Zai Lab (NASDAQ:ZLAB) (ticker not provided), a biopharmaceutical company, has announced a substantial 31% increase in top line revenue on a constant exchange rate basis for the full year of 2023. The company's financial performance was bolstered by the successful launch of VYVGART, which is projected to accrue over $70 million in sales by 2024.
Zai Lab's strategic focus remains on revenue growth, achieving profitability, and expanding its global pipeline. Despite a net loss reported for the year, the company's strong balance sheet, with over $800 million in cash reserves, positions it to continue investing in its business and delivering value to patients and shareholders.
Key Takeaways
- Zai Lab's top line revenue grew by 31% in 2023.
- VYVGART launch is expected to generate over $70 million in sales by 2024.
- The company is working on advancing repotrectinib, SUL-DUR, efgartigimod, bemarituzumab, and KarXT.
- Zai Lab plans to grow revenues, achieve profitability, and maintain disciplined capital allocation.
- Over $800 million in cash reserves support the company's financial stability.
- ZEJULA, QINLOCK, and NUZYRA saw significant year-on-year revenue growth.
- Net loss for 2023 stood at $334.6 million, but the company expects to fund its business through to profitability.
Company Outlook
- Zai Lab aims for substantial revenue growth and profitability in the near future.
- The company has a strong focus on building its global pipeline of products.
Bearish Highlights
- Net loss reported for 2023 was $334.6 million.
- OPTUNE's net product revenue remained unchanged year-over-year due to anti-corruption efforts affecting hospital and physician practices.
Bullish Highlights
- VYVGART net product revenue reached $10 million shortly after its launch.
- ZEJULA's net product revenue increased by 16% year-over-year.
- QINLOCK and NUZYRA experienced significant year-on-year growth.
Misses
- Research and development expenses dropped by $21 million to $265.9 million.
- Selling, general, and administrative expenses rose by $23 million to $281.6 million.
Q&A Highlights
- Success of certain products remains to be determined with future updates expected to provide more clarity.
- Year-on-year growth for certain products in 2023 is expected to be comparable to 2024.
- The IL-17 study and potential partnerships with large pharma companies were discussed.
- VYVGART secured a favorable price in NRDL negotiations, indicating government support for innovative products.
- Expansion of the commercial team is planned, with a target of covering 1,000 hospitals by year's end.
- Formal guidelines on medical device NRDL inclusion are awaited, which could benefit Optune.
Zai Lab's strategic initiatives and robust pipeline suggest a strong commitment to growth and innovation. The company's ability to navigate market challenges while investing in promising treatments positions it as a significant player in the biopharmaceutical industry. With a focus on expanding its commercial presence and leveraging government support for innovative products, Zai Lab continues to build on its momentum heading into 2024.
InvestingPro Insights
Zai Lab's recent financial report reflects a company in a growth phase, with a significant increase in top line revenue and the successful launch of VYVGART, among other products. The company's focus on revenue growth and expansion is echoed in the InvestingPro Tips, which highlight that analysts anticipate sales growth in the current year. This aligns with Zai Lab's own projections for VYVGART and other products in its pipeline.
InvestingPro Data further informs us about the company's financial health and market perception. Zai Lab holds a market capitalization of approximately $2.08 billion, indicating its size and relevance in the biopharmaceutical sector. The company's Price to Earnings (P/E) ratio stands at -6.06, reflecting its current lack of profitability, which is also supported by the InvestingPro Tip that analysts do not anticipate the company will be profitable this year. However, the revenue growth rate of 24.03% over the last twelve months as of Q1 2023 suggests that the company is expanding its sales effectively, despite the challenges in turning a profit immediately.
The InvestingPro Tips also reveal that Zai Lab's liquid assets exceed its short-term obligations, which is a positive sign for the company's liquidity and ability to fund its operations. This is consistent with the article's mention of Zai Lab's strong balance sheet and substantial cash reserves.
For readers interested in a deeper dive into Zai Lab's financials and future prospects, there are additional InvestingPro Tips available. These tips provide a comprehensive analysis of the company's financial health, market performance, and growth potential. To access these insights and take advantage of a special offer, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Zai Lab (ZLAB) Q4 2023:
Operator: Hello, ladies and gentlemen. Thank you for standing by, and welcome to Zai Lab Full Year 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, today's call is being recorded. It's now my pleasure to turn the floor over to Christine Chiou, Senior Vice President of Investor Relations. Please go ahead.
Christine Chiou: Thank you, operator. Good morning, good evening, and welcome, everyone. Zai Lab's full year 2023 earnings call. Today's call will be led by Dr. Samantha Du, Zai Lab’s Founder, CEO and Chairperson. She will be joined by Josh Smiley, President and Chief Operating Officer, Dr. Rafael Amado, President and Head of Global Oncology Research and Development, Dr. Harald Reinhart, President and Head of Global Development, Neuroscience, Autoimmune and Infectious Diseases and Dr. Yajing Chen, Chief Financial Officer. Jonathan Wang, our Chief Business Officer will also be available to answer questions during the Q&A portion of the call. As a reminder, during today's call, we will be making certain forward-looking statements based on our current expectation. 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. We will also refer to product revenue growth rate on a constant exchange rate basis, which is a non-GAAP financial measure. Please refer to our earnings release furnished with the SEC on February 27, 2024 for additional information on this non-GAAP financial measure. At this time, it is my pleasure to turn the call over to Dr. Samantha Du.
