Zai Lab Ltd

Previous wording

We are a patient-focused, innovative, commercial-stage, global biopharmaceutical company with a substantial presence in both Greater China and the United States. We are focused on discovering, developing, and commercializing products that address medical conditions with significant unmet needs in the areas of oncology, autoimmune disorders, infectious disease, and neuroscience. We intend to leverage our competencies and resources to positively impact human health in Greater China and worldwide. We currently have five commercial products – ZEJULA, OPTUNE, QINLOCK, NUZYRA, and VYVGART – that have received marketing approval and that we have commercially launched in one or more territories in Greater China. We also have multiple programs in late-stage product development and a number of ongoing pivotal trials across our portfolio. For more information on our business, products and product candidates, and operations, see Business.

Current wording

We are a patient-focused, innovative, commercial-stage, global biopharmaceutical company with a substantial presence in both Greater China and the United States. We are focused on discovering, developing, and commercializing products that address medical conditions with significant unmet needs in the areas of oncology, immunology, neuroscience, and infectious disease. We intend to leverage our competencies and resources to positively impact human health in Greater China and worldwide. We currently have seven commercial programs – ZEJULA, VYVGART / VYVGART Hytrulo, NUZYRA, OPTUNE, QINLOCK, XACDURO, and AUGTYRO – with products that have received marketing approval and that we have commercially launched in one or more territories in Greater China. We also have multiple programs in late-stage product development and a number of ongoing pivotal trials across our portfolio. For more information on our business, products and product candidates, and operations, see Business.

Previous wording

As we pursue our corporate strategic goals, we anticipate that our financial results will fluctuate from quarter to quarter and year to year depending in part on the balance between the success of our commercial products and the level of our research and development expenses. We cannot predict whether or when our product candidates will receive regulatory approval. Further, if we receive such regulatory approval, we cannot predict whether or when we may be able to successfully commercialize such product or whether or when such product may become profitable.

Current wording

As we pursue our corporate strategic goals, we anticipate that our financial results will fluctuate from quarter to quarter and year to year depending in part on the balance between the success of our commercial products and the level of our research and development expenses. We cannot predict whether or when our product candidates will receive regulatory approval. Further, if we receive such regulatory approval, we cannot predict whether or when we may be able to successfully commercialize such products or whether or when such products may become profitable.

Previous wording

We further discuss in MD&A below key factors affecting our results of operations, key components and primary drivers of changes in our results of operations in 2023, and our liquidity and capital resources. In 2024, we seek to continue advancing our mission of becoming a leading global biopharmaceutical company, driving innovation in treatment options for patients in China and beyond, by focusing on the following corporate strategic goals: accelerating medicines to patients through our R&D activities, including internal discovery; further expanding our product pipeline through synergistic regional and global collaborations and corporate development activities; and continuing our commercial excellence and execution, including by delivering strong financial performance and preparing for the launch of multiple new products and obtaining overall corporate profitability by the end of 2025. We also intend to continue building and maintaining the trust of our stakeholders by further developing and integrating our Trust for Life strategy into our business and operations. For additional information on our Mission and Corporate Strategic Goals, see Business – Our Mission and Corporate Strategic Goals.

Current wording

We further discuss in MD&A below key factors affecting our results of operations, key components and primary drivers of changes in our results of operations in 2024, and our liquidity and capital resources. In 2025, we seek to continue advancing our mission of becoming a leading global biopharmaceutical company, driving innovation in treatment options for patients in China and beyond, by focusing on the following corporate strategic goals: accelerate medicines to patients through our R&D activities; expand and strengthen our global and regional pipelines through our internal discovery efforts and synergistic collaborations and corporate development activities; and continue our commercial excellence and execution, including by delivering strong financial performance as we prepare to launch additional products or new indications for existing products and seek to achieve profitability by the end of 2025. We also intend to continue building and maintaining the trust of our stakeholders by further developing and integrating our Trust for Life strategy into our business and operations. For additional information on our Mission and Corporate Strategic Goals, see Business – Our Mission and Corporate Strategic Goals.

