Zai Lab Ltd (ZLAB) Q1 2024 Earnings Call Transcript

Hello, ladies and gentlemen. Thank you for being here, and welcome to Zai Lab's First Quarter 2024 Financial Results Conference Call. Later, we will have a question-and-answer session, and instructions will be provided at that time. 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 First Quarter 2024 Earnings Call. Today's call will be led by Dr. Samantha Du, Zai Lab's Founder, CEO and Chairperson. She'll be joined by Josh Smiley, President and Chief Operating Officer; Dr. Rafael Amado, President and Head of Global Oncology 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 Commercial 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 various 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 May 8, 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 good morning, and good evening to all who are joining us today. I'm excited to be here to share with you the results from our first quarter. But before I do so, I want to start with a few opening comments. We started Zai Lab with a vision to build a truly innovative and integrated biopharma company focused on bringing innovative medicines to drive the unmet medical needs for patients in China and around the world. We have spent the past few years building our infrastructure, capabilities, and pipeline to get us where we are today. We're in a period of robust growth driven by a late-stage pipeline of our first and best-in-class products. We're also advancing our global pipeline, where we have three assets in the clinic today, and we expect to add new China and global assets. Each year drives both internal discovery and business development. This year, we expect three new product approvals following the launch of VYVGART late last year. Over the next two to three years, we have the opportunity to launch multiple potential blockbuster products, many of which are expected to contribute significantly to our revenue, way beyond 2028. As we scale our business, we will continue to expand our operational efficiency and improve our productivity. Our first quarter results demonstrate our progress across all these areas: strong commercial execution, an increase in productivity, and pipeline progress. We expect 2024 to be a strong year for Zai Lab, and we are on track to achieve the objectives outlined in our five-year strategic plan, including significant revenue growth and achieving profitability by the end of 2025. With a strong balance sheet and a cash position of over USD 750 million, Zai Lab is in a very good position. And with that, I'll pass the call to Josh. Josh?

Thank you, Samantha, and thank you, everyone, for joining the call today. We had a good start to the year with robust revenue growth and continued advancements in our key clinical programs. Our total revenues grew 39% year-over-year to reach $87.1 million. Our commercial performance was driven by strong execution with the launch of VYVGART and uptake across our existing portfolio. ZEJULA continues to maintain its leadership position in the PARP inhibitor class for ovarian cancer. Key drivers of growth for ZEJULA remain increasing new patient penetration in first-line ovarian cancer and extending the duration of treatment for patients in the maintenance setting. QINLOCK and NUZYRA also showed solid growth, benefiting from their NRDL listings in 2023. Together, these three products collectively grew 24% year-over-year. Optune showed a recovery from slowdowns in the second half of last year, growing 49% sequentially from the fourth quarter. Now looking at VYVGART, the launch is off to an excellent start. In the first quarter alone, we estimate that nearly 2,700 new patients were treated with VYVGART. Driving the strong initial uptake is our team's ability to execute on several important launch initiatives. First, VYVGART's NRDL inclusion became effective on January 1, significantly enhancing patient access. Since this inclusion, VYVGART has been steadily added to hospital formularies, and we are making great progress in line with our expectations. Second, our targeted outreach to physicians has been very successful. We've engaged our top 1,000 hospitals, which account for 80% of the eligible patient population. Our highly specialized sales team of 150 reps is well equipped to support the launch in GMG and the upcoming launches of the subcutaneous formulation for this indication later this year and then for CIDP in 2025. Third, we are seeing high adoption from physicians. Nearly 900 healthcare professionals have now prescribed VYVGART, and this number continues to rise. Feedback from physicians and patients continues to be positive, and we are focused on providing these key stakeholders with best-in-class support. We are tracking well to exceed $70 million in sales of VYVGART this year. Our late-stage pipeline also continues to advance nicely. We anticipate several approvals this year, including repotrectinib for ROS1-positive non-small cell lung cancer, where we have seen a significant improvement in PFS versus current standards of care with CNS benefits, SUL-DUR, the first pathogen-targeted therapy addressing ABC infections, and the subcutaneous formulation of VYVGART for GMG, providing additional dosing flexibility for patients. Each of these opportunities has the potential to offer significant benefits to patients, and we look forward to launching these products in the second half of 2024. Looking ahead to next year, we may launch subcutaneous VYVGART in CIDP, followed by TIVDAK, KarXT, and bemarituzumab. Many of these potential blockbuster assets are relatively derisked given their positive pivotal data or compelling proof-of-concept results, positioning us well for future growth. Now moving on to the cost and investment side of the business. In 2024, we expect to maintain R&D expense at a similar level versus 2023 while modestly increasing sales and marketing expenses. As we enter this next phase of significant revenue growth, we remain focused on efficient operations. This includes enhancing commercial efficiency, optimizing resource allocation, and increasing productivity throughout the entire organization. We will continue to execute financial discipline and cost management, and we expect significant operating leverage as our revenue growth meaningfully outpaces that of our operating expenses. This allows us to prepare for the next phase of growth for Zai Lab as we drive both revenues and profitability. I'm also pleased to announce that Andrew Zhu has recently joined as our Chief Commercial Officer in Greater China. Andrew has more than 20 years of experience in marketing and sales management for innovative drug therapies and a proven track record of driving top-line growth and managing large teams and product portfolios with significant revenue in competitive markets. He brings rich experience in building innovative business models and resource integration, which will help us further enhance our commercial operations and drive sales and profit growth across Greater China. Overall, we continue to make great progress towards each of our three corporate objectives, which are to drive revenue growth, achieve profitability, and expand our global pipeline. We are on track to reach profitability by the end of 2025, and with a cash position of over $750 million, we expect to fund our operations and business development deals through to profitability. And with that, I will now pass the call over to Rafael to discuss the great progress within our oncology pipeline.

