Zai Lab Ltd Q4 FY2025 Earnings Call

Hello, ladies and gentlemen. Thank you for standing by, and welcome to Zai Lab's Fourth Quarter and Full Year 2025 Financial Results Conference Call. As a reminder, today's call is being recorded. It's now my pleasure to turn the floor over to Christine Chiou, Senior Vice President of Investor Relations. Thank you. Please go ahead.

Thank you, operator. Hello, and welcome, everyone. Today's earnings call will be led by Dr. Samantha Du, Zai Lab's Founder, CEO, and Chairperson. She will be joined by Josh Smiley, President and Chief Operating Officer; Dr. Rafael Amado, President and Head of Global Research and Development; and Dr. Yajing Chen, Chief Financial Officer. Dr. Shan He, our Chief Business Officer, will also be available to answer questions during the Q&A portion of the call. As a reminder, during today's call, we will be making certain forward-looking statements based on our current expectations. These statements are subject to numerous risks and uncertainties that may cause actual results to differ materially from what we expect due to a variety of factors, including those discussed in our SEC filings. We will also refer to adjusted loss from operations, which is a non-GAAP financial measure. Please refer to our earnings release furnished with the SEC on February 26, 2026, 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.

Thanks, Christine. Good morning, and good evening, everyone. Thank you for joining us today. Zai Lab is at an important point in our evolution. We are building a company increasingly defined by global innovation, resting on a foundation supported by a commercially profitable China business and R&D infrastructure. Today, our global oncology and immunology pipeline is reaching a scale and maturity that fundamentally changes the profile of this company. We have multiple global programs advancing rapidly through the clinic and with zoci in pivotal stage. We see a clear path toward our first potential U.S. approval by 2028. Importantly, we advanced zoci from IND to global Phase III in less than 2 years, an industry-leading pace that reflects the strength of our integrated U.S. and China development model. This capability enables faster, more capital-efficient execution, is now being applied across our broader pipeline. Our China business continues to provide stability and leverage for our global R&D efforts. Despite a challenging macro and operating environment, full-year revenue grew 15% year-on-year, and our commercial profitability continues to improve. Looking ahead to 2026, our priorities are very clear. This is a year focused on execution and preparation. We expect several meaningful pipeline catalysts, including clinical data for zoci in brain metastasis, neuroendocrine carcinoma, and first-line small cell lung cancer, as well as first-in-human data from our IL-13/IL-31 receptor bispecific program in atopic dermatitis. On the regional side, we have important pivotal data readouts for large opportunities such as povetacicept in IgAN and elegrobart in thyroid eye disease, both of which enhance the durability of our China growth engine. Business development remains an important lever for us. Our presence and capabilities in China provides access to one of the world's most important fast-evolving innovation ecosystems, creating opportunities that can meaningfully strengthen and prioritize both our global and regional pipeline. Ultimately, our objective is to build a company that can make a lasting difference for patients while creating substantial value for shareholders. With that, I'll now hand the call over to Rafael, who will walk you through the progress of our R&D pipeline. Rafael?

