Zai Lab Ltd

HKEX:9688

Earnings Call Transcript 2022-Q3

[Operator]

Hello, ladies and gentlemen. Thank you for standing by, and welcome to the Zai Lab's Third Quarter 2022 Financial Results Conference Call. [Operator Instructions]. As a reminder, today's call is being recorded.

It is now my pleasure to turn the floor over to Billy Cho, Chief Financial Officer of Zai Lab, who will make introductory comments.

[Ki Chul Cho, executive]

Thank you, operator. Good morning, good evening, and welcome, everyone. Zai Lab recently issued a press release providing the details of the company's financial results for the third quarter of 2022, as well as some recent product highlights and corporate updates. The press release is available in the Investor Relations section of the company's website at ir.zailaboratory.com.

Today's call will be led by Dr. Samantha Du, Zai Lab's Founder, Chairperson and Chief Executive Officer, to be joined by Josh Smiley, Chief Operating Officer, who will discuss advances in oncology product candidates; and Dr. Harald Reinhart, President and Head of Global Development, Neuroscience, Autoimmune and Infectious Diseases. We will speak about the progress we made in those 3 therapeutic areas, and I will discuss the performance of our marketed products, conclude with comments on our financial results. Additional executives 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, our sales and revenue forecasts for our products and product candidates, regulatory applications and commercial launches. Such forward-looking statements are not guarantees of future performance, and therefore, should not put undue reliance upon them. These statements are subject to numerous risks and uncertainties, and actual results could differ materially from what we expect due to a variety of factors, including those discussed in our SEC filings.

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.

[Ying Du, executive]

Thank you, Billy. Hello, everyone, and thank you all for joining us today. The third quarter marked another period of strong execution across our company, including revenue growth, continuing and significant progress in our mid and late stage platforms and business development. Over the next few quarters and years ahead, I have little doubt that we'll continue to strengthen the company through growth and productivity.

Before I get into specific details, I would like to say that their product all of our employees across the globe, especially regarding Zai's ability to deliver time and time again, no matter what challenges present themselves. We have built a great culture at Zai focused on innovation to bring transformative medicines to address unmet medical needs. Fundamentally, we have a very productive year so far, and we are anticipating finishing 2022 having delivered on [indiscernible] key corporate priorities.

We continue to demonstrate resilience revenue growth in the third quarter, expect some ongoing challenges from COVID in certain regions in China. We expect to deliver significant revenue growth for years to come. Our broad with late-stage development candidates continue to see strong advantages, highlighted by our agreement with the NMPA on a development plan for the current team for bridging study with schizophrenia in China.

On the business development front, we recently announced a strategic collaboration with Seagen for TIVDAK, which strengthens our ability to address unmet medical needs in women's cancer in China. In addition, we expect to realize significant synergies given our existing commercial infrastructure and strategic positioning in this important disease area. In summary, we remain confident in the fundamental strength of our business ability to create significant shareholder value.

With that, I would like to turn the call over to Josh. Josh?

[Joshua Smiley, executive]

Thank you, Samantha. It's been an exciting first quarter as Chief Operating Officer of Zai. Although we currently face some challenging global economic headwinds, to echo Samantha's sentiment, it has been amazing to see the focus and determination of everyone at Zai to continue to deliver on our mission of bringing transformative medicines to patients in China and around the world. The fundamental drivers of value at Zai Lab are strengthened by our experienced leadership team, global talent and first or best-in-class pipeline.

We announced last month that Alan Sandler had left Zai, and we expect to name a new Head of Global Oncology Development soon. I'm very excited to support Samantha on the operational side as she personally leads our global oncology function in the interim. I'm also very excited to welcome Dr. Peter Huang to Zai Lab to lead and oversee our discovery efforts in translational medicine. Peter joined the company from Zentalis Pharmaceuticals this week and has a strong track record in leading internal discovery research as well as external collaborations. We look forward to driving innovation in drug research and development under his leadership.

I also had the opportunity to welcome Alette Verbeek to Zai last month as Senior Vice President, Head of Global Strategic Partnering. Alette joined the company from Novartis, and she is our first employee based in Europe. She is responsible, among other things, for leading our European business development efforts.

