Zai Lab Limited

Ladies and gentlemen, thank you for standing by and welcome to Xilab full year and fourth quarter 2022 financial results conference call. Through the call, I'd like to remind you that the audience who are joining via the webcast can refer to the presentation slides and follow along with management presentation. The slides will be available for download in the Investor Relations section of ZayLab's website after this call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Any section will follow at that time. As a reminder, today's call is being recorded. It's now my pleasure to turn the floor over to Billy Chu, CF Financial Officer of ZayLab, who will make introductory comments.

Thank you, operator.

Good morning, good evening, and welcome, everyone. Xialab recently issued a press release providing the details of the company's full year 2022 financial results, 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.xialaboratory.com. Today's call will be led by Dr. Samantha Du. Zylabs founder, chief executive officer, and chairperson. After Dr. Du provides opening remarks with an overview of 2022 highlights, Josh Smiley, chief operating officer, will further discuss key business updates and 2023 strategic priorities. Dr. Rafael Amado, president and head of global development oncology, We'll discuss advances with our oncology product candidates. Dr. Harold Reinhart, President and Head of Global Development, Neuroscience, Autoimmune, and Infectious Diseases, will speak about progress we have made in those three therapeutic areas. And I will discuss the performance of our marketed products and conclude with comments on our full year and fourth quarter financial results. Additional vectors will be available to answer questions during the Q&A portion of the call. As a reminder, during today's call, Xilab will be making certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including with respect to our business plans and objectives, clinical trials, sales and revenue forecasts for our products and product candidates, regulatory applications, and commercial launches. Such forward-looking statements are not guarantees of future performance, and therefore, we should not put undue reliance upon them. These statements are subject to numerous risks and uncertainties, 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 Xilab's founder, chief executive officer, and chairperson, Dr. Samantha Du.

Thank you, Billy. Hello, everyone, and thank you all for joining us today. On this call, I'll discuss highlights from 2022 and what we expect to accomplish in 2023 and in the longer term. In 2022, despite challenges from the COVID-19 pandemic in China, our four market products each had substantial sales growth, and we made exciting improvements across our broad and advanced platforms. Our platform assets continue to demonstrate potential best-in-class or first-in-class profile globally. The numerous positive late-stage data readouts announced during the year, including adagraphic in non-small cell lung cancer, CAR-T in schizophrenia, and eschatizumab in ITP and GMT. We're also pleased to have contributed to several successful vegetational studies including the Tumor Treating Fields, LUNA study, and the Rebel Treadmill, TREADM1 study. We're pleased to have added Kinglock and New Thera to China's national reimbursement job list in 2023. We further deepened our women's cancer franchise through our strategic collaboration with CSIS for T-STAT. And we continue to significantly enhance our talented global team, further building on our solid foundation. Skylab is already a leading global biotech with very new scale, a world-class pipeline, and a growing commercial portfolio in China. We expect to achieve commercial profitability this year and are preparing to launch at least eight additional products and achieve overall corporate profitability by the end of 2025. We will continue to invest in R&D as we seek to advance in our product pipeline, including our internal discovery activities and accelerate medicines for patients in need. We also aim to strengthen our portfolio and strategic positioning with potentially transformative assets and partnerships We believe that the global regulatory environment will continue to be supportive of innovative pharmaceutical companies like Zyla. We'll continue to build on our success in pursuit of our overall goal of improving human health in China and globally. I would like to now turn the call over to Josh to discuss other key business updates and 2023 strategic Priorities in more detail. Josh?

