Sichuan Kelun Pharmaceutical Co., Ltd. (002422) Earnings Call Transcript

Thank you for joining Kelun Biotech earnings call for 2025 interim results. Within the next 1 hour, we are going to present our 2025 first half performance in terms of both business and finance, followed by a Q&A session. Management presentation will be conducted in Mandarin with English interpretation. Please switch to English channel if you prefer English language. This conference call will be recorded and provided to Kelun Biotech's clients or used internally for reference and distribution. Any forward-looking statements made during this call are based on current expectations and assumptions made by the management. The company undertakes no obligation to update or revise unless required by laws or regulations. The audited information is just for reference only and should not be considered as investment advice or guarantee of the future performance. [Foreign Language] Next, I'm going to introduce attendees on corporate side. [Foreign Language] President and CEO, Dr. [Junyou Ge]; Chief Strategy Officer, Mr. Feng; [Foreign Language]; Chief Scientific Officer of the Biologics, Dr. Tan [Foreign Language]; Chief Scientific Officer of the Small Molecule, Dr. Yu [Foreign Language]; Chief Medical Officer, Dr. Jin [Foreign Language]; Chief Marketing Officer, Mr. Ding [Foreign Language]; Chief Officer for Commercial Management and Market Access, Mr. Chen [Foreign Language]; VP of Molecule R&D, Dr. [indiscernible]; Chief Financial Officer, Mr. Zhou. [Foreign Language] English interpretation has been ready on English channel. [Foreign Language]

Coming up, I'm going to give the floor to the CEO of the company. [indiscernible]. Please go ahead.