Thank you, Samantha. 2025 was a year of significant progress for our R&D organization as we continue to build a globally competitive pipeline. Over the course of the year, we initiated a pivotal trial in oncology, advanced one additional oncology program into the clinic and moved our lead immunology asset into clinical development. With that, I'd like to walk you through our progress, starting with zoci, our potential first and best-in-class DLL3-targeting ADC and a cornerstone of Zai Lab's global oncology portfolio. In second-line and third-line small cell lung cancer, we have initiated a global registrational Phase III study, which will enroll approximately 480 patients across second-line post-platinum and third-line post-tarlatamab settings with a control arm reflecting real-world global practice, including topotecan, lurbinectedin or amrubicin. Importantly, zoci has advanced at a rapid pace, significantly faster than is typically observed for programs in this space. Based on current timelines, we anticipate a potential accelerated approval submission in 2027 and our first global approval in 2028. Clinically, zoci has demonstrated encouraging efficacy in heavily pretreated extensive-stage small cell lung cancer, including an 80% objective response rate in 10 patients with untreated brain metastases. The ability to treat both intracranial and extracranial disease without treatment interruptions represents a meaningful potential advantage for patients, and we look forward to presenting this data in the coming months. Equally important, zoci continues to stand out for its favorable safety profile with low rates of severe treatment-related adverse events. We believe this profile supports zoci's potential role as a backbone ADC in first-line combination regimens, including those that reduce chemotherapy burden. We plan to initiate a first-line pivotal trial in small cell lung cancer and to advance zoci into additional novel combination regimens before year-end. Beyond small cell lung cancer, we see a compelling opportunity for zoci in neuroendocrine carcinomas or NECs, a large underserved population with no approved DLL3-targeted therapies. Enrollment in our global Phase Ib/II is progressing very well, and we plan to present initial data this year with the goal of initiating a registration-enabling study by the year-end. Taken together, we believe zoci's differentiated efficacy and safety profiles, including activity in brain metastases, positions it to address a significant unmet need across small cell lung cancer and neuroendocrine carcinomas where the total addressable global market is estimated to exceed $9 billion. Beyond zoci, our next wave of innovative global assets continues to advance rapidly. ZL-6201, our internally discovered LRRC15-targeting ADC, received U.S. IND clearance, and the global Phase I study was quickly initiated thereafter. ZL-1222, our PD-1/IL-12 immunocytokine is progressing through IND-enabling studies and ZL-1311, a next-generation T-cell engager targeting MUC17, represents our first globally owned TCE with an IND planned by year-end. In immunology, ZL-1503 is our internally discovered IL-13/IL-31 receptor alpha bispecific antibody for atopic dermatitis designed to address both itch and inflammation with the potential for enhanced and faster onset of efficacy associated with less frequent dosing than current biologics. The global Phase I/Ib study is enrolling well, and we expect first-in-human data later this year. Now turning briefly to our key late-stage regional programs, starting with our immunology portfolio. Efgartigimod continues to expand across multiple autoimmune indications with ongoing development across a broad clinical program. Recent late-stage results support further label expansion, and additional Phase III readouts are expected this year and next with China being a valuable contributor to global enrollment. Povetacicept remains on track with an interim analysis for the global RAINIER Phase III study for IgAN planned for the first half of 2026, and enrollment is ongoing in the global pivotal OLYMPUS Phase II/III study for primary membranous nephropathy. Lastly, for elegrobart, our partner, Viridian expects to report top-line data for the global registrational REVEAL-1 study in active TED. This will be in the first quarter of 2026, followed by top-line results from the global registrational REVEAL-2 study in chronic TED in the second quarter of 2026. Elegrobart has the potential to become the first subcutaneous IGF-1R therapy approved for TED in China. Turning to our local oncology portfolio. For TIVDAK, we expect approval in China in the first half of 2026, which will build naturally on our established ZEJULA commercial platform, further deepening our leadership in women's cancers. Finally, for Tumor Treating Fields, the FDA approval for Optune Pax in locally advanced pancreatic cancer earlier this month represents an important milestone in this disease, and we will work closely with China's NMPA under the innovative medical device pathway to support an expedited review. Together, these achievements reflect the depth and quality of our pipeline, one that is advancing with speed and efficiency. And with that, I'll hand it over to Josh.

