Hello, ladies and gentlemen. Thank you for standing by, and welcome to Zai Lab's Third Quarter 2023 Financial Results Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, today's conference 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 Third Quarter 2023 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 Oncology and Research and Development, Dr. Harald Reinhart, President and Head of Global Development, Neuroscience, Autoimmune and Infectious Diseases, and Dr. Yajing 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 all be making certain forward-looking statements based on their 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 November 7, 2023, for certain disclosures regarding these non-GAAP financial measures. At this time, it is my pleasure to turn the call over to Dr. Samantha Du.

Thank you, Christine. Hello everyone, and thank you all for joining us today. Throughout the year, we have continued to successfully advance our pipeline, including several important developments for key late-stage programs, such as Bema, KarXT, and Efgartigimod. In the third quarter, we were especially excited about the launch of our fifth commercial product VYVGART, following months of strategic preparation. Although still early in the launch, we are encouraged by the initial demand for VYVGART and by the positive feedback from both physicians and patients. Josh will provide more details on the progress of this very important product launch. We are well positioned to execute on our corporate strategic goals including the launch of multiple new products and new indications over the next few years. Our pipeline of potential first-in-class and best-in-class products has significant potential to meaningfully improve the lives of patients and we expect these product candidates to contribute to our long-term growth and drive shareholder value. And with that, I'll pass it to Josh.

Thank you, Samantha. It is an exciting time at Zai Lab as we launched VYVGART, the first FcRn blocker approved for the treatment of generalized myasthenia gravis in China. There are over 170,000 patients in China living with gMG, many of whom continue to suffer from symptoms, such as decreased muscle strength and mobility despite receiving treatment. VYVGART is an important new treatment option for gMG and has the potential to significantly change the way patients are treated today. We've already made significant progress through our outreach efforts, having engaged around 75% of our top 200 hospitals since launch in September. And while we are still in the very early stages of the launch of VYVGART, we are encouraged by the positive feedback from neurologists and patients. We are seeing physicians gain experience with VYVGART and impressively nearly 70% of our top 100 MG specialists have already prescribed VYVGART to a patient. Furthermore, many are repeat prescribers and we are seeing the depth and breadth of prescribing continue to increase. We are focused on increasing awareness, providing education on the benefits of this important therapy, and building a strong support network for physicians and patients. Importantly, we are also working hard to increase patient access and we are in the negotiation process for VYVGART's inclusion on the NRDL, which would allow many more patients to be able to benefit from this therapy. We're very excited by the potential of VYVGART not just in gMG, but across a wide range of new opportunities. Earlier this year, we saw positive pivotal data in CIDP. By the end of 2023, we expect pivotal data in ITP and PV. Next year, we're expecting the approval of subcutaneous VYVGART and gMG, and we believe that being able to provide alternative dosing options, both IV and subcutaneous, is beneficial for patients and caregivers. These are just some of the near-term opportunities for VYVGART to add additional layers of growth to the franchise. Now turning to the rest of the commercial portfolio. We delivered year-over-year product revenue growth in the third quarter of 22% on a reported basis and 27% on a constant currency basis. In addition to the launch of VYVGART, ZEJULA hospital sales grew and it continued to be the leading PARP inhibitor in hospital sales for ovarian cancer in China. QINLOCK and NUZYRA continued to benefit from their inclusion in the NRDL and our team was able to expand supplemental insurance coverage for OPTUNE. Looking ahead, we will continue to focus on the execution of our strategic goals. First, we are seeking to accelerate our medicines in the market and drive revenue growth. Over the next 12 months to 18 months, we anticipate several important registrational data readouts, including for efgartigimod and Tumor Treating Fields in pancreatic cancer. We expect to initiate several important trials, including FORTITUDE-102, a trial evaluating bemarituzumab in first-line gastric cancer. Next year, we could see three or more NMPA approvals and four NDA or supplemental NDA submissions in China. Second, we are focused on driving profitability by leveraging our existing capabilities and platforms and by increasing productivity across the organization. And third, we continue to focus on expanding our pipeline through internal discovery and through regional and global collaborations. We entered into a strategic partnership with MediLink in April for a next-generation DLL3 program, which we are currently advancing to a global Phase 1 trial. We also have our topical IL-17 Humabody, which is entering global Phase 2 development. In parallel, we will continue to look for meaningful new external opportunities in strategic areas to further expand our pipeline. We are very excited by the depth and breadth of our portfolio and we are confident that our commercial organization will be able to drive significant revenue growth over the next few years. We are well positioned financially with a cash position of $822 million as of September 30, which we believe will support our business and operations until we reach profitability. And now, I'll turn the call over to Dr. Amado.

