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Operator: Hello, ladies and gentlemen, thank you for standing by, and welcome to Zai Lab’s First Quarter 2025 Financial Results Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, today’s call is being recorded. It is 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. Hello, and welcome, everyone. Today’s earnings 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 Research and Development; 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 expectations. These statements are subject to numerous risks and uncertainties that may cause actual results to differ materially from what we expect due to a variety of factors, including those discussed in our SEC filings.

We will also refer to adjusted loss from operations, which is a non-GAAP financial measure. Please refer to our earnings release furnished with the SEC on May 8, 2025, 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: Thanks, Christine. Good morning, and good evening, everyone. Thank you for joining us today. We entered 2025 with a conviction that this will be a pivotal year for Zai Lab, a year where strong execution, disciplined growth and the scientific innovation would begin to shape our long-term trajectory. Let me be clear, our conviction in the strength of our business fundamentals and strategic direction remains strong. As we close out the first quarter, we’re reaffirming our full year revenue guidance of between $560 million to $590 million. We anticipate accelerating sales growth in the next three quarters, which will translate into significant operating leverage and keep us on track to achieve profitability by Q4 of this year.

Before I turn the call over to Josh to discuss our Q1 performance, I want to share my excitement for the road ahead. Zai Lab has a differentiated and highly potential portfolio, including multiple regional first or best-in-class assets that are poised to deliver significant long-term value. This includes a pipeline of product opportunities like VYVGART and povetacicept as well as other potential blockbusters like bemarituzumab in gastric cancer, KarXT in schizophrenia and TTFields in pancreatic cancer. We are confident in delivering our 2025 revenue targets and surpassing $2 billion by 2028, with the strong momentum carrying well into the 2030s. Our original business is already commercially profitable with a clear growth runway, and we will continue to add new assets with discipline and focus.

At the same time, we have made bold investments to accelerate our global R&D pipeline. Our lead global asset, ZL-1310, is a potential first and best-in-class DLL3 ADC. We’ll present updated Phase I data in small cell lung cancer at ASCO in June and outline our broader development strategy across multiple indications, including a registrational trial that positions us for a potential FDA approval in 2027, a milestone that would elevate our position on the global stage. Beyond 1310, we’re advancing our next wave of innovation. ZL-6201, our novel LRRC15 ADC for solid tumors, and ZL-1503, a first-in-class IL-13/IL-31 bispecific for atopic dermatitis are both expected to enter the clinic this year, further expanding our global oncology immunology pipeline.

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

Josh Smiley: Thank you, Samantha, and good morning and good evening to everyone. Let’s start with VYVGART. Following an exceptional 2024, we expect another strong year in 2025 with VYVGART sales growth expected to outpace total revenue growth, driven by increased patient demand, improved treatment continuity and expanded access. First quarter sales reflected seasonal trends with Chinese New Year driving a temporary decline in patients in January and February. As an IV treatment for a chronic disease, VYVGART is more susceptible to this type of seasonality. That said, patient volumes rebounded in March and April, and we anticipate a return to strong sequential growth throughout the rest of the year. Inventory dynamics also influenced quarterly sales growth.

In preparation for the launch of VYVGART Hytrulo, we had some inventory build in Q4. The timing of these movements had a notable impact on reported sales growth. Looking ahead, we are seeing early positive results from our ongoing strategic initiatives to extend treatment duration. In addition, the first expert recommendations for the clinical application of FcRn antagonist in the treatment of gMG were published in February, and a similar update to the national gMG treatment guidelines is expected later this year. Together, these developments provide additional momentum for continued sequential growth and an acceleration in the second half of this year. We’re also preparing for the upcoming NRDL cycle, targeting IV renewal for gMG and initial listing of the SC formulation, both of which would take effect on January 1, 2026.

Now let me turn to our broader commercial portfolio. All other products, including ZEJULA and NUZYRA, delivered sequential growth supported by NRDL access. We also saw early contributions from AUGTYRO and XACDURO. In particular, XACDURO is showing strong initial demand. Physician feedback has been highly positive, citing XACDURO’s rapid efficacy and favorable safety profile in treating CRAB infections, a serious unmet need in China, where an estimated 300,000 Acinetobacter cases occur annually with limited treatment options and poor outcomes. Turning to our financial position. We continue to strengthen efficiency and operating leverage. For the first quarter of 2025, operating loss improved by 20% to $56.3 million and by 25% to $37.1 million on an adjusted basis, keeping us firmly on track to reach profitability in the fourth quarter.

