Q2 2022 Zai Lab Ltd Earnings Call
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pleasure to turn the floor over to Billy Cho, Chief Financial Officer of Dialect, who will make introductory comments.
Thank you, operator. Good morning, good evening, and welcome, everyone.
Zilab recently issued a press release providing the details of the company's financial results for the second quarter 2022, as well as product highlights and corporate updates.
The press release is available in the investor relations section of the companies website at ir.cyelibratory.com
This call will be led by Dr. Samad Padu, Silas Founder, Chairperson, and Chief Executive Officer.
She'll be joined by Josh Smillet, Chief Operating Officer, who many of you know, and officially started this month and will discuss his priorities and focus areas for the company.
Dr. Alan Sandler, President and Head of Global Development Oncology, who will discuss advances with our oncology product candidates, and Dr. Harold Reinhardt.
President and Head of Global Development Neuroscience, Autoimmune and Sex Diseases.
who will speak about the progress we have made in those three therapeutic areas. And I will discuss the performance of our market products and conclude with comments on our financial results. Additional executives will be on.
to answer questions during the Q&A portion of the call.
As a reminder, during today's call, Zilah will be making certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including our business plans and objectives and timing and success of our clinical trials, our sales and revenue forecasts for the products and product candidates, regulatory applications, and commercial launches. Zilah will be making certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including our business plans and timing and success of our clinical trials and timing and success of our clinical trials and timing
Such forward-looking statements are not guaranteed at future performance, and therefore we should not put undue reliance upon them. These statements are subject to numerous risks and uncertainties. Actual results could differ materially from what we expect due to various factors, including those discussed in our SSC filings.
At this time, it is my pleasure to turn the call over to Zilab's founder, chairperson, and chief executive officer, Dr. Samantha Do.
Thank you, Billy. Hello everyone, and thank you all for joining us today.
I'm happy to report that as we have consistently done in the past, we executed well in the second quarter and delivered strong results.
Despite the challenging operating environment,
They continued to meet all of our corporate goals for 2022.
including the DLA's acceptance to Ascotigamat by China's NMPA
Earlier this week, Mr.
from its phase 3 emergent 2 trial in schizophrenia.
We believe CAR-C could be a very important treatment option as the first new class of medicine in over half a century for the many patients suffering from schizophrenia in China and globally.
In addition, our test line continues to mature and demonstrate its first and best-in-class potential.
Add the graphics, CLN081, ripple trick to nip, I forgot to use the mark.
The zula and tumor-treating fields have each had positive clinical data readouts in the second quarter.
For the remainder of the year, we are on track to deliver our remaining 2022 corporate priorities, including an MBA submission to the NMPA for Subactone, Dual Bactone, and the N
Pending our partners' U.S. violence progress, advancing GL 1102, our innovative L17A human body program, into full global development, as well as seeking NRDL inclusion for King Luke and hurts areas.
We continue to evaluate our pipeline in order to focus our resources on the programs that have the greatest potential for patients.
while strengthening our global competitiveness and providing long-term corporate sustainability.
Importantly, our commercial team continues to drive growth with our full marketing products in Greater China and remains resilient in the face of the ongoing pandemic situation in certain regions of China.
Before I conclude, I would like to welcome our Chief Operating Officer, Josh Smidid, to his first of many earnings and conference calls.
Josh will make introductory comments.
and share some thoughts on SciLife before turning the call over to a discussion on Sci's overall update.
With that, I would like to turn the call over to Josh for comments. Josh? Josh?
Thank you, Samantha. I'm thrilled to be joining Xilab at such a pivotal time in the company's history.
In preparation for my start, I had a chance to meet with many of the company's stakeholders over the summer, and I was consistently asked three questions.
Why did I choose to join Xilab?
What will my priorities be and how will macro and political forces impact iLab's trajectory?
I will give a brief summary of my thoughts on these three questions before turning it back over to Alan, Harold, and Billy to provide more color on Q2 performance.
First on why I joined Xi Lab.
I've had a lot of experience with both R&D and commercial operations in China over the last 15 years in my prior roles.
I've been intrigued by the massive opportunity emerging from both a commercial and scientific standpoint in China.
