Zai Lab Ltd (ZLAB) 2022 Q4 法說會逐字稿

Hello ladies and gentlemen, thank you for standing by and welcome to Zai Lab Full Year and Fourth Quarter 2022 Financial Results Conference Call. (Operator Instructions) As a reminder, today's call is being recorded.

Now my pleasure to turn the floor over to Billy Cho, Chief Financial Officer of Zai Lab will make introductory comments.

Thank you, operator. Good morning. Good evening, and welcome, everyone. Zai Lab recently issued a press release providing the details of the company's full year 2022 financial results as well as some recent product highlights and corporate updates. The press release is available in the Investor Relations section of the company's website at ir.zailaboratory.com.

Today's call will be led by Dr. Samantha Du, Zai Lab's Founder, Chief Executive Officer and Chairperson. After Dr. Du provides opening remarks with an overview of 2022 highlights; Josh Smiley, Chief Operating Officer, will further discuss key business updates and 2023 strategic priorities. Dr. Rafael Amado, President and Head of Global Development, Oncology, will discuss advances with our oncology product candidates; Dr. Harald Reinhart, President and Head of Global Development, Neuroscience, Autoimmune and Effective Diseases will speak about progress we have made in those 3 therapeutic areas. And I will discuss the performance of our market products and conclude with comments on our full year and fourth quarter financial results. Additional executives will be available to answer questions during the Q&A portion of the call.

As a reminder, during today's call, Zai Lab will be making certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including with respect to our business plans and objectives, clinical trials, sales and revenue forecasts for our products and product candidates, regulatory applications and commercial launches. Such forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance upon them. These statements are subject to numerous risks and uncertainties, and actual results could differ materially from what we expect due to a variety of factors, including those discussed in our SEC filings.

At this time, it is my pleasure to turn the call over to Zai Lab's Founder, Chief Executive Officer and Chairperson, Dr. Samantha Du.

Thank you, Billy. Hello, everyone, and thank you all for joining us today. On this call, I'll discuss highlights from 2022 and what we expect to accomplish in 2023 and in the longer term. In 2002, despite challenges from the COVID-19 pandemic in China.

Our 4 marketed products each had substantial sales growth. We made exciting programs across our broad and advanced platform. Our (inaudible) continue to demonstrate potential best-in-class and our first-in-class profile globally. The numerous positive pivotal data readouts announced through the year, including advanced non-small cell lung cancer, KarXT in schizophrenia and efgartigimod in ITP and (inaudible).

We are also pleased to have contributed to several successful (inaudible) studies, including the tumor treating fields, the LUNAR studies, the repotrectinib TRIDENT-1 study. We are pleased to have added QINLOCK and NUZYRA. The trial of National Reimbursement Drug List in 2023. We further deepened our women's cancer franchise through our strategic collaboration with Seagen for TIVDAK, and we continue to significantly enhance our talented global team further building on our solid position.

Zai Lab is already a leading global biotech with relevant scale, a world-class pipeline, and a growing commercial portfolio in China. We expect to achieve commercial profitability this year, and we are preparing to launch at least 8 additional products and achieve overall corporate profitability by the end of 2025.

We will continue to invest in R&D as we seek to advance our product pipeline, including our internal discovery activities, and accelerate medicines to patients in need. We also aim to strengthen our portfolio and strategic positioning with potentially transformative assets and partnerships.

We believe that the global regulatory environment will continue to be supportive or iterated by pharmaceutical companies like Zai Lab. We'll continue to build on our success in pursuit of our overall goal of improving human health in China and globally.

I would like to now turn the call over to Josh to discuss other key business updates and 2023 strategic priorities in more detail. Josh.

Thank you, Samantha. As Samantha mentioned, in 2022, we continue to attract top talent with deep domain expertise. I'd like to highlight a few recent additions to our global leadership team. In December, we were pleased to welcome Dr. Rafael Amado to our team as President, Head of Global Oncology, Research and Development. Rafael joined us from Allogene, and he has experience in leading worldwide discovery and clinical development across a broad range of oncology products.

In November 2022, Dr. Peter Huang joined us as our Chief Scientific Officer. Dr. Huang will lead and oversee our discovery efforts in translational medicine. We were also pleased to appoint Michel Vounatsos to our Board of Directors in January 2023. Mr. Vounatsos brings to the Board extensive global leadership and management experience in the biopharmaceutical industry, including more than 25 years of service as an executive at leading companies. His expertise includes a significant amount of commercial experience in China and worldwide.