Looking ahead, we have a robust set of late-stage opportunities to drive substantial growth. Three regulatory reviews are currently underway, including KarXT for schizophrenia and TIVDAK for cervical cancer, and we anticipate at least three additional submissions this year, including bemarituzumab for gastric cancer, TTFields for pancreatic cancer and VYVGART’s prefilled syringe for gMG and CIDP. We expect to optimize our commercial footprint by leveraging our existing commercial infrastructure to efficiently support future launches. For example, deploying our ZEJULA team to support TIVDAK and our QINLOCK team for bemarituzumab. For targeted opportunities like KarXT, we can effectively reach over 85% of the market with a focused team of approximately 150 sales representatives.

In parallel, we are advancing further operational efficiencies as VYVGART scales and as we localize manufacturing for key products to more cost effectively support our regional portfolio. These efforts are central to our strategy for achieving profitability alongside long-term revenue growth. With a fast-growing Greater China business, a deepening global pipeline and disciplined financial execution, we are well positioned to deliver substantial value for our shareholders in 2025 and beyond. And with that, I’ll pass the call over to Rafael to discuss the great progress within our pipeline.

Rafael Amado: Thank you, Josh. I’ll start by highlighting the key progress updates in our global pipeline since our last earnings call, along with our next steps. Starting with ZL-1310, our potential first and best-in-class DLL3 ADC for small cell lung cancer. Last year, we shared promising preliminary monotherapy results from the Phase 1 dose escalation cohort, demonstrating antitumor responses in the majority of patients with extensive stage small cell lung cancer, including in brain lesions with good tolerability. We completed enrollment in the dose escalation monotherapy cohort. Enrollment in the ongoing monotherapy dose optimization cohort is progressing rapidly, and we look forward to presenting updated data from both cohorts of the global Phase 1 study at the ASCO meeting in June this year.

We’re also pleased with ongoing regulatory discussions with the FDA, and we are on track to initiate a pivotal study in small cell lung cancer later this year, positioning us for a potential accelerated approval in 2027. We’re also assessing potential combinations in the first-line setting, and we expect to provide data in the second half of this year. As DLL3 is also highly expressed in other neuroendocrine tumors, we’re exploring its therapeutic potential beyond small cell lung cancer. A global Phase 1/2 study was initiated in April to explore ZL-1310 in this indication. Next, on our other global oncology assets. At the American Association for Cancer Research meeting, we presented new data for two of our internally developed oncology therapies, ZL-6201 and ZL-1222.

ZL-6201 is a novel ADC with an internally developed high affinity and specificity for LRRC15 antibody and next-generation payload linker. LRRC15 is an attractive target for cancer therapy due to its over expression in multiple solid tumors such as sarcoma, glioblastoma and melanoma as well as its expression in fibroblasts in the tumor microenvironment of multiple tumors such as breast, lung and colorectal cancer. The payload linker system releases the payload by cleavage both extracellularly in the tumor microenvironment and intracellularly within the cellular lysosomes once the antibody is internalized. We are advancing ZL-6201 into a global Phase 1 study this year. ZL-1222 is a PD-1 targeted next-generation IL-12 immunocytokine designed to leverage the antitumor potential of IL-12, while lowering the associated systemic toxicity.

The IL-12 mutant is engineered to remain in a less potent state, reducing systemic IL-12 induced toxicity. A Cis-mediated signaling process is initiated when ZL-1222 binds to PD-1. Findings from its preclinical studies demonstrate potent antitumor activity in both anti-PD-1 sensitive and resistant tumor models with improved systemic safety. These results suggest a potential role in patients who are unresponsive or resistant to current immuno-oncology therapies. We also expect to advance ZL-1503, an IL-13/IL-31 bispecific antibody for atopic dermatitis into Phase 1 development this year, and we’ll present a progress update in June. We are committed to expanding our global pipeline and progressing at least one global product to IND submission stage every year.

