Edited Transcript of ZLAB.OQ earnings conference call or presentation 19-Mar-20 12:30pm GMT

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Thank you, Billy. Hello, everyone, and thank you all for joining us. First and foremost, I hope everyone is safe and sound as the global efforts to contain the coronavirus has impacted all of us. This devastating outbreak really shows how important global health care coordination will be in the future. On a brighter note, I’m excited to provide an update on all the progress Zai Lab has made in 2019. Zai Lab is at an inflection point, and I have great enthusiasm for what the future holds for.

Coinciding with the celebration of our 5-year anniversary, 2019 was a year of many important achievements for Zai Lab. Some of the key milestones achieved were: the China NMPA regulatory approval for ZEJULA in second line ovarian cancer. Two additional submissions for regulatory approval in China for Optune and omadacycline.

Collaboration agreements with Deciphera and Incyte. Continued buildout of a commercial platform in China launched ZEJULA and Optune in Hong Kong and further enhancement of our global in-house R&D capabilities. Today, our portfolio consists of 3 commercial products in line with these aspects, being evaluated in more than 25 clinical trials across oncology and infectious disease.

Looking ahead in 2020, we have another pivotal year coming up as we have, or we expect to, file 3 submissions for approval in China. Launched ZEJULA and Optune in China, deliver key clinical readouts, announce new strategic deals and, as promised during our IPO, advance 2 discovery programs with global rights to R&D submission. We are proud of our global reputation as a biotech pioneer and a partner of choice in China. As we continue to deliver exceptional execution across global and local clinical development, regulatory affairs, business development, commercialization and infrastructure expenses. Within the next 3 years, we believe Zai is well positioned to reach our revision of becoming a leading global biopharma company with a steady stream of approvals and commercial launches in Greater China, across multiple therapeutic areas, internally generated global pivotal stage pipeline assets and transformative partnerships.

With regard to recent updates, at first was addressing the impact caused by the coronavirus outbreak. Global health authorities have appropriately outlined the seriousness of the outbreak, both in China and globally. And while it may be too early to speak to the optimal impact on our company, Zai Lab currently does not expect to be materially impacted from this unfortunate event. In addition, due to the comprehensive safety measures we have quickly implemented across our firm, none of our employees have been infected so far. We have clear procedures in place to deal with any situation should they occur. Some companies will be impacted definite by the virus. While we have seen some disruption to our certain aspects of operation during the first 2 months of 2020, we do not see the need to change our key clinical regulatory and commercial milestones at this time. Having said this, we continue to monitor the situation very closely. We’re doing everything we can to make sure all constituents, our employees, medical community, patients, regulatory agencies and partners, are safe and supportive.

Moving on to other highlights. We recently announced in January that Zai Lab successfully raised total gross proceeds of approximately $300 million. Combined with our cash position at end of 2019, our pro forma cash position exceeds $550 million. Under current market conditions, such financial sums should enable us to execute all of our key strategic initiatives as we continue to expand our business. I’m also thrilled to announce that following the China NDA acceptance of omadacycline this February, and despite the turbulence caused by the coronavirus outbreak, our sNDA for ZEJULA as a first-line maintenance treatment for ovarian cancer patients was accepted in China by the NMPA this week. I believe ZEJULA as first-line monotherapy treatment offers surgery and platinum-based chemotherapy has the potential to fundamentally change how women with ovarian cancer are treated in China.

On the commercial front, I’m pleased to report that both ZEJULA and Optune have outperformed our revenue targets in 2019. According to IQVIA, ZEJULA was not only the leading PARP inhibitor in Hong Kong with market share of 71% last year, but also ranked among the top 5 oncology drugs ever to launch in Hong Kong as measured by first full year revenue. We also understand from our partner, Novocure, that Optune last year in Hong Kong represented one of the most successful launches globally.

Needless to say, we are excited to commercialize ZEJULA and Optune in China soon. While it’s too early to comment on the launch trajectory of ZEJULA in China, we believe there are significant commercial opportunities. More importantly, we are excited that we have already started to address the unmet medical needs of platinum-sensitive ovarian cancer patients in China. Building our own global discovery pipeline is one of the key pillars of Zai Lab’s long-term growth strategy, and I’m pleased to report that we are making good progress. We have prioritized 3 areas of research that include delay damage response, immuno-oncology and signal translation. We’re advancing our pipeline of assets in those areas by building our internal expertise in translational medicine and precision medicine approaches and by exploring the intra-portfolio combination, we expect to progress our first 2 global programs into the IND stage this year.