Samantha Du: Thank you, Christine. In 2023, we had another year of significant achievements for Zai Lab. We grew our top line by 31% on a constant exchange rate basis. We progressed several key late-stage programs. We added new global assets into our pipeline. Today, we're in a fundamentally stronger position than we have ever been, with a growing base of revenues, a path to profitability and a strong balance sheet with over US$800 million in cash. We are now entering a period of high growth, and we are focused on three key corporate objectives to substantially grow revenues, achieve profitability and build our global pipeline. Late last year, we launched VYVGART and it's already off to an excellent start with sales expected to exceed US$70 million this year in gMG. Beyond this, we have a series of other potential approvals, including repotrectinib and SUL-DUR later this year, followed by a series of other new product indications, including efgartigimod in CIDP, bemarituzumab and KarXT. Each of these products has the potential to meaningfully enhance the growth of our business. We are also already deeply committed to building our global pipeline by adding new assets through both our internal discovery efforts and external opportunities, and I look forward to providing updates on our progress in this regard throughout the year. And of course, we'll maintain disciplined capital allocation practices, as we strive to achieve profitability. As we execute on these corporate objectives, we expect to deliver value not only to patients, but also to our shareholders. Thank you for your support as we continue on our journey of innovation and growth together. And with that, I'll pass the call over to Josh. Josh?
Josh Smiley: Thank you, Samantha, and thank you, everyone, for joining the call today. Zai Lab delivered strong full year revenue growth of 25% year-over-year and 31% on a constant exchange rate basis, driven by robust volume growth across our existing product portfolio and the launch of VYVGART. These revenue increases were partially offset by an increase in sales rebates, both in Q1 of 2023 in connection with new listings for our product on China's 2022 National Reimbursement Drug List or NRDL, and in Q4 of 2023 in connection with new and renewed NRDL listings for our products on China's 2023 NRDL. A pivotal achievement for us was the approval and subsequent launch of VYVGART in September, followed by its inclusion in the NRDL, which became effective at the beginning of this year. Throughout the fourth quarter, we implemented comprehensive commercial strategies to drive awareness and adoption of VYVGART, and we entered 2024 with considerable momentum. I'm also pleased to announce that in 2023, we achieved our goal of having net product revenue exceed the cost of sales and sales and marketing expenses for our commercial products, which we refer to as commercial profitability. Our commitment to financial prudence remains steadfast as we work towards achieving and maintaining profitability. Lastly, we made substantial progress on key clinical development programs such as efgartigimod in CIDP and KarXT in schizophrenia, while further enriching our global pipeline with the introduction of a next-generation DLL3 ADC. In 2023, we announced our five-year strategic plan aimed at positioning Zai Lab as a leading global biopharmaceutical company characterized by substantial revenue growth, achievement of profitability and a strong global pipeline. This strategic vision is underpinned by three corporate objectives. First, we are focused on accelerating top line growth. With a strong foundation in place supported by both new product approvals and label expansions within our existing portfolio, we anticipate substantial revenue growth in the coming years. By 2028, we aim to have a significantly larger commercial portfolio with the launch of potential blockbusters such as VYVGART leading the way. Subsequent potential launches include SUL-DUR later this year and TIVDAK, bemarituzumab and KarXT in 2025 and beyond. Such launches would further drive revenue growth with our projections exceeding $2 billion in 2028, reflecting our estimated five-year compound annual growth rate of 50%. Furthermore, we are committed to building our global portfolio through internal discovery initiatives and strategic business development endeavors. Our goal is to advance at least one global IND into clinical trials annually as we continue to evaluate and pursue synergistic global and regional business development opportunities, leveraging Zai Lab's reputation as a trusted brand and preferred strategic partner. As we continue to grow and develop our commercial portfolio and pipeline, we remain focused on scaling with purpose, and this brings us to our third objective, which is to achieve corporate profitability by the end of 2025. To realize this objective, we will continue to enhance efficiency and productivity, prioritize research and development initiatives and execute cost optimization strategies. Our existing infrastructure is agile and sized to support multiple new launches. We maintained a robust reserve of cash and cash equivalents of $807.6 million as of the end of 2023, providing ample financial resources to sustain our operations through profitability and beyond. Now, I will briefly review the performance of each of our commercial products and our expectations for 2024. ZEJULA maintained its position as the leader in hospital sales for PARP inhibitors in ovarian cancer in China, exhibiting growth in the fourth quarter and the entire year. In 2024, we will continue to focus on driving further growth in the first-line setting and extending the duration of therapy. In 2023, QINLOCK and the IV formulation of NUZYRA joined ZEJULA on the NRDL. And these listings help drive substantial sales increases for these products. We expect this positive momentum to continue, supplemented by the additional listing for the oral formulation of NUZYRA in January 2024. As OPTUNE is a medical device and not eligible for NRDL inclusion, we are focused on expanding access and improving affordability for this