Hello, ladies and gentlemen. Thank you for standing by, and welcome to the Zai Lab's Year-End 2018 Earnings Conference Call. At this time, all participants are in a 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 Billy Cho, CFO of Zai Lab, who will make the introductory comments..

Thank you, Operator. Good morning, and welcome to Zai Lab's year-end 2018 earnings conference call. Earlier this morning, Zai Lab issued a press release providing the details of the company's financial results for year-ended December 31, 2018, as well as a corporate and clinical update.

The press release is available in the Investor Relations section of the company's corporate Web site at ir.zailaboratory.com. Today's call will be led by Dr. Samantha Du, Zai Lab's Founder and CEO, and will be joined by Tao Fu, President and COO. As a reminder, during today's call Zai Lab will be making certain forward-looking statements.

To the extent that statements discussed on this call are not descriptions of historical facts regarding Zai Lab, they are forward-looking statements reflecting the current beliefs and expectations of management.

Such forward-looking statements involve substantial risks and uncertainties that could cause future results, performance, or achievements to differ significantly from those expressed or implied by the forward-looking statements.

Factors that may materially affect future results include, among other things, the scope, rate, and progress of clinical and preclinical trials, and other research and development activities, the timing of new clinical trials, plans to commercialize Zai Lab's product candidate, and the timing of and ability to obtain and maintain necessary regulatory approvals for product candidates.

Such forward-looking statements made on this call speak only as the date of this presentation.

Zai Lab undertakes no obligation to update or revise any forward-looking statements made on this call to reflect any changes in expectations or any change in events, conditions, or circumstances on which such statements are based, unless required to do so by applicable law.

For a further description of the risks and uncertainties that could cause the actual results to differ from those expressed in these forward-looking statements, as well as risks relating to Zai Lab's business in general, please refer to the annual report on Form 20F to be filed with the SEC this month, and Zai Lab's future, current, and periodic reports filed with the SEC.

At this time, it is my pleasure to turn the call over to Zai Lab's Founder and CEO, Dr. Samantha Du..

Thank you, Billy. Hello everyone, and thank you all for joining us. Joining me on today's call is Tao Fu, our President and Chief Operating Officer, who will provide more detail on our pipeline, product highlights, including upcoming milestones and commercial progress.

Following this remarks, Billy Cho, our Chief Financial Officer, will return to review financial highlights for our full-year ended December 31, 2018. Dr. Yong-Jiang Hei, Chief Medical Officer for Oncology; Dr. Harald Reinhart, Chief Medical Officer for Autoimmune and Infectious Diseases; Dr.

William Liang, Chief Commercial Officer; and Jonathan Wang, Head of Business Development will also be available to answer questions during the Q&A portion of the call.

2018 was a transformational year for Zai Lab as we achieved significant milestones, solidifying our status of being a leading China and U.S-based innovative commercial space biopharma company. [Indiscernible] having world-call and in-house discoveries, development, regulatory, manufacturing, business development, and commercial capabilities.

We believe 2018 was also the year where we formally demonstrated our clinical development and regulatory execution, as evidenced by the early NDA submission, now pending priority review in China for Niraparib, which was over one year ahead of expectations.

Our pipeline has been carefully constructed to addressing significant unmet medical needs through products with first-in-class or best-in-class profile. As such, we believe each program has multiple indications and blockbuster potential in China. Our portfolio currently includes seven late-stage programs, three of which are U.S.

FDA approved, Niraparib, Optune, and Omadacycline. Just a few weeks ago, Margetuximab, the latest addition to our pipeline, had positive pivotal data -- data line [ph] HER2-positive metastatic breast cancer, demonstrating superiority against Herceptin, the largest oncology drug in China today.

Together with Niraparib, the best-in-class PARP inhibitor, and Optune, a revolutionary treatment for GBM patients, we believe Zai Lab has the strongest late-stage oncology portfolio with global first-in-class and/or best-in-class profile among the innovative Chinese biotech companies, in particular, we have built a [indiscernible] strongholds, including women's cancer, GI cancers, and in Glioma, where we had multiple synergistic assets in each area.

