Zai Lab Limited

Hello ladies and gentlemen, thank you for standing by and welcome to Xilab's second quarter 2021 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, today's call is being recorded. It is now my pleasure to turn the floor over to Billy Cho, Chief Financial Officer of Xilab, who will make introductory comments.

Thank you, operator. Good morning and welcome, everyone. After the market closed yesterday, Dialab issued a press release providing the details of the company's financial results for the second quarter and the June 30th to 2021, as well as product highlights and corporate updates. The press release is available in the investor relations section of the company's corporate website at ir.dialaboratory.com. Today's call will be led by Dr. Samantha Duke, Dialab's founder, chairperson, and chief executive officer. She'll be joined by Tao Fu, Chief Strategy Officer, who will provide more details on her product portfolio along with the pipeline and commercial progress. I will conclude with comments on our financial results in the quarter. Dr. Alan Sandler, President, Head of Global Development Oncology, Dr. Harold Weinhart, Chief Medical Officer for Autoimmune and Infectious Diseases, and Jonathan Wong, Head of Business Development, will also be available to answer questions during the Q&A portions of the call. As a reminder for today's call, YLAB will be making certain forward-looking statements within the meaning of the Private Securities Mitigation Reform Act of 1995, including our business plans and objectives, and timing and success of our clinical trials, regulatory applications, and commercial launches. These forward-looking statements are not guarantees of future performance, and therefore we should not put undue reliance upon them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. I refer you to our SEC filing for a discussion of risk factors that could cause our actual results to differ materially from those discussed today. At this time, it is my pleasure to turn the call over to StyleLab founder, chairperson, and chief executive officer, Dr. Samantha Dew.

Thank you, Billy. Hello, everyone, and thank you all for joining us. On this call, I'll discuss highlights from our second quarter and provide the latest updates of what we expect to accomplish for the remainder of Kindi 21. Consistent with our top-track record, satellites continue to execute with speed and quality across our organization during the second quarter. We successfully launched King Lock in China in record time. King Lock is our third commercial product in oncology to launch over the last 16 months. and the first product in what we expect to become a world-class gadget concept franchise. We continue to generate strong revenue growth from our first two products, as well as an option. We entered into three strategic collaborations with Merati, Microgenics, and Schrodinger, respectively. to further strengthen and strengthen our disease area strongholds and our global pipeline. Tao and Billy will discuss this achievement in more detail. We now have 25 globally generated assets in our pipeline, and the quality, depth, and breadth of our pipeline will continue to grow. Notably, Tao products are in late phase development, of which five have already been approved in the U.S., and three have received FDA breakthrough therapy designation. In addition, our growing pipeline now includes 11 study-based programs with worldwide rights, including three in global clinical trials. We have used a broad, innovative, validated portfolio whose success will allow us to achieve significant scale within just three years. We will continue to leverage our scale and operating excellence to expand our pipeline with globally innovative products through strategic partnerships and internal R&D. We expect to achieve many exciting milestones across our product pipeline throughout the remainder of 2021. We expect approval of our third commercial product in Zara, a community-acquired bacterial pneumonia, and approved bacterial skin and skin structure infections by the NMPA. We also continue to make progress on additional registry filings and activities, We expect to have a discussion with the NNPA on the filing strategy for S. ticumab in the near future. We anticipate numerous data results during the rest of this year for Kinglock in second lung disease, for M. ticumab in gastric cancer, for CLN081 in non-small cell lung cancer, for PPX-0022 in non-small cells and gastric cancer, and for other product candidates in our global pipeline. We continue to invest in our worldwide organization and facilities. In September, we will expand our presence in the U.S. and firmly open a clinical development and business facility in Cambridge, Massachusetts. to tap into the Boston area bell farmer ecosystem. In the meantime, our existing R&D and business center in the San Francisco Bay Area and in China will continue to grow. That life has grown substantially since our inception seven years ago. And with the abundance of growth opportunities we see, we strongly believe that we feel in the early stage of our growth trajectory. And given the current breadth and depth of our portfolio, we have decided to hold an R&D day on September 22nd to take a deep dive into our pipeline and deep-dive its run source and to highlight the fundamental growth potential drive. We hope you come away from it with a more comprehensive understanding of what we are doing and what we expect to accomplish in the future. We believe we have a once-in-a-generation opportunity to build a leading global biopharmaceutical company with a strong foundation in both China and in the U.S. Tsai has been in a great position to capture growth opportunities with our global infrastructure and ever-growing first and our back-and-closet portfolio. We remain as committed as ever to our mission to develop innovative medicines addressing the underlying medical needs of patients around the world. We believe by doing this, we'll benefit our shareholders as well. With that, I'll now ask Paul to discuss our performance and perspective in more detail. Paul?

