Zai Lab Ltd

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our 2024 Annual Report and our unaudited condensed consolidated financial statements and the accompanying notes for the first quarter of 2025 included in Item 1. Financial Statements.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our 2024 Annual Report and our unaudited condensed consolidated financial statements and the accompanying notes for the three and six months ended June 30, 2025 included in Item 1. Financial Statements.

Previous wording

•ZL-1310 (DLL3 ADC): In April 2025, we initiated a global Phase I/II study in patients with selected solid neuroendocrine tumors, allowing us to evaluate its therapeutic potential beyond ES-SCLC.

Current wording

The data also demonstrated a well-tolerated safety profile at target doses of less than 2.0 mg/kg, with Grade ≥ 3 treatment-related adverse events of 6%, no Grade ≥2 interstitial lung disease, and no drug discontinuations. We plan to initiate a pivotal trial in 2L SCLC later this year. In addition, in April 2025, we initiated a global Phase I/II study in patients with selected solid neuroendocrine tumors, allowing us to evaluate its therapeutic potential beyond SCLC.

Previous wording

•ZL-6201 (LRRC15 ADC): In April 2025, we presented new data at the AACR Annual Meeting 2025 reflecting that ZL-6201 efficiently internalizes within and kills tumor cells, while also exhibiting a strong bystander killing effect in the tumor microenvironment. Based on these findings, we plan to initiate IND-enabling studies of ZL-6201 as a potential treatment for patients with sarcoma and other LRRC15-positive solid tumors, such as breast cancer and other malignancies, in 2025.

Current wording

•ZL-6201 (LRRC15 ADC): In April 2025, we presented new data at the American Association for Cancer Research (“AACR”) Annual Meeting 2025 reflecting that ZL-6201 efficiently internalizes within and kills tumor cells, while also exhibiting a strong bystander killing effect in the tumor microenvironment. Based on these findings, we plan to initiate IND-enabling studies of ZL-6201 as a potential treatment for patients with sarcoma and other LRRC15-positive solid tumors, such as breast cancer and other malignancies, in 2025.

Previous wording

•Efgartigimod (FcRn): In April 2025, our partner argenx announced that the FDA had approved VYVGART Hytrulo prefilled syringe (PFS) for self-injection in gMG and CIDP. PFS is the third approved administration option for efgartigimod, providing additional flexibility and convenience for patients. Zai Lab plans to submit for Chemical Manufacturing and Control (CMC) variation for PFS for these indications in China in 2025.

Current wording

•Efgartigimod (FcRn): In April 2025, our partner argenx announced that the FDA had approved VYVGART Hytrulo prefilled syringe (“PFS”) for self-injection in gMG and CIDP. PFS is the third approved administration option for efgartigimod, providing additional flexibility and convenience for patients. In July 2025, the China Guidelines for the Diagnosis and Treatment of Myasthenia Gravis (MG) (2025) was published, emphasizing the importance of Minimal Symptom Expression (“MSE”) as the primary treatment goal in MG. The guidelines have highlighted VYVGART’s ability to achieve MSE rapidly and provide durable benefit. VYVGART is now recommended for early use in mild-to-moderate and highly active patients and for sustained long-term treatment to maximize potential benefit.

Previous wording

•costs related to pre-clinical testing of the Company’s technologies 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; and

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

Our selling, general, and administrative expenses consist primarily of personnel compensation and related costs, including share-based compensation for commercial and administrative personnel. Other selling, general, and administrative expenses include product distribution and promotion costs, and professional service fees for legal, intellectual property, consulting, auditing, and tax services as well as other direct and allocated expenses for rent and maintenance of facilities, insurance, and other supplies used in selling, general, and administrative activities. We expect these costs to continue to be significant to support sales of our commercial products and preparation to launch and subsequent sales of additional product candidates if and when approved.

Current wording

Our selling, general, and administrative expenses consist primarily of personnel compensation and related costs, including share-based compensation for commercial and administrative personnel. Other selling, general, and administrative expenses include product distribution and promotion costs, and professional service fees for legal, intellectual property, auditing, and tax services as well as other direct and allocated expenses for rent and maintenance of facilities, insurance, and other supplies used in selling, general, and administrative activities. We expect these costs to continue to be significant to support sales of our commercial products and preparation to launch and subsequent sales of additional product candidates if and when approved.

