Ladies and gentlemen, thank you for standing by, and welcome to the Zai Lab First Half 2019 Financial Results and Corporate Progress Update Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Billy Cho from Zai Lab. Thank you. Please go ahead.

Thank you, operator. Good morning, and welcome to Zai Lab's First Half 2019 Earnings Conference Call. Earlier this morning, Zai Lab issued a press release providing the details of the company's financial results for 6 months ended June 30, 2019, as well as the corporate and clinical update. 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 and Chief Executive Officer; and we'll be joined by Tao Fu, President and Chief Operating Officer, who will provide more detail on our pipeline, product highlights, including upcoming milestones and commercial progress. Dr. Yong-Jiang Hei, Chief Medical Officer for Oncology and Jon Wang, Head of Business Development, 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 to the extent that statements discussed on this call are not descriptions of historical facts regarding Zai Lab. They are forward looking statements reflecting the current beliefs and expectations of management. Such forward-looking statements involve substantial risks and uncertainties that could cause future results, performance or achievements to differ significantly from those expressed or implied by the forward-looking statements. Factors that may materially affect future results include, among other things, the scope, rate and progress of clinical and preclinical trials and other research and development activities, the timing of new clinical trials, planning -- plans to commercialize Zai Lab's product candidates and the timing of, and ability to, obtain and maintain necessary regulatory approvals for product candidates. Such forward-looking statements made on this call speak only as of the date of this presentation. Zai Lab undertakes no obligation to update or revise any forward-looking statements made on this call to reflect any change in expectations or any change in events, conditions or circumstances, on which such statements are based, unless required to do so by applicable law. For a further description of the risks and uncertainties that could cause actual results to differ from those expressed in these forward looking statements as well as the risks related to Zai Lab's business, in general, please refer to the annual report on Form 20-F, filed in March of this year, with the Securities and Exchange Commission, and Zai Lab's future current and periodic reports filed with the Securities and Exchange Commission. At this time, it is my pleasure to turn the call over to Zai Lab's Founder and Chief Executive Officer, Dr. Samantha Du.

Thank you, Billy. The first half of 2019 was an exciting period for Zai Lab, during which, we've made significant progress toward our goal of building as biotech leader in China and a global commercial-stage biopharma company. Importantly, the advancements we have made since the beginning of the year have set the stage for potentially transformative events to take place in the second half of 2019. Today, I would like to comment on some key highlights from the first half of the year and why these milestones provide us such great enthusiasm about what the future holds for Zai Lab. Our current portfolio consists of 10-late stage assets, targeting over 20 indications across oncology and infectious disease. In the first half of 2019, we initiated our first commercial launches: niraparib in Hong Kong and Macau; and Optune in Hong Kong, and pleased to report that both products are outperforming our targets through the first several months of commercialization, and our team is gaining real and significant market insight, which we believe, will be valuable as we prepare for the anticipated launches to be made in Mainland China. Regarding the Mainland China opportunity for our 2 lead programs, our NDA for niraparib as a second-line treatment for ovarian cancer was granted priority review by NMPA in January. We have ongoing dialog with the agency, and we are making good progress towards receiving approval for niraparib before the end of the year. Our partner, GSK, recently reported positive top line results from PRIMA, the Phase III study of ZEJULA as a maintenance therapy in patients with first-line ovarian cancer following platinum-based chemotherapy. The study met its primary endpoint of a statistically significant improvement in progression-free survival regardless of biomarker status, and we expect full results from the study to be reported at…

