Zai Lab is arguably one of the brightest stars at this ASCO conference. Their DLL3 ADC is both a global first-in-class and best-in-class, and now has relatively complete clinical Phase I data. Additionally, tumor treating fields (TTFields) therapy also drew attention at this ASCO, indicating that Accuray is about to expand indications into pancreatic cancer.
Of course, beyond this, Zai Lab's financial status and overall R&D layout are also worth analyzing. Their PARP inhibitors and FcRn inhibitors continue to scale up, with a bold goal of profitability by Q4 2025. Furthermore, behind DLL3 ADC, several other ADC pipelines are progressing, which are also worth noting. The recent rise in Zai Lab's stock price is a reasonable reflection of these fundamental changes.
Zai Lab's ADC debut amazed everyone last October. Their first ADC pipeline, ZL-1310, showed extraordinary efficacy in small cell lung cancer (SCLC). The waterfall plot of the published data is shown below. Out of 19 evaluable patients, the ORR reached 74%, with 14 achieving partial response (PR), and only 10% showing disease progression.
ZL-1310 uses the YL Biotech platform; its structure is shown below. Although the linker and payload still use Daiichi Sankyo's framework, there are clearly many modifications. These changes seem more like technical improvements rather than mere patent workarounds. The platform is also known for its high toxicity. For example, comparing YL Biotech's B7-H3 ADC YL201, whose recommended dose was locked at 2.0 and 2.4 mg/kg after Phase I trials, the Janssen B7-H3 ADC HS-2093, also developed on Daiichi Sankyo's basis, reached doses of 8-10 mg/kg.
Similarly, ZL-1310 only escalated up to 2.4 mg/kg during dose escalation.
Next, let's summarize ZL-1310's data from this ASCO. Last year's Phase I data was indeed explosive but limited by a small sample size of fewer than 20 patients. This time, data from a much larger cohort of 89 patients was presented. Below is the dose escalation and expansion design, with dose escalation up to 2.8 mg/kg, and a cautious recommended dose expansion at 1.6 mg/kg to avoid dose-limiting toxicity (DLT).
Regarding baseline characteristics: 30% of patients had brain metastases. Prior treatment lines were 1, 2, and 3 lines in 47%, 33%, and 20% of patients respectively. Notably, 90% of patients previously received PD-(L)1 inhibitors.
Safety data was very favorable: for doses under 2 mg/kg, grade 3 or higher adverse events occurred in only 6%, with overall adverse event incidence of 23% among all patients.
As for efficacy — the waterfall plot for all evaluable 74 patients is shown.
At 1.6 mg/kg dose, the ORR for second-line treatment reached 79%, and across all dose groups in second-line treatment, ORR was 67%, with the overall ORR of 51% for all 74 patients. Although slightly less impressive than last October's data, this is a common trend as sample sizes grow, shifting data from extremes toward averages. The recommended 1.6 mg/kg dose still showed very impressive efficacy that can compete with rivals.
In ADC treatment of SCLC, the main competitor remains B7-H3. Comparing clinical data: Janssen's B7-H3 ADC HS-20093, in a median second-line setting, showed ORR of 61.3% at 8 mg/kg dose. YL Biotech's YL-201, with median first-line treatment in an ES-SCLC cohort of 72 patients, had ORR of 68.1%.
Last October, DLL3 ADC was surprisingly better, potentially outperforming B7-H3, but current data show ZL-1310 and HS-20093 are neck and neck, requiring Phase III data for a head-to-head comparison.
As widely known, Accuray's TTFields (tumor treating fields) therapy is one of Zai Lab's most distinctive products. Originating from Novocure in the U.S., this therapy targets tough cancers. It was previously approved for glioblastoma, a highly malignant and difficult-to-treat cancer, for which besides chemotherapy, only bevacizumab is available. This time, it showed significant efficacy in the “cancer king,” pancreatic cancer.
Briefly summarizing the phase III study PANOVA-3: it targeted locally advanced pancreatic cancer (LA-PAC) patients. 571 newly diagnosed LA-PAC patients were randomized to receive gemcitabine 1000 mg/m² and nab-paclitaxel 125 mg/m² intravenously on days 1, 8, and 15 of each 28-day cycle, with or without TTFields therapy. The primary endpoint was overall survival (OS).
Results showed TTFields combined therapy significantly prolonged OS to 16.2 months versus 14.2 months in the control group. OS hazard ratio (HR) was 0.82 with a p-value of 0.039 (<0.05), indicating statistical significance. Progression-free survival (PFS) HR was 0.74, also favorable.
Don't underestimate these numbers: TTFields are not a CAR-T style “one-two punch” cure but an adjunctive combination therapy helping patients extend survival. This explains why Accuray still sells it fairly well in China. Despite only one approved indication (brain cancer), 2023 sales reached $47 million.
Therefore, indication expansion is necessary. Its 2024 revenue was just over $40 million, down 14% from 2023, and sales further declined 9% year-on-year in Q1 2025. The brain cancer market is small, and this high-end product struggles to penetrate lower-tier hospitals in smaller cities. The market has been largely tapped, so new indications are urgently needed.
Fortunately, Novocure achieved promising clinical results in NSCLC last year. In October, the FDA approved TTFields for NSCLC, a good indication expansion and a major breakthrough for Novocure's stagnant sales. This hopefully will bring a significant boost to Zai Lab's TTFields sales.
Guosheng Securities' 2023 research report projected a sales peak for TTFields of over 2.3 billion RMB using a DCF model, hoping this can be achieved through indication expansion.
Looking at Zai Lab's R&D pipeline, it is undeniable that the company is trying to transform.
Zai Lab benefited from its first wave of volume growth with Zejula, and the second wave with Eganelisib. Eganelisib's revenue was just over $10 million in 2023, then surged 9-fold in 2024 to $93.64 million (approximately RMB 735 million). Guosheng Securities' 2024 sales forecast for Eganelisib was RMB 577 million, so actuals greatly exceeded expectations. They also forecasted relatively low gross margins: 40% in 2024 and 2025, improving to 60% in 2026 as scale grows — very low for innovative drugs.
Guosheng projected Eganelisib's domestic sales peak at RMB 6.9 billion, and the entire pipeline's DCF valuation at RMB 7.2 billion, so reaching sales peaks of 4-5 billion RMB should be achievable.
The third wave of licensing dividends is the CNS drug KarXT, a star psychiatric drug. Its domestic registration was accepted by China's regulatory agency about six months ago. Considering licensing fees, Guosheng projected a 67% gross margin. According to their DCF valuation, KarXT's domestic sales peak could reach over RMB 6.5 billion, though this might be slightly overestimated and likely to be revised down.
After these waves of dividends, Zai Lab is considering a transformation, gradually shifting from a licensing-in model toward co-development partnerships to gain global rights. As shown above, its cooperation with YL Biotech includes several ADC pipelines where it holds global rights.
This is a very wise decision. Holding global rights means more business development opportunities, and YL Biotech's ADC technology platform is currently very reliable. Last year's DLL3 ADC data drove two large DLL3 ADC BD deals in the following months. Now Zai Lab has several globally licensed pipelines, all with huge potential. These promising assets deserve a dedicated article to analyze one by one.