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. As of March 31, 2025, we may in the future be required to pay development and regulatory milestone payments of up to an additional aggregate amount of $247.5 million for our current clinical programs and $684.9 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 March 31, 2025, we also in the future may be required to pay sales-based milestone payments of up to an additional aggregate amount of $2,555.0 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.

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 June 30, 2025, we may in the future be required to pay development and regulatory milestone payments of up to an additional aggregate amount of $211.0 million for our current clinical programs and $366.0 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 June 30, 2025, we also in the future may be required to pay sales-based milestone payments of up to an additional aggregate amount of $1,753.0 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

In this section, we discuss our results of operations for the first quarter of 2025 compared to the first quarter of 2024.

Current wording

In this section, we discuss our results of operations for the three and six months ended June 30, 2025 compared to the same periods in 2024.

Previous wording

Cost of product revenue increased by $4.8 million in the first quarter of 2025 primarily due to increasing sales volumes.

Current wording

Cost of product revenue increased by $7.9 million and $12.7 million in the three and six months ended June 30, 2025, respectively, primarily due to increasing sales volumes.

Previous wording

•a decrease of $3.9 million in personnel compensation and related costs primarily driven by the Company’s resource prioritization and efficiency efforts.

Current wording

•a decrease of $8.8 million and $12.7 million, respectively, in personnel compensation and related costs primarily driven by our resource prioritization and efficiency efforts,

Previous wording

•an increase of $20.0 million upfront fees for our license and collaboration agreements; partially offset by

Current wording

•an increase of nil and $20.0 million, respectively, in licensing fees for our license and collaboration agreements.

Previous wording

Selling, general, and administrative expenses decreased by $5.8 million in the first quarter of 2025, primarily due to a decrease of $5.3 million in personnel compensation and related costs related to the Company’s resource prioritization and efficiency efforts.

Current wording

Selling, general, and administrative expenses decreased by $8.7 million and $14.4 million in the three and six months ended June 30, 2025, respectively, primarily due to decreases in personnel compensation and related costs related to our resource prioritization and efficiency efforts.

Previous wording

Interest income decreased by $1.1 million in the first quarter of 2025 primarily due to decreased interest rates.

Current wording

Interest income decreased by $0.5 million and $1.5 million in the three and six months ended June 30, 2025, respectively, primarily due to decreased interest rates.

Previous wording

Interest expense increased by $1.1 million in the first quarter of 2025 primarily due to increased short-term debts.

Current wording

Interest expense increased by $0.8 million and $1.8 million in the three and six months ended June 30, 2025, respectively, primarily due to higher levels of short-term debt.

Previous wording

Foreign currency gain was $0.7 million in the first quarter of 2025, primarily driven by remeasurement gain due to appreciation of the RMB against the U.S. dollar, compared to foreign currency losses of $2.1 million in the first quarter of 2024, driven by remeasurement losses due to depreciation of the RMB against the U.S. dollar.

Current wording

Foreign currency gains were $2.8 million and $3.5 million in the three and six months ended June 30, 2025, respectively, primarily driven by remeasurement gain due to appreciation of the RMB against the U.S. dollar, compared to foreign currency losses of $4.1 million and $6.2 million in the three and six months ended June 30, 2024, respectively, primarily driven by remeasurement loss due to depreciation of the RMB against the U.S. dollar.

Previous wording

Income tax expense was nil in both the first quarter of 2025 and 2024.

Current wording

Income tax expense was nil in both the three and six months ended June 30, 2025 and 2024.

Previous wording

Net loss was $48.4 million in the first quarter of 2025, or a loss per ordinary share attributable to common stockholders of $0.04 (or loss per ADS of $0.45), compared to a net loss of $53.5 million in the first quarter of 2024, or a loss per ordinary share of $0.05 (or loss per ADS of $0.55).

Current wording

Net loss was $40.7 million in the three months ended June 30, 2025, or a loss per ordinary share attributable to common stockholders of $0.04 (or loss per ADS of $0.37), compared to a net loss of $80.3 million in the three months ended June 30, 2024, or a loss per ordinary share of $0.08 (or loss per ADS of $0.82).

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 $2,677.8 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 $61.7 million and $90.1 million in the first quarter of 2025 and 2024, 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 March 31, 2025, we had commitments for capital expenditures of $3.8 million mainly for the purpose of commercial manufacturing development, and facilities construction and improvement activities.

