Zai Lab Q1 2025 Earnings Call Transcript

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May 8, 2025
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Operator

Hello, ladies and gentlemen. Thank you for standing by, and welcome to Zai Lab's First Quarter twenty twenty five Financial Results Conference Call. At this time, all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, today's call is being recorded.

Operator

It is now my pleasure to turn the floor over to Christine Cho, Senior Vice President of Investor Relations. Please go ahead.

Christine Chiou
Christine Chiou
Senior VP & Head of Investor Relations at Zai Lab

Thank you, operator. Hello, and welcome, everyone. Today's earnings call will be led by Doctor. Samantha Du, Zai Lab's Founder, CEO and Chairperson. She will be joined by Josh Smiley, President and Chief Operating Officer Doctor.

Christine Chiou
Christine Chiou
Senior VP & Head of Investor Relations at Zai Lab

Rafael Amato, President and Head of Global Research and Development and Doctor. Ya Jin Chen, Chief Financial Officer. Jonathan Wang, our Chief Business Officer, will also be available to answer questions during the Q and A portion of the call. As a reminder, during today's call, we will be making certain forward looking statements based on our current expectations. These statements are subject to numerous risks and uncertainties that may cause actual results to differ materially from what we expect due to a variety of factors, including those discussed in our SEC filings.

Christine Chiou
Christine Chiou
Senior VP & Head of Investor Relations at Zai Lab

We will also refer to adjusted loss from operations, which is a non GAAP financial measure. Please refer to our earnings release furnished with the SEC on 05/08/2025, for additional information on this non GAAP financial measure. At this time, it is my pleasure to turn the call over to doctor Samantha Du.

Samantha Du
Samantha Du
Founder, Chairperson & CEO at Zai Lab

Thanks, Christine. Good morning, and good evening, everyone. Thank you for joining us today. We entered 2025 with a conviction that this would be a pivotal year for XIALI. A year where strong execution, disciplined growth, and the scientific innovation would begin to reshape our long term trajectory.

Samantha Du
Samantha Du
Founder, Chairperson & CEO at Zai Lab

Let me be clear. Our conviction, the strength of our business fundamentals and strategic direction remains strong. As we close out the first quarter, we are reaffirming our full year revenue guidance of between five sixty million dollars to $590,000,000 We anticipate accelerating sales growth in the next three quarters, which will translate into significant operating leverage and keep us on track to achieve profitability by Q4 of this year.

Samantha Du
Samantha Du
Founder, Chairperson & CEO at Zai Lab

Before I turn the call

Samantha Du
Samantha Du
Founder, Chairperson & CEO at Zai Lab

over to Josh to discuss our Q1 performance, I want to share my excitement for the road ahead. Cell Life has a differentiated and highest potential portfolio, including multiple regional first or best in class assets that are poised to deliver significant long term value. This include pipeline of product opportunities like VivGuard and COVID-nineteen Assist as well as other potential blockbusters like bimetuzumab in gastric cancer, hep c in schizophrenia, and CT field in pancreatic cancer. We are confident in delivering our 2025 revenue targets and surpassing $2,000,000,000 by 2028 with strong momentum carrying well into the 2030s. Our regional business is already commercially profitable with a clear growth runway, and we'll continue to add new assets with discipline and focus.

Samantha Du
Samantha Du
Founder, Chairperson & CEO at Zai Lab

At the same time, we made bold investments to accelerate our global R and D pipeline. Our lead global asset, GL1310, is a potential first in passing class DL380C. We'll present updated Phase I data in small cell lung cancer at ASCO in June and outlined our broader development strategy across multiple indications, including a registrational trial that positions us for a potential FDA approval in 2027, a milestone that would elevate our position on the global stage. Beyond 1310, we're advancing our next wave of innovation. G l sixty two zero one, our novel LRC 15 ADC for solid tumors, and c l fifteen o three is first in class l thirteen l thirty one bispecific for atopic dermatitis are both expected to enter the clinic this year, further expanding our global oncology immunology pipeline.

Samantha Du
Samantha Du
Founder, Chairperson & CEO at Zai Lab

Looking ahead, we see clear drivers of margin expansion, increased scale with vGuard, efficient new launches that leverage our existing infrastructure, manufacturing localization, and the ramp up of high value global assets. These efforts are building Zellev into a profitable, high growth business with global impact. We're just getting started, and I look forward to updating you on our progress throughout the year. Now I'll turn the call over to Josh. Josh?

Josh Smiley
Josh Smiley
President & COO at Zai Lab

Thank you, Samantha, and good morning and good evening to everyone. Let's start with VizGART. Following exceptional twenty twenty four, we expect another strong year in 2025 with VizGART sales growth expected to outpace total revenue growth, driven by increased patient demand, improved treatment continuity and expanded access. First quarter sales reflected seasonal trends with Chinese New Year driving a temporary decline in patients in January and February. As an IV treatment for a chronic disease, VibGard is more susceptible to this type of seasonality.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

That said, patient volumes rebounded in March and April, and we anticipate a return to strong sequential growth throughout the rest of the year. Inventory dynamics also influenced quarterly sales growth. In preparation for the launch of VIBGARTE HITRULO, we had some inventory build in Q4. The timing of these movements had a notable impact on reported sales growth. Looking ahead, we are seeing early positive results from our ongoing strategic initiatives to extend treatment duration.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

