Hello, ladies and gentlemen. Thank you for standing by, and welcome to Zai Lab's Q4 2021 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 Billy Cho, Chief Financial Officer of Zai Lab, who will make introductory comments. Thank you, operator. Good morning, good evening, and welcome everyone. Zai Lab recently issued a press release providing the details of the company's financial results for the 12-months and Q4 ended December 31, 2021, as well as product highlights and corporate updates. 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, chairperson, and chief executive officer. She'll be joined by Dr. Alan Sandler, President and Head of Global Development, Oncology, who will discuss advances with our oncology product candidate. Dr. Harald Reinhart, President and Head of Global Development, Neuroscience, Autoimmune, and Infectious Diseases, who will speak about progress we've made in those three therapeutic areas. I will discuss the performance of our market products and conclude with comments on our financial results. Additional executives will also be available to answer questions during the Q&A portion of the call. 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, our sales and revenue forecasts for our products and product candidates, 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 a 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, chairperson, and chief executive officer, Dr. Samantha Du. Thank you, Billy. Hello, everyone, and thank you all for joining us. On this call, I'll discuss highlights from our 2021 and what we expect to accomplish in 2022. 2021 marked another year of strong growth and execution for Zai Lab. We significantly expanded our portfolio of potentially first-in-class and best-in-class assets. We made meaningful advances with our global pipeline of 11 assets, including achieving proof of concept for ZL-1102, our internally developed anti-IL-17A human antibody for chronic plaque psoriasis for global rights. Through business development, we deepened our world-class gastric and lung cancer franchises with four additional promising drug candidates, including adagrasib. We bolstered our autoimmune franchise with efgartigimod, a pipeline and a product opportunity. We expanded into neuroscience with an exciting KarXT. We achieved additional registry submissions and approvals, including our first non-oncology approval for NUZYRA. Our commercial execution continues to gain strong momentum for our four market products. We're also pleased to have Zejula included in the NRDL for first-line ovarian cancer maintenance treatment, and we expect it to become the leading PARP inhibitor in the ovarian cancer in China, given its unique label for ovarian cancer patients regardless of biomarker status. Last but not least, we further grew our talented global team, both in the United States and China, building a solid foundation for continuing growth and execution. We have set clear strategic priorities for 2022 to position ourselves to lead the next wave for biopharma innovation. First, we'll expedite bringing medicines to patients by accelerating important data results and regulatory filings across our entire portfolio. We plan to file the NDA for sacituzumab in China in mid-2022, subject to ongoing discussions with NMPA, and to initiate a China registrational study for nimotuzumab in first-line gastric cancer in Greater China. Second, we'll continue to invest in R&D and advance our internal pipeline with global rights. We plan to move our ZL-1102 into full global development and submit up to two INDs for internally developed compounds with global rights in 2022. Lastly, we'll leverage our leading position in China to accelerate our growing revenue base and to source innovation internally and externally with potentially transformative assets and partnership opportunities. Our mission is to build a leading global biopharmaceutical company. Looking ahead, we plan to have at least 50 market products approval in more than 30 indications by 2025. We believe that the regulatory environment will continue to be supportive of innovative biopharma companies like Zai Lab. We're also confident in the long-term market potential of our differentiated world-class portfolio, designed to address significant unmet medical needs and to create significant value for all of our constituents, including our shareholders. For example, we are currently forecasting that peak sales of the current assets in our lung and GI cancer franchises could generate up to a combined total of $2.5- 3 billion through 2030. Now I'll turn the call over to Dr. Alan Sandler. Alan? Thank you, Samantha. Zai Lab's oncology franchise continued to make progress on all fronts in Q4, and we expect to have a busy and productive year in 2022. For adagrasib, the FDA recently accepted the NDA filed by Mirati in second-line non-small cell lung cancer in the United States with a PDUFA date of December 14, 2022. In January of this year, Mirati announced exciting clinical data from a phase II cohort of the KRYSTAL-1 study in patients with KRAS G12C mutated GI cancers, revealing a 41% objective response rate and 100% disease control rate in the 27 evaluable patients. In addition, at ESMO in September, Mirati reported the top-line results of the phase II cohort in the KRYSTAL-1 study. In this study, patients with second-line non-small cell lung cancer harboring the KRAS G12C mutation were treated with adagrasib monotherapy at 600mg BID, revealing a 43% objective response rate and an 80% disease control rate. The safety and tolerability profile was consistent with previously reported findings for adagrasib in patients with advanced non-small cell lung cancer. In addition, Mirati reported positive clinical data from a cohort of the phase I/II KRYSTAL-1 study in patients with heavily pretreated