FAST NEWS: Zai Lab’s Loss Widens as R&D Costs Surge

The latest: Biotech company Zai Lab Ltd. (9688.HK; ZLAB.US) on Thursday reported a $161 million net loss in the third quarter, 67% wider than its $96.41 million loss a year earlier.

Looking up: Revenue for the quarter rose 33.5% to $57.54 million, benefiting from a 39% jump in revenue for its core oral oncology drug, Zejula, which generated $39.2 million.

Take Note: The company’s R&D expenses jumped 81% to $99.5 million during the period, equal to 173% of its total revenue. Selling, general and administrative expenses also rose 13% to $66.6 million, fueling the widening loss.

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 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. However, this has also led to increased costs associated with clinical R&D, making it difficult to improve its losses in the near-term.

Market Reaction: After a 4.1% drop when markets opened on Thursday, Zai Lab shares rebounded during the morning and were down a more modest 1.1% at HK$22.70 by the midday break. They now trade at the lower end of their 52-week range.

Translation by Jony Ho

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