Zai Lab Limited
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 20-F (Mark One)☐☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 OR ☐☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to OR☐☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report Commission file number 001-38205 ZAI LAB LIMITED(Exact name of Registrant as specified in its charter) N/A(Translation of Registrant’s name into English) Cayman Islands(Jurisdiction of incorporation or organization) 4560 Jinke RoadBldg. 1, Fourth FloorPudongShanghai, China 201210(Address of principal executive offices) Samantha DuChief Executive OfficerZai Lab Limited4560 Jinke RoadBldg. 1, Fourth FloorPudongShanghai, China 201210Telephone: +86 21 6163 2588(Name, telephone, email and/or facsimile number and address of Company contact person)Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registeredAmerican depositary shares, each representing oneordinary share, par value $0.00006 per share Nasdaq Global Market Securities registered or to be registered pursuant to Section 12(g) of the Act: None(Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None(Title of Class) Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report: 58,355,903 ordinary shares were issued and outstanding as of December 31, 2018 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No Note—checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those sections. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “accelerated filer and large accelerated filer” and“emerging growth company” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer ☐ Accelerated Filer☒Non-Accelerated Filer☐ Emerging Growth Company☒ If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any newor revised financial accounting standards† pursuant to Section 13(a) of the Exchange Act. ☒ † The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP☒International Financial Reporting Standardsas issued by the International AccountingStandards Board ☐Other ☐ If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18If this is an Annual Report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No  Zai Lab LimitedTable of Contents PageCautionary Statement Regarding Forward-Looking Statements 3Part I. 5Item 1.Identity of Directors, Senior Management and Advisers 5Item 2.Offer Statistics and Expected Timetable 5Item 3.Key Information 5Item 4.Information on the Company 53Item 4A.Unresolved Staff Comments 117Item 5.Operating and Financial Review and Prospects 117Item 6.Directors, Senior Management and Employees 132Item 7.Major Shareholders and Related Party Transactions 150Item 8.Financial Information 151Item 9.The Offer and Listing 151Item 10.Additional Information 151Item 11.Quantitative and Qualitative Disclosures About Market Risk 163Item 12.Description of Securities Other Than Equity Securities 164Part II. 166Item 13.Defaults, Dividend Arrearages and Delinquencies 166Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds 166Item 15.Controls and Procedures 166Item 16Reserved Item 16A.Audit Committee Financial Experts 167Item 16B.Code of Ethics 167Item 16C.Principal Accountant Fees and Services 168Item 16D.Exemptions From The Listing Standards For Audit Committees 168Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers 168Item 16F.Change In Registrant’s Certifying Accountant 168Item 16G.Corporate Governance 168Item 16HMine Safety Disclosure 169Part III. 170Item 17.Financial Statements 170Item 18.Financial Statements 170Item 19.Exhibits 170SIGNATURES 174  Industry and Market DataAlthough we are responsible for all disclosure contained in this Annual Report on Form 20-F, in some cases we have relied on certain market andindustry data obtained from third-party sources that we believe to be reliable. Market estimates are calculated by using independent industry publications,government publications and third-party forecasts in conjunction with our assumptions about our markets. While we are not aware of any misstatementsregarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors,including those discussed under the headings “Cautionary Statement Regarding Forward-Looking Statements” and “Item 3.D. Risk Factors” in this AnnualReport on Form 20-F.Trademarks and Service MarksWe own or have rights to trademarks and service marks for use in connection with the operation of our business, including, but not limited to, ZAILAB and . All other trademarks or service marks appearing in this Annual Report on Form 20-F that are not identified as marks owned by us are theproperty of their respective owners.Solely for convenience, the trademarks, service marks and trade names referred to in this Annual Report on Form 20-F are listed without the ®,(TM) and (sm) symbols, but we will assert, to the fullest extent under applicable law, our applicable rights in these trademarks, service marks and trade names.CAUTIONARY STATEMENT REGARDING FORWARD‑LOOKING STATEMENTSThis Annual Report on Form 20-F contains forward-looking statements. Forward-looking statements are neither historical facts nor assurances offuture performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans andstrategies, our operational results and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,”“estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “seek,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,”“contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statementsinclude all matters that are not historical facts. They appear in a number of places throughout this Annual Report on Form 20-F and include statementsregarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects,growth, strategies and the industry in which we operate.By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that mayor may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those described in the “Item 3.D. Risk Factors”section of this Annual Report on Form 20-F, which include, but are not limited to, the following: •our ability to successfully commercialize ZEJULA, Optune and any other products and drug candidates that we may obtain regulatoryapproval for; •the initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and development programs; •the ability of our drug candidates to be granted or maintain Category 1 designation with the State Drug Administration, or SDA (formerlyknown as the CFDA, China Food and Drug Administration), and to receive a faster development, review or approval process; •the timing or likelihood of regulatory filings and approvals; •our ability to continue to develop our commercial team and our sales and marketing capabilities; •our ability to contract on commercially reasonable terms with contract research organizations, or CROs, third-party suppliers andmanufacturers; •the pricing and reimbursement of our drug candidates, if approved; •our ability to contract on commercially reasonable terms with CROs; •the disruption of our business relationships with our licensors;3 •our ability to operate our business without breaching our licenses or other intellectual property-related agreements; •cost associated with defending against intellectual property infringement, product liability and other claims; •regulatory developments in China, the United States and other jurisdictions; •the ability to obtain additional funding for our operations; •the rate and degree of market acceptance of our products and drug candidates; •developments relating to our competitors and our industry; •our ability to effectively manage our growth; and •our ability to retain key executives and to attract, retain and motivate personnel.These factors should not be construed as exhaustive and should be read with the other cautionary statements in this Annual Report on Form 20-F.Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the developmentof the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Annual Reporton Form 20-F. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate, areconsistent with the forward-looking statements contained in this Annual Report on Form 20-F, those results or developments may not be indicative of resultsor developments in subsequent periods.Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-lookingstatement that we make in this Annual Report on Form 20-F speaks only as of the date of such statement, and we undertake no obligation to update anyforward-looking statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments.Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specificallyexpressed as such, and should only be viewed as historical data. 4 PART IITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3. KEY INFORMATIONA.SELECTED FINANCIAL DATAOur Selected Consolidated Financial DataThe following selected consolidated statement of operations data for the years ended December 31, 2018, 2017 and 2016 and the selectedbalance sheet data as of December 31, 2018 and 2017 have been derived from our audited consolidated financial statements included elsewhere in thisAnnual Report on Form 20-F. Our historical results for any period are not necessarily indicative of results to be expected for any future period. The selectedconsolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financialstatements and related notes and “Item 5. Operating and Financial Review and Prospects” below. Our consolidated financial statements have been prepared inaccordance with U.S. generally accepted accounting principles, or U.S. GAAP. Year Ended December 31, 2018 2017 2016 (in thousands, except share and per share data) Revenue 129 — — Cost of sales (43) — — Gross profit 86 — — Research and development expenses $(120,278) $(39,342) $(32,149)Selling, general and administrative expenses (21,576) (12,049) (6,380)Loss from operations (141,768) (51,391) (38,529)Interest income 3,261 527 403 Interest expense (40) — — Changes in fair value of warrants — 200 (1,920)Other income 1,968 933 2,534 Other expense (1,909) (403) — Loss before income taxes and share of loss from equity method investment $(138,488) $(50,134) $(37,512)Income tax expense — — — Share of loss from equity method investment (587) (250) — Net loss $(139,075) $(50,384) $(37,512)Weighted-average shares used in calculating net loss per ordinary share, basic and diluted (1) 52,609,810 21,752,757 9,439,028 Net loss per share, basic and diluted (1) (2.64) (2.32) (3.97) (1)See Note 2 to our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 20-F for a description of the methodused to calculate basic and diluted net loss per share.5 As of December 31, 2018 2017 (in thousands) Consolidated balance sheet data: Cash and cash equivalents $62,952 $229,660 Short-term investments (1) $200,350 — Total assets $301,987 $249,634 Total shareholders’ equity $251,082 $235,171 Total current liabilities $48,841 $12,069 Total non-current liabilities $2,064 $2,394 (1)The short-term investment primarily comprises of the time deposits with original maturities between three months and one year. B.CAPITALIZATION AND INDEBTEDNESSNot applicable. C.REASONS FOR THE OFFER AND USE OF PROCEEDSNot applicable.D.RISK FACTORSRisks Related to Our Financial Position and Need for Additional CapitalWe have incurred significant losses since our inception and anticipate that we will continue to incur losses in the future and may never achieve or maintainprofitability.The Hong Kong Department of Health approved ZEJULA in October 2018 and we launched ZEJULA in Hong Kong in December 2018. TheChina National Medical Products Administration, or NMPA, also accepted our New Drug Application, or NDA, for ZEJULA in December 2018. In December2018, we also announced the launch of Optune (Tumor Treating Fields, or TTFields) for the treatment of glioblastoma multiforme, or GBM, in Hong Kong.Although we have launched ZEJULA and Optune in Hong Kong, it will take some time to attain profitability and we may never do so. We have alsoobtained the rights to commercialize many clinical-stage drug candidates. Investment in biopharmaceutical product development is highly speculativebecause it entails substantial upfront capital expenditures and significant risk that a drug candidate will fail to gain regulatory approval or becomecommercially viable. To date, we have financed our activities primarily through private placements, our initial public offering in September 2017 and afollow-on offering in September 2018. For the year ended December 31, 2018, we had generated revenue of $0.1 million from product sales, and we continueto incur significant development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred losses in eachperiod since our inception in 2014. For the two years ended December 31, 2018 and 2017, we reported a net loss of $139.1 million and $50.4 million,respectively.We expect to continue to incur losses in the foreseeable future, and we expect these losses to increase as we: •continue our development and commence clinical trials of our drug candidates; •maintain and expand regulatory approvals for our products and drug candidates that successfully complete clinical trials; •commercialize ZEJULA, Optune and any other products for which we may obtain regulatory approval; •maintain our manufacturing facilities; •hire additional clinical, operational, financial, quality control and scientific personnel; •maintain and expand sales, marketing and commercialization infrastructure for ZEJULA, Optune and any other products for which we mayobtain regulatory approval;6 •seek to identify additional drug candidates; •obtain, maintain, expand and protect our intellectual property portfolio; •enforce and defend intellectual property-related claims; and •acquire or in-license other intellectual property, drug candidates and technologies.To become and remain profitable, we must continue commercialization efforts of ZEJULA and Optune and develop and eventually commercializeother drug candidates with significant market potential. This will require us to be successful in a range of challenging activities, including completingpreclinical testing and clinical trials of our clinical and pre-clinical stage drug candidates, obtaining marketing approval for these drug candidates,manufacturing, marketing and selling approved products, such as ZEJULA, Optune and other products for which we may obtain marketing approval, andsatisfying any post-marketing requirements. We may never succeed in any or all of these activities and, even if we do, we may never generate productrevenues that are significant or large enough to achieve profitability. We may encounter unforeseen expenses, difficulties, complications, delays and otherunknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses andour ability to generate revenue. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our failure tobecome and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and developmentefforts and commercialization efforts, expand our business or continue our operations. A decline in the value of our company also could cause you to lose allor part of your investment.We will continue to require substantial additional funding for our drug development programs and commercialization efforts for ZEJULA, Optune andother products for which we may obtain regulatory approval, which may not be available on acceptable terms, or at all. If we are unable to raise capital onacceptable terms when needed, we could incur losses or be forced to delay, reduce or terminate such efforts.To date, we have financed our activities primarily through private placements, our initial public offering in September 2017 and our follow-onoffering in September 2018. Through December 31, 2018, we have raised $462.6 million in equity financing, including $157.7 million in net proceeds fromour initial public offering and $140.3 million in net proceeds from our subsequent follow-on offering in September 2018. Our operations have consumedsubstantial amounts of cash since inception. The net cash used in our operating activities was $97.5 million and $32.4 million for the years ended December31, 2018 and 2017, respectively. We expect our expenses to increase significantly in connection with our ongoing activities, particularly as we continue ourcommercialization efforts of ZEJULA and Optune, advance the clinical development of our eight clinical-stage drug candidates, continue research anddevelopment of our preclinical-stage drug candidates and initiate additional clinical trials of, and seek regulatory approval for, these and other future drugcandidates. In addition, if we obtain regulatory approval for any additional drug candidates, we expect to incur significant commercialization expensesrelated to product manufacturing, marketing, sales and distribution. In particular, if more of our drug candidates are approved, additional costs may besubstantial as we may have to modify or increase the production capacity at our current manufacturing facilities or contract with third-party manufacturers.We have, and may continue to, incur expenses as we create additional infrastructure to support our operations as a U.S. public company. Accordingly, we willlikely need to obtain substantial additional funding in connection with our continuing operations through public or private equity offerings, debt financing,collaborations or licensing arrangements or other sources. If we are unable to raise capital when needed or on acceptable terms, we could incur losses and beforced to delay, reduce or terminate our research and development programs or any future commercialization efforts.We believe our cash and cash equivalents and short-term investments as of December 31, 2018 will enable us to fund our operating expenses andcapital expenditure requirements for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could useour capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including: •the number and development requirements of the drug candidates we pursue; •the scope, progress, timing, results and costs of researching and developing our drug candidates, and conducting pre-clinical and clinicaltrials; •the number and characteristics of other product candidates that we may pursue; •the cost, timing and outcome of seeking, obtaining, maintaining and expanding regulatory approval of our products and drug candidates;7 •the cost and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution for ZEJULA,Optune and any other products for which we receive regulatory approval; •the cash received, if any, from commercial sales of ZEJULA, Optune and any other products for which we receive regulatory approval; •our ability to establish and maintain strategic partnerships, collaboration, licensing or other arrangement and the financial terms of sucharrangements; •the cost, timing and outcome of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual propertyrights and defending any intellectual property related claims; •the extent to which we acquire or in-license other drug candidates and technologies; •resources required to develop and implement policies and processes to promote ongoing compliance with applicable healthcare laws andregulations; •costs required to ensure that our and our partners’ business arrangements with third parties comply with applicable healthcare laws andregulations; •our headcount growth and associated costs; and •the costs of operating as a public company in the United States.Raising additional capital or entering into certain other arrangements may cause dilution to our shareholders, restrict our operations or require us torelinquish rights to our technologies or drug candidates.Identifying and acquiring rights to develop potential drug candidates, conducting pre-clinical testing and clinical trials and commercializingproducts for which we receive regulatory approval is a time-consuming, expensive and uncertain process that may take years to complete. Our near-termcommercial revenue, if any, will be derived from sales of ZEJULA and Optune. Any additional commercial revenue, if any, will be derived from sales of drugcandidates that we do not expect to be commercially available until we receive regulatory approval, if at all. We may never generate the necessary data orresults required to obtain regulatory approval and achieve product sales of some of our drug candidates, and even if after obtaining regulatory approval, ourproducts may not achieve commercial success. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.Adequate additional financing may not be available to us on acceptable terms, or at all.We may seek additional funding through a combination of equity offerings, debt financings, collaborations, licensing arrangements, strategicalliances and marketing or distribution arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities,your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect rights of our security holders. Theincurrence of additional indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also result incertain additional restrictive covenants, such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability toacquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. In addition,issuance of additional equity securities, or the possibility of such issuance, may cause the market price of our American depositary shares, or ADSs, todecline. In the event that we enter into collaborations or licensing arrangements to raise capital, we may be required to accept unfavorable terms, includingrelinquishing or licensing to a third party on unfavorable terms our rights to technologies or drug candidates that we otherwise would seek to develop orcommercialize ourselves or potentially reserve for future potential arrangements when we might be able to achieve more favorable terms.8 Risks Related to Our Business and IndustryEven though we have launched ZEJULA and Optune in Hong Kong, we may never obtain approval of or commercialize ZEJULA or Optune outside ofHong Kong, which would limit our ability to realize its full market potential.In December 2018, we launched ZEJULA and Optune in Hong Kong and the NMPA accepted our NDA for ZEJULA. In order to market productsin any given jurisdiction, we must comply with numerous and varying regulatory requirements of such jurisdiction regarding safety, efficacy and quality. Theapproval of ZEJULA and Optune for commercialization in Hong Kong and the NMPA’s acceptance of our NDA for ZEJULA does not mean that the NMPAwill approve ZEJULA. Approval procedures vary among jurisdictions and clinical trials conducted in one jurisdiction may not be accepted by regulatoryauthorities in other jurisdictions, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other jurisdiction.We are invested in the commercial success of ZEJULA and Optune and our ability to generate product revenues in the near future is highly dependent onthe commercial success of ZEJULA and Optune in China and Hong Kong.A substantial portion of our time, resources and effort are focused on the commercialization of our approved products in Hong Kong, ZEJULA andOptune. Our ability to generate product revenues will depend heavily on the successful commercialization of ZEJULA and Optune in China and Hong Kong.We have never, as an organization, commercialized a product, and there is no guarantee that we will be able to do so successfully with ZEJULA or Optune fortheir respective approved indications. Our ability to successfully commercialize ZEJULA and Optune will depend on, among other things, our ability to: •maintain commercial manufacturing or supply arrangements with third-party manufacturers for ZEJULA and Optune; •produce, through a validated process or procure, from third-party manufacturers sufficient quantities and inventory of ZEJULA and Optuneto meet demand; •build and maintain internal sales, distribution and marketing capabilities sufficient to generate commercial sales of ZEJULA and Optune; •secure widespread acceptance of our product from physicians, healthcare payors, patients and the medical community; •properly price and obtain coverage and adequate reimbursement of ZEJULA and of Optune by governmental authorities, private healthinsurers, managed care organizations and other third-party payors; •maintain compliance with ongoing regulatory labeling, packaging, storage, advertising, promotion, recordkeeping, safety and other post-market requirements; and •manage our growth and spending as costs and expenses increase due to commercialization.There are no guarantees that we will be successful in completing these tasks. In addition, we have invested, and will continue to invest,substantial financial and management resources to build out our commercial infrastructure and to recruit and train sufficient additional qualified marketing,sales and other personnel in support of our sales of ZEJULA and Optune.Sales of ZEJULA and Optune may be slow or limited for a variety of reasons including competing therapies or safety issues. If ZEJULA or Optune is notsuccessful in gaining broad commercial acceptance, our business would be harmed.Any sales of ZEJULA and Optune will be dependent on several factors, including our and our partners’ ability to educate and increase physicianawareness of the benefits, safety and cost-effectiveness of ZEJULA and Optune relative to competing therapies. The degree of market acceptance of ZEJULAand Optune among physicians, patients, healthcare payors and the medical community will depend on a number of factors, including: •acceptable evidence of safety and efficacy; •relative convenience and ease of administration;9 •prevalence and severity of any adverse side effects; •availability of alternative treatments; •pricing, cost effectiveness and value propositions; •effectiveness of our sales and marketing capabilities and strategies; •ability to obtain sufficient third-party coverage and reimbursement; •the clinical indications for which ZEJULA and Optune are approved, as well as changes in the standard of care for their targeted indications; •the continuing effectiveness of manufacturing and supply chain; •warnings and limitations contained in the approved labeling for ZEJULA and for Optune; •safety concerns with similar products marketed by others; •the prevalence and severity of any side effects as a result of treatment with ZEJULA or Optune; •our ability to comply with regulatory post-marketing requirements associated with the approval of ZEJULA or Optune; and •the actual market-size for ZEJULA and Optune, which may be larger or smaller than expected.We have a very limited operating history, which may make it difficult for you to evaluate the success of our business to date and to assess our futureviability.We commenced our operations in 2014. Our operations to date have been limited to organizing and staffing our company, identifying potentialpartnerships and drug candidates, acquiring product and technology rights, conducting research and development activities for our drug candidates and,more recently, commercializing products for which we have obtained regulatory approval. We have not yet demonstrated the ability to successfully completelarge-scale, pivotal clinical trials. Additionally, we have limited experience in the sale, marketing or distribution of pharmaceutical and medical deviceproducts. Consequently, any predictions about our future success, performance or viability may not be as accurate as they could be if we had a longeroperating history.Our limited operating history, particularly in light of the rapidly evolving drug research and development industry in which we operate, maymake it difficult to evaluate our current business and prospects for future performance. Our short history makes any assessment of our future performance orviability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by early-stage companies in rapidly evolvingfields as we transition to a company with commercial activities. In addition, as a new business, we may be more likely to encounter unforeseen expenses,difficulties, complications and delays due to limited experience. If we do not address these risks and difficulties successfully, our business will suffer.Eight of our drug candidates are still in clinical development. If we are unable to obtain regulatory approval and ultimately commercialize these drugcandidates or experience significant delays in doing so, our business, financial condition, results of operations and prospects may be materially adverselyharmed.Eight of our drug candidates are in clinical development and various others are in pre-clinical development. Our ability to generate revenue fromour drug candidates is dependent on their receipt of regulatory approval and successfully commercializing such products, which may never occur. Each ofour drug candidates will require additional pre-clinical and/or clinical development, regulatory approval in multiple jurisdictions, development ofmanufacturing supply and capacity, substantial investment and significant marketing efforts before we generate any revenue from product sales. The successof our drug candidates will depend on several factors, including the following: •successful completion of pre-clinical and/or clinical studies; •successful enrollment in, and completion of, clinical trials;10 •receipt of regulatory approvals from applicable regulatory authorities for planned clinical trials, future clinical trials or drug registrations,manufacturing and commercialization; •successful completion of all safety studies required to obtain regulatory approval in China, the United States and other jurisdictions for ourdrug candidates; •adapting our commercial manufacturing capabilities to the specifications for our drug candidates for clinical supply and commercialmanufacturing; •making and maintain arrangements with third-party manufacturers; •obtaining and maintaining patent, trade secret and other intellectual property protection and/or regulatory exclusivity for our drugcandidates; •launching commercial sales of our drug candidates, if and when approved, whether alone or in collaboration with others; •acceptance of the drug candidates, if and when approved, by patients, the medical community and third-party payors; •effectively competing with other therapies and alternative drugs; •obtaining and maintaining healthcare coverage and adequate reimbursement; •successfully enforcing and defending intellectual property rights and claims; and •maintaining a continued acceptable safety profile of the drug candidates following regulatory approval.The success of our business is dependent upon our ability to develop, maintain and expand regulatory approval for and commercialize ourproducts and clinical-stage drug candidates, including ZEJULA and Optune. We have initiated commercialization efforts for ZEJULA and Optune. For ZL-2401, we have completed the technology transfer with Paratek for aspects such as manufacturing know-how and IV and oral formulations and engaged indiscussions with the NMPA and key opinion leaders on our planned China development strategy in preparation for our NDA filing with the NMPA. Weinitiated a Phase II trial in advanced HCC patients in China to investigate ZL-2301’s optimal treatment schedule and dosage as a second-line treatment in thesecond quarter of 2017. The recruitment for the Phase II study has been completed and the study is ongoing. Due to the change of competitive landscape, wedecided to develop ZL-2301 and PD-1 combo treatment in advanced HCC instead of mono-therapy. The FPI is expected in second half of 2019. As a result,our business is substantially dependent on our ability to complete the development of, maintain, expand or obtain regulatory approval for, and successfullycommercialize ZEJULA, Optune, ZL-2401, margetuximab and, to a lesser extent, our other products or drug candidates in a timely manner.We cannot commercialize drug candidates in China without first obtaining regulatory approval from the NMPA. Similarly, we cannotcommercialize drug candidates in the United States or another jurisdiction outside of China without obtaining regulatory approval from the FDA orcomparable foreign regulatory authorities. The process to develop, obtain regulatory approval for and commercialize drug candidates is long, complex andcostly both inside and outside of China and approval may not be granted. Clinical trials conducted in one country may not be accepted by regulatoryauthorities in other countries, and obtaining regulatory approval in one country does not mean that regulatory approval will be obtained in any othercountry. Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods.Even after obtaining regulatory approval from the FDA and comparable foreign regulatory authorities, we would still need to seek approval in China and anyother jurisdictions where we plan to market the product. For example, we will need to conduct clinical trials of each of our drug candidates in patients inChina prior to seeking regulatory approval in China. Even if our drug candidates have successfully completed clinical trials outside of China, there is noassurance that clinical trials conducted with Chinese patients will be successful. Any safety issues, product recalls or other incidents related to productsapproved and marketed in other jurisdictions may impact approval of those products by the NMPA. If we are unable to obtain regulatory approval for ourdrug candidates in one or more jurisdictions, or any approval contains significant limitations, or are imposed on certain drug candidates, we may not be ableto obtain sufficient funding or generate sufficient revenue to continue the commercialization of our products and the development of our drug candidates orany other drug candidate that we may in-license, acquire or develop in the future.11 We may allocate our limited resources to pursue a particular product, drug candidate or indication and fail to capitalize on products, drug candidates orindications that may later prove to be more profitable or for which there is a greater likelihood of success.Because we have limited financial and managerial resources, we must limit our licensing, research, development and commercialization programsto specific products and drug candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with otherproducts or drug candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us tofail to capitalize on viable commercial drugs or profitable market opportunities. In addition, if we do not accurately evaluate the commercial potential ortarget market for a particular drug candidate, we may relinquish valuable rights to that drug candidate through collaboration, licensing or other royaltyarrangements when it would have been more advantageous for us to retain sole development and commercialization rights to such drug candidate.Our products and drug candidates are subject to extensive regulation, and we cannot give any assurance that any of our drug candidates will receive any,or that any of our products will receive any additional, regulatory approval or be successfully commercialized.Our products and drug candidates and the activities associated with their development and commercialization, including their design, testing,manufacture, safety, efficacy, quality control, recordkeeping, labeling, packaging, storage, approval, advertising, promotion, sale, distribution, import andexport are subject to comprehensive regulation by the NMPA, FDA and European Medicines Agency, or EMA, and other regulatory agencies in China andthe United States and by comparable authorities in other countries. We are not permitted to market any of our products or drug candidates in China, theUnited States and other jurisdictions unless and until we receive regulatory approval from the NMPA, FDA and EMA and other comparable authorities,respectively. Securing regulatory approval requires the submission of extensive pre-clinical and clinical data and supporting information to the variousregulatory authorities for each therapeutic indication to establish the product’s or drug candidate’s safety and efficacy. Securing regulatory approval mayalso require the submission of information about the product or drug manufacturing process to, and inspection of manufacturing facilities by, the relevantregulatory authority. Our products and drug candidates may not be effective, may be only moderately effective or may prove to have undesirable orunintended side effects, toxicities or other characteristics that may preclude our obtaining regulatory approval or prevent or limit commercial use. AlthoughZEJULA and Optune were both approved for commercialization in Hong Kong, the United States and the European Union and although the NMPA acceptedour NDA for ZEJULA, we cannot provide any assurance that we will ever obtain regulatory approval for ZEJULA or for Optune in China or for any of ourother drug candidates in any jurisdiction or that any of our drug candidates will be successfully commercialized even if we receive regulatory approval.The process of obtaining regulatory approvals in China, the United States and other countries is expensive, may take many years of additionalclinical trials and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product or drug candidatesinvolved. Changes in regulatory approval policies during the development period, changes in or the enactment of additional statutes or regulations, orchanges in regulatory review for each submitted NDA pre-market approval or equivalent application type, may cause delays in the approval or rejection of anapplication. The NMPA, FDA and EMA and comparable authorities in other countries have substantial discretion in the approval process and may refuse toaccept any application or may decide that our data are insufficient for approval and require additional pre-clinical, clinical or other studies. Our products anddrug candidates could be delayed in receiving, or fail to receive, regulatory approval for many reasons, including the following: •disagreement with the NMPA, FDA and EMA or comparable regulatory authorities regarding the number, design, size, conduct orimplementation of our clinical trials; •failure to demonstrate to the satisfaction of the NMPA, FDA and EMA or comparable regulatory authorities that a drug candidate is safe andeffective for its proposed indication; •failure of contract research organizations, or CROs, clinical study sites or investigators to comply with the ICH-good clinical practice, orGCP, requirements imposed by the NMPA, FDA and EMA or comparable regulatory authorities; •failure of the clinical trial results to meet the level of statistical significance required by the NMPA, FDA and EMA or comparableregulatory authorities for approval;12 •failure to demonstrate that a product’s or drug candidate’s clinical and other benefits outweigh its safety risks; •the NMPA, FDA and EMA or comparable regulatory authorities disagreeing with our interpretation of data from pre-clinical studies orclinical trials; •insufficient data collected from clinical trials to support the submission of an NDA or other submission or to obtain regulatory approval inChina, the United States or elsewhere; •the NMPA, FDA and EMA or comparable regulatory authorities not approving the manufacturing processes for our clinical and commercialsupplies; •changes in the approval policies or regulations of the NMPA, FDA or comparable regulatory authorities rendering our clinical datainsufficient for approval; •the NMPA, FDA or comparable regulatory authorities restricting the use of our products to a narrow population; and •our CROs or licensors taking actions that materially and adversely impact the clinical trials. In addition, even if we were to obtain approval, regulatory authorities may revoke approval, may approve any of our products or drug candidatesfor fewer or more limited indications than we request, may monitor the price we intend to charge for our products or drugs, may grant approval contingent onthe performance of costly post-marketing clinical trials, or may approve a product or drug candidate with a label that does not include the labeling claimsnecessary or desirable for the successful commercialization of that product or drug candidate. Any of the foregoing scenarios could materially harm thecommercial prospects for our products or drug candidates.If safety, efficacy, manufacturing or supply issues arise with any therapeutic that we use in combination with our products and drug candidates, we may beunable to market such products or drug candidate or may experience significant regulatory delays or supply shortages, and our business could bematerially harmed.We plan to develop certain of our products and drug candidates for use as a combination therapy. For example, GlaxoSmithKline, or GSK, whichacquired Tesaro, Inc. in 2018, is currently developing, and we also plan to develop, ZEJULA as both a monotherapy and in combination with any potentialanti-VEGF or PD-1/PD-L1 treatments. However, we did not develop or obtain regulatory approval for, and we do not manufacture or sell, any anti-VEGF orPD-1/PD-L1 treatments or any other therapeutic we use in combination with our drug candidates. We may also seek to develop our drug candidates incombination with other therapeutics in the future.If the NMPA, FDA or another regulatory agency revokes its approval of any anti-VEGF or PD-1/PD-L1 treatments or another therapeutic we use incombination with our drug candidates, we will not be able to market our drug candidates in combination with such revoked therapeutic. If safety or efficacyissues arise with these or other therapeutics that we seek to combine with our drug candidates in the future, we may experience significant regulatory delays,and we may be required to redesign or terminate the applicable clinical trials. In addition, if manufacturing or other issues result in a supply shortage of anyanti-VEGF or PD-1/PD-L1 treatments or any other combination therapeutics, we may not be able to successfully commercialize ZEJULA and/or any other ofour products or drug candidates on our current timeline or at all.Even after obtaining regulatory approval for use in combination with any anti-VEGF or PD-1/PD-L1 treatments, as applicable, or anothertherapeutic, we would continue to be subject to the risk that the NMPA, FDA or another regulatory agency could revoke its approval of the combinationtherapeutic, or that safety, efficacy, manufacturing or supply issues could arise with one of these combination therapeutics. This could result in ZEJULA orone of our other products being removed from the market or being less successful commercially.13 We face substantial competition, which may result in our competitors discovering, developing or commercializing drugs before or more successfully thanwe do, or develop products or therapies that are more advanced or effective than ours, which may adversely affect our financial condition and our abilityto successfully market or commercialize our products and drug candidates.The development and commercialization of new medical device products and drugs is highly competitive. We face competition with respect toour current products and drug candidates, and will face competition with respect to any drug candidates that we may seek to develop or commercialize in thefuture, from major pharmaceutical companies, specialty pharmaceutical companies, biotechnology companies, and medical device companies worldwide. Forexample, there are a number of large pharmaceutical and biotechnology companies that currently market drugs or are pursuing the development of therapiesin the field of poly ADP ribose polymerase, or PARP, inhibition to treat cancer. Some of these competitive drugs and therapies are based on scientificapproaches that are the same as or similar to that of our drug candidates. Potential competitors also include academic institutions, government agencies andother public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research,development, manufacturing and commercialization. Specifically, there are a large number of companies developing or marketing treatments for oncology,autoimmune and infectious diseases including many major pharmaceutical and biotechnology companies.Many of the companies against which we are competing or against which we may compete in the future have significantly greater financialresources and expertise in research and development, manufacturing, pre-clinical testing, conducting clinical trials, obtaining regulatory approvals andmarketing approved drugs than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even moreresources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors,particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retainingqualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiringtechnologies complementary to, or necessary for, our programs.Our commercial opportunities could be reduced or eliminated if our competitors develop and commercialize products or drugs that are safer, moreeffective, have fewer or less severe side effects, are more convenient or are less expensive than products or drugs that we may develop. Our competitors alsomay obtain NMPA, FDA or other regulatory approval for their products or drugs more rapidly than we may obtain approval for ours, which could result in ourcompetitors establishing a strong market position before we are able to enter the market. Additionally, technologies developed by our competitors mayrender our products or potential drug candidates uneconomical or obsolete, and we may not be successful in marketing our products or drug candidatesagainst competitors.In addition, as a result of the expiration or successful challenge of our patent rights, we could face more litigation with respect to the validityand/or scope of patents relating to our competitors’ products. The availability of our competitors’ products could limit the demand, and the price we are ableto charge, for any products that we may develop and commercialize.14 Clinical development involves a lengthy and expensive process with an uncertain outcome.There is a risk of failure for each of our drug candidates. It is difficult to predict when or if any of our drug candidates will prove effective and safein humans or will receive regulatory approval. Before obtaining regulatory approval from regulatory authorities for the sale of any drug candidate, our drugcandidates must complete pre-clinical studies and then conduct extensive clinical trials to demonstrate the safety and efficacy of our drug candidates inhumans. Clinical testing is expensive, difficult to design and implement, and can take many years to complete. The outcomes of pre-clinical developmenttesting and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict finalresults. Moreover, pre-clinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed theirdrug candidates performed satisfactorily in pre-clinical studies and clinical trials have nonetheless failed to obtain regulatory approval of their drugcandidates. Future clinical trials of our drug candidates may not be successful. For example, ZL-2301 failed to meet its primary endpoint of overall survival,or OS, noninferiority for ZL-2301 versus sorafenib in Phase III trials in patients with HCC conducted by Bristol-Myers Squibb Company, or Bristol-MyersSquibb, before we licensed the development rights from them. In addition, ZL-2301 showed no difference when compared to placebo in the primary efficacyendpoint. Although we believe that ZL-2301 has the potential to be an effective treatment for Chinese patients and merits further clinical trials patients, wecannot guarantee that our future clinical trials of ZL-2301 in Chinese patients will be successful.Commencement of clinical trials is subject to finalizing the trial design based on ongoing discussions with the NMPA, FDA and/or otherregulatory authorities. The NMPA, FDA and other regulatory authorities could change their position on the acceptability of trial designs or clinicalendpoints, which could require us to complete additional clinical trials or impose approval conditions that we do not currently expect. Successful completionof our clinical trials is a prerequisite to submitting an NDA (or analogous filing) to the NMPA, FDA and/or other regulatory authorities for each drugcandidate and, consequently, the ultimate approval and commercial marketing of our drug candidates. We do not know whether the clinical trials for our drugcandidates will begin or be completed on schedule, if at all.We may incur additional costs or experience delays in completing pre-clinical or clinical trials, or ultimately be unable to complete the development andcommercialization of our products and drug candidates.We may experience delays in completing our pre-clinical or clinical trials, and numerous unforeseen events could arise during, or as a result of,future clinical trials, which could delay or prevent us from receiving regulatory approval, including: •regulators or institutional review boards, or IRBs, or ethics committees may not authorize us or our investigators to commence or conduct aclinical trial at a prospective trial site; •we may experience delays in reaching, or may fail to reach, agreement on acceptable terms with prospective trial sites and prospective CROswho conduct clinical trials on our behalf, the terms of which can be subject to extensive negotiation and may vary significantly amongdifferent CROs and trial sites; •clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us or them, to conduct additionalclinical trials or we may decide to abandon drug development programs; •the number of patients required for clinical trials of our products and drug candidates may be larger than we anticipate, enrollment in theseclinical trials may be slower than we anticipate or participants may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate; •third-party contractors used in our clinical trials may fail to comply with regulatory requirements or meet their contractual obligations in atimely manner, or at all, or may deviate from the clinical trial protocol or drop out of the trial, which may require that we add new clinicaltrial sites or investigators; •the ability to conduct a companion diagnostic test to identify patients who are likely to benefit from our products and drug candidates; •we may elect to, or regulators, IRBs or ethics committees may require that we or our investigators, suspend or terminate clinical research forvarious reasons, including non-compliance with regulatory requirements or a finding that participants are being exposed to unacceptablehealth risks; •the cost of clinical trials of our products and drug candidates may be greater than we anticipate; •the supply or quality of our products and drug candidates or other materials necessary to conduct clinical trials of our drug candidates maybe insufficient or inadequate; and •our products and drug candidates may have undesirable side effects or unexpected characteristics, causing us or our investigators,regulators, IRBs or ethics committees to suspend or terminate the trials, or reports may arise from pre-clinical or clinical testing of othercancer therapies that raise safety or efficacy concerns about our products and drug candidates.15 We could encounter regulatory delays if a clinical trial is suspended or terminated by us or, as applicable, the IRBs or the ethics committee of theinstitutions in which such trials are being conducted, by the data safety monitoring board, which is an independent group of experts that is formed to monitorclinical trials while ongoing, or by the NMPA, FDA or other regulatory authorities. Such authorities may impose a suspension or termination due to a numberof factors, including: a failure to conduct the clinical trial in accordance with regulatory requirements or the applicable clinical protocols, inspection of theclinical trial operations or trial site by the NMPA, FDA or other regulatory authorities that results in the imposition of a clinical hold, unforeseen safety issuesor adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequatefunding to continue the clinical trial. Many of the factors that cause a delay in the commencement or completion of clinical trials may also ultimately lead tothe denial of regulatory approval of our drug candidates. Further, the NMPA, FDA or other regulatory authorities may disagree with our clinical trial design orour interpretation of data from clinical trials, or may change the requirements for approval even after it has reviewed and commented on the design for ourclinical trials.If we are required to conduct additional clinical trials or other testing of our products or drug candidates beyond those that are currentlycontemplated, if we are unable to successfully complete clinical trials of our products or drug candidates or other testing, if the results of these trials or testsare not positive or are only modestly positive or if there are safety concerns, we may: •be delayed in obtaining regulatory approval for our products and drug candidates; •not obtain regulatory approval at all; •obtain approval for indications or patient populations that are not as broad as intended or desired; •be subject to post-marketing testing requirements; •encounter difficulties obtaining or be unable to obtain reimbursement for use of our products and drug candidates; •be subject to restrictions on the distribution and/or commercialization of our products and drug candidates; or •have our products and drug candidates removed from the market after obtaining regulatory approval.Our product and drug development costs will also increase if we experience delays in testing or regulatory approvals. We do not know whetherany of our clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant pre-clinical study orclinical trial delays also could allow our competitors to bring products to market before we do and impair our ability to successfully commercialize ourproducts and drug candidates and may harm our business and results of operations. Any delays in our clinical development programs may harm our business,financial condition and prospects significantly.If we experience delays or difficulties in the enrollment of patients in clinical trials, the progress of such clinical trials and our receipt of necessaryregulatory approvals could be delayed or prevented.We may not be able to initiate or continue clinical trials for our products and drug candidates if we are unable to locate and enroll a sufficientnumber of eligible patients to participate in these trials as required by the NMPA, FDA or similar regulatory authorities. In particular, we have designed manyof our clinical trials, and expect to design future trials, to include some patients with the applicable genomic mutation with a view to assessing possible earlyevidence of potential therapeutic effect. Genomically defined diseases, however, may have relatively low prevalence, and it may be difficult to identifypatients with the applicable genomic mutation. The inability to enroll a sufficient number of patients with the applicable genomic alteration or that meetother applicable criteria for our clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether.In addition, some of our competitors have ongoing clinical trials for products or drug candidates that treat the same indications as our products ordrug candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ products or drugcandidates.16 Patient enrollment may be affected by other factors including: •the severity of the disease under investigation; •the total size and nature of the relevant patient population; •the design and eligibility criteria for the clinical trial in question; •the availability of an appropriate genomic screening test; •the perceived risks and benefits of the product or drug candidate under study; •the efforts to facilitate timely enrollment in clinical trials; •the patient referral practices of physicians; •the availability of competing therapies also undergoing clinical trials; •the ability to monitor patients adequately during and after treatment; and •the proximity and availability of clinical trial sites for prospective patients.Enrollment delays in our clinical trials may result in increased development costs for our products and drug candidates, which could cause thevalue of our company to decline and limit our ability to obtain additional financing.Our products and drug candidates may cause undesirable side effects that could delay or prevent their regulatory approval, limit the commercial profile ofan approved label, or result in significant negative consequences following regulatory approval, if any.Undesirable side effects caused by our products or drug candidates could cause us to interrupt, delay or halt clinical trials or could causeregulatory authorities to interrupt, delay or halt our clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval bythe NMPA, FDA or other regulatory authorities. In particular, as is the case with all oncology products and drugs, it is likely that there may be side effects,such as fatigue, nausea and low blood cell levels, associated with the use of certain of our oncology products or drug candidates. For example, the knownadverse events for ZEJULA include thrombocytopenia, anemia and neutropenia and for ZL-2301, the known adverse events include hyponatremia, ASTelevation, fatigue, hand-foot skin reaction and hypertension. The results of our products’ or drug candidates’ trials could reveal a high and unacceptableseverity and prevalence of these or other side effects. In such an event, trials of our products or drug candidates could be suspended or terminated and theNMPA, FDA or comparable regulatory authorities could order us to cease further development of or deny approval of our products or drug candidates for anyor all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result inpotential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.Additionally, our products and drug candidates could cause undesirable side effects related to off-target toxicity. For example, many of thecurrently approved PARP inhibitors have been associated with off-target toxicities. While we believe that the superior selectivity of ZEJULA has thepotential to significantly improve the unfavorable adverse off-target toxicity issues, if patients were to experience off-target toxicity, we may not be able toachieve an effective dosage level (especially in combination therapies), receive or maintain approval to market in additional jurisdictions, or achieve thecommercial success we anticipate with respect to, any of our products and drug candidates, which could prevent us from ever generating revenue or achievingprofitability. Many compounds that initially showed promise in early stage testing for treating cancer have later been found to cause side effects thatprevented further development of the compound.17 Clinical trials assess a sample of the potential patient population. With a limited number of patients and duration of exposure, rare and severe sideeffects of our products or drug candidates may only be uncovered with a significantly larger number of patients exposed to the drug candidate. Even after aproduct or drug candidate receives regulatory approval, if we, our partners or others identify undesirable side effects caused by such drug candidates (or anyother similar drugs) after such approval, a number of potentially significant negative consequences could result, including: •the NMPA, FDA or other comparable regulatory authorities may withdraw or limit their approval of such products or drug candidates; •the NMPA, FDA or other comparable regulatory authorities may require the addition of labeling statements, such as a “boxed” warning or acontra-indication; •we may be required to create a medication guide outlining the risks of such side effects for distribution to patients; •we may be required to change the way such products or drug candidates are distributed or administered, conduct additional clinical trials orchange the labeling of our products or drug candidates; •the NMPA, FDA or other comparable regulatory authorities may require a Risk Evaluation and Mitigation Strategy, or REMS (or analogousrequirement), plan to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use,such as restricted distribution methods, patient registries and other risk minimization tools; •we may be subject to regulatory investigations and government enforcement actions; •we may decide to remove such products or drug candidates from the marketplace; •we could be sued and held liable for injury caused to individuals exposed to or taking our products or drug candidates; and •our reputation may suffer.Any of these events could prevent us from achieving or maintaining market acceptance of the affected products or drug candidates and couldsubstantially increase the costs of commercializing our products and drug candidates, if approved, and significantly impact our ability to successfullycommercialize our products and drug candidates and generate revenue.If we are unable to obtain NMPA approval for our products and drug candidates to be eligible for an expedited registration pathway as Category 1 drugcandidates, the time and cost we incur to obtain regulatory approvals may increase. Even if we receive such Category 1 designation, it may not lead to afaster development, review or approval process.The NMPA categorizes domestically-manufactured innovative drug applications as Category 1, provided such drug has a new and clearly definedstructure, pharmacological property and apparent clinical value and has not been marketed anywhere in the world. Domestically developed andmanufactured innovative drugs will be attributed to Category 1 for their CTA and NDA applications. While some multinational pharmaceutical companiesmay file CTAs with the NMPA prior to approval of a drug in another country in order to take advantage of Category 1 classification, such drug will mostlikely be assigned to Category 5, a class designated for drugs that were approved outside China before the NMPA approval for NDA approval purposes. Thisis because, based on historical observations, multinational pharmaceutical companies would typically not prioritize China as the first market for productlaunch, hence subjecting the drug to the Category 5 status. Because margetuximab and ETX2514 are imported drug products, they will be subject toCategory 5 status if they are approved by the NMPA. Our CTAs for ZEJULA, ZL-2301, ZL-2302 and ZL-2401 were approved as Category 1 drugs by theNMPA. Other than FPA144, all of our other clinical stage drug candidates are eligible for Category 1 designation. A Category 1 designation by the NMPAmay not be granted for any of our other drug candidates that will not be first approved in China, or may not lead to faster development or regulatory review orapproval process. Moreover, a Category 1 designation does not increase the likelihood that our product or drug candidates will receive regulatory approval.Optune is a medical device and does not follow the NMPA drug categorization.18 Furthermore, despite positive regulatory changes introduced since 2015 which significantly accelerated time to market for innovative drugs, theregulatory process in China is still relatively ambiguous and unpredictable. The NMPA might require us to change our planned clinical study design orotherwise spend additional resources and effort to obtain approval of our drug candidates. In addition, policy changes may contain significant limitationsrelated to use restrictions for certain age groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval study or riskmanagement requirements. If we are unable to obtain regulatory approval for our drug candidates in one or more jurisdictions, or any approval containssignificant limitations, we may not be able to obtain sufficient funding or generate sufficient revenue to continue the development of our drug candidates orany other drug candidate that we may in-license, acquire or develop in the future.Even if we receive regulatory approval for our products or any drug candidates, we will be subject to ongoing obligations and continued regulatoryreview, which may result in significant additional expense, and if we fail to comply with ongoing regulatory requirements or experience any unanticipatedproblems with any of our products or drug candidates, we may be subject to penalties.Even after obtaining regulatory approval, our products and drug candidates will be subject to, among other things, ongoing regulatoryrequirements governing the labeling, packaging, promotion, recordkeeping and submission of safety, efficacy and other post-market information. Theserequirements include submissions of safety and other post-marketing information and reports, registration, and continued compliance with cGMPs and GCPs.For example, ZEJULA and Optune will continue to be subject to post-approval development and regulatory requirements, which may limit how they aremanufactured and marketed, and could materially impair our ability to generate revenue. As such, we and our partners and any of our and their respectivecontract manufacturers will be subject to ongoing review and periodic inspections to assess compliance with applicable post-approval regulations.Additionally, to the extent we want to make certain changes to the approved products, product labeling, or manufacturing processes, we will need to submitnew applications or supplements to the Hong Kong Department of Health and the NMPA and obtain the agencies’ approval. Additionally, any additional regulatory approvals that we receive for our products or drug candidates may also be subject to limitations on theapproved indicated uses for which the products or drug may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase IV studies for the surveillance and monitoring the safety and efficacy of the products or drug.In addition, once a product or drug is approved by the NMPA, FDA or a comparable regulatory authority for marketing, it is possible that therecould be a subsequent discovery of previously unknown problems with the product or drug, including problems with third-party manufacturers ormanufacturing processes, or failure to comply with regulatory requirements. If any of the foregoing occurs with respect to our products or drug products, itmay result in, among other things: •restrictions on the marketing or manufacturing of the product or drug, withdrawal of the product or drug from the market, or voluntary ormandatory product or drug recalls; •fines, warning letters or holds on clinical trials; •refusal by the NMPA, FDA or comparable regulatory authority to approve pending applications or supplements to approved applicationsfiled by us, or suspension or revocation of product or drug license approvals; •drug seizure or detention, or refusal to permit the import or export of the product or drug; and •injunctions or the imposition of civil, administrative or criminal penalties.Any government investigation of alleged violations of law could require us to expend significant time and resources and could generate negativepublicity. Moreover, regulatory policies may change or additional government regulations may be enacted that could prevent, limit or delay regulatoryapproval of our products or drug candidates. If we are not able to maintain regulatory compliance, regulatory approval that has been obtained may be lost andwe may not achieve or sustain profitability, which may harm our business, financial condition and prospects significantly.19 The incidence and prevalence for target patient populations of our products and drug candidates are based on estimates and third-party sources. If themarket opportunities for our products and drug candidates are smaller than we estimate or if any approval that we obtain is based on a narrowerdefinition of the patient population, our revenue and ability to achieve profitability might be materially and adversely affected.Periodically, we make estimates regarding the incidence and prevalence of target patient populations for particular diseases based on variousthird-party sources and internally generated analysis and use such estimates in making decisions regarding our product and drug development strategy,including acquiring or in-licensing products or drug candidates and determining indications on which to focus in pre-clinical or clinical trials.These estimates may be inaccurate or based on imprecise data. For example, the total addressable market opportunity will depend on, amongother things, their acceptance by the medical community and patient access, product and drug pricing and reimbursement. The number of patients in theaddressable markets may turn out to be lower than expected, patients may not be otherwise amenable to treatment with our products or drugs, or new patientsmay become increasingly difficult to identify or gain access to, all of which may significantly harm our business, financial condition, results of operationsand prospects.The recent restructure of the drug regulatory authorities may delay approval of our products or drug candidates.On March 17, 2018, China’s highest legislative body, the National People’s Congress, approved a sweeping government restructuring plan. Thisis generally considered to be the most comprehensive government restructuring that China has undertaken since its “Open Door” policy in the late 1970s. Aspart of the new plan, China has established a State Market Regulatory Administration (SMRA), which merges and undertakes the responsibilities previouslyheld by the China Food and Drug Administration, the State Administration for Industry and Commerce (SAIC), General Administration of QualitySupervision, Inspection and Quarantine (AQSIQ), price supervision and antitrust enforcement responsibilities previously held by the National Developmentand Reform Commission (NDRC), the antitrust enforcement responsibilities previously held by the Ministry of Commerce (MOFCOM) and theAntimonopoly and Anti-Unfair Competition Bureau of State Council, as well as the responsibilities previously held by the Certification and AccreditationAdministration (CAC), and the Standardization Administration of China (SAC). The new NMPA reports to the SMRA, is responsible for the review and approval of drugs, medical devices and cosmetics, and maintains its ownbranches at the provincial level and leave the post-approval enforcement authorities at the local level to the consolidated SMRA branches. Although the NMPA is fully functional as of 2018, the reorganization will continue at the provincial and local levels through the first quarter of2019. This massive restructuring exercise could result in the delay of key decision-making in various sectors, including the pharmaceutical and medicaldevice industry. In addition, there could be delays in the NMPA’s implementation of the new reform initiatives and disruption in the NMPA’s routineoperations due to personnel reshuffling during this process. Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.We are highly dependent on the expertise of the members of our research and development team, as well as the other principal members of ourmanagement, including Samantha Du, our founder, Chairman and Chief Executive Officer. Although we have entered into employment letter agreementswith our executive officers, each of them may terminate their employment with us at any time with one months’ prior written notice. We do not maintain “keyperson” insurance for any of our executives or other employees.Recruiting and retaining qualified management, scientific, clinical, manufacturing and sales and marketing personnel will also be critical to oursuccess. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development andcommercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers andkey employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth ofskills and experience required to successfully develop, gain regulatory approval of and commercialize drugs. Competition to hire from this limited pool isintense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerouspharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel fromuniversities and research institutions. In addition, our management will be required to devote significant time to new compliance initiatives from our status asa U.S. public company, which may require us to recruit more management personnel. Failure to succeed in clinical trials may make it more challenging torecruit and retain qualified scientific personnel.20 We will need to increase the size and capabilities of our organization, and we may experience difficulties in managing our growth.We expect to experience significant growth in the number of our employees and consultants and the scope of our operations, particularly in theareas of drug development, drug commercialization, regulatory affairs and business development. To manage our anticipated future growth, we must continueto implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualifiedpersonnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth,we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operationsmay lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay theexecution of our business plans or disrupt our operations, and have a materially adverse effect on our business.In addition to in-licensing or acquiring drug candidates, we may engage in future business acquisitions that could disrupt our business, cause dilution toour ADS holders and harm our financial condition and operating results.We have, from time to time, evaluated partnership opportunities or investments and may, in the future, make acquisitions of, or investments in,companies that we believe have products or capabilities that are a strategic or commercial fit with our current drug candidates and business or otherwise offeropportunities for our company. In connection with these acquisitions or investments, we may: •issue stock that would dilute our ADS holders’ percentage of ownership; •incur debt and assume liabilities; and •incur amortization expenses related to intangible assets or incur large and immediate write-offs.We also may be unable to find suitable acquisition candidates and we may not be able to complete partnership opportunities or investments onfavorable terms, if at all. If we do enter into partnership opportunities or investments, we cannot assure you that it will ultimately strengthen our competitiveposition or that it will not be viewed negatively by customers, financial markets or investors. Further, future partnership opportunities or investments couldalso pose numerous additional risks to our operations, including: •problems integrating the purchased business, products or technologies; •increases to our expenses; •the failure to have discovered undisclosed liabilities of the acquired asset or company; •diversion of management’s attention from their day-to-day responsibilities; •harm to our operating results or financial condition; •entrance into markets in which we have limited or no prior experience; and •potential loss of key employees, particularly those of the acquired entity.We may not be able to complete one or more partnership opportunities or investments or effectively integrate the operations, products orpersonnel gained through any such partnership opportunities or investments without a material adverse effect on our business, financial condition and resultsof operations. 21 We may need to significantly concede on prices for ZEJULA, Optune or our other drug candidates and devices for which we may receive regulatoryapproval in China, the United States or other countries and face uncertainty of reimbursement, which could diminish our sales or affect our profitability.The regulations that govern pricing and reimbursement for pharmaceutical drugs and devices vary widely from country to country. In China, thenewly created National Healthcare Security Administration, or NHSA, an agency responsible for administering China’s social security system, organized aprice negotiation with drug companies for 18 oncology drugs in October 2018, which resulted in a price reduction by over 50%. NHSA, together with othergovernment authorities, review the inclusion or removal of drugs from the PRC’s National Drug Catalog for Basic Medical Insurance, Work-related InjuryInsurance and Maternity Insurance, or the National Reimbursable Drug List, or the NRDL, or provincial or local medical insurance catalogues for theNational Medical Insurance Program regularly, and the tier under which a drug or device will be classified, both of which affect the amounts reimbursable toprogram participants for their purchases of those drugs. These determinations are made based on a number of factors, including price and efficacy. The NHSAincluded 17 of the 18 oncology drugs on the NRDL after the price negotiation. We may also be invited to attend the price negotiation with NHSA upon receiving regulatory approval in China, but we will likely need tosignificantly reduce our prices, and to negotiate with each of the provincial healthcare security administrations on reimbursement ratios. If we were tosuccessfully launch commercial sales of our oncology-based drug candidates, including ZEJULA and Optune, our revenue from such sales is largely expectedto be self-paid by patients, which may make our drug candidates and devices less desirable. On the other hand, if the NHSA or any of its local counterpartincludes our drugs and devices in the NRDL or provincial RDL, which may increase the demand for our drug candidates and devices, our potential revenuefrom the sales of our drug candidates and devices may still decrease as a result of lower prices.Moreover, eligibility for reimbursement in either China or the United States does not imply that any drug or device will be paid for in all cases orat a rate that covers our costs, including licensing fees, research, development, manufacture, sale and distribution.Within the United States, significant uncertainty exists regarding the coverage and reimbursement status of drug products approved by theFDA. Sales of approved drugs and devices depend, in part, on the availability of coverage and the adequacy of reimbursement from third-party payors. Third-party payors include government authorities or government healthcare programs, such as Medicare and Medicaid, and private health insurance, includingmanaged care plans. Coverage and reimbursement may vary from payor to payor. Net prices for drugs or devices may be reduced by discounts or rebatesrequired by U.S. government healthcare programs or requested by private payors and by any future relaxation of laws that presently restrict imports of drugsand devices from countries where they may be sold at lower prices than in the United States. Our inability to promptly obtain coverage and profitablepayment rates from both governmental and private payors for any approved drugs that we develop could have a material adverse effect on our operatingresults, our ability to raise capital needed to commercialize drugs and our overall financial condition.In the United States, federal and state governments continue to propose and pass legislation designed to reform delivery of, or payment for, healthcare, which include initiatives to reduce the cost of healthcare. For example, in March 2010, the United States Congress enacted the Patient Protection andAffordable Care Act and the Health Care and Education Reconciliation Act, or the Healthcare Reform Act, which expanded health care coverage throughMedicaid expansion and the implementation of the individual mandate for health insurance coverage and which included changes to the coverage andreimbursement of drug products under government healthcare programs. Under the Trump administration, there have been ongoing efforts to modify or repealall or certain provisions of the Healthcare Reform Act. For example, tax reform legislation was enacted at the end of 2017 that eliminates the tax penaltyestablished under Healthcare Reform Act for individuals who do not maintain mandated health insurance coverage beginning in 2019. The HealthcareReform Act has also been subject to judicial challenge. In December 2018, a federal district court, in a challenge brought by a number of state attorneysgeneral, found the Healthcare Reform Act unconstitutional in its entirety because, once Congress repealed the individual mandate provision, there was nolonger a basis to rely on Congressional taxing authority to support enactment of the law. Pending appeals, which could take some time, the HealthcareReform Act is still operational in all respects. 22 There have also been efforts by government officials or legislators to implement measures to regulate prices or payment for pharmaceuticalproducts and devices, including legislation on drug importation. Recently, there has been considerable public and government scrutiny of pharmaceuticalpricing and proposals to address the perceived high cost of pharmaceuticals. There have also been recent state legislative efforts to address drug and medicaldevice costs, which generally have focused on increasing transparency around drug and medical device costs or limiting drug and medical device prices.Adoption of new legislation at the federal or state level could affect demand for, or pricing of, our product candidates and devices if approved forsale in the United States. We cannot, however, predict the ultimate content, timing or effect of any other federal and state reform efforts. There is no assurancethat federal or state health care reform will not adversely affect our future business and financial results.Companies in China that manufacture or sell drugs and medical devices are required to comply with extensive regulations and hold a number of permitsand licenses to carry on their business. Our ability to obtain and maintain these regulatory approvals is uncertain, and future government regulation mayplace additional burdens on our efforts to commercialize our drug candidates.The life sciences industry in China is subject to extensive government regulation and supervision. The regulatory framework addresses all aspectsof operating in the pharmaceutical industry, including approval, registration, production, distribution, packaging, labelling, storage and shipment,advertising, licensing and certification requirements and procedures, periodic renewal and reassessment processes, registration of new products andenvironmental protection. Violation of applicable laws and regulations may materially and adversely affect our business. In order to manufacture anddistribute drug and medical device products in China, we are required to: •obtain a manufacturing permit and GMP certificate for each production facility from the NMPA and its relevant branches for themanufacture of drug and device products; •obtain a marketing authorization, which includes an approval number, from the NMPA for each drug or device manufactured by us; •obtain a distribution permit (or record filing) and good supply practice, or GSP, certificate from the NMPA and its relevant branches; and •renew the manufacturing permits, the distribution permits (or record-filing), marketing authorizations, GMP certificates and GSP certificatesevery five years, among other requirements.If we are unable to obtain or renew such permits or any other permits or licenses required for our operations, will not be able to engage in thecommercialization, manufacture and distribution of our products and drug candidates and our business may be adversely affected.The regulatory framework governing the pharmaceutical industry in China is subject to change and amendment from time to time. Any suchchange or amendment could materially and adversely impact our business, financial condition and prospects. The PRC government has introduced variousreforms to the Chinese healthcare system in recent years and may continue to do so, with an overall objective to expand basic medical insurance coverageand improve the quality and reliability of healthcare services without incurring significant fiscal burden. The specific regulatory changes under the reformstill remain uncertain. The implementing measures to be issued may not be sufficiently effective to achieve the stated goals, and as a result, we may not beable to benefit from such reform to the level we expect, if at all. Moreover, the reform could give rise to regulatory developments, such as more burdensomeadministrative procedures, which may have an adverse effect on our business and prospects.For further information regarding government regulation in China and other jurisdictions, see “Regulation—Government Regulation ofPharmaceutical Product Development and Approval,” “Regulation—Coverage and Reimbursement” and “Regulation—Other Healthcare Laws.”23 If we breach our license or other intellectual property-related agreements for our products or drug candidates or otherwise experience disruptions to ourbusiness relationships with our licensors, we could lose the ability to continue the development and commercialization of our products and drugcandidates.Our business relies, in large part, on our ability to develop and commercialize products and drug candidates we have licensed and sublicensedfrom third parties including ZEJULA from Tesaro (now GSK), Optune (TTFields) from Novocure Limited, or Novocure, ZL-2301 from Bristol-Myers Squibb,ZL-2401 from Paratek, FPA144 from Five Prime, ETX2514 from Entasis and margetuximab, MGD013 and a pre-clinical multi-specific TRIDENT moleculefrom MacroGenics Inc. Because our license from Paratek was granted to us by a subsidiary of Paratek, our license may not encumber all intellectual propertyrights owned or controlled by the affiliate of Paratek and relevant to our drug candidates. If we have not obtained a license to all intellectual property rightsowned or controlled by such affiliates of our licensors that are relevant to our products and drug candidates, we may need to obtain additional licenses tosuch intellectual property rights which may not be available on an exclusive basis, on commercially reasonable terms or at all. In addition, if our licensorsbreach such agreements, we may not be able to enforce such agreements against our licensors’ parent entity or affiliates. Under each of our license andintellectual property-related agreements, in exchange for licensing or sublicensing us the right to develop and commercialize the applicable drug candidates,our licensors will be eligible to receive from us milestone payments, tiered royalties from commercial sales of such drug candidates, assuming relevantapprovals from government authorities are obtained, or other payments. Our license and intellectual property-related agreements also require us to complywith other obligations including development and diligence obligations, providing certain information regarding our activities with respect to such drugcandidates and/or maintaining the confidentiality of information we receive from our licensors. For example, under our agreements relating to ZEJULA andZL-2301, we are required to use commercially reasonable efforts to conduct the necessary pre-clinical, clinical, regulatory and other activities necessary todevelop and commercialize such drug candidates in the licensed territories. We are also obligated to use commercially reasonable efforts to develop andcommercialize Optune, margetuximab, MGD013, a pre-clinical multi-specific TRIDENT molecule, ZL-2401, ZL-2302, FPA144 and ETX2514 in certain oftheir respective licensed territories, in each case, under their respective license agreements.If we fail to meet any of our obligations under our license and intellectual property-related agreements, our licensors have the right to terminateour licenses and sublicenses and, upon the effective date of such termination, have the right to re-obtain the licensed and sub-licensed technology andintellectual property. If any of our licensors terminate any of our licenses or sublicenses, we will lose the right to develop and commercialize our applicableproducts and drug candidates and other third parties may be able to market products or drug candidates similar or identical to ours. In such case, we may berequired to provide a grant back license or expand an existing license to the licensors under our own intellectual property with respect to the terminatedproducts. For example, if our agreement with Sanofi for ZL-2302 terminates for any reason, we are required to grant Sanofi an exclusive license with respectto certain of our owned patents and know-how that are necessary to exploit ZL-2302 in the field of oncology in the regions where the license is terminated. Inaddition, if our agreements with GSK for ZEJULA terminate for any reason, we are required to grant GSK an exclusive license to certain of our intellectualproperty rights that relate to ZEJULA, as applicable. Furthermore, if our agreement with MacroGenics for margetuximab, MGD013 and a pre-clinical multi-specific TRIDENT molecule is terminated by MacroGenics for certain reasons, we are required to grant MacroGenics an option to convert the non-exclusivelicense granted to MacroGenics to use certain of our intellectual property rights that relate to margetuximab, MGD013 and a pre-clinical multi-specificTRIDENT molecule in China, Hong Kong, Macau and Taiwan to an exclusive license. While we would expect to exercise all rights and remedies available tous, including seeking to cure any breach by us, and otherwise seek to preserve our rights under the intellectual property rights licensed and sublicensed to us,we may not be able to do so in a timely manner, at an acceptable cost or at all. In particular, some of the milestone payments are payable upon our drugcandidates reaching development milestones before we have commercialized, or received any revenue from, sales of such drug candidate, and we cannotguarantee that we will have sufficient resources to make such milestone payments. Any uncured, material breach under the license agreements could result inour loss of exclusive rights and may lead to a complete termination of our rights to the applicable drug candidate. Any of the foregoing could have a materialadverse effect on our business, financial conditions, results of operations, and prospects.In addition, disputes may further arise regarding intellectual property subject to a license agreement, including, but not limited to: •the scope of rights granted under the license agreement and other interpretation-related issues; •the extent to which our technology and processes infringe, misappropriate or otherwise violate on intellectual property of the licensor thatis not subject to the licensing agreement;24 •the sublicensing of patent and other rights under our collaborative development relationships; •our diligence obligations under the license agreement and what activities satisfy those diligence obligations; •the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensorsand us and our partners; and •the priority of invention of patented technology.Moreover, certain of our licensors do not own some or all of the intellectual property included in the license, but instead have licensed suchintellectual property from a third party, and have granted us a sub-license. As a result, the actions of our licensors or of the ultimate owners of the intellectualproperty may affect our rights to use our sublicensed intellectual property, even if we are in compliance with all of the obligations under our licenseagreements. For example, our licenses from GSK, Paratek, and MacroGenics comprise sublicenses to us of certain intellectual property rights owned by thirdparties that are not our direct licensors. If our licensors were to fail to comply with their obligations under the agreements pursuant to which they obtain therights that are sublicensed to us, or should such agreements be terminated or amended, our rights to the applicable licensed intellectual property may beterminated or narrowed, our exclusive licenses may be converted to non-exclusive licenses, and our ability to produce and sell our products and drugcandidates may be materially harmed. In addition, our license from Paratek is limited to intellectual property rights under the control of Paratek Bermuda,Ltd. To the extent Paratek Bermuda, Ltd. loses control over any of the licensed intellectual property rights for any reason, we will no longer be licensed tosuch intellectual property rights to use, develop and otherwise commercialize ZL-2401. Any of the foregoing could have a material adverse effect on ourbusiness, financial conditions, results of operations, and prospects.In addition, the agreements under which we currently license intellectual property or technology from third parties are complex, and certainprovisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise couldnarrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial orother obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results ofoperations, and prospects. Moreover, if disputes over intellectual property that we have licensed or sublicensed prevent or impair our ability to maintain ourcurrent licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected products or drugcandidates, which could have a material adverse effect on our business, financial conditions, results of operations and prospects.Product liability claims or lawsuits could cause us to incur substantial liabilities.We face an inherent risk of product liability exposure related to the use of our products and drug candidates in clinical trials or any products ordrug candidates we may decide to commercialize and manufacture. If we cannot successfully defend against claims that the use of such products or drugcandidates in our clinical trials or any products that we procure from third-party manufacturers, or that we may choose to manufacture at our productionfacilities in the future, including any of our products or drug candidates which receive regulatory approval, caused injuries, we could incur substantialliabilities. Regardless of merit or eventual outcome, liability claims may result in: •significant negative media attention and reputational damage; •withdrawal of clinical trial participants and inability to continue clinical trials; •significant costs to defend the related litigation; •substantial monetary awards to trial participants or patients; •the inability to commercialize any products or drug candidates that we may develop; •initiation of investigations by regulators; •a diversion of management’s time and our resources; and •a decline in the ADS price.25 Existing PRC laws and regulations do not require us to have, nor do we currently, maintain liability insurance to cover product liability claims.We do not have business liability, or in particular, product liability insurance for each of our products and drug candidates. Any litigation might result insubstantial costs and diversion of resources. While we maintain liability insurance for certain clinical trials (which covers the patient human clinical trialliabilities including, among others, bodily injury), this insurance may not fully cover our potential liabilities. Inability to obtain sufficient insurancecoverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of products ordrugs we develop, alone or with our collaborators.The research and development projects under our internal discovery programs are at an early stage of development. As a result, we are unable to predict ifor when we will successfully develop or commercialize any drug candidates under such programs.Our internal discovery programs are at an early stage of development and will require significant investment and regulatory approvals prior tocommercialization. We currently have no drug candidates beyond pre-clinical trials under our internal discovery programs. Each of our drug candidates willrequire additional clinical and preclinical development, management of clinical, preclinical and manufacturing activities, obtaining regulatory approval,obtaining manufacturing supply, building of a commercial organization, substantial investment and significant marketing efforts before they generate anyrevenue from product sales. We are not permitted to market or promote any of our drug candidates before we receive regulatory approval from the NMPA, theFDA or comparable regulatory authorities, and we may never receive such regulatory approval for any such drug candidates.We cannot be certain that clinical development of any drug candidates from our internal discovery programs will be successful or that we willobtain regulatory approval or be able to successfully commercialize any of our drug candidates and generate revenue. Success in preclinical testing does notensure that clinical trials will be successful, and the clinical trial process may fail to demonstrate that our drug candidates are safe and effective for theirproposed uses. Any such failure could cause us to abandon further development of any one or more of our drug candidates and may delay development ofother drug candidates. Any delay in, or termination of, our clinical trials will delay and possibly preclude the filing of any NDAs with the NMPA, the FDA orcomparable regulatory authorities and, ultimately, our ability to commercialize our drug candidates and generate product revenue.If our manufacturing facilities are not approved by regulators, are damaged or destroyed or production at such facilities is otherwise interrupted, ourbusiness and prospects would be negatively affected.In early 2017, we built a small molecule facility capable of supporting clinical and commercial production and in 2018, we built a large moleculefacility in Suzhou, China using GE Healthcare FlexFactory platform technology capable of supporting clinical production of our drug candidates. We intendto rely on these facilities for the manufacture of clinical and commercial supply of some of our products or drug candidates. Prior to being permitted to sellany products or drugs produced at these facilities the facilities will need to be inspected and approved by regulatory authorities. If either facility is notapproved by regulators or is damaged or destroyed, or otherwise subject to disruption, it would require substantial lead-time to replace our manufacturingcapabilities. In such event, we would be forced to identify and rely partially or entirely on third-party contract manufacturers for an indefinite period of time.Any new facility needed to replace an existing production facility would need to comply with the necessary regulatory requirements and be tailored to ourproduction requirements and processes. We also would need regulatory approvals before using any products or drugs manufactured at a new facility inclinical trials or selling any products or drugs that are ultimately approved. Any disruptions or delays at our facility or its failure to meet regulatorycompliance would impair our ability to develop and commercialize our products or drug candidates, which would adversely affect our business and results ofoperations.We may become involved in lawsuits to protect or enforce our intellectual property.Competitors may infringe our patent rights or misappropriate or otherwise violate our intellectual property rights. To counter infringement orunauthorized use, litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine thevalidity and scope of our own intellectual property rights or the proprietary rights of others. This can be expensive and time consuming. Any claims that weassert against perceived infringers could also provoke these parties to assert counterclaims against us alleging that we infringe their intellectual propertyrights. We may not be able to prevent third parties from infringing upon or misappropriating our intellectual property, particularly in countries where the lawsmay not protect intellectual property rights as fully as in the United States. An adverse result in any litigation proceeding could put our patent, as well as anypatents that may issue in the future from our pending patent applications, at risk of being invalidated, held unenforceable or interpreted narrowly.Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of ourconfidential information could be compromised by disclosure during this type of litigation.26 If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed. We may be subject to claimsthat our employees have wrongfully used or disclosed alleged trade secrets of their former employers.In addition to our issued patent and pending patent applications, we rely on trade secrets, including unpatented know-how, technology and otherproprietary information, to maintain our competitive position and to protect our drug candidates. We seek to protect these trade secrets, in part, by enteringinto nondisclosure and confidentiality agreements with parties that have access to them, such as our employees, corporate collaborators, outside scientificcollaborators, sponsored researchers, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention orpatent assignment agreements with our employees and consultants. However, any of these parties may breach such agreements and disclose our proprietaryinformation, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated atrade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. If any of our trade secrets were to be lawfully obtained orindependently developed by a competitor, we would have no right to prevent them from using that technology or information to compete with us and ourcompetitive position would be harmed.Furthermore, many of our employees, including our senior management, were previously employed at other biotechnology or pharmaceuticalcompanies, including our competitors or potential competitors. Some of these employees, including each member of our senior management, executedproprietary rights, nondisclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that ouremployees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees haveused or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. We are not aware ofany threatened or pending claims related to these matters or concerning the agreements with our senior management, but in the future litigation may benecessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectualproperty rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction tomanagement.Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail or suffer security breaches.Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors and consultants arevulnerable to damage from computer viruses and unauthorized access. Although to our knowledge we have not experienced any material system failure orsecurity breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our developmentprograms and our business operations.The data privacy regime in China is evolving and there may be more stringent compliance requirements for the collection, processing, use, andtransfer of personal information and important data. In the ordinary course of our business, we collect and store sensitive data, including, among other things,legally protected patient health information, personally identifiable information about our employees, intellectual property, and proprietary businessinformation. We manage and maintain our applications and data utilizing on-site systems and outsourced vendors. These applications and data encompass awide variety of business critical information including research and development information, commercial information and business and financialinformation. Because information systems, networks and other technologies are critical to many of our operating activities, shutdowns or service disruptionsat our company or vendors that provide information systems, networks, or other services to us pose increasing risks. Such disruptions may be caused byevents such as computer hacking, phishing attacks, ransomware, dissemination of computer viruses, worms and other destructive or disruptive software,denial of service attacks and other malicious activity, as well as power outages, natural disasters (including extreme weather), terrorist attacks or other similarevents. Such events could have an adverse impact on us and our business, including loss of data and damage to equipment and data. In addition, systemredundancy may be ineffective or inadequate, and our disaster recovery planning may not be sufficient to cover all eventualities. Significant events couldresult in a disruption of our operations, damage to our reputation or a loss of revenues, and invite regulator’s scrutiny. In addition, we may not have adequateinsurance coverage to compensate for any losses associated with such events.27 We could be subject to risks caused by misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of informationmaintained in the information systems and networks of our company and our vendors, including personal information of our employees and patients, andcompany and vendor confidential data. In addition, outside parties may attempt to penetrate our systems or those of our vendors or fraudulently induce ourpersonnel or the personnel of our vendors to disclose sensitive information in order to gain access to our data and/or systems. Like other companies, we mayexperience threats to our data and systems, including malicious codes and viruses, phishing, and other cyber-attacks. The number and complexity of thesethreats continue to increase over time. If a material breach of our information technology systems or those of our vendors occurs, the market perception of theeffectiveness of our security measures could be harmed and our reputation and credibility could be damaged. We could be required to expend significantamounts of money and other resources to repair or replace information systems or networks. In addition, we could be subject to regulatory actions and/orclaims made by individuals and groups in private litigation involving privacy issues related to data collection and use practices and other data privacy lawsand regulations, including claims for misuse or inappropriate disclosure of data, as well as unfair or deceptive practices. Although we develop and maintainsystems and controls designed to prevent these events from occurring, and we have a process to identify and mitigate threats, the development andmaintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcomesecurity measures become increasingly sophisticated. Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely.As we outsource more of our information systems to vendors, engage in more electronic transactions with payors and patients, and rely more on cloud-basedinformation systems, the related security risks will increase and we will need to expend additional resources to protect our technology and informationsystems.Risks Related to Our Dependence on Third PartiesWe rely on third parties to conduct our preclinical and clinical trials. If these third parties do not successfully carry out their contractual duties or meetexpected deadlines, we may not be able to obtain regulatory approval for or commercialize our products or drug candidates and our business could besubstantially harmed.We have relied upon and plan to continue to rely upon third-party CROs to monitor and manage data for some of our ongoing preclinical andclinical programs. We rely on these parties for execution of our preclinical and clinical trials, and control only certain aspects of their activities. Nevertheless,we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards,and our reliance on the CROs does not relieve us of our regulatory responsibilities. We also rely on third parties to assist in conducting our preclinical studiesin accordance with Good Laboratory Practices, or GLP, and the Administrative Regulations on Experimental Animals or the Animal Welfare Actrequirements. We and our CROs are required to comply with GCP regulations and guidelines enforced by the NMPA, and comparable foreign regulatoryauthorities for all of our products or drug candidates in clinical development. Regulatory authorities enforce these GCP requirements through periodicinspections of trial sponsors, investigators and trial sites. If we or any of our CROs fail to comply with applicable GCP requirements, the clinical datagenerated in our clinical trials may be deemed unreliable and the NMPA or comparable foreign regulatory authorities may require us to perform additionalclinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatoryauthority will determine that any of our clinical trials comply with ICH-GCP requirements. In addition, our clinical trials must be conducted with products ordrugs produced under cGMP requirements. Failure to comply with these regulations may require us to repeat preclinical and clinical trials, which woulddelay the regulatory approval process.Our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot control whether or notthey devote sufficient time and resources to our on-going clinical, nonclinical and preclinical programs. If CROs do not successfully carry out theircontractual duties or obligations or meet expected deadlines or if the quality or accuracy of the clinical data they obtain is compromised due to their failureto adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not beable to obtain regulatory approval for or successfully commercialize our products or drug candidates. As a result, our results of operations and the commercialprospects for our products and drug candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed orcompromised.28 Because we rely on third parties, our internal capacity to perform these functions is limited. Outsourcing these functions involves risk that thirdparties may not perform to our standards, may not produce results in a timely manner or may fail to perform at all. In addition, the use of third-party serviceproviders requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated. Wecurrently have a small number of employees, which limits the internal resources we have available to identify and monitor our third-party providers. To theextent we are unable to identify and successfully manage the performance of third-party service providers in the future, our business may be adverselyaffected. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays inthe future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.If we lose our relationships with CROs, our product or drug development efforts could be delayed.We rely on third-party vendors and CROs for some of our preclinical studies and clinical trials related to our product or drug development efforts.Switching or adding additional CROs involves additional cost and requires management time and focus. Our CROs have the right to terminate theiragreements with us in the event of an uncured material breach. In addition, some of our CROs have an ability to terminate their respective agreements with usif it can be reasonably demonstrated that the safety of the subjects participating in our clinical trials warrants such termination, if we make a generalassignment for the benefit of our creditors or if we are liquidated. Identifying, qualifying and managing performance of third-party service providers can bedifficult, time-consuming and cause delays in our development programs. In addition, there is a natural transition period when a new CRO commences workand the new CRO may not provide the same type or level of services as the original provider. If any of our relationships with our third-party CROs areterminated, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms, and we may not be able tomeet our desired clinical development timelines.We have limited experience manufacturing our products and drug candidates on a large clinical or commercial scale. We are or will be dependent onthird party manufacturers for the manufacture of certain of our products and drug candidates as well as on third parties for our supply chain, and if weexperience problems with any of these third parties, the manufacture of our products or drug candidates or products could be delayed, which could harmour results of operations.If our two manufacturing facilities are unable to meet our intended production capacity in a timely fashion, we may have to engage a CMO for theproduction of clinical supplies of our products or drug candidates.Additionally, in order to successfully commercialize our products and drug candidates, we will need to identify qualified CMOs for the scaledproduction of a commercial supply of certain of our products and drug candidates. The CMOs should be drug manufacturers holding GMP certificates with ascope that can cover our drug registration candidates, and such CMO arrangement should be approved by the NMPA’s provincial level branches. We havenot yet identified suppliers to support scaled production. If we are unable to arrange for alternative third-party manufacturing sources, or to do so oncommercially reasonable terms or in a timely manner, or to obtain the NMPA approval for our CMO arrangement in a timely manner, we may not be able tocomplete development of our products or drug candidates, or market or distribute them.We rely on third-party manufacturers to manufacture at least some of our products and drug candidates. For example, we rely on MacroGenics tomanufacture and supply margetuximab, MGD013, and a pre-clinical multi-specific TRIDENT molecule, and Novocure to manufacture and supply Optunepursuant to our license agreements with MacroGenics and Novocure.29 Such reliance entails risks to which we would not be subject to if we manufactured drug candidates or products ourselves, including reliance onthe third party for regulatory compliance and quality assurance, the possibility of breach of the manufacturing or supply agreement by the third party becauseof factors beyond our control (including a failure to synthesize and manufacture our drug candidates or any products we may eventually commercialize inaccordance with our specifications) and the possibility of termination or nonrenewal of the agreement by the third party, based on its own business priorities,at a time that is costly or damaging to us. In addition, the NMPA and other regulatory authorities require that our drug candidates and any products that wemay eventually commercialize be manufactured according to cGMP standards. Any failure by our third-party manufacturers to comply with cGMP standardsor failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of drug candidates in a timely manner, could lead to adelay in, or failure to obtain, regulatory approval of any of our drug candidates. In addition, such failure could be the basis for the NMPA to issue a warningor untitled letter, withdraw approvals for drug candidates previously granted to us, or take other regulatory or legal action, including recall or seizure, total orpartial suspension of production, suspension of ongoing clinical trials, refusal to approve pending applications or supplemental applications, detention orproduct, refusal to permit the import or export of products, injunction, or imposing civil and criminal penalties.Any significant disruption in our potential supplier relationships could harm our business. We currently source key materials from third parties,either directly through agreements with suppliers or indirectly through our manufacturers who have agreements with suppliers, as well as through ourlicensors. We anticipate that, in the near term, all key materials will be sourced through third parties. There are a small number of suppliers for certain capitalequipment and key materials that are used to manufacture some of our drugs. Such suppliers may not sell these key materials to us or our manufacturers at thetimes we need them or on commercially reasonable terms. We currently do not have any agreements for the commercial production of these key materials.Any significant delay in the supply of a product or drug candidate or its key materials for an ongoing clinical study could considerably delay completion ofour clinical studies, product or drug testing and potential regulatory approval of our products or drug candidates. If we or our manufacturers are unable topurchase these key materials after regulatory approval has been obtained for our drug candidates, the commercialization of our products or the commerciallaunch of our drug candidates could be delayed or there could be a shortage in supply, which would impair our ability to generate revenues from the sale ofour products and drug candidates.Furthermore, because of the complex nature of our compounds, we or our manufacturers may not be able to manufacture our compounds at a costor in quantities or in a timely manner necessary to make commercially successful products and drugs. In addition, as our drug development pipeline increasesand matures, we will have a greater need for clinical study and commercial manufacturing capacity. We have limited experience manufacturingpharmaceutical products or drugs on a commercial scale and some of our current suppliers will need to increase their scale of production to meet ourprojected needs for commercial manufacturing, the satisfaction of which on a timely basis may not be met.We depend on our licensors or patent owners of our in-licensed patent rights to prosecute and maintain patents and patent applications that are materialto our business. Any failure by our licensors or such patent owners to effectively protect these patent rights could adversely impact our business andoperations.We have licensed and sublicensed patent rights from third parties for some of our development programs, including ZEJULA from GSK, Optunefrom Novocure, ZL-2401 from Paratek, ZL-2301 from Bristol-Myers Squibb, ZL-2302 from Sanofi, FPA144 from Five Prime, ETX2514 from Entasis, andmargetuximab, MGD013 and a pre-clinical multi-specific TRIDENT molecule from MacroGenics. As a licensee and sublicensee of third parties, we rely onthese third parties to file and prosecute patent applications and maintain patents and otherwise protect the licensed intellectual property under certain of ourlicense agreements. In addition, we have not had and do not have primary control over these activities for certain of our patents or patent applications andother intellectual property rights that we jointly own with certain of our licensors and sub-licensors. We cannot be certain that these patents and patentapplications have been or will be prepared, filed, prosecuted or maintained by such third parties in compliance with applicable laws and regulations, in amanner consistent with the best interests of our business, or in a manner that will result in valid and enforceable patents or other intellectual property rightsthat cover our drug candidates. If our licensors or such third parties fail to prepare, prosecute, or maintain such patent applications and patents, or lose rightsto those patent applications or patents, the rights we have licensed may be reduced or eliminated, and our right to develop and commercialize any of our drugcandidates that are subject of such licensed rights could be adversely affected.30 Pursuant to the terms of the license agreements with some of our licensors, the licensors may have the right to control enforcement of our licensedpatents or defense of any claims asserting the invalidity or unenforceability of these patents. For example, under our agreement with Bristol-Myers Squibb forZL-2301, Bristol-Myers Squibb has the first right to enforce the licensed patents in China, Hong Kong and Macau, subject to certain exceptions. Under ouragreement with Novocure for Optune, Novocure owns and has the right to control all patent application and patent prosecution activities related to Optune inChina, Hong Kong, Macau and Taiwan. Similarly, under our agreement with Five Prime for FPA144, Five Prime has the first right to enforce the licensedpatents in China, Hong Kong, Macau and Taiwan, subject to certain exceptions. In addition, with respect to the patent portfolio for ZL-2401, which we sub-license from Paratek, Paratek has the first right to enforce such patent portfolio in territories outside of China, Hong Kong, Macau and Taiwan. Similarly, withrespect to the patent portfolio for ZEJULA, which we sub-license from GSK, we have the first right to enforce such patent portfolio within China, Hong Kongand Macau. However, GSK maintains the right to enforce such patent portfolio in all other territories or, if we fail to bring an action within 90 days withinChina, Hong Kong or Macau, GSK can control such enforcement actions in those areas as well. In the case where GSK controls such enforcement actions,although we have rights to consult with GSK on such actions within China, Hong Kong and Macau, rights granted by GSK under ZEJULA to anotherlicensee, such as Janssen Biotech, Inc. to whom GSK has granted an exclusive right to develop ZEJULA for the treatment of prostate cancer, could potentiallyinfluence GSK’s interests in the exercise of its prosecution, maintenance and enforcement rights in a manner that may favor the interests of such otherlicensee as compared with us, which could have a material adverse effect on our business, financial conditions, results of operations and prospects.Even if we are permitted to pursue the enforcement or defense of our licensed and sub-licensed patents, we will require the cooperation of ourlicensors and any applicable patent owners and such cooperation may not be provided to us. We cannot be certain that our licensors will allocate sufficientresources or prioritize their or our enforcement of such patents or defense of such claims to protect our interests in the licensed patents. Even if we are not aparty to these legal actions, an adverse outcome could harm our business because it might prevent us from continuing to license intellectual property that wemay need to operate our business. If we lose any of our licensed intellectual property, our right to develop and commercialize any of our drug candidates thatare subject of such licensed rights could be adversely affected.Other Risks and Risks Related to Doing Business in ChinaIf we fail to comply with environmental, health and safety laws and regulations of the PRC, we could become subject to fines or penalties or incur coststhat could have a material adverse effect on the success of our business.We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and thehandling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations primarily occur in China and involve the use of hazardousmaterials, including chemical materials. Our operations also produce hazardous waste products. We are therefore subject to PRC laws and regulationsconcerning the discharge of waste water, gaseous waste and solid waste during our processes of research and development of drugs. We engage competentthird party contractors for the transfer and disposal of these materials and wastes. We may not at all times comply fully with environmental regulations. Anyviolation of these regulations may result in substantial fines, criminal sanctions, revocations of operating permits, shutdown of our facilities and obligation totake corrective measures. We cannot completely eliminate the risk of contamination or injury from these materials and wastes. In the event of contaminationor injury resulting from the use or discharge of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed ourresources. We also could incur significant costs associated with civil, administrative or criminal fines and penalties.Although we maintain workers’ compensation insurance to cover costs and expenses incurred due to on-the-job injuries to our employees andthird party liability insurance for injuries caused by unexpected seepage, pollution or contamination, such insurance may not provide adequate coverageagainst potential liabilities. Furthermore, the PRC government may take steps towards the adoption of more stringent environmental regulations. Due to thepossibility of unanticipated regulatory or other developments, the amount and timing of future environmental expenditures may vary substantially fromthose currently anticipated. If there is any unanticipated change in the environmental regulations, we may need to incur substantial capital expenditures toinstall, replace, upgrade or supplement our manufacturing facility and equipment or make operational changes to limit any adverse impact or potentialadverse impact on the environment in order to comply with new environmental protection laws and regulations. If such costs become prohibitivelyexpensive, we may be forced to cease certain aspects of our business operations.31 The PRC’s economic, political and social conditions, as well as governmental policies, could affect the business environment and financial markets inChina, our ability to operate our business, our liquidity and our access to capital.Substantially all of our operations are conducted in China. Accordingly, our business, results of operations, financial condition and prospectsmay be influenced to a significant degree by economic, political, legal and social conditions in China. China’s economy differs from the economies ofdeveloped countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control offoreign exchange and allocation of resources. While the PRC economy has experienced significant growth over the past 40 years, growth has been unevenacross different regions and among various economic sectors of China. The PRC government has implemented various measures to encourage economicdevelopment and guide the allocation of resources. Some of these measures may benefit the overall PRC economy, but may have a negative effect on us. Forexample, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in taxregulations that are currently applicable to us. In addition, in the past the PRC government implemented certain measures, including interest rate increases, tocontrol the pace of economic growth. These measures may cause decreased economic activity in China, which may adversely affect our business and resultsof operation. More generally, if the business environment in China deteriorates from the perspective of domestic or international investment, our business inChina may also be adversely affected.Uncertainties with respect to the PRC legal system and changes in laws, regulations and policies in China could materially and adversely affect us.We conduct our business primarily through our subsidiaries in China. PRC laws and regulations govern our operations in China. Our subsidiariesare generally subject to laws and regulations applicable to foreign investments in China, which may not sufficiently cover all of the aspects of our economicactivities in China. In addition, the implementation of laws and regulations may be in part based on government policies and internal rules that are subject tothe interpretation and discretion of different government agencies (some of which are not published on a timely basis or at all) that may have a retroactiveeffect. As a result, we may not always be aware of any potential violation of these policies and rules. Such unpredictability regarding our contractual,property and procedural rights could adversely affect our business and impede our ability to continue our operations. Furthermore, since PRC administrativeand court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate theoutcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties couldmaterially and adversely affect our business and results of operations.In January 2015, the Ministry of Commerce of the PRC, or the MOFCOM, published a discussion draft of the proposed Foreign Investment Law.The Foreign Investment Law passed the legislative review in March 2019, and will be effective as of January 1, 2020. Foreign-invested entities will enjoynational treatment in industry sectors that are not prohibited or restricted from foreign investment. The Law imposes information reporting requirements onforeign investors and the applicable foreign invested entities. Non-compliance with the reporting requirements will result in corrective orders and finesbetween RMB 100,000 to 500,000. The Law reinforces the duties of government authorities to protect intellectual property rights and trade secrets offoreign-investment entities. Government authorities cannot compel technology transfer by administrative means, reveal or provide trade secrets of foreign-invested entities to third parties. Last but not least, the Law calls for the establishment of a foreign investment security review mechanism, details of whichwill be further developed by the Chinese government.In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources andmanagement attention.32 We may be exposed to liabilities under the U.S. Foreign Corrupt Practices Act, or FCPA, and Chinese anti-corruption laws, and any determination that wehave violated these laws could have a material adverse effect on our business or our reputation.We are subject to the FCPA. The FCPA generally prohibits us from making improper payments to non-U.S. officials for the purpose of obtainingor retaining business. We are also subject to the anti-bribery laws of other jurisdictions, particularly China. As our business expands, the applicability of theFCPA and other anti-bribery laws to our operations will increase. Our procedures and controls to monitor anti-bribery compliance may fail to protect us fromreckless or criminal acts committed by our employees or agents. If we, due to either our own deliberate or inadvertent acts or those of others, fail to complywith applicable anti-bribery laws, our reputation could be harmed and we could incur criminal or civil penalties, other sanctions and/or significant expenses,which could have a material adverse effect on our business, including our financial condition, results of operations, cash flows and prospects.Restrictions on currency exchange may limit our ability to receive and use financing in foreign currencies effectively.Our PRC subsidiaries’ ability to obtain foreign exchange is subject to significant foreign exchange controls and, in the case of transactions underthe capital account, requires the approval of and/or registration with PRC government authorities, including the state administration of foreign exchange, orSAFE. In particular, if we finance our PRC subsidiaries by means of foreign debt from us or other foreign lenders, the amount is not allowed to, among otherthings, exceed the statutory limits and such loans must be registered with the local counterpart of the SAFE. If we finance our PRC subsidiaries by means ofadditional capital contributions, the amount of these capital contributions must first be approved or filed by the relevant government approval authority.In the light of the various requirements imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holdingcompanies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals ontimely basis, if at all, with respect to future loans or capital contributions by us to our PRC subsidiaries. If we fail to complete such registrations or obtainsuch approval, our ability to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect ourliquidity and our ability to fund and expand our business.PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners orour wholly foreign-owned subsidiaries in China to liability or penalties, limit our ability to inject capital into these subsidiaries, limit these subsidiaries’ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.In 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investmentand Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37. SAFE Circular 37 requires PRC residents to register withlocal branches of SAFE or competent banks designated by SAFE in connection with their direct establishment or indirect control of an offshore entity, for thepurpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets orinterests, referred to in SAFE Circular 37 as a “special purpose vehicle.” The term “control” under SAFE Circular 37 is broadly defined as the operation rights,beneficiary rights or decision-making rights acquired by the PRC residents in the offshore special purpose vehicles or PRC companies by such means asacquisition, trust, proxy, voting rights, repurchase, convertible bonds or other arrangements. SAFE Circular 37 further requires amendment to the registrationin the event of any changes with respect to the basic information of or any significant changes with respect to the special purpose vehicle. If the shareholdersof the offshore holding company who are PRC residents do not complete their registration with the local SAFE branches, the PRC subsidiaries may beprohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to the offshore company, and the offshorecompany may be restricted in its ability to contribute additional capital to its PRC subsidiaries. Moreover, failure to comply with SAFE registration andamendment requirements described above could result in liability under PRC law for evasion of applicable foreign exchange restrictions.33 We will request PRC residents who we know hold direct or indirect interests in our company, if any, to make the necessary applications, filingsand amendments as required under SAFE Circular 37 and other related rules. However, we may not be informed of the identities of all the PRC residentsholding direct or indirect interest in our company, and we cannot provide any assurance that these PRC residents will comply with our request to make orobtain any applicable registrations or comply with other requirements under SAFE Circular 37 or other related rules. The failure or inability of our PRCresident shareholders to comply with the registration procedures set forth in these regulations may subject us to fines and legal sanctions, restrict our cross-border investment activities, limit the ability of our wholly foreign-owned subsidiaries in China to distribute dividends and the proceeds from any reductionin capital, share transfer or liquidation to us, and we may also be prohibited from injecting additional capital into these subsidiaries. Moreover, failure tocomply with the various foreign exchange registration requirements described above could result in liability under PRC law for circumventing applicableforeign exchange restrictions. As a result, our business operations and our ability to distribute profits to you could be materially and adversely affected.PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for usto pursue growth through acquisitions in China.PRC regulations and rules concerning mergers and acquisitions including the Regulations on Mergers and Acquisitions of Domestic Companiesby Foreign Investors, or the M&A Rules, and other recently adopted regulations and rules with respect to mergers and acquisitions established additionalprocedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex. For example, theM&A Rules require that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRCdomestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact on the national economicsecurity, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand.Moreover, according to the Anti-Monopoly Law of PRC promulgated on August 30, 2007 and the Provisions on Thresholds for Prior Notification ofConcentrations of Undertakings, or the Prior Notification Rules issued by the State Council in August 2008 and amended in September 2018, theconcentration of business undertakings by way of mergers, acquisitions or contractual arrangements that allow one market player to take control of or to exertdecisive impact on another market player must also be notified in advance to the anti-monopoly enforcement agency of the State Council when the thresholdis crossed and such concentration shall not be implemented without the clearance of prior notification. In addition, the Regulations on Implementation ofSecurity Review System for the Merger and Acquisition of Domestic Enterprise by Foreign Lenders, or the Security Review Rules issued by the MOFCOMthat became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns andmergers and acquisitions through which foreign investors may acquire the de facto control over domestic enterprises that raise “national security” concernsare subject to strict review by the MOFCOM, and the rules prohibit any activities attempting to bypass a security review by structuring the transactionthrough, among other things, trusts, entrustment or contractual control arrangements. In the future, we may grow our business by acquiring complementarybusinesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be timeconsuming, and any required approval processes, including obtaining approval from the MOFCOM or its local counterparts may delay or inhibit our abilityto complete such transactions. It is unclear whether our business would be deemed to be in an industry that raises “national defense and security” or “nationalsecurity” concerns. However, the MOFCOM or other government agencies may publish explanations in the future determining that our business is in anindustry subject to the security review, in which case our future acquisitions in the PRC, including those by way of entering into contractual controlarrangements with target entities, may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand our market sharethrough future acquisitions would as such be materially and adversely affected.Our business benefits from certain financial incentives and discretionary policies granted by local governments. Expiration of, or changes to, theseincentives or policies would have an adverse effect on our results of operations.In the past, local governments in China granted certain financial incentives from time to time to our PRC subsidiaries as part of their efforts toencourage the development of local businesses. We received approximately $1.3 million and $0.2 million in financial incentives from local governments inChina relating to our business operations in 2018 and 2017, respectively. We also received approximately nil and $0.7 million in financial incentives fromlocal governments in Australia as part of its tax incentive program in 2018 and 2017. The timing, amount and criteria of government financial incentives aredetermined within the sole discretion of the local government authorities and cannot be predicted with certainty before we actually receive any financialincentive. We generally do not have the ability to influence local governments in making these decisions. Local governments may decide to reduce oreliminate incentives34 at any time. In addition, some of the government financial incentives are granted on a project basis and subject to the satisfaction of certain conditions,including compliance with the applicable financial incentive agreements and completion of the specific project therein. We cannot guarantee that we willsatisfy all relevant conditions, and if we do so we may be deprived of the relevant incentives. We cannot assure you of the continued availability of thegovernment incentives currently enjoyed by us. Any reduction or elimination of incentives would have an adverse effect on our results of operations.If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us andour non-PRC shareholders or ADS holders.The PRC Enterprise Income Tax Law, or the EIT Law, and the Regulation on the Implementation of the EIT Law, effective as of January 1, 2008,define the term “de facto management bodies” as “bodies that substantially carry out comprehensive management and control on the business operation,employees, accounts and assets of enterprises.” Under the EIT Law, an enterprise incorporated outside of PRC whose “de facto management bodies” arelocated in PRC is considered a “resident enterprise” and will be subject to a uniform 25% enterprise income tax, or EIT, rate on its global income. On April22, 2009, PRC’s State Administration of Taxation, or the SAT, in the Notice Regarding the Determination of Chinese-Controlled Offshore-IncorporatedEnterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or SAT Circular 82, further specified certain criteria for thedetermination of what constitutes “de facto management bodies.” If all of these criteria are met, the relevant foreign enterprise may be regarded to have its “defacto management bodies” located in China and therefore be considered a PRC resident enterprise. These criteria include: (i) the enterprise’s day-to-dayoperational management is primarily exercised in China; (ii) decisions relating to the enterprise’s financial and human resource matters are made or subject toapproval by organizations or personnel in China; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board andshareholders’ meeting minutes are located or maintained in China; and (iv) 50% or more of voting board members or senior executives of the enterprisehabitually reside in China. Although SAT Circular 82 only applies to foreign enterprises that are majority-owned and controlled by PRC enterprises, notthose owned and controlled by foreign enterprises or individuals, the determining criteria set forth in SAT Circular 82 may be adopted by the PRC taxauthorities as the test for determining whether the enterprises are PRC tax residents, regardless of whether they are majority-owned and controlled by PRCenterprises.We believe that neither Zai Lab Limited nor any of our subsidiaries outside of China is a PRC resident enterprise for PRC tax purposes. However,the tax resident status of an enterprise is subject to determination by the PRC tax authorities, and uncertainties remain with respect to the interpretation of theterm “de facto management body.” If the PRC tax authorities determine that Zai Lab Limited or any of its subsidiaries outside of China is a PRC residententerprise for enterprise income tax purposes, that entity would be subject to a 25% enterprise income tax on its global income. If such entity derives incomeother than dividends from its wholly-owned subsidiaries in China, a 25% EIT on its global income may increase our tax burden. Dividends paid to a PRCresident enterprise from its wholly-owned subsidiaries in China may be regarded as tax-exempt income if such dividends are deemed to be “dividendsbetween qualified PRC resident enterprises” under the EIT Law and its implementation rules. However, we cannot assure you that such dividends will not besubject to PRC withholding tax, as the PRC tax authorities, which enforce the withholding tax, have not yet issued relevant guidance.In addition, if Zai Lab Limited is classified as a PRC resident enterprise for PRC tax purposes, we may be required to withhold tax at a rate of 10%from dividends we pay to our shareholders, including the holders of our ADSs, that are non-resident enterprises. In addition, non-resident enterpriseshareholders (including our ADS holders) may be subject to a 10% PRC withholding tax on gains realized on the sale or other disposition of ADSs orordinary shares, if such income is treated as sourced from within China. Furthermore, gains derived by our non-PRC individual shareholders from the sale ofour shares and ADSs may be subject to a 20% PRC withholding tax. It is unclear whether our non-PRC individual shareholders (including our ADS holders)would be subject to any PRC tax (including withholding tax) on dividends received by such non-PRC individual shareholders in the event we aredetermined to be a PRC resident enterprise. If any PRC tax were to apply to such dividends, it would generally apply at a rate of 20%. The PRC tax liabilitymay be reduced under applicable tax treaties. However, it is unclear whether our non-PRC shareholders would be able to claim the benefits of any tax treatiesbetween their country of tax residence and the PRC in the event that Zai Lab Limited is treated as a PRC resident enterprise.35 We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, andany limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct ourbusiness.We are a holding company, and we may rely on dividends and other distributions on equity paid by our PRC subsidiaries for our cash andfinancing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders or to service any debt we may incur.If any of our PRC subsidiaries incur debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or makeother distributions to us. Under PRC laws and regulations, our PRC subsidiaries, each of which is a wholly foreign-owned enterprise may pay dividends onlyout of its respective accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-ownedenterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregateamount of such fund reaches 50% of its registered capital. Such reserve funds cannot be distributed to us as dividends. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to an enterprise expansion fund, or a staff welfare andbonus fund.Our PRC subsidiaries generate primarily all of their revenue in renminbi, which is not freely convertible into other currencies. As result, anyrestriction on currency exchange may limit the ability of our PRC subsidiaries to use their Renminbi revenues to pay dividends to us.In response to the persistent capital outflow in China and renminbi’s depreciation against U.S. dollar in the fourth quarter of 2016, the PBOC andthe SAFE have promulgated a series of capital control measure in early 2017, including stricter vetting procedures for domestic companies to remit foreigncurrency for overseas investments, dividends payments and shareholder loan repayments.The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward bySAFE for cross-border transactions falling under both the current account and the capital account. Any limitation on the ability of our PRC subsidiaries topay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could bebeneficial to our business, pay dividends, or otherwise fund and conduct our business.We and our shareholders face uncertainties in the PRC with respect to indirect transfers of equity interests in PRC resident enterprises.The indirect transfer of equity interest in PRC resident enterprises by a non-PRC resident enterprise, or Indirect Transfer, is potentially subject toincome tax in China at a rate of 10% on the gain if such transfer is considered as not having a commercial purpose and is carried out for tax avoidance. TheSAT has issued several rules and notices to tighten the scrutiny over acquisition transactions in recent years. SAT Circular 7 sets out the scope of IndirectTransfers, which includes any changes in the shareholder’s ownership of a foreign enterprise holding PRC assets directly or indirectly in the course of agroup’s overseas restructuring, and the factors to consider in determining whether an Indirect Transfer has a commercial purpose. An Indirect Transfersatisfying all the following criteria will be deemed to lack a bona fide commercial purpose and be taxable under PRC laws: (i) 75% or more of the equityvalue of the intermediary enterprise being transferred is derived directly or indirectly from the PRC taxable assets; (ii) at any time during the one-year periodbefore the indirect transfer, 90% or more of the asset value of the intermediary enterprise (excluding cash) is comprised directly or indirectly of investments inChina, or 90% or more of its income is derived directly or indirectly from China; (iii) the functions performed and risks assumed by the intermediaryenterprise and any of its subsidiaries that directly or indirectly hold the PRC taxable assets are limited and are insufficient to prove their economic substance;and (iv) the non-PRC tax payable on the gain derived from the indirect transfer of the PRC taxable assets is lower than the potential PRC income tax on thedirect transfer of such assets. Nevertheless, a non-resident enterprise’s buying and selling shares or ADSs of the same listed foreign enterprise on the publicmarket will fall under the safe harbor available under SAT Circular 7 and will not be subject to PRC tax pursuant to SAT Circular 7. Under SAT Circular 7,the entities or individuals obligated to pay the transfer price to the transferor shall be the withholding agent and shall withhold the PRC tax from the transferprice. If the withholding agent fails to do so, the transferor shall report to and pay the PRC tax to the PRC tax authorities. In case neither the withholdingagent nor the transferor complies with the obligations under SAT Circular 7, other than imposing penalties such as late payment interest on the transferors,the tax authority may also hold the withholding agent liable and impose a penalty of 50% to 300% of the unpaid tax on the withholding agent. The penaltyimposed on the withholding agent may be reduced or waived if the withholding agent has submitted the relevant materials in connection with the indirecttransfer to the PRC tax authorities in accordance with SAT Circular 7.36 However, as these rules and notices are relatively new and there is a lack of clear statutory interpretation, we face uncertainties regarding thereporting required for and impact on future private equity financing transactions, share exchange or other transactions involving the transfer of shares in ourcompany by investors that are non-PRC resident enterprises, or the sale or purchase of shares in other non-PRC resident companies or other taxable assets byus. Our company and other non-resident enterprises in our group may be subject to filing obligations or being taxed if our company and other non-residententerprises in our group are transferors in such transactions, and may be subject to withholding obligations if our company and other non-resident enterprisesin our group are transferees in such transactions. For the transfer of shares in our company by investors that are non-PRC resident enterprises, our PRCsubsidiaries may be requested to assist in the filing under the rules and notices. As a result, we may be required to expend valuable resources to comply withthese rules and notices or to request the relevant transferors from whom we purchase taxable assets to comply, or to establish that our company and other non-resident enterprises in our group should not be taxed under these rules and notices, which may have a material adverse effect on our financial condition andresults of operations. There is no assurance that the tax authorities will not apply the rules and notices to our offshore restructuring transactions where non-PRC residents were involved if any of such transactions were determined by the tax authorities to lack reasonable commercial purpose. As a result, we and ournon-PRC resident investors may be at risk of being taxed under these rules and notices and may be required to comply with or to establish that we should notbe taxed under such rules and notices, which may have a material adverse effect on our financial condition and results of operations or such non-PRC residentinvestors’ investments in us. We may conduct acquisition transactions in the future. We cannot assure you that the PRC tax authorities will not, at theirdiscretion, adjust any capital gains and impose tax return filing obligations on us or require us to provide assistance for the investigation of PRC taxauthorities with respect thereto. Heightened scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potentialacquisitions we may pursue in the future.Any failure to comply with PRC regulations regarding the registration requirements for our employee equity incentive plans may subject us to fines andother legal or administrative sanctions, which could adversely affect our business, financial condition and results of operations.In February 2012, the SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic IndividualsParticipating in Stock Incentive Plans of Overseas Publicly Listed Companies, or the Stock Option Rules. In accordance with the Stock Option Rules andrelevant rules and regulations, PRC citizens or non-PRC citizens residing in China for a continuous period of not less than one year, who participate in anystock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualifiedagent, which could be a PRC subsidiary of such overseas listed company, and complete certain procedures. We and our employees who are PRC citizens orwho reside in China for a continuous period of not less than one year and who participate in our stock incentive plan will be subject to such regulation. Weplan to assist our employees to register their share options or shares. However, any failure of our PRC individual beneficial owners and holders of shareoptions or shares to comply with the SAFE registration requirements may subject them to fines and legal sanctions and may limit the ability of our PRCsubsidiaries to distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for ourdirectors and employees under PRC law.Proceedings brought by the SEC against the Big Four PRC-based accounting firms, including our independent registered public accounting firm, couldresult in our inability to file future financial statements in compliance with the requirements of the Exchange Act.In December 2012, the SEC instituted administrative proceedings under Rule 102(e)(1)(iii) of the SEC’s Rules of Practice against the Big FourPRC-based accounting firms, including our independent registered public accounting firm, alleging that these firms had violated U.S. securities laws and theSEC’s rules and regulations thereunder by failing to provide to the SEC the firms’ audit work papers with respect to certain PRC-based companies under theSEC’s investigation. On January 22, 2014, the administrative law judge, or the ALJ, presiding over the matter rendered an initial decision that each of thefirms had violated the SEC’s rules of practice by failing to produce audit workpapers to the SEC. The initial decision censured each of the firms and barredthem from practicing before the SEC for a period of six months. On February 12, 2014, the Big Four PRC-based accounting firms appealed the ALJ’s initialdecision to the SEC. On February 6, 2015, the four China-based accounting firms each agreed to a censure and to pay a fine to the SEC to settle the disputeand avoid suspension of their ability to practice before the SEC and audit U.S.-listed companies. The settlement required the firms to follow detailedprocedures and to seek to provide the SEC with access to Chinese firms’ audit documents via the CSRC, in response to future document requests by the SECmade through the CSRC. If the Big Four PRC-based accounting firms fail to comply with the documentation production procedures that are in the settlementagreement or if there is a failure of the process between the SEC and the CSRC, the SEC could restart the proceedings against the firms.37 In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, listed companies in the United States withmajor PRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which could result in financial statementsbeing determined to not be in compliance with the requirements of the Exchange Act, including possible delisting. Moreover, any negative news about theproceedings against these audit firms may cause investor uncertainty regarding PRC-based, United States-listed companies and the market price of our ADSsmay be adversely affected.If the accounting firms are subject to additional remedial measures, our ability to file our financial statements in compliance with SECrequirements could be impacted. A determination that we have not timely filed financial statements in compliance with SEC requirements wouldsubstantially reduce or effectively terminate the trading of our ADSs in the United States.Certain of our investments may be subject to review from the Committee on Foreign Investment in the United States, or CFIUS, which may delay or block atransaction from closing.The U.S. Congress has passed legislation that will expand the jurisdiction and powers of the CFIUS, the U.S. interagency committee that conductsnational security reviews of foreign investment. President Trump signed the Foreign Investment Risk Review Modernization Act (FIRRMA) in August 2018.Pursuant to FIRRMA, in October 2018 CFIUS launched a new “pilot program” that authorizes it to review transactions that include certain non-controllinginvestments in companies that deal in “critical technology.” The term “critical technology” includes, among others, technology subject to U.S. exportcontrols and certain “emerging and foundational technology,” a term that is still being defined but that is expected to include a range of U.S.biotechnology. If an investment by a foreign entity in a U.S. business dealing in “critical technology” meets certain thresholds, a filing with CFIUS ismandatory.Accordingly, to the extent the U.S. portion of our business decides to take investments from foreign persons, such investments could be subject toCFIUS jurisdiction. To date, none of our investments have been subject to CFIUS review but, depending on the particulars of ongoing or future investments,we may be obligated to secure CFIUS approval before closing, which could delay the time period between signing and closing. If we determine that a CFIUSfiling is not mandatory (or otherwise advisable), there is a risk that CFIUS could initiate its own review, if it determines that the transaction is subject to itsjurisdiction. If an investment raises significant national security concerns, CFIUS has the authority to impose mitigation conditions or recommend that thePresident block a transaction.Risks Related to Intellectual PropertyIf we are unable to obtain and maintain patent protection for our products and drug candidates through intellectual property rights, or if the scope of suchintellectual property rights obtained is not sufficiently broad, third parties may compete directly against us.Our success depends, in part, on our ability to protect our products and drug candidates from competition by obtaining, maintaining andenforcing our intellectual property rights, including patent rights. We seek to protect the products and drug candidates and technology that we considercommercially important by filing PRC and international patent applications, relying on trade secrets or pharmaceutical regulatory protection or employing acombination of these methods. We also seek to protect our proprietary position by in-licensing intellectual property relating to our technology and drugcandidates. We do not own or exclusively license any issued patents with respect to certain of our products and drug candidates in all territories in which weplan to commercialize our products and drug candidates. For example, we do not own or exclusively license any issued patents covering ZEJULA in HongKong and Macau. We do not own or exclusively license any issued patents covering Optune in Hong Kong, Macau or Taiwan. We do not own or exclusivelylicense any issued patents covering margetuximab, MGD013 and a pre-clinical multi-specific TRIDENT molecule in Macau or Taiwan, but we do non-exclusively in-license issued patents in China and Hong Kong and pending patent applications in China, Hong Kong and Taiwan covering them. We do notown or exclusively license any issued patents or pending patent applications covering Optune in Hong Kong, Macau, or Taiwan, but we do exclusivelylicense issued patents and pending patent applications covering Optune in China. Additionally, we do not own or exclusively license any issued patentscovering ZL-2302 in the PRC, but we do in-license a pending patent application relating to ZL-2302 in the PRC. However, we cannot predict whether suchpatent application or any of our other owned or in-licensed pending patent applications will result in the issuance of any patents that effectively protect ourproducts and drug candidates. If we or our licensors are unable to obtain or maintain patent protection with respect to our products or drug candidates andtechnology we develop, our business, financial condition, results of operations, and prospects could be materially harmed. 38 The patent prosecution process is expensive, time-consuming and complex, and we may not be able to file, prosecute, maintain, enforce or licenseall necessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, our license and intellectual property-related agreementsmay not provide us with exclusive rights to use our in-licensed intellectual property rights relating to the applicable products and drug candidates in allrelevant fields of use and in all territories in which we may wish to develop or commercialize our technology and products in the future. For example, underour agreements with GSK for ZEJULA, and Bristol-Myers Squibb for ZL-2301, our licenses are limited to China, Hong Kong, and Macau. In the case of ouragreements with Novocure for Optune, Paratek for ZL-2401, Five Prime for FPA144, and MacroGenics for margetuximab, MGD013 and a pre-clinical multi-specific TRIDENT molecule, our licenses are limited to China, Hong Kong, Macau, and Taiwan. Also, in the case of our agreement with Entasis for ETX2514,our license is limited to China, Hong Kong, Macau, Taiwan, Korea, Vietnam, Thailand, Cambodia, Laos, Malaysia, Indonesia, the Philippines, Singapore,Australia, New Zealand and Japan. As a result, we may not be able to prevent competitors from developing and commercializing competitive products in allsuch fields and territories.Patents may be invalidated and patent applications, including our in-licensed patent application relating to FP144, Optune, margetuximab,MGD013, or a pre-clinical multi-specific TRIDENT molecule, may not be granted for a number of reasons, including known or unknown prior art,deficiencies in the patent application or the lack of novelty of the underlying invention or technology. It is also possible that we will fail to identifypatentable aspects of our research and development output in time to obtain patent protection. Although we enter into non-disclosure and confidentialityagreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, corporatecollaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and any other third parties, any of these parties may breach suchagreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection. In addition, publicationsof discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions aretypically not published until 18 months after filing, or in some cases, not at all. Therefore, we cannot be certain that we or our licensors were the first to makethe inventions claimed in our owned or in-licensed patents or pending patent applications or that we or our licensors were the first to file for patent protectionof such inventions. Furthermore, the PRC and, recently, the United States have adopted the “first-to-file” system under which whoever first files a patentapplication will be awarded the patent if all other patentability requirements are met. Under the first-to-file system, third parties may be granted a patentrelating to a technology, which we invented.In addition, under PRC Patent Law, any organization or individual that applies for a patent in a foreign country for an invention or utility modelaccomplished in China is required to report to the State Intellectual Property Office, or SIPO, for confidentiality examination. Otherwise, if an application islater filed in China, the patent right will not be granted. Moreover, even if patents do grant from any of the applications, the grant of a patent is notconclusive as to its scope, validity or enforceability.The coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted afterissuance. Even if patent applications we license or own currently or in the future issue as patents, they may not issue in a form that will provide us with anymeaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive advantage. Inaddition, the patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions,and has been the subject of much litigation in recent years. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rightsare highly uncertain.The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courtsor patent offices in the PRC, United States and abroad. We and our licensors may be subject to a third-party preissuance submission of prior art to the UnitedStates Patent and Trademark Office, or USPTO, or become involved in opposition, derivation, revocation, re-examination, post-grant and inter partes review,or interference proceedings or similar proceedings in foreign jurisdictions challenging our patent rights or the patent rights of others. An adversedetermination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our owned or in-licensed patent rights, allow thirdparties to commercialize our technology, products or drug candidates and compete directly with us without payment to us, or result in our inability tomanufacture or commercialize products or drug candidates without infringing, misappropriating or otherwise violating third-party patent rights. Moreover,we, or one of our licensors, may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grantchallenge proceedings, such as oppositions in a foreign patent office, that challenge the priority of our or our licensor’s invention or other features ofpatentability of our owned or in-licensed patents and patent applications. Such challenges may result in loss of patent rights, loss of exclusivity, or in patentclaims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identicaltechnology and products, limit the duration of the patent protection of our39 technology, or limit the price at which we can sell our products and drug candidates. Such proceedings also may result in substantial costs and requiresignificant time from our scientists and management, even if the eventual outcome is favorable to us. Consequently, we do not know whether any of ourtechnology, products or drug candidates will be protectable or remain protected by valid and enforceable patents. Our competitors or other third parties maybe able to circumvent our owned or in-licensed patents by developing similar or alternative technologies or products in a non-infringing manner.Furthermore, the terms of patents are finite. The patents we own or in-license and the patents that may issue from our currently pending owned andin-licensed patent applications generally have a 20-year protection period starting from such patents and patent applications’ earliest filing date. Given theamount of time required for the development, testing and regulatory review of products and new drug candidates, patents protecting such products and drugcandidates might expire before or shortly after such products or drug candidates are commercialized. As a result, our owned or in-licensed patents and patentapplications may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. Moreover, some of ourpatents and patent applications are, and may in the future be, co-owned with third parties. If we are unable to obtain an exclusive license to any such thirdparty co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including ourcompetitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of ourpatents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a materialadverse effect on our competitive position, business, financial conditions, results of operations and prospects.Our owned or in-licensed patents could be found invalid or unenforceable if challenged in court or before the USPTO or comparable foreign authority.We or our licensors may become involved in patent litigation against third parties to enforce our owned or in-licensed patent rights, to invalidatepatents held by such third parties, or to defend against such claims. A court may refuse to stop the other party from using the technology at issue on thegrounds that our owned or in-licensed patents do not cover the third-party technology in question. Further, such third parties could counterclaim that weinfringe, misappropriate or otherwise violate their intellectual property or that a patent we or our licensors have asserted against them is invalid orunenforceable. In patent litigation, defendant counterclaims challenging the validity, enforceability or scope of asserted patents are commonplace and thereare numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. In addition, third parties may initiate legal proceedingsbefore administrative bodies in the United States or abroad, even outside the context of litigation, against us or our licensors with respect to our owned or in-licensed intellectual property to assert such challenges to such intellectual property rights. Such mechanisms include re-examination, inter partes review,post-grant review, interference proceedings, derivation proceedings and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Suchproceedings could result in revocation, cancellation or amendment to our patents in such a way that they no longer cover and protect our products and drugcandidates.The outcome of any such proceeding is generally unpredictable. Grounds for a validity challenge could be, among other things, an alleged failureto meet any of several statutory requirements, including lack of novelty, obviousness, lack of written description or non-enablement. Grounds for anunenforceability assertion could be, among other things, an allegation that someone connected with prosecution of the patent withheld relevant informationor made a misleading statement during prosecution. It is possible that prior art of which we and the patent examiner were unaware during prosecution exists,which could render our patents invalid. Moreover, it is also possible that prior art may exist that we are aware of but do not believe is relevant to our currentor future patents, but that could nevertheless be determined to render our patents invalid. Even if we are successful in defending against such challenges, thecost to us of any patent litigation or similar proceeding could be substantial, and it may consume significant management and other personnel time. We donot maintain insurance to cover intellectual property infringement, misappropriation or violation.An adverse result in any litigation or other intellectual property proceeding could put one or more of our patents at risk of being invalidated,rendered unenforceable or interpreted narrowly. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability of our patentscovering one or more of our products or drug candidates, we would lose at least part, and perhaps all, of the patent protection covering such products or drugcandidates. Competing products or drugs may also be sold in other countries in which our patent coverage might not exist or be as strong. If we lose a foreignpatent lawsuit, alleging our infringement of a competitor’s patents, we could be prevented from marketing our products or drugs in one or more foreigncountries. Any of these outcomes would have a materially adverse effect on our business, financial condition, results of operations and prospects.40 We may not be able to protect our intellectual property in the PRC.The validity, enforceability and scope of protection available under the relevant intellectual property laws in the PRC are uncertain and stillevolving. Implementation and enforcement of PRC intellectual property-related laws have historically been deficient and ineffective. Accordingly,intellectual property and confidentiality legal regimes in China may not afford protection to the same extent as in the United States or other countries.Policing unauthorized use of proprietary technology is difficult and expensive, and we may need to resort to litigation to enforce or defend patents issued tous or our licensors to determine the enforceability, scope and validity of our proprietary rights or those of others. As noted above, we may need to rely on ourlicensors to enforce and defend our technologies. The experience and capabilities of PRC courts in handling intellectual property litigation varies, andoutcomes are unpredictable. Further, such litigation may require a significant expenditure of cash and may divert management’s attention from ouroperations, which could harm our business, financial condition and results of operations. An adverse determination in any such litigation could materiallyimpair our intellectual property rights and may harm our business, prospects and reputation.We may not be able to protect our intellectual property and proprietary rights throughout the world.Filing, prosecuting, maintaining and defending patents on products and drug candidates in all countries throughout the world would beprohibitively expensive, and the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Consequently, wemay not be able to prevent third parties from practicing our inventions in all countries outside the United States or PRC or from selling or importing productsmade using our inventions in and into the United States, the PRC or other jurisdictions. Competitors may use our technologies in jurisdictions where we havenot obtained patent protection to develop their own competing products and, further, may export otherwise infringing products to territories where we havepatent protection or licenses but enforcement is not as strong as that in the United States. These products may compete with our products, and our patents orother intellectual property rights may not be effective or sufficient to prevent them from competing.Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions,including China. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, andother intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement ofour patents or marketing of competing products in violation of our intellectual property and proprietary rights generally. Proceedings to enforce ourintellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects ofour business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing, and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, maynot be commercially meaningful. Accordingly, our efforts to enforce our intellectual property and proprietary rights around the world may be inadequate toobtain a significant commercial advantage from the intellectual property that we develop or license.Furthermore, many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inaddition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner mayhave limited remedies, which could materially diminish the value of such patent. If we or any of our licensors are forced to grant a license to third parties withrespect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations andprospects may be adversely affected.Developments in patent law could have a negative impact on our business.Changes in either the patent laws or interpretation of the patent laws in the United States, PRC and other jurisdictions could increase theuncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents, including changing thestandards of patentability, and any such changes could have a negative impact on our business. For example, in the United States, the Leahy-Smith AmericaInvents Act, or the America Invents Act, which was signed into law in September 2011, includes a number of significant changes to U.S. patent law. Thesechanges include a transition from a “first-to-invent” system to a “first-to-file” system as of March 2013, changes to the way issued patents are challenged, andchanges to the way patent applications are disputed during the examination process. These include allowing third party submission of prior art to the USPTOduring patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post grant proceedings,41 including post grant review, inter partes review, and derivation proceedings. As a result of these changes, patent law in the United States may favor larger andmore established companies that have greater resources to devote to patent application filing and prosecution. The USPTO has developed new and untestedregulations and procedures to govern the full implementation of the America Invents Act, and many of the substantive changes to patent law associated withthe America Invents Act, and, in particular, the first-to-file provisions became effective in March 2013. Substantive changes to patent law associated with theAmerica Invents Act may affect our ability to obtain patents, and if obtained, to enforce or defend them. Accordingly, it is not clear what, if any, impact theAmerica Invents Act will have on the cost of prosecuting our patent applications and our ability to obtain patents based on our discoveries and to enforce ordefend any patents that may issue from our patent applications, all of which could have a material adverse effect on our business, financial condition, resultsof operations and prospects.In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularlyuncertain. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights ofpatent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, onceobtained. Depending on future actions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change inunpredictable ways that could have a material adverse effect on our existing patent portfolio and our ability to protect and enforce our intellectual propertyin the future.If we are unable to maintain the confidentiality of our trade secrets, our business and competitive position may be harmed.In addition to the protection afforded by registered patents and pending patent applications, we rely upon unpatented trade secret protection,unpatented know-how and continuing technological innovation to develop and maintain our competitive position. However, trade secrets and know-howcan be difficult to protect. We also seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with partiesthat have access to them, such as our partners, collaborators, scientific advisors, employees, consultants and other third parties, and invention assignmentagreements with our consultants and employees. We cannot guarantee that we have entered into such agreements with each party that may have or have hadaccess to our trade secrets or proprietary technology and processes. We may not be able to prevent the unauthorized disclosure or use of our technical know-how or other trade secrets by the parties to these agreements, however, despite the existence generally of confidentiality agreements and other contractualrestrictions. If any of the partners, collaborators, scientific advisors, employees and consultants who are parties to these agreements breaches or violates theterms of any of these agreements or otherwise discloses our proprietary information, we may not have adequate remedies for any such breach or violation, andwe could lose our trade secrets as a result. Enforcing a claim that a third party illegally disclosed or misappropriated our trade secrets, including throughintellectual property litigations or other proceedings, is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, courts inChina and other jurisdictions inside and outside the United States are less prepared, less willing or unwilling to protect trade secrets.Our trade secrets could otherwise become known or be independently discovered by our competitors or other third parties. For example,competitors could purchase our products and drug candidates and attempt to replicate some or all of the competitive advantages we derive from ourdevelopment efforts, willfully infringe, misappropriate or otherwise violate our intellectual property rights, design around our intellectual property protectingsuch technology or develop their own competitive technologies that fall outside of our intellectual property rights. If any of our trade secrets were to bedisclosed or independently developed by a competitor, we would have no right to prevent them, or others to whom they communicate it, from using thattechnology or information to compete against us, which may have a material adverse effect on our business, prospects, financial condition and results ofoperations.If our products or drug candidates infringe, misappropriate or otherwise violate the intellectual property rights of third parties, we may incur substantialliabilities, and we may be unable to sell or commercialize these products and drug candidates.Our commercial success depends significantly on our ability to develop, manufacture, market and sell our products and drug candidates and useour proprietary technologies without infringing, misappropriating or otherwise violating the patents and other proprietary rights of third parties. Thebiotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. In the PRCand the United States, invention patent applications are generally maintained in confidence until their publication 18 months from the filing date. Thepublication of discoveries in the scientific or patent literature frequently occurs substantially later than42 the date on which the underlying discoveries were made and invention patent applications are filed. Even after reasonable investigation, we may not knowwith certainty whether any third-party may have filed a patent application without our knowledge while we are still developing or producing that product.We may become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our technology andany products or drug candidates we may develop, including interference proceedings, post-grant review, inter partes review and derivation proceedingsbefore the USPTO and similar proceedings in foreign jurisdictions.Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of theirmerit. Even if we believe third-party intellectual property claims are without merit, there is no assurance that a court would find in our favor on questions ofinfringement, validity, enforceability or priority. A court of competent jurisdiction could hold that these third-party patents are valid, enforceable andinfringed, which could materially and adversely affect our ability to commercialize any products or drug candidates we may develop and any other products,drug candidates or technologies covered by the asserted third-party patents. In order to successfully challenge the validity of any such U.S. patent in federalcourt, we would need to overcome a presumption of validity. There is no assurance that a court of competent jurisdiction would invalidate the claims of anysuch U.S. patent.If we are found to infringe a third party’s patent rights, and we are unsuccessful in demonstrating that such patents are invalid or unenforceable,we could be required to:obtain royalty-bearing licenses from such third party to such patents, which may not be available on commercially reasonable terms, if at all andeven if we were able to obtain such licenses, they could be non-exclusive, thereby giving our competitors and other third parties access to the sametechnologies licensed to us, and could require us to make substantial licensing and royalty payments;defend litigation or administrative proceedings;reformulate product(s) so that it does not infringe the intellectual property rights of others, which may not be possible or could be very expensiveand time consuming;cease developing, manufacturing and commercializing the infringing technology, products or drug candidates; andpay such third party significant monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed apatent or other intellectual property right.Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar material adverse effect onour business, financial condition, results of operations, and prospects. Even if we are successful in such litigations or administrative proceedings, suchlitigations and proceedings may be costly and could result in a substantial diversion of management resources. Any of the foregoing may have a materialadverse effect on our business, prospects, financial condition and results of operations.Intellectual property litigation and proceedings could cause us to spend substantial resources and distract our personnel from their normalresponsibilities.Even if resolved in our favor, litigation or other legal proceedings relating to our, our licensor’s or other third parties’ intellectual property claimsmay cause us to incur significant expenses and could distract our personnel from their normal responsibilities. In addition, there could be publicannouncements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these resultsto be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase ouroperating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not havesufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of suchlitigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual propertyportfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on ourability to compete in the marketplace.43 We may be subject to claims that we or our employees, consultants or advisors have wrongfully used or disclosed alleged trade secrets of competitors ortheir current or former employers or are in breach of non-competition or non-solicitation agreements with competitors or other third parties.We could in the future be subject to claims that we or our employees, consultants or advisors have inadvertently or otherwise used or disclosedalleged trade secrets or other proprietary information of current or former employers, competitors or other third parties. Many of our employees, consultantsand advisors are currently or were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors orpotential competitors. Although we try to ensure that our employees and consultants do not improperly use the intellectual property, proprietary information,know-how or trade secrets of others in their work for us, we may be subject to claims that we or these individuals have breach the terms of his or her non-competition or non-solicitation agreement, or that we or these individuals have, inadvertently or otherwise, used or disclosed the alleged trade secrets orother proprietary information of a current or former employer, competitor or other third parties.Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result insubstantial costs and could be a distraction to management and research personnel. If our defenses to these claims fail, in addition to requiring us to paymonetary damages, a court could prohibit us from using technologies or features that are essential to our products and drug candidates, if such technologiesor features are found to incorporate or be derived from the trade secrets or other proprietary information of the former employers. An inability to incorporatesuch technologies or features would have a material adverse effect on our business and may prevent us from successfully commercializing our products anddrug candidates. In addition, we may lose valuable intellectual property rights or personnel as a result of such claims. Moreover, any such litigation or thethreat thereof may adversely affect our ability to hire employees or contract with independent sales representatives. A loss of key personnel or their workproduct could hamper or prevent our ability to commercialize our products and drug candidates, which would have a material adverse effect on our business,results of operations and financial condition.In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectualproperty to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, infact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or theassignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, todetermine the ownership of what we regard as our intellectual property. Such claims could have a material adverse effect on our business, financial condition,results of operations and prospects.We may not be successful in obtaining necessary intellectual property rights to drug candidates for our development pipeline through acquisitions and in-licenses. Although we also intend to develop drug candidates through our own internal research, our near-term business model is predicated, in large part,on our ability to successfully identify and acquire or in-license drug candidates to grow our drug candidate pipeline. However, we may be unable to acquireor in-license intellectual property rights relating to, or necessary for, any such drug candidates from third parties on commercially reasonable terms or at all,including because we are focusing on specific areas of care such as oncology and inflammatory and infectious diseases. In that event, we may be unable todevelop or commercialize such drug candidates. We may also be unable to identify drug candidates that we believe are an appropriate strategic fit for ourcompany and intellectual property relating to, or necessary for, such drug candidates. Any of the foregoing could have a materially adverse effect on ourbusiness, financial condition, results of operations and prospects.The in-licensing and acquisition of third-party intellectual property rights for drug candidates is a competitive area, and a number of moreestablished companies are also pursuing strategies to in-license or acquire third-party intellectual property rights for drug candidates that we may considerattractive or necessary. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinicaldevelopment and commercialization capabilities. Furthermore, companies that perceive us to be a competitor may be unwilling to assign or license rights tous. If we are unable to successfully obtain rights to suitable drug candidates, our business, financial condition, results of operations and prospects for growthcould suffer.44 In addition, we expect that competition for the in-licensing or acquisition of third-party intellectual property rights for drug candidates that areattractive to us may increase in the future, which may mean fewer suitable opportunities for us as well as higher acquisition or licensing costs. We may beunable to in-license or acquire the third-party intellectual property rights for drug candidates on terms that would allow us to make an appropriate return onour investment.If we do not obtain patent term extension and data exclusivity for our products or any drug candidates we may develop, our business may be materiallyharmed.Depending upon the timing, duration and specifics of any FDA marketing approval of our products or any drug candidates we may develop, oneor more of our owned or in-licensed U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent TermRestoration Action of 1984, or Hatch Waxman Amendments. The Hatch Waxman Amendments permit a patent extension term of up to five years ascompensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond atotal of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for usingit, or a method for manufacturing it may be extended. However, we may not be granted an extension because of, for example, failing to exercise due diligenceduring the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, orotherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than werequest. The PRC has not established a patent term extension system, but the government proposed to grant patent term extension to new drugs that will bemarketed in and outside China for up to 5 years. If we are unable to obtain patent term extension or term of any such extension is less than we request, ourcompetitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations, andprospects could be materially harmed.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and otherrequirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with theserequirements.Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and applications will be due to be paid to theUSPTO and various government patent agencies outside of the United States over the lifetime of our owned or licensed patents and applications. In certaincircumstances, we rely on our licensing partners to pay these fees due to U.S. and non-U.S. patent agencies. The USPTO and various non-U.S. governmentagencies require compliance with several procedural, documentary, fee payment, and other similar provisions during the patent application process. We arealso dependent on our licensors to take the necessary action to comply with these requirements with respect to our licensed intellectual property. In somecases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, inwhich non-compliance can result in abandonment or lapse of the patent or patent application, resulting in a partial or complete loss of patent rights in therelevant jurisdiction. In such an event, potential competitors might be able to enter the market with similar or identical products or technology, which couldhave a material adverse effect on our business, financial condition, results of operations, and prospects.Intellectual property rights do not necessarily address all potential threats.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations andmay not adequately protect our business or permit us to maintain our competitive advantage. For example: •others may be able to make gene therapy products that are similar to any product or drug candidates we may develop or utilize similar genetherapy technology but that are not covered by the claims of the patents that we license or may own in the future; •we, our licensors, patent owners of patent rights that we have in-licensed, or current or future collaborators might not have been the first tomake the inventions covered by the issued patent or pending patent application that we license or may own in the future; •we, our licensors, patent owners of patent rights that we have in-licensed, or current or future collaborators might not have been the first tofile patent applications covering certain of our or their inventions;45 •others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing,misappropriating or otherwise violating our owned or licensed intellectual property rights; •it is possible that our pending licensed patent applications or those that we may own in the future will not lead to issued patents; •issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors; •our competitors might conduct research and development activities in countries where we do not have patent rights and then use theinformation learned from such activities to develop competitive products for sale in our major commercial markets; •we may not develop additional proprietary technologies that are patentable; •the patents of others may harm our business; and •we may choose not to file a patent in order to maintain certain trade secrets or know how, and a third party may discover certaintechnologies containing such trade secrets or know how through independent research and development and/or subsequently file a patentcovering such intellectual property.Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations andprospects.Risks Related to Our ADSsWe may be at an increased risk of securities class action litigation.Historically, securities class action litigation has often been brought against a company following a decline in the market price of its securities.This risk is especially relevant for us because biotechnology and biopharmaceutical companies have experienced significant share price volatility in recentyears. If we were to be sued, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.We are eligible to be treated as an “emerging growth company,” as defined in the Securities Act of 1933, as amended (the “Securities Act), and we cannotbe certain if the reduced disclosure requirements applicable to us as an “emerging growth company” will make our ADSs less attractive to investors.We are eligible to be treated as an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, andwe may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerginggrowth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result,our shareholders may not have access to certain information that they may deem important. We could be an emerging growth company for up to five years,although circumstances could cause us to lose that status earlier, including if our total annual gross revenue exceeds $1.07 billion, if we issue more than $1.0billion in non-convertible debt securities during any three-year period, or if the market value of our ordinary shares held by non-affiliates exceeds $700.0million. We cannot predict if investors will find our ADSs less attractive because we may rely on these exemptions. If some investors find our ADSs lessattractive as a result, there may be a less active trading market for our ADSs and our stock price may be more volatile.If we fail to establish and maintain proper internal financial reporting controls, our ability to produce accurate financial statements or comply withapplicable regulations could be impaired.Pursuant to Section 404 of the Sarbanes-Oxley Act, we will be required to file a report by our management on our internal control over financialreporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However,while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued byour independent registered public accounting firm. The presence of material weaknesses in internal control over financial reporting could result in financialstatement errors which, in turn, could lead to errors in our financial reports and/or delays in our financial reporting, which could require us to restate ouroperating results. We might not identify one or46 more material weaknesses in our internal controls in connection with evaluating our compliance with Section 404 of the Sarbanes-Oxley Act. In order tomaintain and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, we will need to expendsignificant resources and provide significant management oversight. Implementing any appropriate changes to our internal controls may require specificcompliance training of our directors and employees, entail substantial costs in order to modify our existing accounting systems, take a significant period oftime to complete and divert management’s attention from other business concerns. These changes may not, however, be effective in maintaining theadequacy of our internal control.If we are unable to conclude that we have effective internal controls over financial reporting, investors may lose confidence in our operatingresults, the price of the ADSs could decline and we may be subject to litigation or regulatory enforcement actions. In addition, if we are unable to meet therequirements of Section 404 of the Sarbanes-Oxley Act, the ADSs may not be able to remain listed on the Nasdaq Global Market.As a foreign private issuer, we are not subject to certain U.S. securities law disclosure requirements that apply to a domestic U.S. issuer, which may limitthe information publicly available to our shareholders.As a foreign private issuer we are not required to comply with all of the periodic disclosure and current reporting requirements of the ExchangeAct and therefore there may be less publicly available information about us than if we were a U.S. domestic issuer. For example, we are not subject to theproxy rules in the United States and disclosure with respect to our annual general meetings will be governed by the Cayman Islands requirements. Inaddition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of theExchange Act and the rules thereunder. Therefore, our shareholders may not know on a timely basis when our officers, directors and principal shareholderspurchase or sell our ordinary shares or ADSs.As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantlyfrom the Nasdaq Stock Market corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy ifwe complied fully with corporate governance listing standards.As a foreign private issuer, we are permitted to take advantage of certain provisions in the Nasdaq Stock Market listing rules that allow us tofollow Cayman Islands law for certain governance matters. Certain corporate governance practices in the Cayman Islands may differ significantly fromcorporate governance listing standards as, except for general fiduciary duties and duties of care, Cayman Islands law has no corporate governance regimewhich prescribes specific corporate governance standards. We follow Cayman Islands corporate governance practices in lieu of the corporate governancerequirements of the Nasdaq Stock Market in respect of the following: (i) the majority independent director requirement under Section 5605(b)(1) of theNasdaq Stock Market listing rules, (ii) the requirement under Section 5605(d) of the Nasdaq Stock Market listing rules that a compensation committeecomprised solely of independent directors governed by a compensation committee charter oversee executive compensation, (iii) the requirement underSection 5605(e) of the Nasdaq Stock Market listing rules that director nominees be selected or recommended for selection by either a majority of theindependent directors or a nominations committee comprised solely of independent directors and (iv) the requirement under Section 5605(b)(2) of theNasdaq Stock Market listing rules that our independent directors hold regularly scheduled executive sessions. Cayman Islands law does not impose arequirement that our board of directors consist of a majority of independent directors. Nor does Cayman Islands law impose specific requirements on theestablishment of a compensation committee or nominating committee or nominating process. Therefore, our shareholders may be afforded less protectionthan they otherwise would have under corporate governance listing standards applicable to U.S. domestic issuers.47 We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and currentreporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s mostrecently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2019. We would lose ourforeign private issuer status if, for example, more than 50% of our ordinary shares are directly or indirectly held by residents of the U.S. and we fail to meetadditional requirements necessary to maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required tofile with the SEC periodic reports and registration statements on U.S. domestic issuer forms beginning on January 1, 2020, which are more detailed andextensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers,directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. Inaddition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the Nasdaq Stock Market listing rules. As aU.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incuras a foreign private issuer, and accounting, reporting and other expenses in order to maintain a listing on a U.S. securities exchange.The audit report included in this Annual Report on Form 20-F was prepared by an auditor who is not inspected by the U.S. Public Company AccountingOversight Board, or the PCAOB, and as such, you are deprived of the benefits of such inspection.Auditors of companies that are registered with the SEC and traded publicly in the United States, including the independent registered publicaccounting firm of our company, must be registered with the PCAOB, and are required by the laws of the United States to undergo regular inspections by thePCAOB to assess their compliance with the laws of the United States and professional standards. Because substantially all of our operations are within thePRC, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities, our auditor is not currentlyinspected by the PCAOB.In May 2013, the PCAOB announced that it had entered into a Memorandum of Understanding on Enforcement Cooperation with the ChinaSecurities Regulatory Commission, or CSRC, and the Ministry of Finance, which establishes a cooperative framework between the parties for the productionand exchange of audit documents relevant to investigations undertaken by the PCAOB in the United States or the CSRC or the Ministry of Finance in thePRC. The PCAOB continues to be in discussions with the CSRC and the Ministry of Finance to permit joint inspections in the PRC of audit firms that areregistered with PCAOB and audit Chinese companies that trade on U.S. exchanges.This lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating audits and quality control procedures of any auditorsoperating in China, including our auditor. As a result, investors may be deprived of the benefits of PCAOB inspections. The inability of the PCAOB toconduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control proceduresas compared to auditors outside of China that are subject to PCAOB inspections. Investors may lose confidence in our reported financial information andprocedures and the quality of our financial statements.We do not currently intend to pay dividends on our securities, and, consequently, your ability to achieve a return on your investment will depend onappreciation in the price of the ADSs.We have never declared or paid any dividends on our ordinary shares. We currently intend to invest our future earnings, if any, to fund ourgrowth. Therefore, investors are not likely to receive any dividends on their ADSs at least in the near term, and the success of an investment in ADSs willdepend upon any future appreciation in its value. Consequently, investors may need to sell all or part of their holdings of ADSs after price appreciation,which may never occur, to realize any future gains on their investment. There is no guarantee that the ADSs will appreciate in value or even maintain theprice at which our investors purchased their ADSs.The market price for our ADSs may be volatile which could result in substantial loss to you.The market price for our ADSs has been volatile. From September 19, 2017 to March 15, 2019, the closing price of our ADSs ranged from a highof $34.09 to a low of $14.95 per ADS.48 The market price of our ADSs is likely to be highly volatile and subject to wide fluctuations in response to factors, including the following: •announcements of competitive developments; •regulatory developments affecting us, our customers or our competitors; •announcements regarding litigation or administrative proceedings involving us; •actual or anticipated fluctuations in our period-to-period operating results; •changes in financial estimates by securities research analysts; •additions or departures of our executive officers; •fluctuations of exchange rates between the RMB and the U.S. dollar; •release or expiration of lock-up or other transfer restrictions on our outstanding ordinary shares of ADSs; and •sales or perceived sales of additional ordinary shares or ADSs.In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to theoperating performance of particular companies. For example, since August 2008, multiple exchanges in the United States and other countries and regions,including China, experienced sharp declines in response to the growing credit market crisis and the recession in the United States. As recently as October2018, the exchanges in China experienced a sharp decline. Prolonged global capital markets volatility may affect overall investor sentiment towards ourADSs, which would also negatively affect the trading prices for our ADSs.Fluctuations in the value of the renminbi may have a material adverse effect on our results of operations and the value of your investment.The value of the renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in politicaland economic conditions. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the renminbi to the U.S. dollar, andthe renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted,and the exchange rate between the renminbi and U.S. dollar remained within a narrow band. In June 2010, China’s People’s Bank of China, or PBOC,announced that the PRC government would increase the flexibility of the exchange rate, and thereafter allowed the renminbi to appreciate slowly against theU.S. dollar within the narrow band fixed by the PBOC. However, more recently, on August 11, 12 and 13, 2015, the PBOC significantly devalued therenminbi by fixing its price against the U.S. dollar 1.9%, 1.6%, and 1.1% lower than the previous day’s value, respectively. On October 1, 2016, the renminbijoined the International Monetary Fund’s basket of currencies that make up the Special Drawing Right, or SDR, along with the U.S. dollar, the Euro, theJapanese yen and the British pound. In the fourth quarter of 2016, the renminbi depreciated significantly while the U.S. dollar surged and China experiencedpersistent capital outflows. With the development of the foreign exchange market and progress towards interest rate liberalization and renminbiinternationalization, the PRC government may in the future announce further changes to the exchange rate system. There is no guarantee that the renminbiwill not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S.government policy may impact the exchange rate between the renminbi and the U.S. dollar in the future.Significant revaluation of the renminbi may have a material adverse effect on your investment. For example, to the extent that we need to convertU.S. dollars into renminbi for our operations, appreciation of the renminbi against the U.S. dollar would have an adverse effect on the renminbi amount wewould receive from the conversion. Conversely, if we decide to convert our renminbi into U.S. dollars for the purpose of making payments for dividends onour ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the renminbi would have a negative effect on the U.S. dollaramount available to us. In addition, appreciation or depreciation in the value of the renminbi relative to U.S. dollars would affect our financial resultsreported in U.S. dollar terms regardless of any underlying change in our business or results of operations.49 Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into anyhedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in thefuture, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, ourcurrency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert renminbi into foreign currency.Holders of ADSs have fewer rights than shareholders and must act through the depositary to exercise their rights.Holders of our ADSs do not have the same rights as our shareholders and may only exercise the voting rights with respect to the underlyingordinary shares in accordance with the provisions of the deposit agreement. Under our fourth amended and restated memorandum and articles of association,an annual general meeting and any extraordinary general meeting may be called with not less than seven days’ notice. When a general meeting is convened,you may not receive sufficient notice of a shareholders’ meeting to permit you to withdraw the ordinary shares underlying your ADSs to allow you to votewith respect to any specific matter. If we ask for your instructions, we will give the depositary notice of any such meeting and details concerning the mattersto be voted upon at least 30 days in advance of the meeting date and the depositary will send a notice to you about the upcoming vote and will arrange todeliver our voting materials to you. The depositary and its agents, however, may not be able to send voting instructions to you or carry out your votinginstructions in a timely manner. We will make all commercially reasonable efforts to cause the depositary to extend voting rights to you in a timely manner,but we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the ordinary sharesunderlying your ADSs. Furthermore, the depositary will not be liable for any failure to carry out any instructions to vote, for the manner in which any vote iscast or for the effect of any such vote. As a holder or beneficial owner of ADSs, you may have limited recourse if we or the depositary fail to meet ourrespective obligations under the deposit agreement or if you wish us or the depositary to participate in legal proceedings. As a result, you may not be able toexercise your right to vote and you may lack recourse if your ADSs are not voted as you request. In addition, in your capacity as an ADS holder, you will notbe able to call a shareholders’ meeting.You may not receive distributions on our ADSs or any value for them if such distribution is illegal or impractical or if any required government approvalcannot be obtained in order to make such distribution available to you.Although we do not have any present plan to pay any dividends, the depositary of our ADSs has agreed to pay to you the cash dividends or otherdistributions it or the custodian receives on ordinary shares or other deposited securities underlying our ADSs, after deducting its fees and expenses and anyapplicable taxes and governmental charges. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent.However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example,it would be unlawful to make a distribution to a holder of ADSs if it consists of securities whose offering would require registration under the Securities Actbut are not so properly registered or distributed under an applicable exemption from registration. The depositary may also determine that it is not reasonablypracticable to distribute certain property. In these cases, the depositary may determine not to distribute such property. We have no obligation to registerunder the U.S. securities laws any offering of ADSs, ordinary shares, rights or other securities received through such distributions. We also have no obligationto take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. This means that you may not receivedistributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions maycause a material decline in the value of our ADSs.Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings.We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rightsavailable to you in the United States unless we register the rights and the securities to which the rights relate under the Securities Act or an exemption fromthe registration requirements is available. Also, under the deposit agreement, the depositary bank will not make rights available to you unless either both therights and any related securities are registered under the Securities Act, or the distribution of them to ADS holders is exempted from registration under theSecurities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such aregistration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act. If thedepositary does not distribute the rights, it may, under the deposit agreement, either sell them, if possible, or allow them to lapse. Accordingly, you may beunable to participate in our rights offerings and may experience dilution in your holdings.50 Taxing authorities could reallocate our taxable income among our subsidiaries, which could increase our overall tax liability.We are incorporated under the laws of the Cayman Islands and currently have subsidiaries in China, Hong Kong, the Cayman Islands, the UnitedStates, Australia and the British Virgin Islands. If we succeed in growing our business we expect to conduct increased operations through our subsidiaries invarious tax jurisdictions pursuant to transfer pricing arrangements between us, our parent company and our subsidiaries. If two or more affiliated companiesare located in different countries, the tax laws or regulations of each country generally will require that transfer prices be the same as those between unrelatedcompanies dealing at arms’ length and that appropriate documentation is maintained to support the transfer prices. While we believe that we operate incompliance with applicable transfer pricing laws and intend to continue to do so, our transfer pricing procedures are not binding on applicable taxauthorities.If tax authorities in any of these countries were to successfully challenge our transfer prices as not reflecting arms’ length transactions they couldrequire us to adjust our transfer prices and thereby reallocate our income to reflect these revised transfer prices, which could result in a higher tax liability tous. In addition, if the country from which the income is reallocated does not agree with the reallocation, both countries could tax the same income, resultingin double taxation. If tax authorities were to allocate income to a higher tax jurisdiction, subject our income to double taxation or assess interest andpenalties, it would increase our consolidated tax liability, which could adversely affect our financial condition, results of operations and cash flows.A tax authority could asset that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, oftenreferred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability inone or more jurisdictions. A tax authority may take the position that material income tax liabilities, interest and penalties are payable by us, in which case, weexpect that we might contest such assessment. Contesting such an assessment may be lengthy and costly and if we were unsuccessful in disputing theassessment, the implications could increase our anticipated effective tax rate, where applicable.If we are classified as a passive foreign investment company, U.S. investors could be subject to adverse U.S. federal income tax consequences.Generally, if, for any taxable year, at least 75% of our gross income is passive income, or at least 50% of the value of our assets is attributable toassets that produce passive income or are held for the production of passive income, including cash, we would be characterized as a “passive foreigninvestment company,” or PFIC, for U.S. federal income tax purposes. For purposes of these tests, passive income generally includes dividends, interest, andgains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties inconnection with the active conduct of a trade or business. If we are a PFIC, U.S. holders of our ADSs may suffer adverse tax consequences, including havinggains realized on the sale of the ADSs treated as ordinary income rather than capital gain, the loss of the preferential rate applicable to dividends received onthe ADSs by individuals who are U.S. holders, and having interest charges apply to distributions by us and the proceeds of sales of the ADSs.As discussed in “Material United States Federal Income Tax Considerations—Passive Foreign Investment Company Considerations,” we believethat our Hong Kong subsidiary, Zai Lab (Hong Kong) Limited, was a PFIC for its taxable year ended July 12, 2017 and that the Company and its othersubsidiaries were not PFICs for the taxable year ended December 31, 2018 and we do not expect that the Company and its subsidiaries will be treated asPFICs for the current taxable year, although no assurance can be provided in that regard. Notwithstanding the foregoing, the determination of whether we area PFIC for any taxable year is a factual determination that can be made only after the end of each taxable year and which depends on the composition of ourincome and the composition and value of our assets for the relevant taxable year. Because we hold a substantial amount of passive assets, including cash, andbecause the value of our assets for purposes of the PFIC rules (including goodwill) may be determined by reference to the market value of our ADSs, whichmay be especially volatile due to the early stage of our products and drug candidates, and by how, and how quickly, we spend any cash that is raised in anyfinancing transaction, we cannot give any assurance that we will not be a PFIC for the current or any future taxable year.Whether or not U.S. holders make a timely “qualified electing fund,” or QEF election or mark-to-market election may affect the U.S. federalincome tax consequences to U.S. holders with respect to the acquisition, ownership and disposition of our ADSs. Prospective investors should consult theirown tax advisors regarding all aspects of the application of the PFIC rules to the ADSs. See “Material United States Federal Income Tax Considerations—Passive Foreign Investment Company Considerations.”51 If a United States person is treated as owning at least 10% of our common shares, such holder may be subject to adverse U.S. federal income taxconsequences.If a U.S. Holder (as defined below under “Material United States Federal Income Tax Considerations”) is treated as owning (directly, indirectly orconstructively) at least 10% of the value or voting power of our ADSs, such U.S. Holder may be treated as a “United States shareholder” with respect to each“controlled foreign corporation” in our group (if any). Because our group includes at least one U.S. subsidiary (Zai Lab (US), LLC), certain of our non-U.S.subsidiaries will be treated as controlled foreign corporations (regardless of whether Zai Lab Limited is treated as a controlled foreign corporation). A UnitedStates shareholder of a controlled foreign corporation may be required to annually report and include in its U.S. taxable income its pro rata share of “SubpartF income,” “global intangible low-taxed income” and investments in U.S. property by controlled foreign corporations, regardless of whether we make anydistributions. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain taxdeductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. We cannot provide any assurances that wewill assist investors in determining whether any of our non-U.S. subsidiaries, if any, are treated as a controlled foreign corporation or whether such investor istreated as a United States shareholder with respect to any of such controlled foreign corporations. Further, we cannot provide any assurances that we willfurnish to any United States shareholders information that may be necessary to comply with the reporting and tax paying obligations discussed above.Failure to comply with these reporting obligations may subject you to significant monetary penalties and may prevent the statute of limitations with respectto your U.S. federal income tax return for the year for which reporting was due from starting. U.S. holders should consult their tax advisors regarding thepotential application of these rules to their investment in our ADSs.Changes in tax law may adversely affect our business and financial results.Under current law, we expect to be treated as a non-U.S. corporation for U.S. federal income tax purposes. The tax laws applicable to our businessactivities, however, are subject to change and uncertain interpretation. Our tax position could be adversely impacted by changes in tax rates, tax laws, taxpractice, tax treaties or tax regulations or changes in the interpretation thereof by the tax authorities in jurisdictions in which we do business. Our actual taxrate may vary from our expectation and that variance may be material. A number of factors may increase our future effective tax rates, including: (1) thejurisdictions in which profits are determined to be earned and taxed; (2) the resolution of issues arising from any future tax audits with various tax authorities;(3) changes in the valuation of our deferred tax assets and liabilities; (4) our ability to use net operating loss carryforwards to offset future taxable income andany adjustments to the amount of the net operating loss carryforwards we can utilize, and (5) changes in tax laws or the interpretation of such tax laws, andchanges in U.S. GAAP.On December 22, 2017, President Trump signed into law new legislation that significantly revises the Internal Revenue Code of 1986, asamended. The newly enacted U.S. federal income tax law, among other things, contains significant changes to corporate taxation, including reduction of thecorporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings(except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of netoperating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreignearnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense overtime, and modifying or repealing many business deductions and credits. The overall impact of the new federal tax law is uncertain and our business andfinancial condition could be adversely affected. The impact of this tax reform on holders of our ADSs is also uncertain and could be adverse. We urge holdersof our ADS to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding ourADSs.You may have difficulty enforcing judgments obtained against us.We are a company incorporated under the laws of the Cayman Islands, and substantially all of our assets are located outside the United States.Substantially all of our current operations are conducted in the PRC. In addition, some of our directors and officers are nationals and residents of countriesother than the United States. A substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult forinvestors to effect service of process within the United States upon these persons. It may also be difficult for investors to enforce in U.S. courts judgmentsobtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, some of whomcurrently reside in the United States and whose assets are located outside the United States. In addition, there is uncertainty as to whether the courts of theCayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions ofthe securities laws of the United States or any state.52 The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize andenforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the countrywhere the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of reciprocity with theUnited States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, thePRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRClaws or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment renderedby a court in the United States.Investors may be subject to limitations on transfers of your ADSs.ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSsgenerally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of anyrequirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason. ITEM 4. INFORMATION ON THE COMPANYA. History and Development of the CompanyOur company was founded in the Cayman Islands on March 28, 2013 as an exempted company with limited liability under the Companies Law,Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. Our principal executive offices are located at 4560 Jinke Road, Bldg. 1, 4F,Pudong, Shanghai, China 201210. Our telephone number at that address is +86 21 6163 2588. The address of our registered office in the Cayman Islands isHarbour Place 2nd Floor, 103 South Church Street, P.O. Box 472, George Town, Grand Cayman KY1-1106, Cayman Islands. Our agent for service of processin the United States is Cogency Global Inc., located at 10 E. 40th Street, 10th Floor, New York, NY 10016.The chart below shows our principal subsidiaries as of February 28, 2019. Since our founding, we have raised approximately $164.6 million in private equity financing. In September 2017, we completed our initial publicoffering in the United States, listing on the Nasdaq Global Market, raising approximately $157.7 million in net proceeds after deducting underwritingcommissions and the offering expenses payable by us. In September 2018, we completed a registered offering of ADSs, raising approximately $140.3 millionin net proceeds after deducting underwriting commissions and the offering expenses payable by us. In addition, we have received government grants totalingapproximately $5.4 million since our inception.53 We currently have eight active in-licensed clinical drug candidates for development in China, Hong Kong, Macau and, in certain instances,Taiwan, Australia, New Zealand and other countries throughout Asia, through partnerships with GSK, Bristol-Myers Squibb, Paratek, Five Prime, Entasis,Novocure and MacroGenics. To date, we have made upfront, milestone and clinical cost reimbursement payments totaling approximately $101.4 millionsince our inception in connection with these licensing arrangements. In early 2017, we built a small molecule drug product facility in Suzhou, China capableof supporting clinical and commercial production. In 2018, we built a large molecule facility in Suzhou, China using GE Healthcare FlexFactory platformtechnology capable of supporting clinical production of our drug candidates. The cost to complete the small molecule facility was approximately $6.7million and was paid with cash on hand. The construction of the large molecule facility was completed in 2018, which cost approximately $12.9 million tocomplete.BusinessOverview of Our BusinessWe are an innovative, research-based, commercial-stage biopharmaceutical company based in China and the United States focusing ondiscovering or licensing, developing and commercializing proprietary therapeutics that address areas of large unmet medical need in the China and globalmarkets, including in the fields of oncology, infectious and autoimmune diseases. As part of that effort, we have assembled a leadership team with globalexperience and an extensive track record in navigating the regulatory process to develop and commercialize innovative drugs first in China and, potentially,the rest of the world. Our mission is to leverage our expertise and insight to address the expanding needs of Chinese patients in order to transform their livesand eventually utilize our China-based competencies to impact human health worldwide.Furthermore, Zai Lab was built on the vision that, despite having a significant addressable market and sizable growth potential, China hashistorically lacked access to many innovative therapies available in other parts of the world and its drug development infrastructure has been underutilized.There remains the need to bring new and transformative therapies to China. In recent years, the Chinese government has focused on promoting localinnovation through streamlining regulatory processes, improving drug quality standards and fostering a favorable environment, which we believe creates anattractive opportunity for the growth of China-based, innovation-focused companies.We have a broad and validated innovative pipeline currently consisting of eight clinical-stage drug candidates with potentially differentiatedprofiles, in addition to other assets, through partnerships with global biopharmaceutical companies. Our clinical-stage portfolio includes seven late-stageassets targeting large, fast growing segments of China’s pharmaceutical market. Across our broader portfolio, we currently have over 20 ongoing or plannedclinical trials. We believe that our leadership team’s extensive global drug development expertise, combined with our demonstrated understanding of thepharmaceutical industry, clinical resources and regulatory system in China, has provided us, and will continue to provide us, with opportunities to bringinnovative products to market in China efficiently.Our eight clinical-stage drug candidates were in-licensed for development in China, Hong Kong, Macau and, in certain instances, Taiwan,Australia, New Zealand and other countries throughout Asia. Our clinical trial applications, or CTAs, for four of these drug candidates have been accepted asCategory 1 drugs by the NMPA. This classification provides us with a competitive advantage as Category 1 drugs benefit from an expedited review of CTAsand NDAs, as well as commercial benefits.Our lead drug candidate ZL-2306, or ZEJULA, is an oral, once-daily small molecule PARP 1/2 inhibitor being developed and commercializedoutside of China, Hong Kong and Macau by our partner, TESARO, Inc. (recently acquired by GSK). ZEJULA has the potential to be a differentiated drug fortreatment across multiple solid tumor types in China, including ovarian and certain other types of cancer. In March 2017, ZEJULA received U.S. Food andDrug Administration, or FDA, marketing approval and in November 2017, it received European Commission European Medicines Agency, or EMA,marketing approval as a maintenance treatment for recurrent platinum-sensitive epithelial ovarian cancer. In April 2017, TESARO (now GSK) commerciallylaunched the product in the United States under the commercial name ZEJULA. In October 2018, the Hong Kong Department of Health approved ourapplication for ZEJULA in Hong Kong for adult patients with platinum-sensitive relapsed high grade serous epithelial ovarian cancer who are in a completeresponse or partial response to platinum-based chemotherapy and we began commercializing ZEJULA in Hong Kong in the fourth quarter of 2018. In China,our CTA for ZEJULA has been approved as a Category 1 drug by the NMPA across all indications that we aim to pursue. ZEJULA was also designated as a“National Sciences and Technology Major Project” by the Chinese government as part of a key initiative to strengthen local innovation.54 We have built a premier, fully integrated drug discovery and development platform that aims to bring both in-licensed and internally-discoveredmedicines to patients in China and globally. Our in-house research and development team had previously been directly involved in the discovery anddevelopment of several innovative drug candidates at Hutchison Medi-Pharma, including fruquintinib and savolitinib. Our in-house research anddevelopment team focuses on the development of innovative therapeutics for the treatment of oncology and auto-immune diseases. We have collaborationswith academic institutions in China, including Tsinghua University, Shanghai Institute of Materia Medica and Shanghai Institute of Organic Chemistry, theChinese Academy of Sciences, or CAS, to expand our in-house research projects. Our company has a leadership team with extensive pharmaceutical research,development and commercialization track records in both global and Chinese biopharmaceutical companies. We believe this team and our in-housediscovery and development capabilities will enable us to achieve our long-term goal of commercializing our internally discovered innovative medicine forpatients worldwide.We have built our own commercial team consisting of more than 180 employees as of March 1, 2019 to launch our portfolio of drug products.Part of our strategy to become a fully integrated biopharmaceutical company is the ability to produce both large and small molecule therapeutics underglobal standards, such as current good manufacturing practices, or cGMP. To this end, in the first half of 2017, we built a small molecule drug product facilitycapable of supporting clinical and commercial production, and in 2018, we built a large molecule facility capable of supporting clinical production of ourdrug candidates.Our Innovative PipelineWe have a broad pipeline of proprietary products and drug candidates that range from discovery stage to late-stage clinical to commercial-stageprograms. The following table summarizes our products, clinical-stage drug candidates and programs. 55 Our Late-Stage Clinical PipelineOur eight clinical stage products consist of seven late-stage drug candidates with China rights focus on oncology and infectious diseases, twotherapeutic areas where there is a large unmet need and lack of innovative treatment options in China. These drug candidates are: •Niraparib (ZEJULA) is a highly potent and selective oral, small molecule PARP 1/2 inhibitor with the potential to be a differentiated drugfor treatment across multiple solid tumor types in China, including ovarian and certain types of lung cancers. We have licensed ZEJULA, orniraparib, from Tesaro, which in March 2017 received FDA marketing approval and in November 2017, received EMA marketing approvalas ZEJULA for maintenance treatment for women with recurrent platinum-sensitive epithelial ovarian cancer. We believe ZEJULA isuniquely suited for the China marketplace, where there is a large ovarian cancer population. Niraparib was commercially launched byTesaro in the United States in April 2017. We commercialized ZEJULA in Hong Kong in the fourth quarter of 2018. In China, our IND forZEJULA has been approved as a Category 1 drug by the NMPA. We initiated the Phase III study of ZEJULA in patients with recurrentplatinum-sensitive ovarian cancer as a second-line maintenance therapy in September 2017. In June 2018, we initiated the second Phase IIIstudy in patients with platinum-responsive ovarian cancer as a first-line maintenance therapy and dosed our first patient. These studies aresimilar in design to Tesaro’s clinical studies of niraparib in ovarian cancer. In July 2018, we also initiated a Phase III study in patients withplatinum-responsive small cell lung cancer as maintenance therapy. In August 2018, we completed our PK study for Chinese patients withplatinum-sensitive ovarian cancer, which demonstrated a comparable PK profile to studies in non-Chinese patients. We continue to exploreZEJULA in patients with small cell lung cancer and other tumors with defects in their DNA repair mechanism. In August 2018, we enrolledthe first patient in our Phase III registration trial of ZEJULA as a first-line maintenance therapy in small cell lung cancer in China. This willbe the first clinical trial of ZEJULA in this type of cancer. We are also exploring the combination potential of ZEJULA with immuno-oncology therapy, targeted therapy and chemotherapy in the clinically relevant indications. •Optune (TTFields) is a new treatment modality known as tumor-treating fields (TTFields) which has demonstrated overall survival benefitin patients with newly diagnosed glioblastoma multiforme, or GMB, in a large randomized controlled clinical trial. TTFields is aninnovative cancer therapy that uses electric fields tuned to specific frequencies to disrupt cell division, inhibiting tumor growth and causingaffected cancer cells to die. Optune is currently marketed in the U.S., EU and Japan for the first line and reoccurring treatment ofglioblastoma and has demonstrated clinical proof of concept in multiple other tumor types such as mesothelioma, lung cancer andpancreatic cancer. Novocure currently has global Phase III studies in brain metastases, non-small cell lung cancer, or NSCLC, and ovariancancer, which are large commercial opportunities in China. In September 2018, Zai Lab announced a global strategic developmentcollaboration with Novocure. Zai Lab obtained an exclusive license to develop and commercialize TTFields in Greater China and will alsosupport enrollment of Chinese patients to accelerate clinical trial enrollment for additional indications. In December, within three monthsof signing the partnership deal with Novocure, Zai Lab launched Optune in Hong Kong and treated its first patient with newly diagnosedglioblastoma multiforme. •Margetuximab is an immune-optimized anti-HER2 monoclonal antibody developed by MacroGenics. In February 2019, MacroGenicsannounced positive top-line results from its SOPHIA Phase III clinical trial. Margetuximab demonstrated improved progression-freesurvival compared to HERCEPTIN (trastuzumab) when used in combination with chemotherapy in patients with HER2+ metastatic breastcancer. We plan to discuss with the NMPA a potential accelerated approval pathway for HER2+ breast cancer in China. In addition, jointlywith MacroGenics, we plan to conduct the China portion of the global pivotal study in HER2+ gastric cancer, which is expected to start inthe second half of 2019. Zai Lab has exclusive rights to margetuximab in Greater China from MacroGenics.56 •MGD013 is a first-in-class bispecific DART molecule designed to provide coordinate blockade of PD-1 and LAG-3 for the potentialtreatment of a range of solid tumors and hematological malignancies. We have exclusive rights to MGD013 in Greater China fromMacroGenics. MGD013 is anticipated to be used for the treatment of a wide range of cancers, including both solid tumors andhematological malignancies and MGD013 has demonstrated a favorable preclinical safety and toxicological profile and is currently beingevaluated in a Phase I dose escalation study. •Bemarituzumab (FPA144) is a humanized monoclonal antibody (IgG1 isotype) specific to the human fibroblast growth factor receptor 2b,or FGFR2b, in clinical development as a targeted therapy for tumors that overexpress FGFR2b, including gastric and gastroesophagealcancer. China has one of the highest incidence rates of gastric cancer in the world, with approximately 680,000 new cases annually. Wehave licensed FPA144, or Bemarituzumab, from Five Prime as part of a global strategic collaboration. In clinical studies conducted by FivePrime, FPA144 has demonstrated good tolerability and efficacy profiles in late-line gastric patients as a monotherapy. The randomized,controlled Phase III portion of the trial evaluating FPA144 in combination with a chemotherapy regimen started in the fourth quarter of2018. We enrolled the first patient from China in this international Phase III trial that will serve as a global registrational study for thetreatment of front-line gastric and gastroesophageal cancers. In May 2018, we received CTA approval from the NMPA to enroll Chinesepatients in the FPA144 global registrational study. We will manage the China portion of this global Phase III study and plans to contribute asignificant number of patients from China to this Phase III study. •Brivanib (ZL-2301) is an oral, small molecule dual target tyrosine kinase inhibitor, or TKI, that blocks both vascular endothelial growthfactor receptor, or VEGFR, and fibroblast growth factor receptor, or FGFR. ZL-2301, or brivanib, was studied by our partner Bristol-MyersSquibb mainly for the treatment of hepatocellular carcinoma, or HCC, the most common type of liver cancer. In those trials, brivanibdemonstrated anti-tumor activity and a generally well-established safety profile in HCC patients. In 2012, Bristol-Myers Squibb terminatedits development program of brivanib after it missed the primary endpoints in two Phase III trials with advanced HCC patients. Based on ourreview of the results from Bristol-Myers Squibb’s development program for brivanib, our understanding of the etiology and current standardof care of HCC in Chinese patients and our ongoing research, we believe that ZL-2301 has the potential to be an effective treatment optionfor Chinese HCC patients and merits further clinical trials. The NMPA has approved our CTA for ZL-2301 as a Category 1 drug, and in thesecond quarter of 2017 we initiated a Phase II trial of ZL-2301 as a second-line treatment for advanced HCC patients in China. Therecruitment for the Phase II study has been completed and the preliminary data were presented at the Chinese Society of Clinical Oncology(CSCO) in September 2018. Preliminary anti-tumor activity has been observed with second-line HCC patients treated with ZL-2301. Thesafety profile to date appears to be tolerable and manageable in general. Given the rapidly changing landscape in the management of HCC,Zai Lab has decided to conduct a trial of brivanib in combination with a PD1 antibody and the trial is planned to initiate in China and HongKong in the second half of 2019. •Omadacycline (ZL-2401) is a broad-spectrum antibiotic in a new class of tetracycline derivatives, known as aminomethylcyclines. Wehave licensed ZL-2401, or omadacycline, from Paratek, which in October 2018 received FDA marketing approval. ZL-2401 is primarilybeing developed for acute bacterial skin and skin structure infection (ABSSSI), community-acquired bacterial pneumonia (CABP), andurinary tract infections (UTI). ZL-2401 is designed to overcome the two major mechanisms of tetracycline resistance, known as pump effluxand ribosome protection. Drugs competing with ZL-2401 in the same class are only available in IV formulation, in contrast, ZL-2401 isavailable in both IV and oral once-daily formulations that makes treatment convenient for care givers and patients. We have completed thetechnology transfer with Paratek for aspects such as manufacturing know-how of the IV and oral formulations and engaged in discussionswith the NMPA and key opinion leaders on our planned China development strategy in preparation for our NDA filing in China. In July2018, we received CTA approval from the NMPA. In December 2018, Zai Lab initiated the abbreviated bridging program previously agreedto with the NMPA, which is expected to allow us to accelerate NDA preparation and submission timeline by up to two years.57 •ETX2514 (ZL-2402) is a novel beta-lactamase inhibitor. We have licensed ETX2514 from Entasis Therapeutics, or Entasis, as part of aglobal strategic collaboration. ETX2514 restores activity of beta-lactams against Class A, C, and D beta-lactamases. Entasis is developingETX2514 as ETX2514SUL, a fixed combination of ETX2514 and sulbactam, for the treatment of Acinetobacter baumannii bacterialinfections, including penem-resistant A. baumannii. Acinetobacter infections occur predominantly in the hospital setting; the pathogen isoften multi-drug resistant, or MDR, and has become extremely difficult to treat. The microbiologic efficacy of the combined ETX2514 andsulbactam was demonstrated in large studies of well-characterized MDR Acinetobacter isolates from diverse regions, including Asia. TheFDA has granted ETX2514SUL Qualified Infectious Disease Product, or QIDP, status as well as Fast Track and Priority Review status.Entasis has completed a Phase II cUTI trial in 2018, reviewed clinical Phase III plans with FDA and plans to initiate a pivotal Phase III studyin MDR Acinetobacter pneumonia and bloodstream infections by mid-2019, which will serve as a global registrational study. Zai Lab willmanage the China portion of this global Phase III study and plans to contribute a significant number of patients from China. We plan toinitiate patient dosing in the Asia-Pacific portion of the Phase III global registration trial of ETX2514 for MDR Acinetobacter pneumoniaand bloodstream infections in late 2019.For our late-stage oncology drug candidates with Greater China rights, our near-term development plan focuses on specific patient segments.These segments have an estimated annual incidence of over 1.3 million patients in China. We expect that the commercial success of our products will bedriven by their differentiated clinical profiles, efficacy in Chinese patients and ability to provide clinical benefits over existing standards of care in a marketwhere targeted therapies are either unavailable or less utilized relative to more developed markets.Within our anti-infective portfolio, we believe that our two novel antibiotics, ZL-2401 and ZL-2402 (ETX2514), will address significant unmetpatient and market needs.With ZL-2401, we have the chance to introduce into China a new broad-spectrum antibiotic with excellent activity not only against commonGram-positive and Gram-negative bacteria, but also against several MDR pathogens. The profile of ZL-2401 includes MRSA, penicillin- and macrolide-resistant streptococci, enterococci and ESBL-E. coli isolates. In addition, the availability of an IV and oral formulation allows step-down treatment ofinfections in the hospital and continued oral therapy in the ambulatory care setting.With ZL-2402, in collaboration with our partner, we are focusing on the combination with sulbactam, which we believe provides unique andspecific bactericidal activity against Acinetobacter baumannii spp., an extremely difficult-to-treat pathogen associated with high mortality that is moreprevalent in China than most other countries. The prevalent overuse of antibiotics, the evolution of resistant bacteria and state of current treatment practicesare expected to lead to an increase in drug-resistant infection rates. In 2013, total antibiotic usage in China accounted for about half of the global antibioticusage, with a per-capita use of antibiotics being more than five times that in Europe and the United States. In 2015, the estimated incidence for ABSSSI and CABP was 2.8 million patients and 16.5 million patients, respectively, in China alone. In 2016,based on a national survey of over 1,300 hospitals in China, there were approximately 210,000 Acinetobacter baumannii infections. Due to the high rates ofmultidrug-resistant infections, the Chinese government has identified the goal of developing one to two innovative anti-infective drugs by 2020.In addition to mainland China, we intend to seek registration and commercialization of the above drug candidates in all areas where we haveapplicable rights. Notably in Hong Kong and Macau, products with existing approvals by the FDA, EMA or a comparable regulatory agency are eligible foran expedited registration process that does not require conducting local clinical trials.While the overall patient population in Hong Kong and Macau is smaller compared to that of China, they are higher income markets withdeveloped medical infrastructure, widely available private insurance and proven capacity to pay for advanced therapeutics. In addition to local patients,there is a significant opportunity to provide treatment for medical tourists from China, who visit these regions in order to access high-end cancer treatment,including prescription drugs that may not be available in mainland China.58 Our Discovery PipelineOur in-house discovery team is dedicated to the research and discovery of therapeutics in the areas of oncology and autoimmune diseases, with afocus on large market opportunities with unmet clinical needs in both China and the U.S. market. Our aim is to produce up to two global INDs per yearstarting in 2020. We have collaborations with leading academic institutions in China, including Tsinghua University, Shanghai Institute of Materia Medicaand Shanghai Institute of Organic Chemistry, the CAS, to expand our in-house research capabilities. We believe our discovery effort will enable us to achieveour long-term goal of generating a sustainable, internally-discovered product pipeline of new products and drug candidates for patients around the world.This effort has resulted in the identification of a number of proprietary targets in our focus areas that we are moving into preclinical development. Ourdiscovery operations in Shanghai, China was established in 2016. Our discovery operations in San Francisco, California, was established in 2018. Our U.S.discovery team focuses on generating large molecule therapeutics and creating a proprietary, best-in-class human transgenic mouse platform.Our Clinical PipelineZEJULAZEJULA is a highly potent and selective oral, once-daily small molecule poly (ADP-ribose) polymerase 1/2, or PARP 1/2, inhibitor with thepotential to be a first-in-class Category 1 drug for treatment across multiple solid tumor types in China. ZEJULA was approved in March 2017 by the FDAand in November 2017 by EMA, as a maintenance treatment for women with recurrent platinum-sensitive ovarian cancer. Maintenance therapy is for thosewomen who have had prior treatment but are expected to see their cancer return, with the purpose of avoiding or slowing a recurrence if the cancer is inremission after the prior treatment. A platinum-sensitive cancer is one that responded to initial platinum-based chemotherapy and remained in remission post-chemo therapy for more than six months.ZEJULA is the first PARP inhibitor to be approved by the FDA for ovarian cancer that does not require BRCA mutation or other biomarkertesting. This makes ZEJULA suitable for a wide patient population and significantly more accessible to patients in China where BRCA biomarker diagnostictests are not widely available. If approved by the SDA, ZEJULA may potentially be the first Category 1 PARP inhibitor on the China market approved forsecond-line maintenance treatment in all recurrent platinum-sensitive ovarian cancer patients.We obtained an exclusive license for the development and commercialization of ZEJULA in China, Hong Kong and Macau in 2016. Wecommercialized ZEJULA in Hong Kong in the fourth quarter of 2018. In China, our CTA for ZEJULA has been approved as a Category 1 drug by the NMPA.We initiated the Phase III study of ZEJULA in patients with recurrent platinum-sensitive ovarian cancer as a second-line maintenance therapy in September2017. In May 2018, we completed enrollment ahead of schedule for our pharmacokinetics, or PK, study for Chinese patients with platinum-sensitive ovariancancer, and in June 2018, we initiated the second Phase III study in patients with platinum-responsive ovarian cancer as a first-line maintenance therapy anddosed our first patient. These studies are similar in design to Tesaro’s clinical studies of niraparib in ovarian cancer. In July 2018, we also initiated a Phase IIIstudy in patients with platinum-responsive small cell lung cancer as maintenance therapy. In August 2018, we completed our PK study for Chinese patientswith platinum-sensitive ovarian cancer, which demonstrated a comparable efficacy profile to studies in non-Chinese patients. We continue to exploreZEJULA in patients with small cell lung cancer and gBRCA+ and triple negative breast cancer and squamous-type non-small cell lung cancer in China. InAugust 2018, we enrolled the first patient in our Phase III registration trial of ZEJULA as a first-line maintenance therapy in small cell lung cancer in China.This will be the first clinical trial of ZEJULA in this type of cancer. We are also exploring the combination potential of ZEJULA with immuno-oncologytherapy, targeted therapy and chemotherapy in the clinically relevant indications.Ovarian CancerOvarian cancer had an estimated annual incidence of 52,000 patients in China in 2015, which is more than double that of the 21,300 patients inthe United States and has seen increasing mortality rates. Since early symptoms of ovarian cancer are non-specific and difficult to detect, a majority of womenwith ovarian cancer are diagnosed when the disease is at an advanced stage, when prognosis is poor. Finding effective therapeutic approaches for advancedovarian cancer patients represents a large unmet medical need. Given the broad applicability of ZEJULA across all patient populations, regardless of gBRCAmutation status, we are currently targeting the entire platinum sensitive ovarian cancer patient population. This represents a significant advantage for patientconvenience and access, given that there is no need for patients to utilize diagnostic tests to determine their gBRCA mutation status, particularly in Chinawhere such tests are not widely available.59 The current standard of care in China consists of radical surgery and platinum-based chemotherapy. Although platinum-based chemotherapy iseffective at inducing an initial response, ovarian cancer will recur in approximately 85% of women. Many women continue to respond to second-lineplatinum based chemotherapy, and following a response, the guideline-recommended approach for many patients is surveillance, monitoring patients fordisease progression and managing their symptoms. However, during the surveillance period, ovarian cancer survivors report anxiety about cancer antigentesting and fear of recurrence, many experiencing symptoms associated with post-traumatic stress disorder. After relapse, patients respond moderately orpoorly to subsequent chemotherapy, with later lines of therapy leading to progressively shorter treatment-free intervals. Therefore, we believe effectivemaintenance therapies that address a broad patient population are needed to prolong the duration of response following platinum-based treatment.Lung CancerLung cancer has the highest total incidence as well as the highest mortality rate of any cancer in China. Annual incidence was estimated at733,300 patients in China in 2015, which is more than triple the 221,200 patients in the United States. We intend to explore ZEJULA’s efficacy in patientswith squamous-type non-small cell lung cancer and small cell lung cancer based on the large unmet need for effective treatment for such patients in China.According to the American Cancer Society, approximately 80% to 85% of lung cancers are non-small cell lung cancer and squamous cell carcinoma is about25% to 30% of lung cancers. Based on an assumption of 80% share of non-small cell lung cancer and 30% of cancers being squamous, we estimate apotential target patient population of 176,000 patients with squamous-type non-small cell lung cancer and 147,000 in small cell lung cancer in China.The standard of care for advanced small cell lung cancer and non-small cell lung cancer in China is platinum-based chemotherapy. For EGFRmutation positive patients, geftinib (Iressa) and erlotinib (Tarceva) are recommended as first-line therapies for patients in the advanced/metastatic stage ofnon-small cell lung cancer who are EGFR mutation positive. For non-small cell lung cancer patients with unclear EGFR mutation status, as well as for smallcell lung cancer, chemotherapy is the standard of care in China.We believe ZEJULA has first-in-class potential in both indications in China, representing an attractive addition to the current standard of care insmall cell lung cancer and. Given the relatively limited therapy options for Chinese physicians and patients we believe that a small molecule PARP inhibitorwill offer an attractive addition to the standard of care with an attractive price level relative to large molecule drugs.In addition to ZEJULA monotherapy in the potential indications stated above, we also intend to explore the combination of ZEJULA with otherpotential therapies such as immuno-oncology therapy, targeted therapy and chemotherapy in the clinically relevant indications.Our Clinical Trial Designs and Strategy for ZEJULA in the China MarketOvarian CancerIn September 2018, we completed our open-label study evaluating the pharmacokinetic, or PK, profile of ZEJULA made in China in Chineseovarian cancer patients. Results from the study show comparable PK profile of the Chinese patients administered ZEJULA to that of patients evaluated inTesaro's global PK study. The study demonstrated that the drug exposure increased proportionally from 100mg to 300mg, with a Tmax of approximatelythree hours. Systemic exposure of ZEJULA, as measured by Cmax and AUC, increased approximately proportionally with increased dose. There were nounexpected safety issues noted during the trial. All key PK and safety parameters were comparable to those in global studies. The study results andpopulation PK data did not identify ethnicity differences between Chinese and non-Chinese patients.In January 2019, we completed patient enrollment of our Phase III trial evaluating ZEJULA as a second-line maintenance therapy in patients withrecurrent platinum-sensitive ovarian cancer. Recurrent ovarian cancer patients who have responded to a platinum-containing regimen were enrolled in thestudy and randomized 2:1 to receive either ZEJULA or placebo once daily. Patients were stratified by gBRCA status. Patients will be randomly assigned in a2:1 ratio to receive ZEJULA or placebo once daily. Patients will be stratified by gBRCA status. The primary endpoint is progression-free survival. Theprimary analysis will be conducted in the entire study population, regardless of gBRCA mutation status. If the primary analysis meets the statisticalsignificance, the study will be ended. If it does not, the study will continue for gBRCA mutation positive patients with the second-step primary analysisconducted in this population.Our second Phase III study is expected to evaluate ZEJULA as a first-line maintenance therapy in patients with platinum-responsive ovariancancer. The study design of this clinical trial has been discussed and agreed with the NMPA and the trial was initiated in the June 2018. Tesaro (now GSK) isalso evaluating ZEJULA in the PRIMA trial, a Phase III clinical trial in the first-line maintenance setting in platinum responsive ovarian cancer patients.60 Lung CancerWe initiated a Phase III study in patients with platinum responsive small cell lung cancer as maintenance therapy in August 2018. The studydesign has been discussed and agreed with the NMPA.Background on PARP InhibitorsOne well-studied area of PARP activity relates to DNA repair. DNA contains genetic instructions used in the development and functioning ofmost known living organisms. DNA can be damaged by many types of mutagens, including oxidizing agents, alkylating agents, ultraviolet light and X-rays.An important property of DNA is that it can replicate, or make copies of itself. This is critical when cells divide because each new cell needs to have an exactcopy of the DNA present in the old cell. It is also critical to the integrity and survival of cells that DNA damage can be repaired. Cells have evolved multiplemechanisms to enable such DNA repair, and these mechanisms are complementary to each other, each driving repair of specific types of DNA damage. If acell’s DNA damage repair system is overpowered, then the cell is programmed to die.Radiation and certain chemotherapies such as alkylating agents and topoisomerase inhibitors induce significant damage to tumor cells, whichresults in programmed cell death. DNA repair mechanisms may reduce the activity of these anti-cancer therapies and, conversely, inhibition of DNA repairprocesses may enhance the effects of DNA-damaging anti-cancer therapy. For example, cancer cells can maintain viability despite disruption of the key DNArepair pathway known as the homologous recombination pathway, but they become particularly vulnerable to chemotherapy if an alternative DNA repairpathway is disrupted. This is known as “synthetic lethality”—a situation where the individual loss of either repair pathway is compatible with cell viability,but the simultaneous loss of both pathways results in cancer cell deaths. Since PARP inhibitors block DNA repair, PARP inhibition is thought to be animportant part of cancer therapy.Clinical studies have shown that PARP inhibitors are effective as a monotherapy in patients with certain types of cancer, including those withgene mutations as discussed below. PARP inhibitors have also been explored in numerous clinical trials to enhance chemotherapy treatments, including incombination with temozolomide, cisplatin, carboplatin, gemcitabine and topotecan.ZEJULA Mechanism of ActionMany DNA repair processes involve PARP-1 and PARP-2, which are zinc-finger DNA-binding enzymes that sense DNA damage and convert itinto intracellular signals to promote DNA repair. PARP inhibitors block DNA repair by the base excision repair pathway. PARP inhibitors appear mosteffective when used to treat tumors with underlying defects in DNA repair or when combined with another DNA-damaging agent. This is because, in normalcells, the homologous recombination pathway compensates for PARP-mediated inhibition of the base excision repair pathway and maintains the fidelity ofDNA repair. In cells with a deficiency in the homologous recombination pathway, such as those with BRCA-1 and BRCA-2 mutations, PARP inhibition leadsto irreparable double-strand breaks, collapsed replication forks, and an increased use of the less effective nonhomologous end joining pathway. Thesedisruptions ultimately result in synthetic lethality, and, in this manner, treatment with PARP inhibitors represents an opportunity to selectively kill cancercells with deficiencies in homologous recombination and other DNA repair mechanisms. PARP inhibitors also have an additional mechanism of actionknown as “PARP trapping.” The effect of PARP trapping is to poison DNA by stabilizing PARP-1 and PARP-2 at sites of DNA damage, generating complexesthat may be even more toxic than the unrepaired single-strand breaks which result from PARP inhibition.ZEJULA is designed to be a highly potent, selective inhibitor of PARP-1 and PARP-2. In an ovarian cancer patient-derived xenograft model,where tumor models are established from transplantation of a human tumor specimen from a cancer patient directly into a mouse, ZEJULA has been shown tohave greater tumor concentration, allowing it to deliver sustained anti-tumor activity as compared to olaparib, an FDA-approved PARP inhibitor marketed byAstraZenaca for gBRCA+ ovarian cancer patients who have received at least three prior lines of chemotherapy.61 ZEJULA Clinical ResultsNOVA, a Phase III maintenance study of ZEJULA versus placebo in patients with recurrent platinum-sensitive ovarian cancer.In March 2017, the FDA approved ZEJULA as a maintenance treatment for women with recurrent platinum-sensitive ovarian cancer, regardless ofBRCA mutation or biomarker status, three months ahead of the FDA’s scheduled decision date (PDUFA date). ZEJULA’s FDA approval followed the releaseof successful results from Tesaro’s NOVA trial in which ZEJULA demonstrated a clinically meaningful increase in progression-free survival in women withrecurrent ovarian cancer, regardless of gBRCA mutation or biomarker status. Treatment with ZEJULA reduced the risk of disease progression or death by 73%in gBRCA mutation positive patients (hazard ratio = 0.27) and by 55% in patients without gBRCA mutations (hazard ratio = 0.45). Hazard ratio is theprobability of an event (such as disease progression or death) occurring in the treatment arm divided by the probability of the event occurring in the controlarm of a study, with a ratio of less than one indicating a lower probability of an event occurring for patients in the treatment arm. P-value is a measure of theprobability of obtaining the observed sample results, with a lower value indicating a higher degree of statistical confidence in these studies. The magnitudeof benefit was similar for patients entering the trial with a partial response or a complete response to platinum treatment.The NOVA trial was a Phase III randomized double-blind trial that assessed the effectiveness of ZEJULA compared with placebo to delay tumorprogression following a platinum containing chemotherapy regimen. Patients enrolled into one of two independent cohorts based on gBRCA mutationstatus. A total of 553 patients were enrolled in the NOVA study at 107 centers worldwide. The study population has 203 patients assigned to the gBRCAmutation positive cohort and 350 patients assigned to the gBRCA mutation negative cohort. Among the patients in the gBRCA mutation negative cohort,162 had tumors that were tumors deficient in homologous recombination, or HRDpos, and 134 had tumors did not have a homologous recombinationdeficiency, or HRDneg. The homologous recombination deficiency status was not determined for 54 patients. The gBRCA mutation negative cohort analysesincluded all patients randomized, regardless of homologous recombination deficiency status.Within each cohort, patients were randomized 2:1 to receive ZEJULA or placebo, and were continuously treated with placebo or ZEJULA untilprogression. The primary endpoint of this study was progression free survival. Secondary endpoints included patient-reported outcomes, chemotherapy freeinterval length, and OS. This trial successfully achieved its primary endpoint in both cohorts, showing that ZEJULA treatment significantly prolongedprogression free survival, compared to control in patients who were gBRCA mutation positive and in patients who were gBRCA mutation negative. Inaddition, within the gBRCA mutation negative cohort, ZEJULA treatment significantly prolonged progression free survival compared to placebo for theprospectively defined patient population with HRDpos tumors. A high proportion of patients in both treatment groups in both cohorts had received three orfour prior lines of chemotherapy. The most common treatment-emergent grade 3/4 adverse events in the ZEJULA arm of the NOVA study, based on theNational Cancer Institute’s Common Terminology Criteria for Adverse Event, or CTC, which is a set of criteria for the standardized classification of adverseeffects of drugs used in cancer therapy (with one and two being relatively mild and higher numbers up to five being more severe), were thrombocytopenia,anemia, and neutropenia.62 The figures below present the results for the primary endpoint of progression free survival for the three primary efficacy populations.Figure 1: Progression free survival was significantly longer for patients who received ZEJULA compared to those who received placebo for all primaryefficacy populations. Median PFS(95%CI) Hazard Ratio(95%CI) Disease Progression Free (%) Treatment (Months) p Value 6 Months 12 Months 18 Months gBRCAmut Cohort Niraparib (N = 138) 21.0 (12.9, NE) 0.27 (0.173, 0.410) 80% 62% 50% Placebo (N = 65) 5.5 (3.8,7.2) p <0.0001 43% 16% 16% HRDpos Subgroup Niraparib (N = 106) 12.9 (8.1, 15.9) 0.38 (0.243, 0.586) 69% 51% 37% Placebo (N = 56) 3.8 (3.5, 5.7) p <0.0001 35% 13% 9% Non-gBRCAmut Cohort Niraparib (N = 234) 9.3 (7.2, 11.2) 0.45 (0.338, 0.607) 61% 41% 30% Placebo (N = 116) 3.9 (3.7, 5.5) p <0.0001 36% 14% 12%Source: Tesaro.Notes: gBRCAmut = gBRCA mutation positive; non-gBRCA mut = gBRCA mutation negativeFigure 2: Progression free survival in the gBRCA mutation positive cohort of patients treated with ZEJULA versus placebo Source: Tesaro.63 Figure 3: Progression free survival in the HRDpos group of the gBRCA mutation negative cohort of patients treated with ZEJULA versus placebo Source: Tesaro.Figure 4: Progression free survival in the overall gBRCA mutation negative cohort of patients treated with ZEJULA versus placebo Source: Tesaro.Within the gBRCA mutation positive cohort, the median progression free survival was 21.0 months on ZEJULA versus 5.5 months on placebo(hazard ratio=0.27; p<0.0001). As shown in the chart above, ZEJULA’s treatment effect started very early during treatment as seen by the two curves beingseparated at first efficacy assessment. Progression free survival was also significantly longer with ZEJULA in the HRDpos group of the gBRCA mutationnegative cohort (median, 12.9 months versus 3.8 months; hazard ratio=0.38; p<0.0001) and in the overall gBRCA mutation negative cohort (median, 9.3months versus 3.9 months; hazard ratio = 0.45; p<0.0001). Additionally, in an exploratory pooled analysis that evaluated all patients in both cohortscombined, progression free survival was longer with ZEJULA (median 11.3 months versus 4.7 months, hazard ratio = 0.38, 95% confidence interval: 0.303,0.488; p<0.0001).64 As it is maintenance therapy, quality of life is important to patients receiving treatment. Patient-reported outcome data from validated surveytools indicated that ZEJULA-treated patients reported no significant difference from placebo in measures associated with symptom specific and generalquality of life.Furthermore, ZEJULA treatment did not reduce the effectiveness of subsequent therapies, and continued to show carry-over of the beneficialtreatment effect in the secondary efficacy measure of second objective disease progression, which is time from randomization to objective tumor progressionon next-line treatment or death from any cause. OS data, while immature, showed no negative impact of ZEJULA treatment.The incidences of CTC grade 3/4 treatment-emergent adverse events (74% vs 23%), serious adverse events (30% vs 15%), treatment-emergentadverse events leading to treatment interruption (69% vs 5%), treatment-emergent adverse events leading to dose reduction (67% vs 15%), and treatment-emergent adverse events leading to treatment discontinuation (15% vs 2%) were higher for ZEJULA versus placebo. There were no on-treatment deathsreported.The most commonly observed hematologic treatment-emergent adverse events (all CTC grades) related to ZEJULA were thrombocytopenia(61%), anemia (50%) and neutropenia (30%). Although CTC grade 3/4 hematologic laboratory events were common at the initiation of treatment, no severeclinical sequelae were observed and relatively few patients discontinued due to these adverse events. Dose adjustment based on individual tolerabilityduring the first cycles substantially reduced the incidence of these events beyond the third 28-day treatment cycle, indicating the overall effectiveness of theapproach to dose modification. Overall the treatment-emergent adverse events were manageable, with no negative impact on quality of life.ZEJULA Preclinical DevelopmentAs discussed below, Merck and our partner Tesaro (now GSK) have completed various preclinical trials to evaluate the pharmacodynamics,pharmacokinetics and toxicology profile of ZEJULA.Pharmacodynamics. In preclinical trials studying ZEJULA’s pharmacodynamics, ZEJULA was found to be a potent and selective PARP-1 andPARP-2 inhibitor that displayed at least a 100-fold selectivity over other PARP-family members PARP-3, v-PARP, and Tankyrase-1. A commonly usedquantitative measure of potency is IC 90, which represents the concentration of a drug that is required to suppress 90% of the target enzyme. The IC 90 ofZEJULA for PARylation in BRCA-deficient tumor cells correlates with functional suppression of single strand breakage repair and anti-tumor effects onBRCA mutation positive tumor cells.Normal primary cells were resistant to ZEJULA with the most sensitive cells (megakaryocytes) exhibiting a 13-fold selectivity margin ascompared to BRCA mutation positive tumor cells in vitro. Maximal in-vivo efficacy was achieved in BRCA 1 mutation positive ovarian tumor models withonce-daily oral administration of ZEJULA at a dose sufficient to suppress 90% of the PARP enzymatic activity in the tumor at eight hours after the dose,which translated to greater than 50% inhibition of PARP activity in peripheral blood mononuclear cells at eight hours post dose.The therapeutic potential of ZEJULA was evaluated in a study designed to examine the benefit of ZEJULA in maintenance setting, i.e., dailyZEJULA treatment following a regression induced with a platinum-based regimen. In this study, tumors in mice receiving maintenance ZEJULA therapybecame undetectable whereas regrowth was observed in those receiving only the chemotherapy regimen. These data support the concept that maintenanceZEJULA therapy after tumor response to chemotherapeutic agents may prolong recurrence-free survival.ZEJULA showed no significant observable effects in nonclinical safety pharmacology studies at clinically relevant doses across the speciesevaluated.Pharmacokinetics. ZEJULA elicited desirable and consistent pharmacokinetic profiles in nonclinical species in vivo. The oral absorption in ratsand dogs was rapid, with moderate to high bioavailability. The compound is readily distributed to the brains of rats and monkeys to a modest extent,suggesting additional therapeutic potential.Elimination of ZEJULA and its metabolites was fecal and renal in rats, while mainly renal in dogs. The potential risk for drug—drug interactionswas determined to be minimal for ZEJULA, due to the lack of the interactions between ZEJULA and the hepatic drug-metabolizing CYP enzymes, the majorhepatic and renal uptake transporters (OATP1B1, OATP1B3, OAT1, OAT3, and OCT2), and BSEP, an efflux transporter known to be associated withhepatotoxicity. The in vitro metabolic results, combined with the in vivo pharmacokinetic findings, demonstrated that ZEJULA had a desirable dispositionprofile with a minimal potential for drug—drug interactions, consistent with the development of ZEJULA as an anticancer agent.65 Toxicology. A comprehensive preclinical toxicology program was conducted to support the administration of ZEJULA in patients with cancer.This program included oral repeat-dose toxicity studies (up to three-months duration) in dogs and rats, genotoxicity and phototoxicity studies. The resultsobtained from the general toxicity studies in rats and dogs indicated that ZEJULA causes bone marrow suppression which leads to decreases in circulatingwhite and red blood cells. Infections and septicemia were a consequence of bone marrow suppression and lymphoid depletion. These findings are linked topharmacology of ZEJULA and showed reversibility.ZEJULA—PharmacokineticsThe pharmacokinetic profile of ZEJULA has been evaluated in multiple clinical studies, with an overall ZEJULA-dosed population of 526patients.Absorption. ZEJULA exhibited linear pharmacokinetic, dose proportional exposure, and dose-independent absorption and clearance. Followingrepeat administrations of the daily recommended dose of 300 mg, ZEJULA accumulation on day 21 was consistent for both the area under the plasmaconcentration-time curve and maximum concentration (approximately two- to three-fold). ZEJULA was shown to be highly orally bioavailable (F ~73%).Bioavailability is a measure of the absorption of drug and is expressed as a percentage of the administrated case of the drug which reaches the patient’ssystem. ZEJULA can be administered with or without food.Distribution. ZEJULA was moderately protein bound to human plasma (83.0%). The apparent volume of distribution was 1220 L, indicating anextensive tissue distribution of ZEJULA.Metabolism. The carboxylesterases-catalyzed amide hydrolysis was delineated to be the major primary pathway, followed by the uridine-5’-diphospho-glucuronosyltransferases (UGT)-mediated glucuronidation and the other minor secondary pathway (i.e., methylation). The major circulatingmetabolites in humans are the carboxylic acid and the glucuronides of carboxylic acid. The metabolic profile seen in humans is consistent with what wasdetected in the experimental species (rats and dogs).Elimination. In an absorption, metabolism and elimination study in cancer patients using 14C-radioactive ZEJULA, a mean measured total of86.2% of the radioactive dose was recovered in urine and fecal samples collected daily from 0 to 504 hours (21 days) post dose after single oraladministration of 14C-ZEJULA. It suggests minimal long-term retention of ZEJULA or its metabolites in body. Moreover, hepatobiliary clearance and renalexcretion are the major routes of elimination in humans.Intrinsic Effects. Population pharmacokinetic analysis identified no intrinsic factors such as age, race, hepatic impairment, renal impairmentwould have significant impact on the pharmacokinetic of ZEJULA.Optune and Tumor-Treating Fields (TTFields)Overview of TTFieldsTumor treating fields (or TTFields) were invented in 2000 by Professor Emeritus Yoram Palti of the Technion Institute of Technology in Israel,who founded Novocure (Israel) in 2000, conducted preclinical studies of TTFields, developed a medical device capable of delivering TTFields to patients,and finally brought TTFields into clinical use through clinical testing in patients with recurrent glioblastoma. Today, after more than 15 years of preclinicalresearch, it is known that TTFields are an electric field based loco-regional, antimitotic treatment modality, which inhibits the growth of cancerous tumors invitro and in vivo. As intermediate frequency (200 kHz) and low intensity (1-3 V/cm) alternating electric fields, TTFields act predominantly during two phasesof mitosis: 1) during metaphase, by disrupting the formation of the mitotic spindle, and 2) during cytokinesis, by dielectrophoretic dislocation ofintracellular constituents resulting in apoptosis. TTFields cannot stimulate nerves or muscles, nor do they lead to heating of the tumor or surrounding tissues.Since TTFields are generated using electrically insulated electrodes (transducer arrays), there is no direct current flow into the tissue so that electrolysis andtissue damage do not occur over time. Since most normal adult brain cells proliferate very slowly, if at all, they are not affected by the TTFields.The efficacy of TTFields is frequency dependent on specific cell types. The anti-mitotic effect of TTFields has been shown in multiple cell lineswhen the appropriate frequency was utilized. This includes but not limited to the following tumor models: glioblastoma at 200 kHz, NSCLC at 150kHz;breast carcinoma at 120kHz; melanoma at 100kHz.66 Four Phase III trials of TTFields in a variety of solid tumors are ongoing. PANOVA-3 is TTFields combined with chemotherapy for newly-dagnosed pancreatic cancer. LUNAR is targeting advanced NSCLC, to evaluate TTFields combined with chemotherapy versus chemotherapy alone, METIStrial is intended for patients who have recently been diagnosed with brain metastases from NSCLC, and ENGOT-ov50/INNOVATE-3 trial is intended forpatients who have recently been diagnosed with ovarian cancer that progressed and became resistant to chemotherapy containing platinum (platinumresistant ovarian cancer). Optune Device DescriptionOptune is a portable battery or power supply operated device which act by delivering low intensity (1-3 V/cm), intermediate frequency (100-300kHz), alternating TTFields to the patient’s shaved head by means of electrically insulated surface transducer arrays. It has been FDA approved for thetreatment of recurrent Glioblastoma multiforme (GBM) and has received CE mark for the treatment of both recurrent and newly diagnosed GBM. The devicehas been available commercially in the E.U. and in the U.S. since October 2011. Optune was approved in Japan for the treatment of recurrent GBM in March2015. The indication of Optune was expanded to include treatment of adult patients with newly diagnosed GBM in combination with temozolomide inOctober 2015 in the U.S. It was also commercially launched in Hong Kong for the treatment of GBM in December 2018.Indications for Optune UseGBM, a malignant form of astrocytoma, is the most common primary intracranial neoplasm. The incidence of GBM increases steadily above 45years of age with a prevalence of approximately 7,500 cases in the United States Despite numerous attempts to improve the outcome of patients with GBM,the 3-year survival of these patients is only 6% with median survival of 14.6 months. •Optune is indicated for the treatment of adult patients (22 years of age or older) with histologically-confirmed recurrence in the supra-tentorial region of GBM. The device is intended to be used as a monotherapy, and is intended as an alternative to standard medical therapyfor GBM after surgical and radiation options have been exhausted. •Optune with temozolomide, or TMZ, is indicated for the treatment of adult patients with newly diagnosed, supratentorial GBM followingmaximal debulking surgery and completion of radiation therapy together with concomitant standard of care chemotherapy.Pivotal Study of TTFields for Recurrent GBM SubjectsIn a prospective, randomized, open label, active parallel control trial (EF-11) was conducted to compare the effectiveness and safety. A total of237 patients (120 Optune; 117 best supportive care, BSC) with progressive or recurrent GBM were enrolled in the study. Baseline characteristics were similarbetween treatment groups. In the ITT population which included all randomized subjects, overall survival in subjects treated with Optune was comparable tothat observed in subjects treated with BSC (median OS=6.3 vs. 6.4 months; p=0.98). The pivotal study data establish that Optune therapy is comparable toBSC therapy in extending OS.The one-year survival is similar in the Optune and BSC groups in the ITT population (21.9% vs. 22.1%). Progression free survival at 6 months(PFS6) is the same in the ITT population (21.4% vs. 15.2%). Radiological response rates from the subset of patients evaluated were reported as 14% for theOptune group compared to 9.6% for the BSC group in the ITT population. Median time to progression, or TTP, was 9.3 weeks for Optune vs. 9.6 weeks forBSC.Optune subjects experienced fewer adverse events in general, significantly fewer treatment related adverse events, and significantly lowergastrointestinal, hematological and infectious adverse events compared to BSC controls. The only device-related adverse event seen was a mild to moderateskin irritation beneath the device transducer arrays, which was easily treated with topical ointments. Finally, certain quality of life measures were better inOptune subjects as a group when compared to subjects receiving effective BSC chemotherapy.67 Pivotal Study of Optune for Newly Diagnosed GBMAn international Phase III trial (EF-14) in newly diagnosed GBM, evaluating the role of Optune in combination with TMZ maintenance aftersurgery and chemoradiation versus temozolomide alone was conducted between July 2009 and September 2014 to evaluate efficacy and safety.A total of 695 patients were randomized, the median number of maintenance TMZ cycles was 6 and 5 cycles, for Optune /TMZ and TMZ alone,respectively. The median progression-free survival was 6.7 months for the patients treated with Optune /TMZ versus 4.0 months for TMZ alone (HR0.63;95% CI 0.52-0.76; p<0.001). Median overall survival from randomization was 20.9 months versus 16 months for the Optune /TMZ and TMZ alone,respectively, with a hazard ratio of 0.63 (95% CI 0.53–0.76), p<0.001. The most common adverse events in the Optune /TMZ arm, defined as occurring in≥10% of patients, were thrombocytopenia, nausea, constipation, vomiting, fatigue, medical device site reaction, headache, convulsions, and depression.Grade 3 to 4 adverse events were well balanced between the 2 treatment arms. None of the systemic grade 3 to 4 adverse events were considered related toOptune by any of the investigators. Mild to moderate skin toxicity underneath the transducer arrays occurred in 52% of patients who received Optune-temozolomide vs no patients who received temozolomide alone.Based on the data, FDA expanded approval of Optune in combination with TMZ for the treatment of adult patients with newly diagnosed GBM.Our Strategy for TTFields in the China MarketGiven the strong clinical data from randomized control trials of Optune and its approval status in the U.S. and EU in recurrent and newlydiagnosed GBM, Zai Lab plans to leverage the global study data to seek potential regulatory in China. Zai Lab intends to participate in the ongoing globalstudies of TTFields, and will also conduct trials of TTFields in Chinese patients with gastric cancer.MargetuximabOverviewApproximately 25% of breast tumors overexpress the HER2 protein which is a member of the ErbB receptor tyrosine kinase family and plays animportant role in the growth and proliferation of HER2-expressing cancer cells. HER2 expression has been associated with aggressive metastatic caners witha poor prognosis. The overall incidence of breast cancer is similar between the U.S. (~268,600 new cases in 2019) and China (~278,800), so is the proportionof patients with HER2+ breast cancer. Many HER2-targeting agents have been developed and marketed with trastuzumab (Herceptin) as one of the mostimportant treatments for HER2+ breast cancer. Margetuximab is a human/mouse chimeric IgG1 anti-HER2 antibody with an optimized Fc domain designed to outperform trastuzumab whosemechanism of action involves not only the inhibition of the signal transduction pathway from HER2, but also the antibody-dependent cytotoxicity (ADCC)mediated by the binding of the Fc domain of the antibody with CD16A (Fcg receptor IIIA or FcgRIIIA) expressed on the surface of the natural killer (NK)cells and macrophages. Both 158V and 131H variants bind the Fc of IgG1 with higher affinity than their respective allelic counterparts. With optimized Fcdomain, margetuximab binds different CD16 variants with similar affinity, leading to stronger ADCC than trastuzumab. A Phase III trial known as SOPHIAcompared margetuximab in combination with chemotherapy with trastuzumab in combination with chemotherapy in HER2+ breast cancer after 2 or morelines of treatment with other HER2-targeting agents including trastuzumab and pertuzumab. The study reported positive outcome indicating thatmargetuximab is superior to trastuzumab in a heavily pretreated HER2+ metastatic breast cancer. Additional clinical trials are being planned to evaluatemargetuximab in HER2+ breast and gastric cancer.Our Clinical Trial Designs and Strategy for Margetuximab in the China MarketZai Lab is exploring regulatory approval pathways for margetuximab in HER2+ breast cancer in China using a bridging approach which mayrequire a PK study and a bridging trial. Details of the study design are being worked on. Data from the positive SOPHIA study and the bridging study datawill be used to support potential regulatory filing for approval in China. In additional, Zai Lab plans to participate in the upcoming global studies ofmargetuximab in combination with a PD-1 antibody in gastric cancer sponsored by MacroGenics in HER2+ first line treatment of gastric cancer. 