Zai Lab Ltd

HKEX:9688

Earnings Call Analysis

Strong Revenue Uptick Leads to Reduced Loss

In Q3 2023, Zai Lab enjoyed a 22% rise in net product revenues, reaching $69.2 million, compared to $57 million the previous year, with growth bolstered by higher sales volumes, VYVGART's launch, and reduced COVID impact. This growth couldn't fully offset the slowdown from anticorruption efforts in China's healthcare sector. ZEJULA continues to shine, earning $41.6 million. R&D expenses dropped significantly owing to lower license fees, while SG&A saw a minor climb due to costs related to new product launches. Overall, the net loss has been halved to $69.2 million, down from $161.2 million. A strong cash position of $822.2 million ensures Zai Lab can fund its journey to profitability.

Solid Growth and Promising Drug Launches

Amidst a backdrop of global challenges, one area of bright news comes from a pharmaceutical company that recently launched a product to great reception. The company's product, VYVGART for gMG, was rolled out in mid-September and has seen significant uptake in the market. The company has high hopes for its indications not only in gMG but also in treating CIDP, with a boost from Breakthrough Therapy designation received in China. This sets the stage for expected commercial success and therapeutic benefit in a market with limited treatment options.

Escalating Financial Performance

The company's financials show a promising trend, with net product revenues in Q3 2023 climbing to $69.2 million compared to $57 million in Q3 2022, marking a 22% growth, or 27% on a constant currency basis. Although the COVID-19 pandemic slowed progress, innovative treatments like ZEJULA, Optune, QINLOCK, and NUZYRA witnessed revenue increases due to high sales volumes, NRDL listings, and decreased negative effects from the pandemic.

A Rich Pipeline of Innovation

The company's pipeline is teeming with upcoming submissions for new indications, including a subcutaneous formulation of efgartigimod (efgar) for gMG, and other indications like CIDP, ITP, and pemphigus vulgaris. Each of these represents not only advancements in medical treatment but also sizable market opportunities, especially in regions like China where the demand is great.

Strategic Commercial Efforts and Anticorruption Impacts

Despite facing challenges from an anticorruption campaign that affected healthcare practices, the company managed a successful launch for VYVGART, with a substantial number of top prescribers already incorporating it into their treatment regimes. This success is partly due to its focused strategy targeting approximately 600 hospitals that manage the majority of the diagnosed patient population for its indicated treatment.

Building a Foundation for Long-term Profitability

The company is strategically aligning itself to enhance gross margins over time as product volumes increase. By optimizing manufacturing processes and controlling sales and marketing investments, it anticipates strong profitability trajectories for its flagship products, including efgartigimod. With a focused commercialization strategy—600 target hospitals, 150 sales reps—it is set to efficiently scale its operations while driving down costs.

Forward-Looking Confidence Despite Regulatory Dynamics

Zai Lab is poised for potential gains in the upcoming year after NRDL negotiations. The company's optimism about its future is evident despite the impacts of anticorruption campaigns and foreign exchange headwinds. It commits to focus on the core fundamentals of driving drug uptake and delivering innovation, signaling a long-term resilience and growth mindset that roots in solid operational strategy and a robust pipeline.

Earnings Call Transcript 2023-Q3

[Operator]

Hello, ladies and gentlemen, thank you for standing by, and welcome to Zai Lab's Third Quarter 2023 Financial Results Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded.It's now my pleasure to turn the floor over to Christine Chiou, Senior Vice President of Investor Relations. Please go ahead.

[Christine Chiou, executive]

Thank you, operator. Good morning, good evening, and welcome to Zai Lab's third quarter 2023 earnings call. Today's call will be led by Dr. Samantha Du, Zai Lab's Founder, CEO and Chairperson. She will be joined by Josh Smiley, President and Chief Operating Officer; Dr. Rafael Amado, President and Head of Global Oncology Research and Development; Dr. Harald Reinhart, President and Head of Global Development, Neuroscience, Autoimmune and Infectious Diseases; and Dr. Yajing Chen, Chief Financial Officer. Jonathan Wang, our Chief Business Officer will also be available to answer questions during the Q&A portion of the call.As a reminder, during today's call, we will be making certain forward-looking statements based on our current expectations. These statements are subject to numerous risks and uncertainties that may cause actual results to differ materially from what we expect due to a variety of factors, including those discussed in our SEC filings. We will also refer to product revenue growth rates on a constant exchange rate basis, which is a non-GAAP financial measure. Please refer to our earnings release furnished with the SEC on November 7, 2023 for certain disclosures regarding this non-GAAP financial measure.At this time, it is my pleasure to turn the call over to Dr. Samantha Du.

