Zai Lab Limited

Hello, ladies and gentlemen, thank you for standing by and welcome to the XyLab third quarter 2022 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 XyLab. who will make introductory comments.

Thank you, operator. Good morning, good evening, and welcome, everyone. Zylab recently issued a press release providing the details of the company's financial results for the third quarter of 2022, as well as some recent product highlights and corporate updates. The press release is available in the investor relations section of the company's website at ir.zylaboratory.com. Today's call will be led by Dr. Samantha Dew, Zylab's founder, chairperson, and chief executive officer. She'll be joined by Josh Smiley, chief operating officer, who will discuss advances in oncology product candidates. And Dr. Harold Reinhart, President and Head of Global Development, Neuroscience, Autoimmune, and Infectious Diseases, who will speak about the progress we've made in those three therapeutic areas. And I will discuss the performance of our marketed products, conclude with comments on our financial results. Additional executives will also be available to answer questions during the Q&A portion of the call. As a reminder, during today's call, ZyLab 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, our sales and revenue forecasts for our products and product candidates, regulatory applications, and commercial launches. But forward-looking statements are not guarantees of future performance, and therefore we should not put unduly lies upon them. These statements are subject to numerous risks and uncertainties, and actual results could differ materially from what we expect due to a variety of factors, including those discussed in our SEC filings. At this time, it is my pleasure to turn the call over to Xylex founder, chairperson, and chief executive officer, Dr. Samantha Du.

Thank you, Billy. Hello, everyone, and thank you all for joining us today. The third quarter marked another period of strong execution across our company, including revenue growth, continuing and significant progress in our mid- and late-stage pipeline and business development. Over the next few quarters and years ahead, I have little doubt that we'll continue to strengthen the company through growth and productivity. Before I get into specific details, I would like to say that I'm very proud of all of our employees across the globe, especially regarding Zai's ability to deliver time and time again, no matter what challenges present themselves. We have built a great culture at Zai focused on innovation to bring transformative medicine to address unmet medical needs. Fundamentally, we have a very productive year so far, and we are anticipating finishing 2022 having delivered on no other key corporate priorities. We continue to demonstrate resilience revenue growth in the third quarter, despite some ongoing challenges from COVID and certain reasons in China. We expect to deliver significant revenue growth for years to come. Our broad-lead and late-stage development candidates continue to see strong advances, highlighted by our agreement with the NMPA on development plans for the corrective for bridging studies with schedule 3 in China. On the business development front, we recently announced a strategic collaboration with CISM for TVEC, which strengthens our ability to address unmet medical needs in women's cancer in China. In addition, we expect to realize significant synergies given our existing commercial infrastructure and strategic positioning in this important disease area. In summary, we remain confident in the fundamental strengths of our business and our ability to create significant shareholder value. With that, I would like to turn the call over to Josh. Josh?