Thank you, Josh. Let me begin by highlighting some of the key progress updates in our oncology pipeline since our last earnings call, along with our next steps. Starting with repotrectinib, our NDA was accepted by China NMPA with priority review status for ROS1-positive non-small cell lung cancer in both TKI-naive and TKI-pretreated patients, and we expect approval in the next few months. In China, ROS1 rearrangements occur in 2% to 3% of patients with advanced non-small cell lung cancer. There is a significant unmet need for these patients given the limited durability of clinical benefits due to the emergence of resistance to approved first-generation therapies. Treatment with repotrectinib, a next-generation ROS1 and NTRK inhibitor, has been shown to result in high response rates with promising durability in patients with ROS1-positive non-small cell lung cancer, including in those with intracranial disease and in the post-first-line treatment settings, which may address the limitations of first-generation TKIs. Specifically, we've seen a directional response of 34.1 months and 14.8 months in TKI-naive and TKI-pretreated patients, respectively. With these results, we believe repotrectinib has the potential to become a new standard of care for patients with ROS1-positive non-small cell lung cancer, including those whose tumors have developed mutations conferring resistance to previous treatment with ROS1 inhibitor therapy. Next, our tumor treating field franchise. This March, our partner Novocure announced that the Phase III METIS clinical trial met its primary endpoint in patients with brain metastases from non-small cell lung cancer. Patients treated with TTFields on supportive care exhibited a median time to intracranial progression of 21.9 months compared to 11.3 months in patients treated with supportive care alone, with a statistically significant p-value of 0.01. TTFields therapy was well tolerated and was associated with sustained quality of life and neurocognitive function. Results from the METIS study will be presented at a late-breaking abstract at this year's American Society of Clinical Oncology Annual Meeting. We also expect another pivotal readout from TTFields in first-line locally advanced pancreatic cancer by the end of this year. We continue to make great progress with bemarituzumab in collaboration with Amgen in our FORTITUDE-101 and 102 studies. These studies evaluate a doublet and triplet combination, respectively, in first-line FGFR2b-positive gastric cancer with overall survival as the primary endpoint. In addition to our late-stage partner programs, we've optimized our global development capabilities and are making excellent progress with our internal global programs, three of which we have disclosed and are in clinical studies. ZL-1310 is our DLL3-targeted homogeneous DAR 8 ADC with high affinity and specificity for DLL3. It utilizes our topoisomerase 1 inhibitor payload and has shown promising preclinical data, which we presented at the European Lung Cancer Congress in Prague. The program is advancing through a global Phase I study in the United States and China for relapsed and refractory small cell lung cancer as a progression on platinum-based therapy, and we expect to expand its geographic footprint as the trial progresses. Depending on the totality of the data, we could potentially see early clinical results at the end of 2024 or early 2025. Our discovery efforts are moving at a brisk pace, and we are progressing on internally discovered product candidates. In addition, we continue to assess external opportunities across multiple modalities in focused areas of cancer biology, aiming to introduce new products in development this year as we continue to execute on our global development objective of generating at least one global IND per year. I am excited about the great progress we're making in oncology with existing and future products. I look forward to the approval and filing of novel and best-in-class oncology drugs to augment and execute our regional and global pipelines. And now I will turn the floor to Dr. Harald Reinhart to discuss the progress in our autoimmune, infectious disease, and neuroscience therapeutic areas.

