Zai Lab Limited

Hello, ladies and gentlemen. Thank you for standing by, and welcome to Xilab's third 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 Mr. Billy Cho, Chief Financial Officer of Xilab, who will make introductory comments.

Thank you, operator. Good morning and welcome, everyone. XyLab recently issued a press release providing the details of the company's financial results for the third quarter ended September 30th, 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.xylaboratory.com. Today's call will be led by Dr. Samantha Dewey, XyLab's founder, chairperson, and chief executive officer. She'll be joined by Jonathan Wong, head of business development, to discuss our recent collaboration for three new potentially transformative medicines. Dr. Alan Sandler, president and head of global development oncology, who will discuss advances with our oncology product candidates. Dr. Harold Reinhart, GMO, autoimmune and infectious diseases, who will speak about progress we've made in two therapeutic areas. Tao Fu, chief strategy officer, who will discuss the performance of our market products. And I will conclude with comments on our financial results in the quarter. We'll all be available to answer questions during the Q&A portion of the call. As a reminder, during today's call, XyLab will be making certain forward-looking statements within the meaning of the private securities litigation 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 you 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 filings 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 Zyla's 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 third quarter, including two exciting new deals we announced yesterday, and give you the latest update for what we expect to accomplish in the fourth quarter and beyond. We continue to deliver strong growth and performance across our entire business. We made important advances across our innovative portfolio, which we continue to differentiate in terms of the steps and breath. I'm very pleased to share with you that we expanded our product portfolio both vertically and horizontally by establishing partnerships for three new potentially first-in-class or second-in-class products. Our agreement with Brooklyn Medicine for two promising lung cancer compounds, Blue 945 and Blue 701 present opportunities to further expand our world-class lung cancer franchise. Our deal with Corona Therapeutics allows us to enter a whole new therapeutic area, Neuroscience. In an exciting, unprecedented CAR-XT, Johnson & Wong will provide additional details about its products. In the third quarter of 2021, Xilab made significant progress across all fronts, R&D, BD, regulatory, and commercial. It continued to generate strong revenue growth from Zula, Aptune, and Kinglock. We had a positive meeting with an MPA on Ascot TIGMOD, which suggests the potential for an accelerated pathway for regulatory approval for GMT in China. Subject to the FDA approval and further discussion with NMPA, we expect to file the MDAs in China by the first half of 2022. We announced exciting data from the ATT&CK clinical trials for subectin, gerobectin, and we will now proceed to prepare regulatory silos. We achieved clinical approval concepts for CL1102 our L17A novel VH antibody fragment for topical treatment of mild to moderate type psoriasis. Demonstrating proof of concept for GL1102 is an important milestone for SciLab in our effort to discover and develop a pipeline of internally developed products with global rights. and to expand to as many indications as possible worldwide. Innovation, several of our innovative product candidates had exciting data updates at recent medical meetings. Alan, Harold, and Paul will elaborate on those positive developments in a few minutes. We continue to expect approval of MISERA for community-acquired bacterial pneumonia. and acute bacterial skin structure infection by the NMPA in the fourth quarter. We are making progress in preparing regulatory filings for tumor-treating fields in mesothelioma and marked tooth and mouth in breast cancer. And we expect to enroll patients in China for numerous global clinical trials over the next several quarters. We now have 28 globally innovative assets in our pipeline, and the quality, depth, and breadth of our pipeline continues to go from strength to strength. 13 products are in late phase development, of which five have already been approved in the U.S., and four have received FDA breakthrough therapy designation. In addition, Our growing pipeline includes 11 early stage programs with worldwide rights, including three in global clinical trials and one that achieves plural concepts and is advancing into full development. We have had a very productive year so far. For 2021, we expect our fourth quarter and 2022 to be reaching milestones to unlock significant value in our business With that, I'll now ask Jonathan to speak about our two collaborations. Jonathan?