Thank you, Samantha. As Samantha mentioned, the first half of 2019 was an extremely busy and exciting period for Zai Lab, across a variety of fronts. We became a commercial-stage company with the launches of Optune and ZEJULA in Hong Kong. We made significant headway towards potentially getting these products approved in the Midland China, by securing priority review status for ZEJULA and Innovative Medical Device Designation for Optune. We've further expanded our portfolio with 2 new partnerships, and we continue building out our commercial and R&D infrastructure through the recruitment of top talent. While our press release from this morning provides an update on all of our programs, and we'll be happy to answer your questions on assets that are not covered in our prepared remarks, I'd like to focus my comments today on a few selected programs and related near-term catalysts. I'll start with niraparib or ZEJULA, a PARP inhibitor, approved globally for the treatment of ovarian cancer and in development of other solid tumors. We believe that it is a highly differentiated PARP inhibitor with affluent efficacy and safety profiles without the need for blocker testing and superior pharmacological properties, including once daily dosing, low drug-drug interactions and ability to cross the blood-brain barrier. I'm pleased to report that our commercial launches in the Hong Kong are performing ahead of our initial expectations. Based on IQVIA, formerly IMS data, ZEJULA is now the market-leading PARP inhibitor with market share in the Hong Kong of 66% in the second quarter of 2019. This is particularly impressive given that Lynparza has been on the market in the Hong Kong for more than 2 years. The launch curve for ZEJULA, during the first 6 months, is significantly ahead of that of Lynparza in the Hong Kong at similar phase. While…

Thanks, Tao. I will now review our financial results for the 6 months ended June 30, 2019. Revenues for the period were $3.4 million, compared to no revenue in the first half of 2018. Our revenues for the period were comprised of $1.9 million in sales of ZEJULA and $1.5 million of Optune sales in Hong Kong. As we previously highlighted, ZEJULA is already the 1 PARP inhibitor in Hong Kong with the launch curve significantly ahead of Lynparza in Hong Kong at a similar phase. Optune was officially launched in February of this year, and we are showing strong initial revenue. Both ZEJULA and Optune have strong momentum for the second half of 2019, and we look forward to commercial launches in Mainland China. R&D expenses were $58.9 million for the period ended June 30, 2019, compared to $34.6 million for the same period in 2018. The increase in R&D expenses was primarily attributable to an increase in licensing fees, ongoing and newly initiated late-stage clinical trials, payroll and payroll-related expenses and expansion of research efforts to support internal development programs. Selling, general and administrative expenses were $29.5 million for the first half 2019, compared to $6.4 million for the same period in 2018. The increase was mainly due to the increase in payroll and payroll-related expenses, as Zai Lab continue to expand on commercial operations in China. For the 6 months ended June 30, 2019, Zai Lab reported a net loss of $83.3 million or net loss per share attributable to common stockholders of $1.37 compared to a net loss of $41.5 million or net loss per share attributable to common stockholders of $0.83 for the 6 months ended June 30, 2018. As of June 30, 2019, cash and cash equivalents and short-term investments totaled $393.2 million, which includes a net proceeds from our follow-on offering demand this year. We would now like to turn the call back over to the operator, so we can go ahead and take your questions. Operator?

[Operator Instructions] The first question comes from the line of Yigal Nochomovitz from Citigroup. Please ask the question.

Hi, everyone, Thanks for taking the questions. Tao, you mentioned the launch in Hong Kong is going very well with ZEJULA with 66% share. I wonder if you could speak in a little bit more detail as to the factors contributing to that very strong launch as well as, as you specifically mentioned some of the lessons that you are learning in Hong Kong, and I assume also in Macau that will apply to your launch in Mainland China. So I'd be curious as to more specifically, what those lessons are that will position you even better for a successful launch in Mainland China? Thank you.

Yeah. And Yigal, it's a very good question. Our CCO, William Liang, is online. I will let him give you the highlights. William, are you online?

Yes, yes. I'm online. So firstly, we - in the Hong Kong, we have a very good team. So, we recruited best talent from the market and formed this Hong Kong team. So, the team execution is very, very good. On the other hand, ZEJULA itself is best-in-class product and it is only once daily use PARP inhibitor and also the statistic evidence is very good. So our medical team also did a great job for medical education. So -- and we have the best people, we have the best products, and our education program is so good. So these kind of things help us to gain market share for our company.

