Athenex, Inc.

Good day, ladies and gentlemen, and welcome to the fourth quarter 2021 Athenax Earnings Conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to Kylie Doherty, Director of Investor Relations. You may begin.

Good afternoon, and thank you for joining our conference call. Today, we will provide an update on a Phoenix's business, as well as a review of financial results for the fourth quarter and full year 2021. The news release detailing the results crossed the wire earlier today and is available on the company's website. A replay of this call will also be archived on the company website. During the conference call, the company will make projections or forward-looking statements regarding future events. including statements about financial, business, and clinical milestones anticipated in fiscal year 2022 and beyond. We encourage you to review the company's past and future filings with the SEC, which identify specific factors that may cause the actual results or events to differ materially from those described in the forward-looking statement. You can find our SEC filings in the EDGAR database at www.sec.gov. or in the Investor Relations section of our website at www.athenix.com. Today we are joined by Dr. Johnson Lau, Chief Executive Officer, Dr. Dan Lang, President of Athenix Cell Therapy, Dr. Kurt Gunter, Chief Medical Officer of Cell Therapy, Mr. Jeff Yorden, Chief Operating Officer, and Mr. Joe Anoni, Chief Financial Officer. The management team will be available to answer questions after the prepared remarks. I will now turn the call over to Johnson for introductory comments.

Thank you, Katie. And thank you, everyone, for joining our conference call this afternoon. I'm excited to walk you through the implications of the announcement we made this morning regarding the strategic pivot of the company and several financial initiatives we have already begun implementing. We made this decision to focus on our cell therapy platform because we believe it has the best-in-class potential and therefore deserves to be the highest priority for our experienced leadership team. We are also working on a strengthened balance sheet that provides a cash runway to allow us to meet our objectives to increase shareholder value and bring innovative treatments to cancer patients. I want to highlight the three key elements of this plan. First, we are refocusing our therapeutic development efforts on our cell therapy programs. Second, we will discontinue most of our R&D initiatives around oral discovery. Third, we are strengthening our balance sheet by monetizing non-core assets. We are also implementing significant cost-saving programs to reprioritize the company to focus on cell therapy. Our management team and board conducted an extensive review of our operations and pipeline. And it's clear to us that the best opportunity to create significant long-term value is by focusing on cell therapy. We see our cell therapy technology as differentiated and believe it has the potential to be highly competitive and potentially disruptive to the current cell therapy landscape. Specifically, we think it can address some of the challenges facing the existing CAR-T treatments, and the early clinical data from our candidates have been very promising. Dr. Stan Lang and Kurt Gunther will provide more details in a few minutes on our strategic plan to build upon our foundational self-therapy programs to create a leading franchise. The oil scuffling programs, served as the main focus of APNIC's clinical development efforts up until 2021. We announced previously that we would not be pursuing the metastatic breast cancer indication in the U.S. after receiving a complete response letter from U.S. FDA. We are now taking this a further step and have decided to discontinue other oral programs in combination with Ensecadar. There are only two ongoing oral pachytextile trials that could potentially unlock value that will both continue. It says validity to limited investment required by Phoenix. The first of these is the I-SPY-2 trial, which has an expected window in the second half of 2022. We call that the quantum leap. Healthcare Collaborative has been using our drug in two of its three arms in combination with Dostarumab plus or minus carboplatin in breast cancer patients in the neoadjuvant setting. This is a randomized phase two trial that could advance into phase three and beyond if results are encouraging. And it's an area of value that could be unlocked. This program requires a minimum future resources for Mayfinex, but we hope that this data readout could drive additional value for our shareholders. We are also pleased to announce that we have initiated the expansion portion of the Phase 1-2 clinical trial of Oropacetaxel in combination with Pembrolizumab in patients with non-small cell lung cancer. This comes after reporting highly encouraging data of four partial responders and four stable diseases in eight evaluable patients at ESMO last fall. We will continue to monitor the progress of both these studies and will look for opportunities to extract further value from this asset through potential partnerships or other means. As a reminder, The UK Medicines and Healthcare Products Regulatory Agency validated our market authorization application for oral pachytexel for the treatment of advanced breast cancer. And we look forward to updating you on the regulatory process in the coming months. Moving on to our balance sheet. Last quarter, we said that we would pursue various initiatives to unlock long-term value, and we have so far raised a total of $40 million in the first quarter. This process will be used towards debt pay down as well as providing operating cash to support our R&D programs in self-therapy. We recently completed the sale of our manufacturing facility in Dunkirk, New York to Immunobar on February 14. We are pleased with how quickly we were able to close this transaction. Having entered discussion with Immunobar late in 2021 and announced the agreement in early January this year, Mr. Jeff Yoden will provide more details on the implications of this sale in a few minutes. There are several components of our business unrelated to cell therapy that we now consider non-core. We are in the process of carrying out actions that will unlock value from these assets, as we did with Dunkirk. We look forward to updating you on those activities in the coming months. A critical component in the organizational changes within the Phoenix is an aggressive cost-cut dating program. which unfortunately will put a reduction in headcount. We have also identified additional means of cutting costs and implementation of this plan is expected to reduce operating expenses by over 50%. All together, with divesting non-core assets and cost reduction programs, we plan to extend cash runway to beyond 18 months We believe the combination of initiatives I have outlined has the potential to unlock value for our shareholders. Finally, Mr. Joe Annone, who was recently appointed our new CFO, is joining us on the call today. Joe brings over 20 years of experience, having worked in big four advisory, investment banking, and private equity. He has expertise in developing and implementing strategic changes within complex environments, which will be extremely valuable to us as we prioritize our programs. I'll now turn the call over to Dr. Dan Lang to discuss our cell therapy programs.