Previous wording

We generate product revenue through the sale of our commercial products in Greater China, net of any related sales returns and rebates to distributors. Our cost of sales mainly consists of the costs of manufacturing ZEJULA and NUZYRA, costs of purchasing OPTUNE, QINLOCK, and VYVGART from our collaboration partners, any royalty fees incurred as a result of sales of our commercial products under our license and collaboration agreements, and amortization of any sales-based milestone payments incurred under our license and collaboration agreements. We expect our revenue to increase in coming years as we continue to focus on increasing patient access to our existing commercial products, such as through NRDL listing or increased supplemental insurance coverage in the private-pay market. For example, in the first quarter of 2023, QINLOCK was added to the NRDL for fourth-line GIST and NUZYRA for the IV treatment of adult patients with CABP and ABSSSI. In the first quarter of 2024, VYVGART (efgartigimod alfa injection) was added to the NRDL for

Current wording

We generate product revenue through the sale of our commercial products in Greater China, net of any related sales returns and rebates to distributors. Our cost of product revenue mainly consists of the costs of manufacturing ZEJULA and NUZYRA, costs of purchasing VYVGART / VYVGART Hytrulo, OPTUNE, QINLOCK, XACDURO, and AUGTYRO from our collaboration partners, any royalty fees incurred as a result of sales of our commercial products under our license and collaboration agreements, and amortization of capitalized post-approval milestone fees incurred under our license and collaboration agreements. We expect our product revenue to increase in coming years as we continue to focus on increasing patient access to our existing commercial products, such as through NRDL listing or increased supplemental

Previous wording

-82- gMG and NUZYRA for the oral treatment of adult patients with CABP and ABSSSI. We also expect revenue to increase in coming years as a result of our launch of additional commercial products, if and when we obtain required regulatory approvals. We expect our cost of sales to increase as the volume of products sold increases.

Current wording

-79- insurance coverage in the private-pay market, and as we launch additional commercial products, if and when we obtain required regulatory approvals. We expect our cost of product revenue to increase as the volume of products sold increases.

Previous wording

•in-licensed patent rights fees of exclusive development rights of products granted to the Company;

Current wording

•fees for exclusive development rights of products granted to the Company;

Previous wording

•costs related to pre-clinical testing of the Company’s technologies under development and clinical trials, such as payments to contract research organizations (“CROs”) and contract manufacturing organizations (“CMOs”), investigators, and clinical trial sites that conduct our clinical studies;

Current wording

•costs related to pre-clinical testing of the Company’s technologies and clinical trials, such as payments to CROs and CMOs, investigators, and clinical trial sites that conduct our clinical studies; and

Previous wording

•costs to develop the product candidates, including raw materials and supplies, product testing, depreciation, and facility-related expenses; and

Current wording

•costs to produce the product candidates, including raw materials and supplies, product testing, depreciation, and facility-related expenses.

Previous wording

We have multiple product candidates in late-stage clinical development and various others in clinical and pre-clinical development in Greater China and the United States. Our ability to generate revenue from our product candidates is dependent on our receipt of regulatory approvals for and successful commercialization of such product candidates, which may not occur. Certain of our product candidates may require additional pre-clinical and/or clinical development, regulatory approvals in multiple jurisdictions, manufacturing supply, substantial investment, and significant marketing efforts before we generate any revenue from product sales.

Current wording

We have multiple product candidates in late-stage clinical development and various others in clinical and pre-clinical development in Greater China and globally. Our ability to generate revenue from our product candidates is dependent on our receipt of regulatory approvals for and successful commercialization of such product candidates, which may not occur. Certain of our product candidates may require additional pre-clinical and/or clinical development, regulatory approvals in multiple jurisdictions, manufacturing supply, and significant marketing efforts before we generate any revenue from product sales.

Previous wording

Our results of operations have been, and will continue to be, affected by our license and collaboration agreements. In accordance with these agreements, we may be required to make upfront payments and milestone payments upon the achievement of certain development, regulatory, and sales-based milestones for the relevant products as well as certain royalties at tiered percentage rates based on annual net sales of the licensed products in the licensed territories. We had $19.3 million and $53.4 million of research and development expenses in 2023 and 2022, respectively, related to upfront

Current wording

Our results of operations have been, and will continue to be, affected by our license and collaboration agreements. In accordance with these agreements, we may be required to make upfront payments and milestone payments upon the achievement of certain development, regulatory, and sales-based milestones for the relevant products as well as certain royalties at tiered percentage rates based on annual net sales of the licensed products in the licensed territories. As of December 31, 2024, we may in the future be required to pay development and regulatory milestone payments of up to an additional aggregate amount of $211.5 million for our current clinical programs and $766.9 million for other programs. Such development and regulatory milestone payments are contingent on the progress of our product candidates prior to commercialization, and we see these payments as favorable because they indicate that product candidates are advancing. As of December 31, 2024, we also may in the future be required to pay sales-based milestone payments of up to an

Previous wording

-83- fees and development milestones. As of December 31, 2023, we may be required to pay development and regulatory milestone payments of up to an additional aggregate amount of $303.5 million for our current clinical programs and $673.2 million for other programs that are contingent on the progress of our product candidates prior to commercialization. As of December 31, 2023, we also may be required to pay sales-based milestone payments of up to an additional aggregate amount of $2,457.5 million as well as certain royalties at tiered percentage rates on annual net sales that are contingent on product performance. If these milestones or royalties do occur, we view related payments as favorable because such payments signify that the product or product candidate is achieving higher sales levels or advancing toward potential commercial launch.

