Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
Pudong |
||
(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
The Stock Exchange of Hong Kong Limited |
* | Included in connection with the registration of the American Depositary Shares with the Securities and Exchange Commission. The ordinary shares are not registered or listed for trading in the United States but are listed for trading on the Stock Exchange of Hong Kong Limited. |
☒ | Accelerated Filer | ☐ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
Emerging growth company |
Page |
||||
1 | ||||
1 | ||||
82 | ||||
157 | ||||
157 | ||||
157 | ||||
157 | ||||
158 | ||||
158 | ||||
168 | ||||
168 | ||||
181 | ||||
182 | ||||
182 | ||||
182 | ||||
183 | ||||
183 | ||||
184 | ||||
184 | ||||
184 | ||||
184 | ||||
184 | ||||
184 | ||||
185 | ||||
185 | ||||
185 |
• | The uncertainties in the Chinese legal system could materially and adversely affect us; |
• | Changes in United States and China relations, as well as relations with other countries, and/or regulations may adversely impact our business, our operating results, our ability to raise capital and the market price of our ordinary shares and/or our ADSs; |
• | The Chinese government may intervene in or influence our operations at any time, which could result in a material change in our operations and significantly and adversely impact the value of our ADSs and ordinary shares, including potentially making those ADSs or ordinary shares worthless; |
• | The audit report included in this Annual Report on Form 10-K was prepared by an auditor who is not inspected by the U.S. Public Company Accounting Oversight Board, or the PCAOB, and as such, you are deprived of the benefits of such inspection, we may be subject to additional Nasdaq listing criteria or other penalties and our ADSs may be delisted from the U.S. stock market; |
• | Proceedings brought by the SEC against China-based accounting firms could result in our inability to file future financial statements in compliance with the requirements of the Exchange Act; |
• | Compliance with China’s Data Security Law, Cyber Security Law, Cybersecurity Review Measures, Personal Information Protection Law, the Regulation on the Administration of Human Genetic Resources, the Biosecurity Law, and any other future laws and regulations may entail significant |
expenses and could materially affect our business. Our failure to comply with such laws and regulations could lead to government enforcement actions and significant penalties against us, materially and adversely impacting our operating results; |
• | The economic, political and social conditions in mainland China, as well as governmental policies, could affect the business environment and financial markets in mainland China, our ability to operate our business, our liquidity and our access to capital; |
• | If the Chinese government determines that our corporate structure does not comply with Chinese regulations, or if Chinese regulations change or are interpreted differently in the future, the value of our ADSs or ordinary shares may decline in value or become worthless; |
• | The approval of, filing or other procedures with the CSRC or other Chinese regulatory authorities may be required in connection with issuing securities to foreign investors under Chinese law, and, if required, we cannot predict whether we will be able, or how long it will take us, to obtain such approval or complete such filing or other procedures. |
• | We may be exposed to liabilities under the U.S. Foreign Corrupt Practices Act, or FCPA, and Chinese anti-corruption laws, and any determination that we have violated these laws could have a material adverse effect on our business or our reputation; |
• | Restrictions on currency exchange may limit our ability to receive and use financing in foreign currencies effectively; |
• | We may rely on dividends and other distributions on equity paid by our Chinese subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our Chinese subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business; |
• | Chinese regulations relating to the establishment of offshore special purpose companies by residents in mainland China may subject our China resident beneficial owners or our wholly foreign-owned subsidiaries in mainland China to liability or penalties, limit our ability to inject capital into these subsidiaries, limit these subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us; |
• | Chinese regulations establish complex procedures for some acquisitions of mainland China based companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in mainland China; |
• | Chinese manufacturing facilities have historically experienced issues operating in line with established GMPs and international best practices, and passing FDA, NMPA, and EMA inspections, which may result in a longer and costlier current GMP inspection and approval process by the FDA, NMPA, or EMA for our Chinese manufacturing processes and third-party contract manufacturers; |
• | Our business benefits from certain financial incentives and discretionary policies granted by local governments. Expiration of, or changes to, these incentives or policies would have an adverse effect on our results of operations; |
• | It may be difficult for overseas regulators to conduct investigations or collect evidence within mainland China; |
• | If we are classified as a Chinese resident enterprise for Chinese income tax purposes, such classification could result in unfavorable tax consequences to us and our non-Chinese shareholders or ADS holders; |
• | We and our shareholders face uncertainties in mainland China with respect to indirect transfers of equity interests in Chinese resident enterprises; |
• | Any failure to comply with Chinese regulations regarding the registration requirements for our employee equity incentive plans may subject us to fines and other legal or administrative sanctions, which could adversely affect our business, financial condition and results of operations; |
• | Certain of our investments may be subject to review from the Committee on Foreign Investment in the United States, or CFIUS, which may delay or block a transaction from closing; |
• | Changes in United States and international trade policies and relations, particularly with regard to mainland China, may adversely impact our business and operating results; |
• | It may be difficult to enforce against us or our management in mainland China any judgments obtained from foreign courts; |
• | We may be subject to fines due to the lack of registration of our leases; |
• | Failure to renew our current leases or locate desirable alternatives for our leased properties could materially and adversely affect our business; |
• | We have incurred significant losses since our inception and anticipate that we will continue to incur losses in the future. To date, we have not generated sufficient revenue from product sales to cover corresponding expenses, and we may never achieve or sustain profitability; |
• | We are invested in the commercial success of our four approved products and our ability to generate product revenues in the near future is highly dependent on the commercial success of each of those products; |
• | We rely on third parties to conduct our pre-clinical and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our products or product candidates and our business could be substantially harmed; |
• | If we are unable to obtain and maintain patent protection for our products and product candidates through intellectual property rights, or if the scope of such intellectual property rights obtained is not sufficiently broad, third parties may compete directly against us; |
• | If we fail to maintain proper internal financial reporting controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired; and |
• | Other risks and uncertainties, including those listed under “Part I—Item 1A — |
• | received approval for and commercialized four products (ZEJULA, Optune, QINLOCK and NUZYRA); |
• | expanded our pipeline to increase our product candidates under development from four in 2015 to 28 today in oncology, autoimmune disorders, infectious diseases, and neuroscience, including 12 programs in late-stage clinical development; |
• | partnered with established biopharmaceutical and leading healthcare companies such as GlaxoSmithKline (GSK), Novocure, argenx, Turning Point, Deciphera, Karuna, Blueprint, MacroGenics, Cullinan, and Amgen through in-licensing product candidates to position ourselves as a partner of choice for the development and commercialization of novel therapeutics in Greater China; |
• | achieved reimbursement for ZEJULA in mainland China through its inclusion on the National Reimbursement Drug List (NRDL); |
• | built a commercial organization of approximately 945 employees; |
• | increased our research and development team to approximately 788 employees; |
• | assembled a leadership team of seasoned industry veterans with extensive pharmaceutical research, development, and commercialization experience in both global and Chinese biopharmaceutical companies; |
• | advanced our in-house discovery pipeline and capabilities targeting global markets; |
• | built out our facilities in China to support our regulatory, clinical, manufacturing, and commercial infrastructure in eleven locations across Greater China and the United States; |
• | acquired land-use rights for 50,851 square meters of land in Suzhou for the purpose of constructing and operating a manufacturing site and research center; and |
• | expanded our U.S. footprint by opening a research facility in the San Francisco Bay area and a new corporate office in Cambridge, Massachusetts. |
Product |
Indications |
Regulatory Status |
Commercial Rights |
Partner | ||||
|
1 st line ovarian cancer maintenance treatmentPlatinum sensitive relapsed ovarian cancer maintenance treatment |
Launched in mainland China, Hong Kong, and Macau | mainland China, Hong Kong, and Macau | GSK | ||||
|
Newly diagnosed glioblastoma multiforme (GBM) Recurrent GBM |
Launched in mainland China, Hong Kong, and Macau | mainland China, Hong Kong, Macau, and Taiwan | Novocure | ||||
|
4 th line gastrointestinal stromal tumors (GIST) |
Launched in mainland China, Hong Kong, and Taiwan | mainland China, Hong Kong, Macau, and Taiwan | Deciphera | ||||
|
Acute bacterial skin and skin structure infections (ABSSSI) Community-acquired bacterial pneumonia (CABP) |
Launched in mainland China | mainland China, Hong Kong, Macau, and Taiwan | Paratek |
• | Patients with advanced solid tumors that have an NTRK gene fusion who have progressed following treatment with one or two prior TRK TKIs, with or without prior chemotherapy, and have no satisfactory alternative treatments; and |