Thank you, Johnson. As we refine our mission at Athenics, we will remain a science-driven company focused on identifying and developing innovative treatments for cancer patients. We believe cell therapy is a promising technology with the potential to change cancer into a treatable chronic disease, particularly in hematologic malignancies. We are excited to focus our R&D efforts on NKT cell-based technology that we believe has shown the potential to address several unmet medical needs faced by healthcare systems, physicians, and patients with the currently marketed CAR-T therapies. we aspire to solve some of the existing bottlenecks and limitations and bring value to the different constituents in the healthcare ecosystem. There are three current challenges to the current CAR T treatments, access, cost, and clinical outcome. Given the unique features of our technology, I believe we can meet each of these challenges. First, Due to the difficult and specialized handling of patient-specific autologous products, current CAR T therapies are primarily reserved for transplant centers, as the community hospitals are in large part not set up to use these technologies. This is the reason why it's estimated that only 25% of the eligible patients are currently treated with CAR T therapies. By providing an allogeneic off-the-shelf product that can be given in an outpatient setting, we expect to broaden access to cell therapy by penetrating the community hospital network with our NKT solutions. By driving deeper adoption of our therapies, we can ultimately benefit more patients than those addressed by current market quantities. Second, Current CAR T therapies cost between $300,000 to $400,000 per dose. More importantly, we are getting the feedback that it costs the academic hospitals even more to take care of these patients because of the prolonged ICU and hospital stays. One highly regarded thought leader recently commented to us that this business model simply does not work for the healthcare system. In contrast, We hope to leverage our ability to manufacture several hundred doses from a healthy donor to create economies of scale that reduce costs within the healthcare system and for payers. With an outpatient-based and well-tolerated treatment, we strive to lower the burden and the cost of taking care of these patients. Lastly, despite the promising clinical performance from current CAR-T therapies, there is still a lot of room for improved efficacy. Up to 60% of relapsed refractory lymphoma patients don't derive long-term durable response from CAR-T treatment, as described by Dr. Nilapoo at our KOL webinar in December. In addition, 30 to 40% of patients experience the dreaded cytokine relief syndrome complications. With an 80% response rate seen at the lowest doses with our CD19 CAR and KT therapy, we believe there are levers we can pull, such as higher doses and repeat dosing that can drive deeper and more durable responses for a larger percent of patients. Our side effect profile is well-tolerated with a CRS rate that is much lower than the current CAR T therapies. In summary, we believe our NKT cell-based treatments could solve some of the problems faced by clinicians and patients using the current first generation CAR T treatments. As the field of cell therapy continues to evolve, we are focused on collaborating with all stakeholders, including patients, physicians, healthcare systems, and payers to extend and improve the quality of life for cancer patients. Now, let me turn it over to Kurt to provide an update on our clinical programs.