important treatment through commercial health insurance coverage. Overall, we anticipate year-over-year revenue growth in 2024 for these four products in aggregate to be comparable to that of 2023. Turning now to the recent launch of VYVGART. I want to take a moment to acknowledge the tremendous effort of our medical and regulatory and commercial teams behind VYVGART. We were able to reach important milestones at a swift pace achieving our best case scenario with regards to the timing for approval, launch and NRDL listing. We are pleased to see the regulatory authorities recognize the innovation of VYVGART and its substantial clinical benefit to patients living with generalized myasthenia gravis or gMG. In China, where there are over 170,000 patients with gMG, many patients endure residual symptoms or inadequate treatment, making everyday tasks challenging and unpredictable. The scarcity of innovative therapies, the persistent shortage of IVIg therapy and the chronic and progressive nature of the disease, can present a formidable challenge for both patients and healthcare providers alike, further underscoring the significance of the VYVGART's approval. Throughout the fourth quarter, our primary focus was on strategically targeting key hospitals and fostering awareness while delivering timely support to physicians and patients alike. And we made great progress. As of December, we have successfully engaged 100% of our top 200 target hospitals and over 90% of our top 100 physicians integrated VYVGART into their treatment protocols. Based on a survey of 250 physicians, awareness of VYVGART grows from 54% to 72% following four months of promotion, and we continue to see this rise. From launch in September through the end of the year, we estimate that nearly 1,000 patients were treated with VYVGART. Turning now to more recent updates on the launch. VYVGART's listing on the NRDL became effective on January 1 this year with a price of $800 a vial or $32,000 per patient per year based on clinical study usage. We estimate that in January 2024 alone, nearly 1,000 new patients were treated with VYVGART, indicating promising progress at this early stage of launch. This demand is being driven by an unmet need in the treatment of gMG, a willingness of physicians to adopt VYVGART into treatment protocols and increased patient access as hospitals add VYVGART to their formularies. We are very pleased with the progress achieved thus far with the launch of VYVGART, and we anticipate sales to exceed $70 million in 2024. Our strategic focus for the year will be to expand outreach to approximately 1,000 hospitals with a concentrated effort on accelerating VYVGART listing at top-tier hospitals. Already, as of the end of January, our team has engaged 100% of our top 600 hospitals in person. Supported by our dedicated sales force of approximately 150 reps, we anticipate robust coverage to facilitate this expansion. Additionally, pending regulatory approval, we expect to launch of VYVGART's subcutaneous formulation for gMG later this year, which will offer enhanced dosing flexibility for physicians and patients. We're also excited about potential indication expansion for VYVGART. This year, we expect to submit a supplemental Biologics License Application or sBLA in China for CIDP, which presents another substantial growth opportunity. This marks an exciting period for Zai Lab and an important year of execution for our team. And with that, I would like to pass the call to Rafael, who will provide an update on our oncology pipeline. Rafael?
Rafael Amado: Thank you, Josh. Let me begin by highlighting some of the key progress updates in our oncology pipeline since our last earnings call, along with our next steps. Starting with bemarituzumab, our FGFR2b inhibitor in collaboration with Amgen (NASDAQ:AMGN). We are enrolling in both FORTITUDE-101 and FORTITUDE-102 Phase 3 study, evaluating bemarituzumab in FGFR2b-positive gastric cancer as a doublet therapy with chemo and a triplet with chemo and a checkpoint inhibitor, respectively. We expect both studies to enroll well, and we're eager to introduce this much-needed therapy to China, where we estimate an incidence of 126,000 FGFR2b-positive gastric cancer patients each year. Next, our Tumor Treating Fields franchise. In January 2024, our partner, NovoCure (NASDAQ:NVCR), announced that the FDA had accepted the filing of their pre-market approval application for TTFields in non-small cell lung cancer, following progression on or after platinum-based therapy and a regulatory decision is expected in the second half of this year. In China, we expect to file a marketing authorization application for TTFields in this indication later this year. We also expect two pivotal readouts for Tumor Treating Fields, including in brain metastases from non-small cell lung cancer and in pancreatic cancer, both in the first-line setting. Also in lung cancer, repotrectinib is currently under priority review for the treatment of adult patients with locally advanced or metastatic ROS1-positive non-small cell lung cancer in China. The filing was based on the results from the pivotal TRIDENT-1 study, which were published in the New England Journal of Medicine in January this year. Findings demonstrated the potential of repotrectinib to overcome limitations of first-generation tyrosine kinase inhibitors in terms of responses and durability in ROS1- resistant mutation. We look forward to a potential regulatory approval and launch this year to bring this best-in-class ROS1/TRK inhibitor to patients in need in China. Now moving on to adagrasib. We will continue to accelerate the regulatory pathway for second-line non-small lung cancer monotherapy by leveraging the global data package for the FDA approval, the ongoing PK study in China and the global confirmatory KRYSTAL-12 study with Zai Lab joined in July 2022, and we await the results for a filing submission in China this year. In addition, our partner, BMS, announced this month that the FDA has accepted its supplemental NDA for priority review for adagrasib in combination with cetuximab for the treatment of patients with