Good day, and thank you for standing by. Welcome to the top-line POC data readout of ZL-1102. Now I'd like to hand the conference over to the first speaker for the day, Mr. Billy Cho. Please go ahead. Good morning, ladies and gentlemen. I'm Billy Cho, Chief Financial Officer of Zai Lab. We are holding this conference call to share exciting news about our early development candidate, ZL-1102, and Dr. Reinhart, Chief Medical Officer at Zai Lab for the Autoimmune and Infectious Diseases therapeutic areas, will make a brief presentation and then take your questions. Turn to slide two, please. 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. Such forward-looking statements are not guarantees of future performance, 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 have said. I refer you to our SEC filings for a discussion of risk factors that could cause our actual results to differ materially from those discussed today. Now I'd like to introduce Dr. Reinhart. Harald? Thank you, Billy. Good morning and good evening, ladies and gentlemen. Turn to slide three, please. As we announced in the press release yesterday afternoon, ZL-1102, our internally developed novel Humabody targeting the IL-17A cytokine and formulated for topical use, achieved proof of concept in a phase I-B trial in psoriasis patients. ZL-1102 was licensed as an early preclinical candidate from Crescendo Biologics. It is our first internally developed drug candidate to advance into full global development. For background, here's an image of ZL-1102, a Humabody derived from the heavy chain of IgG. Humabodies are much smaller than full-size IgGs, only 13.2 kilodalton compared to 150 kilodalton-160 kilodalton for IgG or a usual monoclonal antibody. Besides size, Humabodies have other favorable features. They can latch onto rather inaccessible epitopes. They can have higher receptor affinity and can have noticeably better chemical stability. We took advantage of these special physical-chemical characteristics in the design of our proof-of-concept trial. We wanted to study ZL-1102 as a topical treatment for chronic plaque psoriasis, hypothesizing that penetration of affected skin may be possible with a small biological when directly applied to the skin surface. Animals do not develop psoriasis. There's consensus in the literature that animal and in vitro models do not fully reflect the disease seen in humans. However, it is known that psoriasis is associated with a loss of keratinocytes barrier function, making the epithelial and epidermal layers more penetrable. We also know about the presence of pro-inflammatory IL-17 in psoriatic skin and the great results with IL-17 inhibitors like COSENTYX, secukinumab, that have truly revolutionized the treatment of moderate to severe psoriasis. Therefore, IL-17, especially IL-17A, is a validated target for therapeutics. Our goal is, in this first-in-human proof-of-concept trial, to test whether direct application of an antibody fragment like ZL-1102 can achieve lesion improvement while avoiding those side effects often encountered with systemically administered IL-17 inhibitors. On the right side of the slide, you will find our top-line results. In efficacy data in 51 evaluable patients, treatment with ZL-1102 showed approximately a 45% relative improvement compared to placebo in the local Psoriasis Area and Severity Index, or PASI score, of the target lesion at four weeks. A trend of increasing efficacy compared to placebo was observed over time. Anti-inflammatory effects were observed with clear improvement in erythema of the target lesion up to four weeks. Clinical improvement in scaling was also observed. ZL-1102 showed consistent clinical improvement in target lesion size reduction in the area compared to an area increase in the placebo arm during the treatment period. ZL-1102 also showed consistently higher responder rates over time compared to placebo up to four weeks. The responder rate in this study was defined as the percentage of patients who achieved a greater than 50% reduction in local PASI score of the target lesion measured weekly. The results for PASI score, erythema improvement, and responder rate at four weeks were maintained after the end of the study at six weeks. Safety data in 53 evaluable patients showed a benign safety and tolerability profile comparable to placebo, with treatment-emergent adverse events that were few in number and mild. Pharmacokinetic studies confirmed lack of systemic absorption of the compound. To our knowledge, this is the first-ever study to demonstrate penetration of a protein biological through psoriatic skin, showing clinical response. Turn to slide four, please. Here is an outline of our study design together with relevant entry criteria. Part A of the study enrolled a cohort of six patients with safety and pharmacokinetics, followed by a larger Part B, which was a randomized, double-blind, placebo-controlled, two-arm study for assessing ZL-1102 efficacy, PK, and safety. 