Thank you, Samantha. As Samantha mentioned, yesterday we announced two strategic collaborations that further strengthened and broadened that pipeline. An agreement with Blue Cream, partnering on the two next generation EGFI inhibitors, Blue 945 and Blue 701 would significantly strengthen our established lung cancer franchise and precision medicine portfolio, one of our most important focus areas where we have multiple late-stage assets that are complementary with each other. You'll recall that lung cancer is the most commonly diagnosed cancer type and is the leading cause of cancer death in China. The annual incidence of lung cancer in China is more than 800,000 cases, of which non-small cell lung cancer accounts for approximately 85%. EGFR mutations are more common in China than in the United States, occurring in 40% to 50% of non-small cell lung cancer patients here. And these two compounds target the largest subpopulation in lung cancer for China. Third-generation EGFR TKI, such as ozometanib, are commonly prescribed and have emerged as a standard of care for the first-line study. However, resistance inevitably emerges, leading to a disease progression. There are no approved therapies for patients with disease progression following third-generation EGFR treatments. These two compounds from Blueprint are potentially first and or best-in-class fourth-generation EGFR inhibitors. And together with our other lung cancer products, we'll enable Zyde to cover nearly all the different patient populations for this deadly disease. Blue 945 is a potential first-in-class inhibitor of triple mutant EGFR covering either the activating LA58R or exon 19 deletion mutations, combined with the acquired C790N and C797F mutations. It is potent and has demonstrated high wild-type EGFR selectivity to enable its use in combination. And it has shown anti-tumor activity both alone and in combination with artery preclinically. It entered a Phase I-II clinical trial earlier this year. E701 is a selective EGFR double mutant inhibitor, providing potential best-in-class coverage of activating EGFR mutations, plus coverage of the major on-target resistance mutation for OZI, which is the C797S mutation. It is also highly potent and causes the blood-brain barrier, which is important because in EGFR mutant non-small cell lung cancer patients, the baseline brain metastasis up to 40% of disease progression involves CNS metastasis. Blue 701 is expected to begin phase one clinical trials before the end of the year. The development strategy for these two compounds is either as monotherapy or in combination together or with other agents to overcome or prevent on-target resistance across multiple lines of treatment. In addition, This collaboration enables opportunities to combine Blue 945 or Blue 701 with other dry lab lung cancer drug candidates to address off-target resistance mutations. Yesterday, we also announced an exciting collaboration with Karuna to exclusively develop and commercialize CAR-XT for schizophrenia and dementia-related psychosis in Greater China. We already have several products in neurology, including F-Card PigeonMod, so this is an adjacent expansion for Dye, and CAR-XT can leverage our existing infrastructure to create synergy. Just as F-Card gave Dylab an anchor asset in autoimmune disorders, we believe CAR-XT will do the same for us in neurotrans. It is a late-stage asset with first-in-class potential in a disease area with a large patient population and significant unmet medical needs. There are an estimated eight million schizophrenia patients in China, and the target population for dementia-related psychosis in China is about two million patients. CAR-XT is a phase three asset with strong phase two data and significant differentiation from existing treatment. In the phase two, emerging one clinical trial, it showed good efficacy in PennSF scores particularly in negative symptoms of schizophrenia, such as apathy, lethargy, lack of pleasure, reduced speech, and withdrawal. It also was well tolerated and demonstrated a favorable safety profile compared to existing therapies. Overall, these two collaborations vertically and horizontally expanded our pipeline, and we look forward to bringing in more deals for innovative and differentiated products such as these. And now I'll turn the floor over to Dr. Sandler. Alan?

Thank you, Jonathan. We and our partners had several encouraging data updates for our oncology product candidates in the third quarter, and we anticipate further progress in the fourth quarter. Our partner, Miradi, presented exciting data on adagracib and colorectal cancer and non-small cell lung cancer at ESMO. In the Phase II CRYSTAL-1 trial in patients harboring the KRAS G12C mutation for the adagracib monotherapy arm, Murati reported a response rate of 22% and a disease control rate of 87% in 45 colorectal cancer patients treated with single-agent adagracib who received at least two prior lines of systemic anti-cancer therapies. In 28 colorectal cancer patients treated with at least two prior lines of systemic anti-cancer therapies who received a combination of adagracib and cetuximab, they reported a response rate of 43% and a disease control rate of 100%. In the lung cancer portion of CRYSTAL-1, which is potentially registration-enabling, Mirati reported an objective response rate of 43% and a disease control rate of 80% for adagracib monotherapy, while demonstrating a safety and tolerability profile consistent with previously reported findings for adagracib in non-small cell lung cancer patients. Importantly, 98.3% of patients receiving adagracib following treatment with immunotherapy and chemotherapy. Adagraphid has the potential to be a first-in-class and best-in-class KRAS G12C inhibitor in China. We plan to join global phase three studies in second-line plus non-small cell lung cancer and second-line colorectal cancer in the first half of 2022. Moving to margituximab, Zai's bridging study of the compound in combination with chemotherapy in advanced previously treated HER2-positive breast cancer met its primary endpoint of median progression-free survival, as defined by achievement of at least 50% of the efficacy of margituximab plus chemotherapy in the SOFIA study. The safety profile of margituximab plus chemotherapy was acceptable and consistent with that seen in the SOFIA trial. Based on these positive results, XyLab expects to file a BLA in China for this indication around year end. Our partner, Turning Point, provided positive data updates for Reprotrectinib and Elzovantinib at the AACR NCI EORTC triple meeting. In addition, Reprotrectinib received breakthrough therapy designation by the FDA in the quarter for the treatment of patients with advanced solid tumors that have an NTRK gene fusion, which is the second breakthrough therapy designation and seventh overall regulatory designation for Reprotrectinib. We plan to join the global phase two portion of the SHIELD-1 study for L-zevantinib in 2022. For tumor treating fields, we completed enrollment of our pilot phase two clinical trial of tumor treating fields in gastric cancer in China during this quarter. We plan to join global phase three PIPL trials in pancreatic cancer and ovarian cancer and to submit a regulatory filing in malignant pleural mesothelioma. Vemurituzumab was granted breakthrough therapy designation for first-line treatment for patients with FGFR2B overexpressing and HER2-negative metastatic and locally advanced gastric and GEJ cancers in combination with modified FOLFOX6. Amgen initiated a global Phase III trial of Vemurituzumab in gastric cancer in the fourth quarter. I'm sure you're aware that last Friday, Deciphera announced that Kinloch failed to meet its primary endpoint in the intrigue trial. We were surprised and disappointed with this result and are waiting for further analysis. We will collaborate with our partner, Deciphera, to determine next steps going forward, including a possible combination strategy. Note that Kinloch is still the standard of care for fourth-line GIST patients and addresses major unmet medical needs. It remains the only product that has demonstrated significant benefits, including a survival benefit, in this setting. We continue to have a world-class GI cancer portfolio and multiple products in development. GI cancer is a key area of strength for Zai, and we are fully committed to working with the gastric cancer medical community in China and globally. In hematology, we recently announced that we had enrolled the first patient in China in our partner Regeneron's global potentially registrational phase 2 trial of odronectomab in non-Hodgkin's lymphoma. With so many potentially best-in-class and first-in-class products on schedule, we are very excited about our oncology pipeline at XyLab. And now, I will turn the floor over to Harold.

