《再鼎医药Zai Lab Limited（ZLAB）2020年年度报告「NASDAQ」（英文版）（275页）.pdf》由会员分享，可在线阅读，更多相关《再鼎医药Zai Lab Limited（ZLAB）2020年年度报告「NASDAQ」（英文版）（275页）.pdf（275页珍藏版）》请在三个皮匠报告上搜索。

1、2020 ANNUAL REPORT2020 ANNUAL REPORT(incorporated in the Cayman Islands with limited liability)HKEX:9688NASDAQ:ZLABZai Lab LimitedZai Lab LimitedCONTENTSCHAIRPERSONS STATEMENT IIDEFINITIONS VCORPORATE INFORMATION VIIFINANCIAL HIGHLIGHTS IXEXEMPTIONS AND WAIVERS XRESEARCH AND DEVELOPMENT ACTIVITIES X

2、IIINDEPENDENT AUDITORS REPORT XIIICONSOLIDATED FINANCIAL STATEMENTS XVIIIFORM 10-K LXVADDITIONAL INFORMATION LXVIIICHAIRPERSONS STATEMENTSamantha Du,PhDFounder,Chairpersonand Chief Executive OfficerMarch 1,2021Dear Zai Lab Shareholders,Im pleased to report to you that 2020 was another year of strong

3、 execution and growth at Zai Lab.We received new product approvals,executed successful commercial launches,submitted key regulatory filings,announced important data readouts,established transformative partnerships,expanded into new disease areas and reinforced existing disease strongholds,brought in

4、 significant capital through equity financings,and made important new hires throughout the organization.Im particularly proud of everything our team accomplished in 2020 given the challenges posed by the COVID-19 pandemic.We successfully launched ZEJULA,for both second-line and first-line ovarian ca

5、ncer,and Optune for both newly-diagnosed and recurrent glioblastoma in China.We submitted new drug applications,which were accepted with priority review,for QINLOCK for fourth-line gastrointestinal stromal tumors and for NUZYRA for community-acquired bacterial pneumonia and for acute bacterial skin

6、and skin structure infections in China.And we expanded our pipeline and strengthened several of our disease franchises by forging new strategic partnerships with four leading biopharmaceutical companies for five important compounds.Our portfolio now includes 21 innovative products,including 17 in cl

7、inical development,that can potentially address more than 60 disease indications.Eleven of these products are in late-stage development,and the FDA has already approved five of them.I also want to highlight that along with our growing late-stage pipeline,we have seven early-stage products with world

8、wide rights,including three in global clinical trials.Our achievements to date position us well to make 2021 another transformational year.We expect to launch QINLOCK and NUZYRA in China this year.We also plan to submit regulatory filings in China for Tumor Treating Fields in mesothelioma and marget

9、uximab in HER2-positive breast cancer.We expect to hold regulatory discussions with the NMPA regarding a potential accelerated pathway to approval for efgartigimod,for which our partner argenx has already submitted for regulatory approval in the United States.And we anticipate obtaining new clinical

10、 data for a number of products across our portfolio including,but not limited to,niraparib,Tumor Treating Fields,ripretinib,margetuximab,efgartigimod,repotrectinib,and CLN-081.IIICHAIRPERSONS STATEMENT Our stated strategy today is to make Zai Lab a leading global biopharmaceutical company,developing

11、 and commercializing medicines for patients not only in China but around the world.Over the longer term,we plan to continue our growth trajectory through strong execution of our business and corporate development plans,internal R&D,and commercialization strategies.We have a highly visible near-term

12、pipeline that could potentially launch more than 10 products in the next three to four years.Chinas emergence as the worlds second-largest and fastest-growing biopharmaceutical market will continue to fuel our growth.Our success has been driven by a relentless focus on executing our strategy.When we

13、 founded Zai Lab in 2014,our dedication to bringing first-,best-,or only-in-class therapies to patients in China and beyond to address significant unmet medical needs enabled us to establish ourselves as the partner of choice for Greater China.Our products have the potential to significantly extend

14、the lives and improve the health of millions of patients worldwide.This dedication to patients,in turn,allowed us to bring in world-class assets and to build end-to-end capabilities,including commercialization.We have continued to build upon our substantial scale,which now consists of nearly 1,200 e

15、mployees in China and around the world.We significantly enhanced our global leadership capabilities by hiring,among others,Dr.Alan Sandler,who was previously Senior Vice President and Global Head of Product Development in Oncology at Genentech,as our President and Head of Global Development in Oncol

16、ogy,and Ty Edmondson,who was previously Senior Vice President and Chief Corporation Counsel at Biogen,as our Chief Legal Officer.IVCHAIRPERSONS STATEMENTWith this strong foundation,our top priority is to become a leading global biopharmaceutical company by 2023.We are proud of our accomplishments to

17、 date,but we know that we have a lot more work to do to fulfill our mission.Many of you know that“Zai”in Chinese means“to once again reach the top of mountain.”All the hard work over the past six years has equipped,energized,and committed us to confidently leave the base camp and to start climbing o

18、ur Mount Everest.I would like to conclude by thanking our many key stakeholders around the world,including our patients,partners,employees,and investors for their continued support of Zai Lab.Our unique platform and culture,together with our track record of execution with speed and quality will prep

19、are us well for the many opportunities ahead.Were excited to have you along with us on this journey!Sincerely,Samantha Du,PhDFounder,Chairperson,and CEOZai Lab LimitedVDEFINITIONSIn this report,unless the context otherwise requires,the following terms have the following meanings.These terms and thei

20、r definitions may not correspond to any industry standard definition,and may not be directly comparable to similarly titled terms adopted by other companies operating in the same industries as the Company.“ADS(s)”American Depositary Shares(each representing one Share of our Company)“Chairperson”chai

21、rperson of the Board“China”,“mainland China”or“PRC”the Peoples Republic of China,which for the purpose of this report and for geographical reference only,excludes Hong Kong,Macau and Taiwan“Company”,“our Company”,“the Company”,“Zai Lab”,“we”or“us”Zai Lab Limited(NASDAQ:ZLAB;Hong Kong Stock Exchange

22、Stock code:9688),a company incorporated in the Cayman Islands with limited liability on March 28,2013,the shares of which are listed on the NASDAQ and the Main Board of the Hong Kong Stock Exchange“Core Product(s)”ZEJULA and Tumor Treating Fields,the designated core products as defined under Chapter

23、 18A of the Listing Rules“Director(s)”the director(s)of the Company“FDA”U.S.Food and Drug Administration“Greater China”China,Hong Kong,Macau and Taiwan“Group”,“our Group”,“the Group”,“we”,“us”or“our”the Company and its subsidiaries from time to time“HK$”or“HK dollars”and“HK cents”Hong Kong dollars a

24、nd cents respectively,the lawful currency of Hong Kong“Hong Kong Listing Rules”or“Listing Rules”the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited“Hong Kong Stock Exchange”or“Stock Exchange”The Stock Exchange of Hong Kong Limited“Latest Practicable Date”February

25、 24 2021,being the latest practicable date prior to the publication of this report for the purpose of ascertaining certain information contained in this reportVIDEFINITIONS“Nasdaq”the Nasdaq Global Market“NMPA”National Medical Products Administration(國家藥品監督管理局),the successor of the China Food and Dr

26、ug Administration(國家食品藥品監督管理總局)of the PRC,or the CFDA,the State Food and Drug Administration(國家食品藥品監督管理局),or the SFDA and the State Drug Administration(國家藥品監督管理局),or SDA“R&D”research and development“Reporting Period”the year ended December 31,2020“RMB”Renminbi,the lawful currency of the PRC“SEC”the

27、U.S.Securities and Exchange Commission“SFC”the Securities and Futures Commission of Hong Kong“SFO”Securities and Futures Ordinance(Chapter 571 of the Laws of Hong Kong)(as amended from time to time)“Shares”ordinary share(s)of par value US$0.00006 per share,in the capital of the Company“Shareholder(s

28、)”holder(s)of Shares and,where the context requires,ADSs“Takeovers Code”the Hong Kong Codes on Takeovers and Mergers and Share Buy-backs(as amended from time to time)“United States”or“U.S.”the United States of America,its territories,its possessions and all areas subject to its jurisdiction“US$”Unit

29、ed States dollars,the lawful currency of the United States“ZEJULA”also known as niraparib,a once-daily small-molecule poly(ADP-ribose)polymerase 1/2 inhibitorVIICORPORATE INFORMATIONBOARD OF DIRECTORSDirectorsSamantha Du(Director,Chairperson andChief Executive Officer)Tao Fu(Director,President and C

30、hief Operating Officer)Independent DirectorsKai-Xian ChenJohn DiekmanNisa LeungWilliam LisLeon O.Moulder,JR.Peter WirthHEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN THE PRC4560 Jinke RoadBldg.1,4/FPudong,ShanghaiChina 201210PRINCIPAL PLACE OF BUSINESS IN HONG KONGRoom 2301,23/F.Island Place Tower51

31、0 Kings RoadNorth PointHong KongREGISTERED OFFICEHarbour Place 2nd Floor103 South Church StreetP.O.Box 472George TownGrand Cayman KY1-1106Cayman IslandsPRINCIPAL SHARE REGISTRAR AND TRANSFER AGENTInternational Corporation Services Ltd.P.O.Box 472,Harbour Place2nd Floor,103 South Church StreetGeorge

32、Town,Grand CaymanKY1-1106Cayman IslandsHONG KONG SHARE REGISTRARComputershare Hong Kong Investor Services LimitedShops 1712171617th Floor,Hopewell Centre183 Queens Road EastWanchaiHong KongCOMPLIANCE ADVISORSomerley Capital Limited20/F China Building29 Queens Road CentralHong KongVIIICORPORATE INFOR

33、MATIONAUTHORIZED REPRESENTATIVESDr.Samantha Du4560 Jinke RoadBldg.1,4/FPudong,ShanghaiChina 201210Mr.Tao Fu4560 Jinke RoadBldg.1,4/FPudong,ShanghaiChina 201210AUDIT COMMITTEEDr.John Diekman(Chair)Mr.William LisMr.Peter WirthCOMPENSATION COMMITTEEMr.Peter Wirth(Chair)Ms.Nisa LeungMr.Leon O.Moulder,Jr

34、.NOMINATING COMMITTEEMr.Leon O.Moulder,Jr.(Chair)Dr.John DiekmanMr.William LisSTOCK CODEHKEX:9688NASDAQ:ZLABAUDITORDeloitte Touche TohmatsuRegistered Public Interest Entity Auditors35/F,One Pacific Place88 QueenswayHong KongCOMPANY WEBSITEhttp:/ HIGHLIGHTSFY2020FY2019US$(in thousands)Consolidated ba

