Zai Lab Limited (ZLAB) Earnings Call Transcript & Summary

Okay, great. So welcome, everyone, to the third day of the Citi Biopharma Conference. I'm Yigal Nochomovitz, one of the Biotech analysts. [Operator Instructions]. So it's my great pleasure to have with me this morning, Samantha Du, the CEO of Zai Lab, one of the companies I cover.

And maybe as a starting point, Samantha, just to get everyone oriented, if you could give us a 3- or 4-minute overview of Zai Lab, just highlighting some of the key assets in the pipeline and where you stand with your commercial efforts for ZEJULA and Optune.

Yes. Good morning, Yigal, and thank you for your opening remarks. Since our inception in 2014, we have executed our two-pronged strategy through both in-licensing of potentially best-in-class and first-in-class assets and investing in internal R&D efforts. Today, we have become a fully integrated company with nearly 900 employees and 7 offices across the globe. We have an innovative and differentiated pipeline of 14 clinical stage assets, of which 2 are launched in China and Hong Kong, 2 additional are under priority review by NMPA, another 5 are in pivotal trial stage. We have a strong China commercial footprint and world-class internal R&D capabilities. Over the next 3 years, Zai's vision is to prepare -- to be -- Zai's vision is to become a leading global biopharmaceutical company with a steady stream of drug approvals, strategic partnerships and internally discovered drug candidates in pivotal stage with global rights. I'll start from there.

Okay. Great. That's a good start. So obviously, you've done a lot of BD to develop the pipeline with multiple assets in-licensed from a variety of U.S. biotechs. Maybe you or Jonathan could comment as well on just discussing how you evaluate BD opportunities. What is the process like? What are the factors that you consider when making a decision to in-license a drug? And what are the factors that have led you to walk away from potential opportunities after completing your diligence?

Go ahead, Jonathan.

Yes. Hi, Yigal. Thank you for the question. So our business development strategy has always been evolving. We have been a first mover in this space in-licensing products to China and our deal structures has also evolved as the company's growth strategy evolved. From looking at an assets perspective, our criteria and the process is actually, I think, pretty straightforward. We look really for assets that have the potential to be globally best-in-class and/or perhaps first-in-class and sometimes even only in class and in areas where there are very significant unmet medical needs in our territories and potentially large commercial opportunities. And also in particular, we have really established several disease strongholds, disease area strongholds. For example, in oncology, in areas like lung cancer, GI tumors, we've recently moved into hematology, in particular, in NHL, where there's a very large patient population here in China as well. So in these areas where there are globally differentiated products, we look for these and we engage on one of these, we would involve really a company-wide effort as well as external consultants, experts, both U.S. and China. So really, a lot of people get involved. We're very lucky with that. We have really built a very strong platform and very strong team that helped us evaluate the assets. And that's why you're seeing in the past couple of deals, every time we get them, it's usually before the pivotal data read there sometimes and shortly after we get the deal done a month or 2 later, like, for example, what happened at Turning Point, what happened for Deciphera earlier as well. The data readout came out very positive. So really kudos to our medical team and the wider team here at Zai.

Great. And also to, I think MacroGenics, the data readout after you get the deal, if I'm not mistaken.

Right.

So in terms of future BD, is there a point where you're going to sort of reach sort of a carrying capacity of the company, where it will be hard to in-license new assets? Or should we expect the pace that you're currently on, which is, I think, maybe 2 or 3 deals a year to continue for the next few years?

Yes. Let me first say that it's always quality. That's the most important. When we do a deal, there's obviously never 100%, but we want to make sure we bring assets that is of that high standard that we spoke to that I mentioned earlier. So quality is the most important. But to your point, we have been doing quite consistently a number of good quality deals over the past couple of years. And we have a very strong, robust BD backlog or BD pipeline of potential opportunities and collaborations. I think the thing at Zai's, we're really building scale. And we really demonstrate we can move these assets that we partnered forward very quickly, helping ourselves and helping our partners. And as we continue to execute and demonstrate our track record, we will wing over more deals and really become that plan of choice, really cementing that gateway to China for our partners. And as we build scale and platform and as we move some of these development stage assets into commercial stage, we actually have more capacity to bring new products. So the short answer is we're going to continue to bring more assets, I'm sure. Especially in areas that complements what we currently do, but potentially also in adjacencies and if there are good anchor assets like the Regeneron product, for example, that really helped us move into human hematology area. So those opportunities are also potentially available as well.

