Zai Lab Limited

Hello, ladies and gentlemen. Thank you for standing by and welcome to Xilep's first quarter 2025 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. Hello and welcome everyone. Today's earnings call will be led by Dr. Samantha Du, Scilab's founder, CEO, and chairperson. She will be joined by Josh Smiley, President and Chief Operating Officer, Dr. Rafael Amado, President and Head of Global Research and Development, and Dr. Yaojin 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 adjusted loss from operations, which is a non-GAAP financial measure. Please refer to our earnings release furnished with the SEC on May 8th, 2025 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. Good morning and good evening, everyone. Thank you for joining us today. We entered 2025 with a conviction that this would be a pivotal year for Zalai, a year where strong execution disciplined growth, and scientific innovation would begin to shape our long-term trajectory. Let me be clear, our conviction the strength of our business fundamentals and strategic direction remains strong. As we close out the first quarter, we're reaffirming our full-year revenue guidance of between 560 million to 590 million dollars. We anticipate accelerating sales growth in the next three quarters, which will translate into significant operating leverage and keep us on track to achieve profitability by Q4 of this year. Before I turn the call over to Josh to discuss our Q1 performance, I want to share my excitement for the road ahead. Cell Life has a differentiated and high-potential portfolio, including multiple regional first or best-in-class assets that are poised to deliver significant long-term value. This includes pipeline of product opportunities like VivGuard and Povitacis, as well as other potential blockbusters like bimethylamide in gastric cancer, CAR-C in schizophrenia, and TT field in pancreatic cancer. We are confident in delivering our 2025 revenue targets and surpassing $2 billion by 2028 with strong momentum carrying well into the 2030s. Our original business is already commercially profitable with a clear growth runway. And we'll continue to add new assets with discipline and focus. At the same time, we've made bold investments to accelerate our global R&D pipeline. Our lead global asset, GL1310, is a potential first in pricing class DL3 ADC. We'll present updated phase one data in small cell lung cancer at ASCO in June and outline our broader development strategy across multiple indications, including a registration of trial that positions us for a potential FDA approval in 2027, a milestone that would elevate our position on the global stage. Beyond 1310, We're advancing our next wave of innovation. GL6201, our novel LRC15 ADC for solid tumors, and GL1503, the first in class L13, L31b specific for atopic dermatitis, are both expected to enter the clinics this year. further expanding our global oncology immunology pipeline. Looking ahead, we see clear drivers of margin expansion, increased scale with regard, efficient new launches that leverage our existing infrastructure, manufacturing localization, and the ramp up of high-value global assets. These efforts are building their lives into a profitable, high-growth business with global impact. We're just getting started, and I look forward to updating you on our progress throughout the year. Now, I turn the call over to Josh. Josh?

Thank you, Samantha, and good morning and good evening to everyone. Let's start with VivGuard. Following the exceptional 2024, we expect another strong year in 2025, with VivGuard sales growth expected to outpace total revenue growth, driven by increased patient demand, improved treatment continuity, and expanded access. First quarter sales reflected seasonal trends, with Chinese New Year driving a temporary decline in patients in January and February. As an IV treatment for a chronic disease, VivGuard is more susceptible to this type of seasonality. That said, patient volumes rebounded in March and April, and we anticipate a return to strong sequential growth throughout the rest of the year. Inventory dynamics also influenced quarterly sales growth. In preparation for the launch of VivGuard Hytrula, we had some inventory build in Q4. The timing of these movements had a notable impact on reported sales growth. Looking ahead, we are seeing early positive results from our ongoing strategic initiatives to extend treatment durations. In addition, the first expert recommendations for the clinical application of FCRN antagonists in the treatment of GMG were published in February, and a similar update to the national GMG treatment guidelines is expected later this year. Together, these developments provide additional momentum for continued sequential growth and an acceleration in the second half of this year. We're also preparing for the upcoming NRDL cycle, targeting IV renewal for GMG and initial listing of the SC formulation. both of which would take effect on January 1st, 2026. Now, let me turn to our broader commercial portfolio. All other products, including Zejula and Uzaira, delivered sequential growth supported by NRDL access. We also saw early contributions from Ogtiro and Zactoro. In particular, Zactoro showing strong initial demand. Physician feedback has been highly positive, citing Zactoro's rapid efficacy and favorable safety profile in treating crab infections. a serious unmet need in China, where an estimated 300,000 Acinabacter cases occur annually with limited treatment options and poor outcomes. Turning to our financial position, we continue to strengthen efficiency and operating leverage. For the first quarter of 2025, operating loss improved by 20% to $56.3 million, and by 25% to $37.1 million on an adjusted basis. keeping us firmly on track to reach profitability in the fourth quarter. Looking ahead, we have a robust set of late-stage opportunities to drive substantial growth. Three regulatory reviews are currently underway, including CAR-XT for schizophrenia and TIVDAC for cervical cancer, and we anticipate at least three additional submissions this year, including Vemurituzumab for gastric cancer, TT Fields for pancreatic cancer, and Vivgardt's pre-filled syringe for GMG and CIDP. We expect to optimize our commercial footprint by leveraging our existing commercial infrastructure to efficiently support future launches. For example, deploying our Zejula team to support TIVDAC and our Kinloch team for Bemerituzumab. For targeted opportunities like CAR XT, we can effectively reach over 85% of the market with a focus team of approximately 150 sales representatives. In parallel, we are advancing further operational efficiencies as VivGuard scales. and as we localize manufacturing for key products to more cost-effectively support our regional portfolio. These efforts are central to our strategy for achieving profitability alongside long-term revenue growth. With a fast-growing Greater China business, a deepening global pipeline, and disciplined financial execution, we are well-positioned to deliver substantial value for our shareholders in 2025 and beyond. And with that, I'll pass the call over to Rafael to discuss the great progress within our pipeline.

