On November 3, 2022 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 a corporate and financial update for the third quarter ended September 30, 2022 (Press release, Athenex, NOV 3, 2022, View Source [SID1234622994]).

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"We are excited by the promise of our innovative, first-in-class NKT cell therapy platform with potential for improved efficacy, safety, and accessibility over current cell therapy approaches. This quarter, we continued to implement efficiencies by reducing cash used for operations by 53% and strengthening our balance sheet with our $30 million equity raise," said Dr. Johnson Lau, Chief Executive Officer of Athenex. "As we look ahead, we have several exciting upcoming milestones and expect to report Phase 1 study data updates for our KUR-501 cell therapy program and our allogeneic KUR-502 cell therapy program by the first half of 2023. We also look forward to clinical updates from the Phase 2 trial of Oral Paclitaxel with a checkpoint inhibitor in neoadjuvant breast cancer, which is expected to complete by year-end."

Third Quarter 2022 and Recent Business Highlights

Business Updates

Announced pricing of $30 million public offering of common stock and warrants
Successful Nasdaq hearing confirming the company can continue its listing on The Nasdaq Stock Market subject to demonstrating compliance with the minimum bid price requirement by March 14, 2023
Athenex has met all closing conditions for the sale of the China API operations for approximately $18 million and is in the final stages of closing the transaction, which is expected to occur as soon as COVID-related restrictions are lifted. At closing, the company expects to receive 70% of the proceeds, with 20% and 10% of proceeds receivable within three months and six months of closing, respectively. Furthermore, the company anticipates entering into a supply agreement for API and a waiver of the rights of its senior secured lender to receive any additional proceeds from the sale
Cash Flows from Operating Activities in Continuing Operations was -$15.7M, a 53% year-over-year decrease
NKT Cell Therapy Programs

KUR-501: Autologous GD2 CAR-NKT cell therapy for relapsed/refractory high-risk neuroblastoma

Ongoing sequential enrollment of two additional cohorts in single-institution Phase 1 dose escalation GINAKIT2 study at the 2 highest dose levels (DL5: 3×108 cells/m2; DL6: 1×109 cells/m2)
Early Phase 1 GINAKIT2 study dose escalation data at the American Society of Gene-Cell Therapy (ASGCT) (Free ASGCT Whitepaper) annual meeting in May 2022 demonstrated:
Expansion of CAR-NKT cells in all patients, with dose response observed
2 out of 3 responses at the 1×108 cells/m2 dose level, including a durable complete response lasting more than 12 months
Responses correlating with CD62L+ NKT cell expression as well as CAR-NKT cell exposure (area under the curve [AUC]).
Well-tolerated with no dose-limiting toxicity, no immune effector cell-associated neurotoxicity syndrome (ICANS), and 1 case of Grade 2 cytokine release syndrome (CRS)
KUR-502: Allogeneic CD19 CAR-NKT cell therapy for relapsed/refractory B-cell malignancies

Ongoing multicenter expansion of Phase 1 dose escalation ANCHOR study
Early Phase 1 ANCHOR study dose escalation data at the American Society of Transplantation and Cellular Therapy (ASTCT)/Center for International Blood & Marrow Transplant Research (CIBMTR) Tandem Meetings in April 2022 demonstrated:
60% ORR and 6-month CR rate of 40% in 5 patients from the NHL cohort, including 1 ongoing CR at 34 weeks
Encouraging responses at the lowest dose levels, including 2 durable responses in patients whose NHL failed prior autologous CAR-T cell therapy
Well-tolerated with no cases of CRS in the NHL cohort, ICANS, or graft versus host disease (GvHD)
KUR-503: Allogeneic GPC3 CAR-NKT cell therapy for hepatocellular carcinoma

Pre-clinical data at the ASCO (Free ASCO Whitepaper) Annual Meeting in June 2022 demonstrated:
BATF3 CAR overexpression enhances NKT cell proliferation, long-term tumor control, and survival compared to IL-15 CAR-NKT cells
Commercial Update

Specialty Pharmaceutical Business

Athenex Pharmaceutical Division (APD) currently markets a total of 34 products with 62 SKUs.
Athenex Pharma Solutions (APS) currently markets 4 products with 13 SKUs.
Key Anticipated Milestones