I’d also like to add a little bit on, just from my observation. I think the team in Hong Kong has many years of experience launching successful oncology products. And overall, our team has launched 8 of the top 10 oncology products either launched or lead those programs over the last 8, 10 years. So I think that's number one to me on top of what William said. Number two is also, we do have not only the -- at least in China, we dose the patients according to -- now starting from 300 based on the body weight. So, that gives us better safety profile as well as everyone knows the efficacy is -- this has superior efficacy. In terms of delivery form, it's once a day. In terms of the metabolites, we don't go 650, and 600. That that gives reduced drug-drug interaction, as we know many oncology patients are taking multiple drugs. But another thing I want to highlight is, as William said, this is best-in-class, but also this is the only ovarian cancer drug so far approved in this part of the world, I believe, even globally has a brilliant penetration. And another thing I want to add, just briefly, is, as more and more publications came out, the doctors want to actually bring the drug earlier to prevent the metastases happening. Thank you, Yigal.

Okay. Great. And then just more generally, I was just wondering if you could speak to how you expect some of these new scientific advisory board members to help shape the early development pipeline? You've recently added Alex Adjei and Lieping Chen. Just curious, how you expect them to contribute to the strategy in the earlier stage trials?

That's a good question, again, Yigal. As we are continuously building our discovery efforts globally, as Tao mentioned, we have already four years operation in Shanghai in discovery. But again, we added, last year sites in San Francisco and in Boston. We brought in doctors seasoned in oncology -- oncologist in discovery in San Francisco -- bring her to San Francisco, and she is leading our discovery efforts with Dr. Lieping Chen and a new -- the new SAB onboard to help overall on company strategy, especially on the research front. We do have a four meetings of the year with them and also ad hoc necessary meetings. And I think this will be very helpful. But on top of these people, we always have advisers and also consultants in the fields we're involved, and we use them at ad hoc basis as well.

Great. And just one for Billy, if that -- if you wouldn't mind. Billy, regarding the shareholder base, is it the expectation that you're going to remain an ex-U.S. filer or could we see down the road that you shift to a U.S. filer to become more than 50% held by U.S. investors? Thanks.

Yes. Yigal, thanks for that question and joining this call. That is a function of capital market forces, so it's really hard to say and predict the future. But right now, we remain a foreign private issuer, but we, of course, have a lot of investors in the U.S.

Well, just as last -- as the last follow on, we've brought in more and long only health care reputable investors. For example, our -- other than Fidelity as 1 public investor, we have Wellington as our 2 and -- 2 public investor. We've got Baillie Gifford. We have all the -- no one know -- who is who for the market size, we can accommodate. So we not really, particularly, favor one or another, we're really looking for investor base. We want the investors who are -- can grow with the company in the long term, could -- knows the business, understand what we are doing.

Got it. Thank you very much.

Thank you. The next question comes from the line of Anupam Rama from JPMorgan. Please ask your question.

Hey, guys. Thanks for taking the question and congrats on all the progress. Two quick questions for me. The first question is, you've got the potential approvals in China on the horizon for ZEJULA and Optune. Maybe you could walk us through sort of the final steps and the gaining factors to getting an approval for both. And then the second question is, there's been some business unrest in Hong Kong recently, I'm wondering how we should think about any potential second half ZEJULA-Optune impact in Hong Kong, specifically? Thanks so much.

