Zai Lab Ltd (ZLAB) 2024 Q2 法說會逐字稿

Hello, ladies and gentlemen, thank you for standing by, and welcome to Zai Lab's second quarter 2024 financial results conference call. (Operator Instructions) As a reminder, today's call is being recorded. It is now my pleasure to turn the floor over to Christine Chiou, Senior Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, good evening, and welcome to Zai Lab's second quarter 2024 earnings call. Today's call will be led by Dr. Samantha Du, Zai Lab's Founder, CEO and Chairperson. She will be joined by Josh Smiley, President and Chief Operating Officer; Dr. Rafael Amado, President and Head of Global Research and Development; and Dr. Yaijing Chen, Chief Financial Officer. Jonathan Wang, our Chief Business Officer, will also be available to answer questions during the Q&A portion of the call.

As a reminder, during today's call, we will be making certain forward-looking statements based on our current expectations. These statements are subject to numerous risks and uncertainties that may cause actual results to differ materially from what we expect due to a variety of factors, including those discussed in our SEC filings. We will also refer to product revenue growth rates on a constant exchange rate basis, which is a non-GAAP financial measure. Please refer to our earnings release furnished with the SEC on August 6, 2024. For additional information on this non-GAAP financial measure.

At this time, it is my pleasure to turn the call over to Dr. Samantha Du.

Thank you, Christine, and welcome, everyone. In recent years Zai Lab has grown significantly. We have built a strong commercial infrastructure, developed a promising portfolio of global and regional assets. We established an exceptional and efficient team across our commercial R&D and functional areas. Today, Zai Lab is a pivotal moment advancing towards each of our three strategic imperatives, driving top-line growth, expanding our pipeline and achieving profitability.

In the second quarter, we made great strides in all areas. Our second-quarter net product revenues grew 45% year-over-year, surpassing $100 million for the first time. The success of the course launch significantly contributed to this growth, demonstrating our ability to provide innovative solutions that meet unmet medical needs. VYVGART has rapidly become a cornerstone of our current portfolio and is poised to be a major driver of our near-term growth.

We also made significant progress with our pipeline. We received three product approvals, and event, important base states regional programs such as KarXT for schizophrenia and bemarituzumab for first-line gastric cancer. We're also expecting data in the coming months from our global pipeline for both our DLL3 ADC and CCR8 antibody, and we are prepared to advance these programs quickly. Additionally, we added ROR1 ADC to our portfolio, which Rafael will cover in more detail. We are building a strong foundation for growth well into the next decade.

In addition to top-line growth, we're also focused on driving efficiencies and exercising financial prudence. with the improved efficiency and the cash position of $730 million, Zai is in an excellent position. We are confident that our strategic initiatives and commitment to excellence will drive our success as we deliver innovative medicines to patients in need and generate significant value for our shareholders. I look forward to share more progress updates throughout the year.

Now I pass the call to Josh. Josh?

Thank you, Samantha, and thank you everyone for joining the call today. In Q2, our net product revenues grew 45% year-over-year to reach $100.1 million, driven by the successful launch of VYVGART and uptake of our portfolio.

Starting with VYVGART, the launches progressing exceptionally well across all aspects. First, the demand for big garden is strong, nearly 3,300 new patients were treated in the second quarter, bringing the total number of new patients treated to 6,000 in the first half of this year. While still early in the launch, we're excited to see a growing percentage of patients returning for second and third treatment cycles. With over 170,000 patients living with gMG in China, we have a substantial market opportunity in this indication alone.

Second, we made great progress with our targeted approach for hospital listing. By the end of the second quarter, we achieved over 70% of our full-year hospital listing goal. Our specialized sales team is well equipped to not only support VYVGART in gMG, but also the launch of efgartigimod subcu later this year and the expected launch for CIDP in 2025.

Third, we are seeing increasing adoption from physicians. Nearly 1,500 health care professionals have now prescribed VYVGART with a third being repeat prescribers. Positive feedback from physicians and patients continue to fuel uptake, and we are focused on providing these key stakeholders best-in-class support. The success of VYVGART is a significant milestone and continues to be one of our top commercialization priorities this year.

Based on Q2 uptake and current trends, we are raising our full-year VYVGART sales guidance to over $80 million for the year. Our primary focus will be on expanding access, securing new patient starts and driving usage in the maintenance setting, which we believe will extend the duration of treatment and sustain the benefits for our patients.