colorectal cancer harboring the KRAS G12C mutation. These results showed that adagrasib alone and with cetuximab demonstrated significant clinical activity and broad disease control in these patients. These results are very encouraging and reinforce our view that adagrasib has the potential to be a best-in-class compound for patients with KRAS G12C mutation. We plan to join global phase III studies in second-line+ non-small cell lung cancer and second-line colorectal cancer in mid-2022. Moving to bemarituzumab, we plan to initiate a China registrational study in first-line advanced gastric and gastroesophageal junction adenocarcinoma in Greater China in 2022. Bemarituzumab is a first-in-class FGFR2B inhibitor with a sizable market opportunity in Greater China. There are no approved therapies specifically for these patients in China. For Tumor Treating Fields, Zai Lab partner Novocure anticipates top-line data from the phase III pivotal LUNAR clinical trial testing the efficacy of TTFields together with physicians' choice immune checkpoint inhibitor or docetaxel for the treatment of patients with stage 4 non-small cell lung cancer by year-end 2022. You will recall that in May 2021, the FDA accepted the IDE supplement submitted by Novocure that incorporated recommended changes from the interim analysis of the LUNAR trial conducted by an independent data monitoring committee, including reductions in the sample size to 276 patients and in the follow-up period to 12 months. We believe that this protocol change is a reason for optimism. For margetuximab, we filed an NDA in HER2-positive breast cancer with the NMPA in December, and the filing was accepted. Margetuximab is an Fc-engineered antibody molecule developed by MacroGenics and is an antagonist of a HER2 receptor and has been approved by the FDA to be used in combination with chemotherapy for the treatment of patients with metastatic HER2-positive breast cancer following treatment with two or more anti-HER2 therapy. Zai conducted a bridging study of margetuximab in combination with chemotherapy in advanced previously treated HER2-positive breast cancer that met its primary endpoint of median progression-free survival as defined by achievement of at least 50% of the efficacy of margetuximab plus chemotherapy in the SOPHIA study. The safety profile of margetuximab plus chemotherapy was acceptable and consistent with that seen in the SOPHIA trial. Moving to our internal research and development program, you will recall from our R&D day last year that we embrace an open innovation model. Our goal is to file at least one IND per year, and in 2022, we plan to submit up to two INDs per compounds with global rights. With an abundance of potentially best-in-class and first-in-class products, we are very excited about our oncology pipeline at Zai Lab. Now, I will turn the floor over to Harald Reinhart to discuss progress in our neuroscience, autoimmune, and infectious disease therapeutic area. Harald. Yeah. Thank you, Alan. Q4 brought several very encouraging new developments, clinical and regulatory, in our autoimmune and infectious diseases franchise, and added a new therapeutic franchise, neuroscience. I'll start with autoimmune diseases and efgartigimod. We had a positive meeting with the NMPA on efgartigimod that suggests the potential for an accelerated regulatory approval for generalized myasthenia gravis in China. Subject to further discussion with the NMPA, we expect to file the BLA in mid-2022. Zai's partner, argenx, received approval for efgartigimod in gMG in the United States in December 2021. We initiated clinical trials for efgartigimod in China for other indications, primary immune thrombocytopenia, ITP, chronic inflammatory demyelinating polyneuropathy, CIDP, and pemphigus, as well as a pharmacokinetic study. Next, I'll talk about ZL-1102, Zai Lab's internally developed novel human VH antibody fragment. ZL-1102 is potentially the first IL-17 targeting topical treatment for patients with mild to moderate plaque psoriasis. Last fall, ZL-1102 achieved proof of concept in a phase Ib study and is now advancing into global clinical development. We believe this is the first study to ever demonstrate penetration of a protein biological through psoriatic skin, resulting in a clinical response. Skin penetration was demonstrated by changes in transcriptome for inflammatory markers. With regards to efficacy, topical ZL-1102 resulted in a 45% relative clinical improvement in local PASI score, an improvement in erythema and scaling, in target lesion size, and improved responder rates. Clinically, we observed an early onset of action and consistent improvement over time. ZL-1102 had a benign safety profile comparable to placebo, with treatment-emerging adverse events that were few in number and mild. Pharmacokinetic studies confirmed lack of systemic absorption. Psoriasis affects approximately 125 million people worldwide, of which 80%-90% suffer from chronic plaque psoriasis. As 70%-80% of these patients have mild to moderately severe disease, there's a strong rationale and patient need to develop a topical formulation with IL-17-directed therapy that works directly on the lesion and avoids systemic exposure. Current topical therapies provide limited efficacy or have safety issues with long-term use. Moving on to infectious diseases. Our partner, Entasis, announced positive top-line results for sulbactam-durlobactam, known as SUL-DUR, from the global phase III registrational ATTACK trial. This trial evaluated the safety and efficacy of SUL-DUR versus colistin in patients with serious infections caused by Acinetobacter baumannii. SUL-DUR achieved the primary endpoint of statistical non-inferiority in 28-day all-cause mortality. Most patients had pulmonary infections with carbapenem-resistant Acinetobacter baumannii, known