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spk00: Ladies and gentlemen, thank you for standing by and welcome to YS Biopharma's earnings call for the first nine months of fiscal year 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. Melissa Lee, the company's investor relations director. Please go ahead, madam.
spk04: Thank you very much. Hello, everyone, and thank you for joining us today. Welcome to YSL Pharma's first nine months of fiscal year 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 CMO, Dr. Zanita Muharris, will then share more details on our product pipeline. 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 nine months of fiscal year 2024 financial results on our IR website at investor.ysbiopharma.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 price 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.
spk02: Hello, everyone, and thank you for joining us today for our first nine months of Fiscal Year 2024 Earnings Conference Call. During the first nine months of Fiscal Year 2024, our top line continued to experience the lingering impact of inventory issues from previously supply chain disruption at our YSGA rabies vaccine manufacturing facility. Thanks to operational enhancement, including improved supply of raw material and the refined inventory management strategy, our vaccine production has returned to normal, and our inventory situation is improving. As one of the top rabies vaccine producers in China, higher production throughput and a healthier inventory level of finished product, we have maintained our leadership position in the marketplace. Following the decline of our product sales in the first nine months, end of December 31st, 2023, we have returned to a growth trajectory and we estimate double-digit year-over-year growth in product sales during the three-month period ended March 31st, 2024. Based on the current information at hand, we expect the product sales in fiscal year 2020-25, starting April 1st, 2024, would like to increase by double-digit year-over-year. This would solidify our leadership position as one of the top redispecting producers in China. This guidance reflects our current and preliminary views on the market and operational conditions, which are subject to change. Let's begin by going over the details of our result for the first nine months of fiscal year 2020-2024. Our total revenue for the period was RMB 438.1 million, representing a year-over-year decline of 24.6%. Gross profit was RMB 351.7 million, representing an 8.3% gross margin. For the first nine months of fiscal year 2024, we recorded a net loss of RMB 260 million. At the end of the period, we had cash and cash equivalents of RMB 222.6 million, compared with RMB 370.4 million. as of March 31, 2023. Since we launched product sales of our YSGA Rebis vaccine in late 2020, market intake of the vaccine has been consistent and strong. As of December 31, 2023, we have sold more than 25.6 million doses of YSGA Rebis vaccine to approximately 1,746 CDC customers. which represents over 6% of CDC customers in China since October 2020. Next, I'd like to share some insights into our business initiatives. At the cooperative level, since late 2023, we have embarked a comprehensive series of initiatives aimed at fortifying our foundation for future growth. This includes the change to the board of directors and the senior management team, which we announced in recent months, as well as streamline organizational reporting line, the process. Additionally, we have implemented measures to enhance internal controls and governance. Starting in March 2024, we took further steps forward, including prioritizing our pre-clinic and the clinical pipeline and optimize human resources across all our subsidiaries in the US, China and Singapore. We have also implemented more effective cost controls in our manufacturing, sales and marketing and general administration functions. These initiatives, which include the cost controls and the improvement of operating efficiency, are ongoing and will remain a focus throughout the end of fiscal year 2025. We are confident that this effort will serve as pillars for our future growth. We also took steps to build out our infrastructure, expanding our total numbers of satellite warehouse to 26. These dispersed facilities enhanced our production distribution capabilities and helping us take advantage of the persistent demand for our YSGA rabies vaccine. Thanks in part to our effective implementation of this strategic adjustment, we are pleased to report that our production capacity returned to normal level during the third quarter of fiscal year 2024. Our second quarter of fiscal year 2024 was the last to come under significant pressure from impact of the past production delays. When resolving our inventory issues, we took steps to strike a balance with our current strategy, with the importance of building up our inventory against the need to fulfill market demand. This approach has led to improvement in our inventory situation to date. Ideally, we aim to hold nine to 12 months worth of finished product inventory at any given time. We are working towards achieving this target sometime during next year. Second, despite the short-term pressure on our top line, we continue to