Thank you, Anupam, and let me answer your second question first because that's a very easy quick answer. While this demonstration is going on in China, in Hong Kong, we're actually a couple of months. It's not just recent phenomenon. And we haven't seen any impact to our commercial launch or to our revenue. So we think that's more political, not on business side. And so that's the answer to your second question. On the first question, as we talked about in our earlier script, ZEJULA, we've launched without an CTA -- No. NDA last year. In December, we got quickly -- got the acceptance and also priority review. And currently, if you -- we -- of course, we are not working for the agency. So we cannot disclose lots of these details of how agencies operates. But what we can tell you is, we think the agency has really put a lot of efforts to work closely with us since we are the -- not only has one medical need, I'm talking about ZEJULA, but also we're talking about the category 1, and this is also under lots of endorsement from the KOL networks, and this also brings basically the product to -- well adopted from all the characteristics I've mentioned earlier and to China because it's very much needed right now. So far, we haven't changed our guidance and because -- as you know -- and we haven't get told otherwise. We haven't been told otherwise from the agency. And lastly, I do want to say, China does not have a -- to participate. So there's always a risk. And any product can only -- company can only give you the best estimation we can. Thank you.

Congrats on all the progress.

Thank you.

Thank you. The next question comes from the line of Maurice Raycroft from Jefferies. Please ask your question.

Hi, everyone. Congrats on the progress, and thanks for taking my questions. First question is just based on ZEJULA. So you've talked about some of the advantages of the drug on the call. But just wondering with AstraZeneca's Phase III PAOLA-1, Lynparza plus bevacizumab, for data that came out recently. I'm just wondering how we should think about those data from Lynparza in the context of Phase III PRIMA and the eventual commercial opportunity there?

Thank you, Maurice, for telling me. It's is a very good question. So first -- and we should still wait for the actual data presentation at upcoming medical conferences for both -- the details of both products. But also, the key differences between PRIMA and PAOLA-1 is PRIMA is monotherapy, it's macrolide against placebo, which -- well, PAOLA-1 compare it to a combo, compared and Lynparza plus Avastin, which is -- as you know -- overall, we feel very confident. We remain high confident in macrolide in a competitive -- with competitive advantages not only as a monotherapy but also it's from overall efficacy, positive life perspective. And even from Pharmacoeconomics, particularly in China, we feel confident about this product.

Got it. That's very helpful. And then also in the press release, you mentioned that there's going to be some Prime -- data from Prime and Nora at the upcoming ASCO meeting in a few weeks, just wondering if you contact about -- talk more about what do you expect at the that medical conference?

First of all, that particular one, we cannot disclose, especially on behalf of GSK. No, no, no, on behalf of Lynparza, combo from Zytiga. So it's -- basically it's our -- it's up to them. They have the data package. But from our side, we did see the top line from our GSK top line manifest, and we're getting more details and learning more details as we go this week. So we can't really comment. But all, as I said earlier, we feel very confident about our mono first-line study. We feel it's very competitive in the Greater China markets.

Very good. Looking forward to the data. Thanks for taking my questions.

Sure. Thank you, Maurice.

Thank you. Your next question comes from the line of Jonathan Chang from SVB Leerink. Please ask your question.

Hi, guys. This is David Ruch on for Jonathan. Congrats on the progress. Thanks for taking our question. My first question in terms of commercialize expectations, we, obviously, noted a rapid uptake of niraparib in Hong Kong over the first half of the year. Could you give investors some context on how you're thinking about benchmarking commercial sales of niraparib in China and comparisons to Lynparza sales reported to these?

First of all, thank you, David, and thank you in joining the conference on behalf of Jonathan Wang. And I'll divert this question to our Chief Commercial Officer, Dr. William Liang.

So we believe as the China launch weekend in Japan and also from where we are in regards to [indiscernible] Hong Kong. So as I said, we have the best teams and the best products and also very good promotions. So we're very confident for our success in China.

I have to say, over the past -- okay. On top of what William just mentioned, I want to also talk about we actually not only have done PK but also for competitive -- for market competitiveness, we have also data from additional close -- beyond 250 patients done in China market. And this -- that's actually going to be very helpful to get us to -- get more PIs and also KOLs aware of this products that their strong support and their strong endorsement of this product and also with the publication coming forward, many of the PIs will be very proud they participate and leading the product. There are more than 30 PIs involved in this trial. And number two, I want to say, I want to -- also, again as I mentioned, I want to compliment William's team because they again have launched. And 8 of the top either launched or the -- 8 of the top 10 launched oncology products in China. The team has lots of experience in the field, and they have done the last few months a lot of medical education, a lot of reach out to the whole KOL, PI networks. And so far, it's very well adopted.