11 centers in Australia enrolled a total of 53 patients in Part B. Entry criteria selected patients with mild to moderate CPP, with a suitable lesion by location and PASI score. The percentage change in PASI on day 29 was the key clinical criterion for efficacy. Patients self-applied a 1% preparation of ZL-1102 twice daily for 28 days. For further details, please refer to the ClinicalTrials.gov website. Before we take a closer look at the data, let me start by saying that patient demographics and baseline characteristics were well-matched across age, weight, height, sex, and local entry PASI, which was 8.5. Turn to slide five, please. Like most proof-of-concept trials, this study was made to provide first-in-human data on skin penetration and clinical efficacy. We were also interested in local tolerability of the drug formulation and, of course, the general safety profile. We included a fair amount of PK testing as we were unsure about the degree of transdermal absorption, if any. This study was not powered for statistical significance. Instead, we hope to see a directional trend supporting a go or no-go decision. As you know, the PASI score is the most commonly used severity grading system for psoriasis. We use the components of erythema, scaling, and induration, each run from zero to four when assessing a lesion. Therefore, the total lesion score can range from 0- 12. Our average patient had a local PASI of 8.5 at entry. Clinically, improvement over placebo was seen by means of percent reduction in local PASI and individual PASI components, responder analysis, lesion size, and histologically, a reduction in epithelial thickness. These results consistently show a trend towards improvement over time by various parameters, favoring ZL-1102 in every comparison. This was a rather short trial, treatment was only four weeks, these efficacy results have likely not reached their maximum improvement, and one would expect further PASI changes with longer treatment courses. Adverse events were rare in either arm. There were no premature discontinuations, serious adverse events, or deaths. Local tolerability was excellent as well. There was no systemic absorption. Of over 250 blood samples tested, none tested positive for ZL-1102. All were beneath the limit of quantification. This may explain why the safety profile was comparable to placebo. As of today, several tests are still pending. Among others, we are still awaiting a transcriptome analysis by RNA-Seq from skin biopsy samples. Please turn to slide six, please. The next two slides show typical before and after photographs of the psoriatic skin lesions showing ZL-1102 treatment effect. Case A shows a psoriatic plaque on the leg, which certainly demonstrated signs of improvement in erythema and scaling. Turn to slide seven now, please. Here you see a lesion in the elbow, ulnar region, a frequent site for psoriasis. Four weeks later, redness and amount of scaling is diminished, and the size of the affected area has shrunk with topical ZL-1102 treatment. Turn to slide eight now, please. Here is an overview of the currently available IL-17 monoclonal antibodies, many of which have become blockbusters. All are injectables indicated for moderate to severe psoriasis only. None are indicated for mild to moderate chronic plaque psoriasis. This has to do with the therapeutic index of these agents. While uniquely efficacious, they are also potent immunosuppressive drugs and carry various warnings and precautions, even black box warnings in their labels. Warnings about vaccinations, infections, TB, and herpetic reactivation, and other adverse events indicate that this drug class is not entirely benign. For these reasons, we believe our topical IL-17 directed therapy that works directly on the lesion and avoids systemic exposure has great market potential. Turn to slide 19. To summarize, we envision a significant market opportunity for ZL-1102. Psoriasis affects approximately 125 million people worldwide. Plaque psoriasis is the most common type, affecting 80%-90% of those with psoriasis. 70%-80% of those plaque psoriasis cases are mild to moderate, and marketed IL-17 inhibitors are currently not indicated for them. Topical therapies are the standard of care for treatment of mild to moderate disease. Current treatment options provide limited efficacy or have safety concerns with long-term use. To the best of our knowledge, this phase I study is the first one to demonstrate penetration of a protein biological through psoriatic skin, resulting in a clinical response. Zai Lab plans to advance ZL-1102 into full development, including registrational studies. We plan to present the complete data from this study at an upcoming scientific meeting and to submit them for publication. Thank you for your attention. We would now like to turn the call over to the operator to open up the line for questions. I would like investors to limit their questions to ZL-1102 and its clinical program. We will discuss the competitive landscape and our commercial plans for ZL-1102 at a later time. Operator? Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, please press the pound or hash key. Please stand by while we compile the Q&A roster. For participants who join by webcast, you can only ask questions by dialing into the teleconference. Once again, please press star one for your questions. The first question is from the line of Michael Yee of Jefferies. Please go ahead. Your line is open. Hi. Good morning. This is Dennis on for Mike. I just have two questions. Can you please clarify on the language in the press release when you talk about relative improvement over placebo? Can you put some context around that when you look at other topicals for psoriasis, and if you can sort of talk about how you think you can position yourself versus other topicals? Can you also give some clarity around the next steps? I know you guys mentioned the registrational trials, but how would those look like since you probably need to enroll patients outside China? How confident do you think you can show the same strong execution like you have in China outside of China? Thank you. Thank you, Dennis. This is Harald. Good question. I do believe we need to be very clear about what we considered our primary efficacy variable, which was% improvement over baseline. If you have a baseline PASI, as in our case, of 8.5, we want to see an improvement vis-à-vis the placebo arm that was run in parallel. As you know, in those kinds of studies, you have quite a significant placebo effect, it needs to be run in parallel just to make sure that we don't over-interpret or falsely interpret our data. In our case, we had a good separation from placebo starting at week two, it went out to week four, even out to week six for most of the parameters that we've looked at. Percent improvement compared to baseline, that's the primary efficacy variable that we used, and that's the PASI score, a local PASI in this case, because we restricted ourselves to patients which had mild to moderate disease, in this case, obviously a total body surface area of less than 10%. As far as the competition and the results, it's a bit hard to do a direct side-by-side comparison because most of the studies in this field actually run longer. They run for traditionally three months, some to four months. We can't really directly compare how our data would compare in a similar kind of setting with topical treatments. When we look at data for several other recent drugs like tapinarof and others, you will see that they also have a quite similar efficacy up to week four, and week four data don't reflect full efficacy. This is an important point, because many of those drugs don't really reach full potential. They don't plateau until month three. We were actually very positively surprised to see early responses, very early responses, because in this particular case, the study didn't allow us to go out to three and four months. We were very pleased to see that not just in one parameter, but in multiple parameters, we saw a response and separation from placebo. The next part of your question about next steps. As you indicated, yes, this is a global program. We are very happy to take this to the next step and develop this drug further. This will be going into full global development in multiple jurisdictions. We think we are competitive, as the study indicated, as far as the early efficacy readout is concerned. In this particular case, further studies will further delineate the efficacy and safety and the comparison that we have. However, let me also say that when it comes to comparisons, we need to be careful to compare apples with apples, topicals with topicals. In this case, being an IL-17-directed targeting therapeutic, we always look at IL-17 data as well that are being given by subcutaneous route. Please do not mix up these injectables, which have, despite the fact that they have the same target, they do have a different pharmacokinetic profile clearly. Does that answer your question, or did you have any other questions about this study? No, that's very helpful. Thank you. Thank you. Our next question is from the line of Anupam Rama of JPM, J.P. Morgan. Please go ahead. Line is open. Hey, guys. Thanks so much for taking the question. Just a quick one from me and a follow-up clarification question. Is there any preclinical work that needs to be completed before global studies can be commenced? As a clarification, the phase I-B, that included patients from China and Australia or Australia exclusively? Thanks so much. Yeah. Let me answer the second part of your question first. This was a study conducted totally in Australia. No participation of Chinese patients. phase or Part A and Part B all done in Australia at 11 centers. As far as the preclinical work, the preclinical work was mostly done at our place, in this case, at Zai in China. Is the work finished? It is almost finished. We have done and already initiated some remaining toxicology studies and safety studies in animals. We are on our way to an IND filing, and we will not have to finish any additional work from all we can see. Thanks