• | Patients with ROS1-positive metastatic NSCLC who have not been treated with a ROS1 TKI. |
• | Patients with ROS1-positive advanced NSCLC who have not been previously treated with a ROS1 TKI; |
• | Patients with ROS1-positive advanced NSCLC who have been previously treated with one prior line of platinum-based chemotherapy and one prior ROS1 TKI; |
• | Patients with ROS1-positive advanced NSCLC pretreated with one prior ROS1 TKI without prior platinum-based chemotherapy; and |
• | Patients with advanced solid tumors who have an NTRK gene fusion and who have progressed following treatment with at least one prior line of chemotherapy and one or two prior TRK TKIs and have no satisfactory alternative treatments. |
• | A Phase I proof-of-concept China-only dose escalation and expansion trial of tebotelimab monotherapy and in combination with brivanib, a compound that we in-licensed from Bristol-Myers Squibb, in patients with advanced hepatocellular carcinoma (HCC). The study was initiated in April 2020. |
• | A Phase I China-only clinical trial of tebotelimab in patients with melanoma. In November 2020, we enrolled the first patient in the study. |
• | A Phase Ib dose escalation and multi-cohort expansion clinical study of tebotelimab in combination with ZEJULA in Greater China, including gastric cancer, triple negative breast cancer, biliary tract cancer, and endometrial carcinoma. We have initiated dosing in all cohorts. |
• | monitoring and supervising the administration of pharmaceutical products, medical devices and equipment as well as cosmetics in mainland China; |
• | formulating administrative rules and policies concerning the supervision and administration of the pharmaceutical, medical device and cosmetics industry; |
• | evaluating, registering and approving chemical drugs, biological products and traditional Chinese medicine, or the TCM; |
• | approving and issuing permits for the manufacture and export/import of pharmaceutical products; and |
• | examining and evaluating the safety of pharmaceutical products, medical devices and cosmetics and handling significant accidents involving these products. |
• | The applicant shall first conduct an overall evaluation on the global clinical trial data and further make trend analysis of the Asian and Chinese clinical trial data. In the analysis of Chinese clinical trial data, the applicant shall consider the representativeness of the research subjects, i.e., the participating patients; |
• | The applicant shall analyze whether the amount of Chinese research subjects is sufficient to assess and adjudicate the safety and effectiveness of the study drug, and satisfy the statistical and relevant legal requirements; and |
• | The onshore and offshore IMCCT research centers shall be subject to on-site inspections by the Chinese regulatory authorities. |
• | The IMCCT drug does not need to be approved or entered into either a Phase II or III clinical trial in a foreign country, except for preventive biological products. Phase I IMCCT is permissible in mainland China. |
• | The application for drug marketing authorization can be submitted directly after the completion of the IMCCT. |
• | With respect to clinical trial and market authorization applications for imported innovative chemical drugs and therapeutic biological products, the marketing authorization in the country or region where the foreign drug manufacturer is located will not be required. |
• | the effective constituent of drug extracted from plants, animals, minerals, etc. as well as the preparations thereof have never been marketed in mainland China, and the material medicines and the preparations thereof are newly discovered; |
• | the chemical raw material medicines as well as the preparations thereof and the biological product have not been approved for marketing home and abroad; |
• | the new drugs are for treating AIDS, malignant tumors and rare diseases, etc., and have obvious advantages in clinical treatment; or |
• | the new drugs are for treating diseases with no effective methods of treatment. |
• | The drug candidate must be an innovative new drug or improved new drug; |
• | The drug candidate must be used for the prevention and treatment of life-threatening illnesses or illnesses which have a serious impact on the quality of life; and |
• | There is no other effective prevention or treatment method, or there is adequate evidence proving that the drug candidate has obvious clinical advantages over existing treatment methods. |
• | The drug candidate is for treatment of life-threatening illnesses with no effective treatment method or in dire need in case of a public health emergency; and clinical trial data on drug efficacy is available and the clinical value of the drug candidate can be predicated based on such data; or |
• | For vaccines urgently needed in major public health crisis or other vaccines that are deemed by the NHC to be urgently needed, they may receive conditional approvals if their assessed benefits outweigh the risks. |
• | Drugs that are in short supply and urgently needed clinically, or innovative new drugs or improved new drugs for the prevention and treatment of major contagious diseases or rare diseases; |
• | Drugs for pediatric use with new product specification, dosage form and strength that comply with pediatric physiological characteristics; |
• | Vaccines and innovative vaccines urgently needed for the prevention and control of diseases; |
• | Drugs that received break-through therapeutic drug designation; |
• | Drugs that are qualified for conditional approval; and |
• | Others qualified for priority review as stipulated by the NMPA. |
• | laboratory animals must be qualified and sourced from institutions that have Certificates for Production of Laboratory Animals; |
• | the environment and facilities for the animals’ living and propagating must meet state requirements; |
• | the animals’ feed must meet state requirements; |
• | the animals’ feeding and experimentation must be conducted by professionals, specialized and skilled workers, or other trained personnel; |
• | the management systems must be effective and efficient; and |
• | the applicable entity must follow other requirements as stipulated by Chinese laws and regulations. |
• | drugs with new drug certificates only; or |
• | drugs with new drug certificates and drug approval numbers. |
• | the transferor holds new drug certificates or both new drug certificates and drug approval numbers, and the monitoring period has expired or there is no monitoring period; or |
• | with respect to drugs without new drug certificates, both the transferor and the transferee are legally qualified drug manufacturing enterprises, one of which holds over 50% of the equity interests in the other, or both of which are majority-owned subsidiaries of the same drug manufacturing enterprise. |
• | completion of extensive pre-clinical studies, sometimes referred to as pre-clinical laboratory tests, pre-clinical animal studies and formulation studies all performed in compliance with applicable regulations, including the FDA’s GLP regulations; |
• | submission to the FDA of an IND which must become effective before human clinical trials may begin and must be updated annually; |
• | approval by an independent institutional review board (IRB) representing each clinical site before each clinical trial may be initiated; |
• | performance of adequate and well-controlled human clinical trials in accordance with applicable good clinical practices, or GCPs and other clinical trial-related regulations, to establish the safety and efficacy of the proposed drug or biological product for its proposed indication; |
• | preparation and submission to the FDA of an NDA or BLA; |
• | a determination by the FDA within sixty (60) days of its receipt of an NDA or BLA to accept the application for filing referral to the NDA or BLA to an FDA advisory committee, if FDA determines it to be appropriate; |
• | satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the API and finished drug or biological product are produced to assess compliance with the FDA’s current Good Manufacturing Practices, or cGMP; |
• | potential FDA audit of the pre-clinical and/or clinical trial sites that generated the data in support of the NDA or BLA; and |
• | payment of user fees and FDA review and approval of the NDA or BLA prior to any commercial marketing or sale of the drug or biologic in the United States. |
• | Phase I: The product candidate is initially introduced into a small number of healthy volunteers who are initially exposed to a single dose and then multiple doses. The primary purpose of these clinical trials is to assess the metabolism, pharmacologic action, side effect tolerability and safety of the product candidate. |
• | Phase II: The product candidate is administered to a limited patient population to determine dose tolerance and optimal dosage required to produce the desired benefits. At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, as well as identification of possible adverse effects and safety risks and preliminary evaluation of efficacy. |
• | Phase III: The product candidate is administered to an expanded number of patients, generally at multiple sites that are geographically dispersed, in well-controlled clinical trials to generate enough data to demonstrate the efficacy of the product candidate for its intended use, its safety profile and to establish the overall benefit/risk profile of the product candidate and provide an adequate basis for approval and labeling. Phase III clinical trials may include comparisons with placebo and/or other comparator treatments. |
• | Post-approval trials, sometimes referred to as Phase IV clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, FDA may mandate the performance of Phase IV clinical trials. |
• | the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. companies and their representatives from paying, offering to pay, promising to pay or authorizing the payment of anything of value to any foreign government official, government staff member, political party or political candidate for the purpose of obtaining or retaining business or to otherwise obtain favorable treatment or influence a person working in an official capacity. In many countries, the health care professionals we regularly interact with may meet the FCPA’s definition of a foreign government official. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect their transactions and to devise and maintain an adequate system of internal accounting controls; |
• | federal healthcare program anti-kickback laws, which prohibit, among other things, persons from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid; |
• | federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, information or claims for payment from Medicare, Medicaid or other third-party payers that are false or fraudulent; |
• | the federal Health Insurance Portability and Accountability Act of 1996, as amended, which prohibits executing a scheme to defraud any healthcare benefit program (including private health plans) or making false statements relating to healthcare matters and which also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; |
• | federal laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under government healthcare programs; |
• | the so-called “federal sunshine” law, which requires pharmaceutical and medical device companies to monitor and report certain financial interactions with physicians, certain non-physician practitioners and teaching hospitals to the federal government for re-disclosure to the public; and |
• | state law equivalents of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including private insurers, state transparency laws, state laws limiting interactions between pharmaceutical manufacturers and members of the healthcare industry, state laws regulating or requiring the reporting of prices, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts. |
• | Any person who uses, promises to sell, sells or imports any patented product or product directly obtained in accordance with the patented methods after such product is sold by the patent owner or by its licensed entity or individual; |
• | Any person who has manufactured an identical product, has used an identical method or has made necessary preparations for manufacture or use prior to the date of patent application and continues to manufacture such product or use such method only within the original scope; |
• | Any foreign transportation facility that temporarily passes through the territory, territorial waters or territorial airspace of mainland China and uses the relevant patents in its devices and installations for its own needs in accordance with any agreement concluded between mainland China and that country to which the foreign transportation facility belongs, or any international treaty to which both countries are party, or on the basis of the principle of reciprocity; |
• | Any person who uses the relevant patents solely for the purposes of scientific research and experimentation; or |
• | Any person who manufactures, uses or imports patented drug or patented medical equipment for the purpose of providing information required for administrative approval, or manufactures, uses or imports patented drugs or patented medical equipment for the abovementioned person. |
By Function |
Number of employees |
|||
Research and Development |
788 | |||
Commercial |
945 | |||
Manufacturing |
81 | |||
General and Administrative* |
137 | |||
Total |
1,951 |
* | Includes finance, legal, human resources, information technology and other general and administrative functions. |
• | Our Board is responsible for establishing our risk management and internal control system and reviewing its effectiveness. |
• | Our Audit Committee oversees and manages the overall risks associated with our business operations, including (i) developing, reviewing, and approving our risk management programs and procedures to ensure that it is consistent with our corporate objectives; (ii) monitoring the most significant risks associated with our business operation and our management’s handling of such risks; (iii) reviewing our corporate risk matrix in the light of our corporate risk tolerance; (iv) reviewing the significant residual risks and the need to set up mitigating controls; and (v) monitoring and ensuring the appropriate application of our risk management framework across the company. |
• | Our Chief Legal Officer, Mr. F. Ty Edmondson, is responsible for (i) formulating and updating our risk management program and target; (ii) reviewing and approving major risk management issues of the Company; (iii) promulgating risk management measures; (iv) providing guidance on our risk management approach to the relevant departments in the Company; (v) reviewing the relevant departments’ reporting on key risks and providing feedbacks; (vi) supervising the implementation of our risk management measures by the relevant departments; (vii) ensuring that the appropriate structure, processes and competencies are in place across the Company; (viii) developing and operating an enterprise risk management program for the Company, the results of which are reported to the Audit Committee throughout the year; (ix) developing and managing the Company’s government affairs efforts; (x) reporting to our Audit Committee on our material risks; and (xi) coordinating and providing updates to the Board of Directors as necessary. |
• | The relevant departments in the Company are responsible for implementing our risk management program under the oversight of our Legal and Compliance Departments. |
• | Our Finance Department is responsible for developing and implementing our internal controls systems. |
• | continue to commercialize, and maintain and expand sales, marketing and commercialization infrastructure for our approved products and any other products for which we may obtain regulatory approval; |
• | maintain and expand regulatory approvals for our products and product candidates that successfully complete clinical trials; |
• | continue our development and commence clinical trials of our product candidates; |
• | acquire or in-license other intellectual property, product candidates and technologies; |
• | maintain and expand our manufacturing facilities; |
• | hire additional clinical, operational, financial, quality control and scientific personnel; |
• | seek to identify additional product candidates; |
• | obtain, maintain, expand and protect our intellectual property portfolio; and |
• | enforce and defend intellectual property-related claims. |
• | the cost and timing of future commercialization activities for ZEJULA, Optune, QINLOCK, NUZYRA and any other product candidates for which we receive regulatory approval; |
• | the pricing of and product revenues received, if any, from future commercial sales of our approved products and any other products for which we receive regulatory approval; |
• | the scope, progress, timing, results and costs of clinical development of our products in additional indications, if any; |
• | the scope, progress, timing, results and costs of researching and developing our product candidates, and conducting pre-clinical and clinical trials; |
• | the cost, timing and outcome of seeking, obtaining, maintaining and expanding regulatory approval of our products and product candidates; |
• | our ability to establish and maintain strategic partnerships, collaboration, licensing or other arrangement and the economic and other terms, timing and success of such arrangements; |
• | the cost, timing and outcome of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property related claims; |
• | the extent to which we acquire or in-license other product candidates and technologies and the economic and other terms, timing and success of such collaboration and licensing arrangements; |
• | cash requirements of any future acquisitions; |
• | the number, characteristics and development requirements of the product candidates we pursue; |
• | resources required to develop and implement policies and processes to promote ongoing compliance with applicable healthcare laws and regulations; |
• | costs required to ensure that our and our partners’ business arrangements with third parties comply with applicable healthcare laws and regulations; |
• | our headcount growth and associated costs; and |
• | the costs of operating as a public company in both the United States and Hong Kong. |
• | maintain commercial manufacturing or supply arrangements with third-party manufacturers for ZEJULA, Optune, QINLOCK, and NUZYRA; |
• | produce, through a validated process or procure, both internally or from third-party manufacturers sufficient quantities and inventory of each of our approved products to meet demand; |
• | build and maintain internal sales, distribution and marketing capabilities sufficient to generate commercial sales of each of our approved products; |
• | secure widespread acceptance of ZEJULA, Optune, QINLOCK, and NUZYRA from physicians, healthcare payors, patients and the medical community; |
• | properly price and obtain coverage and adequate reimbursement of each of our approved products by governmental authorities, private health insurers, managed care organizations and other third-party payors; |
• | maintain compliance with ongoing regulatory labeling, packaging, storage, advertising, promotion, recordkeeping, safety and other post-market requirements; |
• | manage our growth and spending as costs and expenses increase due to commercialization; and |
• | manage business interruptions resulting from the occurrence of any pandemic, epidemic, including from the outbreak of COVID-19, or any other public health crises, natural catastrophe or other disasters. |
• | acceptable evidence of safety and efficacy; |
• | relative convenience and ease of administration; |
• | prevalence and severity of any adverse side effects; |
• | availability of alternative treatments; |
• | pricing, cost effectiveness and value propositions; |
• | effectiveness of our sales and marketing capabilities and strategies; |
• | ability to obtain sufficient third-party coverage and reimbursement; |
• | the clinical indications for which such product are approved, as well as changes in the standard of care for their targeted indications; |
• | the continuing effectiveness of manufacturing and supply chain; |
• | warnings and limitations contained in the approved labeling for such product; |
• | safety concerns with similar products marketed by others; |
• | the prevalence and severity of any side effects as a result of treatment with such product; |
• | our ability to comply with regulatory post-marketing requirements associated with the approval of such product; |
• | the actual market-size for such product, which may be larger or smaller than expected; |
• | competitor’s entry timing and price; and |
• | our ability to manage complications or barriers that inhibit our commercialization team from reaching the appropriate audience to promote our product(s) because of the outbreak of COVID-19 or any other public health crises, natural catastrophe or other disasters. |
• | successful enrollment of patients in, and completion of, clinical trials as well as completion of pre-clinical studies, which may be especially challenging given the COVID-19 pandemic; |
