Athenex Inc (ATNX) 2021 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2021 Athenex Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to Caileigh Dougherty, Director of Investor Relations. You may begin.

Good afternoon, and thank you for joining our conference call. Today, we will provide an update on Athenex'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 statements. 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.athenex.com.

Today, we are joined by Dr. Johnson Lau, Chief Executive Officer; Dr. Dan Lang, President of Athenex Cell Therapy; Dr. Kurt Gunter, Chief Medical Officer of Cell Therapy; Mr. Jeff Yordon, Chief Operating Officer; and Mr. Joe Annoni, 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, Caileigh, and thank you, everyone, 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 make 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 3 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 our Orascovery. Third, we are strengthening our balance sheet by monetizing noncore assets. We're 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, it's 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. Dan Lang and Kurt Gunter will provide more details in a few minutes on our strategic plan to build upon our foundational cell therapy programs to create a leading franchise.

The Orascovery programs serve as the main focus of Athenex clinical development efforts up until 2021. We announced previously that we would not be pursuing 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 encequidar. The only 2 ongoing oral paclitaxel trials that could potentially unlock value that will both continue as there's very few limited investment required by Athenex.

The first of this is the I-SPY 2 trial which has an expected result in the second half of 2022. We call that the quantum leap. Healthcare Collaborative has been using our drug in 2 of its 3 arms in combination with dostarlimab or minus carboplatin in breast cancer patients in the new adjuvant setting. This is a randomized Phase II trial that could advance into Phase III and beyond if results are encouraging, and it's an area of value that could be unlocked. This program requires a minimum future resources of Athenex, but we hope that this data result could drive additional value for our shareholders.

We are also pleased to announce that we have initiated expansion portion of the Phase I/II clinical trial of oral paclitaxel in combination with pembrolizumab in patients with non-small cell lung cancer. This comes after reporting highly encouraging data of 4 partial responders and 4 stable diseases in 8 evaluable patients at ESMO last fall. We will continue to monitor the progress of both these studies, and we'll look for opportunities to extract further value from this asset through potential partnerships or other means.

As a reminder, the U.K. Medicines and Healthcare Products Regulatory Agency validated our market authorization application for oral paclitaxel 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 pursued 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 paydown as well as providing operating cash to support our R&D programs in cell therapy. We recently completed the sale of our manufacturing facility in Dunkirk, New York to ImmunityBio on February 14. We are pleased with how quickly we were able to close this transaction, having entered discussions with ImmunityBio late in 2021 and announced the agreement in early January this year. Mr. Jeff Yordon 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 noncore. 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 Athenex is an aggressive cost-cutting program, which unfortunately, will include a reduction in headcount. We have also identified additional means of cutting courses and implementation of this plan is expected to reduce operating expenses by over 50%. Altogether, with divesting noncore assets and cost-reduction programs, we plan to extend cash run rate 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 Annoni, 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 4 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 will now turn the call over to Dr. Dan Lang to discuss our cell therapy programs.

Thank you, Johnson.

As we refine our mission at Athenex, 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 health care 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 health care ecosystem.

There are 3 current challenges that occur in 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 marketed CAR-Ts.

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 states. One highly regarded thought leader recently commented to us that this business model simply does not work for the health care 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 health care 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 2, as described by Dr. Neelapu at our KOL webinar in December. In addition, 30% to 40% of patients experienced the dreaded cytokine lead syndrome complications. With an 80% response rate seen at the lowest doses with our CD19 CAR-NKT 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 CAR-T treatments. As the field of cell therapy continues to evolve, we are focused on collaborating with all stakeholders, including patients, physicians, health care 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 Athenex. I have extensive experience in the field of cell therapy and was previously CMO at Cure Therapeutics. I joined Athenex at the time of our acquisition of Cure and I'm pleased with the progress of our CAR-NKT cell programs since the acquisition.