35、lance sheet data:Cash,cash equivalents and restricted cash442,85976,442Short-term investments(1)744,676200,000Total assets1,297,638355,153Total shareholders equity1,169,345294,660Total current liabilities98,04346,635Total non-current liabilities30,25013,858(1)The short-term investment primarily comp

36、rises of the time deposits with original maturities between three months and one year.FY2020FY2019US$(in thousands,except for share and per share data)Consolidated statements of operations data:Revenue48,95812,985Expenses:Cost of sales(16,736)(3,749)Research and development(222,711)(142,221)Selling,

37、general and administrative(111,312)(70,211)Loss from operations(301,801)(203,196)Interest income5,1208,232Interest expenses(181)(293)Other income,net29,076938Loss before income tax and share of loss from equity method investment(267,786)(194,319)Income tax expenseShare of loss from equity method inv

38、estment(1,119)(752)Net loss(268,905)(195,071)Weighted-average shares used in calculating net loss per ordinary share,basic and diluted77,667,74364,369,490Loss per share,basic and diluted(3.46)(3.03)EXEMPTIONS AND WAIVERSXHONG KONG LISTING RULESUnder Rule 19C.11 of the Listing Rules,we are exempt fro

39、m certain corporate governance requirements of the Hong Kong Stock Exchange,including Appendix 14 of the Listing Rules(Corporate Governance Code and Corporate Governance Report)and Appendix 16 of the Listing Rules(Disclosure of Financial Information).In connection with our listing on the Hong Kong S

40、tock Exchange,the Hong Kong Stock Exchange and the SFC granted certain waivers and exemptions from strict compliance with the relevant provisions of the Listing Rules and the SFO,respectively,and the SFC also granted a ruling under the Takeovers Codes(see below).Not a public company in Hong KongSect

41、ion 4.1 of the Introduction to the Takeovers Code provides that the Takeovers Code apply to takeovers,mergers and share buy-backs affecting,among others,public companies in Hong Kong and companies with a primary listing in Hong Kong.According to the Note to Section 4.2 of the Introduction to the Tak

42、eovers Code,a Grandfathered Greater China Issuer within the meaning of Rule 19C.01 of the Listing Rules with a secondary listing on the Hong Kong Stock Exchange will not normally be regarded as a public company in Hong Kong under Section 4.2 of the Introduction to the Takeovers Code.The SFC granted,

43、a ruling that we are not a“public company in Hong Kong”for the purposes of the Takeovers Code.Therefore,the Takeovers Code do not apply to us.In the event that the bulk of trading in our Shares migrates to Hong Kong on a permanent basis such that we would be treated as having a dual-primary listing

44、pursuant to Rule 19C.13 of the Listing Rules,the Takeovers Code will apply to us.Disclosure of Interests under Part XV of the SFOPart XV of the SFO imposes duties of disclosure of interests in Shares.Under the U.S.Exchange Act,which we are subject to,any person(including directors and officers of th

45、e company concerned)who acquires beneficial ownership,as determined in accordance with the rules and regulations of the SEC and which includes the power to direct the voting or the disposition of the securities,of more than 5%of a class of equity securities registered under Section 12 of the U.S.Exc

46、hange Act must file beneficial owner reports with the SEC,and such person must promptly report any material change in the information provided(including any acquisition or disposition of 1%or more of the class of equity securities concerned),unless exceptions apply.Therefore,compliance with Part XV

47、of the SFO would subject our corporate insiders to a second level of reporting,which would be unduly burdensome to them,would result in additional costs and would not be meaningful,since the statutory disclosure of interest obligations under the U.S.Exchange Act that apply to us and our corporate in

48、siders would provide our investors with sufficient information relating to the shareholding interests of our significant shareholders.The SFC granted a partial exemption under section 309(2)of the SFO from the provisions of Part XV of the SFO(other than Divisions 5,11 and 12 of Part XV of the SFO),o

49、n the conditions that(i)the bulk of trading in the Shares is not considered to have migrated to Hong Kong on a permanent basis in accordance with Rule 19C.13 of the Listing Rules;(ii)the disclosures of interest filed in the SEC are also filed with the Hong Kong Stock Exchange as soon as practicable,

50、which will then publish such disclosure in the same manner as disclosures made under Part XV of the SFO;and(iii)we will advise the SFC if there is any material change to any of the information which has been provided to the SFC,including any significant changes to the disclosure requirements in the

51、U.S.and any significant changes in the volume of our worldwide share turnover that takes place on the Hong Kong Stock Exchange.This exemption may be reconsidered by the SFC in the event there is a material change in information provided to the SFC.XIEXEMPTIONS AND WAIVERSCorporate communicationRule

52、2.07A of the Listing Rules provides that a listed issuer may send or otherwise make available to the relevant holders of its securities any corporate communication by electronic means,provided that either the listed issuer has previously received from each of the relevant holders of its securities a

53、n express,positive confirmation in writing or the shareholders of the listed issuer have resolved in a general meeting that the listed issuer may send or supply corporate communications to shareholders by making them available on the listed issuers own website or the listed issuers constitutional do

54、cuments contain provision to that effect,and certain conditions are satisfied.Since our listing on the Hong Kong Stock Exchange,we made the following arrangements:we issue all corporate communications as required by the Listing Rules on our own website in English and Chinese,and on the Hong Kong Sto

55、ck Exchanges website in English and Chinese.we continue to provide printed copies of notice to our shareholders at no cost.we have added to the“Investor Relations”page of our website which directs investors to all of our filings with the Hong Kong Stock Exchange.Monthly ReturnRule 13.25B of the List

56、ing Rules requires a listed issuer to publish a monthly return in relation to movements in its equity securities,debt securities and any other securitized instruments,as applicable,during the period to which the monthly return relates.Pursuant to the Joint Policy Statement Regarding the Listing of O

57、verseas Companies,or Joint Policy Statement,we sought a waiver from Rule 13.25B subject to satisfying the waiver condition that the SFC has granted a partial exemption from strict compliance with Part XV of the SFO(other than Divisions 5,11 and 12 of Part XV of the SFO).As we have obtained a partial

58、 exemption from the SFC,the Hong Kong Stock Exchange granted a waiver from strict compliance with Rule 13.25B of the Listing Rules.We disclose information about share repurchases,if material,in our quarterly or interim earnings releases and annual reports on Form 20-F which are furnished or filed wi

59、th the SEC in accordance with applicable U.S.rules and regulations.For further details of other waivers granted to the Company by the Hong Kong Stock Exchange and the SFC,please refer to the company information sheet of the Company dated February 5,2021,which is available for viewing on the Hong Kon

60、g Stock Exchanges website at www.hkexnews.hk and the Companys website at .XIIRESEARCH AND DEVELOPMENT ACTIVITIESOVERVIEWWe are an innovative,research-based,commercial stage biopharmaceutical company with a substantial presence in both Greater China and the United States.We are focused on developing

61、and commercializing therapies that address medical conditions with unmet needs in oncology,autoimmune disorders and infectious disease.Our aim is to become a leading global biopharmaceutical company discovering,developing and commercializing products to extend and improve the lives of patients world

62、wide.Since 2014,we have taken steps to execute our strategy to become a fully-integrated global biopharmaceutical company with substantial research and development,business development and commercialization capabilities.As of the Latest Practicable Date,we have expanded our pipeline to increase our

63、product candidates under development from four in 2015 to twenty-one in oncology,autoimmune disorders and infectious diseases,including eleven programs in late-stage clinical development.For further details about our Core Products and a summary of expenditure incurred on research and development act

64、ivities,please refer to the sections headed“Part I Item 1.Business Our Pipeline of Product Candidates”,“Part I Item 1.Business Our Oncology Pipeline”,“Part I Item 1.Business Our Approved Products and Product Candidates under Priority Review by the NMPA”,“Part I Item 1.Business Research and Developme

65、nt”,“Part I Item 1.Business Sales and Marketing Commercialization”,“Part II Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations A.Operating Results.Factors Affecting our Results of Operations Innovation Platform Research and Development Expenses”in this report

66、 and the section headed“Business Our Products and Drug Candidates Pipeline”in the prospectus of the Company dated September 17,2020.Cautionary statement required by Rule 18A.05 of the Listing Rules:The Company cannot guarantee that it will be able to develop,or ultimately market,ZEJULA and Tumor Tre

67、ating Fields in other clinically relevant indications successfully.Shareholders and potential investors of the Company are advised to exercise due care when dealing in the securities of the Company.XIIIINDEPENDENT AUDITORS REPORTTo the Shareholders of Zai Lab Limited(incorporated in Cayman Islands w

68、ith limited liability)OPINIONWe have audited the consolidated financial statements of Zai Lab Limited(the“Company”)and its subsidiaries(collectively referred to as“the Group”)set out on pages XVIII to LXIV,which comprise the consolidated statement of financial position as at December 31,2020,and the

69、 consolidated statement of profit or loss and other comprehensive income,consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended,and notes to the consolidated financial statements,including a summary of significant accounting policies.In our opini

70、on,the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at December 31,2020,and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with accounting principles generally accep

71、ted in the United States of America.BASIS FOR OPINIONWe conducted our audit in accordance with Hong Kong Standards on Auditing(“HKSAs”)issued by the Hong Kong Institute of Certified Public Accountants(“HKICPA”).Our responsibilities under those standards are further described in the Auditors Responsi

72、bilities for the Audit of the Consolidated Financial Statements section of our report.We are independent of the Group in accordance with the HKICPAs Code of Ethics for Professional Accountants(“the Code”),and we have fulfilled our other ethical responsibilities in accordance with the Code.We believe

73、 that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.XIVINDEPENDENT AUDITORS REPORTKEY AUDIT MATTERSKey audit matters are those matters that,in our professional judgment,were of most significance in our audit of the consolidated financial stateme

74、nts of the current period.These matters were addressed in the context of our audit of the consolidated financial statements as a whole,and in forming our opinion thereon,and we do not provide a separate opinion on these matters.Key audit matterHow our audit addressed the key audit matterCut-off of r

75、esearch and development expensesThe Group incurred significant research and development(“R&D”)expenses of approximately USD223 million.A large portion of the Group R&D expenses are comprised of service fees paid to contract research organizations(“CROs”)and contract manufacturing organizations(“CMOs

76、”)(collectively referred as“Outsourced Service Providers”).The R&D activities contracted with these Outsourced Service Providers are documented in detailed agreements and are generally performed over an extended period.There are also typically several milestones pertaining to the services in one agr