Thank you, Josh. I'll start by highlighting the key progress updates in our global pipeline since our last earnings call, along with our next steps. Starting with VL1310, our potential first and best-in-class DLO3 ADC for small cell lung cancer. Last year, we shared promising preliminary monotherapy results from the Phase I dose escalation cohort. demonstrating antitumor responses in the majority of patients with extensive stage small cell lung cancer, including in brain lesions with good tolerability. We completed enrollment in the dose escalation monotherapy cohort. Enrollment in the ongoing monotherapy dose optimization cohort is progressing rapidly, and we look forward to presenting updated data from both cohorts of the global phase one study at the ASCO meeting in June this year. We're also pleased with ongoing regulatory discussions with the FDA, and we are on track to initiate a pivotal study in small cell lung cancer later this year, positioning us for a potential accelerated approval in 2027. We're also assessing potential combinations in the first-line setting, and we expect to provide data in the second half of this year. As DLL3 is also highly expressed in other neuroendocrine tumors, we're exploring its therapeutic potential beyond small cell lung cancer. A global phase 1-2 study was initiated in April to explore ZL1310 in this indication. Next, on our other global oncology assets. At the American Association for Cancer Research meeting, we presented new data for two of our internally developed oncology therapies, ZL6201 and ZL1222. CL6201 is a novel ADC with an internally developed high affinity and specificity for LRRC15 antibody and next-generation payload linker. LRRC15 is an attractive target for cancer therapy due to its overexpression in multiple solid tumors such as sarcoma, glioblastoma, and melanoma, as well as its expression in fibroblasts in the tumor microenvironment of multiple tumors such as breast, lung, and colorectal cancer. The payload linkage system releases the payload by cleavage both extracellularly in the tumor microenvironment and intracellularly within the cellular lysosomes once the antibody is internalized. We are advancing DL6201 into a global phase one study this year. ZL1222 is a PG1-targeted next-generation IL-12 immunocytokine designed to leverage the antitumor potential of IL-12 while lowering the associated systemic toxicity. The IL-12 mutain is engineered to remain in a less potent state, reducing systemic IL-12-induced toxicity. A cis-mediated signaling process is initiated when ZL1222 binds to PG1. Findings from its preclinical studies demonstrate potent anti-tumor activity in both anti-PD-1 sensitive and resistant tumor models with improved systemic safety. These results suggest a potential role in patients who are unresponsive or resistant to current immunology therapies. We also expect to advance ZL1503, an IL-13, IL-31 spike-specific antibody for atopic dermatitis into Phase 1 development this year, and we'll present a progress update in June. We're committed to expanding our global pipeline and progressing at least one global product to IND submission stage every year. Now, moving on to our key late-stage regional programs and starting with immunology. Our partner, Argenix, announced in April that the U.S. FDA approved Vescar Hidroliprezole Syringe, or PFS, for self-injection in generalized myasthenia gravis and chronic inflammatory demyelinating polyneuropathy. It is the third administration option providing additional flexibility and convenience for patients, and we're planning a CMC submission in China later this year. We'll continue to explore the potential of F-carcinoma to treat other IgG-mediated autoimmune indications, including thyroid eye disease, myositis, seronegative GMG, ocular MG, and lupus nephritis. In 2025, we expect top-like results from the global phase 3 study in seronegative T and G and in the phase 2 of lupus nephritis. In January this year, we strengthened our regional immunology franchise with a pipeline in a product opportunity with povitacizab, a novel dual B-cell activating factor, or BAS, and a proliferation-inducing ligand, or APRIL, antagonist. We're leveraging our regional expertise and established footprint with to accelerate its development in renal diseases, namely IgAIN and primary member of nephropathy. China has already joined the global phase three Renier trial in IgAIN and enrollment of the interim analysis cohort has completed. Our partner, Vertex, will conduct an interim analysis once this cohort reaches 36 weeks of treatment. with the potential to file for accelerated approval in the U.S. in the first half of 2026. We also plan to join the Global Pivotal Phase 2 study in PMN this year. There are no approved therapies targeting the underlying cause of the disease, and current treatments rely on immunosuppressants or anti-CD20 monoclonal antibodies, which are associated with infection and myelosuppression. In addition, a subset of these patients experiences progressive kidney function impairment despite available therapies. In neuroscience, characteristic for schizophrenia is under review by China's NMPA since the acceptance of the NDA earlier this year, and we are awaiting the data readout from the Global Phase III ADEPT-II Study in Alzheimer's Disease Psychosis later this year. In oncology for vermituzumab, our first-in-class FGFR2B targeting therapy for gastric cancer, we expect a data readout from the Global Phase III Fortitude 101 study in the second quarter of this year. Gastric cancer poses a significant threat in China with over 350,000 new cases each year and a five-year survival rate of less than 10% in advanced stages. There are currently no approved therapies specifically targeting STFR2B overexpression in gastric cancer, and we look forward to bringing this potentially transformative therapy to patients as quickly as possible. We continue to make great progress across our global pipeline, and we will continue to enrich it and execute existing programs with speed and precision. I look forward to sharing further updates in the coming quarters. And now, Yijing will give an overview of our financial results. Yejing?