Thank you, Rafael, and hello, everyone. Before getting into quarterly performance by product, I want to briefly frame how the business progressed more broadly in 2025. During the year, we made important progress across market access, portfolio optimization, and business development. We successfully completed NRDL renewals for key products and achieved guideline updates supporting VYVGART in generalized myasthenia gravis and KarXT in schizophrenia, both of which strengthen the durability of our commercial portfolio over the long term. At the same time, we sharpened our focus by divesting noncore assets and regions, allowing us to reallocate resources toward higher priority growth opportunities and to improve operational efficiency. From a business development perspective, we maintained a highly selective and strategic approach. During the year, we entered targeted collaborations to explore novel combination strategies in first-line small cell lung cancer and strengthen our oncology platform with the addition of a MUC17/CD3 T-cell engager. Together, these actions reflect our disciplined approach to external innovation, complementing our internal pipeline while preserving financial flexibility. With that broader context, I'll now turn to our quarterly commercial performance. Fourth quarter revenues increased 17% year-over-year to $127 million, and full-year revenues grew 15% to $460 million, reflecting steady progress across our commercial portfolio. Starting with VYVGART. Physician confidence remains strong and patient demand has been stable. Fourth quarter revenues, however, reflected channel dynamics related to NRDL renewal and hospital purchasing patterns. In 2026, we expect a more measured near-term growth profile influenced by pricing dynamics and evolving competition. The long-term trajectory of the franchise remains intact, supported by clinical guideline expansion, affordability initiatives, and additional indications and formulations. Turning briefly to ZEJULA. We delivered a strong fourth quarter driven by first-line BRCA-positive new patient starts. While some variability is expected early in the year due to volume-based procurement dynamics for olaparib and seasonality, ZEJULA remains well positioned in the first-line setting. Looking ahead, KarXT represents a significant near-term growth opportunity. We expect to initiate the commercial launch in the second quarter of 2026 with a clear focus on disciplined execution, building disease awareness, establishing clinical confidence, and laying the groundwork for broader adoption. Recent inclusion in a national expert consensus on negative symptom management builds on last year's inclusion in national treatment guidelines and reinforces growing recognition of KarXT's profile. In summary, 2026 is a year focused on maintaining the strength and stability of our existing business while preparing for multiple growth opportunities ahead, including continuing to build the VYVGART franchise, executing a high-quality launch for KarXT in schizophrenia, and advancing key late-stage assets such as povetacicept in IgAN, elegrobart in TED, and TTFields in pancreatic cancer. The investments we are making across commercial and R&D today are designed to support a multiyear growth trajectory extending well beyond 2026. And with that, I will now pass the call over to Yajing to take us through our financial results. Yajing?

Thank you, Josh. Now I will discuss highlights from our fourth quarter and full-year 2025 financial results compared to the prior year period. Fourth quarter total revenue grew 17% year-over-year to $127.6 million, driven by strong contributions from XACDURO and NUZYRA. XACDURO performance reflected strong patient demand and expanding hospital adoption, though supply constraints during the year limited the full realization of underlying demand. NUZYRA continued to benefit from broader market coverage and increased penetration. Total revenues for the full year were $460.2 million, representing 15% year-over-year growth. Turning now to our expenses. Our commitment to financial discipline is reflected in improved operating leverage with both R&D and SG&A declining as a percentage of revenue year-over-year. R&D expenses for the full year declined 6%, driven by lower personnel compensation costs and increased in the fourth quarter due to fast progression of global clinical trials. SG&A expenses decreased 12% and 7% year-over-year for the fourth quarter and full year, mainly due to the reduction in general and administrative expenses because of strategic resource optimization. As a result, loss from operations improved 19% for the full year to $229.4 million and improved 25% when adjusted to exclude noncash expenses, including depreciation, amortization and share-based compensation. We maintain a strong cash position, ending the quarter with $790 million. Looking to 2026, our focus remains on strengthening the foundation of our regional business, executing across our global pipeline and thoughtful capital deployment to support both near-term launches and the long-term growth drivers. With a strong balance sheet, we are well positioned to execute against these priorities. And with that, I would now like to turn the call back over to the operator to open up lines for questions. Operator?

Our first question comes from Jonathan Chang of Leerink Partners.

First question, can you provide any color on how we should be thinking about revenues and expenses for 2026? And then second question on the global pipeline for zoci, can you remind us of the implications of the intracranial activity in patients with brain mets? And how does this impact the opportunity and positioning of the drug?

Thanks, Jonathan. It's Josh. I'll start with 2026, ask Yajing to provide a comment, and then we'll turn it over to Rafael to discuss zoci. As we consider 2026, we see strong growth opportunities for VYVGART, with good volume increases in the second half of the year expected to continue. We're satisfied with how we concluded the year with ZEJULA, and despite the current generic market for Lynparza, we anticipate maintaining our position and potentially growing. XACDURO is expected to be a positive contributor for us this year. Additionally, we have a couple of significant launches approaching, including COBENFY in the second quarter and TIVDAK later this year. Overall, we anticipate strong commercial performance and revenue growth for the year. Regarding expenses, SG&A is in good shape with only modest investments needed for launches. We'll be deploying the field sales force for COBENFY, which will incur some additional costs, but we're otherwise managing well in terms of synergies and efficiencies. R&D expenses should remain relatively stable compared to recent years, focusing resources on our global portfolio. With some of our late-phase opportunities in China coming offline, we have the capacity to handle that. So, we're looking at flat to very modest growth in R&D. This year appears straightforward, although there are factors related to approvals and market entry timing to consider. Looking ahead to 2027 and beyond, we expect to start seeing the benefits from launches like COBENFY and TIVDAK, along with the assets Rafael mentioned in his opening remarks. Yajing, do you have anything to add?

