Zai Lab Limited (NASDAQ:ZLAB) Q2 2023 Earnings Call Transcript

Zai Lab Limited (NASDAQ:ZLAB) Q2 2023 Earnings Call Transcript August 8, 2023

Operator: Hello, ladies and gentlemen. Thank you for standing by, and welcome to Zai Lab Second 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 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.

Christine Chiou: Thank you, operator. Good morning, good evening, and welcome, to Zai Lab’s Second Quarter 2023 Earnings Call. Today’s call will be led by Dr. Samantha Du, Zai Lab’s Founder, CEO and Chair Person. 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 risk and uncertainties that may cause actual results to differ materially from what we expect due to a variety of factors including those discussed in our SEC filings. We will also refer to product revenue growth rates on a constant exchange rate basis, which is a non-GAAP financial measure. Please refer to our earnings release furnished with the SEC on August 7, 2023 for certain disclosures regarding this non-GAAP financial measures. At this time, it is my pleasure to turn the call over to Dr. Samantha Du.

Samantha Du: Thank you, Christine. Hello, everyone. Thank you all for joining us today. In the second quarter of 2023, we continue to successfully execute across our business achieving multiple key milestones. Our commercial products continue to deliver strong double-digit growth. We progressed several important late-stage and early development programs within our pipeline. Most importantly, we gained NMPA approval of VYVGART, a first-in-class therapy that has the potential to significantly transform the lives of patients living with gMG in China, and we were able to achieve this monumental milestone on June 30th, which makes us eligible for NRDL listing in 2024. Recently, we also had positive registrational data from ADHERE trial evaluating VYVGART Hytrulo in CIDP and the results were outstanding.

Later this year, we anticipate two additional registrational data readouts for VYVGART further supporting its potential as a blockbuster product. The NMPA’s approval of VYVGARTexemplifies our ability to quickly develop novel first-in-class therapies addressing significant unmet need for patients. And today, we have over 17 pivotal trials ongoing and by 2028, we expect to more than triple the number of commercial products in our portfolio. Our world-class R&D team is a key part of our success, driving our remarkable accomplishments, consistently demonstrating the impeccable ability to identify and develop drugs of global quality. This impressive track record in scale give us the confidence to bolster our global pipeline, both organically and collaboratively.

In our early research efforts, we continue to pursue targets and modalities within specific areas of oncology and autoimmune disorders. We’re focusing areas where there is opportunity for differentiation where the unmet needs are high. However, make no mistake we’ll continue to be prudent on capitalization, prioritizing, our R&D efforts and driving increased productivity across the organization by leveraging our existing infrastructure and creating synergies across our business. We expect that these listings along, with our expected revenue growth, will be allowing us to reach corporate profitability by the end of 2025. I’m also encouraged by the continued support of innovation within life science industry in China. As evidenced by the recently published NRDL renewable guidelines and other policy updates, I’m confident that with our world-class team and the strong foundation we have built, we will be able to reach new highs driven by unwavering commitment to bring innovative medicines to patients in need, to provide speed, quality, and efficiency that bring significant value to our shareholders as we deliver on our mission.

And with that, I would like to now turn the call over to Josh. Josh?

Josh Smiley: Thank you, Samantha. As Samantha mentioned, because of the proactive steps taken by our team, Zai Lab has established a good foundation for future commercial execution, and strong financial performance. Product revenues in the second quarter of 2023 grew 45% year-over-year to $69 million. This Revenue growth was 53% on a constant currency basis. Each of our commercial products had continued revenue growth. NUZYRA experienced strong volume uptake as a result of their listings on the National Reimbursement Drug List or NRDL, which became effective in March. We expect the successful NRDL inclusions will continue to drive significant sales growth for these two products in the remaining months of 2023 and beyond. ZEJULA continued to perform well, increasing 26% percent versus prior year quarter, driven by growth in the sales of PARP inhibitors in ovarian cancer and ZEJULA’s increased share of carbo sales.