• | receipt of regulatory approvals from applicable regulatory authorities for planned clinical trials, future clinical trials or drug registrations, manufacturing and commercialization; |
• | successful completion of all safety and efficacy studies required to obtain regulatory approval in Greater China, the United States and other jurisdictions for our product candidates; |
• | adapting our commercial manufacturing capabilities to the specifications for our product candidates for clinical supply and commercial manufacturing; |
• | making and maintaining arrangements with third-party manufacturers; |
• | obtaining and maintaining patent, trade secret and other intellectual property protection and/or regulatory exclusivity for our product candidates; |
• | launching commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others; |
• | acceptance of the product candidates, if and when approved, by patients, the medical community and third-party payors; |
• | effectively competing with other therapies and alternative drugs; |
• | obtaining and maintaining healthcare coverage and adequate reimbursement; |
• | successfully enforcing and defending intellectual property rights and claims; and |
• | maintaining a continued acceptable safety, tolerability and efficacy profile of the product candidates following regulatory approval. |
• | disagreement with the NMPA, FDA, and EMA or comparable regulatory authorities regarding the number, design, size, conduct or implementation of our clinical trials; |
• | failure to demonstrate to the satisfaction of the NMPA, FDA, and EMA or comparable regulatory authorities that a product candidate is safe and effective for its proposed indication; |
• | failure of CROs, clinical study sites or investigators to comply with the ICH-good clinical practice, or GCP, requirements imposed by the NMPA, FDA, and EMA or comparable regulatory authorities; |
• | failure of the clinical trial results to meet the level of statistical significance required by the NMPA, FDA, and EMA or comparable regulatory authorities for approval; |
• | failure to demonstrate that a product’s or product candidate’s clinical and other benefits outweigh its safety risks; |
• | the NMPA, FDA, and EMA or comparable regulatory authorities disagreeing with our interpretation of data from pre-clinical studies or clinical trials; |
• | insufficient data collected from clinical trials to support the submission of an NDA or other submission or to obtain regulatory approval in Greater China, the United States or elsewhere; |
• | the NMPA, FDA, and EMA or comparable regulatory authorities not approving the manufacturing processes for our clinical and commercial supplies; |
• | changes in the approval policies or regulations of the NMPA, FDA or comparable regulatory authorities rendering our clinical data insufficient for approval; |
• | the NMPA, FDA or comparable regulatory authorities restricting the use of our products to a narrow population; and |
• | our CROs or licensors taking actions that materially and adversely impact the clinical trials. |
• | regulators or institutional review boards, or IRBs, or ethics committees may not authorize us or our investigators to commence or conduct a clinical trial at a prospective trial site; |
• | we may experience delays in reaching, or may fail to reach, agreement on acceptable terms with prospective trial sites and prospective CROs who conduct clinical trials on our behalf, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; |
• | clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us or them, to conduct additional clinical trials or we may decide to abandon product development programs; |
• | the number of patients required for clinical trials of our products and product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate; |
• | third-party contractors used in our clinical trials may fail to comply with regulatory requirements or meet their contractual obligations in a timely manner, or at all, or may deviate from the clinical trial protocol or drop out of the trial, which may require that we add new clinical trial sites or investigators; |
• | the ability to conduct a companion diagnostic test to identify patients who are likely to benefit from our products and product candidates; |
• | we may elect to, or regulators, IRBs or ethics committees may require that we or our investigators, suspend or terminate clinical research for various reasons, including non-compliance with regulatory requirements or a finding that participants are being exposed to unacceptable health risks; |
• | the cost of clinical trials of our products and product candidates may be greater than we anticipate; |
• | the supply or quality of our products and product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; and |
• | our products and product candidates may have undesirable side effects or unexpected characteristics, causing us or our investigators, regulators, IRBs or ethics committees to suspend or terminate the trials, or reports may arise from pre-clinical or clinical testing of other cancer therapies that raise safety or efficacy concerns about our products and product candidates. |
• | be delayed in obtaining regulatory approval for our products and product candidates; |
• | not obtain regulatory approval at all; |
• | obtain approval for indications or patient populations that are not as broad as intended or desired; |
• | be subject to post-marketing testing requirements; |
• | encounter difficulties obtaining or be unable to obtain reimbursement for use of our products and product candidates; |
• | be subject to restrictions on the distribution and/or commercialization of our products and product candidates; or |
• | have our products and product candidates removed from the market after obtaining regulatory approval. |
• | the severity of the disease under investigation; |
• | the total size and nature of the relevant patient population; |
• | the design and eligibility criteria for the clinical trial in question; |
• | the availability of an appropriate genomic screening test; |
• | the perceived risks and benefits of the product or product candidate under study; |
• | the efforts to facilitate timely enrollment in clinical trials; |
• | the patient referral practices of physicians; |
• | the availability of competing therapies also undergoing clinical trials; |
• | the ability to monitor patients adequately during and after treatment; |
• | the proximity and availability of clinical trial sites for prospective patients; and |
• | the occurrence of any pandemic, epidemic, including from the outbreak of COVID-19, or any other public health crises, natural catastrophe or other disasters may cause a delay in enrollment of patients in clinical trials. |
• | our revenue may be negatively impacted; |
• | the NMPA, FDA or other comparable regulatory authorities may withdraw or limit their approval of such products or product candidates; |
• | the NMPA, FDA or other comparable regulatory authorities may require the addition of labeling statements, such as a “boxed” warning or a contra-indication; |
• | we may be required to create a medication guide outlining the risks of such side effects for distribution to patients; |
• | we may be required to change the way such products or product candidates are distributed or administered, conduct additional clinical trials or change the labeling of our products or product candidates; |
• | the NMPA, FDA or other comparable regulatory authorities may require a Risk Evaluation and Mitigation Strategy, or REMS (or analogous requirement), plan to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools; |
• | we may be subject to regulatory investigations and government enforcement actions; |
• | we may decide to remove such products or product candidates from the marketplace; |
• | we could be sued and held liable for injury caused to individuals exposed to or taking our products or product candidates; and |
• | our reputation may suffer. |
• | restrictions on the marketing or manufacturing of the product, withdrawal of the product or drug from the market, or voluntary or mandatory product recalls; |
• | fines, warning letters or holds on clinical trials; |
• | refusal by the NMPA, FDA or comparable regulatory authority to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals; |
• | drug seizure, detention or refusal to permit the import or export of the product; and |
• | injunctions or the imposition of civil, administrative or criminal penalties. |
• | efforts to enter into collaboration or licensing arrangements with third parties may increase our expenses or divert our management’s attention from the acquisition or development of product candidates; |
• | difficulty of effective enforcement of contractual provisions in local jurisdictions; |
• | potential third-party patent rights or potentially reduced protection for intellectual property rights; |
• | unexpected changes in tariffs, trade barriers and regulatory requirements, including the loss of normal trade status between mainland China and the United States; |
• | economic weakness, including inflation; |
• | compliance with tax, employment, immigration and labor laws for employees traveling abroad; |
• | the effects of applicable foreign tax structures and potentially adverse tax consequences; |
• | currency fluctuations, which could result in increased operating expenses and reduced revenue; |
• | workforce uncertainty and labor unrest; |
• | failure of our employees and contracted third parties to comply with the anti-bribery laws in mainland China, Office of Foreign Asset Control rules and regulations and the Foreign Corrupt Practices Act and other anti-bribery and corruption laws; and |
• | business interruptions resulting from geo-political actions, including trade disputes, war and terrorism, disease or public health epidemics, such as the coronavirus impacting mainland China and elsewhere, or natural disasters, including earthquakes, volcanoes, typhoons, floods, hurricanes and fires. |
• | issue ordinary shares that would dilute the percentage of ownership of the holders of our ordinary shares and/or ADSs; |
• | incur debt and assume liabilities; and |
• | incur amortization expenses related to intangible assets or incur large and immediate write-offs. |
• | problems integrating the purchased business, products, personnel or technologies; |
• | increases to our expenses; |
• | the failure to have discovered undisclosed liabilities of the acquired asset or company; |
• | diversion of management’s attention from their day-to-day |
• | harm to our operating results or financial condition; |
• | entrance into markets in which we have limited or no prior experience; and |
• | potential loss of key employees, particularly those of the acquired entity. |