Hi, everyone. Good evening. Thank you so much for taking the time to join our 2025 interim results presentation of Kelun Biotech. We are going to cover 4 parts during the presentation. First of all, on behalf of the company, I'm going to review the performance of the company for the first half of 2025. And the second part is our commercialization, which I think many of you are interested in. We will have Mr. Ding and also Ms. Chen introducing these 2 parts regarding the marketing and commercialization and also go-to-market part of the company. The third part is the clinical information, which will be led by Dr. Jin. And the last part will be the financials, which will be presented by our CFO, Mr. Zhou. After the company's prepared remarks and presentation, we will open the floor for Q&A. And we are going to allocate the questions to the dedicated people. First of all, the first part of the presentation, which will take about 10 minutes about the company overview. I think you're all very familiar with this page. I think we've been a listed company for over 2 years. We have been presenting this page for multiple -- across multiple occasions. So you can see the biggest shareholder was our Kelun Pharmaceutical, which was our parent company. And also the second biggest shareholder is MSD, which also is a well-known competition in the world. Apart from these 2 major shareholders, we also have a world-leading R&D platform for ADC and other leading drugs as well. Right now, we actually have about over 30 projects on the pipeline across clinical trial stage, we have over 10 projects. By this first half of this year, we have actually got a lot of progress when it comes to approvals. We already have 3 products that have already finished the approval for 5 indications. We also have 4 in the process of being NDA approval. We also have 2 other products which we will introduce later. When it comes to our operation, we actually have over 1,870 people across the company. And you can see when it comes to the headcount, mainly it comes from the R&D. And apart from that, it mainly come from the commercialization and business development team as well, is mainly preparing for our go-to-market and also market access personnel. We actually have about nearly 400 people in the commercialization team because we now have more and more products ready for the market. We definitely need to increase personnel and headcount in marketing and also commercialization and production and quality control as well. When it comes to our product pipeline, you can see that we actually have 3 main products that are ready for the market. The first one is SKB315 -- sorry SKB264, is also known as [ MK-2870 ]. The indication is, first of all, TNBC. We also have the wild -- sorry, melton type lung cancer. First of all, for TNBC, we are actually the first in China that actually have gotten the approval as a TROP2 ADC for TNBC. We also would like to mention that we also got an approval as the first in the industry, globally speaking, for lung cancer as our indication -- target indication this year. For our sacituzumab-201 project, we also got an approval also by end of last year for our PD-L1 A167 project, also gotten approval for first-line indication as well. Right now, for NDA approval process, we first have our 264, which is a second-line lung cancer indication. In the first half of the year, we have submitted a new NDA for approval, which is for H2 positive and H2 negative indication. We also have A166 drugs as an ADC for 2 indications that are waiting for approval. So clinically speaking, we have several types of products. The first one is that we have adopted a differentiated conjugation strategy, including our 315, 410, 500 and 501 project. We also have some potential target ADC projects. For example, SKB518, SKB571. This is our first bispecific ADC. We also have SKB535 and SKB445. These projects are also in clinical trial stages as well. Dr. Jin is going to give you more information later. Also this year, we also have another project that are in clinical trial stage, which is our first RDC, SKB107. This also have entered the clinical trial stage. Next page, we would like to talk about our global partnership. When it comes to international or global partnership and also internationalization of our products, this has always remained very important and critical for our development. So apart from our important collaboration with MSD, we also have, for example, other products that are in partnership with MSD. Now obviously, for the past 2 years, MSD have kicked off 14 sac-TMT-related clinical trial projects, including monotherapy or combo therapy. So they have launched this global Phase III registrational trial -- clinical trials experiments around the world. At the same time, at the beginning of the year, well, actually beginning from the end of last year and beginning of this year, we also have launched a new partnership regarding SKB378. And recently, this project have entered the global Phase II clinical trial. Next page is our [ Opti ] ADC R&D strategy. I mean, this is very, very important for the past year. It has actually generated a lot of interest. I think we've talked about this before. I'm not going to go into the details. I would like to actually talk about the areas that we want to cover, which is oncology and non-oncology. For oncology, we actually have the replacement of chemotherapy and also going beyond chemotherapy. So for replacement, we have novel targets. We also have payload MoA. We also have new conjugation as strategies to replace chemotherapy. So these are our main strategies for replacing chemotherapy using our OptiDC platform. When it comes to going beyond chemotherapy, we have, for example, other payload MoAs and also adapted compound structures as new strategies. As we mentioned previously, we have already gotten some pipeline products going into clinical trials. The next page is our year-to-date achievement. First of all, we would like to report that we already have products ready for the market that are on market apart from the sac-TMT for third-line EMFG and non-small cell lung cancer. We also have second-line plus HR-positive and HER2-negative breast cancer. We have already submitted the NDA and actually, NDA have accepted the approval. We also have multiple pivotal trials initiated not only in China, but also globally because globally, MSD have kicked off 4 trials in first half of 2025 for OC, EC, TNBC and HR low positive and HER2-negative breast cancer. So these are global trials kicked off or launched by MSD. We also have been granted breakthrough therapy for breakthrough drugs for first-line non-small cell lung cancer. We also have released a lot of data across different conferences, including ASCO and also our second line -- sorry, our Phase II first-line TNBC results, et cetera. At the same time, regarding the 2 trials on lung cancer, we have published data for the first half of the year in BMJ. And we have also launched our third-line registrational trial results. We also have published our Phase I/II non-small cell lung cancer, EGFR mutant type non-small cell lung cancer data. Also, first half of the year, we would like to also report our A166. A166 has gotten approval to become the -- to actually carry out the cross-provincial segmented production pilot program because of its unique conjugation and also payload and also its antibody and DSCP, thanks to the new guideline from the government, we need to actually carry out the segmented production, and the country has actually kicked off some pilot programs. And this year, we submitted the approval. And next year, it will be 1 yearlong pilot program. And then based on that result, we will be pending whether or not it will actually be launched large scale. And our project A166 have successfully gotten the approval to carry out the cross-provincial segmented production pilot program. Once you've gotten the pilot approval, you can actually proceed and push forward the next level or next step of the testing and production and approval. Now for other projects, for example, A167 and also A140, those are already on market. We also have published data as well. For example, we also have the RET inhibitor. I think Dr. Jin is going to give you more clinical trial data elaboration later. Another thing that we would like to report is our financing from the capital market. We completed the H-share follow-on, USD 250 million worth of H-share listing -- sorry, not listing but financing. At the same time, we are currently included as a constituent of the MSCI Global Standard Indexes and also FTSE Global Equity Index Series and Hang Seng Index as well. So I think the next page is also very consistent with what we previously mentioned, and we always uphold, which is on the company level, our strategy has always been advancing differentiated pipelines targeting indications with significant medical needs. We also optimize payload -- we'll continue to optimize our payload linker strategies with novel ADC designs and structures, and we are going to explore application into non-oncology as well. Since last year, we have also strengthened and enhanced our end-to-end drug development and commercialization capabilities, and we have already achieved this closed loop of R&D plus commercialization and production as well. We will continue to expand our global footprint and strengthen our strategic partnership to maximize the value of our pipelines. At the same time, we will optimize our operational system to become a leading global biopharmaceutical company so that we can become more and more comprehensive as a company and also more efficient from the management's perspective as a global biopharmaceutical company.

