Zai Lab Limited

Hello, ladies and gentlemen. Thank you for standing by. And welcome to XyLab's full year 2023 financial results conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, today's call is being recorded. It is now my pleasure to turn the floor over to Christine Cho, Senior Vice President of Investor Relations, please go ahead.

Thank you, operator. Good morning, good evening, and welcome to XyLab's full year 2023 earnings call. Today's call will be led by Dr. Samantha Du, XyLab's founder, CEO, and chairperson. She will be joined by Josh Smiley, President and Chief Operating Officer, Dr. Rafael Motto, President and Head of Global Oncology Research and Development, Dr. Harold Reinhart, President and Head of Global Development, Neuroscience, Autoimmune and Infectious Diseases, and Dr. Yajing Chen, Chief Financial Officer. Jonathan Wang, our Chief Business Officer, will also be available to answer questions during the Q&A portion of the call. As a reminder, during today's call, we will be making certain forward-looking statements based on our current expectations. These statements are subject to numerous risks and uncertainties that may cause actual results to differ materially from what we expect due to a variety of factors, including those discussed in our SEC filings. We will also refer to product revenue growth rates on a constant exchange rate basis, which is a non-GAAP financial measure. Please refer to our earnings release furnished with the SEC on February 27, 2024, for additional information on this non-GAAP financial measure. At this time, it is my pleasure to turn the call over to Dr. Samantha Du.

Thank you, Christine. In 2023, we had another year of significant achievements for Xilat. We grew our top line by 31% on a constant exchange rate basis. We progressed several key late-stage programs. We added new global assets into our pipeline. Today, we're in a fundamentally stronger position than we have ever been with a growing base of revenues, a path to profitability, and a strong balance sheet with over 800 million USD in cash. We're now entering a period of high growth, and we are focused on three key corporate objectives to substantially grow revenues, achieve profitability, and build our global pipeline. Late last year, we launched VidGuard, and it's already off to an excellent start with sales expected to exceed 70 million USD this year in GMG. Beyond this, we have a series of other potential approvals, including Ripple Tractonate and Sodor later this year, followed by a series of other new product syndications. including Ascotizumab in CIDP, Bimatuzumab, and CAR-CT. Each of these products have the potential to meaningfully enhance the growth of our business. We are also already deeply committed to building our global pipeline by adding new assets to both our internal discovery efforts and external opportunities. And I look forward to providing updates on our progress in this regard throughout the year. And of course, we maintain disciplined capital allocation practices as we strive to achieve profitability. As we execute on these corporate objectives, we expect to deliver value, not only to patients, but also to our shareholders. Thank you for your support. as we continue on our journey of innovation and growth together. And with that, I'll pass the call over to Josh. Josh.

Thank you, Samantha, and thank you, everyone, for joining the call today. XyLab delivered strong full-year revenue growth of 25% year-over-year and 31% on a constant exchange rate basis, driven by robust volume growth across our existing product portfolio and the launch of VivGuard. These revenue increases were partially offset by an increase in sales rebates, both in Q1 of 2023, in connection with new listings for our products on China's 2022 National Reimbursement Drug List, or NRDL, and in Q4 of 2023, in connection with new and renewed NRDL listings for our products on China's 2023 NRDL. A pivotal achievement for us was the approval and subsequent launch of VivGuard in September. followed by its inclusion in the NRDL, which became effective at the beginning of this year. Throughout the fourth quarter, we implemented comprehensive commercial strategies to drive awareness and adoption of DivGuard, and we entered 2024 with considerable momentum. I'm also pleased to announce that in 2023, we achieved our goal of having net product revenue exceed the cost of sales and sales and marketing expenses for our commercial products, which we refer to as commercial profitabilities. Our commitment to financial prudence remains steadfast as we work towards achieving and maintaining profitability. Lastly, we made substantial progress on key clinical development programs, such as EPCAR-TIGEMOD in CIDP and CAR-XT in schizophrenia, while further enriching our global pipeline with the introduction of a next-generation DLL3 ADC. In 2023, we announced our five-year strategic plan aimed at positioning XyLAB as a leading global biopharmaceutical company characterized by substantial revenue growth, achievement of profitability, and a strong global pipeline. This strategic vision is underpinned by three corporate objectives. First, we are focused on accelerating top-line growth. With a strong foundation in place supported by both new product approvals and label expansions within our existing portfolio, we anticipate substantial revenue growth in the coming years. By 2028, we aim to have a significantly larger commercial portfolio with the launch of potential blockbusters such as VivGuard leading the way. Subsequent potential launches include Soldor later this year and TivDax, Bemerituzumab, and CarXT in 2025 and beyond. Such launches would further drive revenue growth with our projections exceeding $2 billion in 2028, reflecting our estimated five-year compound annual growth rate of 50%. Furthermore, we are committed to building our global portfolio through internal discovery initiatives and strategic business development endeavors. Our goal is to advance at least one global IND into clinical trials annually as we continue to evaluate and pursue synergistic global and regional business development opportunities, leveraging Xilab's reputation as a trusted brand and preferred strategic partner. As we continue to grow and develop our commercial portfolio and pipeline, We remain focused on scaling with purpose, and this brings us to our third objective, which is to achieve corporate profitability by the end of 2025. To realize this objective, we will continue to enhance efficiency and productivity, prioritize research and development initiatives, and execute cost optimization strategies. Our existing infrastructure is agile and sized to support multiple new launches. We maintained a robust reserve of cash and cash equivalents of $807.6 million as of the end of 2023, providing ample financial resources to sustain our operations through profitability and beyond. Now I will briefly review the performance of each of our commercial products and our expectations for 2024. Zejula maintained its position as the leader in hospital sales for PARP inhibitors in ovarian cancer in China. exhibiting growth in the fourth quarter and the entire year. In 2024, we will continue to focus on driving further growth in the first-line setting and extending the duration of therapy. In 2023, Kinloch and the IV formulation of Nuzaira joins the JUULA on the NRDL, and these listings help drive substantial sales increases for these products. We expect this positive momentum to continue, supplemented by the additional listing for the oral formulation of Nuzaira in January 2024. As Optune is a medical device and not eligible for NRDL inclusion, we are focused on expanding access and improving affordability for this important treatment through commercial health insurance coverage. Overall, we anticipate year-over-year revenue growth in 2024 for these four products in aggregate to be comparable to that of 2023. Turning now to the recent launch of VivGuard. I want to take a moment to acknowledge the tremendous effort of our medical and regulatory and commercial teams behind VivGuard. We were able to reach important milestones at a swift pace, achieving our best-case scenario with regards to the timing for approval, launch, and NRDL listing. We were pleased to see the regulatory authorities recognize the innovation of VivGuard and its substantial clinical benefit to patients living with generalized myasthenia gravis, or GMG. In China, where there are over 170,000 patients with GMG, many patients endure residual symptoms or inadequate treatment, making everyday tasks challenging and unpredictable. The scarcity of innovative therapies, the persistent shortage of IVIG therapy, and the chronic and progressive nature of the disease can present a formidable challenge for both patients and healthcare providers alike, further underscoring the significance of the VipGuard's approval. Throughout the fourth quarter, our primary focus was on strategically targeting key hospitals and fostering awareness while delivering timely support to physicians and patients alike. And we made great progress. As of December, we had successfully engaged 100% of our top 200 target hospitals and over 90% of our top 100 physicians integrated VivGuard into their treatment protocols. Based on a survey of 250 physicians, Awareness of VivGuard rose from 54% to 72% following four months of promotion, and we continue to see this rise. From launch in September through the end of the year, we estimate that nearly 1,000 patients were treated with VivGuard. Turning now to more recent updates on launch, VivGuard listing on the NRDL became effective on January 1st this year, with a price of $800 a vial or $32,000 per patient per year based on clinical study usage. We estimate that in January 2024 alone, nearly 1,000 new patients were treated with VivGuard, indicating promising progress at this early stage of the launch. This demand is being driven by an unmet need in the treatment of GMG, a willingness of physicians to adopt VivGuard into treatment protocols, and increased patient access as hospitals add VivGuard to their formularies. We're very pleased with the progress achieved thus far with the launch of VivGuard and we anticipate sales to exceed $70 million in 2024. Our strategic focus for the year will be to expand outreach to approximately 1,000 hospitals with a concentrated effort on accelerating VivGuard listing at top tier hospitals. Already as of the end of January, our team has engaged 100% of our top 600 hospitals in person. Supported by our dedicated sales force of approximately 150 reps, we anticipate robust coverage to facilitate this expansion. Additionally, pending regulatory approval, we expect to launch VivGuard's subcutaneous formulation for GMG later this year, which will offer enhanced dosing flexibility for physicians and patients. We're also excited about potential indication expansion for VivGuard. This year, we expect to submit a Supplemental Biologics License application, or SBLA in China, for CIDP, which presents another substantial growth opportunity. This marks an exciting period for XyLab and an important year of execution for our team. And with that, I would like to pass the call to Rafael, who will provide an update on our oncology pipeline. Rafael?