Thank you, Alan. The third quarter brought several very encouraging new developments, clinical and regulatory, in our autoimmune and infectious diseases franchise. They stand to truly advance our pipeline to the next stage. Recently, our partner Intasis announced top-line results from the ATT&CK trial. This is a global phase three registrational trial evaluating the safety and efficacy of sulbactam, dulobactam, comparing it to colistin in patients with serious infections caused by Acinetobacter baumannii. Sulbactem dulobactem, or SULDUO for short, met the primary endpoint of statistical non-inferiority in 28-day all-cause mortality. The patients had mainly pulmonary infections with carbapenem-resistant Acinetobacter baumannii, known as CRAB, At test of cure, there was a statistically higher clinical response with SULDUR. In addition, SULDUR met the primary safety objective of the study, achieving a statistically significant reduction in nephrotoxicity versus colistin. SULDUR is the first investigational drug to demonstrate efficacy against CRAB in a prospective, well-controlled clinical trial. CRAB infections are amongst the worst bacterial infections known to man. Safe and effective treatment options are almost non-existent. And as a narrow-spectrum antibiotic, SULDUR targets crab bacteria preferentially, thus potentially avoiding the collateral damage associated with broad-spectrum antibiotics. We look forward to bringing this drug to China, where severe crab infections are frequently seen in ICUs, and result in high mortality. And as Samantha noted, we are actively preparing to file SULDUR with regulators in China. Moving on to CL1102. This is our internally developed anti-IL-17A novel human VH antibody fragment. We are developing it for topical treatment of plaque psoriasis. We recently achieved proof of concept with this novel compound and formulation in the first in-human Phase Ib study. In the study, a psoriatic target lesion was treated for four weeks with 1102 versus placebo in a double-blind fashion. 1102 showed a 45% relative improvement compared to placebo in the local psoriasis area severity index, or PASI. This clinical benefit was maintained after the end of treatment for a prolonged time, observed for up to six weeks. Two key parsing components, erythema and scaling, showed clear improvement. There was also reduction in target lesion size with 1102, in contrast to an increase in lesion size in the placebo arm. In a responder analysis, 1102 had higher responder rates compared to placebo at all time points after week one, and these patients had a 50% or greater reduction in local palsy score to qualify as responders. The safety and tolerability profile of 1102 was indistinguishable from placebo. Pharmacokinetic studies confirmed a lack of systemic absorption, which explains its benign safety profile. There are about 125 million cases of psoriasis worldwide, and 80 to 90% of these have plaque psoriasis. 70 to 80% of plaque psoriasis patients have mild to moderate disease. We are developing 1102 as the first IL-17-directed topical treatment for chronic plaque psoriasis, concentrating on those with mild to moderate disease. Currently approved IL-17 inhibitors for psoriasis are effective, but they are administered subcutaneously and absorbed systemically. Because they are immunosuppressive, they carry various warnings and precautions in their labels and are therefore approved for moderate to severe psoriasis only. On the other hand, existing topical treatments for psoriasis are lacking in efficacy or create safety concerns with long-term use. 1102 is a unique IL-17 inhibitor that can be applied topically to the psoriatic plaque without being absorbed systemically. We look forward to advancing this compound into full development, including registrational studies. We also achieved important regulatory progress for FGAR-TG-MOD, which we partner with Iogenics. As you know, Our partner expects a decision by the FDA on the regulatory filing of F-card tigermod for generalized myasthenia gravis during the fourth quarter of 2021. As Samantha mentioned, we had a positive meeting with the NMPA on F-card tigermod, which suggests the potential for an accelerated pathway for regulatory approval of GMG in China. Subject to U.S. FDA approval and further discussion with the NMPA, we expect to file the NDA in China by the first half of 2022. Lastly, we expect approval of Omada, Cycline, and Zyra for community-acquired bacterial pneumonia and acute bacterial skin-to-skin structure infections in China by the end of this year. And now, my colleague Tao Fu will speak about progress with our commercial products.

