Financial Performance - Total revenue for the six months ended June 30, 2021, was $57.038 million, a significant increase from $19.213 million in the same period of 2020, representing a growth of approximately 197%[16]. - The net loss for the six months ended June 30, 2021, was $396.234 million, compared to a net loss of $128.617 million for the same period in 2020, indicating a deterioration in financial performance[16]. - The company reported a basic and diluted loss per share of $4.37 for the first half of 2021, compared to a loss of $1.74 per share in the same period of 2020[16]. - The company incurred a net loss attributable to ordinary shareholders of $163.324 million for the six months ended June 30, 2021, compared to a net loss of $80.629 million for the same period in 2020[94]. - The net loss attributable to common shareholders was $396.2 million for the six months ended June 30, 2021, compared to a net loss of $128.6 million for the same period in 2020[112]. Research and Development - Research and development expenses for the first half of 2021 were $346.076 million, compared to $102.049 million in the prior year, reflecting a year-over-year increase of about 239%[16]. - The company is focused on expanding its research and development efforts to enhance its core products and pipeline, indicating a strategic emphasis on innovation and market growth[16]. - The company is dedicated to developing and commercializing therapies for unmet medical needs, particularly in oncology, autoimmune diseases, and infectious diseases[35]. - The company has twelve candidate products in late-stage clinical development as of June 30, 2021, in both China and the United States, with multiple other candidates in clinical and preclinical development[88]. - Total R&D expenses for the three months ended June 30, 2021, amounted to $142.2 million, a significant increase from $68.3 million for the same period in 2020[98]. Cash and Liquidity - Cash and cash equivalents as of June 30, 2021, amounted to $1.767 billion, a substantial increase from $442.116 million at the end of 2020[15]. - The company raised $818,874 thousand from the public offering, compared to $281,295 thousand in the previous year, reflecting strong investor interest[34]. - The net cash used in operating activities for the six months ended June 30, 2021, was $235.3 million, compared to $92.3 million for the same period in 2020, indicating an increase in cash outflow[120]. - The company had cash and cash equivalents, along with restricted cash, totaling $1,767.3 million as of June 30, 2021, sufficient to cover operational and capital expenditure needs for at least the next 12 months[119]. - The net cash provided by financing activities for the six months ended June 30, 2021, was $820.9 million, compared to $281.5 million in the same period of 2020, reflecting increased financing efforts[120]. Market and Product Development - The company has three commercialized products approved for sale in one or more regions of Greater China as of August 9, 2021[21]. - There are twelve projects in late-stage development, indicating a strong pipeline for future growth[21]. - The company has a significant market share in both Greater China and the United States[21]. - The company is collaborating on the development of bispecific antibodies based on CD3 or CD47 with MacroGenics, contributing intellectual property to the partnership[66]. - The company is preparing to submit a marketing authorization application for Optune Lua for treating unresectable, locally advanced, or metastatic malignant pleural mesothelioma[82]. Regulatory and Compliance - The company has received exemptions from strict compliance with certain corporate governance regulations under the Hong Kong Listing Rules[17]. - The company is subject to new regulatory frameworks, including the implementation of National Order No. 739, which increases compliance responsibilities for market authorization holders[83]. - The SEC has increased scrutiny on companies with significant operations in China, which may affect the company's ability to raise capital effectively in the U.S.[137]. - Compliance with China's new data security laws and regulations may incur substantial costs and significantly impact the company's operations[138]. - The company is not currently involved in any significant legal or administrative proceedings that could materially affect its financial condition or operating performance[135]. Strategic Partnerships - The company has entered into a collaboration and licensing agreement with GSK, involving upfront payments of $15,000 and potential milestone payments totaling up to $36,000[65]. - The company has also established a collaboration agreement with MacroGenics for the development and commercialization of certain products in the Greater China region[65]. - The company entered into a collaboration and licensing agreement with Mirati for the exclusive commercialization of the small molecule KRASG12C inhibitor adagrasib in Greater China[80]. - The company has exclusive rights to develop and commercialize multiple products in the Greater China region, including those from MacroGenics, Deciphera, and Turning Point[66][67][68]. - The company has paid Turning Point an upfront fee of $25,000 and milestone payments totaling $3,000, with potential payments up to $146,000 for development and regulatory milestones[68]. Operational Challenges - The company faces potential risks from changing U.S.-China relations, which could adversely impact business operations, financial performance, and the market price of its common stock[136]. - The company is aware of the risks associated with adverse safety events that could damage its reputation or financial standing[146]. - The company is monitoring the impact of COVID-19 on its operations and the potential for ongoing effects from the pandemic[146]. - The company faces challenges in navigating the evolving regulatory landscape in China, which may lead to increased operational risks and costs[145]. - The company anticipates needing additional funding to achieve its R&D goals, although current cash reserves are expected to meet operational needs for the next year[119].