I followed and respected Samantha and her leadership over multiple companies and thrilled to have a chance to work with her and the great team at Dyelab.
And I'm excited by the opportunity to partner with other great companies around the world to bring global innovation into China and also to help bring Chinese innovation to Western markets.
whether directly from Xilab or from China's expanding biotech ecosystem.
From the start, Xilab is at a global perspective, and I'm looking forward to helping scale the company, both in China and the U.S.
And the opportunity is significant. This is a strong company today with four marketed products in China and a great pipeline of both partnered and internal assets.
For the second question, in terms of my priorities, I start with three key areas of focus.
First, continuing to drive commercial excellence in China. Our four product launches are off to a good start, and we have significant growth opportunities ahead in each product.
And we have an exciting next set of launches that we need to prepare for and execute on, beginning with F Cartagemod next year.
Realizing the full value of our existing China portfolio is a high priority and will result in great benefits for patients and substantial revenue growth for the company.
My second priority is to expand our pipeline both in China and on a global basis.
We have our first internally developed medicine, ZL1102, anticipated to start a global phase two study in psoriasis later this year. And I will work with our team to bring in more best in class and first in class medicines.
We have obvious expertise and capabilities in China that we will continue to leverage for new regional opportunities.
But we're also well positioned now to bring that capability to partnerships and acquisitions in the US and the rest of the world.
So you should expect us to be active in business development for both new, regional, and global programs over the coming months and years.
Finally, I'll be focused on making sure that as we deliver on launches and pipeline opportunities, we also deliver bottom line results.
We expect Xilab to grow considerably over the next year.
in sales, number of marketed products, and breadth of portfolio.
We will need an increasingly global infrastructure to support this growth.
We will build that in a lean, agile, and productive way that enables both top-line growth and robust profitability.
The third major area of questions I received revolves around macroeconomic and geopolitical risks facing the company. This includes access to capital and our ability to maintain our U.S. stock listing, U.S. FDA challenges to Chinese data in registrational trials, and concerns around drug pricing in China for innovative therapies.
I join Zai with an understanding of these risks and commend the team for the success to date managing these challenges.
Having engaged KPMG, a U.S. auditor that is subject to full review and inspection by the PCAOB, we believe it will be in compliance with the audit requirements of both U.S. and Chinese laws for our fiscal year ending December 31, 2022. As a result, we believe that our NAHDAC listing will continue uninterrupted.
In Q2, we also achieved the primary listing on the Hong Kong Stock Exchange, enhancing the liquidity of our stock and making it available to more investors in Asia and around the world.
These moves, in combination with our strong balance sheet with over $1.2 billion in cash, should provide global investors with enhanced confidence in the company.
In terms of clinical data, we do not have any programs that rely on China-only data for global registration.
Our core strategy is to participate in global registration trials where Chinese patients in sites make up a reasonable percentage of the overall submission.
We have many years of successful regulatory audits from around the world and are confident that our clinical quality meets the highest global standards.
We have not observed any recent reluctance from global innovators to partner with us on their global registration programs.
On pricing and access, we are confident that our portfolio of differentiated best-in-class medicines will command good pricing and broad access in China.
We continue to see NRDL listing as a significant positive economic opportunity and are also encouraged by the continued growth of supplemental insurance across China.
Finally, of course, we have to navigate the impact of COVID restrictions.
While we cannot predict the ultimate course of the virus or the control measures government authorities will take for the remainder of this year and beyond,
We are very proud of the way our teams have improvised and executed so far this year, as demonstrated for example in our increased sales of Zadula and our milestones delivered in the pipeline.
At this point, we do not expect significant negative impacts to any of our major pipeline milestones from further COVID restrictions, but do expect we will see some residual revenue impacts in the second half of the year from local restrictions and lockdown measures.
In closing, I'm excited to be at Xilab and looking forward to working with our great team and all of you on our very promising future.
Now I'd like to turn the call over to Alan for comments on our oncology franchise.
Thank you, Josh and welcome to the team.
Xylabs Oncology franchise continued to make progress in the second quarter, including key clinical data readouts as well as clinical trial initiations and regulatory progress.