We expect 2023 to be a very exciting year for Zai as we anticipate achieving many significant milestones. First, on the regulatory front for efgartigimod, we expect BLA approval and commercial launch for the IV formulation of efgartigimod in generalized myasthenia gravis or GMG, in 2023. And a BLA submission for the subcutaneous efgartigimod in GMG in mid-2023.

We also plan to submit a new drug application to the NMPA for repotrectinib in ROS1 positive advanced non-small cell lung cancer this year. We're also pleased to obtain the NMPA's acceptance of the NDA for Sulbactam-Durlobactam for the treatment of infections caused by a acinetobacter baumannii.

Regarding our commercial products, we delivered good growth even though we faced COVID challenges last year. And now with the COVID challenges mostly behind us, we expect strong growth in revenue in 2023. We expect Zejula to become the leader in PARPi sales for ovarian cancer in China this year.

In the fourth quarter of 2022, we continued to gain share of hospital sales across all indications, reaching 39% of total PARPi Hospital sales. Since last September, there's been some concern around Zejula's China label for ovarian cancer in the recurrent setting on the back of the U.S. FDA decision. However, as we've previously communicated, we do not expect the U.S. label restriction to impact the approval from the NMPA for Zejula in China.

For QINLOCK and NUZYRA, we anticipate a significant increase in the sales of both products following their inclusion in this year on the NRDL.

Moving to key research and clinical development milestones for both Zai and partners, we are looking forward to the top line data readouts for subcutaneous efgartigimod for chronic inflammatory demyelinating polyradiculoneuropathy for CIDP in the second quarter of 2023 and pemphigus vulgaris or PV, and chronic immune thrombocytopenia or ITP in the second half of 2023.

We also expect a full data readout of the Tumor Treating Field LUNAR study in non-small cell lung cancer in the first half of 2023. We also look forward to the clinical data update for adagrasib in combination with pembrolizumab in the first-line KRAS G12C mutated non-small cell lung cancer in the second half of 2023.

In terms of clinical development, we will complete the enrollment in the global Phase III innovaTV-301 study of TIVDAK in second and third-line cervical cancer in the first half of 2023. We also plan to join the global Phase III FORTITUDE-101 study of bemarituzumab in first-line gastric cancer in China in mid-2023. And we anticipate initiating a bridging study of KarXT for schizophrenia in China in mid-2023.

I'd like to emphasize the advancement of these potential treatments for lung and gastric cancers continue to add desired strength in these areas of large unmet patient needs. We will continue to invest in R&D and advance our internal global pipeline. In terms of key research milestones, we plan to move ZL-1102 for potential in chronic plaque psoriasis into full global development with the initiation of a global Phase II study in 2023. We also plan to initiate a global Phase I study for a ZL-1218 or CCR8 in the first half of 2023. Of course, we also continue to evaluate business development opportunities, including the addition of potentially transformative opportunities and partnerships for our regional and global pipeline.

Zai Lab is a trusted brand and strategic partner of choice, and we look forward to entering into more deals that we believe will create significant value and synergies to our existing business.

Before I conclude, I'd like to welcome Dr. Rafael Amado to his first earnings call with Zai. Rafael will make introductory remarks before discussing advances with respect to our oncology product candidates. And now I'll turn the call over to Dr. Amado. Rafael?

Thank you, Josh. I'm thrilled to be joining Zai Lab such a pivotal time in the company's history. As a physician scientist I've had the privilege to work on the development and approval of cancer therapies across various modalities and to form and lead R&D team. Zai has a broad portfolio of innovative products, (inaudible) our capabilities for development in Greater China and the ambition to continue to globalize research and development in oncology.

The combination of products with transformational potential, excellence in execution, together with the ambition for global expansion, make Zai Lab an easy choice as a next step in my career. I look forward to working with our outstanding colleagues to continue to build capabilities and to help catalyze the expansion of our oncology pipeline.

In the fourth quarter of 2022, Zai Labs oncology franchise continued to make progress on all fronts, and we expect to have a productive year in 2023. For tumor-treating fields, in January 2023, Zai Lab and NovoCure announced that the LUNAR study met its primary endpoint, demonstrating a statistically significant and clinically meaningful improvement in overall survival over standard therapies alone.

The LUNAR study also showed a statistically significant and clinically meaningful improvement in overall survival when patients were treated with TTFields and immune checkpoint inhibitors as compared to those treated with immune checkpoint inhibitors alone, and a positive trend in overall survival when patients were treated with TTFields and docetaxel versus docetaxel alone.

TTFields therapies was well tolerated with patients enrolled in the experimental arms of the study. We are excited about the potential of TTFields to help lung cancer patients. In China alone, lung cancer is the most common cancer type with approximately 700,000 new cancer diagnoses each year. We are pleased to contribute and to be a part of the LUNAR study.