Thank you, Rafael. Now I will discuss highlights from our first quarter 2025 financial results compared to the prior year period. Total revenue grew 22% year-over-year to $106.5 million in the first quarter, driven by increased sales for ViviGuard, Vigila, and Amuseira. Our base business remained strong, and we began to see early contributions from our newly launched products. Our focus on financial discipline and efficiency efforts was also reflected on the expense side. R&D and HGMA as a percentage of revenue declined significantly year-over-year. R&D expenses for the first quarter increased 11% year-over-year due to upfront fees totaling $20 million for our license and collaboration agreements. Other R&D expenses decreased as a result of resource prioritization and efficiency efforts. SG&A expenses for the first quarter decreased 8% year-over-year, mainly due to strategic resource allocation and efficiency improvements. As a result of operating leverage we're building into our business, our last fund operations decreased 20% for the first quarter to $56.3 million. When you adjust our loss from operations to exclude certain non-cash items, specifically depreciation, amortization, and share-based compensation, we had adjusted loss from operations of $37.1 million in the first quarter, reflecting year-over-year improvement of 25%. Based on our operating plan and our anticipated revenue growth, we expect to achieve profitability on a adjusted basis by the fourth quarter of this year. Looking ahead, we expect to deliver a quarter-over-quarter total revenue growth in 2025 with a meaningful acceleration anticipated in the later part of the year. We remain confident in reaffirming our four-year 2025 total revenue guidance in the range of $560 million to $590 million. This revenue forecast reflects strong growth for the Visgar franchise, continued growth for our base business, including Nuzaira and Vigura, and contributions from our newly launched products, including Actira and Zacturo. We are in a strong financial position, ending the quarter with a cash position of $857.3 million. 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 will now begin the question and answer session. To ask a question, please press star 11 and wait for a name to be announced. To cancel your request, please press star 11 again. One moment for the first question. Our first question comes from Michael Yee from Jefferies. Please go ahead.

Thank you. Good morning. Congrats on the results and the outlook for the year. We have two questions. First, just on VivGuard, maybe the team could add a little bit more color. Obviously, the number was sequentially down and would be eye-opening, but can you just maybe describe was a lot of the sequential change inventory changes or just seasonality of purchasing And is your confidence in the guidance based specifically on your awareness of what's going on in April and into May? And then the second question is a strategic question. Maybe for Samantha, obviously you're seeking to become more of a global company. Are you seeking to bring in more Chinese assets to be wholly owned this year? And how should we think about some more deals in terms of a wholly owned pipeline? Thank you.

