Zai Lab Limited (NASDAQ:ZLAB) Q4 2019 Earnings Conference Call March 19, 2020 8:30 AM ET

Company Participants

Billy Cho – Chief Financial Officer
Samantha Du – Founder and Chief Executive Officer
Tao Fu – President and Chief Operating Officer
Jonathan Wang – Head-Business Development
Valeria Fantin – Chief Scientific Officer

Conference Call Participants

Yigal Nochomovitz – Citigroup
Anupam Rama – JPMorgan
Jonathan Chang – SVB Leerink
Maury Raycroft – Jefferies
Yang Huang – Bank of America
Xiang Gao – Macquarie
Seamus Fernandez – Guggenheim

Operator

Hello, ladies and gentlemen, thank you for standing by. And welcome to the Zai Lab’s Full Year 2019 Financial Results and Corporate Updates Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, today’s call is being recorded.

Now it’s my pleasure to turn the floor over to Billy Cho, Chief Financial Officer of Zai Lab, who will make introductory comments.

Billy Cho

Thank you, operator. Good morning and welcome to Zai Lab’s full year 2019 financial results and corporate updates conference call. Earlier this morning, Zai Lab issued a press release, provided the details of the company's financial results for the 12 months ended December 31, 2019, as well as recent corporate update. The press release is available in the Investor Relations section of the company's corporate website at ir.zailaboratory.com.

Today's call will be led by Dr. Samantha Du, Zai Lab’s Founder and Chief Executive Officer. We will be joined by Tao Fu, President and Chief Operating Officer, who will provide more details on our pipeline including upcoming milestones and commercial progress. Dr. Valeria Fantin, Chief Scientific Officer and Jonathan Wang, Head of Business Development, will also be available to answer questions during the Q&A portion of the call. Because some of us are dialed-in separately, Samantha will take the lead on the questions and refer to Tao, Valeria, Jonathan and myself as needed.

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

These forward-looking statements are not guarantees of future performance and therefore, you should not put undue reliance upon them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. I refer you to our SEC filings for discussion of risk factors that could cause our actual results to differ materially from those discussed today.

At this time, it is my pleasure to turn the call over to Zai Lab’s Founder and Chief Executive Officer, Dr. Samantha Du.

Samantha Du

Thank you, Billy. Hello everyone and thank you all for joining us. First and foremost, I hope everyone is safe and sound as the global effort to contain the coronavirus has impacted all of us. This devastating outlook really shows how important global healthcare and coordination will be in the future.

On a greater note, I'm excited to provide an update on all the progress Zai Lab has made in 2019. Zai Lab is at an inflection point and I have great enthusiasm for what the future holds for us. Coinciding with the celebration of our five year anniversary, 2019 was a year of many important achievements for Zai Lab. Some of the key milestones achieved were the China NMPA regulatory approval for ZEJULA in second-line ovarian cancer.

Two additional submissions for regulatory approval in China for Optune and omadacyline. Collaborative agreement with Deciphera and Incyte continued build-out of the commercial platform in China launched ZEJULA and Optune in Hong Kong and further enhancement of our global in-house R&D capabilities.

Today, our portfolio consists of three commercial products in line with sales aspects, being evaluated in more than 25 clinical trials across oncology and infectious disease. Thinking ahead in 2020, we have another pivotal year coming off as we have or expect to file three submissions for approval in China, launched ZEJULA and Optune in China, deliver key clinical readouts, announce new strategic deals and as promised during our IPO advanced two discovery programs with global rights to IND submission.

We are proud of our global reputation as a biotech pioneer and a partner of choice in China. As we continue to deliver exceptional execution across global and local clinical development, regulatory affairs, business development, commercialization and infrastructure expansion. Within the next three years, we believe Zai is well positioned to reach our vision of becoming a leading global biopharma company with a steady stream of approvals and commercial launches in greater China across multiple therapeutic areas, internally generated global pivotal stage pipeline assets and transformative partnerships.

With regard to recent updates, at first worth addressing the impact caused by the coronavirus outbreak. Global health authorities have appropriately outlined the seriousness of the outbreak both in China and globally. And while it may be too early to speak to the optimal impact on our company, Zai Lab currently does not expect to be materially impacted from this unfortunate event.

In addition, due to the comprehensive taken measures we have quickly implemented across our firm, none of our employees have been infected so far. We have clear procedures in place to deal with any situations should they occur. Every company will be impacted differently by the virus. While we have seen some disruption to our certain aspects of operation during the first two months of 2020, we do not see the need to change our key clinical regulatory and commercial milestones at this time.

Having said this, we continue to monitor the situation very closely. We're doing everything we can to make sure all considering, our employees’ medical community, patients, regulatory agencies and partners are safe and supportive.

