Zai Lab Limited (ZLAB) Q3 2026 Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for standing by and welcome to Zai Lab's third quarter 2026 financial results 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. It is now my pleasure to turn the floor over to Christine Chiou, Senior Vice President of Investor Relations. Please go ahead.

Christine Chiou: Thank you, operator. Hello and welcome, everyone. Today's earnings call will be led by Dr. Samantha Du, Zai Lab's Founder, CEO, and Chairperson. She will 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 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 adjusted loss from operations, which is a non-GAAP financial measure. Please refer to our earnings release furnished with the SEC on November 5, 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.

Samantha Du: Thanks, Christine. Good morning and good evening, everyone. We're entering one of the most important periods in Zai Lab's history. I founded Zai Lab to discover and develop innovative medicines for patients around the world. We have spent years building the talent, scientific capabilities, and infrastructure to make that possible. With zoci advancing toward a potential U.S. BLA submission next year, that vision is within our reach. Our first-line ESMO data strengthened our confidence that zoci can become the ADC backbone in small cell lung cancer. We are advancing the zoci-IO doublet into a global phase III study and building on it through our T-cell engager collaborations with Amgen and BI. The next two years are pivotal. By year-end, we expect three registrational studies underway across small cell lung cancer and neuroendocrine carcinomas. In 2027, we anticipate two registrational results and our first potential U.S. BLA submission, positioning us for a U.S. launch as early as 2028. This would be a defining achievement for our company. Our recent $250 million financing further strengthens our ability to deliver on the plan. Our ambition extends well beyond zoci. Next week, we will present the first clinical data for ZL-1503, our internally developed bispecific for atopic dermatitis. We also expect three additional oncology and immunology assets in clinical development next year. Meanwhile, we continued to strengthen our China commercial business. Net product revenue grew 2% sequentially, and our China business remained profitable. This performance is consistent with the stabilization we outlined on our second quarter call. We remain on track with that trajectory and continue to expect a return to year-over-year product revenue growth in 2027. I am very proud of what our team has accomplished, but our most important achievements are still ahead of us, and I look forward to updating you over the next year. With that, I will turn the call over to Rafael. Thank you.

