Welcome everyone to the 40th annual JP Morgan Healthcare Conference. My name is Anupam Rama. I'm one of the Senior Biotech Analysts here at JP Morgan. I'm joined by Priyanka Grover, Minoo, and Caleb Smith from the team. Our next presenting company is Zai Lab. Presenting on behalf of the company, we have CEO Samantha Du. I want to remind all the attendees to use the ask the question feature in the portal, and I would be happy to ask your question on your behalf. With that, Samantha, take it away.
Thank you, Anupam, and good morning, everyone. It's a great pleasure to be with you today. Slide number two is our safe harbor slide. Now, let's turn to slide number three, please. I would like to begin by telling you who we are at Zai Lab. I've been a drug hunter for over 30 years, first in the U.S., the largest drug market, now in China, the second-largest and fast-growing market. In the last 20 years, I've been involved in the transformative change in China's biopharma industry from a generic base to an innovation-driven industry. The Chinese population accounts for nearly 1/5 of the world population and is aging rapidly. The need for innovative medicines in China has never been greater. We at Zai Lab were the first to see that opportunity to bring the unmet portfolio of medicines to China to address this unmet medical need.
We rapidly and purposefully seized the once-in-a-generation opportunity to build Zai Lab into a biopharmaceutical leader, first in China, then around the world. We build our business around four key elements, a biotech mindset, pharma quality, Zai Lab speed, and global talent. If you don't remember anything else from this presentation today, please remember this. Zai Lab has already been a leading, fully integrated biopharm in China since its inception 7 years ago. We leverage our China strength to become a leading global biopharmaceutical company. Slide number four, please. This slide highlights what we have accomplished in just over 7 years. We have built a portfolio pipeline of 28 products, including 11 that were internally developed and have global rights, and four that are now marketed in Greater China. We have achieved all of these things in such a short period of time.
You see here various measures of our rapid growth and substantial size, but what we're most proud of is not the quantity of our pipeline, but the quality. They are all potentially first-in-class and best-in-class in areas of unmet needs around the world. This year, we significantly strengthened our portfolio with new assets and capabilities from eight new partnerships and made meaningful progress across our existing pipeline. Our commercial execution is off to a great start with strong momentum. Zai Lab's fundamentals are stronger than ever. Now, next slide, please. We have built a solid foundation for continuous growth. With patients always at the center, we have delivered a deep and diversified portfolio to develop a fully integrated platform to accelerate innovation, all of which is underpinned by our talented global team.
Our leading portfolio consists of e-products with large market potential, and our assets are substantially de-risked because most of them have already achieved proof of concept. Many have generated impressive pivotal data. We purposefully build our portfolio to achieve a leadership position in our disease strongholds and to maximize intra-pipeline synergies. Our platform is fully integrated from early discovery to PD, right through to commercialization. Our R&D capabilities are science-driven and have enabled Zai Lab to build a world-class pipeline in just over seven years. Our people are highly experienced with global expertise in both the U.S. and China. Slide six, please. Our portfolio of products has unmet potential in China, organized around the therapeutic areas of cancer, autoimmune disorders, infectious diseases, and neurological disorders.
We're focused on differentiated assets, addressing large patient populations with unmet needs in China. You can see that we have a world-class portfolio in GI and lung cancers, the two largest tumor types in China. For example, bemarituzumab is a potential first-in-class FGFR2b inhibitor with a significant market opportunity in China. Adagrasib has demonstrated compelling efficacy and favorable tolerability in non-small cell lung cancer and colorectal cancer. In other therapeutic areas, Zai Lab has also accomplished a lot. ZL-1102, an internally developed compound, has the potential to be the first IL-17 topical treatment for global patients with mild to moderate plaque psoriasis. Efgartigimod is a true pipeline product and a potential first-in-class and best-in-class FcRn therapy across many severe autoimmune diseases. Slide seven, please. Our pathway to significant and sustainable growth is very visible.