68 Margetuximab Mechanism of ActionHER2 oncoprotein drive the aggressive behavior of HER2+ breast and other cancer and it proves to be a good target for cancer therapeuticsexemplified by the clinical success of the monoclonal antibody trastuzumab. Margetuximab is believed to mediate its therapeutic activity against HER2+tumours by a combination of mechanisms that are initiated by binding of margetuximab to HER2 expressed on the cell surface, including the following: •Direct impact on HER2 receptor leading to reduced HER receptor dimerization and subsequent activation, induction of endocytosis of theHER2 receptor, and prevention of shedding of the extracellular domain of the HER2 receptor (thereby preventing formation of aconstitutively active truncated intracellular receptor) •Induction of apoptosis •Antibody-mediated cellular cytotoxicity, or ADCC, and presentation of the antigenic determinants of opsonized cells to antigen-presentingcells.Fcγ-receptor (FcγR)-mediated mechanisms, such as ADCC, play a critical part in the action of many antibodies including trastuzumab.Optimization of the Fc component of margetuximab enhances binding to the V/F heterozygous subtype and the F/F homozygous subtype of FcγR comparedto trastuzumab, potentially leading to enhanced ADCC activity in a broader patient population. Margetuximab significantly increased the level of ADCCactivity mediated by Fc domain optimization, and the enhanced ADCC was observed in a range of breast, gastric, bladder and colorectal cancer celllines. Margetuximab maintains the same direct anti-proliferative activity as trastuzumab, but, in contrast to trastuzumab, margetuximab interacts efficientlywith both 158F and 158V allotypes of CD16A due to specific mutations introduced into its Fc region. Consistent with its enhanced binding to CD16A,margetuximab exhibits enhanced in vitro antitumor activity against HER2-expressing tumor cell lines, including against lines expressing low HER2 levels,and in xenograft models in human CD16A+ transgenic mice. The data from the nonclinical pharmacology studies support the hypothesis that margetuximabcan be active against HER2-expressing tumors.Margetuximab Preclinical and Clinical BackgroundNonclinical PharmacologyIn ligand binding studies, compared to the wild-type Fc domain, margetuximab imparts enhanced binding to both the CD16A-158F and CD16A-158V alleles. Binding to human CD32A is unchanged (131H allele) or decreased (131R allele), and there is a substantial decrease in binding to the humaninhibitory receptor, CD32B. In the monkey, the optimized Fc domain of margetuximab imparts increased binding to all three cynomolgus FcγRs (CD16A,CD32A and CD32B) compared to the wild type Fc domain.Consistent with its enhanced binding to CD16A, margetuximab exhibits enhanced antitumour activity against HER2-expressing tumour celllines in vitro and in xenograft models in human CD16A-transgenic mice. Margetuximab, as a single agent, is active against HER2-expressing breast, ovarianor pancreatic tumours in a manner consistent with that of trastuzumab. In general, HER2 3+ tumours (breast BT474 and ovarian SKOV3 cell lines) werehighly sensitive to treatment with either margetuximab or a trastuzumab analogue, RES120, with maximal effects observed at the lowest dose tested.Margetuximab showed enhanced activity against JIMT-1 xenografts compared to RES120 in mCD16-/- hCD16A+ transgenic mouse lines. JIMT-1 is aHER2+ (2+ by HercepTest) line derived from a metastatic breast cancer patient that progressed on trastuzumab therapy and is insensitive to trastuzumab anti-proliferative activity. Margetuximab was also active as a single agent against HER2-expressing gastric cancer xenografts and when combined with achemotherapy agent (taxane or irinotecan). The anti-tumour effects of the combinations were enhanced compared to that of the individual agents.Based on in vitro secondary pharmacology studies conducted with human PBMC and anti-HER2 monoclonal antibodies in the absence orpresence of immobilized HER2 antigen, the optimized Fc domain of margetuximab does not contribute to enhanced cytokine release in vitro. These datasuggest that margetuximab is not likely to induce cytokine release in human patients to levels any higher than those induced by trastuzumab.Margetuximab exhibited anti-tumour activity equal to or better than that of RES120, its WT Fc domain counterpart, in all models tested andincreased potency compared with RES120 in a selected system where the contribution of the optimized Fc domain can be ascertained. These data support thehypothesis that margetuximab is more potent than trastuzumab. In addition, margetuximab exhibited enhanced tumour activity when combined withchemotherapy agents. For patients with HER2-expressing tumours, margetuximab has the potential to expand the benefit to the whole patient population,irrespective of the CD16A genotype. Thus, these data support the use of margetuximab, in combination with chemotherapy, to treat HER2+ breast cancer.69 Nonclinical pharmacokineticsIn the single dose toxicology study, intravenous infusion of margetuximab at 50 mg/kg led to a mean Cmax of 1.62 mg/mL for males and 1.70mg/mL for females. The terminal phase half-life was estimated to be 223.9 hours in males and 233.9 hours in females, while serum clearance was 0.434 mL/hrand 0.400 mL/hr in males and females, respectively. The volume of distribution at steady state (Vss) was estimated to be 132.4 mL in males and 127.2 mL infemales, which is similar to the plasma volume. No gender related differences were apparent in the pharmacokinetic profile. The pharmacokinetic propertiesfor RES120, an antibody identical to margetuximab except for the presence of a wild type human IgG1 Fc domain, were similar to those for margetuximab. Inthe multi-dose toxicology study, margetuximab was administered weekly for 6 weeks at doses of 15, 50 or 150 mg/kg. Toxicokinetic measurements showedan increase in exposure to margetuximab with increasing dose. Cmax appeared to increase linearly with dose following the first dose on Day 1; however,increases in Cmax were not dose proportional following the sixth dose on Day 36. Similar trends were observed with respect to AUC0-∞. Terminal serum half-life ranged from 133 to 189 hours on Day 1 and 176 to 222 hours on Day 36. Serum clearance ranged from 0.55 to 1.09 mL/hr on Day 1 and 0.20 to 0.36mL/hr on Day 36. The volume of distribution approximated to the blood volume. No substantial gender differences were observed. The more rapid clearancefollowing the first dose on Day 1 as compared to Day 36 was probably due to binding to the target receptor and saturation of this binding following multipledoses. Taken together, these data indicate that the pharmacokinetic profile of margetuximab in monkeys is comparable to that of other anti-HER2 IgG1monoclonal antibodiesNonclinical ToxicologyMargetuximab has been investigated in single and repeat dose toxicity studies in the cynomolgus monkey and in a battery of in vitro tissue cross-reactivity studies in human and cynomolgus monkey tissues. Cynomolgus monkeys (Macaca fascicularis) express both the target antigen and FcγRs that arerelevant for modeling margetuximab. A direct comparison of margetuximab and trastuzumab revealed similar staining patterns in human and cynomolgusmonkey tissues. A second (rodent) species was not used in repeat dose toxicity studies because margetuximab, which retains the HER2-binding properties of4D5, the original precursor to the trastuzumab antibody, does not cross react with rodent HER2/neu.In a pilot toxicology study in cynomolgus monkeys margetuximab or RES120 was well tolerated when administered by IV infusion at a singledose of 50 mg/kg. There were no test article-related mortalities and no test article-related changes with regard to clinical signs, food consumption, bodyweights, haematology, coagulation, or urinalysis parameters. There were also no macroscopic, organ weight or microscopic findings related to theadministration of RES120 or margetuximab. Mild increases in alanine aminotransferase (ALT), aspartate aminotransferase (AST), and lactate dehydrogenase(LD), with both margetuximab and RES120, were consistent with a nonhepatic source and can be observed following 1-hour infusions and frequent bloodsampling for toxicokinetic analysis. In the repeat dose study, margetuximab, administered weekly via 1-hour intravenous infusion for six weeks at 15, 50 and150 mg/kg, was well tolerated in male and female cynomolgus monkeys. There were no margetuximab-related mortalities or clinical signs and no test article-related changes in food consumption, body weights, ECG, troponin I or ophthalmic examinations, physical examinations, blood pressure or heart rate,haematology, coagulation, or urinalysis parameters. No margetuximab-related changes were observed in natural killer (NK) cell cytolytic activity during thedosing or recovery intervals. There were no gross findings observed at necropsy, no organ weight or organ weight ratio alterations, and no microscopicfindings attributed to the administration of margetuximab (including no findings in heart tissue).Clinical BackgroundHER2-expressing tumors represent ~25% of breast cancer and ~ 20% of gastric cancer. The HER2 positive rate may be lower for gastric cancer inChina. HER2-targeting agents have had significant impact on the behavior of HER2+ breast and gastric cancers. In the metastatic setting, trastuzumab incombination with pertuzumab and chemotherapy has become the standard of care (SOC) in the first line treatment of HER2-postive breast cancer, whiletrastuzumab in combination with chemotherapy is the SOC in the first line treatment of HER2+ gastric cancer. Trastuzumab has been demonstrated toimprove PFS of patients with gastric and GEJ tumors that overexpress HER-2 from 5.5 months to 6.7 months and OS from 11.1 months to 13.8 months whenadded to chemotherapy compared to chemotherapy alone. The addition of a targeted mAb to chemotherapy has also demonstrated improved PFS and OS inthe second line setting. Ramucirumab (a mAb targeting the vascular endothelial growth factor pathway) improved median OS to 9.6 months when added topaclitaxel chemotherapy compared to 7.4 months with paclitaxel chemotherapy alone. 70 Margetuximab has been evaluated in several ongoing or completed studies. Study CP-MGAH22-04 (SOPHIA) is a Phase III randomized,comparator-controlled study of margetuximab plus chemotherapy for the treatment of patients with HER2+ metastatic breast cancer who have received atleast 2 prior lines of anti-HER2 directed therapy in the metastatic setting, or in case of having received (neo)adjuvant pertuzumab, at least 1 prior line of anti-HER2 directed therapy in the metastatic setting, and who have received at least 1, and no more than 3, lines of therapy overall in the metastatic setting.Eligible patients are randomized 1:1 to receive either margetuximab (15.0 mg/kg IV Q3W) or trastuzumab (8 mg/kg loading dose, 6 mg/kg subsequent doses,IV Q3W) to be administered in combination with chemotherapy (capecitabine, eribulin, gemcitabine, or vinorelbine) of the investigator’s choice and asallowable per local regulations. Patients will receive treatment until disease progression, death, withdrawal of consent, or request by the treating physician todiscontinue treatment. Following completion of (or discontinuation from) treatment, patients will be followed for survival. The study enrolled 536 subjectsand the trial met the primary endpoint of prolongation of progression-free survival (PFS) in patients treated with the combination of margetuximab pluschemotherapy compared to trastuzumab plus chemotherapy. Patients in the margetuximab arm experienced a 24% risk reduction in PFS compared to patientsin the trastuzumab arm (HR=0.76, p=0.033), and approximately 85% of patients in the study were carriers of the CD16A (FcγRIIIa) 158F allele, which hasbeen previously associated with diminished clinical response to Herceptin and other antibodies. In this pre-specified subpopulation, patients in themargetuximab arm experienced a 32% risk reduction in PFS compared to patients in the trastuzumab arm (HR=0.68, p=0.005). Study CP-MGAH22-05 is a Phase Ib/2, open-label, dose escalation and cohort expansion study designed to characterize the safety, tolerability,pharmacokinetics (PK), pharmacodynamics, immunogenicity, and preliminary anti-tumor activity of margetuximab administered IV every 3 weeks incombination with pembrolizumab (Keytruda) administered IV every 3 weeks in patients with relapsed/refractory unresectable locally advanced or metastaticHER2+ gastroesophageal junction or gastric cancer. The study consists of a dose escalation phase to determine maximum tolerated dose (MTD, or maximumadministered dose, if no MTD is defined). Margetuximab was evaluated in 2 sequential escalating doses, 10 mg/kg and 15 mg/kg, in combination with 200mg pembrolizumab in cohorts of 3 to 6 patients each. Subsequently a cohort expansion phase enrolled 60 patients (30 each in North America and Asia) todefine safety and initial efficacy of the combination with the dose defined in the first phase (15 mg/kg).Margetuximab also has an Expanded Access Program (EAP) program that provides margetuximab for the treatment of HER2+ metastatic breastcancer in single, individually approved single-patient INDs is ongoing.Two studies of margetuximab have been completed. Study CP-MGAH22-01 was a Phase I, open-label, single-arm, multicenter dose-escalationstudy to define the toxicity profile, maximum tolerated dose (MTD), immunogenicity, PK, and potential antitumor activity of margetuximab in patients withrefractory HER2+ breast cancers and patients with other carcinomas that overexpress HER2 for whom no standard therapy is available. A total of 66 patientsreceived treatment with margetuximab in this study. Margetuximab doses of 0.1 mg/kg (n=3), 0.3 mg/kg (n=3), 1.0 mg/kg (n=3), 3.0 mg/kg (n=6), and 6.0mg/kg (n=4) per week were evaluated in a sequential manner in the dose escalation segment of the study. Dose-limiting toxicity (DLT) was reported in onlyone patient treated at 3.0 mg/kg who experienced Grade 3 infusion related reaction (also a SAE) associated with the first dose of margetuximab. The cohortwas expanded and the margetuximab dose subsequently escalated to 6.0 mg/kg with no further DLTs observed. When margetuximab was dosed weekly, theMTD was not reached. Margetuximab was tolerated at the highest dose evaluated, 6.0 mg/kg, and this cohort was subsequently expanded to enroll anadditional 15 patients. Overall, 34 patients were enrolled in the weekly dosing cohorts. Margetuximab was well tolerated at doses of 0.1 to 0.6 mg/kg onceweekly or 10.0 to 18.0 mg/kg once Q3W. An MTD was not reached for either regimen evaluated. Adverse events were generally mild to moderate in severityand no cardiotoxicity was observed. The safety data evaluated in this Phase I clinical trial demonstrated an acceptable safety profile for margetuximab.Overall, the results of this Phase I study indicated that single-agent margetuximab was well-tolerated and demonstrated encouraging initial antitumor activityin heavily pretreated patients with refractory HER2-expressing tumors, including patients with metastatic HER2+ breast cancer. Study CP-MGAH22-02 was a single-arm, open-label, Phase II study of margetuximab in patients with relapsed or refractory breast cancer whosetumors express HER2 at a 2+ level by IHC and lack evidence of HER2 gene amplification by FISH. No partial response (PR) or complete response (CR)among 22 response-evaluable patients was observed in response to such treatment. As a result, the study was discontinued early because it did not meet thecriteria to continue as specified in the protocol.71 Bemarituzumab (FPA144)OverviewGastric cancer, including gastroesophageal junction (GEJ) cancer, carries a poor prognosis, with five year OS rates below 30% for advanced stagedisease (Stage III and IV) in the United States and China. China has one of the highest incidence rates of gastric cancer in the world, with approximately680,000 new cases annually.FPA144, which we licensed from Five Prime, is a humanized monoclonal antibody (IgG1 isotype) specific to the human FGFR2b receptor inclinical development as a targeted immuno-therapy for tumors that overexpress FGFR2b, including gastric and gastroesophageal cancer. In December 2017,Five Prime initiated dosing in a Phase I safety lead-in portion of its Phase I/III clinical trial of FPA144 in combination with the mFOLFOX6 chemotherapyregimen in patients with previously untreated, advanced gastric or gastroesophageal cancer. The randomized, controlled Phase III portion of the trialevaluating FPA144 plus chemotherapy was initiated in the second half of 2018 and Zai Lab enrolled the 1st patient in October 2018 in this globalregistrational study for the treatment of front-line gastric and gastroesophageal cancers. We and Five Prime intend to use the proposed global pivotal Phase IIIstudy and additional supportive data from clinical and nonclinical development to form the basis of an eventual marketing application for FPA144 bothwithin and outside of China.Our Clinical Trial Designs and Strategy for FPA144 in the China MarketAs FPA144 is a targeted biologic, the clinical development of FPA144 will ultimately be in selected patients with alterations in the fibroblastgrowth factor receptor 2, or FGFR2, pathway that are most likely to respond to this novel agent. The tumor types most relevant to date include gastric,bladder, and possibly cholangiocarcinoma. Each of these cancers needs new therapeutic options. The FIGHT (FPA144-004) study is designed to evaluate theefficacy, safety, and PK of FPA144 in combination with modified FOLFOX (infusional 5-FU, leucovorin, and oxaliplatin) (mFOLFOX6) chemotherapytreatment. Patients with gastrointestinal (GI) tumors will be enrolled in a Phase I safety run in, while the Phase III will enroll gastric cancer patientsspecifically selected for FGFR2 expression and/or FGFR2 gene amplification (FGFR2 selected) who are eligible for first-line mFOLFOX6 chemotherapy. Theprimary endpoint for Phase I part is the incidence of Grade 2 or higher AEs assessed as related to FPA144 by the Investigator and the incidence of clinicallaboratory abnormalities defined as DLTs. The primary endpoint for the Phase III part is the OS, defined as time from enrollment until death from any cause.China is participating in the Phase III part of above global trial and contributing largely on patient enrollment. The global Phase III data willsupport the NDA submissions both in China and outside China.FPA144 Mechanism of ActionFPA144 is a humanized monoclonal antibody (IgG1 isotype) specific to the human FGFR2b receptor (National Center for BiotechnologyInformation; NCBI; reference sequence ID NP_001138385.1) that blocks FGF ligand binding to the receptor. FPA144 is directed against the third Ig region ofthe FGFR2b receptor isoform, the region that is alternatively spliced and regulates ligand specificity. This antibody is glycosylated, but is produced in aChinese hamster ovary (CHO) cell line that lacks the FUT8 gene (α1,6‑Fucosyltransferase) and therefore lacks a core fucose in the polysaccharide portion ofthe antibody. The absence of the core fucose results in higher affinity for the Fc receptor FcγRIIIa compared to the fucosylated molecule and potentiallyenhances immune cell-mediated tumor cell killing. The antibody has thus been glycoengineered for enhanced antibody‑dependent cell-mediatedcytotoxicity (ADCC). FPA144 inhibits FGF ligand-stimulated FGFR2b phosphorylation and cell proliferation in cell culture in FGFR2b overexpressinggastric and breast cancer cell lines. FPA144 also inhibits tumor growth in FGFR2b overexpressing gastric and breast xenograft models. The 3 potentialmechanisms of action of FPA144 thus include blocking ligand binding and downstream signaling, decreasing expression of the FGFR2b driver protein, andenhancing ADCC.FPA144 can produce complete and durable tumor growth inhibition in FGFR2b-overexpressing and FGFR2 gene-amplified gastric cancerxenografts in immune-compromised mice where FGFR2b is considered a driver of tumor growth. In addition, FPA144 demonstrates recruitment of naturalkiller (NK) cells and concomitant tumor growth inhibition in the 4T1 syngeneic tumor model with modest expression of FGFR2b. These data suggest thatADCC may be efficacious in patients without FGFR2 gene amplification with moderate FGFR2b overexpression, and that ADCC activity may be a majorcontributor to the mechanism of action in these patients.72 Additionally, since FPA144 is specific for the FGFR2b receptor, it does not interfere with signaling of the other FGFs/ FGFRs, including FGFR2c.In contrast to the FGFR tyrosine kinase inhibitors (TKIs), FPA144 does not inhibit FGF23 signaling. FGF23 is a ligand involved in calcium/phosphatemetabolism. Thus, treatment with FPA144 is not expected to cause the dose‑limiting hyperphosphatemia associated with the FGFR TKIs.FPA144 Preclinical and Clinical BackgroundNonclinical PharmacologyThe nonclinical pharmacology program for FPA144 has been designed to assess the in vitro and in vivo pharmacologic action of FPA144 withparticular focus on efficacy and safety. In vitro pharmacodynamic (PD) studies have been performed to characterize the binding affinity of FPA144 toFGFR2b in vitro, as well as to assess the ability of FPA144 to inhibit FGFR2b ligand binding, downstream signaling, and cell proliferation. In addition, theability of FPA144 to induce ADCC has been determined in vitro. The in vivo pharmacology of FPA144 has been studied in animal models of tumor growth.Safety pharmacology studies including CNS, cardiovascular, and respiratory rate assessments have been incorporated into the toxicology studies. FPA144inhibits FGF ligand-stimulated FGFR2b phosphorylation and cell proliferation of FGFR2b‑overexpressing gastric and breast cancer cell lines. FPA144 alsoinhibits tumor growth in FGFR2b‑overexpressing gastric and breast xenograft models, including regression in some models. In addition, Five Prime hasdemonstrated in vitro that FPA144 mediates ADCC in cells expressing FGFR2b.Nonclinical PharmacokineticsThe PK characteristics of FPA144 were investigated as a part of both nonclinical TK and PK studies in rat and cynomolgus monkey. Single-doseand repeat-dose studies evaluated FPA144 doses of 1–150 mg/kg. In those studies, FPA144 was administered intravenously, either as a bolus injection or a30-minute infusion, and given weekly in the repeat-dose studies. Determination of serum concentrations of FPA144 and anti-FPA144 antibodies wereperformed using immunoassay methods developed by Five Prime and validated for use in GLP toxicology studies in rat and monkey.Between rat and cynomolgus monkey, FPA144 demonstrated consistent PK behavior following IV administration, and the PK characteristicsobserved were consistent across all studies. Half‑life was dose-dependent ranging from approximately 20‑40 hours at low doses (1‑1.5mg/kg) to100‑200+ hours at the highest doses (100‑150 mg/kg) tested in cynomolgus monkey. Estimates of the initial volume of distribution approximated the plasmavolume, suggesting that FPA144 did not distribute beyond the plasma compartment immediately after dosing, which is typical of large proteins includingantibodies.The majority of antibodies demonstrate dose-dependent elimination consistent with target-mediated elimination, where clearance decreases as afunction of dose (eg, trastuzumab, rituximab, gemtuzumab, and panitumumab). FPA144 demonstrated dose-dependent, nonlinear PK, similar to what hasbeen observed for other mAbs. This was marked by a faster clearance at the terminal phase of the plasma concentration-time profile, a greater than dose-proportional increase in exposure with increasing dose, and a longer half-life with increasing dose. Target-mediated clearance was saturable at doses≥ 10 mg/kg for single doses and doses ≥ 5 mg/kg following repeat doses, marked by dose-proportional increases in exposure at doses exceeding this levelwhen dosed at weekly intervals. Since FPA144 binds equivalently to rat, monkey, and human FGFR2b, the nonclinical data provide a solid foundation tounderstanding the profile in clinical studies with FPA144.The PK studies supporting the TK studies showed dose-dependent increases in exposure supporting the reliability of these studies to assesstoxicity. Anti-drug antibodies (ADAs) were confirmed in 6.0% of rats and 10.4% of monkeys after 13 weeks of dosing in the two 13‑week GLP toxicologystudies. Thus, the low incidence of ADAs did not impede the validity of the toxicological evaluation and is not predictive of what will occur in humans.Nonclinical ToxicologySix nonclinical in vivo toxicology studies were performed using FPA144: two studies in rat and four studies in monkey. In rat, a dose-rangefinding, repeat-dose toxicology study (four weekly doses of 1.5, 30, or 150 mg/kg and a repeat-dose GLP toxicity study of 13 weekly doses of 1, 5, or100 mg/kg with a nine‑week recovery phase) were performed. In monkey, a single-dose PK/tolerability study (single dose of 10 mg/kg), a dose-range finding,repeat-dose toxicology study (four weekly doses of 1.5, 30, or 150 mg/kg), an ophthalmic–focused, repeat-dose tolerability study (four weekly doses of 1.5,5, 15, 30, or 150 mg/kg), and a repeat-dose GLP toxicology study (13 weekly doses of 1, 5, or 100 mg/kg with a 15-week recovery phase) were performed.73 FPA144 was well-tolerated when administered intravenously once per week for 4 weeks at doses up to 150 mg/kg in rats. Corneal epitheliumthinning was seen in animals receiving FPA144 at 1.5 mg/kg and higher, and these findings were considered treatment-related. The additional cornealchanges were also considered treatment-related, but it is unclear whether they are a direct effect or secondary to the corneal thinning. For the hypertrophicchanges in the RPE, it is unclear if the changes are a direct treatment-related effect since changes to the RPE can be caused by a multitude of factors. Nopathological findings were detected in the RPE in the 13‑week GLP rat toxicity study.FPA144 was well tolerated when administered by IV once per week for 4 doses up to 150 mg/kg in cynomolgus monkeys. Findings potentiallyrelated to FPA144 were corneal epithelium thinning and a unilateral cataract in one high-dose animal.FPA144 administered to rats once per week for 13 weeks at 1, 5, or 100 mg/kg resulted in treatment-related findings at all dose levels, althoughmost of the effects occurred or were more pronounced in animals given 5 and 100 mg/kg. The most prominent findings were tooth abnormalities (clinical,macroscopic, and microscopic findings) and body weight loss/lack of weight most likely secondary to the tooth findings that necessitated early euthanasia ofthree animals at 100 mg/kg, ocular findings (ophthalmic and microscopic findings), macroscopic and/or microscopic findings in the Harderian gland and oralmucosa at 5 mg/kg and 100 mg/kg, and macroscopic and/or microscopic findings in the tongue at all dose levels. FPA144-related but non-adversemicroscopic findings were also noted in the mammary gland of animals in all dose groups. With the exception of FPA144‑related effects on incisors, somedegree of recovery was evident for all findings at the end of the recovery phase. Since all findings in the 1 mg/kg dose group were minimal, without clinicalconsequences, and recoverable, the HNSTD was determined to be 1 mg/kg when given weekly for 13 weeks.FPA144 given to male and female cynomolgus monkeys by IV infusion once per week for 13 weeks at 1, 5, or 100 mg/kg was well tolerated.FPA144-related effects were limited to microscopic findings of corneal atrophy in animals given 5 and 100 mg/kg and mammary gland atrophy in femalesfrom all dose groups. These findings were not associated with clinical sequelae and were not observed at the end of the recovery phase, indicating completerecovery. Therefore, based on the lack of other correlating findings or changes (eg, ophthalmic findings or clinical observations) and the demonstratedreversal, neither FPA144-related microscopic finding was considered adverse. The HNSTD is considered to be above the 100 mg/kg level when given weeklyfor 13 weeks.The data from the tissue cross-reactivity study demonstrated that the expression of the target of FPA144 is similar between the species used fortoxicology studies and humans, and suggest that the safety findings from the nonclinical toxicology studies are likely to apply to the clinic.Examinations of the reproductive organs in the toxicological studies demonstrated no evidence of reproductive target toxicity. No specificreproductive toxicity tests have been conducted for FPA144 to date.FPA144 is an IgG1 monoclonal antibody directed against FGFR2b and is being developed for the treatment of malignancies that overexpressFGFR2b. The toxicology and TK studies with FPA144 were completed in rat and cynomolgus monkey to support the design of the clinical trial.Clinical BackgroundGastric cancer, including gastroesophageal junction (GEJ) cancer, carries a poor prognosis, with five year OS rates below 30% for advanced stagedisease (Stage III and IV) in the United States and China. Intensive multimodal therapy fails to cure the majority of patients with locoregional disease and foradvanced stage disease, standard chemotherapy provides only short-term benefits. First-line chemotherapy used in metastatic or recurrent disease consists ofa fluoropyrimidine (5FU, capecitabine, or S-1) with a platinum agent (usually oxaliplatin or cisplatin). This combination chemotherapy treatment prolongssurvival by 6 months compared to best supportive care but still only provides short-term benefit, with a progression free survival (PFS) of five to six monthsand a median OS of nine to 10 months.Attempts to improve upon standard platinum and fluoropyrimidine combinations include the addition of the targeted monoclonal antibody(mAb) trastuzumab in patients whose tumors overexpress human epidermal growth factor receptor 2 (HER-2). Trastuzumab has been demonstrated toimprove PFS of the approximately 20% of patients with gastric and GEJ tumors that overexpress HER-2 from 5.5 months to 6.7 months and OS from 11.1months to 13.8 months when added to chemotherapy compared to chemotherapy alone. The addition of a targeted mAb to chemotherapy has alsodemonstrated improved PFS and OS in the second line setting. Ramucirumab (a mAb targeting the vascular endothelial growth factor pathway) improvedmedian OS to 9.6 months when added to paclitaxel chemotherapy compared to 7.4 months with paclitaxel chemotherapy alone.74 FGFR2 amplification in gastric cancer results in high levels of FGFR2b expression, which is correlated with poor prognosis for OS with a hazardratio (HR) reported as high as 4.59 when compared to patients without FGFR2b overexpression. FGFR2 is amplified in approximately 3% to 9% of tumorsfrom patients with gastric cancer, with similar rates being observed across Japan, Korea, China, and the United Kingdom, and across platforms used to assessgene amplification (including reverse transcription polymerase chain reaction; RT‑PCR; fluorescence in situ hybridization; FISH; and single nucleotidepolymorphism; SNP; arrays). Using a validated immunohistochemistry (IHC) assay to specifically detect FGFR2b expression in solid tumors, approximately12% of gastric cancers from China express a range of FGFR2b protein. To date, no drug has been approved for the FGFR2b-overexpressing molecular subsetof patients with gastric cancer including cancer of the GEJ.FPA144 is a recombinant, afucosylated, humanized immunoglobulin G1 (IgG1) kappa monoclonal antibody directed against FGFR2b. FPA144is glycoengineered for enhanced antibody-dependent cell-mediated cytotoxicity (ADCC). Preclinically, FPA144 blocks ligand binding and acts as atargeted immunotherapy that drives NK cells and recruits T cells into targeted tumors. As well as driving NK cells into tumors, in vivo preclinical studieshave shown that FPA144 creates an “inflamed” tumor microenvironment consisting of recruited T cells and elevated levels of programmed death-ligand 1(PD-L1). The three potential mechanisms of action of FPA144 include blocking ligand binding and downstream signaling, decreasing expression of theFGFR2b driver protein, and ADCC.FPA144 is being developed in combination with chemotherapy for the treatment of patients with unresectable, locally advanced, or metastaticgastric cancer including cancer of the GEJ whose tumors overexpress FGFR2b, as determined by an investigational device(s) being developed as acompanion diagnostic test(s). Evaluation of this agent in patients with gastric cancer whose tumors have alterations of FGFR2 is an important strategy toimprove the outcome for these patients.A Phase I study, FPA144-001, entitled “A Phase I Open-Label, Dose-Finding Study Evaluating Safety and Pharmacokinetics of FPA144 inPatients with Advanced Solid Tumors” is ongoing in the United States, South Korea, and Taiwan. Safety and efficacy data in 74 patients, includingpreliminary data from an expansion cohort of 24 gastric cancer patients with high FGFR2b overexpression (IHC 3+ intensity in ≥ 10% of tumor cells asdetermined in a laboratory developed test), support further clinical investigation of FPA144 in patients with FGFR2b-selected tumors. Based on an August 7,2017 data cut, treatment with FPA144 resulted in no dose-limiting toxicities (DLTs) reported at doses up to 15 mg/kg administered every two weeks. Ofthe 74 patients who have received at least one dose of FPA144, 50 patients had gastric cancer, of whom 24 had gastric cancer with high FGFR2boverexpression and were evaluable for response. Of these 24 patients, four, or 16.7% (95% CI 4.7-37.4%), reported a radiographically confirmed partialresponse (PR) per Response Evaluation Criteria in Solid Tumors (RECIST) criteria (version 1.1). The median duration of response (DoR) in these four patientswas 15.4 weeks (95% CI 9.1 to 19.1 weeks). Conversely, no responses were reported in the 25 patients with gastric cancer who either had low or moderateFGFR2b overexpression, were IHC negative, or who had unknown FGFR2b status. One patient with gastric cancer did not have measurable disease and wasinevaluable for response. To address the unmet medical need of patients with unresectable, locally advanced, or metastatic gastric cancers and based on the preliminaryPhase I data, Five Prime is proposing FPA144‑004 (FIGHT), a double-blind, randomized, controlled, global Phase III study of FPA144 in combination withmodified FOLFOX6 (mFOLFOX6) chemotherapy, preceded by a Phase I safety run-in. The Phase I safety run-in will be conducted in the United States andwill assess safety and tolerability and identify the recommended dose (RD) of FPA144 as an add-on therapy to fluorouracil, leucovorin, and oxaliplatin(mFOLFOX6, a combination that is used globally) for patients with gastrointestinal (GI) tumors. The global Phase III portion of the study will evaluate theefficacy and safety of FPA144 in combination with mFOLFOX6 versus placebo in combination with mFOLFOX6 in patients with unresectable, locallyadvanced, or metastatic gastric cancers whose tumors have FGFR2b overexpression, as determined by an IHC assay, and/or FGFR2 amplification, asdetermined by a circulating tumor DNA (ctDNA) assay. The proposed Phase III study will enroll a majority of Asian patients, from countries including Japan,South Korea, Taiwan, Thailand, and China. The proposed Phase III study will employ 2 diagnostic assays, the Ventana Medical Systems, Inc. FGFR2b IHCassay and the Personal Genome Diagnostics (PGDx) next-generation sequencing (NGS) assay for FGFR2 testing. The goal is to establish the clinical utilityof the IHC and NGS assays for use as companion diagnostic tests. The primary endpoint for the proposed Phase III study will be OS, supported by a principlesecondary endpoint of investigator-assessed PFS. Other secondary and exploratory endpoints include overall response rate (ORR), DoR, and physicalfunction, as measured by EQ-5D-5L and EORTC QLQ-C30. Additional development of FPA144 for the treatment of gastric cancer includes FPA144-002, aPhase I pharmacokinetic (PK) safety study in Japan. This dose escalation study is designed to assess the PK and safety of single agent FPA144 and willidentify the RD for single agent FPA144 in Japanese patients. The first cohort of three patients treated on FPA144-002 had no DLTs reported at doses of10 mg/kg administered every two weeks.75 Omadacycline (ZL-2401)ZL-2401 is a broad-spectrum antibiotic in a new class of tetracycline derivatives, known as aminomethylcyclines. ZL-2401 is primarily beingdeveloped for ABSSSI, CABP and UTI in both the hospital and community settings and is designed to overcome the two major mechanisms of tetracyclineresistance, known as pump efflux and ribosome protection. ZL-2401 has been granted QIDP and Fast Track status by the FDA. The drug has beenadministered to over 1,500 patients and has an established safety and tolerability profile. In October 2018, following priority review, ZL-2401 was approvedby FDA for both indications and for both the IV and oral once-daily formulations.In June 2016, Paratek announced positive top-line efficacy data in a Phase III registration study in ABSSSI which demonstrated the efficacy andsafety of IV to oral once-daily ZL-2401 compared to linezolid. In April 2017, Paratek announced positive top-line results from a global, pivotal Phase IIIclinical study in CABP which demonstrated the efficacy, general safety and tolerability of IV to oral ZL-2401 compared to moxifloxacin. In July 2017,Paratek also announced positive top-line results from a Phase III study comparing oral-only administration of ZL-2401 in ABSSSI compared to oral-onlylinezolid, which met all of its primary endpoints.Omadacycline / NUZYRA was launched in the United States in February 2019 as a once-daily oral and intravenous antibiotic for the treatment ofadults with community-acquired bacterial pneumonia (CABP) and acute skin and skin structure infections (ABSSSI). The European Marketing AuthorizationApplication for oral and IV omadacycline was submitted in October 2018 and the review has been initiated.In addition to its Phase III program for ZL-2401, Paratek initiated a Phase Ib study in UTIs in May 2016 and positive top-line PK proof-of-principle data was reported in November 2016.We obtained the exclusive license to develop, manufacture and commercialize ZL-2401 in the field of all human therapeutic and preventativeuses (other than biodefense) in China, Hong Kong, Macau, and Taiwan in April 2017.Our Clinical Trial Designs and Strategy for ZL-2401 in the China MarketWe have completed the technology transfer stage and discussed with key opinion leaders our planned China development activities inpreparation for SDA interactions. We have submitted documents and filed for an IND with Chinese Health Authorities in January 2018. Zai is activelyengaged in discussions with the SDA and key opinion leaders on our planned China development strategy in preparation for our NDA filing.We have completed a microbiology study investigating the activity of ZL-2401 against pathogens obtained from Chinese/Asian patients. In thispilot trial of 3,832 isolates, ZL-2401 activity was essentially identical to the susceptibility results obtained in a larger 2016 surveillance study of 21,000isolates conducted outside China (mainly in the United States and European Union). Our data have recently been published. We have also completed a bioequivalence study for the oral tablet which showed almost identical PK exposures of the new China-producedformulation comparison to the formulation used by Paratek in the clinical trial program.We have also initiated a PK study in Chinese which will provide exposure data for both the IV and oral formulation. We have enrolled the firstABSSSI patient in our clinical efficacy study and these studies are part of our bridging plan for regulatory approval in China.Background on Tetracycline AntibioticsThe tetracycline class of antibiotics was introduced into the clinic in the 1960s and found considerable use in the treatment of respiratory andgastrointestinal infections. They are mostly bacteriostatic drugs interfering with protein synthesis by binding selectively to the bacterial 30S ribosomalsubunit.Tetracyclines provide excellent broad-spectrum coverage of Gram-positive, Gram-negative, anaerobes and special pathogens (e.g., malaria,anthrax, Lyme borrelia, nocardia). Resistance is due to efflux mechanisms and ribosomal mutations, but despite the gradual and inevitable increase inresistance over many decades of continued use, doxycycline is still an effective and commonly used drug today.76 ZL-2401 – PharmacokineticsStudies showed that oral doses of 300 mg provide bioequivalent exposure with the therapeutic IV dose of 100 mg. Like with other tetracyclines,absorption is affected by food and divalent cations. The drug has a long half-life (approximately 17 hours) and excellent penetration into tissues, includingalveolar and epithelial lining fluid. In contrast to other tetracyclines, plasma protein binding is low (20%) and not dose-related. The drug is not metabolizedand excretion is predominantly via the biliary route. There is no need for dose adjustment in hepatic or renal impairment.ZL-2401 Clinical ResultsPhase III Pivotal Trial—ABSSSI / OASIS—ABSI 1108ZL-2401 was statistically non-inferior to linezolid IV/PO in a direct comparison study following a protocol established under an SPA agreed towith the FDA as well as the criteria outlined by the EMA. In this trial, patients with wound infections, major abscesses, and erysipelas/cellulitis were enrolledin equal numbers. On average, patients received IV ZL-2401 for 4.4 days, and oral ZL-2401 for 5.5 days.S. aureus (both MSSA and MRSA) was the predominant pathogen isolated from patients followed by streptococci. Clinical response and bacterialeradication rates showed the high efficacy of ZL-2401 against skin pathogens including MRSA.Figure 5: ZL-2401 vs Linezolid—ABSSSI Trial—Primary Efficacy Outcomes Figure 6: Early Clinical Success by Pathogen—micro-mITT Population 77 The safety / tolerability profile was very similar between the treatment arms with only a slightly higher rate of gastrointestinal side effects andinfusion site reactions in ZL-2401 recipients. There was no significant imbalance in treatment emergent adverse events, or TEAEs, serious TEAEs, prematurediscontinuations or deaths.This study was recently published in the New England Journal of Medicine (W O’Riordan et al. Omadacycline for Acute Bacterial Skin and Skin-Structure Infections, N Engl J Med 2019; 380:528-538).Figure 7: Study ABSI-1108: Most Frequent TEAEs (> 3%)—Safety Population Omadacycline Linezolid N = 323 N = 322 % % Subjects with Any TEAE 48.3 45.7 Nausea 12.4 9.9 Infusion Site Extravasation 8.7 5.9 Subcutaneous Abscess 5.3 5.9 Vomiting 5.3 5.0 Cellulitis 4.6 4.7 Headache 3.1 4.0 ALT Increased 2.8 4.3 AST Increased 2.5 3.7 Diarrhea 2.2 3.1 Phase III Pivotal Trial—CABP / OPTIC—CABP1200ZL-2401 was non-inferior to moxifloxacin IV/oral in this direct comparison study following a protocol established under an SPA agreed with theFDA as well as the criteria outlined by the EMA. In this trial, patients with PORT Class II—IV were recruited; less than 25% of patients had received non-study antibiotics before enrollment.Streptococcus pneumoniae and Mycoplasma pneumoniae were the predominant pathogens isolated, followed by H. influenzae, H. parainfluenzae,Legionella and Chlamydophila. The clinical response rates were high for all respiratory pathogens isolated at entry and very similar between ZL-2401 andmoxifloxacin, a powerful respiratory fluoroquinolone. Figure 8: CABP Study—OPTIC: Primary Efficacy Results—FDA Analysis 78 Figure 9: CABP Study—OPTIC: Primary Efficacy Results—EMA Analysis Figure 10: CABP Study—OPTIC: Clinical Success at PTE by Baseline Pathogen Omadacycline(N = 204) Moxifloxacin(N = 182)Baseline Pathogen N Clinical Successn(%) N1 Clinical Successn(%)Atypical Pathogens 118 109 (92.4) 106 97 (91.5)Mycoplasma Pneumoniae 70 66 (94.3) 57 50 (87.7)Chlamydophila Pneumoniae 28 25 (89.3) 28 25 (89.3)Legionella Pneumophila 37 35 (94.6) 37 36 (97.3) Gram-Negative Bacteria (aerobes) 79 67 (84.8) 68 55 (80.9)Haemophilus Influenzae 32 26 (81.3) 16 16 (100.0)Haemophilus Parainfluenzae 18 15 (83.3) 17 13 (76.5)Klebsiella Pneumoniae 13 10 (76.9) 13 11 (84.6) Gram-Positive Bacteria (aerobes) 61 52 (85.2) 56 49 (87.5)Steptococcus Pneumoniae 43 37 (86.0) 34 31 (91.2)PSSP 26 23 (88.5) 22 21 (95.5)Macrolide Resistant 10 10 (100.0) 5 5 (100.0)Stephylococcus Aereus 11 8 (72.7) 11 9 (81.8)*10 or More lsolates for Omadacycline Neither gastrointestinal side effects nor IV infusion reactions occurred more frequently in the ZL-2401 arm than in the comparator arm.Cardiovascular signs and symptoms and liver function test abnormalities occurred in both study arms with similar frequency.79 This study was recently published in the New England Journal of Medicine (R Stets et al.. Omadacycline for Community-Acquired BacterialPneumonia, N Engl J Med 2019; 380:517-527).Figure 11: TEAEs in CABP Trial Omadacycline(N = 382)n(%) Moxifloxacin(N = 388)n(%)Subjects with at Least One TEAE 157 (41.1) 188 (48.5)ALT Increased 14 (3.7) 18 (4.6)Hypertension 13 (3.4) 11 (2.8)GGT Increased 10 (2.6) 8 (2.1)Insomnia 10 (2.6) 8 (2.1)Vomiting 10 (2.6) 6 (1.5)Constipation 9 (2.4) 6 (1.5)Nausea 9 (2.4) 21 (5.4)AST Increased 8 (2.1) 14 (3.6)Headache 8 (2.1) 5 (1.3) Phase III trial – ABSSSI /OASIS-2 Paratek’s third Phase III clinical study (OASIS-2) was an oral-only administration of ZL-2401 in ABSSSI compared to oral-only linezolid. Oral,once daily ZL-2401 met the FDA-specified primary efficacy endpoint of statistical non-inferiority in the modified intent-to-treat, or mITT, population (10%non-inferiority margin, 95% confidence interval) compared to oral, twice daily linezolid at the early clinical response, or ECR, 48-72 hours after initiation oftherapy. The ECR rates for the ZL-2401 and linezolid treatment arms were 87.5% and 82.5%, respectively. In addition, ZL-2401 met specified co-primaryendpoints for the EMA, which are key secondary endpoints for the FDA. For these endpoints, non-inferiority in the mITT and clinically evaluablepopulations in at the post treatment evaluation, seven to 14 days after end of treatment, ZL-2401 demonstrated a high response rate and met statistical non-inferiority to linezolid for both populations using a pre-specified 95% confidence interval. High success rates were observed with response rates of 84.2%(ZL-2401) vs. 80.8% (linezolid) and 97.9% (ZL-2401) vs. 95.5% (linezolid), respectively.The most common TEAEs in ZL-2401-treated patients (occurring in ≥ 3% of patients) were gastrointestinal adverse events of ZL-2401 vs.linezolid included: vomiting (16.8% vs. 3.0%), nausea (30.2% vs. 7.6%), diarrhea (4.1% vs. 2.7%). In addition, alanine aminotransferase, or ALT, increase(5.2% with ZL-2401 vs. 3.0% with linezolid), aspartate aminotransferase increases (4.6% with ZL-2401 vs. 3.3 for linezolid) and headache (3.5% with ZL-2401 vs. 2.2% with linezolid). Drug-related TEAEs were 37.8% for ZL-2401 vs. 14.2% for linezolid (including gastrointestinal events). Discontinuation forTEAEs was uncommon, 1.6% for ZL-2401 vs. 0.8% for linezolid. Serious TEAEs occurred in 1.4% of ZL-2401 patients and 1.4% of linezolid patients; onlyone serious TEAE was considered related to the study drug and the event occurred in a linezolid patient.Phase II studiesIn a small study (N=111) conducted in cSSSI patients ZL-2401 showed comparable efficacy and safety to linezolid IV/PO ± aztreonam. However,the design of the Phase II study (and a truncated Phase III study with 68 patients) was no longer consistent with newer FDA guidance issued for ABSSSI in2008 which required, among other changes, an early efficacy read-out at 48-72 hours.In addition, this early ZL-2401 program used a 200 mg oral step-down dose that proved to not be bioequivalent to the 100 mg IV dose. Hence,these data are now considered supportive and cannot be merged easily with the larger pivotal program trials in ABSSSI and CABP that were conducted withFDA guidance and bioequivalent IV to oral step-down dosing.A Phase II study (IV and oral) in patients with acute pyelonephritis was initiated by Paratek in 2018. 80 Phase I studiesZL-2401 has been evaluated in more than 20 Phase I studies, including food-effect, age and gender, and renal / hepatic insufficiency studies.ZL-2401 has a very favorable PK profile. It was absorbed well; its plasma T 1/2 of 14-20 hours permitted once-daily dosing. The drug was notmetabolized and drug-drug interactions were minimal. In contrast to other tetracyclines, which paradoxically display dose-dependent increases in proteinbinding, 80% of ZL-2401 remained available as free drug. Excretion was via biliary and urinary routes. Data from hepatic and renal impairment studiesshowed that dose adjustments are not needed for patients with either condition.In bioequivalence studies, the 300 mg oral dose was found to match the area under the curve of the 100 mg IV dose within the 80-125% range.ZL-2401 was negative on hERG testing and had no appreciable effect on cardiac conduction in a Thorough QT trial at supra-therapeutic doses.However, in animal tests and during Phase I, a dose-dependent elevation of blood pressure (systolic and diastolic) and heart rate were observed. ZL-2401 wasfound to be an acetylcholine antagonist for muscarinic receptor subtype M2, essentially acting as a vagolytic agent. In subsequent patient studies, theseeffects were less pronounced or absent and clinically asymptomatic. All Phase II and III studies included systematic cardiovascular pre- and post-dosemonitoring of blood pressure and heart rate to further characterize these effects both qualitatively and quantitatively.An ELF study showed excellent penetration of ZL-2401 into bronchoalveolar lavage fluid and into alveolar macrophages.A cystitis (uUTI) study was conducted by Paratek to obtain PK information for different oral dosing regimens of ZL-2401.ETX2514 (ZL-2402)ETX2514 is a novel β-lactamase inhibitor of class A, C, and D beta-lactamases. As such it is active against multiple members of the β-lactamasescommonly found in Acinetobacter baumannii. In particular, it is a potent inhibitor of several Class D enzymes which confer MDR to many β-lactamantibiotics. In combination with sulbactam, ETX2514 reduces the minimum inhibitory concentration, or MIC, against this organism and restoressusceptibility to sulbactam. It is being developed by Entasis as ETX2514SUL, a combination of ETX2514 and sulbactam. The microbiologic efficacy of thiscombination was demonstrated in large studies of well-characterized MDR Acinetobacter isolates from diverse regions, including Asia. ETX2514SUL wasbactericidal and active against penem-resistant Acinetobacter organisms. ETX2514SUL was synergistic with imipenem, further lowering MICs on in-vitrotesting. The FDA has granted ETX2514SUL QIDP, Fast Track and Priority Review status.ETX2514 without sulbactam but in combination with other β-lactams lowered the MICs for E. coli, K. pneumoniae and P. aeruginosa compared tothe partner β-lactam antibiotic alone. Entasis has conducted a comprehensive Phase I safety and PK program for ETX2514. Single ascending dose andmultiple ascending does studies showed that ETX2514 alone and in combination with sulbactam or imipenem is well tolerated and safe. There were nonoticeable drug-drug interactions.Entasis plans to develop ETX2514SUL for the treatment of severe A. baumannii infections. Entasis anticipates initiating a Phase II cUTI trialstarting in 2018 and a pivotal Phase III trial in MDR Acinetobacter infections in 2019.Background on AcinetobactersAcinetobacter is one of the most resistant pathogens encountered in clinical practice. It is one of the ESKAPE pathogens, a leading cause ofnosocomial infections throughout the world, for which new treatment options are needed as these organisms are MDR to most antibiotics currentlyavailable. Approximately 60% of Acinetobacter isolates are carbapenem resistant (so-called CRAB pathogens) and can only be treated with colistin, a rathertoxic drug, or tigecycline which is often ineffective. 81 Of great concern, colistin resistance has been reported in recent years, especially from Asia, in E. coli and in K. pneumoniae. So far, there are noreports of mcr-1 resistance in Acinetobacter but the risk is high that this mobile resistance plasmid may spread to other bacteria, especially in an environmentwith high veterinary colistin use like in China. Recent case reports of successful treatment with experimental phage therapy as a last resort when availableantibiotics fail. Severe Acinetobacter infections are associated with mortality rates of 50-60% despite intensive medical care. These infections usuallypresent as blood-stream infections or hospital-acquired pneumonia. Less severe infections of the skin and urinary tract are not uncommonThe frequency of Acinetobacter infections is on the rise world-wide. In the United States and European Union, the incidence of infection isbetween 80,000 and 120,000 patients per year in each region. The incidence is higher in Asia-Pacific and especially in China where the organism ranksamong the most frequent isolates in intensive care unit patients. In 2015, over 180,000 infections were reported from China alone. In Japan, over 30,000cases were reported for 2015, which is an increase of approximately 50% since 2012.Background on SulbactamSulbactam, a β-lactam derivative, has been in use since the 1980s. It is a IV BLI used in combination with ampicillin, known in the United Statesas Unasyn and widely used since 1987. It is an β-lactam with a proven safety record. Sulbactam has antibiotic activity of its own, notably againstAcinetobacter. However, β-lactamase-mediated resistance to sulbactam has developed and is now common in Acinetobacter.ETX2514 is a non-β-lactam BLI of the DBO class. It has structural similarities to avibactam, a BLI recently approved in combination withceftazidime (Avycaz). However, ETX2514 has demonstrated much greater potency against many β-lactamases, especially the Class D OXA enzymesprevalent in Acinetobacter.Fugan (ZL-3101)OverviewZL-3101 is a topical botanical product with anti-inflammatory properties. for the treatment of. The active ingredients in ZL-3101, glycyrrhizaeradix et rhizoma and sophorae flavescentis, have a long tradition of use in China for the treatment of mild / moderate forms of eczema and psoriasis. Ourmanagement team acquired global rights to this product from GSK in 2016 for development as a potentially steroid-sparing treatment for these conditions.We started a well-designed placebo-controlled double-blind Phase II study that incorporated two dosing regimens in patients with mild /moderate atopic dermatitis in China in the second quarter of 2017. The primary efficacy endpoint was a change in EASI from baseline to day 21 of treatmentcompared to placebo. Although the study showed that topical ZL-3101 was safe and well-tolerated, treatment showed no difference compared to placebo inEASI score improvement, the primary efficacy endpoint. Given the lack of efficacy with either ZL-3101 dose regimen, we discontinued this program for reasons of futility.Overview of Our License AgreementsTesaroIn September 2016, we entered into a collaboration, development and license agreement with TESARO Inc., or Tesaro, which was subsequentlyacquired by GlaxoSmithKline plc, or GSK, under which we obtained an exclusive sub-license under certain patents and know-how that licensed from Merck,Sharp & Dohme Corp. (a subsidiary of Merck & Co. Inc.), or Merck Corp., and AstraZeneca UK Limited to develop, manufacture, use, sell, import andcommercialize Tesaro’s proprietary PARP inhibitor, niraparib (ZEJULA), in mainland China, Hong Kong and Macau, or licensed territory, in the licensedfield of treatment, diagnosis and prevention of any human diseases or conditions (other than prostate cancer). We also obtained the right of first negotiationto obtain a license from GSK to develop and commercialize certain follow-on compounds of niraparib being developed by Tesaro in our licensed field andlicensed territory. Under the agreement, we agreed not to research, develop or commercialize certain competing products and we also granted Tesaro the rightof first refusal to license certain immuno-oncology assets developed by us.82 We are obligated to use commercially reasonable efforts to develop and commercialize the licensed products in our licensed field and licensedterritory. We are also responsible for funding all development and commercialization of the licensed products in our licensed territory.We also agree to take any action or omission reasonably requested by Tesaro that is necessary or advisable to maintain compliance with the termsof Tesaro’s license agreements with Merck Corp. and AstraZeneca UK Limited.Under the terms of the agreement, we made an upfront payment of $15.0 million to Tesaro. If we achieve a specified regulatory, development andcommercialization milestones, we may be required to pay aggregate milestone payments up to $39.5 million to Tesaro. In addition, if we successfullydevelop and commercialize the licensed products, we will pay Tesaro tiered royalties at percentage rates in the mid- to high-teens on the net sales of thelicensed products, until the later of the expiration of the last-to-expire licensed patent covering the licensed product, the expiration of regulatory exclusivityfor the licensed product, or the tenth anniversary of the first commercial sale of the licensed product, in each case on a product-by-product and region-by-region basis. In February 2018, we entered into an amendment with Tesaro to eliminate Tesaro’s option to co-market niraparib in the licensed territory.The agreement with Tesaro will remain in effect until the expiration of the royalty term and may be earlier terminated by either party for the otherparty’s uncured material breach, bankruptcy or insolvency or by mutual agreement of the parties. In addition, we have the right to terminate the agreement forconvenience at any time upon advance notice to Tesaro. Upon early termination of the agreement, we must grant to Tesaro an exclusive license under certainof our intellectual property to develop and commercialize the licensed products outside the licensed territory.ParatekIn April 2017, we entered into a license and collaboration agreement with Paratek Bermuda, Ltd., a subsidiary of Paratek Pharmaceuticals, Inc.,under which we obtained both an exclusive license under certain patents and know-how of Paratek Bermuda Ltd. and an exclusive sub-license under certainintellectual property that Paratek Bermuda Ltd. licensed from Tufts University to develop, manufacture, use, sell, import and commercialize omadacycline(ZL-2401) in mainland China, Hong Kong, Macau and Taiwan, or licensed territory, in the field of all human therapeutic and preventative uses other thanbiodefense, or the licensed field. Under certain circumstances, our exclusive sub-license to certain intellectual property Paratek Bermuda Ltd. licensed fromTufts University may be converted to a non-exclusive license if Paratek Bermuda Ltd.’s exclusive license from Tufts University is converted to a non-exclusive license under the Tufts Agreement. We also obtained the right of first negotiation to be Paratek Bermuda Ltd.’s partner to develop certainderivatives or modifications of omadacycline in our licensed territory. Paratek Bermuda Ltd. retains the right to manufacture the licensed product in ourlicensed territory for use outside our licensed territory. We also granted to Paratek Bermuda Ltd. a non-exclusive license to certain of our intellectual propertyfor Paratek Bermuda Ltd. to develop and commercialize licensed products outside of our licensed territory. Under the agreement, we agreed not tocommercialize certain competing products in our licensed territory. We are obligated to use commercially reasonable efforts to develop and commercializethe licensed products in our licensed field and licensed territory, including making certain regulatory filings within a specified period of time.Under the terms of the agreement, we made an upfront payment of $7.5 million and a milestone payment of $5.0 million to Paratek Bermuda Ltd.and we may be required to pay milestone payments up to $49.5 million to Paratek Bermuda Ltd. for the achievement of certain development and salesmilestone events. In addition, we will pay to Paratek Bermuda Ltd. tiered royalties at percentage rates in the range of low- to mid-teens on the net sales oflicensed products, until the later of the abandonment, expiration or invalidation of the last-to-expire licensed patent covering the licensed product, or theeleventh anniversary of the first commercial sale of the licensed product, in each case on a product-by-product and region-by-region basis.The agreement with Paratek Bermuda Ltd. will remain in effect until the expiration of the royalty term and may be earlier terminated by eitherparty for the other party’s uncured material breach, bankruptcy or insolvency. In addition, we have the right to terminate the agreement for convenience atany time upon advance notice to Paratek Bermuda Ltd. Paratek Bermuda Ltd. has the right to terminate the agreement if we challenge its patents. Upontermination of the agreement, our license of certain intellectual property to Paratek Bermuda Ltd. will continue for Paratek Bermuda Ltd. to develop andcommercialize licensed products worldwide.83 Five PrimeIn December 2017, we entered into a collaboration and license agreement with Five Prime Therapeutics, Inc., or Five Prime, under which weobtained exclusive rights to develop and commercialize Five Prime’s proprietary afucosylated FGFR2b antibody known as FPA144, and all fragments,conjugates, derivatives and modifications thereof in mainland China, Hong Kong, Macau and Taiwan, or the licensed territory.We are responsible for (i) developing and commercializing licensed products under a territory development plan (ii) performing certaindevelopment activities to support Five Prime’s global development and registration of licensed products, including Five Prime’s global Phase IIIregistrational trial of FPA144 in combination with FOLFOX in front-line gastric and gastroesophageal cancer, or the FPA144-004 Study, in the licensedterritory under a global development plan.Under the terms of the agreement, we made an upfront payment of $5 million and a milestone payment of $2.0 million to Five Prime.Additionally, we may be required to pay aggregate developmental and regulatory milestone payments up to $37 million to Five Prime.We are also be obligated to pay Five Prime a royalty, on a licensed product-by-licensed product and region-by-region basis, in the high teens orlow twenties, depending on the number of patients we enroll in the FPA144-004 Study, subject to reduction in certain circumstances, on net sales of eachlicensed product in the licensed territory until the latest of (i) the 11th anniversary of the first commercial sale of such licensed product in such region, (ii) theexpiration of certain patents covering such licensed product in such region, and (iii) the date on which any applicable regulatory, pediatric, orphan drug ordata exclusivity with respect to such licensed product expires in such region.Under the terms of the agreement, provided that we enroll and treat a specified number of patients in the FPA144-004 Study in China, we areeligible to receive a low single-digit percentage royalty, on a licensed product-by-licensed product basis on net sales of a licensed product outside thelicensed territory until the 10th anniversary of the first commercial sale of each such licensed product outside the licensed territory.Unless earlier terminated by either party, the agreement will expire on a licensed product-by-licensed product and region-by-region basis uponthe expiration of our payment obligations with respect to each licensed product under the agreement. We may terminate the agreement in its entirety at anytime with advance written notice. Either party may terminate the agreement in its entirety with written notice for the other party’s material breach if suchparty fails to cure the breach. Five Prime may terminate the agreement in its entirety with written notice for the material breach of our diligence obligationswith respect to development and obtaining marketing approval, and may terminate the agreement on a region-by-region basis for the breach of our diligenceobligations with respect to timely commercialization of a licensed product in a region following marketing approval. Five Prime may terminate theagreement in its entirety if we or one of our affiliates or sublicensees commences a legal action challenging the validity, enforceability or scope of any ofFive Prime’s patents in the licensed territory. Either party also may terminate the agreement in its entirety upon certain insolvency events involving the otherparty.Bristol-Myers SquibbIn March 2015, we entered into a collaboration and license agreement with Bristol-Myers Squibb Company, or BMS, under which we obtained anexclusive license under certain patents and know-how of BMS to develop, manufacture, use, sell, import and commercialize BMS’s proprietary multi-targetedkinase inhibitor, brivanib in mainland China, Hong Kong and Macau, or licensed territory, in the field of diagnosis, prevention, treatment or control ofoncology indications, or licensed field, with the exclusive right to expand our licensed territory to include Taiwan and Korea under certain conditions. BMSretains the non-exclusive right to use the licensed compounds to conduct internal research and the exclusive right to use the licensed compounds tomanufacture compounds that are not brivanib. Under the agreement, we agreed not to develop and commercialize certain competing products for specifiedtime periods.We are obligated to use commercially reasonable efforts to develop and commercialize the licensed products in our licensed field and licensedterritory. BMS has the option to elect to co-promote the licensed products in our licensed territory. If BMS exercises its co-promotion option, BMS will payus an option exercise fee and we will share equally with BMS the operating profits and losses of the licensed products in our licensed territory.84 If BMS does not exercise its co-promotion option, we may be required to pay BMS milestone payments up to $114.5 million for the achievementof certain development and sales milestone events, and also tiered royalties at percentage rates in the mid- to high-teens on the net sales of the licensedproducts in our licensed territory, until the later of the expiration of the last-to-expire licensed patent covering the licensed product, the expiration ofregulatory exclusivity for the licensed product, or the twelfth anniversary of the first commercial sale of the licensed product, in each case on a product-by-product and region-by-region basis.We also have the right to opt-out of the commercialization of the licensed products in our licensed territory under certain conditions. If we electto opt-out, BMS will have the right to commercialize the licensed products in our licensed territory and will pay us royalties on the net sales of the licensedproducts in our licensed territory.BMS has the option to use the data generated by us from our development of the licensed products to seek regulatory approval of the licensedproducts outside our licensed territory, and if BMS exercises such option, BMS will be obligated to make certain payments to us, including upfront,milestone and royalty payments.The agreement with BMS will remain in effect until the expiration of all payment obligations, and may be earlier terminated by either party forthe other party’s uncured material breach, safety reasons or failure of the development of the licensed products. In addition, we have the right to terminate theagreement for convenience after a certain specified time period upon advance notice to BMS. BMS may also terminate the agreement for our bankruptcy orinsolvency.EntasisIn April 2018, we entered into a collaboration and license agreement with Entasis Therapeutics Holdings, Inc., or Entasis, under which weobtained exclusive rights to develop and commercialize Entasis’s proprietary compounds known as ETX2514 and ETX2514SUL, with the possibility ofdeveloping and commercializing a combination of such compounds with Imipenem, in mainland China, Hong Kong, Macau, Taiwan, Korea, Vietnam,Thailand, Cambodia, Laos, Malaysia, Indonesia, the Philippines, Singapore, Australia, New Zealand and Japan, or the territory. Our rights to develop andcommercialize the licensed products are limited to the lead product (ETX2514SUL) until such product receives FDA approval in the U.S.Under the terms of the agreement, we are responsible for (i) developing and commercializing the licensed products in the territory under amutually agreed development plan, and (ii) providing Entasis (or its contract research organization) with clinical and financial support in the territory for theglobal pivotal Phase III clinical trial of ETX2514SUL as set forth in mutually agreed development plans.We made an upfront payment of $5.0 million to Entasis, and we may be required to pay Entasis aggregate development, regulatory and researchmilestone payments up to $46.6 million and aggregate commercial milestone payments up to $52 million. We are also responsible for a portion of the costsof the global pivotal Phase III clinical trial of ETX2514SUL outside of the territory.We are also obligated to pay Entasis a royalty based on a percentage of net sales of licensed products ranging from the high single digits to lowteens, depending on the amount of net sales of licensed products in the territory, subject to reduction in certain circumstances, until, with respect to a licensedproduct in a region in the territory, the latest of (i) the 10th anniversary of the first commercial sale of such licensed product in such region, (ii) the expirationof certain patents covering such licensed product in such region, and (iii) the date on which any applicable regulatory, pediatric, orphan drug or dataexclusivity with respect to such licensed product expires in such region.Unless earlier terminated by either party, the agreement will expire on a country-by-country basis upon the expiration of our payment obligationsapplicable to such country under the agreement. We may terminate the agreement in its entirety at any time with advance written notice. Either party mayterminate the agreement in its entirety with written notice for the other party’s material breach if such party fails to cure the breach. Entasis may terminate theagreement on a country-by-country basis if we cease to commercialize the licensed products in such country for a certain period of time. Entasis mayterminate the agreement in its entirety if we or one of our affiliates or sublicensees commences a legal action challenging the validity, enforceability or scopeof any of Entasis’s patents in the licensed territory. Either party also may terminate the agreement in its entirety upon certain insolvency events involving theother party.85 SanofiIn July 2015, we entered into a license agreement with Sanofi, under which we obtained an exclusive and worldwide license under certain patentsand know-how of Sanofi to develop, manufacture, use, sell, import and commercialize Sanofi’s ALK inhibitor, or the licensed compound, or ZL-2302 for anyoncology indications in humans. Sanofi retains the non-exclusive right to use the licensed compound to conduct internal research and manufacture thelicensed compound and licensed product for such research.We are obligated to use commercially reasonable efforts to develop and commercialize the licensed product in each of the major market countries.Sanofi has the option to exclusively negotiate with us to obtain the exclusive rights to commercialize the licensed product in the oncology field in suchmajor market countries or throughout the world under certain circumstances.Under the terms of the agreement, we made upfront payments to Sanofi totaling $0.5 million. We may be required to make milestone payments toSanofi up to $31.0 million for the achievement of certain development and regulatory milestone events. In addition, we will pay Sanofi tiered royalties atpercentage rates in the range of high single digits to low double digits on the net sales of the licensed products, until the later of the expiration of the last-to-expire licensed patent covering the licensed product, the expiration of regulatory exclusivity for the licensed product, or the tenth anniversary of the firstcommercial sale of the licensed product, in each case on a product-by-product and country-by-country basis. If we sublicense, transfer or assign (other thanthrough a change of control transaction) the right to the licensed product to third parties, we are also required to pay to Sanofi a share of our sublicensingincome.The agreement with Sanofi will remain in effect until the expiration of the royalty term and may be earlier terminated by either party for the otherparty’s uncured material breach. In addition, we have the right to terminate the agreement for convenience at any time upon advance notice to Sanofi. Sanofihas the right to terminate the agreement if we challenge any of the licensed patents. Sanofi may also terminate the agreement for our bankruptcy orinsolvency. Upon any termination of the agreement, in addition to other obligations, we must grant to Sanofi an exclusive license under certain of ourintellectual property to commercialize the licensed product.MacroGenicsIn November 2018, we entered into a collaboration agreement MacroGenics Inc., or MacroGenics. Under the terms of the collaboration agreement,MacroGenics exclusively licensed to us regional development and commercialization rights to margetuximab, MGD013 and an undisclosed multi-specificTRIDENT molecule in preclinical development, or the TRIDENT molecule, and, together with margetuximab and MGD0213, each, a Licensed Product andcollectively, the Licensed Products, in China, Hong Kong, Macau and Taiwan, or the territory. In partial consideration for the license grant to us for theterritory, we paid MacroGenics a non-refundable, up-front license fee in the amount of $25.0 million in January 2019. We also agreed to pay certaindevelopment and regulatory-based milestone payments of up to $140.0 million, and tiered royalties at percentage rates of mid-teens to 20% for net sales ofMargetuximab in the territory, mid-teens for net sales of MGD013 in the territory and 10% for net sales of TRIDENT molecule in the territory.As part of the collaborative clinical development effort, we and MacroGenics intend to initiate a global study using combination regimenscontaining margetuximab in order to maximize potential clinical benefit in gastric cancer, the fifth most common cancer in the world and the second mostcommon in China.The collaboration agreement continues, on a region-by-region and Licensed Product-by-Licensed Product basis, in effect until the expiration ofand payment by us of all of our payment obligations applicable to such Licensed Product and such region as specified in the collaboration agreement. Eachparty may terminate the collaboration agreement upon the material breach of the collaboration agreement by the other party, subject to certain cureperiods. In addition, at any time after November 29, 2020, we may terminate the collaboration agreement for convenience with prior notice to MacroGenics.MacroGenics may terminate the collaboration agreement in its entirety or on a Licensed Product-by-Licensed Product basis with prior notice if one or moremajor safety issues have occurred with respect to such Licensed Product prior to the first commercial sale of such Licensed Product in the territory andMacroGenics has discontinued the global development, manufacturing and commercialization activities with respect to such Licensed Product.86 NovocureIn September 2018, we entered into a License and Collaboration Agreement with Novocure Limited, or Novocure. Under the terms of theagreement, Novocure exclusively licensed to us the rights to perform clinical studies, sublicense to affiliates and third parties (subject to Novocure’sconsent), sell, offer for sale and import TTFields products in the field of oncology, each, a Licensed Product and collectively, the Licensed Products, inChina, Hong Kong, Macau and Taiwan, or the Territory. In partial consideration for the license grant to us for the territory, we paid Novocure a non-refundable, up-front license fee in the amount of $15 million. We also agreed to pay certain development, regulatory and commercial milestone payments upto $78 million, and tiered royalties at percentage rates from ten up to the mid-teens on the net sales of the Licensed Products in the Territory.We will purchase Licensed Products exclusively from Novocure at Novocure’s fully burdened manufacturing cost. The agreement continues, on aregion-by-region and Licensed Product-by-Licensed Product basis, in effect until the expiration of and payment by us of all of our royalty paymentobligations applicable to such Licensed Product and such region as specified in the agreement. Each party may terminate the agreement upon the materialbreach of the agreement by the other party, subject to certain cure periods. In addition, we may terminate the agreement for convenience on twelve months’prior notice prior to commercializing a Licensed Product and on eighteen months’ prior notice after commercializing a Licensed Product, and Novocure mayterminate the agreement due to our diligence failure or material FCPA violation, subject to certain cure periods and dispute resolution mechanisms if disputesarise with respect to such failure or material violation, each as defined in the agreement.GSKIn August 2018, we elected to discontinue development of Fugan (ZL-3101), which we obtained worldwide, exclusive rights to in 2016 under ourlicense and transfer agreement with GlaxoSmithKline (China) R&D Co., Ltd, or GSK China, an affiliate of GSK.UCBIn January 2019, we terminated our license agreement with UCB Biopharma Sprl, under which we obtained an exclusive and worldwide licenseunder certain patents and know-how of UCB Biopharma Sprl to develop, manufacture, use, sell, import and commercialize UCB Biopharma Sprl’s proprietaryantibody UCB3000, or the licensed compound, or ZL-1101 for the treatment, prevention and diagnosis of any human diseases. The license that we retainedwas reverted back to UCB Biopharma Sprl immediately upon termination of the license agreement and we have no continuing obligations (financial orotherwise) thereunder.CompetitionOur industry is highly competitive and subject to rapid and significant change. While we believe that our management’s research, developmentand commercialization experience provide us with