Zai Lab on a Wild Ride: After Cancer, Infection Treatment Approaches Sales

A look at the latest developments of Zai Lab ahead of its financial results for second half-year expected on Mar. 5

CapitalWatch Staff
    Feb 23, 2020 3:00 PM  PT
Zai Lab on a Wild Ride: After Cancer, Infection Treatment Approaches Sales
author: CapitalWatch Staff   

The stock in Zai Lab Ltd. (Nasdaq: ZLAB) was among the few that climbed steeply in recent weeks despite the coronavirus outbreak. On Friday, though down 6% on the day, shares in the commercial stage biopharma company closed at $59.12 per American depositary share – that's compared with its level near $52 just a month ago.

Overall, ZLAB shares have nearly doubled in value since the same time a year ago. In 2019, its stock rose somewhat steadily, dipping when the company pursued to raise additional capital in May and reported doubled losses for the first half-year in September. By end of the year, Zai Lab was trading near the $40-mark compared with $24 per share in late December 2018. Then, from early 2020, its shares took off and peaked at $63.95 apiece in the past week.

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(Image: Yahoo! Finance)

In the fourth quarter, a number of corporate stockholders increased their stakes in Zai Lab. They included State Street Corp., Segantii Capital, Millennium Management, Matthews International Capital, and Gilder Gagnon Howe & Co., according to recent filings with the U.S. Securities and Exchange Commission. As reported by Enterprise Echo, 61.69% of ZLAB shares are now owned by hedge funds and other institutional investors. Echo recently reviewed a number of equities research analyst ratings and reported that ZLAB's stock has an average target of $54.11 per share and a rating of "buy." 

Zai Lab's latest financials showed $3.4 million in revenues, generated from two commercialized drugs, for the six months through June. Research and development expenses were $58.9 million, up 70% year-over-year. Sales, general, and admin expenses were $29.5 million compared with $6.4 million in the first half-year of 2018 due to commercialization efforts, Zai Lab reported. Net loss has doubled year-over-year to $83.3 million, it said.

As of June 30, 2019, ZLAB posted cash and cash equivalents of $91.6 million. It also had short-term investments of $301.6 million.

Taking Zejula, Optune to Market

Over the past year, ZLAB advanced the commercialization of Zejula and Optune in Greater China. Sales of the two drugs generated $1.9 million and $1.5 million in revenues for the first half-year, respectively.

In February, Zai Lab announced a number of developments. Specifically, that Zejula (niraparib), a therapy it developed for adult patients with recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer, will be covered by a private e-insurance operated by Chinese conglomerate Tencent Holdings Ltd. (HKEX: 0700).

Zejula, as well as ZLAB's brain cancer therapy device Optune, were launched in Hong Kong in 2018 and gradually became approved for more uses. ZLAB acquired the rights for the drug in 2016 from Massachusetts-based Tesaro Inc., now owned by GlaxoSmithKline. Zejula competes against British-Swedish AstraZeneca's (LSE: AZN) PARP inhibitor Lynparza (olaparib), launched two years prior in China. In a September statement, ZLAB said Zejula has become the market leader in Hong Kong in the second quarter of 2019, with a 66% market share.

Optune uses electric fields tuned to specific frequencies to disrupt cancer cell division, inhibiting tumor growth and causing affected cancer cells to die, according to Zai Lab. The company is collaborating with the Jersey-headquartered global oncology Novocure (Nasdaq: NVCR) on exclusive sales of the product in Greater China. The drug, also known as Tumor Treating Fields, is marketed in the United States, the EU, Switzerland, Japan and certain other countries for the treatment of GBM and scored revenues of $217 million for Novocure in the year through June 2018, according to a September 2018 statement.

Diversification Push

Earlier this month, Zai Lab announced that it is making progress in pharma sectors outside of oncology – specifically, in the treatment of infection – at a time when the coronavirus is wreaking havoc in China and globally.

Omadacycline is next up in Zai Lab's pipeline of drugs to launch in the market. The acceptance by China National Medical Products Administration (NMPA) of ZLAB's New Drug Application (NDA) for omadacycline took the shares in the drugmaker up 5% on Feb. 10, when the news was announced. The antibiotic was developed for the treatment of community-acquired bacterial pneumonia (CABP) and acute bacterial skin and skin structure infections (ABSSSI) by Boston-based Paratek Pharmaceuticals (Nasdaq: PRTK), a partner of Zai Lab, and was approved by the U.S. FDA in late 2018. 

Other late-stage product candidates, currently in clinical development by Zai Lab and its affiliates, include margetuximab, tested by U.S.-based MacroGenics (Nasdaq: MGNX), as well as ripretinib, bemarituzumab, sulbactam-durlobactam, and brivanib. For ripretinib, Zai Lab acquired an exclusive development and sales license for Greater China from American biotech Deciphera (Nasdaq: DCPH) in June. As to margetuximab, a Fc-optimized monoclonal antibody (mAb) that targets human epidermal growth factor receptor 2 (HER2), Zai Lab said in September that it was preparing to launch global registrational clinical trials of the drug.

Bemarituzumab, a targeted immunotherapy for certain tumors, is tested by ZLAB's partner, California-based Five Prime Therapeutics (Nasdaq: FPRX), and is expected to undergo an early futility analysis for the FIGHT trial by the first half of 2020, Zai Lab said. Lastly, Zai Lab is working with U.S. biotech Entasis Therapeutics (Nasdaq: ETTX) on Phase 3 global trials of sulbactam-durlobactam, a novel IV antibiotic for the treatment of infections caused by carbapenem-resistant Acinetobacter,

CEO Samantha Du

Dr. Du was one of the founders of Hutchison China MediTech Ltd. (Chi-Med) and served as its chief scientific officer after launching Hutchison MediPharma, a drug development company, in 2001. Now, Chi-Med (Nasdaq; LSE: HCM) is listed in New York and in London and has a market cap of $2.75 billion. From 2012 to 2014, she headed the healthcare investment department at Sequoia Capital China.

In 2014, Du founded Zai Lab with a focus on researching medicines for cancer, autoimmune, and infectious diseases, and is now its chairwoman and chief executive. 

Zai Lab is headquartered in Shanghai and has an office in the San Francisco Bay Area.

After its $150 million IPO in September 2017, ZLAB held a number of follow-on offerings, including a $216.2 million public fundraising in May 2019 and a $299.3 million deal in January 2020.

Zai Lab is expected to release its fourth-quarter financials on March 5.

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