77、eement,therefore allocation of the service expenses to the appropriate financial reporting period based on the progress of the R&D projects involved judgement and estimation.We identified cut-off of R&D activities as a key audit matter due to the potential significance of misstatements to the financ

78、ial statements that could arise from not accruing R&D expenses incurred for services provided by the Outsourced Service Providers in the appropriate reporting period.Our audit procedures related to the cut-off of research and development expenses included the following,among others:We tested the eff

79、ectiveness 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 research agreements with Outsourced Service Providers and evaluated the completion status with reference to the progress reported by the represent

80、atives 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 servic

81、e fees incurred for the year ended December 31,2020 and the amounts payable under the contracts as of December 31,2020.We selected projects from the open contract list as of December 31,2020 on a sample basis,made inquiries of responsible personnel regarding the project status and inspected invoices

82、 and other communications from the Outsourced Service Providers to identify potential additional Outsourced Service Providers and related unrecorded R&D expenditures.XVINDEPENDENT AUDITORS REPORTOTHER INFORMATIONThe directors of the Company are responsible for the other information.The other informa

83、tion comprises the information included in the annual report,but does not include the consolidated financial statements and our auditors report thereon.Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion the

84、reon.In connection with our audit of the consolidated financial statements,our responsibility is to read the other information and,in doing so,consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherw

85、ise appears to be materially misstated.If,based on the work we have performed,we conclude that there is a material misstatement of this other information,we are required to report that fact.We have nothing to report in this regard.RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR T

86、HE CONSOLIDATED FINANCIAL STATEMENTSThe directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with the accounting principles generally accepted in the United States of America,and for such internal control a

87、s the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement,whether due to fraud or error.In preparing the consolidated financial statements,the directors are responsible for assessing the Groups ability to continue a

88、s a going concern,disclosing,as applicable,matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations,or have no realistic alternative but to do so.Those charged with governance are responsible for

89、 overseeing the Groups financial reporting process.AUDITORS RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTSOur objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,whether due to fraud

90、 or error,and to issue an auditors report that includes our opinion solely to you,as a body,in accordance with our agreed terms of engagement,and for no other purpose.We do not assume responsibility towards or accept liability to any other person for the contents of this report.Reasonable assurance

91、is a high level of assurance,but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if,individually or in the aggregate,they could reasonably be expected

92、 to influence the economic decisions of users taken on the basis of these consolidated financial statements.XVIINDEPENDENT AUDITORS REPORTAs part of an audit in accordance with HKSAs,we exercise professional judgment and maintain professional skepticism throughout the audit.We also:Identify and asse

93、ss the risks of material misstatement of the consolidated financial statements,whether due to fraud or error,design and perform audit procedures responsive to those risks,and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.The risk of not detecting a mater

94、ial misstatement resulting from fraud is higher than for one resulting from error,as fraud may involve collusion,forgery,intentional omissions,misrepresentations,or the override of internal control.Obtain an understanding of internal control relevant to the audit in order to design audit procedures

95、that are appropriate in the circumstances,but not for the purpose of expressing an opinion on the effectiveness of the Groups internal control.Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.Conclud

96、e on the appropriateness of the directors use of the going concern basis of accounting and,based on the audit evidence obtained,whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Groups ability to continue as a going concern.If we conclude th

97、at a material uncertainty exists,we are required to draw attention in our auditors report to the related disclosures in the consolidated financial statements or,if such disclosures are inadequate,to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our aud

98、itors report.However,future events or conditions may cause the Group to cease to continue as a going concern.Evaluate the overall presentation,structure and content of the consolidated financial statements,including the disclosures,and whether the consolidated financial statements represent the unde

99、rlying transactions and events in a manner that achieves fair presentation.Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements.We are responsible for th

100、e direction,supervision and performance of the group audit.We remain solely responsible for our audit opinion.We communicate with those charged with governance regarding,among other matters,the planned scope and timing of the audit and significant audit findings,including any significant deficiencie

101、s in internal control that we identify during our audit.We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence,and to communicate with them all relationships and other matters that may reasonably be thought to be

102、ar on our independence,and where applicable,actions taken to eliminate threats or safeguards applied.XVIIINDEPENDENT AUDITORS REPORTFrom the matters communicated with those charged with governance,we determine those matters that were of most significance in the audit of the consolidated financial st

103、atements of the current period and are therefore the key audit matters.We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when,in extremely rare circumstances,we determine that a matter should not be communicated in our report be

104、cause the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.The engagement partner on the audit resulting in the independent auditors report is Yau Wing Chi.Deloitte Touche TohmatsuCertified Public AccountantsHong KongMarch 1

105、,2021XVIIICONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETS(In thousands of U.S.dollars(“$”)except for number of shares and per share data)As of December 31,20192020Notes$AssetsCurrent assets:Cash and cash equivalents375,932442,116Short-term investments5200,000744,676Accounts receivable(n

106、et of allowance of nil and$1 as of December 31,2019 and 2020,respectively)63,7915,165Inventories76,00513,144Prepayments and other current assets6,73610,935Total current assets292,4641,216,036Restricted cash,non-current4510743Investments in equity investees82,3981,279Prepayments for equipment440274Pr

107、operty and equipment,net921,35329,162Operating lease right-of-use assets1015,07117,701Land use rights,net7,6557,908Intangible assets,net1,1481,532Long term deposits377862Value added tax recoverable13,73722,141Total assets355,1531,297,638Liabilities and shareholders equityCurrent liabilities:Short-te

108、rm borrowings136,450Accounts payable22,66062,641Current operating lease liabilities104,3515,206Other current liabilities1413,17430,196Total current liabilities46,63598,043Deferred income2,88116,858Non-current operating lease liabilities1010,97713,392Total liabilities60,493128,293XIXCONSOLIDATED FINA

109、NCIAL STATEMENTSAs of December 31,20192020Notes$Commitments and contingencies(Note 22)Shareholders equityOrdinary shares(par value of$0.00006 per share;500,000,000 shares authorized,68,237,247 and87,811,026 shares issued and outstanding as ofDecember 31,2019 and 2020,respectively)45Additional paid-i

110、n capital734,7341,897,467Accumulated deficit(444,698)(713,603)Accumulated other comprehensive income(loss)184,620(14,524)Total shareholders equity294,6601,169,345Total liabilities and shareholders equity355,1531,297,638The accompanying notes are an integral part of these consolidated financial state

111、ments.CONSOLIDATED BALANCE SHEETS(CONTINUED)(In thousands of U.S.dollars(“$”)except for number of shares and per share data)(Continued)XXCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF OPERATIONS(In thousands of U.S.dollars(“$”)except for number of shares and per share data)Year ended De

112、cember 31,201820192020Notes$Revenue1112912,98548,958Expenses:Cost of sales(43)(3,749)(16,736)Research and development(120,278)(142,221)(222,711)Selling,general and administrative(21,576)(70,211)(111,312)Loss from operations(141,768)(203,196)(301,801)Interest income3,2618,2325,120Interest expenses(40

113、)(293)(181)Other income,net5993829,076Loss before income tax and share of loss from equity method investment(138,488)(194,319)(267,786)Income tax expense12Share of loss from equity method investment(587)(752)(1,119)Net loss(139,075)(195,071)(268,905)Net loss attributable to ordinary shareholders(139

114、,075)(195,071)(268,905)Loss per share basic and diluted15(2.64)(3.03)(3.46)Weighted-average shares used in calculating net loss per ordinary share basic and diluted52,609,81064,369,49077,667,743The accompanying notes are an integral part of these consolidated financial statements.XXICONSOLIDATED FIN

115、ANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(In thousands of U.S.dollars(“$”)except for number of shares and per share data)Year ended December 31,201820192020$Net loss(139,075)(195,071)(268,905)Other comprehensive income(loss),net of tax of nil:Foreign currency translation adjustm

116、ents2,2121,958(19,144)Comprehensive loss(136,863)(193,113)(288,049)The accompanying notes are an integral part of these consolidated financial statements.XXIICONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF SHAREHOLDERS(DEFICIT)EQUITY(In thousands of U.S.dollars(“$”)except for number of s

117、hares and per share data)Ordinary sharesAdditional paid in capitalSubscription receivableAccumulated deficitAccumulated other comprehensive(loss)incomeTotalNumber of SharesAmount$Balance at January 1,201849,912,5703345,2700(110,552)450235,171Issuance of ordinary shares upon vesting of restricted sha

118、res338,332000Exercise of shares option256,0650196196Issuance of ordinary shares upon follow-on public offering,net of issuance cost of$6527,500,0000140,348140,348Share-based compensation12,22912,229Net loss(139,075)(139,075)Foreign currency translation2,2122,212Balance at December 31,201858,006,9673

119、498,043(249,627)2,662251,081Issuance of ordinary shares upon vesting of restricted shares539,73300Exercise of shares option670,93901,0551,055Issuance of ordinary shares upon follow-on public offering,net of issuance cost of$8549,019,6081215,345215,346Share-based compensation20,29120,291Net loss(195,

120、071)(195,071)Foreign currency translation1,9581,958Balance at December 31,201968,237,2474734,734(444,698)4,620294,660Issuance of ordinary shares upon vesting of restricted shares225,76800Exercise of shares option899,36106,6646,664Issuance of ordinary shares upon follow-on public offering,net of issu

121、ance cost of$7466,300,0000280,549280,549Issuance of ordinary shares upon secondary listing,net of issuance cost of$5,69812,148,6501850,690850,691Share-based compensation24,83024,830Net loss(268,905)(268,905)Foreign currency translation(19,144)(19,144)Balance at December 31,202087,811,02651,897,467(7

122、13,603)(14,524)1,169,345The accompanying notes are an integral part of these consolidated financial statements.“0”in above table means less than 1,000 dollars.XXIIICONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands of U.S.dollars(“$”)except for number of shares and p

123、er share data)Year ended December 31,201820192020$Operating activitiesNet loss(139,075)(195,071)(268,905)Adjustments to reconcile net loss to net cash used in operating activities:Allowance for doubtful accounts1Inventory write-down29Depreciation and amortization expenses1,6503,7664,640Amortization

124、of deferred income(312)(312)(312)Share-based compensation12,22920,29124,830Share of loss from equity method investment5877521,119Loss(gain)on disposal of property and equipment115(21)Noncash lease expenses2,8314,318Changes in operating assets and liabilities:Accounts receivable(90)(3,701)(1,375)Inve

125、ntories(4)(6,001)(7,168)Prepayments and other current assets(4,794)(1,125)(4,199)Long term deposits(250)180(485)Value added tax recoverable(2,982)(5,693)(8,404)Accounts payable28,464(14,772)39,981Other current liabilities7,0569,136(10,977)Operating lease liabilities(2,436)(3,416)Deferred income(18)1