previously treated KRASG12C-mutated locally advanced or metastatic colorectal cancer with a PDUFA goal date of June 21, 2024. For this indication, adagrasib has the potential to be the first to market KRASG12C inhibitor in China. We completed enrollment in the global Phase 3 KRYSTAL-10 confirmatory study in 2023. Lastly, for TIVDAK, we have participated in the confirmatory Phase 3 innovaTV-301 global trial in second-line cervical cancer and continue an extension portion in China, and we intend to file a new drug application or NDA in China this year. In addition to our late-stage programs, our DLL3 ADC ZL-1310 has shown promising preclinical data and is progressing through a global Phase 1 study in relapsed and refractory small cell lung cancer, who has progressed after platinum-based treatment in the United States and in China. In March, we will present the preclinical data at the European Lung Cancer Congress in Prague. And depending on the dose escalation level, we could potentially see early clinical results at the end of 2024 or early 2025. We're also selecting internally discovered product candidates to achieve our goal of generating at least one IND per year, and we continue to assess external opportunities to introduce a new product in development this year. And now, I will turn the floor over to Dr. Harald Reinhart to discuss the progress in our autoimmune, infectious disease and neuroscience therapeutic areas. Harald?
Harald Reinhart: Thank you, Rafael. This is truly a very exciting time for our neuroscience, autoimmune and infectious diseases or NSAID franchise, as we made significant progress in the past year advancing our pipeline. Starting with VYVGART or efgartigimod. Beyond what Josh shared about the progress for gMG, we are excited about the positive data for treating patients with CIDP or chronic inflammatory demyelinating polyneuropathy. There are an estimated 50,000 patients diagnosed with CIDP in China. And today, only a small fraction are able to achieve remission on their current standard of care, and the majority of patients continue to be burdened with symptoms that can have a debilitating impact on quality of life. Existing treatment options are limited and quite problematic given the general reliance on long-term steroid or chronic immunoglobulin therapy. In China, the situation has worsened due to the persistent shortage of IVIg therapy. Our partner, argenx, announced this month that the FDA had accepted for priority review the sBLA for subcu administered VYVGART Hytrulo in CIDP. It was granted a PDUFA goal date of June 21 of this year. We plan to submit an sBLA to the NMPA in China for this indication in the first half of 2024. In addition, our sBLA for efgartigimod subcu in gMG is under regulatory review in China with potential NMPA approval this year. This approval would give patients flexibility in treatment with either IV or more convenient subcu dosing. Efgartigimod subcu has the advantage of simplicity and speed as administration takes only 30 to 90 seconds for a single dose. We see significant potential fo efgartigimod across multiple additional indications, and we will continue to work with our partner argenx on indication expansion. For example, we expect to join them in the registrational study of efgartigimod in thyroid eye disease or TED in Greater China in the second half of this year. Turning to KarXT. This is the first-in-class antipsychotic, combining a centrally active muscarinic agonist called xanomeline with a peripheral antagonist called trospium, which we are developing with our partner Karuna for patients with acute schizophrenia. In November 2023, the FDA accepted Karuna's NDA for KarXT for the treatment of schizophrenia in adults with a PDUFA goal date of September 26, 2024.We continue to enroll patients in the registrational bridging study in Mainland China, and we expect to complete enrollment this year. We believe that KarXT could become an important new treatment option China, where more than 8 million people are living with schizophrenia and where severe under treatment and inadequate symptom improvement or even disease control persists despite currently available antipsychotics. We have yet another substantial opportunity for KarXT, which is for the treatment and prevention of psychosis in Alzheimer's disease patients or ADP for short. There are approximately 8 million people with Alzheimer's disease in China and about 45% of these patients display psychotic symptoms. We believe that there is a significant unmet need for patients with ADP or Alzheimer's disease with psychosis in China as there are no approved treatments. Karuna initiated the Phase III ADEPT-2 and ADEPT-3 clinical trials in the third quarter of 2023, and we plan to participate in both studies in Greater China in mid-2024.Regarding our infectious diseases portfolio, sulbactam-durlobactam or SUL-DUR is a treatment for hospital-acquired and ventilator-associated bacterial pneumonia caused by Acinetobacter baumannii. In China, there are 240,000 to 300,000 cases of Acinetobacter infections annually, with the majority of strains being carbapenem-resistant. Latest countrywide surveillance data from China indicated a rise in overall resistance to approximately 80%. With limited treatment options for these patients, the mortality rate is around 43%, even with the best available therapy and care. The WHO has listed Acinetobacter baumannii as the number one problem pathogen and the high incidence in China has prompted the Chinese government to prioritize efforts to combat this multidrug-resistant bacteria. Our NDA submission is under priority review, and we are looking forward to a potential approval later this year. Last, not least, ZL-1102, our IL-17 Humabody for the topical treatment of chronic plaque psoriasis or CPP is in the final stages of preparation for a global Phase II dose-finding trial, and we intend to initiate the study in mid-2024. So plenty of exciting progress within our NSAiID portfolio, and I look forward to providing updates at our next earnings call. And now, Yajing will provide an overview of our financial results. Yajing?