Thank you, Rafael. Our neuroscience, autoimmune, and infectious diseases (NSAiID) franchise has also made significant progress in advancing our pipeline. Starting with VYVGART efgartigimod, beyond what Josh shared about the progress of GMG, our supplemental biologics license application for the subcutaneous formulation of VYVGART in CIDP was submitted to the National Medical Products Administration in China in April. There are approximately 50,000 patients diagnosed with CIDP in China, and today, only a small fraction are able to achieve remission with available care. The majority of patients remain symptomatic, and the disease can have a debilitating impact on quality of life. Existing treatments are limited and quite problematic, given the general reliance on long-term steroids or chronic immunotherapy. In China, the situation is worsened due to the persistent shortage of IVIg therapy. As mentioned, we expect the approval of subcutaneous VYVGART in GMG this year, which will provide patients with a second dosing option in addition to IV. We already know that efgartigimod has great potential across multiple additional indications. Therefore, we will continue working with our partner Argenx on indication expansion. We expect to join Argenx in the registration study of efgartigimod in thyroid eye disease (TED) in Greater China in the second half of this year. Moving to KarXT, this is a first-in-class antipsychotic, combining a centrally acting muscarinic agonist called xanomeline with a peripheral antagonist called trospium, which we are developing with our partner, Karuna (now BMS) for patients with acute schizophrenia. In April 2024, BMS presented new interim long-term data from the Phase III emergent program at the Annual Congress of the Schizophrenia International Research Society (SIRS). KarXT demonstrated statistical and clinically meaningful improvement in PANSS score and a differentiated safety profile with continued lack of weight gain, metabolic dysfunction, and extrapyramidal symptoms over a 52-week treatment period. We expect to complete enrollment in the registrational bridging study in Mainland China this year, the results of which would support our NDA filing for the treatment of schizophrenia in adults in early 2025. We have yet another substantial opportunity for KarXT as a treatment for Alzheimer's disease with psychosis (ADP). There are approximately 8 million people with Alzheimer's disease in China, and about 45% of these patients display psychotic symptoms, with no approved treatments for these patients. We will participate in the Phase III ADAPT 2 and ADAPT 3 clinical trials in ADP in Greater China, starting in mid-2024. Regarding our infectious disease portfolio, Sulbactam-Durlobactam (SUL-DUR) is a treatment for hospital-acquired and ventilator-associated bacterial pneumonia caused by Acinetobacter baumannii. Our NDA submission is under priority review with the NMPA, with potential approval later this year. In China, there are 300,000 cases of Acinetobacter infections annually, with the majority of strains being carbapenem-resistant. Patients have limited treatment options, and the mortality rate is around 43%, even with the best available therapy and care. Last but not least, ZL-1102, our IL-17 tumor body for the topical treatment of chronic plaque psoriasis, is in the final stages of preparation for a global Phase II dose-finding trial, which we intend to initiate in the second quarter of 2024. So there's plenty of progress with clinical studies and two expected regulatory approvals from our NSAiID portfolio in the near future. I look forward to providing updates at our next earnings call. And now Yajing will give an overview of our financial results.