Thank you, Josh. Let me begin by highlighting some of the key progress updates in our oncology pipeline since our last earnings call, along with our next steps. Starting with the marituzumab, our FGFR2B inhibitor in collaboration with Hamdun. We are enrolling in both Fortitude 101 and Fortitude 102 Phase 3 studies, evaluating benmarituzumab in FGFR2B positive gastric cancer as a doublet therapy with chemo and a triplet with chemo and a checkpoint inhibitor respectively. We expect both studies to enroll well, and we're eager to introduce this much needed therapy to China where we estimate an incidence of 126,000 FGFR2V-positive gastric cancer patients each year. Next, our tumor-treating field franchise. In January 2024, our partner NovoCure announced that the FDA had accepted the filing of their premarket approval application for DT fields in non-small cell lung cancer following progression on or after platinum-based therapy, and a regulatory decision is expected in the second half of this year. In China, we expect to file a marketing authorization application for TT fields in this indication later this year. We also expect two pivotal readouts for tumor-treating fields, including in brain metastasis from non-small cell lung cancer and in pancreatic cancer, both in the first-line settings. Also in lung cancer, Repotrectinib is currently under priority review for the treatment of adult patients with locally advanced or metastatic ROS1-positive non-Moster lung cancer in China. The filing was based on the results from the pivotal Triton-1 study, which were published in the New England Journal of Medicine in January this year. Findings demonstrated the potential of Repotrectinib to overcome limitations of first-generation tyrosine kinase inhibitors in terms of responses and durability in ROS1-resistant mutations. We look forward to a potential regulatory approval and launch this year to bring this best-in-class ROS1-TRK inhibitor to patients in need in China. Now, moving on to Adagrasif, 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 PK study in China, and the global confirmatory CRYSTAL-12 study, which Zai Lab joined in July 2022, and we await the results for a filing submission in China this year. In addition, our partner BMS announced this month that the FDA has accepted its supplemental NDA for priority review for adagracib in combination with cetuximab, for the treatment of patients with previously treated KRAS G2LC-mutated locally advanced or metastatic colorectal cancer with a PDUFA goal date of June 21, 2024. For this indication, Adagracid has the potential to be the first to market KRAS G2LC inhibitor in China. We completed enrollment in the Global Phase III Crystal 10 confirmatory study in 2023. Lastly, for TIFDAC. We have participated in the confirmatory phase 3 in NOVA TV301 global trial in second-line cervical cancer and continue an extension portion in China, and we intend to file a new drug application or MDA in China this year. In addition to our late stage programs, our DLL3-ADC-ZL1310, has shown promising preclinical data and is progressing through a global phase one study in relapse and refractory small cell lung cancer who has progressed after platinum-based treatment in the United States and in China. In March, we will present the preclinical data at the European Lung Cancer Congress in Prague, and depending on the dose escalation level, we could potentially see early clinical results at the end of 2024 or early 2025. We're also selecting internally discovered product candidates to achieve our goal of generating at least one IND per year, and we continue to assess external opportunities to introduce a new product in development this year. And now, I will turn the floor over to Dr. Harold Reinhart to discuss the progress in our autoimmune, infectious disease, and neuroscience therapeutic areas. Harold?

Thank you, Rafael. This is truly a very exciting time for our neuroscience-altering new and infectious diseases, or NSAID, franchise. And we made significant progress in the past year advancing our pipeline. Starting with Wefgard, or F-Gard-Tegemod. Beyond what Josh shared about the progress for GMG, we are excited about the positive data for treating patients with CIDP, or chronic inflammatory demyelinating polyneuropathy. There are an estimated 50,000 patients diagnosed with CIDP in China. And today, only a small fraction are able to achieve remission on their current standard of care. And the majority of patients continue to be burdened with symptoms that can have a debilitating impact on quality of life. Existing treatment options are limited and quite problematic, given the general reliance on long-term steroid or chronic immunoglobulin therapy. In China, the situation has worsened due to the persistent shortage of IVIG therapy. Our partner, Argenix, announced this month that the FDA had accepted for priority review the SBLA for sub-Q-administered Vifgard Hydrolo in CIDP. It was granted the PDUFA goal date of June 21st of this year. We plan to submit an SBLA to the NMPA in China for this indication in the first half of 2024. In addition, our SBLA for F-Cartezumab sub-Q in GMG is under regulatory review in China with potential NMPA approval this year. This approval would give patients flexibility on treatment with either IV or more convenient sub-Q dosing. F-Cartezumab sub-Q has the advantage of simplicity and speed as administration takes only 30 to 90 seconds for a single dose. We see significant potential for efkartijimod across multiple additional indications, and we will continue to work with our partner, Igenix, on indication expansion. For example, we expect to join them in the registration of study of efkartijimod in thyroid eye disease, or TED, in Greater China in the second half of this year. Turning to CAR-XT, this is a first-in-class antipsychotic combining a centrally acting muscarinic agonist called xenomaline with a peripheral antagonist called traspium, which we are developing with our partner, Corona, for patients with acute schizophrenia. In November 2023, the FDA accepted Karuna's NDA for CAR-XT for the treatment of schizophrenia in adults, with the PDUFA goal date of September 26, 2024. We continue to enroll patients in the Registrational Bridging Study in mainland China, and we expect to complete enrollment this year. We believe that CAR-XT could become an important new treatment option in China, where more than 8 million people are living with schizophrenia and where severe under-treatment and inadequate symptom improvement or even disease control persists, despite currently available antipsychotics. We have yet another substantial opportunity for CAR-XT, which is for the treatment and prevention of psychosis in Alzheimer's disease patients, or ADP for short. There are approximately 8 million people with Alzheimer's disease in China, and about 45% of these patients display psychotic symptoms. We believe that there is a significant unmet need for patients with ADP or Alzheimer's disease or psychosis in China, as there are no approved treatments. Corona initiated the Phase III, ADEPT II, and ADEPT III clinical trials in the third quarter of 2023, and we plan to participate in both studies in Greater China in mid-2024. Regarding our infectious diseases portfolio, sulbactam, duralobactam, or suldur is a treatment for hospital-acquired and ventilator-associated bacterial pneumonia caused by Acinetobacter baumannii. In China, there are 240 to 300,000 cases of Acinetobacter infections annually, with the majority of strains being carbapenem resistant. Latest countrywide surveillance data from China indicate a rise in overall resistance to approximately 80%. With limited treatment options for these patients, the mortality rate is around 43%, even with the best available therapy and care. The WHO has listed ethnic tobacco baumannii as the number one problem pathogen, and the high incidence in China has prompted the Chinese government to prioritize efforts to combat this multi-drug resistant bacteria. Our NDA submission is under priority review, and we are looking forward to a potential approval later this year. Last but not least, CL1102, our IL-17 tumor body for the topical treatment, of Chronic Plaque Psoriasis, or CPP, is in the final stages of preparation for a Global Phase II dose-finding trial, and we intend to initiate the study in mid-2024. So, plenty of exciting progress within our NSAID portfolio, and I look forward to providing updates at our next earnings call. Now, Yajing will provide an overview of our financial results. Yajing.