Thanks, Mike. It's Josh. I'll start with VivGuard and then hand it over to Samantha to make some comments on your second question. First on VivGuard, I would say, you know, as you heard in the call and in our press release, we're reiterating our total sales guidance for the year, $560 million to $590 million. You know, that implies a growth rate in the you know, mid to high 40s, depending on the range. And we are also reiterating that we expect a VivGuard itself to grow faster than the overall sales growth. So I think if you look at Q1 to your question, We did see seasonality in January and February in, I think, patient utilization. Of course, we, you know, all products experience this to some degree in China, given Chinese New Year. IV products particularly, you know, if you think about VivGuard, it requires, when you're in a cycle, a weekly trip to a hospital for an infusion. And, you know, as probably anticipated, we saw some of those visits being delayed. We saw good recovery. of patient volumes and utilization in March and really a really strong April. I think we look at our April patient utilization and patient numbers. It's our highest ever and at least 10% better than anything we've seen to date. So we're quite confident about the the progress for the year for VivGuard and I think the utilization piece was an issue in January and February and not totally unexpected given what we know about China. Hopefully in future years this will be less of an issue as we have products like or formulations like SUBQ and the pre-filled syringe which wouldn't require hospital visits per se. We did have some inventory moves as well, as you asked, as you remember from Q4. We got approval for HyTRULO last year. We did ship HyTRULO to get it into the channel. And, you know, until we get NRDL listing, which we're pursuing for 2026, we're gonna see limited usage there. So there was some inventory move there. But again, I think we're quite confident about the outlook for the year for VivGuard, see really good progress in terms of new patients, patient duration, and we're seeing that in April and May, as you suggested. For your question about overall how we're thinking about the strategy and company, I'll ask Samantha to make some comments.

Thank you, Josh. And thank you, Michael, for the question. As you know, we are a company focused on not only China's regional rights, but also for global rights. We have a very strong BD team, which has a strong coverage in China, as well as in the rest of the world. But of course, we have a very high bar, but if we see anything we think has high potential to have a differentiated product, And we will definitely go for it. Thank you, Michael.

Thank you.

Thank you for the question. One moment for the next question. Our next question comes from the line of Louis Chen from Scotiabank. Please ask your question.

Hi. Thank you for taking my questions here. So I wanted to ask you a few questions here. First of all, are you comfortable with where consensus is today for VivGuard and then for the fiscal year revenues? And then I also wanted to ask you on BEMA 101 study, we would have expected to see something here. Has there been any delay or anything to read into this? Thank you.

Thanks, Louise. It's Josh. I'll do the... The first piece, and then Rafael can talk about BEMA. I think first, as it relates to overall consensus, as I mentioned, we're reaffirming 560 to 590 for the year. We feel good about that range. And we're not giving, you know, specific product level guidance. But I think if you look at VivGuard. I think the consensus is sort of in line with what I mentioned in the last question, which is, you know, VivGuard sales for the full year growing at faster than the overall implied business rates. I think that, you know, that puts us in range with what I need for consensus now. And again, we're off to a really good, you know, last couple months start for the second quarter and feel good about progress for VivGuard and for the business overall. Rafael, you could talk about BEMA, please.

Sure. So, BIMA, for the 42-101 study, which is the chemotherapy plus minus BIMA in SGFR2B expression tumors, the data is expected in the second quarter of this year. I would not really read anything into whether or not it has been released yet or not. It's an interim analysis, and we're pretty excited both about the design of the study and also the potential for this drug to really impact the lives of patients with these tumors with this alteration, particularly based on the results of the Phase II study, which was quite large compared to what we've been seeing with nivolumab, on clotting, and some of the other products that have been added to gastric cancer. I would just say stay tuned and I'm confident that we will get this data in the second quarter.

Thank you.

Thank you for the question.

One moment for the next question.

Your next question comes from the line of Jonathan Cheng from Learing Partners. Please go ahead.

Hi, good morning. This is Yander Li for Jonathan Cheng. Thanks for taking my question. So I have two questions. The first one, you provide some colors on how recent change in the FDA and also maybe tariff might impact ViLab going forward. And how do you estimate these risks in the current financial guidance? Thank you.