Thank you, Samantha. It's been an exciting first quarter as Chief Operating Officer of Zai. Although we currently face some challenging global economic headwinds, to echo Samantha's sentiment, it has been amazing to see the focus and determination of everyone at Zai to continue to deliver on our mission of bringing transformative medicines to patients in China and around the world. The fundamental drivers of value at Zai Lab are strengthened by our experienced leadership team, global talent, and first or best-in-class pipeline. We announced last month that Alan Sandler had left Zai, and we expect to name a new head of global oncology development soon. I'm very excited to support Samantha on the operational side as she personally leads our global oncology function in the interim. I'm also very excited to welcome Dr. Peter Huang to Xai Lab to lead and oversee our discovery efforts in translational medicine. Peter joined the company from Zentalis Pharmaceuticals this week and has a strong track record in leading internal discovery research as well as external collaborations. We look forward to driving innovation in drug research and development under his leadership. I also had the opportunity to welcome Olet Berbake to Xai last month as Senior Vice President, Head of Global Strategic Partnering. Alette joined the company from Novartis, and she is our first employee based in Europe. She is responsible, among other things, for leading our European business development efforts. Beyond our commercial progress, which Samantha touched on, I'm excited to highlight key business development updates from the third quarter, especially our new regional and highly synergistic collaboration with CGEN for TIVDAC. As many of you know, TIVDAC is the first and only ADC approved in the U.S. for the treatment of adult patients with recurrent or metastatic cervical cancer. This collaboration further strengthens our oncology leadership in China, particularly in women's cancer, where we have established a strong sales team and portfolio, including Zijula and others. We will leverage such leadership as our team works to commercialize and accelerate patient access to TIVDEC in China. We will join the ongoing global TV301 phase three confirmatory study and certain potential global studies and other indications. Of course, we continue to evaluate other business development opportunities as well, including potentially transformative opportunities and partnerships for our global pipeline. We've been very disciplined historically and plan to be even more selective in the future in terms of quality deals that are synergistic with our existing portfolio. In terms of commercial progress, we continue to see strong revenue growth led by Zejula. As you may be aware, in October, the FDA expressed some concerns to our partner GSK regarding the overall survival data from GSK's NOVA study in the U.S. and the approved indications for Zejula in the U.S. in the recurrent ovarian cancer setting. GSK is currently considering the FDA's feedback and appropriate next steps, but I'd like to highlight today that we do not expect this development to impact our full approval of Zejula in the second-line all-comer setting in China. Notably, unlike GSK's U.S. approval, which was based entirely on GSK's NOVA study, the NMPA's full approval of Zejula in the recurrent ovarian cancer setting is based on a separate study, the NORA study, which is a phase three randomized double-blind placebo-controlled study of Zejula that the company independently conducted in China. While the NORA study is not fully mature to date, we are seeing favorable trends in overall survival. We also do not anticipate any impact to our first-line ovarian cancer Zijula indication in China. The FDA's discussion with GSK does not apply to this indication. This first-line indication is the largest ovarian cancer market opportunity for ZI, accounting for over 60% of Zijula's revenue in 2022 in China, and we expect this percentage to increase through the remainder of this year and beyond. Moving to clinical developments for our other oncology assets, most recently at CITIC, we just showcased two assets with our internally developed pipeline with global rights, including presentations on two key early stage global programs, ZL1211, an anti-Quaden 18.2 antibody, and ZL1218, an anti-CCR8 antibody. For ZL1211, we presented data showing enhanced anti-tumor activity combined with standard of care chemotherapy in in vivo animal models. For ZL1218, beyond what was presented in the AACR earlier this year, the data supports ZL1218 depleting Treg cells from human tumor samples in vitro and in vivo animal models and our single-cell RNA sequence data indicates that ZL1218 targets the highly suppressive Treg populations. In November 2022, our partner, Blueprint Medicines, presented an update on the Phase 1-2 Symphony trial. The data supports the plan to develop BLU945 in combination with Ocermitinib in first-line EGFR LA58R mutation-positive non-small cell lung cancer. EGFR mutation is one of the most common mutations in non-small cell lung cancer, especially in China. We'll work closely with Blueprint Medicines to accelerate the global development and potentially change the treatment landscape for EGFR-mutated non-small cell lung cancer patients in China. Further, in September 2022, our partner, Mirati, presented results from CRYSTAL-1, a multi-cohort phase 1-2 study evaluating adagracib with or without tetexamab in patients with advanced colorectal cancer harboring a KRAS G12C mutation at ESMO. We believe the data continue to demonstrate that adagracib is potentially a best-in-class KRAS G12C inhibitor in CRC. Looking ahead, Mirati expects potential U.S. FDA approval and commercial launch in the United States for adagracib as the treatment for patients with non-small cell lung cancer, harboring the K-RAS G12C mutation, who have received at least one prior systemic therapy with a PDUFA target action date of December 14, 2022. We remain confident that Adagracid and China can be both first in class and best in class. We'll try to accelerate the regulatory pathway for second-line plus non-small cell lung cancer monotherapy, by leveraging the global data package for the FDA approval, the ongoing PK study in China, and the global confirmatory K-12 study, which Xilab joined in the second quarter of 2022. We also recently launched our Trust Report. This report provides updates on our environmental, social, and governance, or ESG, commitments and activities since the release of our ESG report last year and describes our latest ESG strategy, which we are calling Trust for Life. Zai's Trust for Life strategy includes three commitments, to improve human health, create better outcomes, and act right now. As part of our commitment to improve human health, we seek to reach 1 million patients with Zai medicines by 2030. And now I will turn to Dr. Harold Reinhart to discuss progress in our autoimmune and neuroscience therapeutic areas. Harold?