Thank you, Howard. Now I will discuss our four-year financial results compared to the prior year. In 2023, total net product revenues grew to $266.7 million. This represents year-over-year growth of 25% or 31% on a constant currency basis. Our revenue growth was driven by increased sales volumes and the launch of Visigart partially offset by an increase in our sales rebate to distributors, resulting from price reductions in connection with additional NRDO listings. Sales rebates in connection with NRDO listings rose to $13 million for 2023. These NRDO listings play a crucial role in maintaining patient access to our existing products on NRDO. while it's significantly expanding access for our new products. Growth was also negatively impacted by the temporary effects on the hospital and the physician practices that resulted from industry-wide anti-corruption enforcement efforts in China in the second half of the year. Now, looking at each individual product, the Juna net product revenue increased 16% year over year, to $168.8 million in its third year under NRDL, driven by increased hospital sales in first-line ovarian cancer and a duration of treatment improvement, partially offset by an increase in sales rebates in the fourth quarter in connection with the renewal of the NRDL listing for the July as a maintenance treatment. Basic out-of-net product revenue was $10 million following the launch in China in September, 2023. We successfully negotiated for ViviGuard's first listing on the NLDL with pricing that took effect on January 1st, 2024. Up to net product revenue were relatively flat year over year at $47 million. As continuous growth in supplemental insurance coverage was offset by the disruption in hospital and physician practices, resulting from anti-corruption efforts. CHINLOC grew 29 percent year-over-year to $19.2 million, and Muzaira increased 316 percent to $21.7 million. This growth was supported by the inclusion of CHINLOC and the IV formulation of Muzaira in the NRDL in the first quarter of 2023. partially offset by sales rebate in connection with the scenario listing, as well as sales rebates in the fourth quarter in connection with the inclusion of the oral formulation of Muzira, which became effective in January 2024. Turning now to our expenses, research and developing expenses declined $21 million to $265.9 million. primarily due to decreased upfront and milestone payments for our license and collaboration agreements, partially offset by an increase in personnel compensation and related costs. Selling, general and administrative expenses grew $23 million to $281.6 million, primarily due to higher general selling expenses to support the launch of ViviCard partially offset by a decrease in professional services fees. Both R&D and H&A expenses significantly declined as a percentage of revenue, and we expect this trend to continue as a result of our growing revenues and our ongoing cost and efficiency initiatives. Xilab reported a net loss of $334.6 million for 2023. which improved by $108 million versus prior year. The decrease in net loss reflects our continued progress towards profitability, primarily given our product revenue growing faster than net operating expenses, as well as increased interest income and decreased foreign currency loss. We are in a strong financial position and in the year with a cash position of $807.6 million compared to $1 billion as of December 31st, 2022. Based on our operating plan and our anticipated revenue growth, we expect to be able to fund our business through profitability. And with that, I would now like to turn the call back over to the operator to open up the line for questions. Operator.

We would now like to open the line for questions. If you have a question, please press star one and one at this time. To withdraw your question, please press star one and one again. Please limit yourself to one or two questions. Our first question comes from the line of Michael Yee from Jefferies. Please go ahead, your line is open.

Hi, this is on the line for Michael Yi. Thanks for taking my questions and giving the great VIVGAR guidance, which is obviously above the consensus. I have a couple of questions. Maybe first, can you comment on what your assumptions are for the 17 million in 2024 VIVGAR sales guidance and what visibility you have to be able to guide the 17 million and for the 1K, 1,000 new patients added in January, Were they a bonus waiting for the NIDL price to be treated or due to other factors in play? My second question is about the recent investor concerns and rhetoric in Washington, D.C. about the Committee on CCP. Maybe can you comment on what your confidence level is that you believe this won't impact biotech at all and what you're seeing out there? Thank you.

Great. Thank you for the questions. It's Josh. direct the question to our leadership team here, but I think for the first two, I'll direct them back to me. First, on VivGuard, as we said, we're really pleased with the uptake we've seen so far. We're monitoring all the normal leading indicators you would look at in a launch, but new patient starts is really important. So I think what gives us the confidence to say we're on a path to $70 million or greater in 2024 is is the rate of new patient starts, the penetration we're seeing with hospitals. We focused in the fourth quarter on the top 600 hospitals, which make up about 80% of the sales opportunity. We'll expand that to 1,000 hospitals here in the first half of the year now that we have NRDL listing. And one of the things we look at there is how quickly the hospitals adopt the NRDL national listing into their local formularies, we're off to a good start there. 1,000 patients in January, as we mentioned, I think is a really good start. And I think it's, you know, it's obviously it's very early in the launch. To get into too many details there, we'll keep updating, you know, as we go through the quarters during the year. But I think what we can say right now is with 1,000 new patients and, you know, of course, as we, you know, mentioned last year, you know, some of those patients could have been patients that would have started, you know, in, you know, in December, but were held for the reimbursement. But I think for the most part, we're quite pleased with the absolute magnitude of the number, and it gets us off to a good start in the year. And again, I would look at the $70 million as we know enough now to have confidence there, and we're looking forward to continued progress throughout the year. I think on the second question about the political environment in the U.S. and the Biosecure Act and or others, We've evaluated these bills and the tenor behind them closely. They don't touch on anything that we do, and we're quite confident that as proposed now, these bills or activities won't have any impact on what we do as a biotech company focused on bringing great innovative medicines to patients in China and over time to the rest of the world.

Thank you.

This is great. Thank you.

Thank you.

We'll now move on to our next question.

Our next question comes from the line of Anupam Rama from JP Morgan. Please go ahead. Your line is open.

Hey, guys. Thanks so much for taking the question. Maybe just a broader question for me. So what evidence or anecdotes do you have that some of the anti-corruption efforts in China have kind of played out and won't have a lingering impact moving forward. Thanks so much.

Thanks, Anupam. It's Josh again. I think first we look at how our sales reps are able to interact with their customers, hospitals and physicians and otherwise. And I think what we see now is we've got good access. We're able to communicate the medical benefits of our products to you know, in a way that's helpful to, you know, physicians and patients and so on. So I think that's what we tend to look at. I think on the broader level, of course, it's, you know, we can't predict the future. But, you know, for now, we feel good about the environment we're operating in. And certainly our sales and marketing practices are of the highest standards and, you know, no impact that we've seen, you know, from the historical efforts there.

So we're, you know, we're looking forward to a good year operationally here. Thanks so much for taking the question.

Thank you.

Thank you. We'll now move on to our next question.

Please stand by.

Our next question comes from the line of Louise Chen from Cantor. Please go ahead. Your line is open.

Hi. Thanks for taking my questions here. So I wanted to ask you on CIDP, if you do get approval, How do you think the uptake will be relative to what you've seen right now for myasthenia gravis? And then what's a bigger opportunity for you, MG or CIDP? Thank you.

Thanks, Louise. I'm going to ask Harold to talk a little bit about CIDP and answer your question. And if there's anything to wrap up on, I'll come back at the end. Please go ahead, Harold.

Yeah, hi, thank you for the question. The CIDP indication is rather unique. It is an unmet medical need situation here, much more so than in many other indications for autoimmune diseases. These patients currently really lack something like an efcantijumat that helps improve symptomatology and to break the downslope of their disease. A lot of these patients end up in wheelchairs. So right now, as we said earlier, treatment is just steroids. And at the end of the rope, you get patients who are getting constantly IVIG infusions. So we see really a very, very important role for F-cortisobut in that population. This F-cortisobut treatment here is a weekly treatment for the duration of the symptomatology. So it has a major impact on our financials. Thank you.

I would just add, as Harold mentioned, there's a significant unmet need here, and it's a very big opportunity. I don't think at this point, Louise, we're going to be excited about both of them.

I think they both present large opportunities, both GSA and CIDP, and we're looking forward to progressing the CIDP approval process and be ready to go there. Thanks.

Thank you. Thank you. We'll now move on to our next question. Our next question comes from the line of Yigal Nachumovitz from Citigroup. Please go ahead. Your line is open.

Yeah, hi. Thanks very much. On VivGuard, I think, Josh, you mentioned it was 32,000 per year based on clinical study usage. How is that syncing up with what you're seeing in the real world in terms of the average number of cycles and average vials per four-week cycle? Is that fairly consistent with clinical trial experience so far. Thanks.

Thanks. I'll ask Harold to comment, but I think, you know, it's early in the launch. We have no reason to believe that, you know, we're going to see things that are vastly different than what we're seeing around the world. We're excited about the starting point, but I don't know that we have a lot more to offer now. Harold, if you have any comments you want to make.

Not really. In this case, we are still too early in the use and the pattern and the numbers of cycles that we would expect to see. Right now, given the same labeling as in the U.S., we assume a very similar uptake. However, this needs to be further defined and only future updates here will be able to give you the details that you probably want to hear.

Okay, thanks. And then, Josh, you sort of referenced that the year-on-year growth for the four products in the market, not including VivGuard, would be comparable to 2023 year-on-year growth. However, if you look at the trajectory from Q3 to Q4 in 2023 for Zajula, Optune, and ClinLock, I guess it's a little unclear how you're going to be able to achieve the same year-on-year growth for those products. For Nazira, also, you know, it was a very, very large number. So could you just kind of expand a little bit on how you're, you know, thinking about that year-on-year growth number, given what we're seeing in the second half of 2023 for Quinloc, Optune, and Zajula? Thanks.

thanks you go i think first you know for q4 i want to remind everybody that you know the q4 growth rate uh for zejula uh certainly is impacted by uh rebates associated with nrdl so i think if you look at the portfolio overall for q4 and you take out the the rebate comparison or drag uh you know growth's more like 19 so i think you know uh certainly for zejula we saw

market share growth through the year, and we expect it to continue to grow in 2024.