Rafael Amado: Thank you, Samantha. I will focus on our two lead programs, zoci and ZL-1503. Let me start with zoci, our potential first-in-class and best-in-class DLL3-targeting ADC. At ESMO, we presented first-line small cell lung cancer data from our global phase I study of zoci plus atezolizumab. Across 33 efficacy-evaluable previously untreated patients at the selected 1.6 mg per kg dose, the doublet achieved a confirmed objective response rate of 81.8%. Responses were rapid, with nearly all observed in the first tumor assessment. We are also seeing encouraging signs of durability. In all 33 patients, the estimated six-month progression-free survival was 81.9%. Among the first 15 patients who had a median follow-up of 10 months, median progression-free survival and median duration of response had not been reached. At the data cutoff, 10 of these 15 patients had not progressed. For context, chemo-IO has historically delivered a median PFS of roughly five months. What further differentiates zoci is its potential to deliver this level of efficacy with substantially improved tolerability. With the 1.6 mg per kg doublet, grade three or higher zoci-related adverse events occurred in 9.1% of patients. There was a single case of grade one interstitial lung disease, which is consistent with our monotherapy experience. By comparison, grade three or higher treatment-related adverse events occur in roughly 60% or more of patients with chemo-IO. We believe these results are unprecedented in first-line small cell lung cancer in an unselected patient population for platinum responsiveness. Together, this data challenged the conventional view of what an ADC-based regimen could achieve in first-line small cell lung cancer, both in terms of efficacy, durability, and tolerability. On the strength of this data, we are advancing zoci 1.6 mg per kg plus immunotherapy doublet into a global randomized phase III study. We're also building on this backbone with T-cell engagers. The scientific rationale is complementary. Zoci rapidly reduces tumor burden, while the T-cell engager provides durable immune-mediated clearance. Importantly, zoci's favorable neurotoxicity profile may be particularly advantageous in these combinations, as T-cell engagers carry their own toxicity risk. Our global phase Ib study in small cell lung cancer with Amgen is moving rapidly, and our collaboration with BI is also advancing. Beyond first-line disease, our registrational phase III DLLEVATE study is evaluating zoci in second-line and later disease, including patients previously treated with tarlatamab. Contingent on enrolling sufficient post-tarlatamab, in addition to second-line patients, an interim analysis in 2027 could support a U.S. BLA submission for accelerated approval. Turning to extrapulmonary neuroendocrine carcinomas, or epNECs. This is an aggressive disease where there is no established standard of care beyond first-line chemotherapy. Historical response rates are between 10%-20%, and median overall survival is about six months. We have completed enrollment in our phase I/II second-line epNEC study. Tomorrow, at the North American Neuroendocrine Tumor Society Conference, we will present preliminary results showing activity observed across a diversity of epNEC subtypes. Based on the totality of the clinical data thus far and feedback from FDA, we plan to pursue a potential accelerated approval supported by this single-arm study. We expect final results in 2027 and a potential submission that same year. Now turning to immunology and ZL-1503, our internally discovered long-acting IL-13/IL-31 receptor alpha bispecific antibody for atopic dermatitis. ZL-1503 is designed to address two major drivers of disease: IL-13-driven inflammation and IL-31-mediated itch. By simultaneously blocking both pathways, ZL-1503 has the potential to break the itch-scratch-inflammation cycle, providing more comprehensive disease control with a single biologic. ZL-1503 also incorporates YTE modifications that extend its half-life, with the goal of enabling substantially less frequent dosing than currently available biologics. Next week, at the American College of Allergy, Asthma & Immunology meeting in Phoenix, we will present first-in-human data from the single ascending dose portion of our global phase I study in healthy volunteers. The SAD study has met its pre-specified endpoints, and we will share results demonstrating its safety profile, pharmacokinetics, immunogenicity, and sustained inhibition of IL-13 inflammatory pathway. Two more data sets follow next year. First, clinical efficacy, including itch control in patients with moderate to severe atopic dermatitis, and second, initial data from our fully enrolled IV to subcutaneous bridging study. We are planning phase IIb development in atopic dermatitis while also evaluating the potential for ZL-1503 across additional IL-13 and IL-31-mediated diseases. Our next wave of global assets continue to advance. This includes ZL-6201, our LRRC15-targeted ADC, ZL-1311, our MUC17-targeting T-cell engager, and ZL-1222, our PD-1/IL-12 immunocytokine. Lastly, with our China regional pipeline, we continue to progress multiple regulatory and development opportunities, including potential additional filings for efgartigimod and the ongoing registrational development of elegrobart in thyroid eye disease. And with that, I'll hand it over to Yajing.

Yajing Chen: Thank you, Rafael. Our financial priorities are clear: return our China commercial business to growth, maintain our disciplined cost structure, and fund our highest-value global programs. Our third quarter results showed progress on all three. Total revenue was $108.2 million. Net product revenue increased 2% sequentially, reflecting continued stabilization of our China commercial business. Across our priority brands, ZEJULA held its competitive position despite ongoing volume-based pricing-related dynamics and a competitive PARP inhibitor landscape. VYVGART volumes continue to grow sequentially on new patient starts, and KarXT continued to gain traction ahead of potential NRDL inclusion next year. We expect a return to year-over-year product revenue growth in 2027, driven by continued demand across our priority brands and a new NRDL listing. At the same time, we have maintained strong discipline in managing our operating expenses. Both R&D and SG&A expenses remained relatively stable compared with the prior year period, reflecting the operational efficiencies and resource optimization initiatives we have implemented across the organization. Our China commercial business remained profitable, providing a strong operating foundation as we continue investing in our global development program. We ended the quarter with a cash position of $659.7 million as of September 30th, 2026. In October, we raised approximately $250 million in equity at no discount to market, which further provides the financial flexibility to continue investing in the highest value opportunities. In summary, we have a profitable commercial business, a disciplined cost structure, and a balance sheet that supports our global innovative pipeline through its most important milestones. With that, I will open it up for questions.

