Zai Lab Limited (NASDAQ:ZLAB) Q3 2022 Results Conference Call November 10, 2022 8:00 AM ET Company Participants Billy Cho - Chief Financial Officer Samantha Du - Founder, Chairperson and Chief Executive Officer Josh Smiley - Chief Operating Officer Harald Reinhart - President, Head of Global Development, Neuroscience, Autoimmune and Infectious Diseases Jonathan Wang - Chief Business Development Conference Call Participants Michael Yee - Jefferies Yigal Nochomovitz - Citi Anupam Rama - J.P. Morgan Ziyi Chen ...

Zai Lab Limited (NASDAQ:ZLAB) Q2 2022 Earnings Conference Call August 10, 2022 8:00 AM ET Company Participants Samantha Du - Founder, Chairperson and Chief Executive Officer Josh Smiley - Chief Operating Officer Billy Cho - Chief Financial Officer Alan Sandler - President, Head of Global Development, Oncology Harald Reinhart - President, Head of Global Development, Neuroscience, Autoimmune and Infectious Diseases Jonathan Wang - Chief Business Development Conference Call Participants Michael Yee - Jefferies ...

Start Time: 08:00 January 1, 0000 8:48 AM ET Zai Lab Limited (NASDAQ:ZLAB) Q1 2022 Earnings Conference Call May 11, 2022, 08:00 AM ET Company Participants Samantha Du - Founder, Chairperson and CEO Billy Cho - CFO Alan Sandler - President, Head of Global Development, Oncology Harald Reinhart - President, Head of Global Development, Neuroscience, Autoimmune and Infectious Diseases Jonathan Wang - Chief Business Development Conference Call Participants Michael Yee - Jefferies Yigal Nochomovitz - Citigroup Anu ...

Zai Lab Limited (NASDAQ:ZLAB) Q4 2021 Earnings Conference Call March 2, 2022 8:00 AM ET Company Participants Billy Cho - Chief Financial Officer Samantha Du - Founder, Chairperson & Chief Executive Officer Alan Sandler - President & Head of Global Development, Oncology Harald Reinhart - President & Head of Global Development, Neuroscience, Autoimmune & Infectious Diseases Jonathan Wang - Executive Vice President, Head of Business Development Conference Call Participants Michael Yee - Jefferies Yigal Nochomo ...

Legal and Regulatory Risks in China - The Chinese legal system's uncertainties may affect the company's ability to enforce contractual rights or tort claims, leading to potential legal and regulatory risks[461] - The Chinese government may intervene in the company's operations, potentially requiring permission to continue business activities, which could adversely affect its financial condition[467] - Changes in Chinese regulations or interpretations regarding corporate structures, such as variable interest entities (VIEs), could negatively affect the value of the company's ADSs or ordinary shares[510] - The Draft Rules proposed by the CSRC may require the company to submit filings for future equity securities offerings to foreign investors, adding regulatory complexity[512] - The M&A Rules in China require offshore special purpose vehicles to obtain CSRC approval before listing securities on overseas stock exchanges[513] - Uncertainty remains regarding the enactment and interpretation of regulatory requirements for overseas securities offerings, which could impact the company's ability to raise capital and repatriate proceeds[518] U.S.-China Relations and Capital Market Risks - The company faces risks from changes in U.S.-China relations, including tariffs, sanctions, and increased scrutiny on companies with significant China-based operations, which could impact its business and capital-raising ability[464] - The SEC has issued statements targeting companies with significant China-based operations, potentially subjecting the company to enhanced review and affecting its ability to raise capital in the U.S.[465] - The company's auditor is not inspected by the PCAOB, which may lead to additional Nasdaq listing criteria, penalties, or potential delisting from U.S. stock markets[470] - The Holding Foreign Companies Accountable Act (HFCA Act) could prohibit the company's securities from trading on U.S. exchanges if its auditor is not inspected by the PCAOB for three consecutive years[473] - Nasdaq has adopted additional listing criteria for companies operating in jurisdictions with restrictive laws, which may apply to the company due to its operations in mainland China and Hong Kong[476] - The Accelerating Holding Foreign Companies Accountable Act (AHFCA Act) could reduce the non-inspection period from three to two years, increasing the risk of delisting for the company[477] - The company is implementing business processes to comply with the HFCA Act, but there is no assurance these measures will be sufficient or successful[478] - Delisting of the company's ADSs could force investors to sell or convert their shares, potentially leading to increased costs or losses[478] - SEC proceedings against China-based accounting firms could impact the company's ability to file compliant financial statements, potentially leading to delisting[481][482][483] Data Security and Privacy Regulations in China - Compliance with China's Data Security Law, Cyber Security Law, and other regulations may entail significant expenses and could materially affect the company's business[484] - The company maintains personally identifiable health information and de-identified health data, which could be deemed "personal information" or "important data" under Chinese regulations[485][486] - China's Data Security Law, effective September 2021, requires data classification and prohibits unauthorized data transfers to foreign entities without government approval[487] - The Cyber Security Law mandates a multi-level protection scheme (MLPS) for network and data security, requiring entities to assess and report their