For Optune, our team further improved market access by expanding supplemental insurance coverage. We expect this strong momentum for both products to continue throughout the remainder of this year. We’re also very excited to be launching our fifth approved product later this year, following the NMPA’s approval of VYVGART as the first and only FCRN blocker to treat generalized myasthenia gravis or GMG in China. There are nearly 150,000 patients in China, who have autistic choline receptor antibody positive GMG and we are thrilled to be able to provide these patients with a new treatment option that has the potential to meaningfully improve their symptoms and subsequently have a positive effect on their quality of life. Our specialized and experienced team of about 100 employees in the field are already engaging key opinion leaders and healthcare professionals and are establishing a strong network across all sites of care.

We are building brand awareness through activities and include broad-reaching campaigns and through our ongoing named patient program, which is generating initial clinical data among Chinese patients. VYVGART, which is eligible for NRDL listing in 2024 would be our fourth product on the list and we are ready for a full commercial launch later this year. Moreover, another significant milestone we achieved with VYVGART was the positive results from the registrational ADHERE study in CIDP. The safety and efficacy profile of VYVGART represents a significant advancement for patients. One that has the potential to change the treatment paradigm for those living with CIDP. Similar to the ADHERE study, Zai is also participating in two registrational studies evaluating VYVGART in pemphigus and immune thrombocytopenia where we expect data later this year.

In these four indications alone, we have a total addressable population of over 400,000 patients highlighting the significant opportunity, we have with this product. Over the next few years, we expect to further drive innovation through our expertise in research and development. We intend to do this both as a trusted partner with our demonstrating capabilities in contributing to global, high-quality, multicenter trials and through the successful execution of trials for our own assets with global rights. The strong foundation we have built, puts us in an excellent position to execute our five-year strategic plan, which we announced at our Investor Day. By the end of 2028, we expect to have over 15 commercial-stage products with at least one IND per year for global best-in-class, first-in-class assets.

Our robust portfolio is expected to drive a revenue compound annual growth rate of over 50% from 2023 to 2028. As we launch new products and indications, we will be able to leverage our infrastructure and scale to drive profitability. And we expect to be commercially profitable by the end of 2020 3 and to achieve corporate profitability by the end of 2025. And now I will turn the call over to Dr. Amado. Rafael?

Rafael Amado: Thank you, Josh. In the second quarter of 2023, Zai Labs oncology franchise continued to make progress, across all stages of development. Within oncology, our R&D team will remain properly focused on the execution of our latest product developments and we expect several important updates from some of our key programs over the next six to 12 months. Starting with VYVGART in June, we announced at the national Medical Products Administration in China has accepted our new drug application for the treatment of adult patients with locally advanced or metastatic ROS1-positive non-small cell lung cancer after granting priority review in May 2023. Repotrectinib with a potential next-generation best-in-class treatment for ROS1-positive non-small cell lung cancer in both TKI naive and pretreated patients.

We look forward to bringing this important medicine to patients in need as early as possible. For tumor treating fields, in June our partner NovoCure presented the full results of the LUNAR clinical trial evaluating TTFields in non-small cell lung cancer. The primary endpoint of median overall survival was met and a meaningful overall benefit was demonstrated when TTField therapy was added to immune checkpoint inhibitors with a median overall survival of 18.5 months versus ICIs alone of 10.8 months. TTFields therapy was well-tolerated with no added systemic toxicity. We are also participating in several other pivotal trials, including METIS in brain metastases from lung cancer, as well as PANOVA-3 in locally advanced pancreatic cancer. I look forward to these data readouts over the next year.

For Bemarituzumab, Zai Lab enrolled a first patient in the Mainland China portion with a global Phase 3 FORTITUDE-101 study which was initiated by our partner Amgen and is evaluating pembrolizumab with chemotherapy versus placebo, plus chemotheraphy in first-line gastric cancer with FGFR2b overexpression. Gastric cancer is a significant burden in China where nearly 90% of patients are HER2 negative patients and adults above 30% are FGFR2b positives. Pembrolizumab has the potential to become the standard-of-care as a first-line treatment for FGFR2b positive gastric cancer when no specific targeted therapies exists today. We are aggressive, we are on track to finish this year on the K-12 trial against – and have completed the second-line PXT study K-10, which will form the basis for the submission in these indications together with the global single arm study.

