YS Biopharma Co., Ltd.

Ladies and gentlemen, thank you for standing by and welcome to YS Biopharma's earnings call for the first fiscal quarter of 2024. At this time, all participants are in a listen-only mode. After the management's prepared remarks, we will have a Q&A session. Please note that this event is being recorded. Now, I'd like to hand the conference over to your speaker host today, Ms. Alyssa Lee, the company's investor relations director. Please go ahead, madam.

Thank you very much. Hello, everyone, and thank you for joining us today. Welcome to YS Biopharmers' first fiscal quarter 2024 earnings conference call. Today, you will hear from our president and CEO, Dr. David Hsiao. who will provide an overview of our operations during the past quarter. Our CFO, Ms. Brenda Wu, will then provide a closer look into our financials. After the management team has given their prepared remarks, we will open up the call for questions. You can refer to our first fiscal quarter 2024 financial result on our IR website at investor.1isbiofarm.com. You can also access a replay of this call on our IR website when it becomes available a few hours after its conclusion. Before we continue, I would like to refer you to our Safe Harbor Statement in our earnings press release, which also applies to this call, as we will be making forward-looking statements. Please also note that All numbers stated in the following prepared remarks by management are in RMB terms. With that, I'm now pleased to turn the call over to Dr. David Hsiao, our President and CEO.