We lead world-class talent to achieve our goals and we intend to continue to build and add that to our global team across all functions. We have opened a Boston office this year and plan to a larger facility in San Francisco for the discovery organization this summer. As of February 2020, Zai Lab employed 733 full-time employees across 7 offices globally, with 293 and 340 employees engaged in R&D and commercial activity, respectively. This is a very exciting time at Zai Lab. Our strategic mission is on a global scale, and we believe we have the experience and resources required to successfully reach our goal. As always, we want to thank you for your continued support and interest and look forward to keeping you updated with all of our upcoming milestones. With that said, I would now like to turn the call over to our President and CEO, Tao Fu. Tao?

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Tao Fu, Zai Lab Limited – President, COO & Director [4]

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Thank you, Samantha. As Samantha mentioned, 2019 was an extremely busy and exciting period for Zai Lab across a variety of fronts. We became a commercial stage company with the successful launches of ZEJULA and Optune. We gained approval of ZEJULA in Mainland China. We further expanded our portfolio with 2 new strategic partnerships, expanded our China commercial organization and our global R&D team through recruitment of top-level talent and significantly strengthened our balance sheet to further enable Zai Lab to bring many more important therapies to patients. While our press release for this morning provides detailed updates across most of our programs, I’d like to focus my comments today on a few selected programs and near-term catalysts. That said, we’ll be happy to answer any questions during the Q&A session on any assets that are not covered in our prepared remarks.

I’ll start with niraparib or ZEJULA, a PARP inhibitor approved globally for the treatment of ovarian cancer and in development for several other solid tumor indications. We believe that it is the best-in-class PARP inhibitor with an attractive efficacy and safety profile without the need of blocker testing and superior pharmacological properties, including once daily dosing, low drug-drug interactions and the ability to cross the blood-brain barrier. As you know, ZEJULA was approved by the China NMPA in December for second-line maintenance treatment of platinum-sensitive ovarian cancer patients, making ZEJULA the first and only category 1 PARP inhibitor approved in China. As Samantha noted earlier, this approval represents the fastest time line from submission to approval in China for locally manufactured category 1 oncology drug in 2019, underscoring Zai Lab’s execution track record and leadership in bringing important therapies to patients. In addition, our sNDA for ZEJULA as a first-line maintenance treatment for ovarian cancer patients was recently accepted by the NMPA. This submission was based on the results from the PRIMA study that demonstrate that women in both the HR deficient, or HRD positive, and HR proficient, or HRD negative, subgroups experience a clinically meaningful and statistically significant benefit. In addition, Zai Lab recently completed enrollment of the Phase III PRIME study of ZEJULA in Chinese patients with first-line ovarian cancer. We’re excited for an opportunity to bring this potentially game-changing label expansion to China as soon as possible.

Regarding the commercial launch of ZEJULA in China, we’re very proud of our team, bringing this drug to the market in mid-January, expeditiously following the approval. In response to the challenges caused by the coronavirus outbreak, we have taken immediate measures such as creating online physician and patient education and counseling platforms, getting ZEJULA on reimbursement lists at a provincial and municipal levels and maximizing commercial insurance opportunities. We anticipate providing initial commercial figures for Mainland China when we announce our next financial results and corporate update midyear.

In Hong Kong, I’m pleased to report that our commercial launch continues to perform ahead of our initial financial forecast. While Hong Kong is a small market compared to Mainland China, we believe our initial performance validates 2 key items. First, the compelling profile of ZEJULA in the Greater China region; and second, the capabilities of our commercial team. Therefore, we believe many drivers for success in Hong Kong can be applied to our Mainland China launches to further positions ZEJULA for success in our primary market.

In today’s earnings press release, we announced the termination of the Phase III study of niraparib, a first-line maintenance therapy in patients with small cell lung cancer due to the rapidly changing landscape in treatment options. While this may be set back for small cell lung cancer patients, we can refocus our resources and attention towards other indications with higher unmet clinical need and commercial opportunities for ZEJULA. In regards to other indications, we recently dosed the first patient in the Phase Ib combination study of niraparib with MGD013, a bispecific PD-1/LAG-3 DART molecule in advanced and metastatic gastric cancer. And we plan to continue to work closely with our partner, GSK, to pursue other label expansion opportunities. Looking ahead, we’re committed to making a meaningful impact on the way cancer is treated in China and globally. We believe ZEJULA is a potential best-in-class PARP inhibitor, and our plan is to continue to develop ZEJULA in order to bring this innovative treatment to as many patients who may benefit as possible, including in indications beyond ovarian cancer.