For TIFGAC, we also remain on track executing on the randomized study in cervical cancer and we will also join the global study in squamous cell carcinoma of the head and neck, plus also pivotal registration in these indications in the Greater China region. Moving to our internal global research and development programs, in July 2023, we enrolled the first patient in the global Phase 1 study for ZL-1218, an ant-CCR8 antibody in solid tumors in the United States. Regarding our DLL3ADC ZL-1310, we remain on track an expect an IND submission by the end of the year. With many potential best-in-class and first-in-class products, both in China and globally, we are very excited about our expanding oncology pipeline at Zai Lab. And now, I will turn the floor over to Dr. Harald Reinhart to discuss the progress in our autoimmune infectious diseases, and neuroscience therapeutic areas.

Harald?

Harald Reinhart: Yeah, thank you, Rafael. We have made excellent progress across our autoimmune, infectious disease and neuroscience therapeutic areas. Starting with VYVGART or efgatigamot we had several significant achievements in the second quarter. In June, we received NMPA approval for VYVGART intravenous injection for the treatment of generalized myasthenia gravis or gMG in adult patients who are acetyl choline receptor antibody positive. GMG is a chronic debilitating disease, characterized by a loss of muscle function with severe muscle weakness. In China, patients are often treated with Acetylcholinesterase inhibitors steroids immunosuppressants and IVIG, and acetyl choline esterase inhibitors and steroids used as initial therapies.

The current available treatments for gMG has limited efficacy and also show significant side-effects with a high prevalence of these diseases, coupled with the current unsatisfactory treatment options, patients are in urgent need of a safe and effective treatment option that can control symptoms faster. Furthermore, in July, we announced the NMPA’s acceptance of the biologic license applications or BLA for the subcutaneous formulation of VYVGART for gMG. Once approved, this would provide patients with increased dosing flexibility and convenience. In July, we and our partner argenx were happy to announce positive top-line results in the ADHERE study, a trial in patients with CIDP or chronic inflammatory demyelinating polyneuropathy. Before presenting the key results, I would like to provide background information on CIDP in China.

In China, the prevalence of disease is estimated at approximately 50,000 patients. The CIDP is a chronic progressive autoimmune disease that is characterized by weakness in impaired sensory function that often worsens over time. The disease is debilitating causing immobility, difficulty with walking and balance and patients are often left unable to perform simple daily tasks. Current treatment options are primarily steroids and intravenous immunoglobulin IVIG or plasma Exchange PLEX generally reserved for refractory patients. There are limitations to each of these therapies, including the well-known shortage of IVIG, as well as a significant burden associated with administration, especially for PLEX and IVIG. With long-term steroid use, adverse events become a concern, as most as patients require chronic treatment, there remains a significant unmet need for alternative treatment options that are effective, well-tolerated and convenient for patients with CIDP in China.

The ADHERE study was the largest CIDP trial ever conducted with 322 patients entering Stage 8. The enrolled patient population was representative of the real world of CIDP patience and included treatment-naïve patients off treatment for at least six months and those who have been on IVIG or steroids within the last six months. In stage 8, we saw that 67% of patients demonstrated evidence of clinical improvements and up to 78% in patients that received a full series of four doses of VYVGART. Stage B, we made our primary efficacy endpoints, demonstrating a significantly lower risk of relapse with VYVGART Hytrulo. This was a well-designed, placebo-control trial with time to first adjusted in-cap deterioration as its primary endpoint. The P value was highly significant, driven by a hazard ratio of 0.39 indicating that VYVGART Hytrulo reduces the risk of relapse by 61%.

