We recently had a telephone conversation with Yongtai biological management, and the company shared the latest developments.

Focus on cellular immunotherapy. Yongtai biological focus cellular immunotherapy covers the field of solid tumor and hemolymphatic tumor therapy. The research pipeline mainly includes: 1) EAL activated autologous lymphocytes, 2) CAR-T cell products, 3) 6B11-OCIK autologous T lymphocyte injection, and 4) TCR-T cell products. In the R & D pipeline, the fastest progress is EAL, which is currently in clinical II phase. 6B11-OCIK, CAR-T and other products are still in clinical phase I, which is still far from commercialization.

EAL is expected to be conditionally approved in the middle of next year. The first indication of EAL is to prevent postoperative recurrence of liver cancer, which is for patients with liver cancer (HCC) undergoing hepatectomy, accounting for 70.2% of all HCC patients. In 2018, the number of new cases of liver cancer in China exceeded 400000, accounting for about 44.9% of the new cases of liver cancer in the world, and the five-year survival rate of liver cancer was only 12.1%, much lower than that of other cancers.

At present, there is no drug in China that can prevent the recurrence of early liver cancer and prolong the recurrence-free survival time and overall survival time of patients with early liver cancer. The company's management said that at present, EAL is progressing smoothly in the clinical II phase, and plans to submit and conduct a pre-NDA communication meeting in August 2021, and is expected to be conditionally approved for listing in the middle of next year, with peak sales likely to reach 60-7 billion yuan.

The commercialization of EAL is imminent, and the R & D and production centers need to be expanded in the future. Yongtai currently has an R & D and production center with a total area of about 13640 square meters in Beijing, which can support the pre-clinical and clinical R & D needs of the research project, as well as the early production demand after the research products are approved and put on the market. As EAL has a six-hour transportation radius, in addition to the upcoming Beijing plant, the company will continue to set up R & D and production centers in densely populated cities in the future.

Yongtai core in the research pipeline mainly includes 1) EAL autologous T cell amplification and reinfusion, 2) CAR-T cell products, 3) 6B11-OCIK autologous T lymphocyte injection, and 4) TCR-T cell products.

The fastest progress is the company's core product EAL, which belongs to the cellular immunotherapy product of cancer immunotherapy. EAL is currently in clinical II phase, and the patients who can undergo hepatectomy (HCC) are treated, accounting for 70.2% of all HCC patients. 6B11-OCIK and CAR-T-19 products are still in clinical phase I, the time from commercialization is still long, and the risk of research and development is high.

Core product EAL

The mechanism of EAL killing tumor. Tumor cells can inhibit the function of T cells, thus invalidating the mechanism of tumor cells being killed by T cells. There are many ways for tumor cells to avoid killing by the human immune system, such as: (1) tumor expresses ligands (such as PDL1) that can bind to T cell immune checkpoint molecules (such as PD-1); (2) molecules secreted by tumor tissue (such as TGF- β) can inhibit T cell activity; (3) regulatory T cells (Treg) can inhibit the function of killer T cells through direct contact with T cells. EAL first activated killer T cells in vitro, then expanded the activated T cells about 1000 times and then infused them back into the patient, thus greatly increasing the number of tumor-killing T cells in patients.

EAL belongs to non-genetically modified products in cellular immunotherapy. Cellular immunotherapy usually extracts T cells from patients' blood or tumor tissues and amplifies them in the laboratory. According to whether genetic engineering is used to modify T cells, T cells can be further divided into two categories: non-genetically modified and genetically modified cell products. Yongtai core product EAL belongs to non-genetically modified products, while CAR-T and TCRT belong to genetically modified products.

EAL is similar to Immuncell-LCTM products already on the market in South Korea. In terms of product mechanism, Yongtai's EAL is similar to Korean-listed Immuncell-LCTM, and its indications are also the same for the treatment of liver cancer.