Oral Paclitaxel:
Update on Phase 2 data from I-SPY 2 trial evaluating Oral Paclitaxel in combination with dostarlimab in neoadjuvant breast cancer
Regulatory interactions with UK MHRA for Oral Paclitaxel in advanced breast cancer remain on track with responses to questions submitted in Q3 2022
KUR-501:
Phase 1 GINAKIT2 study dose escalation, safety, and preliminary efficacy data update in 1H 2023
KUR-502:
Next clinical trial data update from the ongoing ANCHOR study anticipated in 1H 2023
KUR-503:
IND application filing for KUR-503 in advanced GPC3-expressing hepatocellular carcinoma planned in 2023
Special Shareholder Meeting

Athenex is hosting a special meeting of stockholders virtually on November 22, 2022 at 9:30 am EST. This special meeting is being held to vote on three matters, including: (1) to effect an increase in the total number of authorized shares of common stock of the Company, (2) to authorize a reverse stock split of the Company’s common stock, which is intended to increase the per share price of the common stock and enable the Company to regain compliance with the Nasdaq continued listing requirements, and (3) to increase the number of shares available for issuance under the Company’s 2017 Omnibus Incentive Plan.

Please refer to the definitive proxy statement filed by the Company with the SEC on October 11, 2022 at the SEC’s website (View Source) and accessible at the Company’s website (View Source) for more information about the special meeting, including instructions for voting and attending the special meeting.

Third Quarter 2022 Financial Highlights

Revenues from product sales increased to $31.3 million for the three months ended September 30, 2022, from $26.3 million for the three months ended September 30, 2021, an increase of $5.0 million or 19%. This increase was primarily attributable to an increase in APD specialty product sales, which increased by $3.8 million as the result of increases in shortage product sales and product launches during 2022. 503B product sales increased by $1.0 million from additional product launches.

License fees and other revenue for the three months ended September 30, 2022, was $2.2 million, compared to $5.1 million for the same period in 2021, a decrease of $2.9 million.

Cost of sales for the three months ended September 30, 2022, totaled $27.7 million, an increase of $2.6 million, or 11%, as compared to $25.1 million for the three months ended September 30, 2021. The increase was primarily due to an increase of $1.5 million in cost of APD product sales and an increase of $1.1 million in cost of 503B product sales.

R&D expenses totaled $9.2 million for the three months ended September 30, 2022, a decrease of $8.5 million, or 48%, as compared to $17.7 million for the three months ended September 30, 2021. This decrease was primarily due to a decrease in costs of clinical and regulatory operations, compensation costs, drug licensing costs, cell therapy costs, and preclinical operations.

SG&A expenses totaled $9.4 million for the three months ended September 30, 2022, a decrease of $8.7 million, or 48%, as compared to $18.1 million for the three months ended September 30, 2021. The decrease was primarily due to a $5.2 million gain on change in earnout liability related to the Kuur contingent consideration, while 2021 had a $3.2 million loss on change in earnout liability. Additionally, there was a $1.4 million decrease in costs for preparing to commercialize Oral Paclitaxel. These decreases were partially offset by a $1.2 million increase in compensation-related and operating costs.

Interest expense totaled $6.3 million and $5.1 million, respectively, for the three months ended September 30, 2022, and 2021. Interest expense in 2022 was related to the Senior Credit Agreement with Oaktree and the Royalty financing liability, while interest expense in 2021 was related to the Senior Credit Agreement only. The increase in interest expense during the three months ended September 30, 2022 was due to the Royalty interest financing carrying a higher effective interest rate.

Income tax expense for the three months ended September 30, 2022, amounted to $0.6 million, compared to $0.3 million expense for the same period in 2021. Income tax expense in the current period is primarily attributable to foreign income tax withholdings on our license revenue.

Net loss attributable to Athenex for the three months ended September 30, 2022, was $19.7 million, or ($0.14) per diluted share, as compared to a net loss of $36.1 million, or ($0.33) per diluted share, for the same period in 2021.

For further details on the Company’s financial results, including the results for the three months ended September 30, 2022, refer to the Form 10Q filed with the SEC.

2022 Financial Guidance

Athenex expects to maintain product sales growth in the range of 20-25% over the prior year period.

Cash Conservation Update

As of September 30, 2022, the Company had cash and cash equivalents, restricted cash, and short-term investments of $41.4 million. The Company is implementing cost savings programs and monetizing non-core assets, and as the Company completes such activities, the Company plans to extend its cash runway into next year.

Conference Call and Webcast Information

Athenex will host a conference call and live audio webcast today, Thursday, November 3, 2022, at 8:00 a.m. Eastern Time to discuss the financial results and provide a business update.

To participate in the call, dial either the domestic or international number fifteen minutes before the conference call begins:

The live conference call and replay can also be accessed via audio webcast here and on the Investor Relations section of the Company’s website under "Events and Presentations", located at View Source