Thank you, Josh. Within oncology, our R&D teams are focused on the development of our late-stage pipeline and we have had several updates during the third quarter, which I will briefly highlight. In August, repotrectinib received its fourth Breakthrough Therapy Designation in China for the treatment of patients with advanced solid tumors that have a neurotrophic tyrosine receptor kinase or NTRK gene fusions and have progressed following treatment with tyrosine kinase inhibitors. In addition, for potential treatment of ROS1-positive non-small cell lung cancer, newly disclosed results from the registrational TRIDENT-1 study showed median duration of response of 34.1 months and median progression-free survival of 35.7 months in tyrosine kinase inhibitor-naive patients. This impressive durability has the potential to be a major differentiating factor. The National Medical Products Administration has accepted our new drug application for repotrectinib in ROS1-positive non-small cell lung cancer with priority review and we look forward to bringing this important medicine to patients in need in China as soon as feasible. Additionally, for KRAZATI or adagrasib, our partner Mirati presented two-year follow-up data from the KRYSTAL-1 study in September. In the pooled analysis, adagrasib demonstrated durable efficacy with a median overall survival of 14.1 months, up from 12.6 months previously reported and a two-year overall survival rate of 31% in patients with previously treated KRASG12C-mutated non-small cell lung cancer. Exploratory analysis suggested clinical benefit in patients with treated stable central nervous system metastases at baseline with responses noted across most baseline communications, highlighting the potential differentiation for adagrasib in KRASG12C-mutated non-small cell lung cancer. We await the results of the KRYSTAL-12 trial of adagrasib against docetaxel, which is the ongoing confirmatory Phase 3 study and which will form the basis for a submission in China in 2024. In October, our partner Seagen announced that TIVDAK demonstrated superior overall survival, progression-free survival, and objective response rate versus chemotherapy in a prespecified interim analysis of the confirmatory Phase 3 innovaTV 301 global trial in recurrent or metastatic cervical cancer patients with disease progression on or after frontline therapy. We have participated in this study and continue an extension portion in China. Moving to our internal global research and development programs regarding our DLL3 antibody-drug conjugate ZL-1310, we just submitted an IND in the US and are targeting to initiate a global Phase I study in the first quarter of 2024. Looking ahead over the next 6 months to 12 months we expect several important updates from some of our key oncology programs. As we continue to expand and advance our oncology pipeline, I am pleased to announce that Dr. Robert Brown has joined Zai Lab as the Chief Medical Officer of Oncology. Robert's impressive medical and drug development background will further strengthen our global oncology research and development team. Dr. Brown will report to me and he will provide strategic leadership and support with respect to the clinical development of our oncology pipeline. 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.

Thank you, Rafael. We have made excellent progress across our autoimmune, infectious diseases, and neuroscience therapeutic areas this last quarter. Starting with VYVGART or efgartigimod, we launched the product for its first indication in gMG in mid-September and already see significant market uptake. We're also very excited about its potential in treating patients with CIDP or chronic inflammatory demyelinating polyneuropathy. Data from the global trial we participated in showed a highly significant statistical and clinical benefit for patients, including the China subset. Indeed in September, the CDE granted Breakthrough Therapy designation for SC subcutaneous efgartigimod for the treatment of patients with CIDP. Existing treatment options are quite limited and problematic given the general reliance on long-term steroids or chronic immunoglobulin therapy. We have seen how efgartigimod subcutaneous can meaningfully improve and stabilize disease symptoms in these patients. We look forward to working with regulatory authorities in China to bring this important medicine to patients as soon as possible. We also see significant potential for efgartigimod across multiple additional indications and we will continue to work with our partner argenx on indication expansion. Turning now to KarXT. We are on track enrolling patients in the clinical bridging study to support our China registration. KarXT is the combination of xanomeline and trospium, which we are developing with our partner Karuna for acute schizophrenia. In September, Karuna submitted a new drug application to the FDA for this indication. As a new class of antipsychotic, we believe that KarXT could become an important new treatment option for schizophrenia patients in China. For Alzheimer's disease-associated psychosis or ADP, Karuna initiated the Phase 3 ADEPT clinical trial program in the third quarter and we plan to participate in these studies in Greater China next year. And now, Yajing will speak about progress with our commercial products and financial results.