Also, Hong Kong launch is also very successful and also very critical to China. So two things. One, internally, the China team can learn the experience from a lot, a very good Hong Kong team. On the other hand, externally, the Hong Kong KOL's experience through [indiscernible] transferred to China's doctors. After launch, we will deleverage this.

Yes. It's a very interconnected community and especially in the Southeast of -- especially in the southern part of China, back in the Pearl Harbor area, and you're talking about the Hong Kong, Macau, Guangdong, and all those provinces, that should actually have very -- a very -- it's a high-yield, high-income area in China. And they have been having -- as a group, has been highly endorsed and have very good experience. And we have been given examples. We have seen patients how they benefit from our macrolide after being treated by our competitor drug.

Great. Thank you. Then second one in regard to margetuximab, you mentioned in SOPHIA results and your plans to participate in the mahogany study in gastric cancer. Could you remind us where your current expectations are for NMPA submission in breast cancer? And how you're thinking about a bridging study for that population?

Let me start, and I may ask certain questions, details about the words of our CMO in oncology, Dr. Yong-Jiang Hei. Just 4 years of communication, that's how we've been -- we gave a feedback before by many people talking at the same time. So let me just start with this. And as you know, for the second-line breast cancer -- and we're still waiting for their internal data. Once we got a whole package, we will file CTA and that's for the market, for the second line. But for gastric cancer, we're ready when you -- they are to provide us a full document than to file an NDA directly.

Great. Thank you. And then last one for me. One program that doesn't discuss as often is the margetuximab program in partnership with Five Prime. Could you give investors some context on how your assumptions on that patient population have evolved over the last couple of months? And reasons for confidence in the program headed into the first half utility analysis? Thank you.

First of all, I want to say -- thank you, David. Okay. So another very good question. First of all, this is the global program lead by Five Prime. So from partner perspective -- and we have a respect on their news release, and we cannot separately making any news release or disclosure on the progress of how many patients being recruited, why there is a futility test, okay, put in place. And I think from our understanding, our discussion, all we can say is our partner is making prudent decision and because this is a -- it's not a small trial and even though with unmet medical needs. But from our side, we have -- we can say, we recruited the first. And even though this is led by Five Prime, we recruited the first patient from China. And from our side, we -- everything goes as planned, and we're very proud of our contribution.

Great. Thank you for the contracts and congratulations on the prorgress.

Thank you, David.

Thank you. The next person comes from the line of Serena Shao from Credit Suisse. Please ask your question.

Thank you for taking my question. First of all, congratulations on the successful soft number for ZEJULA and Optune. And my first question is actually for Billy, with the launch of our product in Hong Kong and China, do I have roughly guidance for the SG&A in the second half and/or first half next year products and the expenses? And my second question is actually for William...

Yes. Serena. Did you want to -- are you going to ask the second question or do you want me to attend to the first? So Serena, this is Billy. I will answer your first question and then you can ask, William, the commercial-related question. We're not yet providing forward-looking guidance in addition to SG&A. You can see that from first half of 2019, we did say that SG&A was $29.5 million. That is compared to 2018 full year SG&A, as you may have remembered of $22 million. So we started building some of the commercial infrastructure late last year, and we continued through the first half of this year. And we have made very nice progress in that effort.

Okay. Got it. Yes. And my second question is actually for William. So just could you give us some color on what kind of prelaunch activities you have had for the 2 drugs in China? Also, I'm quite interested in Optune. The Hong Kong sales number seems pretty good. So how do you see the challenges in Chinese market like from patient size, patient affordability or physician education point of view, where do you see the challenges for Optune in Chinese market?