Beyond our commercial progress, which Samantha touched on, I'm excited to highlight key business development updates from the third quarter, especially our new regional and highly synergistic collaboration with Seagen for TIVDAK. As many of you know, TIVDAK is the first and only ADC approved in the U.S. for the treatment of adult patients with recurrent or metastatic cervical cancer. This collaboration further strengthens our oncology leadership in China, particularly in women's cancer, where we have established a strong sales team and portfolio, including ZEJULA and others.

We will leverage such leadership as our team works to commercialize and accelerate patient access to TIVDAK in China. We will join the ongoing global TV-301 Phase III confirmatory study and certain potential global studies and other indications. Of course, we continue to evaluate other business development opportunities as well, including potentially transformative opportunities and partnerships for our global pipeline. We've been very disciplined historically and plan to be even more selective in the future in terms of quality deals that are synergistic with our existing portfolio.

In terms of commercial progress, we continue to see strong revenue growth led by ZEJULA. As you may be aware, in October, the FDA expressed some concerns to our partner, GSK, regarding the overall survival data from GSK's NOVA study in the U.S. and the approved indications for ZEJULA in the U.S. in the recurrent ovarian cancer study. GSK is currently considering the FDA's feedback and appropriate next steps. But I'd like to highlight today that we do not expect this development to impact our full approval of ZEJULA in the second-line all-comer setting in China.

Notably, unlike GSK's U.S. approval, which was based entirely on GSK's NOVA study, the NMPA's full approval of ZEJULA in the recurrent ovarian cancer setting is based on a separate study, the NORA study, which is a Phase III randomized, double-blind, placebo-controlled study of ZEJULA, the company independently conducted in China. While the NORA study is not fully mature to date, we are seeing favorable trends in overall survival.

We also do not any -- do not anticipate any impact to our first-line ovarian cancer ZEJULA indication in China. The FDA's discussion with GSK does not apply to this indication. This first-line indication is the largest ovarian cancer market opportunity for Zai, accounting for over 60% of ZEJULA's revenue in 2022 in China, and we expect this percentage to increase through the remainder of this year and beyond.

Moving to clinical development for our other oncology assets, most recently at SITC, we just showcased 2 assets with our internally developed pipeline with Global Rights, including presentations on 2 key early-stage global programs, ZL-1211, an anti-CLDN18.2 antibody; and ZL-1218, an anti-CCR8 antibody. For ZL-1211, we presented data showing enhanced antitumor activity combined with standard of care chemotherapy in in-vivo animal models. For ZL-1218, beyond what was presented in the AACR earlier this year, the data supports ZL-1218 depleting Treg cells from human tumor samples in in-vitro and in-vivo animal models. And our single cell RNA sequence data indicates that ZL-1218 targets the highly suppressive Treg populations.

In November 2022, our partner, Blueprint Medicines, presented an update on the Phase I/II SYMPHONY trial. The data supports the plan to develop BLU-945 in combination with osimertinib in first-line EGFR L858R mutation-positive non-small cell lung cancer. EGFR mutation is one of the most common mutations in non-small cell lung cancer, especially in China. We work closely with Blueprint Medicines to accelerate the global development and potentially change the treatment landscape for EGFR-mutated non-small cell lung cancer patients in China.

Further, in September 2022, our partner, Mirati, presented results from KRYSTAL-1, a multi-cohort Phase I/II study evaluating adagrasib with or without cetuximab in patients with advanced colorectal cancer harboring a KRAS G12C mutation at ESMO. We believe the data continue to demonstrate that adagrasib is potentially a best-in-class KRAS G12C inhibitor in CRC. Looking ahead, Mirati expects potential U.S. FDA approval and commercial launch in the United States for adagrasib as the treatment for patients with non-small cell lung cancer harboring a KRAS G12C mutation, who have received at least 1 prior systemic therapy with a PDUFA target action date of December 14, 2022.

We remain confident that adagrasib in China can be both first-in-class and best-in-class. We'll try to accelerate the regulatory pathway for second-line spot non-small cell lung cancer monotherapy by leveraging the global data package for the FDA approval, the ongoing PK study in China and the global confirmatory K-12 study, which Zai Lab joined in the second quarter of 2022.