Thank you, Harald. Now I will discuss our third quarter 2023 financial results compared to the prior year period. Total net product revenues for the third quarter of 2023 were $69.2 million compared to $57 million for the same period in 2022, representing year-over-year growth of 22%. On a constant currency basis, growth year-over-year was 27%. This increase was primarily driven by increased sales volumes from the launch of VYVGART and decreased negative effects from the COVID pandemic. Our revenue growth was slowed by the effects on the hospital and physician practices from the recent industry-wide anticorruption enforcement efforts in China. Our total net product revenues included $41.6 million for ZEJULA, which increased 6% from $39.2 million as ZEJULA, which is in the third year on the NRDL, continued to be the leading PARP inhibitor in hospital sales for ovarian cancer in China, $11.6 million for Optune, which increased 8% from $10.7 million supported by increased patient access to this product in the private-pay market, $5.7 million for QINLOCK, which increased from $5.5 million supported by the NRDL listing in March 2023, $5.5 million for NUZYRA, which increased from $1.5 million supported by NRDL listing in March 2023, and $4.9 million for VYVGART, which launched in September 2023. Research and development expenses were $58.8 million for the third quarter of 2023 compared to $99.5 million for the same period in 2022. This decrease was primarily due to a decrease in license fees for our licensed and collaboration agreements. Selling, general, and administrative expenses were $68.6 million for the third quarter of 2023 compared to $66.6 million for the same period in 2022. The slight increase was primarily due to higher general selling expenses to support new product launches, partially offset by a decrease in professional services fees. Zai Lab reported a net loss of $69.2 million or a loss per ordinary share of $0.07 for the third quarter of 2023 compared to a net loss of $161.2 million for the same period in 2022 or a loss per ordinary share of $0.17. This decrease in net loss was primarily due to an increase in product revenue, the decrease of licensing fees, and the shift from foreign currency loss to gain. We are in a strong financial position ending the quarter with $822.2 million in cash, cash equivalents, short-term investments, and restricted cash compared to $876.4 million as of June 30, 2023. Based on our operating plan and our anticipated revenue growth, we expect to be able to fund our business through profitability. And with that, I would now like to turn the call back over to the operator to open up the line for questions.

Thank you. We would now like to open the line for questions. The first question comes from Louise Chen from Cantor.

Hi. Congratulations on the quarter and thanks for taking my question. So I wanted to ask you on the NRDL if you've seen any efforts to promote innovation? And then also where is private insurance today or commercial insurance, and where do you think that will be over time? And then the second question, I wanted to ask you is on VYVGART and what additional indications that you plan to move forward in the near-term and what your next steps are there? Thank you.

Hi, Louise, this is Samantha Du. Very happy to answer your question. I think overall in terms of the government NRDL, we have seen they have made several serious measures to improve health in the healthcare industry, including multiple updates to the NRDL over the last two years. Recently, NRDL updates continued to support innovative medicines, especially in support of medicines to address unmet medical needs and with a reasonable pricing. Of course, how reasonable we're all going to see very soon, right? Specifically, the increased visibility and transparency on pricing, providing long-term stability of prices, so all of this gives us a more visible roadmap for subsequent price cuts for novel drugs and also drugs like ours which treat patients with unmet medical needs. That's what Zai is all about, right? On the anti-corruption, I would say, in the short term, I think that impacted the whole industry. But in the medium and long term, I think anti-corruption is a very positive force in the long run, especially for companies like Zai Lab that have innovative differentiated assets and address unmet medical needs. I'll stop here, and Louise, sorry. Thank you for asking the question.

Thanks, Samantha. It's Josh. Good morning, Louise, and thanks for the questions. I'll touch on the commercial insurance question briefly. I think this is probably an underappreciated positive also in the China market over the last few years. I think if you look back to the end of 2020, I think about 40 million people were covered through some form of supplemental or commercial insurance. By the end of 2022, that number was about 150 million. We do see, Louise, that growing to somewhere above 200 million. I mean, it's been growing this year and growing somewhere above 200 million by the middle of the decade. I think industry reports put that projection somewhere in the range of 200 million to 300 million people. Of course, that size is as big as many of the bigger Western countries, and the supplemental insurance then supports reimbursement at rates for innovative drugs that are closer to US or Western prices. So it's an important segment, and it's growing. For us, it's important. For Optune, Optune is not eligible for NRDL listing because it's categorized as a medical device now. And we've had a very good experience with supplemental insurance. We’re covered on nearly 100 different supplemental insurance plans, that's grown from 73 a year ago. And by our account, we're second only to KEYTRUDA in terms of the number of plans we're covered by. So while we think for our portfolio overall the NRDL listing is the primary focus given the important unmet needs we're addressing with our drug that Samantha referenced. The supplemental insurance market does provide an important backstop and supplemental coverage for drugs while they're in the pre-NRDL phase or for things like Optune that aren't eligible yet. So thanks for that question. I think Harald you can cover I think the question Louise, you had about the next indications for VYVGART.