competitive advantages, we face competition from global and China-based biopharmaceutical companies,including specialty pharmaceutical companies, generic drug companies, biologics drug companies, academic institutions, government agencies and researchinstitutions.For our global product candidates, we expect to face competition from a broad range of global and local pharmaceutical companies. Many of ourcompetitors have significantly greater financial, technical and human resources than we have, and mergers and acquisitions in the biopharmaceuticalindustry may result in even more resources being concentrated among a smaller number of our competitors. Our commercial opportunity could be reduced oreliminated if our competitors develop or market products or other novel therapies that are more effective, safer or less costly than our current or future drugcandidates, or obtain regulatory approval for their products more rapidly than we may obtain approval for our drug candidates.87 Patents and Other Intellectual PropertyOur commercial success depends in part on our ability to obtain and maintain proprietary or intellectual property protection for our drugcandidates and our core technologies and other know-how to operate without infringing, misappropriating or otherwise violating on the proprietary rights ofothers and to prevent others from infringing, misappropriating or otherwise violating our proprietary or intellectual property rights. We expect that we willseek to protect our proprietary and intellectual property position by, among other methods, licensing or filing our own U.S., international and foreign patentapplications related to our proprietary technology, inventions and improvements that are important to the development and implementation of our business.We also rely on trade secrets, know-how and continuing technological innovation to develop and maintain our proprietary and intellectual property position,which we generally seek to protect through contractual obligations with third parties.PatentsPatents, patent applications and other intellectual property rights are important in the sector in which we operate. We consider on a case-by-casebasis filing patent applications with a view to protecting certain innovative products, processes, and methods of treatment. We may also license or acquirerights to patents, patent applications or other intellectual property rights owned by third parties, academic partners or commercial companies which are ofinterest to us.As with other biotechnology and pharmaceutical companies, our ability to maintain and solidify our proprietary and intellectual propertyposition for our drug candidates and technologies will depend on our success in obtaining effective patent claims and enforcing those claims if granted.However, our pending patent applications, and any patent applications that we may in the future file or license from third parties may not result in theissuance of patents. We also cannot predict the breadth of claims that may be allowed or enforced in our patents. Any issued patents that we may receive orlicense in the future may be challenged, invalidated or circumvented. For example, we cannot be certain of the priority of our patents and patent applicationsover third-party patents and patent applications. In addition, because of the extensive time required for clinical development and regulatory review of a drugcandidate we may develop, it is possible that, before any of our drug candidates can be commercialized, any related patent may expire or remain in force foronly a short period following commercialization, thereby limiting protection such patent would afford the respective product and any competitive advantagesuch patent may provide. For more information regarding the risks related to our intellectual property, please see “Item 3.D. Risk Factors—Risks Related toIntellectual Property.”ZEJULAAs of December 31, 2018, we exclusively licensed two issued patents in the PRC directed to ZEJULA’s free base compound, and salts thereof, andanalogues of ZEJULA. These issued patents are projected to expire between 2027 and 2028. We also exclusively licensed one pending patent application inthe PRC directed to a salt that covers 4-methylbenzenesulfonate monohydrate, the active pharmaceutical ingredient, or API, of ZEJULA. If this patentapplication issues as a patent, such patent will be projected to expire in 2029. We do not own or have an exclusive license to any patents or patentapplications in any jurisdictions outside of the PRC.Optune (TTFields)As of December 31, 2018, we licensed eight issued patents in the PRC and Hong Kong that relate to Optune (TTFields). An additional sevenpatent applications that relate to Optune (TTFields) are pending. We are pursuing patent rights to protect its rights in these technologies and has continuedits efforts to secure patent rights in China for its devices and technologies for applying electric fields to a patient for treating a disease or condition,especially diseases that promote tumor growth. We are pursuing patent rights to protect its rights in these technologies.ZL-2401As of December 31, 2018, we exclusively licensed four issued patents in the PRC directed to ZL-2401’s compound, formulations and crystal formand one pending patent application in the PRC directed to other crystalline forms of ZL-2401. The issued composition of matter patent covering ZL-2401 isprojected to expire in 2021 and the other two issued patents are projected to expire in 2029. If the two patent applications are issued, they are expected toexpire in 2029. We have also exclusively licensed two issued patents in Hong Kong and Taiwan, respectively that cover a crystalline salt form of ZL-2401,which expire in 2029. We do not own or have an exclusive license to any patents or patent applications in any jurisdictions outside of the PRC, Hong Kongand Taiwan.88 FPA144As of December 31, 2018, we exclusively licensed one issued patent in the PRC and one issued patent in Hong Kong. These issued patents aredirected to certain anti-FGFR2b antibodies, and are projected to expire in 2029. We have also exclusively licensed one pending patent application in thePRC, two pending patent applications in Taiwan, one pending patent application in Hong Kong. If issued, claims of these patent applications are projectedto expire between 2034 and 2036. We do not own or have an exclusive license to any patents or patent applications in any jurisdictions outside of the PRC,Hong Kong and Taiwan.ZL-2301 As of December 31, 2018, we exclusively licensed four issued patents in the PRC, one issued patent in Taiwan and one issued patent in HongKong that relate to ZL-2301. Of these issued patents, one patent in the PRC is a composition-of-matter patent that covers the ZL-2301 compound and itsanalogues. One patent in the PRC covers the medical use of ZL-2301. These patents are projected to expire in 2023. Our exclusively licensed patents alsoinclude a patent in the PRC that covers a manufacturing process for intermediates useful in the synthesis of ZL-2301’s API. This patent is projected to expirein 2027. In addition, one patent we exclusively licensed in the PRC covers a crystal form of brivanib alaninate and is projected to expire in 2026. The issuedpatent in Hong Kong that we exclusively licensed is projected to expire in 2023. We do not own or have an exclusive license to any patents or patentapplications in any jurisdictions other than the PRC and Hong Kong.ETX2514As of December 31, 2018, we exclusively licensed one issued patent in the PRC, one issued patent in Japan, and a corresponding issued patent orpending patent application in each of several additional jurisdictions in the territory of the Entasis Agreement, including Australia, Hong Kong, Taiwan andKorea. These issued patents or pending applications are directed to certain beta-lactamase inhibitor compounds, including ETX2514, and are projected toexpire in 2033. We have also exclusively licensed a second family of patent applications having one pending patent application in each of the PRC, Japan,Australia, Taiwan, Korea, and four other jurisdictions in the territory. If issued, claims of these patent applications are projected to expire in 2035 We do notown or have an exclusive license to any patents or patent applications in any jurisdictions outside of the territory of the Entasis Agreement.ZL-2302 As of December 31, 2018, we exclusively licensed one issued patent application in the PRC. We also exclusively licensed two issued U.S.patents, one pending U.S. patent application, and 15 issued patents and 28 pending patent applications in other jurisdictions, including Australia, Canada,Europe, Japan, South Korea and Taiwan. The issued patents in this portfolio are directed to the pharmaceutical composition and therapeutic uses of ZL-2302,and are projected to expire between 2032 and 2033, excluding any additional term for patent term adjustments or patent term extensions in jurisdictionswhere such adjustments and extensions are available.ZL-1101 As of December 31, 2018, we exclusively licensed one issued patent and one pending patent application in the PRC. We also exclusivelylicensed three issued U.S. patents, two pending U.S. patent applications and approximately 26 issued patents and 44 pending patent applications in otherjurisdictions, including Australia, Canada, Europe, Hong Kong, Japan, South Korea, South Africa and Taiwan. The issued patents and pending patentapplications in this portfolio cover antibody sequences and therapeutic uses of ZL-1101. The issued patents in this portfolio are projected to expire between2030 and 2032.MargetuximabAs of December 31, 2018, we exclusively licensed two pending patent applications in the PRC and one issued patent in Hong Kong. The issuedpatent and pending patent applications in this portfolio cover antibody sequences and therapeutic uses of margetuximab. The issued patent and any patentsissuing from the currently pending applications are projected to expire in 2029.89 MGD013As of December 31, 2018, we exclusively licensed three pending patent applications in the PRC, two issued patents in Hong Kong, and threepending patent applications in Taiwan. The issued patents and pending patent applications in this portfolio cover antibody sequences and therapeutic usesof MGD013. The issued patents and any patents issuing from the currently pending applications are projected to expire between 2035 and 2036.Undisclosed multi-specific TRIDENT moleculeAs of December 31, 2018, we exclusively licensed one pending international patent application and one pending patent application inTaiwan. Patents issuing from the pending applications are projected to expire in 2038.Patent TermThe term of a patent depends upon the laws of the country in which it is issued. In most jurisdictions, a patent term is 20 years from the earliestfiling date of a non-provisional patent application. Under the PRC Patent Law, the term of patent protection starts from the date of application. Patentsrelating to inventions are effective for twenty years, and utility models and designs are effective for ten years from the date of application.The above expiration dates are exclusive of any patent term adjustments or patent term extensions that may be available under applicable law. The laws of each jurisdiction vary, and patent term adjustment or patent term extension may not be available in any or all jurisdictions in which we own orlicense patents. For example, there are currently no patent term adjustments or patent term extensions available for issued patents in the PRC. However, thegovernment recently announced a proposal which is under consideration to allow a five-year patent term extension for innovative drugs if they will beconcurrently reviewed for marketing authorizations in and outside China.Trade SecretsIn addition to patents, we rely upon unpatented trade secrets and know-how and continuing technological innovation to develop and maintainour competitive position. However, trade secrets and know-how can be difficult to protect. We seek to protect our proprietary information, in part, byexecuting confidentiality agreements with our partners, collaborators, scientific advisors, employees, consultants and other third parties, and inventionassignment agreements with our consultants and employees. We have also executed agreements requiring assignment of inventions with selected scientificadvisors and collaborators. The confidentiality agreements we enter into are designed to protect our proprietary information and the agreements or clausesrequiring assignment of inventions to us are designed to grant us ownership of technologies that are developed through our relationship with the respectivecounterparty. We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets orproprietary technology and processes or that these agreements will afford us adequate protection of our intellectual property and proprietary informationrights. If any of the partners, collaborators, scientific advisors, employees and consultants who are parties to these agreements breaches or violates the terms ofany of these agreements or otherwise discloses our proprietary information, we may not have adequate remedies for any such breach or violation, and wecould lose our trade secrets as a result. For more information regarding the risks related to our trade secrets, please see “Item 3.D. Risk Factors—Risks Relatedto Intellectual Property—If we are unable to maintain the confidentiality of our trade secrets, our business and competitive position may be harmed.Trademarks and domain namesWe conduct our business using trademarks with various forms of the “ZAI LAB” and “” brands, as well as domain names incorporatingsome or all of these trademarks.EmployeesAs of December 31, 2018, we employed a total of 309 full-time employees, including a total of 49 employees with M.D. or Ph.D. degrees. Of ourworkforce, 183 employees are engaged in research and development. None of our employees is represented by labor unions or covered by collectivebargaining agreements.90 Raw Materials and SuppliesCurrently, we obtain raw materials for our clinical trial activities from multiple suppliers who we believe have sufficient capacity to meet ourdemands. In addition, we believe that adequate alternative sources for such supplies exist. However, a risk exists that an interruption supplies wouldmaterially harm our business. We typically order raw materials and services on a purchase order basis and do not enter into long-term dedicated capacity orminimum supply arrangements.While we do experience price fluctuations associated with our raw materials, we have not experienced any material disruptions in the supply ofthese raw materials in the past.Quality Control and AssuranceWe have our own independent quality control system and devote significant attention to quality control for the designing, manufacturing andtesting of our drug candidates. We have established a strict quality control system in accordance with SDA regulations. Our laboratories are staffed withhighly educated and skilled technicians to ensure quality of all batches of products released. We monitor our operations in real time throughout the entireproduction process, from inspection of raw and auxiliary materials, to manufacture and delivery of finished products to clinical testing at hospitals. Ourquality assurance team is also responsible for ensuring that we are in compliance with all applicable regulations, standards and internal policies. Our seniormanagement team is actively involved in setting quality policies and managing the internal and external quality performance of the Company.RegulationGovernment Regulation of Pharmaceutical Product Development and ApprovalPRC regulation of pharmaceutical product development and approvalSince China’s entry into the World Trade Organization in 2001, the PRC government has made significant efforts to standardize regulations,develop its pharmaceutical regulatory system and strengthen intellectual property protection.In 2017, the drug regulatory system entered a new and significant period of reform. The State Council and the China Communist Party jointlyissued a mandatory plan to further the reform of the review and approval system and encourage the innovation of drugs and medical devices, or theInnovation Opinion. The expedited programs and other advantages under this and other recent reforms encourage drug manufacturers to seek marketingapproval in China first and develop drugs in high priority disease areas, such as oncology, or rare disease areas.To implement the regulatory reform introduced by Innovation Opinion, the NMPA is currently revising the fundamental law, regulations andrules regulating pharmaceutical products and the industry, which includes the framework law known as the PRC Drug Administration Law. However, as ofFebruary 28, 2019, the proposed amendment to the Drug Administration Law and its implementing regulations has not been enacted by the National People’sCongress.Regulatory authoritiesIn the PRC, the newly formed NMPA is the authority under the State Administration for Market Regulation that monitors and supervises theadministration of pharmaceutical products, medical appliances and equipment, and cosmetics. The NMPA’s predecessor, the CFDA, was established in March2013 and separated from the Ministry of Health of the PRC, or the MOH, as part of the institutional reform of the State Council. Predecessors of the NMPAalso include the former State Food and Drug Administration (SFDA) that was established in March 2003 and the State Drug Administration (SDA) that wasestablished in August 1998. The primary responsibilities of the NMPA include: •monitoring and supervising the administration of pharmaceutical products, medical appliances and equipment, as well as cosmetics in thePRC; •formulating administrative rules and policies concerning the supervision and administration of the pharmaceutical, medical device, andcosmetics industry; •evaluating, registering and approving of new drugs, generic drugs, imported drugs and traditional Chinese medicine, or TCM;91 •approving and issuing permits for the manufacture and export/import of pharmaceutical products, as well as medical appliances andequipment, and approving the establishment of enterprises to be engaged in the manufacture and distribution of pharmaceutical products;and •examining and evaluating the safety of pharmaceutical products, medical devices, and cosmetics and handling significant accidentsinvolving these products.The National Health and Family Planning Commission, or NHFPC, is rebranded as the National Health Commission (or NHC). The NHC is anauthority at the ministerial level under the State Council and is primarily responsible for national public health. The NHC combines the former NHFPC, theLeading Group Overseeing Medical and Healthcare Reform under the State Council, the China National Working Commission on Aging, partialresponsibilities of the Ministry of Industry and Information Technology in relation to tobacco control, and partial responsibilities from the StateAdministration of Work Safety in relation to occupational safety. The predecessor of NHFPC is the Ministry of Health, or MOH. Following the establishmentof the former State Food and Drug Administration (SFDA) in 2003, the MOH was put in charge of the overall administration of the national health in the PRCexcluding the pharmaceutical industry. The MOH performs a variety of tasks in relation to the health industry such as establishing medical institutes andproducing professional codes of ethics for public medical personnel. The MOH is also responsible for overseas affairs, such as dealings with overseascompanies and governments.The central government expects to complete the restructuring at the state level by the end of 2018. Municipal and county level authorities mustcomplete the restructure by first quarter of 2019. Healthcare System ReformThe PRC government recently promulgated several healthcare reform policies and regulations to reform the healthcare system. On March 17,2009, the Central Committee of the PRC Communist Party and the State Council jointly issued the Guidelines on Strengthening the Reform of HealthcareSystem. The State Council issued the Notice on the Issuance of the 13th Five-year Plan on Strengthening the Reform of Healthcare System on December 27,2016. On April 21, 2016, the General Office of the State Council issued the Main Tasks of Healthcare System Reform in 2016. Highlights of these healthcarereform policies and regulations include the following: •One of the main objectives of the reform was to establish a basic healthcare system to cover both urban and rural residents and provide theChinese people with safe, effective, convenient and affordable healthcare services. As of 2017, basic medical insurance coverage hasreached more than 95% of the country’s population. By 2020, a basic healthcare system covering both urban and rural residents should beestablished. •Another main objective of reform was to improve the healthcare system, through the reform and development of a graded diagnosis andtreatment system, modern hospital management, basic medical insurance, drug supply support and comprehensive supervision. •The reforms aimed to promote orderly market competition and improve the efficiency and quality of the healthcare system to meet thevarious medical needs of the Chinese population. From 2009, basic public healthcare services such as preventive healthcare, maternal andchild healthcare and health education were to be provided to urban and rural residents. In the meantime, the reforms also encouragedinnovations by pharmaceutical companies to eliminate pharmaceutical products that fail to prove definite efficacy and positive risk-benefitratio. •The key tasks of the reform in the 13th five-year period were as follows: (1) to deepen the reform of public hospitals, (2) to accelerate thedevelopment of a graded diagnosis and treatment system, (3) to consolidate and improve the universal medical insurance system, (4) toguarantee drug supply, (5) to establish and improve a comprehensive supervision system, (6) to cultivate talented health-care practitioners,(7) to stabilize and perfect the basic public health service equalization system, (8) to advance the construction of health informationtechnology, (9) to accelerate the development of the health services industry generally, and (10) to strengthen organization andimplementation.92 Drug Administration Laws and RegulationsThe PRC Drug Administration Law as promulgated by the Standing Committee of the National People’s Congress in 1984 and the ImplementingMeasures of the PRC Drug Administration Law as promulgated by the MOH in 1989 have laid down the legal framework for the establishment ofpharmaceutical manufacturing enterprises and pharmaceutical trading enterprises and for the administration of pharmaceutical products including thedevelopment and manufacturing of new drugs and medicinal preparations by medical institutions. The PRC Drug Administration Law also regulates thepackaging, trademarks and advertisements of pharmaceutical products in the PRC.Certain amendments to the PRC Drug Administration Law took effect on December 1, 2001. Subsequent amendments were also made onDecember 28, 2013 and April 24, 2015. They were formulated to strengthen the supervision and administration of pharmaceutical products, and to ensure thequality of pharmaceutical products and the safety of pharmaceutical products for human use. The current PRC Drug Administration Law applies to entitiesand individuals engaged in the development, production, trade, application, supervision and administration of pharmaceutical products. It regulates andprescribes a framework for the administration of pharmaceutical manufacturers, pharmaceutical trading companies, and medicinal preparations of medicalinstitutions and the development, research, manufacturing, distribution, packaging, pricing and advertisements of pharmaceutical products.According to the current PRC Drug Administration Law, no pharmaceutical products may be produced in China without a pharmaceuticalproduction license. A local manufacturer of pharmaceutical products must obtain a pharmaceutical production license from one of the provincialadministration of medical products in order to commence production of pharmaceuticals. Prior to granting such license, the relevant government authoritywill inspect the manufacturer’s production facilities, and decide whether the sanitary conditions, quality assurance system, management structure andequipment within the facilities have met the required standards.In October 2017, the former CFDA released an amendment to the Drug Administration Law (Draft for Public Comments). This draft amendmentreflects the former CFDA’s recent reform initiatives on the market authorization holder system, clinical trial practices, drug review and approval practices andGMP and GSP certification. This amendment was further revised in late 2018, and the revision was submitted to the National People’s Congress forlegislative review in 2019. The PRC Implementing Regulations of the Drug Administration Law promulgated by the State Council took effect on September 15, 2002, wereamended on February 6, 2016 and serve to provide detailed implementation regulations for the PRC Drug Administration Law.Good Laboratories Practice Certification for Nonclinical ResearchTo improve the quality of animal research, the former SFDA promulgated the Good Laboratories Practice of Preclinical Laboratory in 2003, or theGLP 2003, and began to conduct the certification program of the GLP. The GLP 2003 was then abolished and replaced by the Good Laboratories Practice ofPreclinical Laboratory promulgated in 2017. In April 2007, the former SFDA promulgated the Administrative Measures for Certification of Good LaboratoryPractice of Preclinical Laboratory, providing that the NMPA is responsible for certification of nonclinical research institutions. According to theAdministrative Measures for Certification of Good Laboratory Practice of Preclinical Laboratory, the NMPA decides whether an institution is qualified forundertaking pharmaceutical nonclinical research upon the evaluation of the institution’s organizational administration, personnel, laboratory equipment andfacilities and its operation and management of nonclinical pharmaceutical projects. If all requirements are met, a GLP Certification will be issued by theNMPA and published on the government website.Animal Testing PermitsAccording to Regulations for the Administration of Affairs Concerning Experimental Animals promulgated by the State Science and TechnologyCommission in November 1988, as amended in January 2011, July 2013 and March 2017, and Administrative Measures on the Certificate for AnimalExperimentation promulgated by the State Science and Technology Commission and other regulatory authorities in December 2001, performingexperimentation on animals requires a Certificate for Use of Laboratory Animals. Applicants must satisfy the following conditions: •Laboratory animals must be qualified and sourced from institutions that have Certificates for Production of Laboratory Animals; •The environment and facilities for the animals’ living and propagating must meet state requirements; •The animals’ feed and water must meet state requirements;93 •The animals’ feeding and experimentation must be conducted by professionals, specialized and skilled workers, or other trained personnel; •The management systems must be effective and efficient; and •The applicable entity must follow other requirements as stipulated by Chinese laws and regulations.Administrative measures for drug registrationIn July 2007, the former SFDA released the Administrative Measures for Drug Registration which took effect on October 1, 2007. TheAdministrative Measures for Drug Registration cover (1) definitions of drug registration applications and regulatory responsibilities of the former CFDA; (2)general requirements for drug registration; (3) drug clinical trials; (4) application, examination and approval of drugs; (5) supplemental applications and re-registrations of drugs; (6) inspections; (7) registration standards and specifications; (8) time limit; (9) re-examination; and (10) liabilities and othersupplementary provisions.In October 2017, the former CFDA released the revised Administrative Measures for Drug Registration (Draft for Comments) to seek commentsfrom the public, which as compared to the current Administrative Measures for Drug Registration, includes the following key highlights: •fully implement the marketing authorization holder system; •reform the review and approval system and enhance the efficiency of approval; •differentiate categories of changes and implement category management; •emphasize clinically oriented drug innovation and achieving consistency between generic drugs and originator’s drugs.Although there is no definitive timeline for the official enactment of the revised Administrative Measures for Drug Registration (Draft forComments), it embodies a regulatory trend of promoting drug innovation, accelerating the drug registration process and setting forth higher quality andtechnical requirements.Regulations on the Clinical Trials and Registration of DrugsFour Phases of Clinical TrialsAccording to the Administrative Measures for Drug Registration, a clinical development program consists of Phases I, II, III and IV. Phase I refersto the initial clinical pharmacology and safety evaluation studies in humans. Phase II refers to the preliminary evaluation of a drug candidate’s therapeuticeffectiveness and safety for particular indication(s) in patients, which provides evidence and support for the design of Phase III clinical trials and settles theadministrative dose regimen. Phase III refers to clinical trials undertaken to confirm the therapeutic effectiveness of a drug. Phase III is used to further verifythe drug’s therapeutic effectiveness and safety on patients with target indication(s), to evaluate overall benefit-risk relationships of the drug, and ultimatelyto provide sufficient evidence for the review of drug registration application. Phase IV refers to a new drug’s post-marketing study to assess therapeuticeffectiveness and adverse reactions when the drug is widely used, to evaluate overall benefit-risk relationships of the drug when used among the generalpopulation or specific groups and to adjust the administration dose, etc.Approval Authority for Clinical Trial ApplicationsAccording to the Administrative Measures for Drug Registration, upon completion of its pre-clinical research, a research institution must applyfor approval of a CTA before conducting clinical trials. As of May 1, 2017, the clinical trial approval can be directly issued by the CDE on behalf of theNMPA. This delegation of authority can shorten the approval timeline for the approval of a CTA.94 Special Examination and Approval for Domestic Category 1 DrugsAccording to the Administrative Measures for Drug Registration, drug registration applications are divided into three different types, namelyDomestic New Drug Application, Domestic Generic Drug Application, and Imported Drug Application. Drugs fall into one of three general types divided byworking mechanism, namely chemical medicine, biological product or traditional Chinese or natural medicine. Under the Administrative Measures for DrugRegistration, a Category 1 drug refers to a new drug that has never been marketed in any country, and is eligible for special review or fast track approval bythe NMPA.In March 2016, the former CFDA issued the Reform Plan for Registration Category of Chemical Medicine, or the Reform Plan, which outlined thereclassifications of drug applications under the Administrative Measures for Drug Registration. Under the Reform Plan, Category 1 drugs refer to new drugsthat have not been marketed anywhere in the world. Improved new drugs that are not marketed anywhere in the world fall into Category 2. Generic drugs, thathave equivalent quality and efficacy to the originator’s drugs have been marketed abroad but not yet in China, fall into Category 3. Generic drugs, that haveequivalent quality and efficacy to the originator’s drugs and have been marketed in China, fall into Category 4. Category 5 drugs are drugs which havealready been marketed abroad, but are not yet approved in China. Category 1 drugs and Category 5 drugs can be registered through the Domestic New DrugApplication and the Imported Drug Application procedures under the Administrative Measures for Drug Registration, respectively.According to the Special Examination and Approval Provisions, the former CFDA conducts special examination and approval for new drugregistration applications when: •(1) the effective constituent of drug extracted from plants, animals, minerals, etc. as well as the preparations thereof have never beenmarketed in China, and the material medicines and the preparations thereof are newly discovered; •(2) the chemical raw material medicines as well as the preparations thereof and the biological product have not been approved for marketinghome and abroad; •(3) the new drugs are for treating AIDS, malignant tumors and rare diseases, etc., and have obvious advantages in clinic treatment; or •(4) the new drugs are for treating diseases with no effective methods of treatment.The Special Examination and Approval Provisions provide that the applicant may file for special examination and approval at the CTA stage ifthe drug candidate falls within items (1) or (2). The provisions provide that for drug candidates that fall within items (3) or (4), the application for specialexamination and approval cannot be made until filing for production.We believe that our current drug candidates fall within items (2) and (3) above. Therefore, we may file an application for special examination andapproval at the CTA stage, which may enable us to pursue a more expedited path to approval in China and bring therapies to patients more quickly.Drug Clinical Practice Reform and Compliance with GCPIn October 2017, the Chinese government announced an administrative reform of clinical trial institutions. Certification of clinical trialinstitutions by the former CFDA and the former National Health and Family Planning Commission of the PRC is no longer required. Under this reform, aclinical trial institution can be engaged by a drug marketing authorization applicant (i.e., a sponsor) to conduct a drug clinical study after it has been dulyrecorded with the online platform designated by the NMPA. In July 2018, the NMPA and the NHC jointly released the Rules for Administration of theRequirements for and Recordal of Drug Clinical Trial Institutions. The Rules specify requirements for clinical trial institutions and recordalprocedures. Pursuant to the Rules, a clinical trial institution should comply with the GCP requirements and be capable of undertaking pharmaceuticalclinical trials. It should evaluate or engage a third party to evaluate its clinical trial proficiency, facilities and expertise. A drug marketing authorizationapplicant should only engage a duly recorded clinical trial institution to carry out a drug clinical trial. To date, over 670 hospitals in China have successfullycompleted the recordal with the NMPA and NHC. 95 The conduct of clinical trials must adhere to the GCP and the protocols approved by the ethics committees of each study site. Since 2015, theformer CFDA has strengthened the enforcement against widespread data integrity issues associated with clinical trials in China. To ensure authenticity andreliability of the clinical data, the former CFDA mandated applicants of the pending drug registration submissions to conduct self-inspection and verificationof their clinical trial data. Based on the submitted self-inspection results, the former CFDA also regularly launched onsite clinical trial audits over selectedapplications and reject those found with data forgery. The GCP audit has been ongoing and was able to curb the number of unreliable NDA application.Pilot Plan for the Marketing Authorization Holder SystemUnder the authorization of the Standing Committee of the National People’s Congress, the State Council issued the Pilot Plan for the DrugMarketing Authorization Holder Mechanism on May 26, 2016, which provides a detailed pilot plan for the marketing authorization holder system, or theMAH System, for drugs in 10 provinces in China. Under the MAH System, domestic drug research and development institutions and individuals in thepiloted regions are eligible to be holders of drug registrations without having to become drug manufacturers. The marketing authorization holders mayengage contract manufacturers for manufacturing, provided that the contract manufacturers are licensed and GMP-certified, and are also located within thepiloted regions. Drugs qualified for the MAH System are: (1) new drugs (including Category 1 and 2 drugs under the Reform Plan) approved after theimplementation of the MAH System; (2) generic drugs approved as Category 3 or 4 drugs under the Reform Plan; (3) previously approved generics that havepassed the equivalence assessments against originator drugs; and (4) previously approved drugs whose licenses were held by drug manufacturers originallylocated within the piloted regions, but have been moved out of the piloted regions due to corporate mergers or other reasons.The Pilot Plan was originally set for a 3-year period, and would end in December 2018. Effective as of November 5, 2018, the StandingCommittee of the National People’s Congress decided to extend the pilot program for another year. The above mentioned draft amendment to the DrugAdministration Law (dated November 2018) proposes to roll out this MAH System nation wide. Uncertainties exist as to how this MAH System will beimplemented universally to substitute the Pilot Plan. Administrative Protection and Monitoring Periods for New DrugsAccording to the Administrative Measures for Drug Registration, the Implementing Regulations of the Drug Administration Law and the ReformPlan, the NMPA may, for the purpose of protecting public health, provide for an administrative monitoring period of five years for Category 1 new drugsapproved to be manufactured, commencing from the date of approval, to continually monitor the safety of those new drugs.During the monitoring period of a new drug, the NMPA will not accept other applications for new drugs containing the same active ingredient.This renders an actual five-year exclusivity protection for Category 1 new drugs. The only exception is that the NMPA will continue to handle anyapplication if, prior to the commencement of the monitoring period, the NMPA has already approved the applicant’s clinical trial for a similar new drug. Ifsuch application conforms to the relevant provisions, the NMPA may approve such applicant to manufacture or import the similar new drug during theremainder of the monitoring period.Non-Inferiority StandardIn China, a drug may receive regulatory approval without showing superiority in its primary endpoint. Rather, a drug may be approved for use if itshows non-inferiority in its primary endpoint and superiority in one of its secondary endpoints.New Drug ApplicationWhen Phases I, II and III of the clinical trials have been completed, the applicant may apply to the NMPA for approval of an NDA. The NMPAthen determines whether to approve the application according to the comprehensive evaluation opinion provided by the CDE of the NMPA. We must obtainapproval of an NDA before our drugs can be manufactured and sold in the China market.96 International Multi-Center Clinical Trials RegulationsOn January 30, 2015, the former CFDA promulgated Notice on Issuing the International Multi-Center Clinical Trial Guidelines (Tentative), or theMulti-Center Clinical Trial Guidelines, which took effect as of March 1, 2015, aiming to provide guidance for the regulation of application, implementationand administration of international multi-center clinical trials in China. Pursuant to the Multi-Center Clinical Trial Guidelines, international multi-centerclinical trial applicants may simultaneously perform clinical trials in different centers using the same clinical trial protocol. Where the applicant plans tomake use of the data derived from the international multi-center clinical trials for application to NMPA for approval of an NDA, such international multi-center clinical trials shall satisfy, in addition to the requirements set forth in Drug Administration Law and its implementation regulations, AdministrativeMeasures for Drug Registration and relevant laws and regulations, the following requirements: •The applicant shall first conduct an overall evaluation on the global clinical trial data and further make trend analysis of the Asian andChinese clinical trial data. In the analysis of Chinese clinical trial data, the applicant shall consider the representativeness of the researchsubjects, i.e., the participating patients; •The applicant shall analyze whether the amount of Chinese research subjects is sufficient to assess and adjudicate the safety andeffectiveness of the drug under clinical trial, and satisfy the statistical and relevant legal requirements; and •The onshore and offshore international multi-center clinical trial research centers shall be subject to on-site inspections by competent PRCgovernmental agencies.International multi-center clinical trials shall follow international prevailing GCP principles and ethics requirements. Applications shall ensurethe truthfulness, reliability and trustworthiness of clinical trials results; the researchers shall have the qualification and capability to perform relevant clinicaltrials; and an ethics committee shall continuously review the trials and protect the subjects’ interests, benefits and safety. Before the performance of theinternational multi-center clinical trial, applicants shall obtain clinical trial approvals or complete filings pursuant to requirements under the localregulations where clinical trials are conducted, and register and disclose the information of all major researchers and clinical trial organizations on theNMPA’s drug clinical trial information platform.Data derived from international multi-center clinical trials can be used for the NDAs with the NMPA. When using international multi-centerclinical trial data to support NDAs in China, applicants shall submit the completed global clinical trial report, statistical analysis report and database, alongwith relevant supporting data in accordance with ICH-CTD (International Conference on Harmonization-Common Technical Document) content and formatrequirements; subgroup research results summary and comparative analysis shall also be conducted concurrently.Leveraging the clinical trial data derived from international multi-center clinical trials conducted by our partners, we may avoid unnecessaryrepetitive clinical trials and thus further accelerate the NDA process in China.In October, 2017, the former CFDA released the Decision on Adjusting Items concerning the Administration of Imported Drug Registration, whichincludes the following key points: •If the International Multicenter Clinical Trial, or IMCCT, of a drug is conducted in China, the IMCCT drug does not need to be approved orentered into either a Phase II or III clinical trial in a foreign country, except for preventive biological products. Phase I IMCCT ispermissible in China. •If the IMCCT is conducted in China, the application for drug marketing authorization can be submitted directly after the completion of theIMCCT. •With respect to clinical trial and market authorization applications for imported innovative chemical drugs and therapeutic biologicalproducts, the marketing authorization in the country or region where the foreign drug manufacturer is located will not be required. •With respect to drug applications that have been accepted before the release of this Decision, if relevant requirements are met, importationpermission can be granted if such applications request exemption of clinical trials for the imported drugs based on the data generated fromIMCCT.97 Drug Technology Transfer RegulationsOn August 19, 2009, the former SFDA promulgated the Administrative Regulations for Technology Transfer Registration of Drugs to standardizethe registration process of drug technology transfer, which includes application for, and evaluation, examination, approval and monitoring of, drugtechnology transfer. Drug technology transfer refers to the transfer of drug production technology by the owner to a drug manufacturer and the application fordrug registration by the transferee according to the provisions in the new regulations. Drug technology transfer includes new drug technology transfer anddrug production technology transfer.Conditions for the Application for New Drug Technology TransferApplications for new drug technology transfer may be submitted prior to the expiration date of the monitoring period of the new drugs withrespect to: •drugs with new drug certificates only; or •drugs with new drug certificates and drug approval numbers.For drugs with new drug certificates only and not yet in the monitoring period, or drug substances with new drug certificates, applications for newdrug technology transfer should be submitted prior to the respective expiration date of the monitoring periods for each drug registration category set forth inthe new regulations and after the issue date of the new drug certificates.Conditions for the Application of Drug Production Technology TransferApplications for drug production technology transfer may be submitted if: •the transferor holds new drug certificates or both new drug certificates and drug approval numbers, and the monitoring period has expired orthere is no monitoring period; or •with respect to drugs without new drug certificates, both the transferor and the transferee are legally qualified drug manufacturingenterprises, one of which holds over 50% of the equity interests in the other, or both of which are majority-owned subsidiaries of the samedrug manufacturing enterprise.With respect to imported drugs with imported drug licenses, the original applicants for the imported drug registration may transfer these drugs todomestic drug manufacturing enterprises.Application for, and Examination and Approval of, Drug Technology TransferApplications for drug technology transfer should be submitted to the provincial administration of medical products where the transferee islocated. If the transferor and the transferee are located in different provinces, the provincial administration of medical products where the transferor is locatedshould provide examination opinions. The provincial administration of medical products where the transferee is located is responsible for examiningapplication materials for technology transfer and organizing inspections on the production facilities of the transferee. Drug control institutes are responsiblefor testing three batches of drug samples.The CDE should further review the application materials, provide technical evaluation opinions and form a comprehensive evaluation opinionbased on the site inspection reports and the testing results of the samples. The NMPA should determine whether to approve the application according to thecomprehensive evaluation opinion of the CDE. An approval letter of supplementary application and a drug approval number will be issued to qualifiedapplications. A Clinical Trial Authorization will be issued when necessary. For rejected applications, a notification letter of the examination opinions will beissued with the reasons for rejection.98 Permits and Licenses for Manufacturing of DrugsPharmaceutical Manufacturing PermitTo manufacture pharmaceutical products in the PRC, a pharmaceutical manufacturing enterprise must first obtain a PharmaceuticalManufacturing Permit issued by the relevant pharmaceutical administrative authorities at the provincial level where the enterprise is located. Among otherthings, such a permit must set forth the permit number, the name, legal representative and registered address of the enterprise, the site and scope ofproduction, issuing institution, date of issuance and effective period.Each Pharmaceutical Manufacturing Permit issued to a pharmaceutical manufacturing enterprise is effective for a period of five years. Anyenterprise holding a Pharmaceutical Manufacturing Permit is subject to review by the relevant regulatory authorities on an annual basis. The enterprise isrequired to apply for renewal of such permit within six months prior to its expiry and will be subject to reassessment by the issuing authorities in accordancewith then prevailing legal and regulatory requirements for the purposes of such renewal.Business LicensesIn addition to a Pharmaceutical Manufacturing permit, the manufacturing enterprise must also obtain a business license from the Administrationof Market Regulation at the local level. The name, legal representative and registered address of the enterprise specified in the business license must beidentical to that set forth in the Pharmaceutical Manufacturing Permit.GMP CertificatesThe World Health Organization encourages the adoption of good manufacturing practice, or GMP, standards in pharmaceutical production inorder to minimize the risks involved in any pharmaceutical production that cannot be eliminated through testing the final products.A GMP certification certifies that a manufacturer’s factory and quality management system have met certain criteria for engaging in the planningand manufacturing of drug products, which address institution and staff qualifications, production premises and facilities, equipment, hygiene conditions,production management, quality controls, product operation, maintenance of sales records and manner of handling customer complaints and adverse reactionreports. In January 2011, the MOH issued an updated set of GMP standards, also known as the new GMP, to replace the previous version issued in 1998.There are also five annexes to the new GMP issued by the former SFDA in February 2011, with detailed requirements for the manufacture of sterile drugs,drug/substances/APIs, biologics, blood products and traditional Chinese medicines. Two additional annexes were published in May 2015, with detailedrequirements for IT systems and validation. The GMP certificate is valid for a term of five years and an application for renewal must be submitted six months prior to its expiration date. TheNMPA and its provincial branches are authorized to monitor the continued compliance of pharmaceutical manufacturers, for example, by a follow-upinspection of implementation of the GMP requirements. Failure to continuously comply with the statutory requirements may lead to rectification ordersimposed on the manufacturers. Penalties for breach of GMP compliance can vary depending on the degree of seriousness. Administrative sanctions rangefrom a rectification notice to monetary fines, suspension of production and business operation, and revocation of the pharmaceutical manufacturing permitand the Pharmaceutical GMP Certificate.99 U.S. Regulation of Pharmaceutical Product Development and ApprovalIn the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations. Drugsare also subject to other federal, state and local statutes and regulations. The process of obtaining marketing approvals and the subsequent compliance withappropriate federal, state and local rules and regulations requires the expenditure of substantial time and financial resources. Failure to comply with theapplicable U.S. regulatory requirements at any time during the product development process, approval process or after approval may subject an applicantand/or sponsor to a variety of administrative or judicial sanctions. These sanctions could include, among other actions, FDA’s refusal to approve pendingapplications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of enforcement-related letters, productrecalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution,disgorgement of profits, or civil or criminal investigations and penalties brought by FDA and the Department of Justice, or DOJ, or other governmentalentities. Our drug candidates must be approved by the FDA through the NDA process before they may be legally marketed in the United States. The processrequired by the FDA before a drug may be marketed in the United States generally involves the following: •completion of extensive pre-clinical studies, sometimes referred to as pre-clinical laboratory tests, pre-clinical animal studies andformulation studies all performed in compliance with applicable regulations, including the FDA’s GLP regulations; •submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical trials maybegin and must be updated annually; •approval by an independent IRB representing each clinical site before each clinical trial may be initiated; •performance of adequate and well-controlled human clinical trials in accordance with applicable good clinical practices, or GCPs and otherclinical trial-related regulations, to establish the safety and efficacy of the proposed drug product for its proposed indication; •preparation and submission to the FDA of an NDA; •a determination by the FDA within 60 days of its receipt of an NDA to file the NDA for review and review by an FDA advisory committee,where appropriate or if applicable; •satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the API and finished drugproduct are produced to assess compliance with the FDA’s cGMP; •potential FDA audit of the pre-clinical and/or clinical trial sites that generated the data in support of the NDA; and •payment of user fees and FDA review and approval of the NDA prior to any commercial marketing or sale of the drug in the United States.Preclinical StudiesThe data required to support an NDA is generated in two distinct development stages: pre-clinical and clinical. For new chemical entities, orNCEs, the pre-clinical development stage generally involves synthesizing the active component, developing the formulation and determining themanufacturing process, evaluating purity and stability, as well as carrying out non-human toxicology, pharmacology and drug metabolism studies in thelaboratory, which support subsequent clinical testing. The conduct of the pre-clinical tests must comply with federal regulations, including GLPs and the U.S.Department of Agriculture’s Animal Welfare Act. The sponsor must submit the results of the pre-clinical tests, together with manufacturing information,analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. An IND is a request for authorizationfrom the FDA to administer an investigational drug product to humans. The central focus of an IND submission is on the general investigational plan and theprotocol(s) for human trials. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions regardingthe proposed clinical trials and places the IND on clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve anyoutstanding concerns or questions before the clinical trial can begin. Some long-term preclinical testing, such as animal tests of reproductive adverse eventsand carcinogenicity, may continue after the IND is submitted. The FDA may also impose clinical holds on a drug candidate at any time before or duringclinical trials due to safety concerns or non-compliance. Accordingly, submission of an IND does not guarantee the FDA will allow clinical trials to begin, orthat, once begun, issues will not arise that could cause the trial to be suspended or terminated.100 Clinical StudiesThe clinical stage of development involves the administration of the drug product to human subjects or patients under the supervision ofqualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCPs, which establish standards forconducting, recording data from, and reporting the results of, clinical trials, and are intended to assure that the data and reported results are accurate, and thatthe rights, safety, and well-being of study participants are protected. GCPs also include the requirement that all research subjects provide their informedconsent in writing for their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, theobjectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety and assessefficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Further, each clinical trial must bereviewed and approved by each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trialparticipants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation toanticipated benefits. The IRB also reviews and approves the informed consent form that must be provided to each clinical trial subject or his or her legalrepresentative and must monitor the clinical trial until completed. There are also requirements governing the reporting of ongoing clinical trials andcompleted clinical trial results to public registries. For example, information about certain clinical trials must be submitted within specific timeframes to theNational Institutes of Health for public dissemination on their ClinicalTrials.gov website.Clinical trials are generally conducted in three sequential phases that may overlap or be combined, known as Phase I, Phase II and Phase IIIclinical trials. •Phase I: The drug is initially introduced into a small number of healthy volunteers who are initially exposed to a single dose and thenmultiple doses of the drug candidate. The primary purpose of these clinical trials is to assess the metabolism, pharmacologic action, sideeffect tolerability and safety of the drug. •Phase II: The drug is administered to a limited patient population to determine dose tolerance and optimal dosage required to produce thedesired benefits. At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, as well asidentification of possible adverse effects and safety risks and preliminary evaluation of efficacy. •Phase III: The drug is administered to an expanded number of patients, generally at multiple sites that are geographically dispersed, in well-controlled clinical trials to generate enough data to demonstrate the efficacy of the drug for its intended use, its safety profile, and toestablish the overall benefit/risk profile of the drug and provide an adequate basis for drug approval and labeling of the drug product. PhaseIII clinical trials may include comparisons with placebo and/or other comparator treatments. Post-approval trials, sometimes referred to asPhase IV clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from thetreatment of patients in the intended therapeutic indication. In certain instances, FDA may mandate the performance of Phase IV clinicaltrials.Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA, and more frequently if serious adverseevents occur. Written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events or any finding fromtests in laboratory animals that suggests a significant risk to human subjects. The FDA, the IRB, or the clinical trial sponsor may suspend or terminate aclinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. TheFDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted. Similarly, an IRB cansuspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance withthe IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by anindependent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group providesauthorization for whether or not a trial may move forward at designated check points based on access to certain data from the trial. Concurrent with clinicaltrials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristicsof the drug as well as finalize a process for manufacturing the drug in commercial quantities in accordance with cGMP requirements. The manufacturingprocess must be capable of consistently producing quality batches of the drug candidate and, among other things, cGMPs impose extensive procedural,substantive and recordkeeping requirements to ensure and preserve the long term stability and quality of the final drug product. Additionally, appropriatepackaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptabledeterioration over its shelf life.101 NDA Submission and FDA Review ProcessThe results of non-clinical studies and of the clinical trials, together with other detailed information, including extensive manufacturinginformation and information on the composition of the drug and proposed labeling, are submitted to the FDA in the form of an NDA requesting approval tomarket the drug for one or more specified indications. The FDA reviews an NDA to determine, among other things, whether a drug is safe and effective for itsintended use and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, strength, quality andpurity. FDA approval of an NDA must be obtained before a drug may be offered for sale in the United States.Under the Prescription Drug User Fee Act, or PDUFA, as amended, each NDA must be accompanied by an application user fee. The FDA adjuststhe PDUFA user fees on an annual basis. According to the FDA’s fee schedule, effective through September 30, 2019, the user fee for an application requiringclinical data, such as an NDA, is approximately $2.6 million. PDUFA also imposes an annual prescription drug program fee for human drugs ofapproximately $300,000. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first applicationfiled by a small business. Additionally, no user fees are assessed on NDAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA forfiling. The FDA conducts a preliminary review of an NDA within 60 days of receipt. Once the submission is accepted for filing, the FDA begins an in-depthreview of the NDA. Under the goals and policies agreed to by the FDA under PDUFA, the FDA aims to complete its initial review of an NDA and respond tothe applicant within 10 months from the filing date for a standard NDA and, and within six months from the filing date for a priority NDA. The FDA does notalways meet its PDUFA goal dates for standard and priority review NDAs, and the review process is often significantly extended by FDA requests foradditional information or clarification.After the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether the proposed drug is safeand effective for its intended use, and whether the drug is being manufactured in accordance with cGMP to assure and preserve the drug’s identity, strength,quality and purity. The FDA may refer applications for novel drugs or drug candidates that present difficult questions of safety or efficacy to an advisorycommittee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should beapproved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendationscarefully when making decisions. The FDA may re-analyze the clinical trial data, which can result in extensive discussions between the FDA and us duringthe review process.Before approving an NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new drug to determine whetherthey comply with cGMPs. The FDA will not approve the drug unless it determines that the manufacturing processes and facilities are in compliance withcGMP requirements and adequate to assure consistent production of the drug within required specifications. In addition, before approving an NDA, the FDAmay also audit data from clinical trials to ensure compliance with GCP requirements. After the FDA evaluates the application, manufacturing process andmanufacturing facilities where the drug product and/or its API will be produced, it may issue an approval letter or a Complete Response Letter. An approvalletter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates thatthe review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter usually describes all of the specificdeficiencies in the NDA identified by the FDA. The Complete Response Letter may require additional clinical data and/or an additional pivotal clinicaltrial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials, pre-clinical studies or manufacturing. If a CompleteResponse Letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application.Even if such data and information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained fromclinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data.102 If a drug receives marketing approval, the approval may be significantly limited to specific diseases, dosages, or patient populations or theindications for use may otherwise be limited. Further, the FDA may require that certain contraindications, warnings or precautions be included in the druglabeling or may condition the approval of the NDA on other changes to the proposed labeling, development of adequate controls and specifications, or acommitment to conduct post-market testing or clinical trials and surveillance to monitor the effects of approved drugs. For example, the FDA may requirePhase IV testing which involves clinical trials designed to further assess a drug’s safety and effectiveness and may require testing and surveillance programsto monitor the safety of approved drugs that have been commercialized. The FDA may also place other conditions on approvals including the requirement fora Risk Evaluation and Mitigation Strategy, or REMS, to ensure that the benefits of a drug or biological product outweigh its risks. If the FDA concludes aREMS is needed, the sponsor of the NDA must submit a proposed REMS. The FDA will not approve the NDA without an approved REMS, if required. AREMS could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patientregistries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution,prescription or dispensing of drugs. Drug approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following initialmarketing.Pediatric TrialsUnder the Pediatric Research Equity Act of 2003, a NDA or supplement thereto must contain data that are adequate to assess the safety andeffectiveness of the drug product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for eachpediatric subpopulation for which the product is safe and effective. With the enactment of FDASIA in 2012 , a sponsor who is planning to submit a marketingapplication for a drug that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration must alsosubmit an initial Pediatric Study Plan, or PSP, within sixty days of an end-of-Phase II meeting or as may be agreed between the sponsor and FDA. The initialPSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevantendpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or afull or partial waiver of the requirement to provide data from pediatric studies along with supporting information. FDA and the sponsor must reach agreementon the PSP. A sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on datacollected from pre-clinical studies, early phase clinical trials, and/or other clinical development programs.Orphan Drug Designation and ExclusivityUnder the Orphan Drug Act, FDA may designate a drug product as an “orphan drug” if it is intended to treat a rare disease or condition (generallymeaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which there is no reasonable expectation that the cost ofdeveloping and making a drug product available in the United States for treatment of the disease or condition will be recovered from sales of the product). Acompany must request orphan product designation before submitting a NDA. If the request is granted, FDA will publicly disclose the identity of thetherapeutic agent and its potential use. Orphan product designation does not convey any advantage in or shorten the duration of the regulatory review andapproval process, but the product will be entitled to orphan product exclusivity, meaning that FDA may not approve any other applications for the sameproduct for the same indication for seven years, except in certain limited circumstances. Competitors may receive approval of different products for theindication for which the orphan product has exclusivity and may obtain approval for the same product but for a different indication. If a drug or drug productdesignated as an orphan product ultimately receives marketing approval for an indication broader than what was designated in its orphan productapplication, it may not be entitled to exclusivity.Post-Marketing RequirementsFollowing approval of a new drug, a pharmaceutical company and the approved drug are subject to continuing regulation by the FDA, including,among other things, monitoring and recordkeeping activities, reporting to the applicable regulatory authorities of adverse experiences with the drug,providing the regulatory authorities with updated safety and efficacy information, drug sampling and distribution requirements, and complying withapplicable promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promotingdrugs for uses or in patient populations that are not described in the drug’s approved labeling (known as “off-label use”), limitations on industry-sponsoredscientific and educational activities, and requirements for promotional activities involving the internet. Although physicians may legally prescribe drugs foroff-label uses, manufacturers may not market or promote such off-label uses. Modifications or enhancements to the drug or its labeling or changes of the siteof manufacture are often subject to the approval of the FDA and other regulators, which may or may not be received or may result in a lengthy review process.103 FDA regulations also require that approved products be manufactured in specific approved facilities and in accordance with cGMP. We rely, andexpect to continue to rely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMP regulations.NDA holders using contract manufacturers, laboratories or packagers are responsible for the selection and monitoring of qualified firms, and, in certaincircumstances, qualified suppliers to these firms. These manufacturers must comply with cGMP regulations that require, among other things, quality controland quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any deviationsfrom cGMP. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register theirestablishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies forcompliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and qualitycontrol to maintain cGMP compliance. The discovery of violative conditions, including failure to conform to cGMP, could result in enforcement actions thatinterrupt the operation of any such facilities or the ability to distribute products manufactured, processed or tested by them. Discovery of problems with aproduct after approval may result in restrictions on a product, manufacturer, or holder of an approved NDA, including, among other things, recall orwithdrawal of the product from the market. Discovery of previously unknown problems with a drug or the failure to comply with applicable FDArequirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandatedcorrective advertising or communications with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or effectivenessdata may require changes to a drug’s approved labeling, including the addition of new warnings and contraindications, and also may require theimplementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established,or the FDA’s policies may change, which could delay or prevent regulatory approval of our drugs under development.Other U.S. Regulatory MattersManufacturing, sales, promotion and other activities following drug approval are also subject to regulation by numerous regulatory authorities inaddition to the FDA, including, in the United States, the Centers for Medicare & Medicaid Services, other divisions of the Department of Health and HumanServices, the Drug Enforcement Administration for controlled substances, the Consumer Product Safety Commission, the Federal Trade Commission, theOccupational Safety & Health Administration, the Environmental Protection Agency and state and local governments. In the United States, the activities ofpharmaceutical manufacturers are subject to federal and state laws designed to prevent “fraud and abuse” in the healthcare industry. The laws generally limitfinancial interactions between manufacturers and health care providers or other participants in the healthcare industry and/or require disclosure to thegovernment and public of such interactions. Many of these laws and regulations contain ambiguous requirements or require administrative guidance forimplementation. Pharmaceutical manufacturers are also required to provide discounts or rebates under government healthcare programs or to certaingovernment and private purchasers in order to obtain coverage under federal healthcare programs such as Medicaid. Participation in such programs mayrequire tracking and reporting of certain drug prices. Manufacturers are subject to fines and other penalties if such prices are not reported accurately. Thehandling of any controlled substances must comply with the U.S. Controlled Substances Act and Controlled Substances Import and Export Act. Drugs mustmeet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion and otheractivities are also potentially subject to federal and state consumer protection and unfair competition laws.The distribution of pharmaceutical drugs is subject to additional requirements and regulations, including extensive record-keeping, licensing,storage and security requirements intended to prevent the unauthorized sale of pharmaceutical drugs.The failure to comply with regulatory requirements subjects manufacturers to possible legal or regulatory action. Depending on thecircumstances, failure to meet applicable regulatory requirements can result in criminal prosecution, fines or other penalties, injunctions, recall or seizure ofdrugs, total or partial suspension of production, denial or withdrawal of product approvals, exclusion from participation in government healthcare programsor refusal to allow a firm to enter into supply contracts, including government contracts. In addition, even if a firm complies with FDA and otherrequirements, new information regarding the safety or efficacy of a product could lead the FDA to modify or withdraw product approval. Prohibitions orrestrictions on sales or withdrawal of future products marketed by us could materially affect our business in an adverse way.104 Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i)changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv)additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.Rest of the World Regulation of Pharmaceutical Product Development and ApprovalFor other countries outside of China and the United States, such as countries in Europe, Latin America or other parts of Asia, the requirementsgoverning the conduct of clinical trials, drug licensing, pricing and reimbursement vary from country to country. In all cases the clinical trials must beconducted in accordance with GCP requirements and the applicable regulatory requirements and ethical principles.If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal ofregulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.Coverage and ReimbursementPRC Coverage and ReimbursementHistorically, most Chinese healthcare costs had been borne by patients out-of-pocket, which had limited the growth of more expensivepharmaceutical products. However, in recent years the number of people covered by government and private insurance has increased. According to the PRCNational Bureau of Statistics, as of June 2018, close to 1.2 billion urban employees and residents in China were enrolled in the national medical insuranceprogram, representing a coverage rate of 83% of the total population. The PRC government has announced a plan to give every person in China access tobasic healthcare by year 2020.Reimbursement under the National Medical Insurance ProgramThe national medical insurance program was adopted pursuant to the Decision of the State Council on the Establishment of the Urban EmployeeBasic Medical Insurance Program issued by the State Council on December 14, 1998, under which all employers in urban cities are required to enroll theiremployees in the basic medical insurance program and the insurance premium is jointly contributed by the employers and employees. The State Councilpromulgated Guiding Opinions of the State Council about the Pilot Urban Resident Basic Medical Insurance on July 10, 2007, under which urban residentsof the pilot district, rather than urban employees, may voluntarily join Urban Resident Basic Medical Insurance. The State Council expects the pilot UrbanResident Basic Medical Insurance to cover the whole nation by 2010.Participants of the national medical insurance program and their employers, if any, are required to contribute to the payment of insurancepremium on a monthly basis. Program participants are eligible for full or partial reimbursement of the cost of medicines included in the Medical InsuranceCatalogue. The Notice Regarding the Tentative Measures for the Administration of the Scope of Medical Insurance Coverage for Pharmaceutical Products forUrban Employee, jointly issued by several authorities including the Ministry of Labor and Social Security and the Ministry of Finance, among others, onMay 12, 1999, provides that a pharmaceutical product listed in the Medical Insurance Catalogue must be clinically needed, safe, effective, reasonably priced,easy to use, available in sufficient quantity, and must meet the following requirements: •it is set forth in the Pharmacopoeia of the PRC; •it meets the standards promulgated by the NMPA; and •if imported, it is approved by the NMPA for import.Factors that affect the inclusion of a pharmaceutical product in the Medical Insurance Catalogue include whether the product is consumed inlarge volumes and commonly prescribed for clinical use in the PRC and whether it is considered to be important in meeting the basic healthcare needs of thegeneral public.105 The PRC Ministry of Human Resources and Social Security, together with other government authorities, previously had the power to determinethe medicines included in the NRDL. In February 2017, the PRC Ministry of Human Resources and Social Security released the 2017 NRDL. The 2017NRDL expands its scope and covers 2,535 drugs in total, including 339 drugs that are newly added. The 2017 NRDL reflects an emphasis on innovativedrugs and drugs that treat cancer and other serious diseases. For instance, most of the innovative chemical drugs and biological products approved in Chinabetween 2008 and the first half of 2016 have been included in the 2017 NRDL or its candidate list. The NRDL was further expanded in October 2018 afterthe newly created National Healthcare Security Administration (NHSA), the successor agency to Ministry of Human Resources and Social Security, finalizedthe price negotiations with drug manufacturers for 18 oncology drugs. 10 of the 18 oncology drugs were approved after 2017. 17 of the 18 products wereincluded in the NRDL.Medicines included in the NRDL are divided into two parts, Part A and Part B. Provincial governments are required to include all Part Amedicines listed on the NRDL in their provincial Medical Insurance Catalogue, but have the discretion to adjust upwards or downwards by no more than15% from the number of Part B medicines listed in the NRDL. As a result, the contents of Part B of the provincial Medical Insurance Catalogues may differfrom region to region in the PRC.Patients purchasing medicines included in Part A of the NRDL are entitled to reimbursement of the entire amount of the purchase price. Patientspurchasing medicines included in Part B of the NRDL are required to pay a certain percentage of the purchase price and obtain reimbursement for theremainder of the purchase price. The percentage of reimbursement for Part B medicines differs from region to region in the PRC.The total amount of reimbursement for the cost of medicines, in addition to other medical expenses, for an individual participant under thenational medical insurance program in a calendar year is capped at the amounts in such participant’s individual account under such program. The amount ina participant’s account varies, depending on the amount of contributions from the participant and his or her employer. National List of Essential DrugsOn August 18, 2009, MOH and eight other ministries and commissions in the PRC issued the Provisional Measures on the Administration of theNational List of Essential Drugs and the Guidelines on the Implementation of the National List of Essential Drugs System, which aimed to promote essentialmedicines sold to consumers at fair prices in the PRC and ensured that the general public in the PRC has equal access to the drugs contained in the NationalList of Essential Drugs. MOH promulgated the National List of Essential Drugs (Catalog for the Basic Healthcare Institutions) on August 18, 2009, a revisedNational List of Essential Drugs on March 13, 2013 and another revised National List of Essential Drugs on September 30, 2018. According to theseregulations, basic healthcare institutions funded by government, which primarily include county-level hospitals, county-level Chinese medicine hospitals,rural clinics and community clinics, shall store up and use drugs listed in National List of Essential Drugs. The drugs listed in National List of Essential Drugsshall be purchased by centralized tender process and shall be subject to the price control by NDRC. Drugs listed in the National List of Essential Drugs are alllisted in the Medical Insurance Catalogue. Historically, the entire amount of the purchase price of such drugs would be entitled to reimbursement. Therecent revision in 2018 included several novel drugs, and their reimbursement ratios are subject to further negotiations between the drug manufacturers andlocal administration of healthcare security at the provincial level. Commercial InsuranceOn October 25, 2016, the State Council and the Communist Party of China jointly issued the Plan for Healthy China 2030. According to the Plan,the country will establish a multi-level medical security system built around basic medical insurance, with other forms of insurance supplementing the basicmedical insurance, including serious illness insurance for urban and rural residents, commercial health insurance and medical assistance. Furthermore, thePlan encourages enterprises and individuals to participate in commercial health insurance and various forms of supplementary insurance. The evolvingmedical insurance system makes innovative drugs more affordable and universally available to the Chinese population, which renders greater opportunitiesto drug manufacturers that focus on the research and development of innovative drugs, such as high-cost cancer therapeutics.Price ControlsInstead of direct price controls which were historically used in China but abolished in June 2016, the government regulates prices mainly byestablishing a price negotiations, consolidated procurement mechanism, and revising medical insurance reimbursement standards as discussed below.106 Price NegotiationsThe Chinese government has initiated several rounds of price negotiations with manufacturers of patented drugs, drugs with an exclusive sourceof supply, and oncology drugs since 2016. The average percentage of price reduction has been over 50%. Once the government agreed with the drugmanufacturers on the supply prices, the drugs would be automatically listed in the NRDL and qualified for public hospital purchase.Centralized Procurement and TendersThe Guiding Opinions concerning the Urban Medical and Health System Reform, promulgated on February 21, 2000, aims to regulate thepurchasing process of pharmaceutical products by medical institution. The MOH and other relevant government authorities have promulgated a series ofregulations and releases in order to implement the tender requirements.According to the Notice on Issuing Certain Regulations on the Trial Implementation of Centralized Tender Procurement of Drugs by MedicalInstitutions promulgated on July 7, 2000 and the Notice on Further Improvement on the Implementation of Centralized Tender Procurement of Drugs byMedical Institutions promulgated on August 8, 2001, medical institutions established by county or higher level government or state-owned enterprises(including state-controlled enterprises) are required to implement centralized tender procurement of drugs.The MOH promulgated the Working Regulations of Medical Institutions for Procurement of Drugs by Centralized Tender and Price Negotiations(for Trial Implementation), or there Centralised Procurement Regulations, on March 13, 2002, and promulgated Sample Document for Medical Institutionsfor Procurement of Drugs by Centralized Tender and Price Negotiations (for Trial Implementation), or the Centralized Tender Sample Document in November2001, to implement the tender process requirements and ensure the requirements are followed uniformly throughout the country. The Centralized TenderRegulations and the Centralized Tender Sample Document provide rules for the tender process and negotiations of the prices of drugs, operationalprocedures, a code of conduct and standards or measures of evaluating bids and negotiating prices. On January 17, 2009, the MOH, the SFDA and other fournational departments jointly promulgated the Opinions on Further Regulating Centralized Procurement of Drugs by Medical Institutions. According to thenotice, public hospitals owned by the government at the county level or higher or owned by state-owned enterprises (including state-controlled enterprises)shall purchase pharmaceutical products by online centralized procurement. Each provincial government shall formulate its catalogue of drugs subject tocentralized procurement. Except for drugs in the National List of Essential Drugs (the procurement of which shall comply with the relevant rules on NationalList of Essential Drugs), certain pharmaceutical products which are under the national government’s special control, such as toxic, radioactive and narcoticdrugs and traditional Chinese medicines, in principle, all drugs used by public medical institutions shall be covered by the catalogue of drugs subject tocentralized procurement. On July 7, 2010, the MOH and six other ministries and commissions jointly promulgated the Notice on Printing and Distributingthe Working Regulations of Medical Institutions for Centralized Procurement of Drugs to further regulate the centralized procurement of drugs and clarify thecode of conduct of the parties in centralized drug procurement.The centralized tender process takes the form of public tender operated and organized by provincial or municipal government agencies. Thecentralized tender process is in principle conducted once every year in the relevant province or city in China. The bids are assessed by a committee composedof pharmaceutical and medical experts who will be randomly selected from a database of experts approved by the relevant government authorities. Thecommittee members assess the bids based on a number of factors, including but not limited to, bid price, product quality, clinical effectiveness, productsafety, qualifications and reputation of the manufacturer, after-sale services and innovation. Only pharmaceuticals that have won in the centralized tenderprocess may be purchased by public medical institutions funded by the governmental or state-owned enterprise (including state-controlled enterprises) in therelevant region.In addition to the centralized tender process, the Chinese government also rolled out a “two-invoice system” nationwide in 2018. In the two-invoice system, in principle there can be no more than two invoices issued for drug products supplied by manufacturers to public hospitals. To satisfy withthis requirement, many drug manufacturers have reduced the tiers of distributors, or converted drug distributors into contracted service organizations. Thereduction in distribution tiers resulted in a decrease in distribution mark-ups, hence the supply prices to public hospitals would also be reduced. 