as CRAB. In addition, sulbactam-durlobactam met the primary safety objective of the study, achieving a statistically significant reduction in nephrotoxicity over colistin. Sulbactam-durlobactam is the first investigational drug to demonstrate efficacy against CRAB in a prospective, well-controlled clinical trial. CRAB infections are among the worst bacterial infections. Safe and effective treatment options are almost non-existent. As a narrow-spectrum antibiotic, sulbactam-durlobactam targets CRAB bacteria preferentially, thus potentially avoiding the collateral damage associated with broad-spectrum antibiotics. We look forward to bringing this drug to China and Asia Pacific, where severe CRAB infections are quite frequently seen in ICUs and associated with high mortality. We expect to file sulbactam-durlobactam with regulators in China in Q4 of 2022. As Samantha mentioned, we received approval for omadacycline, NUZYRA for CAP, or community-acquired pneumonia and ABSSSI skin infections, and launched the product in December. Billy Cho will have more to say about NUZYRA in a minute in his discussion of our commercial products. Finally, in Q4, we entered into the neuroscience area with our agreement with Karuna Therapeutics for rights to KarXT in Greater China. KarXT is an oral investigational drug combination consisting of xanomeline, a muscarinic agonist that stimulates M1/M4 receptors in the central nervous system, and trospium, an approved muscarinic antagonist that reduces the incidence of peripheral GI side effects. KarXT has already demonstrated clinical benefits in phase II studies in schizophrenia and Alzheimer's disease. In the phase II EMERGENT-1 trial, KarXT demonstrated clinically meaningful and statistically significant improvement in PANSS total score, which is the total positive and negative syndrome scale, and also in key secondary endpoints, including PANSS positive subscore and PANSS negative subscore. KarXT was well-tolerated, much better than xanomeline alone. Karuna is evaluating KarXT in late-stage clinical trials for the treatment of schizophrenia and psychosis in Alzheimer's disease. Recently, Karuna also initiated the phase III ARISE trial evaluating KarXT as an adjunctive treatment for schizophrenia in adults who inadequately respond to atypical antipsychotics. Additionally, Karuna plans to initiate a phase III study in Alzheimer's patients with psychosis in mid-2022. Results from a phase IB trial in healthy elderly volunteers indicate that standard doses of KarXT can be administered to elderly adults while maintaining a favorable tolerability profile. Zai Lab will work with Karuna to design the optimal strategy to accelerate the development and regulatory timeline of KarXT in China. Now Billy will speak about progress with our commercial products and financial results. Billy. Thank you, Harald. In December, the NMPA approved the NDA for NUZYRA, a novel antibiotic with both oral and intravenous formulations for the treatment of community-acquired bacterial pneumonia and acute bacterial skin and skin structure infection. The product was launched in December. NUZYRA was approved as a Category 1 innovative drug and is locally manufactured in China. It is the fourth Zai Lab product approved over the last 24 months. Our three other marketed products, ZEJULA, Optune, and QINLOCK, continue to achieve robust revenue growth driven by strong demand and commercial execution. ZEJULA continued to perform well, building on the news from the last quarter when the first-line ovarian cancer indication was included in the NRDL. This is important as the first-line ovarian cancer maintenance treatment is the largest indication for PARP inhibitors in China. With this favorable reimbursement decision and ZEJULA's unique label for ovarian cancer patients, regardless of biomarker status, we expect ZEJULA to gain strong momentum this year and to achieve market share leadership no later than next year. In addition, as of December 31, 2021, ZEJULA was listed in nearly 1,300 hospitals in China, providing a strong foundation for further NRDL online. Similarly, the launch of Optune is going well and will achieve solid growth. During the Q4, our team focused on continuing to improve market access by expanding commercial insurance and supplemental insurance coverage for Optune and educating target physicians about its significant clinical benefits, including survival benefits. Currently, Optune is covered by 33 municipal or provincial supplemental insurance plans and has become one of the top treatments reimbursed in 2021. As we noted last year, or last quarter, I should say, we successfully launched QINLOCK fourth line just in China starting last summer. The key focus of our launch is increasing physician awareness, market access, and the number of patients treated by leveraging the INVICTUS trial data and QINLOCK status as the only fourth line GIST treatment, regardless of the mutation status, as well as the guideline recommendation by the Chinese Society of Clinical Oncology. Currently, QINLOCK has been covered by 52 supplemental insurance plans since launch. We're still assessing the impact of the INTRIGUE results. However, we note that the fourth line GIST indication has over 7,000 new patients every year in China and growing, and we are committed to establishing QINLOCK as the standard treatment for this indication. Now I'll discuss our financial results. Product revenues for Q4 and full year 2021 were $44 and 144.1 million, respectively. Over the same period last year, product revenues were $15.1 and 49 million, respectively. We just completed our first calendar year of commercialization and are very pleased with the successful launches and the sales trajectory of our market products. With many more product launches to come, our commercial platform over