Yajing Chen: Thank you, Harald. Now, I will discuss our full year financial results compared to the prior year. In 2023, total net product revenues grew to $266.7 million. This represents year-over-year growth of 25% or 31% on a constant currency basis. Our revenue growth was driven by increased sales volumes and the launch of VYVGART, partially offset by an increase in our sales rebates to distributors resulting from price reductions in connection with additional NRDL listings. Sales rebates in connection with NRDL listings rose to $13 million for 2023. These NRDL listings play a crucial role in maintaining patient access to our existing products on NRDL, while significantly expanding access for our new products. Growth was also negatively impacted by the temporary effects on the hospital and physician practices that resulted from industry-wide anti-corruption enforcement efforts in China in the second half of the year. Now, looking at each individual product, the ZEJULA net product revenue increased 16% year-over-year to $168.8 million in its third year under NRDL, driven by increased hospital sales in first-line ovarian cancer and a duration of treatment improvement, partially offset by an increase in sales rebates in the fourth quarter in connection with the renewal of the NRDL listing for ZEJULA as a maintenance treatment. VYVGART net product revenue was $10 million following the launch in China in September 2023. We successfully negotiated for VYVGART's first listing on the NRDL with pricing that took effect on January 1, 2024. OPTUNE, net product revenue was relatively flat year-over-year at $47 million, as continued growth in supplemental insurance coverage was offset by the disruption in hospital and physician practices resulting from anti-corruption efforts. QINLOCK grew 29% year-over-year to $19.2 million and NUZYRA increased 316% to $21.7 million. This growth was supported by the inclusion of QINLOCK and the IV formulation of NUZYRA in the NRDL in the first quarter of 2023, partially offset by sales rebates in connection with this NRDL listing, as well as sales rebates in the fourth quarter in connection with the inclusion of the oral formulation of NUZYRA, which became effective in January 2024. Turning now to our expenses, research and development expenses declined $21 million to $265.9 million, primarily due to decreased upfront and milestone payments for our license and collaboration agreement, partially offset by an increase in personnel compensation and related costs. Selling, general and administrative expenses grew $23 million to $281.6 million, primarily due to higher general selling expenses to support the launch of VYVGART, partially offset by a decrease in professional services fee. Both R&D and SG&A expenses significantly declined as a percentage of revenue, and we expect this trend to continue as a result of our growing revenues and our ongoing cost and efficiency initiatives. Zai Lab reported a net loss of $334.6 million for 2023, which improved by $108 million versus prior year. The decrease in net loss reflects our continued progress towards profitability, primarily due to our product revenue growing faster than net operating expenses, as well as increased interest income and decreased foreign currency loss. We are in a strong financial position, ending the year with a cash position of $807.6 million, compared to $1 billion as of December 31, 2022. Based on our operating plan and our anticipated revenue growth, we expect to be able to fund our business through profitability. 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 would now like to open the line for questions. [Operator Instructions] Our first question comes from the line of Michael Yee from Jefferies. Please go ahead. Your line is open.
Jiajun Wen: Hi. This is Jiajun Wen on the line for Michael Yee. Thanks for taking my questions and giving a great VYVGART guidance, which is obviously above the consensus. I have a couple of questions. Maybe first, can you comment on what your assumptions are for the $70 million in 2024 VYVGART sales guidance? And what visibility you have to be able to guide the $70 million? And for the 1,000 new patients added in January, were they a bonus waiting for the NRDL price to be treated or due to other factors in play? My second question is about the recent investor concerns and rhetoric in Washington, DC about the committee of CCP. Maybe can you comment on what your confidence level is that you believe this won't impact biotech at all and what you're seeing out there? Thank you.