Current wording

-80- additional aggregate amount of $2,620.0 million as well as certain royalties at tiered percentage rates on annual net sales. Such sales-based milestone and royalty payments are contingent on the performance of our commercial products, and we see these payments as favorable because they signify that a product is achieving higher sales levels.

Previous wording

The following table presents net revenue by product ($ in thousands):

Current wording

The following table presents net revenue by commercial program ($ in thousands):

Previous wording

Our product revenue is derived from the sales our commercial products primarily in mainland China, net of sales returns and rebates to distributors with respect to the sales of these products.

Current wording

Our product revenue is derived from the sales of our commercial products, primarily in mainland China, net of sales returns and rebates to distributors with respect to the sales of these products.

Previous wording

Research and development expenses decreased by $20.5 million in 2023 primarily due to:

Current wording

Research and development expenses decreased by $31.4 million in 2024 primarily due to:

Previous wording

•a decrease of $34.2 million in licensing fees as a result of decreased upfront and milestone payments for our license and collaboration agreements; partially offset by

Current wording

•an increase of $11.7 million in licensing fees in connection with increased upfront and milestone payments for our license and collaboration agreements.

Previous wording

Research and development expenses attributable to clinical programs decreased by $43.6 million in 2023 primarily driven by a decrease in licensing fees of $45.2 million. Research and development expenses attributable to pre-clinical programs increased by $10.7 million in 2023, primarily driven by an increase in licensing fees related to an upfront payment for a new business collaboration.

Current wording

Research and development expenses attributable to clinical programs decreased by $26.0 million in 2024 primarily driven by a decrease of $28.7 million in CROs/CMOs/Investigators expenses related to the progress of existing studies, offset by an increase of $2.7 million in licensing fees. Research and development expenses attributable to pre-clinical programs increased by $14.6 million in 2024, primarily driven by an increase of $9.0 million in licensing fees and an increase of $5.6 million in CROs/CMOs/Investigators expenses related to newly initiated studies.

Previous wording

The following table presents our selling, general and administrative expenses by program ($ in thousands):

Current wording

The following table presents our selling, general, and administrative expenses by category ($ in thousands):

Previous wording

Selling, general, and administrative expenses increased by $22.6 million in 2023 primarily due to:

Current wording

Selling, general, and administrative expenses increased by $17.1 million in 2024 primarily due to higher general selling expenses and personnel compensation and related costs for VYVGART, which was launched in September 2023, and NUZYRA, which was first included in the NRDL for its IV formulation in January 2023 and for its oral formulation in January 2024.

Previous wording

We had a gain on sale of intellectual property of $10.0 million in connection with our sale of certain patent rights and related know-how to a third party in the second quarter of 2023. We had no such intellectual property sales resulting in gains or losses in 2022.

Current wording

We had a gain on sale of intellectual property of $10.0 million in 2023 in connection with our sale of certain patent rights and related know-how to a third party. We had no such gain or loss in 2024.

Previous wording

Other income, net increased by $3.9 million to $7.0 million in 2023 primarily due to an increase of gain on equity investments of $11.7 million, driven by the shift from a loss of $9.0 million in 2022 to a gain of $2.8 million in 2023 for our investment in MacroGenics as a result of changes in its stock price, partially offset by a decrease of $9.0 million in government grant income.

Current wording

Other income, net decreased by $1.7 million in 2024 primarily due to the shift from a gain of $2.8 million in 2023 to a loss of $6.1 million in 2024 for our investment in MacroGenics as a result of changes in its stock price, partially offset by an increase of $5.7 million in government grants.

Previous wording

Income tax expense was nil in both 2023 and 2022. For more information on income taxes, see Note 11.

Current wording

Income tax expense was nil in both 2024 and 2023.

Previous wording

Net loss was $334.6 million for 2023, or a loss per ordinary share attributable to common stockholders of $0.35 (or loss per ADS of $3.46), compared to a net loss of $443.3 million for 2022, or a loss per ordinary share of $0.46 (or loss per ADS of $4.63). The decrease in net loss was primarily due to product revenue growing faster than net operating expenses, increased interest income, and decreased foreign currency loss.