Now looking at other commercial products. For ZEJULA, we anticipate continued top line growth and expanding commercial profitability, driven by increasing sales in first-line ovarian cancer and the duration of treatment. QINLOCK and NUZYRA are expected to continue to benefit from their listings on the NRDL. For Optune in GBM, we are focusing on our core markets, prioritizing our top hospitals, which represents the majority of GBM potential in China. This strategic focus will help us optimize profitability, even as we do anticipate a period of adjustment.

We are also preparing to launch multiple new approved products and indications over the next few months. Since our last earnings report res. received three product approvals, including AUGTYRO in ROS1, positive non-small cell lung cancer, which comprises 2% to 3% of the over 700,000 new cases of non-small cell lung cancer per year in China. XACDURO as the first pathogen targeted therapy addressing hospital-acquired and ventilator-associated pneumonia caused by Acinetobacter Baumannii infections. And lastly, the subcu formulation of VYVGART in GMG, which provides additional dosing flexibility.

Each of these opportunities has the potential to offer significant benefits to patients, and we look forward to bringing these products to patients in the fourth quarter of this year. In the next 12 months, we expect NMPA to approve subcu efgartigimod in CIDP, and we plan to submit multiple regulatory applications to NMPA, including TIVDAK for cervical cancer and KarXT for schizophrenia.

As Samantha mentioned, not only we're on track to deliver substantial top-line growth, we are also focused on driving efficient operations and executing financial discipline. We are optimizing resource allocation to build a stronger and more agile organization. We're also repositioning our commercial teams and prioritizing investments to focus on our highest potential products and indications. VYVGART is a prime example of this.

Through our ongoing efforts, our net loss declined 34% year over year, and we are making great progress towards our goal of achieving profitability by the end of 2025. With a cash position of over $730 million, we expect to be able to fund our operations and business development deals through profitability. Overall, we are advancing towards achieving each of our three key corporate objectives, which are to drive revenue growth, achieve profitability and build our global pipeline.

And with that, I will pass the call over to Rafael to discuss the great progress within our R&D portfolio.

Thank you, Josh. We continued to make significant progress with our pipeline in the second quarter, leading to multiple new approvals as Josh highlighted, and advancements across several key programs. Starting with immunology, we received an NMPA approval for the subcutaneous formulation of efgartigimod for the treatment of generalized myasthenia gravis or gMG.

With both an IV option and a 30 to 92nd subcutaneous injection available, patients will benefit from a more personalized and flexible treatment approach. Beyond gMG, efgartigimod shows great promise for treating various other autoimmune conditions. In collaboration with our partner, our Argenx, we're committed to exploring new therapeutic application.

In May, China's NMPA accepted our supplemental biologics license application for the subcu formulation of efgartigimod in chronic inflammatory demyelinating polyneuropathy or CIBP. There is a significant unmet need among the estimated 50,000 patients afflicted with CIBP in China. Currently, only a small fraction of these patients achieved remission with available care and many patients remain symptomatic.

This disease can severely impact quality of life, and we are urgently working to provide patients with a new, effective and safe treatment option. Later this year, we also plan to join Argenx in a registrational study in Greater China to evaluate the safety and efficacy of efgartigimod subcutaneously administered by prefilled syringe in [thyrate] ITP.

Moving to neuroscience, we expect to complete enrollment in our registrational bridging study for KarXT. for the treatment of schizophrenia in Greater China. We anticipate top line data by the end of 2024, the results of which are expected to support an NDA filing in the first half of 2025. KarXT also presents a significant opportunity as a treatment for Alzheimer's disease with psychosis or ADP for short. In China, approximately 8 million people left with Alzheimer's disease with about 45% exhibiting psychotic symptoms.

Currently, no approved treatments are available for these patients, highlighting a significant medical need. In July we joined the Phase 3 ADEPT-2 study in ADP to support the registration of KarXT in this indication in China, positioning us well to address this critical gap in care. But also building our internal global pipeline with three programs currently in the clinic, one in immunology and two in oncology.

We advanced ZL1102, our IL-17 Humabody in the global Phase 2 development for the topical treatment of chronic plaque psoriasis, and this study is currently accruing. With potentially improved safety and tolerability, this topical therapeutic may bring the potential of IL-17 targeted treatment for the large patient population with less severe chronic plaque psoriasis.

Now moving to some of the key program updates in our oncology pipeline. Starting with AUGTYRO or repotrectinib. As just I just mentioned, we've received NMPA approval in May for ROS1 positive non-small cell lung cancer in both the TKI-naive and TKI-pretreated settings. We are also evaluating repotrectinib as a treatment for patients with entrec positive solid tumors and plan to submit a supplemental NDA to the NMPA in 2025.