Because Lunar met its primary endpoint of overall survival, we're optimistic about its growth potential across a range of hard-to-treat and prevalent cancers. The late-stage studies underway in certain other cancer types include pancreatic, with Zai effectively enrolling.

Moving now to KRAZATI or adagrasib, it was granted accelerated approval by the FDA in December 2022 for adult patients with KRAS G12C mutated locally advanced or metastatic non-small cell lung cancer who have received at least 1 prior systemic therapy.

In China, we will continue to accelerate the regulatory pathway for second-line non-small cell lung cancer monotherapy by leveraging the global data package for the FDA approval, the (inaudible) study in China and the global confirmatory KRYSTAL-12 study with Zai Lab joined in July 2022.

We further, in December 2022, the FDA granted Breakthrough Therapy designation to adagrasib in combination with cetuximab in patients with KRAS G12C mutated advanced colorectal cancer with cancer has progressed following prior treatment with chemotherapy and an anti-VEGF therapy with the results published in the New England Journal of Medicine.

Adagrasib demonstrated antitumor activity in heavily pre-treated patients with KRAS G12C mutant study CRC both as monotherapy and in combination with cetuximab. Mirati plans to submit the new supplemental drug application in third line plus KRAS-G12C mutated advanced CRC by year-end 2023 and move forward with accelerated approval pathway.

Zai initiated enrollment to the randomized KRYSTAL-10 study in second-line metastatic CRC in June 2022 and the enrollment completion is expected by the end of 2023. We remain confident that adagrasib is potentially a best-in-class KRAS G12C inhibitor in colorectal cancer.

For first-line non-small cell lung cancer, recall that in December 2022, Mirati reported results from the KRYSTAL-7 Phase II trial and KRYSTAL-1 Phase Ib cohort evaluating adagrasib in combination with pembrolizumab in patients for the treatment of first-line non-small cell lung cancer harboring KRAS G12C mutations across all PDL1-subgroups. We are excited that these results are the first to demonstrate the tolerability and feasibility of a concurrent combination regimen of a KRAS G12C inhibitor and a PD-1, PD-L1 checkpoint inhibitor, and we will continue to work with Mirati on our first-line registration plan for adagrasib.

Moving now to Zejula. We were pleased that NMPA granted full approval to the first line of ovarian cancer maintenance indication on February 3, 2023, regardless of biomarker status. In December 2022, we presented new interim overall survival data in Chinese patients with (inaudible) sensitive recurrent ovarian cancer from the Phase III NORA study conducted exclusively by Zai Lab at ESMO Virtual Plenary session.

Median overall survival was numerically longer for patients receiving Zejula regardless of biomarker status at 46.3 months compared to 43.4 months in the placebo group. No new safety issues were identified. We expect to present the final OS analysis of the Phase III NORA study sometime this year.

And moving now to our internal global research and development programs, the translation on clinical biomarker data for ZL-1211 an anti-chlorine 18.2 antibody will be presented in a poster at an upcoming AACR conference. And we plan to initiate a global Phase I study in the first half of 2023 for ZL-1218 this an anti-CCR8 antibody. With an abundance of potentially best-in-class and first-in-class products, we're very excited about our oncology pipeline at Zai Lab.

And now I will turn the floor over to Dr. Harald Reinhart to discuss the progress in our autoimmune infectious disease and neuroscience therapeutic areas. Harald?

Thank you, Rafael. I'm excited for the opportunity to share with you today the progress across our autoimmune infectious disease and neuroscience therapeutic areas. Let's start with this VYVGART or efgartigimod.

On the regulatory front, we and our partner, Argenx, continue to make excellent progress. Argenx recently announced that the FDA has accepted for priority review of BLA for efgartigimod subcu for the treatment of adult patients with generalized myasthenia gravis.

The PDUFA date is June 20, 2023. As a reminder, we submitted the BLA for efgartigimod IV for the treatment of patients with GMG in China in the second quarter of 2022 and expect approval and commercial launch this year. We also expect to submit a BLA for efgartigimod subcu for GMG in mid-2023.

We continue to support Argenx on indication expansion in China and worldwide indeed, enrollment in 2 proof-of-concept trials for autoimmune renal diseases has begun this February.

Moving on to KarXT, the combination of xanomeline with trospium which we are developing with our partner, Karuna, in acute schizophrenia. Zai Lab's proposed development plan for China has been accepted by the NMPA and we expect to start a clinical bridging study in mid-2023. As you recall, results from Karuna's EMERGENT-2 trial were released in August 2022. This pivotal trial met its primary endpoint with KarXT demonstrating a statistically significant 9.6 point reduction in PANSS total score compared to placebo at week 5.