Thank you, Samantha. As Samantha mentioned, in 2022, we continue to attract top talent with deep domain expertise. I'd like to highlight a few recent additions to our global leadership team. In December, we were pleased to welcome Dr. Rafael Amado to our team as President, Head of Global Oncology Research and Development. Rafael joined us from Allogene, and he has experience in leading worldwide discovery and clinical development across a broad range of oncology products. In November 2022, Dr. Peter Huang joined us as our chief scientific officer. Dr. Huang will lead and oversee our discovery efforts in translational medicine. We were also pleased to appoint Michelle Venakos to our board of directors in January 2023. Mr. Venatos brings to the board extensive global leadership and management experience in the biopharmaceutical industry, including more than 25 years of service as an executive at leading companies. His expertise includes a significant amount of commercial experience in China and worldwide. We expect 2023 to be a very exciting year for Zai, as we anticipate achieving many significant milestones. First, on the regulatory front for F-Cortegemod, we expect BLA approval and commercial launch for the IV formulation of efcortijimod in generalized myasthenia gravis, or GMG, in 2023, and a BLA submission for the subcutaneous efcortijimod in GMG in mid-2023. We also plan to submit a new drug application to the NMPA for ripotrectinib in ROS1 positive advanced non-small cell lung cancer this year. We're also pleased to obtain the NMPA's acceptance of the NDA for sulbacter duralbactum for the treatment of infections caused by Acinabacter baumannii. Regarding our commercial products, we delivered good growth, even though we faced COVID challenges last year. And now, with the COVID challenges mostly behind us, we expect strong growth in revenue in 2023. We expect Zejula to become the leader in PARP sales for ovarian cancer in China this year. In the fourth quarter of 2022, we continue to gain share of hospital sales across all indications, reaching 39% of total PARP hospital sales. Since last September, there's been some concern around Zejula's China label for ovarian cancer in the recurrent setting on the back of the U.S. FDA decision. However, as we've previously communicated, we do not expect the U.S. label restriction to impact the approval from the NMPA for Zejula in China. For Kinloch and NuZyra, we anticipate a significant increase in the sales of both products following their inclusion this year on the NRDL. Moving to key research and clinical development milestones for both ZY and partners, we are looking forward to the top-line data readouts for subcutaneous efflortigimab for chronic inflammatory demyelinating polyradionucleoneuropathy, or CIDP, in the second quarter of 2023 and Pemphibis vulgaris, or PV, and chronic immune thrombocytopenia, or ITP, in the second half of 2023. We also expect the full data readout of the tumor treating field lunar study in non-small cell lung cancer in the first half of 2023. We also look forward to the clinical data update for Atagracib in combination with Prembolizumab in the first line KRAS G12C mutated non-small cell lung cancer in the second half of 2023. In terms of clinical developments, we will complete the enrollment in the Global Phase III Innovative 301 Study of TIBDAC in second- and third-line cervical cancer in the first half of 2023. We also plan to join the Global Phase III Fortitude 101 Study of Vemurituzumab in first-line gastric cancer in China in mid-2023, and we anticipate initiating a bridging study of CAR-XT for schizophrenia in China in mid-2023. I'd like to emphasize the advancement of these potential treatments for lung and gastric cancers continues to add desired strength in these areas of large unmet patient needs. We will continue to invest in R&D and advance our internal global pipeline. In terms of key research milestones, we plan to move ZL1102 for potential in chronic plaque psoriasis into full global development with the initiation of a global phase two study in 2023. We also plan to initiate a global phase one study for ZL1218 or CCR8 in the first half of 2023. Of course, we also continue to evaluate business development opportunities, including the addition of potentially transformative opportunities and partnerships for our regional and global pipeline. Xilab is a trusted brand and strategic partner of choice, and we look forward to entering into more deals that we believe will create significant value and synergies to our existing business. Before I conclude, I'd like to welcome Dr. Rafael Amato to his first earnings call with Zai. Rafael will make introductory remarks before discussing advances with respect for oncology product candidates. And now I'll turn the call over to Dr. Amato. Rafael?