We also recently launched our trust report. This report provides updates on our environmental, social and governance or ESG commitments and activity since the release of our ESG report last year and describes our latest ESG strategy, which we are calling Trust for Life. Zai's Trust for Life strategy includes 3 commitments: to improve human health, create better outcomes and act right now. As part of our commitment to improve human health, we seek to reach 1 million patients with Zai medicine by 2030.

And now I will turn to Dr. Harald Reinhart to discuss progress in our autoimmune and neuroscience therapeutic areas. Harald?

[Harald Reinhart, executive]

Thank you, Josh. I'm excited for the opportunity to share with you today the progress across our autoimmune, neuroscience and anti-infective therapeutic areas. Let's start with VYVGART or efgartigimod. On the regulatory front, we are happy to share that our partner, argenx, continues to make excellent progress. With the FDA, argenx recently announced the submission of a BLA for efgartigimod SC subcutaneous for the treatment of generalized myasthenia gravis or gMG in adult patients. As a reminder, we at Zai submitted a BLA for efgartigimod IV, intervenous, for the treatment of patients with gMG in China in the second quarter and expect to prove next year.

On the EMA front, argenx also announced that the European Commission has granted marketing authorization for VYVGART as an add-on to standard therapy for the treatment of adult patients with gMG who are anti-acetylcholine receptor or antibody positive. Zai continues to support argenx on indication expansion in China and worldwide, and we soon expect to launch the proof-of-concept trials in 2 autoimmune renal diseases.

Moving to KarXT, the combination of xanomeline and trospium, which we are developing with our partner, Karuna, in acute schizophrenia. Zai Lab has obtained agreement with the NMPA on the development plan for operating study in China. As you recall, results from Karuna's EMERGENT-2 trial were released this August. This pivotal trial met primary endpoint with KarXT demonstrating a statistically significant 9.6 reduction in PANSS total score compared to placebo at week 5.

In addition, Karuna initiated the Phase III ADEPT-1 study evaluating KarXT as a treatment for psychosis in Alzheimer's disease and has completed enrollment in the Phase III EMERGENT-3 trial in schizophrenia. Karuna expects top line data from the Phase III EMERGENT-3 trial in schizophrenia in the first quarter of 2023.

And lastly, our internally developed topical IL-17 product, ZL-1102, continues to progress towards initiation of a global Phase II study in chronic plaque psoriasis in the fourth quarter of 2022, subject to further feedback from regulators. We recently presented the results of the Phase I proof-of-concept study for ZL-1102 at the 2022 European Academy of Dermatology and Venereology Congress.

Regarding our anti-infective portfolio, we have several noteworthy developments. For CL-2402 or SUL-DUR, we are on track to submit an NDA for the treatment of Acinetobacter baumannii infections to the NMPA by the end of this year. And for omadacycline, NUZYRA, we plan to initiate post-approval commitment studies next year and have started the dialogue with CDE about operational details.

And now Billy will speak about progress with our commercial products and financial results. Billy?

[Ki Chul Cho, executive]

Thank you, Harald. Zai Lab continues to execute well with strong results delivered in the third quarter. For the 3 months ended September 30, 2022, our total revenues were $57.5 million compared to $43.1 million for the same period in 2021, representing year-over-year growth of 33%.

Net product revenues for the period were $39.2 million for ZEJULA compared to $28.2 million for the same period in 2021, representing 39% growth; $10.7 million for Optune, which we expect to resume its growth trajectory this quarter; $5.5 million for QINLOCK compared to $4.3 million for the same period in '21; and $1.5 million from NUZYRA compared to nil for the same period last year. We believe QINLOCK and NUZYRA are on track to enter negotiation with the NMPA regarding potential inclusion in the NRDL by the end of the year.

R&D expenses were $99.5 million for the 3 months ended September 30, 2022, compared to $55.1 million for the same period in 2021. The increase in R&D expenses were primarily due to the $30 million upfront payment for the Seagen deal in the third quarter of 2022, along with increased expenses related to ongoing and newly initiated clinical trials and higher payroll and payroll-related expenses from increased R&D headcount and share-based compensation.

SG&A expenses were $66.6 million for the 3 months ended September 30, 2022, compared to $59 million for the same period in 2021. The increase was primarily due to payroll and payroll-related expenses from increased commercial and general and administrative headcount and share-based compensation as Zai Lab continues to enhance infrastructure and commercial operations in anticipation to many new drug approvals and launches and deliver strong top line growth. We expect our net product revenue to exceed cost of goods sold and commercial expenses in 2023.