126、,12914,289Net cash used in operating activities(97,538)(191,011)(216,055)Cash flows from investing activities:Purchases of short-term investments(200,350)(277,640)(949,161)Proceeds from maturity of short-term investments277,990405,000Purchase of equity method investment(2,086)Purchase of property an

127、d equipment(10,015)(6,035)(10,130)Purchase of land use rights(7,836)Purchase of intangible assets(103)(1,371)(539)Net cash used in investing activities(212,554)(14,892)(554,830)XXIVCONSOLIDATED FINANCIAL STATEMENTSYear ended December 31,201820192020$Cash flows from financing activities:Proceeds from

128、 short-term borrowings3,6437,252Repayment of short-term borrowings(4,351)(6,527)Proceeds from exercises of stock options1961,0556,664Proceeds from issuance of ordinary shares upon public offerings141,000216,2001,137,683Payment of public offering costs(692)(854)(5,380)Net cash provided by financing a

129、ctivities144,147219,3021,132,440Effect of foreign exchange rate changes on cash,cash equivalents and restricted cash(763)914,862Net(decrease)increase in cash,cash equivalents and restricted cash(166,708)13,490366,417Cash,cash equivalents and restricted cash beginning of the year229,66062,95276,442Ca

130、sh,cash equivalents and restricted cash end of the year62,95276,442442,859Supplemental disclosure on non-cash investing and financing activities:Payables for purchase of property and equipment1,709416788Payables for intangible assets22570Payables for public offering costs1,063Supplemental disclosure

131、 of cash flow information:Cash and cash equivalents62,95275,932442,116Restricted cash,non-current510743Total cash and cash equivalents and restricted cash62,95276,442442,859Interest paid36288189The accompanying notes are an integral part of these consolidated financial statements.CONSOLIDATED STATEM

132、ENTS OF CASH FLOWS(CONTINUED)(In thousands of U.S.dollars(“$”)except for number of shares and per share data)(Continued)XXVCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the years ended December 31,2018,2019 and 2020(In thousands of U.S.dollars(“$”)and Renminbi(“R

133、MB”)except for number of shares and per share data)1.ORGANIZATION AND PRINCIPAL ACTIVITIESZai Lab Limited(the“Company”)was incorporated on March 28,2013 in the Cayman Islands as an exempted company with limited liability under the Companies Law of the Cayman Islands.The Company and its subsidiaries(

134、collectively referred to as the“Group”)are focused on developing and commercializing therapies that address medical conditions with unmet medical needs including,in particular,oncology,autoimmune disorders and infectious diseases.The Groups principal operations and geographic markets are in the Peop

135、les Republic of China(“PRC”).The Group has a substantial presence in China(refers to mainland China hereinafter),Hong Kong,Macau and Taiwan(collectively referred to as the“Greater China”)and the United States.The accompanying consolidated financial statements include the financial statements of the

136、Company and its subsidiaries.As of December 31,2020,the Groups significant operating subsidiaries are as follows:Name of companyPlace of incorporationDate of incorporationPercentage of ownershipPrincipal activitiesZai Lab(Hong Kong)LimitedHong KongApril 29,2013100%Operating company for business deve

137、lopment and R&D activities and commercialization of innovative medicines and deviceZai Lab(Shanghai)Co.,Ltd.PRCJanuary 6,2014100%Development and commercialization of innovative medicines and devicesZai Lab(AUST)Pty.,Ltd.AustraliaDecember 10,2014100%Clinical trial activitiesZai Lab(Suzhou)Co.,Ltd.PRC

138、November 30,2015100%Development and commercialization of innovative medicinesZai Biopharmaceutical(Suzhou)Co.,Ltd.PRCJune 15,2017100%Development and commercialization of innovative medicinesZai Lab(US)LLCU.S.April 21,2017100%Operating company for business development and R&D activitiesZai Lab Intern

139、ational Trading(Shanghai)Co.,Ltd.PRCNovember 6,2019100%Commercialization of innovative medicines and devicesZai Auto Immune(Hong Kong)LimitedHong KongNovember 4,2020100%Operating company for business development and R&D activitiesXXVICONSOLIDATED FINANCIAL STATEMENTS2.SUMMARY OF SIGNIFICANT ACCOUNTI

140、NG POLICIES(a)Basis of presentationThe consolidated financial statements have been prepared in accordance with U.S.generally accepted accounting principles(“U.S.GAAP”).Significant accounting policies followed by the Group in the preparation of the accompanying consolidated financial statements are s

141、ummarized below.(b)Principles of consolidationThe consolidated financial statements include the financial statements of the Company and its subsidiaries.All intercompany transactions and balances among the Group and its subsidiaries are eliminated upon consolidation.(c)Use of estimatesThe preparatio

142、n of the consolidated financial statements in conformity with U.S.GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount

143、s of expenses during the period.Areas where management uses subjective judgment include,but are not limited to,estimating the useful lives of long-lived assets,estimating the current expected credit losses for financial assets,assessing the impairment of long-lived assets,discount rate of operating

144、lease liabilities,revenue recognition,allocation of the research and development service expenses to the appropriate financial reporting period based on the progress of the research and development projects,share-based compensation expenses,recoverability of deferred tax assets and the fair value of

145、 the financial instruments.Management bases the estimates on historical experience and various other assumptions that are believed to be reasonable,the results of which form the basis for making judgments about the carrying values of assets and liabilities.Actual results could differ from these esti

146、mates.(d)Foreign currency translationThe functional currency of Zai Lab Limited,Zai Lab(Hong Kong)Limited,Zai Lab(US)LLC and Zai Auto Immune(Hong Kong)Limited are the United States dollar(“$”).The Groups PRC subsidiaries determined their functional currency to be Chinese Renminbi(“RMB”).The Groups A

147、ustralia subsidiary determined its functional currency to be Australian dollar(“A$”).The determination of the respective functional currency is based on the criteria of Accounting Standard Codification(“ASC”)830,Foreign Currency Matters.The Group uses the United States dollar as its reporting curren

148、cy.Assets and liabilities are translated from each entitys functional currency to the reporting currency at the exchange rate on the balance sheet date.Equity amounts are translated at historical exchange rates,and expenses,gains and losses are translated using the average rate for the year.Translat

149、ion adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive loss in the consolidated statements of changes in shareholders equity and comprehensive loss.XXVIICONSOLIDATED FINANCIAL STATEMENTS2.SUMMARY OF SIGNIFICANT ACCOUNTING POLIC

150、IES(CONTINUED)(d)Foreign currency translation(Continued)Monetary assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional currencies at the prevailing rates of exchange at the balance sheet date.Non-monetary assets and liabil

151、ities are translated into the applicable functional currencies at historical exchange rates.Transactions in currencies other than the applicable functional currencies during the year are converted into the functional currencies at the applicable rates of exchange prevailing at the transaction dates.

152、Transaction gains and losses are recognized in the consolidated statements of operations.(e)Cash,cash equivalents and restricted cashCash and cash equivalentsThe Group considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.Cash and c

153、ash equivalents consist primarily of cash on hand,demand deposits and highly liquid investments with maturity of less than three months and are stated at cost plus interests earned,which approximates fair value.Restricted cashRestricted cash mainly consists of the bank deposits held as collateral fo

154、r issuance of letters of credit.(f)Short-term investmentsShort-term investments are time deposits with original maturities more than three months.Short-term investments are stated at cost,which approximates fair value.Interest earned is included in interest income.(g)Accounts receivableFrom January

155、1,2020,the Group adopted the ASU 2016-13,Credit Losses,Measurement of Credit Losses on Financial Instruments.Accounts receivable are recorded at the amounts due from customers and net of allowances for credit losses.The allowance for credit losses reflects the Groups current estimate of credit losse

156、s expected to be incurred over the life of the receivables.The Group considers various factors in establishing,monitoring,and adjusting its allowance for credit losses including the aging of receivables and aging trends,customer creditworthiness and specific exposures related to particular customers

157、.The Group also monitors other risk factors and forward-looking information,such as country specific risks and economic factors that may affect a customers ability to pay in establishing and adjusting its allowance for credit losses.Accounts receivable are written off when deemed uncollectible.XXVII

158、ICONSOLIDATED FINANCIAL STATEMENTS2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)(h)InventoriesInventories are stated at the lower of cost or net realizable value,with cost determined on a weighted average basis.The Group periodically reviews the composition of inventory and shelf life of in

159、ventory in order to identify obsolete,slow-moving or otherwise non-saleable items.The Group will record a write-down to its net realizable value in cost of sales in the period that the decline in value is first identified.Nil and$29 inventory write-downs were recorded as of December 31,2019 and 2020

160、,respectively.(i)Investments in equity investeesThe Group uses the equity method to account for an equity investment over which it has significant influence but does not own a majority equity interest or otherwise control.The Group records equity method adjustments in share of earnings and losses.Eq

161、uity method adjustments include the Groups proportionate share of investee income or loss,adjustments to recognize certain differences between the Groups carrying value and its equity in net assets of the investee at the date of investment,impairments,and other adjustments required by the equity met

162、hod.Dividends received are recorded as a reduction of carrying amount of the investment.Cumulative distributions that do not exceed the Groups cumulative equity in earnings of the investee are considered as a return on investment and classified as cash inflows from operating activities.Cumulative di

163、stributions in excess of the Groups cumulative equity in the investees earnings are considered as a return of investment and classified as cash inflows from investing activities.The Group is required to perform an impairment assessment of its investments whenever events or changes in business circum

164、stances indicate that the carrying value of the investment may not be fully recoverable.An impairment loss is recorded when there has been a loss in value of the investment that is other than temporary.No impairment was recorded for the years ended December 31,2018,2019 and 2020.(j)Prepayments for e

165、quipmentThe prepayments for equipment purchase are recorded in long term prepayments considering the prepayments are all related to property and equipment.XXIXCONSOLIDATED FINANCIAL STATEMENTS2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)(k)Property and equipmentProperty and equipment are s

166、tated at cost,less accumulated depreciation and amortization.Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets as follows:Useful lifeOffice equipment3 yearsElectronic equipment1.253 yearsVehicles4 yearsLaboratory equipment5 yearsManufact

167、uring equipment10 yearsLeasehold improvementslesser of useful life or lease termConstruction in progress represents property and equipment under construction and pending installation and is stated at cost less impairment losses if any.(l)LeaseFrom January 1,2019,the Group adopted the ASC Topic 842,L