107 Medical Insurance Reimbursement StandardsThe Opinions on Integrating the Basic Medical Insurance Systems for Urban and Rural Residents issued by the State Council on January 3, 2016,call for the integration of the urban resident basic medical insurance and the new rural cooperative medical care system and the establishment of a unifiedbasic medical insurance system, which will cover all urban and rural residents other than rural migrant workers and persons in flexible employmentarrangement who participate in the basic medical insurance for urban employees.According to the Main Tasks of Healthcare System Reform in 2016 issued by the General Office of the State Council on April 21, 2016, the keytasks of the medical insurance reform are: (1) to advance the establishment of the mechanisms of stable and sustainable financing and security leveladjustment, (2) to advance the integration of the basic medical insurance systems for urban and rural residents, (3) to consolidate and improve the system forserious illness insurance for urban and rural residents, (4) to reform medical insurance payment methods, and (5) to advance the development of commercialhealth insurance. The General Office of the State Council further announced a master plan for the medical insurance reimbursement reform in June 2017. The mainobjectives are to implement a diversified reimbursement mechanism including DRGs, per-capita caps, and per-bed-day caps. These new reimbursementmethods will be rolled out nationwide by 2020 to replace the current reimbursement method that is based on service category and product price. Localadministration of healthcare security will introduce a total budget control for their jurisdictions and decide the amount of reimbursement to public hospitalsbased on hospitals’ performance and the spending targets of individual basic medical insurance funds. U.S. Coverage and ReimbursementSuccessful sales of our drug candidates in the U.S. market, if approved, will depend, in part, on the extent to which our drugs will be covered bythird-party payors, such as government health programs or private health insurance (including managed care plans). Patients who are provided withprescriptions as part of their medical treatment generally rely on such third-party payors to reimburse all or part of the costs associated with their prescriptionsand therefore adequate coverage and reimbursement from such third-party payors are critical to new and ongoing product acceptance. These third-partypayors are increasingly reducing reimbursements for medical drugs and services. Additionally, the containment of healthcare costs has become a priority offederal and state governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments haveshown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements forsubstitution of generic drugs. Adoption or expansion of price controls and cost-containment measures could further limit our net revenue and results.Decreases in third-party reimbursement for our drug candidates, if approved, or a decision by a third-party payor to not cover our drug candidates could havea material adverse effect on our sales, results of operations and financial condition.General legislative cost control measures may also affect reimbursement for our products. The Budget Control Act, as amended, resulted in theimposition of 2% reductions in Medicare (but not Medicaid) payments to providers in 2013 and will remain in effect through 2027 unless additionalCongressional action is taken. If we obtain approval to market a drug candidate in the United States, any significant spending reductions affecting Medicare,Medicaid or other publicly funded or subsidized health programs that may be implemented and/or any significant taxes or fees that may be imposed on uscould have an adverse impact on our results of operations.Other Healthcare LawsOther PRC Healthcare LawsAdvertising of Pharmaceutical ProductsPursuant to the Provisions for Drug Advertisement Examination, which were promulgated on March 13, 2007 and came into effect on 1 May 2007and amended on December 21, 2018, an enterprise seeking to advertise its drugs must apply for an advertising approval code. The validity term of anadvertisement approval number for pharmaceutical drugs is one year. The content of an approved advertisement may not be altered without prior approval.Where any alteration to the advertisement is needed, a new advertisement approval number shall be obtained by submitting a reapplication.108 Insert Sheet and Labels of Pharmaceutical ProductsAccording to the Measures for the Administration of the Insert Sheets and Labels of Drugs effective on June 1, 2006, the insert sheets and labels ofdrugs should be reviewed and approved by the NMPA. A drug insert sheet should include the scientific data, conclusions and information concerning drugsafety and efficacy in order to direct the safe and rational use if drugs. The inner label of a drug should bear such information as the drug’s name, indication orfunction, strength, dose and usage, production date, batch number, expiry date and drug manufacturer, and the outer label of a drug should indicate suchinformation as the drug’s name, ingredients, description, indication or function, strength, dose and usage and adverse reaction.Packaging of Pharmaceutical ProductsAccording to the Measures for The Administration of Pharmaceutical Packaging effective on September 1, 1988, pharmaceutical packaging mustcomply with the national and industry standards. If no national or industry standards are available, the enterprise can formulate its own standards and put intoimplementation after obtaining the approval of the administration of medical products or bureau of standards at provincial level. The enterprise shall reapplywith the relevant authorities if it needs to change its own packaging standard. Drugs that have not developed and received approval for packing standardsmust not be sold or traded in PRC (except for drugs for the military).Other U.S. Healthcare LawsWe may also be subject to healthcare regulation and enforcement by the U.S. federal government and the states where we may market our drugcandidates, if approved. These laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, privacy and security andtransparency laws, such as the following: •federal healthcare program anti-kickback laws, which prohibit, among other things, persons from knowingly and willfully offering,soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service orthe purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as Medicare andMedicaid; •federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented,information or claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent; •the federal Health Insurance Portability and Accountability Act of 1996, which prohibits executing a scheme to defraud any healthcarebenefit program or making false statements relating to healthcare matters and which also imposes certain requirements relating to theprivacy, security and transmission of individually identifiable health information; •the Federal Food, Drug, and Cosmetic Act, which among other things, strictly regulates drug product and medical device marketing,prohibits manufacturers from marketing such products prior to approval or for off-label use and regulates the distribution of samples; •federal laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certaindiscounts or rebates to government authorities or private entities, often as a condition of reimbursement under government healthcareprograms; •the so-called “federal sunshine” law, which requires pharmaceutical and medical device companies to monitor and report certain financialinteractions with physicians and teaching hospitals (and other healthcare professionals starting in 2021) to the federal government for re-disclosure to the public; and •state law equivalents of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursedby any third-party payer, including private insurers, state transparency laws, state laws limiting interactions between pharmaceuticalmanufacturers and members of the healthcare industry, and state laws governing the privacy and security of health information in certaincircumstances, many of which differ from each other in significant ways and often are not preempted by federal laws, thus complicatingcompliance efforts.109 If and when we become subject to such laws, efforts to ensure that our activities comply with applicable healthcare laws may involve substantialcosts. Many of these laws and their implementing regulations contain ambiguous requirements or require administrative guidance for implementation. Giventhe lack of clarity in laws and their implementation, our activities could be subject to challenge. If our operations were found to be in violation of any ofthese laws or any other governmental regulations that may apply to us, we could be subject to significant civil, criminal and administrative penalties,including, without limitation, damages, fines, imprisonment, exclusion from participation in government healthcare programs, such as Medicare andMedicaid, and the curtailment or restructuring of our operations, which could significantly harm our business.Other Significant PRC Regulation Affecting Our Business Activities in ChinaPRC Regulation of Foreign InvestmentInvestment activities in the PRC by foreign investors are principally governed by the Catalogue for the Guidance of Foreign Investment Industry,or the Catalogue, which was promulgated and is amended from time to time by the Ministry of Commerce, or the MOFCOM, and the National Developmentand Reform Commission, or NDRC, and together with Existing FIE Laws and their respective implementation rules and ancillary regulations. The Cataloguelays out the basic framework for foreign investment in China, classifying businesses into three categories with regard to foreign investment: “encourage,”“restricted” and “prohibited.”. Industries not listed in the Catalogue are generally deemed as falling into a fourth category “permitted” unless specificallyrestricted by other PRC laws. In addition, on June 28, 2018 the MOFCOM and the NDRC jointly promulgated the Special Management Measures (NegativeList) for the Access of Foreign Investment, or the 2018 Negative List, which became effective on July 28, 2018 to amend the Guidance Catalogue and theprevious negative list thereunder.On March 15, 2019, the National People's Congress promulgated the FIL, which will come into effect on January 1, 2020 and upon then the FILwill replace the Existing FIE Laws. The FIL embodies an expected regulatory trend in PRC to rationalize its foreign investment regulatory regime in line withprevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. The FIL, bymeans of legislation, establishes the basic framework for the access, promotion, protection and administration of foreign investment in view of investmentprotection and fair competition.According to the FIL, foreign investment shall enjoy pre-entry national treatment, except for those foreign invested entities that operate inindustries deemed to be either “restricted” or “prohibited” in the “negative list”. The FIL provides that foreign invested entities operating in foreign“restricted” or “prohibited” industries will require entry clearance and other approvals. However, it is unclear whether the “negative list” will differ from the2018 Negative List. The FIL also provides several protective rules and principles for foreign investors and their investments in the PRC, including, amongothers, that local governments shall abide by their commitments to the foreign investors; foreign-invested enterprises are allowed to issue stocks andcorporate bonds; except for special circumstances, in which case statutory procedures shall be followed and fair and reasonable compensation shall be madein a timely manner, expropriate or requisition the investment of foreign investors is prohibited; mandatory technology transfer is prohibited, allows foreigninvestors’ funds to be freely transferred out and into the territory of PRC, which run through the entire lifecycle from the entry to the exit of foreigninvestment, and provide an all-around and multi-angle system to guarantee fair competition of foreign-invested enterprises in the market economy. Inaddition, foreign investors or the foreign investment enterprise should be imposed legal liabilities for failing to report investment information in accordancewith the requirements. Furthermore, the FIL provides that foreign invested enterprises established according to the existing laws regulating foreigninvestment may maintain their structure and corporate governance within five years after the implementing of the FIL, which means that foreign investedenterprises may be required to adjust the structure and corporate governance in accordance with the current PRC Company Law and other laws andregulations governing the corporate governance.The Interim Measures for Record-filing Administration of the Establishment and Change of Foreign-invested Enterprises, or FIE Record-filingInterim Measures, was issued by MOFCOM in October 2016 and revised in July 2018. Pursuant to FIE Record-filing Interim Measures, the establishment andchange of foreign-invested enterprises are subject to record-filing procedures, instead of prior approval requirements, provided that the establishment orchange does not involve special entry administrative measures. If the establishment or change of FIE matters involve the special entry administrativemeasures, the approval of the MOFCOM or its local counterparts is still required.110 PRC Regulation of Commercial BriberyPharmaceutical companies involved in a criminal investigation or administrative proceedings related to bribery are listed in the Adverse Recordsof Commercial Briberies by its provincial health and family planning administrative department. Pursuant to the Provisions on the Establishment of AdverseRecords of Commercial Briberies in the Medicine Purchase and Sales Industry which became effective on March 1, 2014, provincial health and familyplanning administrative departments formulate the implementing measures for establishment of Adverse Records of Commercial Briberies. If apharmaceutical company is listed in the Adverse Records of Commercial Briberies for the first time, their production is not required to be purchased bypublic medical institutions. A pharmaceutical company will not be penalized by the relevant PRC government authorities merely by virtue of havingcontractual relationships with distributors or third party promoters who are engaged in bribery activities, so long as such pharmaceutical company and itsemployees are not utilizing the distributors or third party promoters for the implementation of, or acting in conjunction with them in, the prohibited briberyactivities. In addition, a pharmaceutical company is under no legal obligation to monitor the operating activities of its distributors and third party promoters,and will not be subject to penalties or sanctions by relevant PRC government authorities as a result of failure to monitor their operating activities.PRC Regulation of Product LiabilityIn addition to the strict new drug approval process, certain PRC laws have been promulgated to protect the rights of consumers and to strengthenthe control of medical products in the PRC. Under current PRC law, manufacturers and vendors of defective products in the PRC may incur liability for lossand injury caused by such products. Pursuant to the General Principles of the Civil Law of the PRC, or the PRC Civil Law, promulgated on April 12, 1986and amended on August 27, 2009, a defective product which causes property damage or physical injury to any person may subject the manufacturer orvendor of such product to civil liability for such damage or injury.On February 22, 1993, the Product Quality Law of the PRC, or the Product Quality Law, was promulgated to supplement the PRC Civil Lawaiming to protect the legitimate rights and interests of the end-users and consumers and to strengthen the supervision and control of the quality of products.The Product Quality Law was revised by the Ninth National People’s Congress on July 8, 2000, by the Eleventh National People’s Congress on August 27,2009 and by the Thirteenth National People’s Congress on December 29, 2018. Pursuant to the revised Product Quality Law, manufacturers who producedefective products may be subject to civil or criminal liability and have their business licenses revoked.The Law of the PRC on the Protection of the Rights and Interests of Consumers was promulgated on October 31, 1993 and was amended onAugust 27, 2009 and October 25, 2013 to protect consumers’ rights when they purchase or use goods and accept services. All business operators must complywith this law when they manufacture or sell goods and/or provide services to customers. Under the amendment on October 25, 2013, all business operatorsshall pay high attention to protect the customers’ privacy and strictly keep it confidential any consumer information they obtain during the businessoperation. In addition, in extreme situations, pharmaceutical product manufacturers and operators may be subject to criminal liability if their goods orservices lead to the death or injuries of customers or other third parties.PRC Tort LawUnder the Tort Law of the PRC which became effective on July 1, 2010, if damages to other persons are caused by defective products due to thefault of a third party, such as the parties providing transportation or warehousing, the producers and the sellers of the products have the right to recover theirrespective losses from such third parties. If defective products are identified after they have been put into circulation, the producers or the sellers shall takeremedial measures such as issuance of a warning, recall of products, etc. in a timely manner. The producers or the sellers shall be liable under tort if they failto take remedial measures in a timely manner or have not made efforts to take remedial measures, thus causing damages. If the products are produced or soldwith known defects, causing deaths or severe adverse health issues, the infringed party has the right to claim punitive damages in addition to compensatorydamages.PRC Regulation of Intellectual Property RightsChina has made substantial efforts to adopt comprehensive legislation governing intellectual property rights, including patents, trademarks,copyrights and domain names.111 PatentsPursuant to the PRC Patent Law, most recently amended in December 2008, and its implementation rules, most recently amended in January2010, patents in China fall into three categories: invention, utility model and design. An invention patent is granted to a new technical solution proposed inrespect of a product or method or an improvement of a product or method. A utility model is granted to a new technical solution that is practicable forapplication and proposed in respect of the shape, structure or a combination of both of a product. A design patent is granted to the new design of a certainproduct in shape, pattern or a combination of both and in color, shape and pattern combinations aesthetically suitable for industrial application. Under thePRC Patent Law, the term of patent protection starts from the date of application. Patents relating to invention are effective for twenty years, and utilitymodels and designs are effective for ten years from the date of application. The PRC Patent Law adopts the principle of “first-to-file” system, which providesthat where more than one person files a patent application for the same invention, a patent will be granted to the person who files the application first.Existing patents can become narrowed, invalid or unenforceable due to a variety of grounds, including lack of novelty, creativity, anddeficiencies in patent application. In China, a patent must have novelty, creativity and practical applicability. Under the PRC Patent Law, novelty means thatbefore a patent application is filed, no identical invention or utility model has been publicly disclosed in any publication in China or overseas or has beenpublicly used or made known to the public by any other means, whether in or outside of China, nor has any other person filed with the patent authority anapplication that describes an identical invention or utility model and is recorded in patent application documents or patent documents published after thefiling date. Creativity means that, compared with existing technology, an invention has prominent substantial features and represents notable progress, and autility model has substantial features and represents any progress. Practical applicability means an invention or utility model can be manufactured or usedand may produce positive results. Patents in China are filed with the State Intellectual Property Office, or SIPO. Normally, the SIPO publishes an applicationfor an invention patent within 18 months after the filing date, which may be shortened at the request of applicant. The applicant must apply to the SIPO for asubstantive examination within three years from the date of application.Article 20 of the PRC Patent Law provides that, for an invention or utility model completed in China, any applicant (not just Chinese companiesand individuals), before filing a patent application outside of China, must first submit it to the SIPO for a confidential examination. Failure to comply withthis requirement will result in the denial of any Chinese patent for the relevant invention. This added requirement of confidential examination by the SIPOhas raised concerns by foreign companies who conduct research and development activities in China or outsource research and development activities toservice providers in China.Patent EnforcementUnauthorized use of patents without consent from owners of patents, forgery of the patents belonging to other persons, or engagement in otherpatent infringement acts, will subject the infringers to infringement liability. Serious offences such as forgery of patents may be subject to criminal penalties.When a dispute arises out of infringement of the patent owner’s patent right, Chinese law requires that the parties first attempt to settle the disputethrough mutual consultation. However, if the dispute cannot be settled through mutual consultation, the patent owner, or an interested party who believes thepatent is being infringed, may either file a civil legal suit or file an administrative complaint with the relevant patent administration authority. A Chinesecourt may issue a preliminary injunction upon the patent owner’s or an interested party’s request before instituting any legal proceedings or during theproceedings. Damages for infringement are calculated as the loss suffered by the patent holder arising from the infringement, and if the loss suffered by thepatent holder arising from the infringement cannot be determined, the damages for infringement shall be calculated as the benefit gained by the infringerfrom the infringement. If it is difficult to ascertain damages in this manner, damages may be determined by using a reasonable multiple of the license feeunder a contractual license. Statutory damages may be awarded in the circumstances where the damages cannot be determined by the above mentionedcalculation standards. The damage calculation methods shall be applied in the aforementioned order. Generally, the patent owner has the burden of provingthat the patent is being infringed. However, if the owner of an invention patent for manufacturing process of a new product alleges infringement of its patent,the alleged infringer has the burden of proof.112 Medical Patent Compulsory LicenseAccording to the PRC Patent Law, for the purpose of public health, the SIPO may grant a compulsory license for manufacturing patented drugsand exporting them to countries or regions covered under relevant international treaties to which PRC has acceded.Exemptions for Unlicensed Manufacture, Use, Sale or Import of Patented ProductsThe PRC Patent Law provides five exceptions for unauthorized manufacture, use, sale or import of patented products. None of followingcircumstances are deemed an infringement of the patent rights, and any person may manufacture, use, sell or import patented products without authorizationgranted by the patent owner as follows: •Any person who uses, promises to sell, sells or imports any patented product or product directly obtained in accordance with the patentedmethods after such product is sold by the patent owner or by its licensed entity or individual; •Any person who has manufactured an identical product, has used an identical method or has made necessary preparations for manufacture oruse prior to the date of patent application and continues to manufacture such product or use such method only within the original scope; •Any foreign transportation facility that temporarily passes through the territory, territorial waters or territorial airspace of China and uses therelevant patents in its devices and installations for its own needs in accordance with any agreement concluded between China and thatcountry to which the foreign transportation facility belongs, or any international treaty to which both countries are party, or on the basis ofthe principle of reciprocity; •Any person who uses the relevant patents solely for the purposes of scientific research and experimentation; or •Any person who manufactures, uses or imports patented drug or patented medical equipment for the purpose of providing informationrequired for administrative approval, or manufactures, uses or imports patented drugs or patented medical equipment for theabovementioned person.However, if patented drugs are utilized on the ground of exemptions for unauthorized manufacture, use, sale or import of patented drugsprescribed in PRC Patent Law, such patented drugs cannot be manufactured, used, sold or imported for any commercial purposes without authorizationgranted by the patent owner.Trade SecretsAccording to the PRC Anti-Unfair Competition Law, the term “trade secrets” refers to technical and business information that is unknown to thepublic that has utility and may create business interests or profits for its legal owners or holders, and is maintained as a secret by its legal owners or holders.Under the PRC Anti-Unfair Competition Law which was promulgated on September 2, 1993 and was amended on November 4, 2017, businesspersons are prohibited from infringing others’ trade secrets by: (1) obtaining the trade secrets from the legal owners or holders by any unfair methods such astheft, bribery, intimidation, solicitation or coercion; (2) disclosing, using or permitting others to use the trade secrets obtained illegally under item (1) above;or (3) disclosing, using or permitting others to use the trade secrets, in violation of any contractual agreements or any requirements of the legal owners orholders to keep such trade secrets in confidence. If a third party knows or should have known of the fact that an employee or former employee of the rightowner of trade secrets or any other entity or individual conducts any of the illegal acts above mentioned, but still accepts, publishes, uses or allows any otherto use such secrets, such practice shall be deemed as infringement of trade secrets. The parties whose trade secrets are being misappropriated may petition foradministrative corrections, and regulatory authorities may stop any illegal activities and fine infringing parties in the amount of RMB100,000 toRMB500,000, where the circumstance is serious, the fine shall be between RMB500,000 to RMB3,000,000. Alternatively, persons whose trade secrets arebeing misappropriated may file lawsuits in a Chinese court for loss and damages incurred due to the misappropriation.The measures to protect trade secrets include oral or written non-disclosure agreements or other reasonable measures to require the employees of,or persons in business contact with, legal owners or holders to keep trade secrets confidential. Once the legal owners or holders have asked others to keeptrade secrets confidential and have adopted reasonable protection measures, the requested persons bear the responsibility for keeping the trade secretsconfidential.113 Trademarks and Domain NamesTrademark. The PRC Trademark Law and its implementation rules protect registered trademarks. The PRC Trademark Office of StateAdministration of Industry and Commerce is responsible for the registration and administration of trademarks throughout the PRC. The Trademark Law hasadopted a “first-to-file” principle with respect to trademark registration. As of June 30, 2017, we had two registered trademarks in China and four trademarkapplications pending outside China.Domain Name. Domain names are protected under the Administrative Measures on the Internet Domain Names promulgated by the Ministry ofIndustry and Information Technology. The Ministry of Industry and Information Technology is the main regulatory body responsible for the administrationof PRC internet domain names. We have registered zaibio.com, zaibiotech.com, zailaboratory.com, zailab.com.cn, zaimedicine.com and zaipharma.com.PRC Regulation of Labor ProtectionUnder the Labor Law of the PRC, effective on January 1, 1995 and subsequently amended on August 27, 2009 and December 29, 2018, the PRCEmployment Contract Law, effective on January 1, 2008 and subsequently amended on December 28, 2012 and the Implementing Regulations of theEmployment Contract Law, effective on September 18, 2008, employers must establish a comprehensive management system to protect the rights of theiremployees, including a system governing occupational health and safety to provide employees with occupational training to prevent occupational injury,and employers are required to truthfully inform prospective employees of the job description, working conditions, location, occupational hazards and statusof safe production as well as remuneration and other conditions as requested by the Labor Contract Law of the PRC.Pursuant to the Law of Manufacturing Safety of the PRC effective on November 1, 2002 and amended on August 27, 2009 and August 31, 2014,manufacturers must establish a comprehensive management system to ensure manufacturing safety in accordance with applicable laws, regulations, nationalstandards, and industrial standards. Manufacturers not meeting relevant legal requirements are not permitted to commence their manufacturing activities.Pursuant to the Administrative Measures Governing the Production Quality of Pharmaceutical Products effective on March 1, 2011,manufacturers of pharmaceutical products are required to establish production safety and labor protection measures in connection with the operation of theirmanufacturing equipment and manufacturing process.Pursuant to applicable PRC laws, rules and regulations, including the Social Insurance Law which became effective on July 1, 2011 and amendedon December 29, 2018, the Interim Regulations on the Collection and Payment of Social Security Funds which became effective on January 22, 1999, InterimMeasures concerning the Maternity Insurance of Employees which become effective on December 14, 1994, and the Regulations on Work-related InjuryInsurance which became effective on January 1, 2004 and was subsequently amended on December 20, 2010, employers are required to contribute, on behalfof their employees, to a number of social security funds, including funds for basic pension insurance, unemployment insurance, basic medical insurance,work-related injury insurance and maternity insurance. If an employer fails to make social insurance contributions timely and in full, the social insurancecollecting authority will order the employer to make up outstanding contributions within the prescribed time period and impose a late payment fee at the rateof 0.05% per day from the date on which the contribution becomes due. If such employer fails to make the overdue contributions within such time limit, therelevant administrative department may impose a fine equivalent to one to three times the overdue amount.Regulations Relating to Foreign Exchange Registration of Offshore Investment by PRC ResidentsIn July 2014, SAFE issued the SAFE Circular 37, and its implementation guidelines, which abolished and superseded the SAFE Circular 75.Pursuant to SAFE Circular 37 and its implementation guidelines, PRC residents (including PRC institutions and individuals) must register with localbranches of SAFE in connection with their direct or indirect offshore investment in an overseas special purpose vehicle, or SPV, directly established orindirectly controlled by PRC residents for the purposes of offshore investment and financing with their legally owned assets or interests in domesticenterprises, or their legally owned offshore assets or interests. Such PRC residents are also required to amend their registrations with SAFE when there is achange to the basic information of the SPV, such as changes of a PRC resident individual shareholder, the name or operating period of the SPV, or when thereis a significant change to the SPV, such as changes of the PRC individual resident’s increase or decrease of its capital contribution in the SPV, or any sharetransfer or exchange, merger, division of the SPV. Failure to comply with the registration procedures set forth in the Circular 37 may result in restrictionsbeing imposed on the foreign exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshoreparent or affiliate, the capital inflow from the offshore entities and settlement of foreign exchange capital, and may also subject relevant onshore company orPRC residents to penalties under PRC foreign exchange administration regulations.114 Regulations Relating to Employee Stock Incentive PlanIn February 2012, the SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic IndividualsParticipating in Stock Incentive Plans of Overseas Publicly Listed Companies, or the Stock Option Rules, which replaced the Application Procedures ofForeign Exchange Administration for Domestic Individuals Participating in Employee Stock Ownership Plans or Stock Option Plans of Overseas PubliclyListed Companies issued by SAFE on March 28, 2007. In accordance with the Stock Option Rules and relevant rules and regulations, PRC citizens or non-PRC citizens residing in China for a continuous period of not less than one year, who participate in any stock incentive plan of an overseas publicly listedcompany, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be a PRC subsidiary of suchoverseas listed company, and complete certain procedures. We and our employees who are PRC citizens or who reside in China for a continuous period of notless than one year and who participate in our stock incentive plan will be subject to such regulation. In addition, the SAT has issued circulars concerningemployee share options or restricted shares. Under these circulars, employees working in the PRC who exercise share options, or whose restricted shares vest,will be subject to PRC individual income tax, or the IIT. The PRC subsidiaries of an overseas listed company have obligations to file documents related toemployee share options or restricted shares with relevant tax authorities and to withhold IIT of those employees related to their share options or restrictedshares. If the employees fail to pay, or the PRC subsidiaries fail to withhold, their IIT according to relevant laws, rules and regulations, the PRC subsidiariesmay face sanctions imposed by the tax authorities or other PRC government authorities.Regulations Relating to Dividend DistributionThe principal regulations governing distribution of dividends paid by wholly foreign-owned enterprises include: •Company Law of the PRC (1993), as amended in 1999, 2004, 2005 and 2013; •Foreign Investment Enterprise Law of the PRC (1986), as amended in 2000 and 2016; and •Administrative Rules under the Foreign Investment Enterprise Law (1990), as amended in 2001 and 2014.Under these laws and regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any,determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise in China is required to set aside atleast 10.0% of its after-tax profit based on PRC accounting standards each year to its general reserves until the accumulative amount of such reserves reach50.0% of its registered capital. These reserves are not distributable as cash dividends. The foreign-invested enterprise has the discretion to allocate a portionof its after-tax profits to staff welfare and bonus funds. A PRC company is not permitted to distribute any profits until any losses from prior fiscal years havebeen offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.Regulations Relating to Foreign ExchangeThe principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, most recentlyamended in August 2008. Under the Foreign Exchange Administration Regulations, payments of current account items, such as profit distributions and tradeand service-related foreign exchange transactions can be made in foreign currencies without prior approval from SAFE by complying with certain proceduralrequirements. However, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currencyand remitted out of China to pay capital expenses such as the repayment of foreign currency-denominated loans.In August 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Paymentand Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular No. 142, regulating the conversion by a foreign-investedenterprise of foreign currency-registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular No. 142 provides that theRMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scopeapproved by the applicable government authority and may not be used for equity investments within China. SAFE also strengthened its oversight of the flowand use of the RMB capital converted from foreign currency registered capital of foreign-invested enterprises. The use of such RMB capital may not bechanged without SAFE’s approval, and such RMB capital may not in any case be used to repay RMB loans if the proceeds of such loans have not115 been used. In March 2015, SAFE issued SAFE Circular No. 19, which took effective and replaced SAFE Circular No. 142 on June 1, 2015. Although SAFECircular No. 19 allows for the use of RMB converted from the foreign currency-denominated capital for equity investments in China, the restrictions continueto apply as to foreign-invested enterprises’ use of the converted RMB for purposes beyond the business scope, for entrusted loans or for inter-company RMBloans. SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange SettlementManagement Policy of Capital Account, or Circular 16, effective on June 9, 2016, which reiterates some of the rules set forth in Circular 19, but changes theprohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMBentrusted loans to a prohibition against using such capital to issue loans to nonassociated enterprises. Violations of SAFE Circular 19 or Circular 16 couldresult in administrative penalties.In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on ForeignDirect Investment which substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various specialpurpose foreign exchange accounts (e.g., pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts), the reinvestmentof lawful incomes derived by foreign investors in China (e.g. profit, proceeds of equity transfer, capital reduction, liquidation and early repatriation ofinvestment), and purchase and remittance of foreign exchange as a result of capital reduction, liquidation, early repatriation or share transfer in a foreign-invested enterprise no longer require SAFE approval, and multiple capital accounts for the same entity may be opened in different provinces, which was notpossible before. In addition, SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over DomesticDirect Investment by Foreign Investors and the Supporting Documents in May 2013, which specifies that the administration by SAFE or its local branchesover direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relatingto the direct investment in China based on the registration information provided by SAFE and its branches.In February 2015, SAFE promulgated the Circular on Further Simplifying and Improving the Policies Concerning Foreign Exchange Control onDirect Investment, or SAFE Circular No. 13, which took effect on June 1, 2015. SAFE Circular No. 13 delegates the authority to enforce the foreign exchangeregistration in connection with the inbound and outbound direct investment under relevant SAFE rules to certain banks and therefore further simplifies theforeign exchange registration procedures for inbound and outbound direct investment.Other PRC National- and Provincial-Level Laws and RegulationsWe are subject to changing regulations under many other laws and regulations administered by governmental authorities at the national,provincial and municipal levels, some of which are or may become applicable to our business. For example, regulations control the confidentiality ofpatients’ medical information and the circumstances under which patient medical information may be released for inclusion in our databases, or released byus to third parties. These laws and regulations governing both the disclosure and the use of confidential patient medical information may become morerestrictive in the future.We also comply with numerous additional national and provincial laws relating to matters such as safe working conditions, manufacturingpractices, environmental protection and fire hazard control in all material aspects. We believe that we are currently in compliance with these laws andregulations; however, we may be required to incur significant costs to comply with these laws and regulations in the future. Unanticipated changes inexisting regulatory requirements or adoption of new requirements could therefore have a material adverse effect on our business, results of operations andfinancial condition.116 C.Organizational StructureThe following diagram illustrates our corporate structure, including our principal subsidiaries, as of the date of this Annual Report on Form 20-F: D.Property, Plant and EquipmentWe are headquartered in Shanghai where we have our main administrative and laboratory offices, which is 3,632 square meters in size. The leasefor this facility expires in 2020. We also have a 98 square meter office in Beijing, the lease for which expires in 2020. In early 2017, we built a small moleculedrug product facility in Suzhou, China capable of supporting clinical and commercial production and in 2018, we built a large molecule facility in Suzhou,China using GE Healthcare FlexFactory platform technology capable of supporting clinical production of our drug candidates. The cost to complete thesmall molecule facility was approximately $6.7 million and was paid with cash on hand. The construction of the large molecule facility was completed in2018, which cost approximately $12.9 million and was financed with cash. We believe our current facilities are sufficient to meet our near-term needs.ITEM 4A. UNRESOLVED STAFF COMMENTSNone.ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTSYou should read the following discussion and analysis of our financial condition and results of operations together with “Item 3.A. SelectedFinancial Data” and our consolidated financial statements appearing elsewhere in this Annual Report on Form F-20. This report contains forward-lookingstatements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act,including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,”“anticipate,” “intend,” “believe,” or similar language. All forward-looking statements included in this annual report are based on information available tous on the date hereof, and we assume no obligation to update any such forward-looking statements. In evaluating our business, you should carefullyconsider the information provided under “Item 3.D. Risk Factors.” Actual results could differ materially from those projected in the forward-lookingstatements. The terms “Company”, “Zai Lab”, “we”, “our” or “us” as used herein refer to Zai Lab Limited and its consolidated subsidiaries unlessotherwise stated or indicated by context.117 A.Operating Results.OverviewWe are an innovative, research-based, commercial-stage biopharmaceutical company based in China and the United States focusing ondiscovering or licensing, developing and commercializing proprietary therapeutics that address areas of large unmet medical need in the China market,including in the fields of oncology, autoimmune and infectious diseases therapies. Our mission is to transform patients’ lives in China and eventuallyleverage our capabilities to impact human health worldwide.Since our founding in 2014, we have constructed a broad and validated innovative pipeline currently consisting of eight clinical-stage drugcandidates with potentially differentiated profiles, in addition to other assets, through partnerships with global biopharmaceutical companies. Our clinical-stage portfolio includes seven late-stage assets targeting large, fast growing segments of China’s pharmaceutical market. Across our broader portfolio, wecurrently have over 20 ongoing or planned clinical trials. We believe that our leadership team’s extensive global drug development expertise, combined withour demonstrated understanding of the pharmaceutical industry, clinical resources and regulatory system in China, has provided us, and will continue toprovide us, with opportunities to bring innovative products to market in China efficiently.Our consolidated net loss attributable to ordinary shareholders for the year ended December 31, 2016, 2017 and 2018 was $37.5 million, $50.4million and $139.1 million, respectively.Basis of PresentationOur consolidated statement of operations data for the years ended December 31, 2016, 2017 and 2018 and our consolidated statement of financialposition data as of December 31, 2016, 2017 and 2018 have been derived from our audited consolidated financial statements included elsewhere in thisAnnual Report on Form 20-F. Our consolidated financial statements appearing elsewhere in this Annual Report on Form 20-F have been prepared inaccordance with U.S. GAAP.Factors Affecting our Results of OperationsInnovation PlatformResearch and Development ExpensesWe believe our ability to successfully develop drug candidates will be the primary factor affecting our long-term competitiveness, as well as ourfuture growth and development. Developing high quality drug candidates requires a significant investment of resources over a prolonged period of time, anda core part of our strategy is to continue making sustained investments in this area. As a result of this commitment, our pipeline of drug candidates has beensteadily advancing and expanding, with six clinical-stage drug candidates being investigated. For more information on the nature of the efforts and stepsnecessary to develop our drug candidates, see “Business” and “Regulation.”To date, we have financed our activities primarily through private placements, our initial public offering in September 2017 and a follow-onoffering in September 2018. Through December 31, 2018, we have raised approximately $164.6 million in private equity financing and approximately$298.0 million in net proceeds after deducting underwriting commissions and the offering expenses payable by us in our initial public offering and oursubsequent follow-on offering. Our operations have consumed substantial amounts of cash since inception. The net cash used in our operating activities was$32.2 million, $32.4 million and $97.5 million for the years ended December 31, 2016, 2017 and 2018, respectively. We expect our expenditures to increasesignificantly in connection with our ongoing activities, particularly as we advance the clinical development of our six clinical-stage drug candidates andcontinue research and development of our preclinical-stage drug candidates and initiate additional clinical trials of, and seek regulatory approval for, theseand other future drug candidates. These expenditures include: •expenses incurred for payments to CROs, investigators and clinical trial sites that conduct our clinical studies; •employee compensation related expenses, including salaries, benefits and equity compensation expense;118 •expenses for licensors; •the cost of acquiring, developing, and manufacturing clinical study materials; •facilities, depreciation, and other expenses, which include office leases and other overhead expenses; •costs associated with pre-clinical activities and regulatory operations; •expenses associated with the construction and maintenance of our manufacturing facilities; and •costs associated with operating as a public company.For more information on the research and development expenses incurred for the development of our drug candidates, see “Key Components ofResults of Operations—Research and Development Expenses.”Selling, General and Administrative ExpensesOur selling, general and administrative expenses consist primarily of personnel compensation and related costs, including share-basedcompensation for commercial and administrative personnel. Other selling, general and administrative expenses include product distribution and promotioncosts, professional service fees for legal, intellectual property, consulting, auditing and tax services as well as other direct and allocated expenses for rent andmaintenance of facilities, insurance and other supplies used in selling, general and administrative activities. We anticipate that our selling, general andadministrative expenses will increase in future periods to support increases in our commercial and research and development activities and as we prepare tocommercialize, develop, and manufacture our products. These increases will likely include increased headcount, increased share compensation charges,increased product distribution and promotion costs, expanded infrastructure and increased costs for insurance. We also incur increased legal, compliance,accounting and investor and public relations expenses associated with being a public company.Our Ability to Commercialize Our Drug CandidatesAll of our drug candidates are still in development in China. Eight of our drug candidates are in clinical development and various others are inpre-clinical development in China. Our ability to generate revenue from our drug candidates is dependent on their receipt of regulatory approval for andsuccessful commercialization of such products, which may never occur. Certain of our drug candidates may require additional pre-clinical and/or clinicaldevelopment, regulatory approval in multiple jurisdictions, manufacturing supply, substantial investment and significant marketing efforts before wegenerate any revenue from product sales.Our License ArrangementsOur results of operations have been, and we expect them to continue to be, affected by our licensing, collaboration and development agreements.We are required to make upfront payments upon our entry into such agreements and milestone payments upon the achievement of certain development,regulatory and commercial milestones for the relevant drug product under these agreements as well as tiered royalties based on the net sales of the licensedproducts. These expenses are recorded in research and development expense in our consolidated financial statements and totalled $17.1 million, $8.0 millionand $59.2 million for the years ended December 31, 2016, 2017 and 2018, respectively.Key Components of Results of OperationsTaxationCayman IslandsZai Lab Limited is incorporated in the Cayman Islands. The Cayman Islands currently levies no taxes on profits, income, gains or appreciationearned by individuals or corporations. In addition, our payment of dividends, if any, is not subject to withholding tax in the Cayman Islands. For moreinformation, see “Taxation—Material Cayman Islands Taxation.”119 People’s Republic of ChinaOur subsidiaries incorporated in the PRC are governed by the EIT Law and regulations. Under the EIT Law, the standard Enterprise Income Tax,or EIT, rate is 25% on taxable profits as reduced by available tax losses. Tax losses may be carried forward to offset any taxable profits for up to followingfive years. For more information, see “Taxation—Material People’s Republic of China Taxation.”Results of OperationsThe following table sets forth a summary of our consolidated results of operations for the periods indicated. This information should be readtogether with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 20-F. Our operating results in anyperiod are not necessarily indicative of the results that may be expected for any future period. Year ended December 31, (in thousands, except share and per share data) 2018 2017 2016 Comprehensive Loss Data: Revenue 129 — — Cost of sales (43) — — Gross profit 86 — — Operating expenses: Research and development $(120,278) $(39,342) $(32,149)Selling, general and administrative (21,576) (12,049) (6,380)Loss from operations (141,768) (51,391) (38,529)Interest income 3,261 527 403 Interest expenses (40) Changes in fair value of warrants — 200 (1,920)Other income 1,968 933 2,534 Other expense (1,909) (403) — Loss before income tax and share of loss from equity method investment (138,488) (50,134) (37,512)Income tax expense — — — Share of loss from equity method investment (587) (250) — Net loss attributable to ordinary shareholders $(139,075) $(50,384) $(37,512)Weighted-average shares used in calculating net loss per ordinary share, basic and diluted 52,609,810 21,752,757 9,439,028 Net loss per share, basic and diluted $(2.64) $(2.32) $(3.97) Year Ended December 31, 2018 Comparted to Year Ended December 31, 2017Research and Development ExpensesThe following table sets forth the components of our research and development expenses for the years indicated. Year ended December 31, (in thousands) 2018 % 2017 % Research and development expenses: Personnel compensation and related costs $16,755 13.9 $9,370 23.8 Licensing fees 59,152 49.2 7,948 20.2 Payment to CROs/CMOs/Investigators 32,282 26.8 14,993 38.1 Other costs 12,089 10.1 7,031 17.9 Total $120,278 100.0 $39,342 100.0 120 Research and development expenses increased by $81.0 million to $120.3 million for year ended December 31, 2018 from $39.3 million for yearended December 31, 2017. The increase in research and development expenses included the following: •$7.4 million for increased personnel compensation and related costs which was primarily attributable to increased employee compensationcosts, due to hiring of more personnel during the year ended December 31, 2018 and the grants of new share options and vesting ofrestricted shares to certain employees; •$51.2 million for increased licensing fees in connection with the upfront and milestone fee paid for licensing agreement (see “Item 4.Information on the Company—Overview of Our License Agreements” for further information); •$17.3 million for increased payment to CROs/CMOs/Investigators in fiscal year 2018 as we advanced our drug candidate pipeline; and •$5.1 million for increased lab consumables and professional service expenses.The following table summarizes our research and development expenses by program for the years ended December 31, 2018 and December 31,2017, respectively: Year ended December 31, (in thousands) 2018 % 2017 % Research and development expenses: Clinical programs $89,556 74.5 $12,614 32.1 Preclinical programs 8,102 6.7 14,755 37.5 Unallocated research and development expenses 22,620 18.8 11,973 30.4 Total $120,278 100.0 $39,342 100.0 During the year ended December 31, 2018, 74.5% and 6.7% of our total research and development expenses were attributable to clinical programsand preclinical programs, respectively. During the year ended December 31, 2017, 32.1% and 37.5% of our total research and development expenses wereattributable to clinical programs and preclinical programs, respectively. ZEJULA represented approximately 13% and 43% of our external research anddevelopment expense, which includes payments to CROs, CMOs and investigators, for the year ended December 31, 2018 and 2017, respectively. ZL-2401represented approximately 12% and 45% of our external research and development expense, which includes licensing fees and payment to CROs, CMOs andinvestigators, for the year ended December 31, 2018 and 2017. FPA144, Optune and MacroGenics projects represented approximately 12%, 14% and 25% ofour external research and development expense, which includes licensing fees and payment to CROs, CMOs and investigators, for the year ended December31, 2018, respectively. No other programs represented a significant amount of research and development expense for the years ended December 31, 2018 or2017. Though we manage our external research and development expenses by program we do not allocate our internal research and development expenses byprogram because our employees and internal resources may be engaged in projects for multiple programs at any time.Selling, General and Administrative ExpensesThe following table sets forth the components of our general and administrative expenses for the years indicated. Year ended December 31, (in thousands) 2018 % 2017 % Selling, General and Administrative Expenses: Personnel compensation and related costs $13,410 62.2 $7,331 60.9 Professional service fees 3,266 15.1 2,977 24.7 Other costs 4,900 22.7 1,741 14.4 Total $21,576 100.0 $12,049 100.0 121 Selling, general and administrative expenses increased by $9.6 million to $21.6 million for year ended December 31, 2018 from $12.0 million foryear ended December 31, 2017. The increase in general and administrative expenses included the following: •$6.1 million for increased personnel compensation and related costs which was primarily attributable to increased administrative personnelcosts, due to hiring of more personnel during year ended December 31, 2018 and the grants of new share options and vesting of restrictedshares to certain employees; and •$3.2 million for increased other costs due to the increase of selling, rental, and travel expenses in fiscal year 2018. No selling expenses wereincurred during year ended December 31, 2017.Interest IncomeInterest income increased by $2.7 million for year ended December 31, 2018 due to higher cash and short-term investments balance in 2018.Interest ExpensesInterest expense was due to short-term borrowings in 2018.Share of loss from equity method investmentIn June 2017, we entered into an agreement with three third-parties to launch JING Medicine Technology (Shanghai) Ltd. (“JING”), an entitywhich will provide services for drug discovery and development, consultation and transfer of pharmaceutical technology. We account for our investmentusing the equity method of accounting because we do not control the investee but have the ability to exercise significant influence over the operating andfinancial policies of the investee. An investment loss of $586,551 and $249,652 related to this investment was recorded for the year ended December 31,2018 and 2017, respectively.Other IncomeOther income increased by $1.0 million for year ended December 31, 2018 primarily as a result of an increase in governmental subsidies. Net Loss Attributable to Ordinary ShareholdersAs a result of the foregoing, we had net loss attributable to ordinary shareholders of $139.1 million for the year ended December 31, 2018compared to net loss attributable to ordinary shareholders of $50.4 million for the year ended December 31, 2017.Year Ended December 31, 2017 Compared to Year Ended December 31, 2016Research and Development ExpensesThe following table sets forth the components of our research and development expenses for the years indicated. Year ended December 31, (in thousands) 2017 % 2016 % Research and development expenses: Personnel compensation and related costs $9,370 23.8 $6,095 19.0 Licensing fees 7,948 20.2 17,108 53.2 Payment to CROs/CMOs/Investigators 14,993 38.1 6,759 21.0 Other costs 7,031 17.9 2,187 6.8 Total $39,342 100.0 $32,149 100.0 122 Research and development expense increased by $7.2 million to $39.3 million for year ended December 31, 2017 from $13.6 million for yearended December 31, 2016. The increase in research and development expenses included the following: •$3.3 million for increased personnel compensation and related costs which was primarily attributable to increased employee compensationcosts, due to hiring of more personnel during the year ended December 31, 2017 and the grants of new share options and vesting ofrestricted shares to certain employees; and •$8.2 million for increased payment to CROs/CMOs in fiscal year 2017 as we advanced our drug candidate pipeline; and •$4.8 million for increased rental fee, lab consumables and professional service expenses.These increases were offset by a $9.1 million decrease in licensing fees as we incurred $17.1 million in licensing fees in fiscal year 2016compared to $8.0 million in licensing fees in fiscal year 2017.The following table summarizes our research and development expenses by program for the years indicated. Year ended December 31, (in thousands) 2017 % 2016 % Research and development expenses: Clinical programs $12,614 32.1 $20,129 62.6 Preclinical programs 14,755 37.5 4,839 15.1 Unallocated research and development expenses 11,973 30.4 7,181 22.3 Total $39,342 100.0 $32,149 100.0 During the year ended December 31, 2017, 32.1% and 37.5% of our total research and development expenses were attributable to clinicalprograms and preclinical programs, respectively. During the year ended December 31, 2016, 62.6% and 15.1% of our total research and developmentexpenses were attributable to clinical programs and preclinical programs, respectively. ZEJULA represented approximately 43% and 63% of our externalresearch and development expense, which includes payments to CROs, CMOs and investigators, for the year ended December 31, 2017 and 2016,respectively. ZL-2401 represented approximately 45% of our external research and development expense, which includes licensing fees and payment toCROs and CMOs, for the year ended December 31, 2017. No other programs represented a significant amount of research and development expense for theyears ended December 31, 2017 or December 31, 2016. Though we manage our external research and development expenses by program we do not allocateour internal research and development expenses by program because our employees and internal resources may be engaged in projects for multiple programsat any time.General and Administrative ExpensesThe following table sets forth the components of our general and administrative expenses for the years indicated. Year ended December 31, (in thousands) 2017 % 2016 % General and Administrative Expenses: Personnel compensation and related costs $7,331 60.9 $3,120 48.9 Professional service fee 2,977 24.7 2,691 42.2 Other costs 1,741 14.4 569 8.9 Total $12,049 100.0 $6,380 100.0 123 General and administrative expenses increased by $5.6 million to $12.0 million for year ended December 31, 2017 from $6.4 million for yearended December 31, 2016. The increase in general and administrative expenses included the following: •$4.2 million for increased personnel compensation and related costs which was primarily attributable to increased administrative personnelcompensation costs, due to hiring of more personnel during year ended December 31, 2016 and the grants of new share options and vestingof restricted shares to certain employees; and •$1.1 million for increased other costs due to the increase of rental, travel and depreciation expenses in fiscal year 2017.Interest IncomeInterest income increased by $0.1 million for year ended December 31, 2017 due to higher cash balance in 2016.Changes in Fair Value of WarrantsOn December 31, 2015, we entered into a warrant agreement with an investor to purchase up to 461,808 of our Series A2 preferred shares at$2.1651 per share. The fair value of the warrants of $2.0 million was expensed on the date of issuance and an additional $1.9 million change in fair value wasexpensed in 2016 on the re-measurement date. An additional $0.2 million income was recognized upon re-measurement in 2017. The warrants were exercisedon July 19, 2017. Upon such conversion of the underlying preferred stock, the preferred stock was classified as a component of equity and was no longersubject to re-measurement.Share of loss from equity method investmentIn June 2017, we entered into an agreement with three third-parties to launch JING Medicine Technology (Shanghai) Ltd. (“JING”), an entitywhich will provide services for drug discovery and development, consultation and transfer of pharmaceutical technology. We account for our investmentusing the equity method of accounting because we do not control the investee but have the ability to exercise significant influence over the operating andfinancial policies of the investee. An investment loss of $249,652 related to this investment was recorded for the year ended December 31, 2017.Other IncomeOther income decreased by $1.6 million for year ended December 31, 2017 primarily as a result of a decrease in governmental subsidies.Net Loss Attributable to Ordinary ShareholdersAs a result of the foregoing, we had net loss attributable to ordinary shareholders of $50.4 million for the year ended December 31, 2017compared to net loss attributable to ordinary shareholders of $37.5 million for the year ended December 31, 2016.Critical Accounting Policies and Significant Judgments and EstimatesWe prepare our financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions. Wecontinually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and various otherassumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process,actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgmentthan others in their application and require us to make significant accounting estimates.The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity ofreported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. We believe thefollowing accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements.124 Share-Based CompensationAwards Granted to EmployeesWe grant share options to eligible employees, management and directors and account for these share-based awards in accordance with ASC 718,Compensation-Stock Compensation, or ASC 718.Share-based awards are measured at the grant date fair value and recognized as an expense (i) immediately at grant date if no vesting conditionsare required or (ii) using a graded vesting method over the requisite service period, which is the vesting period. See Note 11 to the consolidated financialstatements included elsewhere in this Annual Report on Form 20-F for further details on the assumptions used to estimate the fair value of share-based awardsgranted in prior periods.All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair value of theconsideration 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 awards, previously recognizedcompensation expense relating to those awards are reversed.We determined the fair value of the stock options granted to employees. Before 2018, the binomial option pricing model was applied indetermining the estimated fair value of the options granted to employees. In 2018, the Group changed to use the Black-Scholes option valuation model sincethe Group expected the Black-Scholes option valuation model provide a better estimate of fair value. A change in the valuation technique is a change inaccounting estimate for purposes of applying ASC 250, and shall be applied prospectively to new awards.Awards Granted to Non-Employees We have accounted for equity instruments issued to non-employees in accordance with the provisions of ASC 505, Equity-Based Payments toNon-Employees. All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair value of theconsideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of theequity instrument issued is the date on which the counterparty’s performance is completed as there is no associated performance commitment. The expense isrecognized in the same manner as if we had paid cash for the services provided by the non-employees. Fair Value MeasurementsWe apply ASC Topic 820, Fair Value Measurements and Disclosures, of ASC 820, 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 fair 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 activity.ASC 820 describes three main approaches, for example, to measuring the fair value of assets and liabilities: (1) market approach, (2) incomeapproach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical orcomparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. Themeasurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount thatwould currently be required to replace an asset.125 Financial instruments of our company primarily include cash and cash equivalents, short-term investment, accounts receivable, prepayments andother current assets, short-term borrowings, accounts payable, and other payables. As of each reporting date, the carrying values of cash and cash equivalents,short-term investment, accounts receivable, prepayments and other current assets, short-term borrowings, accounts payable and other payables approximatedtheir fair values due to the short-term maturity of these instruments. The warrant liabilities were recorded at fair value as determined on the respectiveissuance dates and subsequently adjusted to the fair value at each reporting date. We determined the fair values of the warrant liabilities with the assistance ofan independent third party valuation firm, and we have measured the warrant liabilities at fair values on a recurring basis using significant unobservableinputs (Level 3) as of each reporting date.Fair Value of Our Ordinary SharesPrior to our initial public offering in September 2017, we were a private company with no quoted market prices for our ordinary shares. We havetherefore needed to make estimates of the fair value of our ordinary shares at various dates for the following purposes: •determining the fair value of our ordinary shares at the date of issuance and the dates of subsequent measurement of convertible instrumentsas one of the inputs in determining the intrinsic value of the beneficial conversion feature, if any; and •determining the fair value of our ordinary shares at the date of the grant of a share-based compensation award to our employees and non-employees as one of the inputs in determining the grant date fair value of the award.In determining the fair value of our ordinary shares as of various valuation dates, we first applied an income approach, specifically a discountedcash flow, or DCF, analysis based on our projected cash flows using management’s best estimates as of the valuation date and the market approach byreferring to transaction prices of our private equity financing transactions with independent third parties to conclude on the equity value. We then appliedthe option-pricing method to allocate the equity value between preferred shares and ordinary shares. The determination of the equity value requires complexand subjective judgments to be made regarding prospects of the industry and the products at the respective valuation dates, our projected financial andoperating results, our unique business risks and the liquidity of our shares.The income approach involves applying appropriate discount rates to estimated cash flows that are based on earnings forecasts. However, thesefair values are inherently uncertain and highly subjective. The major assumptions utilized in DCF analysis include:Financial projection. The projected cash flows include among other things, an analysis of projected revenue growth, gross margins, effective taxrates, capital expenditures, working capital requirements and depreciation and amortization. The assumptions used in deriving the fair values are consistentwith our business plan. These assumptions include no material changes in the existing political, legal and economic conditions in China; our ability to retaincompetent management and key personnel to support our ongoing operations; and no material deviation in historical industry trends and market conditionsfrom current forecasts. These assumptions are inherently uncertain.Discount Rates. The discount rates were based on the weighted average cost of capital and ranged from 16%-25% where the cost of equity wasdetermined based on a Capital Asset Pricing Model, which includes a consideration of the factors including risk-free rate, comparative industry risk, equityrisk premium, company size and non-systemic risk factors.Discount for Lack of Marketability, or DLOM. DLOM reflects the fact that our shares were privately-held shares. DLOM was quantified by variousvaluation techniques, such as the Black-Scholes option pricing model. Under this method, the cost of the put option, which could be used to hedge the pricechange before the privately held shares can be sold, was considered as a basis to determine the DLOM. This option pricing method is one of the methodscommonly used in estimating DLOM. The key assumptions of such model include risk-free rates, timing of a liquidity event, and estimated volatility of ourshares. The farther the valuation date is from an expected liquidity event, the higher the put option value and thus the higher the implied DLOM. The lowerDLOM is used for the valuation, the higher is the determined fair value of the ordinary shares.126 The equity value of our company determined at the respective valuation dates based on the income approach under the above assumptions andthe market approach referring to transaction price of our private equity financing transactions with independent third parties was allocated between thepreferred shares and ordinary shares. The option-pricing method was used to allocate equity value, taking into account the guidance prescribed by the AICPAAudit and Accounting Practice Aid, “Valuation of Privately-Held Company Equity Securities Issued as Compensation.” The method treats common stockand preferred stock as call options on the enterprise’s value, with exercise prices based on the liquidation preference of the preferred stock.The option-pricing method involves making estimates of the anticipated timing and probability of a potential liquidity event, such as a sale ofour company, an initial public offering, a redemption event (for Series C preferred shares issued in June 2017) and estimates of risk free rate and the volatilityof our equity securities. The anticipated timing and probability were based on the plans of our board of directors and management. The risk free rate isadopted based on the United States Treasury bond yield with a maturity commensurate with the expected time to liquidity, adjusted by country risk premiumbetween China and the United States. Estimating the volatility of the share price of a privately held company is complex because there is no readily availablemarket for the shares. We estimated the volatility of our shares to be 70% based on the historical volatilities of comparable publicly traded companiesengaged in similar lines of business. Had we used different estimates of volatility, the allocations between preferred and ordinary shares would have beendifferent.After our initial public offering in September 2017, the closing market price of the underlying shares on the applicable grant date is used todetermine the fair value of our ordinary shares.Income TaxesCurrent income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense items which arenot assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. We follow the liability method ofaccounting for income taxes.Under this method, deferred tax assets and liabilities are determined based on the temporary differences between the financial statements carryingamounts and tax bases of assets and liabilities by applying enacted statutory tax rates that will be in effect in the period in which the temporary differencesare expected to reverse. We record a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more likely than notthat some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in our consolidatedfinancial statements in the period of change.In accordance with the provisions of ASC 740, Income Taxes, we recognize in our financial statements the benefit of a tax position if the taxposition is “more likely than not” to prevail based on the facts and technical merits of the position. Tax positions that meet the “more likely than not”recognition threshold are measured at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. Weestimate our liability for unrecognized tax benefits which are periodically assessed and may be affected by changing interpretations of laws, rulings by taxauthorities, changes and/or developments with respect to tax audits, and expiration of the statute of limitations. The ultimate outcome for a particular taxposition may not be determined with certainty prior to the conclusion of a tax audit and, in some cases, appeal or litigation process.We consider positive and negative evidence when determining whether some portion or all of our deferred tax assets will not be realized. Thisassessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the durationof statutory carry-forward periods, our historical results of operations, and our tax planning strategies. The ultimate realization of deferred tax assets isdependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based upon the level ofour historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, we believe it is morelikely than not that we will not realize the deferred tax assets resulted from the tax loss carried forward in the future periods.The actual benefits ultimately realized may differ from our estimates. As each audit is concluded, adjustments, if any, are recorded in our financialstatements in the period in which the audit is concluded. Additionally, in future periods, changes in facts, circumstances and new information may require usto adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates arerecognized in the period in which the changes occur. As of December 31, 2017 and 2018, we did not have any significant unrecognized uncertain taxpositions. 127 B.Liquidity and Capital ResourcesSince our inception, we have incurred net losses and negative cash flows from our operations. Substantially all of our losses have resulted fromfunding our research and development programs and general and administrative costs associated with our operations. We incurred net losses of $139.1million, $50.4 million and $37.5 million for the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, we had anaccumulated deficit of $249.6 million. Our primary use of cash is to fund research and development costs. Our operating activities used $97.5 million, $32.4million and $32.2 million of cash flows during the years ended December 31, 2018, 2017 and 2016, respectively. Historically, we have financed ouroperations principally through proceeds from private placements of preferred shares and warrants of $164.6 million as well as proceeds from our initial publicoffering and subsequent follow-on offering. As of December 31, 2018, we had cash and cash equivalents and short-term investments of $263.3 million. Ourexpenditures as a company principally focused on R&D, are largely discretionary and as such our current losses and cash used in operations do not presentimmediate going concern issues. Based on our current operating plan, we expect that our existing cash, cash equivalents and short-term investments as ofDecember 31, 2018, will enable us to fund our operating expenses and capital expenditures requirements for at least the next 12 months after the date that thefinancial statements included in this report are issued. However, in order to bring to fruition our R&D objectives the company will ultimately needadditional funding sources and there can be no assurances that they will be made available.Our ability to pay dividends may depend on receiving distributions of funds from our PRC subsidiaries. Relevant PRC statutory laws andregulations permit payments of dividends by our PRC subsidiaries only out of their retained earnings, if any, as determined in accordance with PRCaccounting standards and regulations. The results of operations reflected in the consolidated financial statements prepared in accordance with U.S. GAAPdiffer from those reflected in the statutory financial statements of our PRC subsidiaries. In accordance with the relevant applicable PRC laws and regulations,a domestic enterprise is required to provide statutory reserves of at least 10% of its annual after-tax profit until such reserve has reached 50% of its respectiveregistered capital based on the enterprise’s PRC statutory accounts. A domestic enterprise is also required to provide discretionary surplus reserve, at thediscretion of the board of directors, from the profits determined in accordance with the enterprise’s PRC statutory accounts. The aforementioned reserves canonly be used for specific purposes and are not distributable as cash dividends. Our PRC subsidiaries were established as domestic enterprises and therefore aresubject to the above mentioned restrictions on distributable profits.During the years ended December 31, 2018, 2017 and 2016, no appropriation to statutory reserves was made because our PRC subsidiaries hadsubstantial losses during such periods. As a result of relevant applicable PRC laws and regulations subject to the limit discussed above that require annualappropriations of 10% of after-tax income to be set aside, prior to payment of dividends, as a general reserve fund, our PRC subsidiaries are restricted in theirability to transfer a portion of its net assets. Foreign exchange and other regulations in the PRC may further restrict our PRC subsidiaries from transferringfunds to us in the form of dividends, loans and advances. As of December 31, 2018, amounts restricted are the paid-in capital of our PRC subsidiaries, whichamounted to $91.0 million.The following table provides information regarding our cash flows for the years ended December 31, 2018, 2017 and 2016: Year ended December 31, (in thousands) 2018 2017 2016 Net cash (used in) operating activities $(97,538) $(32,367) $(32,158)Net cash (used in) investing activities (212,554) (10,434) (2,730)Net cash provided by financing activities 144,147 187,860 106,200 Effect of foreign exchange rate changes (763) 652 (524)Net (decrease) increases in cash and cash equivalents $(166,708) $145,711 $70,788 Net cash used in operating activitiesDuring the year ended December 31, 2018, our operating activities used $97.5 million of cash, which resulted principally from our net loss of$139.1 million, adjusted for non-cash charges of $14.2 million, and by cash provided by our operating assets and liabilities of $27.4 million. Our net non-cash charges during the year ended December 31, 2018 primarily consisted of $1.6 million depreciation expense, $12.2 million share-based compensationexpense and a $0.6 million share of loss from equity method investment, and offset by a $0.3 million amortization of deferred income.128 During the year ended December 31, 2017, our operating activities used $32.4 million of cash, which resulted principally from our net loss of$50.4 million, adjusted for non-cash charges of $10.5 million, and by cash provided in our operating assets and liabilities of $7.5 million. Our net non-cashcharges during the year ended December 31, 2017 primarily consisted of $0.5 million depreciation expense, $9.9 million share-based compensation expense,$0.2 million share of loss from equity method investment and $0.2 million gain from changes in fair value of warrants.During the year ended December 31, 2016, our operating activities used $32.2 million of cash, which resulted principally from our net loss of$37.5 million, adjusted for non-cash charges of $7.0 million, and by cash used in our operating assets and liabilities of $1.7 million. Our net non-cash chargesduring the year ended December 31, 2016 primarily consisted of $0.2 million depreciation expense, $4.9 million share-based compensation expense and $1.9million loss from changes in fair value of warrants.Net cash used in investing activitiesNet cash used in investing activities was $212.6 million for the year ended December 31, 2018 compared to $10.4 million for the year endedDecember 31, 2017. The increase in cash used in investing activities was due to purchases of short-term investments, construction of our large moleculefacility and other investments in 2018.Net cash used in investing activities was $10.4 million for the year ended December 31, 2017 compared to $2.7 million for the year endedDecember 31, 2016. The increase in cash used in investing activities was due to the construction of our small molecule and large molecule facilities and otherinvestments in 2017.Net cash provided by financing activitiesNet cash provided by financing activities was $144.1 million for the year ended December 31, 2018 compared to $187.9 million for the yearended December 31, 2017. The cash provided by financing activities was mainly attributable to the issuance of ADS in our subsequent follow-on offering in2018.Net cash provided by financing activities was $187.9 million for the year ended December 31, 2017 compared to $106.2 million for the yearended December 31, 2016. The increase was due to the issuance of Series C preferred shares and the issuance of ADS in our initial public offering.C.Research and Development, Patents and Licenses, etc.Full details of our research and development activities and expenditures are given in the “Business” and “Operating and Financial Review andProspects” sections of this annual report above.D.Trend Information.Other than as described elsewhere in this Annual Report on Form 20-F, we are not aware of any trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material adverse effect on our revenue, income from continuing operations, profitability, liquidity or capitalresources, or that would cause our reported financial information not necessarily to be indicative of future operation results or financial condition.E.Off-balance Sheet Arrangements.We currently do not engage in trading activities involving non-exchange traded contracts or interest rate swap transactions or foreign currencyforward contracts. In the ordinary course of our business, we do not enter into transactions involving, or otherwise form relationships with, unconsolidatedentities or financial partnerships that are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limitedpurposes.129 F.Tabular Disclosure of Contractual Obligations.The following table sets forth our contractual obligations as of December 31, 2018. Amounts we pay in future periods may vary from thosereflected in the table. Total Less than1 year 1 to 3 years 3 to 5 years More than5 years (in thousands) Operating Lease Obligations $3,341 $2,169 $1,172 $— $— Purchase Obligations 1,455 1,455 — — — Total $4,796 $3,624 $1,172 $— $— We also have obligations to make future payments to third party licensors that become due and payable on the achievement of certaindevelopment, regulatory and commercial milestones as well as tiered royalties on net sales. We have not included these commitments on our balance sheet orin the table above because the commitments are cancellable if the milestones are not complete and achievement and timing of these obligations are not fixedor determinable.Recently Issued Accounting Standards In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize leases on-balance sheet and disclosekey information about leasing arrangements. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset andlease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classificationaffecting the pattern and classification of expense recognition in the income statement. The standard is effective on January 1, 2019, with early adoptionpermitted. We adopted the new standard on January 1, 2019 and use the effective date as the date of initial application. In July 2018, the FASB issued anupdate that provided an additional transition option that allows companies to continue applying the guidance under the lease standard in effect at that timein the comparative periods presented in the consolidated financial statements. Companies that elect this option would record a cumulative-effect adjustmentto the opening balance of retained earnings on the date of adoption. We elected this optional transition method. As of December 31, 2018, we have $3.3million of future minimum operating lease commitments that are not currently recognized on its consolidated balance sheets. Therefore, we would expectchanges to its consolidated balance sheets for the recognition of these and any additional leases entered into in the future upon adoption.In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-BasedPayment Accounting, which intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. The ASUexpands the scope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees willbe substantially aligned. The ASU supersedes Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees. The amendments in this ASU areeffective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption ispermitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. As of December 31, 2018, there was $93,822of total unrecognized compensation expense related to unvested non-employee options or RSU. We do not expect the requirements of ASU 2018-07 willhave a material impact on the consolidated financial statements.In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): The amendments in ASU 2018-13 eliminate therequirements to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, valuation processes for Level 3 fairvalue measurements, and policy for timing of transfers between levels. ASU 2018-13 also provides clarification in the measurement uncertainty disclosure byexplaining that the disclosure is to communicate information about the uncertainty in measurement as of the reporting date. In addition, ASU 2018-13 addedthe following requirements: changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair valuemeasurements held at the end of the reporting period; and range and weighted average of significant unobservable inputs used in Level 3 fair valuemeasurements. Finally, ASU 2018-13 updated language to further encourage entities to apply materiality when considering de minimis for disclosurerequirements. The guidance will be applied retrospectively for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years,with the exception of amendments to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used forLevel 3 fair value measurements, and the narrative description of measurement uncertainty which will be applied prospectively. Early adoption is permitted.We do not expect the requirements of ASU 2018-13 will have a material impact on the consolidated financial statements.130 In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 andTopic 606. This update clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 whenthe counterparty is a customer and precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue fromcontracts 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. This guidance should be applied retrospectively to thedate of initial application of Topic 606. We are currently evaluating the impact on its financial statements of adopting this guidance.JOBS Act Exemptions and Foreign Private Issuer StatusWe qualify as an “emerging growth company” as defined in the JOBS Act. An emerging growth company may take advantage of specifiedreduced reporting and other burdens that are otherwise applicable generally to public companies. This includes an exemption from the auditor attestationrequirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act. We may take advantage of this exemptionfor up to five years or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company if we have morethan $1.07 billion in annual revenue, have more than $700.0 million in market value of our ordinary shares held by non-affiliates or issue more than$1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We will nottake advantage of the extended transition period provided under Section 7(a)(2)(B) of the Securities Act for complying with new or revised accountingstandards.We report under the Exchange Act as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerginggrowth company, as long as we qualify as a foreign private issuer under the Exchange Act we will be exempt from certain provisions of the Exchange Act thatare applicable to U.S. domestic public companies, including: •the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered underthe Exchange Act; •the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability forinsiders who profit from trades made in a short period of time; •the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10‑Q containing unaudited financial andother specified information, or current reports on Form 8‑K, upon the occurrence of specified significant events; and •Regulation FD, which regulates selective disclosures of material information by issuers. 