In addition, Karuna expects top line data results from the Phase III EMERGENT-3 trial in schizophrenia in first quarter of 2023 and an NDA submission to the FDA for KarXT schizophrenia in mid-2023. Regarding our infectious disease portfolio, we have several noteworthy developments.

For sulbactam-durlobactam or Sul-Dur, we submitted the NDA for the treatment of carbapenem resistance acinetobacter baumannii infection to the NMPA in December 2022. We were granted priority review 1 month later in January 2023. And in February, the NDA was officially accepted by the NMPA. We look forward to bringing this novel drug to China and Asia Pacific, where severe CRAB infections are frequent and often can no longer be adequately treated because of multidrug resistance.

For omadacycline, nuzyra, as Samantha mentioned earlier, we are happy to report that it was successfully listed in China's NRDL as of January 2023. And lastly, our internally developed topical IL-17 product, ZL-1102, continues to progress towards initiation of a Phase II study for chronic plaque psoriasis in later 2023.

And now Billy will speak about progress with our commercial products and financial results. Billy?

Thank you, Harold. Our 4-marketed products, Zejula, Optune, QINLOCK and Nuzyra continued to achieve solid revenue growth driven by strong demand and commercial execution. Zejula continues to perform well and increased its share of PARP sales for varying cancer during the fourth quarter of 2022. We expect Zejula to become the sales leader in China this year.

For Optune, we are starting to see a strong recovery given the COVID situation throughout last year, achieving solid revenue growth in the fourth quarter. And during 2022, our team focused on continuing to improve market access by expanding commercial and supplemental insurance coverage for Optune and educating physicians about its potentially significant clinical benefits, including survival. As of December 31, 2022, Optune was covered by 87 municipal or provincial supplemental insurance plans, up from 33 such plans in the prior year.

We're pleased to have added QINLOCK and Nuzyra to China's National Reimbursement Drug List in January 2023, and implementation starts this month. As discussed earlier, we expect strong revenue ramp-up for these products as a result of the NRDL inclusion.

For efgartigimod, the first and only U.S. approved FcRn blocker with pipeline and product potential. We're getting ready for the commercial launch later this year. We plan to have specialized and experienced team for Vyvgart with about 100 employees at launch. We are quite excited about its blockbuster potential in China.

Now I will discuss our full year and fourth quarter 2022 financial results compared to the prior year period. Total revenues for the full year of 2022 were $215 million compared to $144.3 million in 2021, representing a 49% year-over-year growth. Total revenues for the fourth quarter of 2022 were $62.6 million compared to $44.2 million in the prior year, representing a 41.7% year-over-year growth.

Product revenues for the full year of 2022 were $145.2 million for Zejula compared to $93.6 million in 2021, representing a 55.2% year-over-year growth. $47.3 million for Optune compared to $38.9 million for 2021, a 21.6% year-over-year growth and $15 million for QINLOCK, compared to $11.6 million in 2021, a 28.7% year-over-year growth; and $5.2 million for Nuzyra compared to close to 0 in 2021.

R&D expenses were $286.4 million for 2022 compared to $573.3 million for the same period in 2021. The decrease in R&D expenses in 2022 was primarily due to lower upfront payments from new licensing agreements. Excluding upfront payments from new license agreements, R&D expenses were $256.4 million of 2022 compared to $252 million in 2021.

SG&A expenses were $259 million for 2022 compared to $218.8 million for the same period in 2021. The increase was primarily due to higher payroll and payroll-related expenses from the increased headcount as Zai Lab continued to expand and invest in its commercial operations in China and infrastructure in the United States in anticipation of substantial growth over the next few years.

Zai Lab reported a net loss of $443.3 million or a loss per share attributable to common stockholders of $0.46 for 2022 compared to a net loss of $704.5 million or a loss per share attributable to common stockholders of $0.76 for 2021. The decrease in the net loss was primarily attributable to lower payments related to new business development activities and continued growth in product sales.

As of December 31, 2022, cash and cash equivalents, short-term investments and restricted cash totaled $1 billion compared to $1.4 billion as of December 31, 2021. We would now like to turn the call back over to the operator to open up the line for questions. Operator?

Ladies and gentlemen, we now begin the question-and-answer session. (Operator Instructions) The first question from Michael Yee from Jefferies.

We had 2 questions. One was, maybe you could just give us sort of a real-time update with how things are going in China as opposed -- as regards to opening up as COVID evolves there, both from a commercial execution standpoint but also from a clinical trial execution standpoint for all the partners. How is that progressing sort of relative to pre-COVID?

