increased usage of treatments to prevent CIN.

Pricing:

Management has not indicated pricing strategy. Currently, Neulasta is ~$4,000 per dose (net) while biosimilars are several hundred dollars less per dose, with both falling. BeyondSpring will probably face resistance to pricing aggressively above this. The lowered pricing of pegfilgrastim makes combination therapy with Plinabulin more affordable.

While strong adoption of Plinabulin would yield annual revenue of potentially several billion dollars, this is BeyondSpring’s first drug launch, and they are challenging a well-established standard of care. A more modest ramp should be expected. Nomura forecasts $400mln in sales in 2023 and $800mln in sales by 2026.

Regulatory designations:

Received Breakthrough Therapy Designation (BTD) for CIN from FDA and CDE of NMPA.

2nd/3rd Line Non-Small Cell Lung Cancer (NSCLC) EGFR Wild Type Opportunity

Disease:

Lung cancer is the most common form of cancer, and outcomes under current treatment regimens are quite poor (<30% overall 5-year survival rate).

Drug:

Plinabulin was initially being developed by Nereus as an anti-cancer drug, until its superb CIN fighting capabilities were discovered. Nevertheless, fighting cancer still remains an attractive indication.

BeyondSpring’s current focus is on developing Plinabulin for use in conjunction with docetaxel (a chemotherapy drug) as a 2nd/3rd line treatment for NSCLC exhibiting no EGFR mutations (known as EGFR wild type or EGFR-wt).

NSCLC Studies:

Phase 2 of Phase 1/2 in 163 advanced NSCLC patients (aka. Study 101)

o   Addition of Plinabulin to standard regimen of docetaxel (commonly used in chemo) led to a statistically significant reduction in incidence of Grade 3 and 4 neutropenia[5] (p<0.0003).

DUBLIN-3 (aka. Study 103; Plinabulin vs. placebo)

o   Phase 3 study for NSCLC (n=138) evaluated on a secondary endpoint of grade 4 neutropenia reduction in cycle 1 day 8 (lowest neutrophil account in a cycle due to docetaxel treatment) and observed Plinabulin’s ability to reduce docetaxel induced grade 4 neutropenia in NSCLC patients (p<0.0001)

Primary endpoint is for OS in NSCLC