Thank you, Josh. I'm excited for the opportunity to share with you today the progress across our autoimmune, neuroscience, and anti-infective therapeutic areas. Let's start with Vivgard or F-Gard tigimod. On the regulatory front, we are happy to share that our partner, Igenix, continues to make excellent progress. With the FDA, Igenix recently announced the submission of a BLA for F-Gard tigimod SC subcutaneous. for the treatment of generalized myasthenia gravis, or GMG, in adult patients. As a reminder, VSI submitted a BLA for FGAR-Tigermod IV intervenors for the treatment of patients with GMG in China in the second quarter and expect approval next year. On the EMA front, Argenix also announced that the European Commission has granted marketing authorization for VFGARD as an add-on to standard therapy for the treatment of adult patients of GMG who are acetylcholine receptor autoantibody positive. Tsai continues to support iGenX on indication expansion in China and worldwide, and we soon expect to launch the proof-of-concept trials in two autoimmune renal diseases. Moving to CARXT, the combination of Xenomaline and Traspium, which we are developing with our partner Karuna in acute schizophrenia. XyLab has obtained agreement with the NMPA on the development plan for a bridging study in China. If you recall, results from Karuna's EMERGEN II trial were released this August. This pivotal trial met primary endpoint, with CAR-ST demonstrating a statistically significant 9.6 reduction in PANS total score compared to placebo at week five. In addition, Karuna initiated the Phase III ADEPT-1 study evaluating CAR-XT as a treatment for psychosis and Alzheimer's disease and has completed enrollment in the Phase III Emergent III trial in schizophrenia. Karuna expects top-line data from the Phase III Emergent III trial in schizophrenia in the first quarter of 2023. And lastly, our internally developed topical IL-17 product, CL1102, continues to progress towards initiation of a global Phase II study in chronic plaque psoriasis in the fourth quarter of 2022, subject to further feedback from regulators. We recently presented the results of the Phase I proof of concept study for CL1102 at the 2022 European Academy of Dermatology and Venerology Congress. Regarding our anti-infective portfolio, we had several noteworthy developments. For CL2402 or SULDUR, we are on track to submit an NDA for the treatment of Acidobacter baumannii infections to the NMPA by the end of this year. And for Mardacycline musaira, we plan to initiate post-approval commitment studies next year and have started the dialogue with CDE about operational details. And now, Billy will speak about progress with our commercial products and financial results. Billy?

Thank you, Harold. Xylaq continues to execute well with strong results delivered in the third quarter. For the three-month end of September 30th, 2022, our total revenues were $57.5 million, compared to $43.1 million for the same period in 2021, representing year-over-year growth of 33%. Net product revenues for the period were $39.2 million for Gejula, compared to $28.2 million for the same period in 2021, representing 39% growth. $10.7 million for Optune, which we expect to resume its growth trajectory this quarter, $5.5 million for Kinloch compared to $4.3 million for the same period in 2021, and $1.5 million for Nazara compared to nil for the same period last year. We believe Kinloch and Nazara are on track to enter negotiation with the NMPA regarding potential inclusion in the NRDL by the end of the year. R&D expenses were $99.5 million for the three months ended September 30th, 2022, compared to $55.1 million for the same period in 2021. The increase in R&D expenses were primarily due to the $30 million upfront payment for the CGEN deal in the third quarter of 2022, along with increased expenses related to ongoing and newly initiated clinical trials and higher payroll and payroll related expenses from increased R&D headcount and share based compensation. Expenses were 66.6 dollars for the 3 months ended September 30, 2022. Compared to 59M dollars for the same period in 2021. The increase was primarily due to payroll and payroll related expenses from increased commercial and general and administrative headcount and share based compensation. As I continue to enhance infrastructure and commercial operation, the many new drug approvals and launches and deliver strong cop line growth. We expect our net product revenue to exceed cost to get sold and commercial expenses in 2023. That loss was 161.2M dollars for the 3 months ended September 30, 2022 compared to 96.4M dollars in the same period last year. The increase in net loss was primarily due to 30Million dollars upfront payment. For the new collaboration and license agreement. And an increase in foreign exchange loss of 36.7Million dollars. Which is a non cash adjustment that loss per ordinary share during the 3 months ended September 30th, 2022 was 17 cents. Compared to 10 cents for the same period in 2021. Net loss per ADS during the three months ended September 30, 2022, was $1.68, compared to $1.01 for the same period in 2021. As of September 30, 2022, cash and cash equivalents, short-term investments, and restricted cash totaled $1.12 billion, which we expect will provide us with cash runway through 2025. We would now like to turn the call back over to the operator to open the line for questions.