Now turning to Tumor Treating Fields. If we can obtain a clinical trial waiver, we expect to receive the marketing authorization approval for Optune. The Tumor Treating Fields delivery system for the treatment of glioblastoma in the first half of 2020. We view our initial commercial success in Hong Kong as a very encouraging time for Optune and the unmet needs it can address in Mainland China.

As you may know, Novocure received approval from the U.S. FDA for a new indication last year for malignant pleural mesothelioma. We plan to file MAA, or Marketing Authorization Application, in mesothelioma to the China NMPA this year. While mesothelioma is not one of the major cancer types in China, the approval will be very strategic for us even that the next label expansion opportunity is in non-small cell lung cancer.

Beyond glioblastoma and mesothelioma, there are a number of exciting anticipated milestones ahead of this program. In particular, Novocure expects to announce interim results from its LUNAR Phase III trial in patients with non-small cell lung cancer in the second half of 2020, which has a significant market potential in China. We also have an ongoing Phase II pilot clinical trial in first-line gastric adenocarcinoma, which is enrolling well. Just as a reminder, the annual incidence rate in China for lung cancer and gastric cancer are over 733,679 diagnosed patients effectively according to the 2015 National Cancer statistics.

Now on to Ripretinib. Our investigational KIT and PDGFR-alpha kinase switch control inhibitor licensed from Deciphera. In February 2020, our partner, Deciphera, announced U.S. FDA acceptance under priority review of its NDA for Ripretinib in patients with advanced gastrointestinal stromal tumors, or GIST. The submission was based on the compelling data from the pivotal Phase III INVICTUS clinical study of Ripretinib in patients with advanced GIST, where the study met its primary endpoint of a significantly improved median progression-free survival of 6.3 months compared to 1 month in the placebo arm, and the risk of disease progression or death was reduced by 85% or a hazard ratio of 0.15 compared to placebo.

Looking ahead with Zai Lab in China, we plan to submit an NDA to the China NMPA for fourth-line advance GIST this year and initiate bridging trial for second-line GIST in the second half of 2020.

And next with margetuximab. Zai Lab announced last month that the first patient has been dosed in the registrational bridging study of margetuximab in combination with chemotherapy for the treatment of patients with metastatic HER2+ breast cancer. This follows the BLA submission to the U.S. FDA for margetuximab by our partner, MacroGenics, for the treatment of patients with metastatic HER2+ breast cancer in combination with chemotherapy.

Looking ahead, MacroGenics expects to present final data from the Phase III SOPHIA clinical trials in HER2+ metastatic breast cancer by the end of 2020. In addition, Zai Lab expects to enroll Chinese patients in the Phase II/III MAHOGANY study to evaluate the combination of margetuximab, a checkpoint inhibitor and chemotherapy as first-line treatment for advanced gastric and geo-esophageal junction cancer by second half of 2020.

And finally, an update on omadacycline, our once-daily oral and intravenous antibiotic for the treatment of adults with community-acquired bacteria pneumonia and acute bacterial skin and skin structure infections for our anti-infected pipeline. In February 2020, Zai Lab announced that NMPA has accepted its NDA with category 1 new drug definition. We also announced today that we entered into an exclusive promotion partnership with Hanhui, a leading player in the anti-infective area in China with established commercial infrastructure and extensive promotion and distribution network to market omadacycline. The rationale behind this partnership was to expand omadacycline footprint to a much broader China market and maximize its commercial potential of a broad-spectrum novel antibiotics in the community setting.

As for the rest of our late-stage pipeline assets, including our oncology portfolio, and durlobactam, which is different to omadacycline in that it requires a highly specialized sales team focused on large hospitals and ICUs, we intend to directly market these products ourselves.

With that, I will hand the call over to Billy Cho, our Chief Financial Officer, who will provide an overview of our financial highlights. Billy?

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Ki Chul Cho, Zai Lab Limited – CFO [5]

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Thanks, Tao. I will now review our financial results for the 12 months ended December 31, 2019. Revenue for the period were $13.0 million compared to $129,500 in net 2018. Our revenues for the period were comprised of $6.6 million of ZEJULA sales in Hong Kong and Macau and $6.4 million of Optune sales in Hong Kong. R&D expenses were $142.2 million for 2019 compared to $120.3 million for 2018. The increase in R&D expenses was primarily attributable to ongoing and newly initiated late-stage clinical trials, payroll and payroll-related expenses from increased R&D head count and expansion of research efforts to support internal development programs.