In the IIC-I01 clinical data of Immuncell-LCTM, the 48-month relapse-free survival rate after using Immuncell-LCTM was 49.6%. The overall 48-month survival rate was 95.9%, the recurrence-free survival time was 44 months, and the proportion of serious adverse events was about 7.8%. The main differences between EAL and Japanese AAL and Korean Immuncell-LCTM which have been listed abroad lie in cell culture medium, cytokine concentration, antibody concentration and production process.

The company plans to launch EAL in 2022. At present, EAL is conducting a phase II clinical trial, which is designed based on EAL without phase I clinical practice. EAL was enrolled in the first phase II clinical trial in September 2018. According to our recent communication with the company, the number of enrollment due to the epidemic has increased from 272 to more than 300, and is expected to be completed by the end of July 2021. The company expects to submit a pre-NDA communication meeting (pre-NDA meeting) in August and is expected to be conditionally approved and commercialized in mid-2022. With reference to the sales of South Korean Immuncell-LCTM products in 3Q20, the annual sales volume is about 200 million RMB, while the population of South Korea is about one hundred million RMB in China.

At present, there are no approved cellular immunotherapy products on the market in China, and the progress of EAL is ahead of others. Cellular immunotherapy is less targeted at solid tumors and is mostly used to treat blood cancer. Five cell therapy products have been approved in the United States, while there are no cell therapy products on the market in China. At present, the pharmaceutical companies in the forefront include Fosun Kate and Ming Junuo, whose products are in the NDA stage, Novartis, which is in the third clinical stage, and Legend Biotech Corp, Keji Pharmaceutical, Heyuan Biology, which are in the second clinical stage. Yongtai's EAL is the first cellular immunotherapy product to start a clinical trial of solid tumor in China. At present, the only potential competitor for HCC is the CAR-T product of Keji Pharmaceutical, which is in clinical phase I. And the two groups of patients are different. CAR-T of Keji Pharmaceuticals aims at advanced HCC patients who do not meet the conditions for hepatectomy, while EAL aims at early HCC patients who have undergone hepatectomy.

Industry policies have been issued to standardize all aspects of research and development. Cellular immunotherapy is still a cutting-edge therapy in China. Since 2019, regulators have accelerated the introduction of policies to regulate the industry and guided the development of cellular immune products by pharmaceutical companies, which is conducive to the acceleration of subsequent approval for the listing of cellular immune products. The EAL of Yongtai is not a genetically modified cell therapy product, and the whole process is produced independently, so it is easier to meet the regulatory requirements.

EAL will be commercialized soon and will set up a factory in Beijing

EAL will soon be commercialized and will build a factory in Beijing for R & D and production. Yongtai currently has a total area of about 13640 square meters in Beijing for the construction of R & D and production centers, and the planned production capacity can support the pre-clinical and clinical R & D needs of the research project, as well as the early production demand after the research products are approved for market. The company has also set up a research center in Korea to focus on the development of new technologies.

EAL has a six-hour transportation radius requirement, and the company plans to set up R & D and production centers in densely populated cities, which are:

North China: located in Beijing Economic and technological Development Zone, the company has signed a construction agreement in March 2021, with a total site area of 34996 square meters, with an estimated construction period of about 900days, which will be built in batches according to actual needs. After the completion of the plant, the annual production of cellular drugs is expected to exceed 200000 batches, covering the northern and northeastern markets.

East China: in February 2021, Yongtai entered into a cooperation framework agreement with the Management Committee of Shaoxing Binhai New area to set up EAL R & D and production centers in East China, and planned to jointly set up academician workstations with Chinese universities and scientific research institutions. The capital required for the project is about 1 billion yuan, of which Yongtai is responsible for 50 million yuan. It is expected that the first phase will be completed within 24 months after the relevant land ownership certificate is obtained.