This positive data provides strong clinical evidence that VYVGART Hytrulo meaningfully improves and stabilizes disease symptoms in CIDP patients. As in other studies, efgartigimod treatment had a favorable safety profile. WE believe with this profile, there’s a clear benefit over existing treatments. Therefore, VYVGART Hytrulo has the potential to dramatically change the treatment paradigm for CIDP in China. We also see a significant potential of efgartigimod across multiple indications. We will continue to work with our partner rgenx on indication expansion similar to the ADHERE study where Zai contributed a significant number of patients. Regarding our infectious disease portfolio, in May, our partner Entasis, now in Innoviva announced that the FDA approved drug DURAL, or Sulbactam-Durlobactam for the treatment of adults with hospital-acquired pneumonia and ventilator-associated bacterial pneumonia caused by susceptible strains of Acinetobacter baumannii.

Our NDA was accepted by the NMPA in China in February. It is now under priority review. We look forward to bringing this novel drug to China and Asia Pacific versus carbapenem-resistant or CRAB infections of frequent and often can no longer be adequately treated because of multi-drug resistance. Switching now KarXT, we initiated a clinical bridging study in China in June to support China registration. KarXT is the combination of xanomeline and trospium, which we are developing with our partner Karuna for acute schizophrenia. Karuna plans to submit a new drug application to the FDA in the third quarter of 2023 with a potential launch in the second half of 2024, if approved. KarXT could be a very important treatment option. It has a new class of medicine for schizophrenia patients in China and globally.

And now, Yajing will speak about the progress with our commercial products and financial results. Yajing?

Yajing Chen: Thank you, Harald. Now, I will discuss our second quarter 2023 financial results, compared to the prior year period. Total net product revenue for the second quarter of 2023 was $69 million, compared to $48 million for the same period in 2022, representing year-over-year growth of 45%. On a constant currency basis, growth year-over-year was 53%. The increase in net profit revenue was primarily due to increased sales volume and a decrease in negative effects on the COVID 19 pandemic. Our total net product revenue included $43 million for ZEJULA, which increased 26% year-over-year; $14 million for Optune, which increased 18% year-over-year, $7.5 million for QINLOCK, which increased from $0.6 million for the same period in 2022; and $4.6 million for NUZYRA, which increased from $1.3 million for the same period in 2022.

Research and development expenses was $77 million for the second quarter of 2023, compared to $66 million for the same period in 2022. The increase in R&D expenses was primarily due to increased research activity and clinical python advancements. Selling, general and administrative expenses were $68 million for the second quarter of 2023, compared to $63 million for the same period in 2022. The increase was primarily due to higher general and selling expenses to support new product launches. Zai Lab reported a net loss of $121 million, or a loss per ordinary a share $0.13 for the second quarter of 2023, compared to a net loss of $138 million for the same period in 2022 or a loss per ordinary share of $0.14 The decrease in net loss was primarily due to product revenue growing faster than net operating expenses.

We are in a strong financial position ending the quarter with $876 million in cash and cash, equivalents, short-term investment and the restricted cash, compared to $931 million as of March 31st 2023. Based on our operating plan and our anticipated revenue growth we expect it to be able to fund our business until we reach profitability, which is currently expected 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 line for questions. Operator?

Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Ziyi Chen from Goldman Sachs. Please ask your question Ziyi.

Ziyi Chen: Thank you for giving me the opportunity for raise the first questions. I got two questions. I think in the past two weeks in China, the anti-corruption campaign has been one of the key topic in the healthcare industry. So we try to understand a bit more about that and particularly the potential impact on Zai Labs commercial activities, including efgartigimod the launch event, because we think that’s going to be really important for not only this year, but also over the next few years. Our second question also regarding efgartigimod while the positive top-line data coming for CIDP is pretty encouraging. But we’re trying to understand a bit more about the clinical practice difference in China versus in the US and how that could potentially affect the clinical development in China and also the potential in China? Thank you.

Josh Smiley: Great. Thank you for the question. It’s Josh Smiley. I’ll take the anti-corruption question first, and it’s important. And then ask Carol to provide a little bit more color on the current clinical practice and where we see efgartigimod fitting in CIDP. But anti-corruption first, we don’t expect any impacts operationally to our commercial business or practices. In fact, I think we believe the anti-corruption focus is going to be a positive force in the healthcare industry, since it promotes high standards of care. And it’s a positive point of comparison for companies like Zai Lab. If you look at our portfolio it’s got highly innovated and differentiated products. So our commercial practice is focused on medical education.

