The latest: Biotech company Zai Lab Ltd. (9688.HK; ZLAB.US) on Wednesday reported a $137.9 million net loss in the second quarter, 15.4% narrower than its $163 million loss a year earlier.

Looking up: The company’s ovarian cancer drug, Zejula, posted a 45.7% increase in revenue to $34.1 million, while its Optune electric-field therapy for cancer also posted a 22.1% increase to $11.6 million. Those combined to help the company’s total revenue jump 30.6% to $48.2 million in the second quarter.

Take Note: The company recorded a foreign exchange loss of $42.2 million in the second quarter, offsetting the positive impact of not having to make any upfront payments for new licensing agreements.

Digging Deeper: Zai Lab is a pharmaceutical company that licenses other companies’ drugs for the China market, with four main commercial therapies providing its revenues. However, the high cost of licensing has put the company in a difficult situation in recent years whereby the more revenue it generates, the greater its losses. To reverse the situation, the company’s management started to shift its strategy to add more self-developed drugs by hiring R&D staff and initiating clinical trials to strengthen its independent R&D capability. As its licensing fees go down and it earns more revenue from its products, the company’s losses narrowed in the first half of this year.

Market Reaction: Zai Lab’s share price followed the broader market down on Wednesday, falling 5.5% to HK$35.55 at the midday break. It currently trades near the lower end of its 52 week range.

Translation by Jony Ho

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