This is a strategic theme that we will continue to pursue and expand in the future. In 2018, we also became a commercial stage company, with the marketing approval and launches of Zejula and Optune in Hong Kong.

In anticipation of potential commercial launches in China later this year, we have also built out our core commercial infrastructure and now have over 180 employees. As of March 1st, we have about 450 employees at Zai Lab, with nearly 200 employees dedicated to R&D. Our business development execution continues to shine.

We added six assets through four major strategic partnerships in 2018, with MacroGenics, Novocure, Entasis, and Crescendo.

We have had great success in selecting the right partners and assets, and I would like to attribute our success to our deep relationships with our biotech peers, building reputation, track record of success in clinical development, and regulatory execution, and a disciplined approach towards due diligence and deal making.

Our business development pipeline continues to be robust, which will provide a sustainable competitive advantage to Zai Lab. We made progress with global expansion by opening our U.S. headquarters in San Francisco, which further strengthens our discovery and business development capabilities.

In terms of discovery, we are now ready to share more information on our progress and strategy. Over the past three years, we have been working on several targets, focused oncology and autoimmune diseases. We expect to announce 1 to 2 IND filings per year starting 2020.

We are building a discovery pipeline that is synergistic with our clinical portfolio and creating a proprietary best-in-class human transgenic mouse platform to serve as our internal discovery engine.

Before I turn the call over to Tao, I would like to mention how we have strengthened our senior executive team to scale up further as a fully-integrated global platform.

Most recently, Tao Fu, a senior industry leader with over 20 years of experience with leading biopharmaceutical companies, joined us in September as President and Chief Operating Officer. Tao oversees our global business development, discovery, manufacturing, and other operational activities, and is leading the expansion of our U.S. operations. Dr.

Yongjiang Hei joined us as Chief Medical Officer for Oncology. This past fall brings with him over 20 years of global oncology clinical development experience. Dr.

William Liang, who joined Zai in June as Chief Commercial Officer and comes to us with technical [ph] and commercialization experience, a track record of success in running leading oncology commercial organization in China, particularly for AZ and Roche.

William was instrumental in launching many top-selling innovative oncology drugs in China today including herceptin, Tagrisso, Iressa, Tarceva, MabThera, and Avastin to name a few. I will now turn the call over to Tao Fu, who will go into more details on our pipeline, clinical milestones achieved this year, and commercial progress. Thank you..

Thank you, Samantha. 2018 was an extremely busy year on the product development front for Zia Lab as we made significant progress on almost all of our assets in our pipeline including assets that were in license during the year.

I will to highlight a clinical and regulatory progress of our four programs, Niraparib, Optune, Margetuximab, and Omadacycline. Our press release from this morning provides an update on all of our programs and we will be happy to answer your questions on assets that are not covered in our prepared remarks.

Our lead oncology asset Niraparib was brand named Zejula is a potential best-in-class PARP inhibitor for ovarian cancer and other solid tumors due to its differentiated efficacy, once daily dosing, and superior pharmacokinetic properties including its ability to cross the blood-brain barrier.

As Samantha mentioned earlier, we submitted an NDA to the China National Medical Products Administration or NMPA as a category 1 drug for the second line maintenance treatment of platinum-sensitive ovarian cancer patients.

And this submission was accepted by NMPA under priority review recognizing both the urgency of the unmet need and the importance of Niraparib as an important therapeutic option for patients.

This submission was based on the totality of data including a global NOVA trial conducted by our partner Tesaro and the PK study Zai Lab conducted in China, demonstrating comparable PK profile between Chinese patients and non-Chinese patient enrolled in Niraparib global studies.

We completed the PK study nearly four month ahead of schedule and plan to present it at upcoming AACR conference this quarter. Niraparib was also designated as a National Science and Technology major project by the Chinese government as part of a key initiative to strengthen local innovation.