We expect to launch about 12 new products by 2025 for a total of more than 15 products in more than 35 indications. They also have potential not only as monotherapy, but in proprietary combinations that we are testing in clinical development. What's not visible here are the products that we're adding through our in-house research and business development year- after- year. For example, six of the assets shown here were acquired through e-licensing last year. Our opportunities to develop and bring in new assets are as strong as ever. Slide number eight, please. Our fully integrated infrastructure produces a flywheel effect, with each segment supporting the others. Our deep scientific and therapeutic area expertise has created a very productive discovery engine. The same internal and external expertise drive how we evaluate and seize new business development opportunities.
Our steady stream of new product candidates from both Discovery and DD can quickly enter the market through our leading development and regulatory operations. This progress, in turn, drives our track record of commercial success, which will accelerate as we achieve synergies through our disciplined therapeutic area strategy. Our commercial success help us build relationships with KOLs to give us insight in discovery and development, as well as help us further evaluate and pursue future business development opportunities, and so on. The result is a virtuous cycle. Slide number nine, please. Many of you know us as the partner of choice in China with the most advanced product pipeline. What you may not know as well is our internal pipeline. We started our internal discovery effort a little over five years ago, combining internal effort with an open innovation model.
Our innovative, nimble, and efficient discovery effort, both in China and the U.S., working together as a single integrated team and collaborating with leading academic institutions and biotechs, have generated a pipeline of 11 assets with global rights. Our strategy for our internal R&D is to prioritize those programs that are synergistic with our late-stage portfolio. Next slide, please. Let's look at our one promising candidate from our internal pipeline, ZL-1102, which is a small ADT fragment directed against IL-17. In the proof of concept study, topically applied ZL-1102 achieved an approximately 45 relative improvement in local PASI score at the end of four weeks. The responder rates show a similar pattern of consistent benefit, persisting even after the end of therapy. The AE profile with topical 1102 was the same as for the control group.
Additional transcriptome analysis shows that 1102 greatly affects the gene expression profile. Various immune stimulatory genes were differentially downregulated as well as genes for keratinocyte differentiation, immune response pathways, and IL-6. These findings are truly novel as they shatter the dogma that skin is impermeable to molecules with the size of biologics. We plan to advance ZL-1102 into full global development later this year. Next slide, please. It's not just the quantity of the clinical trials, but the quality and speed with which our talented clinical team carry out their work. On the left, you can see examples of their expertise in leading the design and execution of various clinical trials. On the right are a few examples to support our reputation for unmatched speed in clinical development, such as site initiation and patient enrollment and regulatory path approvals.
For patients around the world, every day they see clinical development and regulatory approval is a day closer to improve their health. Next slide, please. You can see that our BD team continues to bring in products and accelerating speed despite strong competition for good assets. Going forward, we'll leverage our BD capacity to continue bringing best-in-class and first-class products for patients both in China and globally. We'll bring in the technology and expertise needed to accelerate our in-house research efforts. Slide number 13, please. Here, you see data from a commercial perspective. Here are the four products we have launched to date in Greater China, where we are achieving expanded patient access for these products through different strategies, including the NRDL or self-pay plus supplemental insurance. Our sales force has a substantial presence across China's hospital system.
Our sales growth has been strong, with momentum that we expect to continue in 2022 and for many years to come. Slide 14, please. Clearly, the environment in which our products are launched is key to their successful commercialization. From my perspective, it's clear that the Chinese government strongly supports the development and commercialization of innovative drugs. For example, the Chinese government has made innovative life science as one of its pillar industries. China continues to harmonize its intellectual property law with global standards. A record number of NDAs are being approved for innovative drugs. Annual NRDL updates provide broader access to innovative drugs, shortening the time from approval to NRDL inclusion. The CDE is encouraging clinical value-oriented innovation, and self-pay plus supplemental insurance is growing rapidly. We are encouraged by these positive developments, and as industry leader, we intend to take full advantage of them.