I want to highlight some of the unique characteristics of NKT cells, which we believe combine the best features of N, K and T cells. Importantly, type 1 NKT cells, which we work with have a unique and variant 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 demonstrated that CAR-NKT cells are superior to CAR-T cells and 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'm 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 KUR-502, our allogeneic CD19-directed CAR-NKT 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 5 evaluable patients, there were 3 complete responses and 1 partial response for an overall response rate of 80% and a complete response rate of 60%. Notably, 2 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-NKT cells hone to site 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, then 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 2 and 3 as we look to establish the recommended Phase II dose.

We will also present more data from a responder analysis of KUR-501, our autologous GD2 CAR-NKT cell program in PDF 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 earlier 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 Yordon.

Thank you, Kurt.

As Johnson mentioned earlier, we recently completed the sale of our manufacturing facility in Dunkirk to ImmunityBio for $40 million. As part of the sale, we entered into an exclusive contract with ImmunityBio to manufacture our 503B products at this facility in the 8 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 nonrecurring international sales due to COVID, representing a baseline figure for 2020 of $84.3 million. Adjusting for these onetime 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 2 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 2 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 ImmunityBio to secure licensing in New York in order to begin operations there and then with the 7 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 in 2023 and beyond.

Athenex Pharmaceutical Division currently markets 29 products with 54 SKUs, and Athenex Pharma Solutions markets 5 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 Annoni 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. Athenex'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 Athenex 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 strength as we focus on the future of our cell therapy programs. In order to do that, we see 2 significant opportunities to strengthen our balance sheet. First, the monetization of noncore 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 Dunkirk facility, which generated $40 million, along with significant overhead cost savings. We have identified other noncore 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's 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 noncore operations and manufacturing small molecule R&D and supporting infrastructure. Small molecule clinical study expenses are being reduced by over 90% as we now only have 2 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 noncore 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 totaled $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 Athenex 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 per diluted share, respectively. The fourth quarter and full year results include noncash goodwill impairments of $67.7 million. As of December 31, 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 31, 2021, Athenex 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 to-date. As you can see, we have already taken steps to pivot Athenex 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 Orascovery programs and other parts of the business we are no longer supporting. I'm grateful for the dedication and contribution the team has made over the past several years. We will 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?

(Operator Instructions) Our first question is from Jonathan Miller with Evercore ISI.

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 paclitaxel at this point, though. If you get a positive approval in the -- positive opinion in the U.K., will you intend to commercialize there? And if I-SPY 2 looks good in the second half, will you pursue a registrational path there? So at this point, what role does oral paclitaxel play as part of your monetization of noncore assets? And then while we're on that topic, when will you have a more concrete sense of cash runway and the -- what's your expected cadence, I guess, of the monetization and unwinding of the noncore or legacy businesses?

Thank you for your question, Jonathan. Certainly, I mean, are there -- there's still value in the Orascovery program, in particular oral paclitaxel. And right now, we have -- 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 will be positive with I-SPY 2 or with a positive development with the U.K. 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 are hoping for in U.K. or if we have very positive data from the I-SPY 2 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?

And on the concrete cash runway, cadence and monetization question.

On that question, I would like to emphasize that we -- when we were trying to build for success, we build 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, the noncore -- some of the components become noncore assets. And the good part is that some of this on 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. And so we hope that we are going to provide an update once this process are in completion and hopefully in the next few months. And with that, we believe that, that we'll be able to extend the cash runway to 18 months or longer.

Our next question comes from Kevin DeGeeter with Oppenheimer.

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

Kurt?

Okay. Thank you for your question there. So at ASGCT, we'll be updating data from the GINAKIT2 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 KUR-503 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 sources 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.

Our next question is from Kennen MacKay with RBC Capital Markets.