We also expect to have a busy and productive remainder of 2022.
We'll focus mostly on the clinical data updates from our clinical programs and then touch on what to look for over the rest of 2022.
From a clinical data perspective, we saw important updates from Adagrasiv, a highly selective and potent oral small molecule inhibitor of KRAS G12C, Zadula, the PARP inhibitor, and TTT fields, the electric fields device that disrupts cancer cell division.
At ASCO this year, Xylab presented a new pre-specified subgroup analysis from the phase 3 prime study for Naraparib in women in China with ovarian cancer.
This analysis examined 384 newly diagnosed stage III or IV ovarian cancer patients enrolled in the PRIME study who experienced either a complete response or partial response to first-line platinum-based chemotherapy.
Results revealed the significant extension of progression-free survival when compared with placebo, regardless of the response status, to prior platinum-based chemotherapy.
Specifically, in the complete response group, the median BFS is 29.4 months for niraparib versus 8.3 months for placebo.
And in the partial response group, the median PFS was 19.3 months for niraparib versus 8.3 months for placebo. And the median PFS was 19.3 months for placebo.
The safety profile of NeurAPRIB was consistent with previous clinical trials, with no new safety issues identified in the subgroup analysis.
Also an ASCO.
Nylab and Novacur announced the EF31 phase 2 pilot study, evaluating the safety and efficacy of TT fields together with standard of care chemotherapy alone or in combination with Trastuzumab for HER2-positive patients.
as a first-line treatment in patients with advanced gastric cancer.
This trial met its primary overall response rate endpoint with supportive signals across secondary endpoints.
For Adagrasib, our partner, Muradi, announced two clinical data updates.
Most recently in June , Marati presented the full results from the registration enabling Phase II cohort of the CRYSTAL-1 study, evaluating adagrassa in patients with previously treated non-small cell lung cancer harboring a KRAS G12C mutation.
The results from the study revealed an overall response rate of 43%.
with a disease control rate of 80%.
and a median duration of response of 8.5 months.
The median PFS was 6.5 months and with a January 15, 2022 data cutoff, the median OS was 12.6 months.
The results of the CNS-specific activity in stable, previously treated CNS metastases revealed an intracranial overall response rate of 33%.
In addition to these results, Marati reported updated findings from a pooled analysis from the CRYSTAL-1 study.
including the registrational phase two and phase one and 1B non-small cell lung cancer cohorts.
The results of this pooled analysis of non-small cell lung cancer cohorts revealed an overall response rate of 44%.
with the disease control rate of 81%.
The median duration of response was 12.5 months and the median PFS was 6.9 months.
For the January 15, 2022 data cutoff, the median OS was 14.1 months.
Also in June , Marati announced the results of a prospective analysis from the Phase 1B cohort of the CRYSTAL-1 study evaluating intracranial responses of adagrassib in patients with KRAS G12C-mutated advanced non-small cell lung cancer with active and untreated CNS metastases.
The results of the CNS-specific activity in these patients revealed an intracranial overall response rate of 32%.
For bimartuzumab, our partner Amgen reported that the final analysis of the FITE Study
Phase II randomized double-blind controlled study evaluating bemeratuzumab and modified full-fox 6 in patients with previously untreated advanced gastric and GEJ cancer was completed.
These results continue to demonstrate that Bemrutuzumab plus modified full Fox6 improves the clinical outcome of patients with FGFR2B expressing tumors with no new safety concerns.
A greater survival benefit was observed with increasing FGFR2B expression levels.
Xilab collaborated with FivePine, which was later acquired by Amgen, on the FICE study in Greater China.
Throughout the year, our oncology pipeline will continue to be productive, including regulatory and clinical data updates from the Adagrassif program in the second half of the year, top-line data from the TT Fields Phase III Pivotal Lunar Study in early first quarter of 2023.
as well as numerous regulatory submissions and clinical trial initiations from across the franchise.
With a number of potentially best in class and first in class products, we're very excited about our oncology pipeline at Xi Lab.
And now I will turn the floor over to Dr. Harold Reinhart to discuss progress in our autoimmune and neuroscience therapeutic areas.