Great. Well, Samantha, let's talk a little bit about ZEJULA. Obviously, you had some very good news this morning. So congratulations on the first-line approval for ZEJULA. I just wanted to ask preliminarily about that. Do you think that you could get the NDRL listing for first-line ovarian this year? Or that might be too optimistic? I think you're on mute, Samantha. I think you're on mute.

Oh, sorry, yes. According to the guideline, the inclusion date was August 11 or 13. So we definitely missed that time line. But however, and this approval is really way ahead of our expectation. And we filed in March this year, and put on priority review subsequently, and we receive it within 6 months of approval. So this really puts our commercial effort on much speedy front, it really means this -- and also this approval give these patients the option to have an all-comer monotherapy for first line regardless of your biomarker status. This is very much unmet medical needs. And I believe with this approval, we will give Zai Lab, whether in the reimbursement or not in reimbursement, a strong edge in the competitive landscape and as a first-mover advantage. And with regard to whether we will be included or not. Historically, this has never happened before, but are we going to try, of course.

Okay. Got it. And maybe...

But the second-line, we definitely qualify.

Okay. And when do you think you would get the NDRL listing for second-line, sometime next year?

No, it's actually according to the original time line, and we're anticipating end of the year.

Okay. Got it. And so obviously, the launch for ZEJULA has been going very well in Mainland China. Maybe you can talk a little bit about the steps that your sales force has been taking to ensure a good launch. And ensure that a continued positive growth trajectory for the ZEJULA brand as well as just highlight what are some of the key -- the value proposition in terms of differences versus your key competitor, which is LYNPARZA?

Yes. Our success is primarily due to having a best-in-class drug, combined with the experienced team. And we have been conducting extensive preclinical prelaunch medical programs and scientific changes with all the key KOLs in position. Right now, we are focusing on private pay market by working with KOLs, commercial and regional insurances, foundations and various financial programs. Since the launch of ZEJULA in mid-January, we've been working to get ZEJULA included for reimbursement at the provincial and the municipal levels, the maximizing commercial insurance opportunities. Of course, in the meantime, we are preparing for the process for NRDL recruitment. And I think for second-line alone, we are very differentiated already in terms of Brain Metastases, in terms of dosing, we are once daily dosing. Also in terms of drug interaction. And in terms of like the -- even in terms of its efficacy and safety overall as of -- and we have seen on the second-line, when we launched in Hong Kong, 18 months later in the game, we were able to first year take over 70 -- more than 70% of the market share. And in China, we just launched in late January, we already see tremendous uptake. And now with the first-line approval being the only all-comer only monotherapy and with -- without the -- and with -- regardless of the biomarker status, this will put this product way on the radar screen of this KOLs or PIs or patients, their choice. And also, as you perhaps know this -- given this drug before the approval was on the first line, before even the first-line approval, we were given by the Chinese government, recommended as a monotherapy first-line maintenance treatment. So women with platinum responsive advanced ovarian cancer and -- which is published by Gynecological Oncology Chinese Medical Association. So this is highly like -- this is the only one recommended as a monotherapy.

Okay. And with that recommendation, I'm assuming that wouldn't -- would that allow prescribers in China to prescribe it for first-line even before the approval? Or that was just a good to have that recommendation just in general, once you got the first-line approval?

I think that at least paved the road for first rapidly launch of the first-line approval.

Okay. And what are some of the key lessons you learned from the successful launch in Hong Kong that you're applying to the Mainland China launch for ZEJULA?

Well, certainly, the launch in Hong Kong give us the confidence that the KOL in Hong Kong, will increase our product and patients -- also patients' response, the real-world data really and very helpful to get the message across to Mainland China. And also we learned with the differentiation, as I mentioned, the second-line only. And it's already -- we got tremendous patient willingness to switch to our product. So in China, now we are 7, 8 months in launch. We have seen steady uptake. And now we go up with the first-line approval with unmet medical needs in first-line. And also in the second, we think this product will be [indiscernible].

Okay. Got it. And do you have any sense as to when you might be comfortable as a company providing initial sales guidance for ZEJULA in Mainland China?

That's a good question. And we are -- the company still, of course -- well, first of all, it's a still first year launch for ZEJULA, especially -- and for the second -- for the first-line, it's just -- we just got approval. And we -- from the analyst report, we have seen various projections already. And for the first half, we did announce our sales in ZEJULA. And we -- from -- we can -- we are pretty comfortable to say we can meet the market expectation for this year for ZEJULA sales. And when it's a good time to give projections from the company's side, I will talk to my CFO.

Okay. Fair enough. And you have some data coming up at the ESMO Conference in a few weeks from the late-breaking abstract for the NOVA trial, which is the study you did in second-line maintenance for ovarian cancer in the Chinese patient population. Maybe you could spend a few minutes just talking about some of the key takeaways from that NOVA trial and how your sales force will leverage the content from that ESMO abstract.

Yes. ZEJULA is the first and only category one PARP inhibitor in China that is supported by local Chinese patient data. The NOVA trial is the first Phase III trial ever done in the ovarian cancer in China. And the data really demonstrated that individualized starting those regimen at 200 milligrams, rather 300 milligrams was able to preserve efficacy while meaningfully improve safety in Chinese patients, particularly in thrombocytopenia and anemia, which we all know, in the West, this is to satisfy commonly the missions by the medical community. So by dropping the -- meaningfully dropping this adverse events really gave the ZEJULA from a safety and efficacy perspective, a more clean profile. We expect our sales team to fully leverage this data set and profile, and I will also note that ZEJULA is the only PARP recommended by the Chinese clinical guidance as a therapy suitable for all patients. Well, this is for the first-line mainly setting, now with approval, and this is even further stronger message to launch, not just second-line, but the first-line as well.

And regarding the way it's going to work commercially, is it your expectation that you could see patients switching from LYNPARZA to ZEJULA? Or will you take share based -- more based on the new starts to maintenance therapy, starting on ZEJULA?

In Hong Kong, that was purely switch since ours. We launched the second-line first. That was a purely switch. In Mainland China, and I think we see both, especially for first-line, we are the only all-comer monotherapy, regardless of the biomarker status. As we know, LYNPARZA in first-line only got approval for gBRCA, which is close to 15% of the total population. So I think I will see both in China.

Okay. And I believe you're also exploring ZEJULA in breast cancer. Maybe you can just spend a few minutes talking about the development strategy for that cancer?

Yes. This is the one we're working with our partner, GSK. So I'll wait for our partner, GSK, to provide further guidance on this.

Okay. Good. Well, let's move over to Optune. Your other -- your second commercial stage product. So obviously, it's very early in the launch, and you're focused more on the direct-to-patient sales or the private pay market, so to speak, as opposed to the NDRL inclusion for Optune. Maybe you could talk a bit about what were the considerations involved in focusing on the private pay market for Optune as opposed to relying on the NDRL pathway.

First of all, in China, right now, there's no NRDL reimbursement on device, a medical device. So -- but I -- things will evolve, hopefully. So so far, we're still a private pay. However, Optune is an innovative once-only-in-class treatment with a large unmet medical needs and no competition. It's the first novel GBM treatment approved in the U.S. and China in 14 -- in more than 14 years -- 15 years. And with more than 45,000 yearly incidents in China, we are, as you stated, initially focusing on private pay, and this means working with KOLs, commercial insurances foundations, financing programs, et cetera. Having said so, we continue to evaluate payer mix options going forward, given our belief that tumor treating field franchise will be commercially important in China.

Similar question to the ZEJULA question. Obviously, you launched Optune in Hong Kong first. Are there any specific lessons that you learned from the launch in Hong Kong that you believe will be valuable as you continue to launch in Mainland China for Optune?

Sure. Certainly, because, again, that was -- Hong Kong's launch was categorized by our partner as one of the best launches, if not the best, or globally. So we will continue to use the best practice. And of course, we also understand and China and Hong Kong has very different dynamics, right? One is a country with 7 million wealthy population. One is country with 1.4 billion and very mixed, regionally mix and income mix, and it's just very different. So it's different. But having said so, I think the -- we just launched the first half, we reported, we just launched one day, have seen a good momentum. So as we're going, we're seeing the uptake curve, it's encouraging. Again, as I mentioned, the patients really desperately need a new treatment for treatment of -- especially the GBM patients after 15 years, this is the only new treatment being approved in China.

And let's talk a little bit about the commercial opportunity for Optune. Obviously, you're planning to submit an MAA for Mesothelioma in the first half of 2021, which you believe could help you with the large -- of a larger launch in non-small cell lung cancer. And your partner, Novocure, is actually coming close to a Phase III readout in the LUNAR trial for non-small cell lung cancer in 2021. And I believe you're also running a pilot trial in gastric cancer. So given all of those potential indications and possibly more indications, how do you think this commercial opportunity will shape up in the long-term and what the launch of this product will look like, say, in the next 3 to 5 years?