Now moving on to our key late-stage regional programs, and starting with immunology. Our partner, argenx, announced in April that the U.S. FDA approved VYVGART Hytrulo prefilled syringe, or PFS, for self-injection in generalized myasthenia gravis and chronic inflammatory demyelinating polyneuropathy. It is the third administration option, providing additional flexibility and convenience for patients, and we’re planning a CMC submission in China later this year. We’ll continue to explore the potential of efgartigimod to treat other IgG-mediated autoimmune indications, including thyroid eye disease, myositis, seronegative gMG, ocular MG and lupus nephritis. In 2025, we expect top line results from the global Phase 3 study in seronegative gMG and the Phase 2 of lupus nephritis.

In January this year, we strengthened our regional immunology franchise with a pipeline in a product opportunity with povetacicept, a novel dual B-cell activating factor, or BAFF, and a proliferation-inducing ligand or APRIL antagonist. We’re leveraging our regional expertise and established footprint with efgartigimod to accelerate its development in renal diseases, namely IgAN and primary membranous nephropathy. China has already joined the global Phase 3 RAINIER trial in IgAN and enrollment of the interim analysis cohort has completed. Our partner, Vertex, will conduct an interim analysis once this cohort reaches 36 weeks of treatment with the potential to file for accelerated approval in the U.S. in the first half of 2026. We also plan to join the global pivotal Phase 2/3 study in PMN this year.

There are no approved therapies targeting the underlying cause of the disease, and current treatments rely on immunosuppressants or anti-CD20 monoclonal antibodies, which are associated with infection and myelosuppression. In addition, a subset of these patients experiences progressive kidney function impairment despite available therapies. In neuroscience, KarXT for schizophrenia is under review by China’s NMPA since the acceptance of the NDA earlier this year, and we are awaiting the data readout from the global Phase 3 ADAPT-2 study in Alzheimer’s disease psychosis later this year. In oncology, for bemarituzumab, our first-in-class FGFR2b targeting therapy for gastric cancer, we expect the data readout from the global Phase 3 FORTITUDE-101 study in the second quarter of this year.

Gastric cancer poses a significant threat in China with over 350,000 new cases each year and a five-year survival rate of less than 10% in advanced stages. There are currently no approved therapies specifically targeting FGFR2b over expression in gastric cancer, and we look forward to bringing this potentially transformative therapy to patients as quickly as possible. We continue to make great progress across our global pipeline, and we will continue to enrich it and execute existing programs with speed and precision. I look forward to sharing further updates in the coming quarters. And now Yajing will give an overview of our financial results. Yajing?

Yajing Chen: Thank you, Rafael. Now I will discuss highlights from our first quarter 2025 financial results compared to the prior year period. Total revenue grew 22% year-over-year to $106.5 million in the first quarter, driven by increased sales for VYVGART, ZEJULA and NUZYRA. Our base business remains strong, and we began to see early contributions from our newly launched products. Our focus on financial discipline and efficiency efforts was also reflected on the expense side. R&D and SG&A as a percentage of revenue declined significantly year-over-year. R&D expenses for the first quarter increased 11% year-over-year due to upfront fees totaling $20 million for our license and collaboration agreements. Other R&D expenses decreased as a result of resource prioritization and efficiency efforts.

SG&A expenses for the first quarter decreased 8% year-over-year, mainly due to strategic resource allocation and efficiency improvements. As a result of operating leverage we are building into our business, our loss from operations decreased 20% for the first quarter to $56.3 million. When you adjust our loss from operations to exclude certain non-cash items, specifically depreciation, amortization and share based compensation, we had adjusted loss from operations of $37.1 million in the first quarter, reflecting year-over-year improvement of 25%. Based on our operating plan and our anticipated revenue growth, we expect to achieve profitability on an adjusted basis by the fourth quarter of this year. Looking ahead, we expect to deliver a quarter-over-quarter total revenue growth in 2025 with a meaningful acceleration anticipated in the later part of the year.

We remain confident in reaffirming our full year 2025 total revenue guidance in the range of $560 million to $590 million. This revenue forecast reflects strong growth for the VYVGART franchise, continued growth from our base business, including NUZYRA and ZEJULA and contributions from our newly launched products, including AUGTYRO and XACDURO. We are in a strong financial position, ending the quarter with a cash position of $857.3 million. 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: [Operator Instructions] Our first question comes from Michael Yee from Jefferies. Please go ahead.