We expect approval and launch of Niraparib in China in the second-half of 2019, which will be over a year ahead of our expectations and the major milestone for Zai Lab. We are executing a comprehensive clinical trial and lifecycle management programs interoperate. Currently in China, we have three ongoing Phase 3 trials.

First, we have our first Phase 3 study of Niraparib as a second line maintenance therapy with a recurrent platinum sensitive ovarian cancer, which has completed enrollment.

Second, we can begin enrollment in a Phase 3 China registrational trial for first line maintenance therapy in patent responsive ovarian cancer and expect to complete an enrollment of our trial by the end of 2019.

While the results of these studies are not required for the approval of Niraparib they will provide important local data to Support adoption. Third, we go with the first patient in a Phase 3 trial in patients with a small cell lung cancer and patient enrollment is on track.

In addition to build ongoing trials, we plan to enroll patients in a number of Global Studies in conjunction with our partner in ovarian cancer, non-small cell lung cancer and potential other indications.

Importantly, we anticipate a read-out of the global PRIMA study in the first line maintenance treatment of an ovarian cancer in the second-half of 2019. If positive, the PRIMA study will support the approval on Niraparib in all comers in the first line indication.

This is a very important differentiation for Niraparib has been part that was only started in G-block mutations patients in this indication, which only represents about 15% of the total patient population. We're actively evaluating with our partner additional indications to expand the label of Niraparib.

Moving on to Optune in September, we announced a strategic collaboration and license agreement with NovoCure for tumor treating fields or Optune in Greater China. Optune is currently marketed in the U.S.

EU and Japan for the first line and a reoccurring treatment of glioblastoma and has demonstrated clinical proof of concept in multiple other tumor types such as mesothelioma, lung cancer, and pancreatic cancer.

NovaCure currently have global Phase 3 studies in Brain Met and non-small cell lung cancer, which are very large commercial opportunities in China.

So it is truly represents a pipeline in a product opportunity for us as part of the agreement Zai Lab will support enrollment of Chinese patients in certain clinical trials investigating tumor treating fields in order to accelerate the clinical trial enrollment.

We also plan to initiate a Phase 2 study in gastric cancer patients in China in the second-half of 2019. On the regulatory front, we're actively working on obtaining a clinical trial waiver for an NMPA, and if approved, would enable us to commercialize Optune based on available clinical data and launch Optune in China later this year.

In November, we added three additional assets to our oncology pipeline. With the collaboration and license agreement with MacroGenics, we expanded our late stage clinical pipeline with Margetuximab and immune optimized anti- HER2 monoclonal antibodies currently being evaluated in both HER2 positive breast and gastric cancers.

As you may be aware, MacroGenics recently announced positive results from its pivotal Phase 3 SOPHIA Study of Margetuximab, which improved progression free survival compared to Herceptin when used in combination with chemotherapy in patients with an advanced HER2 positive metastatic breast cancer. MacroGenics expects a BLA submission in the U.S.

in the second-half of 2019. We believe that the results of the SOPHIA Study significantly de-risks the involvement of Margetuximab in China not only for advanced HER2 breast cancer but possibly for HER2 gastric cancer as well, which is an even larger indication.

We plan to discuss with NMPA about a potential accelerated approval pathway for HER2 breast cancer. Jointly with MacroGenics, Zai Lab will conduct the China portion of the global pivotal studies in HER2+ gastric cancer in combination with a PD-1 agent, which is expected to start in the second-half of 2019.

As part of this agreement Zai also obtained rights to a checkpoint inhibitor, MD013, a first-class by specific dark molecule designed to provide coordinated blockade of PD-1 and LAG-3 for the potential treatment of a range of the following tumors and hematological malignancy and undisclosed multi-specific TRIDENT molecule in preclinical development.

Lastly, I want to update you on the status of omadacycline. Omadacycline was a in license from Paratek Pharmaceuticals in 2017. And there's a next generation broad spectrum tetracycline with both oral and intravenous formulations. Paratek obtained marketing approval for omadacycline in the U.S.

in October 2018 and the drug became available in early 2019 for the treatment of community acquired bacterial pneumonia and acute skin and skin structured infections. Also, in October of last year EMA announced acceptance of MA in Europe for both oral an IV formulations.

Due to the significant amount of clinical data obtained by our partner, we have an agreement with an NMPA in China on an abbreviated bridging program to accelerate the NDA submission timeline. As part of the agreement within NMPA, we have a number of clinical trials ongoing, which we expect to complete this year.

We anticipate beginning to prepare our NDA during the second-half of 2019. Now, let me update you on the commercial progress. As Samantha mentioned, we obtained the approval and start of the commercialization of both Zejula and Optune in Hong Kong late last year.

The launch of the Zejula in Hong Kong in December was a transformational event for Zai Lab as it was our first ever commercial launch.

Our work in building the commercial infrastructure and educating physicians about Zejula is also an opportunity for us to optimize best practices across Greater China as we prepare for the pending launch of the Zejula in Mainland.

We're pleased to report a while it is still early days out of the Zejula Commercial performance in Hong Kong is ahead of our plan in revenue and reach of target physicians. Similar to the Zejula, we obtained marketing approval and began commercializing Optune in Hong Kong.

We treated our first GBM patients in December and recently held our official Hong Kong launch event of February 28 to increase awareness across Greater China. Importantly, we made significant progress in building out our commercial infrastructure in Mainland, China and making preparation for launch of both in Niraparib and Optune.

We have completed recruitment, our medical affairs and sales management team as well as the core marketing and commercial operations function.

Our commercial team members came from the most driven entrepreneurial and scientific talent pool in China and they collectively have a proven track record of success in launching many of the top innovative oncology products in China. They are extremely excited about a highly innovated and differentiated nature of our portfolio.

Our pre-launch activities are well underway. With that, I will hand the call over to Billy Cho, our Chief Financial Officer who will provide an overview of our financial highlights. Of course, we're available to answer questions on these and other Zai programs during the Q&A section of the call.

Billy?.

Thanks, Tao. I will now review our financial results for the year-ended December 31, 2018. As of December 31, 2018, cash and cash equivalents and short-term investment totaled $263.3 million, which includes the net proceeds from the follow-on offering in September of last year.

R&D expenses were $120.3 million for the year ended December 31, 2018 compared with $39.3 million for the same period in 2017.

The increase in R&D expenses was primarily attributable to an increase in upfront licensing fees of $46.8 million from four new strategic partnerships entered into 2018 inclusive of MacroGenics upfront fees of $25 million that was expensed in 2018, but paid in January 2019, ongoing and newly initiated late-stage clinical trials, payroll and payroll-related expenses, and expansion of research efforts to support internal programs.

SG&A expenses were $21.6 million for the year ended December 31, 2018 compared to $12.0 million for the same period in 2017. The increase was primarily due to the increase in payroll and payroll-related expenses from increased commercial and administrative headcount as Zai Lab expanded its operations.

For the year ended December 31, 2018, Zai Lab reported a net loss of $139.1 million, or net loss per share attributable to common stockholders of $2.64, compared to a net loss of $50.4 million, or a net loss per share attributable to common stockholders of $2.32 for the year-ended December 31, 2017.

We would now like to turn the call back over to the operator so we can go ahead and take your questions.

Operator?.

We would now like to open the line for questions. [Operator Instructions] Our first question comes from Anupam Rama with J.P. Morgan..

Hey guys, thanks for taking the question, and congratulations on all the progress. Maybe a couple from me, the first one is, when we track oncology launches here in the U.S. companies provide various metrics on how the launches are going beyond just sales, things like scripts, physician call volumes, bottles shipped for reimbursement metrics.

As we think about the Zejula and Optune launches in China, what are the metrics you're considering to be most relevant in the region to help The Street think about how to track these launches, and have you considered what metrics you'll be providing to The Street? That's the first question..

So, for the sales tracking system, we billed [ph] the multinational standard and system, the [indiscernible] to track our sales performance..

Yes, Anupam, I'll just add, we do have non-revenue KPIs we track on a regular basis, things like the reach to targeted physicians, [indiscernible] listing status, and currently for a class like PARP inhibitor, so you'll be able to get data from IMS, for example, on how Niraparib will perform against [indiscernible].

So those are the things the non-revenue KPIs will track..

Okay. And maybe perhaps you can help us with some recent oncology launches in China that really help build your confidence into heading into your own launches here for Zejula and Optune. Are there any analogues recently that really kind of highlight how big the region could be? Thanks so much..

Yes, so this is William Liang, the Chief Commercial Officer. I launched Tagrisso for AstraZeneca last years, and Tagrisso launched - billed a new launch record in China industry. So my team's numbers come from many high reputable multinational companies, they have the reach, experience to launch a new product.

And I launched two very important product for Roche and AstraZeneca, those products launched [indiscernible]..

And we want to add on the -- how much that grow first year and second year for Tagrisso..

For Tagrisso, the launch, that reached almost $150 million [indiscernible]..

For the first year, right?.

For the first year, annualized sales..

Yes. So, for first year, Tagrisso is [indiscernible] under $150 million, and for second year -- but that also that was out of pocket.

And so second year is about $400 million? IS that - or how much?.

Yes, or maybe I can chime here, this is Billy. So, as you know, from our discussions, the sales of innovative oncology drugs have been doing quite well in China. However we've been thinking about a way to communicate and share that information so you can consume it for public use. So we're still in the midst of that, and [indiscernible] together..

Yes, of course. Congratulations on all the progress, guys. And it's great to see you. And I'll hop back in the queue..

Thank you..

Thanks..

Our next question comes from Yigal Nochomovitz from Citigroup..

Hi, everyone. Thank you for taking the questions. I just want to clarify a few things.

For the approval for priority review for Niraparib, my understanding is that that is a full approval, not an accelerated approval, and that at the point when you get the PRIMA data for Niraparib and you submit that to the Chinese regulators, does that also would be a full approval for a first-line regardless of the fact that you're conducting the first and second-line studies in China.

Can you just confirm that?.

Yes..

Yes, okay, all right, great..

Yes, it will work on both, yes..

Okay. And then in China, do you have anything more specific as far as the time at which you could get approval. You said you're going to launch in the second-half of the year for Niraparib.

But is there an equivalent of a PDUFA date or something more specific, or if not can you just outline some of the precedence for time to approval for other priority review drugs?.

Yes, in China [indiscernible] on last year's data, so Class I average about 12 months, but we have to achieve before that..

Okay.

And regarding Optune and the clinical trial waiver, can you cite any precedence related to other innovative medical devices that were developed outside of China that were successful in getting a clinical trial waiver?.

No, because just like [indiscernible] Optune was the first one ever. Based in China, we'll be the first one ever if we achieve it. But we are working closely with the agency on this..

Okay. And then with the re-launch of both Optune and Niraparib, my understanding is that the early launch, like you mentioned with Tagrisso, would be self-pay, private pay. What are you modeling as far as how quickly that would expand to broader reimbursement.

And we've also heard that the -- that now it's going directly to national reimbursement and that the provincial drug reimbursement is less of a factor.

Can you comment on that, because we're curious about where that stands?.

Yes, I think Chinese government issue more [indiscernible] like annually, the central government reimbursement. So that's why most often and a lot of -- you can get into the [indiscernible] national reimbursement list before provincial or municipal.

And so typically we did know year launch -- when after year of launch you typically drugs can get [indiscernible] to the reimbursement list. Or if you want to, they never have to..

And, Yigal, you're right. I think once you have national reimbursement the provincial reimbursement become less important, but you'll not necessarily always can really meet the yearly cycle, so the provincial reimbursement could still be quite important….

The China government, they are improving their reimbursement projects. So this is good for new product launch..

Yes, okay, got it. And then just a few other quick ones.

For Hong Kong and Macau, are you planning to give any guidance related to the sales ramp for 2019?.

So, I think Tao had a commentary on that, that it's a little bit early there, so far so good. At this point, we're not providing guidance..

Okay. And then just one question on the earlier-stage R&D program, I noticed that you have a preclinical program in gastric cancer.

And I was just wondering regarding the level of commitment to gastric, given that you've already got the Five Prime deal and obviously the MacroGenics deal, what was the thought process in yet a third gastric cancer program internally?.

Yigal, this is a completely different mechanism of auction from the Five Prime and the Margetuximab process. So we think there's opportunity to continue to build synergistic assets in this area, because this is one of the largest tumor type in China, with close to 650,000 annual incidents a year, as you know..

Yes, the second-largest one..

Okay, great. Thank you..

Thank you..

Our next question comes from Jonathan Chang with SVB Leerink..

Hey guys. This is David on for Jonathan. Thanks for taking my question, and congrats on all the progress.

So, first question, given the HER2 breast cancer landscape in China, could you talk a little bit about how you view benchmarks for approval in the third-line setting in terms of for progression-free survival and overall survival?.

So, and this is Yong-Jiang Hei, the CMO Oncology at Zai Lab. I think we -- with the SOPHIA study being positive, so we would certainly leverage that global study in China. The, obviously as you know, the Chinese patient population is not entirely the same as the U.S. population.

But I think conceptually we're looking at literal lines of therapy, after patients have come through the other -- or through agents. So, we're still in discussion with the [indiscernible] about what would be the best pathway to get approval as soon as we can. But we will have better view on the strategy after we have a chance to talk to them..

Okay.

Could you talk a little bit about that regulatory strategy further, and do you expect to kind of leverage the same Phase 3 data, and provide something like a PK bridging study or do you have any thoughts on whether it might require an entirely new study at this time?.

So, obviously, I think it sounds like you know the pathway quite well. We certainly will be doing a PK study and to show the lack of [indiscernible] difference between the U.S. and the Chinese population. And we will -- certainly also looking at perhaps some kind of a bridging strategy as well.

I don't think, and we don't intend to do another Phase 3 study in breast cancer in China..

Okay. Okay, great.

And then just one more for me, regarding the Brivanib study that you mentioned beginning this year, could you comment at all on kind of your thoughts on the evolving ACC landscape? And then is there any other context you could provide on the study itself in terms of line of therapy for ACC, and choice of PD-1 agent?.

Yes, as you stated, the landscape is evolving quickly. I think we do believe the combination of a anti [indiscernible] molecule plus the PD-1 represent one of the -- right now most of the promising pathway to treat FCC in China. We do see a lot of competition in this area.

The PD-1 companies are doing studies in FCC and I think the combo studies so far looks really promising. So, we of course, since we are only starting the trial at the moment we will have to do a -- both finding to be sure that we are selecting the right dose for our drug.

And in terms of the PD-1 source, we have a collaboration with Tessaro where we are able to use their PD-1 in our study..

Okay.

Actually just one more for me, a quick one for Billy, could you provide any additional update on cash guidance and expected runway or is that it for now?.

Yes, that's it for now at this juncture. You could refer to our cash balance at the end of the year, which put us in a pretty strong balance sheet position, and also look at our net loss of last year, which if you exclude the expense $25 million from MacroGenics P&L this year, get to about $114 million. So you can kind of reference that for now..

Got it, awesome. Thanks guys, and congratulations..

Thank you..

The next question comes from Maury Raycroft with Jefferies..

Hi, everyone. I'll add my congrats, and thanks for taking my questions.

Just to start, so for the cost of goods value that you have out there today, can you comment on that, and whether that number is representative of what we should expect going forward?.

Sorry, Maury.

Could you clarify, cost of goods number?.

Just the -- I think it's 43,000 or so that you've reported. Just wondering if that -- so as a percentage of revenue, it's about 33%, just wondering if that's representative for….