Net loss was $161.2 million for the 3 months ended September 30, 2022, compared to $96.4 million for the same period last year. The increase in net loss was primarily due to a $30 million upfront payment for the new collaboration and license agreement with Seagen and an increase in foreign exchange loss of $36.7 million, which is a noncash adjustment. Net loss per ordinary share during the 3 months ended September 30, 2022, was $0.17 compared to $0.10 for the same period in 2021. Net loss per ADS during the 3 months ended September 30, 2022, was $1.68 compared to $1.01 for the same period in 2021.

As of September 30, 2022, cash and cash equivalents, short-term investments and restricted cash totaled $1.12 billion, which we expect will provide us with cash runway through 2025.

We would now like to turn the call back over to the operator to open the line for questions.

[Operator]

[Operator Instructions] Your first question comes from the line of Michael Yee from Jefferies.

[Michael Yee, analyst]

We have 2 questions. Maybe Samantha or Billy, you could talk a little bit about the fluid dynamics in China as it relates to obviously shutdowns and just general ongoing dynamics even as it relates to, say, doing business development with U.S. biotechs. For example, I noted in the Q, more updates around security measures and restrictions around cross-border data flow and data information on Chinese patients. So maybe just make some high-level comments about that because it's certainly an issue that has been weighing on investors. That's question #1.

And then just question #2, I know previously, the company suggested NRDL as possible or at least in discussion for devices. So I just wanted to hear an update on that since Lunar is coming for TTF and that could be important.

[Ki Chul Cho, executive]

Great. Thanks, Mike. So let's -- I'll probably get started on your first question, and then maybe Jonathan also can kind of chime in to the BD front, and Samantha can make some comments from any overarching regulatory point of view. And then we'll move on to your second question.

Now in relation to the COVID situation options, the challenging operating environment due to the ongoing flare-up, it is a reality. We've been talking about it, and I'm sure you've seen it. It's more than a global phenomenon and you're spending a lot of time covering it.

Now this year, starting in really from early on this year and really throughout, we have been sort of discussing about how we've been able to kind of operate and even in this environment continue to execute well, and we've been able to show great variability and resilience due to some of the specific kind of creative things that we've been doing.

But it is -- I mean, Mike, I'm not going to sugarcoat. I mean even probably today, you're probably seeing news of flare-ups happening in China and the continuation of a dynamic 0 COVID policy. So we expect to have additional sort of -- we're monitoring it very closely. We're staying agile. We're very confident that we can kind of grind through this environment, and we'll hope for the best in terms of sort of getting into some sense of normalcy in the not-too-distant future. And if that happens, we think that will be positioned even better.

And now in terms of -- so your other question on BD and are there any sort of -- from a geopolitical or regulatory hurdles for us to continue to do BD deals and to do very important strategic -- important transactions going forward, maybe I'll have John chime in here and then Samantha can add if she can.

[Jonathan Wang, executive]

Yes. Mike, just on the second part of that question, the short answer is there has been no impact. There is no impact. Last year, as you saw, we've done many significant deals. We just announced the deal last month, as Josh said, with a very reputable company in Seattle Genetics for a commercial stage asset. China is the second largest pharmaceutical market. Whether small companies or big companies, it is too important to miss. And it's not only because of the commercial opportunity. More importantly, it's also to help them accelerate their global time line. I mean if you look at the companies that do well in China, like perhaps AZ and others, I mean, they're contributing 20%, 30% of their global patient recruitment pivotal trials coming from China.

At the end of the day, we are providing important medicine, basic medicine to patients. So we do not think this will be affected, even though there are greater, obviously, geopolitical concerns around. But so far, for Zai, for all of our current deals, our negotiating deals, it is a topic to be discussed, but it's never been a roadblock for us or delaying any of our time lines.

[Ying Du, executive]

Yes, Michael. Also come back to your #3 questions regarding government. NMSA has issued some guidance about including medical device in the national reimbursement. And I think they definitely have been trying very hard, even though now all the medical devices, innovative ones, can get a local government-sponsored reimbursement, but putting up into national level is really keen.

