Zai Lab Ltd Q4 FY2020 Earnings Call

Hello, ladies and gentlemen, thank you for standing by, and welcome to Zai Lab's Second Half and Full Year 2020 Financial Results and Corporate Update Conference Call. Well, at this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, today's call is being recorded. It is now my pleasure to turn the floor over to Mr. Billy Cho, Chief Financial Officer of Zai Lab, who will make introductory comments.

Thank you, operator. Good morning. And welcome to Zai Lab's second half and full year 2020 financial results and corporate update conference call. Earlier this morning, Zai Lab issued a press release providing the details of the company's financial results for the full year ended December 31, 2020, as well as recent corporate updates. The press release is available in the IR section of the company's corporate website at ir.zailaboratory.com. Today's call will be led by Dr. Samantha Du, Zai Lab’s Founder, Chairperson, and Chief Executive Officer. She will be joined by Tao Fu, Chief Operating Officer, who will provide more details on our strategy and key pipeline assets, including upcoming milestones and commercial progress. Then Jonathan Wang, Head of Business Development, will discuss recent partnership activity. Dr. Alan Sandler, President, Head of Global Development, Oncology; and Dr. Harald Reinhart, Chief Medical Officer for Autoimmune and Infectious Disease, will also 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 our business plans, objectives, timing and success of our clinical trials, 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 that could cause actual results to differ materially from what we expect. I refer you to our SEC filings for a discussion of risk factors that could cause our actual results to differ materially from those discussed today. At this time, it is my pleasure to turn the call over to Zai Lab's Founder, Chairperson, and Chief Executive Officer, Dr. Samantha Du.

Thank you, Billy. Hello, everyone, and thank you all for joining us. We have investors around the world. So I truly hope everyone and their loved ones are safe and healthy. I would also like to thank all of our investors for their continued interest and support. On this call, I'll provide a quick overview of Zai Lab's strategic position, highlight some of our 2020’s achievements and 2021 goals, and provide remarks as to why we are so excited about our future. I'm proud to start by stating that we believe Zai Lab is poised to become a global leading biopharmaceutical company. We have come to this point by leveraging China's rapid emergence as the second largest and fastest-growing pharmaceutical market, together with our proven track record of execution with speed and quality. In the 6 years since the company was founded, we have created a portfolio of 21 innovative products at Zai Lab. We have now commercialized the first 2 of this product in China with 4 indications and another 2 products currently pending approval with Priority Review status. We have a total of 17 products in clinical development, of which 11 are in late-stage development and 5 have already been approved in the U.S. I also want to highlight that along with our growing pipeline we have 7 early stage products with worldwide rights, including 3 global clinical trials. So we have made remarkable progress in just 6 years. We had another year of great accomplishment in 2020, and I'm very proud of our team and all the support we have received. We successfully launched our first 2 products in China, as I mentioned earlier, ZEJULA for both second line and first-line ovarian cancer, and Optune for newly diagnosed and recurrent GBM. In addition, we submitted 2 NDAs, both under priority reviews, 1 for QINLOCK for advanced GIST, and 1 for NUZYRA for community-acquired bacterial pneumonia and for acute bacterial skin and skin structure infections in China. We continued to expand our pipeline and strengthened our disease franchises by forming new strategic partnerships with 4 leading biopharma companies for 5 important compounds that we believe can help address significant unmet medical needs. We also continue to execute in clinical development and now have more than 40 ongoing or planned clinical trials. We accomplished all of this despite the challenges caused by the COVID-19 pandemic. Looking ahead to 2021, we expect to launch QINLOCK and NUZYRA in China. We also plan to submit 2 regulatory filings, 1 for Tumor Treating Fields in mesothelioma and 1 for margetuximab in HER2-positive breast cancer in China. We expect to hold regulatory discussions with NMPA regarding a potential accelerated pathway for efgartigimod, for which our partner argenx has already filed a BLA in the U.S. for acute MG. We expect to obtain new clinical data for a number of products across our portfolio including, but not limited to, ZEJULA, Tumor Treating Fields, ripretinib, margetuximab, and CLN-081. Over the long run, we plan to continue our growth trajectory through strong execution of our business development, internal R&D, and commercialization strategies. We have built substantial disease strongholds in 3 therapeutic areas: oncology, autoimmune disorders, and infectious diseases. Within oncology, we have focused on 5 kinds of franchises that account for over half of all new cancer patients in China: gastric, lung cancer, where we have built world-class portfolios in just 3 years, as well as women's cancer, brain cancer, and hematology. We strive to expand this product pipeline, both vertically within this area of focus and horizontally into new therapeutic areas of significant unmet medical needs. We also expect to realize orthogonal synergies across several technology platforms, whether it be targeted therapy, IO, TT Fields, or others with proprietary combinations to maximize the value of our portfolio. Our success has been driven by a relentless focus on executing our strategy. When we founded Zai Lab in 2014, we dedicated ourselves to bringing in first and only-in-class therapies for patients in China and beyond to address significant unmet medical needs. In the process of doing that, we have established ourselves as the partner of choice for Greater China. This, in turn, allowed us to bring world-class assets and build end-to-end capabilities, including commercialization. We have built substantial scale with our organization now consisting of nearly 1,200 employees across 8 major locations around the world. We have continued to enhance our global leadership capabilities, for example, by hiring Dr. Alan Sandler to lead our global oncology development. With this foundation, our top priority is to become a leading global biopharma company by 2023. Although we are proud of our accomplishments to date, we have a lot more work to do to fulfill our mission. Many of you know that Zai Lab in Chinese means 'once again reach the top of the mountain.' All the hard work over the last 6 years has equipped us, energized us, and has committed us to confidently lead the base camp and start climbing up our Mount Everest. We are excited to have you on this journey with us. Thank you. And now I will ask Tao to discuss our performance and prospects in more detail. Tao?