I just want to highlight that 2026 will be a transition year. The growth in underlying demand, as Josh mentioned, is certainly valid. We also need to consider various factors, such as the price adjustment for VYVGART IV and potential rebate dynamics for VYVGART and Hytrulo later in the fourth quarter. Additionally, we are observing hospital budgeting and purchasing behaviors. This is why we are not planning to provide full-year guidance at this moment, as these factors are still evolving. Once we have more clarity, we can offer more specific details later in the year.

Thanks, Yajing. Rafael, do you want to talk about zoci, please?

Yes, absolutely. So brain metastases, obviously, in this disease is a big problem. About 70% of patients develop brain metastases. And I think the speed with which patients experience responses with zoci is well appreciated among investigators and it's actually one of the key properties of the molecule. So we've reported up to 80% response rates in patients with untreated metastases. So there are 2 situations. If a patient comes in with brain metastases, oftentimes, they have to have brachytherapy or some local regional therapy, which delays systemic therapy, whereas if it's an uncomplicated untreated met, patients can go into zoci directly. And we see, again, pretty high activity in the brain. The other is there are some drugs that may have activity, but then there is a high rate of relapse in the brain where the brain is a sanctuary site. So using zoci prevents recurrences in the brain, which is really important. So we've reported in RECIST criteria before, and we're planning to report now in the first half of the year using RANO criteria, which is a response assessment that is used in neuro-oncology is a much more stringent one where it's bidimensional and uses 50% instead of 30%. So it really characterizes the responses in the brain, and we look forward to presenting that in the first half of this year.

Our next question comes from Li Watsek from Cantor.

I guess my first question is more about sort of the U.S.-China development model that you alluded to in the opening. So I just wonder, can you elaborate a little bit more, other than maybe sourcing assets from the region? I guess, how much clinical derisking or timeline acceleration can you achieve by leveraging some of the resources in the region?

Thanks, Li. It's Josh. Rafael, why don't you talk a little bit about this point to Li's question?

Sure. Our model obviously has been speedy development in China based on a pretty efficient development structure as well as regulatory and other functions in China, and that's led to the success of registrations local regionally. And now we're applying that speed, relationship with investigators, and sites to add China to global trials or to be the sole site when we want go/no-go decisions with products. So we now have all our global trials really, including China participation, and that really has allowed us to move with speed and quality. So, that will be also the case for Phase III studies. We expect that China will participate and enroll about 1/3 of the patients, at least that's our expectation, for instance, on our current pivotal trial in second-line with zoci. So I think all in all, this efficiency that we have built over the course of the past 10 years in China is serving us well as we are now expanding our pipeline towards global assets. And we are seeing the fruits of that by, for instance, zoci moving within 2 years to Phase III from IND as an example.

Okay. And then my second question is on zoci. And obviously, you guys are going to present data in neuroendocrine. So just wanted to get a little color in terms of expectations, what sort of data you guys going to present, what's good data? And in terms of regulatory pathways, can you maybe just conduct a single-arm study to get approval, maybe expand a little on that as well?