so much for taking my question. Thank you. You're welcome. Thank you. Our next question is from the line of Yigal Nochomovitz of Citi. Please go ahead. Line is open. Great. Thanks for taking the questions. I had three quick ones. What's the longer-term strategy for 1102? Are you planning to retain global rights, or are you planning to partner potentially for late-stage development? Second, could you just quickly remind us what the royalties and milestones are that you owe to Crescendo on this asset? Third, are there any other dermatologic indications beyond psoriasis where 1102 could have application? Thank you. Yeah. Thanks, Yigal. Harald, maybe I'll take the first two? Yes, please go ahead. I'll give you the third one. Hey, Yigal. On the first question, that's a great strategic question. I think for us, and you know as well, our plan is to continue to execute well and get Zai Lab to a stage and scale pretty quickly where we have all the menu at our disposal in front of us so we can make sure we can make the right decision to create value not only for our shareholders, but most importantly, to the patient. We don't have a firm decision at this moment, but we want to have the full optionality. We can do it ourself and have the scale to be able to do so. We can partner out or enter into a more maybe perhaps strategic deal, structured deal where multiple products are involved. We want to have all those options available to us. As to your second question, in terms of the partners with Crescendo, the deal terms were quite modest, and therefore, we actually didn't even have to disclose the terms as they were viewed immaterial. That was in 2018, and our company's a lot bigger now. Basically, there's an upfront component, there's a royalty component, but they're quite low, given that we partnered, we brought in this human biotechnology so early on and had to do a lot of work, led by Harald and the internal team at Zai. Harald, do you want to take the third one? Third question. For the third part of your question, yes, clearly, we felt that psoriasis indication was the one that one should pursue first, given the almost overwhelming data that exists for IL-17 as a validated target. You're correct. There are other indications one could possibly pursue. We don't have it currently really planned out, but we could look into others, like atopic dermatitis, although here the data for IL-17 are just not as strong. We will have to evaluate all these issues as a topical preparation. Clearly, lent itself to be tested in other indications as well. Thank you. Thank you. Our next question is from the line of Jonathan Chang of Leerink. Please go ahead. Line is open. Hi, guys. Thanks for taking my questions. First question, could you provide some insight on the treatment rates for mild to moderate chronic plaque psoriasis, both in China versus the U.S./EU? What's your sense for the percent of patients that will need a novel therapy beyond the conventional options? Okay. Billy, do you want to take the first part? I'll take the second. Well, yeah. Harald, if you're comfortable, please put me on. Yeah, okay. Well, the treatment rate, it is really fairly high because the suffering that comes along with psoriatic lesions is quite significant. The treatment is dependent on the severity of the disease, it is dependent on the success rate, and it is also dependent on the availability of really potent medicines and their overall side effects. When we talk about the treatment rates, you have to remember that, especially for mild to moderate psoriasis, these treatments are not satisfactory. I am saying this despite the fact that steroids are obviously very efficient, but they cannot be really used long-term given all their side effects. That these are side effects both locally on the skin, which means atrophic skin, as well as systemic side effects, which makes it next to impossible to use highly potent steroids in certain classes for any length of time. In this particular area, you will see that mild to moderate psoriasis is underserved because patients are sometimes frustrated with the available options that are not sufficiently active, efficacious, or have safety issues. There is the niche for us, and we see the niche here coming in from an efficacy side and mainly also from the safety side to local tolerability being one, but systemic tolerability much more so, because most of the other topicals are absorbed and will have systemic side effects of some sorts or other. That's been clearly borne out by all the other categories of topicals that have been studied too far. Got it. Thank you. Second question, can you comment on any investigator-reported improvement in patients' symptoms, such as pain and itching, in general, and more specifically in treated versus untreated lesions? Yeah. Okay. Good point. Thank you so much. Pain and itching is usually a symptom much more associated with atopic dermatitis. No, we didn't record this because the PASI doesn't make user votes to dimensions, so we didn't measure it in this