And then second is, obviously, with TTF and lung cancer, that was a big announcement recently, appreciating that, that needs to probably get filed first, et cetera. How are you thinking about that launch and opportunity relative to GBM and particularly on the reimbursement side, how to think about that opportunity?

Thanks, Mike, for your questions. Maybe I'll get started and other colleagues can chime in. So on the ground reporting from COVID kind of opening, I think everyone is quite familiar with the challenges that everyone faced in 2022 and the impact, of course, in -- even all the way through end of '22 as well as early this year. We're clearly monitoring the situation very closely, and we'll continue to do that. But so far, so good. And it looks like as we kind of enter right now in March and wrapping up the first quarter, it looks, saying we're being optimistic going into the spring and beyond and getting back into some normalcy. So pretty energized. And if you were here, and I am in Shanghai right now, the activity is quite active and buzzing. So it's great to see that traffic not so much.

But for the -- on the commercial side and the R&D side, on the R&D piece, I think we've really learned our team in the clinical development, clinical (inaudible) has done a terrific job of navigating the challenges with COVID in the past, and you've seen us consistently execute and have a very resilient performance and not slipping up in any of our commitments to the patients, to the physician community to our partners, et cetera. So I think for us, we had -- we've managed it quite smoothly. So quite proud of that.

As well as commercial, you would have seen consistent growth. I think fourth quarter came in, given what happened even through the end of December and parts of early this year, I think relatively speaking, quite happy with the outcome and looking forward to a more normal environment. So we expect 2023 to be a strong year for growth.

On the tumor treating fields, I think your question was really more towards the commercial opportunity part and reimbursement part. So you've probably heard us say before that like NRDL a national reimbursement policy for a technology like tumor treating fields, we think that there's a possibility it could be formalized as early as this year. So will all sort of be on standby for that? And if we hear something, we'll kind of upstream to everybody else.

And the significance of -- I mean it's subject to data, of course, for LUNAR, but the opportunity is quite significant. I think Rafael said that there's -- people know there's 700,000 new cases per year for non-small cell lung cancer, half of whom are going to be in stage 4 and about 30% in stage 3. And despite treatment options available, the significant unmet medical need and at that type of quantum that number is pretty dire. So again, subject to data that should be coming out sometime this year, the opportunity is quite significant and it could be a blockbuster program opportunity for us.

We are now taking the next question. The next question is from Anupam Rama from JPMorgan.

Maybe a broader question actually. You guys have talked a lot about private pay and supplemental insurance. What portion of revenues are currently reimbursed with this mechanism? And what does that look like as you model out to 2025 and 2030 time frame? And which products do you see with the greatest portion being reimbursed by private pay and supplemental insurance?

Josh, do you want to take this one?

Sure. Hi Anupam, thanks for the question. I'd say first, we're pleased with the overall reimbursement environment in China and its development over the last few years. Certainly, on the supplemental insurance side, we've seen number of people covered grow from about $40 million at the end of 2020 to $150 million at the end of 2022. We expect that number to grow over the next few years to somewhere between $200 million and $300 million. So a quite sizable population if you start to look at that compared to other countries around the world. So that's certainly positive, and we see the benefits of that most directly now in Optune.

So in terms of percentages, while we don't break it out, I think just looking at our 2022 results, ZEJULA is covered through NRDL, the other 3 products weren't. So just at a very macro level, about 70% or so of our sales were through some NRDL mechanism, the rest through a combination of commercial, supplemental insurance and private pay.

I think as we look forward, though, certainly with the growth in supplemental insurance that provides a really important option at launch for our innovative products for a sizable number of patients to have access to the innovation and for physicians to get experience. But our strategy is going forward for the kind of drugs that we are developing either in our internal pipeline or with partners. We think they are ultimately going to be NRDL opportunities. And Billy alluded earlier that even on the medical device side, we see some really important progress there. So I think Anupam, really, our strategy is to bring great innovation as it relates to China, great innovation to Chinese patients, and we want to do that as broadly as possible. So our lead strategy will be to leverage NRDL opportunities.

We're quite pleased with the 3 products we now have on NRDL and the economics associated with them. In other words, the net price we now have relative to the patient opportunities. We'll continue to pursue that for innovative drugs like efgartigimod this year. But certainly, the multilayered system we're seeing now in China develop in a robust way, provides a lot more flexibility and a lot more options for early access for some sizable amount of patients over time. Thanks for the question.

We are now taking the next question. The next question from Yigal Nochomovitz from Citi.

Billy, I think you said that you're basically flat year-on-year on R&D at the upfront and maybe marginally higher year-on-year on SG&A. Just if you could just clarify, is the spend basically going to be flattish going forward to drive to overall corporate profitability with the top line growth by the year-end '25? Or might you have some flexibility to accelerate OpEx and still navigate to profitability with the top line growth by the end of '25.