I got you. No, it's not. As you know, that's basically at the very tail end, a little over $100,000 in revenue reported for 2018. So I think I'll kind of guide you towards more robust data..

Got it. And just for that $100,000 worth of revenue.

I don't know if you're I know it's early but I don't know if you're willing to go any more granularity as to whether that's coming from Optune or Niraparib?.

So, the only level of detail that I can provide you is that it's for Niraparib our first patient was treated in mid-November and then of course we made a press release that late December treated our first GBM patient, newly diagnosed GBM patient for Optune.

So, based on those two points, you can get a feel for what the majority would contribute that over $100,000 in revenue..

Okay.

And then if you guys aren't commenting on a number of patients treated with either program?.

Yes, it's early days. So gives us little bit more time..

Got it. Okay.

And then so for the SOPHIA data, our readout I guess with GC and breast cancer, how are you thinking about prioritizing both of those programs and can you provide any more granularity on the timelines for the breast cancer launch in China?.

I think as I mentioned earlier we are in discussion with the PD about the specific pathway. So I think right now it's a bit too early to speculate on the timeline. We will do the necessary trial the PK study for sure. And if you think of them, then that would take us to next year.

So eventually in terms of how life is going to take for us to get actually approval and launch, I think it's bit early for us to estimate at the moment.

The breast cancer certainly is very important but that requires additional studies, so we are working closely with MacroGenics to design the global Phase 3 study which would help us to bring margin for breast cancer in China..

One more and maybe I can just put the commercial opportunity in perspective. So in China, we have about up to 70,000 HER-2 positive breast cancer patients obviously we'll be targeting not the first line but later line patients, but that's still a pretty significant pool of patients. And for HER-2 gastric cancer, it's even bigger, it's about 90,000..

Also work in first line, right..

Yes, and after having reimbursed more second-line patients..

For breast cancer, yes..

So I think both are pretty significant commercial opportunities..

Got it, very helpful.

And last question is just on with the two potential launches in the second-half of the year, just how should we think about SG&A and maybe if you can comment on the number of people you're going to have on the ground from a sales perspective and any additional details there would be great?.

Yes, maybe I can tackle the SG&A number and then maybe I'll have William or the colleagues chime in about the commercial strategy especially on the headcount side, but SG&A of course will increase given that historically we've only had G&A and starting in 2008, we added yes because we had to build a team for Hong Kong, so that drove some of the increase in cost as you heard on before on call as well as the press release.

So that number would go up but again at this time, we're not giving projections on the increase of SG&A for 2018..

And also in terms of commercial optimization, I think closer to the approval, we'll have more solid numbers to give it to you. Right now, we already have 180 people but it's a core team. But as I said as we get closer to the approval, we will have more solid numbers..

Okay. Thank you very much..

Thank you..

Thanks..

Our next question comes from Serena Shao with Credit Suisse..

Yes, hi. Thank you for taking my question. I actually have a couple of questions here. My first question actually so was discussed, the Chinese government now they don't have the accelerated insurance coverage especially the oncology drugs.

I think -- quite a few biotech names in Hong Kong reacted very positively to this new I think definitely that's also going to be quite positive Zai Lab as well.

So I think because our Niraparib is already submitted NDA last year and then this new coverage of insurance coverage potentially is going to come at September, so I think in the base case scenario, we could achieve approval and insurance coverage at the same time.

What's the probability that the management think that's going to be happen, that's my first question? My second question is I am quite curious about you know pricing of Optune and Niraparib in Chines market, I think it might be too early for you to disclose any of your pricing strategy here but I think these two product already launched in Hong Kong.

Can you sharing of the well any information on the Hong Kong market, how does it benchmark to the U.S. side of this two product as your Hong Kong price and how it's going to be benchmark with your potential China launch and China pricing that's my second question.

And the third question is really as more caution on Niraparib, the first line ovarian cancer progress, I think Dr. Fu mentioned the next readout -- the data readout for Phase 3 is going to be second-half 2019, I am not sure if I get this right.

So what's the potential NDA submission and approval timeline in China for the first line ovarian cancer that's my questions? Thank you..

Okay.

So, Serena I will take your first one, and the first one is regarding reimbursement as you mentioned very likely this time by September Chinese government will announce the list who are on the reimbursement list and in our situation as we predict the second-half and as I mentioned on average it takes -- for class one, it takes about 12 months we submitted December but we still very optimistic and about our potential to get down to the reimbursement list but having said so, there is a risk we will miss that..

But Serena, as you are familiar with the Chinese system, even if we miss the national reimbursement, we will have opportunity to get our many of the provincial reimbursement list, so that our teams have a lot of experience managing this, so we are pretty confident either way that we will be able to really manage the commercial..

The another nice thing to -- the other thing we want to know this Zejula is definitely best-in-class, especially it has to bring blood during diarrhea and contractual to this flat barrier and this is only approved [indiscernible].

So there are lots of talks, especially in China, we actually treated several patients in Hong Kong who had this issue and they had been posed to other parts before and only when this reach to our part it shows tumor shrinking and also patient benefit. So there are a lot of opportunities for best-in-class to get into the reimbursement list..

Yes, I definitely, I think go ahead….

Go ahead. I just wanted to make a comment on top of Samantha's point I think we discussed in our script earlier. If the PRIMA study is positive, obviously we will have a very broad first line label, which [indiscernible] will not have.

So the mutation in first line patient is only 15% so they simply wouldn't be able to treat other patient, so it's very important differentiation as you know that's largest ovarian cancer indication..

Okay, yes got it, thank you..

So I think your second question was about the approval time right..

It's about pricing, Billy, why don't you….

Approval time, right?.

I will take this one. Yes, so the price strategy is still being formulated definitely because we are still not launched in China for both the Zejula as well as Optune. However, I think if you kind of dig around public sources, you can see where [indiscernible] China as a reference for now. So, it is roughly around….

Yes, okay..

You can say it's about 30% discount to U.S. prices, and if you provide a patient assistance program, so you can get a nice [indiscernible] point, yes. Optune given it's really innovative and unique and given its premium positioning differentiation, it could be in a different scenario.

So we are not again giving -- we are still formulating a pricing strategy, but you can refer to how it's priced globally both at a list level as well as reimbursed level to have a view..

Okay. Okay, thank you..

And I believe you have a third question on the PRIMA study and how we will leverage that for China filing. So maybe Yong, you can take that question..

Right. So the PRIMA study is done by Tesaro, GSK now, and it's an event-driven trial. And their current projection looks at maybe towards the end of this year to have the readout. So, we hope by the time we would have the approval in this similar setting, so we become F&DA filing in China.

And we could perhaps even try to have some of inter [ph] study with U.S., but it's something we will look into..

Okay. Okay, okay, got it. Thank you so much. Yes, that's all my question. Thank you..

Thank you..

Thanks, Serena..

Our next question is a follow-up question from Jonathan Chang with SVB Leerink..

Hey guys, just a quick follow-up, maybe got kind of lost in all the updates on Niraparib, but just to really confirm with regards to update you guided towards the second-half of this year on second line platinum-sensitive data, are we still expecting that update in that timeframe of second-half? And do you have any context on the setting that you might provide that?.

So this was done very well. We finished the enrollment in January. And again, it's also event-driven study. So we have to track number of events. And it's looking I think -- but we do have two criteria. So we either reach the number of events that we have target or a specific period of time.

So, the latest we would have the readout time would be sometimes in Q1 next year. And if the event -- if the number of event is high, we could reach that number by the end of this year. So we are tracking the event and so we will see..

Got it. Okay, thank you..

Welcome..

And I am not showing any further questions at this time. I would like to turn the call back over to Zai Lab CEO, Samantha Du for closing remarks..

Yes, 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 periodically on our progress throughout the year. Again, thank you everyone..

Ladies and gentlemen, that concludes today's presentation. You may now disconnect, and have a wonderful day..