study. Maybe something to consider at a later point in time. We stuck with erythema, scaling, induration, which are the three components of the PASI, and that's the one that makes it the easiest to compare to other therapies out there as well. Good point. We didn't measure pain or itching. Got it. Thanks for taking my questions. Thank you. Once again, for those who wish to ask a question, please press star one on your telephones and wait for your name to be announced. For participants who joined by webcast, you can only ask questions by dialing into the teleconference. Next question is from the line of Seamus Fernandez of Guggenheim Securities. Please go ahead. Line is open. Great. Thanks. Guys, I'm a little kind of confused by this relative improvement estimate. Typically, what we see with a vehicle around topicals in plaque psoriasis is something in the range of a 6%-11% placebo response, with really no improvement from vehicle over time in any meaningful way, and certainly not at four weeks. I'm confused by this relative improvement metric, and I was just hoping you could help us understand it a little bit better. If the comparison to tapinarof is the right comparison, that's helpful. Just wanted to get a better understanding of the, I just don't understand why the actual rate current being presented here, whether it be on the PASI score itself or the differences of the two-point change, which is required by FDA on the IGA. I just wanted to get a better understanding of what's being presented here. Separately, as we think about the opportunity for other potential biologics, it doesn't appear that the breadth of the opportunity for this product would be similar to some other potential programs in development that are also pursuing atopic dermatitis. However, it would seem like you would have the capability to develop a separate and unique biologic potentially that could look an awful lot like DUPIXENT. Just wondering what other biologics you have in mind for this topical delivery and development program. Thanks. Yeah. Thank you for the question. I totally understand that we did not bring out all the data that exists currently, but follow me on this one. The percent improvement was the primary efficacy variable at day 29. We started out with a low PASI score in both arms, averaged out to 8.4, in the one arm it was 8.5. In one arm, it was 8.4, in the other it was 8.6. At day 29, we saw an absolute reduction in those numbers, and the separation was a total of 7.9 percentage point between the two arms. This is, as I said earlier, a placebo-related comparison because placebo activity does occur in these kinds of trials because of the attention patients do get, the treatments that are being monitored, and the compliance that is being monitored. In the placebo arm, you're referring to a placebo response of 6%-7%? I don't think that is what you see in topical moderate to severe psoriasis. It's 6%-13%, very consistent. Yeah. Usually you see those small numbers when you go towards severe psoriasis. If you go to others, obviously, the numbers go up because the placebo effect is larger. You're right, there is a significant number of patients that do respond to just placebo or vehicle treatment, as in our study, too. We saw a 17% rough number. I would have to verify, and we can get back to you. There was this separation of about 45% relative between placebo and active at day 29. As far as the other indications, I'm really not at liberty to talk about those. We spoke a bit earlier about other dermatologic indications. We have the right to the compound as such, and we are looking into other potential indications in which this drug, which is a Humabody, a very small fragment here of VH, the IGVH fragment, could be possibly used beneficially. We are very much interested in exploring that and might do some more POC trials. I think at this point in time, we don't want to speculate. Great. Thanks. That information is super helpful, though, on the differences between placebo and control. Thank you. Sure. Thank you. Thank you. Our next question is from the line of Yan Wang of Credit Suisse. Please go ahead. Your line is open. Thank you. I have two questions. As we know, there are two kind of novel, mechanism-based, small molecule topical treatments under FDA review. One is the tapinarof, another one I think is a PDE4 inhibitor. Can you quickly comment on what are kind of pros and the cons between biologics-based topical treatment and small molecule-based topical treatment? Yan, thank you for the question. Yeah, you're absolutely correct. There's tapinarof or benvitimod in development. It's a topical treatment. We do believe it is a very good drug overall. We have seen some data on it. It's called PSOARING study. Let me say this, we have very similar data early on as they have as far as efficacy. The second is you bring up what is the big difference here to ours. The biggest difference between a small molecule that penetrates the skin and has systemic side effects per se, or can develop or give rise to