Thank you, Josh. I'm thrilled to be joining Zai Lab at such a pivotal time in the company's history. As a physician scientist, I've had the privilege to work on the development and approval of cancer therapies across various modalities and to form and lead R&D teams. XAI has a broad portfolio of innovative products, capabilities for development in Greater China, and the ambition to continue to globalize research and development in oncology. The combination of products with transformational potential, excellence in execution, together with the ambition for global expansion, makes Dylab an easy choice as the next step in my career. I look forward to working with outstanding colleagues to continue to build capabilities and to help catalyze the expansion of our oncology pipeline. In the fourth quarter of 2022, Dylab's oncology franchise continues to make progress on all fronts, and we expect to have a productive year in 2023. For tumor-treating fields, in January 2023, XyLab and Novocare announced that the LUNAR study met its primary endpoint, demonstrating a statistically significant and clinically meaningful improvement in overall survival over standard therapies alone. The LUNAR study also showed a statistically significant and clinically meaningful improvement in overall survival when patients were treated with TTP fields and immune checkpoint inhibitors as compared to those treated with immune checkpoint inhibitors alone. And a positive trend in overall survival when patients were treated with TTP fields and docetaxel versus docetaxel alone. TTP field therapies was well tolerated with patients enrolled in the experimental arms of the study. We are excited about the potential of TT fields to help lung cancer patients. In China alone, lung cancer is the most common cancer type with approximately 700,000 new cancers diagnosed each year. We are pleased to contribute and to be a part of the LUNAR study. Because LUNAR met its primary endpoint of overall survival, we're optimistic about its broad potential across a range of hard-to-treat and prevalent cancers. The next-stage studies underway in certain other cancer types include pancreatic, where ZY is actively enrolling. Moving now to Cresati or Adagratis, it was granted accelerated approval by the FDA in December 2022 for adult patients with KVAS T12C-mutated locally advanced or metastatic non-smoker lung cancer who had received at least one prior systemic therapy. In China, we will continue to accelerate the regulatory pathway for second-line non-small cell lung cancer monotherapy by leveraging the global data package for the FDA approval, the ongoing TK study in China, and the global confirmatory CRYSTAL12 study, which Tsai Lab joined in July 2022. Further, in December 2022, the FDA granted breakthrough therapy designation to adagrassive in combination with cetuximab in patients with KRAS G12C mutated advanced colorectal cancer whose cancer had progressed following prior treatment with chemotherapy and an anti-VEGAS therapy with the results published in the New England Journal of Medicine. Adagrassive demonstrated anti-doumarin activity in heavily protruded patients with KRAS G12C metastatic CRC both as monotherapy and in combination with cetoctinib. Miravi plans to submit the new supplemental drug application in third-line plus KRAS G2C mutated advanced CRC by year-end 2023 and move forward with accelerated approval pathway. XAI initiated enrollment to the randomized crystal 10 study in second-line metastatic CRC in June 2022, and the enrollment completion is expected by the end of 2023. We remain confident that Adagracid is potentially a best-in-class KRAS G2LC inhibitor in colorectal cancer. For first-line multiple cell lung cancer, recall that in December 2022, Murady reported results from the CRYSTAL-7 Phase 2 trial and CRYSTAL-1 Phase 1B cohort, evaluating Adagracid in combination with Pembrolizumab in patients for the treatment of first-line non-small cell lung cancer harboring KRAS T2FC mutations across all PD-L1 subgroups. We are excited that these results are the first to demonstrate the tolerability and feasibility of a concurrent combination regimen of a KRAS T2FC inhibitor and a PD-1 PD-L1 checkpoint inhibitor, and we will continue to work with MIRADI on a first-line registration plan for other grasses. Moving now to CIGILA, we were pleased that NMPA granted full approval to the first-line ovarian cancer maintenance indication on February 3rd, 2023, regardless of biomarker status. In December 2022, we presented new interim overall survival data in Chinese patients with platinum-sensitive recurrent ovarian cancer from the Phase III NORA study conducted exclusively by XyLA at the ESMO virtual plenary session. Median overall survival was numerically longer for patients receiving Sejula regardless of biomarker status at 46.3 months compared to 43.4 months in the placebo group. No new safety issues were identified. We expect to present the final OS analysis of the Phase III NORA study sometime this year. And moving now to our internal global research and development programs, the translational and clinical biomarker data for ZL1211, an anti-chlorine 18.2 antibody, will be presented in a poster at an upcoming ASCR conference. And we plan to initiate a global phase one study in the first half of 2023 for ZL1218, which is an anti-CCR8 antibody. With an abundance of potentially best-in-class and first-in-class products, we're very excited about our oncology pipeline at Zylab. And now, I will turn the floor over to Dr. Harold Reinhart to discuss the progress in our autoimmune infectious disease and neuroscience therapeutic area. Harold?

Thank you, Rafael. I'm excited for the opportunity to share with you today the progress across our autoimmune infectious disease and neuroscience therapeutic areas. Let's start with LivGuard for FGAR-TGMA. On the regulatory front, we and our partner, Igenix, continue to make excellent progress. Igenix recently announced that the FDA has accepted for priority review a BLA for FGAR-TGMA sub-Q for the treatment of adult patients with generalized myasthenia gravis. The PDUFA date is June 20th, 2023. As a reminder, we submitted the BLA for FGAT-TG-MOD-IV for the treatment of patients with GMG in China in the second quarter of 2022, and expect approval and commercial launch this year. We also expect to submit a BLA sub-Q for GMG in mid-2023. We continue to support iGenX on indication expansion in China and worldwide. Indeed, enrollment in two proof-of-concept trials for autoimmune renal diseases has begun this February. Moving on to CAR-XT, the combination of Xenomalin and Traspium which we are developing with our partner Karuna in acute schizophrenia. XyLABS proposed development plan for China has been accepted by the NMPA, and we expect to start a clinical bridging study in mid-2023. As you recall, results from Karuna's EMERGEN II trial were released in August 2022. This pivotal trial made its primary endpoint with CAR-XT demonstrating a statistically significant 9.6 point reduction in PANS total score compared to placebo at week five. In addition, Karuna expects top line data results from the phase three immersion three trial in schizophrenia in first quarter of 2023, and an NDA submission to the FDA for CAR-XT in schizophrenia in mid 2023. Regarding our infectious diseases portfolio, we have several noteworthy developments. For sulbactam duralobactam, or suldur, we submitted the NDA for the treatment of carbapenem-resistant Acetazobacter baumannii infection to the NMPA in December 2022. We were granted priority review one month later in January 2023, and in February, The NDA was officially accepted by the NMPA. We look forward to bringing this novel drug to China and Asia Pacific where severe crab infections are frequent and often can no longer be adequately treated because of multi-drug resistance. For Omada Cycline, Nuthyra, as Samantha mentioned earlier, we are happy to report that it was successfully listed in China's NRDL as of January 2023. And lastly, our internally developed topical IL-17 product, CL1102, continues to progress towards initiation of a Phase II study for chronic plaque psoriasis in later 2023. And now, Billy will speak about progress with our commercial products and financial results. Billy?