Selling, general and administrative expenses were $70.2 million for 2019 compared to $21.6 million for 2018. The increase was primarily due to payroll and payroll-related expenses from increased commercial head count and related costs as Zai Lab expanded its commercial operation in China.

For the full year of 2019, Zai Lab reported a net loss of $195.1 million or a net loss per share attributable to common shareholders of $3.03 compared to a net loss of $139.1 million or a net loss per share attributable to common stockholders of $2.64 for the full year of 2018.

As of December 31, 2019, cash and cash equivalents and short-term investments totaled $276.4 million. In addition, in January of this year, Zai Lab announced the closing of an underwritten public offering with total proceeds net of underwriting fees and other expenses of approximately $281.3 million.

We would like now to turn the call back over to the operator, who can go ahead and take your questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have the first question from the line of Yigal Nochomovitz.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division – Director [2]

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Billy and Samantha and Tao, very good to hear that there were no coronavirus cases among your employees. I wanted to explore a bit more, however, the impact the coronavirus is having on the business. I know Samantha, you mentioned that you don’t expect a material impact on operations. But I would like to get a better understanding of what headwinds you might be seeing early — in the early days of the niraparib ZEJULA launch in terms of reduced new patient starts, given potential travel restrictions or closed physician offices in the early innings. I do appreciate, obviously, that you did launch the product before the crisis became worldwide back in January, but nonetheless, it would be important for us to understand what you’re seeing in the field with that regard.

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [3]

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Thank you, Yigal, and that’s a very fair question. And as you mentioned, we’re very fortunate we launched the products in mid-January, before the outburst of this coronavirus and that’s mainly during the second half of February and also the first week of March, the travel restriction was in China though. So exactly, if you look at our sales activities in first half of — second half of January until the mid of February, I didn’t see any impact on our commercial launch, mainly because our team has been very effective in not only in months — in 3 weeks of approval, but also in 1 day deliver all the supplies to 29 provinces and all the major hospitals. But even due to the travel restrictions and outburst in China, and we have seen some impact, but keen also very entrepreneur, and there’s — we luckily held 3 launch events prior to this. So we have sold most of the CI, especially the payout, before the major outbreak.

And so during the mid-February and March, in response to the challenges caused by the coronavirus, we have taken the immediate measures such as creating online division and patient education and consulting platforms deliver the products to patients at home or nearby pharmacy. And we’re also creating online — we also create — working on reimbursed — getting our reimbursement, the provincial and municipal level. Within the first month, we record 3 municipal cities give us local reimbursement. Of course, we also worked with the medical insurance — the commercial insurance companies. And by now, we have already several patients treated with that commercial insurance that are providing.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division – Director [4]

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Okay, great. And then just sort of following up…

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [5]

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Yes, sorry, sorry, Yigal. Just one more last one. And I just also want to report, for the last 2 weeks, we’re seeing even the business, because China relaxed on the travel restriction. And — but we’re seeing the sales team has come back and we see more patients — the new patients add on to the treatment.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division – Director [6]

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Okay. So can you just confirm now that as of today or I’m not sure what day, but you can tell me, when did the sales force return to the field on a full-scale basis?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [7]

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I’ll say in cities other than in Hubei province, the other sales force has maturely — is back on the field. But they are still not full skilled on the visits to the — to hospitals. Certain hospitals allow full-time visits. Some hospitals still have limited time to allocate to the visits. So I cannot say 100% by end of the month — of — with that question, I have to answer based on the evolution of the coronavirus situation in China. But luckily, the coronavirus situation in China has been in control for a while, and we would like to continue to see that before we can report the full sales force feedback for the sales.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division – Director [8]

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Okay. And then just quickly, in terms of anything you’re seeing in — with respect to enrollment rates for the ongoing clinical trials as well as the supply chain integrity for ZEJULA and Optune with respect — given the coronavirus pandemic, can you comment on any impacts there or no?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [9]

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First of all, I think the supply has not been interrupted at all. Because we — as I mentioned, we shipped the supplies and — the first day after we officially launched the product in mid-January. And the first day delivered to all the hospitals, the pharmacies. And so they are — we — also from manufacturing sites, we have enough supply. And also the people already back to work if we need additional supplies. And in terms of clinical recruitment, I have to say on this part, we are quite fortunate because we have several major recruitments and trials. And one already completed not even patient recruitment, but also the close the — we already closed the study. We are in the process of data mining. The other one, we already completed patient recruitment in November. And during the mid-February to early March, we did see some — we did see only 50% patients were coming back to the hospital for follow on. But now we see more — as of this week and last week, we see more patients coming back for follow-ons. And so other crowd we are speaking, either they are at the beginning of what we just — we haven’t announced, but if you look at the clinical.com in China’s CFDA website, we have 10 recent approvals of CTAs, and they are in the process of getting all the approvals and also the human genomic office approval. So the trial has not taken off yet. And some other trials, we are ongoing on small bridging studies. They usually don’t need that many sites. And those we don’t see impact.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division – Director [10]

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Okay. And then just the final question is, obviously, you’ve mentioned that you’ve got the sNDA accepted by the NMPA for ZEJULA for first line. Is it the case that you will not need to wait for the PRIME Phase III results to get the first-line approval as occurred with second-line with the NORA trial? I just want to confirm that the regulatory setup is the same.