Moving onto other highlights. We recently announced in January that Zai Lab successfully reached total gross proceeds of approximately $300 million. Combined with our cash position at the end of 2019, our pro forma cash position exceeds $550 million. In the current market conditions such financials should be enable us to execute all of our strategic initiatives as we continue to expand our business.

I'm also thrilled to announce that following the China NDA acceptance of omadacyline this February and despite the turbulence caused by the coronavirus outbreak. Our sNDA for ZEJULA as a first-line maintenance treatment for ovarian cancer patients was accepted in China by the NMPA this week. I believe ZEJULA as first-line monotherapy treatment after surgery and platinum-based chemotherapy has the potential to fundamentally change how women with ovarian cancer are treated in China.

On the commercial front, I’m pleased to report that both ZEJULA and Optune have outperformed our revenue targets in 2019. According to IQVIA, the ZEJULA was not only the leading PARP inhibitor in Hong Kong with market share of 71% last year, but also ranked among the top five oncology drugs ever to launch in Hong Kong as measured by first full year revenue.

We also understand from our partner, Novocure that Optune last year in Hong Kong represented one of the most successful launches globally. Needless to say, we are excited to commercialize ZEJULA and Optune in China soon. While it's too early to comment on the launch trajectory of ZEJULA in China, we believe there are significant commercial opportunities. More importantly, we are excited that we have already started to address the unmet medical needs of platinum-sensitive ovarian cancer patients in China.

Building our own global discovery platform is one of the key pillars of Zai Lab’s long-term growth strategy. And I'm pleased to report that we are making good progress. We have prioritized three areas of research that includes DNA damage response, immuno-oncology and signal translation.

We are advancing our pipeline of assets in those areas by building our internal expertise in translational medicine and precision medicine approaches and by exploring the inter-portfolio combination. We expect to progress our first two global programs into the IND stage this year. We need world-class talent to achieve our goals and we intend to continue to build and add that to our global team across all functions.

We have opened Boston office this year and plan to a larger facility in San Francisco for the discovery organization this summer. As of February 2020, Zai Lab employed 733 full-time employees across seven offices globally with 293 and 340 employees engaged in R&D and commercial activities respectively.

This is a very exciting time at Zai Lab, our strategic mission is on a global scale. And we believe we have the experience and resources required to successfully reach our goal. As always, we want to thank you for your continued support and interest and look forward to keeping you updated with all of our upcoming milestones.

With that said, I’d now like to turn the call over to our President and COO, Tao Fu. Tao?

Tao Fu

Thank you, Samantha. As Samantha mentioned, 2019 was an extremely busy and exciting period for Zai Lab across a variety of fronts. We became a commercial stage company with the successful launches of ZEJULA and Optune. We gained approval of ZEJULA in Mainland China. We further expanded our portfolio with two new strategic partnerships, expanded our China commercial organization and our global R&D team through recruitment of top-level talent and significantly strengthened our balance sheet to further enable Zai Lab to bring many more important therapies to patients.

While our press release for this morning provides detailed updates across most of our programs. I like to focus my comments today on a few selected programs and near-term catalysts. That said, we'll be happy to answer any questions during the Q&A session on any assets that are not covered in our prepared remarks.

I'll start with niraparib or ZEJULA, a PARP inhibitor approved globally for the treatment of ovarian cancer and in development for several other solid tumor indications. We believe that it is a best-in-class PARP inhibitor with an attractive of efficacy and safety profiles without the need of blocker testing and superior pharmacological properties, including once daily dosing, low drug-drug interactions and ability to cross the blood-brain barrier.

As you know, ZEJULA was approved by the China NMPA in December for second line maintenance treatment of platinum-sensitive ovarian cancer patient, making ZEJULA the first and only Category 1 PARP inhibitor approved in China. As Samantha noted earlier, this approval represents the fastest timeline for submission to approval in China or locally manufactured category 1 oncology drug in 2019, underscoring Zai Lab’s execution track record and leadership in bringing important therapies to patients.

In addition, our sNDA for ZEJULA as a first line maintenance treatment for ovarian cancer patients was recently accepted by the NMPA. This submission was based on the results from the PRIMA study, as demonstrate that woman in both the HR deficient or HRD positive and HR provision or HRD negative subgroups experience a clinically meaningful and statistically significant benefit.

In addition Zai Lab recently completed enrollment of the Phase 3 PRIME study of ZEJULA in Chinese patients with first line ovarian cancer. We’re excited for an opportunity to bring this potentially game changing label expansion to China as soon as possible. Regarding the commercial launch of ZEJULA in China, we’re very proud of our team bringing this drug to the market in mid-January expeditiously following the approval.