Thank you, Harold. Our four marketer products, Zedula, Optune, Kinloch, and Zyra continue to achieve solid revenue growth, driven by strong demand and commercial execution. Zedula continues to perform well and increase its share of part sales for ovarian cancer during the fourth quarter of 2022. We expect Zedula to become the sales leader in China this year. For Optune, we are starting to see a strong recovery given the COVID situation throughout last year, achieving solid revenue growth in the fourth quarter. During 2022, our team focused on continuing to improve market access by expanding commercial and supplemental insurance coverage for Optum and educating physicians about its potentially significant clinical benefits, including survival. As of December 31st, 2022, Optum was covered by 87 municipal or provincial supplemental insurance plans, up from 33 such plans the prior year. We're pleased to have added Kinloch and Muzara to China's national reimbursement drug list in January 2023, and implementation starts this month. As discussed earlier, we expect strong revenue ramp-up for these products as a result of their NRDO inclusion. For Escar-Tijamad, the first and only U.S.-approved FCRN blocker with pipeline and product potential, we're getting ready for the commercial launch later this year. We plan to have a specialized and experienced team for FCAR with about 100 employees at launch. We are quite excited about its blockbuster potential in China. Now I will discuss our full year and fourth quarter of 2022 financial results compared to the prior year period. Total revenues for the full year of 2022 were $215 million compared to $144.3 million in 2021, representing a 49% year-over-year growth. Total revenues for the fourth quarter of 2022 were $62.6 million compared to $44.2 million in the prior year, representing a 41.7% year-over-year growth. Product revenues for the full year of 2022 were $145.2 million for Zejula compared to $93.6 million in 2021, representing a 55.2% year-over-year growth. $47.3 million for Optune compared to $38.9 million for 2021, a 21.6% year-over-year growth. And $15 million for Kinloch compared to $11.6 million in 2021, a 28.7% year-over-year growth. And $5.2 million for Nazira compared to close to zero in 2021. R&D expenses were $286.4 million for 2022 compared to $573.3 million for the same period in 2021. The decrease in R&D expenses in 2022 was primarily due to lower upfront payments for new licensing agreements. Excluding upfront payments for new licensing agreements, R&D expenses were $256.4 million in 2022 compared to $252 million in 2021. SG&A expenses were $259 million for 2022, compared to $218.8 million for the same period in 2021. The increase was primarily due to higher payroll and payroll-related expenses from the increased headcount, as Dylab continued to expand and invest in its commercial operations in China and infrastructure in the United States in anticipation of substantial growth over the next few years. XyLab reported a net loss of $443.3 million, or a loss per share attributable to common stockholders of 46 cents for 2022, compared to a net loss of $704.5 million, or a loss per share attributable to common stockholders of 76 cents for 2021. The decrease in the net loss was primarily attributable to lower payments related to new business development activities and continued growth in product sales. As of December 31, 2022, cash and cash equivalents, short-term investments, and restricted cash totaled $1 billion, compared to $1.4 billion as of December 31, 2021. We would now like to turn the call back over to the operator to open up the line for questions. Operator?

Ladies and gentlemen, we now begin the question and answer session. If you wish to ask a question, please press star 1 1 on your telephone. Please keep your question to maximum of 2. Star 1 1 to ask a question. We are now taking the first question. Please stand by. The first question from Michael He from Jefferies. Please go ahead.

Hey, guys, thanks, and good morning from our side. We had two questions. One was maybe you could just give us sort of a real-time update with how things are going in China as regards to opening up as COVID evolves there, both from a commercial execution standpoint but also from a clinical trial execution standpoint for all the partners. How is that progressing sort of relative to pre-COVID? And then second is obviously with TTF and lung cancer, that was a big announcement recently, appreciating that that needs to probably get filed first, et cetera. How are you thinking about that launch and opportunity relative to GBM and particularly on the reimbursement side, how to think about that opportunity? Thank you.