So for -- yes, you're right, the Hong Kong Optune progress is very good. After China launch, I think to prepare for the potential launch in China, our medical affairs team worked very hard. So they do many degrees, education and the medical-sharing programs with our KOL to introduce this TTFields and the -- and there is burden about the GBM also for the same for the ZEJULA and ovarian cancer. So our launch really is in China is -- rely on our medical affairs teams. That program is a -- also progressed very well in China. For the Optune. Yes, please?

And -- go ahead, Billy. No, no. Go ahead, William.

So you're right, the affordability is always, like I said, always the issue for China, and not only for development but also for many premium oncology products. So we will try many things, for example like a PAP or other financial program to support -- to improve the market access for our patients. We are -- try all means to help of our China patients after launch.

May I just add a little bit for you, more color on this, Serena?

Yes.

So first of all, welcome on the call, and thanks for the question. I think William gave some very good highlights on what's ongoing. I have to say this one, so far I've been very, very impressed by how the team rolled out the medical education, the market access actually province by province and city by city. And with the support, actually, with the Novocure team. We have sponsored so many neuro oncologist conferences, participated and specifically talking about this product. Number two, this product -- remember, it's a GBM. This is the one and only product. We don't have any competition. And so this -- also the market because in China, it's a very, very big market, considerably much, much bigger. 7 -- Hong Kong has only 7 million population. If you think about China, China's population, the patient number and even consider affordability, let's say, even from Taipei [ph] China now has -- even 2016, they -- it has the purchasing power. So look, equivalent to the upper-middle class to the world's people. It's about 70 million in 2016 in U.S. But in China, it's already by the powers of 100 tenth. So I think 2 years passed -- 3 years passed by, the number, as you know, especially pharmaceutical market, innovative one, grow very fast in China. The second quarter -- just you see the second -- new earnings from AT, they actually -- they already reached for second quarter alone, USD 1.2 billion sales and is with a 44% year-to-date -- year-to-year increase. Same with -- marked the second quarter, this year, they reported $750 million roughly sales with, actually, also beyond-45% increase on second quarter year-to-year. So innovative oncology products are now under -- I have to say most of their products not being reimbursed…

Thank you so much.

Thank you. The next question comes from the line of Yang Huang from Bank of America. Please ask the question.

Hi. This is Yang. Thanks for taking my questions. So I have two questions. First one is about commercial sales in Hong Kong for ZEJULA in Optune. So could management give us some colors on a few points, for example, like how many patients have been on ZEJULA or Optune? And also about the healthcare patient coverage in Hong Kong for these 2 drugs. Second one is about our pricing strategy in Hong Kong compared to our competitors, which might be able to give us some color about your many prior strategy. That's my first question.

Let me take a -- Yang, let me take a first quick part on that because -- and William is actually dialing from China from distance, and it's very hard for him to be able to -- especially William is -- Dr. William Liang is fully trained in China. And even though he worked in multinational companies, and I just want to say things to highlight. But a few things first. If you missed my accessory, you can go down to the next level. So in terms of commercial sales of a -- and -- so number one, the question you have is in terms of pricing -- the last one is pricing strategy, right? And I have to say...

Competitive pressure.

Yes. Competitive pressure, I have to say Lynparza sales, 785 -- 750,000 per patient, right, in Hong Kong. And our product, I would say, the way -- because in Hong Kong, we are -- we haven't disclosed that number. But it seems that we cannot give you the de facto number because, in Hong Kong, they're very different from the other places. You actually can charge differently based on the hospital or clinic and also based on the patient needs, patients' affordability. So that's number one, pricing strategy. So we always say competitive. Remember, we are best-in-class and also with unmet medical needs. So we -- so far, we're saying we're very competitive not in terms of dropping the sales, the price but more in terms of the product quality. Number two, in terms of the -- the number two question you had was about the number of patients. And again, I don't think we are not in a position to comment that details because I believe, typically, that's not a number we release, especially the first 6-month launch. And what is your other question? Oh, reimbursement. I have to say, Lynparza in the house, Lynparza has launched 2 years ago, still now in reimbursement in Hong Kong. And we are just also launched 6 months, we are not in reimbursement either. So thank you for all the 3 questions, Yang.