Thank you, Harold. The third quarter marks our continuing progress in ramping up our three commercial products, all launched within a period of 16 months. Despite the COVID-19 flare-up in certain regions in China, which presented access difficulties, our commercial team did a great job overcoming these challenges and delivering a strong sales performance. Zojula continued to perform well, building on the momentum from the last quarter when the second line ovarian cancer indication was included in the NRDL. Our team executed two key strategies to grow Zojula brand. First, our team has been laser focused on increasing hospital listings as a result of our NRDL landing. As of September 30, 2021, Sejula was listed in nearly 1,100 hospitals in China. Second, our commercial team focused on market penetration to drive pool through by leveraging Sejula's differentiated label as the only PARP inhibitor monotherapy approved for all comers in first-line ovarian cancer. By executing these two strategies, we were able to grow Sejula's market share in both revenue and the number of new patients treated, and we plan to carry the momentum into the fourth quarter when we expect to enter into NRDL negotiations for first-line ovarian cancer. We're confident that over time, Sejula will be the market-leading PARP inhibitor in China for ovarian cancer. Similarly, the launch of Optum is going well. During the third quarter, our team focused on continuing to improve market access by expanding commercial insurance and supplemental insurance coverage for Optum and educating target physicians about its significant clinical benefits, including survival benefits. Currently, Optum is covered by 25 municipal or provincial supplemental insurance plans. The implementation of some of the newly added plans in the fourth quarter presents a good opportunity for us to grow opt-in. We have also kicked off several important physician education campaigns and plan to establish a GBN patient journey management platform to increase the number of patients treated. As we noted last quarter, we successfully launched a team log for fourth line GIST in China last May and we're still very early in our launch process. The key focus of our launch is increasing physician awareness and the number of patients treated by leveraging Invictus trial data and chin lock status as the only later line GIST treatment, regardless of the mutation status, as well as the guideline recommendation by the Chinese Society of Clinical Oncology. In the third quarter, We also received approval for and launched Kinlock in Taiwan, making it the first-ever product that is available to all parts of the Greater China region during the first year of launch. As Alan mentioned earlier, we're still assessing the impact of the intrigue results. We're committed to establish Kinlock as the standard treatment for forced-line GIST based on its compelling product profile, extending patient survival, and we will make appropriate adjustments to our commercial strategy. And now, Billy Cho will discuss our third quarter financial results. Billy?

Thank you, Tao. We saw continued significant growth and strong performance across our business. Today, I'll briefly summarize our financial results for the third quarter as well as year-to-date 2021. Revenues for the third quarter and year-to-date in 2021 were $43.1 million, and $100.1 million respectively. Over the same period last year, revenues were $14.7 million and $33.9 million respectively. We're still early in our commercialization phase, but we're very pleased with the successful launches and sales trajectory of our first three oncology products. With many more product launches anticipated, our commercial platform over time is expected to generate strong growth and considerable operating leverage. Digital sales for third quarter in year to date 2021 were $28.2 million and $64.2 million, respectively. And over the same period last year, digital sales were $8.5 million and $22.3 million, respectively. Opt-in sales for third quarter in year to date 2021 were $10.7 million and $27.3 million, respectively. And over the same period last year, opt-in sales were $6 million and $11.4 million, respectively. Kinloch sales for third quarter and year-to-date 2021 were $4.3 million and $8.7 million respectively. Research and development expenses were $55.1 million for the three-month end of September 30, 2021, compared to $58.1 million for the same period in 2020. The decrease in R&D expenses was primarily attributable to lower upfront payments for new licensing agreements, partially offset by the increase in expenses related to ongoing and newly initiated late-stage clinical trials and payroll and payroll-related expenses from increased R&D headcount. Selling, general, and administrative expenses were $59 million for the three months ended September 30, 2021, compared to $27.9 million for the same period in 2020. The increase was primarily due to payroll and payroll-related expenses from increased commercial headcount and expanded commercial activities, as Xilab continued to expand its commercial operations throughout Greater China. For the three-month end of September 30, 2021, Xilab reported a net loss of $96.4 million, or a loss per share attributable to common stockholders, of $1.01, compared to a net loss of $63.7 million, or a loss per share attributable to common stockholders of $0.84 for the same period in 2020. As of September 30, 2021, Cash and cash equivalents, short-term investments, and restricted cash totaled $1.57 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?

Certainly. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, you can press the pound or hash key. We would request you to kindly ask two questions per participant to allow everyone a chance. We have the first question. This is coming from the line of Michael E. from Jefferies. Please go ahead.

Hi. Thank you very much and congrats on a great quarter. We had two questions. The first was obviously on the announcement of the Karuna transaction. This brings you into a pretty big market opportunity in neurology, but also a complex one. Can you just comment on how you're thinking about synergy and being opportunistic in neurology now going forward and what that means for business development for you? And the second question is you had made some nice comments about F-cortisomod on the Argenix compound. Can you just remind us about your confidence level in regulatory discussions and the potential faster filing in 2022? And if you could do that, that would be huge. So I would just love to know if you actually think that's possible. Thank you.

Thanks, Mike, for the question. This is Billy. We have several members of our management team on. Sorry about the background noise. We have several members of our management team on, so I'll help direct them in traffic. For your first question on Karuna and our entry into neuroscience, John, why don't you take this, and I'm sure other colleagues can chime in as needed.

Sure.