Thank you, Mr. Ge, for your comprehensive introduction and review of the company. Coming up, Mr. Ding and also Mr. Chen is going to talk about our sales and marketing and also our market access so that we can understand better what we've achieved for the first half of 2025. Mr. Ding, please go ahead.

Great. Can you hear me okay? Do I come through okay?

Yes. Very clear.

Hi, everyone. Good evening. So for first half of 2025, we definitely believe that this is the first chapter and first year of our commercialization. And we also have really launched our first ADC as commercialized drugs. And the total sales revenue has achieved our expectation, which is around CNY 300 million. And so for the first half, so far, we have already covered actually over 30 provinces. From the city level, we have covered 300 cities, and we also have covered over 1,000 hospitals across China with over 10,000 doctors covered as well. We also have successfully got into cisco non-small cell lung cancer and also key guidelines, et cetera. At the same time, for the first half, we have already started partnership with over 400 pharmacies across China. So if we look at the comparison from second half to first half, we believe that first half has been -- gotten a lot of new approvals for new indications, and we have launched different specifications of the drugs, and those built very solid foundation for the second half of the year. So that's my very brief overview of the commercialization of our drugs for the first half. If you have any questions, I can elaborate later.

Hi, everyone. I would like to also talk about our market access of the company drugs for the first half of the year. We have 3 products ready for the market or they are already on the market. So we have already launched a lot of partnership with the important partners. For example, we have covered professional pharmacies, 400 of them. Some of them are dual channel pharmacies. Some of them are actually specific pharmacies as well. Now for our new drugs, as we mentioned, we have been going into different channels, and we're trying to cover actually 4,500 pharmacists in the first half of the year, which significantly enhanced the professionalism of our terminal services and also improve the ability to provide patients with our drugs. At the same time, we -- right now, our drugs are in out-of-pocket area. It's not being covered by medical insurance yet. So we need to do some more development. For the first half of the year, we have accumulatively covered actually 29 provinces. And for our products, A167, we have covered 25 provinces. So a lot of the interest has been surrounding the application or the approval of going into the medical insurance coverage. And actually, today is the last day of this process. And I think this is the last stage of the final review. And I think one thing that I would like to mention is that domestically, there are all kinds of insurance, including the medical insurance and we have already successfully covered 7 provinces going into this specific kind of affordable care. We also have gotten into 20 cities into another type of medical care, trying to solve some of the medical expense issues for using our drugs. That's all for the market access and commercialization. Coming up, Dr. Jin is going to walk you through our clinical trial development.