In response to the challenges crossed by the coronavirus outbreak, we have taken immediate measures such as creating all lines physician and patient education and consoling platform. Getting ZEJULA on reimbursement lift out of provincial and municipal levels and maximizing commercial insurance opportunities. We anticipate providing initial commercial figures for Mainland China when we announced our next financial results and corporate update mid-year.

In Hong Kong, I’m pleased to report that our commercial launch continues to perform ahead of our initial financial forecast. While Hong Kong is a small market compared to Mainland China, we believe our initial performance validates two key items. First, the compelling profile of ZEJULA integrated China region. And second, the capabilities of our commercial team.

Therefore, we believe many drivers with accessing Hong Kong can be applied to our Mainland China launch, the further positions ZEJULA for success in our primary market. In today’s earnings press release, we announced the termination of the Phase 3 study of niraparib, our first-line maintenance therapy in patients with small cell lung cancer due to the rapidly changing landscape in treatment options.

While this maybe a setback for small cell lung cancer patients, we can refocus our resources and attention towards other indications with higher unmet clinical need and commercial opportunities for ZEJULA. In regards to other indications, we recently dosed the first patient in the Phase 1b combination study of niraparib with MGD013, a bispecific PD-1 LAG-3 DART molecule in advanced and metastatic gastric cancer. And we plan to continue to work closely with our partner GSK pursue other label expansion opportunities.

Looking ahead, we’re committed to making a meaningful impact on the way cancer is treated in China and globally. We believe ZEJULA is a potential best-in-class PARP inhibitor and our plan is to continue to develop ZEJULA in order to bringing this innovative treatment to as many patients who may benefit as possible, including indications beyond ovarian cancer.

Now turning to Tumor Treating Fields. If we can obtain a clinical trial waiver, we expect to receive the marketing authorization approval for Optune, the Tumor Treating Fields deliver a system for the treatment of glioblastoma in the first half of 2020. We view our initial commercial success in Hong Kong, it’s a very encouraging time for Optune and the unmet needs and can address in Mainland China.

As you may know, Novocure received an approval from the U.S. FDA for new indication last year for malignant pleural mesothelioma. We plan to file MAA for marketing authorization application mesothelioma to the China NMPA this year. While mesothelioma is not one of the major cancer types in China, the approval will be very strategic for us even that the next label extension opportunity is in non-small cell lung cancer. Beyond glioblastoma and mesothelioma, there are a number of exciting anticipated milestones ahead of this program.

In particular, Novocure expect to announce interim results from its LUNAR Phase 3 trial in patients with non-small cell lung cancer in the second half of 2020, which has a significant market potential in China. We also have an ongoing Phase 2 pilot clinical trial in first line gastric adenocarcinoma, which enrolling well. Just as a reminder, the annual incidence rate in China for lung cancer and gastric cancer are over 733,000 and the 679,000 diagnosed patients respectively, according to the 2015 national cancer statistics.

Now on to Ripretinib, our investigational KIT and PDGFR kinase switch control inhibitor licensed from Deciphera. In February 2020, our partner Deciphera announced U.S. FDA acceptance under priority review of its NDA for Ripretinib in patients with advanced gastrointestinal stromal tumors or GIST. The submission was based on the compelling data from the pivotal Phase 3 INVICTUS clinical study of ripretinib in patients with advanced GIST, where the study met its primary endpoint of a significantly improved median progression free survival of 6.3 months compared to one month in the placebo arm and the risk of disease progression or death was reduced by 85% or hazard ratio of 0.15 compared to placebo.

Looking ahead with Zai Lab in China, we plan to submit an NDA for the China NMPA for fourth line advanced GIST this year and initiate bridging the trial for second line GIST in the second half of 2020.

And next with Margetuximab. Zai Lab announced last month the first patient has been dosed in the registrational bridging study of margetuximab, in combination with chemotherapy, for the treatment of patients with metastatic HER2-positive breast cancer. This follows the BLA submission for the U.S. FDA for margetuximab by our partner MacroGenics for the treatment of patients with metastatic HER2-positive breast cancer in combination with chemotherapy.

Looking ahead, MacroGenics expects to present final data for Phase 3 Sophia clinical trial in HER2-positive metastatic breast cancer by the end of 2020. In addition, Zai Lab expects to enroll Chinese patients in the Phase 2/3 MAHOGANY study, evaluate the combination of margetuximab, a checkpoint inhibitor and chemotherapy, a frontline treatment for advanced gastric and geo esophageal junction cancer by second half of 2020.

And finally, an update on omadacycline, our once daily oral and intravenous antibiotics with a treatment of adults with community acquired bacterial pneumonia and acute accurate skin and skin structure infections for our anti-infected pipeline.

In February 2020, Zai Lab announced that the NMPA has accepted its NDA with Category 1 new drug designation. We also announced today that we entered into an exclusive or promotion partnership with Hanhui, a leading player in the anti-infective area in China with established commercial infrastructure and extensive promotion and distribution network to market omadacycline.

The rationale behind this partnership was to expand omadacycline footprint will much broader China market and maximize its commercial potential as a broad spectrum novel antibiotics in the community setting. As for the rest of our late stage pipeline assets including our oncology portfolio and our global backend, which is different to omadacycline in that it requires a highly specialized the sales team focused on large hospitals and ICUs, we intend to directly market these products ourselves.

With that, I will hand the call over to Billy Cho, our Chief Financial Officer, who will provide an overview of our financial highlights. Billy?

Billy Cho

Thanks, Tao. I will now review our financial results for the 12 months ended December 31, 2019. Revenue for the period were $13.0 billion compared to $129,500 in 2018. Our revenues for the period were comprised of $6.6 million of ZEJULA sales in Hong Kong and Macau and $6.4 million of Optune sales in Hong Kong.

R&D expenses were $142.2 million for 2019 compared to $120.3 million for 2018. The increase in R&D expenses was primarily attributable to ongoing and newly initiated late-stage clinical trials, payroll and payroll-related expenses from increased R&D headcount and expansion of research efforts to support internal development programs.

Selling, general and administrative expenses were $70.2 million for 2019 compared to $21.6 million for 2018. The increase was primarily due to payroll and payroll-related expenses from increased commercial head counts and related costs as Zai Lab expanded its commercial operation in China.

For the full year of 2019, Zai Lab reported a net loss of $195.1 million, or net loss per share attributable to common shareholders of $3.03, compared to a net loss of $139.1 million, or net loss per share attributable to common stockholders of $2.64, for the full year of 2018.

As of December 31, 2019, cash and cash equivalents and short-term investment totaled $276.4 million. In addition, in January this year, Zai Lab announced the closing of an underwritten public offering with total proceeds, net of underwriting fees and other offering expenses of approximately $281.3 million.

We would like now to turn the call back over to the operator. We can go ahead and take your question. Operator?

Question-and-Answer Session

Operator

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] We have the first question from the line of Yigal Nochomovitz [Citigroup]. Please ask your question.

Yigal Nochomovitz

All right, great. Thank you very much. Hi, Billy and Samantha and Tao. Very good to hear that, there were no coronavirus cases among your employees. I wanted to explore a bit more, however, the impact of coronavirus has having on the business. I know, Samantha, you mentioned that you don’t expect the material impact on operations, but I would like to get a better understanding of what headwinds you might be seeing early – in early days of the niraparib, ZEJULA launch in terms of reduced new patient starts given potential travel restrictions or closed physician offices in the early innings. I do appreciate, obviously, that you did launch the product before the crisis became worldwide back in January. But nonetheless, important for us to understand, what you’re seeing in the field with that regard. Thank you.

Samantha Du

Thank you, Yigal. That’s a fair question. And as you mentioned, we are very fortunate, we launched product in mid January before the outburst of this coronavirus that mainly during the second half of February, and also the first week of March. So travel restriction was in China though. So, in fact, if you look at our sales activities in first half of – second half of January, till the mid of February, I didn’t see any impact on our commercial launch, mainly because our team has been very effective in not only in three weeks of the approval, but also in one day deliver all the supplies to 29 provinces and all the major hospitals.

But even during the travel restrictions and the outburst in China and we have seen some impact, but very keen also very entrepreneur, and there’s – we luckily held three launch events prior to this. So we have sold most of the CIs, especially the payout, before the major outbreak.

And so during the mid February and March in response to the challenges caused by the coronavirus, we have taken the immediate measures such as creating online physician and patient education and consulting platforms to deliver the products to patients at home or nearby pharmacy. And we’re also creating online – we’re also working on reimbursed selling on reimbursement, a provincial at a significant level. Within the first month we record three municipal cities give us a local reimbursement. Of course, they also work with the medical insurance – commercial insurance company. By now we have already several patients treated with that commercial insurance provided.

Yigal Nochomovitz

Okay, great. Thank you. And then just sort of following up…

Samantha Du

Sorry, sorry, Yigal, just one more last one. And I just also want to report for the last two weeks we’ve seen even the business because China relaxed on the travel restriction. But we’ve seen the sales team has come back and we see more patients, so new patients are add-on to the treatment.

Yigal Nochomovitz

Okay. So can you just confirm now that as of today or I’m not sure what day, but you can tell me when did the sales force return to the field on a full scale basis?

Samantha Du

I’d say in cities other than Hubei province the other sales force has majority with back on the field. But they are still not full skilled on the visits to hospitals. Certain hospitals are now full like visits, some hospitals still have limited time to allocate to the visits. So I cannot say 100% by end of the month or with that question I have to answer based on the evolution of the coronavirus situation in China. But luckily the coronavirus situation in China has been in control for awhile. And the way you’d like to continue to see back before we can report the full sales force feedback for the sales.

Yigal Nochomovitz

Okay. And then just quickly in terms of anything you’re seeing with respect to enrollment rates for the ongoing clinical trials as well as the supply chain integrity for ZEJULA and Optune with respect given the coronavirus pandemic. Can you comment on any impact there or no?

Samantha Du

First, so I think the supply has not been interrupted at all, because we – as I mentioned, we’ve shipped the supplies the first day after we officially launched the product in mid January. And the first day delivery to all the hospitals, the pharmacies, and so they are – also from manufacturing side, we have enough supply and also the people already back to work if we need additional supplies.

And in terms of clinical recruitment, I have to say on this part, we are quite fortunate because we have several major recruitments and trials and one already completed not even patient recruitment, but also they’ll close the – we already closed the study, in the process data mining. The other one, we already completed patient recruitment in November and till the mid February to early March we did see some – we did see only 50% patients were coming back to the hospital for a follow on, but now we see more as of this week and last week with more patients coming back for follow on.

So other trails we are thinking either they are at the beginning – we haven’t announced, but if you look at the clinical.com in China’s CFDA website, we have 10 recent approvals of CTAs and they are in the process of getting the approvals and also the human genomic office approval so the trial has not taken off yet. And some other trials, we are ongoing on small bridging studies. They usually don’t need many sites, and those we don’t see impact.

Yigal Nochomovitz

Okay. And then just the final question is obviously, you’ve mentioned that you’ve got the sNDA accepted by the NMPA for ZEJULA for first line. Is it the case that you will not need to wait for the PRIME Phase 3 results to get the first line approval as occurred with second line with the NORA trial? I just want to confirm that the regulatory setup is the same.

Samantha Du

You mean in China?

Yigal Nochomovitz

Yes, in Mainland China, yes.

Samantha Du

Yes. In Mainland China, as you know, we got the second-line maintenance approval also not based on the China data. And the majority is based on the U.S. and also based on the PK/PD study. We do have a second-line maintenance study, we’re going to see the results hopefully this first half of this year and we’ll report by then. So for first line, we did not announce that we closed the study. And so as you expect, the package, we accept this majority based on the package from the same as the GSK submitted from the PRIME study. But of course, there are others we included, but the PRIME is the majority of the submission.

Yigal Nochomovitz

Okay. Understood. Thank you so much for your help and best of luck in managing and navigating through the remainder of the coronavirus crisis in China.

Samantha Du

Thank you, Yigal. I think the regulatory team on this regard, I have to really applause, they are experts. Because it’s major disruption to many business and especially the regulatory team emulated with many coronavirus effect, both on the kick side and on the treatment side.

Operator

Thank you. We have the next question from the line of Anupam Rama from JPMorgan. Please ask your question.

Anupam Rama

Hey guys, thanks for taking the question. Congratulations on all the progress and also glad to hear that everyone’s doing well at the company. I know that you have an infectious disease vertical at the company. Any thoughts on internal options or potential business development options that may present strategies for COVID-19? Thanks so much.

Samantha Du

First of all, we do not have an in-house discovery capability for viral and also bacterial. And in fact, however, we do look for opportunities. So other includes other anti-infectives, which we – over long we have been looking into those. I will turn more details to Jonathan Wang, our Head of Business Development to elaborate on this point.

Jonathan Wang

Yes. Hi, Anupam. Thanks for the question. I think we are evaluating a lot of opportunities anti-infective as Samantha said, we look at both anti-bacterial as well as anti-viral opportunity that have large unmet medical needs, especially in the Asia-Pacific in China. Although, we can’t – probably comment specifically on COVID-19 that within anti-viral we looked at a lot of opportunities as well. Some hopefully that answers your question.

Anupam Rama

Thanks for taking our question.

Operator

We have the next question from the line of Jonathan Chang from SVB Leerink. Please ask your question.

Jonathan Chang

Hi, congrats on the progress. And thanks for taking my question. First question, can you provide any color on the successful, the ZEJULA launch in Hong Kong and reasons for confidence that the success could translate into the China launch.

Samantha Du

Jonathan, thank you for taking the time to participate on this call. And I’ll refer that to Jonathan.

Jonathan Wang

Yes. Thank you, Jonathan. As Samantha mentioned, in our presentation earlier, the ZEJULA was launched at the end of 2018 and its first full year of sale achieved pretty remarkable revenue and ranked basically among the top five oncology drugs that was ever launched in Hong Kong behind the likes of Keytruda, Opdivo, Tecentriq and Tagrisso. And we also overtook our competitive drug even though we launched about 18 months after Lynparza.

So we now have over 70% market share in Hong Kong for the full year of 2019 based on IQVIA or IMS data. So the commercial launch in Hong Kong was very strong and we are confident that we can replicate the success in China overtime and we believe that the success is primarily due to having this best-in-class drug, as well as having a very experienced team that has clearly demonstrated the ability to execute and very rapidly rent-up sales. And even in China, despite the coronavirus situation, I think the team was able to mobilize very quickly for the launch in China. In fact, for all the products that was approved in December in China last year, we were the only product that was launched in January of 2020.

Jonathan Chang

Got it. Thank you. Second question, can you highlight the strategic similarities and differences between the ZEJULA and potential Optune launch in China?

Samantha Du

Jonathan, you can keep going for that question.

Jonathan Wang

Yes. I think for our pipeline, if you look at it, we – with the licensing on discovery is first-in-class, best-in-class profiles. And in the case of Optune, it’s, in fact, the only in cost. So first and foremost, we believe we have a very strong product, which gives our team a lot of confidence. And that has been demonstrated in Hong Kong so far, that launch as our partner Novocure has taught us and has told many people is probably their best launch out of all the geographies in terms of the ramp-up and the pickup in that location.

And having done very well in Hong Kong last year, I think that give us very strong confidence in China. And as you may know in China, Optune is also included in the national treatment guideline, which is the official guideline that the physicians should follow and tell the patients that there is a streaming option available for them. So I think with all these positive on the back of Hong Kong as well as on the physician endorsement, we're very confident about the launch of Optune in China once it's approved.

Jonathan Chang

Got it. Thank you.

Operator

We have the next question from the line of Maury Raycroft from Jefferies. Please ask your question.

Maury Raycroft

Hi everyone. Congrats on the progress and thanks for taking my questions. First question is just on the launches. Just wondering if you can provide any more specifics on the patients starts in Hong Kong for ZEJULA and Optune, and then for ZEJULA in China?

Samantha Du

Jonathan, you want to take – continue your discussion.

Jonathan Wang

Yes, sorry. I just want to clarify. You need the patient numbers in Hong Kong for both products.

Maury Raycroft

Yes. If that's – if you're willing to provide that info.

Samantha Du

Okay. So thank you, Maury. Yes. We currently do not have the splits in Hong Kong for the patients from Mainland China and also from Hong Kong. So we are not in a position to split that number yet.

Maury Raycroft

Understood. And for the bridging trial for ripretinib and second-line, just wondering if you can comment in how many patients you're going to need for that study and will you need that the study results from that in order to submit the NDA?

Samantha Du

So correct me, Maury, you're mentioning second-line, right, not the first or fourth-line.

Maury Raycroft

That's right.

Samantha Du

Okay. For second-line, we have two choices. We can either work with our partner to be part of the global – contribute to the global patient recruitment, or we can do a small parallel study, while they are doing the global trial. So it depends on our partners progress, we may go either way.

Maury Raycroft

Got it. And last quick question is, just on omadacycline, just wondering if you can provide more specifics on the agreement with Hanhui and what the terms are there?

Samantha Du

So thank you. I'll turn that question to Tao.

Tao Fu

Yes, sure. Sure, Maury. Thanks for your questions. So for us, we mentioned, this is really CSO agreement. So we really retain all the development right – regulatory right and will continue to be the MAH holder or we grant any exclusive promotional right to Hanhui, which is one of the leading anti-infective player in China. They have over 800 sales reps in the anti-infective business.

And if you think about this product, it really is a broad spectrum antibiotic that has a lot of view within the community setting. So you really need a pretty large primary care sales force promote this kind of product. So we think this is a fast go-to-market strategy versus building a primary care sales force ourselves. So as related to terms, I think we look all revenue, we receive upfront payments and milestone payments and there will be a profit split mechanism for their promotional efforts.

Maury Raycroft

Got it. Okay. Thank you very much for taking my questions.

Samantha Du

Yes. Also the Maury, just want to add a line, because this is our first family care and social anti-infective, that's why we'd like to work with a partner on this.

Maury Raycroft

Understood. Understood. Thank you.

Operator

We have the next question from the line of Yang Huang from Bank of America. Please ask your question.

Yang Huang

Thank you. Thank you for taking my question and congratulation on all the progress and it’s good to know that everyone is doing great on the road. And my first question is, I think earlier in the call, you mentioned for Optune, it is really important to get the second indication in mesothelioma and which has some indications we're getting lung cancer. Do you minded to further elaborate on that point?

Samantha Du

Sure. And thank you, Yang for joining the call and thank you for your time. I'll turn the question to Tao.

Tao Fu

Yes. Thanks, Samantha, and thank you, Yang for your question. So we do believe the mesothelioma approval is very important and also we're trying to get that indication approved in China as well, because it is the first validation of the Tumor Treating Fields technology outside the brain. And it really is a very strong technology validation. And as you know, mesothelioma is also a form of lung cancer and lung disease. So we believe the success there really bodes well for the LUNAR trial and at the current in non-small cell lung cancer and I do know that the very, very large market in China close to 800,000 patients per year. So we really think that’s validation, the potential of Tumor Treating Fields in lung cancer.

Yang Huang

Okay, great. Thanks. And my next question is about ZEJULA launch in Mainland China. So as I understand, the main channel for the ZEJULA for patients will be going through from pharmacy, right, not a house, probably not a hospital yet. So can you able to tell us how many pharmacies you already entered for ZEJULA? And what's your kind of year-end goal or how many pharmacies you can to get visualizing by the end of this year? Thanks.

Samantha Du

Yes. That's a very good question. And I think Jonathan has the detailed answer for you.

Jonathan Wang

Yes. Yes, thanks for that question, Yang. You're right. So the oncology products in China are the prescriptions are fulfilled at the pharmacies, but these pharmacies are also affiliated with the hospitals. But what I can tell you is that when we launched ZEJULA in Mainland China, we have about 150 sales FTEs dedicated to cover ZEJULA. For these 150 FTEs, they cover currently about 800 to 900 hospitals in Mainland China already. And that basically covers about up to 5,000 to 6,000 physicians as well in terms of our coverage. So I think, as Samantha said, we also got onto a couple of important municipal city reimbursement, while we still wait for the NRDL inclusion hopefully later this year. So we have already mobilized and have done a lot of work despite the coronavirus situation in China. And hopefully, that gives you a bit more confidence.

Yang Huang

Okay, great. Thanks.

Operator

We have the next question from the line of [indiscernible] from Credit Suisse. Please ask your question.

Unidentified Analyst

Hi, thanks for taking my questions. I have only two small questions. First, why is the – is there any particular reason that why we have not put much effort for ZEJULA in breast cancer. And my second question is, what is our focus for the in-house segment products and when we expect to see some milestones for these products? Thanks.

Samantha Du

Thank you for the question. I think in Tao’s presentation, we alluded to our effort in the breast cancer. Tao, why don't you cover this question?

Tao Fu

Yes. So thanks for your question. We are working very closely with our partner GSK on additional line extension opportunities for niraparib. So we intend to work with them closely and potentially join global studies. I think breast cancer is one of the indications about being served.

Unidentified Analyst

Thanks. Can you give me – give us some color on the in-house development product effort?

Valeria Fantin

Yes, Samantha, do you want me to take that one?

Samantha Du

Yes, Valeria, and please.

Valeria Fantin

Yes, sure. Thanks for the question. You were asking about when are we going to start hitting our milestones and actually, this is a key year. We are targeting one to two new global IND some sort of patient builds this year and we’ll be providing more details as these IND filings proceed. And in terms of the overall strategy for the portfolio, as Samantha mentioned earlier, the types of programs that you will be seeing emerging from our internal efforts fall into three major categories, immuno-oncology, DNA damage, response and repair and oncogenic signaling.

And these are the three areas that we have currently prioritized. Because as you know, there’s clinical validation for these three they are synergistic with our clinical pipeline. And as Samantha mentioned, we will be exploring intra-portfolio combinations and they are also aligned with the growing in-house expertise. So, this is a way to continue to build that an expertise in those three very key scientific areas.

Unidentified Analyst

Okay. Thanks. Thanks so much.

Operator

We have the next question from the line of Xiang Gao from Macquarie. Please ask your question.

Xiang Gao

Hey, thanks very much for the presentation and our company is holding out for our well in the volatile market. This is Gao Xiang from Macquarie. I have two questions. The first one is what is the update for the anti-infectives, especially for the EXT2514. So, is that also going to be collapsed with the sales company and the second question is the manufacturing of biologics, because we have quite a few drug candidates of biologics, right? So, I just want to know what’s the plan for the manufacturing for that category?

Samantha Du

Yes, sure Xiang. And that’s a good question. So, the second – for the manufacturing side, we always do API supplies from different suppliers; local supplier and sometimes, they qualify to suppliers. Because we don’t feel like API is especially for small molecule API. We don’t see that should be one of our core expertise, but we do work with very credible suppliers, the – on the commercial activity, so that we are talking about the project from the in-licensed Entasis, that is more hospital products and also more ICO products. We do intend to commercialize that ourselves.

Xiang Gao

Okay. So, for the biologics down the road, we also got to use some CMO.

Samantha Du

So, biologics, it’s so far, the imminent one we’re talking about is the PD-1 and also, the margetuximab. For those, they will be imported first.

Xiang Gao

Okay.

Samantha Du

and then during that time, if we switch to local, we either can go locally by ourselves, because we do have the capability to expand our manufacturing facility and or we can go to CMO, it depends on which makes sense at the time.

Xiang Gao

Okay. Maybe, just a follow-up question, maybe quick. Correct me if I’m wrong, I remember ZEJULA was actually the manufactured by ourselves, right?

Samantha Du

ZEJULA drugs product.

Xiang Gao

Okay.

Samantha Du

But again, API, we do use two suppliers, qualified local suppliers.

Xiang Gao

Okay. Got it. Thank you very much.

Samantha Du

Yes. Thank you.

Operator

We have the next question from the line of Seamus Fernandez from Guggenheim. Please ask your question.

Seamus Fernandez

Thanks for the question. So, just two questions here. Can you guys just update us again on the opportunity and just maybe, talk a little bit about that and timing and if there’s any complexities introduced from the collaboration with Deciphera, because of COVID-19 if there are any issues there. And then for Samantha, maybe, you can talk about what you think are there kind of near and long-term – if there are any near and long-term structural changes from COVID-19. I know that a lot of people aren’t inclined to consider potential positives coming out of this. But if there are or if there are any silver linings that you would envision on a long-term basis, love to know if any of your thoughts there? Thanks so much.

Seamus Fernandez

Operator, did that go through.

Samantha Du

Oh, sorry. I muted my line. So, let me thank you – really sorry about the hold-on. And yes, and with regard to the quick note, for the fourth-line GIST with approval in China, we do expect to leverage the INVICTUS data as part of our regulatory submission and – but in the meantime, we will conduct a bridging short breaking study and we will combine those data together to slobber and DSM nutrient. We do not expect the coronavirus will impact on this product.

To answer your second question, the coronavirus, I think in the short term, especially in regions affected in China, we do see some disruptions in both cells and also in clinical recruitment. But having said so, in medium term, we see a good recovery, but in long-term, I think companies like us, who has very strong fundamentals, who are always looking for the best and the first-in-class unmet medical needs and also we have a very strong cash position. We have, as Billy mentioned earlier, we have more than $557 million in the bank. So that would put us in an even stronger position to assist – to not only able to get through this crisis, but also come out to be organizationally more efficient and more thinking out of box and also have more agility to tap to global changes.

Seamus Fernandez

Thanks very much, Samantha.

Samantha Du

Thank you, Seamus.

Operator

We have the next question from the line of Yigal Nochomovitz from Citigroup. Please ask your question.

Yigal Nochomovitz

Thanks for taking the follow-up very quickly. Thanks, Samantha. Just regarding the prior question that I’d asked related to a trial enrollment given COVID, I think you mentioned that you were in a fortunate position, because one study was closed recently and another one completed recruitment in November, but could you just tell us which studies those were? Because it wasn’t quite clear. Thank you.

Samantha Du

Sure, Yigal. Thanks for asking. The one we already – in the data mining and the stage is the second-line ovarian cancer maintenance studies. So, it’s in the – the one we just closed the recruitment in November last year for the first-line ovarian cancer maintenance therapy.

Yigal Nochomovitz

Okay. Thank you very much for clarifying.

Samantha Du

Yes. Thank you.

Operator

[Operator Instructions] We have the next question from the line of Jonathan Chang from SVB Leerink. please ask your question.

Jonathan Chang

Hi. Thanks for taking the follow-up. on a different topic for MGD013, the PD-1 LAG-3 specific partner with MacroGenics. We’re expecting a pretty expansive OB heterogeneous update on the phase 1 study at ASCO this year. Where do you think this drug is most likely to show activity?

Samantha Du

Yes. Thanks, Jonathan for asking the question. I probably would like Scott to answer before I answer it. Does the data package…

Jonathan Chang

I got the next…

Samantha Du

Yes. the data package is this coming from them and unless Valeria want us to have some additional comment on that or Tao.

Tao Fu

Yes. So, I – Jonathan, I think it’s probably better for not MacroGenics to answer that question, but we didn’t note it in our prepared remarks that we actually had a combination trial of MGD013 and niraparib in gastric cancer that’s what we have filled to public.

Jonathan Chang

Got it. Thank you.

Operator

[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.

Samantha Du

Thank you, operator. I want to thank everyone for taking the time to join us on the call today. We appreciate your support and look forward to updating you periodically on our progress throughout the year. Operator, you may now disconnect this call.

Operator

Thank you, ma’am. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.