Hey, thanks, Mike, for your questions. Maybe I'll get started and other colleagues can chime in. So, some on-the-ground reporting from COVID kind of opening, I think everyone is quite familiar with the challenges that everyone faced in 2022 and the impact, of course, even all the way through end of 2022 as well as early this year. We're clearly monitoring the situation very closely and we'll continue to do that. But so far, so good. And it looks like, you know, as we kind of enter right now in March and wrapping up the first quarter, it looks like we're being optimistic going into the spring and beyond and getting back into some semblance of normalcy. So pretty energized. And if you are here and I'm in Shanghai right now, the activity is quite active and buzzing. So it's great to see that. Traffic, not so much. But on the commercial side and the R&D side. On the R&D piece, I think we've really learned, our team in the clinical development, clinical ops team has done a terrific job of navigating the challenges with COVID in the past. And you've seen us consistently execute and have a very resilient performance and not slipping up in any of our commitments to the patients, to the physician community, to our partners, et cetera. So I think for us, we've managed it quite smoothly, so quite proud of that. As well as commercial, and you would have seen consistent growth. I think fourth quarter came in, given what happened even through the end of December and parts of early this year, I think relatively speaking, quite happy with the outcome and looking forward to a more normal environment. So we expect 2023 to be a strong year for growth. On the tumor-treating fields, I think your question was really more towards the commercial opportunity part and reimbursement part. So you've probably heard us say before that like an NRDL, a national reimbursement policy for a technology like tumor treating fields, we think that there's a possibility it could be formalized as early as this year. So we'll all sort of be on standby for that. And if we hear something, we'll kind of upstream to everybody else. And the significance of, I mean, it's subject to data, of course, for lunar, but the opportunity is quite significant. I think Raphael said that there's And people know there's 700,000 new cases per year for non-small cell lung cancer, half of whom are going to be in stage four and about 30 percent in stage three. And despite treatment options available, the significant medical need and that type of quantum number is pretty dire. So, again, subject to the data that should be coming out sometime this year, the opportunity is quite significant and it could be a blockbuster program opportunity for us. Good. Thank you.

Thank you for your question. We are now taking the next question. Please stand by. The next question from Anupam Rama from JP Morgan. Please go ahead. Your line is open.

Hey, guys. Thanks so much for taking the question. Maybe a broader question, actually. You guys have talked a lot about private pay and supplemental insurance. What portion of revenues are currently reimbursed with this mechanism, and what does that look like as you model out to 2025 and 2020-30 timeframe? And which products do you see with the greatest portion being reimbursed by private pay and supplemental insurance?

Thanks so much. Josh, do you want to take this one?

Sure. Thanks for the question. I'd say first, you know, we're pleased with the overall reimbursement environment in China and its development over the last few years. You know, certainly on the supplemental insurance side, we've seen a number of people covered grow from about 40 million at the end of 2020 to 150 million at the end of 2022. We expect that number to grow. over the next few years to somewhere between 200 and 300 million, so a quite sizable population if you start to look at that compared to other countries around the world. So that's certainly positive, and we see the benefits of that most directly now in Optune. So in terms of percentages, while we don't break it out, I think just looking at our 2022 results, Zejula is covered through NRDL. The other three products weren't, so just at a very macro level. You know, about 70% or so of our sales were through some NRDL mechanism, the rest through a combination of, you know, commercial supplemental insurance and private pay. I think as we look forward, though, certainly with the growth in supplemental insurance, that provides a really important option at launch for our innovative products for a sizable number of patients. to have access to the innovation and for physicians to get experience. But our strategies going forward for the kind of drugs that we are developing, either in our internal pipeline or with partners, we think they are ultimately gonna be NRDL opportunities. And Billy alluded earlier that even on the medical device side, we see some really important progress there. So I think Anaplam, Really, our strategy is to bring great innovation as it relates to China, great innovation to Chinese patients, and we want to do that as broadly as possible. So, our lead strategy will be to leverage NRDL opportunities. We're quite pleased with the three products we now have on NRDL and the economics associated with them. In other words, the net price we now have relative to the patient opportunities. We'll continue to pursue that for innovative drugs like efcar-tijamod this year, but certainly the multilayered system we're seeing now in China develop in a robust way provides a lot more flexibility and a lot more options for early access for some sizable amount of patients over time.

Thanks for the question. Thanks so much. Thank you for your question. We are now taking the next question.

The next question for Yigal Nachumovitz from Citi. Let's go ahead. Your line is open.

Hi, thank you for taking the question, Billy. I think you said that you're basically flat year on year on R&D, XP upfronts, and maybe marginally higher year on year on SG&A. If you could just clarify, is the spend basically going to be flattish going forward to drive to overall corporate profitability with the top line growth by the year end 25? Or might you have some flexibility to accelerate OpEx and still navigate to profitability with the top line growth by the end of 25? Thanks.