So, I think that product is performing well and will continue to push it. I think with the other three, I mean, between the three of them, there are some ups and downs, and otherwise, I think Uzaira, with the NRDL listing now for the oral formulation, I think we're in a good position to continue to see. you know, good growth for that product in 2024. I think with Optune, you know, it's a medical device, so there were some, you know, challenges, I think, you know, for that product overall. But, you know, we expect to grow it. It provides an important benefit to patients, and, you know, we expect to continue to grow that in 2024. And Kinloch is performing about what we would expect. It's a small product, but it's an important foundational drug for us as we think about gastric cancer. So I think if you put those all together, there's no reason to believe that the overall sales growth we saw in 2023 can't be replicated in 2024.

Okay, thanks. And then just the last question on the IL-17. I think you mentioned just starting the global study in plaque psoriasis. There was some discussion in past meetings over the years with respect to partnering that globally with a large pharma, where does that stand? And can you just update us on your strategy for that product? Thanks.

Harold, you can comment on the study. I think we're excited to get going and begin to create clinical data, and then we'll evaluate options as we proceed. But Harold, maybe you can give us an update.

Yeah, thank you. Yes, we are happy to, you know, go into phase two with this program. And as far as the question here about partnering, I think we are always open to partnering offers and looking at increasing value here for the product. Otherwise, I would like to defer the question to Jonathan, who is on the call.

Yeah, I think, you know, we'll evaluate as the data coming, but it's probably too early at this stage to think about partnering.

Thank you, Garth. Okay. Okay, thank you.

Thank you. We'll now move on to our next question. Our next question comes from the line of Linhai Zhao from Goldman Sachs. Please go ahead. Your line is open.

Hi, thanks for taking my question. Just wondering for opt-in, we know that there are indication expansion opportunities. Particularly, we have two phase three readouts in 2024, and we're planning to filing for the second line of most outlaw cancer in China following our partner's filing in FDA. Wondering if the management can share a bit more on the indication expansions, particularly for these three indications, and also with all the debates on the second line, non-small cell lung cancer with the LUNA data. Can you share a bit more color on our communications with the China regulators about the potential concerns and how we are going to address their potential concerns on that aspect? And on that, for 2028, as part of our $2 billion revenue target, how much do you see revenue contribution from Optune in 2028? Thanks.

Rafael, why don't you address the question, please?

Yes, thank you. This is Rafael. Maybe I'll start with Lunar 2. And as I said in the prepared remarks, Another care has announced that the FDA has accepted the pre-market authorization in January. And as you know, the review time is 180 days. You asked about our interactions with regulatory authorities in China. We are starting those interactions, and we have a really good collaboration with our partner. And our intention is to file this year, and we will need for that the China subset analysis, and we're collaborating, as I said, really well with our partners, Novogear, to be able to file this year. So obviously, you know, we will see how it goes with FDA, but as I said, the PMA has been accepted. And then with regards to additional indications, Novocare has announced some of those. I guess the one that's most immediate is the Lunar 2 study, which includes checkpoint inhibitors and chemotherapy, plus minus the device in frontline non-small cell lung cancer, blind and contained regimen. We are considering participating in that trial and in discussions with them. And then there's an ongoing study with a checkpoint inhibitor for patients with high DBM scores, which is a phase two study, which we're awaiting the results. But in terms of phase three studies, the most important readouts are medicine on small cell lung cancer patients with brain metastasis, as well as locally advanced pancreatic cancer, a Panova trial. We participated in both of those studies. We put sufficient patients and we're eagerly awaiting the results of those trials, which should be this year, and then we'll add accordingly. So this is sort of an overview of where we are with all these programs, you know, the future programs that we may participate, the ones that we have that we're awaiting results, and definitely we are committed to filing with Lunar and, as I said, start interactions already with the device division of NMPA.

As it relates to the 2028 composition, we looked at a range of outcomes here when we put together that guidance and that goal. It wasn't dependent on any single product, although what I can tell you for sure is VivGuard is the start that we have there, and our excitement around GMG and CIDC I think is the biggest driver towards what puts us on the path to the 2028 goals.

Thank you. Thank you.

Thank you. We'll now move on to our next question. Our next question comes from the line of Jonathan Chang from Lear Inc. Partners. Please go ahead. Your line is open.

Hey, guys, this is Matt Cowper on for Jonathan. Thanks for taking my question. I was just wondering if you can discuss how you see the pricing of DisGuard evolving over time, particularly in the context of NRDL renewal cycles and then also in the context of adding additional indications such as CIDP. Thank you.

Thanks, Matt. I'll ask Jonathan to take that one, please.

Sure. Thanks for the question. Look, I think first we achieved a good price at the end of last year in the NRDL negotiations. So we're off to a very good starting point. And I think NRDL is also evolving and we do see positive trends that the government is increasingly supportive of innovative and differentiated products. VivGuard being the only in class and addressing a very large medical need in China is a program which we see that the government is supporting and we do expect to maintain good price Also, if you look at the doula, we maintain very good price in the most recent negotiation. So we feel pretty good about the pricing at this stage.

Thanks, Jonathan.

Thank you.

Thank you. We'll now move on to our next question. Our next question comes from the line of Jacqueline from Morgan Stanley. Please go ahead. Your line is open.

Hi, good morning, everyone, and thank you for taking my question. I have a couple quick questions. First one, again, on the VITGAR. Curious to know if there's any color you could share in terms of the patient background that we've seen since the fourth quarter and also in January. What proportion of them were refractory versus kind of in the earlier setting? And for the refractory ones, what might be the breakdown between refractory to the conventional oral immunotherapies versus the alternative biologics? That's on the VidGuard. And just two really quick questions on commercialization. One, I think you mentioned earlier, we're looking to break into 1,000 hospitals by end of this year. And I think we're at 150 right now. Curious to know about how the commercial team is in place, or is it kind of still ongoing effort for more recruitment? And also for Optune, assuming that we have success from the Penovo 3 studies and others, Will we rethink in terms of the getting reimbursement coverage in China considering the significant larger patient size? Thank you.

Thanks, Jack. I'll ask Harold to talk a little bit about VivGuard patients. Obviously, it's very early in the launch, but Harold, if you may make a comment.

Yeah, thank you for the question. And again, the patient background that we've seen so far is really the background of those patients who were prior to NRDL reimbursement. So those patients, we would assume, are the patients who are somewhat more sick and more ill and possibly close to the refractory part of the disease cycle. However, this will all mobilize, we believe, as NIDL pricing kicks in, and we should expect a similar kind of patient population going forward that has been seen in the studies and also in the United States. So this is a drug which comes in after, you know, steroid use. It's not a drug for the refractory patients. Only it is a patient selection that we see right in the middle is the bulk of patients with GMG that starts to lose control with steroids alone or runs into side effects with steroids. Thank you. It's fairly early in the day, and we shall provide updates as time goes on and as we have a more normalized situation as far as under NIDL pricing conditions. Thank you.

Jack, your question about some of the commercialization efforts. So when we launched in September, we had 100 sales reps. We focused on the top 600 hospitals, which, as I mentioned earlier, made up about 80% of the sales opportunity that we were focused on. With NRDL listing, we always plan to move from 100 reps to 150. We're in the middle of that expansion right now. And we would increase our target hospital list from 600 to 1,000. And, you know, that comes with the expansion, the reps. We'd expect all of that to be complete over the first half of this year. So I think as you get into the second half of the year, we'll be at what we believe to be full strength. And I think that's, you know, that's sufficient to cover the opportunity given how concentrated the prescribing and the patient base is here. So again, we're excited about what we're seeing so far. And we think the opportunity is well-defined and in front of us Jonathan, I don't know if you have any comments you want to make on sort of the longer term pricing, you know, policy opportunities for medical devices and how often they fit in there.

Yeah, it's also evolving very rapidly. As you recall, you know, about a year and a half ago, the government was having draft proposals on the medical device, you know, NIDL inclusion. So far, they haven't come up with more formal guidelines yet, so we're eagerly waiting for that. We think if that does eventually, obviously, OffTune would benefit. But for now, I think the commercial insurance is very important for OffTune, and it's a viable market just based on that. Thank you. Thank you.

Thank you. I am showing no further questions at this time. I will now turn the call back over to Xilab CEO, Samantha Du, for closing remarks.

Thank you, operator. I want to thank everyone for taking the time to join us on the call today. We appreciate your support and look forward to updating you again after the first quarter of 2024. Operator, you may now disconnect the call.