Harold?
Thank you, Alan. I'll start with autoimmune diseases and eschatinimod for its marketed name, LISGARD.
In July 2022, Zilab announced the NMPA accepted the BLA for F-Gartigimod alpha injection for the treatment of adult patients with generalized myasthenia gravis in China, and that F-Gartigimod was introduced to the Hainan International Medical Tourism pilot zone. And in July 2022, the first Chinese patient was treated with F-Gartigimod.
These important milestones bring us closer to delivering a truly novel treatment for the many myosinear gravis patients who face challenges living with this complex and difficult to control autoimmune disease.
Moving to the neuroscience area.
As you recall, last November we entered into an agreement with Carula Therapeutics for exclusive rights to Car-X-T in Greater China.
ChirX-T is an oral investigational M1M4-preferring muscarinic agonist that stimulates receptors in the central nervous system implicated in various psychiatric conditions.
It is a late-stage clinical trial for the treatment of schizophrenia and psychosis in Alzheimer's disease.
And just this Monday, our partner Karuna reported positive top-line results from its phase 3 emergent II trial, evaluating the efficacy, safety, and tolerability of car extinct in adults with schizophrenia.
The trial met its primary endpoint with CAR-XT demonstrating a statistically significant and clinically meaningful 9.6...
point reduction in the positive and negative syndrome scale.
total score compared to placebo at week 5 with a p-value of less than 0.0001.
CAR-XT also demonstrated an early and sustained statistically significant reduction of symptoms as assessed by PAN-C total score starting at week two and maintained such reduction through all time points in the trial.
Karsti also made key secondary endpoints demonstrating a statistically significant reduction in both positive symptoms, i.e. hallucinations or delusions, and negative symptoms, for instance difficulty enjoying life or withdrawal from others, or schizophrenia as measured by the pansy-positive, pansy-negative, and pansy-marder-negative subscales.
CARX-T was generally well tolerated with a side effect profile substantially consistent with prior trials of CARX-T and schizophrenia.
We are thrilled that these top-line results from the pivotal phase 3 emergent 2 trial confirm what we have seen in the phase 2 emergent 1 trial.
These data build on the growing body of clinical evidence supporting the potential of CAR-XT as a new and differentiated approach for schizophrenia, demonstrating notable improvements across both positive and negative symptoms while not being associated with common problematic side effects of current therapies such as weight gain, sedation, and movement disorders.
With more than 8 million people in greater China living with schizophrenia, we believe Kajksi has the potential to become a new standard of care for treating schizophrenia and other psychotic disorders.
Our partner plans to submit a new drug application with the UF FDA in mid-2023.
With regards to the China development plan, the Xi team is in discussion with the CDE and getting ready to submit the clinical trial application for a bridging program in China.
Moving to CL-1102, our Topical IL-17 Monoclonal Antibody Fragment Program.
Last year, we reported that we were very excited to show skin penetration and early clinical benefit in a proof of concept trial in patients with chronic plaque psoriasis.
In the second quarter of this year, we filed a protocol to the FDA and we continue to work with the FDA on the proposed global phase 2 program. We are on track to start a dose finding phase 2 trial of CL1102 in the second half of this year.
And now Billy will speak about progress with our commercial products and financial results. Billy.
Thank you, Harold. Zilab continues to execute well with strong results delivered in the second quarter.
For three months under June 30, 2022, total revenues were $48.2 million, compared to $36.9 million for the same period in 2021.
three months under June 30, 2022, total revenues were $48.2 million, compared to $36.9 million for the same period in 2021, representing a 30% year-over-year growth.
Product revenues for the period were $34.1 million for Sejula, compared to $23.4 million for the same period in 2021, representing a 46% year-over-year growth. $11.6 million for Optune, compared to $9.5 million for the same period in 2021, representing a 22% year-over-year growth. $0.6 million for Kinloch, compared to $4 million for the same period in 2021, and $1.3 million for Nizara, compared to nil for the same period last year.