Hello, everyone, and thank you for joining us today for our first quarter fiscal year 2024 earnings conference call. In the first quarter of 2024, our top line came under pressure due primarily to inventory issue stemming from COVID-related disruptions at our YSJ-Rebis vaccine manufacturing facilities. While we anticipate that the impact of this inventory issue will persist for the near term, we are confident that robust demand for our product, our continued effort to boost our manufacturing strength, our sales network and efficiency, and the eventual commercialization of our product pipeline will keep us on the path to long-term success. Let's begin by going over the details of our result for the first quarter of fiscal year 2024. Our total revenues for the quarter was RMB 176.3 million, representing a year-over-year decline of 14.2%. Gross profit was RMB 141.6 million, representing a gross margin of 80.3%. For the first quarter, we recorded net loss of RMB 69.5 million. At the end of first quarter, we had cash and cash equivalents of RMB 311.8 million, compared with RMB 370.4 million. as of March 31st, 2023. Since we launched product sales of our YSJ-Rebis vaccine in late 2020, the market intake of the vaccine has been consistent and strong. As of June 30, 2023, we had sold more than 22.2 million doses of our YSJ-Rebis vaccine to approximately 1,725 CDC customers. representing over 60% of CDC customers in China. Next, I'd like to provide some context regarding our previously manufacturing disruption we discussed in our previous earning call last month. The impact on our top line and our plan to overcome these near-term difficulties. Towards end of calendar year 2020, manufacturing operations at our YSJ Rips vaccine production facility in Shenyang were disrupted due to COVID-19 pandemic in China. This occurred as much of China was under siege from the virus. November and December 2022 marked the peak of the country's most recent wave, which extend to the beginning of calendar year 2023. Supply chain of raw materials as well as overall manufacturing operations were disrupted due to the pandemic, which weighed on our output. Since the production of vaccine involved multi-months of lead time from raw material to finished product, the disruption caused a lingering effect, limited batch production and approval, and has impacted the number of finished doses available for sale during the second half of calendar year 2023. We are building up our inventory and leveraging our existing inventory in an attempt to maintain sales levels month by month, while the demand for our product continues to overweight our inventory capacity. Vaccine manufacturing is a month-long process from start to finish. The manufacturing process starts when the viral cell is taken from the working cell bank, restored to a normal state, and moved to culture media. After several generations, The cell can be used for subsequent virus infection. The virus will reproduce after being inoculated to a cultured virus cell and will be used later in the production process. The manufacturing process also involves centrifugation, ultrafiltration, concentration inactivation, hydrolyzation and virus, as well as purification formulation of semi-finished product. like filling, lavalization, and the packaging steps. The production cycle of YSGA rabies vaccine is approximately five months. The shelf life of the finished product is approximately 36 months. After the production cycle, each completed lot of product must be inspected and approved by the relevant regulatory authorities. In China, the National Medical product administration, or NMPA, require vaccine product and other biologics to be sampled, inspected, and certified after thorough quality and technical check before each batch can be delivered to customer. This quality test is also called lot release, which could take three to four months long to complete. Due to the long and complete vaccine production, and the lot release process, we anticipate that we will continue to feel the impact of late 2022 to early 2023 delay our top line for the rest of fiscal year 2024, which will end March 31st, 2024. Presently, all of our revenue is derived from sales of our YSCA Rebis vaccine. As Rebis remains a persistent health concerns in China, Demand for our vaccine remains robust. We expect market demand to persist going forward. Despite encountering near-term difficulties in our operation, the foundation of our business remains stable, and our production continues to remain in demand in the marketplace. However, we have not used our confidence in the future as an excuse to stand idly by. Our team has taken a number of steps to ensure that we emerge from the period of difficulty as a more capable and better prepared business. First and foremost, we are currently taking several steps to increase our production capacity. This includes securing supplies of raw material from domestic and international supplies, conducting technical trainings of our manufacturing staff. Our initiatives will aid us in overcoming our weak points and enhancing GMP compliance in our manufacturing plant. As we enhance our production capacity and output consistency, we will better equip ourselves to meet demand for our product. And we will be better prepared to avoid inventory crunches in the event that future disruption occur. We are also taking steps to develop our infrastructure outside our core facilities. Over the past year, we have built up and begin operating approximately 25 satellite warehouse outside of our central warehouse in our Xinyang facility. These warehouse are designed to facilitate more efficient delivery of our vaccine to end user. By strengthening the core of our infrastructure, we will be able to operate more effectively in both favorable and unfavorable conditions. Second, Looking beyond our production infrastructure, we have historically placed emphasis on establishing relationships with the province and the county-level CDCs across China. These efforts have helped us to develop a robust, wide-ranging sales network spread across the country. This network spans 30 out of 34 province-level CDCs and 1,725 CDC customers in China. as of June 30, 2023. In total, this represents over 60% of CDC customers in China. Even as we take steps to diligently manage our sales and marketing expenses, our past investments in this area have provided a solid foundation from which we can grow our business in the future. As our production capacity grows, we will be able to more efficiently boost our sales by leveraging our existing network, helping us achieve great economies of scales, maintaining price stability and foster loyalty among customers. And while our investment into our sales network already benefit our business, they are also effective as a long-term strategy. As we bring our PicaRibs vaccine and other product candidate to market, we will be able to leverage our strong sales network to enhance their commercialization and potentially expand our network and market share. Finally, we have retooled and optimized our research and development operations to better suit our current situation and the global health environment. Last year, research and development expenses were elevated due to our effort to expedite trials of our PICA adjuvant COVID-19 vaccine. we have seen the global response towards COVID-19 shift as the disease become endemic. And so we have revised our research effort to better align with our vision of the future and the market trend. For fiscal year 2024, we expect the majority of our research and development investment will be focused on our new generation of rabies vaccine, the Pica rabies vaccine, which is entering phase 3 trial this year. This product candidate has the potential to become the best in class and to lift the standard of rabies infection care globally. The clinical data so far has demonstrated the potential superiority of the pica-rabies vaccine as compared to the conventional rabies vaccine in the marketplace. We expect the total clinical budget for these three clinical studies of our pica-rabies vaccine to be lower than that of our COVID-19 vaccine trial, which we just completed. We just reviewed the above three approaches to better managing our expense and enhance our stability that will help us ensure future success. Meanwhile, we remain optimistic about multiple driving forces, which we expect will continue to a long-term growth of our business. First, we expect that human rabies will continue to remain a substantial public health issue in largest sources of the world. Rabies is a threat, particularly in lower and middle income countries across Asia and Africa, where the vast majority of human rabies cases occurred. As we expand our presence and grow our business, we aim to enhance our capability to deliver vaccine to communities and individuals who need them most. This will allow us to provide a critical layer of protection against the disease that otherwise has fatal consequences. Both our existing YSGA rabies vaccine and our new generation pica rabies vaccine well play important role in this strategic expansion. Turning to our pica rabies vaccine, we expect that it will eventually provide us with significant growth opportunities and advantages compared to conventional rabies vaccine in the marketplace. Our pica rabies vaccine is expected to accelerate the onset of immunity from 14 days to 70 days, and can be administered in a three-visit, one-week regimen to replace the conventional regimen involving five injections, three- or four-week-long protocol. The product has the potential to elevate the global standard of rabies treatment as it excels beyond existing vaccines in both seroconversion rate and regimen schedule. By helping patients attain immunity sooner, The Pica-Rebis vaccine will help lower death rate and enhance the chance of survival for individuals exposed to Rebis. Recognize the substantial potential benefit of Pica-Rebis vaccine in comparison to the traditional Rebis vaccine. Our intention is to develop a premium pricing strategy that sets it apart from other competing products in the marketplace. As we mentioned in our last earning call, Our PicaRibs vaccine is currently entering phase three clinical development. We are taking proactive steps to maximize its commercialization potential once the clinical trials are complete. We have established a subsidiary in the Philippines to aid in the advancement of clinical and the regular process related to the vaccine's development. This subsidiary will also help us enhance PicaRibs vaccine commercialization going forward. In addition, we previously entered into agreement with a healthcare-focused investment firm to boost our commercialization effort of our rabies vaccine franchise, particularly in less developed countries. Now, as we move closer to bring our Pika rabies vaccine to market, we are exploring the potential of established strategic partnerships in regard to the commercialization of our Pika rabies vaccine. Finally, we are also making clinical progress on our other long-term pipeline candidate. PICA-YSON-001, our pipeline product targeting multi-indications of solid tumors, continued to progress through its phase one trial in China. We expect this trial to be completed by the end of calendar year 2023, and we hope that we could move this program into phase two study in 2024. Meanwhile, our new generation of hepatitis B vaccine is also making its way through the development process. Unlike most prophylactic hepatitis B vaccine, which are preventive, this product is designed to be a new therapeutic approach against the chronic hepatitis B infection. We expect this vaccine to enter phase one clinical trial in calendar year 2024. To summarize, The first quarter of our fiscal year, 2024, saw our top line impacted by the fallout from COVID-related issues we encountered late in 2022. Despite this, the core of our business remained robust, and we have taken the opportunity to reinforce our company's strengths and address our weakness. As we advance commercialization of our promising P. caribbean vaccine and progress toward exciting new chapters in our company's history, we will remain diligent in our operation and pursue new ways of innovating and growing our business. I will now turn the call over to our CFO, Ms. Brenda Wu, to discuss our financial results in more details. Brenda, please go ahead.