Slide 15, please. Among the things I'm most proud of are our leadership team and our results-oriented culture centered around creativity, diversity, collaboration, and teamwork. Our strengthened R&D team prepares well to harness global innovation. Our expanded commercial team will continue to drive sales and marketing leadership in China. Corporate functions continuously improve our position in financial, regulatory, compliance, and ESG issues, et cetera, especially those involving China and the U.S. Next slide, please. We expect to accomplish a lot in 2022, which will put us well-
Samantha, I believe that you're frozen.
Yeah, Anupam, why don't I step in here,
Yeah, go ahead, Billy.
I think she was saying we expect to accomplish a lot in 2022, which will put us well on the track to reaching our stated goal of leading the next wave of biopharma innovation globally by 2025. First, we will speed medicines to patients by accelerating important data readouts and regulatory filings across our entire portfolio and pipeline. Here we've listed just a few of the key 2022 milestones to watch out for. Second, we'll expand our pipeline with potentially transformative assets and partnership opportunities and continue to advance that global pipeline. Lastly, we will take a big step forward, becoming a global biopharma leader by leveraging our leading position in China, accelerating our large and growing revenue base, and maintaining a strong balance sheet and our position in global capital markets. Turn to 17.
Slide 17, please. In conclusion, I'd like to return to what we said in the beginning. Zai Lab's mission is to bring innovation to China and to the world. We are already a leading biopharma in China, and we will continue to strengthen our leadership in China. We will leverage our China strength to expand and become a leading global biopharmaceutical company. Thank you. Now Zai's leadership team would be happy to answer your questions.
Billy, if you wanna just introduce the broader team on the line, we can get started with the Q&A portion here.
Happy to. On the line with us is Alan Sandler, our Head of Global Development for Oncology. Harald Reinhart, Head of Global Development, Neuroscience, Autoimmune, and Infectious Diseases. Paul Fu, our Chief Strategy Officer.
I just wanna remind all the attendees of this session that you can submit a question via the Ask a Question feature in the portal, and I'm happy to ask the question on your behalf. Maybe we'll start out, Billy, with ZEJULA, and now you have frontline and NRDL approval, now secure. What are the pricing and launch dynamics we should be considering for 2022? Longer term, one of the questions that we get is how you think about LYNPARZA, patent exclusivity and how that might impact on your sales.
Yeah. Thanks, Anupam. And Happy New Year. We're pleased with the outcome of the 2021 NRDL negotiations for ZEJULA . As we're in January 2022, implementation has already started. Now there are four PARPs, so this pricing will provide us a rational basis to really build from here. Of course, we have a natural advantage due to our unique label, in as an all-comer, as the only PARP, first and the only PARP with an all-comer label in frontline. So despite the much, which means that we're gonna have a pretty significant opportunity, market opportunity compared to the competition.
On one hand, with the other entry, it's gonna build up awareness for PARP as a class, but on the other hand, we're the only one with this, you know, clear and unique advantage due to the label. Now we believe all of this will set us up very nicely for a solid ground of growth momentum to continue in 2022. We expect the size of the asset class to increase as the penetration continues over the next several years. Within that, we also expect to build a market share or leading market share position pretty quickly, you know, likely, you know, within this year or next. We're confident and optimistic, you know, for the strategy.
In terms of your second part of the question, if generics launch after LYNPARZA patent expiry, I'd like to just highlight that ZEJULA will still enjoy the broadest label advantage, as the only PARP inhibitor covering first line all-comer ovarian cancer, and it's also already a reimbursed drug.
Got it. We've got a question in the portal here. Given the fourth-line focus for QINLOCK, can you please share what you think the potential of this drug is, and what are the main hurdles for unlocking this market? What gives you confidence in the diagnosis rate of this condition, and what are your 2022 expectations for QINLOCK?
Alan, do you wanna comment on this one?
I'll talk about the clinical relevance of this. I think that we remain very excited and enthusiastic about QINLOCK in the fourth-line setting. I think there's a precedent in China as far as testing. I'll start with that first, that as drugs become available, the testing required to identify those patients goes up rapidly. We've seen that in non-small cell lung cancer with the EGFR era. Also, we're seeing it in ROS1, et cetera. It's sort of that if you build it, they will come.
In addition to that, we believe that the market itself will expand in the fact that, again, that you have effective therapy in that fourth line setting, that will also cause physicians to initiate therapy potentially earlier and identify a broader patient population than is what currently is anticipated. This, again, is something that has happened historically in oncology across multiple diseases and indications. As there's effective therapy, patients, physicians tend to switch to that therapy earlier, therefore identifying more patients who have access to that therapy.
We've got another portal question here. What are your expectations for LYNPARZA LOE in China? Given its approval in first-line breast, should we expect it to be a meaningful competitor to ZEJULA ?
Yeah. I mean, Anupam, the, you know, LYNPARZA , you know, was launched, you know, with the first PARP to launch. The market opportunity is, you know, quite significant. You know, they were the first in class to enter the market. They've spent a lot of resources building up awareness. But of course, when we came in with, again, a unique label as the first and only PARP inhibitor in first line all-comers, you know, I think we expect to continue to you know, drive this momentum and have market share leadership.
Kind of net net of it all, you know, I think what you typically see, whether it's in U.S., Europe or China for that matter, you know, in the, you know, if you introduce innovation into market space, you know, the first and second in class is positioned well to have a pretty sizable position. Within that, you know, we think that ZEJULA has already been positioned as the best-in-class PARP inhibitor. Again, reiterating my previous comment that we have confidence in driving market share leadership within this year or next year. Maybe, oh, actually, we have another portal question. Can you guys comment on the commercial growth strategy of the newly licensed product, KarXT in China?
Historically, sales of antipsychotics in China have not been great. Yeah, Harald, do you wanna maybe comment a little bit about KarXT and why it's such an important drug for, you know, for this therapeutic area and in China? And maybe I can follow it up with some comment on the commercial opportunity. Harald, you're on mute.
Yeah. Thank you for the question. Indeed, this is a new area for us at Zai, but it's also a very unmet medical need area worldwide. One of the things why we are excited about this drug, which is currently in phase III, with readouts coming out in the middle of this year, is the fact that in schizophrenia, which is by no means rare, it's actually fairly frequent all over the world, 2% at least of the population, that the patients with negative symptoms are usually not well served. Those patients who have cognitive problems, those patients who have the negative symptoms, are those that currently are not well treatable with antipsychotic medicines. Those antipsychotic medicines currently in the market, and there are many of those, they're usually addressing the dopaminergic and the serotonergic transmitter substances.
Having said that, they also have a whole slew of side effects, and they are very difficult to take. Getting back to your question, we believe that a differentiated drug, which doesn't come along with weight gain, that doesn't come along with extrapyramidal symptoms, it doesn't come along with tardive dyskinesia and things like that, is a very welcome addition to the armamentarium in China as it is in the West. As far as the commercial side, well, maybe, Billy, you can talk more about these things.
Yeah, I'll chime in here.
I think the patient numbers alone and the unmet medical needs, which currently are also shown by the high dropout rates on current treatments, you know, gives this a very big market potential.
Yeah. Schizophrenia in particular was a great segment to enter. You know, first of all, as Harald mentioned, the patient base is quite significant. It impacts over 8 million Chinese population, 4.3 million of whom are already registered cases in the national management system as having severe mental illness from schizophrenia. Really, what lies at the heart of this is that there's just been a lack of innovation. With limited efficacy and safety profile of current therapies, you know, long-term treatment is required and needed. Then also safety, therefore, is critical in maintaining compliance with the treatment option if you have the right innovation.
Lastly, in terms of the market access strategy, the market is quite concentrated, as, you know, we've seen in oncology, and, you know, severe autoimmune disorder, et cetera. That's a little bit different from the U.S., you know, in that regard. Harald already commented on the clinical profile and why we're excited, but I'll just kind of reiterate that neuroscience is the fifth-largest therapeutic area in China, expected to grow in a very robust fashion over the next several years. Within neuroscience, antipsychotic market in particular is the largest segment.
Also within the published guideline with the Healthy China Action Plan in 2019 through 2030, they've set a national goal, a clear goal, to improve the treatment rate for registered schizophrenia patients to 85% by 2030. We're pretty excited to, you know, with KarXT to improving disease awareness and driving good patient outcomes.
Maybe a question from me. On the monotherapy sort of refractory KRAS, G12C, that's been filed here in the U.S. for adagrasib. When might you have more feedback from Chinese regulators on if a largely ex-China data set would be sufficient for approval, much like, you know, the Optune, ZEJULA experiences that we've all kind of been privy to?
Yeah, maybe I'll give this to Alan. You're right. It's been filed in the U.S. for second line plus non-small cell lung cancer. I think we're waiting for acceptance. Maybe Alan can comment about just about that.
Yeah. There, I mean, a couple of things to mention is, of course, we're looking forward to adagrasib, which, of course, has the opportunity to be both first in class and best in class in China. We remain in very close communication with the NMPA along the regulatory pathway. We're working with our partners, Mirati, very closely with this, and we'll continue to provide information as that becomes more and more available. We're extremely enthusiastic about this novel agent.
One other pretty common question that we get is, you know, there are more and more companies popping up regionally with a similar focus to Zai Lab and, you know, building a pipeline via BD. I guess the question is, you know, how has that impacted sort of partnership discussions and negotiations, competition for assets, and how do you kind of think about, you know, making sure you don't overpay for an asset?
Maybe I'll take this one. Yeah.
Yeah.
Yeah. Hi, Anupam. Good to see you. Thanks for the question. As you know, we are the pioneers of the licensing strategy in China, and we have firmly established Zai Lab as the partner of choice for innovative assets, and we continue to build on that leadership position. Looking at our BD track record, we have done more quality deals than any other Chinese companies since our IPO in 2017. In particular, in 2021, we arguably won all the top assets, including efgartigimod, adagrasib, two of the top 10 global biotech assets. There was significant competition for those prized assets. We expect to maintain our competitive advantage because of our strong track record of execution. We have taken global assets, developed them in China, obtained regulatory approvals, and launched them successfully.
We have done that 4x already, and really no other company has that track record. We have proven to our partners again and again with our strong execution, we help them develop their assets with high quality, and we help them accelerate global development. To a lot of our partners, that is more important than financials. I would just comment that our BD pipeline remains to be robust and we expect to have another great year to use business development to grow Zai Lab.
Maybe a final question from me here. I don't see any questions in the portal, but as a reminder, if you want me to ask one, just put it in there. As a final question from me, one of the things that we've been hearing because of, you know, the 2021 experience is, you know, how do I wake up in the morning and there isn't a headline about China and something that pressures the entire Chinese sector, including, you know, Zai Lab, healthcare or not, right? I guess there's a very broad question, but what are the potential regional risks that we should be monitoring in 2022, given one of the big fears on the street as it relates to Zai Lab is waking up to macro headlines and that causing volatility?
Yeah, Anupam, maybe I'll start this one. Yeah, I mean, as Samantha presented in her slide, I think it was slide 14 or so, you know, China is, we believe, you know, it still encouraging biotech as one of the main pillar industries, with increasing support. We're quite optimistic in the long-term fundamental opportunity, and we think that we're, you know, best positioned to capitalize on that. You know, for example, you know, she spoke about the. We can go a little bit more of the details, but for example, from the regulatory agencies, the CDE draft guideline that came out on July second, which really raised the bar for innovation in drug development.
You know, Beijing also recently renewed their ICH governing membership status, and that comes, of course, from the national government level and continues to show a strong commitment to harmonize with global standards. China's 14th Five-Year Plan has a very strong focus on innovation to promote the integration and innovation of biotechnology and to accelerate the development of this sector. Also, you know, you see the ripple effects of that by the continued, you know, robust number of approvals coming in from the NMPA, you know, finding ways for, you know, the NRDL to improve market access, and getting more drugs reimbursed. Then, you know, the CDE draft guideline that I just mentioned, the ICH, et cetera, et cetera. There's been a relative consistency that we see, and we think that that will continue.
It's also important to remember that our industry is already one of the most heavily regulated sectors, you know, unlike other areas that you may have seen and heard of. You know, we see a very clear path and opportunity for us into the future and therefore we have you know calibrated our strategy accordingly. The key focus is to make sure that we have a broad and the most differentiated pipeline, and we think that will be the defined foundation you know to become one of the leading biopharma companies in China and then using that advantage. We're already a large part you know we've already accomplished that you know to become a global player. Again, in closing, you know, we're very encouraged by these positive developments.
As an industry leader, we intend to take full advantage of them. We're building Zai Lab today to be the largest contributor and beneficiary to this generational trend that we see.
We've got a couple email questions that just came in, which are: What are the top two or three data cards that we should be focused on this year? What does Zai Lab look like in five years? What are you targeting in terms of peak sales in China?
Yeah, I think I can probably answer that question in one kind of integrated comment. Again, as Samantha highlighted, or you know, when I stepped in, you know, she right now just got back to Shanghai. Our priorities for this year and beyond is to really make sure that Zai Lab has the highest probability to be leading the next wave of biopharma innovation that we see. Then to also leverage our unique, you know, kind of platform in China and beyond. When you look at how to accelerate medicines to patients, we called out some, you know, selected milestones for 2022 that could be highly relevant.
Efgartigimod, not only the filing of the gMG in China, but also the phase III data readouts of both ITP and sub-gMG. For KarXT, we have two phase III data readouts this year, EMERGENT-2 and EMERGENT-3 studies in schizophrenia. In Tumor Treating Fields, we have phase III LUNAR data readout by end of the year and also gastric that we ran separately. We have bemarituzumab that's gonna initiate, you know, phase III study in gastric cancer. That could be a very important drug. We have the IL-17 program, where Harald and his team is gonna meet with the U.S. FDA as well as other agencies around the world and go into full development.
We're also advancing our other global programs and also looking to expand the portfolio with potentially transformative assets and partnerships. All of this, we believe, and we're gonna have a very busy year in 2022 as we have in the past. We think that's gonna make us or give us an opportunity to make one big, you know, significant step forward to building a global biopharma leader. That means, again, in shorthand, to leverage our leading position in China, giving us a natural opportunity to branch out globally with a much better risk return profile and speed. It means to accelerate our large and growing revenue base and sourcing innovation and having financial flexibility underpinned by a strong balance sheet.
really is, you know, establishing ourselves as one of the international biopharma bellwether with good liquidity and whether it's in ADRs or ordinary shares around the world, that trade around the world.
Very quickly, 30 seconds, two quick ones. Optune peak sales and GBM, how do we think about that? What ORR do you need for repotrectinib in the front line for it to be meaningful?
Yeah. I'll give the second question to Alan. We're not yet giving guidance on GBM for Optune. You know, we have some very I mean, I'll keep it very punchy. You know, one of the strategy we have, you know, last year and continuing, you know, this year and beyond, is to expand supplementary insurance coverage. Optune is the first and only medical device covered by supplementary insurance, which we think is gonna be a meaningful payer in the future. We already have been listed in 33 plans since launch. We expect to continue to focus here and build that up. That's you know, just GBM, and we wanna really position it as the standard of care.
As you know, the other, you know, broad indications also come across, that's gonna, you know, allow us to really double down on Tumor Treating Fields for the future. Just like to remind the audience that the other, you know, late-phase studies that are underway, you know, you're talking about 1 million-2 million additional new patients per year in China, including non-small cell lung cancer, ovarian, pancreatic, gastric, et cetera. Alan, I don't have any comments on repotrectinib.
Yeah, I just think that I know we probably only have a couple of seconds now at this point, but I think that you know continued repotrectinib has done remarkably well across both the chemotherapy-naive setting and also the previously treated setting. I think if it maintains those numbers we're very likely to achieve the goal of approval, accelerated approval across multiple potential indications. It has a wonderful safety profile as well, and blood-brain penetration.
Okay. Samantha and team, I wanna thank you guys so much for taking the time, and we'll just end the session.
Sounds good. Thanks, Anupam.
Thank you.
Thank you, Anupam.
Thank you.