time is expected to generate strong, continued growth and considerable operating leverage. ZEJULA sales for Q4 and full year 2021 were $29.4 and 93.6 million, respectively. Over the same period last year, the ZEJULA sales were $9.9 and 32.2 million respectively. Note that there was a - $7.5 million non-recurring adjustment to revenue in Q4 of 2021. This was due to one-time compensation to distributors for ZEJULA sold at the 2021 price that remained in the distribution channel before the NRDL implementation. Optune sales for fourth quarter and full year 2021 were $11.6 and 38.9 million respectively. Over the same period last year, Optune sales were $5 and 16.4 million respectively. QINLOCK sales for Q4 and full year 2021 were $2.9 and 11.6 million respectively. Over the same period last year, QINLOCK sales were $0.2 and 0.4 million respectively. R&D expenses were $573.3 for 2021 compared to 222.7 million for the same period in 2020. The increase in R&D expenses was primarily attributable to $321.3 in upfront payments for eight new licensing agreements, compared to 83.5 million in 2020, expenses related to ongoing and newly initiated late-stage clinical trials, and payroll and payroll-related expenses from increased R&D headcount. Excluding upfront payments for new license agreement, the core R&D expenses were $252 in 2021 compared to 139.2 million in 2020. Selling, general, and administrative expenses were $218.8 in 2021 compared to 111.3 million for the same period in 2020. The increase was primarily due to payroll and payroll-related expenses from increased commercial headcount and expanded commercial activities as Zai Lab continues to expand its commercial operations throughout Greater China. Zai Lab reported a net loss of $704.5 million for the full year of 2021, or a loss per share attributable to common stockholders of $7.58, compared to a net loss of 268.9 million, or a loss per share attributable to common stockholders of $3.46 for the same period in 2020. Excluding upfront payments for new licensing agreements, our cash used in operating activity and purchase of property and equipment and intangible assets was $309.2 in 2021 compared to 143.2 million in 2020. As of December 31, 2021, cash and cash equivalents, short-term investments and restricted cash totaled $1.41 compared to 1.19 billion as of December 31, 2020. We would now like to turn the call back over to the operator to open up the line for questions. Operator? Thank you. We would now like to open the lines for questions. If you have a question, please press star one at this time. To withdraw your request, please press the pound or hash key. Please try to limit to one question each time. Once again, that's star one for questions. Our first question comes from the line of Michael Yee from Jefferies. Please ask your question. Hey, good morning, everyone. Thank you very much for the question. Our question was around ZEJULA and thinking about the growth trajectory in 2022 and 2023 and 2024, as it relates to obviously getting expanded NRDL, but also as Billy noted, there were some price adjustments in Q4. How should we think about the growth in the future coming years, but appreciating that we might expect price cuts every couple of years? Talk about that in the outlook for ZEJULA. Thank you very much. Hey, Mike, this is Billy. I'll take your question. So, yeah, we're pretty excited to see the momentum, early momentum in ZEJULA, and of course, looking forward to implementing now the NRDL, you know, inclusion for first line, for all comer patients, which as we noted in the press release and the current call, it is the largest market opportunity for PARP inhibitors in China. I believe that, you know, AstraZeneca released in their earnings that their emerging market sales for Lynparza was around $400 million and, you know, more than 50% of that came from China. What we can share with you in terms of what we've seen so far based on the, you know, the data that we are following is that with our entry, we've seen that the, you know, the size of the pie, so the penetration of the PARP as a class in China, and at the same time, our market share within that growing pie has both been increasing very nicely. We expect that to continue for the foreseeable future, this year, next year, and even beyond. That's part of the reason why we had made the comment on this call that, you know, a little later than next year, we actually also expect to be the market share leader in the PARP, you know, as a class in space. Hopefully that gives you a sense of, you know, the answer that you're looking for to your question as well as the confidence that we have in both the opportunity. May I ask a little follow-up on the second part of that question, which was related to the price adjustment in Q4? Yeah. We saw this with another major drug as well in China, and so I'm not sure that- Yeah. Wall Street analysts may appreciate this adjustment every couple of years and how we need to think about that. What is your opinion of that? Yeah. So it is correct that this is universal, you know, pretty commonplace in our industry in China, where every time you are included in the NRDL, right before, you're going to have a non-recurring adjustment. If your question, Mike, is for ZEJULA in particular, you know, what do you need to factor in, you know, every couple of years? You know, could there be a possibility that we have to renegotiate for NRDL? That would be a case-by-case decision. Yeah, as you know, we also have additional indications that we have in the pipeline. What I can tell you is that, you know, for renegotiating the current indication, it's a lot more modest than, you know, a lot of the headline numbers that you've seen. For example, we had a 23.6% discount, right, to get the first-line indication, which is, you know, again, a