Michael Yee: Thank you. Good morning. Congrats on the results and the outlook for the year. We had two questions. First, just on VYVGART, maybe the team could add a little bit more color. Obviously, the number was sequentially down and would be eye opening. But can you just maybe describe was a lot of the sequential change inventory changes or just seasonality of purchasing? And is your confidence in the guidance based specifically on your awareness of what’s going on in April and into May? And then the second question is a strategic question, maybe for Samantha. Obviously, you’re seeking to become more of a global company. Are you seeking to bring in more Chinese assets to be wholly owned this year? And how should we think about some more deals in terms of a wholly owned pipeline? Thank you.

Josh Smiley: Thanks, Mike. It’s Josh. I’ll start with VYVGART and then hand it over to Samantha to make some comments on your second question. First on VYVGART, I would say, as you heard in the call and in our press release, we’re reiterating our total sales guidance for the year, $560 million to $590 million. That implies a growth rate in the mid to high 40s depending on the range. And we are also reiterating that we expect VYVGART itself to grow faster than the overall sales growth. So I think if you look at Q1, to your question, we did see seasonality in January and February and I think patient utilization. Of course, we — all products experience this to some degree in China given Chinese New Year, IV products particularly, if you think about VYVGART, it requires, when you’re in a cycle, a weekly trip to the hospital for an infusion.

And as probably anticipated, we saw some of those visits being delayed. We saw a good recovery of patient volumes and utilization in March and really — a really strong April. I think if we look at our April patient utilization and patient numbers, it’s our highest ever and at least 10% better than anything we’ve seen to date. So we’re quite confident about the progress for the year for VYVGART. And I think the utilization piece was an issue in January and February and not totally unexpected given what we know about China. Hopefully, in future years, this will be less of an issue as we have products like — or formulations like subcu and the prefilled syringe, which wouldn’t require hospital visits per se. We did have some inventory moves as well as you asked.

As you remember from Q4, we got approval for Hytrulo last year. We did ship Hytrulo to get it into the channel. And until we get NRDL listing, which we’re pursuing for 2026, we’re going to see limited usage there. So there was some inventory move there. But again, I’d say we’re quite confident about the outlook for the year for VYVGART to see really good progress in terms of new patients, patient duration, and we’re seeing that in April and May, as you suggested. For your question about overall — how we’re thinking about the strategy and company, I’ll ask Samantha to make some comments.

Samantha Du: Hi, thank you, Josh. Thank you, Michael, for the question. As you know, we are a company focused on not only China regional rights, but also for global rights. We have a very strong BD team, which has a strong coverage in China as well as in the rest of the world. So if we — but of course, we have a very high bar. But if we see anything we think have high potential to have a differentiated products, we will definitely go for it. Thank you, Michael.

Michael Yee: Thank you.

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

Louise Chen: Hi, thank you for taking my questions here. So I wanted to ask you a few questions here. First of all, are you comfortable with where consensus is today for VYVGART and then for the fiscal year revenues? And then also wanted to ask you on bema 101 study, we would have expected to see something here. Has there been any delay or anything to read into this? Thank you.

Josh Smiley: Thanks, Louise. It’s Josh. I’ll do the first piece and then Rafael can talk about bema. I think first, as it relates to overall consensus, as I mentioned, we’re reaffirming $560 million to $590 million for the year, we feel good about that range. And we’re not giving specific product level guidance. But I think if you look at VYVGART, I think the consensus is sort of in line with what I mentioned in the last question, which is VYVGART sales for the full year growing at faster than the overall implied business rate. So I think that puts us in range with what I see for consensus now. And again, we’re off to a really good last couple of months start for the second quarter and feel good about the progress for VYVGART and for the business overall. Rafael, you could talk about bema, please?

RafaelAmado: Sure. So bema for the FORTITUDE-101 study, which is the chemotherapy plus/minus bema in FGFR2b expressing tumors, the data is expected in the second quarter of this year. I would not really read anything into whether or not it has been released yet or not. It’s an interim analysis, and we’re pretty excited both about the design of the study and also the potential for this drug to really impact the lives of patients with these tumors with this alteration, particularly based on the results of the Phase 2 study, which was quite large compared to what we’ve been seeing with nivolumab and claudin and some of the other products that have been added to gastric cancer. So I would just say stay tuned, and I’m confident that we will get this data in the second quarter.

Louise Chen: Thank you.

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

Yen-Der Li: Hi, good morning. This is Yen-Der Li on for Jonathan Chang. Thanks for taking my question. So I have two questions. The first one, can you provide some color on how recent change in the FDA and also maybe tariff might impact Zai Lab going forward? And how do you estimate these risks in the current financial guidance? Thank you.