Thank you, Dan. Good day. My name is Kurt Gunter, and I am the Chief Medical Officer for Cell Therapy at Athenics. I have extensive experience in the field of cell therapy and was previously CMO at Cure Therapeutics. I joined Athenics at the time of our acquisition of CURE, and I'm pleased with the progress of our CAR-NK T-cell programs since the acquisition. I want to highlight some of the unique characteristics of NK T-cells, which we believe combine the best features of NK and T-cells. Importantly, type 1 NK T-cells, which we work with, have a unique invariant T cell receptor, or TCR. Because of this invariant TCR, there is virtually no risk of graft-versus-host disease compared to allogeneic T cells. CAR-NKT cells have strong cytolytic activity and can kill tumor cells directly and indirectly. These cells are known to have good memory and persistence, characteristics not shared by NK cells. NKT cells home to tissues and tumors, and we have data demonstrating that CAR-NKT cells are superior to CAR-T cells in tumor homing. For these reasons, we believe this is the ideal cell type to treat solid tumors, and our early data support the promise that CAR-NKT cell holds in the treatment of cancers. I am extremely pleased to report continued progress in advancing our key cell therapy platform over the past quarter. Data from our Phase I anchor trial of KUR502, our allogeneic CD19-directed CAR and KT cell candidate, were reported at ASH in December. We saw strong efficacy and an excellent tolerability in a population of heavily pretreated relapsed refractory leukemia and lymphoma patients. Specifically, out of five evaluable patients, there were three complete responses and one partial response for an overall response rate of 80% and a complete response rate of 60%. Notably, two of the responders had failed prior autologous CAR-T, and we are seeing results at very low dose levels. In this trial, we also observed that CAR and KT cells home to sites of disease and expand in the peripheral blood. These results are extremely encouraging and suggest a promising platform for off-the-shelf immunotherapy. Further enrollment in the ANCHOR trial continues, and we are working to enroll additional patients at higher dose levels. As we look to the remainder of 2022, we are excited about several important events and presentations. Our IND application expanding the anchor study to up to 12 clinical sites was recently allowed to proceed by the FDA. This should markedly accelerate enrollment from that achieved with the current single center. Additional data from this program are expected to be reported at ASH in December. including updates from patients at dose levels two and three as we look to establish the recommended phase two dose. We will also present more data from a responder analysis of KUR501, our autologous GD2 CAR-NKT cell program in pediatric neuroblastoma at the ASGCT conference in May. We plan to present preclinical data from our allogeneic GPC3 CAR NKT cell program in liver cancer at the ASCO conference in June and file an IND for this program in the first half of 2023. Finally, for our earliest stage program of allogeneic NKT cells expressing T cell receptors for solid tumors, we expect to have clinical candidates defined by the second half of 2022. I will now turn the call over to Jeff Yorden.