Kinlock and Zara are scheduled to enter negotiations with the NMPA regarding potential inclusion in the NRDL, and in June 2022, the company lowered the selling price for these products. As a common practice in China, we accrued sales rebates as compensation to distributors for those products previously sold at the price prior to the reduction of $2.7 million for Kinlock and $0.2 million from Zara, respectively, during the three months ended June 30, 2022.
Our expenses were $66.1 million for the three-month ended June 30, 2022.
compared to $142.2 million for the same period in 2021. The decrease in R&D expenses was primarily due to no upfront payment for new licensing agreements, partially offset by increased expenses related to the ongoing and newly initiated late-stage clinical trials, and higher payroll and payroll-related expenses from increased R&D headcount.
Excluding upfront payments for new licensing agreements, core R&D expenses were $51.7 million for the same period until 2021.
SG&A expenses were $63.4 million for three months and between 30 and 2022, compared to $54.4 million for the same period of 2021. The increase was primarily due to payroll and payroll-related expenses from increased commercial and general administrative headcount as Zyla continued to expand and invest in its commercial operations in China in anticipation of strong top-line growth over the next few years.
Net loss was $137.9 million for the three months ended June 30, 2022, compared to $163.3 million for the same period until 2021.
The decrease in net loss was primarily due to no upfront payments for newly licensed agreements, partially offset by increase in foreign exchange loss of $42.2 million, which is a non-cash adjustment.
Net loss per ordinary share during the three months ended June 30, 2022 was 14 cents, compared to 18 cents for the same period as bug 21.
Net loss per ADS during the three months ended June 30, 2022 was $1.44 compared to $1.76 for the same period last year.
As of June 30, 2022, cash and cash equivalents, short-term investments, and restricted cash totaled $1.26 billion compared to $1.31 billion as of March 31, 2022.
We would now like to turn the call back over to the operator to open up the line for questions.
Operator.
We would now like to open the live for questions. If you have a question, please press star 1 1 at this time.
Can you repeat your questions to one question at each time? Please stand by while we compile the Q&A roster.
Our first question comes from the line of.
from Jeffrey please go ahead.
Hi, good morning. This is Dennis Bing on for Mike. Thanks for taking our questions.
Can you just briefly talk about your views around the HFCAA and your comment that Zylab can be audited in the U.S. versus having to be audited in China? How confident are you the FCC would be on board with this? Have you engaged with them specifically on this? Thank you. For live UN video visit www.un.org.au
Hey Josh, do you want to take this one?
Yeah, sure. Hi, it's Josh. Thanks for the question. As we've said, we appointed KPMG in the US as our auditor for 2022 in the second quarter. And as such, the PCAOB will have full access to KPMG's work papers. And they'll do the audit for 2022. So from that standpoint, we're compliant with the
holding foreign companies accountable act, and the next time you'll see any movement on this would be when we file our 10K and KPMG completes our audit. We're very confident that given the control practices and reporting and things we have here that that audit will go well and we will not be on the list once we file the 10K. I think between now and then really the work is to.
is for KPMG to prepare for the year-end audit and ultimately sign off on our 2022 financial. So again, we're quite confident that we've met the requirements of the law.
Thank you for the questions.
Our next question comes from the line of Yigal Ntumovitz from Citi. Please go ahead.
Hi guys, thanks very much for taking the question. So you made the statement that you believe you can become the market leader for Sijuwa in the park space in China. So if you could perhaps just drill down a little bit more into that statement in terms of the metrics, data, and or internal projections that you're making that will make you confident in making that statement. Thank you.
There you go. I'll take this one. Thanks for your question. So we tried many things. I think broadly I'll say that we continue to see the awareness and penetration of first for the part acid class.
continue to increase, particularly since we came into the picture.
And as the size of Pi has been growing, our market share has just continued to grow really kind of starting last year. And even despite the recent sort of COVID situation, it didn't stop from that trend. So it was really a kind of a unidirectional season.
Anyways, you're asking about other metrics.
we follow. There's a lot. So we publicly sort of state the number of hospital listings and we're up to about 1700 as of June , you know, around 1672 to be exact hospital listings for the JUULA as of June 22. And you know that's going to continue to climb. We're tracking of course market share data as I mentioned earlier. You know it's sampling but it's published by QVIA. It gives a good reference.
kind of the awareness usage, the first line and the second line. We track a lot of things and it's all pointing towards the initial statement I mentioned and that's what gives us a confidence that should this hold and be expected to.