Josh Smiley: I’ll start with the tariff piece and then ask Rafael to make some comments on FDA. And then, Samantha, if you have anything at the end you want to add, please do. But I think first on tariffs, we don’t see any impact to our business today or anticipated in the future. Obviously, tariffs are sort of a fluid situation. But if you look at where we sell product today in China, we have local rights to manufacture product. Any of our regional deals we can manufacture in China, we do that, for example, with ZEJULA and are in the process for our big new launches like bema and KarXT to bring that manufacturing locally. Other products today that we don’t make locally like VYVGART are sourced out of Europe and Asia, not out of the U.S. So we really anticipate no impact on tariffs today for our revenue base.

As we think about going forward and products like DLL3, which we anticipate launching in the U.S. in 2027, we’ll manufacture that locally from a commercial perspective. So we won’t be exposed to tariffs coming into the U.S. there either. Rafael, if you want to make some comments about recent FDA interactions?

RafaelAmado: Yes. Very briefly, I would say that most of our products are — we interact with CDER at FDA. We recently had interactions with FDA on 1310. We really saw no difference based on my experience of developing drugs with regards to the nature of those interactions. Of course, this is a macro question of how FDA will evolve in the future with the new commissioner and as they appoint heads of both CBER and CDER, but we will have to see how that shapes up. But so far, we — in our products, have seen really no impact with regards to their advice and the way that we’ve been able to interact with them and including the time lines.

Yen-Der Li: Understood. Very helpful. Thank you. And my second question is about on a study design. Thank you.

RafaelAmado: All right. There was a silence at least for me. Can you please repeat the question?

Yen-Der Li: Yes, sorry, I’m asking like could you share your thoughts on the pivotal trial design for ZL-1310 in small cell lung cancer? And also, can you share how far you are in reaching the agreement with the FDA for the study design? Thank you.

RafaelAmado: Thank you for the question. Yes. So our interactions with FDA have been very productive. We obviously have generated a lot of monotherapy data. The current plan is to launch a randomized pivotal trial for registration. We think and have reasons to believe that the accelerated approval pathway remains open, and that can be achieved in a randomized trial by comparing response rates — and then the final post-approval commitment will be within the same study, looking at overall survival. So the study will be powered for overall survival and response rate will be an interim analysis for accelerated approval. So that’s our current plan, and we plan to start that study this year as soon as we have the dose.

Yen-Der Li: Understood. Thank you so much.

Operator: Thank you for the questions. One moment for the next question. Next question comes from the line of Li Watsek from Cantor. Please go ahead.

Li Watsek: Hi, guys. Thanks for taking our questions. Maybe a couple here. Just wondering on VYVGART, can you talk a little bit about the competitive landscape of gMG in China, given there are some other therapies that might get approval in the near term, how do you see the sort of competitive dynamics playing out in the near and longer term? And the second question is on the BD efforts. Just given the uncertainty of tariffs and geopolitical tensions, what are you seeing in terms of big pharma’s appetite to outlicensing the commercial rights in China? And just in general, anything from the macro side have shifted your thinking around in-licensing?

Josh Smiley: Thanks, Lee. It’s Josh. Thanks, Lee. It’s Josh. I’ll do VYVGART and ask Jonathan to make some comments on business development. I think on VYVGART, first, I’d just remind everybody, there’s — there’s a very big opportunity in China for gMG, about 170,000 patients. And while we’re really happy with where we are today, we still have less than 10% of patients who are getting a newer biologic therapy. So in one sense, I think having more newer agents approved and in the market is going to be good for everyone, and it will be good for VYVGART as we continue to educate physicians and get them to adopt the new and best therapies. I think then as we compare where we are with VYVGART to other recent approvals or anticipated approvals, we love the position we’re in.

We’ve got a comprehensive data set. I think if you look at the results around activities of daily living or getting back to sort of as much normalcy as possible, our data is strong, compelling and I think stacks up well against any of the FcRns or other newer agents that are either approved or headed towards approval. We obviously have this year as the only newer agent on NRDL, and we’ll continue to build our experience and expertise there. But I think longer term, between efficacy, and I think if you look at safety across the FcRns and other agents, again, we feel very good about where we are from that perspective. So we welcome new approvals. And again, I think it’s going to be good for patients and good for treating physicians to have options and to have more education in the market.