And we believe those will be unaffected and unimpacted by any of this, any of his focus. I think as you all know, we’ve always been committed to serving the needs of patients with highly innovative first-in-class, best-in-class types of products, our commercial practices adhere to the highest standards of ethics and regulations across China. And also, one of the things that made us very attractive to global partners is our focus on commercial excellence and ethics and compliance. So, again, I think from a general standpoint we don’t see any changes or operational impact as a result of this focus and we think the more any country focuses on quality education and emphasis on differentiated products I think is a good thing long term. As it relates specifically to efgartigimod, again, our focus here with this best-in-class and first-in-class product is educating the healthcare provider community, we’ve been doing that since the approval we’re in the process of doing that.

Now, we haven’t stepped back or been impacted in any way by this emphasis. So, we don’t expect there would be any impact on the launch activities that we have planned and we have – we’ll move into a full commercial launch later this year. But, for now we’re educating physicians and providers in major cities and we’ll continue to do that. So, again, overall, we are excited about the opportunity to bring give efgartigimod to Chinese patients. We think that the emphasis that we’re seeing from anti-corruption campaign will not impact that. And in fact will help us from a differentiated perspective. I think transitioning now to CIDP, Harald, maybe you could provide a little bit more on current treatment paradigms and how VYVGART will fit.

Harald Reinhart: Yeah, thank you. The question was about clinical practice U.S. versus China from CIDP treatment. And overall the treatment is very similar. It is as we said before it usually starts with steroids, long-term steroids in those milder patients. And if this necessary the next step would be IVIG. This is by guidelines that were recently propagated in Europe and in the US and China is using a same kind of regimen. So steroids followed by IVIG based on supply, this is a treatment in these patients that is all often times required for a long, long time. And it’s just a sentence about the disease because it’s not so well understood and often spoken about. This is a chronic demyelinating disease and the progression is usually over months to years.

These patients, once they have the damage to the neurons and to the marlins feasts, they have a downhill course and having only IVIG as a resort at the current time, moment, efgartigimod really fits nicely into the treatment paradigm here. I do believe that we have a very, very underserved disease here and as such it has really high potential to be used and efgartigimod is filling the gap. Thank you so much for the question.

Josh Smiley: Thanks Harald.

Ziyi Chen: Thank you, Josh, and thank Harald. Thank you.

Operator: Thank you. Our next question comes from the line of Yigal Nochomovitz from Citi. Please ask your question Yigal.

Yigal Nochomovitz: Yeah. Hi. Thank you very much for taking the questions. Just a few specific ones on efgart and then one on finances. For VYVGART, for sure MG is there any potential to sell this product on a private pay basis in the second half of the year before you get the NDRL listing?

Josh Smiley: Hey, Yigal, it’s Josh. Yes, for sure. We are – as I mentioned, we’re in the midst of educating providers. Now, we’ll have a full commercial launch later this year and we do expect certainly expect commercial sales in the fourth quarter. Of course, we’re very excited about the opportunity to list on NRDL early in 2024. So we’ve got a lot of activity going into that preparation. But in the meantime, we will look to the private pay and supplemental insurance market for primarily the third and fourth quarter of this year.

Yigal Nochomovitz: Okay. And then, I’m not sure if I saw it, but when are you planning to file for CIDP in China and the timing to launch that?

Josh Smiley: Yeah, I’ll ask Harald to provide some comments. But will we participated in the trial and we will follow argenx at the submission. Harald if you want to add anything to that?

Harald Reinhart: No, you pretty much said, it – we will follow the path that argenx. We use for CIDP and we will file into time afterwards.

Yigal Nochomovitz: Okay. The 2024 first half filing, I think…

Harald Reinhart: That’s pretty much what we are currently anticipating. Yes.