I'll start with the tariff piece and then ask Rafael to make some comments on FDA. And then, Samantha, if you have anything at the end you want to add, please do. But I think first on tariffs, we don't see any impact to our business today or anticipated in the future. Obviously, tariffs are sort of a fluid situation. But if you look at Where we sell product today in China, we have local rights to manufacture product. Any of our regional deals we can manufacture in China. We do that, for example, with the Juul and are in the process for our big new launches like Bima and Car XT bring that manufacturing locally. Other products today that we don't make locally like VivGuard are sourced out of Europe and Asia, not out of the US. So we really anticipate no impact on tariffs today for a revenue basis. We think about going forward and products like DLL3, which we anticipate launching in the U.S. in 2027. We'll manufacture that locally from a commercial perspective, so we won't be exposed to tariffs coming into the U.S. there either. Rafael, if you want to make some comments about recent FDA interactions.

Yeah, very briefly, I would say that You know, most of our products are, we interact with CDER at FDA. You know, we recently had interactions with FDA on 1310. We really saw no difference, you know, based on my experience of developing drugs with regards to the nature of those interactions. Of course, this is a macro question of how, you know, FDA will evolve in the future with a new commissioner. And I say I point heads of both Cedar and Cedar, but we will have to see, you know, how that shapes up. But so far, we, in our products, have seen really no impact with regards to, you know, their advice and the way that we've been able to interact with them and including timelines.

That's very helpful. Thank you. And my second question is about the study design.

Thank you.

There was a silence, at least for me. Can you please repeat the question?

Oh, yes. Sorry. I'm asking, like, please share your thoughts on the pivotal trial design for CL1310 in muscle lung cancer. And also, can you share how far you are in reaching agreement with the FDA for the study design?

Thank you. Oh, thank you for the question. Yes. So, our interactions with FDA have been very productive. We obviously have generated a lot of monotherapy data. The current plan is to launch a randomized pivotal trial for registration. We think and have reasons to believe that the accelerated approval pathway remains open, and that can be achieved in a randomized trial by comparing response rates. And then the final post-approval commitment will be within the same study looking at overall survival. So the study will be Power for Overall Survival, and the response rate will be an interim analysis for accelerated approval. So that's her current plan, and we plan to start that study this year as soon as we have the dose.

And that's it. Thank you so much.

Thank you for the questions. One moment for the next question. Next question comes from the line of Lee Watsick from Kantor. Please go ahead.

Hey, guys. Thanks for taking our questions. Maybe a couple here. Just wondering on these cards, can you talk a little bit about the competitive landscape of GMG in China, given there are some other therapies that might get approval in the near term. How do you see the sort of competitive dynamics playing out in the near and longer term? And the second question is on, you know, the BD efforts. Just given the uncertainty of tariffs and geopolitical tensions, what are you seeing in terms of big pharma's, you know, appetite to outlicensing the commercial rights in China And, you know, just in general, anything from the macro side have shifted your thinking around e-licensing?

Thanks, Leigh. It's Josh. I'll do VivGuard and ask Jonathan to make some comments on business development. I think on VivGuard first, I'd just remind everybody there's, you know, it's a very big opportunity in China for GMG, about 170,000 patients. And while we're really happy with where we are today, you know, we still have less than 10% of patients who are getting a newer biologic therapy. So, you know, in one sense, I think having, you know, more newer agents approved and in the market is going to be good for everyone, and it'll be good for VivGuard as we continue to educate physicians and get them to adopt the new and best therapies. I think then as we compare where we are with VivGuard to other recent approvals or anticipated approvals, we love the position we're in. We've got a comprehensive data set. I think if you look at the results around activities of daily living or getting back to sort of as much normalcy as possible, our data is strong, compelling, and I think stacks up well against any of the FCRNs or other newer agents that are either approved or headed towards approval. We obviously have this year as the only newer agent on NRDL, and we'll continue to, you know, build our experience and expertise there. But I think longer term, you know, between efficacy and I think if you look at safety across the FCRNs and other agents, again, we feel very good about where we are from that perspective. So we welcome new approvals. And again, I think it's going to be good for patients and good for treating physicians to have options and to have more education in the market. And it doesn't change our view in terms of how we see progress this year. As I've said, we're quite excited about what we're seeing today in the market with VivGuard. Of course, we have a series of new indications coming as well that'll I think bolster our competitiveness versus, you know, anticipated new approvals. We'll, you know, of course, we have CIDP. We've got new formulations coming that we'll be pursuing for NRDL. And over the course of the next few years, we'll have more supplemental indications for MG. We also anticipate other indications, including things like thyroid eye disease, where we're running trials in conjunction with Argenix today. So I think the future is very bright for VivGuard and for patients in China with GMG. Jonathan, if you want to address the business development question.