very significant piece of the PARP asset class. You know, a couple of years later on, if we were to renegotiate, it'd be a lot more modest compared to, you know, the precedent that we've seen. Thank you. Mike, maybe just to add. Sorry, it's Jonathan here. I was in a negotiation with the NRDL late last year, so maybe you can provide a bit more color. Look, I think it's an important addition for us first to include the first-line front line. That gives us a very strong competitive advantage, you know, given we're the only all-comer product in that front-line setting. So we are really gonna expect to get a lot of volume in exchange for a modest discount. You know, this discount would not come if we didn't add this indication. Every two years, when we do renew, we do not expect. Although, you know, things would change, right? Things could change for the better, too. We don't know. You know, if we didn't have to add that new indication this time, we would not have to, you know, be subject to that, you know, discount. I think, you know, given our competitive product profile and given the volume exchange, I think we're already seeing that, you know, in Q1 that, you know, we're getting very good traction in terms of market share growth. Thank you. That makes sense related to the expanded label. Thank you. Thank you. Our next question comes from Yigal Nochomovitz from Citigroup. Please go ahead. Hi, Samantha, Billy, and team. Thanks for taking the questions. You made some interesting comments in the opening remarks regarding the lung and GI cancer franchises that could generate up to $2.5-3 billion through 2030. I was just wondering if you could just drill down a bit into that projection. Which products are you referring to in lung and GI? Can you talk a little bit about the assumptions you're using to get into that $2.5-3 billion dollar range and what the ramp may look like to get there? Of course, how confident are you that you can hit that $2.5-3 billion window by 2030? Thank you. Hey, Yigal Nochomovitz. This is Billy Cho. I'll initiate and others can chime in. Yeah, we could provide some more color, but before I do that, I'll just kind of recall that, you know, look, you know, we just wrapped up our first calendar year of commercialization. We're off to the races, and we have great momentum that we're gonna build upon. You know, I think we have a lot of new products launching, as you know, a pretty intense launch schedule over the next three, four years. We need to make sure that goes well, so we're still making investments. We felt as a team at Zai Lab that, you know, it may be useful, to, you know, both the, you know, buy side, sell side, for us to offer up, you know, kind of a framework on how to think about the commercial opportunity. We made those comments and you saw it on the release. You know, I mean, additional color that we can provide on, you know, the peak year revenue, you know, number of $2.5- 3 billion is that, first of all, it only includes our current portfolio. A lot of the epi data, et cetera, were based on statistics we've publicly disclosed and that you guys have. The portfolio in terms of, you know, revenue mix is very diversified. You know, we're not giving specific numbers and, you know, since just yet, but it's nice to see that it's a pretty diverse revenue portfolio. You know, because of the fact that we have so many products launching, you've got the waterfall effect as well. Over the next three, four years, you've got products launching and building, launching and building sort of at the same time. The growth curve actually accelerates in the, you know, the mid to later years. You know, I think that's the extent of, you know, kind of additional color that we can provide at this time, but hopefully you find it helpful. That's definitely a helpful answer for our modeling. Thanks. Then just one follow-up just on the broader portfolio strategy. Obviously, you have a very nice mix of therapeutic areas, oncology and infectives, autoimmune, and now Karuna with neuroscience. Just wondering about how much broader you'd be willing to go therapeutically. As you know, there are many novel mechanisms in other areas. For instance, cardiovascular, nephrology, bone disease, even platform approaches in gene and cell therapy are very interesting to potentially extend the portfolio. Just could you talk in broad brush strokes about how you're thinking about broadening the therapeutic reach with respect to your BD opportunities? Yeah. I mean, we just broke into neuroscience, and we're gonna stay awfully busy with the four that we have. But I'd maybe, you know, Jonathan, I don't know if you have any additional comments on additional TA strategy. Yeah. Hi, Billy. Maybe I'll just chime in. Jonathan here. Jonathan? Yeah. I think for us, you know, certainly wanna continue to strengthen those therapeutic areas, which we have built leadership positions in. I think just in oncology alone, we're seeing really a lot of opportunities. I think last year, you know, in autoimmune, in neuroscience, we have expanded with two, you know, pipeline of product anchor opportunities in VYVGART and in KarXT. I think we see a lot of these opportunities. I think what we're really building at Zai is a world-class, you know, company with truly innovative best-in-class or first-in-class assets. If there are assets that are synergistic to what we have, if there are assets which could, you know, help with a very large unmet medical need, we certainly continue to pursue those opportunities. You know, we've seen a lot of these opportunities today, actually. You know, these pipeline of product opportunities, you know, I think you can expect continued, you know, quantities of deal flow, you know, this year. You know, I think especially in these areas where we have significant presence, you