Hi, everyone. Coming up, I'm going to update you on our clinical development for 1H 2025. As was mentioned by our CEO, Dr. Ge, we talked about some of the key clinical studies. We already have 3 drugs that are on market. We also have submitted NDA approval for second-line HR-positive and HER2-negative breast cancer. Hopefully, with ESMO, we actually can have more recognition of our Phase III results. And for our second-line TKI resistance non-small cell lung cancer indication, we also are looking forward to publishing the results. Hopefully, we can get approval by end of the year. And hopefully, we can also present the large Phase III trial results on ASCO this year. And another thing that we would like to mention is that in registrational Phase III projects, mainly we would like to talk about the SKB264 for CDK4/6 inhibitor failure first-line failure breast cancer, this kind of subtype Phase III trial is something that we would like to mention. So this is a registrational research. Another thing is that our focus is shifting from SKB164 to some other -- sorry, SKB264 to some other ADC pipeline projects. For first half of 2025, we actually have a lot of ADC projects that have gotten R&D approval that got into clinical trials. As was mentioned by Dr. Ge, we have a lot of first-in-class ADC. We also have bispecific ADCs. A lot of ADCs after first half ramp-up, we have entered the escalation trial and going into actually Phase II. Hopefully, by next year, we can actually expand the indication into covering more. And we also can explore maybe flexible administration and also with our clinical trial study, we can actually expand our ADC pipeline into a registrational Phase III trials. Besides that, we also can see that the possibility of actually having more trials going into actually clinical trial, especially Phase III. Now one of the key focus is sac-TMT. As we mentioned, all of the registrational studies are going really well. For example, first-line TNBC, PDI in first line, we actually have enrolled 500 -- over 500 patients. So this is a large-scale Phase III. Hopefully, by end of the year or beginning of next year, we can get NDA submission. And another thing that we would like to mention is also for sac-TMT, we are moving from late line to actually early lines or first line, especially for second line and also some mutant type Phase III trials and also earlier line trials as well. Hopefully, next year, we can submit the NDA approval. We also mentioned that HR-positive/HER2-negative breast cancer Phase III, we have already initiated. We just finished the patient enrollment. And so across the country, we now are launching this project very well and trying to enroll patients into different centers across the country. And obviously, breast cancer and lung cancer are 2 of the biggest indications, and MSC is going to do some differentiation development. For example, for some UC, et cetera. So we are doing some early development assistance and empowerment with MSD together. Now this year, we also presented some of the data, especially for chemo failure patients. As you can see, we are very gladly reporting that you can see the results is very, very well. You can actually see that not only for our second-line TNBC Phase III results that we would like to report, we also would like to say that by actually -- by 2025, end of the year, we actually can look forward to reading out the OS results for this large-scale Phase III registrational study for actually over 400 patients. At the same time, PFS, you can see that first-line TNBC results, PFS has been improved to over 13 months, which is very exciting. Also combo therapy with our A165, results are really, really exciting. PFS actually 15 months plus. So we look forward to Phase III trial so that we can reconfirm this very exciting results, very good results. Next page. Now for our product, project A166, again, we look forward to getting the approval for HER2-positive breast cancer second line approval, especially when we look at DS8201 and also a lot of other ADCs, they have already gotten into Phase III registrational trial. So for [ A66 ], our positioning is very, very clear. It's definitely very unique and differentiated ADC. The toxin that it uses, MAE, which is really rare. So our positioning is to use -- to target patients who have developed resistance to topo enzyme and also because the toxin is very different that we use here is very different from other ADCs of the same category. We believe that the safety profiles can actually be much better, especially for patients who are -- who developed resistance to existing ADCs. Next page. As was mentioned by Dr. Ge, we already have 3 drugs that are on the market, A67, for example, this already has been commercialized. From our clinical data, the results have been very, very exciting. And it definitely sets us apart from other drugs such as PD-1, PD-L1. And so our positioning is basically to use it to combine with other pipeline projects that we developed. For example, with 315 and other pipeline, you can see that they have exciting results targeting, for example, non-small cell lung cancer, and it's for combo therapy and also flexible administration as well. 8140 also has been commercialized for first-line RAS wild-type CRC. For clinical trial data, EGFR is a very good target. Definitely, there's a lot of publication regarding it together with ADC. There's a lot of synergy that we can look forward to. So we definitely are looking forward to explore the combo therapy results with our existing ADC. Now 8400 is a small molecule drug and it's very targeted treatment as well. For this drug, in particular, we actually are preparing for submission of NDA. Hopefully, by next year, we can get approval for the market. Again, going back to the earlier statement for 2025, for the second half of 2025 or going into 2026, I think one of our key focus is to really develop or continue to push forward the early developed pipeline, including small molecule bispecific projects, which we are in partnership with MSC with. So after 264, I think these are very, very heavy weighted or highly look forward, highly expected drugs that we can actually help launch the Phase II lung cancer treatment. We can explore monotherapy and also combo therapy so that we can continue to push forward the development with high efficiency judging from -- drawing from our previous experience and learnings from other drugs development. Thank you.