And it doesn’t change our view in terms of how we see progress this year. As I’ve said, we’re quite excited about what we’re seeing today in the market with VYVGART. Of course, we have a series of new indications coming as well that will help, I think, bolster our competitiveness versus anticipated new approvals. We’ll — of course, we have CIDP. We’ve got new formulations coming that we’ll be pursuing for NRDL. And over the course of the next few years, we’ll have more supplemental indications for MG. We also anticipate other indications, including things like thyroid eye disease, where we’re running trials in conjunction with argenx today. So I think the future is very bright for VYVGART and for patients in China with gMG. Jonathan, if you want to address the business development question?

Jonathan Wang: Sure. Thanks, Josh, and thanks for the question. On the BD sort of impact from the geopolitical situation, I think the first is that so far, there has been no suggestions, no sort of regulatory prohibition from the administration with regards to any licensing transactions between life sciences companies. So far, I think it’s business as usual. We have been doing deals earlier this year as well. So we continue to evaluate deals. In fact, sometimes I think volatility creates opportunities. Multinational companies are increasingly looking to China for innovation and looking to China also for commercial opportunities. There has been a lot of visits, increasing number of visits by multinational business development heads as well as CEOs. Just today, actually, Samantha and myself met several multinational CEOs here.

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

Li Watsek: Great. Thanks guys.

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

Yigal Nochomovitz: Hi, thank you. I have one for Josh and two for Rafael. Josh, just could you outline the scenarios with regard to how NRDL will help with negotiation of the price for VYVGART. I’m just curious, is there some sort of a cap in terms of how much you can get negotiated down? Or is there a floor? And is this going to apply to both IV and subcu pricing terms? And then for Rafael, with the FORTITUDE-101 and FORTITUDE-102, I’m just curious how you’re thinking about the competitive dynamics and whether the Jazz trial with zanidatamab chemo and the BeiGene PD-1 impacts your thinking about the competitive landscape or maybe not so much considering you’re focused on FGFR2b patients? And then last question, with regard to the ADCs, the DLL3 and the LLRC15, just curious about the antibody engineering there and whether you’ve tuned these antibodies to cleave mainly intracellularly or if there’s also extracellular cleavage. Thank you.

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

Jonathan Wang: Sure. You know, Yigal, I think for VYVGART, we have two formulations, first of all. Each of these formulations, the subcu and IV will be treated as different products. So we have a lot of flexibility when it comes to pricing. Of course, the NRDL negotiation will happen potentially earlier this year as well. So as they do this, sort of the time lines brought forward. So they also look at the sales from last year in quarter one this year. But we expect potential modest discounts to the price, obviously, subject to negotiations, too early to comment on the precise pricing, but we would expect probably some discount there.

RafaelAmado: Yes, I’ll take the — yes, I’ll take the R&D question. So yes, there is some competition in gastric cancer. It is generally for HER2-negative disease. We still have yet to see what effect these new products will have. Clearly, they’ve been promising in other settings, because this is specific for an alteration that is present in about one-third of patients, and we’re looking at least 10% expression. So these are patients where their tumors is driven by this oncogene and we are silencing this oncogene. We feel pretty positive about it. And our second study also includes a PD-1 inhibitor, as you know, nivolumab. So we will have to see what happens with the competition, but we think these studies are pretty well designed and they’re targeted to the alteration that the disease manifests.

With regards to the antibodies, DLL3 was engineered to have picomolar activity, and I think that’s bearing out in some of the — what we’re seeing in the clinic. And LRRC15 is internally developed, and they both are conjugated with a system whereby there’s a release of the payload after internalization of the intact molecule as well as cleavage in the extracellular matrix. So that’s why with LRRC15, we’re excited about the fact that the target may just be a flag and whether it’s in the tumor or it’s in the malignant fibroblast, there will still be a strong bystander effect. So we don’t see a really high levels at all of the payload in circulation, but it is in the tumor microenvironment, and I think it’s due to the second generation payload linker system.

Yigal Nochomovitz: Thank you.

Operator: Thank you for the question. Our next question comes from Anupam Rama from JPMorgan. Please go ahead.

Anupam Rama: Hi guys, thanks so much for taking the question. Quick one for me, just what’s going to be the size and scope of the 1310 ASCO update? And what would you have us focus in on the data at ASCO? Thanks so much.

RafaelAmado: So the 1310 data that we presented was with 25 patients. There were 19 patients eligible for efficacy. So that was dose escalation. Since that presentation, we’ve completed the dose escalation with a few more patients, and every patient has had an opportunity to have a confirmatory scan. So we will have the complete data set for dose escalation. And then the other data set that will be new will be the dose optimization. And I think there, it will be really a focus on which dose or doses are looking most promising to be included as the dose in the pivotal trial in the Phase 3 study. In terms of numbers, we will — as I said, we had a few more patients than at ENA in the dose escalation and we should have another 50 patients or so in the dose optimization.

So I think the focus for me would be what is the dose that has the broader therapeutic benefit as we have been marching on the dose optimization with the knowledge that we’ve accrued rapidly and that the follow-up is not going to be very long, but at least we’ll have responses and we will have durability of response in the earlier patients that we enroll.

Anupam Rama: Thanks so much for taking our questions.

Operator: Thank you for the question. One moment for the next question. Our next question comes from the line of Jack Lin from Morgan Stanley. Please go ahead.

Jack Lin: Hi, good morning. Are you able to hear me?

Josh Smiley: Yes.

Jack Lin: Hi, thank you for taking my question. I just have two quick ones. First, I was wondering, this is a very big SG&A improvement. I was wondering if you guys will be able to kind of share more in terms of what kind of initiatives were taken this quarter specifically to help reduce the SG&A to this degree? And how much we’ll be able to continue leveraging on for the following quarters? How many of these are actually, I guess, onetime thing? Yes, that if you help us kind of break down how this was achieved? And the second one is just kind of on where we stand as far as CTF. I see that the pancreatic cancer data that you are going to present at the ASCO as well. And just kind of wondering what — where our focus is that right now, kind of how our strategy is going moving forward? Thank you.

Josh Smiley: Thanks for the question. On the financial results and SG&A specifically, I think if you look at our Q1, I think it’s representative of what you should expect through the year. Obviously, we have ups and downs as it relates to marketing programs. But our fixed resource base to support the products that we have today and to prepare for launches for the big things coming like COVEMTI and bemarituzumab are pretty stable. So I think this year, SG&A should be modest, very modest growth versus last year. And I think we’re happy with where we’ve started the year from a cost base and from a profitability perspective. As Yajing mentioned, if you look at our adjusted net loss, basically taking out non-cash charges. We were at a $37 million loss.

That includes though $20 million of R&D — I mean, upfront payments for the two new assets we brought in, in Q1. So if you take that out, we’re at about a $17 million loss. And as we’ve mentioned, we see sales accelerating through the year. And I think as they do on a relatively fixed SG&A base and R&D, which should be pretty stable as well. We feel quite confident about our ability to achieve profitability this year. So SG&A is rightsizing the organization for optimizing the launches and products that we have today. And we’ve taken a lot of actions in the last few years to try to get to that point. So that’s why we have a lot of confidence in profitability later this year and expanding operating margins as we get into the 2026 to 2028 time frame.

Rafael, you can address the second part of the question.

RafaelAmado: Yes. So with regards to the TTF, as you correctly said, there will be an oral presentation on the PANOVA -3 study, which is in locally advanced pancreatic cancer. So these are inoperable patients that don’t have metastatic disease, and it was announced that it was positive for overall survival, which is a really important outcome given that this is a very difficult and unmet need in that there hasn’t been any intervention that have improved survival in this setting. So we plan to file this year with our partner, Novocure. We’ve started the regulatory discussions in China, and we think that we are well on our way to do this. With regards to LUNAR, we’ve deprioritized this given the fact that PANOVA-3 is really an important indication for us.

And I think together with gastric cancer as well as GIST, it really positions us well in the GI setting in China with really transformational products. So I think this is really our plan this year, and we’re working very well with Novocure to ensure that this submission can go into this year.

Jack Lin: Understood. Thank you both.

Operator: Thank you for the question. One moment for the next question. It comes from Rebecca Liang from Bernstein. Please go ahead.

Rebecca Liang: Hi, thank you for taking my question. My first question is on R&D. So it seems that you’ve highlighted quite a few in-house developed assets. Are you shifting the strategy from more in-licensing to more in-house focus? And if so, are we expecting to see more in-house developed assets to enter into the clinical phase in the coming years? And if so, could you provide some guidance as to the pace of such assets? And my second question is on the topic of the FDA changes recently. There’s been a new appointment of CDER Head as well as the job cuts from FDA. So how do you expect these to impact on the approval process, for example, the upcoming talks regarding DLL3 and the whole accelerated track that you mentioned? Thank you.

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

RafaelAmado: Yes. So with regards to the new agents that we will bring forward in development, I think it will be a blend of internally discovered products as well as BD products, and it will match our strategy. So for instance, in oncology, we will focus on ADCs and in immuno-oncology with improved checkpoint inhibitors as well as in the future T-cell engagers. So relatively sort of confined area where we have these agents already made or in development, we will utilize them and where we find high quality products, then we will utilize our BD capabilities to do this. So as I said, our goal is to have one IND, whether it’s internally sourced or externally sourced every year. This year, we plan to have two, LRRC15 or 6201 and 1503, which is IL13/31 for atopic dermatitis.

And so it just so happened that these two are internally discovered, but that doesn’t necessarily mean that, that will be the exclusive patent going forward. So with regards to FDA, I made some comments before about the experience that we’ve had so far. And of course, it’s early as FDA begins to reshape itself with new leaders coming in. Again, we deal with CDER, where we yet had to see the appointment there. With CBER there, yes, there’s been some comments about accelerated approval. But I think the comments were made more in the context of accelerated approvals based on single arms. So there’s not that I’ve heard of any — there’s not been any comments about accelerated approval in the context of randomized trials. And I think in our case with 1310, that shouldn’t be the case since our pathway forward for accelerated approval will be an interim analysis on a randomized study against standard of care.

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

Operator: Thank you for the question.

Rebecca Liang: Thank you. Very clear.

Operator: Our final question comes from the line once again from Linhai Zhao from Goldman Sachs. Please go ahead.

Linhai Zhao: Hi, thanks for taking my question. This is Linhai from Goldman. My question is on KarXT, particularly regarding the recent top line is on the Phase 3 ARISE trial, what would be the read across the China market, I know that Zai Lab is not participating.

Josh Smiley: Rafael, why don’t you go ahead on that?

RafaelAmado: Yes. So ARISE was a study where KarXT was used as an adjunctive therapy to standard therapy in schizophrenia. It didn’t meet the primary endpoint. But with regards to the indication of schizophrenia in China, it really has no impact. Our regulatory submission was based on a study that mimic the EMERGENT studies, and it was positive in all endpoints. More than 80% of patients with schizophrenia in China are treated with single agent. And clearly, there was — there are some clear advantages of this product with regards to toxicity over the classical antipsychotics. So the patients that require adjuvant therapy are difficult to treat patients, and this is not a practice that occurs in China. So no impact with regards to that.

And likewise, we see no impact with regards to ADP, where obviously, those patients were not included in the ARISE study, and we’re just awaiting the results of ADEPT-2 in the second half of this year where we participated together with Karuna BMS.

Linhai Zhao: Great. Thank you. A quick follow-up on that would be, since you mentioned that majority of schizophrenia patients in China are primarily treated with a single agent. So if that’s the case, what’s your perspective based on the communications with the KOLs in China? What would be the potential treatment position for KarXT? Do you see it be used as an initial usage for patients when they were at the initial acute stage or more possibly used as a longer-term maintenance stage while the patients are having better control on the positive symptoms while they are trying to get more prepared when getting back to their normal life?

RafaelAmado: Yes. I mean my impression is that this is an agent that will be used in novel in patients with schizophrenia. I think the differences with regards to toxicity are really stark in favor of this drug. It’s also a drug that has the potential to be effective in multiple other indications. And so we will see other indications coming through as BMS develops this drug, and we will partner with them on other indications. But with regards to schizophrenia, we think that this is kind of a sort of a quantum leap with regards to the side effects, including tardive dyskinesia and all the metabolic side effects that we’re seeing with the classical antipsychotics. So our impression is that this will be used de novo. And there’s really data that goes now beyond 52 weeks showing that this safety profile really is maintained over the long term. So therefore, the logical conclusion is that it should become the treatment of choice.

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

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

Samantha Du: Thank you, operator. I want to thank everyone for taking the time to join us on the call today. We appreciate your support. We look forward to updating you again after the second quarter of 2025. Operator, you may now disconnect this call.

Operator: That concludes today’s conference call. Thank you all for participating. You may now disconnect your lines.