security levels[488] - The company must establish a comprehensive data and network security management system, which could be costly and may not fully mitigate all risks[489] - Data categorized as "important data" requires higher protection levels and may need government approval for cross-border transfers[490] - The Revised CAC Measures, effective February 2022, require cybersecurity reviews for companies with over one million users seeking foreign listings[492] - The Draft Management Regulations propose annual data security assessments for companies seeking foreign listings, with potential significant uncertainty[493] - The PIPL, effective November 2021, imposes strict data privacy and protection requirements, with fines up to RMB 50 million or 5% of annual revenues for serious violations[498] - Data localization requirements under China's national security legal regime mandate stricter controls on personal and health-related data, potentially increasing operational costs and causing business disruptions[506] Biosecurity and Clinical Trial Regulations in China - The Biosecurity Law of China, effective from April 15, 2021, establishes a comprehensive regulatory system for biosecurity-related activities, including human genetic resources (HGR), and grants significant regulatory power to the Ministry of Science and Technology (MOST)[501] - A multinational pharmaceutical company's Chinese subsidiary was banned from submitting clinical trial applications due to illegal transfer of biospecimens, resulting in a temporary halt in new clinical trials in mainland China[502] Financial and Tax Risks - RMB is not freely convertible into foreign currencies, which may limit the ability of Chinese subsidiaries to pay dividends to offshore entities[526] - Chinese regulations require residents of mainland China to register with SAFE for offshore investments, which could restrict capital injections or profit distributions[528] - If classified as a Chinese resident enterprise, the company would be subject to a 25% enterprise income tax (EIT) on its global income[537] - Non-resident enterprise shareholders may be subject to a 10% Chinese withholding tax on gains from the sale of ADSs or ordinary shares[539] - Indirect transfers of equity interests in Chinese resident enterprises may be subject to a 10% income tax on gains if deemed for tax avoidance[540] - The company may face uncertainties and potential tax liabilities related to future private equity financing and share exchange transactions[542] - Failure to comply with Chinese regulations on employee equity incentive plans may result in fines and legal sanctions[543] Operational and Commercial Risks - The company generated net revenue of $144.3 million in 2021, compared to $49.0 million in 2020, primarily from product sales[556] - The company reported a net loss of $704.5 million in 2021, compared to $268.9 million in 2020[556] - The company raised approximately $164.6 million in private equity financing and $2,462.7 million in net proceeds from public offerings as of February 28, 2022[560] - The company's net cash used in operating activities was $549.2 million in 2021, compared to $216.1 million in 2020[560] - The company has four approved, commercialized products: ZEJULA, Optune, QINLOCK, and NUZYRA, which are being marketed in various regions including mainland China, Hong Kong, Macau, and Taiwan[554] - The company expects to continue incurring significant losses as it expands commercialization efforts, clinical trials, and manufacturing facilities[556] - The company's cash and cash equivalents are expected to fund operating expenses and capital expenditures for at least the next twelve months[561] - The company may face challenges in renewing leases for its office and manufacturing facilities, potentially leading to relocation expenses and operational disruptions[553] - The company may be subject to fines ranging from RMB1,000 to RMB10,000 per lease agreement for unregistered leases in mainland China[552] - The company's ability to generate revenue in the near future is highly dependent on the commercial success of its four approved products[566] - Sales of the company's four approved products (ZEJULA, Optune, QINLOCK, NUZYRA) depend on factors such as safety, efficacy, pricing, and market acceptance, which could impact commercial success[569] - The company is building its salesforce in China to commercialize approved products, requiring significant capital and resources[572] - Limited experience in commercializing products, including managing sales teams and obtaining reimbursement, poses risks to successful product launches[573] - The company relies on third-party manufacturers for production, and any disruptions could delay manufacturing and harm operations[576][579] - Plans to build a large-scale manufacturing plant in Suzhou may face delays, impacting long-term manufacturing capacity and financial performance[578] - The company faces challenges in identifying qualified contract manufacturing organizations (CMOs) for scaled production of commercial supplies[577] - Regulatory approval for product candidates is uncertain and may be delayed or denied due to clinical trial results, manufacturing processes, or regulatory changes[589][591] - The company's limited operating history and lack of experience in large-scale clinical trials and commercialization increase risks and uncertainties[584][585] - Success depends on completing development, obtaining regulatory approval, and commercializing product candidates in a timely manner[588] - The company competes with well-funded pharmaceutical and biotechnology companies for marketing and sales personnel, which could