[Ying Du, executive]

Thank you, Christine. Hello, everyone, and thank you all for joining us today. Throughout the year, we have continued to successfully advance our pipeline, including several important developments for key late-stage programs, such as bema, KarXT, [indiscernible] and efgartigimod. In the third quarter, we were especially excited about the launch of our [ 5th ] commercial product, VYVGART, following months of strategic preparation. Although still early in the launch, we are encouraged by the initial demand for VYVGART and by the positive feedback from both physicians and patients.Josh will provide more details on the progress of this very important product launch. We are well positioned to execute on our corporate strategic goals, including the launch of multiple new products and new indications over the next few years. Our pipeline of potential first-in-class and best-in-class products has significant potential to meaningfully improve the lives of patients, and we expect this product candidates to contribute to our long-term growth to drive shareholder value.And with that, I'll pass it to Josh. Josh?

[Joshua Smiley, executive]

Thank you, Samantha. It is an exciting time at Zai Lab as we launched VYVGART, the first FcRn blocker approved for the treatment of generalized myasthenia gravis in China. There are over 170,000 patients in China living with gMG, many of whom continue to suffer from symptoms such as decreased muscle strength and mobility despite receiving treatment. VYVGART is an important new treatment option for gMG and has the potential to significantly change the way patients are treated today. We've already made significant progress through our outreach efforts, having engaged around 75% of our top 200 hospitals since launch in September.And while we are still in very early stages of the launch of VYVGART, we are encouraged by the positive feedback from neurologists and patients. We are seeing physicians gain experiences on VYVGART, and impressively, nearly 70% of our top 100 MG specialists have already prescribed VYVGART to a patient. Furthermore, many are repeat prescribers and we are seeing the depth and breadth of prescribing continue to increase. We are focused on increasing awareness, providing education on the benefits of this important therapy and building a strong support network for physicians and patients.Importantly, we are also working hard to increase patient access, and we are in the negotiation process for VYVGART's inclusion on the NRDL, which would allow many more patients to be able to benefit from this therapy. We're very excited by the potential of VYVGART and not just in gMG but across a wide range of new opportunities. Earlier this year, we saw positive pivotal data in CIDP. And by the end of 2023, we expect pivotal data in ITP and PV. Next year, we're expecting the approval of subcutaneous VYVGART and gMG, and we believe that being able to provide alternative dosing options, both IV and subcutaneous is beneficial for patients and caregivers. These are just some of the near-term opportunities for VYVGART to add additional layers of growth to the franchise.Now turning to the rest of the commercial portfolio. We delivered year-over-year product revenue growth in the third quarter of 22% on a reported basis and 27% on a constant currency basis. In addition to the launch of VYVGART, ZEJULA hospital sales grew and it continued to be the leading PARP inhibitor in hospital sales for ovarian cancer in China. QINLOCK and NUZYRA continued to benefit from their inclusion in the NRDL, and our team was able to expand supplemental insurance coverage for Optune.Looking ahead, we will continue to focus on the execution of our strategic goals. First, we are seeking to accelerate our medicines in the market and drive revenue growth. Over the next 12 months to 18 months, we anticipate several important registrational data readouts, including for efgartigimod and Tumor Treating Fields in pancreatic cancer. And we expect to initiate several important trials, including FORTITUDE-102, a trial evaluating bemarituzumab in first-line gastric cancer. Next year, we could see 3 or more NMPA approvals and 4 NDA or supplemental NDA submissions in China.Second, we are focused on driving profitability by leveraging our existing capabilities and platforms and by increasing productivity across the organization. And third, we continue to focus on expanding our pipeline through internal discovery and through regional and global collaborations. We entered into a strategic partnership with MediLink in April for a next-generation DLL3 program, which we are currently advancing to a global Phase I trial. And we also have our topical IL-17 Humabody, which is entering global Phase II development.In parallel, we will continue to look for meaningful new external opportunities in strategic areas to further expand our pipeline. We are very excited by the depth and breadth of our portfolio and we are confident that our commercial organization will be able to drive significant revenue growth over the next few years. We are well positioned financially with a cash position of $822 million as of September 30, which we believe will support our business and operations until we reach profitability.And now I'll turn the call over to Dr. Amado. Rafael?