Operator: Thank you. We will now begin the question-and-answer session. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Anupam Rama from JPMorgan. Please go ahead, Anupam. Your line is open.

Anupam Rama: Hey, guys. Thanks so much for taking the question. With the pivotal DLLEVATE study enrollment ongoing here, based on your discussions with regulators, can you give us a sense of how many patients, the amount of follow-up, and if there's an ORR threshold that you need to meet for accelerated approval?

Rafael Amado: Hi, this is Rafael. Let me take that question, and thanks for it. We did have discussions with the agency. The study is randomized trial with overall survival as the primary endpoint, but there is a possibility that there is accelerated approval based on response rate. To answer your question, the number of patients in the response rate accelerated approval analysis, which is a formal interim analysis, will include 200 patients, and this will be a mixture of patients that are after platinum progression or after platinum plus tarlatamab. In terms of the length of follow-up, it would be six months after the first scan assessment so that we can assess durability of response. The other criteria is all patients must be approved by the time this analysis is done. In terms of assumptions, we don't disclose assumptions, but with 200 patients, the study is overpowered really for efficacy, given that the historical rates are in the 20% range or so, and we've disclosed data in the 60% overall response rate in the second line plus. The reason for the 200 is so that we have a good safety database in addition to efficacy. Hopefully those details help you understand the interim analysis and the possibility of accelerated approval outside interim analysis.

Anupam Rama: Thanks so much for taking our question.

Operator: Thank you. We will now move to our next question, and our next question comes from Michael Yee from UBS. Please go ahead, Michael. Your line is open.

Michael Yee: Great. Thanks. Maybe two questions. On the DLL3 opportunity, clearly there is a multi-billion dollar horizon given what Amgen's tarlatamab is showing this week, and yet they're also partnering, or collaborating, I should say, with your ADC. Can you talk a little bit about how that collaboration's going and what studies have started or how you envision the two mechanisms perhaps working together such that you could maximize that multi-billion dollar opportunity? So that's question one. Then maybe the second question is, presuming that we do have great data next year and we're going to file with the FDA, do you have any view on whether you would partner, launch yourself? How are you thinking about the different scenarios for your product? Thank you.

Samantha Du: Thanks, Michael. I think Rafael will answer your first question, and this is Samantha. I'll address your second one.

Rafael Amado: Great. Thanks, Mike. With regards to the collaboration with Amgen, obviously the results of the DeLLphi-305 are, I think, practice-changing, and we're pretty excited to see those results. At the same time, we presented data ourselves with the combination with IO, where the PFS hadn't been reached after 10 months. I think their PFS was in the order of about 7.4 months. So, there's a possibility of using zoci with IO, but the big promise, I think, is the combination, because as you know, in the 305, there were a number of patients, a percentage of patients that couldn't really get maintenance because they progressed. They had less than stable disease on platinum etoposide and IO. So, being able to get everybody on maintenance should be superior to that study because the disease control rate using zoci is pretty high, approaching 100%. With regards to how things are going, the study's progressing well. We started with tarlatamab progressors to make sure there was combinability. We started with two different doses. We're pretty confident we can get to the standard dose of 1.6 mg per kg for combinability. And we look forward to the results of treating patients that are treatment-naïve with the triplet, and then continue to discuss with Amgen options going forward. But we believe that both zoci plus IO and zoci plus TCE plus IO would be options for patients that would move the field beyond even what 305 has done.