invest in our relationships with customers throughout China. As of December 31st, 2023, our sales network encompassed 30 out of 31 province-level CDCs and 1,746 CDC customers across China. representing over 6% of CDC customers in the country. Our sales and marketing strategy is based on a long-term perspective. The robust sales network we have built up over the past several years provides us with a solid foundation from which we can drive future success. Maintaining a network of loyal customers makes it easier for us to reap the benefits of production capacity improvement especially as the demand for YFJ Redis vaccine remains robust. Our enhanced production capacity combined with this expanded pricing power is a testament to the utility and the value of our existing sales network. With our CDC customers' recognition of the safety and efficacy of YFJ Redis vaccine, we are optimistic that this relationship will remain an integral part of our operational strategy. And finally, we believed our goal to reconfigure our research and development effort was reaching us for long-term business success. By late 2023, we had shaped our focus away from our PICA COVID-19 vaccine candidate in light of the evolving global health environment. While our R&D expenditures in the first nine months of fiscal year 2024 was still impacted by the 12-month monitoring period for the PICA COVID-19 vaccines phase three trial. We have delivered on our goal of prioritizing development of PICA-RIPS vaccine. We just recently announced interim results of multi-country, multi-center phase three clinical study of PICA-RIPS vaccine. The interim result of this study indicates that the Pica-Rebis vaccine has successfully met the primary endpoint of the clinical study and has the potential to achieve best-in-class accelerated production and meet the WHO's goal of a one-week Rebis vaccine regimen to replace the conventional three- or four-week-long regimens. After the completion of Phase III study, the production registration and eventual commercialization of our Pica leaves vaccine remain a top priority, and we are pleased with the progress we have made towards this goal to today. As such, we plan to craft a pricing strategy which distinguishes the Pika leaves vaccine from other market competitors. To summarize, while we have spent a fair portion of 2024 overcoming lingering production issues, the temporary setback we faced had primarily been overcome. as we refine our operations and bolster our resilience. Since late 2020-2023, we have embarked on a comprehensive series of initiatives aimed at fortifying our foundation for future growth. Looking ahead, we will continue to advance our product portfolio towards commercialization, focus on operational efficiency, and then leverage our refined inventory strategy and the robust sales network to build a sustainable long-term shareholder value. I will now turn the call over to our CMO, Dr. Zuneda Maharis, to discuss our product candidates in more details. Zuneda, please go ahead.
spk05: Thank you, David. Now, from the clinical development pipeline mentioned earlier, We have gone through internal evaluations on current pipeline products and have made strategic decisions on budgeting and prioritizing the preclinical and clinical pipeline. PICA rabies vaccine and PICA HBV002 vaccine remain as the key development product candidates going forward. Here, I would like to spotlight two studies sponsored by YS Biopharma. First, the YS002. This is the ongoing phase three clinical trial of our pica rabies vaccine. And second, the YS101, the upcoming phase one trial of YSHBV002. This is a therapeutic vaccine intended to be used as a treatment for chronic hepatitis B. Now, let me begin with YS002, the pica rabies study. In this large-scale study, we enrolled subjects across seven sites in the Philippines and Pakistan in September 2023, with a total of 4,500 randomized subjects. We compared the safety and immunogenic profiles of pica rabies vaccine using a five-dose regimen completed in a span of three clinic visits in only seven days, to that of a leading market competitor with a traditional five-dose schedule completed in five clinic visits spread throughout a 28-day period. Rabies virus proliferation within the muscle and nerve tissue can occur as early as the seventh day from viral inoculation. Moreover, patient compliance to rabies vaccination has been shown to drop significantly after seven days as well. We have defined the pica rabies vaccine regimen with these factors in mind. Our interim analysis results show that the pica rabies vaccine surpassed expectations as highlighted by the three key findings. First, early onset of protection. Zero conversion rate or the production of protective antibodies against rabies was noted to be twice that of the comparator in as early as seven days. Second, non-inferior and durable protection against rabies. as evidenced by similar zero conversion rates with the competitor on days 14, 28, and 42. And finally, a reassuring safety profile with the majority of adverse events being mild to moderate local and systemic complaints, and there were no serious adverse events suspected to be related to the tested vaccine. In brief, Not only does the PicaRabies vaccine offer substantial