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [11]

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You mean in China?

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division – Director [12]

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Yes. In Mainland China, yes. Yes.

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [13]

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Yes. In Mainland China, as you know, we got the second-line maintenance approval, also not based on the China data. And the majority is based on the U.S. and also based on the PK/PD study. We do have a second-line maintenance study going to — we’re going to see the results hopefully this first half of this year and we’ll report by then. So for first-line, the — we did not announce that we closed the study, and so as you expect, the package, we accept this, majority based on the package from — the same package the GSK submitted from the PRIMA study. But of course, there are other things we included, but its — PRIMA is the majority of the submissions.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division – Director [14]

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Okay. Understood. Best of luck in managing and navigating through the remainder of the coronavirus crisis in China.

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [15]

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Thank you, Yigal. I think the regulatory team on this regard, I have to really applaud their efforts, because it’s major disruption to many big business and especially the regulatory team emulated with many coronavirus effect, both on the kick side and on the treatment side.

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Operator [16]

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We have the next question from the line of Anupam Rama from JPMorgan.

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Anupam Rama, JP Morgan Chase & Co, Research Division – VP and Analyst [17]

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Congratulations on all the progress and also glad to hear that everyone is doing well at the company. I know that you have an infectious disease vertical at the company. Any thoughts on internal options or potential business development options that may present strategies for COVID-19?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [18]

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First of all, we do not have an in-house discovery capability for viral and also bacterial and in fact anti-infectives. And — however, we do look for opportunities, so other — include other anti-infectives, which we — over long, we have been looking into those. I will turn more details to Jonathan Wang, our Head of Business Development, to elaborate on this point.

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Jonathan J. Wang, Zai Lab Limited – Senior VP & Head of Business Development [19]

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Yes, Anupam, thanks for the question. I think we’re evaluating a lot of opportunities in anti-infectives, as Samantha said, we look at both antibacterial as well as antiviral opportunities that have large unmet medical needs, especially in Asia Pacific and China. Although we can’t probably comment specifically on COVID-19, but within antiviral, we’re looking at a lot of opportunities as well. So hopefully that answers your question.

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Operator [20]

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We have the next question from the line of Jonathan Chang from SVB Leerink.

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Wei Ji Chang, SVB Leerink LLC, Research Division – MD of Emerging Oncology & Senior Research Analyst [21]

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Congrats on the progress. First question, can you provide any color on the successful ZEJULA launch in Hong Kong? And reasons for confidence that the success could translate into the China launch?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [22]

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Jonathan, thank you for taking the time to participate in this call. And I’ll refer that to Jonathan.

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Jonathan J. Wang, Zai Lab Limited – Senior VP & Head of Business Development [23]

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Yes. Thank you, Jonathan. As Samantha mentioned, in our presentation earlier, ZEJULA was launched at the end of 2018, and its first full year of sale, it achieved pretty remarkable revenue and ranked basically amongst the top 5 oncology drugs that was ever launched in Hong Kong, behind the likes of Keytruda, Opdivo, Tecentriq and Tagrisso. And we also overtook our competitive drug, even though we launched about 18 months after Lynparza. So we now have over 70% market share in Hong Kong for the full year of 2019 based on IQVIA or IMS data. So the commercial launch in Hong Kong was very strong, and we’re confident that we can replicate this success in China over time. And we believe that this success is primarily due to having this best-in-class drug, as well as having a very experienced team that has clearly demonstrated the ability to execute and very rapidly ramp up sales. And even in China, despite the coronavirus situation, I think the team was able to mobilize very quickly for the launch in China. In fact, for all the products that was approved in December in China last year, we were the only product that was launched in January of 2020.

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Wei Ji Chang, SVB Leerink LLC, Research Division – MD of Emerging Oncology & Senior Research Analyst [24]

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Got it. Second question. Can you highlight the strategic similarities and differences between the ZEJULA and potential Optune launch in China?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [25]

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Jonathan, you can keep going for that question.

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Jonathan J. Wang, Zai Lab Limited – Senior VP & Head of Business Development [26]

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Yes. I think for our pipeline, if you look at it, we — with the licensing discovery is first-in-class, best-in-class profiles. And in the case of Optune, it’s in fact the only in-class. So first and foremost, we believe we have a very strong product which gives our team a lot of confidence. And that has been demonstrated in Hong Kong so far. That launch, as our partner, Novocure, has told us and has told many people, is probably the best launch out of all the geographies in terms of the ramp-up and the pickup in that location. And having done very well in Hong Kong last year, I think that gives our team very strong confidence in China. And as you may know, in China, Optune is also included in the national treatment guideline, which is the official guideline that the physicians should follow and tell the patient that there is a streaming option available for them. So I think with all these positive on the back of Hong Kong as well as on the physician endorsement, we’re very confident about the launch of Optune in China once it’s approved.

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Operator [27]

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We have the next question from the line of Maury Raycroft from Jefferies.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division – Equity Analyst [28]

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Congrats on the progress. First question is just on the launches. Just wondering if you can provide any more specifics on the patient starts in Hong Kong for ZEJULA and Optune and then for ZEJULA in China?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [29]

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Jonathan, you want to take — continue your discussion?

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Jonathan J. Wang, Zai Lab Limited – Senior VP & Head of Business Development [30]

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Yes, sorry. I just want to clarify, you mean the patient numbers in Hong Kong for both products?

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Maurice Thomas Raycroft, Jefferies LLC, Research Division – Equity Analyst [31]

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Yes, if that’s — if you’re willing to provide that info.

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [32]

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Okay. So thank you, Maury. Yes, in — we currently do not have the split in Hong Kong for the patients from Mainland China and also from Hong Kong. So we are not in a position to split that number yet.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division – Equity Analyst [33]

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Understood. And for the bridging trial for ripretinib and second-line GIST, just wondering if you can comment on how many patients you’re going to need for that study? And will you need that — the study results from that in order to submit the NDA?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [34]

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So correct me, Maury, you’re mentioning second-line, right, not the third or the fourth line?

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Maurice Thomas Raycroft, Jefferies LLC, Research Division – Equity Analyst [35]

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That’s right.

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [36]

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Okay. For second-line, we have 2 choices. We can either work with our partners to be part of the global — contribute to the global patient recruitment. But — or we can do a small parallel study, while they are doing the global trial. So it depends on our partner’s progress, we may go either way.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division – Equity Analyst [37]

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Got it. And last quick question is just on omadacycline. Just wondering if you can provide more specifics on the agreement with Hanhui and what the terms are there?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [38]

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So thank you. I’ll turn that question to Tao.

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Tao Fu, Zai Lab Limited – President, COO & Director [39]

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Yes, sure. Sure, Maury. Thanks for your questions. So as we mentioned, this is really a CSO agreement. So we really retain all the development right, regulatory right and will continue to be the MAH holder or we grant the exclusive promotional right to Hanhui, which is one of the leading anti-infective player in China. They have over 800 sales reps in the anti-infective business. And if you think about this product, it really is a broad-spectrum antibiotic that has a lot of view within the community setting. So you really need a pretty large primary care sales force from all this kind of product. So we think this is the best go-to-market strategy versus building a primary care sales force ourselves. So as related to the terms, I think we look all revenue that will — we receive upfront payments and milestone payments, and there will be a profit split mechanism for their promotional efforts.

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [40]

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Yes, also, Maury. Just want to add a line, because this is our first primary care and social anti-infective, that’s why we’d like to work with a partner on this.

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Operator [41]

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We have the next question from the line of Yang Huang from Bank of America.

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Yang Huang, BofA Merrill Lynch, Research Division – Research Analyst [42]

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Congratulations on all the progress and good to know that everyone is doing great all around. And my first question is, I think, earlier in the call, you mentioned for Optune, it is really important to get the second indication in mesothelioma and which has some indication for getting lung cancer. Do you mind to further elaborate on that point?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [43]

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Sure. And thank you, Yang, for joining the call, and thank you for your time. I’ll turn the question to Tao.

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Tao Fu, Zai Lab Limited – President, COO & Director [44]

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Yes. Thanks, Samantha, and thank you, Yang, for your question. So we do believe the mesothelioma approval is very important. And also we’re trying to get that indication approved in China as well, because it is the first validation of the Tumor Treating Fields technology outside the brain. And it really is a very strong technology validation. And as you know, mesothelioma is also a form of lung cancer and lung disease. So we believe the success there really bodes well for the LUNAR trial and at the current study in non-small cell lung cancer. And as you know that’s a very, very large market in China, close to 800,000 patients per year. So we really think that’s a validation of the potential of Tumor Treating Fields in lung cancer.