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited condensed consolidated financial statements for Q2 and H1 2021 show total assets increased to **$1.90 billion**, net loss widened significantly to **$163.3 million** for Q2 and **$396.2 million** for H1, driven by increased R&D expenses, with strong financing cash flow from a public offering [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2021, total assets increased to **$1.90 billion** from **$1.30 billion**, primarily due to a rise in cash and cash equivalents to **$1.77 billion** following a public offering, with total liabilities and shareholders' equity also increasing Condensed Consolidated Balance Sheets | Balance Sheet Item | June 30, 2021 ($ thousands) | Dec 31, 2020 ($ thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | 1,766,573 | 442,116 | | Total current assets | 1,808,603 | 1,216,036 | | Total assets | 1,895,215 | 1,297,638 | | Total current liabilities | 193,917 | 98,043 | | Total liabilities | 223,517 | 128,293 | | Total shareholders' equity | 1,671,698 | 1,169,345 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2021, revenue grew to **$36.9 million**, but net loss more than doubled to **$163.3 million** due to sharply increased R&D expenses; for H1, revenue was **$57.0 million**, and net loss widened to **$396.2 million** Condensed Consolidated Statements of Operations | Metric ($ thousands) | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | 36,935 | 10,995 | 57,038 | 19,213 | | R&D Expenses | (142,224) | (68,307) | (346,076) | (102,049) | | SG&A Expenses | (54,414) | (23,758) | (90,252) | (42,472) | | Loss from operations | (170,571) | (83,966) | (397,663) | (130,288) | | Net loss | (163,324) | (80,629) | (396,234) | (128,617) | | Loss per share ($) | (1.76) | (1.08) | (4.37) | (1.74) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For H1 2021, net cash used in operating activities increased to **$235.3 million**, net cash provided by investing activities was **$737.8 million**, and net cash from financing activities surged to **$820.9 million**, resulting in a net increase in cash Condensed Consolidated Statements of Cash Flows | Cash Flow Activity ($ thousands) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | (235,348) | (92,319) | | Net cash provided by (used in) investing activities | 737,828 | (6,521) | | Net cash provided by financing activities | 820,949 | 281,500 | | Net increase in cash | 1,324,457 | 182,672 | [Notes to the Financial Statements](index=8&type=section&id=Notes%20to%20the%20Financial%20Statements) Key notes detail Q2 2021 net product revenue of **$36.9 million** from ZEJULA, Optune, and QINLOCK, significant collaboration agreements with potential future milestone payments of approximately **$4.54 billion**, and share-based compensation expenses Product Revenue - Net | Product Revenue - Net ($ thousands) | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | ZEJULA | 23,366 | 7,446 | 35,972 | 13,791 | | Optune | 9,535 | 3,549 | 16,665 | 5,422 | | QINLOCK | 4,034 | — | 4,401 | — | | **Total** | **36,935** | **10,995** | **57,038** | **19,213** | - The company is contingently obligated to make future milestone payments of up to approximately **$4.54 billion** related to its various license and collaboration agreements upon the achievement of specified development and regulatory milestones[79](index=79&type=chunk) - In January 2021, the company entered a collaboration with argenx, making an upfront payment by issuing 568,182 ordinary shares valued at **$62.25 million**, which was recorded as an R&D expense[75](index=75&type=chunk)[76](index=76&type=chunk) - In May 2021, the company entered a collaboration with Mirati Therapeutics for adagrasib, accruing an upfront payment of **$65 million**; Mirati is eligible for up to **$273 million** in future milestone payments[77](index=77&type=chunk)[78](index=78&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the significant increase in net loss for Q2 and H1 2021 to higher R&D expenses from new licensing agreements, while revenue grew strongly, and the company successfully raised **$857.5 million** in a global offering [Recent Developments](index=21&type=section&id=Recent%20Developments) Recent developments include closing an **$857.5 million** global offering, advancing clinical trials, establishing new collaborations with Mirati, MacroGenics, and Schrödinger, and noting significant updates to PRC regulations - Closed a global offering of ADSs and ordinary shares in April 2021, raising gross proceeds of **$857.5 million**[93](index=93&type=chunk) - Entered into a collaboration and license agreement with Mirati for adagrasib, a KRASG12C inhibitor, in Greater China[94](index=94&type=chunk) - Expanded collaboration with MacroGenics to develop and commercialize up to four bispecific antibody-based molecules[95](index=95&type=chunk) - China's new Data Security Law (DSL), effective September 1, 2021, will impact data processing activities and has extraterritorial effect, potentially affecting the company's operations[103](index=103&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) For Q2 2021, revenue increased 236% to **$36.9 million**, R&D expenses rose 108% to **$142.2 million**, and SG&A expenses grew 129% to **$54.4 million**, leading to a widened net loss Expense Breakdown (Q2) | Expense Breakdown ($ thousands) | Q2 2021 | Q2 2020 | Change ($) | | :--- | :--- | :--- | :--- | | R&D Expenses | 142,224 | 68,307 | +73,917 | | - Licensing fees | 97,966 | 42,480 | +55,486 | | SG&A Expenses | 54,414 | 23,758 | +30,656 | Expense Breakdown (H1) | Expense Breakdown ($ thousands) | H1 2021 | H1 2020 | Change ($) | | :--- | :--- | :--- | :--- | | R&D Expenses | 346,076 | 102,049 | +244,027 | | - Licensing fees | 269,248 | 51,720 | +217,528 | | SG&A Expenses | 90,252 | 42,472 | +47,780 | [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2021, the company held **$1.77 billion** in cash, cash equivalents, and restricted cash, primarily from public offerings, with management expecting existing reserves to fund operations for at least the next 12 months - As of June 30, 2021, the company held **$1.77 billion** in cash, cash equivalents, and restricted cash[165](index=165&type=chunk) - Net cash used in operating activities for the six months ended June 30, 2021, was **$235.3 million**, compared to **$92.3 million** for the same period in 2020[164](index=164&type=chunk)[168](index=168&type=chunk) - Management expects existing cash to be sufficient to fund operations and capital requirements for at least the next 12 months[165](index=165&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces primary market risk from foreign exchange fluctuations due to RMB and HKD operations reported in USD, and manages credit risk by holding high-quality financial institution investments - The company's primary market risk is foreign exchange risk, as its business operates mainly in China with transactions in RMB, while financial statements are in U.S. dollars; the value of ADSs is affected by the USD/RMB exchange rate[177](index=177&type=chunk) - Credit risk is concentrated in cash, cash equivalents, and short-term investments held at major financial institutions in China and internationally, which are believed to be of high credit quality[178](index=178&type=chunk) [Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that as of June 30, 2021, the company's disclosure controls and procedures were effective at a reasonable assurance level, with no material changes to internal controls over financial reporting - Management concluded that as of June 30, 2021, the company's disclosure controls and procedures were effective at the reasonable assurance level[181](index=181&type=chunk) - No material changes to internal controls over financial reporting occurred during the six months ended June 30, 2021[182](index=182&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal or administrative proceedings - The company is not currently a party to, nor is its property the subject of, any actual or threatened material legal or administrative proceedings[183](index=183&type=chunk) [Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) Material changes to risk factors include deteriorating U.S.-China relations, new Chinese data security laws imposing compliance costs, and the potential delisting of ADSs due to the PCAOB's inability to inspect the company's auditor - Changes in U.S.-China relations and regulations may adversely impact business, operating results, ability to raise capital, and stock price[184](index=184&type=chunk)[185](index=185&type=chunk) - Compliance with China's new Data Security Law and other cybersecurity regulations may entail significant expenses and could materially affect the business, with potential penalties for non-compliance[188](index=188&type=chunk)[189](index=189&type=chunk) - The company's auditor is not inspected by the U.S. Public Company Accounting Oversight Board (PCAOB); under the Holding Foreign Companies Accountable Act (HFCA Act), this could lead to the delisting of the company's ADSs from U.S. stock markets if the auditor is not inspected for three consecutive years (potentially reduced to two)[194](index=194&type=chunk) - Uncertainties in the Chinese legal system, including recent government documents enhancing enforcement against illegal securities activities and supervision over overseas-listed companies, could adversely affect the company[198](index=198&type=chunk)[199](index=199&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the period - None reported[201](index=201&type=chunk) [Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section provides an index of the exhibits filed with the Form 10-Q, including corporate governance documents, material contracts, and officer certifications

Zai Lab Limited (NASDAQ:ZLAB) Q1 2021 Earnings Conference Call May 10, 2021 8:00 AM ET Company Participants Billy Cho - Chief Financial Officer Samantha Du - Founder, Chairperson & Chief Executive Officer Tao Fu - Chief Operating Officer Jonathan Wang - Head of Business Development Alan Sandler - President, Head of Global Development, Oncology Conference Call Participants Yigal Nochomovitz - Citigroup Seamus Fernandez - Guggenheim Ziyi Chen - Goldman Sachs Anupam Rama - JPMorgan Jonathan Chang - SVB Leerink ...