• | obtain a manufacturing permit for each production facility from the NMPA and its relevant branches for the manufacture of drug and device products domestically; |
• | obtain a marketing authorization, which includes an approval number, from the NMPA for each drug or device for sale in mainland China; |
• | obtain a Pharmaceutical Distribution Permit from the provincial medical products administration if we were to sell drugs manufactured by third parties; and |
• | renew the Pharmaceutical Manufacturing Permits, the Pharmaceutical Distribution Permits and marketing authorizations every five years, among other requirements. |
• | the scope of rights granted under the license agreement and other interpretation-related issues; |
• | the extent to which our technology and processes infringe, misappropriate or otherwise violate on intellectual property of the licensor that is not subject to the licensing agreement; |
• | the sublicensing of patent and other rights under our collaborative development relationships; |
• | our diligence obligations under the license agreement and what activities satisfy those diligence obligations; |
• | the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and |
• | the priority of invention of patented technology. |
• | significant negative media attention and reputational damage; |
• | withdrawal of clinical trial subjects and inability to continue clinical trials; |
• | significant costs to defend the related litigation; |
• | substantial monetary awards to trial subjects or patients; |
• | the inability to commercialize any products or product candidates that we may develop; |
• | initiation of investigations by regulators; |
• | a diversion of management’s time and our resources; and |
• | a decline in the market price of our ordinary shares and/or our ADSs. |
• | obtain royalty-bearing licenses from such third party to such patents, which may not be available on commercially reasonable terms, if at all and even if we were able to obtain such licenses, they could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and could require us to make substantial licensing and royalty payments; |
• | defend litigation or administrative proceedings; |
• | reformulate product(s) so that it does not infringe the intellectual property rights of others, which may not be possible or could be very expensive and time consuming; |
• | cease developing, manufacturing and commercializing the infringing technology, products or product candidates; and |
• | pay such third party significant monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. |
• | others may be able to make products that are similar to any product or product candidates we may develop or utilize similar technology but that are not covered by the claims of the patents that we license or may own in the future; |
• | we, our licensors, patent owners of patent rights that we have in-licensed, or current or future collaborators might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or may own in the future; |
• | we, our licensors, patent owners of patent rights that we have in-licensed, or current or future collaborators might not have been the first to file patent applications covering certain of our or their inventions; |
• | others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing, misappropriating or otherwise violating our owned or licensed intellectual property rights; |
• | it is possible that our pending licensed patent applications or those that we may own in the future will not lead to issued patents; |
• | issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors; |
• | our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; |
• | we may not develop additional proprietary technologies that are patentable; |
• | the patents of others may harm our business; and |
• | we may choose not to file a patent in order to maintain certain trade secrets or know how, and a third party may discover certain technologies containing such trade secrets or know how through independent research and development and/or subsequently file a patent covering such intellectual property. |
• | announcements of competitive developments; |
• | regulatory developments affecting us, our customers or our competitors; |
• | announcements regarding litigation or administrative proceedings involving us; |
• | actual or anticipated fluctuations in our period-to-period |
• | changes in financial estimates by securities research analysts; |
• | additions or departures of our executive officers; |
• | fluctuations of exchange rates between the RMB and the U.S. dollar; |
• | release or expiration of lock-up or other transfer restrictions on our outstanding ADSs or ordinary shares; and |
• | sales or perceived sales of additional ADSs or ordinary shares. |
• | Note: Reflects opening prices for 9/21/17, the date of initial trading of ZLAB ADSs, and closing prices for all other quarterly dates. |
9/21/17 |
9/30/17 |
12/31/17 |
3/31/18 |
6/30/18 |
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
|||||||||||||||||||||||||||||||
Zai Lab Limited |
$ | 100.00 | $ | 95.81 | $ | 75.34 | $ | 75.76 | $ | 82.51 | $ | 69.13 | $ | 82.40 | $ | 104.72 | $ | 123.74 | $ | 114.80 | ||||||||||||||||||||
NASDAQ Composite |
$ | 100.00 | $ | 100.73 | $ | 107.05 | $ | 109.54 | $ | 116.46 | $ | 124.78 | $ | 102.90 | $ | 119.86 | $ | 124.16 | $ | 124.05 | ||||||||||||||||||||
NASDAQ Biotechnology |
$ | 100.00 | $ | 100.45 | $ | 96.52 | $ | 96.46 | $ | 99.31 | $ | 110.29 | $ | 87.52 | $ | 101.00 | $ | 98.58 | $ | 89.94 |
12/31/19 |
3/31/20 |
6/30/20 |
9/30/20 |
12/31/20 |
3/31/21 |
6/30/21 |
9/30/21 |
12/31/21 |
||||||||||||||||||||||||||||
Zai Lab Limited |
$ | 147.59 | $ | 182.68 | $ | 291.45 | $ | 295.14 | $ | 480.27 | $ | 473.49 | $ | 628.07 | $ | 373.99 | $ | 223.03 | ||||||||||||||||||
NASDAQ Composite |
$ | 139.14 | $ | 119.41 | $ | 155.98 | $ | 173.18 | $ | 199.86 | $ | 205.42 | $ | 224.92 | $ | 224.06 | $ | 242.61 | ||||||||||||||||||
NASDAQ Biotechnology |
$ | 108.89 | $ | 97.55 | $ | 123.58 | $ | 122.41 | $ | 136.85 | $ | 135.87 | $ | 148.03 | $ | 146.23 | $ | 135.99 |
(i) | the primary location of the day-to-day |
(ii) | decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in mainland China; |
(iii) | the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in mainland China; and |
(iv) | at least 50% of voting board members or senior executives habitually reside in mainland China. |
• | a citizen or individual resident of the United States; |
• | a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) organized in or under the laws of the United States or any state thereof, or the District of Columbia; |
• | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
• | a trust if (i) it has a valid election in effect to be treated as a U.S. person for U.S. federal income tax purposes or (ii) a U.S. court can exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions. |
• | banks or other financial institutions; |
• | insurance companies; |
• | real estate investment trusts; |
• | regulated investment companies; |
• | grantor trusts; |
• | tax-exempt organizations (including private foundations); |
• | persons holding ADSs or ordinary shares through a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) or S corporation; |
• | dealers or traders in securities, commodities or currencies (including those who use a mark-to-market |
• | persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar; |
• | certain former citizens and former long-term residents of the United States; |
• | persons who acquired our ADSs or ordinary shares pursuant to the exercise of any employee stock option or otherwise as compensation; |
• | persons holding ADSs or ordinary shares as part of a position in a straddle or as part of a hedging, wash sale, constructive sale, conversion or integrated transaction for U.S. federal income tax purposes; or |
• | direct, indirect or constructive owners of 10% or more of our total combined voting power or value. |
A. |
Operating Results. |
• | expenses incurred for payments to CROs, CMOs, investigators and clinical trial sites that conduct our clinical studies; |
• | employee compensation related expenses, including salaries, benefits and equity compensation expenses; |
• | expenses for licensors; |
• | the cost of acquiring, developing and manufacturing clinical study materials; |
• | facilities and other expenses, which include office leases and other overhead expenses; |
• | costs associated with pre-clinical activities and regulatory operations; |
• | expenses associated with the construction and maintenance of our manufacturing facilities; and |
• | costs associated with operating as a public company. |
(in thousands) |
Year ended December 31, |
|||||||||||||||
2021 |
% |
2020 |
% |
|||||||||||||
Revenues: |
||||||||||||||||
Product revenue, net |
$ | 144,105 | 99.9 | $ | 48,958 | 100.0 | ||||||||||
Collaboration revenue |
207 | 0.1 | — | 0.0 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 144,312 | 100.0 | $ | 48,958 | 100.0 | ||||||||||
|
|
|
|
|
|
|
|
(in thousands) |
Year ended December 31, |
|||||||||||||||
2021 |
% |
2020 |
% |
|||||||||||||
Product revenue, net: |
||||||||||||||||
ZEJULA |
$ | 93,579 | 64.9 | $ | 32,138 | 65.7 | ||||||||||
Optune |
38,903 | 27.0 | 16,418 | 33.5 | ||||||||||||
QINLOCK |
11,620 | 8.1 | 402 | 0.8 | ||||||||||||
NUZYRA |
3 | 0.0 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 144,105 | 100.0 | $ | 48,958 | 100.0 | ||||||||||
|
|
|
|
|
|
|
|
(in thousands) |
Year ended December 31, |
|||||||||||||||
2021 |
% |
2020 |
% |
|||||||||||||
Research and development expenses: |
||||||||||||||||
Personnel compensation and related costs |
$ | 77,227 | 13.5 | $ | 40,257 | 18.1 | ||||||||||
Licensing fees |
384,104 | 67.0 | 108,169 | 48.6 | ||||||||||||
Payment to CROs/CMOs/Investigators |
82,571 | 14.4 | 53,275 | 23.9 | ||||||||||||
Other costs |
29,404 | 5.1 | 21,010 | 9.4 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 573,306 | 100.0 | $ | 222,711 | 100.0 | ||||||||||
|
|
|
|
|
|
|
|
• | $37.0 million for increased personnel compensation and related costs which was primarily attributable to increased employee compensation costs, due to hiring of more personnel during the year ended December 31, 2021 and the grants of new share options and vesting of restricted shares to certain employees; |
• | $275.9 million for increased licensing fees in connection with the upfront and milestone fee paid for licensing agreements; |
• | $29.3 million for increased payment to CROs/CMOs/Investigators during the year ended December 31, 2021 as we advanced our drug candidate pipeline; and |
• | $8.4 million for increased lab consumables and other cost during the year ended December 31, 2021. |