systemic side effects, is really the difference between our molecule and theirs. For tapinarof, you have to separate the two versions. There is benvitimod, which is a different formulation. For tapinarof, there is indeed a systemic side effect that's been noticed, and it's not surprising, but it's quite noticeable in that particular drug because it causes all kinds of dermatitis and folliculitis. For the other one which you mentioned, the PDE4 inhibitor that I assume you're thinking of is filgotinib, if that's the one. Sure. Filgotinib is also a well-known entity from its pedigree. It's a PDE4 inhibitor like apremilast or tofacitinib, just this time as a cream. We think the way of applying it is great, because we do believe in topical treatment, but we also need to realize that it's not terribly efficacious. Again, we are talking about something that is absorbed into systemic levels. I think the jury is still out. The market will determine. We will have to do more studies. One thing is also clear, we are the only one in our drug class. There's no other protein that has ever shown efficacy in penetration of a psoriatic skin lesion. Knowing what IL-17 antagonists can do, this is a logical consequence or a drug for a remission phase. I think that's one of the nice features. Not being absorbed is another added benefit, because the pathology is really in the skin. Okay, great. Thank you. I have a quick follow-up. Now we have this drug based on IL-17 antibody mechanism. Is there a way we can adopt it as a platform technology, trying to make other biological drugs into a topical treatment? For example, for TNF-alpha or for other biological drug, and then make for potential other indications, not just IL-17, applying to other biologic drugs. Yeah, that's a very interesting thought and a super good question. I do believe we are just opening the door here for these kinds of approaches. Being the first one is obviously nice, but again, we don't know how much the principle holds up for other applications, because a lot depends really on the nature of your molecule. I'm not the scientist to ask these details, but I can tell you we are very happy with the results, and we're very happy to see the absorption and the results coming through early on is also a very nice feature. I think you're right. There may be other proteins, other fragments, that would from now on be more scrutinized for efficacy by transdermal application. Okay, got it. Yeah. Thanks a lot. Thank you. The next question is from the line of Mike Liu of Goldman Sachs. Please go ahead. Hey, this is Mike. Just a quick question here. I'm sure you've looked into this. Just wondering about the PK and PD of the drug. Have you looked at the penetration and the bioavailability of this drug? Thanks. Yeah, thank you, Mike. This was one of our major unknowns when we started out this proof of concept trial, and that's why we did this Part A, Part B sequential treatment set up. The Part A was truly just an intense PK of systemic absorption. We couldn't, however, measure it. Maybe our tests are not sensitive enough, but I doubt it. We do wanted to make sure that we didn't have a drug that potentially have a high exposure. Again, none of that was known before. None of us had any data or guidance how a protein would behave in psoriatic skin, not a protein or a Humabody or an antibody of that size. This is uncharted territory, and we checked it out, and we're very pleased to say there is no systemic absorption. As far as PD, this drug class as such had sort of a hysteresis curve in response. You don't see a response right away, but when it finally kicks in, it does stay and hangs around for a while. We like to think that this has something to do with the intracellular mechanisms and signaling that's being affected here, which does take a bit of time. We saw efficacy starting week two, and that was seen in the responses of patients compared to placebo. From week two, week three, week four, week six, we have clear evidence that the responder rates increases over placebo in a very consistent fashion. There is this effect, which in this case starts with a slight lag, but not very long, and then has an extended PD effect which carries out beyond the last treatment. The last treatment in our case was day 29, and we see on day 42 still a good treatment effect and separation from placebo, clearly. Got it. Thanks. Thank you. That concludes our question-and-answer session. I'd like to hand the conference back to Mr. Billy Cho for closing remarks. Please go ahead. Thank you, operator. I would like to thank everyone for spending time with us today. We hope you've gained a deeper appreciation of the value potential of ZL-1102, as well as our global research and development capabilities. We look forward to giving you further updates on ZL-1102, as well as the rest of our broad innovative pipeline on a regular basis. This will be the end of the call. Thank you again. Thank you. This concludes today's conference call. Thank you for participating. You now all disconnect.