can expect us to do what we've been doing good at, and potentially expand in other areas, you know, as we, you know, pursue global opportunities or maybe other transformative opportunities as well. Great. Thanks. Thanks very much. Thank you. Our next question comes from Anupam Rama from J.P. Morgan. Please ask your question. Hey, guys. Thanks so much for taking the question. Just a quick specific question on adagrasib. With the U.S. PDUFA in second line, set for later this year, are there plans to speak to regional regulators on an approval on ex-China, China data, for second-line lung for adagrasib? Thanks so much. Alan, do you wanna take this one? Yeah, sure, Billy. Yeah, thanks for the question. So, as you of course know, Mirati has announced the acceptance of the filing with the PDUFA date that we mentioned earlier in December. We believe that we are already in contact with Chinese regulators, and that will continue with our path forward. That should not change any of the timelines that we're looking for moving forward. Also, I know our partners, Mirati, are optimistic that as you know, in the U.S., sometimes with data that's very encouraging, those announcements can come before decisions can come before the PDUFA date. We're looking forward to continue to work with our partner, Mirati, on this exciting and potential first-in-class and best-in-class agent in China. Thanks so much for taking our question. Thank you. Our next question comes from Jonathan Chang from SVB Leerink. Please go ahead. Hi, guys. Thanks for taking my question. On bemarituzumab, to clarify, are you planning to initiate a registrational frontline gastric study in China in Q4 as a separate study from the Amgen phase III studies? And if so, can you discuss the rationale for this? Thank you. Alan, back to you. Yeah, sure. Thanks for the question. This is something that we're in discussion with our partners, Amgen, as the best method to move forward to get this exciting agent into patients in China. As you know, there's a significant number of patients that express FGFR2B. This is something that we're again, very excited about. We're still working on details as to how that is going to play out, and we'll of course be releasing more information as we get closer to that date. Jonathan, I think you are correct in assuming that it'll be a registrational trial for frontline. Got it. Is there a reason why it would be like a separate study from the Amgen studies versus, you know, participating in the Amgen studies? Yeah, as Alan noted, I think right now we're prepared to say that it's going to be in one way or another an efficient registrational trial pathway. We're still, you know, working closely with Amgen. Still working out the details as to the best way to move forward with the option. I'm sorry that I can't be more specific. Got it. Thanks for taking the question. Thank you. Thank you. Our next question comes from Ziyi Chen from Goldman Sachs. Please ask your question. Thank you for taking my questions. This is Ziyi Chen from Goldman Sachs. I think I got two questions on the financials. Number one is on the gross margin in Q1. It looks rather lower compared to previous quarters, 51% compared to 72% in Q3 of 2021. I'm trying to understand a bit more about the reason behind, what's the impact from the sales milestones, and also what's the impact from, you know, the rebates to the inventory, channel inventory in Q1. If we, you know, average out or back it out, what will be the reasonable gross margin assumptions we should be assuming for the portfolio going forward in 2022? Secondly, given the current funding environment in China and also globally for biotech, last year, I think companies still spent a decent amount of money on BD deals, licensing fees up to about getting very close to $400 million. Now, getting into 2022, when we are facing the challenge in the funding side, how should we think about budgeting for those BD deals? Are we gonna spend still a lot of money on the BD deals this year, or we're gonna be more focusing on budget control, refocusing on the clinical trials instead of a BD? Thank you. Hey, Ziyi. Thanks for your two questions. In terms of gross margin, Q4 2021, if you were to add back the non-recurring items, the $7.5 million NRDL deal negative adjustment, as well as which was in the press release and in our 10-K, it was also disclosed that in the cost of goods sold line item, there was also a one-time payment to GSK for hitting a certain revenue threshold of $8 million. Without those one-time adjustments, gross margin would have actually increased quarter over quarter, so from 72% in Q3 to about 73% in Q4. For the year 2021, if you made those same adjustments, you would have also seen an increase as well. Gross margin in 2020 was 66%, sorry, 66%. In 2021, normalized, it would have been around 70.9%. In terms of going forward, you know, gross margin for 2022 and even beyond, you know, as you know, it's really, you know, driven by sort of the product mix and what the launch trajectories of each product at their particular point in time. You know, there might be some, you know, we'll need some time to find kind of a steady state because, you know, we have such an intense launch schedule. Hopefully you see that, you know, we're already seeing some, you know, some certain productivity gains, right? Even in the gross margin level. With that said, that segues into your second question. Yes, 2021 was, you know, our most active BD year. Eight new partnerships and assets, which we're quite excited about. We are very confident that it could create a lot of value. But you do hit on a point as well that, you know, the current capital market environment is a little bit different than in the previous years. Now, I think we believe at Zai Lab that, you know, it kind of dovetails