Yigal Nochomovitz: Okay. And then, I was looking at the slides from the Analyst Day from June, and I noticed that myositis was one of the indications that’s got about a threefold higher representation in China, but it’s not part of the global Phase 3 registration. I am just wondering what the thoughts are there. It looked like potentially attractive opportunity. But it doesn’t seem to be emphasized right now.

Josh Smiley: Harald, if you want to?

Harald Reinhart: Yes. Thanks for the question. It’s indeed one of those many, many autoimmune diseases, for which efgatigamot has a wonderful way of hopefully turning around the course for patients. Myositis is like many of those indications are being considered by us, and have been considered by us. WE cannot do all of them, but we have decided instead to go with the TED or other indications, going forward. These decisions are being made with a partner and we are in constant discussions with argenx here to select the next indications if we indeed going to myositis or into Ted. So, these kinds of indications are open fields for efgatigamot treatment and we believe that we will over time, address the needs of patients in these diseases which are clearly are antibody-driven.

Yigal Nochomovitz: Okay. Thanks Harald. And then, just two very quick ones. You mentioned the IVIG shortage in China. Is that sort of a permanent feature of the landscape there? Or is that expected to resolve at some point? And then lastly on the finances, I think this is the first time you’ve reported sales on a constant currency basis if I recall, is there just a reason for the change there? And if that should we expect that that metric going forward? Thank you.

Josh Smiley: Yeah, just I think on IVIG, I think there is – it’s a perpetual challenge I think in terms of supply. Jonathan, if you want to add anything to that when I’m done here you can. But, I think then on constant currency, Yigal, it’s really just the fact that we’ve seen over the course of the last year a pretty significant depreciation relative to the US dollar and we wanted to make sure that given the fact that would report in dollars here but are translating from RMB. We just want to make sure that was clear here. So you should expect to see both going forward. We do expect some volatility in the currency and want to make sure that you get – that’s clear investors get a clear picture of the overall operational impact to the business in China as we move forward.

Yigal Nochomovitz: Okay. Thank you.

Josh Smiley: I think we can go to the next question, please Amber.

Operator: Thank you. Our next question comes from the line of Michael from Jefferies. Please ask your question, Michael.

Michael Yee: Hey guys. Good morning. Good afternoon. It’s Michael Yee from Jeffries. We had two questions. One was on efgartigimod. If you could just take a step back for us and remind us how we should think about reimbursement and pricing structure for rare orphan diseases here, I know, for example, I think if you look at – it’s a pretty low number, compared to the U.S. pricing. So just kind of walk us through the bookends on how to think about orphan pricing for efgartigimod given that there’s a potential big impact there on how to think about these sales? And then, second question is going back to ZEJULA, I know there was a little bit of a slow down here in the second quarter versus the first quarter. Could you just remind us how to think about future growth here for the next year or so? I can’t remember if I received the GSK compound make out generic? Or how to think about that if there’s any impact we should be aware of in 2024? Thank you.

Josh Smiley: Great. Thank you, Michael. And I guess, first would say that when you look at the patient populations across China for the various indications we’re pursuing with efgart it’s sort of not really all that rare. I mean, we’re looking at probably 400,000 patients across four lead indications now. And so pricing of course is going to reflect on those kind of patient volumes opportunities. I would say that we’re – as I mentioned, we’re preparing for a full commercial launch, but we do have a pre-NRDL price that’s in US dollar terms at least for gMG, when we look at cycles and otherwise it’s about $47,000 per year. So that’ll be our starting pre-NRDL price. And as we’ve been very clear with everyone with that approval by June 30th of this year, we expect to enter and be successful with NRDL negotiations for 2024.

So, I think if you look at price ranges for drugs that are highly differentiated and, first-in-class in rare conditions that bring the kind of benefits that that we believe efgart does and that the data supports, you should think about pricing on a net basis that’s it was going to be less than the launch, $47,000 price. But certainly we see a robust pricing opportunity on a relative basis in China. And of course, we’ll have more to disclose on that as we work through the negotiations for next year. I think, as we talked about at the Investor Day, given the patient volume that we’re talking about, the unmet need and the benefit that efgart can bring with first with gMG, followed by CIDP and other hopefully other indications. We definitely see a billion dollar opportunity and more for this product and we expect with an NRDL listing at a good price.