Current wording

Net loss was $257.1 million in 2024, or a loss per ordinary share attributable to common stockholders of $0.26 (or loss per ADS of $2.60), compared to a net loss of $334.6 million in 2023, or a loss per ordinary share of $0.35 (or loss per ADS of $3.46).

Previous wording

Significant assumptions are required in determining the fair value of share options, which we estimate using the Black-Scholes option valuation model. These assumptions include: (i) the expected volatility of our ADS price, (ii) the periods of time over which grantees are expected to hold their options prior to exercise (expected term), (iii) the expected dividend yield on our ADSs, and (iv) risk-free interest rates. Since we do not have sufficient trading history since our September 2017 initial public offering on Nasdaq to cover the expected term of our share options, we estimate expected volatility based on movements in the share price of certain companies we consider comparable over the most recent equivalent historical period. Since we do not have sufficient historical information since to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior, the expected term is derived from the average midpoint between the weighted average vesting and the contractual term, also known as the simplified method. The expected dividend yield is zero as we have never paid dividends and do not currently anticipate paying any in the foreseeable future, and risk-free interest rates are based on quoted U.S. Treasury rates for securities with maturities approximating the expected term. If actual results vary from our estimates or our expectations change, our reported expenses and earnings for the corresponding period may be affected.

Current wording

Significant assumptions are required in determining the fair value of share options, which we estimate using the Black-Scholes option valuation model. These assumptions include: (i) the volatility of our ADS price, (ii) the periods of time over which grantees are expected to hold their options prior to exercise (expected term), (iii) the expected dividend yield on our ADSs, and (iv) risk-free interest rates. Since we do not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior, the expected term is derived from the average midpoint between the weighted average vesting and the contractual term, also known as the simplified method. The expected dividend yield is zero as we have never paid dividends and do not currently anticipate paying any in the foreseeable future, and risk-free interest rates are based on quoted U.S. Treasury rates for securities with maturities approximating the expected term. If actual results vary from our estimates or our expectations change, our reported expenses and earnings for the corresponding period may be affected.

Previous wording

-88- the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some or all of a deferred tax asset will not be realized. Significant judgements are required when evaluating tax positions in accordance with ASC 740, Income Taxes.

Current wording

We recognize deferred tax assets and liabilities for temporary differences between the financial statement and income tax bases of assets and liabilities, which are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some or all of a deferred tax asset will not be realized. Significant judgements are required when evaluating tax positions in accordance with ASC 740, Income Taxes.

Previous wording

To date, we have financed our activities primarily through private placements, our September 2017 initial public offering and various follow-on offerings on Nasdaq, and our September 2020 secondary listing and initial public offering on the Hong Kong Stock Exchange. In addition, we have raised approximately $164.6 million in private equity financing and approximately $2,462.7 million in net proceeds after deducting underwriting commissions and the offering expenses payable by us in our initial public offering and subsequent follow-on offerings on Nasdaq and our initial public offering on the Hong Kong Stock Exchange. Our operations have consumed substantial amounts of cash since inception. The net cash used in our operating activities was $198.2 million and $367.6 million in 2023 and 2022, respectively. For information on these activities and related expenditures, see the Research and Development Expenses, Selling, General, and Administrative Expenses, License and Collaboration Arrangements, and Results of Operations sections in MD&A above. In addition, as of December 31, 2023, we had commitments for capital expenditures of $1.2 million, mainly for the purpose of plant construction and installation.

Current wording

To date, we have financed our activities primarily through private placements, our September 2017 initial public offering and various follow-on offerings on Nasdaq, and our September 2020 secondary listing and initial public offering on the Hong Kong Stock Exchange. In addition, we have raised approximately $164.6 million in private equity financing and approximately $2,677.8 million in net proceeds after deducting underwriting commissions and the offering expenses payable by us in our initial public offering and subsequent follow-on offerings on Nasdaq and our initial public offering on the Hong Kong Stock Exchange. Our operations have consumed substantial amounts of cash since inception. The net cash used in our operating activities was $214.9 million and $198.2 million in 2024 and 2023, respectively. For information on our research and development activities and related expenditures see the Research and Development Expenses, Selling, General, and Administrative Expenses, License and Collaboration Arrangements, and Results of Operations sections above. In addition, as of December 31, 2024, we had commitments for capital expenditures of $6.8 million mainly for the purpose of commercial manufacturing development and facilities construction and improvement activities.