Current wording

To date, we have financed our activities primarily through private placements and public offerings, including 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. We have raised approximately $164.6 million in private equity financing and approximately $2,677.8 million in net proceeds from public offerings after deducting underwriting commissions and the offering expenses payable by us. Our operations have consumed substantial amounts of cash since inception. The net cash used in our operating activities was $92.7 million and $132.3 million in the six months ended June 30, 2025 and 2024, 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 June 30, 2025, we had commitments of $1.1 million related to commercial manufacturing development activities and capital expenditures.

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. As of March 31, 2025, we had such debt arrangements with Chinese financial institutions that allow certain of our subsidiaries to borrow up to approximately $240.2 million (or RMB1,721.7 million) to support our working capital needs in mainland China. As of March 31, 2025, we had short-term debt outstanding of $173.4 million (or RMB1,244.7 million) pursuant to these debt arrangements. These debt arrangements will provide us with additional capital capacity that gives us enhanced flexibility to execute on our corporate strategic goals. For more information, see Note 10.

Current wording

We have also identified opportunities to access capital through debt arrangements on favorable commercial terms. As of June 30, 2025, we had such debt arrangements with Chinese financial institutions that allow certain of our subsidiaries to borrow up to approximately $240.2 million (or RMB1,721.7 million) to support our working capital needs in mainland China. As of June 30, 2025, we had short-term debt outstanding of $174.5 million (or RMB1,244.7 million) pursuant to these debt arrangements. These debt arrangements provide us with additional capital capacity that will give us enhanced flexibility to execute on our corporate strategic goals. For more information, see Note 10.

Previous wording

As of March 31, 2025, we had cash and cash equivalents, current restricted cash, and short-term investments of $857.3 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.

Current wording

As of June 30, 2025, we had cash and cash equivalents, current restricted cash, and short-term investments of $832.3 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

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.

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, utilize debt arrangements on favorable commercial terms or consider additional funding sources to bring to fruition our strategic objectives. 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 $28.4 million in the first quarter of 2025, primarily due to an increase of $22.2 million in net changes in operating assets and liabilities, a decrease of $5.0 million in net loss, and an increase of $1.1 million in adjustments to reconcile net loss to net cash used in operating activities.

Current wording

Net cash used in operating activities decreased by $39.6 million in the six months ended June 30, 2025, primarily due to a decrease of $44.6 million in net loss and an increase of $11.5 million in net changes in operating assets and liabilities, partially offset by a decrease of $16.5 million in other adjustments to reconcile net loss to net cash used in operating activities.

Previous wording

Net cash provided by investing activities increased by $322.8 million in the first quarter of 2025, primarily due to an increase of $313.7 million in proceeds from the maturity of short-term investments and a decrease of $9.7 million from acquisition of intangible assets, partially offset by an increase of $0.6 million in purchases of property and equipment.

Current wording

Net cash provided by investing activities increased by $320.8 million in the six months ended June 30, 2025, primarily due to an increase of $313.7 million in proceeds from the maturity of short-term investments, a decrease of $8.5 million from acquisitions of intangible assets, and an increase of $1.2 million in proceeds from the sale of our equity investment in MacroGenics, partially offset by an increase of $2.7 million in purchases of property and equipment.

Previous wording

Net cash provided by financing activities decreased by $4.4 million in the first quarter of 2025, primarily due to $60.9 million in repayment of short-term bank borrowings and $0.9 million in payments of public offering costs, partially offset by $54.3 million increased in short-term debt proceeds and an increase of $3.0 million in proceeds from exercises of stock options.

Current wording

Net cash provided by financing activities decreased by $17.9 million in the six months ended June 30, 2025, primarily due to $82.8 million in repayment of short-term bank borrowings and $0.9 million in payments of public offering costs, partially offset by an increase of $54.4 million in short-term debt proceeds and an increase of $11.4 million in proceeds from exercises of stock options.

Previous wording

For more information regarding recently issued accounting standards, see Part II – Item 8. Financial Statements and Supplementary Data – Recent Accounting Pronouncements in our 2024 Annual Report.

Current wording

For more information regarding recently issued accounting standards, see Part II – Item 8. Financial Statements and Supplementary Data – Recent Accounting Pronouncements in our 2024 Annual Report. The Company has not adopted any new accounting standards in the three and six months ended June 30, 2025.