Thank you, Harald. Now I will discuss our first quarter 2024 financial results compared to the prior year period. Total net product revenues for the first quarter of 2024 were $87.1 million compared to $62.8 million for the same period in 2023, representing year-over-year growth of 39%, or 43% on a constant currency basis. Our revenue growth was primarily driven by increased sales volumes, including from the launch of VYVGART and the decreased sales rebates to distributors resulting from price reductions in connection with the NRDL listings for certain products. Now looking at each individual product, ZEJULA's net product sales were $45.5 million, an increase of 7% year-over-year from $42.7 million for the same period in 2023, driven by increased hospital sales in first-line ovarian cancer and increased duration of treatment. VYVGART's net product sales were $13.2 million for the first quarter of 2024, following the launch in China in September 2023 and its first listing on the NRDL with pricing that took effect on January 1, 2024. Our revenue growth was driven by expanding physician and patient adoption, as well as increased patient access as VYVGART is added to hospital formularies. OPTUNE's net product sales were $12.5 million for the first quarter of 2024, which is a sequential increase of 49% from the fourth quarter of 2023, with continued recovery expected throughout 2024. QINLOCK grew 367% year-over-year to $6.1 million, and NUZYRA increased 81% to $9.9 million for the first quarter of 2024. The growth was supported by the inclusion of QINLOCK and the IV formulation of NUZYRA in the NRDL in the first quarter of 2023, as well as the inclusion of the oral formulation of NUZYRA in the first quarter of 2024. Turning now to our expenses, research and development expenses were $54.6 million in the first quarter of 2024 compared to $48.5 million for the same period in 2023. This increase was primarily driven by increased clinical trial expenses, partially offset by an increase in milestone fees for our licensed partner. Selling, general and administrative expenses grew to $69.2 million from $62.5 million for the same period in 2023. This increase was primarily driven by higher general selling expenses and headcount growth associated with the VYVGART launch. Both R&D and SG&A expenses significantly declined as a percentage of revenue in the first quarter of 2024 compared to the same period in 2023. And as just stated previously, we expect this trend to continue as a result of growing revenues and ongoing cost and efficiency initiatives. Zai Lab reported a net loss of $53.5 million in the first quarter of 2024, or a loss per ordinary share attributable to common shareholders of $0.05, compared to a loss of $49.1 million for the same period in 2023, which also had a loss per ordinary share of $0.05. We are in a strong financial position, ending the quarter with cash and cash equivalents, current restricted cash, and short-term investments of $758.8 million compared to $806.5 million as of December 31, 2023. Based on our operating plan and our anticipated revenue growth, we expect 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 up the lines for questions.

Our first question comes from Anupam Rama from JPMorgan.

For VYVGART, you noted the hospital formulary listings are sort of tracking in line with your expectations post NRDL. Can you help quantify that a little bit in terms of the number of key hospitals you're on formulary currently and the time frame in which you would expect to finish the process?

Anupam, it's Josh. Thanks for the question. We have 1,000 hospitals that we're targeting for key accounts and NRDL pull-through on the listing. Based on historical experience, it takes about a year to pull the listings all the way down to the local hospitals. Our goal has been to get at least two-thirds of those 1,000 hospitals to get the listing by the first half of this year. As of mid-May, we're well on our way to that goal.

The questions come from the line of Louise Chen from Cantor.

Congratulations on the progress this quarter. So I had a few for you. First question I had is if you could provide any more color on KarXT's regulatory status? And then any thoughts on this opportunity in light of the changing market landscape?

Harald, why don't you take the regulatory piece and then I can comment on the commercial opportunity?

Yes. Thanks for the question. The regulatory update is that we are currently executing a bridging study. This was a study discussed and designed with the agency. We are almost in the final stages of completing that study on time and hope to finish it this year, as mentioned before. So the regulatory status is that we will have a dossier eventually with good results from our bridging study, plus the dossier that was presented by Karuna last year to the FDA, which contains the large merchant studies as a backup. In addition, we have obviously the PK study which we executed in China just in order to continue the bridging program.