Yeah. Thank you Josh, and thanks for the question. There is indeed a lineup of new indications coming up this year and next year for submission and later on obviously approval. We've already spoken about the subcutaneous formulation of efgartigimod which is in gMG not really a new indication but one with a new formulation. Following that is CIDP. It's a very important indication for us. It's a large market in China, three times larger than in the US, if I may say. And as such it is a study that has shown incredible benefit from efgartigimod treatment in a patient population that is not well served currently with only IVIg. Following that, there are two other indications, one is ITP, the thrombocytopenia indication for which you have already seen study results earlier this year with the press release from argenx. And following that, roughly at the same time, there should be pemphigus vulgaris and foliaceus. This is our third one that is coming through, and the results for ITP and the PV study are supposed to come at the end of this year. So this is our lineup. There is also one new indication that we want to start next year, which is in TED thyroid eye disease, another exciting way of showing and highlighting the efficacy of efgartigimod. And that is at least in the foreseeable future lineup. Thank you.

Thank you. Yeah. Also I just want to add quick points, Louise. And commercial insurance actually has been in discussion for a few years and this year it has to be more and more putting into agenda. But of course when it will be effective we'll see, but I think that's not somewhere that has been the nod or not been rapid. I think there is quite a strong group of people and a very influential group so trying to lobby for the benefits of patients. So I'm very hopeful for that.

Thank you.

Thank you for the questions. Next question comes from the line of Michael Yee of Jefferies. Please go ahead.

Hi, thanks for taking my question. This is someone on the line for Michael Yee. I have two questions. First, can you provide an update on the ongoing China anticorruption campaign? What are your observations there? Do you anticipate any impact during Q4 and beyond? Secondly, regarding VYVGART, you mentioned $5 million in sales within the first two weeks after the September launch. How much of that is actual demand versus inventory stocking? Also, you indicated that 70% of the top 100 specialists have already prescribed it. How would you assess the penetration in that market? Thanks.

So, Josh do you want me to take the first question or you go ahead. Why don't you go ahead?

Okay. Samantha provided some broader comments on anti-corruption, and to address the specific question about impacts for the rest of the year, we believe that focusing on anti-corruption in healthcare is beneficial for everyone involved—patients, companies, and providers, particularly for a company like ours that aims to deliver innovative drugs to meet unmet needs. However, it is clear that in Q3, this focus had an effect on prescribing patterns and healthcare utilization. We noticed this in our results, and I think other companies are experiencing similar challenges to varying extents. There have been previous initiatives in China, but the rapid rollout of this current focus, along with its general nature rather than specific details, created challenges in Q3. This resulted in fewer patients being seen and fewer procedures taking place. We also observed that healthcare practitioners who usually participated in educational events did not engage to the same extent in Q3, and sales representative access was restricted as hospitals limited entry. Fortunately, we have seen much of this start to normalize as we move into the fourth quarter. We expect and hope that by the end of this year, practices will return to normal, which is positive for the industry and for us at Zai. However, we may see some lingering effects in the fourth quarter, albeit modest, particularly concerning the VYVGART launch. Despite the challenges I mentioned, we have managed to initiate the launch and its activities quite successfully. Our sales in Q3 for VYVGART reflect only a few weeks of commercial efforts, as we received approval at the end of June and shipped product from Suzhou in early September. This was a brief period between approval and shipment, and we are proud of that accomplishment. However, those sales primarily represent initial stocking. Now that we are past the end of October, we are witnessing strong physician acceptance and patient prescribing for VYVGART. Notably, over 70% of our top 100 prescribers have already prescribed or used VYVGART for their patients, and about half of these physicians have become repeat prescribers. These launch metrics are promising and indicate good overall demand, and we expect utilization to continue into the fourth quarter along with restocking.