168、eases(“ASC 842”).The Group adopted the new guidance using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application and not restating comparative periods.The Group determines if an arrangement is a lease at inception.The Gro

169、up classifies the lease as a finance lease if it meets certain criteria or as an operating lease when it does not.The Group has lease agreements with lease and non-lease components,which the Group has elected to account for the components as a single lease component.The Group leases facilities for o

170、ffice,research and development center,and manufacturing facilities in China,Hong Kong,and the United States,which are all classified as operating leases with fixed lease payments,or minimum payments,as contractually stated in the lease agreements.The Groups leases do not contain any material residua

171、l value guarantees or material restrictive covenants.At the commencement date of a lease,the Group recognizes a lease liability for future fixed lease payments and a right-of-use(“ROU”)asset representing the right to use the underlying asset during the lease term.The lease liability is initially mea

172、sured as the present value of the future fixed lease payments that will be made over the lease term.The lease term includes periods for which its reasonably certain that the renewal options will be exercised and periods for which its reasonably certain that the termination options will not be exerci

173、sed.The future fixed lease payments are discounted using the rate implicit in the lease,if available,or the incremental borrowing rate(“IBR”).Upon adoption of ASU 2016-02,the Group elected to use the remaining lease term as of January 1,2019 in the Groups estimation of the applicable discount rate f

174、or leases that were in place at adoption.For the initial measurement of the lease liability for leases commencing after January 1,2019,the Group uses the discount rate as of the commencement date of the lease,incorporating the entire lease term.Additionally,the Group elected not to recognize leases

175、with lease terms of 12 months or less at the commencement date in the consolidated balance sheets.XXXCONSOLIDATED FINANCIAL STATEMENTS2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)(l)Lease(Continued)The ROU asset is measured at the amount of the lease liability with adjustments,if applicabl

176、e,for lease prepayments made prior to or at lease commencement,initial direct costs incurred by the Group and lease incentives.Under ASC 842,land use rights agreements are also considered to be operating lease contracts.The Group will evaluate the carrying value of ROU assets if there are indicators

177、 of impairment and review the recoverability of the related asset group.If the carrying value of the asset group is determined to not be recoverable and is in excess of the estimated fair value,the Group will record an impairment loss in other expenses in the consolidated statements of operations.RO

178、U assets for operating leases are included in operating lease right-of-use assets in the consolidated balance sheets.Operating leases are included in operating lease right-of-use assets and operating lease liabilities in the consolidated balance sheets.Operating lease liabilities that become due wit

179、hin one year of the balance sheet date are classified as current operating lease liabilities.Lease expense is recognized on a straight-line basis over the lease term.(m)Land use rightsAll land in the PRC is owned by the PRC government.The PRC government may sell land use rights for a specified perio

180、d of time.The purchase price of land use rights represents the operating lease prepayments for the rights to use the land in the PRC under ASC 842 and is recorded as land use rights on the balance sheet,which is amortized over the remaining lease term.In 2019,the Group acquired land use rights from

181、the local Bureau of Land and Resources in Suzhou for the purpose of constructing and operating the research center and biologics manufacturing facility in Suzhou.The land use rights are being amortized over the respective lease terms,which are 30 years.(n)Long term depositsLong term deposits represe

182、nt amounts paid in connection with the Groups long-term lease agreements.(o)Value added tax recoverableValue added tax recoverable represent amounts paid by the Group for purchases.The amounts were recorded as long-term assets considering they are expected to be deducted from future value added tax

183、payables arising on the Groups future revenues.XXXICONSOLIDATED FINANCIAL STATEMENTS2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)(p)Intangible assetsIntangible assets mainly consist of externally purchased software which are amortized over one to five years on a straight-line basis.Amortiz

184、ation expenses for the years ended December 31,2018,2019 and 2020 were$15,$305 and$307,respectively.Amortization expenses of the Groups intangible assets are expected to be approximately$402,$399,$386,$270 and$55 for the years ended December 31,2021,2022,2023,2024,and 2025 and thereafter,respectivel

185、y.(q)Impairment of long-lived assetsLong-lived assets are reviewed for impairment in accordance with authoritative guidance for impairment or disposal of long-lived assets.Long-lived assets are reviewed for events or changes in circumstances,which indicate that their carrying value may not be recove

186、rable.Long-lived assets are reported at the lower of carrying amount or fair value less cost to sell.For the years ended December 31,2018,2019 and 2020,there was no impairment of the value of the Groups long-lived assets.(r)Fair value measurementsThe Group applies ASC topic 820(“ASC 820”),Fair Value

187、 Measurements and Disclosures,in measuring fair value.ASC 820 defines fair value,establishes a framework for measuring fair value and requires disclosures to be provided on fair value measurement.ASC 820 establishes a three-tier fair value hierarchy,which prioritizes the inputs used in measuring fai

188、r value as follows:Level 1 Observable inputs that reflect quoted prices(unadjusted)for identical assets or liabilities in active markets.Level 2 Include other inputs that are directly or indirectly observable in the marketplace.Level 3 Unobservable inputs which are supported by little or no market a

189、ctivity.ASC 820 describes three main approaches to measuring the fair value of assets and liabilities:(i)market approach;(ii)income approach;and(iii)cost approach.The market approach uses prices and other relevant information generated from market transactions involving identical or comparable asset

190、s or liabilities.The income approach uses valuation techniques to convert future amounts to a single present value amount.The measurement is based on the value indicated by current market expectations about those future amounts.The cost approach is based on the amount that would currently be require

191、d to replace an asset.XXXIICONSOLIDATED FINANCIAL STATEMENTS2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)(r)Fair value measurements(Continued)Financial instruments of the Group primarily include cash,cash equivalents and restricted cash,short-term investments,accounts receivable,prepayment

192、s and other current assets,short-term borrowings,accounts payable and other current liabilities.As of December 31,2019 and 2020,the carrying values of cash and cash equivalents,short-term investments,accounts receivable,prepayments and other current assets,short-term borrowings,accounts payable and

193、other current liabilities approximated their fair values due to the short-term maturity of these instruments,and the carrying value of restricted cash approximates its fair value based on the nature and the assessment of the ability to recover these amounts.(s)Revenue recognitionIn 2018,the Group ad

194、opted of ASC Topic 606(“ASC 606”),Revenue from Contracts with Customers,in recognition of revenue.Under ASC 606,the Group recognizes revenue when its customer obtains control of promised goods or services,in an amount that reflects the consideration expected to receive in exchange for those goods or

195、 services.To determine revenue recognition for arrangements that the Group determines are within the scope of ASC 606,the Group performs the following five steps:(i)identify the contract(s)with a customer;(ii)identify the performance obligations in the contract;(iii)determine the transaction price,i

196、ncluding variable consideration,if any;(iv)allocate the transaction price to the performance obligations in the contract;and(v)recognize revenue when(or as)the Group satisfies a performance obligation.The Group only applies the five-step model to contracts when it is probable that the Group will col

197、lect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.Once a contract is determined to be within the scope of ASC 606 at contract inception,the Group reviews the contract to determine which performance obligations it must deliver and which

198、of these performance obligations are distinct.The Group recognizes as revenue the amount of the transaction price that is allocated to each performance obligation when that performance obligation is satisfied or as it is satisfied.The Groups revenue is all from product sales.The Group recognizes rev

199、enue from product sales when the Group has satisfied the performance obligation by transferring control of the product to the customers.Control of the product generally transfers to the customers when the delivery is made and when title and risk of loss transfers to the consumers.Cost of sales mainl

200、y consists of the acquisition cost of products and royalty fee.The Group has applied the practical expedients under ASC 606 with regard to assessment of financing component and concluded that there is no significant financing component given that the period between delivery of goods and payment is g

201、enerally one year or less.The Group started to generate product sales revenue since 2018.For the year ended December 31,2019 and 2020,the Groups product revenues were mainly generated from the sale of ZEJULA(niraparib)and Optune(Tumor Treating Fields)to customers.XXXIIICONSOLIDATED FINANCIAL STATEME

202、NTS2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)(s)Revenue recognition(Continued)In China,the Group sells the products to distributors,who ultimately sell the products to health care providers.Based on the nature of the arrangements,the performance obligations are satisfied upon the produc

203、ts delivery to distributors.Rebates are offered to distributors,consistent with pharmaceutical industry practices.The estimated amount of unpaid or unbilled rebates are recorded as a reduction of revenue if any.Estimated rebates are determined based on contracted rates,sales volumes and distributor

204、inventories.The Group regularly reviews the information related to these estimates and adjusts the amount accordingly.In Hong Kong,the Group sells the products to customers,which are typically healthcare providers such as oncology centers.The Group utilizes a third party for warehousing services.Bas

205、ed on the nature of the arrangement,the Group has determined that it is a principal in the transaction since the Group is primarily responsible for fulfilling the promise to provide the products to the customers,maintains inventory risk until delivery to the customers and has latitude in establishin

206、g the price.Revenue was recognized at the amount to which the Group expected to be entitled in exchange for the sale of the products,which is the sales price agreed with the customers.Consideration paid to the third party is recognized in operating expenses.The Group didnt recognize any contract ass

207、ets and contract liabilities as of December 31,2019 and 2020.(t)Research and development expensesElements of research and development expenses primarily include(i)payroll and other related costs of personnel engaged in research and development activities;(ii)in-licensed patent rights fees of exclusi

208、ve development rights of products granted to the Group;(iii)costs related to pre-clinical testing of the Groups technologies under development and clinical trials such as payments to contract research organizations(“CROs”)and contract manufacturing organizations(“CMOs”),investigators and clinical tr

209、ial sites that conduct our clinical studies;(iv)costs to develop the product candidates,including raw materials and supplies,product testing,depreciation,and facility related expenses;and(v)other research and development expenses.Research and development expenses are charged to expense as incurred w

210、hen these expenditures relate to the Groups research and development services and have no alternative future uses.The Group has acquired rights to develop and commercialize product candidates.Upfront payments that relate to the acquisition of a new product compound,as well as pre-commercial mileston

211、e payments,are immediately expensed as acquired in-process research and development in the period in which they are incurred,provided that the new product compound did not also include processes or activities that would constitute a“business”as defined under U.S.GAAP,and the product candidate has no

212、t achieved regulatory approval for marketing and,absent obtaining such approval,has no established alternative future use.Milestone payments made to third parties subsequent to regulatory approval which meet the capitalization criteria would be capitalized as intangible assets and amortized over the

213、 estimated remaining useful life of the related product.If the conditions enabling capitalization of development costs as an asset have not yet been met,all development expenditures are recognized in profit or loss when incurred.XXXIVCONSOLIDATED FINANCIAL STATEMENTS2.SUMMARY OF SIGNIFICANT ACCOUNTI

214、NG POLICIES(CONTINUED)(u)Deferred incomeDeferred income mainly consists of deferred income from government grants,American Depositary Receipts(the“ADR”)Program Agreement with ADR depositary bank(the“DB”)in July 2017 and the upfront payments received from Huizheng(Shanghai)Pharmaceutical Technology C

215、o.,Ltd.(“Hanhui”).Government grants consist of cash subsidies received by the Groups subsidiaries in the PRC from local governments.Grants received as incentives for conducting business in certain local districts with no performance obligation or other restriction as to the use are recognized when c

216、ash is received.Cash grants of$1,332,$2,151 and$7,289 were included in other income for the years ended December 31,2018,2019 and 2020,respectively.Grants received with government specified performance obligations are recognized when all the obligations have been fulfilled.If such obligations are no

217、t satisfied,the Group may be required to refund the subsidy.Cash grants of$2,023 and$2,519 were recorded in deferred income as of December 31,2019 and 2020 respectively,which will be recognized when the government specified performance obligation is satisfied.According to the ADR program agreement,t

218、he Group has the right to receive reimbursements for using DBs services,subject to the compliance by the Group with the terms of the agreement.The Group performed a detail assessment of the requirements and recognizes the reimbursements it expects to be entitled to over the five-year contract term a

219、s other income.For the years ended December 31,2018,2019 and 2020,$312,$312 and$312 were recorded in other income,respectively.$858 and$546 were recorded in deferred income as of December 31,2019 and 2020,respectively.In March 2020,the Group entered into an exclusive promotion agreement with Hanhui.