Thank you, Samantha. I will comment on the launch performance of our three commercial products and on progress we have made in the quarter in our main disease franchises, lung cancer, gastric cancer, hematology, autoimmune disorders, and infectious diseases. So DERVA continued to perform very well in the second quarter and has achieved significant sequential revenue growth. As a reminder, Zodula is approved in China for first- and second-line ovarian cancer and is the only PARP inhibitor monotherapy approved for all comers in the first line. So this provides significant differentiation from other PARP inhibitors. The inclusion of Zodula in NRDL starting from March of this year provided a major momentum for the Zodula launch. One key leading indicator for the successful launch and NRDL implementation was hospital listings. Our team has been laser-focused on increasing hospital listings, and as of June 30, 2021, Zodula has been listed in more than 800 hospitals in China, which represents a more than seven-fold increase than just prior to the NRDL implementation in March 2021. Combined with the differentiator label, our successful market access strategy lays the foundation for strong volume growth in the second half of the year and beyond. We remain confident that over time, Cordula will become the market-leading park inhibitor in ovarian cancer in China. Similarly, the launch of Optune is going well. As a reminder, Optune is the first innovative medical device supported by commercial health insurance in China and also has been covered in 14 supplemental insurance plans since its launch in June 2020. During the second quarter, We've had extensive multidisciplinary physician education campaigns to increase grant adoption, and we were pleased with the feedback we received from treatment specialists. Importantly, on the development side, we're working with our partner, NovoCure, to extend indications of tumor-treating fields in areas of large unmet medical need globally and in China. We look forward to additional clinical data readouts in lung, pancreatic, liver, and ovarian cancers, in burn metastasis, and in glioblastoma with high intensity array over the next few years. And we continue to target a firing of tumor-treating fields for molybdenum, pleura, and epithelium later this year. As Samantha mentioned, we achieved another important commercial milestone in successfully launching KingLock in fourth-line chips in China in May, our third oncology launch in the last 16 months. KingLock is another great example of our track record of accelerating registered following and approval of innovative oncology products. we were able to file the NDA for Kinlog in China only two months after FDA approval, and we received NMPA approval eight months after NDA acceptance. In July, Kinlog was included in the Chinese Society of Clinical Oncology Guidelines for Diagnosis and Treatment of Gastrointestinal Fibroma Tumors 2021 as an option for second-line treatment for advanced GIF patients. We are encouraged by our initial launch performance and look forward to updating you with our progress through the remainder of the year. Let's move on to progress in our product pipeline, starting in lung cancer, where we continue to build a disease household with six products currently in clinical development. In June, we entered into an important strategic collaboration with Mirati and obtained the right to research, develop, manufacture, and exclusively commercialize autoglossic, a potential best-in-class small molecule KRAS G12C inhibitor in Greater China. Adagracib received FDA breakthrough therapy designation in June for the potential treatment of non-small cell lung cancer patients who harbor the KRAS G12C mutation following prior systemic therapy. I will support accelerated enrollment in key global registration-enabling clinical trials of Adagracib in KRAS G12C cancer patients, including non-small cell lung cancer and colorectal cancer. Meravi has announced their intention to file Adagracid for second-line non-small cell lung cancer in the U.S. in the second half of 2021. We believe Adagracid has emerging cost potential, and we will also aim to make it first in class in China, where there are currently no ongoing clinical trials in this product category. Autogracid is a great addition to our lung cancer franchise and complements other promising Zai products being developed for lung cancer, including tumor-treating fields with protractinib, CLN-081, and TPX-0022. For tumor-treating fields, Zai initiated the Dishina portion of the Phase III pivotal lunar trial and the Phase III pivotal metastrial in brain metastases for nine small cell lung cancers. You will recall that in May, Novacure announced that the FDA approved their IDE supplement for lunar, reducing enrollment requirements by about a half and shortening the required patient follow-up from 18 months to 12 months, potentially accelerating the completion of the trial by more than a year. So CRM081, in June, Tsai's partner, Quilinon, announced Phase I-2A interim data reminds us of lung cancer EGFR exon 20 patients. CLM081 continues to demonstrate expressing cost potential with good activity and encouraging safety and tolerability. Let's move on to gastric cancer, a Tsai disease stronghold with seven products currently in clinical development, including Kinlox and Dermal SuzyMap. As I mentioned earlier, we're actively launching PMLOC in first-line GIST, supported by the compelling data generated from the Invictus-based sleep study. In the second half of this year, our partner, Decephala, expect to receive data from the Intrude trial of PMLOC, which is significant in second-line GIST. Other gastric cancer products also made significant progress in the quarter, including