protection using a shortened regimen, it also demonstrates promising superiority in generating an earlier protective response compared to a globally marketed comparator. A shortened treatment regimen may improve treatment compliance and completion among patients where it has been found that a major barrier to treatment completion is the long vaccination schedule used by current rabies vaccines. Now, we turn to the YS101, which is a chronic hepatitis B vaccine study. We successfully received the approval of the Philippine FDA on February 15th of this year. to conduct the Phase I study by Q2 of this year. The clinical trial unit where the study will be conducted is managed by one of the most prominent researchers in the Philippines. This study will evaluate the safety, tolerability, and preliminary efficacy of YF-HBV002 for the treatment of chronic hepatitis B in adults. YSHBV002 is the proprietary formulation of YS Biopharma of recombinant hepatitis B surface antigen, recombinant hepatitis B core antigen, and our signature immunomodulating platform. This vaccine is intended to be injected intramuscularly with a 14-dose regimen that can be completed in 40 days. We designed this investigation as a double-blind, randomized, placebo-controlled dose escalation study. Without getting too technical, this means that we will conclude the study with the knowledge of the appropriate dose to be used further along in the clinical development of the vaccine. Chronic hepatitis B is responsible for around 80% of cases of hepatocellular carcinoma in the regions with historically high rates of hepatitis B virus infection. At the moment, there is no approved curative treatment for chronic hepatitis B. That is tolerated well with only a low frequency of severe adverse events, and we are hopeful in the potential of our vaccine to change that. Thank you for your attention, and I now pass the floor to our Chief Financial Officer, Brenda Wu.
spk03: Thank you, Saneda. I will now provide a close look into our financials. Please know that all numbers are in RB terms, that the reporting period is the first nine months of fiscal 2024 versus the comparable period of fiscal 2023. And all comparations are year over year basis unless otherwise stated. For the first nine months of fiscal 2024, our revenue was 438.1 million compared to 581.2 million. in the comparable period of 2023, representing a change of 24.6%. This was mainly due to COVID-related disruptions affecting our manufacturing operations and production, which negatively impacts batch approval and doses available for sale. This was partially offset by an increase in the price of our WestJV vaccine, of approximately RMB 3.0 per dose. As David discussed earlier, starting October 2023, we return to the growth trend, and we estimate double-digit year-over-year growth in product sales during the three-month period ended March 31, 2024. The growth profit was $351.7 million compared to $449.0 million in the previous year. Wealth growth margin improved by 3 percentage points to 80.3%. Now, turning to our operating expense. Setting the marketing expense was $229.2 million compared to $224.5 million in the comparable period of 2023. The change was primarily driven by the increase in promotional and the marketing service fees. As we continue to promote our WestJS Rebis vaccine and establish relationship with CDC. General and administrative expense was 142.8 million compared to 68.6 million in the comparable period of 2023. This was mainly due to increase in provision for inventory impairment. and provision for trade receivables. Research and development expense was $244.7 million compared to $221.8 million in the comparable period of 2023. The change was primarily driven by the increase in testing and clinical trial fees associated with our PicaRibbis vaccine and Hepatitis B vaccine. as we continue to advance our product pipeline towards commercialization. Net loss was $252.3 million compared to $64.2 million in the comparable period of 2023. Turning to our balance sheet, we had $222.6 million in cash and cash equivalents as of December 31, 2023, compared with $370.4 million as of March 31st, 2023. Finally, I would like to provide some commentaries on our financial outlook. We expect product revenue in fiscal year 2025 starting April 1st, 2024 to increase at a double-digit rate compared with fiscal year 2024. At the same time, we are taking further measures to more prudently manage our expenditure and improve our bottom line at the end of fiscal 2025. This guidance reflects our current and preliminary views on the market and operational conditions, which are subject to change. As we emerge from our previous disruption with the enhanced operational approach, we remain dedicated to address the persistent and worst demand from the virus vaccine across China and Southeast Asia. We will continue to strategically advance our pipeline of promotional product candidates, and we are excited to take advantage of all the opportunities which lie before us. With this straightforward focus on craving success, we are confident that we will generate long-term success and building sustainable value for our shareholders. That concludes our prepared remarks for today. Operator, we are now ready to take questions.