Thank you, Samantha. I will discuss our near-term commercial performance, our expected 2021 launches, and a few important franchises we are building for the long-term in gastric and lung cancer and autoimmune diseases. Last year, we successfully launched ZEJULA in China for second-line ovarian cancer in January during the COVID pandemic and for first-line ovarian cancer in September, less than 6 months after we submitted our sNDA. ZEJULA is the only PARP inhibitor approved for all-comers in the first-line setting. In comparison, other PARP inhibitors have labeled restrictions limiting their use to patients with gBRCA mutation, which comprise only about 15% of ovarian cancer patients. The results of the PRIMA study conducted by GSK globally and the NORA study sponsored by Zai in China demonstrated that an individualized starting dose regimen of ZEJULA preserves efficacy while improving the product's side effect profile. This further differentiates ZEJULA from other PARP inhibitors. On the commercial front, our team has been successful in gaining reimbursement from commercial health insurance, with coverage currently provided by 67 commercial health insurance plans and 44 supplemental insurance plans. Importantly, we announced ZEJULA's inclusion in NRDL for 2021, which should further drive strong volume growth. We're pleased with our launch performance so far, and over time, we believe that ZEJULA will become the market-leading PARP inhibitor in China. We launched Optune in China in late June 2020. The product is the first novel treatment in glioblastoma approved by the NMPA in the last 15 years. It was highly anticipated by the medical community and was already recommended by the National Glioma Guidelines prior to launch. With our team's effort, Optune became the first innovative medical device supported by commercial health insurance in China and is also covered in 10 supplemental insurance plans. We deployed innovative strategies to support patient access and rapid uptake, including establishing 24 direct-to-patient centers in China. Importantly, we're working with our partner, Novocure, to potentially expand the indications of Tumor Treating Fields in areas of large unmet medical needs. Additional late-stage studies are underway in tumor types potentially affecting over 1.5 million new patients a year in China. We and our partner, Novocure, expect to have several important data readouts in 2021, including interim analysis of Phase 3 pivotal trials in ovarian and lung cancer, and results in a pivotal Phase 2 study in liver cancer. We expect to complete enrollment in our own Phase 2 study in gastric cancer by the end of 2021. Now let's look at the launches we expect this year. We filed QINLOCK for approval in China last July, and it is under Priority Review. We expect to launch the product for fourth-line GIST in 2021. QINLOCK is the first approved tyrosine kinase inhibitor designed specifically for GIST patients regardless of mutational status. The INVICTUS trial demonstrated a significant benefit versus placebo in progression-free survival and overall survival; and third, as the basis for QINLOCK's approval in the U.S. in May 2020. Top line data from the Phase 3 global pivotal entry trial in second-line GIST are expected in the second half of 2021 and could potentially support label expansion in this important indication. We also filed NUZYRA, a tetracycline antibiotic, for approval in China last year for acute bacterial skin and skin structure infections and community-acquired bacterial pneumonia, and it is under priority review. We expect to launch NUZYRA in 2021. We believe that NUZYRA has the potential to become a preferred choice of physicians who use it as a broad-spectrum monotherapy antibiotic in disease areas where antibiotic resistance is of significant concern in China. Looking further into the future, we have a highly visible near-term pipeline and could potentially launch more than 10 additional products over the next 3 to 4 years. While we don't have time to discuss all of these products in detail, I'd like to highlight 3 disease strongholds we have built: gastric cancer; lung cancer; and autoimmune disease and some of the exciting products we are developing in these areas. Gastric cancer is the second most commonly diagnosed cancer type in China with an estimated 600,000 - 700,000 new cases annually, and it is one of the leading causes of cancer death. We have built a comprehensive and synergistic portfolio of at least 6 product candidates in just 3 years. We believe we have one of the most innovative and formidable gastric cancer pipelines in the world today. The targeted agent, bemarituzumab, margetuximab, and TPX-0022, all have positive clinical proof-of-concept data. And combined, they could cover nearly half of gastric cancer patients in China. In addition, our pipeline includes ripretinib for GIST, the combination of niraparib and the PD-1 LAG-3 bispecific teprotumumab, and tumor treating fields. Lung cancer is the most commonly diagnosed cancer type and the leading cause of cancer death in China. We have built a differentiated franchise of at least 5 product candidates that include target agents Repotrectinib, CLN-081, and TPX-0022, the immunotherapy agent, rituximab, and tumor treating fields. We believe our precision medicine portfolio provides broad coverage of key driver mutations. And together, they can address up to 15% of non-small cell lung cancer patients in China. In addition, these targeted agents may be synergistic with other modalities in our portfolio, such as checkpoint inhibitors and tumor treating fields, allowing us to pursue novel combinations. In 2020, we also significantly boosted our autoimmune franchise with the addition of efgartigimod. As a late-stage potential first-in-class asset with the potential for multiple indications, efgartigimod will be the anchor asset assigned in the autoimmune area, where we are seeing a fast-growing market with significant unmet medical needs. As you can see, we continue to strengthen our existing franchises vertically and expand into new areas horizontally through strategic partnerships, and this remains a key growth strategy for Zai going forward. Now I would like to turn the floor over to my colleague, Jonathan Wang, Head of Business Development, to discuss a few new product candidates we brought in through our in-licensing deal last year. Jonathan?