So there are talks about in 2, 3 term -- 2-, 3-year terms, so it's coming. It's not back they're talking about in 5 to 10 years terms. And even though on the NRDL inclusion, more and more governments talk about, number one, how much innovation you have, are you the first in class, best in class, even specifically this year highlight for rare disease, for children's disease. So that's all helpful to the positive trend.

[Operator]

We will move to our next question. And the question comes from the line of Yigal Nochomovitz from Citi.

[Yigal Nochomovitz, analyst]

I just wanted to follow up on the comments regarding the NOVA versus NORA comparison that you're making. Obviously, it's encouraging to see the favorable OS trends in NORA. So just a few questions there. Can you comment on the percent maturity of the overall survival in NORA? And are you seeing stronger OS trends in gBRCA or the non-gBRCA group? And then what's your current hypothesis as to why in your China trial and the NORA trial, so far, the OS is trending favorably, whereas obviously in the NOVA trial from GSK it didn't end up that way. Thank you.

[Ki Chul Cho, executive]

Thanks, Yigal. Josh, do you want to kick it off? And others can chime in if needed.

[Joshua Smiley, executive]

Yes, sure. Yigal, thanks for the question. I think first, in the NORA trial, we'd expect to achieve the number of events in 2023. So we're well along toward maturity, but don't have a specific percentage there. And we -- what we can say is, at this point, having looked at the data, that the numeric trend is favorable in both populations. But again, I'd remind everyone that the study was powered for PFS, not OS, and we'll disclose that data in 2023 when the study is complete. But we take patient safety very seriously. And based on our analysis of the data, given what we had -- what we know from the NOVA study, we feel confident that there is a positive risk benefit in the data we're seeing from an overall survival perspective as well.

So I think that's probably the most important thing. And I keep reemphasizing, we do have a separate study, full Phase III, full approval based on PFS. I think in terms of why we may see differences, probably the most significant difference that we know of in the studies is the fact that we used an individualized dosing regimen in NORA where the dosing, based on weight and platelet counts, between 200 and 300 milligrams. And we think that allows patients to stay on the drug, have fewer side effects and get the full efficacy benefit. That could be one of the reasons.

Again, as you know, looking at the NOVA study, there's -- it wasn't powered certainly for overall survival, and you know all the challenges that come with crossover and otherwise. So again, we're confident in the studies that we see in China and confident that we're providing a real and meaningful benefit to patients, both in first-line and second-line all-comers settings.

[Yigal Nochomovitz, analyst]

Okay. And then, Billy, just on the commercial business. Obviously, ZEJULA had another strong growth quarter-on-quarter of 15%, similar to last quarter. So is the conclusion that the COVID headwinds -- and I know given the comments you made earlier, but just in general, do you think the COVID headwinds are pretty much behind us? And when would you feel comfortable given the initial revenue guidance for ZEJULA?

And then for QINLOCK, obviously, there was a very, very strong rebound over the second quarter. If you could elaborate a little bit on the dynamics there. And then finally, for Optune. Obviously, you said you were flat year-on-year. It's been down a little bit relative to the first half. So can you just give us some thoughts as to how that projection will evolve?

[Ki Chul Cho, executive]

Yes. Thanks, Yigal. On ZEJULA, I think -- I mean, look, we're still in a challenging operating environment as we've talked about before. But we've been able to navigate this well. We expect to continue to navigate it well. And while we don't give guidance on specific revenue and margins, et cetera, at this time, we feel very good about reiterating our statement that ZEJULA is positioned to be the market share leader by no later than next year, and we look forward to delivering that -- on that goal.

On QINLOCK, you're right, we had a great quarter in third quarter. Now if you recall in the last earnings, we mentioned that we adjusted the pricing to prepare for the NRDL negotiations. Clearly, that helped sort of drive some kind of initial demand right off the bat. And it continues to be endorsed as -- within the best practice guidelines, not only in advanced line, but even in earlier lines as well. It actually got a little bit of an upgrade on second line. So that could help build awareness for QINLOCK. So we look forward to getting over the hurdles we can with NRDL. Let's see if we can get to the rational pricing level that we like or that we can accept. And next year, under those circumstances, we should have good trajectory.