Turning to gastric cancer. We continue to make great progress for bemarituzumab in collaboration with Amgen. In June, we completed enrollment for the global FORTITUDE-101 study, which evaluates bemarituzumab in combination with chemotherapy as a first-line treatment for FGFR2b positive gastric cancer.

Additionally, we are assessing bemarituzumab in combination with chemotherapy and a checkpoint inhibitor in the FORTITUDE-101 study. Bemaratizumab has the potential to become the first targeted therapy specifically for FGFR2b positive gastric cancer. Next, our Tumor Treating Fields franchise. We expect the pivotal data readout for the Phase 3 PANOVA-3 study in first line locally advanced pancreatic cancer by the end of this year. We are participating in this study in Greater China.

In addition, to our late-stage partner programs, we made good progress in our two internal oncology assets in the clinic. ZL-1310 is our DLL3 targeted homogeneous DAR 8 ADC designed with high affinity and specificity for DLL3. DLL3 is a validated therapeutic target in the treatment of small cell lung cancer and more than 88% of small cell lung cancer patients are expressing.

ZL-1310 utilizes a protease cleavable linker and a novel topoisomerase one inhibitor payload. It has shown promising preclinical data and enrollment is ongoing in a global Phase one study in the United States and China for relapse and refractory small cell lung cancer following progression on platinum-based therapy. This study will also include patients treated with the combination of our DLL3 ADC and a checkpoint inhibitor. Depending on the totality of the data, we could potentially see early clinical results by the end of 2024 or early 2025. ZL-1218 is a CCR8 antibody currently under enrollment in a global Phase 1 study, evaluatin1218 as a single agent and in combination with pembrolizumab in patients with advanced solid tumors.

We expect to present a preliminary clinical PK and PD analysis of the global Phase 1 study in solid tumors at the European Society of Medical Oncology in September 2024. We're also excited by the possibility of synergistic combination opportunities for ZL-1218 with our portfolio asset niraparib. A recent publication in cell highlights, the combination's potential to improve treatment of homologous recombination deficiency positive ovarian cancers.

Our efforts in drug discovery are moving at a brisk pace, and we are also progressing other internally discovered product candidates. We'll continue to execute on our global development objective of generating at least one global IND per year. We recently have expanded our global oncology pipeline with a next-generation ROR1 ADC program term ZL-6301. ROR1 is an attractive target with the potential to be used in the treatment of solid tumors, whether it is commonly expressed with validation in hematological malignancies.

We believe the linker payload technology embodied in the LZL-6301 will overcome the limitations of earlier ROR1 targeted agency, giving us a potential best-in-class and first-in-class targeting of expressing solid tumors. This ADC program demonstrates our continuous focus on our global solid tumor portfolio, and we will leverage our strong capabilities to develop this as quickly as possible.

Overall, we achieved plenty of progress of gross R&D in the first half of this year, and we can expect this fast momentum to continue. I look forward to providing updates at our next earnings call. And now, Yaijing will give us an overview of our financial results. Yaijing.

Thank you, Rafael. Now, I will discuss our second quarter 2024 financial results compared to the prior year period. Total net product revenues for the second quarter of 2024 were $100.1 million compared to $68.9 million for the same period in 2023 representing year-over-year growth of 45% or 47% on a constant currency basis. This growth was primarily driven by increased sales for VYVGART since it's launch in September 2023 and NRDL listing in January 2024 and increased sales for the ZEJULA and NUZYRA.

Primary drivers of this year-over-year revenue growth included the following. ZEJULA net product revenues increased 5% to $45 million driven by increased hospital sales in first-line ovarian cancer and increased duration of treatment supported by renewal of ZEJULA's NRDL listing for the maintenance treatment of adult patients with first line and recurrent ovarian cancer effective January 1, 2024.

VYVGART net product revenues grew to $23.2 million compared to $0.1 million for the same period in 2023. Driven by NRDL listing for the IV formulation for the treatment of gMG effective January 1, 2024, and positive physician and patient reception as well as increased patient access as VYVGART is added to hospital formularies.

NUZYRA net product revenues grew 165% to $12.3 million driven by the NRDL listings for the IV formulation for the treatment of adults with community-acquired bacterial pneumonia, or CABP, and acute bacteria skin and skin structure infection or ABSSSI in the first quarter of 2023 and the oral formulation for this indication in the first quarter of 2024.