Zai Lab Limited (NASDAQ:ZLAB) Q4 2020 Results Conference Call March 1, 2021 8:00 AM ET Company Participants Billy Cho - Chief Financial Officer Samantha Du - Founder, Chairperson and Chief Executive Officer Tao Fu - Chief Operating Officer Jonathan Wang - Head of Business Development Alan Sandler - President, Head of Global Development, Oncology Conference Call Participants Seamus Fernandez - Guggenheim Anupam Rama - JPMorgan David Ruch - SVB Leerink Ziyi Chen - Goldman Sachs Yang Huang - Credit Suisse Davi ...

Company Overview and Strategy - In 2020, Zai Lab achieved significant milestones, including the successful launch of new products and submission of new drug applications, with a strong focus on innovation despite the global COVID-19 pandemic [2]. - The company aims to become a leading global biopharmaceutical company by 2023, focusing on innovative therapies for patients in China and worldwide [5]. - Zai Lab focuses on developing and commercializing therapies for unmet medical needs, particularly in oncology, autoimmune diseases, and infectious diseases [37]. - The company has established partnerships with leading biopharmaceutical and healthcare companies such as GSK, Novocure, and Incyte Corporation to position itself as a preferred partner for new therapies in the Greater China region [138]. - The company aims to leverage global collaborations and business development activities to expand its candidate product pipeline and capture commercial opportunities for approved products [139]. Product Development and Pipeline - The company has 21 products in clinical development targeting over 60 indications, with 11 in late-stage clinical development and 5 products already approved by the FDA [2]. - Zai Lab's strong product pipeline is expected to significantly address unmet medical needs and improve patient outcomes globally [3]. - The company has expanded its candidate product pipeline from four in 2015 to twenty-one, including eleven in late-stage clinical development [16]. - The company has commercialized two products, Zejula and Aipudun, and has expanded its pipeline from 4 to 21 candidate products since 2015, including 11 clinical projects in late-stage development [138]. - The company is focused on expanding its oncology drug pipeline, including potential combinations with immunotherapy and targeted therapies [155]. Financial Performance - Total revenue for the fiscal year 2020 was $48.96 million, a significant increase from $12.99 million in 2019, representing a growth of approximately 276% [12]. - The company reported a net loss of $268.91 million for the fiscal year 2020, compared to a net loss of $195.07 million in 2019, reflecting an increase in losses of approximately 37.8% [12]. - Research and development expenses rose to $222.71 million in 2020, compared to $142.22 million in 2019, indicating a year-over-year increase of about 56.5% [12]. - Cash and cash equivalents, along with restricted cash, totaled $442.86 million at the end of 2020, up from $76.44 million in 2019, marking an increase of about 479% [11]. - Total assets reached $1.30 billion in 2020, a substantial rise from $355.15 million in 2019, representing an increase of approximately 265% [11]. Research and Development - The company has incurred significant R&D expenses amounting to approximately $223 million, primarily paid to Contract Research Organizations (CROs) and Contract Manufacturing Organizations (CMOs) for outsourced services [20]. - The company has implemented strategies since 2014 to enhance its R&D and commercialization capabilities [16]. - Research and development expenses include employee wages, patent fees, and costs related to clinical trials, with all R&D expenditures recognized as incurred [60]. Regulatory and Compliance - The company has received priority review status for its new drug applications, indicating strong regulatory support for its products [2]. - The company has received priority review designation from the National Medical Products Administration for certain candidate products [16]. - The company is responsible for preparing consolidated financial statements in accordance with U.S. GAAP, ensuring no material misstatements due to fraud or error [23]. Collaborations and Licensing Agreements - The company entered into a collaboration and licensing agreement with GSK, involving an upfront payment of $15,000 and potential milestone payments totaling up to $36,000 [116]. - The company has a licensing agreement with NovoCure Limited, with an upfront payment of $15,000 and milestone payments totaling $10,000, along with potential milestone payments up to $68,000 [120]. - The company has entered into a licensing and collaboration agreement with Five Prime, acquiring exclusive rights to develop and commercialize bemarituzumab (FPA144) in Greater China, with an upfront payment of $5 million and a milestone payment of $2 million [196]. Market Presence and Growth - As of December 31, 2020, Zai Lab has significant market shares in Greater China and the United States, with 100% ownership in its subsidiaries across various regions [38]. - The company has opened a new 20,000 square foot research facility in the San Francisco Bay Area and established a new office in Cambridge, Massachusetts, to expand its presence in the U.S. [138]. - The company is actively working to attract, retain, and motivate key personnel to support its growth strategy [137]. Risks and Challenges - Significant risks include the ability to commercialize products and candidates successfully, as well as the expected amounts and timing of revenue [136]. - The ongoing COVID-19 pandemic may have direct and indirect effects on the company's operations and growth capabilities [137]. - The company acknowledges the potential impact of new laws, regulations, and accounting standards on its operations [137].