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Yang Huang, BofA Merrill Lynch, Research Division – Research Analyst [45]

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Okay, great. And my next question is about ZEJULA launch in Mainland China. So as I understand, the main channel for ZEJULA for patients will be going through from pharmacy, right, not a hospital — probably not a hospital yet. So can you tell us how many pharmacies you already entered for ZEJULA? And what’s your kind of year-end goal or how many pharmacies you intend to get ZEJULA in by the end of this year?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [46]

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Yes, that’s a very good question. And I think Jonathan has the detailed answer for you.

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Jonathan J. Wang, Zai Lab Limited – Senior VP & Head of Business Development [47]

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Yes. Yes, thanks for that question, Yang, you’re right. So the oncology products in China are — the prescriptions are procured at the pharmacies. But these pharmacies are also affiliated with the hospitals. But what I can tell you is that when we launched ZEJULA in Mainland China, we had about 150 sales FTEs dedicated to cover ZEJULA. And for these 150 FTEs, they cover currently about 800 to 900 hospitals in Mainland China, already. And that basically covers about up to 5,000 to 6,000 physicians as well in terms of our coverage. So I think, as Samantha said, we also got onto a couple of important municipal city reimbursement, while we still way for the NRDL inclusion hopefully later this year. So we have already mobilized and have done a lot of work despite the coronavirus situation in China. And hopefully, that gives you a bit more confidence.

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Operator [48]

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We have the next question from the line of Fei Zheng from Crédit Suisse.

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Fei Zheng, Crédit Suisse AG, Research Division – Associate [49]

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I have only 2 small questions. First, why is the — is there any particular reason that why we have not put much effort for ZEJULA in breast cancer? And my second question is, what is our focus for the in-house segment products? And when we expect to see some milestones for this product?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [50]

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Thank you for the question. I think the in Tao’s presentation, we alluded to our effort in the breast cancer. Tao, why don’t you cover this question?

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Tao Fu, Zai Lab Limited – President, COO & Director [51]

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Yes. So thanks for your question. We are working very closely with our partner, GSK, on additional line extension opportunities for niraparib. So we intend to work with them closely and potentially join global studies. I think breast cancer is one of the indications about being served.

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Fei Zheng, Crédit Suisse AG, Research Division – Associate [52]

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Can you give me — give us some color on the in-house development product efforts?

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Valeria Fantin, Zai Lab Limited – Chief Scientific Officer [53]

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Yes, Samantha, you want me to take that one?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [54]

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Yes, Valeria, and please.

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Valeria Fantin, Zai Lab Limited – Chief Scientific Officer [55]

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Yes, sure. Thanks for the question. You were asking about when are we going to start hitting our milestones, and actually, this is a key year. We are targeting 1 to 2 new global INDs and first patient dose this year. And we will be providing more details as these IND filings proceed. And in terms of the overall strategy for our portfolio, as Samantha mentioned earlier, the types of programs that you will be seeing emerging from our internal efforts fall into 3 major categories, immuno-oncology, DNA damage, response and repair and oncogenic signaling. And these are the 3 areas that we have currently prioritized, because, as you know, there’s clinical validation for these 3. They are synergistic with our clinical pipeline, and as Samantha mentioned, we will be exploring intra-portfolio combinations and they are also aligned with the growing in-house expertise. So this is a way to continue to build depth and expertise in those 3 very key scientific areas.

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Operator [56]

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We have the next question from the line of Xiang Gao from Macquarie.

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Xiang Gao, Macquarie Research – Analyst [57]

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Our company is holding up very well in the volatile market. This is Gao Xiang from Macquarie. I have 2 questions. The first one is, what is the update for the anti-infectives, especially for the EXT2514 (sic) [ETX2514]? So is that also going to be collapsed with our company? And the second question is manufacturing of biologics. Because we have quite a few drug candidates or biologics, right? So I just want to know what’s the plan for the manufacturing for that category.

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [58]

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Yes, sure, Xiang. And that’s a good question. So for the second — for the manufacturing side, we always do API supplies from different suppliers. Local supplier and sometimes we qualify 2 suppliers because we don’t feel like API is — especially for small molecule APIs, we don’t see that should be one of our core expertise. But we do work with very credible suppliers. And on the commercial activity, so you were talking about the project from — the in-license from Entasis. That is more hospital products and also more ICU products. We do intend to commercialize that ourselves.