We have an internal goal to be the market share leader, no later than next year.
Thank you for the question.
Next question comes from July of Anupam Rama of JP Morgan. Please go ahead.
Hey, guys. Hope you're all well, and thanks so much for taking the question. There was a comment on the call about doing a bridging study in China for CAR-HT and schizophrenia.
So, why is there no regulatory path on XChina data for Car XT similar to what you had with Zadula, Kinloch? Yeah, thanks so much. Why should there beups?
Thank you.
Yeah, hello and thanks for the question. Bridging is the standard way of doing things when you don't have data in China per se. We had a different situation, for instance, for FGT-MOD and for some of the other programs you mentioned where we had some asiatic data at least. This is not the case for the XT program, so we are now in discussions with the CDE on the bridging program.
which will allow us then to expeditiously move forward in China as well.
Thanks so much for taking our question.
for the questions.
The next question comes from the line of Jonathan Chang from D-ring. Please go ahead.
Hi guys, thanks for taking my questions. On Car XT, can you discuss the schizophrenia treatment landscape in China and the similarities and differences versus the US?
Yeah, thank you for the question Jonathan. This is a world united when it comes to psychosis treatment. And indeed the second generation of the psychotic are in use in China as they are in use elsewhere. There is a.
movement away from first generation antipsychotics because of their side effect profile. But as you probably know, the side effect profile of the second generation antipsychotics, atypical antipsychotics, which are all serotonin active or dopamine active agents, is quite well known and understood.
And it's really a bothersome side effect and it has led to the discontinuation of the treatment over, you know, that should probably be much longer in a given patient than it currently is.
So, the treatment paradigm in China is based on the same treatment paradigm and similar drugs as you would see elsewhere in the world in the US or in Europe .
There is no other drug that is like the Car-X-T drug. It really stands out by its mode of action. So this is our opportunity to show differentiation and we are really delighted.
to see the results of the EMERGENCY-2 trial, which showed that this assumption was correct.
So thanks for the question.
Thank you for the question. Got it. Thank you for taking the question.
Thanks for taking the question.
The next questions will come from the line of Zui Chen of Goldman Sachs. Please go ahead.
Thank you for taking my questions. Actually, two questions. First, it's about opt-in cells in the second quarter, because we feel like the cells were pretty receded in the second quarter. However, we do notice that because of the lockdown, very limited hospital visits and surgeries in the second quarter, particularly in some of the large cities. Could you elaborate a bit more on what kind of efforts you have done by the cells team to achieve that receding in cells? And also, second question on chin lock, this is a very small indication for slide...
Thank you. Thank you.
Hey Z, thanks for your questions. I'll take these questions.
We had a year over year growth. It was resilient despite the fact that it is not, you know, it's not an NLDL listed treatment option. So there's more of a concentrated market access strategy clustered around sort of tier one, tier two cities. And of course we all know about the market access challenges in the second quarter, but we've continued to progress well. First of all, you know, our team, you know, as an institution, we've been under a kind of a COVID.
and been operating within it for the past two plus years. So, there's been flare ups throughout China, as you know, during that time, nothing as kind of structural as kind of Shanghai recently. But we've discussed it on the first quarter call, the things that we've deployed, a lot of technology enabled solutions, of course, resilience and hard work goes into that.
And I think just a big credit goes out to our commercial team. But also, in addition to that, we've now listed on 50 supplemental insurance plans for Optune.
and we're going to continue to grow that. And it's already the second most reimbursed program in the supplemental insurance program after Keytruda, and that's when you're going to continue to grow. So I think these are the two factors. So I hope that gives you a little bit of color around resilience. And of course, it's really owning class treatment and these GBM patients really do need access to additional treatment options and innovation.
And your second question was around, you know, Kinlock and our decision to, you know, go into, you know, NRDL this year. And first of all, I'll say that Kinlock is, we believe very strongly that it's been established as a standard of care for four or five years.