BEMA. the monoclonal antibody against FGFR2B. In April 2021, science partner Amgen was granted breakthrough therapy designation by the FDA for BEMA as a first-line treatment for patients with FGFR2B over-excessing HER2-negative metastatic and locally advanced gastric and gastroesophageal junction adenocarcinoma in combination with modified Fofox. In June, Tsai's partner, TurningPoint, was granted open-vac decimation by the FDA for TPX0022 in gastric cancer, including gastroesophageal junction adenocarcinoma. In our hematology franchise, in May 2021, Tsai's partner, Regeneron, resumed enrollment in the Phase II, potentially pivotal clinical trial, or ultramexacomab, in patients with follicular lymphoma and diffuse large B-cell lymphoma. We look forward to initiating this important clinical trial in China. Since our last earnings call, we also entered into two other strategic research and development collaborations to bolster our global oncology pipeline. In June, Chi and Macrogenics announced that the two companies have entered into an exclusive collaboration and license agreement involving up to four immuno-oncology molecules. The first collaboration program covers a lead research molecule that incorporates macrogenics, the DART platform, and binds CD3 in an undisclosed target that is expressed in multiple solid tumors. The second program covers a target to be designated by macrogenics. For both molecules, Tsai receives commercial rights in Greater China, Japan, and Korea, and obtains an option to convert the lead research program into a global 50-50 profit-sharing arrangement upon achieving a predefined clinical milestone. For two additional early-stage molecules, Tsai Lab has exclusive global development and commercial rights. Earlier this month, Tsai and Schrodinger announced a global discovery, development, and commercialization collaboration focused on another target in the DNA damage response pathway, a key research interest for XyLab in oncology. Schrodinger is an industry leader in providing computational platforms using drug discovery. The research program will be conducted jointly by the two companies' scientific teams, and XyLab will have exclusive development and commercial rights globally. This initiative will complement our existing discovery efforts in DNA damage response pathway in addition to potential combinatorial approaches within our pipeline with such products as the PARP inhibitor Zegula and DO2309. In our autoimmune franchise, in July, Xilop's partner, ArgenX, announced myositis and bolus cancervoid as two new indications for afco-tigimod as its R&D day. Today, five clinical trial applications for FGAR 5 by Zai have been approved. With all of this progress, as you can see, Zai's development and commercialization operations are hitting on all cylinders. We have an abundance of growth opportunities, and we very much look forward to sharing our further progress with you throughout the year. And now, Billy will discuss our financial results in the corner. Thank you, Tom. We continue to remain in high growth mode and our financial results reflect strong progress across our business. Today, I'll briefly summarize our financial results for the second quarter as well as year-to-date 2021, which are both in line with our internal expectations. Revenues for the second quarter and year-to-date 2021 were $36.9 million and $57 million, respectively. Over the same period last year, revenues were $11 million and $19.2 million, respectively. We're still early in the revenue ramp cycle, but we are very pleased with the successful launches and sales trajectory of our first three oncology products. Dejula sales for the second quarter and year-to-date 2021 were $23.4 million and $36 million, respectively. Over the same period last year, Dejula sales were $7.5 million and $13.8 million, respectively. Opt-in sales for the second quarter and year-to-date 2021 were $9.5 million and $16.6 million, respectively. And over the same period last year, opt-in sales were $3.5 million and $5.4 million, respectively. As for our third product update, we successfully launched Kinlock on May 20th and achieved $4 million of revenue for the quarter. Research and development expenses were $142.2 million for the three-month end of June 30th, 2021. compared to $68.3 million for the same period in 2020. The increase in R&D expenses was primarily attributable to additional strategic partnerships, including a $65 million upfront payment to Mirati and a $25 million upfront payment to Macrogenics. Expenses relate to ongoing and newly initiated late-stage clinical trials, and pay and payroll-related expenses from increased R&D headcounts. Selling, general, and administrative expenses were $54.4 million for the three months ended June 30, 2021, compared to $23.8 million for the same period in 2020. The increase was primarily due to payroll and payroll-related expenses from increased commercial headcount and additional commercial activities, and Zyla continued to expand its commercial operations in China. For the three months ended June 30th, 2021, Dialog reported a net loss of $153.3 million, or a loss per share attributable to common stockholders of $1.76, compared to a net loss of $80.6 million, or a loss per share attributable to common shareholders of $1.08 for the same period in 2020. The increase in net loss was primarily attributable to additional strategic partnerships, increased R&D, and SG&A expenses for the reasons I just mentioned. As of June 30, 2021, cash and cash equivalents, short-term investments, and restricted cash totaled $1.77 billion, compared to $1.19 billion as of December 31, 2020. We would now like to turn the call back over to the operator to open up the line for questions. Operator?