In addition, the first expert recommendations for the clinical application of FcRn antagonists in the treatment of gMG were published in February. And a similar update to the National gMG Treatment Guidelines is expected later this year. Together, these developments provide additional momentum for continued sequential growth and an acceleration in the second half of this year. We're also preparing for the upcoming NRDL cycle targeting IV renewal for gMG and initial listing of the SC formulation, both of which would take effect on 01/01/2026. Now let me turn to our broader commercial portfolio.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

All other products, including Zejula and NUZYRA, delivered sequential growth supported by NRDL access. We also saw early contributions from OGTYRO and ZACDURO. In particular, Zacduro is showing strong initial demand. Physician feedback has been highly positive, citing Zacduro's rapid efficacy and favorable safety profile in treating crab infections, a serious unmet need in China, where an estimated three hundred thousand Acinetobacter cases occur annually with limited treatment options and poor outcomes. Turning to our financial position, we continue to strengthen efficiency and operating leverage.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

For the first quarter of twenty twenty five, operating loss improved by 20% to $56,300,000 and by 25% to $37,100,000 on an adjusted basis, keeping us firmly on track to reach profitability in the fourth quarter. Looking ahead, we have a robust set of late stage opportunities to drive substantial growth. Three regulatory reviews are currently underway, including CAR XT for schizophrenia and TIVDAC for cervical cancer. And we anticipate at least three additional submissions this year, including bemiratuzumab for gastric cancer, TT Fields for pancreatic cancer, and Vivgart's prefilled syringe for gMG and CIDP. We expect to optimize our commercial footprint by leveraging our existing commercial infrastructure to efficiently support future launches.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

For example, deploying our Zejula team to support TIVDAC and our Kinlok team for bemiratuzumab. For targeted opportunities like CAR XT, we can effectively reach over 85% of the market with a focused team of approximately 150 sales representatives. In parallel, we are advancing further operational efficiencies as VIBGUARD scales and as we localize manufacturing for key products to more cost effectively support our regional portfolio. These efforts are central to our strategy for achieving profitability alongside long term revenue growth. With a fast growing Greater China business, a deepening global pipeline and disciplined financial execution, we are well positioned to deliver substantial value for our shareholders in 2025 and beyond.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

And with that, I'll pass the call over to Rafael to discuss the great progress within our pipeline.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

Thank you, Josh. I'll start by highlighting the key progress updates in our global pipeline since our last earnings call, along with our next steps. Starting with ZL-thirteen ten, our potential first and best in class DLO-three ADC for small cell lung cancer. Last year, we shared promising preliminary monotherapy results from the Phase I dose escalation cohort, demonstrating antitumor responses in the majority of patients with extensive stage small cell lung cancer, including in brain lesions with good tolerability. We completed enrollment in the dose escalation monotherapy cohort.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

Enrollment in the ongoing monotherapy dose optimization cohort is progressing rapidly, and we look forward to presenting updated data from both cohorts of the global phase one study at the ASCO meeting in June. We're also pleased with ongoing regulatory discussions with the FDA, and we are on track to initiate a pivotal study in small cell lung cancer later this year, positioning us for a potential accelerated approval in 2027. We're also assessing potential combinations in the first line setting, and we expect to provide data in the second half of this year. As TLC is also highly expressed in other neuroendocrine tumors, we're exploring its therapeutic potential beyond small cell lung cancer. A global Phase onetwo study was initiated in April to explore ZL1310 in this indication.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

Next, on our other global oncology asset. At the American Association for Cancer Research meeting, we presented new data for two of our internally developed oncology therapies, z l six two zero one and 1222. 6 2 0 1 is a novel ADC with an internally developed high affinity and specificity for LRRC 15 antibody and next generation payload linker. LRRC 15 is an attractive target for cancer therapy due to its overexpression in multiple solid tumors such as sarcoma, glioblastoma, and melanoma, as well as its expression in fibroblasts in the tumor microenvironment of multiple tumors such as breast, lung, and colorectal cancer. The payload linkage system releases the payload by cleavage both extracellularly in the tumor microenvironment and intracellularly within the cellular lysosomes once the antibody is internalized.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

We're advancing CL six thousand two hundred and one into a global phase one study this year. CL one thousand two hundred twenty two is a PD-one targeted next generation IL-twelve immunocytopine designed to leverage the antitumor potential of IL-twelve while lowering the associated systemic toxicity. The IL-twelve mutane is engineered to remain in a less potent state, reducing systemic IL-twelve induced toxicity. A cis mediated signaling process is initiated when ZR1222 binds to PD-one. Findings from its preclinical studies demonstrate potent antitumor activity in both anti PD-one sensitive and resistant tumor models with improved systemic safety.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

This result suggests a potential role in patients who are unresponsive or resistant to current immune oncology therapies. We also expect to advance ZL1503, an IL13, IL31 antibody for atopic dermatitis into phase one development this year and will present a progress update in June. We're committed to expanding our global pipeline and progressing at least one global product to IND submission stage every year. Now moving on to our key late stage regional programs and starting with immunology. Our partner, Argenx, announced in April that the US FDA approved VESCAR Hytrolop refill syringe or PFS for self injection in generalized myasthenia gravis and chronic inflammatory demyelinating polyneuropathy.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