Sure. Thanks, Josh, and thanks for the question. On the BD sort of impact from the geopolitical situation, I think the first is that so far there has been no suggestions, no sort of regulatory prohibition from the administration with regards to any licensing transactions between life sciences companies. So far, I think it's business as usual. We have been doing deals earlier this year as well. So we continue to evaluate deals. In fact, sometimes I think volatility creates opportunities. Multinational companies are increasingly looking to China for innovation and looking to China also for commercial opportunities. There has been a lot of visits, increasing number of visits by multinational business development heads as well as CEOs. Just today, actually, Samantha and myself met several multinational CEOs here. We expect to continue to do deals in this environment. Obviously, as Samantha earlier said, I think the buy is always very high for us. Quality is the most important. But I don't think the current situation will prohibit us, certainly not, from doing any deals. Thank you.

Great. Thanks, guys. Thank you for the questions. Our next question comes from from CT. Please go ahead.

Hi. Thank you. One for Josh and two for Raphael. Josh, could you outline the scenarios with regard to how the NDRL will help with negotiation of the price for BivGard? I'm just curious, is there some sort of a cap in terms of how much it can get negotiated down, or is there a floor, and is this going to apply to both IV and sub-Q pricing terms? And then for Rafael, With the Fortitude 101 and Fortitude 102, I'm just curious, you know, how you're thinking about the competitive dynamics and whether the JAS trial with Zandatimab chemo and the Beijing PD-1 impacts your thinking about the competitive landscape or maybe not so much considering you're focused on FGFR2B patients. And then last question, with regard to the ADCs, the DLL3 and the LLRC15, Just curious about the antibody engineering there and whether you've tuned these antibodies to cleave mainly intracellularly or if there's also extracellular cleavage. Thank you.

Thanks, Igal. You know, we've got Jonathan on the phone. Jonathan leads our pricing work in China, so I'll ask him to comment on the NRDL process for VivGuard for 2026, and then we can pass it on to Rafael.

Sure. You know, Igao, I think for Vivga, we have two formulations, first of all. Each of these formulations are sub-QNIV, will be treated as different products. So we have a lot of flexibility when it comes to pricing. Of course, the NIDO negotiation will happen potentially earlier this year as well. So as they do this, sort of the timeline is brought forward. So they also look at the sales from last year and quarter one this year. But, you know, we expect potential modest discounts to the pricing, obviously subject to negotiations too early to comment on the precise pricing. But we would expect probably some discount there.

Yeah, I'll take Dale. Yeah, I'll take the R&D question. So yeah, there is some competition in gastric cancer. It is generally for HER2-negative disease. We still have yet to see what effect these new products will have. Clearly, they've been promising in other settings. Because this is specific for an alteration that is present in about a third of patients, and we're looking at least 10% expression. So, these are patients where their tumor is driven by this oncogene, and we are silencing this oncogene. We feel pretty positive about it, and our second study also includes a PG-1 inhibitor, as you know, nivolumab. We will have to see what happens with the competition, but we think these studies are pretty well designed, and they're targeted to the alteration that the disease manifests. With regards to the antibodies, the LO3 was engineered to have picomolar activity, and I think that's bearing out in some of what we're seeing in the clinic. And LRRC15 is internally developed, and they both are conjugated with a system whereby there's release of the payload after internalization of an intact molecule, as well as cleavage in the extracellular matrix. So that's why with LLRC15, we're excited about the fact that the target may just be a flag, and whether it's in the tumor or it's in the malignant fibroblasts, there will still be a strong bystander effect. So, we don't see a really high level at all of the payload in circulation, but it is in the tumor microenvironment, and I think it's due to the second generation payload linker system.

Thank you.

Thank you for the question. Our next question comes from Anupam Ram from JP Morgan. Please go ahead.

Hey, guys. Thanks so much for taking the question. Quick one from me. Just what's going to be the size and scope of the 1310 ASCO update, and what would you have us focus in on the data at ASCO?