Yes. If you don't mind, my last one is about -- in PD-1. So can you comment on your PD-1 clinical trial progress and the potential timeline for trials and eventual registration in China?

Okay. Let me go from different -- just highlights, okay, then further details are deferred to our CMO. In the first trial, the PD-1, the interest for us to do PD-1 is not like we are PD-1 company because as you know there are more than 200 PD-1s already in China. But the reason we groomed this PD-1 is really because we believe our current portfolio has a lot of synergies with PD-1, especially, for example, margetuximab, and we're going to do humble with -- for gastric cancer with PD-1. And it's important, we hope, both combos in this part of the world, not only from drug's effectiveness, effectiveness of the supply also clinical development but even more for the pricing and instead of negotiating with 2 companies or plus the government 3 parties, we now own both products. We'd be going -- we already we negotiated with the government. And based on the competitive landscape of PD-1 in China, we can decide how to allocate to each -- in combo, each portion of the combo on the pricing. And so number two, I want to highlight is, we brought this product in also based on all the PD work we had done, all the PD-1s we have revealed. We do believe this is based on their preclinical and the limited -- not limited, actually, a lot of clinical data. They are -- they have the crocidolite quality, which is we believe is very high quality in PD-1. Not all PD-1 are PD-1 inhibitors the same as you know. So we're always looking for the best. Our philosophy is always either for best-in-class or first-in-class. So that still fits into the categories, especially in China. And so what -- so Incyte has already gone down 3 pivotal trials. And those…

The next question comes from the line of Xiang Gao from Macquarie.

I had 2 small questions. First one is the SG&A cost, I just want to know, basically what is the breakdown between the ZEJULA and Optune in Hong Kong? And how much of the SG&A goes to that? And how much is for the preparations to launch in China? That's my first question. And the second question, by the R&D cost. With more and more drugs entering late stage, but I suppose drug KOL partner's more in milestone phase. So I just want to know roughly, how much it can go up in the second half and first half 2020? And if you don't mind, I just ask another small question about the PD-1 competition. It is already very competitive in China. So how are we going to compete to be the big Pharma, especially about [indiscernible]

Xiang Gao, maybe I can start with the first two.

Xiang Gao. Yes. Yes. Billy, why don't you start with the first two, I'll address the last one. And if necessary, I'll just chip in. Yes.

Sure. So Xiang Gao, your question -- first question on SG&A. We are not breaking that up between product at this juncture. But I think based on our previous answer to the question, a lot of this increase of SG&A went into to building our commercial infrastructure, of course, not only Hong Kong but in our main geography of Mainland China.

We also -- in R&D, we also are expanding our development team and certain discover team. And so it's not really just for these 2 products. And also, I want to highlight is, it's not just for -- milestone is very small portion of all of the cost because -- but it's more clinical development, more of these new discoveries and more expanding our pipeline and more opening up new indications.

Yes. And Xiang Gao, to your second question. So that was SG&A, and then also, Samantha already provided guidance about some commentary on R&D, but I -- we would like to point to also, not only first half year-over-year, but also how we track from the full year or second half of last year to this year. So what I'm saying is our R&D expenditure for first half of this year came out to about $58.9 million, right? Last year, the full year R&D was actually $120 million. But to your point, we do have many more projects coming up. But I wanted to also highlight those numbers for you.