[Rafael Amado, executive]

Thank you, Josh. Within oncology, our R&D teams are focused on the development of our late-stage pipeline, and we have had several updates during the third quarter, which I will briefly highlight. In August, repotrectinib received its fourth Breakthrough Therapy Designation in China for the treatment of patients with advanced solid tumors that have a neurotrophic tyrosine receptor kinase or NTRK gene fusions and have progressed following treatment with tyrosine kinase inhibitors. In addition, for potential treatment of ROS1-positive non-small cell lung cancer, newly disclosed results from the registrational TRIDENT-1 study showed median duration of response of 34.1 months and median progression-free survival of 35.7 months in tyrosine kinase inhibitor-naive patients. This impressive durability has the potential to be a major differentiating factor.The National Medical Products Administration has accepted our new drug application for repotrectinib in ROS1-positive non-small cell lung cancer with priority review, and we look forward to bringing this important medicine to patients in need in China as fairly as feasible. Additionally, for KRAZATI or adagrasib, our partner Mirati presented 2-year follow-up data from the KRYSTAL-1 study in September. In the pooled analysis, adagrasib demonstrated durable efficacy with a median overall survival of 14.1 months, up from 12.6 months previously reported and a 2-year overall survival rate of 31% in patients with previously treated KRASG12C-mutated non-small cell lung cancer. Exploratory analysis suggested clinical benefit in patients with treated stable central nervous system metastases at baseline with responses noted across most baseline communications, highlighting the potential differentiation for adagrasib in KRASG12C-mutated non-small cell lung cancer.We await the results of the KRYSTAL-12 trial of adagrasib against docetaxel, which is the ongoing confirmatory Phase III study and which will form the basis for a submission in China in 2024. In October, our partner, Seagen announced that TIVDAK demonstrated superior overall survival, progression-free survival and objective response rate versus chemotherapy and a prespecified interim analysis of the confirmatory Phase III innovaTV 301 global trial in recurrent or metastatic cervical cancer patients with disease progression on or after frontline therapy. We have participated in this study and continue an extension portion in China.Moving to our internal global research and development programs regarding our DLL3 antibody-drug conjugate, ZL-1310, we just submitted an IND in the U.S. and are targeting to initiate a global Phase I study in the first quarter of 2024. Looking ahead, over the next 6 months to 12 months, we expect several important updates from some of our key oncology programs. As we continue to expand and advance our oncology pipeline, I am pleased to announce that Dr. Robert Brown has joined Zai Lab as a Chief Medical Officer of Oncology. Robert's impressive medical and drug development background will further strengthen our global oncology research and development team. Dr. Brown will report to me and he will provide strategic leadership and support with respect to the clinical development of our oncology pipeline.And now I will turn the floor over to Dr. Harald Reinhart to discuss the progress in our autoimmune infectious disease and neuroscience therapeutic areas. Harald?

[Harald Reinhart, executive]

Thank you, Rafael. We have made excellent progress across our autoimmune infectious diseases and neuroscience therapeutic areas this last quarter. Starting with VYVGART or efgartigimod, we launched the product for its first indication in gMG in mid-September and already see significant market uptake. We're also very excited about its potential in treating patients with CIDP or chronic inflammatory demyelinating polyneuropathy. Data from the global trial, we participated in, showed a highly significant statistical and clinical benefit for patients, including the China subset.Indeed, in September, the CDE granted Breakthrough Therapy designation for SC subcu efgartigimod for the treatment of patients with CIDP. Existing treatment options are quite limited and problematic given the general reliance on long-term steroids or chronic immunoglobulin therapy. We have seen how efgartigimod subcu can meaningfully improve and stabilize disease symptoms in these patients. We look forward to working with regulatory authorities in China to bring this important medicine to patients as soon as possible. We also see significant potential of efgartigimod across multiple additional indications and we will continue to work with our partner, argenx, on indication expansion.Turning now to KarXT. We are on track enrolling patients in the clinical bridging study to support our China registration. KarXT is the combination of xanomeline and trospium, which we are developing with our partner, Karuna, for acute schizophrenia. In September, Karuna submitted a new drug application to the FDA for this indication. As a new class antipsychotic, we believe that KarXT could become an important new treatment option for schizophrenia patients in China. For Alzheimer's disease-associated psychosis or ADP, Karuna initiated the Phase III ADEPT clinical trial program in the third quarter, and we plan to participate in these studies in Greater China next year.And now Yajing will speak about progress with our commercial products and financial results. Yajing?