Thanks so much. The 1310 data that we presented was with 25 patients. There were 19 patients eligible for efficacy. So that was dose escalation. Since that presentation, we've completed the dose escalation with a few more patients, and every patient has had an opportunity to have a confirmatory scan. So we will have the complete data set for dose escalation And then the other data set that will be new will be the dose optimization. And I think there it will be really a focus on, you know, which dose or doses are looking most promising to be included as the dose in the pivotal trial in the phase three study. In terms of numbers, you know, we will, as I said, we have a few more patients than at ENA in the dose escalation, and we should have, you know, another 50 patients or so in the dose optimization. So, I think the focus for me would be, you know, what is the dose that has the broader therapeutic benefit as we have been marching on the dose optimization with the knowledge that we've accrued rapidly and that the follow-up is not going to be very long, but at least we'll have responses and we will have durability of response in the earlier patients that we enroll.

Thanks so much for taking our questions. Thank you for the questions. One moment for the next question. Next question comes from the line of Ling Haichao from Goldman Sachs. Please go ahead. Operator, do you want to move to the next question? We can't hear anything on this side. I beg your pardon. Allow me to take the next question. Our next question comes from . Please go ahead. Hi.

Good morning. Are you able to hear me? Yes. Hi. Thank you for taking my question. I just have two quick ones. First, I was wondering, and this is a very big SG&A improvement, I was wondering if you the you guys will be able to kind of share more in terms of, you know, what kind of initiatives were taken this quarter, specifically, to help reduce the strain to this degree, and how much we'll be able to continue leveraging out for the following quarters, how many of these actually, I guess, one time thing, yeah, that you could probably kind of break down how this was achieved. And the second one is just kind of on the where we stand as far as CTF. And I see that the pancreatic cancer data is going to present at the ESCO as well. and just kind of wondering where our focus is at right now, kind of how our strategy is moving forward. Thank you.

Thanks for the question on the financial results and SG&A specifically. I think, you know, if you look at our Q1, I think it's representative of what, you know, you should expect through the year. Obviously, we have, you know, ups and downs as it relates to marketing programs, but our our fixed resource base to support the products that we have today and to prepare for launches for the big things coming like CoBEMPHY and Bemerituzumab are pretty stable. So I think this year SG&A should be modest, you know, very modest growth versus last year. And I think we're happy with where we've started the year from a cost base and from a profitability perspective, as Yejing mentioned, You know, if you look at our adjusted debt loss, basically taking out non-cash charges, we were at a $37 million loss. That includes, though, $20 million of R&D, I mean, upfront payments for the two new assets we brought in in Q1. So if you take that outward, about a $17 million loss. And, you know, as we've mentioned, we see, sales accelerating through the year. And I think as they do on a relatively fixed SG&A base and R&D, which should be pretty stable as well. We feel quite confident about our ability to achieve profitability this year. So SG&A is right-sizing the organization for optimizing the launches and products that we have today. And we could have taken a lot of actions in the last few years to try to get to that point. So that's why we have a lot of confidence in profitability later this year and expanding operating margins as we get into the 2026 to 2028 time frame. Rafael, you can address the second part of the question.

Yes, so with regards to TTS, as you correctly said, there will be an oral presentation on the Panova 3 study, which is in locally advanced pancreatic cancer. So these are inoperable patients that don't have metastatic disease, and it was announced that it was positive for overall survival, which is and really important outcome given that this is a very difficult and unmet need in that there hasn't been any intervention that has improved survival in this setting. So we plan to file this year with our partner, Novocure. We've started the regulatory discussions in China, and we think that we're well on our way to do this. With regards to lunar, we've deprioritized this, given the fact that, you know, Panova 3 is really an important indication for us. And I think together with gastric cancer, as well as just really positions as well in the GI setting in China with really transformational products. So I think this is, you know, this is really, our plan this year, and we're working very well with Novocare to ensure that the submission can go into this year.

Anderson, thank you, Paul.

Thank you for taking my question. My first question is on R&D. So it seems that you've highlighted quite a few in-house developed assets. Are you shifting the strategy from more in-licensing to more of in-house focus? And if so, are we expecting to see more in-house assets to enter into the clinical phase in the coming years? And if so, could you provide some guidance as to the pace of such assets? And my second question is on the topic of the FDA changes recently. There's been a new appointment the CDR had, as well as the job cuts from FDA. So how do you expect these to impact on the approval process, for example, the upcoming talks regarding DL3 and the whole accelerated track that you mentioned? Thank you.

Thanks for the question. It's Josh. At first, I think we're really excited about the progress of the internal pipeline, so we'll give Rafael a chance to talk about that. I think you should expect us to continue to be balanced as we move forward, looking at both really good internal assets as well as opportunities to bring in best-in-class products for both the globe and for China over the coming years. But I think with that introduction, Rafael, why don't you talk a little bit about the internal pipeline, and then the FDA question.