It is the third administration option providing additional flexibility and convenience for patients, and we're planning a CMC submission in China later this year. We'll continue to explore the potential of efgartigimod to treat other IgG mediated autoimmune indications, including thyroid eye disease, myositis, seronegative gMG, ocular MG, and lupus nephritis. In 2025, we expect top line results from the GLOBAL phase three study in seronegative gMG and in the phase two of lupus nephritis. In January, we strengthened our regional immunology franchise with a pipeline in a product opportunity with povidacisab, a novel dual B cell activating factor or BAF and a proliferation inducing ligand or APRO antagonist. We're leveraging our regional expertise and established footprint with efgartigimod to accelerate its development in renal diseases, namely IgAN and primary membranous nephropathy.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

Jenna has already joined the global Phase III RENEER trial in IgAN and enrollment of the interim analysis cohort has completed. Our partner Vertex will conduct an interim analysis once this cohort reaches thirty six weeks of treatment with the potential to file for accelerated approval in The US in the first half of twenty twenty six. We also plan to join the global pivotal phase two three study in PMN this year. There are no approved therapies targeting the underlying cause of the disease, and current treatments rely on immunosuppressants or anti c d 20 monoclonal antibodies, which are associated with infection and myelosuppression. In addition, a subset of these patients experiences progressive kidney function impairment despite available therapies.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

In neuroscience, for schizophrenia is under review by China's NMPA since the acceptance of the NDA earlier this year, and we are awaiting the data readout from the global phase three ADEPT two study in Alzheimer's disease psychosis later this year. In oncology for remituzumab, our first in class FGFR2b targeting therapy for gastric cancer, we expect the data readout from the global phase three forty two one zero one study in the second quarter of this year. Gastric cancer poses a significant threat in China with over three hundred and fifty thousand new cases each year and a five year survival rate of less than ten percent in advanced stages. There are currently no approved therapies specifically targeting SCFR2B of overexpression in gastric cancer, and we look forward to bringing this potentially transformative therapy to patients as quickly as possible. We continue to make great progress across our global pipeline, and we will continue to enrich it and execute existing programs with speed and precision.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

I look forward to sharing further updates in the coming quarters. And now, Ya Jin will give an overview of our financial results. Ya Jin?

Yajing Chen
Yajing Chen
Chief Financial Officer at Zai Lab

Thank you, Rafael. Now I will discuss highlights from our first quarter twenty twenty five financial results compared to the prior year period. Total revenue grew 22% year over year to $106,500,000 in the first quarter, driven by increased sales for Viviguard, Zejula and NUZYRA. Our base business remained strong, and we began to see early contributions from our newly launched products. Our focus on financial discipline and efficiency efforts was also reflected on the expense side.

Yajing Chen
Yajing Chen
Chief Financial Officer at Zai Lab

R and D and SG and A as a percentage of revenue declined significantly year over year. R and D expenses for the first quarter increased 11% year over year due to upfront fees totaling $20,000,000 for our license and collaboration agreements. Other R and D expenses decreased as a result of resource prioritization and the efficiency effort. SG

Yajing Chen
Yajing Chen
Chief Financial Officer at Zai Lab

and

Yajing Chen
Yajing Chen
Chief Financial Officer at Zai Lab

A expenses for the first quarter decreased 8% year over year, mainly due to strategic resource allocation and the efficiency improvement. As a result of operating leverage we are building into our business, our loss from operations decreased 20% for the first quarter to 56,300,000 When you adjust our loss from operations to exclude certain noncash items, specifically depreciation, amortization and share based compensation, we had adjusted loss from operations of $37,100,000 in the first quarter, reflecting year over year improvement of 25%. Based on our operating plan and our anticipated revenue growth, we expect to achieve profitability on an adjusted basis by the fourth quarter of this year. Looking ahead, we expect to deliver a quarter over quarter total revenue growth in 2025 with a meaningful acceleration anticipated in the later part of the year. We remain confident in reaffirming our full year 2025 total revenue guidance in the range of $560,000,000 to $590,000,000 This revenue forecast reflects strong growth for the Vigar franchise, continued growth from our base business, including NUZYRA and the ZEJULA, and the contributions from our newly launched products, including Aktayra and ZACTURA.

Yajing Chen
Yajing Chen
Chief Financial Officer at Zai Lab

We are in a strong financial position, ending the quarter with a cash position of $857,300,000 And with that, I would now like to turn the call back over to the operator to open up the line for questions. Operator?

Operator

We will now begin the question and answer session. To ask a question, please press 11 and wait for a name to be announced. To cancel your request, please press 11 again. Our first question comes from Michael Yee from Jefferies.

Michael Yee
Managing Director at Jefferies LLC

Congrats

Michael Yee
Managing Director at Jefferies LLC

on the results and the outlook for the year. We had two questions. First, just on VIBGART, maybe the team could add a little bit more color. Obviously, the number was sequentially down and would be eye opening. But can you just maybe describe was a lot of the sequential change inventory changes or just seasonality of purchasing?

Michael Yee
Managing Director at Jefferies LLC

And is your confidence in the guidance based specifically on your awareness of what's going on in April and into May? And then the second question is a strategic question. Maybe for Samantha, obviously, you're seeking to become more of a global company. Are you seeking to bring in more Chinese assets to be wholly owned this year? And how should we think about some more deals in terms of a wholly owned pipeline?