(in thousands) |
Year ended December 31, |
|||||||||||||||
2021 |
% |
2020 |
% |
|||||||||||||
Research and development expenses: |
||||||||||||||||
Clinical programs |
$ | 433,021 | 75.5 | $ | 160,674 | 72.1 | ||||||||||
Pre-clinical programs |
47,768 | 8.3 | 10,598 | 4.8 | ||||||||||||
Unallocated research and development expenses |
92,517 | 16.2 | 51,439 | 23.1 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 573,306 | 100.0 | $ | 222,711 | 100.0 | ||||||||||
|
|
|
|
|
|
|
|
(in thousands) |
Year ended December 31, |
|||||||||||||||
2021 |
% |
2020 |
% |
|||||||||||||
Selling, General and Administrative Expenses: |
||||||||||||||||
Personnel compensation and related costs |
$ | 124,675 | 57.0 | $ | 63,010 | 56.6 | ||||||||||
Professional service fees |
22,901 | 10.5 | 12,751 | 11.5 | ||||||||||||
Other costs |
71,255 | 32.5 | 35,551 | 31.9 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 218,831 | 100.0 | $ | 111,312 | 100.0 | ||||||||||
|
|
|
|
|
|
|
|
• | $61.7 million for increased personnel compensation and related costs which was primarily attributable to increased commercial and administrative personnel costs, due to hiring of more personnel during year ended December 31, 2021 and the grants of new share options and vesting of restricted shares to certain employees; |
• | $10.1 million for increased professional service fee, mainly attributable to our increased legal, compliance, accounting and investor and public relations expenses associated with being a public company and in connection with sales of ZEJULA, Optune, QINLOCK and NUZYRA in mainland China after our commercial launch of these four commercialized products; and |
• | $35.7 million for increased other costs, mainly including selling, rental, and administrative expenses primary attributable to the commercial operation in Hong Kong, Taiwan and mainland China. |
(in thousands) |
Year ended December 31, |
|||||||||||||||
2020 |
% |
2019 |
% |
|||||||||||||
Product revenue, net: |
||||||||||||||||
ZEJULA |
$ | 32,138 | 65.7 | $ | 6,625 | 51.0 | ||||||||||
Optune |
16,418 | 33.5 | 6,360 | 49.0 | ||||||||||||
QINLOCK |
402 | 0.8 | — | 0.0 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 48,958 | 100.0 | $ | 12,985 | 100.0 | ||||||||||
|
|
|
|
|
|
|
|
(in thousands) |
Year ended December 31, |
|||||||||||||||
2020 |
% |
2019 |
% |
|||||||||||||
Research and development expenses: |
||||||||||||||||
Personnel compensation and related costs |
$ | 40,257 | 18.1 | $ | 30,820 | 21.6 | ||||||||||
Licensing fees |
108,169 | 48.6 | 58,682 | 41.3 | ||||||||||||
Payment to CROs/CMOs/Investigators |
53,275 | 23.9 | 36,814 | 25.9 | ||||||||||||
Other costs |
21,010 | 9.4 | 15,905 | 11.2 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 222,711 | 100.0 | $ | 142,221 | 100.0 | ||||||||||
|
|
|
|
|
|
|
|
• | $9.4 million for increased personnel compensation and related costs which was primarily attributable to increased employee compensation costs, due to hiring of more personnel during the year ended December 31, 2020, and the grants of new share options and vesting of restricted shares to certain employees; |
• | $49.5 million for increased licensing fees in connection with the upfront and milestone fee paid for licensing agreement; |
• | $16.5 million for increased payment to CROs/CMOs/Investigators in fiscal year 2020 as we advanced our drug candidate pipeline; and |
• | $5.1 million for increased lab consumables and professional service expenses. |
(in thousands) |
Year ended December 31, |
|||||||||||||||
2020 |
% |
2019 |
% |
|||||||||||||
Research and development expenses: |
||||||||||||||||
Clinical programs |
$ | 160,674 | 72.1 | $ | 96,442 | 67.8 | ||||||||||
Pre-clinical programs |
10,598 | 4.8 | 8,268 | 5.8 | ||||||||||||
Unallocated research and development expenses |
51,439 | 23.1 | 37,511 | 26.4 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 222,711 | 100.0 | $ | 142,221 | 100.0 | ||||||||||
|
|
|
|
|
|
|
|
(in thousands) |
Year ended December 31, |
|||||||||||||||
2020 |
% |
2019 |
% |
|||||||||||||
Selling, General and Administrative Expenses: |
||||||||||||||||
Personnel compensation and related costs |
$ | 63,010 | 56.6 | $ | 43,572 | 62.1 | ||||||||||
Professional service fees |
12,751 | 11.5 | 2,887 | 4.1 | ||||||||||||
Other costs |
35,551 | 31.9 | 23,752 | 33.8 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 111,312 | 100.0 | $ | 70,211 | 100.0 | ||||||||||
|
|
|
|
|
|
|
|
• | $19.4 million for increased personnel compensation and related costs which was primarily attributable to increased commercial and administrative personnel costs, due to hiring of more personnel during year ended December 31, 2020, and the grants of new share options and vesting of restricted shares to certain employees; |
• | $9.9 million for increased professional service fee, mainly attributable to our increased legal, compliance, accounting and investor and public relations expenses associated with being a public company and in connection with sales of ZEJULA and Optune in mainland China after our commercial launch of these two commercialized products; and |
• | $11.8 million for increased other costs, mainly including selling, rental, and administrative expenses primary attributable to the commercial operation in Hong Kong and mainland China. |
(in thousands) |
Year ended December 31, |
|||||||||||
2019 |
2020 |
2021 |
||||||||||
Net cash used in operating activities |
$ | (191,011 | ) | $ | (216,055 | ) | $ | (549,231 | ) | |||
Net cash provided by (used in) investing activities |
(14,892 | ) | (554,830 | ) | 249,957 | |||||||
Net cash provided by financing activities |
219,302 | 1,132,440 | 820,202 | |||||||||
Effect of foreign exchange rate changes |
91 | 4,862 | 1,116 | |||||||||
|
|
|
|
|
|
|||||||
Net increases in cash, cash equivalents and restricted cash |
$ | 13,490 | $ | 366,417 | $ | 522,044 | ||||||
|
|
|
|
|
|
(a) |
Disclosure Controls and Procedures |
(b) |
Management’s Annual Report on Internal Control over Financial Reporting |
(c) |
Report of Registered Accounting Firm |
(d) |
Changes in Internal Control over Financial Reporting |
* | Filed herewith |
** | Furnished herewith |
# | Management contract or compensatory plan |
+ | Confidential treatment has been granted as to certain portions, which portions have been omitted and submitted separately to the Securities and Exchange Commission. |
^ | Certain confidential information contained in this exhibit has been omitted because it (i) is not material and (ii) would be competitively harmful if publicly disclosed. |
Signature |
Title |
Date | ||
/s/ Samantha (Ying) Du Samantha (Ying) Du |
Chief Executive Officer and Chairwoman (Principal Executive Officer) |
March 1, 2022 | ||
/s/ Billy Cho Billy Cho |
Chief Financial Officer (Principal Financial and Accounting Officer) |
March 1, 2022 | ||
/s/ John Diekman John Diekman |
Director |
March 1, 2022 | ||
/s/ Kai-Xian Chen Kai-Xian Chen |
Director |
March 1, 2022 | ||
/s/ Nisa Leung Nisa Leung |
Director |
March 1, 2022 | ||
/s/ William Lis William Lis |
Director |
March 1, 2022 | ||
/s/ Leon O. Moulder, Jr. Leon O. Moulder, Jr. |
Director |
March 1, 2022 | ||
/s/ Peter Wirth Peter Wirth |
Director |
March 1, 2022 | ||
/s/ Richard Gaynor Richard Gaynor |
Director |
March 1, 2022 | ||
/s/ Scott Morrison Scott Morrison |
Director |
March 1, 2022 |
ZAI LAB LIMITED | ||||
Date: March 1, 2022 |
By: | /s/ Samantha (Ying) Du | ||
Name: | Samantha (Ying) Du | |||
Title: | Chief Executive Officer |
Page |
||||
F-2 |
||||
F-5 |
||||
F-6 |
||||
F-7 |
||||
F-8 |
||||
F-9 |
||||
F-11 |
||||
F-47 |
• |
We tested the effectiveness of key controls over the accrual of the R&D expenses payable to the Outsourced Service Providers. |
• |
We obtained and read the key terms set out in the research agreements with Outsourced Service Providers and evaluated the completion status with reference to the progress reported by the representatives of the Outsourced Service Providers, on a sample basis, to determine whether the service fees were recorded based on respective contract sums, progress and/or milestones achieved. |
• |
We sent audit confirmations to Outsourced Service Providers, on a sample basis, to confirm the amount of the R&D service fees incurred for the year ended December 31, 2021 and the amounts payable under the contracts as of December 31, 2021. |
• |
We selected projects from the open contract list as of December 31, 2021 on a sample basis, made inquiries of responsible personnel regarding the project status and inspected invoices and other communications from the Outsourced Service Providers to identify potential additional Outsourced Service Providers and related unrecorded R&D expenditures. |
As of December 31, |
||||||||||||
2020 |
2021 |
|||||||||||
Notes |
$ |
$ |
||||||||||
Assets |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
3 | |||||||||||
Short-term investments |
5 | |||||||||||
Accounts receivable (net of allowance for credit loss of $ |
6 | |||||||||||
Notes receivable |
||||||||||||
Inventories |
7 | |||||||||||
Prepayments and other current assets |
||||||||||||
|
|
|
|
|||||||||
Total current assets |
||||||||||||
Restricted cash, non-current |
4 | |||||||||||
Long-term investments (including the fair value measured investment of |
8 | |||||||||||
Prepayments for equipment |
||||||||||||
Property and equipment, net |
9 | |||||||||||
Operating lease right-of-use |
10 | |||||||||||
Land use rights, net |
||||||||||||
Intangible assets, net |
||||||||||||
Long-term deposits |
||||||||||||
Value added tax recoverable |
||||||||||||
|
|
|
|
|||||||||
Total assets |
||||||||||||
|
|
|
|
|||||||||
Liabilities and shareholders’ equity |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
||||||||||||
Current operating lease liabilities |
10 | |||||||||||
Other current liabilities |
13 | |||||||||||
|
|
|
|
|||||||||
Total current liabilities |
||||||||||||
Deferred income |
||||||||||||
Non-current operating lease liabilities |
10 | |||||||||||
|
|
|
|
|||||||||
Total liabilities |
||||||||||||
|
|
|
|
|||||||||
Commitments and contingencies (Note 20) |
||||||||||||
Shareholders’ equity |
||||||||||||
Ordinary shares (par value of $ |
||||||||||||
Additional paid-in capital |
||||||||||||
Accumulated deficit |
( |
) | ( |
) | ||||||||
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||||||
Treasury s toc (at cost, k |
( |
) | ||||||||||
|
|
|
|
|||||||||
Total shareholders’ equity |
||||||||||||
|
|
|
|
|||||||||
Total liabilities and shareholders’ equity |
||||||||||||
|
|
|
|
Year ended December 31, |
||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||
Notes |
$ |
$ |
$ |
|||||||||||||
Revenues: |
||||||||||||||||
Product revenue, net |
11 | |||||||||||||||
Collaboration revenue |
||||||||||||||||