Yeah, so with regards to the new agents that we will bring forward in development, I think it'll be a blend of internally discovered products as well as BD products, and it will match our strategy. So, for instance, in oncology, we will focus on ADCs and and in immuno-oncology with improved checkpoint inhibitors as well as, you know, in the future, T cell engagers. So, you know, relatively sort of confined area where we have these agents already made or in development, we will utilize them. And where we find high-quality products, then we will utilize our you know, our BD capabilities to do this. So as I said, our goal is to have one IND, whether it's, uh, uh, intent internally source or externally source, um, uh, every year. Um, you know, this year we, we plan to have two LRC 15 or 6201 and 1503, which is IO 1331 for, uh, atopic dermatitis. Uh, and so, um, It just so happened that these two are internally discovered. But that doesn't necessarily mean that that will be the exclusive pattern going forward. So with regards to FDA, I made some comments before about the experience that we've had so far. And of course, it's early as FDA begins to reshape itself with new leaders coming in. Again, we deal with CEEDAR where we yet had to see the appointment there. With CEEDAR, yeah, there's been some comments about accelerated approvals, but I've seen the comments were made more in the context of accelerated approvals based on single arms. So, there's not that I've heard of. there's not been any comments about accelerated approval in the context of randomized trials. And I think, you know, in our case with 1310, you know, that shouldn't be the case since our pathway forward for accelerated approval will be an interim analysis on a randomized study against standard of care. So that's all I have to say for now because it's still early in the reshaping of the agency and we will have to see you know, how if it does evolve, how it evolves. But as I said, so far we have seen no changes with regards to our history of developing drugs in the past.

Thank you for the question. Thank you, Alistair. Very clear. Our final question comes from the line, once again, from Linhai Zhao from Goldman Sachs.

Please go ahead.

Hi, thanks for taking my question. This is Linhai from Goldman. My question is on CAR-XT, particularly regarding the recent top-line miss on the Phase III ARISE trial. What would be the read-across for China market? I know that ZyLab is not participating.

Rafael, why don't you go ahead on that?

Yeah, so ARISE was a study where characteristic was used as an adjunctive therapy to standard therapy in schizophrenia. It didn't meet the primary endpoint, but with regards to the indication of schizophrenia in China, it really has no impact. Our regulatory submission was based on study that mimicked the emergent studies, and it was positive in all endpoints. More than 80% of patients with schizophrenia in China are treated with a single agent, and clearly there are some clear advantages of this product with regards to toxicity over the classical antipsychotics. the patients that require adjuvant therapy are difficult to treat patients, and this is not a practice that occurs in China. So no impact with regards to that, and likewise, we see no impact with regards to ADP, where obviously those patients were not included in the ARISE study. And we're just awaiting the results of ADEPT-2 in the second half of this year, where we participated together with Karun and BMS.

Great. Thank you. A quick follow-up on that would be, since you mentioned that a majority of schizophrenia patients in China are primarily treated with a single agent, So if that's the case, what's your perspective based on the communications with the KOLs in China? What would be the potential treatment position for CAR-XT? Do you see it be used as an initial usage for patients when they were at the initial acute stage or more possibly used as a longer-term maintenance stage while the patients are having better control on the positive symptoms while they are trying to get more prepared when getting back to their normal life.

Yeah, I mean, my impression is that this is an agent that will be used in patients with schizophrenia. I think the difference is with regards to toxicity are really stark in favor of this drug. It's also a drug that has the potential to be effective in multiple other indications, and so we will see other indications coming through as PMS develops this drug, and we will partner with them on other indications. But with regards to schizophrenia, we think that this is kind of a, you know, sort of a quantum leap with regards to the side effects, including tardive dyskinesia and all the metabolic side effects that we're seeing with the classical antipsychotics. So, our impression is that this will be used de novo. And there's really data that goes now beyond 52 weeks, you know, showing that this safety profile really is maintained over the long term. Therefore, the logical conclusion is that it should become the treatment of choice.

Got it. Thanks for the very comprehensive answers. That concludes my question. Thank you.

Thank you for the question. There are no more questions on the line. I'd like to hand the call back to management for closing.

Thank you, operator. I want to thank everyone. for taking the time to join us on the call today. We appreciate your support. Look forward to updating you again after the second quarter of 2025.

Operator, you may now disconnect this call.