It is recommended right now in the treatment guidelines as really the only therapy with 1A level evidence for advanced GIST patients in all comer setting. We hope to actually kind of expand that treatment guideline into an earlier line setting. And if we can get that accomplished, you'll see that in the public domain. But that really is about building awareness. And there's still 7,000 roughly patients in four or five GIST alone.
And we think we can really drive and treat many more patients just in that population and hopefully even beyond. So this is always part of our strategy to pursue NRGIL this year. Given, of course, last year we waited for the second line data, which in some respects, the INTRI study has some interesting favorable safety profile compared to sunitinib. So whatever we can to leverage that and try to treat as many patients, just patients as we can. So thank you.
Thank you for the questions. Next question from the line of Simas Fernandes from Guggenheim. Please go ahead.
Great, thanks for the question. My question is actually on Car XT. Can you guys just give us a sense of where penetration of antipsychotics actually sits in the 8 million patients that you guys cite? And just given where we stand in the development of that market, where do you feel Car XT could go?
relative to other markets. Obviously, the US market has lots and lots of products available. But here, it seems like there's a more limited number of products that are likely available in China. And there's quite a bit of opportunity to really take substantial market share once the product becomes available. So just interested to know how you guys are thinking about that. And then secondarily, just broadly your thoughts on the Adagrassib opportunity.
in China would be helpful to, you know, as we kind of think about the opportunity for combination with PD-1 versus just the standalone opportunity in the KRAS patient populations. Thanks.
Jonathan, do you want to take the first one on Car-X-T?
Yeah, I can start out. For Harold, do you want me to?
Please go ahead.
Let me take a first stab at the answer here with Car XT in the market in China. It's an underserved market. Let me just start up by saying it's a large market, but it's also underserved and it's been recognized by the government as being underserved because there is no effort to really address the
services that relate to psychiatric diseases is a government program and a recognition that there is a need to widen the access to enter psychotics and treatment options, both personnel wise as well as treatment wise in the Chinese population. You're correct. There is a more limited spectrum of other treatments currently available. But clearly a drug which is differentiated like Car-X-T will have a mark.
both in the US and in China, once approved. The main differentiating features are really what makes this drug either useful as a standalone or as an add-on treatment.
The current program is at a stand-alone and as such we hope to get the approval eventually. But clearly the side effect profile is not overlapping and as such you have greater options here to use a drug which is more better tolerated.
So I leave it at that. Maybe somebody else from our team can speak to the other market aspects in China.
So maybe, Jonathan, feel free to chime in. But also, just piggybacking off Harold, I'll just mention that there are over 8 million schizophrenia patients in China today.
And the number to really think about TAM in China is how many of these patients are actually diagnosed. And you can look at it from two ways. One is we do know right off the bat that around 4.3 million schizophrenia patients are in the registered cases with the National Superior Mental Illness Department. Another way to triangulate is that around half of
of all schizophrenia patients are being treated today. And that gets you to around the same number, around 4.2, 4.3 million. So that's a pretty good, I think, solid number to start with. And if you even think about a decent penetration with potentially a brand new class of drug in five plus decades, I think the opportunity here is quite compelling and we can't be more excited.
Thank you for the question. Oh, sorry. Seamus had the part two question. Yeah, he had a second question. At aggressive. Um,
So Alan, feel free to chime in and and others but I think the question was around so for the recent Probably the WCLC data. That's probably what process James's
inquiry and shame is that you hit on the nail. You know, I think the, you know, for Adagrass, for PRK-RAS, it's really the battle in frontline non-sophageal lung cancer, right? So it's a key area of how you're going to differentiate.
and have the two programs here sort of duke it out if you will. You know, this is pretty significant for us in China and there's gonna be another data update later this year. So well, you know, we'll all stay tuned for that. But you know, you're talking about 700,000 people.
new non-coupline cast patients every year in China.
And there's not a lot of good publication on the mutation rate for G12C.
The only thing that's out there is I think a publication out of I think a Hong Kong that had something like 35% So that's what we're using for now, but we believe
that can only go up, you know, as you know, we've already initiated trials for the first time in KRAS, G12C in China.
few trials. And you know we think that as awareness grows and actual patients are being treated with KRAT treatment options, you know we're going to have much better data because as you know kind of in the US or globally it's kind of at around 13% plus and let's see if we can inch towards that. But so it's a pretty significant opportunity. Billy let me maybe I'll add a little more color as well to that and just maybe broaden the question just just a bit. So as Billy mentioned...
with the CDE moving forward. We've already started participating in global studies, the CRYSTAL-10 and second line CRC and CRYSTAL-12 and the second line plus non-small cell lung cancer global studies. Importantly, we believe in the non-small cell lung cancer studies, we're using the tablet formulation, which I believe cannot improve the GI tolerability. And lastly, just wanna close it, we do also believe along with our partners of course.
We have another question from the line of Yang Huang from Credit Suisse. Please go ahead.
Thank you. I have two quick questions. The first one is on the JULA. So we know that the JULA approval has been five years since it's approved in the US. However, its indication expansion is still kind of in the process and it only has one kind of indication. So can you talk about future indication expansion opportunities in China for the JULA?
Alan, I think that's for you. Yes, yes, sure. Thanks for the question. So I will mention, and I think you alluded to this as well, that there are lung cancer in terms of non-small cell lung cancer and also breast cancer global registration trials are ongoing. There's also an early phase zero clinical study along with the IV Brain Tumor Center looking for GBM patients. We are constantly working with our partners at GSK on the residual.
this quarter compared to the same quarter last year. Gross margin for our product seems to be down. So is there a particular reason for that?
Hey Yang, I'll take this one. I mean so the non-recurring adjustment that you saw around 30 million, that drops straight to the bottom line on gross margin. So that would probably explain it. But I would also sort of guide toward our evolving gross margin.
as it's really a function of product mix and revenue ramp if you do the product.
Hopefully that helps.
We have time for one pull-up question from the line of Ding from Jefferies. Please go ahead.
Thanks for putting me in queue again. In your prepared remarks, I will now turn it over to
You talked a little bit more about expanding globally and the need for global infrastructure to support your growth and the fact that you guys will be more active in the coming months to years. So to us it seems like you are emphasizing it a little bit more than you have in the past around globalization and things like that. So given you haven't really done many deals this year, is there a possibility we could see a larger announcement sooner than later? Thank you.
Josh, do you want to take that?
Sure, yeah, thanks for the question. And I think first, as we mentioned in the quarter, we're advancing our internal asset ZL1102 into a phase 2 study. So we've got global rights there and, of course, are thinking about the opportunity for that potential product. I think as it relates to business development, from the beginning, Zilab has been geared towards global innovation.
We built a great portfolio of regional opportunities in China and certainly are now looking to take advantage of opportunities on a global scale. The team has done a fabulous job of picking great products and winners and I think we certainly can use that capability to not just select potential partners for China but on a broader basis. So.
I think these deals come when they come, and we're not going to do a deal just to have a global product. It's going to be, we're going to use the same kind of evaluation process we use for all of our partnerships. So I think predicting if and when a global acquisition or license comes would be very speculative. But we're certainly interested, and again, I think our capabilities of working closely with some of the best
partners in the world gives us, I think, a really good insight into good opportunities and will be selective, of course, but when we see something that's you know, that makes sense on not just a China basis but on a you know, on a broader global basis, we're gonna, we will act. Thanks.
Yes, also Michael, that's a good question. And Sci-Lab has been, since inception, we have spent the last five years focused on internal discovery. So as we're moving forward, we will see those programs gradually entering into the industry.
clinical stages as well. So, thank you.
Thank you. I'm showing no further question at this time. I'll now turn the call back over to Zilab's CEO , Samantha Tu, for closing remarks.
Thank you. I'm showing no further questions at this time. I'll now turn the call back over to Zilab's CEO , Samantha Tu, for closing remarks. Thank you, operator.
I want to thank everyone for taking the time to join us on this cultural day.
We appreciate your support and look forward to update you again after the third quarter.
Operator, you may now disconnect this call.
Thank you. Ladies and gentlemen, that does conclude the conference for today. Thank you for your participation. You may now disconnect.
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