Ladies and gentlemen, we will now begin the question and answer session. To ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. To cancel the request, please press the pound or hash key. And we note, we request you to ask two questions per term for time constraints. Once again, it is star 1 to ask a question. We have the first question coming from the line of Mike A. E. We have the first question coming from the line of Egan Matomovic from Citigroup. Please go ahead.

Hi, great. Thank you very much for taking the questions. So you have a very rich pipeline of in-license assets that are making their way through clinical development and now three approved products. So are you still as focused on the BD effort to bring in new assets into the company, or do you believe you have a sufficiently rich pipeline and will focus more on developing the assets that you've already got?

Thank you, Iqal. This is Samantha. Good morning. I'll let Jonathan to address the question.

Hi, Iqal. Thank you for the question. Look, I think that's right. The BD strategy always follows the company's core strategy. And, you know, this has really been evolution for us. You know, I think we've been really positioning ourselves as the plan of choice in China. So, continue to execute on bringing, you know, globally first-in-class assets into our pipeline to, you know, complement within oncology, within autoimmune, and within infectious diseases. But I think beyond that, we're also looking for transformative deals. We're also looking for, you know, opportunities to go beyond, you know, our existing therapeutic areas, just like we have done in the past, you know, with FGAR,

with the general asset, I think we continue to do that.

And I think even beyond that, like what we have done recently with the macrogenics, with the short-term reviews, you know, I think even to support discovery, you know, I think DD is always evolving, and I think it's multidimensional, you know, to support the growth of the company.

Okay, thanks, Jonathan. I just had one follow-up. So by my count, I believe you have 11 oncology products in your portfolio with two already approved. So that opens up the possibility of investigating combination strategies within your portfolio. So that being said, I'd be curious to know which products do you believe would make the most sense to evaluate in combination clinical trials and in what tumor types?

Thank you. , I'm the president of the oncology department. Please take the question.

Oh, sorry, I was on mute. Thank you for the question, and yes, this is one of the great advantages that we have here at PSI, given the large number of assets in the portfolio and additional ones forthcoming. I think that there are opportunities would exist, interestingly, in our gastric franchise and our lung franchise, I think, in particular, given the broad number of assets that we have in there and the targeted approach with which we have. So we're looking at a number of different combinations that may be associated with K-LAS, also combinations in lung and also in gastric. with the various combinations that are available, including PD-1, ARMARGE, HER2 agent, MET, et cetera. So I think that would give you a hint of some of the areas with which we're looking. Have I addressed your question?

Yes, thank you.

Thank you. Thank you. We have the next question. This is coming from the line of Mike from Jefferies. Please go ahead and ask your question. Hi. Good morning. Good evening. We have two questions. One was on the recent Schrodinger deal, but just more broadly strategically. Should we anticipate that you are going to do more deals that bring in more global rights and with an intention of developing and bringing in more internally developed R&D programs rather than an in-license of other programs, rather instead developing your own internal and to do it globally. That's question one, how should we think about that? And question two is based on a comment around expanding outside your therapeutic areas. I think you have a very strong focus on oncology, et cetera. That's pretty well known. Can you just maybe expand upon the idea to go beyond oncology and to what other areas, you know, should we expect or could anticipate so we're not surprised? Thank you so much.

Thank you, Michael. How do you want to comment on the AI and the showing the idea?

Yeah, sure, Samantha. Mike, thank you very much for your questions. So, yeah, the firmware collaboration is a pretty exciting new partnership for us. As you may know, they are the industry leader in, you know, physics-based computational chemistry platform and really have a very strongly existing track record, you know, So we had this collaboration with them, really focused on a key area of R&D interest for Xilab, the DNA damage repair pathway, on a very, you know, interesting target, which we will discuss later. So really trying to leverage the capabilities of both companies and obviously get Xilab global rights on this particular project. particular target. Yeah, so the AI area is a new promising area. We'll try to stay on the cutting edge. We're really trying to use external collaboration to complement our existing capabilities in areas such as AI discovery.

Yeah, I think just to elaborate on the target frame, the discovery technology platform collaboration like Michael you rightly mentioned, is a way for us to expand our discovery capability and to complement our existing discovery technology platforms for us to do internal global discovery and development. But we will continuously do what we have done very well, which is we see differentiation, we see medical needs, whether for China or for global. Thank you. Question number one. Go ahead. Yeah, both are important.

Makes sense, both are important. And then the idea of expanding therapeutically, could you comment on what areas could be of interest?

Yes. We actually have many opportunities, more and more inbound interest from potential partners who have really given us a lot of credit for what they have done for the partnerships And so we're actively looking, but when we expand horizontally, we want to expand with anchor access into a new therapeutic area. So that has to have, you know, such as, for example, we expand into the collaboration with Archimedes, so at the peak amount. which offers a pipeline of product kind of opportunities. So that kind of feel when we do expansion, we are looking for. That I mean horizontally, but vertically, we're always looking for more opportunities to complement our existing pipelines.

We have the next question. This is coming from the line of Seamus Fernandez from Guggenheim Securities. Please go ahead.

Oh, great. Thanks for the question. So maybe just if we could cover the dynamics, you know, around just investor questions that we've gotten and concerns that have been raised with regard to some of the volatility in shares in China and and where biotech fits strategically in terms of the Chinese government's focus on certain areas. I think, Samantha, you're uniquely well-positioned to comment on those concerns. Obviously, Zai is well outside of some of the concerns that have been raised for other companies with regard to how the company's accounting has been executed, things like that. But just maybe help us understand the importance and strategic positioning of the biotech industry in China and its importance to the continued growth and local growth in China. And then, you know, a second question, Billy, I was just hoping you could give us a sense of the, you know, potential payments that we could see to collaboration partners as it relates to milestones that we should be thinking about for 2021 and 2022, given the very robust, you know, series of pipeline opportunities. And then just one final question. Should we see a meaningful data set, particularly either lunar or one of the other major data sets come forward How are you guys thinking about manufacturing capabilities with your partner, Novacure, in the context of CTF, and how do you hope to address that? Thanks so much.

Thank you, Seamus. The first question is, you asked me to speak about this sector, and actually we do agree. We have seen lots of volatility in the market. a long time of companies listed on the net back. And so we have done quite a lot of developments myself also. And I was sometimes with different agencies to discuss with them what they mean to wildlife. And also, of course, wildlife companies like wildlife. So we, from our due diligence, of course, from our underfunding, and I'm not sure we are representing any government body, but we believe that the actions that cause the recent market volatility are unrelated to price particular business. And also a recent event, including the Chinese government continues to support an innovative biotech industry. For example, the new CBE traffic guideline issued on July 2nd on quality drugs, with the bar for innovation through drug development. And they actually are very helpful for companies really focusing on differentiating first or second class product portfolios instead of focusing on doing maybe two or maybe more words. And he also recently reviewed the ACH Guideline membership status, which shows their continued strong commitment to harmonization, global harmonization. And also, quite honestly, other sectors are already very heavily regulated. But if you're looking at the 14th time of the economic five-year plan, biotech sector is considered one with a very strong support of the industry. And the focus really is on innovation and promote integration and innovation with biotech and accelerate the biotype and biopharmaceutical and reduce the, you know, in China and the innovation capability from the fundamental side. And so from all the activities we involved, also including some minor details like, you know, for these sectors, first they are piloting tax reduction plans in Shanghai, Pudong, and Beijing. So there are many positive news. Of course, those are only perhaps not hidden to the public. But what we have seen so far, we're very confident on Xilat's fundamental growth. So, Peter, do you want to address the second question?

Yeah, sure. Hey, Seamus, I think I still have that second and third question. So the question related to upcoming milestone type of payment, as you know, Seamus, we don't give guidance, forward-looking guidance on those figures, but rest assured it's a material compared to, let's say, the upfront portion or the actual royalty that kick in after the commercialization. So you would have seen some disclosures along the way. I know that Turning Point announced yesterday, and they did disclose, you know, we made a $5 million payment because we achieved a certain development milestone. And, you know, you can expect something kind of along that zip code when we have a notable sort of development or regulatory milestone achieved. But, you know, you can kind of get a sense, right, Seamus, that in terms of materiality, it's quite limited compared to the upfront royalty. which is at the one time up front and then at the back end. In terms of your question on sort of the, you know, kind of racking up volume and what that means in terms of manufacturing capabilities for tumor-treating fields, and I'll let Tao add any additional comments, but, yeah, I mean, you're right. Your observation is right in that if Lunar trial is successful with final phase-treat data out next year, you know, we're talking about different levels of scale. And are there opportunities to drive operating leverage at that volume, at that scale, especially, you know, China scale? And these are the questions that we've been having these discussions with our partners.

Thank you. Okay, thank you. We have the next question. We have the next question from the line of Anupam Rama from JPM. Please go ahead.

Hey, guys. Thanks so much for taking the question. A couple of broader macro questions following up on the last question, but specifically there's been a lot of headlines on sort of Chinese regulators' proposed rules on oncology trials. Maybe you can talk about what the implications for development here are in the region for your broader pipeline. And then, Samantha, dig me into your comments a little bit more on the PCAOB auditing and sort of what's going on in China there. You guys have PCAOB not reviewing your financials as a 10K sort of risk. How are you strategically thinking about this situation and kind of addressing it over the long term? Thanks so much.

First, though, Amazon, thank you for the question. So you're asking about to elaborate on the July 2nd guideline? Is that the first question?

On the oncology proposed, yeah.

Right, right. Okay, so as I mentioned earlier, we think that guidance for industry, first of all, it's still guidance for soliciting industry's input. we really think that they're going to leave the bar for innovation for oncology development. And as we all know, China has many, many PD-1s, and PD-1s like the bioclimator, the tools may not work, right? And I think it's from many angles. It's not only you not really be responsible. If people continue to support it, that really means it doesn't... it's not helpful for patients who already should have been exposed to the approved, many approved products, including instead of exposed to the placebo arm. And secondly, you know, so what we are really trying to emphasize is actually closer to FDA standard oncology, which is you, number one, you have to show differentiation to address unlike medical needs. And secondly, if there are already growth vendors established, will you need to do comparative studies instead of consumer trials? I think that's the fundamental on that particular guideline. So that fits very well with Freelife's strategy, the model pipeline. And from day one, we evaluate internally or externally to develop products. That's how we use the global funder. to say whether it shows first class or, you know, following class, right, other criteria. And in terms of you asked also perhaps about the overall, the country's future, right, about the government issue, the rules, the policies, and again, both really have a lot to do with the overall government China's role over the last 40 years. They also want to balance different industries and how to control the government, how to be, you know, anti-monopoly and how to balance the population which We see when the educational sector has to provide the equal opportunities to 1.4 billion populations. Having said that, those are not our area of expertise. Honestly, those have been in debate for a long time, and I'm a little bit surprised, actually, the market reacted with that kind of activity because This has not been as new. This has been long debated, even since 2018. And overall, we believe we are very well positioned for the future generation of biopharmaceutical companies to have time exposure, but also continually expanding in the U.S., continuously instead of just China for China, but we do China for global and global for global. Those directions we're taking, I think, go on a very positive trajectory, especially for companies that already are dry life size. We believe that this gives us a strong opportunity to continue to see growth and a strong growth from dry life. Did you want to comment on anything else?

Yeah, sure. Thanks, Samantha. Anna Palm, you asked about PCAOB, so I'm just going to mention two quick broad points. First, just want to, as you know, remind everyone here that we are a 100% privately owned enterprise with a very simple legal structure, no VIE, never have, never will. And our financial reporting has historically been and continues to be on a U.S. GAAP basis. and in accordance with PCAOB standards. As a domestic issuer now, which is why we're having a quarterly call with quarterly filings, we have also completed a full stock filing historically as well and ongoing. And the second broad point is that, you know, where of course we have same with the infrastructure in China, but we do have eight offices around the world. And we're making investments in the U.S. as well. And that, I guess, without going through details, I can make the statement that we do plan to have options available to us to significantly limit the risk that's been, you know, publicly kind of published so far. And you can also look towards our 10Q, our filings for additional info on those. But thanks for your question.

Thank you. We have our next question. This is coming from Jonathan Chang from . Hi, guys.

Thanks for taking my questions. First question, are there certain subsectors or spaces within Chinese biopharma that could be more or less vulnerable to changes in the regulatory landscape in the future?

Well, I think of companies like Dry Life, as I said, focusing on innovation, focusing on bringing magnetic needs to patients and for patients globally. I personally believe we are in the best sector in dialysis.

Got it. And maybe just a second question. Can you provide any additional color around how investors should be thinking about second-half revenues? You know, maybe specific to the Jula. Are there additional metrics you can provide to give us a sense of how the Jula is performing relative to competitor programs? Thank you.

Yeah, sure. So... Thanks, Jonathan. We're obviously, you know, quite pleased with the sales momentum that we're seeing so far year-to-date. We saw a nice volume uptake and market share gains. Our NRDO implementation, while early, is off to a fast start, and you saw our press release citing that, you know, starting from the implementation date of March 1st until the end of June, we actually increased the number of hospital listings over 7X. or about seven-fold, which is actually closer to kind of more close to 850 than 800. So, you know, we're quite happy with the implementation going so far and look forward to, of course, you know, kind of building on the momentum for the back half of the year as well. And we're pretty confident. We're actually very confident, you know, that we will hit our internal goals. So, Jonathan, we're not yet giving kind of full-year sales guidance just yet. But, you know, you can see some statistics that we shared around hospital listings. Our hospital coverage is also expanding as well, and now we have over 2,000 hospitals in our coverage.

Got it. Thanks for taking the questions.

We have the next question. This is coming from V. Chen from Goldman Sachs. Please go ahead.

Sure, thank you. Thank you for giving me the opportunity to raise questions. I looked at the pipeline. Actually, this time we have specifically left out the internal R&D pipeline, which now we counted about, you know, 13 projects in target identification and about 10 projects in the range of lead optimization to Phase I studies. So a couple questions regarding the in-house discovery strategy. Number one is SciLab teamed up with a couple of AR companies, actually. It's not only Schrodinger, but back in March, I see there's a collaboration also with AlphaMap. So I'm trying to understand a bit more about in terms of building the in-house pipeline, will external cooperation on the discovery side will be one of the major drivers, or still you are building up a pretty strong in-house team. You know, if we can know the number, you know, how big the discovery team is now within Xilab. And particularly, I think, in terms of the pipeline covering the oncology autoimmune But in terms of a target selection, so is there any specific strategy you're going to be following in terms of picking the right target to work on? My second question is still trying to get a sense on the POP competitions, particularly Towards the end of this year, I think that I would have a very good chance to get into an RDI for the first-line indication. But at the same time, we start to see, you know, some of the local competitors, including Honorary Medicine, Beijing, they are also being pretty aggressive in terms of marketing for their products. But, of course, it's a third-line indication instead of a second-line, first-line. And based on our track, you know, in the second quarter, well, first half this year, probably is that I've already got about 25% to 30% market share in the apartment market. So if you guys get a first-line indication, what kind of market share should we be looking at in two to three years' time? Thank you.

Thank you, Jimmy. We'll start with our first question related to our e-health discovery. I think as you can see, we're in the least reduced. We announced our pipeline, our internal discovery pipeline with global rights. And so I'd just like to remind the audience, this is a seven-year-old company. And we, five years, we invest in internal discovery, increasingly investing in internal discovery with our e-house platforms. But as well as the expansion of, like we talked about earlier, by specific platforms. We talked about working with Schrodinger's and other universities which we did not really feel it's material enough to expand or to elaborate. But having said that, what I'm trying to say is I'm very pleased with five years in terms of discovery efforts. We started with a very small team in Shanghai. Now the team is expanding not only in Shanghai, but in Shenzhen, in the San Francisco Bay Area. We're also going to very soon announce our opening of Boston, Boston, Cambridge, and Massachusetts sites. and more focused on global development and also focusing on business, all kinds of business activities. So that's, I think, the first thing I want to say. Secondly, I think we are no longer working within the world for R and for D, because we are in a different phase of development. There are constantly technologies which we, as a one company, cannot handle all. And so with that, we understand we need to collaborate. We need to collaborate with companies that have data capabilities, so companies have strong computational chemistry capabilities, Or, you know, companies have shown by specific platforms which complement what we don't have, which doesn't mean we will not continue to add internally other types of platforms. And all of this, I am saying, going forward, you will continue to see we have more and more collaborations, some with us. That means some with... and that they're a mature company. But our intention is not to say we do not want to continue our licensing model. What works, we're not going to fix it. We'll continue to bring in, you know, continue as we accelerate internal discovery. We'll also continue to look for the best and, you know, first-in-class, to complement not only for our China rights pipeline but also global pipeline. And ThriveLive now is in this scale. We have the capacity to have the people. And I think this is where we're going. So in terms of specific targets and those details, hopefully we can, because of the time of the day, we can bring this on the side there, or we can talk about this in the upcoming R&D day. Thank you, Gene. And Billy, you want to address the question regarding this?

Yeah, so I'll take your second question about the Jula in relation to NRBL and some competition that you referenced in Hungary and other domestic companies. So just to reiterate, the Jula is the only PARP approved for all comers in the first-line setting. It is a once-daily model therapy, excellent safety profile, and has the ability to cross the blood-brain barrier. and we already have it in the second line for NRDL. And we actually believe that it's already been positioned as the best-in-class pod for all the varying kinds of patients. So, you know, I'd also like to kind of you also mentioned that next year with first-line, you know, volume taking off potentially, you know, what does it look like in terms of market share? You know, while we don't give guidance, I know you've heard us, you know, historically say that we're confident that we can be the market share leader. and we stick by that. I'd also like to point you towards some ex-China statistics. In the U.S. right now, you know, the July has a 51% market share at first line, and in Japan they have 68% market share. So, you know, again, we're not keeping an exact, you know, kind of percentage for China, but we have a very robust strategy on how to firmly establish markets Zedula as the best-in-class PARC inhibitor, and we're making very good progress toward that end. And also on NRDL, for first-line ovarian cancer, it is eligible for negotiation this year. And actually at the end of July, the NHSA published a review list, right, for the drugs that are eligible for NRDL negotiation, and Zedula is included. So we'll leave it at that. Thank you for your question.

Yeah, I think that to me also you correctly came to that. Were the only O'Connor first-line mental therapy approved in China and eligible for an idea of inclusion for next year?

Yeah, sure. Thank you so much for having me, Billy.

Thank you. The next question comes from . Please go ahead.

Thanks, and congrats management for the nice commercial progress in China in the second quarter. I have two questions. First is tumor-treating field competitive for landscape in China. So in the last year, we are starting to see a few China, domestic China companies starting conducting their tumor-treating field device clinical trial in China. And potentially in the next few years, we're going to see clinical data from those studies. So I just want to have a management comment on competitive landscape in the long term in terms of tumor-treating field device in China. That's my first question.

Yeah, I think that's a good question you're asking. And first of all, as you correctly mentioned, it's a local company, still in clinical development stage, and they still focus on the very narrow indication. and which we do not know how the results will come out, and that's in the next couple of years we'll see. So it's too early for us to say whether there is any competition because we're also expanding, and as you see, we have many other indications, large trials ongoing. and from already a path phase two going into phase three, those are a lot of indications. So we are very comfortable at this stage with our own data, and even if there are any drugs, we welcome any treatment options. I'm sure if it's proven to be successful, there are going to be people who want to come up. But whether it's Me Too or Me Now Worse, or whether it's even qualified Me Now Worse, we'll see. And whether it's, by then, pride will have very strong footprint in the areas we are in. We have very strong confidence in this particular opportunity. And we've been working on opportunity ever since, well, We licensed. We got very quick approval. We got into the clinical guidance. So basically, doctors put this already into the treatment guidelines. So we'll see, but we are very optimistic.

Great. Thanks for that, Carla. And my second question is about our So I noticed in our press release we did not mention our kind of clinical plan for KRAS. We just licensed it from . So can you comment on that?

Andy, do you want to comment there? Sure. Thanks, Samantha, and thanks for the question.

A couple of comments. One, we're extremely excited, as I, to be partnering with Muradi on this very interesting and wonderful molecule in KRAS. And as a former thoracic oncologist, having spent over 20 years trying to come up with something for KRAS, this is extremely, extremely exciting. We had the opportunity to participate in all of the mono and combo global trials. We also have the potential to run exploratory local studies within our own pipeline assets, such as with the PD-1 and YX-3 and PD-1, et cetera. And so it's a bit early to comment on what local studies we're doing, but what I'd like to emphasize is that we will be participating with Moabian in their global combination, in their global studies. There will be more to come as we move further along.

Okay, thanks. Thank you.

Thank you for the question. Thank you. That concludes our question and answer session for today. I would now like to hand the conference over to our host for any ending remarks.