Thank you, Kurt. As Johnson mentioned earlier, we recently completed the sale of our manufacturing facility in Dunkirk to Immunity Bio for $40 million. As part of this sale, we entered into an exclusive contract with Immunity Bio to manufacture our 503b products at this facility in the eight new pods we developed there. The advantage of this arrangement, in addition to the cash generated from the sale, is that we can now reduce our overhead significantly and still increase our capacity fourfold with a very low cost of goods, which should have a positive impact on the margins of this business. This sale represents part of the new strategy of the company, unlocking value as we pivot, which you can expect to continue throughout the year. Moving to our APS and APD specialty pharma business, sales for the fourth quarter and full year 2021 were 23.5 million and 92.3 million, respectively, compared with 21.8 million and 105.3 million for the fourth quarter and full year 2020. There were several factors that influenced performance in 2021. The 2020 revenues included approximately 21 million in non-recurring international sales due to COVID, representing a baseline figure for 2020 of 84.3 million. Adjusting for these one-time sales in 2020, revenue for 2021 grew by 8 million to 92.3 million. Most of the issues relating to the COVID pandemic, including the manufacturing slowdowns in China and India, inability to secure shipping options to bring inventory into the U.S., Shortage of essential materials and challenges to purchase and receive essential APIs for our products have largely been resolved, and we are in a much better position to grow the business in 2022. We launched two products in the fourth quarter, and we have an additional 10 planned for 2022. Two of the planned new introductions are very significant products, and these will be launched at market formation, meaning right at the time of patent expiry. The revenues on these two products will increase revenues and margins of the overall business significantly. Both products already have tentative approvals, which means we will be able to launch them when the patent expires. We previously announced a delay in securing state licenses for the Dunkirk facility. We're currently collaborating with Immunity Bio to secure licensing in New York in order to begin operations there, and then with the seven largest states we currently do business with. It will likely be late 2022 or early 2023 before this process is complete. But once the licenses are in place, this sets us up for significant further growth 2023 and beyond. A Phoenix Pharmaceutical Division currently markets 29 products with 54 SKUs, and a Phoenix PharmaSolution markets five products and 16 SKUs. Overall, we are very excited by the potential of this business to generate significant value. The revenues at APS and APD are robust, and we are selling every unit we can manufacture at substantial margins. We see the consolidated business returning to growth in 2022 and are now forecasting that revenues will increase by between 15 and 20%. Further product launches by APS and the receipt of licenses to ship 503b products are expected to result in substantial growth further in 2023. I will now turn the call over to Joe Annone to discuss the financials.

Thank you, Jeff. Good afternoon, everyone. I am honored to join this team of innovative leaders in the world of cancer research and development. The Phoenix's mission to improve the lives of cancer patients resonated with me personally, as I'm sure it does with many of you listening. I came on board to apply my transactional and operational experience to drive strategic financial changes so that the Phoenix will be in a better position to deliver on that goal. Our announcements today mark an important time of change, a time to break down and a time to build back up our foundational strengths as we focus on the future of our cell therapy programs. In order to do that, we see two significant opportunities to strengthen our balance sheet. First, the monetization of non-core assets, and second, cost reduction. As you heard today, we have already begun addressing both. The asset monetization steps we have implemented so far include the sale of our Dunkart facility, which generated $40 million, along with significant overhead cost savings. We have identified other non-core assets in the business that could serve to unlock additional value, and we will provide updates on these programs as we continue to execute on our strategy. Our cost reduction initiatives are related to the streamlining of the company structure to refocus it around cell therapy. The sale of Dunkirk alone reduced our headcount immediately by 70 people, and we eliminated the associated operating and capital expenses. Our plan also includes the winding down of non-core operations in manufacturing, small molecule R&D, and supporting infrastructure. Small molecule clinical study expenses are being reduced by over 90% as we now only have two ongoing studies. Additional cost reduction initiatives should allow us to reduce total operating expenses by over 50%. And by transitioning to a pure play biotech model, we can minimize future capital expenses. The process of strengthening our balance sheet is underway, and the team is committed to taking necessary steps to ensure a strong financial foundation for the future of Athenex. Combining the activities that we have executed on, as well as planned actions in the divestiture of non-core assets and cost reductions, we expect to extend our cash runway for 18 months and beyond. In summary, we aim to succeed in realizing the full potential of our cell therapy platform while transitioning to a focused business model that has an appropriately sized infrastructure. Now turning briefly to the fourth quarter and full year 2021. I would ask that you please refer to our press release that was issued earlier today for a full summary of our financial results. But I will highlight the following. Total revenues for the fourth quarter and full year 2021 were $24.9 million and $120.2 million, respectively, compared to $21.8 million and $144.4 million, respectively, for the same periods in 2020. R&D expenses totaled $18.3 million for the fourth quarter, in line with the prior year period, and R&D expenses totaled $80.2 million for the full year 2021, an increase of 6% year over year. SG&A expenses total $12.9 million and $72.1 million for the fourth quarter and full year 2021 respectively. This represents a year-over-year decrease of 59 and 26% respectively. Net losses attributable to a Phoenix for the fourth quarter and full year 2021 were $104.4 million and $199.8 million respectively or losses of $0.95 and $1.92 for diluted share, respectively. The fourth quarter and full year results include non-cash goodwill impairments of $67.7 million. As of December 31st, 2021, we had long-term debt of $150.3 million under our senior credit agreement with Oaktree and Sagard, which we have begun to pay down with the proceeds from our asset monetization activities. As of December 31st, 2021, Athenix had cash, cash equivalents, and restricted cash of $51.7 million and short-term investments of $10.2 million. Finally, as Jeff mentioned, the specialty pharma business is expected to return to growth this year. Given the visibility we have on demand and on new launches, we are issuing product sales guidance for the fiscal year 2022 of 15% to 20% growth over the prior year. I will now turn the call back to Johnson.