And I think you were asking about Optune on the last piece. And you're right. So we had a flat quarter year-over-year at just shy of $11 million. And as you heard from the opening remarks, we do expect to resume growth in fourth quarter and position ourselves well for '23 and beyond. What really has been going on for Optune, as you may know, Optune has -- it's been -- the market access strategy has been around, top cities, supplement insurance is very helpful and that's a real growth area, and in the large hospitals.

So when you have cities like Shanghai, which is in the past, but even like Chengdu, right, as a more recent one, it's going to have more of an impact than, let's say, a nationally reimbursed treatment option like ZEJULA, where we have more kind of strategies to maneuver. So I think those are the comments that we'd like to kind of message to you.

[Ying Du, executive]

Also, Yigal, there are 2 things I would like to add here. First of all, I don't think we can clear the situations over, especially the quarantine situation is still not over. Number two, in terms of Optune, the major reason cost, not only we see is the COVID, right? But also because all the major hospitals now, very few people can take surgery. And so surgery has to go through a very stringent analysis and waiting for COVID testing reports, all of that. Bottom line is that, there's a live surgery taken on the -- because we usually give to patients took a surgery, then we will put it on, right? So this is also another reason across the year-over-year, we didn't see a significant growth or even further growth.

[Operator]

We will take our next question. And the question comes from the line of Anupam Rama from JPMorgan.

[Anupam Rama, analyst]

Two really quick ones from me. The $1.2 billion of cash, one question we frequently get is kind of what is the cash runway sufficient to? And then on 1102, the internal pipeline program, I think, correct me if I'm wrong, this will be the first global study that Zai Lab conducts on its own. How should we think about the geographic breakdown of the study as you think about Asia, U.S., EU and other regions?

[Ki Chul Cho, executive]

Thanks, Anupam. I'll give the -- we'll give the second question to Harald. On your first question on cash runway, we feel pretty good about having a runway through 2025, as we stated. Our revenue, even in this environment, we can -- we have a durable, resilient revenue curve or we expect to see that. We just flat out think that the demand is there, and we see it. Now we have some on the supply side issues with COVID, but the demand is clearly there for our portfolio and the drugs that we're trying to bring in. So we feel pretty good about that. And by the way, that's including BD deals along the way on an annual basis. So with that, I'll hand it over to Harald on the second question on 1102.

[Harald Reinhart, executive]

Yes. It's Harald. I -- yes, you're correct, this is the first Zai program which is global to go into Phase II. It is a drug which we've developed in-house and which has, as you remember, had a very nice proof-of-concept readout. So we are anxious to move into Phase II. And we have selected certain territories, North America being one, Asia being another one, Australia being another one. We do believe that we can place the study in various territories, and we are just awaiting the feedback from regulators as to where and what sequence to place it.

[Operator]

We will move to our next question. The question comes from the line of Ziyi Chen from Goldman Sachs.

[Ziyi Chen, analyst]

Two questions. The first one is really on the expense control. Because in the past 9 months, 3 quarters, we have seen company have been controlling the OpEx pretty well. And just as Billy mentioned, now you are really extending the cash run rate to 2025. So we try to understand a bit more on that. What you have done, are you freezing the headcount or laying up some people? And also, have you deprioritized terminating any of the projects? So we're trying to understand how you actually achieve that. And more importantly, looking forward, like 12 months, what are the major milestone payment you could potentially pay out and how big that could be?

And second question is really on KarXT. I think you have agreed with CDE that you're going to run a bridging study. So trying to understand on how you're going to design a trial in China and how long does it take for the bridging study to be completed in China and for the potential regulatory filing. And particularly, KarXT is going to be targeting very different therapeutic areas compared to oncology portfolio you have. So in terms of the future commercial strategy, what is your current strategy -- current thinking of that?

[Ki Chul Cho, executive]

Ziyi, thanks for your questions. I'll take the first and give the KarXT question to Harald. For the -- yes, I mean the controlling expenses topic, yes, I mean we are -- the investments that we made and the progress we've made allows us to really not only maintain growth but also get into increases in productivity as well. And clearly, you see that this year.

But I would say that in terms of prioritizing our resources, it's really embedded sort of in how we operate the business and really in our culture. Even if you go back a couple of years, you would have seen us talk about very quickly being able to prioritize resources and even our [ prioritizing ] certain programs ahead of others. So if you look back, you'll see that cadence.