Hi Louise, it's Josh. I think on the commercial opportunity, we're quite excited. As I mentioned before, we see somewhere in the range of 8 million patients with schizophrenia in China. I think there's a strong emphasis on improving the care of patients with severe mental illness across China. As you know, with KarXT, based on the global data, we have strong efficacy performance and a really good safety profile of the drug. So we think this is going to be an important option for treating patients. We're excited to get through the regulatory process as Harald mentioned and begin to get this to patients as quickly as possible.

Okay. And can I just squeeze in one more question here. So on VYVGART, just curious for the sales rep. I don't know if you give quarterly guidance, but is it something of steady growth? Or would it be more back-end weighted? How should we think about modeling that?

Thanks, Louise. I think first, we're pleased with the first quarter performance. I think we're off to a good start. As you know, we said earlier in the year that, just based on what we were seeing as a function of the NRDL listing, we were confident with the sales potential for the product in 2024 to be greater than $70 million. We think we're well on track for that with the first quarter performance. Yes, in general, we'd expect to see sequential growth through the quarters. Certainly, we would expect to see more in Q4 than Q3 and so on, but not back-end loaded in terms of growth. I think we expect this to be steady. We're seeing that in the patient initiations. I think when we look at the first quarter, we had fewer patient initiations in February, but that was a function of Chinese New Year and the healthcare utilization that always happens in that month. So, looking at where we were in March, we continue to see a steady acquisition of new patients, and we would expect that to continue throughout the year. We're looking forward to continued growth quarter-over-quarter. As I say, we're comfortable with the greater than $70 million sales number. We're not going to give specific quarterly guidance, but again, we're off to a really good and exciting start.

The questions come from the line of Michael Yee from Jefferies.

We had two questions. The first is about VYVGART. I understand you expressed confidence for the year. You mentioned 2,700 patients, and if you take that number and multiply it by the price along with some compliance rate, it suggests you're already achieving a $70 million run rate. Can you confirm my calculations and whether there are additional factors I should consider, such as compliance? Or do you believe you are indeed at that run rate already, which is why you think you can exceed that figure? Please elaborate on this. The second question is about business development. You mentioned some aspects of business development and your team’s presence. Could you outline one or two priorities you have? Are you looking at a U.S. pipeline deal or a commercial deal? Would you consider a commercial deal, for instance? Please share your thoughts on this to help set some expectations.

Thanks, Mike. It's Josh. I'll address the VYVGART question and then ask Jonathan and possibly Rafael to discuss the business development aspect. Regarding VYVGART, with 2,700 patients in Q1, ongoing hospital listings, and positive uptake from physicians, I believe we are on track for the $70 million trend. As for the calculations and considering how the patients currently receiving VYVGART will progress throughout the year, it’s still early to determine what we should expect for each patient who starts. Any patients starting later in the year might not complete the full number of cycles. In markets where Argenx has launched, cycles have averaged about 5% per year. We have no reason to think this won't be true in China, but it’s still early days. Most patients are just beginning treatment now. We will have more insights to share as we move into Q2 and Q3. For now, your calculations appear solid, and we're confident we're moving in that direction. Thanks for your question, and Jonathan, could you start on the business development aspect?

Mike, thanks for the questions. On BD, I think there are two primary areas that we're focusing on. One is to continue to do what we always do, which is late-stage regional deals, China, Asia deals for derisked assets, especially if they're synergistic with our portfolio. Sometimes when things cross or overlap, we could potentially expand beyond our therapeutic area of focus. And then, we are spending a lot of time on assets that may broaden or accelerate our global ambitions. These tend to be a bit more earlier stage, so maybe less derisked, but we have a very strong scientific team. We've done deals in the past, even for regional rights where the asset was still very early stage, such as bemarituzumab, to name some examples. So we want to continue to leverage that scientific expertise and bring assets that may give us some potential global rights and fulfill those ambitions.

The questions come from Lin Hisao from Goldman Sachs.

On behalf of Zeyu's, I have two questions regarding non-small cell lung cancer. The first is about adagrasib. I recall that the previous plan was to file the NDA this year, but I don't see it mentioned in the 1Q company materials. I'm wondering if there have been any changes in plans for adagrasib and, if so, what the potential next steps for these assets would be. The second question is regarding Optune. I understand that NovoCure has completed the day 100 meeting with the FDA without an indication for an advisory panel. Can you provide more insight into Zai Lab's expectations for China approval in the second-line non-small cell lung cancer for Optune? Will that approval wait for FDA approval before filing the MAA in China?