Turning now to our expenses. Research and development expenses were $61.6 million in the second quarter of 2024 compared to $76.7 million for the same period in 2023. This decrease was primarily due to decreased milestone fees for our license and collaboration agreement, partially offset by increased clinical trial expenses related to newly initiated studies and the progress of existing studies.

Selling, general and administrative expenses were $79.7 million in the second quarter of 2024 compared to $67.9 million for the same period in 2023. This increase was primarily driven by higher general selling expenses and headcount growth primarily to support VYVGART.

Both R&D and SG&A expenses significantly declined as a percentage of revenues in the second quarter of 2024 compared to the same period in 2023 and we expect this trend to continue as a result of growing revenues and ongoing cost and efficiency and initiative. Zai Lab reported a net loss of $80.3 million in the second quarter of 2024 or a loss per ordinary share attributable to company shareholders of $0.08 compared to a net loss of $120.9 million for the same period in 2023 or a loss per ordinary share of $0.13.

We are in a strong financial position ending the quarter with cash position of $730 million compared to $750.8 million as of March 31, 2024. Based on our operating plan and our anticipated revenue growth, we expect to be able to fund our business through profitability, which we expect to achieve by the end of 2025.

And with that, I would now like to turn the call back over to the operator to open our line for questions. Operator?

(Operator Instructions)

Kyle Young, Jeffries.

It's Michael Yee for Kyle Yang. We had two questions. First question is related to VYVGART. Obviously, maybe just talk a little bit about the trajectory month-over-month ads. How are things going across the country and tell us a little bit more about the metrics that you're tracking as it relates to what gives you confidence on your guidance.

And second question, maybe a little bit different. I appreciate the new in-licensing deal for the ROR1. Can you just talk a little bit about business development? Are you particularly keenly focused on oncology, would you go to other areas, such as metabolic and obesity. I know you have neurology. Kind of a little bit spat out everywhere, but are you considering things beyond just oncology? Thank you.

Good morning, Michael. It's Josh. Thanks for the questions. I'll start on VYVGART and then ask Jonathan to talk a little bit about business development strategy. I think first in VYVGART, we're quite pleased with the performance through the first three quarters of launch going back to last year, but certainly, the first half of this year, is what gives us the confidence to say we'll -- we certainly see the trend exceeding $80 million for the year.

First, I think as you know, what we've been focused on in the early parts of launch is getting physicians experience using the product with their patients in gMG, and we focus on those patients who are in an acute episode or not responding well to current treatment. I think that's gone really well. We're seeing about 1,000 new patients a month, and that's been consistent through the first half of the year, and I don't think we see any reason for that to start to slow down.

Keep in mind that we see about 150,000 patients who are on label in China with gMG, who will benefit. And so far, I think we've treated somewhere in the range of about 7,000. So we've still got a long way to go. But I think with the initial emphasis on patients who aren't doing well, what we're seeing is physicians are getting really good experience.

We've had over 1,500 physicians prescribe so far and of those physicians, a third of those are, I think, using it in pretty significant quantities now that their patients have used for second, third, and I think we have a pretty good percentage of physicians who have used it 10 or more times. So I think as we look now to the second half of the year, we'll continue to focus on accruing new patients. So I say we're just scratching the surface, I think, in terms of the patients who can benefit from this important therapy.

But we will begin to look at ensuring that we're transitioning from just an acute sort of initial experience to ensuring patients are getting the full benefits from the maintenance aspects of the drug. So I think we're still early in the launch, Michael. But I think as we get into the second half of the year here, we will be focused on continuing to accrue patients but also on ensuring they're getting back in for their second, third cycles and so on. And no reason to believe that that won't be a successful transition over time here.

So more to come. But again, I think based on where we are right now, we're confident that we'll be over $80 million for the year, but still as we think into '25 and beyond, I think just a really huge opportunity, I think, here for gMG patients in China.

I'll turn it over to Jonathan to talk about business development.

Hey, Mike. Thanks for the question. So I think the ROR1 is really a continuation of our strategy to grow the global pipeline. And in terms of our focus, as we grow that global pipeline, it's primarily oncology and immunology programs and even within that, we have certain areas that we're more focusing on. So for example, ADC is an area that we have a growing early stage as well as late-stage product pipeline.