Thank you, Joe. We have outlined our strategic plan and emphasized our priorities for you today. As you can see, we have already taken steps to pivot APNICs towards our new future in therapy, and this is just the beginning. We are intensely focused on advancing this promising pipeline And our actions will ensure the simplified company will reflect our focus and position us for success. I want to take a moment to thank all of our colleagues who work endlessly on the oral scuffing programs and other parts of the business we're no longer supporting. I'm grateful for the dedication and contribution the team has made over the past several years. We'll miss all individual team members who will be departing and wish them luck on their future endeavors. We will now open the call for questions. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

Thank you.

Our first question is from Jonathan Miller with Evercore ISI. Please proceed with your question.

Hey, guys. Thanks so much for taking my question. Very excited to hear about the pivot here and all of your plans for cash runway extension. I just want to be super clear about the plans for Oral Pacliftaxel at this point, though. If you get positive approval and a positive opinion in the UK, will you intend to commercialize there? And if I-SPY2 looks good in the second half, will you pursue a registrational path there? So at this point, what role does oil-packed tax play as part of your monetization of non-core assets? And then while we're on that topic, when will you have a more concrete sense of cash runway and what's your expected cadence, I guess, of the monetization and unwinding of the non-core or legacy businesses?

Thank you for your question, Jonathan. Certainly, I mean, there's still value in the Oral Discovery Program, in particular, Oropec Ataxel. And right now, we understand the challenges that we're facing. With the resources that we have, cell therapy is definitely the priority right now, given the exciting data we've generated and the potential return for the investors. It was a tough decision. But anyway, if the data turn out to be positive with iSpy2 or with a positive development with the UK MHRA, obviously we intend to continue extracting the value from this program. And it will be able to update with regard to our plan in case we have something very positive which we're hoping for in UK or if we have very positive data from the iSpy2 program. Certainly, when positive things develop, we have already demonstrated that we know how to react, and there could be strategic actions that we could take in order to realize the value for this asset for our shareholders.

Jonathan? Yeah, thank you. And on the concrete sensor cash runway, a cadence and monetization question?

On that question, I would like to emphasize that when we were trying to build for success, we built the vertical integration with regard to having supply chain. And then because of that, we then also was able to realize, create some value based on the specialty pharma business. But now that we're focusing on cell therapy, some of the components become non-core assets. And the good part is that some of these non-core assets, they do have a lot of value. We already indicated that we are in the process of monetizing them, and we have done a lot of work on that. So we hope that we are going to provide an update once this process is in completion, and hopefully in the next few months. And with that, we believe that we'll be able to extend the cash run rate to 18 months or longer.

Okay, excellent. Thank you very much. Thank you, Jonathan.

Thank you. Our next question comes from Kevin Degener with Oppenheimer. Please proceed with your question.

Hey, appreciate the update. With regard to the data to be presented at ASGCT, you know, how should we think about, you know, number of patients and kind of maturity of that update? And maybe on a related point with regard to the, you know, the ASCO presentation, you know, any sense to think about expectations there as well?

Okay, thank you for your question there. So, at ASGCT, we'll be updating data from the GenaKit 2 study. We're not providing any guidance yet on patient accrual, but we have accrued more patients. I can tell you that from the last presentation at ASGCT, and we're also following durations of response in the patients we've previously presented. At ASCO, we'll be presenting preclinical data from our KUR503 program, which is targeting GPC3 in hepatocellular carcinoma.

Great. And then maybe just a housekeeping question for me. Johnson, from your last response, I would interpret the 18-month cash runway to include proceeds from monetization? If for some reason you were not successful in future monetization, how should we think about cash runway?

I think we are working on different sorts of revenues and also avenues, and we are having different approaches to ensure that we will be able to sustain to that point. And certainly, we have been conducting a lot of activities in relation to the monetization. Suffice to say, I mean, our usual approach is that we'll only announce it when it's to completion, but we emphasize that we would like to emphasize that we have been working on this for quite a while already, and we're hoping to update you in the next few months. And there are other sorts of approaches we can take, but certainly, I mean, we are going to use whatever approach we can to ensure that we are going to be able to have resources up to 18 months or longer.

Great. Thanks for taking our questions.

Thank you for your understanding.

Thank you. Our next question is from Kenan McKay with RBC Capital Markets. Please proceed with your question.

Hi, I have two questions. First, I was wondering if you could just comment on the potential to further monetize Turban Ibuen and the number of territories and the territories that hadn't yet been partnered out or licensed out there. And then beyond that, on the specialty pharma business, I was wondering if you could expand a little bit on the margins. This is a business previously that had obviously been manufacturing Raxol as clinical supply and had been non-profitable as a result of that. But now without that capacity and cost, I would just like some further clarity on what those operating margins could be. Thank you.

Thank you, Kenneth. I'll answer the first question. I'll let Mr. Jeff Yoden to answer your second question on specialty farmer margin. With regard to turbulent, we collaborate with our partner, Emerald, for both US and Europe. And we also partners in China, in Taiwan, Japan, Korea, and also Australia and Canada. So therefore, the territories that we are working on right now is Latin America. But having said that, I think the pickup of tabernacle has been going according to plan, and therefore there will be some sort of upside potential with regard to that, and also that particular royalty stream will be of value. And since we are going to support the company, we're looking for different ways and various different approaches in terms of monetizing it to ensure that we will be able to create such resources for the company to go forward and to move the cell therapy program. I hope I answered your first question. And if so, then Jeff, do you want to answer the second question?

Yes, Johnson. Can everybody hear me? Yes. All right. Ken, thanks for the question. uh we're going to be we're going to be uh introducing 10 new products uh in 2022 the specialty farm of business uh and several of the products will be at market formation which is the first time we've been in a position to do that so the margins will be much better we we anticipate the margins to be in the area of about 25 percent uh for the specialty farm of business uh this year and uh We also anticipate positive EBITDA.

Thank you. Our next question comes from Jonathan Chang with SVB Learing. Please proceed with your question.

Hi, guys. This is for Jonathan. Just had a question on the NKT cell therapy platform. Wanted to ask if you had any thoughts on the recent FDA guidance regarding cell therapy clinical trials and how this might apply to your strategy for the NKT cell therapy platform.

Ben? I would direct that question to Kurt. Kurt?

So if you're referring to the CAR T cell guidance that came out from FDA today. I haven't had a chance to study it thoroughly. However, I will say I think we are pretty up to date with regard to how to design CAR-NK T cell studies since we just submitted an IND recently that was allowed to proceed by the FDA. If you give me a few more hours, I'll definitely read that thoroughly and be able to, in a position to discuss it with you in more depth.

Great. Sounds good. Thank you. And then if I could just ask one more question on NKT cell therapies. Just curious if you guys could provide some color on your kind of perceived or anticipated differentiation versus other companies out there doing NKT-based therapies.

Dan? Dan?

Sure. Thank you for the question. So I believe we're the leader for developing NKT cells. We have two clinical trials ongoing right now, as you know, one in neuroblastoma for GD2 CAR-NKT and one in relapsed refractory lymphoma leukemia for CD19 CAR-NKT. Other NKT companies, as far as I know, they are not in the clinic yet. And the one that is in the clinic, I think they are pursuing a unmodified NKT cells. My understanding is that they're just taking NKT cells from donors without doing any genetic modification like putting in the car or putting an IL-15 like we did to make these cells more potent and persist longer. They're just infusing unmodified NKT cells to I believe, multiple myeloma patients. So in that regard, I think we are probably a year to two years ahead of the competition with regards to NKT cell therapy in cancer treatment.

Kai, thanks for taking the time.

I also want to emphasize that, as mentioned in our press release, that we also already got the industry-sponsored R&D for the QR502 allowed already. and this will allow us to expand to more centers and in a way accelerate the recruitment rate to capture the full value of our allogeneic approach for the B-cell malignancies including lymphoma in a more expedited fashion. So therefore, it highlights with regard to our commitment and our ability to work with FDA to resolve to advance our program in cell therapy. I hope that this provides you some more data points for your consideration in your evaluation.

Perfect. Thank you so much. Thank you.

Thank you. Our next question comes from Matt Kaplan with Leidenberg Thalmann. Please proceed with your question.

Hi. Thanks for taking the questions. Johnson, just wanted to follow up on that a little bit more in terms of CURE 502. How should we think about the rollout of those 12 additional sites this year and generating additional data throughout 2022? And what are your expectations in terms of increasing patient enrollment there in the anchor study?

Thank you. Yeah, thank you. Dan, do you want to answer this question?

Sure. So we're very pleased that we were able to file an IND that was recently allowed by the FDA to expand our current single center study from Baylor to a multi-center studies. As Kurt mentioned in his prepared remarks, we're looking to stand up 12 sites. We're actually taking all those actions right now. And we're hoping to have more patients that will replicate the very early promising data that we presented at last year's ASH medical conference. Currently, we're not projecting, we're not giving any guidance on the number of patients. but we're hoping that by the time that we exit the year, we'll have a pretty good idea what the recommended phase two dose should be for my dose escalation study.

Okay, very good. And then kind of follow up on the anchor. At the ASTCT conference next month, should we expect to see additional patient data versus ASH of last year?

Dan?

Yeah, so at the ASTC team meeting, we are going to have just a little bit more incremental data on a couple of patients. And then we also have more mature data for those patients that have the ongoing complete response or PRs. So there's a little bit of incremental information on the durability of responses, as well as incremental data on a couple more patients. But really the big data update will be later this year at ASH after we stand up all these sites to enroll more patients in what we call the Anchor 2 study in this multi-center study.

Okay, great, great. And then last question, you've already spoken about the asset monetization plans. Can you give us a little bit more color on the cost reduction programs you've put in place and And as you shift your focus to the cell therapy platform, help us understand in terms of your SG&A and R&D, where you think you can get to.