Thank you, Dr. Jin, for your introduction. The last part is our financials of first half of 2025 of the company. First of all, let's look at the bottom line and also top line. So we have actually recorded RMB 950 million as our revenue. Now we are very happy to report that this is our first year of commercialization. We actually have achieved the dual driver of not only R&D, but also our sales revenue. So among that RMB 950 million, actually, over RMB 300 million actually come from our commercialized drugs. And as was mentioned by our commercial management that we actually have high hopes for the future income from sales revenue. So we believe that they will continue to generate cash flow for the company. And we also are very happy to report that we have income and revenue coming from our R&D partnership. On a yearly basis, it maintained a very regular contributor to our cash flow. When you look at the actual execution of the contracts, we have milestones that trigger this revenue based on different conditions, but we have a very broad partnership across different pipeline projects. So we actually have a very, very natural mismatch of deadlines of recognizing the revenue. So on our financial statement, everyone can actually see that our partnership every year generates income, even though they may originate from the previous periods, but the continuous income of R&D revenue is very good for the company. Now for our gross profit, which was RMB 660 million, basically, it's comparable to the level of the previous year. Our net loss for the first half of the year is RMB 145 million. And after the adjustment of the one-off budget and incentives, our adjusted loss was RMB 69 million. Now the page here is our cost and expenses. First of all, our operating costs actually correspond to our income. As we mentioned, that actually includes our upfront production and also R&D, including optimizing our development craftsmanship. And so the cost -- right now, when you look at the operational cost, the main driver or the main item of the cost is the -- those kind of costs come from the R&D, but the R&D cost-related costs can be reimbursed. And so that is why the operating cost is over RMB 200 million. And so on the cost here, R&D that we have to carry out ourselves is actually RMB 610 million. So that's including our headcount personnel, et cetera, in clinical trials, et cetera. So our clinical expenses for the first half was actually RMB 74 million, which is very similar to last year. Including -- well, the next item is our sales and marketing expenses because this year is the first year for our commercialization. For first half of the year, our sales expenses definitely increased for commercialization purposes. So it's RMB 190 million. So you can easily do the math. As we mentioned previously, we have very high hopes for our commercialization. We not only want to have revenue, we also want to be profit making as well, and we believe that we can deliver that in the long term. Now the last page is basically our consolidated balance sheet. As we mentioned, in June, we have finished another round of financing, which allow us to actually generate and enrich our cash at hand. So by the first half of this year, our cash and financial assets are mainly some bank financing. And our total scale of cash is actually RMB 4.5 billion, which is very sufficient in order to support our upcoming R&D and innovation. On the debt side, it's less than RMB 1 billion, and it's mainly some fluid debts, including some contractual debts or liabilities. So overall, our financial status is really healthy. So that's the -- a very brief introduction and overview of the company's performance for first half of the year.

We now are opening the floor to Q&A. Apart from our online participants, we also have invited a large number of analysts who participate in the meeting offline [Operator Instructions] Who would like to start first? Maybe lady first [indiscernible].

So my first question is related to our sales. So when we look at the first half, you have RMB 300 million in sales revenue. So my question is that for breast cancer and lung cancer, what is the breakdown there? And also your previous sales revenue guideline, do you still uphold that? Because it used to be RMB 800 million to RMB 1 billion. So sales expenses is about 60%, right, going into, for example, medical insurance coverage next year. What do you think your sales expenses ratio will become? And right now, your sales team headcount is about 350 people. And are you going to divide them into different indications, breast cancer, lung cancer, et cetera? And also for hospitals, how are you connect with different hospitals? And my second question is related to R&D. For example, you have a lot in the pipeline. You have bispecific. You have RDC. You also have some projects that you did not disclose the target of. So what is your key focus here for your R&D going into the next stage?

The first question is about commercialization, right? Mr. Ding, would you like to take that? Or maybe Mr. Wei. And the second question, I'm going to invite Dr. [indiscernible] to take the second question.