spk00: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question please press star then two. In addition, I'd like to remind you to please mute yourself after asking your question. Thank you. At this time, we will pause momentarily to assemble our roster. The first question comes from Hunter Diamond with Diamond Equity Research. Please go ahead.
spk01: Hi. Firstly, congratulations on the recent results. My first question was, can you provide an overview of the timeline for the registration and commercialization of the peak or rabies vaccine following the positive phase three trial? And then additionally, what level of market acceptance do you anticipate once the vaccine is commercially available?
spk02: Okay, Hunter, this is David. Let me take your call first, then probably I will ask Dr. Zaheda-Moharris to provide additional information. As you know that just a few days ago, we announced the internal result of this retrial, which is the multi-country, multi-center study from Philippines and Pakistan. And right now, we are still working on the final report for this clinical trial. After that, we will put more updates for market about the product registration progress. At this moment, actually, we started discussing with the potential regulatory organizations at the different countries for the information for the commission application and other related application process already. Right now, we haven't given the guidance on specific commercialization timeline yet, but a different country could be different. That's kind of the situation. Probably, the NIDA can provide an update on that part.
spk05: Thank you, David. Yes, Hunter, this is the NIDA. With regards to the pica rabies vaccine, we mentioned about the interim analysis. And we have the high-level preliminary results. Actually, the final interim report will be released by next week. So our plan, as indicated within the study, using the interim analysis data, we are really applying for a conditional approval in some countries where it is feasible. Aside from that, we also have an orphan drug designation. Because of the good results, we would try using the interim data. Now, with regards to a timeline, so the study will complete all study visits towards the end of December. And once you close the study, By quarter one of next year, we would be having our final study report. And using those data, we intend to submit using rolling submission strategy because there are still a lot of things to be done in the background. Nevertheless, once all documents are ready, all things that have to be done will continue and we'll check with regulators for rolling submission. And then with that, I think securing marketing authorization would take around one to two years. It depends on the country. So it would probably be out in the market within maximum of two years' time? Did I answer your question, Hunter?
spk01: Yes. No, thank you. That was a very clear answer to that question. My second follow-up question, then I'll open the line for other questions, but could you offer an update on the development status of the other drugs in your portfolio and key upcoming milestones for these projects, whatever you can mention on your other assets?
spk05: Right, yeah. Right now, we're really looking forward to start our vaccine for chronic hepatitis B treatment. The scheduled start is either May or June. As you know, there are also other HBV vaccines that are in the trial stage, but having HBV vaccine would maybe a better option to really come up with a treatment for this chronic disease. Because currently, we only have antiviral medications, which have their own side effects, and patients will be taking this for life. Whereas if we come up with an HBV vaccine, a single regimen, which will take around 40 days, would really help them turn back to the normal condition. Now, another thing that we are doing, aside from our PyKarabies vaccine outside of China, this is also being done inside China. So these are the things, and the management team is also trying to brainstorm and discuss the probability of using our in you know modulating platform that is our pica adjuvant uh in coming up with an adjuvanted the flu vaccine but that is not yet confirmed is that okay hunter i guess the yes yes thank you thank you that was a great answer to the question um yeah
spk02: Hater, I just add one more sentence on this approach with the hepatitis B vaccine. We do have a clinical team on ground in Philippine, and we also very fortunate to have this FIS-1 clinical trial license approved by Philippine FDA recently to conduct FIS-1 study. If you look at the details we disclose on this study, we are able to directly to use this clinical candidate among Chronic Hepatitis B patients in the Phase I trial. This is not easy to get. If we apply Phase I study in other countries, probably we have to start with healthy volunteers. But in the Philippines this time, we are able, we're fortunate to have chance to directly to use this medication for Chronic Hepatitis B patients directly. Hopefully we can collect more result from this study very quickly to provide additional evidence for us to move this project forward.
spk01: Right. Makes perfect sense. Okay. Thank you very much for taking my questions and congratulations again on the results.
spk02: Thank you, Hunter.
spk00: As there are no further questions, I will now turn the call back over to our management for closing remarks.
spk04: Thank you again for joining us today. If you have any further questions, please feel free to contact us or submit a request through our IR website. We look forward to speaking with everyone during our next call. Have a good day.
spk00: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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