Total revenues |
||||||||||||||||
Expenses: |
||||||||||||||||
Cost of sales |
( |
) | ( |
) | ( |
) | ||||||||||
Research and development |
( |
) | ( |
) | ( |
) | ||||||||||
Selling, general and administrative |
( |
) | ( |
) | ( |
) | ||||||||||
|
|
|
|
|
|
|||||||||||
Loss from operations |
( |
) | ( |
) | ( |
) | ||||||||||
Interest income |
||||||||||||||||
Interest expenses |
( |
) | ( |
) | ||||||||||||
Other income (expenses), net |
( |
) | ||||||||||||||
|
|
|
|
|
|
|||||||||||
Loss before income tax and share of loss from equity method investment |
( |
) | ( |
) | ( |
) | ||||||||||
Income tax expense |
12 | |||||||||||||||
Share of loss from equity method investment |
( |
) | ( |
) | ( |
) | ||||||||||
|
|
|
|
|
|
|||||||||||
Net loss |
( |
) | ( |
) | ( |
) | ||||||||||
|
|
|
|
|
|
|||||||||||
Net loss attributable to ordinary shareholders |
( |
) | ( |
) | ( |
) | ||||||||||
|
|
|
|
|
|
|||||||||||
Loss per share — basic and diluted |
14 | ( |
) | ( |
) | ( |
) | |||||||||
Weighted-average shares used in calculating net loss per ordinary share — basic and diluted |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
$ |
$ |
$ |
||||||||||
Net loss |
( |
) | ( |
) | ( |
) | ||||||
Other comprehensive income (loss), net of tax of |
||||||||||||
Foreign currency translation adjustments |
( |
) | ( |
) | ||||||||
|
|
|
|
|
|
|||||||
Comprehensive loss |
( |
) |
( |
) |
( |
) | ||||||
|
|
|
|
|
|
Ordinary shares |
Additional paid in capital |
Accumulated other comprehensive income (loss) |
Treasury Stock |
|||||||||||||||||||||||||||||
Number of Shares |
Amount |
Accumulated deficit |
Number of Shares |
Amount |
Total |
|||||||||||||||||||||||||||
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||||||||
Balance at January 1, 2019 |
( |
) | — | — | ||||||||||||||||||||||||||||
Issuance of ordinary shares upon vesting of restricted shares |
— | — | — | — | — | |||||||||||||||||||||||||||
Exercise of shares option |
— | — | — | — | ||||||||||||||||||||||||||||
Issuance of ordinary shares upon follow-on public offering, net of issuance cost of $ |
— | — | — | — | ||||||||||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Net loss |
— | — | — | ( |
) | — | — | — | ( |
) | ||||||||||||||||||||||
Foreign currency translation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Balance at December 31, 2019 |
( |
) | — | — | ||||||||||||||||||||||||||||
Issuance of ordinary shares upon vesting of restricted shares |
— | — | — | — | — | |||||||||||||||||||||||||||
Exercise of shares option |
— | — | — | — | ||||||||||||||||||||||||||||
Issuance of ordinary shares upon follow-on public offering, net of issuance cost of $ |
— | — | — | — | ||||||||||||||||||||||||||||
Issuance of ordinary shares upon secondary listing, net of issuance cost of $ |
— | — | — | — | ||||||||||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Net loss |
— | — | — | ( |
) | — | — | — | ( |
) | ||||||||||||||||||||||
Foreign currency translation |
— | — | — | — | ( |
) | — | — | ( |
) | ||||||||||||||||||||||
Balance at December 31, 2020 |
( |
) | ( |
) | — | — | ||||||||||||||||||||||||||
Issuance of ordinary shares upon vesting of restricted shares |
— | — | — | — | — | |||||||||||||||||||||||||||
Exercise of shares option |
— | — | — | — | ||||||||||||||||||||||||||||
Issuance of ordinary shares upon follow-on public offering, net of issuance cost of $ |
— | — | — | — | ||||||||||||||||||||||||||||
Issuance of ordinary shares in connection with collaboration and license arrangement (Note 17) |
— | — | — | — | ||||||||||||||||||||||||||||
Issuance cost adjustment for secondary listing |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Receipt of employees’ shares to satisfy tax withholding obligations related to share-based compensation |
— | — | — | — | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Net loss |
— | — | — | ( |
) | — | — | — | ( |
) | ||||||||||||||||||||||
Foreign currency translation |
— | — | — | — |
( |
) | — | — | ( |
) | ||||||||||||||||||||||
Balance at December 31, 2021 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
$ |
$ |
$ |
||||||||||
Operating activities |
||||||||||||
Net loss |
( |
) | ( |
) | ( |
) | ||||||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||
Allowance for credit loss |
— | |||||||||||
Inventory write-down |
— | |||||||||||
Depreciation and amortization expenses |
||||||||||||
Amortization of deferred income |
( |
) | ( |
) | ( |
) | ||||||
Share-based compensation |
||||||||||||
Noncash research and development expenses |
— | — | ||||||||||
Share of loss from equity method investment |
||||||||||||
Loss from fair value changes of equity investment with readily determinable fair value |
— | — | ||||||||||
Loss (gain) on disposal of property and equipment |
( |
) | ||||||||||
Noncash lease expenses |
||||||||||||
Changes in operating assets and liabilities: |
||||||||||||
Accounts receivable |
( |
) | ( |
) | ( |
) | ||||||
Notes receivable |
— | — | ( |
) | ||||||||
Inventories |
( |
) | ( |
) | ( |
) | ||||||
Prepayments and other current assets |
( |
) | ( |
) | ( |
) | ||||||
Long-term deposits |
( |
) | ( |
) | ||||||||
Value added tax recoverable |
( |
) | ( |
) | ( |
) | ||||||
Accounts payable |
( |
) | ||||||||||
Other current liabilities |
( |
) | ||||||||||
Operating lease liabilities |
( |
) | ( |
) | ( |
) | ||||||
Deferred income |
||||||||||||
|
|
|
|
|
|
|||||||
Net cash used in operating activities |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Cash flows from investing activities: |
||||||||||||
Purchases of short-term investments |
( |
) | ( |
) | ( |
) | ||||||
Proceeds from maturity of short-term investments |
||||||||||||
Purchase of investment in equity investee |
— | — | ( |
) | ||||||||
Purchase of property and equipment |
( |
) | ( |
) | ( |
) | ||||||
Disposal of property and equipment |
— | — | ||||||||||
Purchase of land use rights |
( |
) | — | — | ||||||||
Purchase of intangible assets |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Net cash provided by ( used in) investing activities |
( |
) | ( |
) | ||||||||
|
|
|
|
|
|
|||||||
Cash flows from financing activities: |
||||||||||||
Proceeds from short-term borrowings |
— | — | ||||||||||
Repayment of short-term borrowings |
( |
) | ( |
) | — | |||||||
Proceeds from exercises of stock options |
||||||||||||
Proceeds from issuance of ordinary shares upon public offerings |
||||||||||||
Payment of public offering costs |
( |
) | ( |
) | ( |
) | ||||||
Employee taxes paid related to settlement of equity awards |
— | — | ( |
) | ||||||||
|
|
|
|
|
|
|||||||
Net cash provided by financing activities |
||||||||||||
|
|
|
|
|
|
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
$ |
$ |
$ |
||||||||||
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash |
||||||||||||
|
|
|
|
|
|
|||||||
Net increase in cash, cash equivalents and restricted cash |
||||||||||||
Cash, cash equivalents and restricted cash — beginning of the year |
||||||||||||
|
|
|
|
|
|
|||||||
Cash, cash equivalents and restricted cash — end of the year |
||||||||||||
|
|
|
|
|
|
|||||||
Supplemental disclosure on non-cash investing and financing activities: |
||||||||||||
Payables for purchase of property and equipment |
||||||||||||
Payables for intangible assets |
— | |||||||||||
Payables for public offering costs |
— | — | ||||||||||
Payables for treasury stock |
— | — | ||||||||||
Supplemental disclosure of cash flow information: |
||||||||||||
Cash and cash equivalents |
||||||||||||
Restricted cash, non-current |
||||||||||||
|
|
|
|
|
|
|||||||
Total cash and cash equivalents and restricted cash |
||||||||||||
|
|
|
|
|
|
|||||||
Interest paid |
1. |
Organization and principal activities |
Name of company |
Place of incorporation |
Date of incorporation |
Percentage of ownership |
Principal activities | ||||
Zai Lab (Hong Kong) Limited |
||||||||
Zai Lab (Shanghai) Co., Ltd. |
China |
2014 |
||||||
Zai Lab (AUST) Pty., Ltd. |
2014 |
|||||||
Zai Lab (Suzhou) Co., Ltd. |
China |
2015 |
||||||
Zai Biopharmaceutical (Suzhou) Co., Ltd. |
China |
|||||||
Zai Lab (US) LLC |
States |
|||||||
Zai Lab International Trading (Shanghai) Co., Ltd. |
China |
2019 |
||||||
Zai Auto Immune (Hong Kong) Limited |
2020 |
,|||||||
Zai Lab (Taiwan) Limited |
2020 |
2. |
Summary of significant accounting policies |
Useful life | ||
Office equipment |
||
Electronic equipment |
||
Vehicle |
||
Laboratory equipment |
||
Manufacturing equipment |
||
Leasehold improvements |
Description |
Fair Value as of December 31, 2021 |
Fair Value Measurement at Reporting Date Using Quoted Prices in Active Markets for Identical Assets (Level 1) |
||||||
US$ |
US$ |
|||||||
Equity Investments with Readily Determinable Fair Value |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
$ |
$ |
$ |
||||||||||
A |
* | * | ||||||||||
B |
* | * | ||||||||||
C |
* |
* | Represents less than 10% of revenue for the years ended December 31, 2019, 2020 and 2021. |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
$ |
$ |
$ |
||||||||||
F |
* | * | ||||||||||
G |
* | * | ||||||||||
H |
* | * | ||||||||||
I |
* | * | ||||||||||
J |
* | * | ||||||||||
K |
* | * |
* |
Represents less than 10% of research and development expenses and the inventory purchases for the years ended December 31, 2019, 2020 and 2021. |
As of December 31, |
||||||||
2020 |
2021 |
|||||||
$ |
$ |
|||||||
C |
||||||||
D |
* |
|||||||
E |
* |
* |
Represents less than |
3. |
Cash and cash equivalents |
As of December 31, |
||||||||
2020 |
2021 |
|||||||
$ |
$ |
|||||||
Cash at bank and in hand |
||||||||
Cash equivalents (note (i)) |
||||||||
Denominated in: |
||||||||
US$ |
||||||||
RMB (note (ii)) |
||||||||
Hong Kong dollar (“HK$” ) |
||||||||
Australian dollar (“A$”) |
||||||||
Taiwan dollar (“TW$”) |
||||||||
(i) | Cash equivalents represent short-term and highly liquid investments in a money market fund. |
(ii) | Certain cash and bank balances denominated in RMB were deposited with banks in mainland China. The conversion of these RMB denominated balances into foreign currencies is subject to the rules and regulations of foreign exchange control promulgated by the Chi government.nese |
4. |
Restricted cash, non-current |
5. |
Short-term investments |
6. |
Accounts receivable |
Allowance for Credit Losses |
||||
$ |
||||
Balance as of December 31, 2020 |
||||
Current period provision for expected credit losses |
||||
Amounts written-off |
— | |||
Recoveries of amounts previously written-off |
— | |||
Balance as of December 31, 2021 |
||||
7. |
Inventories |
As of December 31, |
||||||||
2020 |
2021 |
|||||||
$ |
$ |
|||||||
Finished goods |
||||||||
Raw materials |
||||||||
Work in progress |
— | |||||||
Inventories |
||||||||
8. |
Long-term investments |
9. |