Right. Let's go -- let's take the first question first. I think there are several sub-questions included in your first question. I'll take them one by one. The first one, lung cancer is definitely the biggest contributor of the sales revenue. It's consistent with our total patient number and also our indications. Our lung cancer definitely is the bigger contributor of our sales revenue. The second part of your question is our sales and revenue -- sorry, our sales expenses. And I think -- I think if we got into the national centralized medical insurance, the sales revenue will be lower. But right now, definitely, it's at the highest level for sales expenses because this is the first year of commercialization. So we launched a lot of training programs and promotional programs to educate the market. And as we continue to expand our coverage, I think we are not going to spend as much because when you look at the total number of hospitals, majority of them actually use this medical insurance covered products. So once we got into the catalog, I think the operational cost will come down. When it comes to the headcount of the sales team and also the breakdown of people by indication, first of all, for important hospitals, we can do clear divide. But overall, the team is pretty comprehensive. So we now are connecting with, for example, 100 hospitals. We actually have people who target, for example, breast cancer and lung cancer. But in the future, as we continue to advance with medical insurance coverage, I think we are going to connect with more and more hospitals that are not only in top-tier cities, but also in lower-tier cities and smaller counties as well. As we go into lower-tier cities and counties, obviously, those salespeople will have overlapped responsibilities. Now for top-tier hospitals, obviously, we will divide people based on the indication and oncology. But for smaller cities, maybe not so much. When it comes to sales expectation, I think for second half, definitely lung cancer indication is going to generate more income for us. And again, this year is the first year of our sales and commercialization. So we are still laying the groundwork for ADC, we definitely are not trying to just divide the market or get some market share. We also take the responsibility of educating a lot of clinical experts so that they can adopt ADC drugs. So I think it will take time to generate results. And when we look at second half of the year, statistically speaking, we expect to actually have more sales revenue by comparison to the first half. [indiscernible] I think I have another part of the question that regard the sales guideline. I mean, any guidance -- sorry, any guidance changes on the sales performance?

Yes, I would like to repeat my question. You mentioned that your sales expectation is RMB 1 billion. Do you maintain the same guidance?

Well, I think this is a target that we will work towards.

Got it. Understood.

All right. The second question, Dr. Yu, would you like to maybe take that? It's about our focus of R&D and our strategy.

So our early development pipeline is in ADC and small molecule. For ADC, our focus again is to target clinical demands and needs and try to develop differentiated products. That's always our goal and big strategy. Specifically speaking, we have several foci. The first one is just several key points. The first one is that, as was mentioned, when it comes to targets, we are going after bispecific target. And obviously, that we are trying to find good combinations of dual targets together. And when it comes to the payload, now payload-wise, our focus right now is that we are deepening our understanding of payload and our efforts and our experience is deeper and more strengthened too. And we have put into a lot of efforts into new payload meant to actually prepare more payloads that are replacing traditional chemotherapy or to go beyond -- actually go beyond chemotherapy. For example, we have payload or dual payload. We also have small molecule as the payload. We have different strategies and different combination, IADC and also we have the BAC or protein degradation agents, et cetera. So we definitely attach a lot of importance to developing and laying the groundwork for different types of payload, and we have expanded our AUC now to cover non-oncology areas, too. I hope I answered your questions.

The next question?

I would like to follow up on the commercialization. So after the 264 commercializing, right now, we have entered Q3, right? Can you give us some guidelines on the sales trend? And the second question is more specific. Well, actually 2 specific questions. The first one is the bispecific ADC, Project 571 that you are in partnership with MSD with, I know that you are kicking off another trial. So can you talk about the treatment and also safety profile right now, the efficacy? And also, let's talk about the dual payload ADC. I remember last year, you mentioned that this is one of your development focus. And so 6 months has passed, can you share with us your latest development?

Thank you, [indiscernible], for your question. For the first part of the question, Mr. Ding, can you take that? And the second question for our bispecific ADC, Dr. Jin is going to take that. And then for dual payload ADC, maybe Dr. Jin again or maybe Dr. Yu.

So okay, Q1, Q2, Q3, we were able to record a quarter-over-quarter growth of several dozen percentage points. So that's quarter-over-quarter growth. That's all for my answer.