Josh Smiley: Great. Thank you for the question. It's Josh. I'll direct the questions to our leadership team here, but I think for the first two, I'll direct them back to me. First on VYVGART, as we said, we're really pleased with the uptake we've seen so far. We're monitoring all the normal leading indicators you would look at in the launch, but new patient starts is really important. So I think our -- what gives us the confidence to say we're on a path to $70 million or greater in 2024 is the rate of new patient starts, the penetration we're seeing with hospitals where we focused in the fourth quarter on the top 600 hospitals, which make up about 80% of the sales opportunity. We'll expand that to 1,000 hospitals here in the first half of the year now that we have NRDL listing. And one of the things we look at there is how quickly the hospitals adopt the NRDL national listing into their local formularies. We're off to a good start there. 1,000 patients in January, as we mentioned, I think, is a really good start. And I think it's obviously, it's very early in the launch to get into too many details there. We'll keep updating as we go through the quarters during the year. But I think what we can say right now is with 1,000 new patients, and of course, as we mentioned last year, some of those patients could have been patients that would have started in December, but were held for the reimbursement. But I think for the most part, we're quite pleased with the absolute magnitude of the number, and it gets us off to a good start in the year. And again, I would look at the $70 million as we know enough now to have confidence there, and we're looking forward to continued progress throughout the year. I think on the second question about the political environment in the US and the Biosecure Act and/or others, we've evaluated these bills and the tenor behind them closely. We don't -- they don't touch on anything that we do, and we're quite confident that as proposed now, these bills or activities won't have any impact on what we do as a biotech company focused on bringing great innovative medicines to patients in China and over time to the rest of the world. Thank you.
Jiajun Wen: This is great. Thank you.
Operator: Thank you. We will now move on to our next question. Our next question comes from the line of Anupam Rama from JPMorgan. Please go ahead. Your line is open.
Anupam Rama: Hey, guys. Thanks so much for taking my question. Maybe just a broader question for me. So what evidence or anecdotes do you have that some of the anticorruption efforts in China have kind of played out and won't have a lingering impact moving forward? Thanks so much.
Josh Smiley: Thanks, Anupam. It's Josh again. I think, first, we look at how our sales reps are able to interact with their customers, hospitals and physicians and otherwise. And I think what we see now is we've got good access, we're able to communicate the medical benefits of our products in a way that's helpful to physicians and patients and so on. So I think that's what we tend to look at. I think on the broader level, of course, it's -- we can't predict the future. But for now, we feel good about the environment we're operating in, and certainly, our sales and marketing practices are of the highest standards and no impact that we've seen from the historical efforts there. So we're looking forward to a good year operationally here.
Anupam Rama: Thanks so much for taking my question.
Josh Smiley: Thank you.
Operator: Thank you. We will now move onto our next question. Please standby. Our next question comes from the line of Louise Chen from Cantor. Please go ahead. Your line is open.
Louise Chen: Hi, thanks for taking my questions here. So I wanted to ask you on CIDP, if you do get approval, how do you think the uptake will be relative to what you've seen right now for myasthenia gravis? And then what's the bigger opportunity for you, MG or CIDP? Thank you.
Josh Smiley: Thanks, Louise. I'm going to ask Harald to talk a little bit about the CIDP and answer your question. And if there's anything to wrap up on, I'll come back at the end. Please go ahead, Harald.
Harald Reinhart: Yes. Thank you for the question. The CIDP indication is rather unique. It is an unmet medical need situation here much more so than in many other indications for autoimmune diseases. These patients currently really lack something like an efgartigimod that helps improve symptomatology and to break the downslope of their disease. A lot of these patients end up in wheelchairs. So right now, as we said earlier, treatment is just steroids. And at the end of the rope, you get patients who are getting constantly IVIg infusions. So we see really a very, very important role for efgartigimod in that population. This efgartigimod treatment here is a weekly treatment for the duration of the symptomatology. So it has a major impact on our financials. Thank you.
Josh Smiley: I would just add, as Harald mentioned, there's a significant unmet need here. And it's a very big opportunity. I don't think at this point, Louise, we're going to be excited about both of them. I think they both present large opportunities, both gMG and CIDP, and we're looking forward to progressing the CIDP approval process and be ready to go there. Thanks.
Louise Chen: Thank you.
Operator: Thank you. We'll now move onto to next question. Our next question comes from the line of Yigal Nochomovitz from Citigroup. Please go ahead, your line is open.
Yigal Nochomovitz: Yes, hi. Thanks very much. On the -- on VYVGART, I think, Josh, you mentioned it was $32,000 per year based on clinical study usage. How is that syncing up with what you're seeing in the real world in terms of the average number of cycles and average vials per four-week cycle? Is that fairly consistent with the clinical trial experience so far? Thanks.
Josh Smiley: Thanks Yigal. I'll ask Harald to comment. But I think it's early in the launch, we have no reason to believe that we're going to see things that are vastly different than what we're seeing around the world. We're excited about the starting point. But I don't know that we have a lot more to offer now. Harald, if you have any comments you want to make.
Harald Reinhart: Not really. In this case, we are still too early in the use and the pattern and the numbers of cycles that we would expect to see right now. Given the same labeling as in the U.S., we assume a very similar uptake. However, this needs to be further defined and only future updates here, we'll be able to give you the details that you probably want to hear.