Yes. NEC is a complex group of diseases and first-line is treated with chemotherapy. There is the gastroenteropancreatic subgroup and then other neuroendocrine carcinomas that exclude lung because lung tends to have a different prognosis. And when you look across the board in second-line, chemotherapy really has dismal activity in terms of response rate and PFS. So our study has started in second-line and is looking at GEP, neuroendocrine carcinoma, non-GEP neuroendocrine carcinomas or extrapulmonary. And then there's a group that is looking at neuroendocrine tumors, which are less aggressive. So an initial data set will be presented in second-line. We are pleased with what we're seeing thus far. We will have, I think, sufficient patients to make an assessment in terms of the response. The durability may be limited, but we think that there's enough information there to present in the first half of this year. And there may be about 60-plus patients that will be included in this analysis. Like you said, we are sort of ourselves seeking a regulatory path for NEC in second-line. And this is actually the subject of regulatory discussions that we're initiating now in terms of whether a single-arm would be sufficient or whether a randomized trial would be required. It's unclear what the control arm would be in the second option, but it's still a possibility. So those discussions are beginning now as we uncover the data. And we're also thinking about what to do in frontline as well. As you know, some T-cell engagers are getting into this space, and we would probably consider something in first-line in combination, but that is standalone in the future. We want to sort of see what we can do to help patients in second-line where options are just scarce.

Our next question comes from Michael Yee of UBS.

We have 2 questions. First, just wanted to understand, given all the thoughts and comments you have talked about regarding steady revenue growth and pushes and pulls as it relates to financials this year. Does the company believe that they could achieve breakeven or profitability by the end of the year? Do you think that's something that is achievable given what we had expectations for last year? And then the second question is, obviously, zoci and DLL3 are critically important. What is the expectation for completion of enrollment and the timing of reading out the primary endpoint on response rate in order to file?

Great. Thanks, Mike. How about Yajing, you talk about the cash flow, and then we'll hand it over to Rafael.

Yes. So our corporate profitability, I mean the cash flow breakeven is definitely continue to be a very clear objective for Zai Lab. We will manage the business accordingly. Our business right now is commercially profitable today. That provides a stable foundation for the company. At the corporate level, I think the timing of the profitability is really driven by the 2 primary factors. One is the top-line growth, the rate of the growth and the other one is the level of investment that we choose to make in the high-value global programs. So I think at this time, we remain efficient, disciplined in our spending. We do expect the corporate profitability to emerge. I won't be able to share the guidance for 2026, where we're going to be, but that's definitely the goal for us to continue to drive. And also, I want to mention that we are focused on progressing towards the goal, but also focus on continue to expand our global pipeline. So we do want to preserve the flexibility to invest when we see the strong value.

Thanks, Yajing. Go ahead, Rafael.

Thanks, Josh, and thanks, Michael, for the question. So the study started in December. It's a global trial. It started in the U.S. first, and China is coming online imminently as Europe will and North America and other countries in Asia as well, Asia Pacific. Our plan is to have about 75% of the patients enrolled by the end of the year. We have to have everybody enrolled before we do the interim analysis for response. And we think that we will finish enrollment at the end of the first quarter of next year and do the analysis and subsequently file. So we're hoping for an approval in 2028. And the study, as you know, is a combination of second-line as well as post-tarlatamab patients, and we're balancing the accrual of each one of those subgroups in the study. So 2027 end of accrual and filing and 2028, hopefully, accelerated approval.

Our next question comes from Yigal Nochomovitz from Citigroup.

This is Caroline on for Yigal. Could you talk about your strategy to grow VYVGART, specifically how to increase cycles per patient?

Thank you, Caroline. We are focusing on increasing the cycles per patient to at least three, as outlined in the updated national myasthenia gravis guidelines in China from July last year. The clinical data shows that achieving five or more cycles over a year offers significant benefits, but our current priority is on reaching three cycles. We're making solid progress; in fact, we've seen over a 50% improvement in average cycles at the end of 2025 compared to 2024. However, we still have some work to do to reach that average of three cycles. To support this goal, we have key initiatives in place. Firstly, we are utilizing the guidelines through both our medical and sales professionals, which is proving to be beneficial. Guidelines have a considerable impact in China and in various other markets as well, and our approach with VYVGART has been to build the market gradually. We're encouraged by our progress and have both the clinical data and national guidelines to back us up. Additionally, we are implementing affordability initiatives because while VYVGART is listed, patients still face co-pays and out-of-pocket expenses. We have established an online support program to help patients manage their appointments and resources, as well as targeted co-pay assistance that focuses on minimizing the economic burden while helping patients reach three cycles. We’re already seeing positive outcomes from these efforts, and I anticipate that this year we'll continue to see an increase in therapy duration, with many patients in the acute phase of the disease likely to achieve three or more cycles. Furthermore, we are also targeting patients in the non-acute phase who can benefit from long-term therapy as well, although this may take a bit longer to achieve. Overall, we see substantial growth opportunities by leveraging our strengths with acute patients and gradually moving into the non-acute population. Our current initiatives are driving results, and I am optimistic about expanding our reach with VYVGART this year, helping more patients benefit from the drug through sustained therapy.