To the extent that there is channel inventory, we would adjust pricing in alignment with whatever the negotiated NRDL price is at the end. We have observed in previous years, based on our experience with drugs gaining NRDL access, that physicians ready to start a patient on the drug in December, knowing a listing is coming in January, may cause some delays in starts. These factors might affect fourth quarter utilization slightly, but overall, all the initial operational metrics and leading indicators are very positive for VYVGART, and we are excited about the launch of this drug.

Thank you for the questions. One moment for the next questions. Next question comes from the line of Yigal Nochomovitz from Citigroup. Please go ahead.

Hi, Samantha, Josh, and team. Thanks for taking the question. Just a few more on the VYVGART launch. Can you comment on whether these early adopters were community or academic centers, and then were the patients new to therapy for gMG or had they previously been on IVIg? And then if you could comment overall, in terms of how many patients are currently on VYVGART and what the overall prescribing account number is? I know you mentioned the 100 top accounts, but how many total prescriber accounts are you focused on in China overall? Thank you.

Thanks, Yigal. It's Josh. I'll address that as best as I can. First, regarding the accounts we are focused on, there are about 600 hospitals. Just to reiterate, there are approximately 200,000 patients diagnosed with MG in China, and around 170,000 of those have generalized Myasthenia Gravis (gMG). This is the population we are targeting. Out of the 170,000 patients, around 80% receive treatment at about 600 hospitals. This is our primary focus moving forward, as it encompasses a significant portion of our potential business. When we look at prescribers, the numbers are similar; there are about 600 prescribers that we are concentrating on, and they are also distributed among those 600 hospitals. Our efforts are very focused. Currently, we have about 80 representatives dedicated to these accounts, and we plan to increase that to about 150 after the National Reimbursement Drug List (NRDL) is finalized, which will help us reach over 80% of the prescribing market. When we refer to the top 100 hospitals or prescribers, we mean a tightly-knit group. Regarding patient numbers, we are observing positive utilization and prescribing trends among our physicians. Despite the anticorruption challenges in the third quarter, at least 75% of the top 200 hospitals we mentioned have representatives who can engage with physicians face-to-face for discussions and education. We're making solid progress. Most patients receiving efgartigimod have already undergone some treatment for gMG, a combination of IVIg, steroids, and other older therapies. Historically, we have noted that this is a well-diagnosed group, typically treated with older medications. Therefore, it’s safe to say that most patients currently using VYVGART have prior treatment experiences with gMG. Our initial patient focus is on those not responding well to existing therapies, many of whom might be in an acute phase of gMG. By definition, these individuals have previously attempted other treatment options. Thanks, Yigal.

Okay. Thanks. And then if I could just – one quick follow-up, Josh. You mentioned with respect to the inventory once you had the negotiations with NRDL that you take a pricing adjustment. But if that inventory flowed into the market before 2024, then it would reflect the NRDL price or would it not? Just – could you just clarify how that works mechanically?

Yes, it would represent – it would represent channel inventory that had been shipped in that's already in the market and we just adjust – we would adjust the price to whatever the NRDL piece is. So you've seen this with ZEJULA over the last few years when we've had a new price either as a function of an initial listing or subsequent negotiation, we look at the channel inventory and make a price adjustment for that piece. So it will be whatever – whatever is in the market at that time again, I say that just to say that is just a common effect. We'll describe that when we – if and when this happens when we report our next quarter sales. Again, though what I would say is we're seeing good patient utilization today. So we expect there's going to be a decent amount of patients who have already been on access and utilized VYVGART by the end of this year.

Thank you for the questions. One moment for the next question. Next question comes from the line of Anupam Rama from JPMorgan. Please go ahead.

Hey, guys. Thanks so much for taking my question. So on this VYVGART launch for gMG, how should we be thinking about reimbursement dynamics going into next year NRDL, self-pay any sort of private insurance contribution and how do you expect that to change over the next couple of years? Thanks so much.