We expect to see the kind of launch uptake that you have come to expect from efgartigimod in other markets around the world. So we’re really excited about that opportunity. I think then moving on to ZEJULA, yeah, so first, we’re pleased with the performance of the ZEJULA so far this year. Current market share value, share across all indications for ZEJULA in the – is 44% given that we’re focused in ovarian and – has got broader indications. We’re clearly, the market share leader in ovarian cancer for PARP Inhibitors. Any way you cut it whether it’s by value or by number of prescription. So, we had said, we were on track to become the market share leader and we have, in fact, done that. We’ve seen really good growth in share, over the last year.

I think, in terms of growth, we – it’s not a surprise, we’ve known for a long time that Lynparza will go will face generic competition at the end of 2024. And, as you know, we’ve got a differentiated label. We’ve got all comers in first line where Lynparza has only got the BRCA mutation. So, while there will be, of course, some generic impact in second line and maybe in the more targeted first line settings we still see lots of room for growth for ZEJULA on to ‘24 and beyond. If you look at our sales today, about 60% of ZEJULA sales are in the first-line setting and penetration in the first-line for corpse is also somewhere around 60% or so. So we still got a lot of room to grow. Penetration in the first line setting where there’s great, great data, and that’s where we’d expect to see the good growth even in the face of generic competition in 2025 and beyond.

Michael Yee: Okay. Thank you. And particular in the 47,000 number. Appreciate that. Thank you guys.

Operator: Thank you. Our next question comes from the line of Anupam Rama from JP Morgan. Please ask your question Anupam.

Malcolm Kuno: Hi. Thank you for taking the questions. This is actually Malcolm Kuno on for Anupam. Just one question from us. Across your commercial portfolio, where are you seeing the most growth in terms of private pay?

Josh Smiley: Thanks, Malcolm. Yeah, I’ll ask maybe Jonathan who is on the line here to take the question on private pay. And how it’s impacting our portfolio.

Jonathan Wang: Yeah, thanks for the question. So for us the main product since the beginning of the year which is on private pay is OPTUNE. Because QINLOCK and NUZYRA entering into the NRDL as of June the 1st. So we see pretty good growth for OPTUNE. That growth is coming from an increasing KOL patient adoption that is particularly driven by the growth in supplemental health insurance. OPTUNE today is available in something like 68, 70, major cities across, China with supplemental insurance. When we started the program in early 2021 in the first half of that year, if you fast forward almost two years, so at the beginning of that we were low-single-digits, penetration with supplemental insurance. Today, we’re about 30% of our total sales. And we project that to continue to grow quite rapidly. So, you should expect continued strong growth for OPTUNE. Thank you.

Malcolm Kuno: Great. Thank you. Appreciate it.

Josh Smiley: Thanks Jonathan. Amber, next question.

Operator: Thank you. Our next question comes from the line of Jonathan Chang from Leerink Partners. Please ask your question, Jonathan.

Jonathan Chang: Hi guys. Thanks for taking the questions. Can you please confirm that Zai Lab did not participate in the INNOVATE 3 study? And if that is true, can you provide some color around that? And what does that mean for Zai Lab if the INNOVATE 3 study results positively? Thank you.

Josh Smiley: Rafael, do you want to go ahead with that one?

Rafael Amado: Yes, thank you, Jonathan for asking the question. You’re correct. Zai Lab participate on INNOVATE 3 and just as a reminder, this is a study – a survival study of TTFields plus [Indiscernible] versus paclitaxel alone in patients with platinum-resistant ovarian cancer. And it’s supposed to report soon. We did participate METIS which is a brain metastases from lung cancer study, as well as PANOVA-3 that you may have for NovoCure reported that the study is continuing to completion of survival after an DMT review. And with regards to the consequences were the study to be positive, which hopefully will be, we have options to register with an NMPA. For the indication of ovarian cancer. And the most logical way to go is to after consultation with NMPA is to do a bridging study, obviously there’s no PK study.