Right. Now also, our goal is produce, and at this stage in China, we believe it's very important to be national champions. So rather than to make EBITDA even and/or positive, our goal is to -- this is land grabbing in China. And this is building national leaders that 20 years ago from Japan where with all the competitions, you come out 3 national champions. That's where we want to be or at least one of them. And that's why we have very strong supporters from investment community, from you guys, and that's why we have all the confidence. And -- but I haven't said so, if you're looking at historical numbers, if you look at how much we spent as a company with current portfolio, you see Billy, can give you the very exact number. We are very effectively in using investors' money and deliver the most portfolio. And also in terms of licensing, you can see we did some controversial licensing. But 3 times in a row, we proved to the market, we have done good PD work. We have done enough market analysis in China. We have understand the policies, which is the right product to bring in. So far, I'm very confident in our PD team, our commercial team, discover team and the development team. Development team also shows exemplary execution capabilities in China. If we go to details, you can see exactly every program, how we break through the system, how we make it really faster approval in China. Yes, Jonathan. Go ahead.

I just want to add one other quick point about the R&D cost because you specifically asked about the milestones and future costs. Although we can't give specific guidance for each or one of our licensing projects, but on a overall level, most of our milestones are regulatory-approval related. So these are not immediate milestones that gets triggered, a lot of them buy in the clinical trial. And I think the other thing is that we have a very capital-efficient model. So a lot of our trials are also global trials where we contribute a small percentage of patients to those trails. So consequently, they're not stand-alone trials, which may cost a lot of money. We help our planners, and together, we're trying to get some simultaneous approval. And I think lastly, I just want to start on the PD-1 competition. In addition to there may be niche opportunities in monotherapy, the rationale as Tom and Samantha mentioned earlier, is to fully open up the other best-in-class or first-in-class assess in our pipeline. So a lot of these are de-risked on a global basis whether it's combination with the PARP or combination with VEGF, et cetera. We have a loss of these best-in-class agent, single agents, which together with this good PD-1 have a lot of commercial opportunities really expanding the pie for us.

And on top of that, I also want to add is, the reason we decided not to do a PD-1 very early on is, as you mentioned, we do believe PD-1 market is very crowded. And if we develop a PD-1, internally, just start from, let's say even license at Phase I just preclinical like most of the companies are, but that can develop one niche indication, PD-1, if you do it just for China alone, not leveraging for global packages. That requires minimum USD 80 million. But by doing so, we're working with partners already generated pivotal data. We just need to do briefing in PK study, which is very cost efficient. And still, I agree more or less. But because also I wanted to highlight, we're not here just for PD-1 monotherapy, it's a combo expanding our portfolio. And still, this is the -- we believe this is the best PD-1 with -- going to be with the Chinese company that promote this. It's not a PD-1. We believe this is very unique from both from the manufacture cost effecting from the safety, efficacy data. We have been -- done PD so far and has got us, as Jonathan said, a lot of synergies with our process of existing portfolio. Thank you, again, Xiang.

Thank you. The last question comes from the line of Wai Chak Yuen from Bank of China International.

Thank you for taking my questions. So I just want to follow up one quick question on R&D. So can you provide us some information on the breakdown on the R&D spending in the first half in terms of different programs?

Yes. Sure. Happy to. The R&D breakdown -- I think you can pretty much imply, we did before the -- before we finished the first half of the year, we had to decide for a deal, right, where the upfront was publicly announced at $20 million? So you can assume that -- correctly assume that $20 million of the $58.9 million was the upfront licensing fees.

And also, we had $17.5 million upfront from Incyte, right?

Yes, for July.

Yes, yes. And again, we don't -- each individual programs, we don't breakdown to their details because lot of our internal IP people working on multiple projects. Even though we do have a kind of tracking systems, but we're not in a position to comment that. Thank you, Yuen. Just sorry for, Yuen, sorry for -- it's not this -- it's not for you. But as a company, as a public company, we had to be consistent and responsible to all investors.

Thank you. And congratulations on the progress.

Thank you. We have reached the end of question-and-answer session. I would like to hand the conference back to the Zai Lab's CEO, Samantha, 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 look forward to updating you periodically on our progress throughout the year. Again, operator, thank you, and you may now disconnect this call.