Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Zai Lab Ltd (ZLAB, Financial) achieved a 45% year-over-year growth in net product revenues, surpassing $100 million for the first time.
- The successful launch of VYVGART significantly contributed to revenue growth, with nearly 3,300 new patients treated in Q2.
- Zai Lab Ltd (ZLAB) received three product approvals, including KarXT for schizophrenia and bemarituzumab for first-line gastric cancer.
- The company has a strong cash position of $730 million, providing a solid foundation for future growth and operations.
- Zai Lab Ltd (ZLAB) is on track to achieve profitability by the end of 2025, with a net loss declining by 34% year-over-year.
Negative Points
- Despite the progress, Zai Lab Ltd (ZLAB) still faces significant competition in the market, particularly from other FCRN agents.
- The subcutaneous formulation of VYVGART will not be covered by NRDL until at least 2026, potentially limiting its near-term market penetration.
- Research and development expenses remain high, although they have decreased compared to the previous year.
- Selling, general, and administrative expenses increased by 17.3% year-over-year, driven by higher general selling expenses and headcount growth.
- The company is still in the early stages of launching multiple new products, which may take time to generate significant revenue.
Q & A Highlights
Q: First question is related to VYVGART. Obviously, maybe just talk a little bit about the trajectory month-over-month ads. How are things going across the country and tell us a little bit more about the metrics that you're tracking as it relates to what gives you confidence on your guidance.
A: Good morning, Michael. It's Josh. Thanks for the questions. I'll start on VYVGART and then ask Jonathan to talk a little bit about business development strategy. I think first in VYVGART, we're quite pleased with the performance through the first three quarters of launch going back to last year, but certainly, the first half of this year, is what gives us the confidence to say we'll -- we certainly see the trend exceeding $80 million for the year. First, I think as you know, what we've been focused on in the early parts of launch is getting physicians experience using the product with their patients in gMG, and we focus on those patients who are in an acute episode or not responding well to current treatment. I think that's gone really well. We're seeing about 1,000 new patients a month, and that's been consistent through the first half of the year, and I don't think we see any reason for that to start to slow down. Keep in mind that we see about 150,000 patients who are on label in China with gMG, who will benefit. And so far, I think we've treated somewhere in the range of about 7,000. So we've still got a long way to go. But I think with the initial emphasis on patients who aren't doing well, what we're seeing is physicians are getting really good experience. We've had over 1,500 physicians prescribe so far and of those physicians, a third of those are, I think, using it in pretty significant quantities now that their patients have used for second, third, and I think we have a pretty good percentage of physicians who have used it 10 or more times. So I think as we look now to the second half of the year, we'll continue to focus on accruing new patients. So I say we're just scratching the surface, I think, in terms of the patients who can benefit from this important therapy. But we will begin to look at ensuring that we're transitioning from just an acute sort of initial experience to ensuring patients are getting the full benefits from the maintenance aspects of the drug. So I think we're still early in the launch, Michael. But I think as we get into the second half of the year here, we will be focused on continuing to accrue patients but also on ensuring they're getting back in for their second, third cycles and so on. And no reason to believe that that won't be a successful transition over time here. So more to come. But again, I think based on where we are right now, we're confident that we'll be over $80 million for the year, but still as we think into '25 and beyond, I think just a really huge opportunity, I think, here for gMG patients in China. I'll turn it over to Jonathan to talk about business development.
Q: With subcu VYVGART now approved, how do you think about the dynamics of incorporating this modality into the marketplace in the near term? And what is kind of like a post-NRDL world look like for subcu. I'm assuming NRDL is coming next January, but given the approval came in July, would we have to wait for 2026 NRDL for subcu VYVGART. Maybe you could walk us through that timeline as well.
A: Thanks, Anupam. It's Josh. Yeah, we're excited about the approval for subcu. Yeah. So just going back, of course, now, IV is approved and on NRDL, and that's what we're focused on. We'll look to launch subcu later this year, and it won't be covered by NRDL this year. I think given the timing of the approval, which was post June 30, it's unlikely that we'll be able to add this product to NRDL for 2025. It's an important addition to the franchise. It improves the patient experience versus IV in terms of time as Rafael mentioned on the call. So we'll work to make sure that the product is available for physicians and patients. But I think for now, the base assumption is that will be available through NRDL in 2026, not 2025. I don't see that as a major impediment to continuing to drive the kind of patient uptake and maintenance that I talked about in the last answer. Today, patients do go to the hospital for treatment, for follow-up and of course, subcu while a better experience, a faster experience still requires physician administration. So we're focused on getting that two NRDL as quickly as possible, but I think it's likely a 2026, not 2025 opportunity. But then, of course, we look to combine that with CIDP approval and launch, and that will be our next big indication, but we still have a great opportunity in front of us with gMG. And as I say, I think the IV formulation works really well and fits the treatment paradigm for China today. Thanks, Anupam.
Q: Back in the second quarter of '23, you outlined the profitability guidance by the end of 2025 and the 50% year-on-year top-line CAGR. It would be really helpful if you could just take a moment and walk us through the key drivers on the P&L more concretely to get to that profitability target by the end of 2025 and discuss the growth assumptions and what contribution you'd expect from subcu VYVGART as well as CIDP and potentially any contribution from these new launches of XACDURO and AUGTYRO that are coming at the end of the year.
A: Thanks, Yigal. It's Josh again. I'll start, but then I'll ask Yajing to maybe provide a few more comments on the P&L. But I think the biggest driver here for profitability for the full year of '26 and achieving that toward the end of '25 is the top line growth, as you're suggesting through your question. We've said we expect a compound annual growth of 50% or greater between the end of 2023 and the end of 2025 and that's starting with the launch of efgartigimod this year, and you're seeing us start to approach that number even in the second quarter and the more that efgartigimod contributes to the total revenue base, the higher the sales growth is going to be. So I think the biggest thing to watch is over the next 8 to 12 quarters is the top line growing at or around 50%. And I think if that's the case, then the rest of the P&L sort of falls into place. To your question about what's the composition or contribution there. Again, I think the biggest driver between now and the end of 2025 and into 2026 is going to be VYVGART, IV, gMG. I think that will be the biggest driver of growth, just given where we are now and the timeline we have between
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