impact commercialization efforts[574] - Regulatory approval processes vary significantly across countries, and obtaining approval in one country does not guarantee approval in others, such as mainland China, where additional clinical trials may be required[592] - The company may allocate limited resources to specific products or indications, potentially missing more profitable opportunities due to financial and managerial constraints[593] - The company's products and product candidates are subject to extensive regulation, and there is no assurance of additional regulatory approvals or successful commercialization[595] - Obtaining regulatory approvals in Greater China, the United States, and other countries is expensive, time-consuming, and subject to delays due to policy changes or additional requirements[596] - Even if approved, regulatory authorities may impose limitations, require costly post-marketing trials, or restrict labeling claims, potentially harming commercial prospects[597] - The market for the company's products may be limited to patients who have failed prior treatments, and the addressable patient population could be smaller than estimated[598][599] - The company's revenue and profitability could be adversely affected if market opportunities are smaller than estimated or if approvals are based on narrower patient population definitions[601] - The pharmaceutical industry in Greater China is highly regulated, and changes in laws or regulations could impact the approval and commercialization of the company's products[605] - The company faces significant competition from larger pharmaceutical and biotechnology companies with greater resources, which could impact its ability to commercialize products[615] - Clinical development is a lengthy, expensive, and uncertain process, with no guarantee that product candidates will prove effective, safe, or receive regulatory approval[618][619] - Clinical trials may face delays or termination due to regulatory, safety, or enrollment issues, potentially increasing costs and delaying product commercialization[623][624][626][628][629] - Patient enrollment challenges, particularly for genomically defined diseases, could significantly delay or halt clinical trials[629][631] - Undesirable side effects from products or product candidates could lead to trial suspension, regulatory delays, or more restrictive labeling[632][633][635] - Post-approval regulatory requirements, including ongoing safety monitoring and compliance, may increase costs and limit product marketing[642][643] - Category 1 drug designation in China may not guarantee faster development or approval, and regulatory processes remain unpredictable[638][640][641] - Competitor clinical trials may reduce patient enrollment for the company's trials, further delaying progress[631] - Supply or quality issues with clinical trial materials could disrupt trials and increase costs[623] - Regulatory authorities may impose additional requirements or restrictions, such as post-marketing studies or risk management plans[636][643] - Failure to comply with regulatory requirements could result in fines, product recalls, or market withdrawal[643] - Negative or inconclusive clinical trial results may require additional trials or lead to program abandonment[623][627] Pricing and Reimbursement Risks in China - The company may face significant price reductions for drugs included in China's National Reimbursable Drug List (NRDL), with average price reductions of 60% for 70 drugs in 2019, 50.64% in 2020, and 61.71% in 2021[657] - ZEJULA's inclusion in the NRDL in December 2020 led to significant price decreases, potentially negatively impacting revenue[657] - The company may need to reduce prices and negotiate reimbursement ratios with provincial healthcare security administrations in China upon regulatory approval[658] - Revenue from oncology-based products in China is expected to be largely self-paid by patients, which may reduce demand[658] Strategic Collaborations and Partnerships - The company entered into a strategic collaboration with argenx BV in January 2021, obtaining an exclusive license for efgartigimod in Greater China in exchange for cash and ordinary shares[652] - Future partnerships, acquisitions, or investments may dilute shareholders, increase debt, or incur large write-offs[651] - The company may explore licensing or collaboration opportunities outside Greater China, exposing it to additional risks in international markets[649] International Market Risks - The company faces risks in international markets, including currency fluctuations, regulatory changes, and compliance with anti-bribery laws[649] - Changes in U.S. and international trade policies, particularly with China, may adversely impact the company's business and operating results[547] - Investments in the U.S. may be subject to CFIUS review, potentially delaying or blocking transactions[545] Human Resources and Organizational Risks - The loss of key personnel could impede research, development, and commercialization objectives[646] - The company expects significant growth in employees and operations, which may lead to increased costs and management challenges[647] Manufacturing and Supply Chain Risks - Manufacturing facilities in mainland China may face challenges meeting FDA, NMPA, and EMA standards, potentially delaying product approvals[532] - Local governments in mainland China provide financial incentives to the company's subsidiaries, but these incentives are discretionary and subject to change[533] - Government grants and subsidies recognized in the income statement for 2021 and 2020 were $4.1 million and $7.3 million, respectively[535]