CASI Pharmaceuticals, Inc. (NASDAQ:CASI) is a U.S. biopharmaceutical company with a focus on developing and commercializing innovative therapeutics and pharmaceutical products, primarily in China. Despite facing various challenges in recent years, the company has demonstrated resilience and a commitment to advancing its pipeline and commercial operations.

Company History and Strategic Shift

Incorporated in 1991, CASI originally operated as a U.S.-based biopharmaceutical company. However, in 2012, the company underwent a strategic shift, refocusing its efforts on the Chinese market. This pivotal decision was driven by the recognition of significant growth opportunities in China's rapidly expanding pharmaceutical industry, which was fueled by rising demand for high-quality medicines and regulatory reforms facilitating the entry of new products.

Since the strategic shift, CASI has built a comprehensive infrastructure in China, including sales and marketing, medical affairs, regulatory and clinical development capabilities, and is now laying the groundwork for future manufacturing capabilities. The majority of the company's operations and activities are now conducted in China, with its Beijing office overseeing day-to-day operations and a commercial team of over 130 hematology-oncology specialists stationed throughout the country.

CASI's first commercial product, EVOMELA (Melphalan for Injection), was launched in China in August 2019. This launch marked a significant milestone for the company, as it transitioned from a development-stage company to a commercial-stage biopharmaceutical company. EVOMELA is approved for use as a conditioning treatment prior to stem cell transplantation and as a palliative treatment for patients with multiple myeloma in China.

The company's pipeline includes several promising hematology-oncology assets. In 2019, CASI in-licensed the global rights to CID-103, an investigational anti-CD38 monoclonal antibody, from Black Belt Therapeutics Limited. In 2020, CASI entered into an exclusive licensing agreement with BioInvent International AB for the development and commercialization of the novel anti-FcγRIIB antibody, BI-1206, in Greater China. The company has also in-licensed other assets such as CB-5339, a novel VCP/p97 inhibitor, and CNCT19, an autologous CD19 CAR-T investigative product.

Navigating Challenges and Setbacks

Despite its progress, CASI has faced various challenges in recent years, including the impact of the COVID-19 pandemic on its marketing and sales activities, as well as supply chain disruptions for EVOMELA. The pandemic adversely affected CASI's ability to commercialize and expand distribution of EVOMELA, as the company currently relies on a single source for the supply of this product. In 2022, the company reported a 33% decrease in EVOMELA revenue for the fourth quarter, attributed to factors such as increasing competition from a generic melphalan product, inventory management strategies by its distributor, and restructuring of the sales force.

Moreover, CASI has been embroiled in a dispute with its partner, Juventas Biotechnology, regarding the commercialization of CNCT19. This dispute has led to delays and uncertainties surrounding the development and potential commercialization of this key asset. In September 2022, CASI Biopharmaceuticals, a subsidiary of CASI, entered into an agreement to transfer its equity interest in Juventas to a third party. However, the exclusive license agreement between CASI and Juventas for CNCT19 remains in effect.

Financing and Strategic Transition

To support its ongoing operations and pipeline development, CASI has raised additional capital through various means, including a $15 million private placement financing led by institutional investors in 2024. The company has also received a non-binding proposal from its chairman, Dr. Wei-Wu He, to acquire CASI's business operations in China, which the board is currently evaluating.

In 2024, CASI announced a strategic pivot, shifting its focus towards the development of therapeutics for organ transplant rejection and autoimmune diseases, with CID-103 as the keystone of this new strategic direction. The company plans to submit an Investigational New Drug (IND) application to the U.S. FDA for CID-103 in antibody-mediated rejection in kidney transplant recipients by the end of 2024.

Financial Performance and Liquidity

CASI's financial performance has shown mixed results in recent years. In 2022, the company reported total revenue of $43.11 million, representing a significant increase from the previous year. However, the company continues to operate at a loss, with a net loss of $41.01 million for the fiscal year 2022. Operating cash flow for 2022 was negative $21.09 million, while free cash flow was negative $26.7 million.