Property and equipment, net |
As of December 31, |
||||||||
2020 |
2021 |
|||||||
$ |
$ |
|||||||
Office equipment |
||||||||
Electronic equipment |
||||||||
Vehicle |
||||||||
Laboratory equipment |
||||||||
Manufacturing equipment |
||||||||
Leasehold improvements |
||||||||
Construction in progress |
||||||||
Less: accumulated depreciation |
( |
) | ( |
) | ||||
Property and equipment, net |
||||||||
10. |
Lease |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
$ |
$ |
$ |
||||||||||
Operating fixed lease cost |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
$ |
$ |
$ |
||||||||||
Cash paid for amounts included in measurement of lease liabilities |
||||||||||||
Non-cash operating lease liabilities arising from obtaining operating right-of-use |
Year ended December 31 |
||||
$ |
||||
2022 |
||||
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
||||
Thereafter |
||||
|
|
|||
Total lease payments |
||||
Less: imputed interest |
( |
) | ||
|
|
|||
Present value of minimum operating lease payments |
||||
|
|
Year ended December 31, |
||||||||
2020 |
2021 |
|||||||
Weighted-average remaining lease term |
||||||||
Weighted-average discount rate |
% | % |
11. |
Product revenue, net |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
$ |
$ |
$ |
||||||||||
Product revenue — gross |
||||||||||||
Less: Rebate and sales return |
— | ( |
) | ( |
) | |||||||
|
|
|
|
|
|
|||||||
Product revenue — net |
||||||||||||
|
|
|
|
|
|
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
$ |
$ |
$ |
||||||||||
ZEJULA |
||||||||||||
Optune |
||||||||||||
QINLOCK |
— | |||||||||||
NUZYRA |
— | — | ||||||||||
|
|
|
|
|
|
|||||||
Total product revenue — net |
||||||||||||
|
|
|
|
|
|
12. |
Income Tax |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
$ |
$ |
$ |
||||||||||
Cayman |
( |
) | ||||||||||
BVI |
||||||||||||
Mainland China |
||||||||||||
HK |
||||||||||||
US |
||||||||||||
AUST |
||||||||||||
TW |
— | — | ||||||||||
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
Statutory income tax rate |
% | % | % | |||||||||
Share-based compensations |
( |
%) | ( |
%) | ( |
%) | ||||||
Non-deductible expenses |
( |
%) | ( |
%) | ( |
%) | ||||||
Prior year tax filing adjustment |
% | % | % | |||||||||
Effect of different tax rate of subsidiary operation in other jurisdictions |
% | ( |
%) | ( |
%) | |||||||
Preferential tax rate |
( |
%) | ( |
%) | ( |
%) | ||||||
Effect of change in tax rate |
( |
%) | — | — | ||||||||
Changes in valuation allowance |
( |
%) | ( |
%) | ( |
%) | ||||||
Effective income tax rate |
— | — | — | |||||||||
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
$ |
$ |
$ |
||||||||||
Deferred tax assets: |
||||||||||||
Depreciation of property and equipment, net |
||||||||||||
Government grants |
||||||||||||
Deferred revenue |
— | |||||||||||
Public welfare donations |
— | |||||||||||
Net operating loss carry forwards |
||||||||||||
Less: valuation allowance |
( |
) | ( |
) | ( |
) | ||||||
Deferred tax assets, net |
— | — | — | |||||||||
2020 |
2021 |
|||||||
$ |
$ |
|||||||
Balance as of January 1, |
( |
) | ( |
) | ||||
Additions |
( |
) | ( |
) | ||||
Balance as of December 31, |
( |
) | ( |
) | ||||
13. |
Other current liabilities |
As of December 31, |
||||||||
2020 |
2021 |
|||||||
$ |
$ |
|||||||
Payroll |
||||||||
Accrued professional service fee |
||||||||
Payables for purchase of property and equipment |
||||||||
Accrued rebate to distributors |
||||||||
Tax payables |
||||||||
Others (note (i)) |
||||||||
Total |
||||||||
(i) | Others are mainly payables to employees for exercising the share-based compensations, payables related to travel and business entertainment expenses. |
14. |
Loss per share |
For the years ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
Numerator: |
||||||||||||
Net loss attributable to ordinary shareholders |
( |
) | ( |
) | ( |
) | ||||||
Denominator: |
||||||||||||
Weighted average number of ordinary shares- basic and diluted |
||||||||||||
Net loss per share-basic and diluted |
( |
) | ( |
) | ( |
) | ||||||
As of December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
Share options |
||||||||||||
Non-vested restricted shares |
15. |
Related party transactions |
Company Name |
Relationship with the Company | |
MEDx (Suzhou) Translational Medicine Co., Ltd. |
16. |
Share-based compensation |
2019 |
2020 |
2021 | ||||
Risk-free rate of return |
||||||
Contractual life of option |
||||||
Expected term |
6, 6.25 or 6.5 | |||||
Estimated volatility rate |
||||||
Expected dividend yield |
||||||
Fair value of underlying ordinary shares |
$ |
$ |
$ |
Number of options |
Weighted average exercise price |
Weighted average remaining contractual term |
Aggregate intrinsic value |
|||||||||||||
$ |
Years |
$ |
||||||||||||||
Outstanding at December 31, 2020 |
||||||||||||||||
Granted |
— | — | ||||||||||||||
Exercised |
( |
) | — | — | ||||||||||||
Forfeited |
( |
) | — | — | ||||||||||||
Outstanding at December 31, 2021 |
||||||||||||||||
Vested and exercisable as of December 31, 2021 |
||||||||||||||||
Vested or expected to vest as of December 31, 2021 |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
$ |
$ |
$ |
||||||||||
Selling, general and administrative |
||||||||||||
Research and development |
||||||||||||
Total |
||||||||||||
Numbers of non-vested restricted shares |
Weighted average grant date fair value |
|||||||
$ |
||||||||
Non-vested as of December 31, 2020 |
||||||||
Granted |
||||||||
Vested |
( |
) | ||||||
Forfeited |
( |
) | ||||||
Non-vested as of December 31, 2021 |
||||||||
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
$ |
$ |
$ |
||||||||||
Selling, general and administrative |
||||||||||||
Research and development |
||||||||||||
Total |
||||||||||||
17. |
Licenses and collaborative arrangement |
18. |
Restricted net assets |
19. |
Employee defined contribution plan |
20. |
Commitments and Contingencies |
(a) |
Purchase commitments |
(b) |
Contingencies |
21. |
Selected quarterly financial data (unaudited) |
Quarter Ended, |
||||||||||||||||
2021 |
March 31, |
June 30, |
September 30, |
December 31, |
||||||||||||
$ |
$ |
$ |
$ |
|||||||||||||
Product revenue, net |
||||||||||||||||
Collaboration revenue |
||||||||||||||||
Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Net loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Net loss attributable to ordinary shareholders |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Basic and diluted net loss per share |
( |
) | ( |
) | ( |
) | ( |
) |
Quarter Ended, |
||||||||||||||||
2020 |
March 31, |
June 30, |
September 30, |
December 31, |
||||||||||||
$ |
$ |
$ |
$ |
|||||||||||||
Product revenue, net |
||||||||||||||||
Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Net loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Net loss attributable to ordinary shareholders |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Basic and diluted net loss per share |
( |
) | ( |
) | ( |
) | ( |
) |
22. |
Subsequent events |
As of December 31, |
||||||||
2020 |
2021 |
|||||||
$ |
$ |
|||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
||||||||
Short-term investments |
||||||||
Prepayments and other current assets |
||||||||
|
|
|
|
|||||
Total current assets |
||||||||
Investment in subsidiaries |
||||||||
|
|
|
|
|||||
Total assets |
||||||||
|
|
|
|
|||||
Liabilities and shareholders’ equity |
||||||||
Liabilities |
||||||||
Current liabilities: |
||||||||
Other current liabilities |
||||||||
|
|
|
|
|||||
Total current liabilities |
||||||||
Deferred income |
||||||||
|
|
|
|
|||||
Total liabilities |
||||||||
|
|
|
|
|||||
Shareholders’ equity |
||||||||
Ordinary shares (par value of US$ |
||||||||
Additional paid-in capital |
||||||||
Accumulated deficit |
( |
) | ( |
) | ||||
Additional other comprehensive income |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Treasury stock |
— | ( |
) | |||||
|
|
|
|
|||||
Total shareholders’ equity |
||||||||
|
|
|
|
|||||
Total liabilities and shareholders’ equity |
||||||||
|
|
|
|
Year Ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
$ |
$ |
$ |
||||||||||
Operating Expenses: |
||||||||||||
Research and development |
( |
) | ( |
) | ( |
) | ||||||
General and administrative |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Loss from operations |
( |
) |
( |
) |
( |
) | ||||||
Interest income |
||||||||||||
Other income (expenses), net |
( |
) | ||||||||||
|
|
|
|
|
|
|||||||
Profit ( Loss) before income tax and equity in loss of subsidiaries |
( |
) |
( |
) | ||||||||
Equity in loss of subsidiaries |
( |
) | ( |
) | ( |
) | ||||||
Income tax expense |
||||||||||||
|
|
|
|
|
|
|||||||
Net loss attributable to Zai Lab Limited |
( |
) |
( |
) |
( |
) | ||||||
|
|
|
|
|
|
|||||||
Net loss |
( |
) | ( |
) | ( |
) | ||||||
Other comprehensive income (loss) , net of tax of nil: |
||||||||||||
Foreign currency translation adjustment |
( |
) | ( |
) | ||||||||
|
|
|
|
|
|
|||||||
Comprehensive loss |
( |
) |
( |
) |
( |
) | ||||||
|
|
|
|
|
|
Year Ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
$ |
$ |
$ |
||||||||||
Cash flows from Operating activities: |
||||||||||||
Net loss |
( |
) | ( |
) | ( |
) | ||||||
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||||||
Amortization of deferred income |
( |
) | ( |
) | ( |
) | ||||||
Share based compensation |
||||||||||||
Equity in loss of subsidiaries |
||||||||||||
Loss from fair value changes of equity investment of readily determinable fair value |
— | — | ||||||||||
Changes in operating assets and liabilities: |
||||||||||||
Prepayments and other current assets |
( |
) | ( |
) | ||||||||
Other current liabilities |
( |
) | ||||||||||
Net cash provided by (used in) operating activities |
( |
) | ||||||||||
Cash flows from investing activities: |
||||||||||||
Purchases of short-term investments |
( |
) | ( |
) | ( |
) | ||||||
Proceeds from maturity of short-term investments |
||||||||||||
Purchase of investment in equity investee |
— |
— |
( |
) | ||||||||
Investment in subsidiaries |
( |
) | ( |
) | ( |
) | ||||||
Net cash used in investing activities |
( |
) | ( |
) | ( |
) | ||||||
Cash flows from financing activities: |
||||||||||||
Proceeds from exercises of stock options |
||||||||||||
Proceeds from issuance of ordinary shares upon public offerings |
||||||||||||
Payment of public offering costs |
( |
) | ( |
) | ( |
) | ||||||
Employee taxes paid related to settlement of equity awards |
— | — | ( |
) | ||||||||
Net cash provided by financing activities |
||||||||||||
Effect of foreign exchange rate changes on cash and cash equivalent |
— | ( |
) | |||||||||
Net increase in cash and cash equivalents |
||||||||||||
Cash and cash equivalents-beginning of the year |
||||||||||||
Cash and cash equivalents-end of the year |
||||||||||||