Thanks, Anupam. It's, Josh. First, we're in the middle of NRDL negotiations for 2024 listing. As you recall, our big focus was to try to get an approval in the first half of 2023 so that we would be eligible to roll right into these negotiations. We're in the middle of those now so not going to comment on potential price. But if we end up with a mutually acceptable price and are able to move to a listing for NRDL for 2024, in the past that generally happens in January of the calendar year, so January of 2024. Once then that happens, that would then supersede or take out any commercial or supplemental insurance or private-pay. So, of course, that's why we're focused on making that happen because it opens up the market for the 170,000 patients, who we believe can benefit from this therapy. So I think what’s the next important milestone is to conclude that negotiation and see where we end up on price. And if that's the case, then it becomes a matter in 2024 of getting that listing and then getting that access pushed down to the 500 to 600 hospitals that are critical to our patient base and that should – based on historical experiences, that over time takes a couple of quarters to get that all the way pulled through to all the hospitals. But again, with an acceptable price and NRDL listing in 2024, we have basically open access for all of those patients who are suffering from gMG today. And of course, then that's subject to the normal every two-year negotiation, but as Samantha mentioned in the upfront question, there's been a lot of positive developments in how you renew price and go through these pieces, this is the transparency and automatic renewal piece. So we're really focused on getting a good price reflective of the value that VYVGART can bring to patients to get that for NRDL listing in 2024. And of course, we can't say much more than that at this point, but more to come there as we proceed through the negotiations.

Thank you for taking my questions. I have two questions. The first is about the full year guidance, as I recall you previously provided a revenue target of 300 million USD for this year. Considering the anticorruption disruptions and the third quarter foreign exchange impacts, how should we assess the sales target for this year, and what is a realistically achievable level? My second question is regarding the margin. Throughout the past few quarters, it has remained relatively stable, but in the third quarter, it has declined by 2% to 3% compared to both the previous year and previous quarter. I'm trying to understand if this decline is mainly due to the efgartigimod runoff. If so, how should we view the gross margin and profit margin for efgartigimod moving forward? Given that this is a new drug, there will be significant investment needed for sales, marketing, and commercialization. How should we evaluate the return on these investments, and do you have any estimates on how large the drug needs to be to become profitable? Thank you.

Thanks. I'll start with the outlook for the year and then Yajing can address the second question. During our Investor Day in June, we mentioned that the consensus for 2023 was around $300 million, and we felt comfortable with that outlook. Since then, two factors have changed. First, the full-year impact of the currency decline against the US dollar is now reflected in our Q3 results and is expected to carry into Q4. Secondly, we’ve been affected by anticorruption efforts, which I believe will primarily impact Q3, with some residual effects into Q4. If we consider these two factors, the updated consensus seems to be in the range of $270 million, which likely reflects those changes. We are focused on regaining full strength with our sales reps, promoting VYVGART adoption, and striving for ZEJULA to outperform its competitors. Overall, the dynamics we discussed during our Investor Day appear positive, although we are managing the effects of currency fluctuations. The impact from Q3 should lessen in Q4, but we will still experience a slight effect. These considerations likely place us on a reasonable long-term trajectory, while we navigate these two impacts in Q3 and Q4. Yajing can now comment on the profitability question.

Yeah. Thanks for the question. So first of all, I'm going to answer the question about the gross margin in the third quarter. So our gross margins usually get impacted by the product mix and sometimes one-time adjustment in the quarter so the timing of it. So we are going to see some variability quarter-over-quarter. So for the third quarter, it is not because of efgartigimod. So I just want to know that. And then I think we can focus on year-to-date; gross margin will be better than just picking up one quarter. And then, over the next couple of years, we are going to see a few new products launching by which is going to drive significant revenue growth. So our gross margin for the long run will continue to increase over time as the volume picks up. And coming to the specific question about efgartigimod and efgartigimod will follow the same trend, the volume is going to increase. And I think the partner and us are working on the manufacturing process that's going up to 20,000 and that will drive the unit cost very dramatically downward. So we are going to continue to see efgartigimod gross margin to increase significantly over time. And then, sales marketing efforts for efgartigimod, as Josh mentioned, is a very concentrated effort, right? We're talking about 600 hospitals, like just a limited number of the specialty physicians, so we're talking about 150 reps, not a huge scale of that. And so in my case we're very confident that we are on a trajectory to achieve the profitability very soon for efgartigimod and also for the company as a whole.

Our next question comes from Jonathan Chang at Leerink Partners. Please go ahead, Mr. Chang, your line is open. You may unmute the call now. I'm not showing any further questions at this time. I will now turn the call back to Zai Lab's CEO, Samantha Du, for her 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. Look forward to updating you again after the fourth quarter of 2023. We are very optimistic about the future of Zai Lab and we'll work hard towards achieving our end goals as we all know what they are. Operator, you may now disconnect this call.

Thank you. Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.