When we turn sort of more regional assets, which we are also very tiny looking at to build on the operational synergies there. In that area, we can probably go a bit beyond oncology and immunology, like what we have done with KarXT for example, when we see a product in a pipeline kind of opportunity that's big enough, then certainly, we want to leverage our capabilities in China and Asia. In this part of the world, I think we have demonstrated capabilities across modalities, across diseases. But certainly, globally, we are much more focused within oncology and immunology.

Thanks, Jonathan. Operator, next question.

(Operator Instructions)

Anupam Rama, JPMorgan.

Hey, guys. Thanks so much for taking the question and congrats on the progress. So with subcu VYVGART now approved, how do you think about the dynamics of incorporating this modality into the marketplace in the near term? And what is kind of like a post-NRDL world look like for subcu. I'm assuming NRDL is coming next January, but given the approval came in July, would we have to wait for 2026 NRDL for subcu VYVGART. Maybe you could walk us through that timeline as well. Thanks so much.

Thanks, Anupam. It's Josh. Yeah, we're excited about the approval for subcu. Yeah. So just going back, of course, now, IV is approved and on NRDL, and that's what we're focused on. We'll look to launch subcu later this year, and it won't be covered by NRDL this year. I think given the timing of the approval, which was post June 30, it's unlikely that we'll be able to add this product to NRDL for 2025.

It's an important addition to the franchise. It improves the patient experience versus IV in terms of time as Rafael mentioned on the call. So we'll work to make sure that the product is available for physicians and patients. But I think for now, the base assumption is that will be available through NRDL in 2026, not 2025.

I don't see that as a major impediment to continuing to drive the kind of patient uptake and maintenance that I talked about in the last answer. Today, patients do go to the hospital for treatment, for follow-up and of course, subcu while a better experience, a faster experience still requires physician administration. So we're focused on getting that two NRDL as quickly as possible, but I think it's likely a 2026, not 2025 opportunity.

But then, of course, we look to combine that with CIDP approval and launch, and that will be our next big indication, but we still have a great opportunity in front of us with gMG. And as I say, I think the IV formulation works really well and fits the treatment paradigm for China today. Thanks, Anupam.

Yeah. I think -- Hi. This is Samantha. I think Josh gave a very good overall perspective. But the one thing I want to add is even though we won't be very unlikely to be included in the NRDL in January. However, for the subcu we will continue to work with the municipal and provincial reimbursement plans, which we have done that before. For example, our OPTUNE, this is the second most supported by municipal and provincial insurance plan, second only to KEYTRUDA.

Thank you, Samantha. Very good. Next question, operator.

Yigal Nochomovitz, Citigroup.

Hi. Great. Thanks very much. So back in the second quarter of '23, you outlined the profitability guidance by the end of 2025 and the 50% year-on-year top-line CAGR. It would be really helpful if you could just take a moment and walk us through the key drivers on the P&L more concretely to get to that profitability target by the end of 2025 and discuss the growth assumptions and what contribution you'd expect from subcu VYVGART as well as CIDP and potentially any contribution from these new launches of XACDURO and AUGTYRO that are coming at the end of the year. Thanks.

Thanks, Yigal. It's Josh again. I'll start, but then I'll ask Yajing to maybe provide a few more comments on the P&L. But I think the biggest driver here for profitability for the full year of '26 and achieving that toward the end of '25 is the top line growth, as you're suggesting through your question.

We've said we expect a compound annual growth of 50% or greater between the end of 2023 and the end of 2025 and that's starting with the launch of efgartigimod this year, and you're seeing us start to approach that number even in the second quarter and the more that efgartigimod contributes to the total revenue base, the higher the sales growth is going to be. So I think the biggest thing to watch is over the next 8 to 12 quarters is the top line growing at or around 50%. And I think if that's the case, then the rest of the P&L sort of falls into place.

To your question about what's the composition or contribution there. Again, I think the biggest driver between now and the end of 2025 and into 2026 is going to be VYVGART, IV, gMG. I think that will be the biggest driver of growth, just given where we are now and the timeline we have between now and 2026, to remind everyone that we are -- we don't expect any other FCRNs to be on NRDL and available over that time period, certainly in through 2025.

So we've got a really good open field in front of us here and tremendous patient opportunities. We will, as mentioned, we'll launch three new products or product forms later this year. That includes XACDURO and repo. Expect launches for those products at the end of Q4. We'll pursue NRDL listing over time, and I do expect that they will contribute growth, of course, to the franchise -- to the overall franchise.

I think if you look at our base business, so ZEJULA, QINLOCK, NUZYRA and OPTUNE, we've said for this year, you should expect cumulatively those products together to grow similar to last year, so that's in or around 20% range. And I think for the next year or two, we should expect those products to continue to grow and to approach something like that, probably not exactly 20%.