Yeah, there you go. So you're right. You heard that correctly. In terms of core R&D, it was pretty much at the 250 level. So roughly flat year over year, 21, 22. This year, you can expect a very modest increase. And as you know, we have a pretty active development calendar given the anticipated approvals and launches over the next two, three years. I think we have around eight at least in the queue. So, but I think so you should expect that to be at that range. Now, for SG&A, so we have the S portion. We have said that this year we're going to be commercially profitable, or we target to be commercially profitable even as we build a new sales team for FGAR-KGMA launch. So that's a great place to be. You can expect to see that operating leverage continue to increase as the revenue increases and as we launch additional products. And so there is, you know, a lot of flexibility that we have. And that's, I think, you know, a kind of a great place to be, you know, when you have kind of a growing and relevant scale, a strong balance sheet, and sort of all the engines are firing on all cylinders, you can establish a good baseline and preserve some optionality.

Hey, Billy, I'll just maybe add just one quick point to that is, you know, really our priorities are to grow the top line and to advance our clinical programs. And we've got, you know, a plethora of them. But if we execute on those two priorities, you know, the profitability is going to follow. So, you know, if you look at, you know, products like Zajula and our women's health franchise and the expected growth over the next few years, and then add TIVDAC on top of that, those are the things that are going to drive profitability and give us the flexibility, as Billy mentioned, to continue to invest in, you know, Salesforce, to continue to invest in the clinical program. So, again, to us, it's more around the portfolio that we built. If we execute as we expect to along that side, the profitability is going to compensate.

And just real fast, just one housekeeping on ClinLock and Hizira. So, can you say at this point what the discount is for the NRDL? I think you mentioned the press release, we expect significant increase. Just for our modeling purposes, what does that look like? Thanks.

Yeah, so the NRDL pricing for Kinloch is $2,400 a month. And then for Nuzara, it's $450 a month. Oh, sorry. For Nuzara, it would be for the treatment. It's $450 a month for the treatment cost. Okay, great. All right. Yeah. Thanks.

Thank you for your question. We are now taking the next question. Please stand by. The next question from Jonathan Chang from SBB Securities. Please go ahead. Your line is open.

Hi, guys. Thanks for taking my questions. First question, just to – can you elaborate more on the assumptions underlying your guidance of achieving corporate profitability by the end of 2025 and discuss your level of confidence in this? And then second question, can you discuss Xilab's current state of compliance with the HFCAA and how you're thinking about the situation going forward? Thank you.

Yeah, thanks, Jonathan. So I could take these two. And maybe I'll start with the second one. That's got to be a quick point that I want to, that I can make. So you would have seen that our 10K that we just filed is with KPMG US. And that means that we have filings that are fully accessible by the PCOB. And as a result, you know, we have and continue to believe that we are now fully compliant with all the requirements of the HFCAA. And that's going to preclude us from now and the future to be off sort of any kind of list or any kind of potential for delisting from the NASDAQ. So very proud of the team that worked hard to get this done. And it was strategically very important for us. So I think, again, a little kudos to the team and welcoming KPMG US on board. So to your first question on kind of... How do you feel about the statement that we made about getting to an overall profitability by end of 25? Jonathan, we wouldn't make such statements, you know, unless we carefully thought about it. So the best way to think about the, you know, we're not giving guidance at this time, so we're not going to kind of give you hard numbers, but if you took your, you know, the number that you had for 2025, whether you, Jonathan, or whether the street, and I know there's a range out there, but you take that and you assume, even if you assume just today's gross profit, and you know that's going to continue to improve over, you know, kind of next several years, but You use that and then you kind of stick with sort of the modest assumptions on sales marketing and GNA, especially since we would have already done a lot of heavy lifting infrastructure spend by then. You will be able to get that. So I think we feel pretty good about it. And that gives us the confidence to make a public comment about that.

Got it. Thank you. Thank you for your question. We are now taking the next question.

Please stand by.

The next question from from GS. Please go ahead. Your line is open.

Thank you. Thank you for taking my questions. The first question is, you know, if we're looking at the commercial infrastructure, with more drugs expected to be launched in 2023 and next year, including margituximab, Afgar, Ripple, and more antibiotics. So the therapeutic category is becoming, you know, much bigger compared to what it is now. I'm trying to understand a bit more about your plan in terms of commercialization teams set up in order to achieve the sales efficiency and, of course, maintain the productivity when covering a variety of different therapeutic areas. And secondly, since you mentioned about, you know, Optune, now we're looking forward to the data, but could you elaborate a little bit more about, you know, based on the LUNA data, and what you're planning to communicate to CDE in China and what could potentially be the regulatory pathway and also timetable for the potential indication of approval in China.