Samantha Du: Yeah, Michael, in terms of your second question about whether partnering or not, I think our current plan is take zoci forward ourselves, and that planning is already underway. Our priority today is execution. We are advancing our global program of zoci aggressively and remain fully committed to deliver the key clinical milestones we outlined. That said, we are also disciplined, as you mentioned. Global partners are interested in this asset and will evaluate any option that could accelerate patient access or increase shareholder values. Those evaluations are independent of our development plans, and I don't think they will change the pace or urgency with which we are advancing the program. Thank you, Michael.

Michael Yee: Great. Thank you.

Operator: Thank you. We will now move to our next question, and our next question comes from Li Watsek from Cantor Fitzgerald. Please go ahead, Li. Your line is open.

Li Watsek: Hey, good morning, and congrats on the progress. Two questions from me. So in terms of zoci in second-line epNEC, can you talk a little bit about your alignment with FDA on the AA submission and what the bar is? Then in terms of the confirmatory study, what would be the design timing of that? For example, do you need to enroll a certain number of patients before you file for AA? Second, in terms of the TCE combinations, you have two partners here. When will you be in a position to select a go-forward regimen, and what goes into that decision? Thanks.

Rafael Amado: This is Rafael. I will take both questions. With regards to epNEC or epNEC, we will present tomorrow at the NANETS conference in Las Vegas the latest dataset of about 60 patients. It is an update from what we presented at AACR. Just to give you a sense, there is really no standard second line for extrapulmonary neuroendocrine carcinoma, and people treat with a variety of regimens. Generally, the response rate is between 10%-20%. The progression-free survival is in the order of two months. So essentially, the next time the patients are scanned, most of them have progressed. The bar is really low, with percent of response rates approaching 40% and durability between five and six months. This is really being perceived as an advance in the field, particularly given that the tolerability is quite good. In second line plus small cell lung cancer, the treatment-related adverse events is in the mid-teens. Those are the discussions we have had with the agency. We have two sets of single-arm data that amount to about 100 patients, and depending on how the results read out after waiting for six months after the first scan, then that will determine whether or not we will be able to file for accelerated approval based on those single-arm studies. As you said, there will need to be a confirmatory study. We have discussed a design with the agency that was accepted. The design will be in front line. We will get into more detail as we get that study going. But we need to get it well underway before the action date. The study will start early next year so that there is no delay to the potential accelerated approval file that we expect to file next year. With regard to the TCE, we are working with both companies, with Imdelltra and Amgen and BI respectively. Obviously, Amgen has got a very dominant position in this space, and we will obviously follow the development path of both compounds. My sense is that the combination with IMDELLTRA may move faster, but we will just have to see. All I can say is that it is a very fruitful collaboration, and I described before what the makeup of the phase II study is. And we will take the data from there, and if it is positive, discuss with our partners how to advance the field with that combination. That is sort of where we are at the moment, but our desire is to move to the most active combination with the best benefit-risk as soon as possible.

Li Watsek: Thank you.

Operator: Thank you. Our next question comes from the line of Yigal Nochomovitz from Citigroup. Please go ahead, Yigal, your line is open.

Caroline DePaul: Hi, this is Caroline on for Yigal. Thanks for taking our question. We noticed NUZYRA came in stronger than expected this quarter. Can you help us understand what drove this upside, and has anything changed in your view of the product's longer-term growth outlook? Thanks.

Christine Chiou: Yizhe, can you take that question?

Yizhe Wang: Yeah, can you repeat the first line? My audio is a little bit choppy here. Which revenue?

Caroline DePaul: Sure. I was saying NUZYRA came in stronger than expected this quarter. Could you help us understand what drove this upside and whether your long-term view has changed?

Yizhe Wang: You mean the- which brand? You mean the-

Caroline DePaul: NUZYRA.

Yizhe Wang: -total revenue?

Caroline DePaul: Sales, yeah.

Christine Chiou: Yizhe, she's asking about NUZYRA sales.