But I think if you take the base business continuing to grow through 2026, add on significant growth from gMG, we'll layer in CIDP next year also with the subcu and then the new products that are coming. I think that's -- that gives us a lot of confidence that there's 50%-plus top line potential there. Most of the infrastructure to support those products are already in place. So I think we should be able to manage our expense base pretty well. But I'll ask Yajing to make any final comments here.

Thank you, Josh. Yeah, I'm online now. Thank you very much for the question. I think we're happy to see, right? We're kind of happy to see the perspective of revenue growth. So as we grow the revenue at 50%, we are putting the operating expenses in the sort of in control, meaning that we want to be as efficient as we can. As we communicated before, our G&A expense is going to be flattish in the next few years. So we are already building the infrastructure.

You're not going to expect to see the growth there. Our R&D expenditures will also remain relatively stable in the next couple of years as we're running down the current studies and then ramping up some of the global studies. The area that you're going to expect modest growth is the sales and marketing.

As Josh mentioned, a new list of new launches in the next couple of years. So we are going to grow the commercial [SNM] but in a modest way, much smaller than the revenue growth. So overall, you're going to see the expenses as a percentage of revenue will continue to go down significantly year over year, and we have demonstrated that in the prior year three years, and we're going to continue that trend in the next couple of years. That's how we -- that's the path to get to the profitability by the end of 2025.

Okay. Thank you very much. That was great. Just one follow-up on -- I'm assuming that KarXT and bema are going to launch, I would think, in 2026. Is that a fair assumption? And once those are launched and then you have those two plus VYVGART, plus the original four products, is there the potential to provide some sort of longer-term guidance for the entire commercial portfolio so investors can get a sense of the trajectory as we move into the second half of the decade?

Yeah. First, just to confirm, I think both of those products should be contributing revenue in 2026, the exact timing of approvals end of '25 or early '26 or whatever is obviously contingent on getting the trials complete and submitted and otherwise. But certainly, in 2026, we'd expect both of those products to be on the market.

And yeah, I think at that point, as you know, Yigal, we gave guidance, the first guidance that we gave was last year and said that between, as I say, the end of '23 and end of '28, we expect sales growth to be at least 50% on a compound annual basis. I think as we get those products on the market and have a few years of history behind us with the first wave of launches of course, we'll be in a position to give a little bit more longer-term guidance.

But I think the thing that is important to keep in mind is the products that will drive 50%-plus sales growth between now and the end of 2028 are all still going to be in the growth phase of their launch trajectories. And if we can get to that kind of growth in 2028, there's no reason that it shouldn't continue at very high rates as we get to the end of the decade and early into the 2030s.

I mean, of course, products like bema and KarXT by 2028, will still be early in their launch trajectory, and we'll be adding indications to VYVGART like thyroid eye disease and otherwise. So I think we're quite optimistic about the long-term growth potential of the portfolio, and we just need to take them one launch at a time, but so far, so good, and we're quite excited.

Thank you.

Louise Chen, Cantor.

Hi. This is [Sara Angeros] on for Louise Chen from Cantor. Congratulations on the progress this quarter. We have two questions. One kind of a follow-up to the previous question that we just talked about, which is KarXT and the bema. As we're getting closer to the registrational stage, how should we think about these two assets in terms of the contribution to the overall top and bottom line? And then maybe kind of a different question is the latest status on the DLL3 ADC and what kind of data we should expect later this year. Thank you.

Great. Thanks, Sarah. First, on KarXT and bema, yes, I think that we've talked -- we expect those to be contributing to the company in 2026 for sure. Just to confirm sort of timelines with KarXT, we are -- we should complete the bridging study this quarter and look to submit that data by the end of the year or early next year. So that puts us well online for a timeline for 2026 approval and launch.

With bema, we're in two first-line studies, FORTITUDE-101 and FORTITUDE-102, as Rafael mentioned. 101, the enrollment is complete, and we should be in a position to release those results in conjunction with our partner Amgen sometime in early 2025 and submit. So I think certainly for the first-line doublet study. So this is bema with chemo that approval should certainly hit sometime in early 2026. The FORTITUDE-102 is enrolling. And I think it's about six months or so behind. So again, I think both of those, hopefully, are contributing in 2026.

I think overall, if you look at the opportunity for KarXT in schizophrenia, we've said in the past, there's 8 million patients diagnosed with schizophrenia in China. KarXT represents a really important advancement, first certain new mechanism that will be approved on a global basis in more than 30 years, I think.

And I think a lot of interest and receptivity among thought leaders in China to get this product available for their patients. So I think there's no reason there shouldn't be a very significant opportunity, $1 billion type of annual opportunity over time in China. We're also joining the Alzheimer's psychosis trial. And of course, that's a big opportunity as well on a longer-term basis.

I think for bema, if you look at gastric cancer in Asia, of course, and in China specifically, it's very significant cancer. We're focused on patients who overexpress, FGFR. And I think that's a more -- sort of if you look at the greater than 10% expression that's approaching 100,000 patients a year. This a first-line therapy that if we can replicate what we've seen in earlier smaller studies, patients should be benefiting from this drug for quite a long time. So a period of time in terms of survival.

So I think, again, this one we've also said could contribute up to $1 billion in annual sales per year in the first-line setting. Again, we've got to get the trials complete, submitted and approved, but both of these products, I think, are quite significant, and it will represent major advances for patient care in China. So I think that's where we are there.

In DLL3, in terms of data, we've said we'd expect data from the dose escalation phase of the Phase 1 trial to be available and discussed at a medical meeting by the end of this year or early next year. And hopefully, we have something to report there in Q4, we're quite excited about the progress we're seeing with this asset. And of course, it's an important target, and we think we've got a really good drug here. So thanks for the questions.

Thank you so much.

Jonathan Chang, Leerink Partners.

Hi, guys. Thanks for taking my questions. On bemarituzumab, can you discuss how enrollment in the Phase 3 FORTITUDE studies have progressed versus the plan? And what are your latest thoughts on FGFR2b expression levels and the level of overlap with other markers like PD-L1. Thank you.

Thanks, Jonathan. I'll start here, and John from our team may have some comments as well. But I think first, in terms of enrollment, we've been quite pleased with the ability to enroll here. We've contributed significant amounts of patients to both FORTITUDE-101 and -102, just given the prevalence of gastric cancer in China and are, I think, very good clinical execution and relationships with key sites.

So as I mentioned, we're -- enrollment is complete in 101 and we'll transition to completing the assessment and working towards a submission in conjunction with Amgen on a global basis, hopefully, early next year. 102, as I say, is about six months behind, but enrollment is going really well. So I think both of these -- you should expect both of these studies to be fundamentally complete in 2025 with hopefully good top line data available.

And I think as we look at the opportunity, as I mentioned, I think if you look at the expression greater than 10%. It's somewhere in the range of 75,000 to 100,000 patients in China. I think with -- Jonathan can comment here too because he's very close to this.

But I think with relatively limited overlap, I think, with some of the other targeted agents in this case. But of course, our focus here is, I think the bigger opportunity long term is in the triplet study. So in combination with the PD-1 in a first-line setting. So quite excited about that opportunity. Jonathan, I don't know if you have anything to add.

Yeah. Sure. Maybe just quick comments to add to Josh's remarks, I think first, China contributes more than 50% of the majority of the gastric patients around the world. So since Zai joined the bema studies, which Zai joined much later, then global, we contributed more patients in China than any other country in the world and a very significant percentage of the global enrollment, thereby, we are accelerating the global timeline of bema to China and to other markets.

On the expression levels, when we did the initial FORTITUDE-144 study, the Phase 2 study, whether the high expressions or the low-, medium- expressions was actually much more than what we expected before we start the Phase 2 studies. So FGF2b is about 32% and of which high expression patients is about 18% of the overall patient population.

So it is a very large patient group and the more higher expression, we also found with FGFR2b the more aggressive the tumor type. So therefore, bema showing much wider separation of the PFS and the OS curves in the original FORTITUDE-144 study. And we also saw there's additive effect with agents like PD-1 and mind you, PD-1 in gastric cancer the response rate is in the teens.

So it works, but there's probably a lot more room for improvement. So look, we're very excited about bema We think there's a lot of potential to be transformative for these medicines and we're looking forward to the data which we are accelerating at the moment together with Amgen.

Thank you.

Jack Lin, Morgan Stanley.

Hi. Thank you. Can you hear me?

Yes.

Hi. Thanks for taking my question and congrats on the stellar performance quarters. So my question is on the subcutaneous VYVGART. I kind of understood the topic was touched upon earlier with particular detail on the NRDL timing.