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by. you Thank you. Thank you. Thank you.

Thank you. Bye. Thank you. Bye.

Hello, ladies and gentlemen.

Thank you for standing by. And welcome to Xilab's full year 2023 financial results conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, today's call is being recorded. It is now my pleasure to turn the floor over to Christine Cho, Senior Vice President of Investor Relations, please go ahead.

Thank you, operator. Good morning, good evening, and welcome to XyLab's full year 2023 earnings call. Today's call will be led by Dr. Samantha Du, XyLab's founder, CEO, and chairperson. She will be joined by Josh Smiley, President and Chief Operating Officer, Dr. Rafael Motto, President and Head of Global Oncology Research and Development, Dr. Harold Reinhart, President and Head of Global Development, Neuroscience, Autoimmune and Infectious Diseases, and Dr. Yajing Chen, Chief Financial Officer. Jonathan Lang, our Chief Business Officer, will also be available to answer questions during the Q&A portion of the call. As a reminder, during today's call, we will be making certain forward-looking statements based on our current expectations. These statements are subject to numerous risks and uncertainties that may cause actual results to differ materially from what we expect due to a variety of factors, including those discussed in our SEC filings. We will also refer to product revenue growth rates on a constant exchange rate basis, which is a non-GAAP financial measure. Please refer to our earnings release furnished with the SEC on February 27, 2024, for additional information on this non-GAAP financial measure. At this time, it is my pleasure to turn the call over to Dr. Samantha Du.

Thank you, Christine. In 2023, we had another year of significant achievements for Xilat. We grew our top line by 31% on a constant exchange rate basis. We progressed several key late-stage programs. We added new global assets into our pipeline. Today, we're in a fundamentally stronger position than we have ever been with a growing base of revenues, a path to profitability, and a strong balance sheet with over 800 million USD in cash. We're now entering a period of high growth, and we are focused on three key corporate objectives to substantially grow revenues, achieve profitability, and build our global pipeline. Late last year, we launched VidGuard, and it's already off to an excellent start with sales expected to exceed 70 million USD this year in GMG. Beyond this, we have a series of other potential approvals, including Ripple Tractonate and Sodor later this year, followed by a series of other new product syndications. including Ascotizumab in CIDP, Bimatizumab, and CAR-CT. Each of these products have the potential to meaningfully enhance the growth of our business. We are also already deeply committed to building our global pipeline by adding new assets to both our internal discovery efforts and external opportunities. And I look forward to providing updates on our progress in this regard throughout the year. And of course, we maintain disciplined capital allocation practices as we strive to achieve profitability. As we execute on these corporate objectives, we expect to deliver value, not only to patients, but also to our shareholders. Thank you for your support. as we continue on our journey of innovation and growth together. And with that, I'll pass the call over to Josh. Josh.

Thank you, Samantha, and thank you, everyone, for joining the call today. XyLab delivered strong full-year revenue growth of 25% year-over-year and 31% on a constant exchange rate basis, driven by robust volume growth across our existing product portfolio and the launch of VivGuard. These revenue increases were partially offset by an increase in sales rebates, both in Q1 of 2023, in connection with new listings for our products on China's 2022 National Reimbursement Drug List, or NRDL, and in Q4 of 2023, in connection with new and renewed NRDL listings for our products on China's 2023 NRDL. A pivotal achievement for us was the approval and subsequent launch of VivGuard in September. followed by its inclusion in the NRDL, which became effective at the beginning of this year. Throughout the fourth quarter, we implemented comprehensive commercial strategies to drive awareness and adoption of DivGuard, and we entered 2024 with considerable momentum. I'm also pleased to announce that in 2023, we achieved our goal of having net product revenue exceed the cost of sales and sales and marketing expenses for our commercial products, which we refer to as commercial profitabilities. Our commitment to financial prudence remains steadfast as we work towards achieving and maintaining profitability. Lastly, we made substantial progress on key clinical development programs, such as EPCAR-TIGEMOD in CIDP and CAR-XT in schizophrenia, while further enriching our global pipeline with the introduction of a next-generation DLL3 ADC. In 2023, we announced our five-year strategic plan aimed at positioning Xilab as a leading global biopharmaceutical company characterized by substantial revenue growth, achievement of profitability, and a strong global pipeline. This strategic vision is underpinned by three corporate objectives. First, we are focused on accelerating top-line growth. With a strong foundation in place supported by both new product approvals and label expansions within our existing portfolio, we anticipate substantial revenue growth in the coming years. By 2028, we aim to have a significantly larger commercial portfolio with the launch of potential blockbusters such as VivGuard leading the way. Subsequent potential launches include Soldor later this year and TivDax, Bemerituzumab, and CarXT in 2025 and beyond. Such launches would further drive revenue growth with our projections exceeding $2 billion in 2028, reflecting our estimated five-year compound annual growth rate of 50%. Furthermore, we are committed to building our global portfolio through internal discovery initiatives and strategic business development endeavors. Our goal is to advance at least one global IND into clinical trials annually as we continue to evaluate and pursue synergistic global and regional business development opportunities, leveraging Xilab's reputation as a trusted brand and preferred strategic partner. As we continue to grow and develop our commercial portfolio and pipeline, We remain focused on scaling with purpose, and this brings us to our third objective, which is to achieve corporate profitability by the end of 2025. To realize this objective, we will continue to enhance efficiency and productivity, prioritize research and development initiatives, and execute cost optimization strategies. Our existing infrastructure is agile and sized to support multiple new launches. We maintained a robust reserve of cash and cash equivalents of $807.6 million as of the end of 2023, providing ample financial resources to sustain our operations through profitability and beyond. Now I will briefly review the performance of each of our commercial products and our expectations for 2024. Zejula maintained its position as the leader in hospital sales for PARP inhibitors in ovarian cancer in China. exhibiting growth in the fourth quarter and the entire year. In 2024, we will continue to focus on driving further growth in the first-line setting and extending the duration of therapy. In 2023, Kinloch and the IV formulation of Nuzaira joins the JUULA on the NRDL, and these listings help drive substantial sales increases for these products. We expect this positive momentum to continue, supplemented by the additional listing for the oral formulation of Nuzaira in January 2024. As Optune is a medical device and not eligible for NRDL inclusion, we are focused on expanding access and improving affordability for this important treatment through commercial health insurance coverage. Overall, we anticipate year-over-year revenue growth in 2024 for these four products in aggregate to be comparable to that of 2023. Turning now to the recent launch of VivGuard. I want to take a moment to acknowledge the tremendous effort of our medical and regulatory and commercial teams behind VivGuard. We were able to reach important milestones at a swift pace, achieving our best-case scenario with regards to the timing for approval, launch, and NRDL listing. We were pleased to see the regulatory authorities recognize the innovation of VivGuard and its substantial clinical benefit to patients living with generalized myasthenia gravis, or GMG. In China, where there are over 170,000 patients with GMG, many patients endure residual symptoms or inadequate treatment, making everyday tasks challenging and unpredictable. The scarcity of innovative therapies, the persistent shortage of IVIG therapy, and the chronic and progressive nature of the disease can present a formidable challenge for both patients and healthcare providers alike, further underscoring the significance of the VipGuard's approval. Throughout the fourth quarter, our primary focus was on strategically targeting key hospitals and fostering awareness while delivering timely support to physicians and patients alike. And we made great progress. As of December, we had successfully engaged 100% of our top 200 target hospitals and over 90% of our top 100 physicians integrated VivGuard into their treatment protocols. Based on a survey of 250 physicians, Awareness of VivGuard rose from 54% to 72% following four months of promotion, and we continue to see this rise. From launch in September through the end of the year, we estimate that nearly 1,000 patients were treated with VivGuard. Turning now to more recent updates on launch, VivGuard listing on the NRDL became effective on January 1st this year, with a price of $800 a vial or $32,000 per patient per year based on clinical study usage. We estimate that in January 2024 alone, nearly 1,000 new patients were treated with VivGuard, indicating promising progress at this early stage of the launch. This demand is being driven by an unmet need in the treatment of GMG, a willingness of physicians to adopt VivGuard into treatment protocols, and increased patient access as hospitals add VivGuard to their formularies. We're very pleased with the progress achieved thus far with the launch of VivGuard, and we anticipate sales to exceed $70 million in 2024. Our strategic focus for the year will be to expand outreach to approximately 1,000 hospitals with a concentrated effort on accelerating VivGuard listing at top tier hospitals. Already as of the end of January, our team has engaged 100% of our top 600 hospitals in person. Supported by our dedicated sales force of approximately 150 reps, we anticipate robust coverage to facilitate this expansion. Additionally, pending regulatory approval, we expect to launch VivGuard subcutaneous formulation for GMG later this year, which will offer enhanced dosing flexibility for physicians and patients. We're also excited about potential indication expansion for VivGuard. This year, we expect to submit a supplemental biologics license application or SBLA in China for CIDP, which presents another substantial growth opportunity. This marks an exciting period for XyLab and an important year of execution for our team. And with that, I would like to pass the call to Rafael, who will provide an update on our oncology pipeline. Rafael?