We would now like to open the line for questions. If you have a question, please press star one and one at this time. Your first question comes from the line of Michael Yee from SIS.

Hi, good morning. Thank you for the updates. We had two questions. Maybe, Samantha or Billy, you could talk a little bit about the fluid dynamics in China as it relates to obviously shutdowns and just general ongoing

dynamics, even as it relates to, say, doing business development with U.S. biotechs. For example, I note in the queue, you know, more updates around security measures and, you know, restrictions around cross-border data flow and data information on Chinese patients. So maybe just make some high-level comments about that because it's certainly an issue that has been weighing on investors. That's question number one. And then just question number two, I know previously The company suggested NRDL is possible, or at least in discussion, for devices. So I just wanted to hear an update on that, since Lunar is coming for TTF, and that could be important. Thank you.

Great. Thanks, Mike. So let's all probably get started on your first question, and then, you know, maybe Jonathan also can kind of tie into the BD front, and Samantha can make some comments, you know, from any overarching regulatory point of view. And then we'll move on to your second question. Now, in relation to the COVID situation or, you know, the challenging operating environment due to the ongoing flare-up, it is a reality. You know, we've been talking about it, and I'm sure you've seen it. You know, it's more of a global phenomenon, and you're spending a lot of time covering it. This year, starting and really from early on this year and really throughout, we have been sort of discussing about how we've been able to kind of operate and even this environment continue to execute well. And we've been able to show great durability and resilience due to some of the specific kind of creative things that we've been doing. But it is, I mean, Mike, I'm not going to sugarcoat it. I mean, even probably today, you're probably seeing news of flare ups happening, you know, in China and the continuation of a dynamic zero COVID policy. So, you know, we expect to have additional, you know, sort of we're monitoring it very closely. We're staying agile. We're very confident that we can kind of grind through this environment and we'll hope for the best in terms of, you know, sort of getting into some sense of normalcy, you know, in the not too distant future. And if that happens, we think that will be even better And now in terms of your other question on BD and are there any sort of geopolitical or regulatory hurdles for us to continue to do BD deals and to do very important strategic, important transactions going forward? Maybe I'll have John chime in here and then Samantha can add if she can.

Yeah, Mike, just on the second part of that question, the short answer is there has been no impact. There's no impact. Last year, as you saw, we've done many significant deals. We just announced the deal last month, as Josh said, with a very reputable company, Seattle Genetics, for a commercial stage asset. China is the second largest pharmaceutical market. Whether small companies or big companies, it is too important to miss. And it's not only because of the commercial opportunity. More importantly, it's also to help them accelerate their global timeline. I mean, if you look at the companies that do well in China, like perhaps AZs and others, I mean, they're contributing 20, 30% of their global patient recruitment, pivotal trials coming from China. At the end of the day, we are providing important medicine, basic medicine to patients. So, you know, we do not think this will be affected, you know, even though there are greater, obviously, geopolitical concerns around. But so far for Zai, you know, for all of our current deals, our negotiating deals, you know, it is a topic to be discussed, but it's never been a roadblock for us or delaying any of our timelines.

Yeah, Michael, also come back to your number three questions regarding government. And then MSA has issued some guidance about including medical device in the national reimbursement. And I think they definitely have been trying very hard, even though now all the medical devices, innovative ones, can get a local government sponsored but putting up international level is really key. So they're talking about in two, three term, two, three year terms. So it's coming, you know, it's not like they're talking about in five to 10 years terms. And even though, you know, on the NRDL inclusion, more and more government talk about number one, how much innovation you have, you're the first in class, best in class. even specifically this year, highlight for rare disease, for children's disease. So that's all helpful to the positive trend.

That's great. Thank you.

Great news. Thank you.

Sure. Thanks, Matt.

Thank you. We will move to our next question. And the question comes from the line of Yigal Nokomovic from Citi. Please ask your question.