And more specifically this year, as an example, over the past 2, 3 sort of filing cycles, we also announced some programs that we have liked to be prioritized so that we can make sure to continue to grow, and we're making good advances on the mid- to late-stage clinical programs and also the operating leverage that's kicking in into our commercial strategy. So I think that will continue and we feel pretty confident about that going forward.

And I think the part of the other question was on milestone payments. Now we don't disclose in our filings the breakdown of the details on milestone payments. But I can tell you, I think there's a kind of a confusion. A lot of people get confused with these kind of what we call biobucks in the industry, right? You see a pretty big numbers, a couple of hundred million dollars, over $1 billion in somebody's strategic deals. But what I can tell you is that while we don't give guidance like next year or over the next 12 months, all the payments related to development report milestones that we have in our pretty broad portfolio, I would just basically say that it's less than a typical upfront payment for a deal, right, including the most recent one we did with Seagen, if you just kind of -- I'll just kind of give that framework.

So the main messaging being is in the actual payment that goes out is quite sensible. So -- and not material, which is also why we don't have to disclose it, right, because if there was a material, we would. So I'll now turn it over to Harald for the second question on KarXT.

[Harald Reinhart, executive]

Yes. Thank you. The KarXT situation is really evolving. We have, as you said, reached agreement after negotiations with the CDE on a bridging program -- bridging study for China. That study, we have currently an agreement and we are awaiting the formal approval for that. And once that is in-house, we will start the program.

We are currently thinking of a study program, and I cannot go into great details, but I can say this much, that it will be very similar as a study design as the emergent studies that you know, they are 2 identical emergent studies, EMERGENT-2, which just read out, and EMERGENT-3, which is a copy of EMERGENT-2. So we will try to mimic that with slight modifications as needed.

And so the design is clear, the structure and the requirements that the regulators have on us is also fairly clear. And these are acute schizophrenia studies. Nowadays, they take a total of 5 weeks to execute the action study. But obviously, there is a follow-up.

Then as far as the portfolio, I think there was some question about that. This is the first study in the area that we call neurosciences, but we clearly have an interest to get into neurosciences with several of our other programs. And neurosciences is, for instance, quite dominant on the efgartigimod side of things because we are running a CIDP study there. We are running obviously gMG. And so we are very familiar with the space as such and have the contact in this space. Thank you.

[Operator]

We will take our next question. And the question comes from the line of Jonathan Chang from SVB Securities.

[Jonathan Chang, analyst]

First question on TIVDAK. Can you discuss your views on the opportunities both in cervical cancer and other tumor types? And how much of a headwind or not the ocular toxicities associated with the drug are? And then on the second question, on the business development front, this has been a quieter year than in the past. Can you provide some color on the considerations for this year and how you're thinking about additional in-licensing opportunities moving forward?

[Ki Chul Cho, executive]

John, do you want to take these questions from Jonathan?

[Jonathan Wang, executive]

Sure. Thanks for the question, Jonathan. First, on the first question, the ocular toxicities that TIVDAK has shown are pretty low-grade ocular toxicities. So it's, I think, a lot benign than some of these other ADCs. And these ocular toxicities can be easily managed through your typical eye drops. So I think the safety profile is actually pretty good for this ADC.

And then TIVDAK, it's a first-in-class product. And it's a product which, especially in China, is very relevant because cervical cancer is today 110,000 annual incidents. It has the highest mortality of all the women oncology diseases, especially relevant China because adagrasib is only approved more recently. For adagrasib and the vaccines to really drive down cervical cancer incidents, it's going to take decades because these patients sort of emerged with the disease in their 50s. So you basically have to fast forward at least 10, 20 years for that really to take effect.

So we view the incidence is going to continue to grow. There is a limited number of treatment options. IO is really the only other product that's available here. So we believe TIVDAK, a targeted therapy, would be widely used by physicians in an area with high unmet medical need in cervical in China.

And then also, I think the other things for Zai, there's a lot of synergies because we don't have to add any sales force. We can just tag along with our niraparib in ovarian cancer sales team. So I think that side is also very advantageous for us given the relationships we have.

Now on the second question for business development. First, there are variabilities throughout the year. I mean, last year, we had a -- at least from a quantity perspective, a lot more deals, and we did a number of very significant transactions. Admittedly, products like fcab, like KarXT, adagrasib, they don't come every year. So first of all, I think there are variability because of that. So we have a very -- I mean we always have a very high standard when we're bringing assets. It has to be globally competitive, globally differentiated assets. So that's first and foremost.

Now within that broader context, obviously, this year, everybody -- because of the capital market, we have to be extra cautious. So we are taking approaches as we look internally, as we look externally to add this additional lens because we do have a very broad and diverse pipeline today. We have a lot of products to support our growth. And our share price, unfortunately, is not where we hope it can be. So we have to take that into consideration as we look at new BD opportunities as well.

But look, if there's another asset like an fcab, like a KarXT, we will be aggressive, and we will bring it in. And in addition to these regional opportunities, we have growth opportunities today because today's market is different from last year from a business development perspective. There are more opportunities that may offer rights, which may not be available in past years, including global rights, including 50-50 global rights that biotechs in the United States and in China may be interested in because of the conditions.

I think as Josh also made in his remarks, we are also looking at other types of deals, which can we help other types of companies to bring broader portfolio assets to help them in China from a development as well as a commercial perspective. So we are busy. So stay tuned. And I'm sure you'll hear more from business development over the next few months.

[Operator]

We will take our next question. Your question comes from the line of Seamus Fernandez from Guggenheim Partners.

[Seamus Fernandez, analyst]

So just 2 quick ones. Just as we think about the KarXT opportunity, just hoping that you guys could frame that opportunity for us in terms of the size of the market opportunity again and perhaps when we might see a possible entry into the Chinese -- the market in China. And then just the last question is specific to the LUNAR study. Can you just help us understand what the time frame is, and if that were to fail, how your investment behind that program would work out?

[Ki Chul Cho, executive]

Seamus, thanks for your questions. Maybe I'll get -- I'll address your second question first, and then I'll hand the second one to Jonathan, Jon, on KarXT opportunity in China. For LUNAR, I mean there's actually multiple shots on goal. LUNAR is pretty significant. Milestone has come up pretty soon, probably early Q1. And I think we'll go from there. Samantha spoke previously about an opportunity to even get national reimbursement in the future. So if everything goes well, this will be a real sort of step-change. We're talking about a pretty big quantum step-change in the real opportunity -- in the mass market opportunity here for tumor-treating fields.

Now, Seamus, your question is LUNAR data is not cooperative. There are other shots on goals as well, right? There's global Phase III trials going on right now in pretty advanced stages and progressing across pretty large tumor touch as well. So is LUNAR important yet? Is it kind of be all, end all? Certainly not. But we're hoping for the best. We remain cautiously optimistic and we'll make a data-driven decision regardless.

[Ying Du, executive]

Yes. I think with or without LUNAR's success. And I don't think you should hear Zai Lab considering whatever market evaluation we're at.

[Jonathan Wang, executive]

Seamus, Jonathan. So maybe also to address your first question on KarXT, Look, I think it's a pretty sizable market opportunity. There are 8 million schizophrenia patients in China. Obviously, there are other indications, which we're working with Karuna to expand. But the lead indication, schizophrenia, there are 8 million patients, of which 4 million are currently getting active treatment on the registry.

And so I think you know the product profile well because I think not only on the safety side, but on the efficacy side for both the positive and the negative symptoms, there are differentiations. So given the product profile, given that in this sector, there has not really been something innovative, something this impactful on these different dimensions, I think this product will make a pretty significant impact once we launch it.

And this market is also very concentrated. The psychiatric hospitals and some of the neurology departments in the larger hospitals, you do not need a lifestyle team to cover it. We believe looking at other players in this market, you're looking at probably about 200 sort of sales force. And we also have coverage in many of these hospitals with our neurology franchise with our opportunity. And so I think there are definitely synergies there.

From a time line perspective, I think Harald already mentioned that, I mean we only need to do 1 [indiscernible] bridging study. So it's a pretty quick and simple path forward and we'll give more guidance as we start that study.

[Operator]

Thank you. I will now turn back over to Zai Lab's CEO, Samantha Du, for closing remarks.

[Ying Du, executive]

Thank you, operator. I would like to thank everyone for taking the time to join us on the call today. We appreciate your support and look forward to updating you again and again after next quarter. Operator, you may now disconnect this call.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.