Welcome to BeyondSpring Inc. Third Quarter 2017 Conference Call. [Operator Instructions] I would now like to turn the conference over to Steve Silver of KCSA Strategic Communications. Please go ahead.

Thank you, operator. Before turning the call over to management, I'd like to advise during that during today's call, management may make forward-looking statements relating to such matters as its clinical and preclinical research, research and development, industry trends and collaborative initiatives. These statements are based on currently available information and management's current assumptions, expectations and projections about future events. While management believes that its assumptions, expectations and projections are reasonable in view of the currently available information, you are cautioned not to place undue reliance on these forward-looking statements. The company's actual results may differ materially from those discussed during this call for a variety of reasons, including those described in the Forward-looking Statements and Risk Factors section of the company's 20-F and other filings with the SEC, which are available on BeyondSpring's Investor Relations website. With those comments complete, it is my pleasure to turn the call over to Dr. Lan Huang, Co-Founder, Chairman and CEO of BeyondSpring. Lan, the floor is yours.

Thank you, Steve, and thank you, everyone, for joining today's call. With me are Richard Brand, our Chief Financial Officer, who will discuss our quarterly results; and Dr. Ramon Mohanlal, our Chief Medical Officer, who will be available during Q&A. We are pleased to present an update on our business and the financial results for the third quarter of 2017. I'm also excited to announce that we will host an investor and analyst event on December 14 in New York City, at which we will provide an in-depth overview of Plinabulin's position as the potential new standard of care. Included at the event will be 2 leading key opinion leaders in the neutropenia field. We'll provide additional information on this event later in the call. With that said, there are 3 key points I would like to focus on during today's call. First, all of our Plinabulin program studies will provide potential near-term catalysts for our investors, including top line efficacy data in neutropenia prevention in December 2017 from the Phase II portion of study 105; interim efficacy data in neutropenia prevention in mid-2018 from the Phase III portion of study 105 and from the Phase II portion of study 106; Phase III interim efficacy data in non-small cell lung cancer in mid-2018 from study 103; and proof of mechanism and safety data from our nivolumab combo study in the first quarter of 2018. Second, positive regulatory advancements in China are validating our long-standing vision for drug development and approval in China. Recent game-changing guidelines from the CFDA could result in Plinabulin NDA filings in China for neutropenia prevention and for the treatment of non-small cell lung cancer as early as in 2018. We would anticipate China approvals around 6 months after filing given the severe unmet medical need in…

Thank you, Lan. I would also like to thank everyone for participating on today's call. As of September 30, 2017, our cash and cash equivalents totaled $40.7 million, which compares with $49 million at June 30, 2017. Based on our current operating plan, we continued to believe we have sufficient cash resources necessary to file the China NDAs for Plinabulin for the prevention of neutropenia as well as the China NDAs for non-small cell lung cancer in combination with docetaxel, both in 2018. Research and development expenses for the third quarter of 2017 were $15.3 million compared to $12.2 million in the second quarter of 2017. The sequential increase in R&D expenses was primarily due to increased costs related to our ongoing late-stage clinical programs in neutropenia and advanced non-small cell lung cancer, including a higher number of patients, investigator sites and drug cost. Included in the R&D expenses are $7.5 million of stock-based compensation, noncash accounting accrual expense, which account for the higher total R&D expense compared to our quarterly cash burn. General and administrative expenses for the third quarter of 2017 were $3.3 million compared to $2.8 million in the second quarter of 2017. The increase in G&A expenses was primarily due to higher stock compensation expense. Lastly, during the third quarter, we received $914,000 in nonequity-diluting grants from the city government of Dalian, China and from the Dalian Economic Development Park. The awarding of these 2 grants underscores the Chinese government's support for our programs. Part of the proceeds from these awards will be used to advance our de novo drug discovery effort for our ubiquitination platform among other early-stage projects towards IND-enabling studies. With that, allow me to turn the call back over to Lan.

Thank you, Richard. In conclusion, first, we remain confident in Plinabulin as a platform for us that can be successfully combined with standard of care for multiple treatment regimes, including chemotherapy regimes such as docetaxel at the beachhead or I/O agents such as nivolumab. These key programs remain on track to deliver a multiple near-term catalyst and clinical data for our investors. Second, positive regulatory advancement in China could result in Plinabulin's approval in China for the prevention of neutropenia and in non-small cell lung cancer in 2019. And third, our preclinical pipeline of immuno-oncology agents and ubiquitination pathway agents continues to progress, and we expect to advance a second novel candidate into the clinic in 2018. Our company's philosophy remains to support [ frontline ] with solid execution. We look forward to keeping you updated on this exciting program in the coming months. With our comments complete, operator, we are now ready to open the call for questions.

[Operator Instructions] Our first question comes from Joe Pantginis of H.C. Wainwright.

Lan, I'd first like to ask about the upcoming ASH conference. If we can assume that your abstract is accepted as a late-breaker, can you describe, I know that you can't discuss the data, but what the expectations are about what we could see in the presentation with regard to the interim Phase II?

Yes. Thank you, Joe, for this good question. Yes. So what -- we did file the late-breaking abstracts, but we'll see if it's going to be accepted. But what we plan to show is the Phase II efficacy portion of the 105 study with docetaxel. This is a prospective study of Plinabulin in reducing neutropenia off docetaxel, and it's also a head-to-head study against Neulasta. In addition, we're also going -- plan to show, from the 103 study, the non-small cell lung cancer, which will have enrolled over 150 patients. There, we plan to show, out of the 70 pairs of patients, what is the rate of grade IV neutropenia reduction in the Plinabulin versus the docetaxel long arm. So that will give us more substantial data for this indication.

That's great. Just having that extra data there, I think, should give even a better view on the product there. So that's fantastic and good luck with getting it accepted. With regard just quickly on the 103 study, when you ultimately put out the Phase III data, are you looking to do any sort of translational analyses or biopsy data from these patients to look for immune markers or evidence of immune cell infiltration?

Well, for the 103 study, that's a good question. So what we are planning to do is we have been saving the tumor samples from the patients and also the blood samples. So for the tumor sample, yes, if we see PR in the patients, we would like to look into the immune biomarkers. And in addition, with the blood sample, we're also looking at the KRAS mutation status of the patients so that we can also do a separate analysis of the KRAS mutant for this large lung cancer study, which consists of 550 patient study, 275 pairs. So that will give us enough data trend to see if we should also proceed in the KRAS mutant indication for lung.

Our next question comes from Jason Kolbert from Maxim.

Can you walk us through some of the requirements once you have filed in order to realize an approval in commercialization in China? It's a big country. There's a lot of people. Talk with me a little bit about manufacturing, distribution and kind of how you are seeing the transition in the company as you become a commercial entity in China.

Thank you, Jason, for this great question. So for the filing package we plan to have in both of the indications, would consist the interim Phase III data for the non-small cell lung cancer, for the lung cancer indication, and then we should -- if positive, we should have the efficacy trend there. And also, for the neutropenia, it could consist of Phase III interim with [ capacity ] and also Phase II efficacy data for the 106 study. So that's the clinical portion. But in addition, of course, there's also the -- a CMC portion, the non-clinical portion for the submission. And then what we plan to have for each of the indications is to supply for 2 NDAs. One is for the imported drug NDA. So we have made this drug in the U.S., and then now, currently, all the trials are using the imported drug for the clinical study in China and also in other global countries. So with that imported drug NDA, we could charge in China the same price as the list price in the U.S. So -- and that catches really the price premium in China. And there are patients in China who are wealthy, who can pay out of pocket for those pricing. And then secondly, we also want to apply for Category 1.1 drug NDA, so that's for the drug made in China. So currently, we have already transferred the technology in manufacturing to China, and with that, we can have a much lower price. So this way, we could get into the mass of the population in China. As you know, China every year has 4 million new cancer patients, and 1/3 of the worldwide cancer patients reside in China. So that's a huge market which we can target to with this Category 1.1 NDA. And this is -- we'll be able to help the government and also the patients in China. And with the commercialization plan, in China, actually, it's -- the cancer care is very centralized. So 80% of patients are being seen by the centers in Shanghai, Beijing and the Guangzhou area. So just taking Beta Pharma's experiments, they actually had a series-like compound, EGFR, a mutant lung cancer drug and they have a 30-people marketing team and marketing into these major areas and then use the contract salespeople for second-tier cities, and they generated around $200 million for those -- for -- annually and then they are trading at over $3 billion in China. So we could use similar strategies like that, and currently, we are using the top 60 sites in China, and so basically, we are premarketing already in our Phase III trials in China.

Our next question comes from Graham Tanaka of Tanaka Capital Management.

Just if you could review for us, just summarize maybe how much you'd save in costs in doing the studies in China, and I guess really the savings are cost and time, if there's sort of a simple way to kind of explain to us. And then what kind of capital needs might you need in the next 2 years?

Thanks, Graham, for this nice question. So if I can just use non-small cell lung cancer as an example to explain the cost and the time efficiency of our trials. So lung cancer is a 550-patient study. So for that, we enrolled 440 patients in China and 110 in the western world. For western world, each patient usually costs $100,000. In China, it's around $30,000. So actually, for this study, we only need to use 3 countries, U.S., China and Australia in 60 centers, and enrollment can be done around 2 to 3 years. So you can see the saving is dramatic here. And then coming up is around probably $20 million to $30 million for this Phase III study. But then if we just use another study, for example, the ramucirumab plus docetaxel versus docetaxel, that's also in the second-line and third-line non-small cell lung cancer patients in also similar size. And then that trial actually was done in 26 countries in over 200 sites, and the enrollment took 4 to 5 years. And usually, that trial probably costs over $100 million. So you can see that there's plenty of savings in our efficiency, so probably around 50% of the time-saving and then 60%, 70% of the cost savings.