For the third quarter of 2022, CASI reported revenue of $7.79 million, a 26% increase compared to the same period in 2021. This growth was primarily driven by continued strong demand for EVOMELA in the Chinese market. However, the company's net loss for the quarter was $8.4 million. It's worth noting that revenue in Q2 and Q3 2022 was adversely impacted by COVID-19 related restrictions in China that limited access to local hospitals.

EVOMELA sales have been a key driver of CASI's revenue growth. For the three and nine months ended September 30, 2022, EVOMELA generated $10.21 million and $27.79 million in product sales, respectively. This represents a 26% and 33% increase compared to the same periods in 2021. The cost of revenues for EVOMELA was $4.25 million and $11.55 million for the three and nine month periods, respectively, resulting in a stable gross profit margin of around 58% for all four quarters.

CASI's research and development expenses were $3.9 million and $11.75 million for the three and nine months ended September 30, 2022, respectively, as the company continued to advance its pipeline of investigational drug candidates. Selling and marketing expenses also increased to $3.57 million and $10.24 million for the respective periods, reflecting the expansion of its commercial team in China to support the growth of EVOMELA sales.

As of December 31, 2022, CASI had a strong liquidity position, with $47.11 million in cash and cash equivalents. The company's balance sheet reflects a current ratio of 4.32 and a quick ratio of 3.99, indicating a healthy ability to meet short-term obligations. CASI's debt-to-equity ratio stood at 0.03, suggesting a conservative approach to leverage.

In terms of available credit, CASI entered into a $10 million revolving line of credit agreement with East West Bank in May 2022, with $3 million drawn as of September 30, 2022. Additionally, in June 2022, CASI's subsidiary CASI China entered into a RMB 20 million ($3 million) guaranteed line of credit with CITIC Bank, which was fully repaid in Q3 2022.

Product Portfolio and Pipeline

CASI's product portfolio currently centers around EVOMELA, its only commercial product, which is primarily sold in China. The company does not have significant sales in other geographic markets at present.

In addition to EVOMELA, CASI has a diverse pipeline of investigational drug candidates focused on hematology-oncology and other areas of unmet medical need. Key assets in CASI's pipeline include:

1. CNCT19: An autologous CD19 CAR-T investigative product being developed by CASI's partner Juventas Biotechnology for the treatment of hematological malignancies such as B-cell acute lymphoblastic leukemia and B-cell non-Hodgkin lymphoma.

2. BI-1206: A novel anti-FcγRIIB antibody in-licensed from BioInvent International AB, currently in Phase 1/2 trials for the treatment of solid tumors and relapsed/refractory non-Hodgkin lymphoma.

3. CB-5339: A novel VCP/p97 inhibitor in-licensed from Cleave Therapeutics, Inc., being evaluated in a Phase 1 clinical trial for acute myeloid leukemia and myelodysplastic syndrome.

4. CID-103: A full human IgG1 anti-CD38 monoclonal antibody with exclusive global rights, which CASI is developing for the treatment of multiple myeloma. The Phase 1 dose escalation and expansion study is ongoing.

Risks and Outlook

CASI's business faces several risks, including continued competition and pricing pressures for EVOMELA, uncertainty surrounding the CNCT19 dispute, and the successful execution of its strategic pivot towards organ transplant rejection and autoimmune disease therapeutics. The company's ability to navigate these challenges and successfully advance its pipeline will be crucial for its long-term success.

Despite the headwinds, CASI's management remains focused on strengthening its commercial operations, resolving the Juventas dispute, and advancing its pipeline of innovative therapies. The company's strong liquidity position and the potential acquisition of its China business operations by the chairman provide a degree of financial flexibility as it navigates this transitional period.

As CASI Pharmaceuticals continues to evolve, investors will closely monitor the company's ability to execute on its strategic goals, resolve its ongoing disputes, and deliver on the promise of its pipeline. The company's resilience and adaptability will be critical in determining its future trajectory within the dynamic Chinese and global pharmaceutical markets.