Thank you, Tao. Samantha mentioned that we had formed 4 new partnerships for 5 products over the last 12 months, including 3 new partnerships announced in late December and early January. These partnerships speak to the high standards we have for the products we in-license and for the partners we have the privilege to work with. While we have consistently succeeded in in-licensing several products each year since the inception of the company, we're more focused on quality than on quantity. I'd like to speak to you now about our most recent deals, each of which is strategic for our company's growth. To bolster our franchise in lung cancer, the leading cause of cancer death in China, we acquired the rights to several innovative and highly differentiated target therapies. In December, we reached an exclusive agreement with Cullinan Oncology for the rights in Greater China to CLN-081. This compound is a potential best-in-class small molecule that targets cells expressing EGFR exon 20 insertion mutations in non-small cell lung cancer, which currently approved EGFR inhibitors do not adequately address. The unmet need in this patient population is significant in China, where EGFR mutation rates are the highest in the world. Approximately 4% - 5% of overall non-small cell lung cancer is driven by EGFR exon 20 insertion mutations. So we're talking about over 30,000 addressable new patients each year. Our partner, Cullinan, recently announced their decision to move forward with a Phase 2a expansion cohort based on encouraging data from the ongoing Phase 1/2 trial. Zai expects to begin recruiting Chinese patients into a global pivotal trial later this year. We expanded not only our lung cancer franchise but also our gastric cancer franchise with 2 collaborations with Turning Point Therapeutics. You may recall that last July, we reached an exclusive agreement to collaborate with Turning Point on Repotrectinib, a breakthrough therapy designation product that targets tumors overexpressing ROS1 and NTRK. ROS1 is estimated to be an oncogenic driver in approximately 2% - 3% of patients with advanced non-small cell lung cancer and NTRK in approximately 0.5% of patients with other advanced solid tumors in China. We will begin recruiting patients in China for the Trident-1 study in the first half of this year, which could be the basis for potential approval. We further expanded our partnership with Turning Point in January by adding a second molecule, TPX-0022, a promising MET, START, CSF1R inhibitor that is highly synergistic with our portfolio. Turning Point has reported initial encouraging safety and efficacy data across multiple tumor types, including non-small cell lung cancer and especially in gastric cancer, where there is high unmet medical need in China. In the second half of this year, Turning Point anticipates initiating the Phase 2 portion of the SHIELD-1 study, pending FDA feedback. And finally, in January, we reached an exclusive agreement with argenx for the Greater China rights to efgartigimod as an anchor asset for our autoimmune franchise. We have specifically targeted the most severe and poorly served autoimmune diseases. Efgartigimod is truly a pipeline and product opportunity with ongoing clinical development by argenx in gMG, ITP, pemphigus, and CIDP, conditions with more than 400,000 patients combined in China. It has potential applications in at least 8 other autoimmune diseases. Efgartigimod is filed in the U.S. for gMG, and Zai intends to begin regulatory discussions in China this year for a potential accelerated regulatory pathway for the product. Even with our recent success, I want to make clear that we're not going to rest on our laurels. With our strong track record of in-licensing potential best-in-class and/or first-in-class assets and supported by strong development and commercial execution, we have established a sustainable and leading platform to continue to bring in world-class assets that address unmet needs in China. We will continue to use business development as a key strategy to expand our business, both vertically and horizontally. With a strong pipeline of potential deals, we expect to continue to strengthen our franchises through BD and internal efforts, including the possibility of transformative partnerships in China and beyond. And I will now turn the floor back over to Billy.

Thank you, Jonathan. I will now review our financial results for the full year ended December 31, 2020. Revenues for the full year of 2020 were $49 million compared to $13 million in 2019. Revenues for the period were comprised of $32.1 million in sales of ZEJULA and $16.4 million in sales of Optune, respectively. The increase in revenue was primarily driven by the successful China commercial launches of ZEJULA and Optune in late January and late June, respectively. R&D expenses were $222.7 million for 2020 compared to $142.2 million in 2019. The increase in R&D expenses was primarily attributable to the new licensing agreements and ongoing and newly initiated late-stage clinical trials, along with payroll and payroll-related expenses from increased R&D headcount and expansion of research efforts to support internal development programs. Selling, general, and administrative expenses were $111.3 million for 2020 compared to $70.2 million in 2019. The increase was primarily due to payroll and payroll-related expenses from the increased commercial headcount and related costs as we launched ZEJULA and Optune in China and continue to invest in our commercial platform for future growth. For the full year of 2020, Zai Lab reported a net loss of $268.9 million or a net loss per share attributable to common stockholders of $3.46 compared to a net loss of $195.1 million or a net loss per share attributable to common stockholders of $3.03 for the full year of 2019. As of December 31, 2020, cash and cash equivalents, short-term investments, and restricted cash totaled $1.19 billion compared to $276.4 million as of December 31, 2019. The increase is primarily due to our secondary listing on the main board of the Stock Exchange of Hong Kong with total proceeds, before deducting underwriting fees and commissions and other operating expenses of approximately $881 million. We would now like to turn the call back over to the operator to open the lines for questions.

Your first question comes from Yigal from Citi.

This is Carly on for Yigal. Just to start on the argenx deal, assuming a favorable outcome from regulatory discussions for myasthenia gravis, can you talk about how quickly you expect to be able to file the NDA? And then alternatively, if the agency were to require you to conduct a bridging study, can you talk about what the timeline might look like under that scenario?

Thank you for the question. This is Samantha Du. We are currently, of course, just started a discussion process. And it's very hard for us to give you actually the answer to this question. But we do believe this Efgart program, especially the first indication, gMG definitely addresses significant unmet medical needs. And it's also the first to the market. So we are optimistic about the regulatory discussion and outcome. Thank you.

Okay. Great. And then switching gears to Ripretinib and the potential commercial launch for fourth line GIST this year. Can you talk about what learnings you've gathered from launching ZEJULA and Optune that you believe will position you well for the Ripretinib launch? And if you could just provide some color on how concentrated the GIST market is in China, and how many sales reps do you expect to hire to execute the launch?

Billy, do you like to handle those questions?

Thank you for the question. We've gained valuable insights. Last year, we successfully launched both ZEJULA in late January and Optune, which became commercially available at the end of June. Despite the challenges posed by the pandemic, we're quite satisfied with the progress of our commercialization efforts thus far. We are eager to carry this momentum into the new year, marking the first full calendar year for both products. Regarding your specific question about our preparations for QINLOCK, there are certainly similarities. This will be our first launch for a gastric cancer product. However, market access for drugs that address unmet clinical needs is very concentrated in China, leading us to anticipate similar dynamics with QINLOCK. You'll notice in our earnings release that we recently obtained approval in Hong Kong, and we are on track for a mainland China launch in the first half of this year. We are very much looking forward to this launch and have been diligently preparing to ensure another successful rollout.

Our next question comes from Michael Yee from Jefferies.

This is Dennis Ping on for Mike. I just have 2. First one is just about your appetite for deals for the rest of this year, and if we should expect a greater focus on autoimmune and perhaps non-oncology areas, now after argenx. And my second question is on just around your comments around globalization. I think you guys have an internal goal to be a global company by 2023. How do you envision yourself as a global company? And what possible paths can you take to achieve that?

Thank you, Dennis. Let me turn the first question over to our Head of Business Development, Jonathan Wang.

Dennis, thank you for the question. First of all, we have a very robust BD pipeline. I think really credit goes to the strong execution by the development, commercial, and other teams. We have really built a reputation and trust within the community of biotechs and pharmaceutical companies around the world. So today, we have really a lot of inbound interest to partner not only in oncology, immunology, but perhaps other areas as well. So for us, we're looking always for significant deals that would really boost our pipeline of potentially first-in-class and best-in-class products. We always have a very high standard for whatever assets that we bring in. Last year, I think we established quite a number of very significant partnerships with great companies around the world. So we see we will potentially continue this trend of always executing every single year. To your specific question about autoimmune, when we brought in Efgart, that is really an anchor asset for us to build our immunology franchise. Of course, we have other products in our immunology franchise, including our own in-house discovery program, the nanobody IL-17, which we're developing globally. But Efgart is a pipeline of product opportunity, targeting many very severe autoimmune diseases with a lack of other treatment options. So I think other similar products will certainly be a focus as we look to strengthen our pipeline in different areas.

To address your question about globalization, it's important to note that China is already the second largest market globally. Managing our operations in China is crucial, as it represents a significant opportunity. Our recent earnings release highlights that we have three therapeutic areas supported by multiple strong franchises. In particular, our treatments for gastric and lung cancer are substantial, collectively accounting for half of the new cancer cases in China. This presents a considerable upside for us. Over the past six years, we have made progress in internal discovery, with three assets now in global Phase 1 development and worldwide rights. We plan to further develop our franchise over the next three years, both vertically and horizontally, in China and internationally. We are optimistic about our potential as a global leader.

Our next question comes from Seamus Fernandez from Guggenheim.

So I wanted to just get a sense of penetration in the second-line market in China. If you guys could just give us a quick sense of that and how the competitive landscape continues to evolve. And if you don't mind, I'd love to just ask, can you guys talk a little bit about the mechanism of action and exactly what you're targeting. I know that this is targeting ATR, but the key tumor types that you're most excited to see the ATR advancing in.

Thank you, Seamus. Those are great questions. For your first one, I'll turn it over to Billy Cho. And for your second one, I'll give our President of Oncology Development, Dr. Alan Sandler, an opportunity to address.

Thank you for your question, Seamus. As you know, we launched ZEJULA over the past year. We've been covering hospitals and have discussed heavy construction and thresholds. However, we want to expand our focus. We are continuing to deepen our coverage in those hospitals. When we launched ZEJULA, we had about 150 sales representatives, and that number has nearly doubled. The implementation is set to start today, so you can expect an acceleration in hospital listings in China. Although we don’t publicly disclose all our data, we are quite pleased with our performance across major metrics and KPIs, and we are ahead of the benchmark in all those areas. Now, regarding your second question, I will hand it over to Alan.

Thank you for the question. CDC7 is a selective inhibitor that plays a role in replication stress and can also inhibit cell division. In our early phase studies, we intend to explore potential biomarker-driven approaches for various malignancies, including pancreatic cancer, which appears to be a promising target. At this moment, we are still assessing which malignancies may be the most suitable, and we will take a broad approach initially, refining our focus as we gain insights from our biomarker-driven studies.

Our next question comes from Anupam Rama from JPMorgan.

Just a quick one from me. You guys mentioned the NORA results a couple of times on this call for ZEJULA. Can you remind us 2 parts: one, how the NORA results are being used in commercialization? And then two, are there plans to submit the NORA data to regulators for inclusion in the label?

Thank you, Anupam. And I would like Tao to address your questions. And if any additional comments are needed, I'll just make it up.

Yes, yes. Thank you, Samantha. Anupam; thanks for the question. I think the NORA study is pretty important to us because it is a China-specific study, and it's very large. As you may know, in the NORA study, we really proved that ZEJULA, when using other individualized starting dosing regimens, can significantly improve the side effect profile while preserving efficacy. That really kind of fits into the majority of Chinese patients. It is also important to point out in the NORA study, we observed almost 18 months of PFS versus 12 months in the global NOVA study. So these are all very, very significant results. I think we're currently utilizing it in our commercialization effort in China.

Yes. In terms of labeling, Anupam, for your information, our first-line was approved based on 200 milligrams instead of 300 milligrams. Also, we are working to change the labeling from 300 milligrams as a starting dose to 200.

Our next question comes from Jonathan Chang from SVB Leerink.

This is David Ruch on for Jonathan. Congrats on the awesome progress this year. Just 1 for me. You guys are partnering with MacroGenics on module B of the MAHOGANY study of margetuximab in frontline gastric cancer. MacroGenics has guided to presenting data from module A in the first half of the year, and I was just wondering if you could talk about what you would be looking for in that dataset to give you confidence in module B in terms of response rates or any other durability data.

Thank you, David. I'll turn this over to Tao.

Thank you for the question. Module A of the MAHOGANY trial is focused on the chemo-free regimen, which we find quite significant for first-line gastric cancer patients when comparing it to standard chemotherapy. We will definitely be assessing response rates. If we see a strong response rate, we believe it will provide a positive indication for module B, which will incorporate a checkpoint inhibitor.

Our next question comes from Ziyi Chen from Goldman Sachs.

Actually got 2 questions. Well, first, if we look at the financial data, right, the gross margin was a lot lower in the second half versus first half, 61% versus 74% in first half. Trying to understand what was the reason behind. And also, we are interested in the upcoming Optune Phase 3 pivotal LUNAR study, which is going to have some interim data coming probably second half this year. So what kind of the interim data we should be expecting that you will consider as positive signals? And particularly, given the study's plan to show superiority in terms of OS benefit for the combo with immunotherapy and also with docetaxel combination. So do you need to show the superiority in both combo arms or you just need to show the superiority in just either one of the arms?

Hello, Ziyi. I'll direct your first question to our CFO, Billy Cho, and the second question to Tao Fu.

Yes, regarding your question about the margin in the second half, I want to point out that there will be some variability for two reasons. First, we recently launched Optune at the end of June, so we are just beginning to ramp that up. Secondly, there might be some nonrecurring variability related to the implementation of the NRDL, which will be reflected shortly before it is added to the national catalog. These are the two factors that could lead to that variability.

Can you just clarify your second question? I'm not sure I captured it fully.

We're expecting the Optune's Phase 3 pivotal LUNAR study. So it's going to be an interim data, right? So what kind of threshold we're looking for the data to hit considered as a positive signal for the Phase 3 studies? And also, I know the study actually is comparing the combination with immunotherapy or combination with docetaxel versus immunotherapy or docetaxel. So do you need to show the superiority in both combo arms? Or do you just need to show superiority in either one of the arms?

Yes. I think this is probably a question that we should defer to Novocure's clinical team to answer. We do think this is a very important trial for China because there's a very large unmet medical need for non-small cell lung cancer, and this is a very unique approach and differentiated modality. But in terms of the trial detail, I think we'll probably refer to Novocure to answer.

Our next question comes from Yang Huang from Credit Suisse.

So my first question is I think for ZEJULA and for Optune, where you have sales coming from Mainland China and Hong Kong and Macau. So can you give us a breakdown for Optune sales in terms of Mainland China? And also, Mainland China sales for Optune, since I consider, for example, Optune, first half last year, Optune sales is about $5 million. And if we think it will continue in Hong Kong and Macau as $5 million or $6 million, that doesn't mean for second half in Mainland China, Optune sales was about USD 5 million?

Go ahead, Billy.

Yang, thanks for the question. Yes, Hong Kong and the greater market outside of Mainland China, I should say, has been very strategic for us historically, especially for Hong Kong. As you know, we were able to launch ZEJULA and Optune in advance of the Mainland China launch. And as I mentioned this morning, we just got the call approved for QINLOCK. So I think that going forward, the reason why we did not break out by Hong Kong versus Mainland China versus even in Macau is because Mainland China is a pretty substantial factor going forward. So we have decided not to really break up our geography.

Okay. And so my second question is still kind of related to Optune. So we indicated for 2021 we are going to join some global Phase 3 Optune study like in non-small cell lung cancer and pancreatic cancer trial. So does it mean that after we've participated in Phase 3 trial, if those trial results are positive, we can directly apply for June indication for Optune in China? Or do we still need some kind of localized study, just like a bridging study for drugs?

Thanks, Yang. This is Samantha. The point of joining global studies is to accelerate global development timelines; number two is to fast-track China's regulatory approval. So from what we know right now, we think, combined with global approval, together with China's patient data from the global trial will be sufficient. But if things change, we can update you.

Our last question today comes from David Ng from Macquarie.

Since I think I dialed in a little bit late, so maybe I'll ask some bigger macro question, if you don't mind. My first question is, as the competitive landscape continues to change, I believe that some of your in-licensed products may face different prospects than your original expectation. And this is not just due to the pricing environment, but also due to the new products being developed by competitors. So take example for, like in breast cancer and gastric cancer, you have the ADC HER2-positive product doing very well at high margins than some of those in development, maybe including margetuximab. So one broad question is the flexibility of your in-licensing model allows you to reshuffle the priorities of your pipeline much more easily than those who purely depend on in-house. Any thoughts on that, about how you're going to more dynamically reprioritize some of your products that you have in-licensed? So that's kind of the first question. Second one is regarding your intention to maybe develop or allocate more resources to develop products for chronic diseases like diabetes or cardiovascular, knowing that it takes much more capital, much more time, and potentially less exciting market than oncology. But with such a diversified portfolio and a very strong balance sheet today, will you consider allocating more resources to some chronic diseases? And my final question is, again, in view of a lot of your peers successfully out-licensing to overseas partners, so kind of going out of China into the international market, whether through actual exporting or signing a partner, and some of your peers signing up partners domestically to strengthen the marketing expertise. If we have to single out one particular business aspect that Zai Lab may be a little bit weaker than your competitor, which area would you say that in the upcoming 1 or 2 years that Zai Lab would definitely focus a lot on? Not necessarily just a particular product or target, right, but a particular business strategy that you think that Zai Lab needs to catch up to a little bit in the next 1 or 2 years?

Thanks, David. I'll address your questions in order, starting with your last one. Firstly, Zai Lab is still relatively young compared to some of our peers, having only been around for 6 years. People may see us as a preferred partner for in-licensing pipelines. Throughout these 6 years, we have invested considerable effort into internal R&D. Regarding in-licensing, we are confident in our track record. Over the past 5 years, we have in-licensed many early-stage products, consistently making the right decisions based on strong science and deep industry knowledge. Nearly all of us, apart from our CFO and Head of Business Development, have extensive experience in drug development, often spanning over 30 years collectively. Looking ahead, we will continue our successful approach, seeking opportunities that can enhance our portfolio both horizontally and vertically. Areas like lung cancer, gastric cancer, and breast cancer present significant unmet medical needs, as do conditions in autoimmune diseases. If a strong anchor product aligns with our pipeline, we will pursue it. Each time we enter a new therapeutic area, we ensure a thorough understanding of the market and competitive landscape, prioritizing quality over numbers. While competition will certainly increase, we believe our pipeline in the next few years will still feature first-in-class or best-in-class products. For instance, in the area of antibody-drug conjugates, different mechanisms are necessary for various tumor types. It's important to remember that no single drug can address every issue—multiple treatment options are often needed, as seen with patients developing resistance in treatments like Tagrisso and PD-1 therapies. We also have diverse strategies within our pipeline, including PD-1, PD-1 LAG-3, and other innovative approaches such as TTFields and targeted therapies. I believe our competitive edge lies in our ability to adapt and learn continuously, improving in areas where necessary. As I mentioned earlier, we are just at the beginning of our journey, having spent 6 years preparing and equipping our team for future challenges. While we recognize the inevitable mistakes we might make, I feel confident that we are on a positive trajectory, supported by our dedicated employees and investors. I am genuinely optimistic about Zai Lab's substantial growth momentum and our future prospects.

Thank you. I'll now turn the call back over to the management team for the closing remarks. Please go ahead.

Thank you, operator. I want to thank everyone for taking the time to join us on the call today. We appreciate your support. We look forward to updating you periodically on our progress throughout the year. Operator, now you can turn the call off.

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect.