Hello, ladies and gentlemen, thank you for standing by, and welcome to Zai Lab's Second Half and Full Year 2020 Financial Results and Corporate Update Conference Call. Well, 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 Mr. Billy Cho, Chief Financial Officer of Zai Lab, who will make introductory comments..

Thank you, operator. Good morning. And welcome to Zai Lab's second half and full year 2020 financial results and corporate update conference call. Earlier this morning, Zai Lab issued a press release providing the details of the company's financial results for the full year ended December 31, 2020, as well as recent corporate updates.

The press release is available in the IR section of the company's corporate website at ir.zailaboratory.com. Today's call will be led by Dr. Samantha Du, Zai Lab’s Founder, Chairperson and Chief Executive Officer.

She will be joined by Tao Fu, Chief Operating Officer, who will provide more details on our strategy and key pipeline assets, including upcoming milestones and commercial progress. Then Jonathan Wang, Head of Business Development, will discuss recent partnership activity. Dr. Alan Sandler, President, Head of Global Development, Oncology; and Dr.

Harald Reinhart, Chief Medical Officer for Autoimmune and Infectious Disease, will also be available to answer questions during the Q&A portion of the call.

As a reminder, during today's call, Zai Lab will be making certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including our business plans and objectives and timing and success of our clinical trials, regulatory applications and commercial launches.

Such forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance upon them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.

I refer you to our SEC filings for a discussion of risk factors that could cause our actual results to differ materially from those discussed today. At this time, it is my pleasure to turn the call over to Zai Lab's Founder, Chairperson and Chief Executive Officer, Dr. Samantha Du..

gastric lung cancer, where we have built work class portfolios in just 3 years, as well as women's cancer, brain cancer and hematology. We strive to expand this product pipeline, both vertically within this area of focus and horizontally into new therapeutic areas of significant unmet medical needs.

We also expect to realize [orthogonal] synergies across several technology platforms, whether it be targeted therapy, IO, TT Fields or others with proprietary combinations to maximize the value of our portfolio. Our success has been driven by a relentless focus on executing our strategy.

When we founded Zai Lab in 2014, we dedicated ourselves to bringing in first and only-in-class therapies for patients in China and beyond to address significant unmet medical needs. In the process of doing that, we have established ourselves as the partner of choice for Greater China.

This, in turn, allowed us to bring world-class assets and build end-to-end capabilities, including commercialization. We have built substantial scale with our organization now consisting of nearly 1,200 employees across 8 major locations around the world. We have continued to enhance our global leadership capabilities, for example, by hiring Dr.

Alan Sandler to lead our global oncology development. With this foundation, our top priority is to become a leading global biopharma company by 2023. Although we are proud of our accomplishments to-date, we have a lot more work to do to fulfill our mission. Many of you know that Zai Lab in Chinese means once again reach the top of the mountain.

All the hard work over the last 6 years has equipped us, energized, has committed us to confidently lead the base camp and start climbing up our Mount Everest. We are excited to have you on this journey with us. Thank you. And now I will ask Tao to discuss our performance and prospects in more detail.

Tao?.

gastric cancer; lung cancer; and autoimmune disease and some of the exciting products we are developing in these areas. Gastric cancer is the second most commonly diagnosed cancer type in China with an estimated 600,000 -- 70,000 new cases annually, and it is one of the leading causes of cancer death.

We have built a comprehensive and synergistic portfolio of at least 6 product candidate in just 3 years. We believe we have one of the most innovative and formidable gastric cancer pipeline in the world today. The targeted agent, bemarituzumab, margetuximab and TPX-0022, all have positive clinical proof-of-concept data.

And combined, they could cover nearly half of gastric cancer patients in China. In addition, our pipeline includes Ripretinib for GIST, the combination of niraparib and the PD-1 LAG-3 bispecific teprotumumab and tumor treating fields. Lung cancer is the most commonly diagnosed cancer type and the leading cause of cancer death in China.

We have built a differentiated franchise of at least 5 product candidates that include target agents Repotrectinib, CLN-081 and TPX-0022, the immunotherapy agent, rituximab, and tumor treating fields. We believe our precision medicine portfolio provides broad coverage of key driver mutations.

And together, they can address up to 15% of non-small cell lung cancer patients in China. In addition, these targeted agents may be synergistic with other modalities in our portfolio, such as checkpoint inhibitors and tumor treating fields, allowing us to pursue novel combinations.

In 2020, we also significantly boosted our autoimmune franchise with the addition of Efgartigimod. As a late-stage potential first-in-class asset with the potential for multiple indications, Efgartigimod will be the anchor asset assigned in the autoimmune area, where we are seeing a fast-growing market with significant, unmet medical needs.

As you can see, we continue to strengthen our existing franchises vertically and expand into new areas horizontally through strategic partnerships, and this remains a key growth strategy for Zai going forward.

Now I would like to turn the floor over to my colleague, Jonathan Wang, Head of Business Development, to discuss a few new product candidates we brought in through our in-licensing deal last year.

Jonathan?.

Thank you, Tao. Samantha mentioned that we had formed 4 new partnerships for 5 products over the last 12 months, including 3 new partnerships announced in late December and early January. These partnerships speak to the high standards we have for the products we in-license and for the partners we have the privilege to work with.

While we have consistently succeeded in in-licensing several products each year since the inception of the company, we're more focused on quality than on quantity. I'd like to speak to you now about our most recent deals, each of which is strategic for our company's growth.

To bolster of franchise in lung cancer, the leading cause of cancer death in China, we acquired the rights to several innovative and highly differentiated target therapies. In December, we reached an exclusive agreement with Cullinan Oncology for the rights in Greater China to CLN-081.

This compound is a potential best-in-class small molecule that targets cells expressing EGFR exon 20 insertion mutations in non-small cell lung cancer, which currently approved EGFR inhibitors do not adequately address. The unmet need in this patient population is significant in China, where EGFR mutation rates are the highest in the world.

Approximately 4% to 5% of overall non-small cell lung cancer is driven by EGFR exon 20 insertion mutations. So we're talking about over 30,000 addressable new patients each year. Our partner, Cullinan, recently announced their decision to move forward with Phase 2a expansion cohort based on encouraging data from the ongoing Phase 1/2 trial.

Zai expects to begin recruiting Chinese patients into a global pivotal trial later this year. We expanded not only our lung cancer franchise but also our gastric cancer franchise with 2 collaborations with Turning Point Therapeutics.

You may recall that last July, we reached an exclusive agreement to collaborate with Turning Point on Repotrectinib, a breakthrough therapy designated product which targets tumors over expressing ROS1 and NTRK.

ROS1 is estimated to be an oncogenic driver in approximately 2% to 3% of patients with advanced non-small cell lung cancer and NTRK in approximately 0.5% of patients with other advanced solid tumors in China.

We will begin recruiting patients in China for the Trident-1 study in the first half of this year, which could be the basis for potential approval. We further expanded our partnership with Turning Point in January by adding a second molecule, TPX-0022, a promising MET start CSF1R inhibitor that is highly synergistic with our portfolio.

Turning Point has reported initial encouraging safety and efficacy data across multiple tumor types, including non-small cell lung cancer and especially in gastric cancer, where there is high unmet medical need in China.

In the second half of this year, Turning Point anticipates initiating the Phase 2 portion of the SHIELD-1 study, pending FDA feedback. And finally, in January, we reached an exclusive agreement with argenx for the Greater China rights to Efgartigimod as an anchor asset for our autoimmune franchise.

We have specifically targeted the most severe and poorly served autoimmune diseases. Efgartigimod is truly a pipeline and a product opportunity with ongoing clinical development by argenx in gMG, ITP, pemphigus and CIDP, conditions with more than 400,000 patients combined in China. It has potential application in at least 8 other autoimmune diseases.

Efgart is filed in the U.S. for gMG, and Zai intends to begin regulatory discussions in China this year for a potential accelerated regulatory pathway for the product. Even with our recent success, I want to make clear that we're not going to rest on our laurels.

With our strong track record of in-licensing potential best-in-class and/or first-in-class assets and supported by strong development and commercial execution, we have established a sustainable and leading platform to continue to bring in world-class assets that address unmet needs in China.

We will continue to use business development as a key strategy to expand our business, both vertically and horizontally. With a strong pipeline of potential deals, we expect to continue to strengthen our franchises through BD and internal efforts, including the possibility of transformative partnerships in China and beyond.

And I will now turn the floor back over to Billy..

Thank you, Jonathan. I will now review our financial results for the full year ended December 31, 2020. Revenues for the full year of 2020 were $49 million compared to $13 million in 2019. Revenues for the period were comprised of $32.1 million in sales of ZEJULA and $16.4 million in sales of Optune, respectively.

The increase in revenue was primarily driven by the successful China commercial launches of ZEJULA and Optune in late January and late June, respectively. R&D expenses were $222.7 million for 2020 compared to $142.2 million in 2019.

The increase in R&D expenses was primarily attributable to the new licensing agreements and ongoing and newly initiated late-stage clinical trials along with payroll and payroll-related expenses from increased R&D headcount and expansion of research efforts to support internal development programs.

Selling, general and administrative expenses were $111.3 million for 2020 compared to $70.2 million in 2019. The increase was primarily due to payroll and payroll-related expenses from the increased commercial headcount and related costs as we launched ZEJULA and Optune in China and continue to invest in our commercial platform for future growth.

For the full year of 2020, Zai Lab reported a net loss of $268.9 million or a net loss per share attributable to common stockholders of $3.46 compared to a net loss of $195.1 million or a net loss per share attributable to common stockholders of $3.03 for the full year of 2019.

As of December 31, 2020, cash and cash equivalents, short-term investments and restricted cash totaled $1.19 billion compared to $276.4 million as of December 31, 2019.

The increase is primarily due to our secondary listing on the main board of the Stock Exchange of Hong Kong with total proceeds before deducting underwriting fees and commissions and other operating expenses of approximately $881 million. We would now like to turn the call back over to the operator to open the lines for questions.

Operator?.

[Operator Instructions] Your first question comes from Yigal from Citi..

This is [Carly] on for Yigal.

Just to start on the argenx deal, assuming a favorable outcome from regulatory discussions for myasthenia gravis, can you talk about how quickly you expect to be able to file the NDA? And then alternatively, if the agency were to require you to conduct a bridging study, can you talk about what the time line might look like under that scenario?.

Thank you for the question. This is Samantha Du. We are currently, of course, just started a discussion process. And it's very hard for us to give you actually the answer to this question. But we do believe this Efgart program, especially the 1 full the first indication, gMG definitely address significant, unmet medical needs.

And it's also the first 1 to the market. So we have we have -- we are optimistic about the regulatory discussion and outcome. Thank you..

Okay. Great. And then switching gears to Ripretinib and the potential commercial launch for fourth line GIST this year.

Can you talk about what learnings you've gathered from launching ZEJULA and Optune that you believe will position you well for the Ripretinib launch? And if you could just provide some color on how concentrated the GIST market is in China, and how many sales reps do you expect to hire to execute the launch, that would be really helpful..

Billy, do you like to handle those questions?.

Yes, sure. So thanks for the question. We've learned a lot. Last year, we were to launch successfully both ZEJULA in late January and Optune, which was made commercially available at the last day of June. And despite the pandemic, I think we're quite pleased with the commercialization effort so far.

So we look very much forward to turning that momentum into the new year. And this will be the first full calendar year for both of those products. But as to your specific question about how that relates to our preparation for QINLOCK, yes, I mean, there is definitely some parallels. So it is our first gastric cancer product to launch.

However, market access for drugs addressing unmet clinical need is very concentrated in China. So we expect some similar dynamics in QINLOCK as well. So you may have seen in our earnings release that we just got approval in Hong Kong. And of course, we have in our -- as part of a milestone for a mainland China launch in the first half of this year.

So I think we look very much forward to the launch, and we've been doing a lot of preparation for another success..

Our next question comes from Michael Yee from Jefferies..

This is [Dennis Ping] on for Mike. I just have 2. First one is just about your appetite for deals for the rest of this year, and if we should expect a greater focus on autoimmune and perhaps non-oncology areas, now after argenx. And my second question is on just around your comments around globalization.

I think you guys have an internal goal to be a global company by 2023.

How do you envision yourself as a global company? And what possible paths can you take to achieve that?.

Thank you, [Dennis]. Let me turn the first question over to our Head of Business Development, Jonathan Wang..

Dennis, thank you for the question. First of all, we have a very robust BD pipeline. I think really credit to the strong execution by the development, commercial and other teams. We have really built a reputation and a trust within the community of biotechs and pharmaceutical companies around the world.

So today, we have really a lot of inbound interest to partner not only oncology, immunology, but perhaps other areas as well. So for us, we're looking always for significant deals that would really boost our pipeline of potentially first-in-class and best-in-class. We always have a very high standard for whatever assets that we bring in.

Last year, I think we established quite a number of very significant partnerships with great companies around the world. So we see we will potentially continue this trend of always executing every single year. To your specific question about autoimmune, when we brought in Efgart, that is really an anchor asset for us to build our immunology franchise.

Of course, we have other products in our immunology franchise, including our own in-house discovery program, the nanobody IL-17, which we're developing this globally. But Efgart is a pipeline of product opportunity, targeting many very severe autoimmune diseases with lack of other treatment options.

So I think other similar products will certainly be very open to it as we look to strengthen our pipeline in different areas..

Yes. To answer your question about globalization. First of all, I think China, as you know, is already second largest global market. So taking care of China, patients is actually, by itself, is already second largest market, which is very important.

And as you can see from our news cover earnings release, we have 3 therapeutic areas and covered by multiple strong franchises. Especially in oncology, looking -- if you look at our gastric cancer and lung cancer franchises, they are huge, and they cover total half of the cancer new incidents in China.

So that alone actually, in terms of give us the, I would say, upside, right? That's alone -- China alone it would be -- give us a tremendous upside. Of course, we also have, over the last 6 years, internal discovery. We have 3 assets already in global Phase 1 development with worldwide rights.

And we will continue over the next 3 years to build our franchise, both as Jonathan said, vertically, horizontally, but both within China and beyond China. So we are very -- we are optimistic about our future being the global leader..

Our next question comes from Seamus Fernandez from Guggenheim..

So I wanted to just get a sense of penetration in the second line market in China. If you guys could just give us a quick sense of that and how the competitive landscape continues to evolve.

And if you don't mind, I'd love to just ask, the CDC7, can you guys talk a little bit about the mechanism of action and exactly what you're targeting? I know that this is targeting ATR, but the key tumor types that you're most excited to see the ATR -- or the CDC7 advancing in..

Thank you, Seamus. Those are great questions. For your first one, I'll turn over to Billy Cho. And for your second one, I'll give our President of Oncology Development, Dr. Alan Sandler, an opportunity to address..

Seamus, thanks for your question. As you know, of our launch of ZEJULA over the last year [indiscernible] hospitals coverage, although it's -- we talked about heavy construction, even doing thresholds. But we want to think a little bit broader. And now we're continuing to deepen that coverage into those hospitals.

Now, when we had -- when we launched ZEJULA, we had about 150 sales reps. We're nearly double that. And of course, [indiscernible] of the [indiscernible] implementation. So starting basically today, the implementation date, you should expect us to accelerate the hospital listings in China.

We were already -- we don't really publicly disclose it, but across major metrics and KPIs, we're quite pleased with how we've been performing. I can say that we were ahead of the benchmark across all those metrics. So I think to your second question, I'll turn it over to Alan..

Yes. Thanks for the question. So CDC7 is a selective inhibitor and is involved in replication stress. And it also would induce then cell division inhibition.

The -- what we're going to be doing is conducting in our early phase -- early studies is to look at areas where we might have biomarker-driven attempts at different malignancies such as pancreatic cancer, which looks like a potential target as well.

So at this particular time, they're not -- we're still evaluating what potential malignancies would be best, and we'll do that in a broad fashion early on and then direct more as we learn more from our biomarker-driven studies..

Our next question comes from Anupam Rama from JPMorgan..

one, how the NORA results are being used in commercialization? And then two, are there plans to submit the NORA data to regulators for inclusion in the label?.

Thank you, Anupam. And I would like Tao to address your questions. And if any comments -- additional comments needed, I'll just make it up..

Yes, yes. Thank you, Samantha. Anupam; thanks for the question. I think the NORA study is pretty important to us because it is a China-specific study, and it's very large.

As you may know, in the NORA study, we really proved that ZEJULA, when using other individualized starting dosing regimen, can significantly improve the side effect profile while preserve efficacy. And that really kind of fits into the majority of the Chinese patients.

It is also important to point out in the NORA study, we observed almost 18 months of PFS versus 12 months in the global NOVA study. So these are all very, very significant results. I think we're currently utilizing in our commercialization effort in China..

Yes. In terms of labeling, Anupam, for your information, our first-line was approved based on 200 milligrams instead of 300 milligrams. Also, we are in the work to changing the labeling from 300 milligrams as a starting dose to 200..

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

This is David Ruch on for Jonathan. Congrats on the awesome progress this year. Just 1 for me. You guys are partnering with MacroGenics on module B of the MAHOGANY study of margetuximab in frontline gastric cancer.

MacroGenics has guided to presenting data from module A in the first half of the year and I was just wondering if you could talk about what you would be looking for in that data set to give you confidence in module B in terms of response rates or any other durability data..

Thank you, David. I'll turn this over to Tao..

Yes. So thanks for the question. So module A of the MAHOGANY trial, as you know, is the chemo-free regimen. We think this is also pretty interesting for an important -- for the first-line gastric cancer patient, to look for a chemo-free regimen versus just chemotherapy. So we will be certainly looking for response rate.

If we observe a really good response rate, we believe this will also be very good readthrough to the module B, which will include a checkpoint inhibitor..

Our next question comes from Ziyi Chen from Goldman Sachs..

Actually got 2 questions. Well, first, if we look at the financial data, right, the gross margin was a lot lower in second half versus first half, 61% versus 74% in first half. Trying to understand what was the reason behind.

And also, we are interested in the upcoming Optune Phase 3 pivotal LUNAR study, which is going to have some interim data coming probably second half this year.

So what kind of the interim data we should be expecting that you will consider as positive signals? And particularly, given the study's plan to show superiority in terms of OS benefit for the combo with immunotherapy and also with docetaxel combination.

So do you need to show the superiority in both combo arms or you just need to show the superiority in just either one of the arm?.

Hello, Ziyi. And I'll turn your first question to Tao. And the second question -- no, sorry. First question to our CFO, Billy Cho. Second question to Tao Fu..

Yes. To your question about the second half margin, I think what I -- what we can say is that I mean there is some variability in second half because of 2 things. We just had launched Optune, as I mentioned, in the last day of June. So we're just getting that started and ramping.

And then the other sort of nonrecurring variability point would be, I think, in event of a NRDL implementation, you're all going to -- you also should expect to see a little bit of variability right before that. The trial is going to get implemented into the national catalog.

So what I'm trying to say is that there's some -- those are the 2 factors that could have led to that..

Can you just clarify your second question? I'm not sure I captured it fully..

We're expecting the Optune's Phase 3 pivotal LUNAR study.

So it's going to be an interim data, right? So what kind of threshold we're looking the data to hit considered as a positive signal for the Phase 3 studies? And also, I know the study actually is comparing the combination with immunotherapy or combination with docetaxel versus immunotherapy or docetaxel.

So do you need to show the superiority in both combo arms? Or do you just need to show like superiority in either one of the arms?.

Yes. I think this is probably a question that we should defer to Novocure's clinical team to answer. We do think this is a very important trial for China because there's a very large unmet medical need for non-small cell lung cancer, and this is a very unique approach and differentiated modality.

But in terms of the trial detail, I think we'll probably refer to Novocure to answer..

Our next question comes from Yang Huang from Credit Suisse..

So my first question is I think for ZEJULA and for Optune, where you have sales coming from Mainland China and Hong Kong and Macau. So can you give us a breakdown for Optune sales in terms of Mainland China? And also Mainland China sales for Optune, since I consider, for example, Optune, first half last year, Optune sales is about $5 million.

And if we think it will continue in Hong Kong and Macau as $5 million or $6 million, that doesn't mean for second half in Mainland China, Optune sales was about USD 5 million?.

Go ahead, Billy..

Yang, thanks for question. Yes, Hong Kong and the greater market outside of Mainland China, I should say, has been very strategic for us historically, especially for Hong Kong. As you know, we were able to launch ZEJULA and Optune in advance of Mainland China launch. And as I mentioned this morning, we just got the call approved for QINLOCK.

So I think that going forward, the reason why we did not break out by Hong Kong versus Mainland China versus even in Macau [indiscernible] is because Mainland China is a pretty substantial [indiscernible] more so as we move forward. So we have decided not to really break up our geography..

Okay. And so my second question is still kind of related to Optune. So we indicated for 2021 we are going to join some global Phase 3 Optune study like in non-small cell lung cancer and pancreatic cancer trial.

So does it mean that after we've participated in Phase 3 trial, if those trial results are positive, we can directly apply for June indication for Optune in China? Or do we still need some kind of localized study, just like a bridging study for drugs?.

Number one is to accelerate global development time line; number two is fast track China's regulatory approval. So from what we know right now, we think, combined with global approval, together with China's -- the patient's data from the global trial, which should be -- so right -- current regulatory guideline will be sufficient.

But if things change, we can update you..

Our next question comes from David Li from Bank of America Merrill Lynch..

Great. I would like to know more about your margin, especially where we did a very simple calculation. It seems like your gross profit margin for 2020 is only 66%. So we understand it is mixed because you have both top 1 and Optune.

But it seems like the margin -- can I confirm this margin has not been projected, has not been negatively impacted by the national negotiation, which happened just by the end of December last year? And going forward, this margin is going to be lower because of the negative price cut in 2020.

And also it seems like 66% margin is not that attractive even compared with the generic drugs in China. Can you help us to have more color on this? This is my first question..

First of all, thank you, David. And I think if -- first of all, I have to say, compared to generics, this margin is very attractive. But I'd like our CFO, Billy, to answer your details question..

Yes. David, I hope you're well. Thanks for your question. I'm not sure if you picked up on the previous question from Yang, but on that question, we have to be similar. And the second point that maybe you have missed was that, yes, there was variability from the NRDL inclusion.

And that's something that you may see sort of outside Zai Lab as well, right? So right now, we are not giving guidance on our margin profile given that it's -- we're still very much early on in ramping up, and the product mix is going to change.

And we're right now focused on -- we have 10 additional new products and a lot more indications than that coming up over the next 3, even 4 years, if we execute according to our plan. So we're very much growing very, very fast. But we're not yet giving guidance on the margin.

But I mean, I want to echo what Samantha also just said in that I think in our gross margin, you also have to remember that that's where we also recognize the royalty. In order to have an apples-to-apples comparison, you would have to look at the overall margin profile, right, of the business, generic versus innovative..

Right. I got you. And can I also ask that -- ask you a follow-up question. So we....

Also -- let me -- sorry, David. Let me cut in quickly. I also want to say, company is still in a very, very early stage of investing. So we are investing very heavily in the commercial organization. And so going forward, you may see different margins..

Samantha, on my second question....

I think as the pipeline gets broader, as we build the franchise instead of launch just 1 product more and more into same franchise, you've seen a lot of synergy. And I think you see also differently.

Again, I want to emphasize we're in early development, very heavy top line investment stage, and we are also launching 1 or 2 -- like last year, 2 products. And each of them -- one is actually less than 2 quarters, one is less than 3 quarters. So with that -- and we believe going forward, our future is very, very optimistic..

Got you. Very clear.

Can I ask a follow-on question? So do you see the margin pressure after considering the price cuts by the end of last year and also the price -- and also the competition with [Henry's] PARP inhibitor in this year in terms of the margin perspective?.

Thank you, David. First of all, [Henry's] approval is in third line for the PARP inhibitor. It's not in first line, it's now in second line. Secondly, our second line is already in the NRDL. Even though there will be price cuts and considering how much volume will pick it up, we really think it's more positive, much more positive.

That's why we had a choice to be in the NRDL or not in NRDL. We did ample calculation on the pharma economics. So we came out, agreed on NRDL listing, must have a good reason.

And lastly, you -- we were -- you're talking about -- I want to emphasize, we are the only one, for the first-line is all commerce status regardless of whether your HRD mutation or gBRCA, and we look forward to see other companies to show this kind of data, and we welcome more companies come into the space.

But I think we are -- right now, we're the only one in the first line..

Our last question today comes from David Ng from Macquarie..

Since I think I dialed in a little bit late, so maybe I'll ask some bigger macro question, if you don't mind. My first question is, as the competitive landscape continue to change, I believe that some of your in-licensed products may face different prospects than your original expectation.

And this is not just due to the pricing environment, but also due to the new products being developed by competitors. So take example for, like in the breast cancer, gastric cancer, you have the ADC HER2-positive product doing very well at Y margin than some of the those in the development, maybe including margetuximab.