The other question is you did touch on another compound in immuno-oncology out of the pipeline. Just curious what market size that might be, and is that sort of tailor-selected especially to be able to address the China and U.S. markets and the western markets?

You mean our pipeline assets?

Yes. Your second new compound, right.

So the BPI-002, you mean? We have other -- yes, so we still have a pipeline asset in the I/O space. So they are all in the I/O space. So as you know, now the current standard of care for cancer is moving into the immuno space. So I think with additional compounds in the pipeline, especially in the T-cell activation and also the neoantigen generation, we could have a complementary pipeline in addition to Plinabulin's effects in the dendritic cell maturation. So we could cover bigger of those cancer space, not only in China, but also in a global sense.

I just was wondering, you mentioned that you're having -- you're going to have another compound in a clinical in 2018. I'm just wondering what the target market size might be of that -- for that outbound.

Okay. So that's the BPI-002. It's for T-cell activation. So actually, the inventor here is Dr. Mohanlal. So probably, Ramon, you can talk a little bit about the potential market for this 002?

Yes. BPI-002 is a co-simulation drug. From a mechanism of action, it works similar to what CTLA-4s are doing. We have here the differentiated mechanism, but also, this is an oral drug and therefore, more manageable. As we know, the field, with the checkpoint inhibitors, is moving into combination therapy, and PD-1 inhibitors combined with CTLA-4 inhibitors, they are far more effective than PD-1 inhibitors alone. However, they come at the price of a significantly increase of immuno-related side effects. BPI-002 is developed essentially to compete with the CTLA-4 in a way that we will improve on the overall efficacy, but also prevent side effects. As I mentioned, it's an oral molecule, therefore, it's more manageable. CTLA-4s are antibodies that are long-acting and, of course, once the patient has been given these long-acting drugs and they do develop negative side effects, the fact that it's long-acting is not helpful. And therefore, with the short oral approach, we believe we can manage the safety concerns while adding to overall efficacy. From a market size perspective, the field's moving into combination therapy, and essentially, BPI-002 is to be combined with PD-1 and PD-L1 inhibitors, which we know has now become a significant market. So this is a combination therapy, an add-on to that. And a good indication of the market size is perhaps by looking at the overall market size of PD-1 inhibitors from BMS and Merck, and this then will be combined with that. Regarding the other immuno agents that we are developing, which is BPI-004, that drug is designed to stimulate antigen production by cancer cells that normally do not produce enough antigen. As we know, with immunotherapy, it's very important that a cancer cell produces antigen to stimulate the immune system. The majority of human cancers do not produce enough antigen and, therefore, it will be important to force those cancer cells to produce those antigens. BPI-004 is designed to force those cancer cells to produce those antigens. So with that approach, we will essentially expand the market for PD-1 inhibitors because now we can expand into cancers that normally do not express these antigens. That, of course, also is a very significant market.

Graham, as you probably know, Bristol's NEVO had $1.4 billion of sales last quarter and Merck's KEYTRUDA, $1 billion of sales last quarter. So when we now refer to them as a proxy, those are the numbers for those drugs.

Okay. And is there any kind of a way that maybe perhaps out of animal studies or whatever that you can get a feel for what kind of lift you might get in efficacy? Are we talking about perhaps moving efficacy up like 10% or 20%? Proving -- I mean, is there some way you can give us sort of a quantified estimate of what you're shooting for on efficacy improvement?

Yes, we have a preclinical data in the cancer model. And in the end, we are talking about, in the animal model, roughly a doubling of efficacy. The combination with BPI-002 and PD-1 inhibitor is roughly 2x more effective than PD-1 inhibitors alone. Of course, we have done experiments with comparing BPI-002 with CTLA-4s, also in combination with PD-1 inhibitors, and there, we also see roughly a doubling of effect. Of course, with animal models, we have to be mindful that they don't always translate into what we will see in humans, but nevertheless, from a mechanism perspective, it is proven that BPI-002 acts as a CTLA-4 with all the benefits that I just mentioned.

[Operator Instructions] This concludes the question-and-answer session. I would now like to turn the conference back over to Dr. Lan Huang for any closing remarks.

Thank you, operator. Thank you all for joining the call today. It's truly an honor to have your support. We will keep you updated on our exciting progress in the coming months. Have a nice day.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.