Thanks, Rafael, why don't you go ahead and address both of those, please?

Sure. Thanks for the question. So on adagrasib, as you know, there's a single data that led to the approval of adagrasib in the United States. BMS recently announced the results of the KRYSTAL-12 trial. They announced just top-line data, which met the primary endpoint of progression-free survival, which was statistically and clinically meaningful. We are evaluating further data. BMS has announced that they are still assessing the rest of the data and they expect to present this at an upcoming congress. Of course, we need to await their evaluation as we make a decision on formulating a plan going forward. So we're essentially expecting further data as BMS looks at the totality of the data set. So that's the update on adagrasib. With regard to TTFields, you're right, they filed in December and had a productive meeting at 100 days; they don't expect an advisory committee. They're also filing in Europe and expecting to see margins as well and their negotiations in Japan. So fully sort of a global approach here to their submission. We're working closely with them, and we expect to submit ourselves on the MA in China this year based on those results. So no change in the plan with regards to our expectation to file for second-line non-small cell lung cancer this year.

Yes. Just to clarify, for the China filing, we are not necessarily required to wait for the potential FDA approval, right?

Not necessarily. We don't have to wait for the approval.

The questions come from the line of Yigal Nochomovitz from Citigroup.

Another VYVGART question. What are you hearing in the marketplace in China with regard to physicians and patients interested in waiting for the subcutaneous version before prescribing, or do not see that as an impediment? And then once the subcu is launched, do you expect an acceleration in the launch or just continued linear momentum? Also, can you talk a little bit about the market for CIDP in China? What is the current standard of care there?

It's Josh. I'll start, and then Harald, maybe you can comment a little bit on the current standard of care for CIDP. I think in terms of the IV versus subcutaneous, right now, patients go to these 1,000 hospitals that I mentioned, which cover the vast majority of patients with GMG; they go to the hospital for treatment. So right now, the IV formulation is fine. I don't think there's a wait for subcutaneous. I think we mentioned in other settings, we're targeting patients initially who are not doing well, either on standard care or in a suite of a flare or rescue episode. So they'd be coming into the hospitals for treatment anyway. The subcutaneous version still will require physician administration, so I don't think we see that as a barrier today. Certainly, we are excited about the opportunity for subcutaneous as it provides another dosing option, and it's an important formulation for all the future indications. But I don't think as it relates to GMG we expect to see a new inflection point with that approval. We are quite excited about the patient capture and opportunities we are seeing today, and are looking forward to CIDP. And Harald, maybe you could give a few comments there.

Yes. The question was about CIDP and the current standard of care treatment. Currently, there is no approved treatment for CIDP anywhere in the world. The study that was done by Argenx announced in China is really a landmark study in a way that it brings a larger patient number into a study situation and allows us to make some conclusions about treatment. The current treatment everywhere in the world is that these patients receive steroids initially, and if they progress, many end up getting IVIG; there's nothing really in between that has shown to benefit patients. The disease is actually rather progressive and much more severe than GMG, which is a shorter version of this neurologic disease. So we believe that VYVGART will have a significant role to play in CIDP. This is a totally unmet medical need situation and will have a major impact on the treatment modality and paradigms.

Okay. And then just a follow-up. It sounds like, based on your comments, Josh, the dynamics with IV versus subcu, the similar dynamics would apply for CIDP. Is that fair?

Well, CIDP will be approved in the subcutaneous version. That's how it was submitted. So I think by the time we get to CIDP, that will be the formulation for that indication.

The questions come from the line of Jonathan Chang from Leerink Partners.

First question on ZL-1310, your DLL3 ADC. Can you help set expectations for the potential dose escalation data expected end of '24 or early '25? What types of patients are being enrolled in the study? How many may have seen prior DLL3 targeting agents? And how much duration data are you hoping to have? The second question, zooming out, how are you thinking about expanding your global portfolio over time? What are the considerations here beyond the business development comments that you made earlier?