Yigal Nochomovitz: Okay. Thanks. And then, Josh, you sort of referenced that the year-on-year growth for the four products in the market, not including VYVGART, would be comparable to 2023 year-on-year growth. However, if you look at the trajectory from Q3 to Q4 and 2023 for ZEJULA, Optune, and QINLOCK, I guess it's a little unclear how you're going to be able to achieve the same year-on-year growth for those products. For NUZYRA, also, it was a very, very large number. So, could you just kind of expand a little bit on how you're thinking about that year-on-year growth number given what we're seeing in the second half of 2023 for QINLOCK, Optune, and ZEJULA? Thanks.
Josh Smiley: Thanks, Yigal. I think first, for Q4, I want to remind everybody that the Q4 growth rate for ZEJULA certainly is impacted by rebates associated with NRDL. So, I think if you look at the portfolio overall for Q4 and you take out the rebate comparison or drag, growth is more like 19%. So I think certainly for ZEJULA, we saw market share growth through the year, and we expect to continue to grow in 2024. So, I think that product is performing well, and we'll continue to push it. I think with the other three, I mean, between the three of them, there are some ups and downs and otherwise, I think NUZYRA with the NRDL listing now for the oral formulation, I think we're in a good position to continue to see good growth for that product in 2024. I think with Optune, it's a medical device, so there were some challenges, I think, for that product overall. But we expect to grow it. It provides an important benefit to patients, and we expect to continue to grow that in 2024. And QINLOCK is performing about what we would expect. It's a small product, but it's an important foundational drug for us as we think about gastric cancer. So, I think if you put those altogether, there's no reason to believe that the overall sales growth we saw in 2023 can't be replicated in 2024.
Yigal Nochomovitz: Okay. Thanks. And then just a last question on the IL-17, I think you mentioned you're starting the global study in plaque psoriasis. Where do -- there was some discussion in past meetings over the years with respect to partnering that globally with a large pharma. Where does that stand? And can you just update us on your strategy for that product? Thanks.
Josh Smiley: Harald, you can comment on the study. I think we're excited to get going and begin to create clinical data, and then we'll evaluate our options as we proceed. But Harald, maybe you can give us an update.
Harald Reinhart: Yeah. Thank you. Yes, we are happy to go into Phase 2 with this program. And as far as the question here about partnering, I think we are always open to partnering offers and looking at increasing value here for the product. Otherwise, I would like to defer the question to Jonathan, who is on the call.
Jonathan Wang: Yeah. I think we'll evaluate as the data coming, but it's probably too early at this stage to think about partnering.
Yigal Nochomovitz: Thank you, guys.
Jonathan Wang: Okay thanks.
Harald Reinhart: Okay. Thank you.
Operator: Thank you. We'll now move on to our next question. Our next question comes from the line of Linhai Zhao from Goldman Sachs. Please go ahead. Your line is open.
Linhai Zhao: Hi. Thanks for taking my question. Just wondering for Optune, we know that there are indication expansion opportunities. Particularly, we have two, Phase 3 readouts in 2024, and we are planning to filing for the second line non-small cell lung cancer in China following our partners filing in FDA. So wondering if the management can share a bit more on the indication expansions, particularly for these three indications? And also, with all the debates on the second-line non-small cell lung cancer with the LUNAR data, can you share a bit more color on our communications with the China regulators about the potential concerns and how we are going to address their potential concerns on that aspect? And on that, for 2028, as part of our $2 billion revenue target, how much do you see revenue contribution from Optune in 2028? Thanks.
Josh Smiley: Rafael, why don't you address the question, please?
Rafael Amado: Yes. Thank you. This is Rafael. Maybe I'll start with LUNAR 2. And as I said in the prepared remarks, NovoCure has announced that the FDA has accepted the pre-market authorization in January. And as you know, the review time is 180 days. You asked about interactions with regulatory authorities. In China, we are starting those interactions. And we have a really good collaboration with our partner. And our intention is to file this year. And we will need for that the China sub-set analysis, and we're collaborating, as I said, really well with our partners, NovoCure, to be able to file this year. So obviously, we will see how it goes with FDA. But as I said, our PMA has been accepted. And then with regards to additional indications, NovoCure has announced some of those, I guess, the one that's most immediate is the LUNAR-2 study, which includes checkpoint inhibitors and chemotherapy plus/minus the device in frontline non-small cell lung cancer, platinum containing regimen. We are considering participating in that trial and in discussions with them. And then just an ongoing study with a checkpoint inhibitor for patients with high GBS scores, which is a phase study, which we're awaiting the results. Now in terms of Phase 3 studies, the most important readouts are METIS in non-small cell lung cancer patients with brain metastases, as well as locally advanced pancreatic cancer of PANOVA trial. We participate in both of those studies to put sufficient patients, and we're eagerly awaiting the results of those trials, which should be this year, and then we'll add accordingly. So this is sort of an overview for where we are with all these programs, the future programs that we may participate, the ones that we have, that we are awaiting results. And definitely, we are committed to a filing with LUNAR and as I said, start interactions already with the device division of NMPA.