Yes. So you're right. You heard that correctly. In terms of core R&D, it was pretty much at the 250 level, so roughly flat year-over-year '21-'22. This year, you can expect a very modest increase. And as you know, we have a pretty active development calendar given the anticipated approvals and launches over the next 3 years. I think we have around 8 at least in the Q. So -- but I think you should expect that to be at that range.

Now for SG&A, so we have -- as portion. We have said that this year, we're going to be commercially profitable or we target to be commercially profitable even as we build a new sales team for efgartigimod launch. So that's a great place to be. You can expect to see that operating leverage continues to increase as the revenue increases and as we launch additional products. And so there is a lot of flexibility that we have. And that's, I think, kind of a great place to be. When you have kind of a growing and relevant scale, a strong balance sheet and sort of all the engines are firing on all cylinders you can establish a good baseline and preserve some optionality.

Billy, I'll just maybe add just one quick point to that, is really our priorities are to grow the top line and to advance our clinical programs, and we've got a plethora of them. But if we execute on those 2 priorities, Yigal, the profitability is going to follow. So if you look at products like Zejula and our women's health franchise and the expected growth over the next few years and then add TIVDAK on top of that. Those are the things that are going to drive profitability and give us the flexibility, as Billy mentioned, to continue to invest in sales force, to continue to invest in the clinical program.

So again, to us, it's more around the portfolio that we built if we execute as we expect to along that side, the profitability is going to come.

And just real fast, just one housekeeping on QINLOCK and Nuzyra. So can you say at this point what the discount is for the NRDL. I think you mentioned in the press release, you expect significant increase. Just trying to -- just for our modeling purposes, what does that look like?

Yes. So the NRDL pricing for QINLOCK is $2,400 a month. And then for Nuzyra, it's $450 a month. Sorry, for Nuzyra it will be for the treatment, the $450 million -- $450 for the treatment cost. The treatment program.

We are now taking the next question -- the next question from Jonathan Chang from SVB Securities.

First question, just to -- can you elaborate more on the assumptions underlying your guidance of achieving corporate profitability by end of 2025 and discuss your level of confidence in this? And then second question, can you discuss Zai Lab's current state of compliance with the HFCAA and how you're thinking about the situation going forward?

Yes. Thanks, Jonathan. So I can take these 2, and maybe I'll start with the second one. That's going to be a quick point that I want to -- that I can make. So you would have seen that our 10-K that we just filed is with KPMG U.S. And that means that we have filings that are fully accessible by the PCOB and as a result, we have and continue to believe that we are now fully compliant with all the requirements of the HFCAA and that's going to preclude us from now and the future to be all sort of any kind of list or any kind of potential for delisting from the NASDAQ. So very proud of the team that worked hard to get this done. And it was strategically very important for us. So I think, again, a little kudos to the team and welcoming KPMG U.S. onboard.

So to your first question, on kind of how do we feel about the statement that we made about getting to an overall profitability by '25. Jonathan, we wouldn't make such statements unless we've carefully thought about it. So the best way to think about -- we're not giving guidance at this time. So we're not going to kind of give you hard numbers. But if you took your -- the number that you had for 2025, whether you Jonathan or whether the Street, and I know there's a range out there, but you take that and you assume, even if you assume just today's gross profit, and you know that's going to continue to improve over kind of next several years, but use that and then you kind of stick with sort of the modest assumptions on sales and marketing and G&A, especially since we have already done a lot of heavy lifting infrastructure spend by then. You we'll be able to get that. So I think you should -- we feel pretty good about it, and that gives us the confidence to make a public comment about that.

We are now taking the next question -- please stand by. The next question from Ziyi Chen from GS.

The first question is, if we're looking at the commercial infrastructure with more drugs expected to be launched in 2023 and next year, including bemarituzumab, efgar, repo and more antibiotics. So the therapeutic category is becoming much bigger compared to what it is now. I'm trying to understand a bit more about your plan in terms of commercialization team set up in order to achieve the sales efficiency and, of course, maintain the productivity when covering a variety of different therapeutic areas.

And secondly, since you mentioned about Optune now we're looking forward to the data. But could you elaborate a little bit more about based on the LUNAR data and what you're going to be planning to communicate to CD in China? And what could potentially be the regulatory pathway and also time table for the potential indication approval in China?