Yeah, hi, Samantha and Tim. Thanks very much for taking the question. I just wanted to follow up on the comments regarding the NOVA versus NORA comparison that you're making. Obviously, it's encouraging to see the favorable OS trends in NORA. So just a few questions there. Can you comment on the percent maturity of the overall survival in NORA? And are you seeing stronger OS trends in G-BRCA or the non-G-BRCA group? And then what's your current hypothesis as to why in your China trial and the NORA trial so far the OS is trending favorably, whereas obviously in the NOVA trial from GSK it didn't end up that way? Thank you.

Thank you, Gal. Josh, do you want to kick it off? And I'll take some time in if needed.

Yeah, sure. Good morning, Gal. Thanks for the question. First, in the NORA trial, we'd expect to achieve, you know, the number of events in 2023. So, we're, you know, we're well along toward maturity but don't have a specific percentage there. And we, you know, what we can say is, at this point, having looked at the data, that the, you know, the numeric trend is, you know, is favorable in both populations. Again, I'd remind everyone that the study was powered for PFS, not OS, and we'll disclose that data in 2023 when the study is complete, but we take patient safety very seriously, and based on our analysis of the data, given what we know from the NOVA study, we feel confident that there's a positive risk benefit in the data we're seeing from an overall survival perspective as well. So, I think that's probably the most important thing, and I keep reemphasizing, we do have a separate study, full phase three, full approval based on PFS. I think in terms of why we may see differences, probably the most significant difference that we know of in the studies is the fact that we used an individualized dosing regimen in in NORA where the dosing based on weight and platelet counts between 200 and 300 milligrams. And we think that allows patients to stay on the drug, have fewer side effects, and get the full efficacy benefit. That could be one of the reasons. Again, though, as you know, looking at the NOVA study, it wasn't powered certainly for overall survival and all the challenges that come with crossover and otherwise. So, again, we're confident in the studies that we see in China and confident that we're providing a real and meaningful benefit to patients, both in first-line and second-line all-commerce settings.

Okay. And then, Billy, just on the commercial business, obviously, the Jula had another strong growth quarter-on-quarter of 15%, similar to last quarter. You know, is the conclusion that the COVID headwinds, and I know given the comments you made earlier, but in general, do you think the COVID headwinds are pretty much behind us? And when would you feel comfortable giving the initial revenue guidance for the Jula? And then for Quinlan, obviously, there was a very, very strong rebound over the second quarter. You could elaborate a little bit on the dynamics there. And then finally, for Optune, obviously, you said you reflect, you know, year on year. down a little bit relative to the first half, so if you could just give us some thoughts as to how that trajectory will evolve. Thank you.

Yeah, thanks, Igor. On the doula, you know, I think, I mean, look, we're still in a challenging operating environment, as we've talked about before. But, you know, we've been able to navigate this well. We expect to continue to navigate it well. And while we don't give, you know, guidance on specific revenue and margins, et cetera, at this time, feel very good about you know reiterating our statement that visual is positioned uh to be the market share leader uh by no later than next year and you know we look forward to delivering that on on that goal um on uh kinlock you're right we had a great uh great quarter uh in third quarter um now if you recall in the last earnings we mentioned that we adjusted uh the pricing uh to prepare for the nrd negotiations clearly that helped uh sort of uh you know drive some you know kind of initial demand right off the bat. And it continues to be endorsed within the best practice guidelines, not only in advanced line, but even in earlier lines as well. It actually got a little bit of an upgrade on second line. So that could help build awareness for Kinlog. So we look forward to getting over the hurdle if we can with NRDL. Let's see if we can get to the rational pricing level that we like or that we can accept. And next year, if under those circumstances, we should have good trajectory And I think, Yigal, you were asking about Optune on the last piece. And you're right. So we had a flat quarter year over year at just shy of $11 million. And as you heard from the opening remarks, we do expect to resume growth in fourth quarter and position ourselves well for 2023 and beyond. What really has been going on for Optune, as you may know, you know, Optune has, you know, it's been, the market action strategy has been around in the top cities, you know, supplement insurance is very helpful, and that's a real growth area, and in the large hospitals. So, when you have, and, you know, cities like Shanghai, which is in the past, but even like Chengdu, right, that was a more recent one, it's going to, you know, have more of an impact than, let's say, a nationally reimbursed you know, treatment option like the Jula where we have more, you know, kind of strategies to maneuver. So, I think those are the comments that we'd like to kind of message to you.