Josh Smiley: As it relates to the 2028 composition, we looked at a range of outcomes here when we put together that guidance and that goal. It wasn't dependent on any single product. Although what I can tell you for sure is VYVGART is the start that we have there and our excitement around gMG and CIDP, I think is the biggest driver towards what puts us on the path to the 2028 goals. Thank you.
Linhai Zhao: Thank you.
Operator: Thank you. We'll now move on to our next question, Our next question comes from the line of Jonathan Chang from Leerink Partners. Please go ahead. Your line is open.
Matt Cowper: Hey, guys. This is Matt Cowper on for Jonathan. I was just wondering if you can discuss how you see the pricing of VYVGART evolving over time, particularly in the context of NRDL renewal cycles and then also in the context of adding additional indications such as CIDP. Thank you.
Josh Smiley: Thanks, Matt. I'll ask Jonathan to take that one, please.
Jonathan Wang: Sure. Thanks for the question. Look, I think, first, we achieved a good price at the end of last year in NRDL negotiation. So we're off to a very good starting point. And I think NRDL is also evolving, and we do see positive trends that the government increasingly supportive of innovative and differentiated products. VYVGART being the only in class and addressing a very large unmet medical need in China is a program which we see for the government supporting, and we do expect to maintain good price. Also if you look at ZEJULA, we maintain very good price in the most recent negotiation. So, we feel pretty good about the pricing at this stage.
Matt Cowper: Thanks Jon.
Jonathan Wang: Yes.
Operator: Thank you. We will now move on to our next question. Our next question comes from the line of Jack Lin from Morgan Stanley. Please go ahead. Your line is open.
Jack Lin: Hi. Good morning, everyone. Thank you for taking my question. I have a couple of quick questions. First one, again on VYVGART, curious to know if there's any color you could share in terms of the patient background that we've seen since the fourth quarter and also in January, what proportion of them were refractory versus kind of in the earlier setting? And for the refractory ones, how -- what might be the breakdown between refractory to the conventional oral immunotherapies versus the alternative biologics? That's on the VYVGART. And just two really quick questions on commercialization. One, I think you mentioned earlier, we're looking to break into 1,000 hospitals by end of this year. And I think we're at 150 right now. Curious to know about how the commercial team is, is it all in place? Or is it kind of still an ongoing effort to -- for more recruitment? And also for OPTUNE, assuming that we have success from the PANOVA-3 studies and others, will we rethink in terms of getting reimbursement coverage in China considering the significantly larger patient size? Thank you.
Josh Smiley: Thanks, Jack. I'll ask Harald to talk a little bit about VYVGART patients. Obviously, it's very early in the launch. But Harald, if you may make any comment?
Harald Reinhart: Yes. Thank you for the question. And again, the patient background that we've seen so far is really the background of those patients who were prior to NRDL reimbursement. So those patients, we would assume, are the patients who are somewhat more sick and more ill, and possibly close to the refractory part of the disease cycle. However, this will all normalize, we believe, as NRDL pricing kicks in, and we should expect a similar kind of patient population going forward that has been seen in the studies and also in the United States. So this is a drug which comes in after steroid use. It's not a drug for the refractory patients. Only it is a patient selection that we see, right in the middle is the bulk of patients for -- with gMG that starts to lose control with steroids alone or runs into side effects with steroids. This is fairly early in the day, and we shall provide updates as time goes on and as we have a more normalized situation as far as under NRDL pricing conditions. Thank you.
Josh Smiley: Jack, your question about some of the commercialization efforts. So when we launched in September, we had 100 sales reps that we focused on the top 600 hospitals, which, as I mentioned earlier, made up about 80% of the sales opportunity that we were focused on. With NRDL listing, we always plan to move from 100 reps to 150. We're in the middle of that expansion right now. And we would increase our target hospital list from 600 to 1,000, and that comes with the expansion of reps. We'd expect all of that to be complete over the first half of this year. So I think as you get into the second half of the year, we'll be at what we believe to be full strength. And I think that's sufficient to cover the opportunity given how concentrated the prescribing and the patient base is here. So again, we're excited about what we're seeing so far, and we think the opportunity is well defined and in front of us. Jonathan, I don't know if you have any comments you want to make on sort of longer-term pricing policy opportunities for medical devices and how Optune may fit in there?
Jonathan Wang: Yes, it's also evolving very rapidly. As you recall, about 1.5 years ago, the government was having draft proposals on the medical device NRDL inclusion. So far, they haven't come up with a more formal guidelines yet, so we eagerly wait for that. We think if that eventually, obviously, Optune would benefit. But for now, I think the commercial insurance is very important for Optune and it's a viable market just based on that.
Jack Lin: Thank you.
Jonathan Wang: Thank you.
Operator: Thank you. I'm showing no further questions at this time. I will now turn the call back over to Zai Lab's CEO, Samantha Du, for closing remarks.
Samantha Du: Thank you, operator. I want to thank everyone for taking the time to join us on the call today. We appreciate your support and look forward to updating you again after the first quarter of 2024. Operator, you may now disconnect the call.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers' please standby.
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