Thank you, Josh. Let me begin by highlighting some of the key progress updates in our oncology pipeline since our last earnings call, along with our next steps. Starting with the marituzumab, our FGFR2B inhibitor in collaboration with Hamdun. We are enrolling in both Fortitude 101 and Fortitude 102 Phase III studies, evaluating benmarituzumab in STFR2B-positive gastric cancer as a doublet therapy with chemo and a triplet with chemo and a checkpoint inhibitor, respectively. We expect both studies to enroll well, and we're eager to introduce this much needed therapy to China where we estimate an incidence of 126,000 FGFR2V-positive gastric cancer patients each year. Next, our tumor-treating field franchise. In January 2024, our partner NovoCure announced that the FDA had accepted the filing of their premarket approval application for TTP fields in non-small cell lung cancer following progression on or after platinum-based therapy, and a regulatory decision is expected in the second half of this year. In China, we expect to file a marketing authorization application for TT fields in this indication later this year. We also expect two pivotal readouts for tumor-treating fields, including in brain metastasis from non-small cell lung cancer and in pancreatic cancer, both in the first-line settings. Also in lung cancer, Repotrectinib is currently under priority review for the treatment of adult patients with locally advanced or metastatic ROS1-positive non-Moster lung cancer in China. The filing was based on the results from the pivotal Triton-1 study, which were published in the New England Journal of Medicine in January this year. Findings demonstrated the potential of Repotrectinib to overcome limitations of first-generation tyrosine kinase inhibitors in terms of responses and durability in ROS1-resistant mutations. We look forward to a potential regulatory approval and launch this year to bring this best-in-class ROS1 TRK inhibitor to patients in need in China. Now, moving on to L-aggressive, 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 PK study in China, and the global confirmatory CRYSTAL-12 study, which Zai Lab joined in July 2022, and we await the results for a filing submission in China this year. In addition, our partner BMS announced this month that the FDA has accepted its supplemental NDA for priority review for adagracib in combination with cetuximab, for the treatment of patients with previously treated KRAS G2LC-mutated locally advanced or metastatic colorectal cancer with a PDUFA goal date of June 21, 2024. For this indication, Adagracid has the potential to be the first to market KRAS G2LC inhibitor in China. We completed enrollment in the Global Phase III Crystal 10 confirmatory study in 2023. Lastly, for TIFDAC. We have participated in the confirmatory phase 3 in NOVA TV301 global trial in second-line cervical cancer and continue an extension portion in China, and we intend to file a new drug application or MDA in China this year. In addition to our late stage programs, our DLL3-ADC-ZL1310, has shown promising preclinical data and is progressing through a global phase one study in relapse and refractory small cell lung cancer who has progressed after platinum-based treatment in the United States and in China. In March, we will present the preclinical data at the European Lung Cancer Congress in Prague, and depending on the dose escalation level, we could potentially see early clinical results at the end of 2024 or early 2025. We're also selecting internally discovered product candidates to achieve our goal of generating at least one IND per year, and we continue to assess external opportunities to introduce a new product in development this year. And now, I will turn the floor over to Dr. Harold Reinhart to discuss the progress in our autoimmune, infectious disease, and neuroscience therapeutic areas. Harold?

Thank you, Rafael. This is truly a very exciting time for our neuroscience-altering new and infectious diseases, or NSAID, franchise. And we made significant progress in the past year advancing our pipeline. Starting with Wefgard, or F-Gard-Tegemod. Beyond what Josh shared about the progress for GMG, we are excited about the positive data for treating patients with CIDP, or chronic inflammatory demyelinating polyneuropathy. There are an estimated 50,000 patients diagnosed with CIDP in China. And today, only a small fraction are able to achieve remission on their current standard of care. And the majority of patients continue to be burdened with symptoms that can have a debilitating impact on quality of life. Existing treatment options are limited and quite problematic, given the general reliance on long-term steroid or chronic immunoglobulin therapy. In China, the situation has worsened due to the persistent shortage of IVIG therapy. Our partner, Argenix, announced this month that the FDA had accepted for priority review the SBLA for sub-Q-administered Vifgard Hydrolo in CIDP. It was granted the PDUFA goal date of June 21st of this year. We plan to submit an SBLA to the NMPA in China for this indication in the first half of 2024. In addition, our SBLA for F-Cartezumab sub-Q in GMG is under regulatory review in China with potential NMPA approval this year. This approval would give patients flexibility on treatment with either IV or more convenient sub-Q dosing. F-Cartezumab sub-Q has the advantage of simplicity and speed as administration takes only 30 to 90 seconds for a single dose. We see significant potential for efkartijimod across multiple additional indications, and we will continue to work with our partner, Igenix, on indication expansion. For example, we expect to join them in the registration of study of efkartijimod in thyroid eye disease, or TED, in Greater China in the second half of this year. Turning to CAR-XT, this is a first-in-class antipsychotic combining a centrally acting muscarinic agonist called xenomaline with a peripheral antagonist called traspium, which we are developing with our partner, Corona, for patients with acute schizophrenia. In November 2023, the FDA accepted Karuna's NDA for CAR-XT for the treatment of schizophrenia in adults, with the PNUFA goal date of September 26, 2024. We continue to enroll patients in the Registrational Bridging Study in mainland China, and we expect to complete enrollment this year. We believe that CAR-XT could become an important new treatment option in China, where more than 8 million people are living with schizophrenia and where severe under-treatment and inadequate symptom improvement or even disease control persists, despite currently available antipsychotics. We have yet another substantial opportunity for CAR-XT, which is for the treatment and prevention of psychosis in Alzheimer's disease patients, or ADP for short. There are approximately 8 million people with Alzheimer's disease in China, and about 45% of these patients display psychotic symptoms. We believe that there is a significant unmet need for patients with ADP or Alzheimer's disease or psychosis in China, as there are no approved treatments. Corona initiated the Phase III, ADEPT II, and ADEPT III clinical trials in the third quarter of 2023, and we plan to participate in both studies in Greater China in mid-2024. Regarding our infectious diseases portfolio, sulbactam, duralobactam, or suldur is a treatment for hospital-acquired and ventilator-associated bacterial pneumonia caused by Acinetobacter baumannii. In China, there are 240 to 300,000 cases of Acinetobacter infections annually, with the majority of strains being carbapenem resistant. Latest countrywide surveillance data from China indicate a rise in overall resistance to approximately 80%. With limited treatment options for these patients, the mortality rate is around 43%, even with the best available therapy and care. The WHO has listed Acetobacter baumannii as the number one problem pathogen, and the high incidence in China has prompted the Chinese government to prioritize efforts to combat this multi-drug resistant bacteria. Our NDA submission is under priority review, and we are looking forward to a potential approval later this year. Last but not least, ZL1102, our IL-17 tumor body for the topical treatment, of Chronic Plaque Psoriasis, or CPP, is in the final stages of preparation for a Global Phase II dose-finding trial, and we intend to initiate the study in mid-2024. So, plenty of exciting progress within our NSAID portfolio, and I look forward to providing updates at our next earnings call. Now, Yajing will provide an overview of our financial results. Yajing.

Thank you, Howard. Now I will discuss our four-year financial results compared to the prior year. In 2023, total net product revenues grew to $266.7 million. This represents year-over-year growth of 25% or 31% on a constant currency basis. Our revenue growth was driven by increased sales volumes and the launch of Visigart partially offset by an increase in our sales rebate to distributors, resulting from price reductions in connection with additional NRDO listings. Sales rebates in connection with NRDO listings rose to $13 million for 2023. These NRDO listings play a crucial role in maintaining patient access to our existing products on NRDO. while it's significantly expanding access for our new products. Growth was also negatively impacted by the temporary effects on the hospital and the physician practices that resulted from industry-wide anti-corruption enforcement efforts in China in the second half of the year. Now, looking at each individual product, the Juna net product revenue increased 16% year over year, to $168.8 million in its third year under NRDL, driven by increased hospital sales in first-line ovarian cancer and a duration of treatment improvement, partially offset by an increase in sales rebates in the fourth quarter in connection with the renewal of the NRDL listing for the July as a maintenance treatment. Basic out-of-net product revenue was $10 million following the launch in China in September, 2023. We successfully negotiated for ViviGuard's first listing on the NLDL with pricing that took effect on January 1st, 2024. Up to net product revenue were relatively flat year over year at $47 million. As continuous growth in supplemental insurance coverage was offset by the disruption in hospital and physician practices, resulting from anti-corruption efforts. CHINLOC grew 29 percent year-over-year to $19.2 million, and Muzaira increased 316 percent to $21.7 million. This growth was supported by the inclusion of CHINLOC and the IV formulation of Muzaira in the NRDL in the first quarter of 2023. partially offset by sales rebate in connection with the scenario listing, as well as sales rebates in the fourth quarter in connection with the inclusion of the oral formulation of Muzira, which became effective in January 2024. Turning now to our expenses, research and developing expenses declined $21 million to $265.9 million. primarily due to decreased upfront and milestone payments for our license and collaboration agreements, partially offset by an increase in personnel compensation and related costs. Selling, general and administrative expenses grew $23 million to $281.6 million, primarily due to higher general selling expenses to support the launch of ViviCard partially offset by a decrease in professional services fees. Both R&D and H&A expenses significantly declined as a percentage of revenue, and we expect this trend to continue as a result of our growing revenues and our ongoing cost and efficiency initiatives. Xilab reported a net loss of $334.6 million for 2023. which improved by $108 million versus prior year. The decrease in net loss reflects our continued progress towards profitability, primarily given our product revenue growing faster than net operating expenses, as well as increased interest income and decreased foreign currency loss. We are in a strong financial position and in the year with a cash position of $807.6 million compared to $1 billion as of December 31st, 2022. Based on our operating plan and our anticipated revenue growth, we expect to be able to fund our business through profitability. And with that, I would now like to turn the call back over to the operator to open up the line for questions. Operator.

We would now like to open the line for questions. If you have a question, please press star one and one at this time. To withdraw your question, please press star one and one again. Please limit yourself to one or two questions. Our first question comes from the line of Michael Yee from Jefferies. Please go ahead, your line is open.

Hi, this is on the line for Michael Yi. Thanks for taking my questions and giving the great VIVGAR guidance, which is obviously above the consensus. I have a couple of questions. Maybe first, can you comment on what your assumptions are for the 70 million in 2024 VIVGAR sales guidance and what visibility you have to be able to guide the 70 million and for the 1K, 1,000 new patients added in January, Were they a bonus waiting for the NIDL price to be treated or due to other factors in play? My second question is about the recent investor concerns and rhetoric in Washington, D.C. about the committee of CCP. Maybe can you comment on what your confidence level is that you believe this won't impact biotech at all and what you're seeing out there? Thank you.

Great. Thank you for the questions. It's Josh. direct the question to our leadership team here, but I think for the first two, I'll direct them back to me. First on VivGuard, as we said, we're really pleased with the uptake we've seen so far. We're monitoring all the normal leading indicators you would look at in a launch, but new patient starts is really important. So I think what gives us the confidence to say we're on a path to $70 million or greater in 2024 is the rate of new patient starts, the penetration we're seeing with hospitals where we focused in the fourth quarter on the top 600 hospitals, which make up about 80% of the sales opportunity. We'll expand that to 1,000 hospitals here in the first half of the year now that we have NRDL listing. And one of the things we look at there is how quickly the hospitals adopt the NRDL national listing into their local formularies, we're off to a good start there. 1,000 patients in January, as we mentioned, I think is a really good start. And I think it's, you know, it's obviously very early in the launch. To get into too many details there, we'll keep updating, you know, as we go through the quarters during the year. But I think what we can say right now is with 1,000 new patients and, you know, of course, as we, you know, mentioned last year, you know, some of those patients could have been patients that would have started, you know, in January. in December, but were held for the reimbursement. But I think for the most part, we're quite pleased with the absolute magnitude of the number, and it gets us off to a good start in the year. And again, I would look at the $70 million as we know enough now to have confidence there, and we're looking forward to continued progress throughout the year. I think on the second question about the political environment in the U.S. and the Biosecure Act and or others, We've evaluated these bills and the tenor behind them closely. They don't touch on anything that we do, and we're quite confident that, as proposed now, these bills or activities won't have any impact on what we do as a biotech company focused on bringing great innovative medicines to patients in China and over time to the rest of the world.

Thank you.

This is great. Thank you.

Thank you.

We'll now move on to our next question.

Our next question comes from the line of Anupam Rama from JP Morgan. Please go ahead. Your line is open.

Hey, guys. Thanks so much for taking the question. Maybe just a broader question for me. So what evidence or anecdotes do you have that some of the anti-corruption efforts in China have kind of played out and won't have a lingering impact moving forward. Thanks so much.

Thanks, Anupam. It's Josh again. I think first we look at how our sales reps are able to interact with their customers, hospitals and physicians and otherwise. And I think what we see now is we've got good access. We're able to communicate the medical benefits of our products to you know, in a way that's helpful to, you know, physicians and patients and so on. So I think that's what we tend to look at. I think on the broader level, of course, it's, you know, we can't predict the future. But, you know, for now, we feel good about the environment we're operating in. And certainly our sales and marketing practices are of the highest standards and, you know, no impact that we've seen, you know, from the historical efforts there.

So we're, you know, we're looking forward to a good year operationally here. Thanks so much for taking the question.

Thank you.

Thank you. We'll now move on to our next question. Please stand by. Our next question comes from the line of Louise Chen from Cantor. Please go ahead. Your line is open.

Hi. Thanks for taking my questions here. So I wanted to ask you on CIDP, if you do get approval, How do you think the uptake will be relative to what you've seen right now for myasthenia gravis? And then what's a bigger opportunity for you, MG or CIDP? Thank you.

Thanks, Louise. I'm going to ask Harold to talk a little bit about CIDP and answer your question. And if there's anything to wrap up on, I'll come back at the end. Please go ahead, Harold.

Yeah, hi, thank you for the question. The CIDP indication is rather unique. It is an unmet medical need situation here, much more so than in many other indications for autoimmune diseases. These patients currently really lack something like an efcantijumat that helps improve symptomatology and to break the downslope of their disease. A lot of these patients end up in wheelchairs. So right now, as we said earlier, treatment is just steroids. And at the end of the rope, you get patients who are getting constantly IVIG infusions. So we see really a very, very important role for F-cortisobut in that population. This F-cortisobut treatment here is a weekly treatment for the duration of the symptomatology. So it has a major impact on our financials. Thank you.

I would just add, as Harold mentioned, there's a significant unmet need here, and it's a very big opportunity. I don't think at this point, Louise, we're going to be excited about both of them.

I think they both present large opportunities, both GSA and CIDP, and we're looking forward to progressing the CIDP approval process and be ready to go there. Thanks.

Thank you. Thank you. We'll now move on to our next question. Our next question comes from the line of Yigal Nachumovitz from Citigroup. Please go ahead. Your line is open.

Yeah, hi. Thanks very much. On VivGuard, I think, Josh, you mentioned it was 32,000 per year based on clinical study usage. How is that syncing up with what you're seeing in the real world in terms of the average number of cycles and average vials per four-week cycle? Is that fairly consistent with clinical trial experience so far. Thanks.

Thanks. I'll ask Harold to comment, but I think it's early in the launch. We have no reason to believe that we're going to see things that are vastly different than what we're seeing around the world. We're excited about the starting point, but I don't know that we have a lot more to offer now. Harold, if you have any comments you want to make.

Not really. In this case, we are still too early in the use and the pattern and the numbers of cycles that we would expect to see. Right now, given the same labeling as in the U.S., we assume a very similar uptake. However, this needs to be further defined and only future updates here will be able to give you the details that you probably want to hear.

Okay, thanks. And then, Josh, you sort of referenced that the year-on-year growth for the four products in the market, not including VivGuard, would be comparable to 2023 year-on-year growth. However, if you look at the trajectory from Q3 to Q4 in 2023 for Zajula, Optune, and ClinLock, I guess it's a little unclear how you're going to be able to achieve the same year-on-year growth for those products. For Nazira, also, you know, it was a very, very large number. So could you just kind of expand a little bit on how you're, you know, thinking about that year-on-year growth number, given what we're seeing in the second half of 2023 for Quinloc, Optune, and Zajula? Thanks.

thanks you go i think first you know for q4 i want to remind everybody that you know the q4 growth rate uh for zejula uh certainly is impacted by uh rebates associated with nrdl so i think if you look at the portfolio overall for q4 and you take out the the rebate comparison or drag uh you know growth's more like 19 so i think you know uh certainly for zejula we saw market share growth through the year, and we expect it to continue to grow in 2024. So, I think that product is performing well and will continue to push it. I think with the other three, I mean, between the three of them, there are some ups and downs, and otherwise, I think Uzaira, with the NRDL listing now for the oral formulation, I think we're in a good position to continue to see. you know, good growth for that product in 2024. I think with Optune, you know, it's a medical device, so there were some, you know, challenges, I think, you know, for that product overall. But, you know, we expect to grow it. It provides an important benefit to patients, and, you know, we expect to continue to grow that in 2024. And Kinloch is performing about what we would expect. It's a small product, but it's an important foundational drug for us as we think about gastric cancer. So I think if you put those all together, there's no reason to believe that the overall sales growth we saw in 2023 can't be replicated in 2024.

Okay, thanks. And then just the last question on the IL-17. I think you mentioned just starting the global study in plaque psoriasis. There was some discussion in past meetings over the years with respect to partnering that globally with a large pharma, where does that stand? And can you just update us on your strategy for that product? Thanks.

Harold, you can comment on the study. I think we're excited to get going and begin to create clinical data, and then we'll evaluate options as we proceed. But Harold, maybe you can give us an update.

Yeah, thank you. Yes, we are happy to, you know, go into phase two with this program. And as far as the question here about partnering, I think we are always open to partnering offers and looking at increasing value here for the product. Otherwise, I would like to defer the question to Jonathan, who is on the call.

Yeah, I think, you know, we'll evaluate as the data coming, but it's probably too early at this stage to think about partnering.

Thank you, Garth. Okay. Okay, thank you.

Thank you. We'll now move on to our next question. Our next question comes from the line of Linhai Zhao from Goldman Sachs. Please go ahead. Your line is open.

Hi, thanks for taking my question. Just wondering for opt-in, we know that there are indication expansion opportunities, particularly we have two phase three readouts in 2024, and we're planning to following for the second line of most outlaw cancer in China following our partners following in FDA. Wondering if the management can share a bit more on the indication expansions, particularly for these three indications, and also with all the debates on the second line, non-small cell lung cancer with the LUNA data. Can you share a bit more color on our communications with the China regulators about the potential concerns and how we are going to address their potential concerns on that aspect? And on that, for 2028, as part of our $2 billion revenue target, how much do you see revenue contribution from Optune in 2028? Thanks.

Rafael, why don't you address the question, please?

Yes, thank you. This is Rafael. Maybe I'll start with Lunar 2. And as I said in the prepared remarks, Another care has announced that the FDA has accepted the pre-market authorization in January. And as you know, the review time is 180 days. You asked about our interactions with regulatory authorities in China. We are starting those interactions, and we have a really good collaboration with our partner. And our intention is to file this year, and we will need for that the China subset analysis, and we're collaborating, as I said, really well with our partners, Novogear, to be able to file this year. So obviously, you know, we will see how it goes with FDA, but as I said, the PMA has been accepted. And then with regards to additional indications, Novocare has announced some of those. I guess the one that's most immediate is the Lunar 2 study, which includes checkpoint inhibitors and chemotherapy, plus minus the device in frontline non-small cell lung cancer, blind and contained regimen. We are considering participating in that trial and in discussions with them. And then there's an ongoing study with a checkpoint inhibitor for patients with high DBM scores, which is a phase two study, which we're awaiting the results. But in terms of phase three studies, the most important readouts are medicine on small cell lung cancer patients with brain metastasis, as well as locally advanced pancreatic cancer, a Panova trial. We participated in both of those studies. We put sufficient patients and we're eagerly awaiting the results of those trials, which should be this year, and then we'll add accordingly. So this is sort of an overview of where we are with all these programs, you know, the future programs that we may participate, the ones that we have that we're awaiting results, and definitely we are committed to filing with Lunar and, as I said, start interactions already with the device division of NMPA.

As it relates to the 2028 composition, we looked at a range of outcomes here when we put together that guidance and that goal. It wasn't dependent on any single product, although what I can tell you for sure is VivGuard is the start that we have there, and our excitement around GMG and CIDC I think is the biggest driver towards what puts us on the path to the 2028 goals.

Thank you. Thank you.

Thank you. We'll now move on to our next question. Our next question comes from the line of Jonathan Chang from Lear Inc. Partners. Please go ahead. Your line is open.

Hey, guys. This is Matt Cowper on for Jonathan. Thanks for taking my question. I was just wondering if you can discuss how you see the pricing of DivGuard evolving over time, particularly in the context of NRDL renewal cycles and then also in the context of adding additional indications such as the IDP. Thank you.

Thanks, Matt. I'll ask Jonathan to take that one, please.

Sure. Thanks for the question. Look, I think first we achieved a good price at the end of last year in the NRDL negotiation. So we're off to a very good starting point. And I think NRDL is also evolving and we do see positive trends that the government increasingly supportive of innovative and differentiated products. VivGuard being the only in class and addressing a very large unmet medical need in China is a program which we see that the government is supporting and we do expect to maintain good price. Also, if you look at the doula, we maintain very good price in the most recent negotiation. So we feel pretty good about the pricing at this stage. Thanks, John. Thank you.

Thank you. We'll now move on to our next question. Our next question comes from the line of Jacqueline from Morgan Stanley. Please go ahead. Your line is open.

Hi, good morning, everyone, and thank you for taking my question. I have a couple quick questions. First one, again, on the VITGAR. Curious to know if there's any color you could share in terms of the patient background that we've seen since the fourth quarter and also in January. What proportion of them were refractory versus kind of in the earlier setting? And for the refractory ones, what might be the breakdown between refractory to the conventional oral immunotherapies versus the alternative biologics? That's on the VidGuard. And just two really quick questions on commercialization. One, I think you mentioned earlier, we're looking to break into 1,000 hospitals by end of this year. And I think we're at 150 right now. Curious to know about how the commercial team is in place, or is it kind of still ongoing effort for more recruitment? And also for Optune, assuming that we have success from the Penovo 3 studies and others, Will we rethink in terms of the getting reimbursement coverage in China considering the significant larger patient size? Thank you.

Thanks, Jack. I'll ask Harold to talk a little bit about VivGuard patients.

Obviously, it's very early in the launch, but Harold, if you may make a comment.

Yeah, thank you for the question. And again, the patient background that we've seen so far is really the background of those patients who were prior to NRDL reimbursement. So those patients, we would assume, are the patients who are somewhat more sick and more ill and possibly close to the refractory part of the disease cycles. However, this will all mobilize, we believe, as NIDL pricing kicks in. And we should expect a similar kind of patient population going forward that has been seen in the studies and also in the United States. So this is a drug which comes in after steroid use. It's not a drug for the refractory patients. Only it is a patient selection that we see right in the middle is a bulk of patients with GMG that starts to lose control with steroids alone or runs into side effects with steroids. Thank you. It is fairly early in the day, and we shall provide updates as time goes on and as we have a more normalized situation as far as under NIDL pricing conditions. Thank you.

Jack, your question about some of the commercialization efforts. So when we launched in September, we had 100 sales reps. We focused on the top 600 hospitals, which, as I mentioned earlier, made up about 80% of the sales opportunity that we were focused on. With NRDL listing, we always plan to move from 100 reps to 150. We're in the middle of that expansion right now. And we would increase our target hospital list from 600 to 1,000. And that comes with the expansion, the reps. We'd expect all of that to be complete over the first half of this year. So I think as you get into the second half of the year, we'll be at what we believe to be full strength. And I think that's sufficient to cover the opportunity given how concentrated the prescribing and the patient base is here. So again, we're excited about what we're seeing so far. And we think the opportunity is well-defined and in front of us Jonathan, I don't know if you have any comments you want to make on sort of the longer-term pricing policy opportunities for medical devices and how often they fit in there.

Yeah, it's also evolving very rapidly. As you recall, about a year and a half ago, the government was having draft proposals on the medical device NIDL inclusion. So far, they haven't come up with more formal guidelines yet, so we're eagerly waiting for that. We think if that does eventually, obviously, OffTune would benefit. But for now, I think the commercial insurance is very important for OffTune, and it's a viable market just based on that. Thank you. Thank you.

Thank you. I am showing no further questions at this time. I will now turn the call back over to Xilab CEO, Samantha Du, for closing remarks.

Thank you, operator. I want to thank everyone for taking the time to join us on the call today. We appreciate your support and look forward to updating you again after the first quarter of 2024. Operator, you may now disconnect the call.

This concludes today's conference call. Thank you for participating. You may now disconnect.