First of all, let me again say that we have a known core asset. We're not giving any guidance. we are just emphasizing that we understand that we want to emphasize this is the path that we are taking after due evaluation with regard to what's the best path forward. I want to emphasize again that we are not actually giving any guidance, but rather we would like to emphasize that all these are in action and then we'll then be able to announce at the appropriate time when all these activities are, some of these activities are completed at the appropriate time. Now with regard to cost reduction, as our CFO Mr. Joe Anony has indicated that a lot of the activities related to other aspects of oral discovery are already being discontinued. And then we also reduced the oral pachytexel activities to only two of the existing studies that will require minimal investment. And then correspondingly, the SG&A will also come down. The current projection is that it will be more than 50% reduction of the entire operating expenses in the next couple of months right now.

Okay. Thank you, Johnson.

That's very helpful. Thank you. Thank you, Matt.

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. Our next question comes from Yale Jen with Laidlaw and Company. Please proceed with your question.

Good afternoon, and thanks for taking the questions. I just want to clear that in terms of you talking about cash runway, you have about $61 million cash by the end of last year. And when you talk about the runway, do you also include the $40 million for the Dunkirk assets? the proceeds from that as well.

Joel? Can you hear me? Yes. Can you hear me okay? Yes.

Yes, I can hear you. Okay. Okay, good. Thanks. My phone is acting up there. But, yeah, the $61 million that you're referring to, that was as of December 31st, so that does not include the proceeds from Dunkirk, which occurred in January. We have not provided updated numbers as far as the cash balance, but, yeah, you can infer from that, from those two data points.

Okay, great. That's very helpful. And the second question here is that in terms of TCRT, Does it consider as a non-core or still part of the cell therapy potentially to be pursued going forward?

Dan, do you want to address this question, or do you want me to address this question?

I'm happy to take it. So, Yale, so as you know, the TCRRT is a TCL receptor that targets the antigen NYESO, and it's an autologous T cell approach. Currently, we have a phase one program that is ongoing at Baylor in Dallas, and this is targeting those solid tumors, including lung cancer, breast cancer, head and neck cancer, TMBC, and I believe bladder cancer. They are high expressors of MYESO. We are hoping to get some safety and efficacy signal from this study. Longer term, it's our belief that in order to derive long-term durable response in solid tumors, a more appropriate approach would be an AllergyNIC approach because based on our understanding of the science and the literature and other companies' experiences, we don't believe a one-shot autologous approach is going to be efficacious enough to treat solid tumor. So long-term, if we're seeing an interesting signal from our MY-ESO TCR, there's a possibility that we could put that TCR onto the NKT cell platform so we can provide an allogeneic approach that we can give repeat dosing. So that's sort of our long-term plan, but it's I hope that's helpful to you, Yael.

Yes, absolutely. And maybe the last one more question here, which is that it's a housekeeping question. That based on the fourth quarter operating expenses, both in the R&D and SG&A, should we consider that could be the new basis for the operating expenses of 2022 in general?

you should consider much lower because when you're trying to wind down certain operations, including the marketing arm, they are nearly all gone already. And also that we are eliminating some of the clinical operational team related to oral pachytexel. You should expect that the operating expenses should go down drastically, including SG&A. So therefore, your assumption should be based on the number and based on the regular number and then should take around 50 percent, at least 50 percent reduction. That's our objective right now.

Okay, great. Thanks a lot, and best of luck for things moving forward.

Thank you for your question. Yeah.

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Johnson Lau for any closing comments.

Thank you very much. We are pleased to provide you with this update today as we begin a new chapter at Affinex. We believe that our cell therapy programs should be the main driver for future growth and position us to be a leader in this space. The encouraging clinical data are in strong support of the great potential of our cell therapy program. Our decision to monetize non-core assets improve our balance sheet and cut operating expenses result in a leaner structure that will meet our long-term corporate objectives and create sustainable long-term value. The combination of these initiatives set us up for variable creation for shelters and will help us execute on our mission to bring innovative treatments to cancer patients.

Thank you, everyone, for joining us today. This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.