nicely with where we are in our life cycle. You know, our revenue momentum will continue this year and beyond. We're already going into productivity drive. For example, in terms of our sales and marketing, you know, team size and spend, you know, we don't expect to see a notable increase this year. For the investments we made, you know, last year, and even the prior years, you know, we're gonna enjoy some of the benefits, while not sacrificing any growth and also with a mind towards preparing for additional launches, in the coming years. But we will and we expect to do additional deals, and I'll let you know, Jonathan and other colleagues chime in. You know, we are very selective, as you know. If there are opportunities, especially in this market where there's a little bit of a dislocation, if there are very, you know, value-creating opportunities that meet our very high threshold and criteria, we have the balance sheet to do it. We are at the point in time for our company's life cycle where we have that flexibility to manage growth and productivity. All right. Thank you. Our next question comes from Seamus Fernandez from Guggenheim Securities. Please ask your question. Great. Thanks for the question. Just one quick question. You know, your next big catalyst, I think really will be tied to KarXT. Just love to get a sense for, you know, the key attributes that you think are likely to be most impactful. You know, does it relate to both negative and positive symptoms? In terms of the overall environment in China for what I think is, you know, largely a nascent opportunity but one supported by the Chinese government now, can you just walk us through how to think about the opportunity for KarXT in schizophrenia, but then perhaps more broadly in Alzheimer's disease? Do you really view these as two unique potential indications? Thanks. Thanks, Seamus. Harald, do you wanna take the first part of the question, and maybe Jon could chime in on the second? Yeah. Thank you. Thanks for the question. It's really a new opportunity for us. It's an anchor asset as you already heard from others, and we see this really differentiated, as a differentiated product for us and in the market here in general, and especially meeting an unmet need in China. Having said that, you already hinted at the efficacy side in the, you know, schizophrenia symptom scores on the negative symptom side which is something that is not well taken care of by current second-generation antipsychotics. By the way, it's also efficacious on the positive symptom side. We are covering very broadly with this drug combination, the most important symptoms that you see in schizophrenia patients. The second point, which should really not be forgotten, is safety and the safety of this drug. It has a totally different safety profile from all the other antipsychotics with their EPS, their extrapyramidal symptoms and so on so forth, which are a class effect seen regularly. Weight gain, commonly seen. Other side effects are related to the serotonin and dopaminergic effects of these, this drug class. We are obviously different here, and this is one of the differentiating features. What we believe is that schizophrenia is not well covered on the symptom score, the negative symptom score, and that's a worldwide phenomenon. We see ourselves differentiated here because there are no other drugs that really cover that area as well as KarXT. Having said that, the overall market size is considerable. It's considerable in general because schizophrenia is such a common indication, such a common affliction, but it's also something which the government in China is trying to address. Now, there is still a deficit here in the coverage and in the clinical care setting in China for this indication. It was recognized by the government in recent years, and they will act accordingly. This is already a well-known thing. Schizophrenia is a very common affliction, as I said in China, with what we assume is at least eight million patients that are currently diagnosed as such. We know that this doesn't cover everybody. This is not a very hard statistics. It's also a very concentrated market, I should say, because unlike the U.S. or Europe, you don't see the treatment really initiated in 1,000 small places, but it's much more concentrated in the medical centers. We see this as a way to address rather quickly a high unmet medical need in China. Does that sort of answer your question, or should I go into any details? No, that's very helpful. Thank you. Thank you. Our next question comes from Yang Huang from Credit Suisse. Please ask your question. Thanks for the question. I got a quick one too. Q4, we saw Optune sales is about $11.6, and then QINLOCK sales is about $2 point something. QINLOCK sales quarter-over-quarter is actually declining. The growth for Optune sales in Q4 seems also a little bit slowed down if we look at quarter-over-quarter. I just want to get some color. Is there a particular reason for what we have seen for these two drug sales in Q4? What could we look forward for the two drugs commercial performance every year? Hey, Yang. Let me chime in here. Thanks for your question. There are reasons. But at the same time, yeah, I think, you know, at the moment, you know, kind of in a nutshell, let me just walk you through those two questions then. Optune Q4 sales is $11.6 million. For the year, $38.9 million. You know, we've always said that the launch trajectory is not gonna be the same as, let's say, you know, a drug like ZEJULA, et cetera. But having said so, you know, we expect a very durable growth curve over time. We know this because we're also benchmarking. This is such a unique product. We're also looking at how Optune has done, you know, sold throughout the world, including even Asia. We feel pretty, you know, as months go