Previous wording

As of December 31, 2023, we had cash and cash equivalents, restricted cash, and short-term investments of $807.6 million. Based on our current operating plan, we expect that our cash, cash equivalents, restricted cash, and short-term investments will enable us to meet our cash requirements and fund our operating expenses and capital expenditure requirements for at least the next 12 months.

Current wording

As of December 31, 2024, we had cash and cash equivalents, current restricted cash, and short-term investments of $879.7 million, which we expect will enable us to meet our cash requirements including the funding of operating expenses, capital expenditures, and debt obligations for at least the next 12 months.

Previous wording

Although we believe that we have sufficient capital to fund our operations for at least the next twelve months, we may, from time to time, identify opportunities to access capital through debt arrangements on favorable commercial terms. In February 2024, we entered into three such debt arrangements with Chinese financial institutions that allow certain of our subsidiaries to borrow approximately $164.5 million (or RMB1,171.7 million) to support our working capital needs in mainland China. So far, our subsidiaries have entered into working capital loans with an aggregate principal amount of RMB390.0 million ($54.8 million), which are guaranteed by us. These debt arrangements will provide us with additional capital capacity that gives us enhanced flexibility to execute on our corporate strategic goals.

Current wording

Although we believe that we have sufficient capital to fund our operations for at least the next twelve months, we may, from time to time, identify opportunities to access capital through debt arrangements on favorable commercial terms. In 2024, we entered into four such debt arrangements with Chinese financial institutions that allow certain of our subsidiaries to borrow up to approximately $198.9 million (or RMB1,421.7 million) to support our working capital needs in mainland China. As of December 31, 2024, we had short-term debt of approximately $131.7 million (or RMB946.8 million) pursuant to these debt arrangements. In January 2025, we entered into a working capital loan contract with another Chinese financial institution with respect to a revolving credit facility of up to RMB300.0 million (approximately $41.1

Previous wording

Although we do not currently anticipate entering into additional debt arrangements, we may consider, or we may ultimately need, additional funding sources to bring to fruition or research and development objectives or otherwise, and there can be no assurances that such funding will be made available to us on acceptable terms or at all.

Current wording

We may consider, or we may ultimately need, additional funding sources to bring to fruition our strategic objectives, and there can be no assurances that such funding will be made available to us on acceptable terms or at all.

Previous wording

Net cash used in operating activities decreased by $169.5 million in 2023, primarily due to a decrease of $108.7 million in net loss and an increase of $105.9 million in net changes in operating assets and liabilities, partially offset by a decrease of $45.1 million in adjustments to reconcile net loss to net cash used in operating activities.

Current wording

Net cash used in operating activities increased by $16.7 million in 2024, primarily due to a decrease of $77.5 million in net loss and an increase of $13.8 million in adjustments to reconcile net loss to net cash used in operating activities, partially offset by a decrease of $108.0 million in net changes in operating assets and liabilities.

Previous wording

Net cash used in investing activities was $10.8 million in 2023, compared to net cash provided by investing activities of $420.0 million in 2022. This shift was primarily due to a decrease of $587.6 million in proceeds from maturity of short-term investments, partially offset by a decrease of $126.3 million in purchases of short-term investments, a decrease of $17.4 million in purchases of property and equipment, and proceeds of $13.9 million from a sale of intellectual property and a disposal of land use rights in 2023.

Current wording

Net cash used in investing activities increased by $364.4 million in 2024, primarily due to an increase of $196.0 million purchases of short-term investments, a decrease of $101.4 million in proceeds from maturity of short-term investments, an increase of $54.6 million in acquisition of intangible assets, a decrease of $10.0 million in proceeds from sale of intellectual property, and a decrease of $3.9 million in proceeds from land use right, partially offset by a decrease of $1.6 million in purchases of property and equipment.

Previous wording

Net cash used in financing activities increased by $4.7 million in 2023, primarily due to a decrease of $3.5 million in proceeds from exercises of share options and an increase of $1.2 million in taxes paid related to settlement of equity awards.

Current wording

Net cash provided by financing activities was $349.9 million in 2024, compared to net cash used in financing activities of $6.4 million in 2023. This shift was primarily due to an increase of $216.1 million in proceeds from issuance of ordinary shares upon public offerings net of offering costs, an increase of $131.6 million in proceeds from short-term debt, and a decrease of $8.8 million in taxes paid related to settlement of equity awards.

Previous wording

For more information regarding recently issued accounting standards, see Financial Statements and Supplementary Data–Recent Accounting Pronouncements.

Current wording

For more information regarding recently issued accounting standards, see Part II - Item 8. Financial Statements and Supplementary Data–Recent Accounting Pronouncements.