Yes. Thanks Zi. And I'll give your second question to Rafael. On your first question, as people who are familiar with Zai Lab story knows, we've been pretty thoughtful about curating a portfolio that's clustered around specific areas that are very strategic for us. And within that they're all quite differentiated and some of the programs are quite large in terms of commercial potential -- potential blockbusters would be the likes of -- let's see, based on the data for LUNAR, the Tumor Treating Fields franchise, bemarituzumab, adagrasib as a pipeline of program. I think that people are also underestimating, underappreciating drugs like KarXT, et cetera. So that's point one.

Point two is it's actually -- if you look at a snapshot of a quarter, 2 quarter, 3 quarter, you will not see it. But if you look at what we have in currently the NDA submissions, and you've already mentioned some of those, and you look at the programs that we have in pivotal stage right now. There's also a lot of clustering effect going on. So for women's cancer franchise that we've already built out with Zejula, you threw out (inaudible) that Josh mentioned. And these are pretty substantial operating lever that kicks in. I believe that we have a slide in our corporate deck that says here's a case study for Zejula, which is the first drug in the women's cancer franchise, (inaudible) TIVDAK on top of that, and we're thinking we're sort of expecting commercial profitability, kind of profit margins for that product to be in the 40% range and even build upon from there.

And then you look at the lung programs in just the near-term stuff, and you've got in addition to, of course, LUNAR, which benefits from, of course, a specialized sales force for tumor treating fields and of in any ways, the lung itself would have -- they have LUNAR, they have KRAZATI. We've got the ROS1 and probably missing 1 or 2 more.

And so we think that we have a lot of -- just a great opportunity here to drive productivity as we scale kind of revenue pretty much at the same time. Again, you will not see it in like from a quarter, 2 quarter view from within a 1- to 2-year time frame, you just really begin to see that.

This is Rafael. I just wanted to go over the second part of the question. And just briefly, Novocure has made public that they expect to submit a PMA, a premarket approval application with the U.S. FDA by the end of -- on the second half of this year. That's the equivalent of the NDA for drugs. So our plan is to follow the (inaudible) submission and submit the MAA following the U.S. submission in China. So the timing of that is still obviously is lot, we work with our partner for the exact timing of the submission in the U.S., but it will follow very closely the U.S. submission. And then obviously, there's no (inaudible) time line in China, but we will work with the authorities who try to accelerate the approval as soon as possible. So we expect that -- this potentially could be approved in a not-too-distant future and the file will be imminent after the U.S. model.

We are now the next question and the next question is from Seamus Fernandez for Guggenheim Partners.

So just 2 quick questions. Can you -- team, if you could just walk us through, how you see the KarXT opportunity evolving? I think, Billy, you specifically stated that you feel this particular program is underappreciated. And just, again, from that SG&A spend perspective, what do you think is necessary to really effectively promote KarXT to kind of maximize the opportunity? And then just a second quick question. As we think about the Tumor Treating Fields opportunity, obviously, manufacturing to support this potential size of that market opportunity is going to be important. Can you just help us understand how you're going to approach that opportunity from a manufacturing perspective?

Hey Seamus, thanks for your question. I'll provide the manufacturing question to Josh. For your question on KarXT, the -- yes, you're right. I did say people are underestimating the potential in China, and we believe that there are more than 8 million people in China living with schizophrenia today, and we believe in this product.

And we think that it's got a potential to treat multiple symptom domains as a monotherapy or even adjunctive. So really, the -- and out of the 8 million people, we know that 4.3 million people are diagnosed with severe forms of schizophrenia in the national database. So these are truly significant figures. And so -- and I think I hear my colleague, Harald kind of clearing is throat because I think you may be adding some comments here and there, but feel free to chime in, Harald, on the potential impact of KarXT on a kind of (inaudible), the size of China.

Yes. Thank you for the question, too. It's clear that with the in-license KarXT, we were really keen on bringing something to China, which is differentiated. We have and see in KarXT in 2 studies now in the E1 and in the E2, both of the EMERGENT studies that this drug is addressing the negative symptoms that are really difficult to treat with existing pharmaceuticals. So that was one major differentiating feature.

The second one was the side effect profile. This is a totally different class of drugs. And that alone is an important piece to remember because most of the other antipsychotics for schizophrenia, they do come from the serotonin dopamine series and have a certain side effect profile, which is really problematic. That's one of the reasons why a lot of patients do not continue treatment.

As far as the addressable patient population, there is a significant unmet need in the patients with schizophrenia, just because the negative symptoms are not adequately treated at this point in time. So we see this as a global issue, but we see it also in China where there is a need to bring more psychiatric help to patients who are currently underserved. If the government drive to increase the number of psychiatrists and to help patients out with schizophrenia, much more so than in the past. So from our perspective, we see a significant market potential in China, and we see it in a patient group that currently has very few options.