Thank you. Yeah, thank you. And I'll give you a second question to Rafael. On your first question, as people who are familiar with Xilab story knows, we've been pretty thoughtful about curating a portfolio that's clustered around specific areas that are very strategic for us. And within that, they're all quite differentiated, and some of the programs are quite large in terms of commercial potential. So potential blockbusters would be the likes of, let's see, based on the data for Lunar, the tumor-treating fields franchise, femurituzumab, Adagracib as a pipeline program, I think that people are also underestimating, underappreciating drugs like CAR-XT, et cetera. So that's point one. Point two is it's actually a, if you look at a snapshot of a quarter, two quarter, three quarter, you will not see it. But if you look at what we have in currently the NDA submission, and you've already mentioned some of those, and you look at the programs that we have in pivotal stage right now, There's also a lot of clustering effect going on. So, for women's cancer franchise that we've already built that with the Jula youth throughout, you know, but we have tip that that Josh mentioned, and these are pretty substantial operating leverage that kicks in. I believe that we have a slide in our corporate deck that says, here's a case study for the Jula. which is the first drug in the women's cancer franchise, you layer TIVDAC on top of that, and we're sort of expecting commercial profitability, kind of profit margins for that product to be in the 40% range and even build upon from there. And then you look at the lung programs in just the near-term stuff, and you've got, in addition to, of course, Lunar, which benefits from, of course, a specialized sales force for tumor treatment fields and often anyways, the lung itself would have Lunar, they have Crisati, we've got the ROS1, and probably missing one or two more. And so we think that we have a lot of, you know, just a great opportunity here to drive productivity as we scale kind of revenue, pretty much at the same time. Again, you will not see it in like, you know, from a quarter view, two quarter view, from within a one to two year timeframe. You should, you know, really begin to see that.

This is Rafael. Please.

Yeah, I just wanted to go over the second part of the question. And, you know, just briefly, Novocare has made public that they expect to submit a PMA or pre-market approval application with the U.S. FDA by the end of, on the second half of this year. That's the equivalent of the NDA for drugs. So our plan is to follow the heels of that submission and submit the MAA following the U.S. submission in China. So, you know, the timing of that is still obviously in flux as we work with our partner for the exact timing of the submission in the U.S., but it will follow very closely the U.S. submission. And then, obviously, there's no particular timeline in China, but we work with the authorities try to, you know, accelerate the approval as soon as possible. So, you know, we expect that this, you know, potentially, you know, could be approved in the not too distant future, and the file will be imminent after the U.S. file.

Got it. Thank you.

Thank you for your question. We are now taking the next question. Please stand by. And the next question from Timo Fernandes from Cook & I Partners. Please go ahead.

Your line is open. Great. Thanks for the question. So just two quick questions. Can you, Timo, if you could just walk us through how you see the CAR XT opportunity evolving? You know, I think, Billy, you specifically stated that you feel this particular program is underappreciated. And just, again, from that SG&A spend perspective, What do you think is necessary to really effectively promote CAR XT to kind of maximize the opportunity? And then just a second quick question. As we think about the tumor treating fields opportunity, obviously manufacturing to support the potential size of that market opportunity is going to be important. Can you just help us understand how you're going to approach that opportunity from a manufacturing perspective. Thanks.

Hey, Seamus. Thanks for your question. I'll provide the manufacturing question to Josh. For your question on CAR XT, yeah, you're right. I did say people are underestimating the potential in China, and we believe that there are more than 8 million people in China living with schizophrenia today, and we believe in this product. And we think that it's got a potential to treat multiple symptom domains as monotherapy or even, you know, And out of the 8 million people, we know that 4.3 million people are diagnosed with severe forms of schizophrenia in the national database. So these are truly significant figures. And so And I think I hear my colleague Harold kind of clearing his throat because I think he may be adding some comments here and there. But feel free to chime in, Harold, on the potential impact of CAR-XT on a kind of a TAM the size of China.

Yeah, thank you. Thank you for the question, too. It's clear that when we in-licensed CAR-XT, we were really keen on bringing something to China which is differentiated. We have and see in CAR-XT in two studies now, in the E1 and in the E2, both are the emergent studies, that this drug is addressing the negative symptoms that are really difficult to treat with existing pharmaceuticals. So that was one major differentiating feature. The second one was the side effect profile. This is a totally different class of drug. And that alone is an important piece to remember because most of the other antipsychotics for schizophrenia, they do come from the serotonin dopamine series and have a certain side effect profile, which is really problematic. That's one of the reasons why a lot of patients do not continue treatment. As far as the addressable patient population, there is a significant unmet need in the patients with schizophrenia just because the negative symptoms are not adequately treated at this point in time. So we see this as a global issue, but we see it also in China where there is a need to bring more psychiatric help to patients who are currently undeserved. There's a government drive to increase the numbers of psychiatrists and to help patients out with schizophrenia, much more so than in the past. So from our perspective, we see a significant market potential in China, and we see it in a patient group that currently has very few options. Thank you.