Our next question comes from Anupam Rama from JPMorgan.

On the global second, third-line DLL3 study, which is enrolling patients, you kind of talked about this, but can you remind us what the ultimate regional breakdown of sites is going to be given this is a global effort? And is there a breakdown of patients that need to be ex China, for U.S. and more global approvals?

Thanks, Anupam. I'll start, but Rafael can talk about the enrollment and how we're thinking about that. But I think first, if we look at small cell lung cancer and focus first on the U.S., I think in the second-line and later settings, we see about 15,000 patients available. First-line is probably 25,000. If we sort of look at that on a major market, Western market sort of look, that's probably 100,000 patients total in small cell lung cancer that are eligible for treatment in first or later-line settings. So it's a big opportunity. And of course, when we sort of size that and you guys have done this as well, it's approaching $10 billion probably in terms of total opportunity, and we think zoci can fit really well in that space. I think when we look at neuroendocrine, we're probably in the U.S., it's somewhere in that 5,000 to 10,000 sort of range, maybe similarly in other markets. We have more to learn here, I think, as we continue to work through the trial. But it's not insignificant, I guess, is what I would say. Rafael, maybe you can talk about enrollment.

Sure. The distribution, I think, of the countries and patients coming from China and other regions is really designed to make sure that we have enough patients post-tarlatamab that reflect real-world usage in the United States. That may be up to 30% of patients or so coming from the United States. About 30% of patients will come from China. This is a reasonable number. I don't think it's ever been questioned that a percent of patients of that magnitude can jeopardize approval in a positive study. The rest of the patients will come from Europe. in terms of post-tarlatamab patients, obviously, we count on Japan as well. We count on the U.K., some countries where a lot of studies have been done with tarlatamab. And obviously, the United States where tarlatamab is gaining market share. So I think that's probably the distribution that you should expect on the study.

Our next question comes from the line of Cui Cui of Jefferies.

I have three questions for the management team. The first is a follow-up to the JPMorgan question. Could you share more details about zoci? We are also excited to see the clinical trial design for first-line small cell lung cancer, including the combination regimen and the strategy for NEC. Will that also be advanced to first-line treatment in the future? My second question is regarding KarXT. What should we expect from KarXT in 2026 and 2027, and how do you plan to build your commercialization team moving forward? Lastly, over the past year, we've seen some deals related to autoimmune bispecifics. Can we discuss some of those?

Thanks, Cui Cui. Rafael, why don't you start and then I'll come back in with the next 2.

Yes. I will concentrate on the first-line opportunity. Our main goal is to establish zoci as the primary ADC for various therapy lines and combinations, due to its low grade 3 toxicity, activity in the brain, high response rate, and durability. In our initial study, the Phase I/II study 001, we have been enrolling first-line patients for a while. We began with a doublet using atezolizumab, then a triplet by adding carboplatin. We expect to share mature data in the latter half of this year. To give you an idea, we've treated around 60 patients and continue to monitor them. Once we assess the activity, we will decide on the design for the front-line study. Our aim is to create a design that minimizes chemotherapy. We are also considering how the front-line landscape may evolve with the potential entry of IMDELLTRA and other TCEs. If we continue to observe a high level of activity, we will experiment with other agents to determine if this combination can provide greater benefits for first-line patients. Pay attention to the upcoming data; our final design will be determined when we analyze the complete durability and activity based on what we gather from the Phase I/II study.