Rafael, why don't you start, and I can close out with any final comments on this question.

Yes. Jonathan, thanks for the question. As Samantha mentioned before, we have three products that are global and in the clinic at the moment, and one of them is 1310 or DLL3 ADC, which utilizes its team-winning technology that has a bystander effect. We see the problem based on preclinical results and have initiated a trial that started in the United States and expanded to China, and we're going to continue to expand the global footprint and try to accelerate those escalations. I can say that we're proceeding well through dose escalation at the moment. As we move forward, we will also, as I mentioned in the prepared remarks, be combining with checkpoint inhibitors. In terms of the patient population, they're all pre-exposed, obviously, and we will enroll some patients that have been exposed to bispecifics as well against DLL3. Those will be studied based on biology that informed us DLL3 remains expressed in patients that progress after bispecifics. We will have a wealth of data in the treatment-resistant patients in combination with ATEZO and in DLL3-naive patients as well as pre-exposed patients. In terms of how much data we will have, as you know, this is our Phase I study, and it depends on when we will achieve DLTs and when we will achieve a dose that we can then comment on the expansion of that dose and understand the full potential of the drug. So we've guided towards the end of 2024 and potentially early '25, at least with the initial data. We're very pleased with the way this program is progressing at the moment. With regards to your broader question, Jonathan made some comments about business development. Perhaps I can just complement that with the fact that we are making what I believe is good progress in discovery. We're focused on certain areas of cancer biology where we have expertise. We're nominating candidates, and our goal is to have our internal INDs coming from our laboratories at least one a year, and I'm very pleased with the progress that we're making at the moment. So thanks for the question.

We're now going to take our last question. The questions come from the line of Jack Lin from Morgan Stanley.

I have a quick question regarding VYVGART and the pipeline. Specifically, we have treated 2,700 new patients in the first quarter. Can you share what you’ve observed regarding the treatment profile, particularly the proportion of patients who were completely treatment-naive versus those who were refractory to conventional immunotherapy? Additionally, what are your expectations for the opportunities that will arise from indication expansions for VYVGART, especially with CIDP on the horizon? How do you see the qualitative comparison of these new indications in the China market compared to GMG?

Thanks, Jack. I'll start. It's Josh, and then Harald can provide some more detail and color on the question. First, as it relates to the patient profiles for the initial launch year, we are targeting as part of the broader 170,000 GMG patients who could benefit from VYVGART. We're initially targeting those who haven't responded well to current treatment. The majority of patients are those who have been treated before. The goal here is to get physicians comfortable using the product to have a good initial experience. We know from real-world experience patients who are exposed to VYVGART and haven't responded well to other treatments are going to show a good response, and we're seeing that. Of course, we'll expand the emphasis over time. But I think initially, the majority of patients are those who have already been under care and on some kind of pharmacological treatment for GMG. Regarding the market opportunity, then Harald can provide some additional comments. With all of the programs that we're participating in with Argenx, we see a very good need for VYVGART as a treatment option for many of these devastating diseases, including thyroid eye disease, and we're excited about the opportunity over time.

Yes. Very little to add here. Thank you so much for the question. The enabling expansion to other indications is something we coordinate obviously with Argenx. There is a regular interaction there as to what is a reasonable next step to take. TED is one of the things that we've announced is definitely coming to us, and we will start those programs really soon. There's discussion about other indications. We are very committed to doing a myopathy study, which includes dermatomyositis and polymyositis patients, which we believe efgartigimod is a good option for. But there are more indications that could also be entertained, and you just heard from Bristol Myers in the recent press release that they had good results in the Phase II study.

Awesome. Thanks, Harald. I think if there are no other questions, we can turn it back to Samantha.

I'm showing no further questions at this time, so I'll turn back the call to Zai Lab CEO, Samantha Du, for closing remarks. Thank you.

Yes. Thank you, operator. I want to thank everyone for taking your time to join us on this call today. We appreciate your support and look forward to updating you again after the second quarter of 2024. Operator, you may now disconnect this call.

Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you. Have a great day.