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Xiang Gao, Macquarie Research – Analyst [59]

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Okay. So for the biologics down the road, we also going to use some CMO?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [60]

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So biologics, it’s so far, we — the imminent one we’re talking about is the PD-1 and also the margetuximab. For those, they will be imported first. And then during that time, if we switch to local, we either can go locally by ourselves because we do have the capability to expand our manufacturing facility, and — or we can go to a CMO. It depends on which makes sense at the time.

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Xiang Gao, Macquarie Research – Analyst [61]

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Okay. Maybe just a follow-up question, very quick. Correct me if I’m wrong, I remember ZEJULA was actually manufactured by ourselves, right?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [62]

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Yes, ZEJULA drug product. But again, API, we do use 2 suppliers, qualified local suppliers.

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Operator [63]

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We have the next question from the line of Seamus Fernandez from Guggenheim.

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Seamus Christopher Fernandez, Guggenheim Securities, LLC, Research Division – Senior Analyst of Global Pharmaceuticals [64]

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So just 2 questions here. Can you guys just update us again on the opportunity in GIST? Maybe talk a little bit about that and timing and if there’s any complexities introduced from the collaboration with Deciphera because of COVID-19, if there are any issues there? And then for Samantha, maybe you can talk about what you think are the kind of near and long term — if there are any near- and long-term structural changes from COVID-19? I know that a lot of people aren’t inclined to consider potential positives coming out of this. But if there are, or if there are any silver linings that you would envision on a long-term basis, love to know if — any of your thoughts there.

Operator, did that go through?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [65]

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Sorry, I muted my line. So let me — thank you, Seamus. Really sorry about the hold-on. And yes, and regard to Ripretinib, for the fourth-line GIST with approval in China, we do expect to leverage the INVICTUS data as part of our regulatory submission. And — but in the meantime, we will conduct a bridging — short bridging study, and we’ll combine those data together to our NDA submission. We do not expect the coronavirus will impact on this product. To answer your second question, the coronavirus, I think in the short term, especially in regions affected in China, we do see some disruptions in both sales and also in clinical recruitment.

But having said so, in medium term, we see a good recovery, but in long term, I think companies like us who have very strong fundamentals, who are always looking for the best and the first-in-class unmet medical needs, and also, we have a very strong cash position. We have — as Billy mentioned earlier, we have more than $557 million in the bank. So that will put us in even stronger position to not only be able to get through this crisis, but also come out to be organizationally more efficient and more thinking out-of-box and also have more agility to adapt to global changes.

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Operator [66]

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We have the next question from the line of Yigal Nochomovitz from Citigroup.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division – Director [67]

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Just regarding the prior question that I asked related to trial enrollment, given COVID, I think you mentioned that you were in a fortunate position because one study was closed recently and another one completed recruitment in November. But can you just tell us which studies those were? Because it wasn’t quite clear.

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [68]

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Sure, Yigal. Thanks for asking. The one we already — in the data mining stage is the second-line ovarian cancer maintenance study. So it’s — the one we just closed the recruitment in November last year was for the first-line ovarian cancer maintenance therapy.

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Operator [69]

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(Operator Instructions) We have the next question from the line of Jonathan Chang from SVB Leerink.

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Wei Ji Chang, SVB Leerink LLC, Research Division – MD of Emerging Oncology & Senior Research Analyst [70]

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On a different topic for MGD013, the PD-1/LAG-3 bispecific partner with MacroGenics. We’re expecting a pretty expensive, albeit, heterogeneous update on the Phase I study at ASCO this year. Where do you think this drug is most likely to show activity?

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [71]

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Yes, thanks, Jonathan, for asking the question. I probably would like Tao to answer that question before I answer it. Since the data package — yes, the data package is coming from them. And unless Valeria wants us to have some additional comment on that or Tao?

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Tao Fu, Zai Lab Limited – President, COO & Director [72]

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Yes. So I — Jonathan, I think it’s probably better for MacroGenics to answer that question, but we did note it in our prepared remarks that they actually had a combination trial of MGD013 and niraparib in gastric cancer. That’s what we have to fill the public.

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Operator [73]

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(Operator Instructions) I’m showing no further questions at this time. I will now turn the call back over to Zai Lab’s CEO, Samantha Du, for closing remarks.

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Ying Du, Zai Lab Limited – Founder, Chairman & CEO [74]

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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 periodically on our progress throughout the year. Operator, you may now disconnect this call.

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Operator [75]

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Thank you, ma’am. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.