Thanks, Rafael. I'll talk about KarXT for a minute. We're really excited about this opportunity, which was approved without a black box in this setting, the first new mechanism in over 70 years. So there's a really exciting introduction here. We'll launch the product commercially in the second quarter. We are currently in the process of getting the product ready, including labeling and inspections. So we will have it in the market by the second quarter. Of course, we don't have NRDL listing this year due to timing, but we expect that in 2027. This year's focus will be on getting physicians experienced with the drug and establishing a commercial team. Prescribing is primarily concentrated in China. While in 2024 there will be over 2 billion days of atypical antipsychotic prescriptions, it's likely that about 800 institutions represent a significant portion of that volume, particularly for initial prescribing and monitoring. We will target those institutions at launch, and that will create around 100 additional positions for our commercial team. We're focused this year and will expand if needed, seeing this as an efficient and significant opportunity. In terms of financials, I wouldn't anticipate major sales this year since this will be a non-NRDL product for patients without commercial insurance or other payment access. However, looking ahead to 2027, referencing NRDL, branded olanzapine is about $5 a day, and paliperidone is similar. This provides a clear reference. I believe KarXT is a straightforward opportunity. Atypical antipsychotic monotherapy accounts for over 90 percent of the standard of care today. This drug offers significant additional benefits in terms of safety and negative symptoms, and we will be educating physicians on these advantages this year, gearing up for what I believe will be an exciting increase in financial value starting in 2027. Regarding business development, we've got Shan on the phone, and Rafael, we're actively exploring opportunities worldwide. Notably, considering the innovation in China, especially in oncology and immunology modalities like ADCs and T-cell engagers, we see many promising options. You can expect us to continue pursuing these. Recently, we announced a deal on MUC17, which aligns with our strategy of focusing on late preclinical targets with biological precedence, allowing us to act quickly, utilize our clinical development expertise as Rafael noted earlier, and aim to introduce first and best-in-class products in oncology and immunology globally, which we are very excited about.

We will now take the last question from Linhai Zhao from Goldman Sachs.

My question is around zoci. The first one is regarding the Phase III trial for the second-line small cell lung cancer. Understood that the current clinical protocol does not take tarlatamab as a control arm, but it was allowed to be available both as a prior treatment option and the post-progression treatment options. So on that end, I want to collect your thoughts on the potential risk of having an elongated OS for the control arm given that you're allowing tarlatamab both before and after the second-line treatment? That's the first question. And the second question is about first-line. Understood that you're going to share the Phase I trial data for both doublet and triplet in the second half. And just want to collect your detailed plans about when do you want to make a decision on what to choose from doublet versus triplet in first-line?

Go ahead, Rafael.

Thank you for your question. Let's address the second part first. We plan to initiate the Phase III study for the first-line treatment this year. While it may take time to assess durability, we might use a landmark based on the number of months patients remain without progression to make our decision. Our primary goal is to avoid chemotherapy, which is the main cause of most complications. Typically, patients can only undergo about four cycles of carboplatin/etoposide combined with a checkpoint inhibitor before they experience progression; many cannot tolerate this treatment. If we can provide more therapy using zoci alongside a checkpoint inhibitor, based on the encouraging responses observed in the second line, we should have improved outcomes in the first line. We believe we have a strong chance of achieving a positive trial, and I anticipate launching the study by the end of the year. Regarding your question about tarlatamab, patients will enter the study post-tarlatamab in both groups, but only those who have experienced progression on tarlatamab will be eligible. Some may have responded and then progressed, while others may have been initially resistant, but both groups will be balanced across each arm, with the study stratifying for those who have received tarlatamab versus those who have not. Therefore, I expect similar performance across both arms. Concerning post-progression therapies, we cannot control what treatments patients receive afterward, as some may receive tarlatamab, others may get lurbi, or different therapies. However, since it is a sufficiently large study, we anticipate that these therapies will be evenly distributed across both arms. Thus, any survival benefits tarlatamab provides should be consistent in both arms. We are not overly worried about bias, especially among post-tarlatamab patients entering the study, as they are being stratified and can only participate if they have experienced progression. I hope this adequately addresses your questions.

We have come to the end of the question-and-answer session. With that, I would like to hand the call back to Samantha Du for closing remarks.

Thank you, operator. Thanks, everyone, for taking the time to join us on the call. We appreciate all your support and look forward to updating you again after the first quarter of 2026. Operator, you may now disconnect this call.

Thank you. That concludes today's conference call. Thank you all for participating. You may now disconnect your lines.