I have 2 questions. First, I was wondering if you could just comment on the potential to further monetize tirbanibulin and the number of territories and the territories that hasn'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 as the business previously that had obviously been manufacturing of Rexel as clinical supply and had been nonprofitable 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, Kennen. I'll answer the first question. I'll let Mr. Jeff Yordon to answer your second question on specialty pharma margin. With regard to tirbanibulin, we collaborate with our partner, Emerald, for both U.S. and Europe. And we also have 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 tirbanibulin has been going according to plan. And therefore, there will be sort of upside potential with regard to that.

And also that particular royalty stream will be -- obviously, 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 source of 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. Kennen, thanks for the question. We're going to be introducing 10 new products in 2022, the specialty pharma business. 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 anticipate the margins to be in the area of about 25% for the specialty pharma business this year, and we also anticipate positive EBITDA.

Our next question comes from Jonathan Chang with SVB Leerink.

This is Faisal on for Jonathan. Just had a question on the NKT cell therapy platform. I 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.

Dan?

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-NKT 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. 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?

Sure. Thank you for the question. So I believe we're the leader for developing NKT cells. We have 2 clinical trials ongoing right now, as you know, one in neuroblastoma for GD2 CAR-NKT and one in relapsed/refractory lymphoma and 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 an 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, a lot of myeloma patients. So in that regard, I think we are probably a year to 2 years ahead the competition with regards to NKT cell therapy in cancer treatment.

I also -- I want to emphasize that, as I mentioned in our press release that we also already got the industry sponsor IND for the KUR-502 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.

Our next question comes from Matt Kaplan with Ladenburg Thalman.

Johnson, I just wanted to follow up on that a little bit more in terms of KUR-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?

Yes. Thank you. Dan, do you want to answer the 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 Valor to multicenter studies. As Kurt mentioned in his prepared remarks, we are looking to stand up 12 sites. We're actually ticking all those activities 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 a 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 II dose should be from a dose escalation study.

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

Dan?

Yes. So that the ASTCT 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 had 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 of more patients. But the really, the big data update will be in this year at ASH, after we stand up all these sites to enroll more patients in the ANCHOR -- what we call the ANCHOR 2 study in this multicenter 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 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 noncore asset. We are not giving any guidance, we are just emphasizing that. We understand that this is -- we want to emphasize this is the path that we are taking after due diligence -- due evaluation with regard to what's the best path forward as 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 Annoni has indicated that a lot of the activities related to other aspects of Orascovery are already being discontinued. And then we also reduced the oral paclitaxel activities to only 2 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.

(Operator Instructions) Our next question comes from Yale Jen with Laidlaw & Company.

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

Joe?

Can you hear me?

Yes.

Can you hear me okay?

Yes.

Okay. Okay. Good. My phone is acting up there. But yes, the $61 million that you're referring to, that was as of December 31, 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 you can infer from that -- from those 2 data points.

Okay. Great. That's very helpful. And the second question here is that, in terms of TCR-T, does it consider as noncore or still part of the cell therapy potential that will 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 TCR-T, the TCR receptor that targets the antigen NY-ESO and it's an autologous T cell approach. Currently, we have a Phase I program that is ongoing at Baylor in Dallas and this is targeting those solid tumors, including lung cancer, breast cancer, head and neck cancer, TNBC and I believe, bladder cancer, they have high expressers of NY-ESO. We are hoping to get some safety and efficacy signal from this study.

Longer term, it's our belief that in order to drive long-term durable response in solid tumors, a more appropriate approach would be an allergenic approach because based on our understanding of the science and the literature and other companies' experience, 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 a quite interesting signal from our NY-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, Yale.

Yes, absolutely. And maybe the last -- squeezing one more question here, which is that is 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 expense -- 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 really all gone already and also that we are eliminating some of the clinical operational team related to oral paclitaxel. You should expect that the operating expenses should go down drastically, including SG&A. So therefore, your assumption should be based on a number based on the regular number and then it should take around 50% -- at least 50% reduction. That's our objective right now.

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 Athenex. 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 noncore 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 value creation for shareholders and will help us execute on our mission to bring innovative treatments to cancer patients.

Thank you for everyone for joining us today.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.