[Yajing Chen, executive]

Thank you, Harald. Now I will discuss our third quarter 2023 financial results compared to the prior year period. Total net product revenues for the third quarter of 2023 was $69.2 million compared to $57 million for the same period in 2022, representing year-over-year growth of 22%. On a constant currency basis, growth year-over-year was 27%. This increase was primarily driven by increased sales volumes, the launch of VYVGART and decreased negative effects from the COVID pandemic. Our revenue growth was slowed by the effects on the hospital and physician practices from the recent industry-wide anticorruption enforcement efforts in China.Our total net product revenues included $41.6 million for ZEJULA, which increased 6% from $39.2 million, as ZEJULA which is in the third year on the NRDL continued to be the leading PARP inhibitor in hospital sales for ovarian cancer in China. $11.6 million for Optune, which increased 8% from $10.7 million, supported by increased patient access to this product in the private-pay market. $5.7 million for QINLOCK, which increased from $5.5 million, supported by the NRDL listing in March 2023. $5.5 million for NUZYRA, which increased from $1.5 million, supported by NRDL listing in March 2023, and $4.9 million for VYVGART, which launched in September 2023.Research and development expenses were $58.8 million for the third quarter of 2023 compared to $99.5 million for the same period in 2022. This decrease was primarily due to a decrease in license fees for our licensed and collaboration agreement. Selling, general and administrative expenses were $68.6 million for the third quarter of 2023 compared to $66.6 million for the same period in 2022. The slight increase was primarily due to higher general selling expenses to support new product launches, partially offset by a decrease in professional services fees.Zai Lab reported a net loss of $69.2 million or a loss per ordinary share of $0.07 for the third quarter of 2023 compared to a net loss of $161.2 million for the same period in 2022 or a loss per ordinary share of $0.17. This decrease in net loss was primarily due to increase of product revenue, the decrease of licensing fees and the shift from foreign currency loss to gain. We are in a strong financial position, ending the quarter with $822.2 million in cash and cash equivalents, short-term investments and restricted cash compared to $876.4 million as of June 30, 2023. Based on our operating plan and our anticipated revenue growth, we expect to be able to fund our business through profitability.And with that, I would now like to turn the call back over to the operator to open up the line for questions. Operator?

[Operator]

[Operator Instructions] First question comes from the line of Louise Chen from Cantor.

[Louise Chen, analyst]

Congratulations on the quarter, and thanks for taking my question. So I wanted to ask you on the NRDL, if you've seen any efforts to promote innovation? And then also, where is private insurance today or commercial insurance and where do you think that will be over time? And then the second question I wanted to ask you is on VYVGART, and what additional indications that you plan to move forward in the near-term and what your next steps are there?

[Ying Du, executive]

Louise, this is Samantha Du. Very happy to answer your question. I think overall in terms of the government NRDL, we have seen they have made several, very serious -- serious measures to improve health of the health care industry, including multiple updates to NRDL over the last 2 years. Recently, NRDL updates continued to support innovative medicines, especially in support medicines to address unmet medical needs and with a price -- with a reasonable pricing. Of course, how reasonable we're all going to see very soon, right?Specifically, the increased -- the increase in the visibility and transparency on pricing providing long-term stability of prices. So all of this give us more visible road map for subsequent price cut for novel, novel drugs and also drugs like us, which treats patients with unmet medical needs,That's what Zai is all about, right? On the anticorruption, I would say, short-term, I think that impact the whole industry. But medium and long-term, I think anticorruption is a very positive force in the long run -- in the medium and long-term run, especially for companies that like Zai Lab have innovative, differentiated assets and address unmet medical needs. I'll stop here, and Louise, sorry. Thank you for asking the question.

[Joshua Smiley, executive]

Thanks, Samantha. It's Josh. Louise, thanks for the questions. I'll touch on the commercial insurance question briefly. I think this is probably an underappreciated positive also in the China market over the last few years. I think if you look back to end of 2020, I think about 40 million people were covered through some form of supplemental or commercial insurance. By the end of 2022, that number was 150 million -- I mean, yes, about 150 million. We do see, Louise, that growing to somewhere above 200 million -- I mean it's been growing this year and growing somewhere above 200 million by the middle of the decade.I think industry reports put that projection somewhere in the range of 200 million to 300 million people. Of course, that size is as big as many of the bigger western countries, and the supplemental insurance then supports reimbursement at rates for innovative drugs that are closer to U.S. or western prices. So it's an important segment and it's growing. For us, it's important for Optune. Optune is not eligible for NRDL listing because it's categorized as a medical device now. And we've had very good experience with supplemental insurance. We're covered on nearly 100 different supplemental insurance plans, that's grown from 73 a year ago. And by our account, we're second only to KEYTRUDA in terms of the number of plans we're covered by.So while we think for our portfolio overall, the NRDL listing is the primary sort of focus, given the important unmet needs we're addressing with our drug that Samantha referenced. The supplemental insurance market does provide an important backstop and supplemental sort of coverage for drugs while they're in the pre-NRDL phase or for things like Optune that aren't eligible yet. So thanks for that question. I think Harald, you can cover, I think the question Louise you had about the next indications for VYVGART.

[Harald Reinhart, executive]

Yes. Thank you, Josh, and thanks for the question. There is indeed a lineup of new indications coming up in this year and next year for submission and later on obviously approval. We've already spoken about the subcutaneous formulation of efgar, which is in gMG, not really a new indication, but one with a new formulation.Following that is CIDP. It's a very important indication for us. It's a large market in China, 3x larger than in the U.S., if I may say. And as such, it is a study also that has shown incredible benefit from efgartigimod treatment in a patient population that is not well served currently with only IVIg. Following that, there are 2 other indications, one is ITP, the thrombocytopenia indication for which you have already seen study results earlier this year with the press release from argenx. And following that, roughly at the same time, there should be pemphigus vulgaris [indiscernible]. This is our third one that is coming through, and the results for ITP and the PV study are supposed to come the end of this year. So this is our lineup. There is also one new indication that we want to start next year, which is in TED, thyroid eye disease, another exciting way of showing and highlighting the efficacy of efgartigimod. And that is at least in the foreseeable future lineup.

[Ying Du, executive]

Yes, also I just want to add quick points, Louise. And commercial insurance actually has been in discussion for few years, and this year, it has to be more and more putting into agenda. But, of course, when will be effective, we'll see, but I think that's not somewhere has been [ the nod ] or not been rapid. I think there is -- they are quite a strong group of people and a very influential group, so trying to lobby for the benefits of patients. So I'm very hopeful for that.

[Operator]

Next question comes from the line of Michael Yee of Jefferies.

[Unknown Analyst]

This is [indiscernible] on the line for Michael Yee. I have 2 questions. First, can you tell us about the ongoing China anticorruption campaign? And what do you see there? Do you expect any kind of aftermath impact during Q4 and so forth? And secondly, I think I have a couple on VYVGART. First, I guess, you have mentioned [ $5 million ] sales in just 2 weeks after the September launch. So I wonder how much VYVGART is actually demand versus stocking inventory? And I guess, you also mentioned that 70% of the top 100 specialists have already prescribed. So how would you characterize the penetration there?

[Ying Du, executive]

So, Josh, do you want me to take the first question or you go ahead. Why don't you go ahead?

[Joshua Smiley, executive]

Okay. I -- well, Samantha provided some broader comments on anticorruption, I think to get to the specific question around impacts for the remainder of the year. First as we've stated and then Samantha has talked about, I think from a long-term perspective focus on anticorruption in health care is good for everyone, patients and companies and providers and certainly for a company like us that focuses on bringing innovative drugs for unmet needs. But in the short term, there's no doubt in Q3, it had an impact on prescribing patterns and on health care utilization. We see that in our results and I think all companies to varying degrees are seeing that. I think now there had been these focuses in the past in China. I think this one given the sort of quick way it was rolled out, I think the generalities that we're in it as opposed to very specific pieces did cause some challenges in utilization in Q3, resulting in fewer patients being seen, fewer procedures. We saw health care practitioners who otherwise would have attended educational events and other things, who didn't do that in Q3 to the same degree.And we did have an impact on sales rep access where hospitals were sort of blocking access to rep. Now we've seen much of that now begin to normalize as we're here into the fourth quarter. So we expect and hope that by the end of this year, we're back to sort of normal practices and again good for long-term for the industry and certainly for Zai, but we will see some lingering effect, I think in the fourth quarter relatively modest for the things that we're focused on, particularly the VYVGART launch and I'll transition into that for your question. I think we -- while this has been challenging given those factors that I mentioned, we've been able to get off to, I think a really good start in terms of the launch and launch activities.As you mentioned, our sales in the third quarter for VYVGART really represents just a few weeks of commercial activity. Just a reminder to everybody, we were approved right at the end of June. We shipped product from Suzhou in early September. So just a little bit more than 60 days from approval by our count, that is small of a gap between approval and shipping as we have seen. So we're quite proud of that. But again, it only represents a few weeks of utilization from a commercial perspective in Q3. So, of course, a decent amount of those sales represent initial stocking, but now that we're through the end of October, we're seeing really good physician acceptance and patient prescribing and utilization of VYVGART.As you referenced, if you look at just our top 100 prescribers, more than 70% have already written a prescription or used VYVGART for their patients. And of those physicians, I think approximately half have already become repeat prescribers. So for launch metrics, these are really good and exciting, I think indicators of overall demand and certainly, we will expect, as we get into the fourth quarter, that utilization to continue and we'll see certainly restocking. So we do expect to record sales in the fourth quarter for sure as the patients continue to use and get the benefits of VYVGART. But the one thing I would say for the fourth quarter [Technical Difficulty] is we are in the middle of NRDL negotiations now for potential listing next year. And to the extent that, that leads to a favorable result, we have a couple of things that could impact fourth quarter sales for VYVGART. One would be to the extent that there is channel inventory we would make a pricing adjustment in line with whatever that NRDL price is that's negotiated at the end.We also have seen in prior years as we have a lot of experience with drugs gaining NRDL access, I think we have physicians who are ready to start a patient on the drug in -- sometime in September -- in December, and they know a listing is coming in January, you may see some delays in starts. So I think those things could impact the fourth quarter utilization a little bit, but overall, I think all the initial operational metrics and leading indicators are really positive for VYVGART and we're really excited about the launch of this drug.

[Operator]

[Operator Instructions] Next question comes from the line of Yigal Nochomovitz from Citigroup.

[Yigal Nochomovitz, analyst]

Just a few more on the VYVGART launch. You comment on whether these early adopters were community or academic centers and then were the patients new to therapy for MG or had they previously been on IVIg? And then if you could comment overall in terms of how many patients are currently on VYVGART and what the overall prescribing account number is? I know you mentioned the 100 top accounts, but how many total prescriber accounts are you focused on in China overall?

[Joshua Smiley, executive]