Thanks for the question, Mike. I think, first of all, there's actually similarities and adjacencies for this expansion to neuroscience. You know, like what we have done in the past, you know, going into sort of severe autoimmune diseases with FGAR, going to, you know, hematology, you know, with our Regeneron collaboration. There's been a lot of, obviously, thought and strategizing as we go into new areas. So when we go into new areas, there's always similarities. In this case, the similarity, first of all, is that, you know, especially with this drug, where patients go seek care in China. It's very concentrated. So there's a very limited number of psychiatric hospitals where patients go get care. There's about a thousand of them. In addition, the large class 3A hospitals, only a very limited number of them have these psychiatric departments within them. So therefore, you know, the amount of sales team that's required to commercialize this is very limited. I mean, if you look at, you know, some of the currently leading companies in China are focused in this area. Their sales force is somewhere between 100 to 300 FTEs. And I think that brings to my second point is that there's adjacency to our current business because, you know, if you look at FGAR, the first indication is within neurology It's in DMV. So, you know, before we launch, you know, CAR-ST, hopefully we will already have a commercial team on the ground selling F-CAR and building up the care networks in this area. So, you know, it's been a very short process as we go into neuroscience. It's a very big market. You know, it's, you know, right behind oncology, immunology, one of the largest TAs in China, in fact, a very high-growing TA, you know, double-digit growth, even though there's very lack of innovative products. So, you know, this product being very differentiated, you know, offering both on the efficacy side as well as safety side, clear differentiation compared to the standard pair today, you know, we are very confident about the commercial viability given our presence already in neurology given the adjacency of differentiated products. And in terms of the future BD efforts, look, when we get into a new area, we're bringing an anchor product, a de-risk late-stage product. So this is our first product here. You know, we're obviously going to continue to look for assets that may be synergistic with this and, you know, expand our CNS pipeline, you know, with similar de-risk and late-stage assets. But certainly we'll be on the lookout for those.

And Mike, for your second question on F-Card Tijamot, you're right. We did make an announcement just on our third quarter earnings that we have the potential to submit for approval in the first location by first half of next year. And your question was our confidence level of that. Samantha, would you like to provide some commentary on this?

Sure. Thank you, Michael, for the question. Definitely, we are very optimistic about the potential of accelerating the approval process and submit the application in the first half of 2022 based on our discussion with the CEO.

Okay. Sounds good. Thank you.

Sure. Thank you. Thanks, Michael.

We have the next question. This is coming from the line of Miguel Mitromovitz from Citigroup. Please go ahead.

Hi, Billy and team. Thank you very much for taking the questions. I had three. First, I was just wondering about Zijula's current market share in second-line ovarian in China and how that market share has been trending since the Zijula launch. Second, I'm curious about the distribution of sales for Zejula across the 1100 Tier 1, 2, and 3 hospitals where Zejula is available. Is there a certain tier where you're seeing most sales, or are the sales evenly distributed across hospital tiers? And finally, just curious, what are the gating factors for when you will begin to introduce revenue guidance for Zejula and also for Optum? Thanks.

All right. Yigal, thank you for your question. So I'll kick it off on all three and invite other colleagues to join if needed. So the Jula second-line market share, we are not providing specific guidance at this point. You can access information like you do in the U.S. through IQVIA, et cetera, to get views on it. What I can share with you, Yigal, is that You know, with the introduction of the Jula in the marketplace, you know, in second line, which is a NRDL reimbursed product, and then, of course, with first line as the only all-comer labeled PARP inhibitor in ovarian cancer, clearly we've seen not only the increasing of the pie of the PARP penetration, but also our market share within it. And that's both within second line and also increasingly so in our first line. So we're very optimistic that this trend will continue. And so hopefully that helps you. And we could provide additional color as we make further progress. And we're very confident that we're really set up here to have a commanding market share position for Zedula in the very near future, in the not-too-distant future. Your second question on the distribution of sales of Zedula between Tier 1, 2, and 3 sort of hospitals or geographies. Clearly, our initial focus was to really make sure that we penetrate the class three hospitals in the top tier one, two cities. And we have the benefit of that legacy with strong execution. Now, with the second line in NRDL, we have nationwide coverage. But the first line is still private pay. And so we're optimistic that we're well-positioned. you know, for NRDL, you know, negotiation on first line as well. And that's when you're also going to see not only, you know, a dramatic impact of the volume going up, but also a broader distribution as well. And then in terms of any gating factors for revenue guidance, You know, I guess we're still very much early in our life cycle in terms of commercialization, as we noted on the call. But every month that goes by, clearly, you know, we're getting more momentum, you know, more, you know, hard, real data, you know, inside iLab. And our commercial platform continues to execute with strong growth and productivity. So there will be a point in time, but that point in time is not at this moment.

Gotcha.

Thank you very much.

Thanks, you all. The next question comes from the line of Anupam Rama from JPM.

Please go ahead. Hey, guys. Thanks so much for taking the question. I've got two quick ones. Maybe following up on Mikey's question on neurology, you talked about business development, but will there also be a build-out of an internal kind of research effort on the neuro side? And then second question, I think there was a mention of NRDL for first-line. I wanted to confirm that Kinloch is also going to be NRDL submission, and when those pricing effects could take place in 2022. Thanks so much.

Hey, Afong. I'll address your second question and then tee it up for the team on your first question. So, yeah, you heard it right. You know, first line, so for NRDL negotiation for the Julian first line, you know, will be happening. We're well prepared and we're optimistic that we're well prepared for a good outcome. But, you know, that's to be determined. What you will hear in the public domain will be very similar to last year and previous years where the drug that made it, the companies and drugs who've made it on the NRDL and accept it will be made public by the NRDL, you know, a few weeks after the negotiation finalized, which you know is happening in very near term. And then most of the companies will be signing an NDA, so you will not hear about the prior year until the implementation date, which will be likely January of next year, early next year, this year, not like March of last year, like in 2021 where implementation date was March, next year is expected to be happening in the usual January cycle. So that's the cadence, and so there will be more to come, but again, We're optimistic that Zitula will be a very important drug for many more patients. And we'll have a dominating or a commanding market share position in the Park class for a very class of patients. Now for Kinloch, we were eligible. We launched the advanced GIST label in October 20th this year, which means we were eligible to be included in the NRDL negotiation. We've elected not to. because we have an ability to drive adoption, and as the only really, you know, we establish this as a standard of care, as Alan mentioned, in advanced check. And so, you know, we have another opportunity next year to do so. And so we have, you know, good optionality there. Your first question on neurology, where we're going to build out, you know, our internal, you know, research capabilities there, as you know, Anna Palm, we you know, we've been really dedicating our energy towards oncology and autoimmunity. But in terms of neurology, I mean, we just signed this deal. So it's hot with the press, you know, yesterday. But in terms of building that out, I don't know if other, you know, Samantha, you know, Alan, Harold, if you have additional comments on that, or Samantha or Harold. But... Yeah, if I can just... Thanks.

Go ahead. Go ahead. Go ahead.

Yeah. Hi, thank you for the question. Will there be a build out in neurosciences? The answer is yes. This is a big new addition to our current franchise. It does require extra work. It will require extra dedication and it has huge potential. This is a big new market for us, but it's not an unknown market because we have had already experience in the neuroscience world. And as mentioned before, we have on the FK-TIGEMOD side at least two programs that are in neurology, and that is GMG, obviously, and CIDP. So, yes, there will be a build-out in clinical and also in the sales team. It will be, you know, for commercialization in those hospitals in China that have psychiatric units, which actually is not too much, but it will not require a large team. So we think it's worthwhile. And one point maybe in addition to your question, why do we go into this area? Because we understand the mechanism. This is a well thought out mechanism of an antagonist and an agonist working on the M1 and M4 muscarinic receptor. And that's a very well established approach. It's one that hasn't been really tried yet. because everybody else has looked in other areas with other antagonists that look at dopamine and serotonin. So there's also a lot of data in support of this. So with all this, it gives us confidence, together with the emergent one trial data, that this is something we can really sprint full press forward. Thank you.

Yeah, I think, thanks, Annapol. Thanks, Harold. I think Harold brought a very good point about we branch out into this area with a lot of information. But in terms of discovery and upon, we're not interested in building our own research. We're still focused on oncology and opening in.

Thanks for taking our question.

Take that up. Thank you. We have the next question. This is coming from the line of Jonathan Chang. Please go ahead.

Hi, guys. Thanks for taking the questions. First question, can you discuss your answer strategy following the recent intrigue study results? Can you provide any color around how you're thinking about potential next steps?

We'll pass that to Alan.

Great. Thanks very much for the question. I think for next steps at this particular point, you know, we believe very strongly in our world-class GI cancer portfolio, and specifically for Kinloch in the fourth-line setting. which, again, as has been noted in a randomized study, showed significant overall survival benefits. So we'll continue to look and work in that particular area, continue to build upon that. In addition, of course, we're looking forward to working with Deciphera to evaluate the data from the original study and see what sort of opportunities we have moving forward, which potentially could include combinatorial approaches as well. So that's the approach we'll be taking at this point. Thank you so much for the question.

Got it. Thank you. And second question, can you provide any color around how the opportune lunar study is progressing? Are you able to provide any more granular color when the study could read up? Thank you.

Alan, would you like to comment on this one as well?

Yes. Again, thanks for the question. This is something that, of course, is a study that's been accruing and is run, of course, by our partner, Novacure, and we're still working with them on this and participating in that study and waiting, again, for the accrual to finish. And as you know, given the recommendations by the DMSC, the follow-up for the study has been reduced from 18 months to 12 months, so in terms of the minimal follow-up. So that might provide you with a little bit of guidance as to when we'll start to see data potentially after completion of accrual. Thank you again.

Yeah. Yeah, Jonathan, you know, Novocare also recently announced, and I don't think they've only said that that's the 2022 milestone, you know, final data should be read out. So I don't think they've got it to, you know, whether it's going to be first half or second half, but, you know, that's going to be, you know, an anticipated milestone for next year.

Got it. Thanks for taking the questions.

Thanks, Austin.

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

Oh, thanks, guys. Just a couple of quick questions. First, AstraZeneca in its filing documents has noted a patent expiration for Lemparsa in 2024. Just wanted to get a little bit more color on how you guys are assessing the patent landscape in China. Are you anticipating the entry of Lemparsa generics in 2024 or shortly thereafter? And if not, why not? Have you assessed the patent landscape and feel that Lemparsa is likely to be protected longer? If there are generics that are introduced in 2024, what's your expectation for the evolution of the market from that point in time? And my second question really relates to, you know, the expansion and earlier stage opportunity for Optune. What are you guys doing at this point to prepare for a potential expansion should the phase two or the trial, the lunar trial read out positively to basically, you know, prepare for uptake and demand.

Hey, Seamus. Thank you for your questions. I think the first one, John, would you like to take it? And then I'll take the second one.

Sure. Thanks for the question, Seamus. You know, let me first say that we have a very strong pattern position for the wrap rib. You know, we have a strong composition of matter pattern that lasts almost to the end of this decade. And we have a very differentiated product. So even if there is an generic that comes to the market after being part of the patent expiration, we have very differentiated assets. In particular, we're the only asset that has the all-comer monotherapy label in first line. And we're rapidly gaining market share as we're being on the second line in our deal as we have a better product. Now, as we have NIDL negotiations that's currently ongoing, you know, if we're successful to get onto the front line for NIDL, we will have an even stronger market position. We will solidify, you know, our broader label. Therefore, I think with a differentiated product with a strong pattern position, we can dominate the market for a very long time with that.

And James, for your second question on tumor-treating fields, so Optune, obviously, we have it in the market since the second half of last year. Our dedicated commercial team has been doing a great job covering the top hospitals in Optune for GBM. There's about top 250 hospitals and great coverage to neurology, to radiotherapy departments. We have a dedicated DSS team who continue to provide patient care and education. And they've also done a great job with the supplemental insurance. You saw from our earnings release that we have up to about 25 supplemental insurance plans signed up. So this is going to bode well for not only Optune, but really positioning and building awareness for tumor-treating fields in the future across indications. Now, next year, obviously, the lunar readout is going to be an important milestone. But ahead of that, there's a lot of things we'll be doing. So in addition to other indications and global phase three trials, and we just wrapped up a China-only phase two trial, and we'll have data out for that by about the first half of next year, we're also been preparing to submit the second indication in mesothelioma. And as you know, this gives us a strategic opportunity to engage with the lung cancer community ahead of a possible positive outcome for lunar trials so we can really optimize that event if it was positive. So remain optimistic on all those fronts and continue to be big believers in the potential tumor-treating fields to serve many, many more patients than what we're doing right now. So thanks for your questions. I think we can move on to the next question, operator.

The next question comes from Z Chen from Goldman Sachs. Please go ahead.

Thanks for taking my questions. A couple of questions on the recent deals. Number one is on the blooper to EGFR assets. I'm trying to understand a bit more about the two molecules preclinical tox, you know, how the therapeutic window look like, and also for their clinical strategy in China, because, you know, the third generation EGFR, including Tegressol, and then some of the domestic brands are going to potentially becoming the standard care in China in the first line, second line setting. And some of them also show a decent, the brain blood barrier penetration. So will the BLU945 and the 701 mainly targeting the patient failed, the third generation EGFR? Or if we're trying to move into earlier lines, I guess have to have study will be inevitable. Any chance that the combo could potentially beat the third generation EGFR in the survival benefits to patients? Try to understand a bit more about your thoughts here. And also for CAR-XP, Well, we understand there's a large population of schizophrenia patients in China, you know, six million plus. However, a lot of them actually in a poor financial condition. So, affordability might be a big challenge, you know, particularly given available standard care now are super cheap. So what could potentially be the pricing strategy here in China and how we should look at the commercial potential? Thank you.

Thank you for your questions. Alan, would you like to take this question around the EGFR?

Sure. Thanks, John. Thanks, William. Thanks for the question. So a couple aspects. I think I can probably link those together. The initial one was more sort of the toxicity and You know, for these two agents, there's wonderful preclinical data that shows exceptional wild type sparing effects. And so that is the main cause for toxicity with these types of agents. So by limiting the effects on the wild type, there should be fewer toxicities such as dermalogic and diarrhea effects. So that's one potential advantage. And it also, what it does is it allows for the potential for combination of these two agents. And that's a very key element for this because by combining these two agents based on preclinical data, you not only have limited wild type, you also impact those original mutations in EGFR and then also the resistance, such as, again, the T790 and the C797S. So that allows for coverage that is actually in some ways similar to that of Targrizzo and then superior because it also can potentially overcome the escape mechanism, the resistance mechanisms. So although the initial study of these agents will be in resistance because that's a faster path to approval, ultimately, moving and looking at this combination in the frontline setting is certainly a logical approach, and we're confident, along with our partners at Blueprint, that there is an opportunity to be superior to Gresso in this area. Thank you so much for the question.

And, V, for your second question, I'm sorry, there was one last question.

They also have excellent blood-brain barrier penetration as well. So resistance that occurs in the CNF will be overcome by these agents as well. Thank you. Sorry.

Thanks, Alan. And for your second question on the CAR-ST, you know, clearly we've done a lot of work around this, as we always do for all of our programs. But I'll invite, you know, John to provide additional comments.

Yeah, thanks for the question, Lee. Look, I think, first of all, the cheaper prices are due to it's pretty much mostly generics. However, all the products are on the NIDL. And in fact, when there's recently, a more recent launch product, you know, gone to the NIDL, the price cut was very limited. For example, Invigor, you know, only had a 5% to 10% price cut to get onto the NIDL. And its annual treatment cost is about 4,000 to 5,000 U.S. dollars. But it's still very largely undifferentiated acid in the dopamine, you know, H5T category. So with this product, a totally new MLA, you know, with first and best in class attributes that addresses not only the positive symptoms of schizophrenia, but more importantly, addressing the negative symptoms, which currently nothing out there does. And with a much better tolerability profile, you know, for example, weight gain, QT elongation, you know, these kind of bad side effects, CAR-XT seems to do very well at. We believe it is definitely worth premium pricing. And then you couple that with, you know, there's about 8 million schizophrenia patients in China due to chronic usage. And because of the better tolerability, you can have a much longer DOT potentially. And then beyond schizophrenia, obviously, it's potential in dementia-related psychosis. I mean, when there's nothing currently is approved on the market, that is a very large market potential. So I think we should consider it as well. So hopefully this answers your question.

Thank you. Just a quick follow-up here. What is the patent status in China for CAR-XT? Okay.

Yeah, look, it's undergoing the prosecution. Globally, its patent has a pretty broad family of patents. There's two primary major families. The patents are strong. As you know, it includes two APIs. One of the APIs is not approved anywhere in the world, so there's no potential for any off-label usage. But overall in the U.S., we're looking at the patent up to 2039, and we believe we have a good opportunity here in China as well.

Thank you.

Thank you. Thank you. We have the next question. This is coming from Yang Wang from .

Thanks. So I have two questions. First one is on the Jula. So can you quickly comment on kind of what's a rough split for the Jula prescription in terms of, you know, ovarian cancer, first-line maintenance therapy, and the second-line maintenance therapy in China right now. Just give us, you know, just give us some idea would be great. And then since our Jula is in an ideal negotiation, I think it has, you know, a large chance can be included for first-line. And if the first line included in the NIDL, then in the kind of longer term, what's kind of a rough split between first line and the second line prescription for the Jula in the longer term? So that's my first question. And my second question is about our kind of PD-1 strategy. Since we see in our portfolio we don't have a PD-1 approved yet, but quite a few of our drugs Actually, our partner are doing a combo study for the K-RAS and the methotuximab. They are all doing combo study, and the combo study with PD-1 has seen great efficacy and safety. So can you clarify your PD-1 or PD-L1 development strategy in China? Thanks.

Hey, Yong, thanks for your question. So for the Zedula-related question, first of all, as you've heard on this call, for first-line Zedula, we have been selected to find a negotiation for NRDA inclusion, which will be going into effect early next year. So it's a season for that. And I'd also like to remind you, we are and will be the only all-comer first-line monotherapy product in the market. And it's a very differentiated product profile. So the inclusion into the NRDA will significantly solidify our market position. And again, we're optimistic on the negotiation and the potential to be a market share leader in ovarian cancer. So with that first line, we've always been saying that the first line indication is where really the battle is going to be won. And so we continue to have very much confidence around that At this time, we're not still giving splits between, you know, first line, second line, you know, kind of market share and revenue split as well. But just want to remind you, Young, that, you know, we recently launched first line and it's a private pay product, you know, and it was up against the reimbursed price, although they have a slightly different label. So, you know, we'll try to provide additional color, you know, as we're going to, as we wrap up our first, you know, it's really 2021 was our first full calendar year of commercialization, so we're still very much wrapping up, so I hope you understand. In terms of your second question on PD-1 strategy, you're right in that, and I'll invite Alan to also comment here, but we have several combos, and in the future we'll have additional what we call orthogonal synergies that we expect to realize And that'll be quite proprietary. But you already listed a few that are ongoing. The KRAT, they just had an update, you know, I think a day or two ago, an incremental update on the combo for lung. That was quite interesting. We have, you know, MARG and even the JULA, right? There's PD-1 late-stage combo trials, you know, in two very large indications, you know, frontline lung and breast cancer as well. And so, you know, it's great and it'll be strategic for us to have a, you know, not only PD-1, but to have a, you know, unencumbered portfolio within immunology to really, you know, go after and fully realize, you know, those orthogonal synergy opportunities. But, Alan, do you want to provide any additional color?

Actually, Billy, you did a great job, and I don't have too much more to add other than we'll continue with the studies that we're doing to establish PD-1 retropenilamab as an opportunity for use such that we can then go on to those combinatorial approaches, as you mentioned. And again, the KRAS is certainly an exciting one. There'll be other opportunities, of course, as well, along with that in second-generation IO combinations as well. So, yeah, thanks very much for the question. Okay, thanks.

Thank you.

Thank you. I'm showing no further questions at this time. I will now turn the call back over to Zainab's CEO. Samantha Du for closing remarks.

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