220、Under the terms of the agreement,the Group will leverage Hanhuis existing infrastructure to optimize an anticipated future commercial launch of omadacycline in China given that omadacycline is a broad-spectrum antibiotic in both the hospital and community care facilities.In exchange for the exclusiv

221、e promotion rights in China,Hanhui has agreed to pay the Group a non-creditable,upfront payment in the amount of RMB230,000,of which RMB90,000 was received in April 2020.The Group assessed and determined that the income recognition criteria was not met and recorded the upfront payment as deferred in

222、come.As of December 31,2020,a total amount of RMB90,000($13,793)was recorded in deferred income.(v)Comprehensive lossComprehensive loss is defined as the changes in equity of the Group during a period from transactions and other events and circumstances excluding transactions resulting from investme

223、nts by owners and distributions to owners.Among other disclosures,ASC 220,Comprehensive Income,requires that all items that are required to be recognized under current accounting standards as components of comprehensive loss be reported in a financial statement that is displayed with the same promin

224、ence as other financial statements.For each of the periods presented,the Groups comprehensive loss includes net loss and foreign currency translation adjustments,which are presented in the consolidated statements of comprehensive loss.XXXVCONSOLIDATED FINANCIAL STATEMENTS2.SUMMARY OF SIGNIFICANT ACC

225、OUNTING POLICIES(CONTINUED)(w)Share-based compensationThe Group grants share options and non-vested restricted shares to eligible employees,management and directors and accounts for these share-based awards in accordance with ASC 718,Compensation-Stock Compensation.Employees share-based awards are m

226、easured at the grant date fair value of the awards and recognized as expenses(i)immediately at grant date if no vesting conditions are required;or(ii)using graded vesting method over the requisite service period,which is the vesting period.All transactions in which goods or services are received in

227、exchange for equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued,whichever is more reliably measurable.To the extent the required vesting conditions are not met resulting in the forfeiture of the share-based awa

228、rds,previously recognized compensation expense relating to those awards are reversed.The Group determined the fair value of the stock options granted to employees using the Black-Scholes option valuation model.Awards Granted to Non-EmployeesThe Group grants share options to eligible Non-Employees an

229、d accounts for these share-based awards in accordance with ASC 718,Compensation-Stock Compensation.Non-Employees share-based awards are measured at the grant date fair value of the awards and recognized as expenses(i)immediately at grant date if no vesting conditions are required;or(ii)using graded

230、vesting method over the requisite service period,which is the vesting period.All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued,whichever

231、 is more reliably measurable.To the extent the required vesting conditions are not met resulting in the forfeiture of the share-based awards,previously recognized compensation expense relating to those awards are reversed.The Group determined the fair value of the stock options granted to Non-Employ

232、ees using the Black-Scholes option valuation model.(x)Income taxesIncome tax expense includes(i)deferred tax expense,which generally represents the net change in the deferred tax asset or liability balance during the year plus any change in valuation allowances;(ii)current tax expense,which represen

233、ts the amount of tax currently payable to or receivable from a taxing authority;and(iii)non-current tax expense,which represents the increases and decreases in amounts related to uncertain tax positions from prior periods and not settled with cash or other tax attributes.XXXVICONSOLIDATED FINANCIAL

234、STATEMENTS2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)(x)Income taxes(Continued)The Group recognizes 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

235、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 portion or all of a deferred tax asset will not be realized.The Group evaluates its uncertain tax positions using the provisions of ASC 740,Income Taxe

236、s,which requires that realization of an uncertain income tax position be recognized in the financial statements.The benefit to be recorded in the financial statements is the amount most likely to be realized assuming a review by tax authorities having all relevant information and applying current co

237、nventions.It is the Groups policy to recognize interest and penalties related to unrecognized tax benefits,if any,as a component of income tax expense.No unrecognized tax benefits and related interest and penalties were recorded in any of the periods presented.(y)Earnings(loss)per shareBasic earning

238、s(loss)per ordinary share is computed by dividing net income(loss)attributable to ordinary shareholders by weighted average number of ordinary shares outstanding during the period.Diluted earnings(loss)per ordinary share reflects the potential dilution that could occur if securities were exercised o

239、r converted into ordinary shares.The Group had stock options and non-vested restricted shares,which could potentially dilute basic earnings(loss)per share in the future.To calculate the number of shares for diluted earnings(loss)per share,the effect of the stock options and non-vested restricted sha

240、res is computed using the treasury stock method.The computation of diluted earnings(loss)per share does not assume exercise or conversion of securities that would have an anti-dilutive effect.(z)Segment informationIn accordance with ASC 280,Segment Reporting,the Groups chief operating decision maker

241、,the Chief Executive Officer,reviews the consolidated results when making decisions about allocating resources and assessing performance of the Group as a whole and hence,the Group has only one reportable segment.The Group does not distinguish between markets or segments for the purpose of internal

242、reporting.As the Groups long-lived assets are substantially located in and derived from China,no geographical segments are presented.XXXVIICONSOLIDATED FINANCIAL STATEMENTS2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)(aa)Concentration of risksConcentration of customersThe following custome

243、rs accounted for 10%or more of revenue for the years ended December 31,2018,2019 and 2020:Year ended December 31,201820192020$A515,397*B34*C14*D*4,682*E*15,774*Represents less than 10%of revenue for the years ended December 31,2018,2019 and 2020.Concentration of suppliersThe following suppliers acco

244、unted for 10%or more of research and development expenses and the inventory purchases for the years ended December 31,2018,2019 and 2020:Year ended December 31,201820192020$A25,515*B14,664*C*27,966*D*18,362*E*33,564F*26,710*Represents less than 10%of research and development expenses and the invento

245、ry purchases for the years ended December 31,2018,2019 and 2020.XXXVIIICONSOLIDATED FINANCIAL STATEMENTS2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)(aa)Concentration of risks(Continued)Concentration of credit riskFinancial instruments that are potentially subject to significant concentrat

246、ion of credit risk consist of cash and cash equivalents,and short-term investments.The carrying amounts of cash and cash equivalents and short-term investments represent the maximum amount of loss due to credit risk.As of December 31,2019 and 2020,all of the Groups cash and cash equivalents and shor

247、t-term investments were held by major financial institutions located in the PRC and international financial institutions outside of the PRC which management believes are of high credit quality and continually monitors the credit worthiness of these financial institutions.Foreign currency riskRMB is

248、not a freely convertible currency.The State Administration of Foreign Exchange,under the authority of the Peoples Bank of China,controls the conversion of RMB into foreign currencies.The value of RMB is subject to changes in central government policies and to international economic and political dev

249、elopments affecting supply and demand in the China Foreign Exchange Trading System market.The cash and cash equivalents of the Group included aggregated amounts of RMB47,168 and RMB155,934,which were denominated in RMB,as of December 31,2019 and 2020,respectively,representing 9%and 5%of the cash and

250、 cash equivalents as of December 31,2019 and 2020,respectively.(ab)Recent accounting pronouncementsAdopted Accounting StandardsIn June 2016,the FASB issued ASU 2016-13,Credit Losses,Measurement of Credit Losses on Financial Instruments,which has subsequently been amended by ASU 2018-19,ASU 2019-04,A

251、SU 2019-05,ASU 2019-10,ASU 2019-11 and ASU 2020-03.This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.The standard has replaced incurred loss approach with an expected l

252、oss model for instruments measured at amortized cost.Entities will apply the standards provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.The standards are to be applied using a modified retrospective

253、 approach and are effective for interim periods and fiscal years beginning after December 15,2019,with early adoption permitted.The Group adopted the standard on January 1,2020.Based on the composition of the Groups trade receivables and investment portfolio,the adoption of this standard did not hav

254、e a material impact on the Groups financial position or results of operations upon adoption.The Group has updated its accounting policy for accounts receivable and is providing additional disclosure about its allowance for credit losses,as required by the standard,upon adoption.The impact of other f

255、inancial instrument is not material.XXXIXCONSOLIDATED FINANCIAL STATEMENTS2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)(ab)Recent accounting pronouncements(Continued)Adopted Accounting Standards(Continued)In August 2018,the FASB issued ASU 2018-13,Fair Value Measurement(Topic 820):Disclosu

256、re Framework Changes to the Disclosure Requirements for Fair Value Measurement.This guidance removes certain disclosure requirements related to the fair value hierarchy,modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements.The new disclosur

257、e requirements include disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to devel

258、op Level 3 fair value measurements.Certain disclosures required by this guidance must be applied on a retrospective basis and others on a prospective basis.The guidance is effective for interim periods and fiscal years beginning after December 15,2019,with early adoption permitted.The Group adopted

259、this standard on January 1,2020.There was no impact to the Groups financial position or results of operations upon adoption as the Group did not have any financial instruments that are measured as level 3.In November 2018,the FASB issued ASU 2018-18,Collaborative Arrangements(Topic 808):Clarifying t

260、he Interaction between Topic 808 and Topic 606.This update clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer and precludes an entity from presenting consideration from a transaction in a c

261、ollaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction.The update is effective in fiscal years beginning after December 15,2019,and interim periods therein,and early adoption is permitted for entities that have adopted ASC 606.The

262、 Group adopted this standard on January 1,2020.There was no material impact to the Groups financial position or results of operations upon adoption.Future Adoption of Accounting StandardsIn December 2019,the FASB issued ASU 2019-12,Income Taxes(Topic 740):Simplifying the Accounting for Income Taxes.

263、This update simplifies the accounting for income taxes as part of the FASBs overall initiative to reduce complexity in accounting standards.The amendments include removal of certain exceptions to the general principles of ASC 740,Income taxes,and simplification in several other areas such as account

264、ing for a franchise tax(or similar tax)that is partially based on income.The update is effective in fiscal years beginning after December 15,2020,and interim periods therein,and early adoption is permitted.Certain amendments in this update should be applied retrospectively or modified retrospectivel

265、y,all other amendments should be applied prospectively.The Group is currently evaluating the impact on its financial statements of adopting this guidance.XLCONSOLIDATED FINANCIAL STATEMENTS3.CASH AND CASH EQUIVALENTSAs of December 31,20192020$Cash at bank and in hand75,111441,283Cash equivalents8218

266、3375,932442,116Denominated in:US$62,478297,813RMB(note(i)6,76123,898Hong Kong dollar(“HK$”)5,948119,695Australian dollar(“A$”)74571075,932442,116Note:(i)Certain cash and bank balances denominated in RMB were deposited with banks in the PRC.The conversion of these RMB denominated balances into foreig

267、n currencies is subject to the rules and regulations of foreign exchange control promulgated by the PRC government.4.RESTRICTED CASH,NON-CURRENTThe Groups restricted cash balance of$510 and$743 as of December 31,2019 and 2020 was long-term bank deposits held as collateral for issuance of letters of

268、credit.These deposits will be released when the related letters of credit are settled by the Group.5.SHORT-TERM INVESTMENTSShort-term investments are primarily comprised of time deposits with original maturities between three months and one year.For the years ended December 31,2018,2019 and 2020,the

269、 Group recorded the interest income of$2,359,$7,778 and$4,860,respectively,from the short-term investments in the consolidated statements of operations.As of December 31,2020,the Groups short-term investments consisted entirely of short-term held to maturity debt instruments with high credit ratings

270、,which were determined to have no risk of expected credit loss.Accordingly,no allowance for credit loss was recorded as of December 31,2019 and 2020.XLICONSOLIDATED FINANCIAL STATEMENTS6.ACCOUNTS RECEIVABLEThe roll-forward of the allowance for credit losses related to accounts receivable for the yea

271、r ended December 31,2020 consists of the following activity:Allowance for Credit Losses$Balance as of December 31,2019Current period provision for expected credit losses1Amounts written-offRecoveries of amounts previously written-offBalance as of December 31,20201The Group did not have any allowance

272、 for credit losses for the years ended December 31,2018 and 2019.7.INVENTORIESThe Groups inventory balance of$6,005 and$13,144 as of December 31,2019 and 2020,respectively,mainly consisted of finished goods purchased from Tesaro Inc.,now GlaxoSmithKline(GSK)and NovoCure Limited(“NovoCure”)for distri

273、bution in Hong Kong,as well as finish goods and certain raw materials for ZEJULA commercialization in China.As of December 31,20192020$Finished goods5933,041Raw materials5,41210,103Inventories6,00513,144The Group write-down inventory for any excess or obsolete inventories or when the Group believe t

274、hat the net realizable value of inventories is less than the carrying value.During the years ended December 31,2018,2019 and 2020,the Group recorded write-downs of$Nil,$Nil and$29,respectively,in cost of revenues.XLIICONSOLIDATED FINANCIAL STATEMENTS8.INVESTMENTS IN EQUITY INVESTEESIn June 2017,the

275、Group entered into an agreement with three third-parties to launch JING Medicine Technology(Shanghai)Ltd.(“JING”),an entity which provides services for product discovery and development,consultation and transfer of pharmaceutical technology.The capital contribution by the Group was RMB26,250 in cash

276、,representing 20%of the equity interest of JING,which was paid by the Group in 2017 and 2018.The Group accounts for this investment using the equity method of accounting due to the fact that the Group can exercise significant influence on the investee and recorded its share of loss in this investee

277、of$587,$752 and$1,119 for the years ended December 31,2018,2019 and 2020,respectively.9.PROPERTY AND EQUIPMENT,NETProperty and equipment consist of the following:As of December 31,20192020$Office equipment397430Electronic equipment1,4822,646Vehicle76143Laboratory equipment5,85411,933Manufacturing eq

278、uipment11,04912,198Leasehold improvements7,5289,641Construction in progress4282,42326,81439,414Less:accumulated depreciation(5,461)(10,252)Property and equipment,net21,35329,162Depreciation expenses for the years ended December 31,2018,2019 and 2020 were$1,634,$3,372 and$4,324,respectively.10.LEASET

279、he Group leases facilities for office,research and development and manufacturing facilities in China,Hong Kong,and the United States.Lease terms vary based on the nature of operations and the market dynamics,however,all leased facilities are classified as operating leases with remaining lease terms

280、between one and seven years.Total lease expense related to short-term leases was insignificant for the year ended December 31,2019 and 2020.XLIIICONSOLIDATED FINANCIAL STATEMENTS10.LEASE(CONTINUED)Supplemental information related to leases was as follows:Year ended December 31,20192020$Operating fix

281、ed lease cost3,2454,539Supplemental cash flow information related to leases was as follows:Year ended December 31,20192020$Cash paid for amounts included in measurement of lease liabilities2,7784,056Non-cash operating lease liabilities arising from obtaining operating right-of-use assets10,8766,393T

282、he maturities of lease liabilities in accordance with Leases(Topic 842)in each of the next five years and thereafter as of December 31,2020 were as follows:Year ended December 31$20215,43420224,36220232,40120242,23820252,192Thereafter2,610Total lease payments19,237Less:imputed interest(639)Present v

283、alue of minimum operating lease payments18,598XLIVCONSOLIDATED FINANCIAL STATEMENTS10.LEASE(CONTINUED)Weighted-average remaining lease terms and discount rates are as follows:Year ended December 31,20192020Weighted-average remaining lease term4.4 years5.0 yearsWeighted-average discount rate3.1%2.3%1

284、1.REVENUEThe Groups revenue is primarily derived from the sale of ZEJULA and Optune in China and Hong Kong.The table below presents the Groups net product sales for the years ended December 31,2018,2019 and 2020.Year ended December 31,201820192020$Product revenue gross12912,98557,355Less:Rebate and

285、sales return(8,397)Product revenue net12912,98548,958Sales rebates are offered to distributors in China and the amounts are recorded as a reduction of revenue.Estimated rebates are determined based on contracted rates,sales volumes and distributor inventories.The following table disaggregates net re

286、venue by product for the years ended December 31,2018,2019 and 2020:Year ended December 31,201820192020$ZEJULA1296,62532,138Optune6,36016,418Others402Total product revenue net12912,98548,958XLVCONSOLIDATED FINANCIAL STATEMENTS12.INCOME TAXCayman Islands(“Cayman”)Zai Lab Limited,ZLIP Holding Limited,

287、Zai Auto Immune Limited,and Zai Anti Infectives Limited are incorporated in the Cayman Islands.Under the current laws of the Cayman Islands,Zai Lab Limited,ZLIP Holding Limited,Zai Auto Immune Limited,and Zai Anti Infectives Limited are not subject to tax on income or capital gain.Additionally,the C

288、ayman Islands does not impose a withholding tax on payments of dividends to shareholders.British Virgin Islands Taxation(“BVI”)ZL Capital Limited is incorporated in the British Virgin Islands.Under the current laws of the British Virgin Islands,ZL Capital Limited is not subject to income tax.Austral

289、ia(“AUST”)Zai Lab(AUST)Pty.,Ltd.is incorporated in Australia and is subject to corporate income tax at a rate of 30%.Zai Lab(AUST)Pty.,Ltd.has no taxable income for all periods presented,therefore,no provision for income taxes is required.United States.(“U.S.”)Zai Lab(US)LLC is incorporated in U.S.a

290、nd is subject to U.S.federal corporate income tax at a rate of 21%.Zai Lab(US)LLC is also subject to state income tax in Delaware.Zai Lab(US)LLC has no taxable income for all periods presented,therefore,no provision for income taxes is required.Hong Kong(“HK”)Zai Lab(Hong Kong)Limited,ZL China Holdi

291、ng Two Limited,Zai Auto Immune(Hong Kong)Limited,and Zai Anti Infectives(Hong Kong)Limited are incorporated in Hong Kong.Companies registered in Hong Kong are subject to Hong Kong profits tax on the taxable income as reported in their respective statutory financial statements adjusted in accordance

292、with relevant Hong Kong tax laws.Under the two-tiered profits tax rates regime in Hong Kong,the first HK$2 million of profits of the qualifying group entity will be taxed at 8.25%,and profits above HK$2 million will be taxed at 16.5%.For the years ended December 31,2018,2019 and 2020,Zai Lab(Hong Ko

293、ng)Limited,ZL China Holding Two Limited,Zai Auto Immune(Hong Kong)Limited,and Zai Anti Infectives(Hong Kong)Limited did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong for any of the periods presented.Under the Hong Kong tax la

294、w,Zai Lab(Hong Kong)Limited,ZL China Holding Two Limited,Zai Auto Immune(Hong Kong)Limited,and Zai Anti Infectives(Hong Kong)Limited are exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.XLVICONSOLIDATED FINANCIAL STATEM

295、ENTS12.INCOME TAX(CONTINUED)PRCUnder PRCs Enterprise Income Tax Law(“EIT Law”),the statutory income tax rate is 25%,and the EIT rate will be reduced to 15%for state-encouraged High and New Technology Enterprises(“HNTE”).Zai Lab(Shanghai)Co.,Ltd.,first obtained a HNTE certificate in 2018 and began to

296、 enjoy the preferential tax rate of 15%from 2018 to 2020.Zai Lab International Trading(Shanghai)Co.,Ltd.,Zai Lab(Suzhou)Co.,Ltd.,Zai Biopharmaceutical(Suzhou)Co.,Ltd.,and Zai Lab Trading(Suzhou)Co.,Ltd.are subject to the statutory rate of 25%.No provision for income taxes has been required to be acc

297、rued because the Company and all of its subsidiaries are in cumulative loss positions for all the periods presented.Loss(income)before income taxes consists of:Year ended December 31,201820192020$Cayman1,218(3,241)2,612BVI223PRC127,711185,239220,813HK7,7783,27120,022US2,3519,78624,616AUST1514839139,