Michael Yee
Managing Director at Jefferies LLC

Thank you.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

Thanks, Mike. It's Josh. I'll start with Vibgard and then hand it over to Samantha to make some comments on your second question. First on Vibgard, would say, as you heard in the call and in our press release, we're reiterating our, total sales guidance for the year, fifth 560,000,000 to $590,000,000. You know, that implies a growth rate in the, you know, mid mid to high 40 depending on the range.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

And we are also reiterating that we expect a Vimgart itself to grow faster than the overall sales growth. So, I think if you look at q one to your question, we did see seasonality in, January and February in in, I think, patient utilization. Of course, we you know, all products experience this to some degree in China given, Chinese New Year. IV products, particularly, you know, if you think about, VipGuard, it requires, when you're in a cycle, a weekly trip to a hospital for an infusion. And and, you know, as probably anticipated, we saw some of those visits being delayed.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

We saw a good recovery of patient volumes and utilization in March and really a really strong April. I think we look at our our April patient utilization and patient numbers. It's our highest ever and and, you know, at least 10% better than anything we've seen to date. So we're we're quite confident about the the progress for the year for Bivgart. And I think the utilization piece was, you know, an issue in January and February and, you know, not not totally unexpected given what we know about China.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

Hopefully, in future years, this will be less of an issue as we have, products like or, you know, formulations like SubQ and the prefilled syringe, which, wouldn't require, hospital, visits per se. We did have some inventory moves as well as you as you ask as as you remember from q four, we got approval for HITRULO last year. We did ship, HITRULO to get it into the channel. And, you know, until we get, NRDL listing, which we're pursuing for for 2026, we're gonna see limited usage there. So there was some inventory move there.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

But but, again, I think we're quite confident about the outlook for the year for Bivgart, see really good progress in terms of new patients, patient duration, and, you know, we're seeing that in April and May as you suggested. For your question about, overall, how we're thinking about the strategy and company, I'll ask Samantha to make some comments.

Samantha Du
Samantha Du
Founder, Chairperson & CEO at Zai Lab

Thank you, Josh. Thank you, Michael, for the question. As you know, we are a company focused on not only China regional rights, but also for global rights. We have a very strong BD team, which has a strong coverage in China as well as in The U in the rest of the world. So if we but, of course, we have very high bar.

Samantha Du
Samantha Du
Founder, Chairperson & CEO at Zai Lab

But if we see anything we think have high potential to have a differentiated product, and we will definitely go for it. Thank you, Michael.

Michael Yee
Managing Director at Jefferies LLC

Thank you.

Operator

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

Louise Chen
Managing Director at Scotiabank

Hi. Thank you for taking my questions here. So I wanted to ask you a few questions here. First of all, are you comfortable with where consensus to is today for Vibgart and then for the fiscal year revenues? And then also wanted to ask you on BIMA one zero one study, we would have expected to see something here.

Louise Chen
Managing Director at Scotiabank

Has there been any delay or anything to read into this? Thank you.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

Thanks, Louise. This is Josh. I'll I'll do the the first piece, and then Rafael can talk about BIMA. I think first as it relates to overall consensus, yeah, as I mentioned, we're reaffirming May to five ninety for the year. We feel good about, that range.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

And and we're not giving, you know, specific product, level guidance, but I think if you look at Vivgart, I think the consensus is sort of in line with what I I mentioned in the last question, which is, you know, Viv Vivgart sales for the full year growing at faster than the overall, implied business rates. I think that, you know, that puts us in range with what I need for consensus now. And, again, we're off to a a really good, you know, last couple months, start for the the the second quarter and feel good about the progress for Vivgart and for the business overall. Rafael, you could talk about Vima, please.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

Sure. So Vima, for the four g two one zero one study, which is the chemotherapy plus minus BMA in in FGFR2b expressing tumors, the data is expected in the second quarter of this year. I would not really read anything into whether or not it has been released yet or not. It's an interim analysis, and we're pretty excited both about the design of the study and also the potential for this drug to really impact the lives of patients with these tumors with this alteration, particularly based on the results of the phase two study, which was quite large compared to what we've been seeing with Nivolumab, Clotin, and some of the other products that have been added to gastric cancer. So, I would just say stay tuned, and and I'm I'm confident that we will get this data in the second quarter.

Louise Chen
Managing Director at Scotiabank

Thank you.

Operator

Thank you for the question. One moment for the next question. Your next question comes from the line of Jonathan Chang from Leerink Partners. Please go ahead.

Yen-Der Li
Equity Research Associate at Leerink Partners

Hi, good morning. This is Yeander Li on for Jonathan Chang. Thanks for taking my question. So I have two questions. The first one, can you provide some colors on how recent change in the FDA and also maybe tariff might impact Zai Lab going forward?

Yen-Der Li
Equity Research Associate at Leerink Partners

And how do you estimate these risks in the current financial guidance? Thank you.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

I'll start with the tariff piece and then ask Rafael to make some comments on FDA. And then, Samantha, if you have anything at the end you wanna add, please do. But I think first on tariffs, we don't see, any impact to our business, today or or anticipated in the future. Obviously, tariffs are sort of a a fluid situation. But if you, you know, look at where we, sell product today in China, We have local rights to manufacture product.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

Any of our regional deals, can manufacture in China. We do that, for example, with Zejula, and are in the process for our big new launches like Vima and CarXt to bring that manufacturing locally. Other products today that we don't make locally, like, Vivgard are sourced out of Europe and Asia, not out of The US. So we really anticipate no impact on on tariffs today for a revenue base as we think about going forward and products like d l l three, which we anticipate launching in The US in 2027. We'll manufacture that locally from a commercial perspective, so we won't be exposed to tariffs coming into The US there either.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

Rafael, if you wanna make some comments about recent FDA interactions.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

Yeah. Very

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

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

Yen-Der Li
Equity Research Associate at Leerink Partners

Understood. Very helpful. Thank you. And my second question is about

Operator

Pardon for the interruptions? Yeah. The Repeat please.

Yen-Der Li
Equity Research Associate at Leerink Partners

On the study design. Thank you.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

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

Yen-Der Li
Equity Research Associate at Leerink Partners

Oh, yes. Sorry. I'm asking, like, how like, please share your thoughts on the pivotal trial design for c o thirteen ten And, also, can you share how far you are in reaching the agreement with the FDA for the study design? Thank you.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

Oh, thank you for the question. Yes. So our interactions with FDA have been very productive. We obviously have generated a lot of monotherapy data. The current plan is to launch a randomized pivotal trial for registration.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

We think and have reason to believe that the accelerated approval pathway remains open, and that can be achieved in a randomized trial by comparing response rates. And and then the final post approval commitment will be within the same study looking at overall survival. So the study will be powered for overall survival, and, the sponsor will be an interim analysis for accelerated approval. So that's that's her current plan, and we plan to start that study, this year, as soon as we have the dose.

Yen-Der Li
Equity Research Associate at Leerink Partners

Understood. Thank you so much.

Operator

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

Li Watsek
Director at Cantor Fitzgerald

Hey, guys. Thanks for taking our questions. Maybe a couple here. Just wondering on, you know, we've got, can you talk a little bit about the competitive landscape of gMG in China? Given there are some other therapies that might get approval in the near term, how do you see the sort of competitive dynamics playing out in the near and longer term?

Li Watsek
Director at Cantor Fitzgerald

And the second question is on the BD efforts. Just given the uncertainty of tariffs and geopolitical tensions, what are you seeing in terms of big pharma's appetite to out licensing, the commercial rights in China? And just in general, anything from the macro side have shifted your thinking around in licensing?

Josh Smiley
Josh Smiley
President & COO at Zai Lab

Thanks, Lee. It's Josh. I'll I'll do Vivgart and ask Jonathan, to make some, comments on business development. I think on Vivgart, first, I'd just remind everybody there's you know, it's a very big opportunity in China for, gMG, about a 70,000 patients. And while we're really happy with, where we are today, you know, we still have less than ten percent of patients who are getting a newer biologic therapy.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

So, you know, in one sense, I think having, you know, more newer agents, approved and in the market is gonna be good for everyone, and it'll be good for VivGuard as we continue to educate physicians and get them to adopt the new and and best therapies. I think that as we compare, where we are with the Vivgart to other recent approvals or anticipated approvals, we we love the position we're in. We've got a comprehensive dataset. I think if you look at, you know, the results around, activities of daily living or, you know, getting back to sort of, as much normalcy as possible, our data is strong, compelling, and I think stacks up well against any of the FCRNs or other, newer agents that are either approved or or, headed towards approval. We obviously have this year, as the only newer agent on, on NRDL, and we'll continue to, you know, build our experience and and expertise there.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

But I think longer term, what you know, between efficacy, and I think if you look at safety across the FcRn and other agents, again, we feel very good about, where we are from that perspective. So we welcome, new approvals. And, again, I think it's gonna be good for patients and good for treating physicians to have options and to have more education, in the market. And it doesn't change our view in terms of how we see progress this year. As I've said, we're we're quite excited about what we're seeing, today in the market with, with Vimgart.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

Of course, we have a series of new indications coming as well that'll help, I think, bolster our competitiveness versus, you know, anticipated new approvals. We'll you know, of course, we have CIDP. We've got new formulations coming that we'll be pursuing for NRDL. And over the course of the next few years, we'll have more supplemental indications for MG. We also anticipate other indications, including things like thyroid eye disease where we're running trials in conjunction with argenx today.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

So I think the future is very bright for VipGuard and for patients in China with gMG. Jonathan, if you wanna address the business development question.

Jonathan Wang
Jonathan Wang
Chief Business Officer at Zai Lab

Sure. Thanks, Josh, and thanks for the question. On the BD sort of impact from the geopolitical situation, I think the first is that so far there has been no suggestions, no sort of regulatory prohibition from the administration with regards to any licensing transactions between life sciences companies. So far, I think it's business as usual. We have been doing deals earlier this year as well.

Jonathan Wang
Jonathan Wang
Chief Business Officer at Zai Lab

So we continue to evaluate deals. In fact, sometimes I think volatility creates opportunities. Multinational companies are increasingly looking to China for innovation and looking to China also for commercial opportunities. There has been a lot of visits, increasing number of visits by multinational business development heads as well as CEOs. Just today actually, Samantha and myself met several multinational CEOs here.

Jonathan Wang
Jonathan Wang
Chief Business Officer at Zai Lab

So we expect to continue to do deals in this environment. And obviously, as Samantha earlier said, I think the bar is always very high for us. Quality is the most important. But I don't think the current situation will prohibit us certainly not from doing any deals. Thank you.

Li Watsek
Director at Cantor Fitzgerald

Great. Thanks, guys.

Operator

Thank you for the questions. Our next question comes from the line of Yigal Nokomovitz from Citi. Please go ahead.

Yigal Nochomovitz
Yigal Nochomovitz
Director at Citigroup

Hi. Thank you. I have one for Josh and two for Rafael. Josh, just could you outline the scenarios with regard to how the NDRL will help with negotiation of the price for BIVGART? I'm just curious, is there some sort of a cap in terms of how much you can get negotiated down?

Yigal Nochomovitz
Yigal Nochomovitz
Director at Citigroup

Or is there a floor? And is this going to apply to both IV and sub q pricing terms? And then for Rafael, with the FORTITUDE 101, FORTITUDE 102, I'm just curious how you're thinking about the competitive dynamics and whether the Jazz trial with Zendatimab chemo and the Beijing PD-one impacts your thinking about the competitive landscape or maybe not so much considering you're focused on FGFR2b patients? And then last question, with regard to the ADC, the DLL3 and the LLRC15, just curious about the antibody engineering there and whether you've tuned these antibodies to cleave mainly intracellularly or if there's also extracellular cleavage. Thank you.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

Thanks, Yigal. We've got Jonathan on the phone. Jonathan leads our pricing work in China. So I'll ask him to comment on the NRDL process for Vivgard for 2026, and then we can pass it on to Rafael.

Jonathan Wang
Jonathan Wang
Chief Business Officer at Zai Lab

Sure. Igal, I think for VIVGAARD, we have two formulations, first of all. Each of these formulations are subcu NIV will be treated as different products. So we have a lot of flexibility when it comes

Jonathan Wang
Jonathan Wang
Chief Business Officer at Zai Lab

to

Jonathan Wang
Jonathan Wang
Chief Business Officer at Zai Lab

pricing. Of course, the NI deal negotiation will happen potentially earlier this year as well. So as they do this, sort of the time line is brought forward. So they also look at the sales from last year and quarter one this year. But we expect potential modest discounts to the pricing, obviously subject to negotiations too early to comment on the precise pricing, but we would expect probably some discount there.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

Yeah. I'll take the, yeah, I'll take the IND question. So, yeah, there is some competition in gastric cancer. It is generally for HER two negative disease. We, you know, still have yet to see, you know, what effect these new products will have.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

Clearly, they've been promising in other settings. Because this is specific for an alteration that is present in about a third of patients, and we're looking at least ten percent expression. So, these are patients where their tumor is driven by this oncogene, and we are silencing this oncogene. We feel pretty positive about it. And our second study also includes a PD-one inhibitor, as you know, nivolumab.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

So we will have to see what happens with the competition, but we think these studies are pretty well designed, and they're targeted to the alteration that the disease manifests. With regards to the antibodies, ELO-three was engineered to have picomolar activity, and I think that's bearing out in some of the of what we're seeing in the clinic. And LRRC 15 is internally developed, and they both are conjugated with the system whereby there's release of the payload after internalization of a intact molecule as well as cleavage in the extracellular matrix. So that's why with LLRC 15, we're excited about the fact that the target may just be a flag. And whether it's in the tumor or it's in the malignant fibroblast, there will still be a strong bystander effect.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

So we don't see really high levels at all of the of the payload in circulation, but it is in the in the tumor microenvironment, and I think it's due to the second generation payload linker system.

Yigal Nochomovitz
Yigal Nochomovitz
Director at Citigroup

Thank you.

Operator

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

Anupam Rama
Anupam Rama
Analyst at JP Morgan

Hey, guys. Thanks so much for taking the question. Quick one for me. Just what's going to

Anupam Rama
Anupam Rama
Analyst at JP Morgan

be the size and scope of the

Anupam Rama
Anupam Rama
Analyst at JP Morgan

1310 ASCO update, and what would you have us focus in on the data at ASCO? Thanks so much.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

So the 1310 data that we presented was with twenty five patients. There were 19 patients eligible for efficacy. So, that was dose escalation. Since that presentation, we've completed the dose escalation with a few more patients. And every patient has had an opportunity to have a confirmatory scan.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

So we will have the complete dataset for the dose escalation. And then the other dataset that that will be new will be the dose optimization. And I think there, it will be really focused on, you know, which dose or doses are looking most promising to be included as the dose in the pivotal trial in the Phase III study. In terms of numbers, you know, we will as I said, we have a few more patients than at ENA in the dose escalation, and we should have, you know, another 50 patients or so in the dose optimization. So I think the focus for me would be, you know, what is the dose that has the broader therapeutic benefit as we have been marching on the dose optimization with the knowledge that we've accrued rapidly and that the follow-up is not going to be very long, but at least we'll have responses, and we will have durability of response in the earlier patients that we enroll.

Anupam Rama
Anupam Rama
Analyst at JP Morgan

Thanks so much for taking our questions.

Operator

Thank you for the questions. One moment for the next question. Next question comes from the line of Linhai Chao from Goldman Sachs. Please go ahead.

Christine Chiou
Christine Chiou
Senior VP & Head of Investor Relations at Zai Lab

Operator, do you wanna move to the next question?

Josh Smiley
Josh Smiley
President & COO at Zai Lab

We can't hear anything on this side.

Operator

I beg your pardon. Allow me to take the next question. Our next question comes from the line of Jack Lin from Morgan Stanley. Please go ahead.

Po Han Lin
Po Han Lin
Analyst at Morgan Stanley

Hi. Good morning. Are you good are you able to hear me?

Josh Smiley
Josh Smiley
President & COO at Zai Lab

Yes.

Po Han Lin
Po Han Lin
Analyst at Morgan Stanley

Hi. Thank you for taking my question. I just have two quick ones. First, I was wondering and this is

Po Han Lin
Po Han Lin
Analyst at Morgan Stanley

a very big SG and A improvement.

Po Han Lin
Po Han Lin
Analyst at Morgan Stanley

I was wondering if the you guys will be able to kinda share more in terms of, you what kind of initiatives were taken this quarter specifically to help reduce the, SG and A to this degree and, you know, how much we'll be able to continue leveraging now for the following quarters, how many of these are actually, I guess, one time thing, yeah, that you could probably just kinda break out how this was achieved. And the second one is just kinda on where we stand as far as CTF. You know, I see that the pancreatic cancer data is gonna present at the ASCO as well. And just kinda wondering what what where our focus is at right now, kinda how our strategy is going moving forward. Thank you.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

Thanks for the question. On the the financial results and s g and a specifically, I think, you know, if you look at our q one, I think it's representative of what, you know, you should expect through the year. Obviously, we have, you know, ups and downs as it relates to marketing programs. But our our our fixed resource base to to support the products that we have today and to prepare for launches for the big things coming like Cobemfi and bemrituzumab are pretty stable. So I think this year, SG and A should be modest, very modest growth versus last year.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

And I think we're happy with where we've started the year from a cost base and from a profitability perspective. As Jing mentioned, if you look at our adjusted net loss, basically taking out noncash charges, we were at a $37,000,000 loss. That includes, though, $20,000,000 of r and d miles I mean, upfront payments for the two new assets we we brought in in q one. So if you take that out, we're at about a $17,000,000 loss. And as we've mentioned, we see sales accelerating through the year.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

And I think as they do on a relatively fixed SG and A base and R and D, which should be pretty stable as well, we feel quite confident about our ability to achieve profitability this year. So SG and A is is rightsizing the the organization for optimizing the launches and and products that we have today, and we took taken a lot of actions in the last few years to try to get to that point. So that's why we have we have a lot of confidence in profitability later this year and, you know, expanding operating margins as we get into the 2026 to 2028 time frame. Rafael, you can address the second part of the question.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

Yes. So with regards to TTF, as you correctly said, there will be an oral presentation on the PANOVA three study, which is in locally advanced pancreatic cancer. So these are inoperable patients that don't have metastatic disease, and it was announced that it was positive for overall survival, which is a really important outcome given that this is a very difficult and unmet need in that there hasn't been, you know, any intervention that has improved survival in this setting. So, we plan to file this year with our partner, NovoCure. We've started the regulatory discussions in China, and we think that we are well on our way to do this.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

With regards to LUNAR, we've deprioritized this given the fact that, you know, PANOVA3 is really an important indication for us. And I think together with gastric cancer as well as GIST, and really positions us well in the GI setting in China with three transformational products. So, I think this is, you know, this is really our plan this year. And you know, we're working very well with NovoCure to ensure that this submission can go into this year.

Po Han Lin
Po Han Lin
Analyst at Morgan Stanley

Understood. Thank you both.

Operator

Thank you for the question. The next question comes from Eika Liang from Bernstein. Please go ahead.

Rebecca Liang
Director & Senior Analyst at Bernstein

Hi. Thank you for taking my question. My first question is on r and d. So it seems that you've highlighted quite a few in house developed assets. Are you shifting the strategy from in more in licensing to more of in house focus?

Rebecca Liang
Director & Senior Analyst at Bernstein

And if so, are we expecting to see more in house valid assets to enter into the clinical phase in the coming years? And if so, could you provide some guidance as to the pace of such assets? And my second question is on the topic of the FDA changes recently. There's been a new appointment the CER had as well as the job cuts from FDA. So how do you expect these to impact on the approval process, for example, the upcoming talks regarding DRL three and the the whole accelerated track that you mentioned?

Rebecca Liang
Director & Senior Analyst at Bernstein

Thank you.

Josh Smiley
Josh Smiley
President & COO at Zai Lab

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

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

Yeah. So with regards to the new agents that that we will bring forward in development, I think it'll be a blend, of, internally discovered products as well as BD products, and it will match our strategy. So, for instance, in in oncology, we will focus on ADCs and and in immuno oncology with improved checkpoint inhibitors as well as, you know, in the future T cell engagers. So, you know, relatively sort of a confined area where we have these agents already made or in development, we will utilize them. And where we find high quality products, then we will utilize our, you know, our BD capabilities to do this.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

So as I said, our goal is to have one IND, whether it's internally sourced or externally sourced every year. You know, this year we plan to have two LRC 15 or six two zero one and fifteen o three, which is IL-thirteen 31 for atopic dermatitis. And so it just so happened that these two are internally discovered, but that doesn't necessarily mean that that will be the exclusive pattern going forward. So with regards to FDA, I made some comments before about the experience that we've had so far. And, of course, it's early as FDA begins to reshape itself with new leaders coming in.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

Again, we deal with Cedar where we we yet had to see the appointment there. Receiver there yeah. There's been some comments about accelerated approvals, but I've seen the comments were made more in the context of accelerated approvals based on single arms. So there's not that I've heard of any there's not been any comments about accelerated approval in the context of randomized trials. And I think, you know, in our case with thirteen ten, you know, that shouldn't be the case since our pathway forward for accelerated approval will be an interim analysis on a randomized study against standard of care.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

So that's all I have to say for now because it's still early in the reshaping of the agency, and we will have to see, you know, how, if if if if it does evolve, how how it evolves. But as I said, so far, we have seen no changes, with regards to our history of developing drugs, in the past.

Rebecca Liang
Director & Senior Analyst at Bernstein

You for the question. Very clear.

Operator

Our final questions comes from the line once again from Linhai Chao from Goldman Sachs. Please go ahead.

Linhai Percy Zhao
Linhai Percy Zhao
Equity Research Analyst at Goldman Sachs

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

Josh Smiley
Josh Smiley
President & COO at Zai Lab

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

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

Yeah. So Arise was a study where CAR T was used as an adjunctive therapy to standard therapy in schizophrenia. It didn't meet the primary endpoint. But with regards to the indication of schizophrenia in China, it really has no impact. Our regulatory submission was based on a study that made the emergent studies, and it was positive in all endpoints.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

More than eighty percent of patients with schizophrenia in China are treated with single agent. And, clearly, there was there are some clear advantages of this product with regards to toxicity over the classical antipsychotics. So the the patients that require adjuvant therapy are difficult to treat patients, and this is not a practice that occurs in in in China. So no impact with regards to that. And likewise, we see no impact with regards to ADP where, obviously, those patients were not included in the ARIES study, and we're just awaiting the results of ADAPT two in the second half of this year where we participated together with Karuna BMS.

Linhai Percy Zhao
Linhai Percy Zhao
Equity Research Analyst at Goldman Sachs

Great. Thank you. A quick follow-up on that would be, since you mentioned that majority of schizophrenia patients in China are primarily treated with a single agent. So if that's the case, what what's your perspective based on the communications with the the KOLs in China? What would be the potential treatment position for CAR XT?

Linhai Percy Zhao
Linhai Percy Zhao
Equity Research Analyst at Goldman Sachs

Do you see that be used as a initial usage for patients when they were at the initial acute stage or more possibly used as a longer term maintenance stage while the patients are having better control on the positive symptoms while they are trying to get more prepared when getting back to their normal life.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

Yeah. I mean, my impression is that this this is an agent that will be used de novo in in patients with schizophrenia. I think the differences with regards to toxicity are really stark in favor of this drug. It's it's also a drug that has the potential to be effective in multiple other indications, and so we will see other indications coming through as BMS develops this drug to and and and we will partner with them on on other indications. But with regards to schizophrenia, we think that this is kind of a, you know, a a sort of a quantum leap with regards to the side effects, including targeted dyskinesia and all the metabolic side effects that we're seeing with the classical antipsychotics.

Rafael Amado
Rafael Amado
President and Head of Global Research & Development at Zai Lab

So, our impression is that this will be used, de novo. And there's really data that goes now beyond sixty two weeks, you know, showing that this safety profile really is maintained over the long term. So, therefore, the logical conclusion is that should become the treatment of choice.

Linhai Percy Zhao
Linhai Percy Zhao
Equity Research Analyst at Goldman Sachs

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

Operator

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

Samantha Du
Samantha Du
Founder, Chairperson & CEO at Zai Lab

Thank you, operator. I want to thank everyone for taking the time to join us on the call today. We appreciate your support. Look forward to updating you again after the second quarter of twenty twenty five. Operator, you may now disconnect this call.

Operator

That concludes today's conference call. Thank you all for participating. You may now disconnect the lines.

Executives
    • Christine Chiou
      Christine Chiou
      Senior VP & Head of Investor Relations
    • Samantha Du
      Samantha Du
      Founder, Chairperson & CEO
    • Josh Smiley
      Josh Smiley
      President & COO
    • Rafael Amado
      Rafael Amado
      President and Head of Global Research & Development
    • Yajing Chen
      Yajing Chen
      Chief Financial Officer
    • Jonathan Wang
      Jonathan Wang
      Chief Business Officer
Analysts
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Key Takeaways

  • Zai Lab reaffirmed its full-year 2025 revenue guidance of $560 million to $590 million and expects accelerating sales growth to deliver profitability by Q4 2025.
  • VivGuard experienced a Q1 seasonal dip due to Chinese New Year and inventory build for its SC formulation, but patient volumes rebounded in March and April to record levels, supporting a strong second-half ramp and NRDL renewal and SC listing in 2026.
  • The global pipeline advanced with ZL1310 (DLL3 ADC) preparing for a pivotal trial in small cell lung cancer after promising Phase I data to be presented at ASCO, targeting potential FDA accelerated approval in 2027, while ZL6201 (LRRC15 ADC) and ZL1503 (IL-13/IL-31 bispecific) are set to enter the clinic in 2025.
  • Operational discipline drove a 20% improvement in Q1 operating loss to $56.3 million (25% on an adjusted basis) and reduced R&D and SG&A spend as a percentage of revenue, leaving a strong cash position of $857.3 million.
  • Multiple late-stage regional programs are under review—including CAR-T for schizophrenia, TTFields for pancreatic cancer, and bemiratuzumab for gastric cancer—and at least three additional submissions are expected in 2025, leveraging existing commercial infrastructure for efficient launches.
A.I. generated. May contain errors.
Earnings Conference Call
Zai Lab Q1 2025
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