Like so 1 broad question is the flexibility of your in-licensing model allows you to reshuffle the priorities of your pipeline much more easily than those who purely depends on in-house. Any thoughts on that, about how you're going to more dynamically reprioritize some of your products that you have in-licensed? So that's kind of the first question.

Second one is regarding your intention to maybe develop or allocate more resources to develop product for chronic diseases like diabetes or cardiovascular, knowing that it takes much more capital, much more time and potentially less exciting market than oncology.

But with such a diversified portfolio and a very strong balance sheet today, will you consider allocating more resources to some chronic diseases? And my final question is, again, in view of a lot of your peers successfully out-licensing to overseas partners, so kind of going out of China into the international market, whether through actual exporting or signing a partner, and some of your peers signing up partner domestically to strengthen the marketing expertise.

If we have to single out one particular business aspect that Zai Lab may be a little bit weaker than your competitor, which area would you say that in the upcoming 1 or 2 years that Zai Lab would definitely focus a lot on? Not necessarily just particular product or target, right, but particular business strategy that you think that Zai Lab need to catch up to a little bit in the next 1 or 2 years? So kind of 3 macro questions..

Okay. Thanks, David. And I may go through by order of questions. Let me just answer your last one first. Number one, Zai Lab is still a very young company compared to, as you mentioned, some peers. We have 6 years in existence. So people may view us as a partner of choice in in-licensing pipelines.

But along the 6 years, we actually spent also a lot of efforts in internal R&D. And also in terms of in-licensing, we are very confident in terms of our track record. If you look at the last 5 years, where we in-licensed many of them, they are very early stage with the kind of data bank.

From time and time, over and over, we showed the straight way, made the right decision.

I think the right decision was made not just because we're good at business development, of course, but also that's supported by strong signs, strong R&D, deep knowledge and experience because we all -- most of us, of course, other than our CFO, our Head of BD and their business people, the rest of us, we're drug developers.

We've developed drugs over 30 years individually or combined for how many years, I don't know. So if you say going forward, we will continue to do what we do, we have done well, which is continue to look at opportunities where horizontally and vertically, can give us portfolio growth, continue to build our franchise.

For example, we mentioned lung cancer, gastric cancer, breast cancer, all this tremendous -- with tremendous unmet medical needs even in autoimmune. And -- but having said so, if we do see a good anchor product, which justified as a product in the pipeline status, we will go in.

However, and we also, every time we get into a new therapeutic area, we want to fully understand the market, understand the competitive landscape. We do not sacrifice the numbers for the quality. We -- so as you mentioned, probably first question, going forward, there will be some competition.

But if you look at our pipeline over the next few years, we are still either first-in-class and best-in-class. Of course, with, for example, you mentioned ADC, but different mechanisms. For each, for example, each tumor type, not every drug can solve it all.

Even PD-1 cannot solve all the problems, right? We all know it needs multiple options to treat a disease. Some patients even develop -- for example, even on, say, lung cancer, on Tagrisso, there are a lot of resistance already after many years of uses. PD-1 is the same. And we mentioned previously, we have -- we do have PD-1, PD-1 LAG-3.

We do have a orthogonal approach like TTFields. We do have target therapies. We do have combo opportunities. And even within our own pipeline. So I believe we are very competitive. And I believe there are many things as a company we need to have the agility to learn.

Constantly, we need to adjust what's doing well, what we need to improve, and what needs to do better. As I said earlier in my speech, we are just at the beginning of climbing Mount Everest. We've spent 6 years to prepare to energize the company, equip the people. And we are ready to climb and it's not [a good] feeling, of course.

But we have the agility to learn, we have the agility to improve, and we also believe we have the right signs behind every decision we make. Of course, having said so, we always -- we will make mistakes.

But I hope so far, and I think the company has done a good job, at least from every employee's perspective, supported by investors, we try our best to make -- not making mistakes, which we believe is because of ignorance.

But going forward, I really think Zai Lab is -- have a -- we just started with substantial growth momentum, and I'm very optimistic about the future of the company..

Thank you. I'll now turn the call back to the management team for the closing remarks. Please go ahead..

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 periodically on our progress throughout the year. Operator, now you can turn the call off..

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect..