Zai Lab Limited American Depositary Shares 2026 Q2 Earnings Call

Hello, and welcome everyone. Today's earnings call will be led by Dr. Samantha Du, Zai Lab's Founder, CEO, and Chairperson. She'll be joined by Dr. Rafael Amado, President and Head of Global Research and Development, and Dr. Yajing Chen, Chief Financial Officer. Dr. Shan He, our Chief Business Officer, and Dr. Yizhe Wang, our Operating Partner, will also be available to answer questions during the Q&A portion of the call. As a reminder, during today's call, we'll 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 adjusted loss from operations, which is a non-GAAP financial measure.

Please refer to our earnings release furnished with the SEC on August 6th, 2026, for additional information on this non-GAAP financial measure. At this time, it is my pleasure to turn the call over to Dr. Samantha Du.

Thanks, Christine. Good morning, good evening, everyone. Thank you for joining us today. Zai Lab has reached an important inflection point in its evolution from a regional business into a global biopharmaceutical company. We built this company by bringing first-of-best-in-class medicines to patients in China. Today, we are developing our own innovative medicines for patients worldwide. With our first U.S. regulatory submission expected next year. The transformation reflects the R&D capabilities we have built. We're conducting global multiple center registrational oncology trials, advancing additional clinical programs across oncology and immunology, and advancing our preclinical pipeline into IND this year. zoci, our potential first-in-best-in-class DLL3 ADC, demonstrates what Zai Lab is capable of. We advanced it from IND to global pivotal trials in less than 2 years, reflecting the speed and efficiency of the integrated development organization we have built.

By the end of this year, we expect to have three registrational programs in small cell lung cancer and neuroendocrine carcinoma. We're also evaluating Zoci in combination with T-cell engagers through collaborations with Amgen and Boehringer Ingelheim. Our second major global opportunity is ZL-1503, a potential first-in-class long-acting IL-13/IL-31 bispecific for atopic dermatitis. We believe it has the potential to bring together multiple attributes in a single asset, robust skin clearance, rapid and durable itch reduction, and longer dosing interval. Later this year, we'll report the program's first human data. At the same time, we continue to strengthen our commercial business. This quarter, we sharpened our focus behind our highest priority brands. Net product revenue grew 11% versus the previous quarter, and the business remained commercially profitable.

We're setting a strong foundation and expect a return to meaningful year-on-year growth in 2027, followed by the potential for our first U.S. product launch in 2028. Zai Lab's evolution into a global biopharmaceutical company is well underway. With a growing portfolio of globally developed, differentiated medicines and a profitable commercial business. We're confident in the path ahead and the long-term value we can create for shareholders and patients. With that, let me turn the call over to Rafael to further discuss our pipeline in greater detail.

Thank you. Thank you, Samantha.

Let me walk you through the pipeline and what to expect this year. Starting with Zoci, our DLL3-targeted ADC. Small cell lung cancer is one of the most difficult diseases in oncology, and Zoci has demonstrated what we believe is a potential best-in-class ADC profile. In patients who have failed frontline multiple lines of treatments, we're seeing strong responses, including high responses and control of brain metastasis. That efficacy, with a favorable safety profile, positions Zoci as a backbone for future combination regimens across lines of therapy. This program is moving fast. A global registration phase III in second-line plus small cell lung cancer is expected to complete enrollment in the first half of 2027, with a U.S. accelerated approval submission expected to follow later that year, and approval anticipated in 2028.

At ESMO in October, we will present combination data evaluating Zoci plus PD-L1 with or without chemo in first-line small cell lung cancer or during maintenance. Today's standard of care of IO plus chemo delivers a 60%-70% response rate, median PFS of about five months, and Grade 3 or higher treatment-related adverse events around 60%. NCCN guidelines recommend four cycles of platinum-based chemotherapy. A chemo-sparing regimen could offer better tolerability, allow longer treatment duration compared to systemic chemotherapy, and improve control of brain metastasis. This is the basis of our Phase III combination strategy with immunotherapy, which we have discussed with regulators. We anticipate initiating the trial in the coming months.

In extrapulmonary neuroendocrine carcinomas, where there is no established standard of care in the second line and beyond, zoci demonstrated a confirmed ORR of 38.2%, which is well above the roughly 18% seen with currently used regimens. We are engaging with regulators on a potential approval pathway using extended single-arm data from our ongoing second-line trial with a subsequent approval pathway in first line. 3 registrational programs underway by year-end. We are also collaborating with Amgen and Boehringer Ingelheim to combine zoci with T-cell engagers. A global phase I-B study with Amgen is already enrolling, including a cohort of untreated small cell lung cancer patients on a triple combination of zoci, IMDELLTRA, and IMFINZI. The global phase I-B/II study with Boehringer Ingelheim in neuroendocrine carcinoma is expected to initiate in the coming months. Beyond zoci, our next wave of global assets is advancing quickly.

ZL-1503 is a long-acting humanized IgG1 bispecific antibody targeting both interleukin-13 and interleukin-31 receptor alpha. It includes YTE amino acid modifications in the Fc region that extend serum half-life and support less frequent dosing. Through blocking both pathways at once, ZL-1503 is designed to break the itch scratch inflammation cycle with rapid, durable efficacy and less frequent dosing in moderate to severe atopic dermatitis. ZL-1503 is in the clinic now with first-in-human data in healthy volunteers to be presented in the second half of this year. This data set will include pharmacokinetic data following single-dose administration and pharmacodynamic data, including inhibition of AD-related biomarkers such as p-STAT6, TARC, and CCL26, a cytokine that recruits eosinophils during type 2 inflammation. We will also have an initial read on safety and immunogenicity, including assessment of anti-drug antibodies.

We are also currently enrolling patients with AD in the Multiple Ascending Dose portion of the trial, and we will share this data at a major medical conference next year. We believe ZL-1503, with a potentially differentiated profile, can address unmet medical needs in one of the largest markets in immunology globally, and we are moving this program forward rapidly. Beyond its lead indication, ZL-1503 has the potential to expand into additional IL-13 and IL-31-mediated diseases, creating a broader development opportunity over time. We look forward to sharing updates as the program advances. I would highlight just two more programs. ZL-6201, our internally discovered LRRC15 targeting ADC. We are actively enrolling patients in the global phase I study and expect to complete enrollment in the dose escalation portion with initial data expected in the first half of next year.

By year-end, we expect to submit an IND for ZL-1311, a next-generation T-cell engager targeting MUC17, a promising target for gastrointestinal cancers. In summary, we have the infrastructure and capacity to advance multiple global programs at different stages of development simultaneously at speed and efficiency and across geographies, while also advancing a regional pipeline. We have significant data emerging throughout the year on our most advanced products, and I look forward to sharing it with you in the coming months. With that, I'll hand it over to Yajing.

Thank you, Rafael. As Samantha and Rafael described, Zai Lab is entering the next phase of its evolution. From a financial perspective, our objective is straightforward: build on our commercially profitable business while investing with discipline behind the innovation that will drive our next stage of growth. In the second quarter, net product revenue grew 11% sequentially to $105.8 million, and the business remained commercially profitable. ZEJULA was steady. VYVGART volumes grew double digits sequentially. ZALDIA, in the end, remained strong despite supply constraints, and KarXT's launch is off to an excellent start. In the second half of the year, we expect to further stabilize product sales while laying the foundation for a return to a meaningful growth in 2027. KarXT is expected to be a key driver of that growth. That's the first new mechanism of action for schizophrenia in decades.