So Dr. Jin, can you talk about 571, Project 571?

So 571, as we mentioned, this is another really, really heavyweight project that we are going to have a lot of high hopes for after 264. This is one of our blockbuster products. So we learned a lot of lessons from SKB264, for example, regarding the safety profile, et cetera, and the kind of adverse effects that it's going to generate, right? We learned from those, and we have made some improvement on Project 571. From some of our early days, we also realize that safety profile needs some ramp-up and the target is very actually different because after ADC, the administration dosage may not be as high as bispecific alone. And so when it comes to our design during earlier ramp-up, we actually look at the target. And for example, c-MAPB target and look at the toxicity by comparison with c-MAPB bispecific is very different. EGFR so far, when we look at the reaction from the patient -- I mean from the administration of the drug, I think the safety profile has been actually better than before than traditional drugs. And it's basically consistent with our expectation according to our design scheme and strategy and it's definitely very useful for a combination with PD-1 and TKI resistance. And right now, we are still into -- going into Phase II expansion study. I think everything when it comes to the performance is consistent with our expectation. Again, EGFR mutant, I mean, it's a very, very effective indication. And we also have seen some initial outcome from patients as well. Hopefully, for Phase II, we can see that it go into more oncology indications. Hopefully, in the future, we can give you the development report on the safety profile of this particular project. And also another question is our dual payload ADC development progress, right? We actually have a dual payroll right now is in and then enabling steady trial sort of progress. So by first half -- by Q1 next year, we're going to actually submit for approval.

So my next question is that when you look at the first half of the year, your sales expenses is relatively lower for a company that just launched their commercialization project for the first year. And as was mentioned during previous earnings call, your parent company can give you a lot of empowerment and synergy when it comes to penetrating lower-tier cities. Can you elaborate on that? Actually, management -- Mr. Ding mentioned that for lower-tier markets, you plan to actually use a whole basket kind of strategy when you launch the sales force into it -- workforce into it. It's not like the top 100 hospital strategy, right? So can you elaborate on how your parent company can help you to do it better? Also PL-1 and also your commercialized drugs, right, for sac-TMT, right now, we don't see a lot of sales performance yet. So for drugs that are like not so innovative or unique in the market, what is people's -- how do the market perceive it?

So the first question, I think, Mr. Ding, because it's related to our sales and commercialization. So I think the synergy between us and our parent company is about market access and also commercialization channels because Kelun Biotech, we are very specific. Also, we're very focused on oncology drug development. And for the product 140, as you've seen from our announcement, we actually commissioned it to Kelun's one of their teams to promote it. And also, we are participating very proactively in the medical insurance coverage of the company -- of the country. And so hopefully, we want the -- after it got approval into the medical insurance coverage and catalog, we can quickly increase the sales volume. And so for this kind of the oncology, for example, GI-related oncology -- sorry, GI-related indication, we are going to rely on our parent company's distribution channel. And for ourselves, we're going to focus on a lot of oncology indications such as lung cancer, TNBC and others that our 264 and 167 are focused on. Also this year, we initiated some projects, the combo therapy of using 315 on gastric cancer. So going forward, we believe that combo therapy, especially leveraging PD-L1 as a component, it's going to generate a lot of market opportunity for us.

Got it. We would like to actually switch to the online participants. Following the order of hand raising, we're going to ask the first -- give the first opportunity to [indiscernible].

Can you hear me?

Yes, we can.

Very, very happy to ask the first question online. We can see that a lot of MNC overseas, including MSD and also Pfizer, they actually invested in some PD-1 and bispecific assets. And a lot of MNCs said that they are going to use these new assets to do combo therapy with ADC. It looks like this is the market trend going forward. So clinically speaking, how do you perceive this opportunity or trend? And so far, any kind of consideration when it comes to clinical trial design. This is the first part of my question. The second one is that Dr. Jin talked about clinical trial development. We actually have a lot of first-line trial 3 trials. Let me just confirm with you -- can you confirm with us that KEYTRUDA in China, especially for wild-type lung cancer trial -- sorry, Phase III progress. Can you report on that? I think I missed that part during your presentation.