But I was wondering if a company could expand on the kind of the commercial strategy such as pricing to drive kind of adoption, particularly given that potential competition, the [Renazzo] lutikizumab was also accepted by the [SED] for review and could potentially be approved later this year, which is also a subcu-based FCR. So -- and also on that note, management could help share as kind of comparing VYVGART with the two drugs? And also, how does UCB China commercial operation compared to us, especially in the immunology space. Thank you.

Thanks, Jack. It's Josh. I'll start. I think, first, I think as I mentioned, and Samantha mentioned as well, we'll do everything we can to make subcu a viable alternative and option for patients who have supplemental insurance or other ways of accessing it. But for now, the emphasis on the IV formulation works well, as I say, it fits very well into patient treatment patterns and how patients seek treatment for gMG in China. I think the differentiation among the agents is really going to be around how does it improve the symptoms and manage the symptoms of gMG much more than the convenience or formulation piece.

So I think we're quite confident that the data that we have that Argenx is accumulated and we are now accumulating in a real-world setting in China is going to give us, I think, a really strong position even as other agents are potentially approved and on the market. Of course, anything that's approved in the next number of months is not going to be eligible for NRDL listing until 2026.

And again, I think by that point, the data that we've generated both in clinical trials, but also now in a real-world setting with what will be tens of thousands of patients experience, I think put us in a really strong position. So we're not I think overly concerned about the next approvals or the next generation of agents.

Of course, in any setting like this, having been involved in many launches over many years, having more competitors is both a challenge from a competitive perspective, but also an opportunity, particularly in new classes where you have more good and high-quality organizations talking to physicians and educating them and educating patients.

So I think from that standpoint, we welcome some of the bigger companies with quality products. But I think on an individual basis, we think our data stands up really well and we'll be in a strong position for many years to come.

Well, thank you.

Linhai Zhao, Goldman Sachs.

Thanks for taking my question. I'm curious about the overall commercial strategy for OPTUNE going forward, especially given that I know that for GBM, we are now adopting a more focused commercial strategy to the top-tier oncology companies where we could find more concentrated GBM patients. Just curious about would we adopt similar concentrated strategy for other indications.

For example, we have larger indications in non-small cell lung cancer and potentially the pancreatic cancers, which may be less concentrated compared to GBM. Then for the other indications, would you still consider adopting this concentrated commercial strategy for OPTUNE? And overall, how do you see the profitability of the program level for OPTUNE? Thanks.

Thanks for the question. It's Josh. I'll take a shot at this one. I think first, yeah, as it relates to GBM, we're we have enough experience now to understand where the best opportunities are from an economic perspective, and we have made some adjustments in the second quarter that will allow us to drive profitability through this indication. And I think the limiting factors here, of course, are reimbursement.

And until or unless something changes in terms of NRDL eligibility for medical devices, I think we're always going to have to be focused on where it makes sense to deploy our resources and how to do that in a way that drives not just sales but also bottom-line profits. And you'll see that that's the focus we've initiated for Q2 and beyond for GBM.

I think as it relates to the next opportunity in LUNAR in non-small cell lung cancer, we will take the same approach. I mean, we're going to look. I mean, this is a product that if approved, I think provides a really important treatment option in second-line lung cancer in China. And I think there's good interest in having this product available.

We'll look and make sure that as we deploy our resources against it, that we're going to put it against the opportunities where we can drive benefits for physicians and patients, but also benefits for shareholders. So I think it will -- because of the supplemental insurance focus here necessarily will focus on areas where patients can get it and stay on the drug and -- or to stay on the technology and so on but it's a much bigger opportunity.

I think in just the number of patients who could benefit from TT fields in second-line lung cancer is pretty significant. I think we're quite excited and anxious to see the results from the PANOVA trial at the end of this year in pancreatic. I think as you indicated, that's maybe not as concentrated in opportunity, but to have something that could work in pancreatic cancer and provide benefits, I think, is pretty significant.

So I think that's an opportunity that as the data is available and if it looks good, I think there's a compelling opportunity there, and we'll make sure we sort of optimize the launch there. But I think the summary overall is really important technology. We do have to take a focused approach here because of the reimbursement opportunity. But if it continues to show benefits in multiple tumors, there's a lot to work with here.

Thanks for the question.

Thanks. That's very helpful.

Thank you. I'm showing no further questions at this time. I will now turn the call back over to Zai Lab CEO, Samantha Du 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 third quarter of 2024. Operator, you may now disconnect this call.

This concludes today's conference call. Thank you for participating. You may now all disconnect. Speakers, please standby.