Yeah, and Seamus, to the second part of your question about what kind of infrastructure the commercial infrastructure is needed, you know, we're not yet in the, you know, we could provide a specific number later on as we're close to the approval and launch, but While the prevalence of disease in neuroscience is quite large, it's a pretty concentrated market. And so we believe that a sales team that's focused and smaller than even an oncology product will be sufficient. And on top of that will be to leverage existing capabilities that we have that we've built for, for example, FGAR in GNG and CIDP, as you know, that touches neurology. And so, you know, I think it will provide specific details later on, but it's going to be an efficient build out.

Thanks. I'll take the manufacturing question on TT Fields. Thanks, Seamus. I think first, this is hopefully a great problem to have. Of course, Novacure's been focused on the breadth and size of the opportunity for many, many years. and have a series of strategies in place to work to bring down manufacturing costs for the device. And I think if we look at the China opportunity, of course, it's gonna be driven by the data. But if you look at the studies that are underway today across various tumors, as well as where the data could lead us, I think our view is there's probably somewhere in the range of 1.8 million patients in China who could benefit from you know, could benefit the technology over time. So the volumes that we're considering and thinking about here could be quite significant. With those volumes, I think there will be very good opportunities to bring down, you know, unit costs. And we're working closely with NovaQR on those strategies. And again, they've got the same view as they look at the world, not just China. But I think we're excited about the commercial opportunity. We certainly believe that given the potential volumes here in the supply chain and manufacturing strategies that Novotour is working on and that we're partnering with them on, that we'll be able to have this be a very attractive economic proposition as well, both at gross margin as well as at the you know, at the bottom line. So again, I think the big focus for us, of course, will be to get through the lunar data to see the readouts from, you know, the study and, you know, other tumors. But we're well, you know, we're well aligned with NovoPure and well prepared to supply the volumes that we think, you know, can benefit Chinese patients and to be able to do that at reasonable gross margins.

Thank you for your question.

We are now taking the next question. Please stand by. And the next question from Yang Wang from Credit Suisse. Please go ahead. Your line is open.

Thanks for taking my questions. I have two. First one is about the lunar trial. We know that we are going to see lunar data in the first half of this year. And I think people are probably, including us, more interested in understanding some subgroup analysis for LUNA, right? Given LUNA trial enrolled both in first line people who only received chemo and the people who received PD-1 plus chemo. So my question is, is that case that the subgroup analysis for the patient who received PD-1 plus chemo in the first line is a kind of key to allow us to file. And in the worst case, let's assume a worst case scenario, if the subgroup analysis in the PD-1 plus chemo group is not that great, considering the treatment landscape is different, between U.S. and China. Will Xilab still consider filing for the indication?

That's my first question. Thanks. Rafael, I think this one's for you.

Yeah, I'll take the question. Thanks for this insightful question. I think the most important thing is to understand that the study met its primary endpoint with both statistically and clinically meaningful results on the primary endpoint. And, you know, in any study, that's really what matters. It is a randomized trial, and the population being studied is the post-platinum population. So prior PD-1 is not a solution criteria. And the study is randomized, obviously, and stratified as well. And factors are supposed to mitigate per patient imbalances. So the important point, I think, is that regardless of the makeup of the PD-1 subgroup, there was a statistically significant and clinically meaningful difference in overall survival in the overall population and in the PD-1 subgroup with the trend in the doxetaxel group. So the details of the patient characteristics and prior treatment history will be shared at future data presentations, and the release is owned by Novocare. So rather than speculating on subgroups, I think it's best to just wait for the full analysis of the data set to interpret the results. But, you know, we should be cautious about subgroup analysis and really focus on the primary analysis, had results that were pretty exciting as reported by Novocare.

Okay, got it. Yeah, my second question is apical mode, commercial preparation. As we understand, this is a kind of real disease in China as well. And so can the company let us know Has the company started to try to identify some MG patients just to prepare for the launch of the drug? And if so, can you let us know how many MG patients you have identified so far?

Yeah. Hey, Yang, I'll take this one. So first of all, the addressable patient pool is quite large for AMG. We're talking about a prevalence of about 200,000. And we strongly believe that F-cartesian mod will become a very important treatment option for these patients. It's early days, but we have started to build awareness. ahead of the anticipated approval launch. As you know, we've launched a, you know, a program in a part of China where, you know, patients can potentially get access. It was really more for strategic purposes, given travel restrictions up until recently, but it really allowed us to engage, you know, with not only the physician, but patients and get some feedback and responses. And it's quite encouraged by what we see and no surprise, right, given what's been happening outside of China, I believe, Argenix just reported a pretty strong first-year sales and engagement and whatever metrics that you follow on the commercial side. So I think that provides a nice read-through for the potential and opportunity in China.

Okay, great. Thank you. Thank you for your question.

There are no further questions at the moment. I will hand back 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 first quarter of 2023. Operator, you may now disconnect the call.