Yizhe Wang: Oh, NUZYRA sales. Sorry, really the choppy, I really apologize. Yes, I think it is really about this is our strong partnership with our partners. The NUZYRA sales is coming in a little bit stronger. But again, as I said, I think we should be looking at our business as going in a totality. We do believe that NUZYRA could be one of the drivers for our total business going forward. Yes. So we believe this trend will continue.

Caroline DePaul: Great. Thank you.

Operator: Thank you. Our next question comes from the line of Daina Graybosch from Leerink Partners. Please go ahead, Daina, your line is open.

Daina Graybosch: Hi. Thanks for the question. I wonder if you could talk about a frontline strategy should Amgen's DeLLphi-312, where they're giving Tarla an induction of traditional chemo, is successful. If that's great and you have a traditional chemo option in frontline, how do you envision moving forward in frontline with zoci and Tarla? Thank you.

Rafael Amado: Yeah. Great question, and I think this is really what happens when a drug is being developed in the midst of a field that's evolving. IMDELLTRA, for some patients, will become a frontline drug, either in the maintenance setting or if that study is positive in the induction setting. I think the question will be how positive that study is, what the tolerability is of full-dose chemotherapy plus IO, as on these four cycles plus tarlatamab, and again, how that compares to the maintenance data and the data with the ADCs. We still think we're pretty confident that the efficacy that we've seen with IO is pretty strong. The response rates are incredibly high in the 80% range and long PFS. I think for then we'll have to see what the overall survival is eventually. We're launching that study this year, the frontline doublet study against standard of care. I think the data will really dictate what physicians and patients will choose. My sense is that we will have to evaluate what the safety of that induction combination is, and the tolerability of zoci is superior to carbo/etoposide IO by a really big margin. If that triplet with standard chemotherapy sparing type of approach is at least equal or superior to chemotherapy plus tarlatamab IO, then I think it would be a preferred regimen to use zoci than to use carbo/etoposide. Carbo/etoposide is a very old regimen, it is over 40 years old, and I think the field, my sense and the sense of many of the experts that I talked to in this space, is that the field will move away from chemotherapy if we can demonstrate that an ADC, either with IO or in combination with Tarla plus IO, by IO, I mean checkpoint inhibitor, is superior and is safer. It is a great question, but the data are not yet there. But the hope is that we can simplify the regimen, make it safer and more effective.

Operator: All right. Thank you. As a reminder, before we move to our next question, please press star one one if you wish to ask a question now. Our next question comes from the line of Linhai Zhao from Goldman Sachs. Please go ahead, Linhai. Your line is open.

Linhai Zhao: Thanks. This is Linhai from Goldman. Thanks for the opportunity. Regarding our sales growth outlook in 2027, can you preach the key drivers required to deliver the anticipated resumed growth in 2027, including the access expansion like NRDL coverage, the new launches, and the stabilization of the mature portfolio? Thanks.

Yizhe Wang: Thank you for the question. I will take this. Yes, we remain confident in our 2027 guidance on meaningful growth. The key drivers are really a couple of fronts. The first one are two, in anticipation of NRDL, there will be volume expansion coming from key brands like VYVGART SubQ, as well as KarXT, and also our main core brands. ZEJULA has shown it has regained its important patient shares. We believe that business will return to growth next year. Also XACDURO, as our supply constraint is relieved, we will see a meaningful growth as well. All in all, we are quite confident that we will be able to driving 2027 meaningful revenue growth. In addition, we believe the positive environment overall in China now favors an innovation portfolio, which I have, and we believe that in combination with our disciplined focused execution will allow us to really provide a predictable and consistent growth in 2027.

Linhai Zhao: Thank you.

Operator: Thank you. I am showing no further questions. I will now turn the conference back to Dr. Samantha Du for her closing comments.

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 again after the fourth quarter of 2026. Operator, you may now disconnect the call. Thank you.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your line.