Thanks, Yigal. It's Josh. I'll try to cover some of that as much as I can. I think, first, in terms of the accounts and how we're focused, there are about 600 hospitals -- so just a reminder, there's like 200,000 patients with MG in China that are diagnosed and in some form of treatment, about 170,000 of those have gMG. So that's sort of the universe we're looking at. Of that 170,000, about 80% of those patients are treated at one of about 600 or about somewhere between 500 and 600 hospitals. So that's what we're really targeting over time is that 80% of the business. If you then look and you sort of get down to prescribers, it's coincidentally about the same.So we've got about 600 prescribers that are really our core focus, and again, they are spread across about 600 hospitals. So it's very concentrated. We've got about 80 reps right now that are focused on those accounts, will grow that number to about 150 post NRDL and that will cover again 80-plus percent of the prescribing universe. So when we talk about top 100 hospitals, that's -- that -- or top 100 prescribers, that's -- it's a pretty concentrated group. In terms of patient numbers, again, I would just say that we're seeing really good utilization and prescribing patterns among our physicians. I think even given the challenges we've seen with anticorruption in the third quarter, if you look at just the top 200 hospitals of that, about 600 that I mentioned, I think at least 75% of those hospitals we have reps that are able to get in and have in-person discussions and education with physicians.So I think we're off to a good start there. In terms of the -- what those patients who are getting efgartigimod look like, most of them have had some kind of treatment in -- for gMG. It's a mix of IVIg steroids and other sort of older treatments. Again, I think the thing that we've said historically here is this is a well diagnosed population and they are treated just with older therapy. So I think it's fair to assume that most of the patients who are getting VYVGART today are getting it and have had other treatments for gMG for sure. So I think that's -- and that's really our focus with the initial patient group is to get those patients who are in -- not responding well to current therapies and in many cases could be in an acute phase of gMG. So sort of by -- almost by definition, I think these are patients who have tried other and have been on other therapies before. Thanks, Yigal.

[Yigal Nochomovitz, analyst]

Okay. And then if I could just -- one quick follow-up, Josh. You mentioned with respect to the inventory once you had the negotiations with [ NRDL ] that you take a pricing adjustment. But if that inventory flowed into the market before 2024, then it would reflect the NRDL price or would it not? Just -- could you just clarify how that works mechanically?

[Joshua Smiley, executive]

Yes, it represent -- it would represent channel inventory that had been shipped in, that's already in the market and we just adjust -- we would adjust the price to whatever the NRDL piece is. So you've seen this with ZEJULA over the last few years when we've had a new price either as a function of an initial listing or subsequent negotiation, we look at the channel inventory and make a price adjustment for that piece. So it will be whatever -- whatever is in the market at that time, again, I say that, just to say that is just a common effect. We'll describe that when we -- if and when this happens when we report our next quarter sales. Again, though, what I would say is, we're seeing good patient utilization today. So we expect there's going to be a decent amount of patients who have already been on access and utilized VYVGART by the end of this year.

[Operator]

[Operator Instructions] Next question comes from the line of Anupam Rama from JPMorgan.

[Anupam Rama, analyst]

So on this VYVGART launch for gMG, how should we be thinking about reimbursement dynamics going into next year, NRDL, self-pay, any sort of private insurance contribution and how do you expect that to change over the next couple of years?

[Joshua Smiley, executive]

Thanks, Anupam. It's Josh. First, we're in the middle of NRDL negotiations for 2024 listing. As you recall, our big focus was to try to get an approval in the first half of 2023. So that we would be eligible to roll right into these negotiations. We're in the middle of those now, so not going to comment on potential price. But if we end up with a mutually acceptable price and are able to move to a listing for NRDL for 2024, in the past that generally happens in January of the calendar year, so January of 2024. And once then that happens that would then supersede or take out any commercial or supplemental insurance or private-pay. So, of course, that's why we're focused on making that happen because it opens up the market for the 170,000 patients who we believe can benefit from this therapy.So I think what -- what's the next important milestone is to conclude that negotiation and see where we end up on price. And if that's the case, then it becomes a matter in 2024 of getting that lifting and then getting that access pushed down to the -- as I mentioned, the 500 to 600 hospitals that are critical to our patient base, and that should -- based on historical experiences that over time -- takes a couple of quarters to get that all the way pulled through to all the hospitals. But again with an acceptable price and NRDL listing in 2024, that -- then we have basically open access for all of those patients who are suffering from gMG today.And, of course, then that's subject to the normal every 2-year negotiation, but as Samantha mentioned in the upfront question, there's been a lot of positive developments in how you renew price and go through these pieces, this is the transparency and automatic renewal piece. So we -- we're really focused on getting a good price, reflective of the value that VYVGART can bring to patients to get that for NRDL listing in 2024. And, of course, we can't say much more than that at this point, but more to come there as we proceed through the negotiations.

[Operator]

[Operator Instructions] Next question comes from the line of Ziyi Chen from Goldman Sachs.

[Ziyi Chen, analyst]

Just 2 questions. One is on the full year guidance because I remember that you previously -- earlier the year, you gave the guidance of USD 300 million revenue target this year. Now with all those anticorruption disruptions and third quarter, well, of course, there has been foreign exchange impacts, how should we think about the sales target for this year and what kind of level is really achievable? My second question is really on the margin, because in the past few quarters or much, it has been relatively stable, but into the third quarter this year on the year-over-year basis and a quarter-over-quarter basis, the margin has been declining by 2% to 3%. So trying to understand whether that was really because of the runoff of the efgartigimod?If that's the case, then how should we think about efgartigimod gross margin and profit margin going forward? And particularly, this is going to be a really new drug still need a lot of investment into sales and marketing commercialization. So how -- think about the return on these assets, is there any estimate on how big the drug could be to make it profitable?

[Joshua Smiley, executive]

Thanks. I'll start with the question on sort of outlook for the year and then Yajing, you can comment on the second question. Yes, when we did our Investor Day in June, what we said was consensus at the time for 2023 was approximately $300 million, we weren't giving guidance, where we said that we were comfortable with that outlook. I think the 2 things that have changed and you mentioned them, since then have been the -- sort of the full-year effect of the currency decline basically the weakening versus the U.S. dollar. So that's now fully, of course, reflected in our Q3 results and expected in Q4.And then the impact from the anticorruption efforts, which again I think will be mostly concentrated in Q3 with, as I mentioned, a little lingering effect into Q4. I think if you put both of those together, I think we're -- I think if I look at, and I know consensus is not fully updated, but I think if I see the consensus today that's in may be in that $270 million range, I think that probably reflects those 2 events. Of course, we're focused on, say, getting back to full strength as it relates to sales reps in front of physicians, driving VYVGART uptake, continuing to drive outperformance for ZEJULA relative to the class. So I think all those -- all the underlying dynamics that we talked about over the summer in our Investor Day all [ sounds ] good. We're just dealing with the currency effect, which is what it is.And then impact that we saw in Q3 with that abating I think in Q4, but probably a little bit of an effect. So I think those things probably put us on a reasonable long-term trend, but we are absorbing those 2 impacts in Q3 and Q4. Yajing, you can comment on the profitability question.

[Yajing Chen, executive]

Yes. Thanks for the question. So first of all, I'm going to answer the question about the gross margin in the third quarter. So our gross margins usually get impacted by the product mix and sometimes one-time adjustment in the quarter, so [ it's the timing of it ]. So we are going to see some variabilities quarter-over-quarter. So for third quarter, it is not because of efgar. So I just want to know that. And then I think we can focus on year-to-date, gross margin will be better than just picking up one quarter. And then over the next couple of years, we are going to see a few new products launching by which is going to drive significant revenue growth.So our gross margin for the long run will continue to increase over time as the volume picks up. And coming to specific question about at efgar, and efgar will be the same, the trend, right, the volume is going to increase. And our -- I think the partner and us are working on the manufacturing process that's going up to [ 20,000 ], and that will drive the cost -- the unit cost, very, very dramatically downward. So we are going to continue to see efgar gross margin to increase significantly over time. And then sales marketing efforts for efgar as Josh mentioned is a very concentrated effort, right? We're talking about 600 hospitals, like just a limited number of the specialty physicians, so we're talking about [ 150 ] reps, not a huge scale of that. And so in my case, we're very confident that we are on a trajectory to achieve the profitability very soon for efgar and also for the company as a whole.

[Operator]

Our next question comes from the line of Jonathan Chang from Leerink Partners. Mr. Chang, your line is open. You may unmute locally. Once again, Mr. Chang, your line is now open. Please unmute locally. [Operator Instructions] I'm showing no further questions at this time. I will now turn the call back over to Zai Lab's CEO, Samantha Du for closing remarks.

[Ying Du, executive]

Thank you, operator. I want to thank everyone for taking the time to join us on the call today. We appreciate your support. Look forward to update you again after the fourth quarter of 2023. We are very optimistic about the future of Zai Lab and we'll work hard towards achieving our -- our end goals as we all know what they are. Operator, you may now disconnect this call.

[Operator]

Thank you. Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.