Also, there are two things I would like to add here. First of all, I don't think we can clear the COVID situation over, especially the quarantine situation is still not over. Number two, in terms of opportune, the major reason cost, not only we say it's COVID, right, but also because all the major hospitals now, very few people can take surgery. And so surgery has to go through a very stringent, you know, analysis and waiting for COVID testing reports, all of that. Bottom line is that there's less surgery taken on the, because we usually give to patients, took a surgery, then we'll put it on, right? So this is also another reason cause the, you know, year over year we didn't see a significant growth or even further growth. Got it.

Thank you.

Thank you. We will take our next question. And the question comes from the line of Anupam Rama from JP Morgan. Please ask your question. Hey, guys.

Thanks so much for taking the question. Two really quick ones from me. The 1.2 billion of cash, one question we frequently get is kind of what is the cash runway sufficient to? And then on 1102, the internal pipeline program, I think, correct me if I'm wrong, this will be the first global study that Xilad conducts on its own. I'm sure we think about the geographic breakdown of this study as you think about Asia, US, EU, and other regions. Thanks so much.

Thanks, Anupam. We'll give the second question to Harold. On your first question on cash runway, we feel pretty good about having runway through 2025. As we stated, our revenue, even this environment, we have a durable, resilient revenue curve. We expect to see that. We just flat out think that the demand is there and we see it. Now we have some on the supply side issues with COVID, but the demand is clearly there for our portfolio and the drugs that we're trying to bring in. So we feel pretty good about that. And by the way, that's including BD deals along the way. on an annual basis. So with that, I'll hand it over to Harold on the second question on 1102. Yeah, hi.

This is Harold. You're absolutely correct. This is the first ZY program which is global to go into phase two. It is a drug which we've developed in-house and which has, as you remember, had a very nice proof of concept readout. So we are anxious to move into phase two. And we have selected certain territories, North America being one, Asia being another one, Australia being another one. We do believe that we can place the study in various territories, and we are just awaiting the feedback from regulators as to where and in what sequence to place it.

Thanks so much for taking our questions. You're welcome.

Thank you. We will move to our next question. Please stand by. The question comes from the line of C.E. Shen from Goldman Sachs. Please ask your question.

Good morning. Thank you for taking my questions. Two questions. The first one is really on the expense control because in the past nine months, three quarters, we have seen companies have been controlling the OPEX pretty well. And just as Billy mentioned, now you are really extending the cash runway to 2025. So we try to understand a bit more on that. What you have done, are you freezing the headcounts or laying off some people? And also, have you prioritized terminating any of the projects? So we're trying to understand how you actually achieve that. And more importantly, looking forward, like 12 months, what are the major milestone payments you could potentially pay out and how big that could be? And second question is really on CAR-XT. I think you have agreed with CDE that you're going to run a bridging study. So try to understand on how you're going to design the trial in China and how long does it take for the bridging study to be completed in China and for the potential regulatory filing. And particularly, CAR-XT is going to be targeting very different therapeutic areas compared to oncology portfolio you have.

so um in terms of the future commercial strategy uh what is um your current strategy uh current thinking of that thank you hey thanks for your questions i'll take the first and give the correct question to harold um for the yeah i mean the the controlling expenses uh you know topic Yeah, I mean, we are, you know, the investments that we made and the progress we've made allows us to really not only maintain growth, but also, you know, get into increases in productivity as well. And clearly you see that, you know, this year. But I would say that in terms of, you know, prioritizing our resources, it's really embedded sort of in how we operate the business and really in our culture. Even if you go back a couple of years, you would have seen us talk about very quickly being able to prioritize the resources and, you know, even our prioritizing, you know, certain programs ahead of others. So if you look back, you'll see that cadence and, you know, more specifically this year, as an example, over the past, you know, two, three sort of filing cycles, we also announced, you know, some programs that we have elected to be prioritized so that we can make sure to, you know, continue to grow, you know, and we're making good advances on the mid to late stage. clinical programs and also the operating leverage that's kicking in into our commercial strategy. So, you know, I think that'll continue. And, you know, we feel pretty confident about that going forward. And I think the part B of that question was on milestone payments. Now, we don't disclose in our filings, you know, the breakdown of the details on milestone payments, but I can tell you, I think there's a kind of a confusion, you know, a lot of people get confused with, you know, these kind of what we call bio bucks in the industry, right? You see, you know, pretty big numbers, a couple hundred million dollars, over a billion dollars in some of these strategic deals. But what I can tell you is that, you know, while we don't give guidance like next year or over the next 12 months, you know, all the payments related to, you know, development report milestones that we have in our pretty broad portfolio, I would just basically say that it's less than a typical upfront payment for a deal. right, including the most recent one we did with CGEN, if you just kind of saw, I'll just kind of give that framework. So the main messaging being, you know, it's in, you know, the actual payments that goes out is quite, you know, quite sensible. So, and not material, which is also why we don't have to disclose it, right? Because if it was material, we would. So I'll now turn it over to Harold for the second question on CAR-XT.

Yeah, thank you. Car XT situation is really evolving. We have, as you said, reached agreement after negotiations with the CDE on a bridging program, bridging study for China. That study, we have currently an agreement and we are awaiting the formal approval for that. And once that is in house, we will start the program. We are currently Thinking of a study program and I cannot go into great details But I can say this much that it will be very similar as a study design as The emergent studies that you know, they are two identical emergent studies the emergent two which just read out and emergent three Which is a copy of emergent two. So we will try to mimic that with slight modifications as needed and So the design is clear. The structure and the requirements that the regulators have on us is also fairly clear. And, you know, these are acute schizophrenia studies. Nowadays, they take a total of five weeks to execute the actual study. But obviously, there is a follow up. Then as far as the portfolio, I think there was some question about that. This is the first study in the area that we called neurosciences. But we clearly have an interest to get into neurosciences with several of our other programs. And neurosciences is, for instance, quite dominant on the FGAR-TIGIMOD side of things because we are running a CIDP study there. We are running, obviously, GMG. And so we are very familiar with the space as such and have the context in the space. Thank you.

Got it. Thank you.

Thank you. We will take our next question. And the question comes from the line of Jonathan Chang from SVB Securities. Please ask your question.

Hi, guys. Thanks for taking my questions. First question on TIVDAC. Can you discuss your views on the opportunities both in cervical cancer and other tumor types? and how much of a headwind or not the ocular toxicities associated with the drug are. And then on the second question, on the business development front, this has been a quieter year than in the past. Can you provide some color on the considerations for this year and how you're thinking about additional in-licensing opportunities moving forward? Thank you.

Hey, John, do you want to take these questions from Jonathan?

Sure. Thanks for the question, Jonathan. First, on the first question, the ocular toxicities that TIVDAC has shown are pretty low-grade ocular toxicities. So it's, I think, a lot benign than some of these other ADCs. And these ocular toxicities can be easily managed through your typical eye drops. So, you know, I think the safety profile is actually pretty good for this ADC. And then TIVDAC, you know, it's a first in class product. And it's a product which especially in China is very relevant because cervical cancer is today 110,000 annual incidents. It has the highest mortality of all the, you know, women, you know, oncology diseases. you know, especially, you know, relevant China because, you know, Gardasil is only approved more recently, you know, for Gardasil and the vaccines to really drive down cervical cancer incidence. It's going to take decades, you know, because these patients sort of emerged with the disease, you know, in their 50s. So you basically have to fast forward at least 10, 20 years for that really to take effect. So we view the incidence is going to continue to grow. There is a, you know, limited number of treatment options. IO is really the only other, you know, product that's available here. So, you know, we believe TIBDAC, a targeted therapy, you know, would be widely used by physicians in an area with high medical need, you know, in cervical in China. And then also, I think, you know, the other thing is for Zai, you know, there's a lot of synergies because we don't have to add any, you know, sales force. We can just, you know, tag along with our, you know, neuropathic ovarian cancer sales team. So, you know, I think that side is also very advantageous for us, you know, given the relationships we have. Now, on the second question, you know, for business development, you know, first, you know, there are variabilities throughout the year. I mean, last year we had a, you know, at least from a quantity perspective, a lot more deals and we did a number of very significant transactions. Admittedly, products like EFGAR, like CarXT, Adagrasive, they don't come every year. So first of all, I think there are variability because of that. So we have a very, I mean, we always have a very high standard when we're bringing assets. It has to be globally competitive, globally differentiated assets. So that's first and foremost. Now, within that broader context, you know, obviously this year, you know, everybody because of the capital market, you know, we have to be extra cautious. So we are taking approaches as we look internally, as we look externally to add this additional lens because, you know, we do have a very broad and diverse pipeline today. We have a lot of products to support our growth. And, you know, our share price, unfortunately, you know, is not where we hope it can be. So we have to take that into consideration as we look at new BD opportunities as well. But look, if there's another asset like an FGAR, like a CAR-XT, we will be aggressive and we will bring it in. And in addition to these regional opportunities, we have global opportunities today because today's market is different from last year's from a business development perspective. There are more opportunities that may offer rights which may not be available in past years, including global rights, including 50-50 global rights, that biotechs in the United States and in China may be interested in because of the conditions. You know, I think as Josh also made in his remarks, you know, we are also looking at other types of deals, which, you know, can we help other types of companies to bring broader portfolio assets, you know, to help them in China from a development as well as a commercial perspective. So we are busy. So stay tuned. And, you know, I'm sure you'll hear more from business development, you know, over the next few months.

Got it. Thank you.

Thank you. We will take our next question. The question comes from the line of Seamus Fernandez from Guggenheim Partners. Please ask your question.

Oh, great. Thanks for the question. So just two quick ones. Just as we think about the car XT opportunity just hoping that you guys could frame that opportunity for us in terms of the size of the market opportunity again and perhaps when we might see a possible entry into the Chinese the market in China and then just the last question is you know specific to the lunar study Can you just help us understand what the timeframe is, and if that were to fail, how your investment behind that program would work out? Thanks so much. Bye.

Hey, James. Thanks for your question. Maybe I'll address your second question first, and then I'll hand the second one to Jonathan. It's John on CarXT Opportunity in China. For Lunar, I mean, there's actually multiple shots on goal. Lunar is pretty significant. You know, milestone is coming up pretty soon, you know, probably early Q1. And, you know, I think we'll go from there. Samantha spoke previously about an opportunity to even get national reimbursement. in the future. So, you know, if everything goes well, this will be a real, you know, sort of step change. You know, we're talking about, you know, in a pretty big quantum step change in the real opportunity, you know, mass market opportunity here for tumor-treating fields. Now, Seamus, your question is lunar, you know, data, you know, is not cooperative. You know, there are other shots on goals as well, right? There's, you know, global phase three trials going on right now in pretty advanced stages and progressing across pretty large tumor types as well. So, you know, is, you know, is Lunar important? Yes. Is that, you know, kind of be all end all? You know, certainly not. But, you know, we're hoping for the best. We remain cautiously optimistic and we'll make a data-driven decision regardless.

Yeah. I think with or without Lunar's success, And I don't think it should hurt Xilab considering whatever market evaluation we're at.

Hi, Seamus. Hi, Jonathan. So maybe also to address your first question on CARXT. Look, I think it's a pretty sizable market opportunity. There are 8 million schizophrenia patients in China. Obviously, there are other indications which are working with Karuna to expand. But the lead indication, schizophrenia, there are 8 million patients, of which 4 million are currently getting active treatment on the registrar. And so I think you know the product profile well, because I think not only on the safety side, but on the efficacy side for both the positive and the negative symptoms, there are differentiations. So given the product profile, Given that in this sector there has not really been something innovative, something that's impactful on these different dimensions, I think this product will make a pretty significant impact once we launch it. And this market is also very concentrated. The psychiatric hospitals and some of the neurology departments in the larger hospitals, you do not need a large cell stream to cover it. You know, we believe looking at other players in this market, you know, you're looking at probably about 200, you know, FDM sort of Salesforce. And we also have coverage in many of these hospitals, you know, with our neurology franchise, with our opportunity even. So I think there are definitely synergies there. From a timeline perspective, I think, you know, Howard already mentioned that. I mean, we only need to do one abbreviated bridging study. So it's a pretty, you know, quick and, you know, simple path forward, and we'll give more guidance, you know, as we start that study.

Thank you. I will now turn back over to Xilab's CEO, Samantha Dew, for closing remarks.

Thank you, operator. I would like 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 and again after the next quarter. Operators, you may now disconnect this call. This concludes today's conference call.

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