South and West China: the company is currently conducting field assessments in the Pearl River Delta and Sichuan-Chongqing regions for the commercial use of EAL, which is expected to be implemented as soon as the second quarter of 2021 at the earliest.

CAR-T and TCR-T

The CAR-T pipeline takes the CAR-T-19 series as the core, and the preliminary results of phase I clinical analysis are expected to be released in 2022. Yongtai is currently conducting a phase I clinical trial of CAR-T-19 injection, and the company expects to enroll the first phase I clinical trial in May 2021, complete the target patient in 1Q22, and release preliminary analysis and results in 2022. In addition, CAR-T-19-DNR injection and aT19 injection based on CAR-T-19 injection technology are in the preclinical stage. The purpose of these two products is to solve the pain points of CAR-T cells in the treatment of solid tumor, such as insufficient persistence, poor therapeutic effect and preventing tumor recurrence. Among the CAR-T listed at present, the earliest approved Kymriah has been approved for the second-line and above treatment of recurrent or refractory diffuse large B-cell lymphoma (DLBCL), and two indications for the first-line treatment of B-cell precursor acute lymphoblastic leukemia (B-ALL). In addition, Novartis has published phase II clinical data (ORR=83%,CR=65%) of Kymriah for the treatment of recurrent or refractory follicular lymphoma. In addition to the four listed CART targeting CD19, KYMRIAH, YESCARTA, TECARTUS and Liso-cel, BMS/Celgene Nex-T CD19 is currently in phase I of clinical practice.

Among the CAR-T products sold, only Kymriah and CAR-T-19 have the same indications and can be used to treat relapsed or refractory acute lymphoblastic leukemia. From the clinical data of Kymriah and Yescarta it can be seen that although CAR-T has significant efficacy in the treatment of leukemia and non-Hodgkin's lymphoma its safety is also a large-scale clinical problem to be solved.

The selectable range of TCR-T cell target is higher than that of CAR-T. The mechanism of action of TCR-T and CAR-T cells is similar, which makes T cells acquire the specific ability of killing tumor by increasing the receptor that can recognize tumor antigen in T cells. The difference between the two lies in the method of tumor recognition. CAR-T cells mainly recognize tumor cells with antibodies, while TCR-T cells directly target tumor cells with classical T cell receptors. Due to the different mechanisms of tumor recognition, the range of targets of TCR-T cells is much higher than that of CAR-T cells.

Many TCR-T products are pre-clinical, and there are still technical bottlenecks in large-scale applications. Yongtai currently has a number of TCR-T cells under preclinical research, targeting antigens such as 1) NY-ESO-1, which is a testicular or placental cancer antigen, and 2) antigens derived from viruses such as EBV and HPV. However, there are still some technical difficulties in the large-scale application of TCR-T cells, such as how the T cells infused into the human body can effectively function in the tumor tissue, and how to overcome the immunosuppressive factors in the human body, thus acting on the tumor and so on.

Yongtai biological financial data

Yongtai Biological currently has no commercial products, so there is no main business income for the time being. The largest part of the expenditure is R & D expenditure, which recorded 31.17 million RMB, 61.98 million RMB and 279 million RMB respectively from 2018 to 2020. R & D expenditure increased significantly in 2020, mainly because the company completed the Hong Kong stock IPO in 2020 and invested the funds raised into R & D expenditure. It is expected that with the clinical promotion of the company's products, R & D expenditure will maintain a high growth rate.

Like the Hong Kong biotech 18A company, Yongtai is still at a loss stage, recording a loss of 440 million yuan in 2020, an increase from a loss of 110 million in 2019, mainly due to a significant increase in the company's R & D expenses in 2020. But management says EAL products can be profitable and profitable after they go public.

As of December 31, 2020, the company had a total cash of 850 million yuan, down from 280 million yuan at the end of 2019. The company raised a total of about 1.14 billion yuan in IPO in 2020 and the subsequent exercise of over-allotment options to issue shares. The company currently has no debt financing.