This is such a device as to do a bridging study and submit that together with the global package of INNOVATE-3 for approval, the equivalent of pre-market approval in the United States and in China. So, we are eagerly awaiting the results as well. And we will make the decision as we see them.

Jonathan Chang: Got it. Thank you.

Operator: Next question comes from the line of Jason Liu from Credit Suisse. Please ask your question, Jason.

Jason Liu: Two questions from my end. One on just overall kind of policy we do know that for National Reimbursement, that there had some kind of changes in rules lately, as well. So, going forward, based on some of these renewal rule updates, how does that impacts Zia’s products and products that may be up for renewal going forward? And then, second question, just on the strategic plan for five years. We’ve mentioned again that the break-even target is by 2025. So, I was wondering if there can be any more color as to how we plan to meet that target? Thanks.

Josh Smiley: Thanks, Jason, I think on NRDL, we’ve been pretty clear that the renewal policies are – I think very favorable – good transparency. It should yield lower reductions on a biannual basis. Samantha, I don’t know if you want to make any comments on NRDL or policy environment more generally? I think we have…

Samantha Du : Okay.

Josh Smiley: Okay, you got it. Okay, you got it. Okay. Thanks.

Samantha Du : I actually have – still in my background, if you cannot hear me better, I’m sorry about that. So, that yes, I think I agree with Josh. It’s actually especially in terms of we have, let’s – new indications coming in with an updated NRDL guidance will really help us to say that the price we initially developed. So there are other things like other questions raised about for the OPTUNE’s new indication. Some of them, we’ve participated, some we don’t. But just be clear, even the first approval in China and that was say some – that data was based on the US data. And so, there’s a lot of potential space on the unmet needs. We need to work with the regulator locally. So just that just few comments – quick comments. Thank you, all.

Josh Smiley: Thanks, Samantha. And Jason on your second question around the five year strategic plan and our cash position and profitability. First, we are – we are currently on track for the guidance that we gave out in June at our Investor Day which is 50% compound annual growth rate in sales from ‘23 to ’28, profitability by the end of 2025 and of course, increasing margins from there on. And I think if you look at the quarter, I think you can see the, beginnings of that 50% – greater than 50% growth in sales and good expense management. And of course, that’s the formula they’ll lead to profitability in 2025 and beyond. I think if you look at our cash position and cash burn it’s coming down to significantly. So we feel good about where we are from that perspective and I think have plenty of capacity to invest in all of our new launches that starting with efgartigimod this year continue to pursue good targeted business development opportunities.

And I think we’ve got plenty of capacity within the R&D line to finish the studies that we’re participating in now for registration and be able to bring new ones on board within that same envelope of R&D spend. I’ll ask Yajing Chen to make a couple comments, specifically about the balance sheet and cash position.

Yajing Chen : Thank you, Josh. Yes. So we are in a strong sort of position in terms of our cash flow right now. So we are at $876 million right now of cash. So the next media is the way that we are looking at sort of – again. In terms of our revenue growth, 50% in OpEx, – leverage 5 if you go down the path to profitability. Secondly, when we look at our sort of a commercial organization, there was a lot of new launches that there are a lot of synergies for us to shoot for, right? So we’re going to optimize our commercial growth in the next five years. And then, when we look into all the expenditures in R&D, right, we have 17 pivotal trials. You see slight increase in R&D expenses this year and that will continue for the next two years.

So we are going to continue to drive productivity in R&D organization. And on the other by the infrastructure, we already have a strong infrastructure right now. We don’t expect any loss in that both in the leverage side. So with all that very, very high revenue growth and much, much smaller sort of expenditure expansion. And that’s how we get to the profitability by the end of 2023.

Josh Smiley: Thank you Yajing. And thanks for the questions. I think at this point I would turn it back over to Samantha to close out the call.

Samantha Du: Sure. Operator, do you want to say something? Okay, thank you, Josh. I want to thank everyone for taking the time for joining us on the call today. We appreciate your support and look forward to updating you again after the third quarter of 2023. Operator, you may now disconnect this call.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.