298、075195,071268,905XLVIICONSOLIDATED FINANCIAL STATEMENTS12.INCOME TAX(CONTINUED)Reconciliations of the differences between the PRC statutory income tax rate and the Groups effective income tax rate for the years ended December 31,2018,2019 and 2020 are as follows:Year ended December 31,201820192020St

299、atutory income tax rate25%25%25%Share-based compensations(1.93%)(1.51%)(1.36%)Non-deductible expenses(0.38%)(0.39%)(1.17%)Prior year tax filing adjustment1.55%1.93%1.78%Effect of different tax rate of subsidiary operation in other jurisdictions(0.76%)0.07%(1.04%)Preferential tax rate(9.14%)(7.48%)Ef

300、fect of change in tax rate(9.15%)Changes in valuation allowance(23.48%)(6.81%)(15.73%)Effective income tax rateThe principal components of the deferred tax assets and liabilities are as follows:Year ended December 31,201820192020$Deferred tax assets:Depreciation of property and equipment,net155784Go

301、vernment grants187325400Deferred revenue2,069Public welfare donations7,627Net operating loss carry forwards49,72662,83394,954Less:valuation allowance(49,928)(63,215)(105,134)Deferred tax assets,netXLVIIICONSOLIDATED FINANCIAL STATEMENTS12.INCOME TAX(CONTINUED)The Group considers positive and negativ

302、e evidence to determine whether some portion or all of the deferred tax assets will be more likely than not realized.This assessment considers,among other matters,the nature,frequency and severity of recent losses and forecasts of future profitability.These assumptions require significant judgment a

303、nd the forecasts of future taxable income are consistent with the plans and estimates the Group is using to manage the underlying businesses.Valuation allowances are established for deferred tax assets based on a more likely than not threshold.The Groups ability to realize deferred tax assets depend

304、s on its ability to generate sufficient taxable income within the carry forward periods provided for in the tax law.In 2019 and 2020,the Group has determined that the deferred tax assets on temporary differences and net operating loss carry forwards are related to certain subsidiaries,for which the

305、Group is not able to conclude that the future realization of those net operating loss carry forwards and other deferred tax assets are more likely than not.As such,it has fully provided valuation allowance for the deferred tax assets as of December 31,2019 and 2020.Amounts of operating loss carry fo

306、rwards were$204,693,$403,460 and$605,226 for the years ended December 31,2018,2019 and 2020,respectively,which are expected to expire from 2021 to 2030.Movement of the valuation allowance is as follows:20192020$Balance as of January 1,(49,928)(63,215)Additions(13,287)(41,919)Balance as of December 3

307、1,(63,215)(105,134)Uncertainties exist with respect to how the current income tax law in the PRC applies to the Groups overall operations,and more specifically,with regard to tax residency status.The EIT Law includes a provision specifying that legal entities organized outside of the PRC will be con

308、sidered residents for Chinese income tax purposes if the place of effective management or control is within the PRC.The implementation rules to the EIT Law provide that non-resident legal entities will be considered PRC residents if substantial and overall management and control over the manufacturi

309、ng and business operations,personnel,accounting and properties,occurs within the PRC.Despite the present uncertainties resulting from the limited PRC tax guidance on the issue,the Group does not believe that the legal entities organized outside of the PRC within the Group should be treated as reside

310、nts for EIT Law purposes.If the PRC tax authorities subsequently determine that the Company and its subsidiaries registered outside the PRC should be deemed resident enterprises,the Company and its subsidiaries registered outside the PRC will be subject to the PRC income taxes,at a rate of 25%.The G

311、roup is not subject to any other uncertain tax position.XLIXCONSOLIDATED FINANCIAL STATEMENTS13.SHORT-TERM BORROWINGSOn June 25,2018,Zai Lab(Suzhou)Co.Ltd.entered into a three-year facility agreement for RMB25,000 with a local commercial bank,and the outstanding borrowing under this agreement was ni

312、l as of December 31,2020.The borrowing is guaranteed by Zai Lab(Shanghai)Co.Ltd.,with an average interest rate of 4.785%.For the year ended December 31,2020,Zai Lab(Suzhou)Co.Ltd.repaid the outstanding principal of RMB25,000.For the year ended December 31,2019,Zai Lab(Suzhou)Co.Ltd.drawn down an agg

313、regate of RMB30,000 of this loan and repaid the outstanding principal of RMB25,000.For the year ended December 31,2018,Zai Lab(Suzhou)Co.Ltd.drawn down an aggregate of RMB20,000 of this loan.On December 12,2018,Zai Biopharmaceutical(Suzhou)Co.Ltd.entered into a three-year facility agreement for RMB4

314、0,000 with a local commercial bank,the outstanding borrowing under this agreement was nil as of December 31,2020.The borrowing is guaranteed by Zai Lab(Shanghai)Co.,Ltd.,with average interest rate of 4.785%.For the year ended December 31,2020,Zai Biopharmaceutical(Suzhou)Co.Ltd.repaid the outstandin

315、g principal RMB20,000.For the year ended December 31,2019,Zai Biopharmaceutical(Suzhou)Co.Ltd.drew down an aggregate of RMB20,000 of this loan and repaid the outstanding principal of RMB5,000.For the year ended December 31,2018,Zai Biopharmaceutical(Suzhou)Co.Ltd.drew down an aggregate of RMB5,000 o

316、f this loan.14.OTHER CURRENT LIABILITIESOther current liabilities consist of followings:As of December 31,20192020$Payroll9,59013,694Professional service fee7743,128Payables for purchase of property and equipment416788Payables for purchase of intangible assets70Accrued rebate to distributors7,067Oth

317、ers(note(i)2,3945,449Total13,17430,196Note:(i)Others are mainly payments from employees for exercising the share-based compensations,tax payables,and payables related to travel and business entertainment expenses and conference fee.LCONSOLIDATED FINANCIAL STATEMENTS15.LOSS PER SHAREBasic and diluted

318、 net loss per share for each of the years presented are calculated as follow:For the years ended December 31,201820192020Numerator:Net loss attributable to ordinary shareholders(139,075)(195,071)(268,905)Denominator:Weighted average number of ordinary shares basic and diluted52,609,81064,369,49077,6

319、67,743Net loss per share-basic and diluted(2.64)(3.03)(3.46)As a result of the Groups net loss for the three years ended December 31,2018,2019 and 2020,share options and non-vested restricted shares outstanding in the respective periods were excluded from the calculation of diluted loss per share as

320、 their inclusion would have been anti-dilutive.As of December 31,201820192020Share options8,761,7359,122,9808,755,920Non-vested restricted shares1,112,001743,268541,75016.RELATED PARTY TRANSACTIONSThe table below sets forth the major related party and the relationship with the Group as of December 3

321、1,2020:Company NameRelationship with the GroupMEDx(Suzhou)Translational Medicine Co.,Ltd.(Formerly known as Qiagen(Suzhou)translational medicine Co.,Ltd)Significant influence held by Samantha Dus(Director,Chairwoman and Chief Executive Officer of the Company)immediate familyFor the years ended Decem

322、ber 31,2018,2019 and 2020,the Group incurred$126,$234 and$678 research and development expense with MEDx(Suzhou)Translational Medicine Co.,Ltd.for product research and development services,respectively.All of the transactions are carried out with normal business terms and are on arms length basis.LI

323、CONSOLIDATED FINANCIAL STATEMENTS17.SHARE-BASED COMPENSATIONShare optionsOn March 5,2015,the Board of Directors of the Company approved an Equity Incentive Plan(the“2015 Plan”)which is administered by the Board of Directors.Under the 2015 Plan,the Board of Directors may grant options to purchase ord

324、inary shares to management including officers,directors,employees and individual advisors who render services to the Group to purchase an aggregate of no more than 4,140,945 ordinary shares of the Group(“Option Pool”).Subsequently,the Board of Directors approved the increase in the Option Pool to 7,

325、369,767 ordinary shares.In connection with the completion of the initial public offering(the“IPO”),the Board of Directors has approved the 2017 Equity Incentive Plan(the“2017 Plan”)and all equity-based awards subsequent to the IPO would be granted under the 2017 Plan.In 2018,the Group granted 2,759,

326、750 share options to certain management and employees of the Group at the exercise price ranging from$17.60 to$24.58 per share under the 2017 Plan.These options granted have a contractual term of 10 years and generally vest over a five-year period,with 20%of the awards vesting beginning on the anniv

327、ersary date one year after the grant date.In 2019,the Group granted 1,067,385 share options to certain management,employees and individual advisors of the Group at the exercise price ranging from$27.23 to$41.59 per share under the 2017 Plan.These options granted have a contractual term of ten years

328、and generally vest over a five or three-year period,with 20%or 33.3%of the awards vesting beginning on the anniversary date one year after the grant date.In 2020,the Group granted 1,220,177 share options to certain management,employees and individual advisors of the Group at the exercise price rangi

329、ng from$44.94 to$128.72 per share under the 2017 Plan.These options granted have a contractual term of ten years and generally vest over a five or three-year period,with 20%or 33.3%of the awards vesting beginning on the anniversary date one year after the grant date.LIICONSOLIDATED FINANCIAL STATEME

330、NTS17.SHARE-BASED COMPENSATION(CONTINUED)Share options(Continued)The following table presents the assumptions used to estimate the fair values of the share options granted in the years presented:201820192020Risk-free rate of return2.7%3.2%1.6%2.5%0.4%0.8%Contractual life of option10 years10 years10

331、yearsExpected term6.5 years6 or 6.5 years6 or 6.5 yearsEstimated volatility rate70%70%70%Expected dividend yield0%0%0%Fair value of underlying ordinary shares$17.60$24.58$27.23$41.59$44.94$128.72A summary of option activity under the 2015 Plan and 2017 Plan during the years ended December 31,2018,20

332、19 and 2020 is presented below:Number of optionsWeighted average exercise priceWeighted average remaining contractual termAggregate intrinsic value$Years$Outstanding at January 1,20186,548,3771.288.06130,669Granted2,759,75021.15Exercised(256,065)0.76Forfeited(290,327)3.73Outstanding at December 31,2

333、0188,761,7357.477.80138,010Granted1,067,38532.22Exercised(670,939)1.57Forfeited(35,201)25.99Outstanding at December 31,20199,122,98010.737.16281,562Granted1,220,17763.98Exercised(899,361)7.41Forfeited(687,876)26.37Outstanding at December 31,20208,755,92017.266.531,033,899Vested and exercisable as of December 31,20205,073,0014.905.47661,708Vested or expected to vest as of December 31,20208,755,9201