by, as quarters go by, you know, we see the progress continuing well. We see that one of our focus areas, execution is doing well. For example, the supplemental insurance plan, we signed up 33 plans, and it's, you know, one of the top assets that can be reimbursed. It's the only non-drug, you know, treatment option. It really speaks volumes about, you know, how much value Optune Tumor Treating Fields, you know, can have in the marketplace. Now, we're not here to make excuses, but I will also note that there were some restrictions in large hospitals in the northern region of China due to COVID. Again, we're not gonna, you know, sit here and complain about that. We're gonna really just focus on, you know, making sure that the long-term trajectory is, you know, remains robust. You know, the 9% quarter-over-quarter from Q3 to Q4, you know, one could say that it was slower than the 12% from Q2 to Q3, but I also want to make that small remark. You know, starting 2022, we're pretty keen on the supplemental insurance strategy. We see nice, robust volume uptake coming from, you know, major plans like Shanghai, like Hangzhou. It's great to see patients, you know, getting access to this technology. QINLOCK, you know, Q4 was $2.9, 11.6 million for the year. You know, significant growth year-over-year, but it was down from third quarter. It's not due to demand. We had some, you know, channel inventory build, and I think that it was impacted also from the INTRIGUE outcome. You know, I think that's all we'll kind of say at this moment. The more important point is that we see strong hospital demand in Q4, which was, you know, which allowed us to absorb the inventory build. I think, you know, kind of reset our 2022 path. Okay. Yes, that's helpful. Thank you, Billy. Thank you. Our next question comes from David Li from Bank of America. Please ask your question. Great. Thank you management for giving me the chance to ask a question. Some of my question has been covered by the previous Q&A. Basically now I have two questions. Number one is, so what's your NRDL plan for your newly approved assets, for example, like QINLOCK and NUZYRA? How shall we think about your ramp up? This is my first question. My second question is, currently you have $1.4 billion cash on your balance sheet. So how to spend this money? What about the burning rates and the cash run rate now? That's my second question. Thank you. Thank you, David. I'll try to quickly address your two questions. The first part on NRDL plan. You are kind of right, no, you know, calling out NUZYRA in particular. A drug like that would require, you know, antibiotic in China, even though it's next generation, you know, innovative breakthrough second class, it would require NRDL for volume. It'll be eligible for this year's negotiation. I think you were mentioning about ZEJULA, but maybe you're talking about QINLOCK as well. QINLOCK is also eligible. It was eligible last year, and it'll be eligible this year for NRDL negotiation for fourth line. We'll make the right strategic decision, you know, based on the outcome of those negotiations. Now, to your second question about the cash burn or how to, you know, allocate our capital usage. We do have a strong balance sheet. We ended the year with little over $1.4 billion. You will see that in terms of core cash spend, you know, outside of the upfront BD activities, it was just shy of $310 million. It gives us a lot of flexibility and buffer, as I mentioned before. However, we're not gonna rest on our laurels there. You know, we are still in growth stage, there's no doubt about that, but we're also entering into productivity stage at the same time I made comments earlier about the, you know, some operating leverage and productivity drive in the commercial investments we made so far. You know, our R&D core R&D spend did increase 80% year-over-year from 2020 to 2021. Our R&D quite frankly has been you know very efficient given the size of our portfolio. It will increase this year given the progress we're making with you know many new assets we brought in last year as well. You can expect us to maintain that you know the same level of productivity efficiency in the R&D side. Again you know it gives us you know a lot of flexibility on how to manage growth and productivity from here on out. All right. Thank you, Billy. That's very helpful. I have no further questions. Thanks, David. Thank you. Our next question comes from Wilfred Yuen from Macquarie. Please ask your question. Oh, thank you for taking my question. I've got a quick one on TTFs, Tumor Treating Fields. What is our expectation for gastric cancer as we expect to have a pilot trial data later this year. How should we be thinking of the BART efficacy that will lead us to decide to move further to a larger clinical trial? Thank you Hey, Alan, do you wanna take this last question? Yeah. Yeah, sure. Thanks for the question. You know, as you point out, what we'll be doing is analyzing the data, looking at in particular response rates, progression-free survival, to see how that matches up with historical controls to see whether you know that data is exciting enough to move forward in a next registrational type randomized study. We're excited and looking forward to the data readout moving forward. Stay tuned, and hopefully that addressed your question. Got it. Great. Thank you. I am showing no further question at this time. I'll now turn the call back to Zai Lab CEO, Samantha Du, for closing remarks. Thank you, operator. I want to thank everyone for taking the time to join us on the call today. We appreciate your support and looking forward to updating you again after Q4. Operator, you may now discontinue the call. Thank you. Thank you. Well, that does conclude our conference for today. Thank you for participating. You may all disconnect.