Yes. Seamus, to the second part of your question about what kind of infrastructure -- the commercial infrastructure needed. We're not yet in the -- we could provide a specific number later on as we close to the approval and launch. But while the prevalence of the disease in the neuroscience is quite large, it's a pretty concentrated market. And so we believe that a sales team that's focused and smaller than even an oncology product will be sufficient.

And on top of that, we'll be to leverage existing capabilities that we have that we've built for, for example, efgar in GMG and CIDP, as you know, that touches neurology. And so I think it will provide specific details later on, but it's going to be an efficient build-out.

I'll take the manufacturing question on TTFields. Thanks, Seamus. I think first, this is hopefully a great problem to have. Of course, NovaCure has been focused on the breadth and size of the opportunity for many, many years and have a series of strategies in place to work -- to bring down manufacturing costs for the device. And I think if we look at the China opportunity, of course, it's going to be driven by the data. But if you look at the studies that are underway today across various tumors as well as where the data could lead us, I think our view is there's probably somewhere in the range of 1.8 million patients in China who could benefit from -- could benefits of the technology over time. So the volumes that we're considering and thinking about here could be quite significant with those volumes, I think there will be very good opportunities to bring down unit costs, and we're working closely with NovoCure on those strategies. And again, they've got the same view as they look at the world, not just China, but I think we're excited about the commercial opportunity. We certainly believe that gives the potential volumes here in the supply chain and manufacturing strategies that NovaCure is working on and that we're partnering with them on, that we'll be able to have this be a very attractive economic proposition as well as both gross margin as well as at the bottom line. So again, I think the big focus for us, of course, will be to get through the LUNAR data to see the readouts from the studies in other tumors. But we're well aligned with NovaCure and well prepared to supply the volumes that we think can benefit Chinese patients and to be able to do that at reasonable gross margins.

We are now taking the next question -- and the next question is from Yang Huang from Credit Suisse.

I have 2. First one is about the LUNAR trial. We know that we are going to see LUNAR data in the first half of this year. And I think people are probably including us are more interested in understanding some subgroup analysis for LUNAR given LUNAR trial enrolled in first-line people only receive chemo and the people receive PD-1 plus chemo. So my question is, is that case that the subgroup analysis for the patients who receive PD-1 plus chemo in the first line is a kind of key to allow us to file. And in the worst case, let's assume a worst-case scenario, if the subgroup analysis in the PD-1 plus chemo group is not that great considering the treatment landscape is different between U.S. and China will Zai Lab still consider filing for the indication? That's my first question.

Rafael, this one is for you.

Yes, I'll take the question. Thanks for this insightful question. I think the most important thing is to understand that the prime med, its primary endpoint with both statistically and clinically meaningful results on the primary endpoint. And in any study that's really what matters. It is a randomized trial and the population being studied is the post-platinum population. So prior PD-1 is not an exclusion criteria.

And the study is randomized obviously and stratify as well and factors are supposed to mitigate (inaudible) imbalances. So the important point, I think, is that regardless of the makeup of the PD-1 subgroup, there was a statistically significant and clinically meaningful difference in overall survival in the overall population and in the key one subgroup with the trend in the docetaxel group. So the detail of the patient characteristics, compare treatment history will be shared of future data presentation and the release in done by NovoCure. So rather than speculating on subgroups, I think it's best to dissuade for the full analysis of the data set to interpret their results. But we should be cautious about subgroup analysis and really focus on the primary analysis, which had results that were pretty exciting as reported by NovoCure.

Okay. Got it. My second question is efgartigimod commercial preparation, as we understand this is a kind of a rare disease in China as well. And so can company let us know -- has companies started to try to identify some MG patients just to prepare for the launch of the drug. And if so, can you let us know kind of how many MG patients you have identified so far?

Yes. Yang, I'll take this one. So first of all, the addressable patient pool is quite large for MG. We're talking about a prevalence like about $200,000. And we strongly believe that efgartigimod will become a very important treatment option for these patients. Its early days, but we have started to build awareness ahead of the anticipated approval launch. As you know, we've launched a program in a part of China where patients can't potentially get accessed. It was really more for strategic purposes, given travel restrictions up until recently, but it really allowed us to engage with not only the physician but patients and get some feedback and responses and it's quite encouraged by what we see. And no surprise, right, given what's been happening outside of China, I believe, Argenx just reported a pretty strong first year sales and engagement and whatever metrics that you follow on the commercial side. So I think that provides a nice read-through for the potential and opportunity in China.

There are no further questions at the moment. I will hand back for closing remarks.

Thank you, operator. I want to thank everyone for taking the time to join us on the call today. We appreciate your support and look forward to updating you again after the first quarter of 2023. Operator, you may now disconnect the call.