131 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementOur Executive Officers and DirectorsBelow is a list of the names and ages of our directors and officers as of March 1, 2019, and a brief account of the business experience of each ofthem. The business address for our directors and officers is c/o Zai Lab Limited, 4560 Jinke Road, Bldg. 1, 4F, Pudong, Shanghai, China 201210. Name Age Position(s) Executive Officers Ying (Samantha) Du 54 Director, Chairman and Chief Executive Officer Tao Fu 47 Director, President & Chief Operating Officer Yongjiang Hei 56 Chief Medical Officer, Oncology Harald Reinhart 67 Chief Medical Officer, Autoimmune and Infectious Diseases Billy Cho 41 Chief Financial Officer William Liang 48 Chief Commercial Officer Ning Xu 54 Executive Vice President, Head of Clinical and Regulatory James Yan 55 Executive Vice President, Pre-clinical Development and Program &Portfolio Management Non-Management Directors Kai-Xian Chen 73 Director Nisa Leung 48 Director William Lis 54 Director Peter Wirth 68 Director; Senior Advisor John Diekman 76 Director Other Key Employees Jonathan Wang 37 Senior Vice President, Head of Business Development Bo Zhang 46 Senior Vice President, Chemistry, Manufacturing and Controls Zhengqi (Mary) Sun 52 Vice President, Regulatory Affairs Xiaopeng (Tom) Feng 46 Vice President, Finance Yunpeng Su 44 Vice President, Head of Biologics Discovery, China Scientific Advisors Lieping Chen 62 Scientific Advisor Richard A. Flavell 73 Scientific Advisor Gwen Fyfe 67 Scientific Advisor Neal Rosen 68 Scientific Advisor132 Executive OfficersYing (Samantha) Du, Ph.D. co-founded our company and has been our Director, Chairman and Chief Executive Officer since our inception. Priorto founding our company, Dr. Du spent two years as Managing Director of healthcare investments at Sequoia Capital China, where she led four investments.From 2001 to 2011, Dr. Du was founder and Chief Executive Officer of Hutchison Medi-Pharma and the co-founder and Chief Scientific Officer of HutchisonChina MediTech Limited, a Nasdaq-listed biopharmaceutical company, where she pioneered China-based global biopharmaceutical innovation by bringingfive internally-discovered innovative drug candidates into clinical trials, including two global Phase III ready drug candidates. Dr. Du began her career withPfizer in the United States in 1994, where she was involved in the development and launch of two global drugs. While at Pfizer, she was responsible forPfizer’s global metabolic licensing program on the scientific side. She received a Ph.D. in biochemistry from the University of Cincinnati. Dr. Du has alsobeen involved with and chaired several Chinese regulatory and government related committees.Tao Fu has been our Director since 2017 and has served as our company’s Chief Operating Officer since September 2018. Prior to joining ourcompany, he was executive Vice President, Chief Commercial and Business Officer of Portola Pharmaceuticals, Inc., a publicly traded biotechnologycompany specializing in cardiovascular disease, hematological disorders and cancer from June 2015 to September 2018. Prior to joining Portola in June2015, Mr. Fu was Vice President, business development, head of M&A and alliance management at BMS. Mr. Fu led all M&A, divestiture, strategictransaction and venture investment opportunities as well as alliance management for BMS. Between 2003 and 2015, Mr. Fu worked at Johnson & Johnson ina number of roles, most recently as Vice President, business development, where he was responsible for global M&A activities in the pharmaceutical sector.Prior to joining Johnson & Johnson, Mr. Fu held managerial positions with Scios Inc., a biotechnology company in California; McKinsey &Company, aglobal management consulting firm; and Becton Dickinson, a leading medical device company. Mr. Fu received a master of science in cell biology from theUniversity of Rochester, and a master of business administration in finance and marketing from Vanderbilt University. Mr. Fu did his undergraduate studiesin biology at Tsinghua University and is a Chartered Financial Analyst (CFA).Yongjiang Hei, M.D., Ph.D. has been our Chief Medical Officer, oncology since 2018. Prior to joining our company, Dr. Hei was the ChiefMedical Officer at Qilu Pharmaceuticals responsible for the overall strategy and operations of clinical development programs in all therapeutic areas. Dr. Heijoined Qilu from the San Diego-based biotechnology company Ambrx, where he served as the Chief Medical Officer responsible for the clinical strategy andoperations, focusing on antibody-drug conjugates and bispecific antibodies. Prior to Ambrx, Dr. Hei had worked at Amgen for approximately 10 years as theExecutive Medical Director in oncology global development and medical affairs. In particular, he was the Global Development Leader for numerousoncology pipeline molecules and marketed products including small molecules such as Motesanib as well as biologics such as conatumumab and Vectibix.Additionally, during his tenure at Amgen, Dr. Hei spent three years in China as the Medical Head to build the clinical medical teams and establish productdevelopment and clinical operation capabilities for Amgen China. Before Amgen, Dr. Hei served as the U.S. Medical Director for Roche, and Senior GlobalBrand Medical Director/Executive Director for Novartis Oncology where he led the development and execution of medical plans and expanded investigator-initiated clinical research. In addition, Dr. Hei supported regulatory filings and submissions at the FDA, PMDA (Japan), EMA, and the CFDA.Harald Reinhart, M.D. has been our Chief Medical Officer, autoimmune and infectious diseases since 2017. He is currently adjunct clinicalprofessor of infectious diseases at the Yale School of Medicine. Prior to joining our company, Dr. Reinhart worked at Shionogi US as Head of ClinicalDevelopment & Medical Affairs, where he directed a broad portfolio of antibiotics, diabetes, allergy and pain medications. and guided a woman’s healthproduct through Phase III, NDA and FDA approval. Between 2003 and 2011, Dr. Reinhart held senior roles at Novartis, including Vice President and GlobalProject Leader of Infectious Disease, Transplantation and Immunology. He oversaw successful filings of SNDAs and NDAs for Coartem, Famvir, Sebivo, andCubicin, managed clinical development groups in the U.S. and E.U., and supervised the transitioning of projects from research into clinical development.From 1991 until 2003 he worked at Bayer in anti-infectives and diabetes. He was International Clinical Project Manager for ciprofloxacin and acarbose andin charge of numerous successful SNDA filings. He also oversaw the strategic development of several early phase antibacterial and antiviral projects. Dr.Reinhart received his medical degree from the University of Würzburg in Germany. He completed his medical specialty training in the United States withboard-certifications in internal medicine and infectious diseases.133 Billy Cho, M.B.A., M.A. joined our company as our Chief Financial Officer in March 2018. Prior to joining our company, Mr. Cho served asManaging Director and Head of Asia Healthcare Investment Banking at Citigroup. Based in Hong Kong since 2011, Mr. Cho was responsible for healthcareclient coverage at Citigroup across the Asia Pacific region and led many biopharma transactions in China, including Zai Lab’s U.S. initial public offering.Prior to this, he was based in New York in healthcare M&A investment banking and also spent time in corporate development for a pharmaceutical servicescompany. Mr. Cho started his career at Ernst & Young performing financial audits of U.S.-based healthcare companies. Mr. Cho earned his M.B.A. from theWharton School of the University of Pennsylvania and M.A. in Accounting from University of Virginia.William Liang, M.D. joined our company as our Chief Commercial Officer in June 2018. Prior to joining our company, Mr. Liang served as VicePresident at AstraZeneca heading up the Oncology Business Unit in China. Under his leadership, AstraZeneca built a top performing oncology franchise inChina by significantly outgrowing the market with many successful product launches, including setting a new benchmark for the successful market launch ofTagrisso. During his tenure, Mr. Liang expanded his team from approximately 500 to 2,000 professionals and introduced a patient-centric business model toestablish AstraZeneca’s oncology leadership position in China. Prior to AstraZeneca, he was Vice President of Oncology at Bristol-Myers Squibb in China,where he rebuilt the oncology sales team to achieve substantial sales growth. Previously, he spent over 13 years in senior commercial roles at Roche, wherehe began his career and ultimately achieved the position of China Business Unit Director of Oncology. Mr. Liang received his Medical Degree in ClinicalMedicine from Fudan University and his Executive MBA degree from the China Europe International Business School.Ning Xu, M.D. has been our executive Vice President, head of clinical operations and regulatory affairs since 2014. Prior to joining our company,he served as Vice President, head of clinical development service at Covance China. Before joining Covance, Dr. Xu served as a senior medical andregulatory affairs executive at Johnson & Johnson and GlaxoSmithKline. Dr. Xu received a medical degree from Peking Union Medical College and a masterof business administration from the University of Illinois at Chicago. Dr. Xu also completed a postdoctoral fellowship at the Medical School, University ofIllinois at Chicago. Between 2011 and 2015, he was the chairman of the Advisory Council of DIA China and a Director of DIA Global.James Yan, Ph.D. has been our executive Vice President, pre-clinical development and program & portfolio management since 2015. Prior tojoining our company, Dr. Yan was the head of the Covance early development Shanghai site, where he was responsible for all aspects of the business.Between 2009 and 2011, Dr. Yan served as the head of drug safety evaluation and program management of Hutchison Medi-Pharma. Prior to HutchisonMedi-Pharma, Dr. Yan had significant experience at Pfizer in the United States. Over the course of his career, Dr. Yan was been involved in many IND andNDA filings for multiple drug candidates and gained substantial experience working with regulatory agencies in several countries. Dr. Yan received a Ph.D.from Peking Union Medical University and completed post-doctoral training at the University of Chicago’s Ben-May Institute for Cancer Research. He is adiplomat of the American Board of Toxicology, a council member of the China Society of Toxicology and a member of the Drug Toxicity and Drug SafetyEvaluation Committee.Non-Management Directors Kai-Xian Chen, Ph.D. joined our company as Director in August 2018. From 2007 to 2017, he served as a member of the National Committee ofthe Chinese People’s Political Consultative Conference. From 2005 to 2014, Professor Chen served as President of Shanghai University of TraditionalChinese Medicine. From 2011 to 2018, Professor Chen served as President of the Shanghai Science and Technology Association. Prior to that, from 1993 to2004, Professor Chen served as Deputy Director and later, Director of Shanghai Institute of Materia Medica, or SIMM, Chinese Academy of Sciences.Professor Chen has as also served as Principal Scientist for two National Basic Research Programs by the Ministry of Science and Technology, or MOST.Since 2001, professor Chen has served successively as the member of the Chief Specialists Board and the deputy Chief Technical Officer of the major scienceand technology projects "innovative drugs and modernization of traditional Chinese medicine" and " Innovative Drug Research & Development ", where heparticipated in the organization and promotion of new drug research and development for the PRC’s 10th -13th Five Year Plans. In 1999, Professor Chen waselected as a member of the Chinese Academy of Sciences. Prior to that, Professor Chen conducted postdoctoral research at Institut de Biologie Physico-Chimique in Paris. Professor Chen started his academic career at SIMM as an Associate Professor, where he later reached the level of Full Professor. ProfessorChen received his Master and Ph.D. Degree at the Chinese Academy of Science, and his Bachelor of Science from Fudan University.134 Nisa Leung has been our Director since 2014. Ms. Leung is a Managing Partner at Qiming Venture Partners, where she leads its health careinvestments. In addition to serving on our board of directors, Ms. Leung is also a member of the board of directors of CanSino Biotechnology, a vaccinedeveloper; dMed, a Shanghai-based CRO consulting startup; Gan & Lee Pharmaceuticals, a developer of insulin analog; Nurotron Biotechnology, adeveloper of neurostimulation systems; and Venus Medtech, a developer of interventional artificial cardiac valve systems. Ms. Leung received a Master ofBusiness Administration from the Stanford Graduate School of Business.William Lis has been our independent Director since October 2018. He has 28 years of biopharmaceutical experience. He served as ChiefExecutive Officer and a Director of Portola Pharmaceuticals, Inc. from 2010 until 2018 after serving as Chief Operating Officer and Chief Business Officerfrom 2008 until 2009. Under his leadership, Portola successfully grew from a discovery stage company to a fully integrated R&D and commercialorganization, and independently advanced: Andexxa and Bevyxxa from discovery and early stage development through commercial launch; cerdulatinib, anovel immunology and oncology compound, from discovery through Phase III. He led corporate partnerships and private and public financings including aninitial public offering in 2013. The company’s valuation grew from $250 million to $2.7 billion during his tenure. Prior to Portola, Mr. Lis held executiveand management positions at Scios, Inc. (a Johnson & Johnson company) from 2003 to 2008 where he last served as Vice President of Commercial Operationsand Business Development, having led efforts for the in-licensing, and then the strategic development and pre-commercial launch for Xarelto; and served onthe Janssen West Coast Research and Development Committee. He also held positions of increasing responsibility at Millennium Pharmaceuticals, Inc.(previously COR Therapeutics, Inc.) from 1998 to 2003 in sales and marketing, medical affairs and business development for INTEGRILIN and early stagecompounds. Earlier in his career, he was involved in the U.S. commercial launch of several products with multiple pharmaceutical companies, includingLovenox and Rilutek while at Rhone-Poulenc Rorer. Mr. Lis served as a member of the Bio Board of Directors, Emerging Companies Section in 2015 and2016 and served as an Independent Director of Eidos Therapeutics, Inc. since December, 2018. Mr. Lis holds a B.S. from the University of Maryland.Peter Wirth has been our Director since 2017 and has been our senior advisor since 2015. He is chairman of FORMA Therapeutics Holdings LLC,a small molecule drug discovery company; executive chairman of ZappRx, a digital health care company; chair of the board of directors at SyrosPharmaceuticals, a Nasdaq-listed biopharmaceutical company; and a venture partner at Quan Capital Management, LLC, a global venture capital firm. From2011 to 2014, Mr. Wirth served as President and Director of Lysosomal Therapeutics, Inc., a biopharmaceutical company focused on small molecule research.From 1996 to 2011, Mr. Wirth served as a senior executive at Genzyme, which is now part of Sanofi, and most recently as its Executive Vice President oflegal and corporate development, Chief Risk Officer and corporate secretary. During the last five years, Mr. Wirth also served as a director of SynagevaBioPharma Corp., a biopharmaceutical company which is now owned by Nasdaq-listed Alexion Pharmaceuticals. Mr. Wirth received a law degree fromHarvard Law School.John D. Diekman, Ph.D., has been our independent Director since 2017. Dr. Diekman is founding partner of 5AM Ventures, where he has servedsince 2002. He is chairman of the board of directors of IDEAYA Biosciences, Inc., an oncology-focused biotechnology company; director of WildcatDiscovery Technologies, Inc., a technology company that discovers materials for energy storage applications; charter trustee of Princeton University;chairman of the board of directors of The Scripps Research Institute; and a member of the advisory board of the Schaeffer Center for Health Policy andEconomics at the University of Southern California. During the last five years, Dr. Diekman also served as director of Calibrium LLC, a biopharmaceuticalresearch company focused on diabetes and other metabolic diseases; Cellular Research, Inc., a single-cell genomics startup; and PhaseRx Inc., abiopharmaceutical company developing mRNA treatments for life-threatening inherited liver diseases in children. Dr. Diekman holds an A.B. in OrganicChemistry from Princeton University and a Ph.D. in Chemistry from Stanford University.Other Key Employees and AdvisorsJonathan Wang has been our senior Vice President, head of business development since 2014. Prior to joining our company, Mr. Wang was aninvestment professional at OrbiMed, where he was responsible for China healthcare investment and portfolio management. From 2005 to 2011, Mr. Wangworked as a consultant at the Boston Consulting Group in China, where he specialized in pharmaceutical and healthcare engagements, assistingmultinational and local companies with their China strategy. Previously, Mr. Wang also gained financial transactional experience at Goldman SachsInvestment Banking. Mr. Wang received a master of business administration in healthcare management from Wharton Business School.135 Bo Zhang, Ph.D. has been our Senior Vice President, chemistry, manufacturing and controls since 2014. Prior to joining our company, Dr. Zhangwas a director of the nature product business unit at GlaxoSmithKline, where he was responsible for chemistry, manufacturing and controls development.From 2010 to 2013, Dr. Zhang served as Senior Director of Hutchison Medi-Pharma, where he was responsible for chemistry, manufacturing and controlsdevelopment. Before returning to China, Dr. Zhang had significant experience at Pfizer in the United States. Dr. Zhang received a Ph.D. in analyticalchemistry from Iowa State University and a masters degree in chemical fibers from Sichuan University.Mary Sun has been our Vice President of Regulatory since October 2018. Prior to joining our company, she had been working at Pfizer for nearly20 years as regulatory Project & Effectiveness Director, leading team to provide supports for more than 30 in-line products maintenance, and more than 10new products registration in China. Ms. Sun also had significant experience in many therapeutic areas, especially oncology and anti-inflammation areas.Under her leadership, the team successfully received over ten NDA approvals in China such as Palbociclib, Crizotinib, Sunitinib, Axitinib, Tofacitinib andLyrica. Before joining Pfizer, Mary served as regulatory affairs head at Ethypharm, where she effectively established regulatory affairs team as the firstregulatory colleague. She has been actively involved in several CDE working groups. Ms. Sun got her bachelor degree of Biology from Shanghai NormalUniversity and completed Peking University MBA course.Xiaopeng (Tom) Feng has been our Vice President, finance since 2017. Prior to joining our company, Mr. Feng was the Financial Director ofAscletis Bioscience Limited, where he was responsible for financial reporting and management. From 2012 to 2015, Mr. Feng served as financial controller ofGMT Shipping Nigeria. From 2002 to 2011, Mr. Feng served as Financial Director in various subsidiaries of Hutchison China MediTech Limited. Mr. Fengreceived a bachelor of economics from Fudan University. He is a member of CICPA and a fellow member of the FCCA.Yunpeng Su, M.D. has been our Vice President, Head of Biologics Discovery China since August 2018. He has also been a Visiting Professor inInstitute of Health, the Chinese Academy of Sciences since March 2016. Prior to joining our company, Dr. Su built novel antibody drug discovery platformsand led the research and development team to develop novel antibodies, bispecific antibodies and nanobodies at Simcere Pharmaceutical Group from 2011to 2014 and NovoMab Biopharmaceuticals Inc. from 2011 to 2014. Prior to that, Dr. Su was Assistant Professor & Associate Director, Cancer ResearchInstitute, Scott & White Hospital at Texas A&M University, College of Medicine, U.S. His research focused on a variety of anti-cancer drug discoveryincluding antibodies, recombinant proteins and small molecules. Dr. Su received his M.Sc. in Protein Engineering and Molecular Biology from PekingUniversity and Ph.D. in Biochemistry and Immunology from University of Oxford, UK.Lieping Chen, M.D. Ph.D., has served on our Scientific Advisory Board since 2019. Dr. Chen is the United Technologies Corporation Professor inCancer Research, Co-Director of the Cancer Immunology Program at the Yale Cancer Center and a Professor of immunobiology, dermatology and medicine(Medical Oncology) at the Yale University School of Medicine. Dr. Chen studies cell membrane proteins which control lymphocyte functions and translateshis laboratory findings for the treatment of human diseases including cancer. Dr. Chen has published more than 350 research articles, review and bookchapters. He has received several awards and professional recognitions including William B. Coley Award (2014), Warren Alpert Foundation Prize (2017)and Giants of Cancer Care (2018).Richard A. Flavell, Ph.D. FRS, has served on our Scientific Advisory Board since 2017. Since 2002, Dr. Flavell has been the Sterling Professor ofImmunobiology at Yale University School of Medicine. Prior to joining the Yale faculty in 1988, Dr. Flavell was the President and Chief Scientific Officer ofBiogen Research Corporation. Dr. Flavell received a Ph.D. in biochemistry from the University of Hull, England, and performed postdoctoral work inAmsterdam and Zurich. He is an Investigator of the Howard Hughes Medical Institute, a fellow of the Royal Society, a member of the National Academy ofSciences, and a member of the Institute of Medicine of the National Academies. He has published over 800 papers and has received many awards, includingthe Invitrogen Meritorious Career Award from the American Association of Immunologists.Gwen Fyfe, M.D. has served on our Scientific Advisory Board since 2016. Since 2009, Dr. Fyfe has been a consultant for venture capital firms andfor a variety of biotechnology companies. From 1997 to 2009, Dr. Fyfe held various positions with Genentech Inc. (now a member of the Roche Group),including Vice President, Oncology Development and Vice President, Avastin Franchise Team, as well as the honorary title of Senior Staff Scientist. Dr. Fyfeplayed an important role in the development of Genentech’s approved oncology agents including Rituxan, Herceptin, Avastin and Tarceva. From 1990 to1997, Dr. Fyfe was Medical Director at Chiron Therapeutics. Dr. Fyfe currently serves as a director of Array Biopharma, Inc., Cascadian Therapeutics andMolecular Partners AG and previously served as a director of Infinity Pharmaceuticals, Inc. Dr. Fyfe received a medical degree from Washington Universityand is a board-certified pediatric oncologist. She has been an invited member of Institute of Medicine panels, National Cancer Institute working groups andgrant committees and American Society of Clinical Oncologists oversight committees.136 Neal Rosen, M.D., Ph.D. has served on our Scientific Advisory Board since 2016. Dr. Rosen is a Member of the Department of Medicine and aMember of the Molecular Pharmacology and Chemistry Program at Memorial Sloan Kettering Cancer Center, where he serves as Head of DevelopmentalTherapeutics. He is also a Professor of Pharmacology, Cell Biology and Medicine at Cornell University Medical School. He has played an important role inthe development of tyrosine kinase-mediated signaling inhibitors and has pioneered the concept that cancer cells are dependent on cellular machinery forprotein folding. Dr. Rosen received a medical degree and a Ph.D. in Molecular Biology from the Albert Einstein College of Medicine. He completed aresidency in Internal Medicine at the Brigham and Women’s Hospital and post-doctoral training and a fellowship in Medical Oncology at the NationalCancer Institute, where he served on the senior staff prior to joining the faculty of Memorial Sloan Kettering Cancer Center. He was the recipient of theNIH/NCI Outstanding Investigator Award in 2016.B.CompensationEmployment Arrangements with Our Executive OfficersWe have entered into employment agreements with each of our executive officers and our directors (other than our non-employee directors)(together, the “executive officers”). Dr. Du is employed by Zai Lab Limited, pursuant to an amended and restated employment agreement that becameeffective December 1, 2018. Dr. Du also is a party to an employment agreement with Zai Lab (Shanghai) Co., Ltd. In addition, Dr. Du has entered into anagreement with our U.S. subsidiary, Zai Lab (US) LLC, pursuant to which a portion of her base salary will be paid by Zai Lab (US) LLC based on the level ofservices that she provides this entity. Dr. Fu and Dr. Reinhart are each employed by Zai Lab (US) LLC pursuant to amended and restated employmentagreements that became effective on January 25, 2019 and December 1, 2018, respectively. Dr. Hei is employed by Zai Lab (US) LLC and also party to anemployment agreement with Zai Lab (Shanghai) Co., Ltd. Mr. Cho is employed by Zai Lab (Hong Kong) Limited. Mr. Liang, Dr. Xu and Dr. Yan areemployed by Zai Lab (Shanghai) Co. Ltd.Employment Agreements with Executive Officers at Zai Lab (Hong Kong) Limited, Zai Lab (US) LLC and Zai Lab LimitedUnder the terms of the Zai Lab (Hong Kong) Limited, Zai Lab (US) LLC and Zai Lab Limited employment agreements with our executive officers,we may terminate an executive officer’s employment at any time, with or without “cause,” by giving such executive officer a notice of termination. In theevent of a voluntary termination other than for “good reason” or a termination by the company for cause, the executive officer will receive the unpaid portionof his or her base salary, computed pro rata to the date of termination, plus reimbursement for unpaid business expenses (“accrued compensation”). In theevent of a termination without “cause” or a resignation of the executive officer for “good reason,” the executive officer, other than Dr. Du, will receive (i)accrued compensation, (ii) a separation benefit consisting of either six or twelve months’ base pay and payment of the Company’s portion of monthlypremiums for health, dental and vision insurance coverage, to be paid in the form of salary continuation over such period following the effective date of suchofficer’s termination of employment, depending on service, (iii) a pro-rated portion of the executive officer’s target bonus (other than Mr. Cho and Dr. Hei)and (iv) any additional compensation that may be required by applicable law (the “Severance Benefits”). In the event that Dr. Du’s employment is terminatedwithout “cause” or she resigns for “good reason”, Dr. Du will receive (i) the accrued compensation, (ii) a separation benefit consisting of eighteen months’base pay and payment of the Company’s portion of monthly premiums for health, dental and vision insurance coverage, to be paid in the form of salarycontinuation over the eighteen-month period following the effective date of her termination of employment, (iii) a pro-rated portion of her target bonus, (iv)accelerated vesting of any unvested stock options, restricted stock or other equity awards granted to Dr. Du prior to such termination (the “EquityAcceleration”) and (v) any additional compensation that may be required by applicable law (the “Du Severance Benefits”). In the event the employment ofan executive officer, other than Dr. Du, is terminated without “cause” or the executive officer resigns for “good reason” within twelve months following achange in control of the Company (as defined in the executive officer’s employment agreement), the executive officer is entitled to receive (i) accruedcompensation, (ii) a separation benefit consisting of twelve months’ base pay and payment of the Company’s portion of monthly premiums for health, dentaland vision insurance coverage, to be paid in the form of salary continuation over such period following the effective date of such officer’s termination ofemployment, depending on service, (iii) a pro-rated portion of the executive officer’s target bonus, (iv) any additional compensation that may be required byapplicable law and (v) accelerated vesting of any unvested stock options, restricted stock or other equity awards granted to the executive officer prior to suchtermination. In the event Dr. Du’s employment is terminated without “cause” or she137 resigns for “good reason” within twelve months following a change in control of the Company (as defined in her employment agreement), in addition to theEquity Acceleration, Dr. Du is entitled to receive (i) the accrued compensation, (ii) a separation benefit consisting of eighteen months’ base pay and paymentof the Company’s portion of monthly premiums for health, dental and vision insurance coverage, to be paid in the form of salary continuation over theeighteen-month period following the effective date of her termination of employment and (iii) an additional lump-sum payment equal to the sum of (x) six (6)months’ base salary, (y) two times her target bonus and (z) six months of the Company’s portion of monthly premiums for health, dental, and vision insurancecoverage.For purposes of the employment agreements described above, “cause” generally means (1) the executive officer’s repeated drunkenness or use ofillegal drugs (or, in the case of Mr. Fu, the executive officer’s drunkenness or use of illegal drugs) which adversely interferes with the performance of theexecutive officer’s obligations and duties in the company, (2) the conviction of a felony, or any crime involving fraud or misrepresentation or violation ofapplicable securities laws, (3) the executive officer’s gross mismanagement of the business and affairs of the company or of its subsidiaries that directlyresults in a material loss to the company and for which the company has reasonable proof was committed by the executive officer, (4) the executive officer’smaterial violation of any terms of the employment agreement or the restrictive covenants agreement between him or her and the company, or (5) a conclusivefinding by an independent fact finder appointed by the board of directors for any willful misconduct, dishonesty or acts of moral turpitude by the executive,which is materially detrimental to the interests and well-being of the Company, including, without limitation harm to its business or reputation. For thispurpose, “good reason” means (1) any material diminution of the executive officer’s duties or responsibilities (except in connection with a termination forcause, or by reason of death or “disability”) or an assignment of duties or responsibilities that are materially inconsistent with the executive officer’s position,(2) any material breach of the employment agreement by the company which is not cured within ten (10) business days after written notice is given to thecompany, or (3) relocation of the executive officer’s original employment location (for Dr. Du, Dr. Reinhart and Mr. Fu, relocation from the place ofassignment by the company), without consent, to a location more than thirty (30) kilometers from the original employment location, other than temporaryrelocations of no longer than six (6) calendar months.In the event of termination of employment by reason of death or disability, the executive officer is entitled to receive the accrued compensation, apayment equal to one month’s base pay and payment of the Company’s portion of monthly premiums for health, dental and vision insurance coverage plusany other additional compensation required by law and, with respect to Dr. Du only, the Equity Acceleration. For purposes of the employment agreements,“disability” means the executive officer is incapacitated or disabled by accident, sickness or otherwise, so as to render him or her mentally or physicallyincapable of performing the services under the employment agreement for a period of ninety (90) or more consecutive days, or for ninety (90) days during anysix (6) month period. As a condition to receiving payments during an applicable severance period, the executive officer must execute a release of claims that issatisfactory to the Company.Each executive officer has generally agreed to assign to us or our designee all rights and titles to any inventions created while he or she isperforming services within the scope of employment with us or utilizing our facilities. Each executive officer has also agreed, during his or her employmentwith us and thereafter, not to use, disclose or transfer any confidential information of our company other than as authorized by us within the scope of his orher duties. Moreover, each of our executive officers has agreed to execute the company’s compliance agreement regarding confidentiality, trade secrets,intellectual property and competitive activities, which subjects the executive to certain restrictive covenant obligations, including an agreement by theexecutive, for the term of his or her employment and for a period of one to two years thereafter, not to (i) directly or indirectly, compete with our businesswithin any country where we conduct or, at the time of his or her employment, are actively engaged in planning to conduct, our business (for Dr. Hei and Mr.Fu, this restriction is limited to their period of employment) or (ii) solicit for any employees of our company or orders from any person, firm or companywhich was at any time during the twelve months prior to termination of such employment a customer or supplier of our company, or to modify its businessrelationship with our company in a manner adverse thereto.Employment Agreements with Executive Officers at Zai Lab (Shanghai) Co., Ltd.Executive officers working for Zai Lab (Shanghai) Co., Ltd., except for Dr. Reinhart, Mr. Fu and Mr. Cho, are party to a service agreement with ZaiLab (Shanghai) Co., Ltd. The employment agreements with Zai Lab (Shanghai) Co., Ltd. provide that we engage each executive officer on a fixed term (Dr.Du’s agreement with Zai Lab (Shanghai) Co. Ltd. does not have a fixed term). We provide labor protection and work conditions that comply with the safetyand sanitation requirements stipulated by the relevant PRC laws. Relevant executive officers (except non-PRC nationals) and the company contribute tostatutory social insurance and other benefits.138 During any probation period, we may immediately terminate an executive’s employment agreement without payment of severance or otherliability if the executive fails to meet the company’s recruiting requirements. Outside any probation period, we may terminate an executive officer’semployment with Zai Lab (Shanghai) Co., Ltd. by providing the executive with thirty (30) days’ notice or one month’s base salary in lieu of such notice anda severance benefit in accordance with local law if (i) the executive is ill or suffers any injury that is not work-related, and fails to perform the original workafter the prescribed treatment period or fails to perform other work arranged by the company, (ii) the executive is not qualified for the job, and still fails to bequalified for the job after training is given or the position is adjusted, (iii) there is a significant change to the objective circumstances on which this contractis based, resulting in the failure to perform this contract, and after the consultations by both parties, no agreement can be reached in respect of themodification of the content of this contract, (iv) the company needs to terminate employees during any reorganization to avoid bankruptcy, or because itexperiences serious difficulties in production or operation, and (v) other circumstances prescribed by PRC laws or regulation. In addition, we may terminatethe executive’s employment without notice or payment if (i) the executive seriously or continuously violates, or violates several times, the employment rulesand policies of the company, (ii) the executive commits serious dereliction in the performance of his or her duties, or practices graft, or engages in malpracticeto seek private benefit, as applicable, in either case causing severe damage to the interests of the company, (iii) the executive commits fraud or uses coercivemeasures or takes advantage of the company’s vulnerability to make it enter into this contract or to make amendments thereto against the company’s will, (iv)the executive is prosecuted for criminal liability, or (v) under other circumstances as permitted by PRC laws and regulations. Each executive officer mayvoluntarily terminate his or her contract without cause with thirty (30) days’ prior notice to us. In the event the employment of Mr. Liang is terminatedwithout “cause” or resigns for “good reason” within twelve months following a change in control of the Company (as defined in his employment agreement.Mr. Liang is entitled to receive (i) the accrued compensation, (ii) a separation benefit consisting of twelve months’ base pay and payment of the Company’sportion of monthly premiums for health, dental and vision insurance coverage, to be paid in the form of salary continuation over the twelve-month periodfollowing the effective date of his termination of employment, (iii) a pro-rated portion of Mr. Liang’s target bonus, (iv) accelerated vesting of any unvestedstock options, restricted stock or other equity awards granted to the executive officer prior to such termination and (iv) any additional compensation that maybe required by applicable law.Each executive officer has agreed to comply with our rules and policies regarding confidentiality and, during his or her employment with us andthereafter, has agreed not to use or disclose any confidential information of our company other than as authorized by us within the scope of his or her duties.Moreover, each of our executive officers has agreed that during his or her employment and for two years after his or her employment with us at Zai Lab(Shanghai) Co., Ltd., he or she will not work for another company or individual that is in competition with us directly or indirectly or provide services to anycompany or individual that is in competition with us, and will not setup or operate any business which is in competition with us directly or indirectly, or withany other third party, or through any other form. Each of our executive officers is entitled to receive monthly compensation during their 24-month non-compete period in an amount equal to 30% of their respective average monthly salaries received during the 12 months immediately preceding thetermination of their employment. Each of the executives has agreed that, during employment and within one year after the termination thereof, certain “worksfor hire,” as defined in the agreements, shall belong to the company.In addition, we have been advised by our PRC counsel, Zhong Lun Law Firm, that notwithstanding any provision to the contrary in ouremployment agreements at Zai Lab (Shanghai) Co., Ltd., we may still be required to make severance payments upon termination without cause to complywith the PRC labor laws and other relevant PRC regulations, which entitle employees to severance payments in case of early termination.Compensation of Directors and Executive OfficersIn the year ended December 31, 2018, we paid aggregate salaries, bonuses and benefits (excluding equity-based grants) of approximately $4.35million to our executive officers. Executive officers are eligible to receive an annual incentive bonus, as determined by our board of directors, based onachievement of pre-established individual, departmental and company performance goals. Other than 401(k) and social insurance benefits that we provide toour U.S. executive officers, we do not otherwise separately set aside any amounts for pensions, retirement or other benefits for our executive officers, otherthan pursuant to relevant statutory requirements, and health and life insurance. In the year ended December 31, 2018, we paid aggregate cash retainers(excluding equity-based grants and consulting fees) of approximately $216,848 to our non-employee directors pursuant to our non-employee directorcompensation policy, described below. For information regarding equity-based grants to our executive officers and directors, see “—2017 Equity IncentivePlan.”139 2017 Equity Incentive Plan The following summary describes the material terms of the Zai Lab Limited 2017 Equity Incentive Plan (the “2017 Equity Plan”), which is theonly equity plan under which the Company currently grants equity awards. This summary is not a complete description of all provisions of our 2017 EquityPlan and is qualified in its entirety by reference to our 2017 Equity Plan, which has been previously filed as an exhibit to our registration statement on FormF-1.Purposes. The purposes of our 2017 Equity Plan are to attract, retain and reward key employees and directors of, and consultants and advisors to,the Company and its subsidiaries, to incentivize them to generate shareholder value, to enable them to participate in the growth of the Company and to aligntheir interests with the interests of our shareholders.Administration. Our 2017 Equity Plan is administered by our compensation committee, which has the discretionary authority to interpret our2017 Equity Plan, determine eligibility for and grant awards, determine, modify and waive the terms and conditions of any award, determine the form ofsettlement of awards, designate whether an award will be over, or with respect to, ordinary shares or ADSs, prescribe forms, rules and procedures relating toour 2017 Equity Plan and awards and otherwise do all things necessary or desirable to carry out the purposes of our 2017 Equity Plan. Our compensationcommittee may delegate such of its duties, powers and responsibilities as it may determine to one or more of its members, members of our board of directorsand, to the extent permitted by law, officers of the Company, and may delegate to employees and other persons such ministerial tasks as it deems appropriate.As used in this summary, the term “Administrator” refers to our compensation committee and its authorized delegates, as applicable.Eligibility. Key employees, directors, consultants and advisors of the Company and its subsidiaries are eligible to participate in our 2017 EquityPlan. Eligibility for stock options intended to be incentive stock options, or ISOs, is limited to employees of the Company or certain affiliates. Eligibility forstock options, other than ISOs, and stock appreciation rights, or SARs, is limited to individuals who are providing direct services on the date of grant of theaward to the Company or certain affiliates.Authorized shares. Subject to adjustment as described below, the maximum number of shares that may be delivered in satisfaction of awardsunder our 2017 Equity Plan is 1,924,327 shares, plus an annual increase, to be added as of January 1st of each year from January 1, 2018 to January 1, 2027,equal to the lesser of (i) four percent (4%) of the number of shares outstanding as of the close of business on the immediately preceding December 31st; and(ii) the number of shares determined by our board of directors on or prior to such date for such year. For purposes of our 2017 Equity Plan, “share” means ashare of our common stock (an “ordinary share”), unless there are ADSs representing ordinary shares available, in which case “share” means the number ofADSs equal to an ordinary share. If the ratio of ADSs to ordinary shares is not 1:1, then (a) the maximum number of shares that may be delivered under our2017 Equity Plan, (b) all award adjustments made pursuant to our 2017 Equity Plan; and (c) all awards designated as awards over ordinary shares willautomatically be adjusted to reflect the ratio of the ADSs to ordinary shares, as reasonably determined by the Administrator. Up to the total number of sharesavailable for awards under the plan may be delivered in satisfaction of ISOs.Subject to applicable laws, shares delivered under our 2017 Equity Plan may be newly issued ordinary shares, previously issued ordinary sharesacquired by us or ADSs. Any shares underlying awards that are settled or that expire, become unexercisable, terminate or are forfeited or repurchased by us, ineach case without the delivery of shares, will again be available for issuance under our 2017 Equity Plan. In addition, the number of shares delivered insatisfaction of awards will be determined net of shares withheld by us in payment of the exercise price or purchase price of an award or in satisfaction of taxwithholding requirements with respect to an award.Individual limits. The maximum number of shares subject to share options that may be granted to any participant in our 2017 Equity Plan in anycalendar year is 577,298 shares and the maximum number of shares subject to SARs that may be granted to any participant in any calendar year is 288,649shares. The maximum number of shares subject to awards other than share options and SARs that may be granted to any participant in any calendar year is288,649 shares.140 Director limits. In addition to the individual limits described above, the maximum grant date fair value of awards granted under our 2017 EquityPlan to any non-employee director of the Company in respect of his or her service as a director with respect to any calendar year may not exceed $500,000,assuming maximum payout.Types of awards. Our 2017 Equity Plan provides for the grant of share options, SARs, restricted and unrestricted shares and share units,performance awards, and other awards that are convertible into or otherwise based on our shares. Dividend equivalents may also be provided in connectionwith awards under our 2017 Equity Plan.1. Stock options and SARs. The Administrator may grant share options, including ISOs, and SARs. A share option is a right entitling theholder to acquire shares upon payment of the applicable exercise price. A SAR is a right entitling the holder upon exercise to receive an amount(payable in cash or shares of equivalent value) equal to the excess of the fair market value of the shares subject to the right over the base valuefrom which appreciation is measured. The exercise price of each share option, and the base value of each SAR, granted under our 2017 EquityPlan shall be no less than 100% of the fair market value of a share on the date of grant (110% in the case of certain ISOs). Other than in connectionwith certain corporate transactions or changes to our capital structure, share options and SARs granted under our 2017 Equity Plan may not berepriced or substituted for with new share options or SARs having a lower exercise price or base value, nor may any consideration be paid uponthe cancellation of any share options or SARs that have a per share exercise or base price greater than the fair market value of a share on the dateof such cancellation, in each case, without shareholder approval. Each share option and SAR will have a maximum term of not more than tenyears from the date of grant (or five years, in the case of certain ISOs).2. Restricted and unrestricted shares and share units. The Administrator may grant awards of shares, share units, restricted shares andrestricted share units. A share unit is an unfunded and unsecured promise, denominated in shares, to deliver shares or cash measured by the valueof shares in the future, and a restricted share unit is a share unit that is subject to the satisfaction of specified performance or other vestingconditions. Restricted shares are shares that are subject to restrictions requiring that they be redelivered or offered for sale to the Company ifspecified conditions are not satisfied.3. Performance awards. The Administrator may grant performance awards, which are awards subject to performance criteria. TheAdministrator may grant performance awards that are intended to qualify as exempt performance-based compensation under Section 162(m), tothe extent applicable, and awards that are not intended to so qualify.4. Other stock-based awards. The Administrator may grant other awards that are convertible into or otherwise based on shares, subject tosuch terms and conditions as it determines.5. Substitute awards. The Administrator may grant substitute awards, which may have terms and conditions that are inconsistent with theterms and conditions of our 2017 Equity Plan.Vesting; terms of awards. The Administrator determines the terms of all awards granted under our 2017 Equity Plan, including the time or timesan award vests or becomes exercisable, the terms on which an award remains exercisable, and the effect of termination of a participant’s employment orservice on an award. The Administrator may at any time accelerate the vesting or exercisability of an award.Transferability of awards. Except as the Administrator may otherwise determine, awards may not be transferred other than by will or by the lawsof descent and distribution.Performance criteria. Our 2017 Equity Plan provides for grants of performance awards subject to “performance criteria.” Performance criteria withrespect to those awards that are intended to qualify as “performance-based compensation” for purposes of Section 162(m) are limited to objectivelydeterminable measures of performance relating to any, or any combination of, the following (measured either absolutely or comparatively (including, withoutlimitation, by reference to an index or indices or the performance of one or more companies) and determined either on a consolidated basis or, as the contextpermits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof and subject to such adjustments, if any, as theAdministrator specifies, consistent with the requirements of Section 162(m) of the Code, to the extent applicable): sales; revenues; assets; expenses; earningsbefore or after deduction for all or any portion of interest, taxes, depreciation, or amortization, whether or not on a continuing operations or an aggregate orper share basis; return on equity, investment, capital or assets; one or more operating141 ratios; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; share or ADS price; shareholder return; sales ofparticular products or services; customer acquisition or retention; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances;spin-offs, split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings; or strategic businesscriteria, consisting of one or more objectives including meeting specified market penetration or value added, product development or introduction(including, without limitation any clinical trial accomplishments, regulatory or other filings or approvals, or other product development milestones),geographic business expansion, cost targets, cost reductions or savings, customer satisfaction, operating efficiency, acquisition or retention, employeesatisfaction, information technology, corporate development (including, without limitation, licenses, innovation, research or establishment of third-partycollaborations), manufacturing or process development, legal compliance or risk reduction, patent application or issuance goals. To the extent consistentwith the requirements of the performance-based compensation exception under Section 162(m) of the Code, the Administrator may provide in the case of anyaward intended to qualify for such exception that one or more of the performance criteria applicable to such award will be adjusted in an objectivelydeterminable manner to reflect events (for example, but without limitation, acquisitions or dispositions) occurring during the performance period that affectthe applicable performance criteria. During a transition period following the completion of our initial public offering, the Administrator may grant awardsunder our 2017 Equity Plan that are exempt from Section 162(m) of the Code and its requirements under a special transition rule.Effect of certain transactions. In the event of certain covered transactions (including the consummation of a merger, consolidation, or the sale ofsubstantially all of the Company’s assets or shares, a change in ownership of the Company’s shares, or the dissolution or liquidation of the Company), theAdministrator may, with respect to outstanding awards, provide for (in each case, on such terms and subject to such conditions as it deems appropriate):1.The assumption, substitution or continuation of some or all awards (or any portion thereof) by the acquirer or surviving entity;2.The acceleration of exercisability or delivery of shares in respect of any award, in full or in part; and/or3.The cash payment in respect of some or all awards (or any portion thereof) equal to the difference between the fair market value of theshares subject to the award and its exercise or base price, if any.Except as the Administrator may otherwise determine, each award will automatically terminate immediately upon the consummation of thecovered transaction, other than awards that are substituted for or assumed.Adjustment provisions. In the event of certain corporate transactions, including an extraordinary cash dividend, share dividend, share split orcombination of shares (including a reverse share split), recapitalization or other change in our capital structure, the Administrator shall make appropriateadjustments to the maximum number of shares that may be issued under our 2017 Equity Plan, the individual award limits, the number and kind of securitiessubject to, and, if applicable, the exercise or purchase prices (or base values) of, outstanding awards, and any other provisions affected by such event.Clawback. The Administrator may provide that any outstanding award or the proceeds of any award or shares acquired thereunder will be subjectto forfeiture and disgorgement to the Company if the participant to whom the award was granted violates a non-competition, non-solicitation, confidentialityor other restrictive covenant or to the extent provided in any applicable Company policy that provides for forfeiture or disgorgement, or as otherwise requiredby law or applicable stock exchange listing standards.Amendments and termination. The Administrator may at any time amend our 2017 Equity Plan or any outstanding award and may at any timeterminate our 2017 Equity Plan as to future grants. However, except as expressly provided in our 2017 Equity Plan, the Administrator may not alter the termsof an award so as to materially and adversely affect a participant’s rights without the participant’s consent (unless the Administrator expressly reserved theright to do so at the time the award was granted). Any amendments to our 2017 Equity Plan will be conditioned on shareholder approval to the extentrequired by law or applicable stock exchange requirements. 142 Outstanding awards. The following table summarizes the outstanding share options and restricted shares held by our directors and executiveofficers, as well as by their affiliates, as of March 15, 2019. Name Ordinary shares*underlying outstandingawards, whichrepresent optionsunless otherwiseindicated Purchaseprice($/share) Exerciseprice($/share) Date ofgrant(1)Samantha Du 216,666 N/A US$ 0.60 March 5, 2015 1,739,166 N/A US$ 0.60 October 22, 2015 604,376 N/A US$ 1.20 March 9, 2016 922,184 N/A US$ 1.74 August 25, 2016 350,000 N/A US$ 20.90 March 28, 2018Harald Reinhart 66,666 N/A US$ 3.00 May 12, 2017 100,000 N/A US$ 18.00 September 20, 2017 100,000 N/A US$ 20.90 March 28, 2018 50,000 N/A US$ 17.99 November 16, 2018Billy Cho 400,000 N/A US$ 21.84 March 2, 2018 100,000 (2) N/A N/A March 2, 2018Ning Xu 211,666 N/A US$ 0.60 March 5, 2015 450,000 N/A US$ 0.60 October 22, 2015James Yan 333,333 N/A US$ 0.60 October 22, 2015 83,333 N/A US$ 1.74 August 25, 2016William Liang 375,000 N/A US$ 23.80 June 4, 2018 125,000 (2) N/A N/A June 4, 2018Yongjiang Hei 375,000 N/A US$ 22.00 August 6, 2018 125,000 (2) N/A N/A August 6, 2018Peter Wirth 12,500 (2) N/A N/A January 1, 2018 12,500 (2) N/A N/A January 10, 2019Tao Fu 25,000 (2) N/A N/A September 20, 2017 12,500 (2) N/A N/A January 1, 2018 500,000 N/A US$ 18.92 September 24, 2018 200,000 (2) N/A N/A September 24, 2018John Diekman 25,000 (2) N/A N/A September 20, 2017 12,500 (2) N/A N/A January 1, 2018 12,500 (2) N/A N/A January 10, 2019Kaixian Chen 12,500 (2) N/A N/A August 30, 2018 12,500 (2) N/A N/A January 10, 2019William Lis 12,500 (2) N/A N/A October 8, 2018 12,500 (2) N/A N/A January 10, 2019 (1)Options expire on or before the 10-year anniversary of the grant date.(2)Represents restricted shares.Other Compensation Programs2017 Cash Bonus PlanOur board of directors has adopted and our shareholders have approved the Zai Lab Limited 2017 Cash Bonus Plan (our “Cash Plan”). Annualaward opportunities for executive officers and key employees of the Company and its subsidiaries are granted under our Cash Plan. The following summarydescribes the material terms of our Cash Plan. This summary is not a complete description of all provisions of our Cash Plan and is qualified in its entirety byreference to our Cash Plan, which is filed as an exhibit to this Annual Report on Form 20-F.143 Administration. Our Cash Plan will be administered by our compensation committee and its delegates. As used in this summary, the term“Administrator” refers to our compensation committee and its authorized delegates, as applicable. The Administrator will have the discretionary authority tointerpret our Cash Plan, determine eligibility for and grant awards, determine, modify or waive the terms and conditions of any award, prescribe forms, rulesand procedures relating to our Cash Plan and awards, and otherwise do all things necessary or appropriate to carry out the purposes of our Cash Plan.Eligibility and participation. Executive officers and key employees of the Company and its subsidiaries will be eligible to participate in ourCash Plan and will be selected from time to time by the Administrator to participate in the plan.Awards. For each award granted under our Cash Plan, the Administrator will establish the performance criteria applicable to the award, theamount or amounts payable if the performance criteria are achieved and such other terms and conditions as the Administrator deems appropriate.Performance criteria. Awards under our Cash Plan will be made based on, and subject to achieving, specified criteria established by theAdministrator, including measures of performance relating to any, or any combination of, the following (measured either absolutely or comparatively(including, without limitation, by reference to an index or indices or the performance of one or more companies) and determined either on a consolidatedbasis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof and subject to suchadjustments, if any, as the Administrator specifies): sales; revenues; assets; expenses; earnings before or after deduction for all or any portion of interest,taxes, depreciation, or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital orassets; one or more operating ratios; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; share or ADS price;shareholder return; sales of particular products or services; customer acquisition or retention; acquisitions and divestitures (in whole or in part); joint venturesand strategic alliances; spin-offs, split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity) orrefinancings; or strategic business criteria, consisting of one or more objectives based on: meeting specified market penetration or value added, productdevelopment or introduction (including, without limitation any clinical trial accomplishments, regulatory or other filings or approvals, or other productdevelopment milestones), geographic business expansion, cost targets, cost reductions or savings, customer satisfaction, operating efficiency, acquisition orretention, employee satisfaction, information technology, corporate development (including, without limitation, licenses, innovation, research orestablishment of third-party collaborations), manufacturing or process development, legal compliance or risk reduction, patent application or issuance goals.Payments under an award; individual limits. A participant will be entitled to payment under an award only if all conditions to payment havebeen satisfied in accordance with our Cash Plan and the terms of the award. Following the end of a performance period, the Administrator will determinewhether and to what extent the applicable performance criteria have been satisfied and will determine the amount payable under each award. The maximumamount payable to any participant in any calendar year under awards intended to satisfy the requirements of the performance-based compensation exceptionunder Section 162(m) of the Code, to the extent applicable, is $5,000,000.Recovery of compensation. Payments in respect of an award will be subject to forfeiture and disgorgement to the Company if the participant towhom the award was granted violates a non-competition, non-solicitation, confidentiality or other restrictive covenant or to the extent provided in anyapplicable Company policy that provides for forfeiture or disgorgement, or as otherwise required by law or applicable stock exchange listing standards.Amendment and termination. The Administrator may amend or terminate our Cash Plan at any time, except that any amendment or terminationthat would materially and adversely affect a participant’s rights under an award will require the consent of the affected participant, unless the Administratorexpressly reserved the right to so amend the award at the time of grant, and any amendment will be approved by our stockholders if required by Section162(m) of the Code.144 Non-Employee Director Compensation PolicyOur board of directors has adopted a non-employee director compensation policy under which each member of our board of directors who is notan employee of the Company or one of our affiliates (each a “non-employee director”) will be eligible to receive an annual cash retainer payment of $50,000.In addition, each non-employee director who was appointed to our board of directors following the adoption of this policy and whose appointment waseffective prior to our IPO received an award of 25,000 restricted shares under our 2017 Equity Plan, which vests ratably on each of the first three anniversariesof the date of grant, subject to continued service as a member of our board of directors through such date. Further, commencing in calendar year 2018, non-employee directors became eligible to receive an annual grant of 12,500 restricted shares under our 2017 Equity Plan, which vest in full on the firstanniversary of the date of grant, subject to continued service as a member of our board of directors through such date.In addition, the non-employee director compensation policy provides for the following additional annual cash retainer payments for the membersand chairpersons of our board committees: audit committee chair, $20,000; audit committee member, $10,000; compensation committee chair, $15,000;compensation committee member, $7,500; nominating committee chair, $10,000; nominating committee member, $5,000; compliance committee chair,$10,000; and compliance committee member, $5,000.Composition of Our BoardOur board of directors consists of seven directors, of whom two qualify as independent directors under the rules and regulations of the SEC andNasdaq Stock Market. Our directors hold office until they are removed from office by special resolution at an annual general meeting of the shareholders orby a vote of the board of directors. In addition, a director will cease to be a director it the director (i) dies, becomes bankrupt or makes any arrangement orcomposition with his or her creditors, (ii) is found to be or becomes of unsound mind or (iii) resigns his office by notice in writing to the Company. Forinformation regarding the period during which our officers and directors have served in their respective positions, please see “Item 6.A. Directors and SeniorManagement.”Duties of DirectorsUnder Cayman Islands law, all of our directors owe us fiduciary duties, including a duty of loyalty, a duty to act honestly and a duty to act ingood faith and in a manner they believe to be in our best interests. Our directors also have a duty to exercise the skill they actually possess and such care anddiligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensurecompliance with our amended articles of association, as amended and restated from time to time. We have the right to seek damages if a duty owed by any ofour directors is breached.Board CommitteesOur board of directors has established an audit committee, a compensation committee, a nominating and corporate governance committee and acompliance committee.Audit CommitteeOur audit committee consists of John Diekman, William Lis and Professor Kai-Xian Chen, with Mr. Diekman serving as chairman of thecommittee. We have determined that Mr. Lis qualifies as a financial expert as set forth under the applicable rules of the SEC and that Mr. Lis, Dr. Diekmanand Professor Chen each satisfies the independence requirements under the rules of the Nasdaq Stock Market and under Rule 10A-3 of the Exchange Act.The audit committee oversees our accounting and financial reporting processes and the audits of our financial statements. Our audit committee isresponsible for, among other things: •selecting, and evaluating the qualifications, performance and independence of, the independent auditor; •approving or, as permitted, pre-approving auditing and non-auditing services permitted to be performed by the independent auditor; •considering the adequacy of our internal accounting controls and audit procedures;145 •reviewing with the independent auditor any audit problems or difficulties and management’s response; •reviewing and approving related party transactions; •reviewing and discussing the annual audited financial statements with management and the independent auditor; •establishing procedures for the receipt, retention and treatment of complaints received from our employees regarding accounting, internalaccounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionableaccounting or auditing matters; •meeting separately, periodically, with management, internal auditors and the independent auditor; and •reporting regularly to the full board of directors.Compensation CommitteeOur compensation committee consists of Peter Wirth, Nisa Leung and Professor Kai-Xian Chen, with Mr. Wirth serving as chairman of thecommittee.Our compensation committee is responsible for, among other things: •reviewing, evaluating and, if necessary, revising our overall compensation policies; •reviewing and evaluating the performance of our directors and executive officers and determining the compensation of our executiveofficers; •reviewing and approving our executive officers’ employment agreements with us; •determining performance targets for our executive officers with respect to our incentive compensation plan and equity-based compensationplans; •administering our equity-based compensation plans in accordance with the terms thereof; and •carrying out such other matters that are specifically delegated to the compensation committee.Nominating and Corporate Governance CommitteeOur nominating and corporate governance committee consists of Samantha Du, Nisa Leung and John Diekman, with Dr. Du serving as chairmanof the committee.Our nominating and corporate governance committee is responsible for, among other things: •electing the board nominees for election by the shareholders or appointment by the board; •periodically reviewing with the board the current composition of the board with regards to characteristics such as independence,knowledge, skills, experience and diversity; •making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board;and •advising the board periodically with regards to significant developments in corporate governance law and practices as well as ourcompliance with applicable laws and regulations, and making recommendations to the board on corporate governance matters.146 Compliance CommitteeOur compliance committee consists of William Lis, Peter Wirth and Tao Fu, with Mr. Lis serving as chairman of the committee.Our compliance committee is responsible for, among other things: •overseeing the Company’s policies and practices for complying with laws, regulations and internal procedures (other than regardingfinancial reporting matters); •overseeing the Company’s compliance program and evaluate its effectiveness and adequacy, review and approve the internal complianceaudit plan and receive periodic updates from the Chief Compliance Officer on major compliance-related activities; •reviewing the Company’s policies and practices regarding issues that have the potential to seriously impact the Company’s businessoperations and reputation; •reviewing and monitoring efforts to promote an ethical culture; •overseeing the mechanisms for employees to seek guidance and report concerns regarding matters of compliance with laws, regulations andindustry standards; and •exercising such other powers and perform such other duties as the Board may from time to time delegate to it.Code of EthicsOur board of directors has adopted a code of ethics to set standards for our directors, officers and employees as are reasonably necessary topromote (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professionalrelationships; (ii) full, fair, accurate, timely and understandable disclosure in the reports and documents that we file or submit to the applicable stockexchanges, and in any other public communications; (iii) compliance with applicable governmental and regulatory laws, rules, codes and regulations;(iv) prompt internal reporting of any violations of the code of ethics; and (v) accountability for adherence to the code of ethics.Complaints ProceduresOur board of directors has adopted procedures for the confidential receipt, retention, and treatment of complaints from, or concerns raised by,employees regarding accounting, internal accounting controls and auditing matters as well as illegal or unethical matters. The complaint procedures arereviewed by the audit committee from time to time as warranted to ensure their continuing compliance with applicable laws and listing standards as well astheir effectiveness.D.EmployeesAs of December 31, 2018, 2017 and 2016, we had 309, 88 and 50 full-time employees, respectively. None of our employees are represented bylabor unions or covered by collective bargaining agreements. The number of employees by function as of the end of the period for our fiscal years endedDecember 31, 2018, 2017 and 2016 was as follows: By Function 2018 2017 2016 Research and Development 183 52 36 Commercial 55 — — Manufacture 46 20 4 General and Administrative 25 16 10 Total 309 88 50 147 E.Share Ownership.We had 58,355,903 ordinary shares outstanding as of March 1, 2019. The following table and accompanying footnotes set forth informationrelating to the beneficial ownership of our ordinary shares as of March 1, 2019 by: •each person, or group of affiliated persons, known by us to beneficially own more than 5% of our outstanding ordinary shares; •each of our directors; •each of our executive officers; and •all of our executive officers and directors as a group.Our major shareholders do not have voting rights that are different from our shareholders in general. Beneficial ownership is determined inaccordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership ofthat person, we have included shares that the person has the right to acquire within 60 days, including through the exercise of any option, warrant or otherright or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person. Ordinary SharesBeneficially Owned Name of beneficial owner† Number Percent Executive Officers and Directors: Samantha Du(1) 9,601,826 15.9 %Tao Fu(2) 20,833 * Harald Reinhart(3) 56,666 * Yongjiang Hei — — Billy Cho(4) 100,000 * William Liang — — Ning Xu(5) 487,832 * James Yan(6) 266,648 * Peter Wirth(7) 312,500 * John Diekman(8) 20,833 * Nisa Leung — — Kai-Xian Chen — — William Lis — — All Executive Officers and Directors as a Group 10,867,138 17.7 %Beneficial Owners of 5% or More of our Ordinary Shares: QM 11 Limited(9) 10,470,933 17.9 %Investment funds affiliated with Advantech Capital(10) 7,167,397 12.3 %The Z Trust(11) 4,289,930 7.4 %FMR, LLC(12) 5,810,578 10.0 %Investment funds affiliated with Sequoia Capital(13) 3,884,152 6.6 %KPCB China Fund II, L.P.(14) 3,437,311 5.9 % *The person beneficially owns less than 1% of our outstanding ordinary shares.†The business address of all directors and officers is 4560 Jinke Road, Bldg. 1, 4F, Pudong, Shanghai, China 201210.(1)Includes 2,195,850 ordinary shares issuable to Dr. Du upon exercise of vested options and options exercisable within 60 days of March 1, 2019.Includes 6,030,323 ordinary shares held by certain holders of ordinary shares, including Zai management and their affiliates. Although Dr. Du does nothave any pecuniary interest in these ordinary shares, these shareholders have granted Dr. Du the right to vote their shares and, therefore, she may bedeemed to be the beneficial owner of the ordinary shares held by these shareholders.(2)Includes 20,833 vested restricted shares and restricted shares will be vested within 60 days of March 1, 2019.148 (3)Includes 56,666 ordinary shares issuable upon exercise of vested options and options exercisable within 60 days of March 1, 2019.(4)Includes 80,000 ordinary shares issuable upon exercise of vested options and options exercisable within 60 days of March 1, 2019 and 20,000 vestedrestricted shares and restricted shares will be vested within 60 days of March 1, 2019.(5)Includes 487,832 ordinary shares issuable upon exercise of vested options and options exercisable within 60 days of March 1, 2019.(6)Includes 266,648 ordinary shares issuable upon exercise of vested options and options exercisable within 60 days of March 1, 2019.(7)Includes 12,500 vested restricted shares and restricted shares will be vested within 60 days of March 1, 2019.(8)Includes 20,833 vested restricted shares and restricted shares will be vested within 60 days of March 1, 2019.(9)Based on a Schedule 13G filed on February 13, 2019. The address for QM 11 Limited is Units 4206-06 Gloucester Tower, The Landmark, Central, HongKong.(10)Based on a Schedule 13G filed on February 13, 2018. Consists of (i) 6,734,064 ordinary shares held by Maxway Investment Limited and (ii) 433,333ordinary shares held by Harbor Front Investment Limited. The address for Maxway Investment Limited and Harbor Front Investment Limited is c/oDMS House, 20 Genesis Close, George Town, Grand Cayman, KY1-1103, Cayman Islands.(11)The address for The Z Trust is 16015 Huebner BLF, San Antonio, Texas 78248-1469.(12)Based upon the information provided by FMR LLC in a Schedule 13G filed on February 13, 2019. Abigail P. Johnson is a Director and the ChiefExecutive Officer of FMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts,of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series Bshareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with themajority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group withrespect to FMR LLC. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by thevarious investment companies registered under the Investment Company Act (“Fidelity Funds”) advised by Fidelity Management & ResearchCompany (“FMR Co”), a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’ Boards of Trustees. FMR Co carries outthe voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees. The address for FMR LLC is 245 Summer Street,Boston, Massachusetts 02110(13)Based on a Schedule 13G filed on February 14, 2018. Consists of (i) 2,986,278 ordinary shares held by Sequoia Capital CV IV Holdco, Ltd. and (ii)897,874 ordinary shares held by SCC Growth I Holdco A, Ltd. The address for Sequoia Capital CV IV Holdco, Ltd. and SCC Growth I Holdco A, Ltd. isConyers Trust Company (Cayman) Limited, P.O. Box 2681, Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, CaymanIslands.(14)Based on a Schedule 13G filed on February 22, 2019. The address for KPCB China Fund II, L.P. is c/o Campbells Corporate Services Limited, Floor 4,Willow House, Cricket Square, PO Box 268 Grand Cayman KY1-1104, Cayman Islands.As of March 1, 2019, based on public filings with the SEC, there are no major shareholders owning 5% or more of our ordinary shares or ADSsrepresenting ordinary shares, except as described above. As of March 1, 2019, we had nine holders of record with addresses in the United States, includingCitibank, N.A., depositary of our ADS program, which held 27,091,114 ordinary shares as of that date. To our knowledge, except as disclosed above, we are not owned or controlled, directly or indirectly, by another corporation, by any foreigngovernment or by any other natural or legal person or persons, severally or jointly. To our knowledge, there are no arrangements the operation of which mayat a subsequent date result in us undergoing a change in control. Our major shareholders do not have different voting rights than any of our othershareholders.149 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major Shareholders.Please refer to “Item 6.E. Directors, Senior Management and Employees—Share Ownership.”B.Related Party TransactionsThe following is a description of related party transactions we have entered into since January 1, 2018 with any members of our board of directorsor executive officers and beneficial holders of more than 5% of our ordinary shares:Agreements and Transactions with ShareholdersRegistration Rights AgreementWe have entered into a shareholders agreement in January 2016, or the Registration Rights Agreement, with certain of our shareholders, in whichwe granted certain demand registration rights, piggyback registration rights and F-3 registration rights to holders of our registrable securities.Other RelationshipsVoting ProxyCertain holders of our ordinary shares, which hold 6,030,323 ordinary shares, have granted Dr. Du the right to vote their ordinary shares.Quan Venture Partners I, L.L.C.Quan Venture Fund I, L.P., or Quan Fund, is a Cayman Islands exempted limited partnership organized in April 2017 to make capital investmentsin global public and private companies with a particular focus on the healthcare industry. Quan Fund’s general partner, which is responsible for investmentand divestment decisions related to the Quan Fund, is Quan Venture Partners I, L.L.C., or Quan GP, a Cayman Islands limited liability company. Each of Dr.Du and Marietta Wu are managers of Quan GP. In the first half of 2017, Zai sold its interest in three entities to the Quan Fund, for a total consideration ofapproximately $500,000.Qiagen (Suzhou) Translational Medicine Co., Ltd.An immediate family member of Dr. Du is owner of Qiagen (Suzhou) Translational Medicine Co., Ltd., or Qiagen. We incurred $125,679 inresearch and development expenses to Qiagen for drug research and development services for the year ended December 31, 2018.Agreements with Our Directors and Executive OfficersCompensation of Directors and Executive OfficersSee “Item 6.B. Directors, Senior Management and Employees—Compensation—Compensation of Directors and Executive Officers” for adiscussion of our compensation of directors and executive officers.Employment AgreementsWe have entered into employment agreements with our executive officers. For more information regarding these agreements, see “Item 6.B.Directors, Senior Management and Employees—Compensation—Employment Arrangements with Our Executive Officers.”Indemnification AgreementsWe have entered into indemnification agreements with each of our directors and executive officers. We also maintain a general liability insurancepolicy which covers certain liabilities of our directors and executive officers arising out of claims based on acts or omissions in their capabilities as directorsor officers.150 C.Interests of Experts and CounselNot applicable.ITEM 8. FINANCIAL INFORMATIONA.Consolidated Financial Statements and Other Financial InformationSee “Item 18 Financial Statements.”A.7Legal ProceedingsWe are, from time to time, subject to claims and suits arising in the ordinary course of business. Although the outcome of these and other claimscannot be predicted with certainty, management does not believe that the ultimate resolution of these matters will have a material adverse effect on ourfinancial position or on our results of operations. We are not currently a party to, nor is our property the subject of, any material legal proceedings.A.8Dividend PolicyWe have never declared or paid dividends on our ordinary shares. We currently expect to retain all future earnings for use in the operation andexpansion of our business and do not have any present plan to pay any dividends. The declaration and payment of any dividends in the future will bedetermined by our board of directors in its discretion, and will depend on a number of factors, including our earnings, capital requirements, overall financialcondition, and contractual restrictions.B.Significant ChangesWe have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.ITEM 9. THE OFFER AND LISTINGA.Offering and Listing DetailsThe principal host market for our ADSs is the Nasdaq Global Market.B.Plan of DistributionNot applicable.C.MarketsOur ADSs have been listed on the Nasdaq Global Market since September 20, 2017 under the symbol “ZLAB.”D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10. ADDITIONAL INFORMATIONA.Share CapitalNot applicable.151 B.Memorandum and Articles of AssociationWe are a Cayman Islands company and our affairs are governed by our fourth memorandum and articles of association and the Companies Law.The following are summaries of material provisions of our fourth amended and restated memorandum and articles of association that becameeffective immediately prior to the completion of our initial public offering in September 2017, insofar as they relate to the material terms of our ordinaryshares.Registered Office and ObjectsOur registered office in the Cayman Islands is located at Harbour Place 2nd Floor, 103 South Church Street, P.O. Box 472, George Town, GrandCayman KY1-1106, Cayman Islands, or at such other location within the Cayman Islands as our board of directors may from time to time decide. The objectsfor which our company is established are unrestricted and we have full power and authority to carry out any object not prohibited by the Companies Law, asamended from time to time, or any other law of the Cayman Islands.Board of DirectorsSee “Item 6.C. Directors, Senior Management and Employees—Board Practices.”Ordinary SharesGeneral. Our authorized share capital consists of $5,000.00 divided into 83,333,333 ordinary shares, with a par value of $0.00006 each. Ourordinary shares are issued in registered form, and are issued when registered in our register of members. Certificates representing the ordinary shares are issuedin registered form. Our shareholders who are non-residents of the Cayman Islands may freely hold and transfer their ordinary shares.Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. Our fourth amended andrestated articles of association provide that dividends may be declared and paid out of our profits, realized or unrealized, or from any reserve set aside fromprofits which our board of directors determine is no longer needed. Dividends may also be declared and paid out of share premium account or any other fundor account which can be authorized for this purpose in accordance with the Companies Law. Holders of ordinary shares will be entitled to the same amount ofdividends, if declared.Voting rights. In respect of all matters subject to a shareholders’ vote, each ordinary share is entitled to one vote. Voting at any meeting ofshareholders is by show of hands unless a poll is demanded. A poll may be demanded by the chairman of such meeting or any one or more shareholderspresent in person or by proxy and who together hold not less than 10% of the nominal value of the total issued voting shares of our company. Each holder ofour ordinary shares is entitled to have one vote for each ordinary share registered in his or her name on our register of members.A quorum required for a meeting of shareholders consists of one or more shareholders who hold at least one-third of all voting power of our sharecapital in issue at the date of the meeting present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative.Shareholders’ meetings may be held annually. Each general meeting, other than an annual general meeting, shall be an extraordinary general meeting.Extraordinary general meetings may be called by a majority of our board of directors or our chairman or upon a requisition of shareholders holding at the dateof deposit of the requisition not less than one-third of the aggregate voting power of our company. Advance notice of at least seven days is required for theconvening of our annual general meeting and other general meetings unless such notice is waived in accordance with our articles of association.An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching to allissued and outstanding shares cast at a meeting, while a special resolution also requires the affirmative vote of no less than two-thirds of the votes castattaching to the issued and outstanding shares at a meeting. A special resolution will be required for important matters such as a change of name or makingchanges to our fourth amended and restated memorandum and articles of association.Transfer of ordinary shares. Subject to the restrictions set out below, any of our shareholders may transfer all or any of his or her ordinary sharesby an instrument of transfer in the usual or common form or any other form approved by our board of directors.152 Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on whichwe have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless: •the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such otherevidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; •the instrument of transfer is in respect of only one class of ordinary shares; •the instrument of transfer is properly stamped, if required; •in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; •the shares are free from any lien in favor of the Company; and •a fee of such maximum sum as the Nasdaq Stock Market may determine to be payable or such lesser sum as our directors may from time totime require is paid to us in respect thereof.If our directors refuse to register a transfer they shall, within two months after the date on which the instrument of transfer was lodged, send to eachof the transferor and the transferee notice of such refusal.The registration of transfers may, on 14 days’ notice being given by advertisement in one or more newspapers or by electronic means, besuspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that theregistration of transfers shall not be suspended nor the register closed for more than 30 days in any year.Liquidation. On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of ordinary shares), assetsavailable for distribution among the holders of ordinary shares shall be distributed by a liquidator who may divide our assets for distribution among ourshareholders in his discretion. The liquidator also may vest all or part of our assets in trust. None of our shareholders may be compelled to accept any sharessubject to liability.Calls on ordinary shares and forfeiture of ordinary shares. Our board of directors may from time to time make calls upon shareholders for anyamounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 clear days prior to the specified time of payment. The ordinaryshares that have been called upon and remain unpaid are subject to forfeiture.Redemption of ordinary shares. The Companies Law and fourth amended and restated articles of association permit us to purchase our ownshares. In accordance with our fourth amended and restated articles of association and provided the necessary shareholders or board approval have beenobtained, we may issue shares on terms that are subject to redemption, at our option or at the option of the holders of these shares, on such terms and in suchmanner, including out of capital, as may be determined by our board of directors.Variations of rights of shares. All or any of the special rights attached to any class of shares may, subject to the provisions of the Companies Law,be varied with the written consent of the holders of a majority of the issued shares of that class or with the sanction of a special resolution passed at a generalmeeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class issued shall not, unless otherwise expresslyprovided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu with suchexisting class of shares.Inspection of books and records. Holders of our ordinary shares have no general right under Cayman Islands law to inspect or obtain copies ofour list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements.Issuance of additional shares. Our fourth amended and restated memorandum of association authorizes our board of directors to issue additionalordinary shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.153 Our fourth amended and restated memorandum of association also authorizes our board of directors to establish from time to time one or moreseries of preferred shares and to determine, with respect to any series of preferred shares, the terms and rights of that series, including: •the designation of the series; •the number of shares of the series; •the dividend rights, dividend rates, conversion rights and voting rights; and •the rights and terms of redemption and liquidation preferences.Our board of directors may issue preferred shares without action by our shareholders to the extent authorized but unissued. Issuance of theseshares may dilute the voting power of holders of ordinary shares.Anti-Takeover provisions. Some provisions of our fourth amended and restated memorandum and articles of association may discourage, delay orprevent a change of control of our company or management that shareholders may consider favorable, including provisions that authorize our board ofdirectors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred shareswithout any further vote or action by our shareholders.Exempted company. We are an exempted company with limited liability under the Companies Law. The Companies Law distinguishes betweenordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of theCayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinarycompany except that an exempted company: •does not have to file an annual return of its shareholders with the Registrar of Companies; •is not required to open its register of members for inspection; •does not have to hold an annual general meeting; •may issue negotiable or bearer shares or shares with no par value; •may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the firstinstance); •may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands; •may register as a limited duration company; and •may register as a segregated portfolio company.“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company.C.Material ContractsWe have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4.Information on the Company” or elsewhere in this Annual Report on Form 20-F.D.Exchange ControlsSee “Item 4.B. Information on the Company—Business—Regulation—Regulations Relating to Foreign Exchange Registration of OffshoreInvestment by PRC Residents.”154 E.TaxationThe following is a discussion of the material Cayman Islands, People’s Republic of China and U.S. federal income tax considerations that may berelevant to an investment decision by a potential investor with respect to our ADSs. This summary should not be considered a comprehensive description ofall the tax considerations that may be relevant to the decisions to acquire ADSs.Material Cayman Islands TaxationThe Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is notaxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islandsexcept for stamp duties which may be applicable on instruments executed in, or after execution brought within the jurisdiction of the Cayman Islands. TheCayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange controlregulations or currency restrictions in the Cayman Islands.Material People’s Republic of China TaxationWe are a holding company incorporated in the Cayman Islands.Under the EIT Law and its implementation rules, an enterprise established outside of China with a “de facto management body” within China isconsidered a “resident enterprise,” and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules definethe term “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions,personnel, accounts and properties of an enterprise. In 2009, the State Administration of Taxation issued SAT Circular 82, which provides certain specificcriteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Althoughthis circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals orforeigners, the criteria set forth in the circular may reflect the State Administration of Taxation’s general position on how the “de facto management body”text should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, all offshore enterprises controlled by aPRC enterprise or a PRC enterprise will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China only if all of thefollowing conditions are met: (i)the primary location of the day-to-day operational management is in the PRC; (ii)decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnelin the PRC; (iii)the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located ormaintained in China; and (iv)at least 50% of voting board members or senior executives habitually reside in China.We believe that none of Zai Lab Limited and its subsidiaries outside of China is a PRC resident enterprise for PRC tax purposes. Zai Lab Limitedis not controlled by a PRC enterprise or PRC enterprise group, and we do not believe that Zai Lab Limited meets all of the conditions above. Zai Lab Limitedis a company incorporated outside China. As a holding company, some of its key assets are located, and its records (including the resolutions of its board ofdirectors and the resolutions of its shareholders) are maintained, outside China. For the same reasons, we believe our other subsidiaries outside of China arealso not PRC resident enterprises. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertaintiesremain with respect to the interpretation of the term “de facto management body.”155 If the PRC tax authorities determine that Zai Lab Limited is a PRC resident enterprise for EIT purposes, we may be required to withhold tax at arate of 10% on dividends we pay to our shareholders, including holders of our ADSs, that are non-resident enterprises. In addition, non-resident enterpriseshareholders (including our ADS holders) may be subject to a 10% PRC withholding tax on gains realized on the sale or other disposition of ADS or ordinaryshares, if such income is treated as sourced from within China. Furthermore, gains derived by our non-PRC individual shareholders from the sale of our sharesand ADSs may be subject to a 20% PRC withholding tax. It is unclear whether our non-PRC individual shareholders (including our ADS holders) would besubject to any PRC tax (including withholding tax) on dividends received by such non-PRC individual shareholders in the event we are determined to be aPRC resident enterprise. If any PRC tax were to apply to dividends realized by non-PRC individuals, it will generally apply at a rate of 20%. The PRC taxliability may be reduced under applicable tax treaties. However, it is unclear whether non-PRC shareholders of Zai Lab Limited would be able to claim thebenefits of any tax treaty between their country of tax residence and China in the event that Zai Lab Limited is treated as a PRC resident enterprise.See “Item 3.D. Risk Factors—Risks Related to Doing Business in China—If we are classified as a PRC resident enterprise for PRC income taxpurposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.”Pursuant to the EIT Law and its implementation rules, if a non-resident enterprise has not set up an organization or establishment in China, or hasset up an organization or establishment but the income derived has no actual connection with such organization or establishment, it will be subject to awithholding tax on its PRC-sourced income at a rate of 10%. Pursuant to the Arrangement between Mainland China and the Hong Kong SpecialAdministrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, the tax rate in respect to dividends paid by a PRC enterprise to aHong Kong enterprise is reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant tothe Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or SAT Circular 81,a Hong Kong resident enterprise must meet the following conditions, among others, in order to enjoy the reduced tax rate: (i) it must directly own therequired percentage of equity interests and voting rights in the PRC resident enterprise; and (ii) it must have directly owned such percentage in the PRCresident enterprise throughout the 12 months prior to receiving the dividends. Furthermore, the Announcement of the State Administration of Taxation onPromulgating the Administrative Measures for Tax Convention Treatment for Non-resident Taxpayers, which became effective in November 2015, requirethat non-resident enterprises may be entitled to the reduced tax rate itself when filing a tax return or making a withholding declaration through a withholdingagent. There are also other conditions for enjoying the reduced tax rate according to other relevant tax rules and regulations. Accordingly, our subsidiary ZaiLab (Hong Kong) Limited may be able to enjoy the 5% tax rate for the dividends it receives from its PRC incorporated subsidiaries if they satisfy theconditions prescribed under SAT Circular 81 and other relevant tax rules and regulations and obtain the approvals as required. However, according to SATCircular 81, if the relevant tax authorities determine our transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, therelevant tax authorities may adjust the favorable tax rate on dividends in the future.If our Cayman Islands holding company, Zai Lab Limited, is not deemed to be a PRC resident enterprise, holders of our ADSs and ordinary shareswho are not PRC residents will not be subject to PRC income tax on dividends distributed by us or gains realized from the sale or other disposition of ourshares or ADSs.Material United States Federal Income Tax ConsiderationThe following discussion, subject to the limitations set forth below, describes the material U.S. federal income tax consequences for a U.S. Holder(as defined below) of the acquisition, ownership and disposition of ADSs. It is not a comprehensive description of all tax considerations that may be relevantto a particular person’s decision to acquire our ADSs. This discussion is limited to U.S. Holders who hold such ADSs as capital assets (generally, propertyheld for investment). This discussion is based on Internal Revenue Code of 1986, as amended, or the Code, U.S. Treasury Regulations promulgatedthereunder and administrative and judicial interpretations thereof, and the income tax treaty between the PRC and the United States, or the U.S.-PRC TaxTreaty, each as available and in effect on the date hereof, all of which are subject to change or differing interpretations, possibly with retroactive effect, whichcould affect the tax consequences described herein. In addition, this summary is based, in part, upon representations made by the depositary to us andassumes that the deposit agreement, and all other related agreements, will be performed in accordance with their terms.156 For purposes of this summary, a “U.S. Holder” is a beneficial owner of an ADS that is for U.S. federal income tax purposes: •a citizen or individual resident of the United States; •a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) organized in or under the laws of the UnitedStates or any state thereof, or the District of Columbia; •an estate the income of which is subject to U.S. federal income taxation regardless of its source; or •a trust if (i) it has a valid election in effect to be treated as a U.S. person for U.S. federal income tax purposes or (ii) a U.S. court can exerciseprimary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions.Except as explicitly set forth below, this summary does not address all aspects of U.S. federal income taxation that may be applicable to U.S.Holders subject to special rules, including: •banks or other financial institutions; •insurance companies; •real estate investment trusts; •regulated investment companies •grantor trusts; •tax-exempt organizations; •persons holding ADSs through a partnership (including an entity or arrangement treated as a partnership for U.S. federal income taxpurposes) or S corporation; •dealers or traders in securities, commodities or currencies; •persons whose functional currency is not the U.S. dollar; •certain former citizens and former long-term residents of the United States; •persons holding ADSs as part of a position in a straddle or as part of a hedging, conversion or integrated transaction for U.S. federal incometax purposes; or •direct, indirect or constructive owners of 10% or more of our total combined voting power or value.In addition, this summary does not address the 3.8% Medicare contribution tax imposed on certain net investment income, the U.S. federal estateand gift tax or the alternative minimum tax consequences of the acquisition, ownership, and disposition of ADSs. We have not received nor do we expect toseek a ruling from the U.S. Internal Revenue Service, or the IRS, regarding any matter discussed herein. No assurance can be given that the IRS would notassert, or that a court would not sustain, a position contrary to any of those set forth below. Moreover, on December 22, 2017, President Trump signed intolaw new legislation that significantly revises the Code. The overall impact of the new federal tax law is uncertain and the impact of this tax reform on holdersof our ADSs is also uncertain and could be adverse. Each prospective investor should consult its own tax advisors with respect to the U.S. federal, state, localand non-U.S. tax consequences of acquiring, owning and disposing of ADSs.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds ADSs, the tax treatment of the partnership and apartner in such partnership generally will depend on the status of the partner and the activities of the partnership. Such partner or partnership should consultits own tax advisors as to the U.S. federal income tax consequences of acquiring, owning and disposing of ADSs.157 PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE PARTICULAR TAXCONSEQUENCES APPLICABLE TO THEIR SITUATIONS AS WELL AS THE APPLICATION OF ANY U.S. FEDERAL, STATE, LOCAL, NON-U.S. OROTHER TAX LAWS, INCLUDING GIFT AND ESTATE TAX LAWS.ADSsA U.S. Holder of ADSs will generally be treated, for U.S. federal income tax purposes, as the owner of the underlying ordinary shares that suchADSs represent. Accordingly, no gain or loss will be recognized if a U.S. Holder exchanges ADSs for the underlying shares represented by those ADSs.The U.S. Treasury has expressed concern that parties to whom ADSs are released before shares are delivered to the depositary or intermediaries inthe chain of ownership between holders and the issuer of the security underlying the ADSs, may be taking actions that are inconsistent with the claiming offoreign tax credits by U.S. Holders of ADSs. These actions would also be inconsistent with the claiming of the reduced rate of tax, described below,applicable to dividends received by certain non-corporate U.S. Holders. Accordingly, the creditability of non-U.S. withholding taxes (if any), and theavailability of the reduced tax rate for dividends received by certain non-corporate U.S. Holders, each described below, could be affected by actions taken bysuch parties or intermediaries.Taxation of DividendsAs described in “Item 8. Financial Information—A.8 Dividend Policy,” we do not currently anticipate paying any distributions on our ADSs inthe foreseeable future. However, subject to the discussion below in “—Passive Foreign Investment Company Considerations,” to the extent there are anydistributions made with respect to our ADSs, the gross amount of any distribution on the ADSs (including withheld taxes, if any) made out of our current oraccumulated earnings and profits (as determined for U.S. federal income tax purposes) will generally be taxable to a U.S. Holder as ordinary dividend incomeon the date such distribution is actually or constructively received. Distributions in excess of our current and accumulated earnings and profits will be treatedas a non-taxable return of capital to the extent of the U.S. Holder’s adjusted tax basis in the ADSs and thereafter as capital gain. However, because we do notmaintain calculations of our earnings and profits in accordance with U.S. federal income tax accounting principles, U.S. Holders should expect to treatdistributions paid with respect to the ADSs as dividends. Dividends paid to corporate U.S. Holders generally will not qualify for the dividends receiveddeduction that may otherwise be allowed under the Code. This discussion assumes that distributions on the ADSs, if any, will be paid in U.S. dollars.Dividends paid to a non-corporate U.S. Holder by a “qualified foreign corporation” may be subject to reduced rates of U.S. federal incometaxation if certain holding period and other requirements are met. A qualified foreign corporation generally includes a foreign corporation (other than a PFIC)if (1) its ordinary shares (or ADSs backed by ordinary shares) are readily tradable on an established securities market in the United States or (2) it is eligiblefor benefits under a comprehensive U.S. income tax treaty that includes an exchange of information program and which the U.S. Treasury Department hasdetermined is satisfactory for these purposes.Our ADSs are listed on the Nasdaq Global Market, which is an established securities market in the United States. IRS guidance indicates that theADSs will be readily tradable for these purposes.The United States does not have a comprehensive income tax treaty with the Cayman Islands. However, in the event that we were deemed to be aPRC resident enterprise under the EIT Law (see “—Material People’s Republic of China Taxation” above), although no assurance can be given, we might beconsidered eligible for the benefits of the U.S.-PRC Tax Treaty, and if we were eligible for such benefits, dividends paid on the ADSs, regardless of whetherthe ADSs are readily tradable on an established securities market in the United States, would be eligible for the reduced rates of U.S. federal income taxation,subject to applicable limitations. U.S. Holders should consult their own tax advisors regarding the availability of the reduced tax rates on dividends in lightof their particular circumstances.Non-corporate U.S. Holders will not be eligible for reduced rates of U.S. federal income taxation on any dividends received from us if we are aPFIC in the taxable year in which such dividends are paid or in the preceding taxable year.158 In the event that we were deemed to be a PRC resident enterprise under the EIT Law (see “—People’s Republic of China Taxation” above), ADSholders might be subject to PRC withholding taxes on dividends paid with respect to ADSs. In that case, subject to certain conditions and limitations, suchPRC withholding tax may be treated as a foreign tax eligible for credit against a U.S. Holder’s U.S. federal income tax liability under the U.S. foreign taxcredit rules. For purposes of calculating the U.S. foreign tax credit, dividends paid on the ADSs will be treated as income from sources outside the UnitedStates and will generally constitute passive category income. If a U.S. Holder is eligible for U.S.-PRC Tax Treaty benefits, any PRC taxes on dividends willnot be creditable against such U.S. Holder’s U.S. federal income tax liability to the extent such tax is withheld at a rate exceeding the applicable U.S.-PRCTax Treaty rate. An eligible U.S. Holder who does not elect to claim a foreign tax credit for PRC tax withheld may instead be eligible to claim a deduction,for U.S. federal income tax purposes, in respect of such withholding but only for the year in which such U.S. Holder elects to do so for all creditable foreignincome taxes. The U.S. foreign tax credit rules are complex. U.S. Holders should consult their own tax advisors regarding the foreign tax credit or deductionrules in light of their particular circumstances.Taxation of Capital GainsSubject to the discussion below in “—Passive Foreign Investment Company Considerations” below, upon the sale, exchange, or other taxabledisposition of ADSs, a U.S. Holder generally will recognize gain or loss on the taxable sale or exchange in an amount equal to the difference between theamount realized on such sale or exchange and the U.S. Holder’s adjusted tax basis in the ADSs. The initial tax basis of ADSs to a U.S. Holder will generally bethe U.S. Holder’s U.S. dollar purchase price for the ADS.Subject to the discussion below in “—Passive Foreign Investment Company Considerations” below, such gain or loss will be capital gain or loss.Under current law, capital gains of non-corporate U.S. Holders derived with respect to capital assets held for more than one year are generally eligible forreduced rates of taxation. The deductibility of capital losses is subject to limitations. Capital gain or loss, if any, recognized by a U.S. Holder generally willbe treated as U.S. source income or loss for U.S. foreign tax credit purposes. U.S. Holders are encouraged to consult their own tax advisors regarding theavailability of the U.S. foreign tax credit in consideration of their particular circumstances.If we were treated as a PRC resident enterprise for EIT Law purposes and PRC tax were imposed on any gain (see “—Material People’s Republicof China Taxation” above), and if a U.S. Holder is eligible for the benefits of the U.S.-PRC Tax Treaty, the holder may be able to treat such gain as PRCsource gain under the treaty for U.S. foreign tax credit purposes. A U.S. Holder will be eligible for U.S.-PRC Tax Treaty benefits if (for purposes of the treaty)such holder is a resident of the United States and satisfies the other requirements specified in the U.S.-PRC Tax Treaty. Because the determination of treatybenefit eligibility is fact-intensive and depends upon a holder’s particular circumstances, U.S. Holders should consult their tax advisors regarding U.S.-PRCTax Treaty benefit eligibility. U.S. Holders are also encouraged to consult their own tax advisors regarding the tax consequences in the event PRC tax were tobe imposed on a disposition of ADSs, including the availability of the U.S. foreign tax credit and the ability and whether to treat any gain as PRC source gainfor the purposes of the U.S. foreign tax credit in consideration of their particular circumstances.Passive Foreign Investment Company ConsiderationsStatus as a PFICThe rules governing PFICs can have adverse tax effects on U.S. Holders. We generally will be classified as a PFIC for U.S. federal income taxpurposes if, for any taxable year, either: (1) 75% or more of our gross income consists of certain types of passive income (the Income Test), or (2) the averagevalue (determined on a quarterly basis), of our assets that produce, or are held for the production of, passive income (including cash) is 50% or more of thevalue of all of our assets (the Asset Test).Passive income generally includes dividends, interest, rents and royalties (other than certain rents and royalties derived in the active conduct of atrade or business), annuities and gains from assets that produce passive income. If a non-U.S. corporation owns at least 25% by value of the stock of anothercorporation, the non-U.S. corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation and asreceiving directly its proportionate share of the other corporation’s income.Whether we are a PFIC for any taxable year is a factual determination that can be made only after the end of each taxable year and which dependson the composition of our income and the composition and value of our assets for the relevant taxable year. The fair market value of our assets for purposes ofthe PFIC rules (including goodwill) may be determined in large part by reference to the quarterly market price of our ADSs, which is likely to fluctuatesignificantly. In addition, the composition of our income and assets will be affected by how, and how quickly, we use the cash in our business, including anycash that is raised in a financing transaction.159 We believe that our Hong Kong subsidiary, Zai Lab (Hong Kong) Limited, was a PFIC for its taxable year ended December 31, 2017 and we donot expect that the Company and its subsidiaries will be treated as PFICs for the current taxable year. However, because we hold a substantial amount ofpassive assets, including cash, and because the value of our assets (including goodwill) may be determined by reference to the market value of our ADSs,which may be especially volatile due to the early stage of our drug candidates, we cannot give any assurance that we will not be a PFIC status for the currentor any future taxable year.If we are a PFIC in any taxable year with respect to which a U.S. Holder owns ADSs, we generally will continue to be treated as a PFIC with respectto such U.S. Holder in all succeeding taxable years, regardless of whether we continue to meet the tests described above, unless we cease to be a PFIC and (i)the U.S. Holder makes the “deemed sale election” described below, (ii) the U.S. Holder has a valid mark-to-market election in effect as described below, or aPFIC during such U.S. Holder’s holding period in which we are a PFIC or makes a purging election to cause a deemed sale of the PFIC shares at their fairmarket value in connection with a QEF election (as discussed below). If a U.S. Holder makes a deemed sale election, such U.S. Holder will be deemed to havesold the shares held by such U.S. Holder at their fair market value, and any gain from such deemed sale would be subject to the rules described below. Afterthe deemed sale election, so long as we do not become a PFIC in a subsequent taxable year, a U.S. Holder’s ADSs subject to such election will not be treatedas shares in a PFIC, and the rules described below with respect to any “excess distributions” or any gain from an actual sale or other disposition of the ADSswill not apply. Prospective investors should consult their own tax advisors regarding our PFIC status for the current or any future taxable years.U.S. Federal Income Tax Treatment of a Shareholder of a PFICIf we are a PFIC for any taxable year during which a U.S. Holder owns ADSs, the U.S. Holder, absent the elections listed above, generally will besubject to adverse rules (regardless of whether we continue to be a PFIC) with respect to (1) any “excess distributions” (generally, any distributions receivedby the U.S. Holder on its ADSs in a taxable year that are greater than 125% of the average annual distributions received by the U.S. Holder in the threepreceding taxable years or, if shorter, the U.S. Holder’s holding period for its ADSs) and (2) any gain realized on the sale or other disposition, including incertain circumstances a pledge, of its ADSs.Under these adverse rules (a) the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period, (b) the amountallocated to the current taxable year and any taxable year prior to the first taxable year in which we are a PFIC will be taxed as ordinary income and (c) theamount allocated to each other taxable year during the U.S. Holder’s holding period in which we were a PFIC (i) will be subject to tax at the highest rate oftax in effect for the applicable category of taxpayer for that year and (ii) will be subject to an interest charge at a statutory rate with respect to the resulting taxattributable to each such other taxable year. Non-corporate U.S. Holders will not be eligible for reduced rates of U.S. federal income taxation on anydividends received from us if we were a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year.If we are a PFIC, a U.S. Holder will generally be treated as owning a proportionate amount (by value) of stock or shares owned by us in any director indirect subsidiaries that are also PFICs, or Lower-tier PFICs, and will be subject to similar adverse rules with respect to any distributions we receive from,and dispositions we make of, the stock or shares of such subsidiaries. U.S. Holders are urged to consult their tax advisors about the application of the PFICrules to any of our subsidiaries.PFIC “Mark-to-Market” ElectionIn certain circumstances if we are a PFIC for any taxable year, a U.S. Holder can be subject to rules different from those described above bymaking a mark-to-market election with respect to its ADSs, provided that the ADSs are “marketable.” ADSs will be marketable if they are “regularly traded”on a “qualified exchange” or other market within the meaning of applicable U.S. Treasury Regulations. ADSs will be treated as “regularly traded” in anycalendar year in which more than a de minimis quantity of the ADSs are traded on a qualified exchange on at least 15 days during each calendar quarter. A“qualified exchange” includes a national securities exchange that is registered with the SEC.Under current law, the mark-to-market election may be available to U.S. Holders of ADSs if the ADSs are listed on the Nasdaq Global Market(which constitutes a qualified exchange) and such ADSs are “regularly traded” for purposes of the mark-to-market election (for which no assurance can begiven).160 A U.S. Holder that makes a mark-to-market election must include in gross income, as ordinary income, for each taxable year that we are a PFIC anamount equal to the excess, if any, of the fair market value of the U.S. Holder’s ADSs at the close of the taxable year over the U.S. Holder’s adjusted tax basisin its ADSs. Accordingly, such mark-to-market election may accelerate the recognition of income without a corresponding receipt of cash. An electing U.S.Holder may also claim an ordinary loss deduction for the excess, if any, of the U.S. Holder’s adjusted tax basis in its ADSs over the fair market value of itsADSs at the close of the taxable year, but this deduction is allowable only to the extent of any net mark-to-market gains previously included in income. Theadjusted tax basis of a U.S. Holder’s ADSs will be adjusted to reflect amounts included in gross income or allowed as a deduction because of such mark-to-market election. If a U.S. Holder makes an effective mark-to-market election, gains from an actual sale or other disposition of ADSs in a year in which we are aPFIC will be treated as ordinary income, and any losses incurred on a sale or other disposition of ADSs will be treated as ordinary losses to the extent of anynet mark-to-market gains previously included in income.If we are a PFIC for any taxable year in which a U.S. Holder owns ADSs but before a mark-to-market election is made, the adverse PFIC rulesdescribed above will apply to any mark-to-market gain recognized in the year the election is made. Otherwise, a mark-to-market election will be effective forthe taxable year for which the election is made and all subsequent taxable years unless the ADSs are no longer regularly traded on a qualified exchange or theIRS consents to the revocation of the election.A mark-to-market election is not permitted for the shares of any of our subsidiaries that are also classified as PFICs (unless the shares of suchsubsidiaries are themselves marketable). Prospective investors should consult their own tax advisors regarding the availability of, and the procedure formaking, a mark-to-market election, and whether making the election would be advisable, including in light of their particular circumstances.PFIC “QEF” ElectionAlternatively, if we provide the necessary information, a U.S. Holder can be subject to rules different from those described above by electing totreat us (and each Lower-tier PFIC, if any) as a QEF under Section 1295 of the Code in the first taxable year that we (and each Lower-tier PFIC) are treated as aPFIC with respect to the U.S. Holder. A U.S. Holder must make the QEF election for each PFIC by attaching a separate properly completed IRS Form 8621 foreach PFIC to the U.S. Holder’s timely filed U.S. federal income tax return.In any year in which we determine that we are a PFIC, we will provide the information necessary for a U.S. Holder to make a QEF election withrespect to us upon the request of a U.S. Holder and will endeavor to cause each Lower-tier PFIC that we control to provide such information with respect tosuch Lower-tier PFIC. However, there can be no assurance that we will be able to cause any Lower-tier PFIC we do not control to provide such information.We may elect to provide the information necessary to make such QEF elections on our website.If you make a QEF election with respect to a PFIC, you will be taxed currently on your pro rata share of the PFIC’s ordinary earnings and netcapital gain (at ordinary income and capital gain rates, respectively) for each taxable year that the entity is classified as a PFIC, even if no distributions werereceived. If a U.S. Holder makes a QEF election with respect to us, any distributions paid by us out of our earnings and profits that were previously includedin the U.S. Holder’s income under the QEF election would not be taxable to the U.S. Holder. A U.S. Holder will increase its tax basis in its ADSs by an amountequal to any income included under the QEF election and will decrease its tax basis by any amount distributed on the ADSs that is not included in the U.S.Holder’s income. In addition, a U.S. Holder will recognize capital gain or loss on the disposition of ADSs in an amount equal to the difference between theamount realized and the U.S. Holder’s adjusted tax basis in the ADSs, as determined in U.S. dollars. Once made, a QEF election remains in effect unlessinvalidated or terminated by the IRS or revoked by the U.S. Holder. A QEF election can be revoked only with the consent of the IRS. A U.S. Holder will notbe currently taxed on the ordinary income and net capital gain of a PFIC with respect to which a QEF election was made for any taxable year of the non-U.S.corporation for which such corporation does not satisfy the PFIC Income Test or Asset Test.U.S. Holders should note that if they make QEF elections with respect to us and any Lower-tier PFIC, they may be required to pay U.S. federalincome tax with respect to their ADSs for any taxable year significantly in excess of any cash distributions received on the ADSs for such taxable year. U.S.Holders should consult their tax advisers regarding the advisability of, and procedure for, making QEF elections in their particular circumstances.161 PFIC Information Reporting RequirementsIf we are a PFIC in any year with respect to a U.S. Holder, such U.S. Holder will be required to file an annual information return on IRS Form 8621regarding distributions received on, and any gain realized on the disposition of, our ADSs, and certain U.S. Holders will be required to file an annualinformation return (also on IRS Form 8621) relating to their ownership of our ADSs.THE U.S. FEDERAL INCOME TAX RULES RELATING TO PFICS ARE COMPLEX. PROSPECTIVE INVESTORS SHOULD CONSULT THEIROWN TAX ADVISORS WITH RESPECT TO THE OPERATION OF THE PFIC RULES AND RELATED REPORTING REQUIREMENTS IN LIGHT OFTHEIR PARTICULAR CIRCUMSTANCES, INCLUDING THE ADVISABILITY OF MAKING ANY ELECTION THAT MAY BE AVAILABLE.U.S. Backup Withholding and Information ReportingBackup withholding and information reporting requirements may apply to distributions on, and proceeds from the sale or disposition of, ADSsthat are held by U.S. Holders. The payor may be required to withhold U.S. backup withholding tax on payments made with respect to the ADSs to a U.S.Holder, other than an exempt recipient, if the U.S. Holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, orestablish an exemption from, the backup withholding requirements. Backup withholding is not an additional tax. Amounts withheld as backup withholdingmay be credited against a U.S. Holder’s U.S. federal income tax liability (if any) or refunded provided the required information is furnished to the IRS in atimely manner.Certain U.S. Holders of specified foreign financial assets with an aggregate value in excess of the applicable dollar threshold are required to reportinformation relating to their holding of ADSs, subject to certain exceptions (including an exception for shares held in accounts maintained by certainfinancial institutions) with their tax return for each year in which they hold ADSs. U.S. Holders should consult their own tax advisors regarding theinformation reporting obligations that may arise from their acquisition, ownership or disposition of ADSs.THE ABOVE DISCUSSION DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PARTICULAR INVESTOR.PROSPECTIVE INVESTORS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS ABOUT THE TAX CONSEQUENCES OF ANINVESTMENT IN THE ADSs.F.Dividends and Payment AgentsNot applicable.G.Statement by expertsNot applicable.H.Documents on displayWe are subject to the informational requirements of the Exchange Act and are required to file reports and other information with the SEC. TheSEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that makeelectronic filings with the SEC using its EDGAR system.We are a “foreign private issuer” as such term is defined in Rule 405 under the Securities Act, and are not subject to the same requirements that areimposed upon U.S. domestic issuers by the SEC. Under the Exchange Act, we are subject to reporting obligations that, in certain respects, are less detailedand less frequent than those of U.S. domestic reporting companies. As a result, we do not file the same reports that a U.S. domestic issuer would file with theSEC.We also make available on our website’s investor relations page, free of charge, our annual report and the text of our reports on Form 6-K,including any amendments to these reports, as well as certain other SEC filings, as soon as reasonably practicable after they are electronically filed with orfurnished to the SEC. The address for our investor relations page is “ir.zailaboratory.com” The information contained on our website is not incorporated byreference in this annual report.162 I.Subsidiary informationNot applicable.ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKWe are exposed to market risk including foreign exchange risk, credit risk, cash flow interest rate risk and liquidity risk.Foreign Exchange RiskRenminbi (“RMB”) is not a freely convertible currency. The State Administration of Foreign Exchange, under the authority of the People’s Bankof China, controls the conversion of RMB into foreign currencies. The value of RMB is subject to changes in central government policies and tointernational economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. The cash and cashequivalents of our company included aggregated amounts of RMB26.9 million and RMB25.7 million, which were denominated in RMB, as of December 31,2018 and 2017, respectively, representing 6% and 2% of the cash and cash equivalents as of December 31, 2018 and 2017, respectively.Our business mainly operates in the PRC with most of our transactions settled in RMB, and our financial statements are presented in U.S. dollars.We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge ourexposure to such risk. Although, in general, our exposure to foreign exchange risks should be limited, the value of your investment in our ADSs will beaffected by the exchange rate between the U.S. dollar and the RMB because the value of our business is effectively denominated in RMB, while the ADSswill be traded in U.S. dollars.The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’spolitical and economic conditions. The conversion of RMB into foreign currencies, including U.S. dollars, has been based on rates set by the PBOC. On July21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the revised policy, the RMB ispermitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy resulted in a more than 20%appreciation of the RMB against the U.S. dollar in the following three years. Between July 2008 and June 2010, this appreciation halted, and the exchangerate between the RMB and U.S. dollar remained within a narrow band. In June 2010, the PBOC announced that the PRC government would increase theflexibility of the exchange rate, and thereafter allowed the RMB to appreciate slowly against the U.S. dollar within the narrow band fixed by the PBOC.However, more recently, on August 11, 12 and 13, 2015, the PBOC significantly devalued the RMB by fixing its price against the U.S. dollar 1.9%, 1.6%,and 1.1% lower than the previous day’s value, respectively.To the extent that we need to convert U.S. dollars into RMB for our operations or if any of our arrangements with other parties are denominated inU.S. dollars and need to be converted into RMB, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount wereceive from the conversion. Conversely, if we decide to convert RMB into U.S. dollars for the purpose of making payments for dividends on our ordinaryshares or ADSs or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amountsavailable to us.Credit RiskOur credit risk is primarily attributable to the carrying amounts of cash and cash equivalents, short-term investment and prepayment to suppliers.The carrying amounts of cash and cash equivalents and short-term investment represent the maximum amount of loss due to credit risk. As of December 31,2018 and 2017, all of our cash and cash equivalents and short-term investments were held by major financial institutions located in the PRC andinternational financial institutions outside of the PRC which we believe are of high credit quality, and we will continually monitor the credit worthiness ofthese financial institutions. With respect to the prepayments to suppliers, we perform on-going credit evaluations of the financial condition of these suppliers.163 InflationIn recent years, China has not experienced significant inflation, and thus inflation has not had a material impact on our results of operations.According to the National Bureau of Statistics of China, the Consumer Price Index in China increased by 2.1%, 1.6% and 2.0% in 2018, 2017 and 2016,respectively. Although we have not been materially affected by inflation in the past, we can provide no assurance that we will not be affected in the future byhigher rates of inflation in China.ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt SecuritiesNot applicable.B.Warrants and RightsNot applicable.C.Oher SecuritiesNot applicableD.American Depositary SharesFees and Charges our ADS Holders May Have to PayAn ADS holder will be required to pay the following service fees to Citibank, N.A., the depositary of our ADS program, and certain taxes andgovernmental charges (in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited securities represented byany of the ADSs): Service Fees • Issuance of ADSs (e.g., an issuance of ADS upon a deposit of ordinary shares, upon a change in the ADS(s)-to-share ratio, or for any other reason), excluding ADS issuances as a result of distributions of ordinaryshares Up to U.S.$0.05 per ADS issued • Cancellation of ADSs (e.g., a cancellation of ADSs for delivery of deposited property, upon a change in theADS(s)-to-share ratio, or for any other reason) Up to U.S. $0.05 per ADS cancelled • Distribution of cash dividends or other cash distributions (e.g., upon a sale of rights and other entitlements) Up to U.S. $0.05 per ADS held • Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise ofrights to purchase additional ADSs Up to U.S. $0.05 per ADS held • Distribution of securities other than ADSs or rights to purchase additional ADSs (e.g., upon a spin-off) Up to U.S. $0.05 per ADS held • ADS Services Up to U.S. $0.05 per ADS held on theapplicable record date(s) established by thedepositary bank 164 As an ADS holder you will also be responsible to pay certain charges such as: •taxes (including applicable interest and penalties) and other governmental charges; •the registration fees as may from time to time be in effect for the registration of ordinary shares on the share register and applicable totransfers of ordinary shares to or from the name of the custodian, the depositary bank or any nominees upon the making of deposits andwithdrawals, respectively; •certain cable, telex and facsimile transmission and delivery expenses; •the expenses and charges incurred by the depositary bank in the conversion of foreign currency; •the fees and expenses incurred by the depositary bank in connection with compliance with exchange control regulations and otherregulatory requirements applicable to ordinary shares, ADSs and ADRs; and •the fees and expenses incurred by the depositary bank, the custodian, or any nominee in connection with the servicing or delivery ofdeposited property.ADS fees and charges payable upon (i) the issuance of ADSs, and (ii) the cancellation of ADSs are charged to the person to whom the ADSs areissued (in the case of ADS issuances) and to the person whose ADSs are cancelled (in the case of ADS cancellations). In the case of ADSs issued by thedepositary bank into DTC, the ADS issuance and cancellation fees and charges may be deducted from distributions made through DTC, and may be chargedto the DTC participant(s) receiving the ADSs being issued or the DTC participant(s) holding the ADSs being cancelled, as the case may be, on behalf of thebeneficial owner(s) and will be charged by the DTC participant(s) to the account of the applicable beneficial owner(s) in accordance with the procedures andpractices of the DTC participants as in effect at the time. ADS fees and charges in respect of distributions and the ADS service fee are charged to the holders asof the applicable ADS record date. In the case of distributions of cash, the amount of the applicable ADS fees and charges is deducted from the funds beingdistributed. In the case of (i) distributions other than cash and (ii) the ADS service fee, holders as of the ADS record date will be invoiced for the amount of theADS fees and charges and such ADS fees and charges may be deducted from distributions made to holders of ADSs. For ADSs held through DTC, the ADSfees and charges for distributions other than cash and the ADS service fee may be deducted from distributions made through DTC, and may be charged to theDTC participants in accordance with the procedures and practices prescribed by DTC and the DTC participants in turn charge the amount of such ADS feesand charges to the beneficial owners for whom they hold ADSs.In the event of refusal to pay the depositary bank fees, the depositary bank may, under the terms of the deposit agreement, refuse the requestedservice until payment is received or may set off the amount of the depositary bank fees from any distribution to be made to the ADS holder. Certain of thedepositary fees and charges (such as the ADS services fee) may become payable shortly after the closing of the ADS offering. Note that the fees and chargesyou may be required to pay may vary over time and may be changed by us and by the depositary bank. You will receive prior notice of such changes. Thedepositary bank may reimburse us for certain expenses incurred by us in respect of the ADR program, by making available a portion of the ADS fees chargedin respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary bank agree from time to time.The depositary has agreed to pay certain amounts to us in exchange for its appointment as depositary. We may use these funds towards ourexpenses relating to the establishment and maintenance of the ADR program, including investor relations expenses, or otherwise as we see fit. The depositaryhas reimbursed us for expenses related to the administration and maintenance of the facility in the amount of $0.3 million and $0.1 million, after deduction ofapplicable U.S. taxes, for the year ended December 31, 2018 and 2017, respectively.165 PART IIITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSMaterial Modifications to the Rights of Security HoldersNone.Use of ProceedsThe following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File No. 333-219980), in relation toour initial public offering, which was declared effective by the SEC on September 20, 2017. In September 2017, we completed our initial public offering inwhich we issued and sold an aggregate of 9,583,333 ADSs (reflecting the full exercise of the over-allotment option by the underwriters to purchase anadditional 1,250,000 ADSs), resulting in net proceeds to us of approximately $157.7 million. J.P. Morgan Securities LLC, Citigroup Global Markets Inc. andLeerink Partners LLC were the representatives of the underwriters for our initial public offering.For the period from September 20, 2017, the date that the F-1 Registration Statement was declared effective by the SEC, to December 31, 2018,we used the net proceeds from our initial public offering as follows: •approximately $34.5 million for research development costs driven primarily by ZEJULA, ZL-2401 and ZL-2301; •approximately $34.6 million for licensing and developing new drug candidates; •approximately $11.3 million for the construction of our large molecule drug product facility in Suzhou; and •approximately $38.0 million for staff cost, working capital and other general corporate purpose.There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus datedSeptember 20, 2017 filed with the SEC pursuant to Rule 424(b)(4). Our management retains broad discretion over the allocation and use of the remaining netproceeds of our U.S. initial public offering..ITEM 15. CONTROLS AND PROCEDURESA.Disclosure Controls and ProceduresOur management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectivenessof our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as requiredby Rule 13a-15(b) under the Exchange Act.Based upon that evaluation, our management has concluded that, as of December 31, 2018, our disclosure controls and procedures were effectivein ensuring that the information required to be disclosed by us in the reports that we file and furnish under the Exchange Act was recorded, processed,summarized and reported, within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the reportsthat we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chieffinancial officer, to allow timely decisions regarding required disclosure.166 B.Management’s Annual Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f)and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance withU.S. GAAP in and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflectthe transactions and dispositions of the assets of our company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of consolidated financial statements in accordance with U.S. GAAP, and that receipts and expenditures of our company are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of theunauthorized acquisition, use or disposition of our company’s assets that could have a material effect on the consolidated financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.As required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules as promulgated by the Securities and Exchange Commission, ourmanagement including our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of internal control over financial reporting as ofDecember 31, 2018 using the criteria set forth in the report “Internal Control—Integrated Framework (2013)” published by the Committee of SponsoringOrganizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effectiveas of December 31, 2018.C.Attestation Report of the Registered Public Accounting FirmThis annual report on Form 20-F does not include an attestation report of our independent registered public accounting firm because we qualifiedas an “emerging growth company” as defined under the JOBS Act as of December 31, 2018.D.Changes in Internal Control over Financial ReportingThere were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that William Lis, an independent director (under the standards set forth in Nasdaq Stock MarketRule 5605(a)(2) and Rule 10A-3 under the Exchange Act) and member of our audit committee, is an audit committee financial expert.ITEM 16B. CODE OF ETHICSOur board of directors has adopted a code of ethics applicable to all of our employees, officers and directors, including our principal executiveofficer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. This code is intended to qualify as a“code of ethics” within the meaning of the applicable rules of the SEC. Our code of ethics is available on our website athttp://ir.zailaboratory.com/phoenix.zhtml?c=254615&p=irol-govhighlights. We expect that any amendment to this code, or any waivers of its requirements,will be disclosed on our website. Information contained on, or that can be accessed through, our website is not incorporated by reference into this annualreport. See “Item 6.C. Directors, Senior Management and Employees—Code of Ethics” for more information.167 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICESPrincipal Accountant Fees and ServicesThe following table sets forth the aggregate fees by the categories specified below in connection with certain professional services rendered byDeloitte Touche Tohmatsu Certified Public Accountants LLP, our independent registered public accounting firm, for the periods indicated. We did not payany other fees to our auditors during the periods indicated below. 2018 2017 US$ US$ (in thousands) Audit Fees(1) $550 $405 (1)“Audit fees” means the aggregate fees in each of the fiscal years listed for professional services rendered by our independent registered publicaccounting firm for the audit of our financial statements or services that are normally provided by the auditors in connection with and regulatory fillingor engagements.The policy of our audit committee is to pre-approve all audit and non-audit services provided by Deloitte Touche Tohmatsu Certified PublicAccountants LLP, including audit services, audit-related services, tax services and other services as described above, other than those for de minimis serviceswhich are approved by the Audit Committee prior to the completion of the audit.ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G. CORPORATE GOVERNANCEThe Nasdaq Stock Market listing rules include certain accommodations in the corporate governance requirements that allow foreign privateissuers, such as us, to follow “home country” corporate governance practices in lieu of the otherwise applicable corporate governance standards of the NasdaqStock Market. We currently follow Cayman Islands corporate governance practices in lieu of the corporate governance requirements of the Nasdaq StockMarket in respect of the following: •the majority independent director requirement under Section 5605(b)(1) of the Nasdaq Stock Market listing rules; •the requirement under Section 5605(d) of the Nasdaq Stock Market listing rules that a compensation committee comprised solely of independentdirectors governed by a compensation committee charter oversee executive compensation; •the requirement under Section 5605(e) of the Nasdaq Stock Market listing rules that director nominees be selected or recommended for selectionby either a majority of the independent directors or a nominations committee comprised solely of independent directors; and •the requirement under Section 5605(b)(2) of the Nasdaq Stock Market listing rules that the independent directors have regularly scheduledmeetings with only the independent directors present.168 Cayman Islands law does not impose a requirement that the board consist of a majority of independent directors or that such independentdirectors meet regularly without other members present. Nor does Cayman Islands law impose specific requirements on the establishment of a compensationcommittee or nominating committee or nominating process.ITEM 16H. MINE SAFETY DISCLOSURENot applicable.169 PART IIIITEM 17. FINANCIAL STATEMENTS.See “Item 18. Financial Statements.”ITEM 18. FINANCIAL STATEMENTS.The consolidated financial statements of Zai Lab Limited and its subsidiaries are included at the end of this Annual Report on Form 20-F.ITEM 19. EXHIBITS170 EXHIBIT INDEX ExhibitNumber Exhibit Title 1.1 Fourth Amended and Restated Memorandum and Articles of Association of Zai Lab Limited (incorporated by reference to Exhibit 3.1 toAmendment No. 2 to our Registration Statement on Form F-1 (File No. 333-219980) filed with the SEC on September 1, 2017) 4.1 Form of Deposit Agreement (incorporated by reference to Exhibit 4.1 to Amendment No. 2 to our Registration Statement on Form F-1(File No. 333-219980) filed with the SEC on September 1, 2017) 4.2 Form of American Depositary Receipt (incorporated by reference to Exhibit 4.1 to Amendment No. 2 to our Registration Statement onForm F-1 (File No. 333-219980) filed with the SEC on September 1, 2017) 4.3 Registrant’s Specimen Certificate for Ordinary Shares (incorporated by reference to Exhibit 4.3 to Amendment No. 2 to our RegistrationStatement on Form F-1 (File No. 333-219980) filed with the SEC on September 1, 2017) 4.4 Third Amended and Restated Shareholders Agreement between Zai Lab Limited and other parties named therein dated June 26, 2017(incorporated by reference to Exhibit 4.4 to our Registration Statement on Form F-1 (File No. 333-219980) filed with the SEC onAugust 15, 2017) 10.1# Zai Lab Limited 2015 Omnibus Equity Incentive Plan as amended on February 3, 2016 and April 10, 2016 (incorporated by reference toExhibit 10.1 to Amendment No. 2 to our Registration Statement on Form F-1 (File No. 333-219980) filed with the SEC on September 1,2017) 10.2# Zai Lab Limited 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.22 to Amendment No. 2 to our RegistrationStatement on Form F-1 (File No. 333-219980) filed with the SEC on September 1, 2017) 10.3# Form Restricted Share Unit Award Agreement (incorporated by reference to Exhibit 10.23 to Amendment No. 2 to our RegistrationStatement on Form F-1 (File No. 333-219980) filed with the SEC on September 1, 2017) 10.4# Form Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.24 to Amendment No. 2 to our Registration Statementon Form F-1 (File No. 333-219980) filed with the SEC on September 1, 2017) 10.5# Form of Non-Statutory Stock Option Award Agreement (incorporated by reference to Exhibit 10.25 to Amendment No. 2 to ourRegistration Statement on Form F-1 (File No. 333-219980) filed with the SEC on September 1, 2017) 10.6# Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.10 to Amendment No. 2 to our RegistrationStatement on Form F-1 (File No. 333-219980) filed with the SEC on September 1, 2017) 10.7# Zai Lab Limited 2017 Cash Bonus Plan (incorporated by reference to Exhibit 10.11 to Amendment No. 2 to our Registration Statementon Form F-1 (File No. 333-219980) filed with the SEC on September 1, 2017) 10.8+ Collaboration, Development and License Agreement by and between Tesaro, Inc. and Zai Lab (Shanghai) Co., Ltd. dated September 28,2016 (incorporated by reference to Exhibit 10.2 to our Registration Statement on Form F-1 (File No. 333-219980) filed with the SEC onAugust 15, 2017) 10.9 Amendment to Collaboration, Development and License Agreement by and between Tesaro, Inc. and Zai Lab (Shanghai) Co., Ltd.,dated February 26, 2018 (incorporated by reference to Exhibit 4.3 to our Annual Report on Form 20-F (File No. 001-38205) filed withthe SEC on April 30, 2018) 10.10+ License Agreement by and between Bristol-Myers Squibb Company and Zai Lab (Hong Kong) Limited dated March 9,2015 (incorporated by reference to Exhibit 10.3 to our Registration Statement on Form F-1 (File No. 333-219980) filed with the SEC onAugust 15, 2017)171 10.11+ License and Collaboration Agreement by and between Paratek Bermuda Ltd. and Zai Lab (Shanghai) Co., Ltd. dated April 21,2017 (incorporated by reference to Exhibit 10.4 to our Registration Statement on Form F-1 (File No. 333-219980) filed with the SECon August 15, 2017) 10.12+ License Agreement by and between Sanofi and Zai Lab (Hong Kong) Limited dated July 22, 2015 (incorporated by reference to Exhibit10.8 to our Registration Statement on Form F-1 (File No. 333-219980) filed with the SEC on August 15, 2017) 10.13+ License Agreement by and between Five Prime Therapeutics, Inc. and Zai Lab (Shanghai) Co., Ltd. dated December 19, 2017(incorporated by reference to Exhibit 4.11 to our Annual Report on Form 20-F (File No. 001-38205) filed with the SEC on April 30,2018) 10.14+ License and Collaboration Agreement by and between Entasis Therapeutics Holdings Inc. and Zai Lab (Shanghai) Co., Ltd. dated as ofApril 25, 2018 (incorporated by reference to Exhibit 10.12 to our Amendment No. 2 to our Registration Statement on Form F-1 (File No.333-227159) filed with the SEC on September 5, 2018) 10.15*^ License and Collaboration Agreement by and between Novocure Limited and Zai Lab (Shanghai) Co., Ltd. dated September 10, 2018 10.16*^ Collaboration Agreement by and between MacroGenics, Inc. and Zai Lab (Shanghai) Co., Ltd. dated November 29, 2018 10.17 Form of Indemnification Agreement for Directors and Officers (incorporated by reference to Exhibit 10.12 to our Registration Statementon Form F-1 (File No. 333-219980) filed with the SEC on August 15, 2017) 10.18*# Fourth Amended and Restated Founder Employment Agreement between Samantha (Ying) Du and Zai Lab Limited dated December 1,2018 10.19*# Amended and Restated Employment Agreement between William Ki Chul Cho and Zai Lab (Hong Kong) Limited dated March 22,2019 10.20# Founder Employment Agreement between Ning Xu and Zai Lab (Hong Kong) Limited dated May 6, 2014 (incorporated by reference toExhibit 10.14 to Amendment No. 2 to our Registration Statement on Form F-1 (File No. 333-219980) filed with the SEC on September1, 2017) 10.21# Employment Agreement between James Yan and Zai Lab (Hong Kong) Limited dated March 10, 2015 (incorporated by reference toExhibit 10.15 to Amendment No. 2 to our Registration Statement on Form F-1 (File No. 333-219980) filed with the SEC on September1, 2017) 10.22*# Second Amended and Restated Employment Agreement between Harald Reinhart and Zai Lab (Hong Kong) Limited dated December28, 2018 10.23# Employment Agreement between Samantha (Ying) Du and Zai Lab (Shanghai) Co., Ltd. dated July 1, 2017 (English translation)(incorporated by reference to Exhibit 10.18 to Amendment No. 2 to our Registration Statement on Form F-1 (File No. 333-219980) filedwith the SEC on September 1, 2017) 10.24# Employment Agreement between Ning Xu and Zai Lab (Shanghai) Co., Ltd. dated July 1, 2017 (English translation) (incorporated byreference to Exhibit 10.19 to Amendment No. 2 to our Registration Statement on Form F-1 (File No. 333-219980) filed with the SEC onSeptember 1, 2017) 10.25# Employment Agreement between James Yan and Zai Lab (Shanghai) Co., Ltd. dated September 1, 2015 (English translation)(incorporated by reference to Exhibit 10.20 to Amendment No. 2 to our Registration Statement on Form F-1 (File No. 333-219980) filedwith the SEC on September 1, 2017) 10.26*# Amended and Restated Employment Agreement between Tao Fu and Zai Lab (US) LLC dated December 3, 2018 10.27*# Amended and Restated Employment Agreement between Yongjiang Hei and Zai Lab (US) LLC dated March 22, 2019172 10.28 Letter Agreement between Samantha (Ying) Du and Zai Lab (US) LLC dated December 11, 2017 (incorporated by reference to Exhibit4.16 to our Annual Report on Form 20-F (File No. 001-38205) filed with the SEC on April 30, 2018) 10.29 Jinchuang Building House Leasing Contract by and between Zai Lab (Shanghai) Co., Ltd. and Shanghai Jinchuang Property Co., Ltd.dated September 1, 2016 (English translation) (incorporated by reference to Exhibit 10.26 to Amendment No. 2 to our RegistrationStatement on Form F-1 (File No. 333-219980) filed with the SEC on September 1, 2017) 12.1* Certification of Chief Executive Officer Required by Rule 13a-14(a) 12.2* Certification of Chief Financial Officer Required by Rule 13a-14(a) 15.1** Certification of Chief Executive Officer Required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United StatesCode 15.2** Certification of Chief Financial Officer Required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United StatesCode 21.1 Subsidiaries of the registrant (incorporated by reference to Exhibit 21.1 to our Registration Statement on Form F-1 (File No. 333-219980) filed with the SEC on August 15, 2017) 23.1* Consent of Deloitte Touche Tohmatsu Certified Public Accountants LLP, an independent accounting firm, regarding the consolidatedfinancial statements of Zai Lab Limited 23.2* Consent of Zhong Lun Law Firm 101.INS** XBRL Instance Document 101.SCH** XBRL Taxonomy Extension Schema Document 101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB** XBRL Taxonomy Extension Label Linkbase Document 101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document 101.DEF** XBRL Taxonomy Extension Definitions Linkbase Document *Filed herewith**Furnished herewith#Management contract or compensatory plan+Confidential treatment has been granted as to certain portions, which portions have been omitted and submitted separately to the Securities andExchange Commission.^Confidential treatment has been requested as to certain portions, which portions have been omitted and submitted separately to the Securities andExchange Commission. 173 SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on annual report on Form 20-F and that it has duly caused andauthorized the undersigned to sign this annual report on its behalf. ZAI LAB LIMITED By:/s/ Samantha Du Name:Samantha DuDate: March 29, 2019Title:Chief Executive Officer 174 Zai Lab LimitedIndex to Consolidated Financial Statements PageReport of Independent Registered Public Accounting Firm F-2Consolidated Balance Sheets as of December 31, 2017 and 2018 F-3Consolidated Statements of Operations for the Years Ended December 31, 2016, 2017 and 2018 F-4Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2016, 2017 and 2018 F-5Consolidated Statements of Changes in Shareholders' (Deficit) Equity for the Years Ended December 31, 2016, 2017 and 2018 F-6Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2017 and 2018 F-7Notes to Consolidated Financial Statements F-8Schedule I - Condensed Financial Information of Parent Company F-34 F-1 Report of independent registered public accounting firmTo the Board of Directors and Shareholders of Zai Lab LimitedOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Zai Lab Limited (the "Company") and its subsidiaries (collectively referred to as the"Group") as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive loss, changes in shareholders' equity (deficit),and cash flows, for each of the three years in the period ended December 31, 2018, and the related notes and the financial statement schedules included asSchedule I (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financialposition of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period endedDecember 31, 2018, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on the Group's financial statementsbased on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, norwere we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding ofinternal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control overfinancial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures inthe financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Deloitte Touche Tohmatsu Certificated Public Accountants LLPShanghai, ChinaMarch 29, 2019We have served as the Company's auditor since 2017.F-2 Zai Lab LimitedConsolidated balance sheets(In U.S. dollars ("$") except for number of shares) As of December 31, 2017 2018 Note $ $ Assets Current assets: Cash and cash equivalents 3 229,660,148 62,951,607 Short-term investments 4 — 200,350,000 Accounts receivable — 89,708 Inventories 5 — 3,822 Prepayments and other current assets 954,506 5,749,260 Total current assets 230,614,654 269,144,397 Investments in equity investees 6 1,650,348 3,149,855 Prepayments for equipment 126,411 275,853 Property and equipment, net 7 11,853,764 20,494,482 Intangible assets, net 20,089 321,566 Long term deposits 306,825 556,738 Value added tax recoverable 5,062,137 8,044,258 Total assets 249,634,228 301,987,149 Liabilities and shareholders' equity Current liabilities: Short-term borrowings 9 — 3,642,616 Accounts payable 8,967,685 37,432,035 Other payables 10 3,101,459 7,766,843 Total current liabilities 12,069,144 48,841,494 Deferred income 2,394,124 2,063,942 Total liabilities 14,463,268 50,905,436 Commitments and contingencies (Note 19) Shareholders' equity Ordinary shares (par value of US$0.00006 per share; 83,333,333 shares authorized, 49,912,570 and 58,006,967 shares issued and outstanding as of December 31,2017 and 2018, respectively) 2,995 3,481 Subscription receivable (18) — Additional paid-in capital 345,269,688 498,043,011 Accumulated deficit (110,551,613) (249,626,508)Accumulated other comprehensive income 15 449,908 2,661,729 Total shareholders' equity 235,170,960 251,081,713 Total liabilities and shareholders' equity 249,634,228 301,987,149 The accompanying notes are an integral part of these consolidated financial statements.F-3 Zai Lab LimitedConsolidated statements of operations(In U.S. dollars ("$") except for number of shares) Year ended December 31, 2016 2017 2018 Note $ $ $ Revenue — — 129,452 Cost of sales — — (43,590)Gross profit — — 85,862 Operating expenses: Research and development (32,149,157) (39,341,518) (120,278,023)Selling, general and administrative (6,380,144) (12,049,518) (21,575,921)Loss from operations (38,529,301) (51,391,036) (141,768,082)Interest income 403,266 527,351 3,260,634 Interest expense — — (39,672)Changes in fair value of warrants (1,920,000) 200,000 — Other income 2,533,966 933,158 1,968,325 Other expense (143) (403,997) (1,909,549)Loss before income tax and share of loss from equity method investment (37,512,212) (50,134,524) (138,488,344)Income tax expense 8 — — — Share of loss from equity method investment — (249,652) (586,551)Net loss (37,512,212) (50,384,176) (139,074,895)Net loss attributable to ordinary shareholders (37,512,212) (50,384,176) (139,074,895)Loss per share - basic and diluted 12 (3.97) (2.32) (2.64)Weighted-average shares used in calculating net loss per ordinary share - basic and diluted 9,439,028 21,752,757 52,609,810 The accompanying notes are an integral part of these consolidated financial statements.F-4 Zai Lab LimitedConsolidated statements of comprehensive loss(In U.S. dollars ("$") except for number of shares) Year ended December 31, 2016 2017 2018 $ $ $ Net loss (37,512,212) (50,384,176) (139,074,895)Other comprehensive (loss) income, net of tax of nil: Foreign currency translation adjustments (594,912) 1,148,440 2,211,821 Comprehensive loss (18,120,630) (49,235,736) (136,863,074) The accompanying notes are an integral part of these consolidated financial statements. F-5 Zai Lab LimitedConsolidated statements of shareholders' (deficit) equity(In U.S. dollars ("$") except for number of shares) Ordinary shares Additional Accumulatedother Number ofShares Amount paidin capital Subscriptionreceivable Accumulateddeficit comprehensiveloss (income) Total $ $ $ $ $ $ Balance at January 1, 2016 8,885,184 533 4,388,410 (1) (22,655,225) (103,620) (18,369,903)Issuance of ordinary shares upon vesting of restricted shares 771,991 46 (42) (4) — — — Share-based compensation — — 4,925,278 — — — 4,925,278 Net loss — — — — (37,512,212) — (37,512,212)Foreign currency translation — — — — — (594,912) (594,912)Balance at December 31, 2016 9,657,175 579 9,313,646 (5) (60,167,437) (698,532) (51,551,749)Issuance of ordinary shares upon vesting of restricted shares 1,666,145 100 (87) (13) — — — Exercise of shares option 100,834 6 65,494 — — — 65,500 Exercise of warrant 461,808 28 4,699,972 — — — 4,700,000 Conversion of convertible preferred shares to ordinary shares 28,443,275 1,707 163,605,437 — — — 163,607,144 Issuance of ordinary shares upon initial public offering, net of issuance cost of $2,770,299 9,583,333 575 157,654,120 — — — 157,654,695 Share-based compensation — — 9,931,106 — — — 9,931,106 Net loss — — — — (50,384,176) — (50,384,176)Foreign currency translation — — — — — 1,148,440 1,148,440 Balance at December 31, 2017 49,912,570 2,995 345,269,688 (18) (110,551,613) 449,908 235,170,960 Issuance of ordinary shares upon vesting of restricted shares 338,332 20 (38) 18 — — — Exercise of shares option 256,065 16 195,695 — — — 195,711 Issuance of ordinary shares upon follow-on public offering, net of issuance cost of $651,527 7,500,000 450 140,348,023 — — — 140,348,473 Share-based compensation — — 12,229,643 — — — 12,229,643 Net loss — — — — (139,074,895) — (139,074,895)Foreign currency translation — — — — — 2,211,821 2,211,821 Balance at December 31, 2018 58,006,967 3,481 498,043,011 — (249,626,508) 2,661,729 251,081,713 The accompanying notes are an integral part of these consolidated financial statements. F-6 Zai Lab LimitedConsolidated statements of cash flows(In U.S. dollars ("$") except for number of shares) Year ended December 31, 2016 2017 2018 $ $ $ Operating activities Net loss (37,512,212) (50,384,176) (139,074,895)Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation of property and equipment 198,224 545,705 1,634,377 Amortization of intangible assets 781 2,422 15,398 Amortization of deferred income — (78,000) (312,000)Share-based compensation 4,925,278 9,931,106 12,229,643 Share of loss from equity method investment — 249,652 586,551 Loss on disposal of property and equipment — 12,961 704 Change in fair value of warrants 1,920,000 (200,000) — Changes in operating assets and liabilities: Accounts receivable — — (89,708)Inventories — — (3,822)Prepayments and other current assets (74,507) (810,979) (4,794,754)Long term deposits (267,980) (38,845) (249,913)Value added tax recoverable (1,376,921) (3,685,216) (2,982,121)Accounts payable (929,716) 8,444,347 28,464,350 Other payables 242,187 1,950,152 7,056,350 Deferred income 716,835 1,693,690 (18,182)Net cash used in operating activities (32,158,031) (32,367,181) (97,538,022) Cash flows from investing activities: Purchases of short-term investments — — (200,350,000)Purchase of cost method investment (500,000) — — Disposal of cost method investment — 500,000 — Purchase of equity method investment — (1,900,000) (2,086,058)Purchase of property and equipment (2,223,882) (9,102,330) (10,015,005)Disposal of property and equipment — 82,789 — Purchase of intangible assets (5,615) (14,690) (102,834)Net cash used in investing activities (2,729,497) (10,434,231) (212,553,897) Cash flows from financing activities: Proceed from short-term borrowings — — 3,642,616 Proceed from issuance of convertible preferred shares, net of issuance cost 106,200,000 29,100,000 — Proceeds from exercise of warrants — 1,000,000 — Proceeds from exercises of stock options — 65,500 195,711 Proceeds from issuance of ordinary shares upon public offerings — 160,424,994 141,000,000 Payment of public offering costs — (2,730,299) (691,527)Net cash provided by financing activities 106,200,000 187,860,195 144,146,800 Effect of foreign exchange rate changes on cash and cash equivalents (524,398) 652,595 (763,422)Net increase (decrease) in cash and cash equivalents 70,788,074 145,711,378 (166,708,541)Cash and cash equivalents - beginning of the year 13,160,696 83,948,770 229,660,148 Cash and cash equivalents - end of the year 83,948,770 229,660,148 62,951,607 Supplemental disclosure on non-cash investing and financing activities: Payables for purchase of property and equipment — 413,657 1,708,663 Payables for intangible assets — — 225,158 Payables for public offering costs — 40,000 — Conversion of convertible preferred shares — 163,607,144 — Exercise of warrants — 3,700,000 — Supplemental disclosure of cash flow information: Interest expense paid — — 35,799 The accompanying notes are an integral part of these consolidated financial statements. F-7 Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares)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 theCompanies Law of the Cayman Islands. The Company and its subsidiaries (collectively referred to as the “Group”) are principally engaged in discovering orlicensing, developing and commercializing proprietary therapeutics that address areas of large unmet medical needs in the China market, including in thefields of oncology, autoimmune and infectious disease therapies.As of December 31, 2018, the Group's significant operating subsidiaries are as follows: Name of company Place ofincorporation Date ofincorporation Percentage ofownership Principal activitiesZai Lab (Hong Kong) Limited Hong Kong April 29, 2013 100% Operating company for businessdevelopment and R&D activitiesZai Lab (Shanghai) Co., Ltd. The People'sRepublic of China("PRC" or "China") January 6, 2014 100% Development and commercialisation ofinnovative medicinesZai Lab (AUST) Pty., Ltd. Australia December 10, 2014 100% Clinical trial activitiesZai Lab (Suzhou) Co., Ltd. PRC November 30, 2015 100% Development and commercialisation ofinnovative medicinesZai Biopharmaceutical (Suzhou) Co., Ltd. PRC June 15, 2017 100% Development and commercialisation ofinnovative medicinesZai Lab (US) LLC U.S. April 21, 2017 100% Operating company for businessdevelopment and R&D activities 2.Summary of significant accounting policies(a) Basis of presentationThe consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP").(b) Principles of consolidationThe consolidated financial statements include the financial statements of the Company and its subsidiaries. All intercompany transactions and balancesamong the Group and its subsidiaries are eliminated upon consolidation.(c) Use of estimatesThe preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements and the reportedamounts of expenses during the period. Areas where management uses subjective judgment include estimating the useful lives of long-lived assets, assessingthe impairment of long-lived assets, revenue recognition, valuation of ordinary shares, share-based compensation expenses, recoverability of deferred taxassets and the fair value of the financial instruments. Management bases the estimates on historical experience and various other assumptions that arebelieved to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results coulddiffer from these estimates.F-8Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) (d) Foreign currency translationThe functional currency of Zai Lab Limited and Zai Lab (Hong Kong) Limited are the United States dollar ("$"). The Group's PRC subsidiaries determinedtheir functional currency to be Chinese Renminbi ("RMB"). The Group's Australia subsidiary determined its functional currency to be Australia dollar ("A$").The determination of the respective functional currency is based on the criteria of Accounting Standard Codification ("ASC") 830, Foreign CurrencyMatters. The Group uses the United States dollar as its reporting currency.Assets and liabilities are translated from each entity's functional currency to the reporting currency at the exchange rate on the balance sheet date. Equityamounts are translated at historical exchange rates, and expenses, gains and losses are translated using the average rate for the year. Translation adjustmentsare reported as cumulative translation adjustments and are shown as a separate component of other comprehensive loss in the consolidated statements ofchanges in shareholders' deficits and comprehensive loss.Monetary assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional currencies at theprevailing rates of exchange at the balance sheet date. Nonmonetary assets and liabilities are remeasured into the applicable functional currencies athistorical exchange rates. Transactions in currencies other than the applicable functional currencies during the year are converted into the functionalcurrencies at the applicable rates of exchange prevailing at the transaction dates. Transaction gains and losses are recognized in the consolidated statementsof operations.(e) Cash and cash equivalentsThe Group considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Cash and cashequivalents consist primarily of cash on hand, demand deposits and highly liquid investments with maturity of less than three months and are stated at costplus interests earned, which approximates fair value.(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 fairvalue. Interests are included in interest income.(g) Accounts receivableAccounts receivable are recorded at the amounts due from customers and net of allowances for doubtful accounts. An allowance for doubtful accounts isrecorded when the collection of the full amount is no longer probable. In evaluating the collectability of accounts receivable, the Group considers manyfactors including aging of the receivable due, the customer's payment history, creditworthiness, financial conditions, and current economic trends. Creditlosses of accounts receivable, which may be for all or part of a particular accounts receivable, shall be deducted from the allowance. The related accountsreceivable balance shall be charged off in the period in which the accounts receivable are deemed uncollectible. Recoveries of accounts receivablepreviously charged written off shall be recorded when received. The Group regularly reviews the adequacy and appropriateness of any allowance for doubtfulaccounts. No allowance for doubtful accounts was recorded as of December 31, 2018.(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 thecomposition of inventory in order to identify obsolete, slow-moving or otherwise non-saleable items. The Group will record a write-down to its net realizablevalue in the period that the decline in value is first identified. No inventory provision was recorded as of December 31, 2018.F-9Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) (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 orotherwise control. The Group records equity method adjustments in share of earnings and losses. Equity method adjustments include the Group’sproportionate share of investee income or loss, adjustments to recognize certain differences between the Group’s carrying value and its equity in net assets ofthe investee at the date of investment, impairments, and other adjustments required by the equity method. Dividends received are recorded as a reduction ofcarrying amount of the investment. Cumulative distributions that do not exceed the Group’s cumulative equity in earnings of the investee are considered as areturn on investment and classified as cash inflows from operating activities. Cumulative distributions in excess of the Group’s cumulative equity in theinvestee’s earnings are considered as a return of investment and classified as cash inflows from investing activities.For equity investments over which the Group does not have significant influence or control, the cost method of accounting is used. Under the cost method,the Group carries the investment at cost and recognizes income to the extent of dividends received from the distribution of the equity investee’s post-acquisition profits.The Group is required to perform an impairment assessment of its investments whenever events or changes in business circumstances indicate that thecarrying 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 isother than temporary. No impairment was recorded for the years ended December 31, 2016, 2017 and 2018.(j) Prepayments for equipmentThe prepayments for equipment purchase are recorded in long term prepayments considering the prepayments are all related to property and equipment.(k) Property and equipmentProperty and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over theestimated useful lives of the respective assets as follows: Useful lifeOffice equipment 3 yearsElectronic equipment 3 yearsVehicle 4 yearsLaboratory equipment 5 yearsManufacturing equipment 10 yearsLeasehold improvements lesser of useful life or lease term Construction in progress represents property and equipment under construction and pending installation and is stated at cost less impairment losses if any.(l) Long term depositsLong term deposits represent amounts paid in connection with the Group’s long-term lease agreements.(m) 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 areexpected to be deducted from future value added tax payables arising on the Group's revenues which it expects to generate in the future.F-10Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) (n) Intangible assetsIntangible assets mainly consist of externally purchased software which are amortized over one to five years on a straight-line basis. Amortization expensesfor the years ended December 31, 2016, 2017 and 2018 were $781, $2,422 and $15,398, respectively. Amortization expenses of the Group's intangible assetsare expected to be approximately $206,881, $41,584, $26,562, $24,940 and $21,599 for the years ended December 31, 2019, 2020, 2021, 2022, 2023 andthereafter, respectively.(o) 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 assetsare reviewed for events or changes in circumstances, which indicate that their carrying value may not be recoverable. Long-lived assets are reported at thelower of carrying amount or fair value less cost to sell. For the years ended December 31, 2016, 2017 and 2018, there was no impairment of the value of theGroup's long-lived assets.(p) Fair value measurementsThe Group applies ASC topic 820 ("ASC 820"), Fair Value Measurements and Disclosures, in measuring fair value. ASC 820 defines fair value, establishes aframework 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 fair 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 activity.ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) costapproach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets orliabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on thevalue indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required toreplace an asset.Financial instruments of the Group primarily include cash and cash equivalents, short-term investments, accounts receivable, prepayments and other currentassets, short-term borrowings, accounts payable and other payables. As of December 31, 2017 and 2018, the carrying values of cash and cash equivalents,short-term investments, accounts receivable, prepayments and other current assets, short-term borrowings, accounts payable and other payable approximatedtheir fair values due to the short-term maturity of these instruments. F-11Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) (q) Revenue recognitionIn May 2014, the Financial Accounting Standards Board (FASB) issued a comprehensive new standard which amends revenue recognition principles. In2018, the Group adopted of ASC topic 606 ("ASC 606"), Revenue from Contracts with Customers, in recognition of revenue. Under ASC 606, the Grouprecognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration expected to receive inexchange for those goods or services. To determine revenue recognition for arrangements that the Group determines are within the scope of ASC 606, theGroup performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determinethe transaction price, including 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 thatthe Group will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer. Once a contract is determinedto be within the scope of ASC 606 at contract inception, the Group reviews the contract to determine which performance obligations it must deliver andwhich of these performance obligations are distinct. The Group recognizes as revenue the amount of the transaction price that is allocated to eachperformance obligation when that performance obligation is satisfied or as it is satisfied.The Group's principal source of revenue is product sales. The contracts with customers generally contain a single performance obligation and the Grouprecognizes revenue 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 customer upon delivery.The timing between the recognition of revenue for product sales and the receipt of payment is not significant. Therefore the Group do not assess whether acontract has a significant financing component if the expectation at contract inception is such that the period between the transfer of the promised good tothe customer and receipt of payment will be one year or lessFor the year ended December 31, 2018, the Group's product revenues were generated from the sale of ZEJULA (niraparib) to customers, which are typicallyhealthcare providers such as oncology centers. The Group utilizes a distributor in Hong Kong for warehousing services. Based on the nature of thearrangement, the Group has determined that it is a principal in the transaction since the Group is primarily responsible for fulfilling the promise to provide theproducts to the customer, maintains inventory risk until delivery to the customer and has latitude in establishing the price. Revenue was recognized at theamount 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. Considerationpaid to the distributor is recognized in operating expenses.(r) Research and development expensesElements of research and development expenses primarily include (1) payroll and other related costs of personnel engaged in research and developmentactivities, (2) in-licensed patent rights fee of exclusive development rights of drugs granted to the Group, (3) costs related to preclinical testing of the Group’stechnologies under development and clinical trials such as payments to contract research organizations (“CROs”), investigators and clinical trial sites thatconduct our clinical studies (4) costs to develop the product candidates, including raw materials and supplies, product testing, depreciation, and facilityrelated expenses, (5) other research and development expenses. Research and development expenses are charged to expense as incurred when theseexpenditures relate to the Group’s 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 drug compound, aswell as pre-commercial milestone payments, are immediately expensed as acquired in-process research and development in the period in which they areincurred, provided that the new drug compound did not also include processes or activities that would constitute a “business” as defined under US GAAP, thedrug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future use. Milestone paymentsmade to third parties subsequent to regulatory approval would be capitalized as intangible assets and amortized over the estimated remaining useful life ofthe related product. The conditions enabling capitalization of development costs as an asset have not yet been met and, therefore, all developmentexpenditures are recognized in profit or loss when incurred.F-12Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) (s) Deferred incomeDeferred income consists of deferred income from government grants and American Depositary Receipts (the "ADR") Program Agreement with ADRdepositary bank (the “DB”) in July 2017.Government grants consist of cash subsidies received by the Group's subsidiaries in the PRC from local governments. Grants received as incentives forconducting business in certain local districts with no performance obligation or other restriction as to the use are recognized when cash is received. Cashgrants of $2,065,510, $855,158 and $1,332,419 were included in other income for the years ended December 31, 2016, 2017 and 2018, respectively. Grantsreceived with government specified performance obligations are recognized when all the obligations have been fulfilled. If such obligations are not satisfied,the Group may be required to refund the subsidy. Cash grants of $912,124 and $893,942 were recorded in deferred income as of December 31, 2017 and 2018respectively, which will be recognized when the government specified performance obligation is satisfied.According to the ADR program agreement, the Group has the right to receive reimbursements for using DB's services, subject to the compliance by the Groupwith the terms of the Agreement. The Group performed a detailed assessment of the requirements and recognizes the reimbursements it is expected to beentitled to over the five-year contract term as other income. For the year ended December 31, 2017 and 2018, $78,000 and $312,000 were recorded in otherincome, respectively, and $1,482,000 and $1,170,000 were recorded in deferred income as of December 31, 2017 and 2018, respectively.(t) LeasesLeases are classified at the inception date as either a capital lease or an operating lease. the Group assesses a lease to be a capital lease if any of the followingconditions exist: (1) ownership is transferred to the lessee by the end of the lease term, (2) there is a bargain purchase option, (3) the lease term is at least 75%of the property's estimated remaining economic life or (4) the present value of the minimum lease payments at the beginning of the lease term is 90% or moreof the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and anincurrence of an obligation at the inception of the lease. The Group has no capital leases for the years presented.All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over the periods of their respective leaseterms. The Group leases office space and employee accommodation under operating lease agreements. Certain of the lease agreements contain rent holidays.Rent holidays are considered in determining the straight-line rent expense to be recorded over the lease term. The lease term begins on the date of initialpossession of the lease property for purposes of recognizing lease expense on straight-line basis over the term of the lease.(u) Comprehensive lossComprehensive loss is defined as the changes in equity of the Group during a period from transactions and other events and circumstances excludingtransactions resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220, Comprehensive Income, requires that allitems that are required to be recognized under current accounting standards as components of comprehensive loss be reported in a financial statement that isdisplayed with the same prominence as other financial statements. For each of the periods presented, the Group's comprehensive loss includes net loss andforeign currency translation adjustments, which are presented in the consolidated statements of comprehensive loss.(v) Stock-based compensationAwards granted to employeesThe Group grants share options 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 measured at the grant date fair value of the awards and recognized as expenses (1) immediately at grant date if no vestingconditions are required; or (2) using graded vesting method over the requisite service period, which is the vesting period.F-13Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair value of the considerationreceived 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 awards, previously recognized compensation expenserelating to those awards are reversed.The Group determined the fair value of the stock options granted to employees. Before 2018, the Group applied binomial option pricing model indetermining the estimated fair value of the options granted to employees. In 2018, the Group changed to use the Black-Scholes option valuation model sincethe Group expected the Black-Scholes option valuation model provide a better estimate of fair value. A change in the valuation technique is a change inaccounting estimate for the purposes of applying ASC 250, and shall be applied prospectively to new awards.Awards granted to non-employeesThe Group has accounted for equity instruments issued to non-employees in accordance with the provisions of ASC 505, Equity-Based Payments to Non-Employees. All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair value of theconsideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of theequity instrument issued is the date on which the counterparty's performance is completed as there is no associated performance commitment. The expense isrecognized in the same manner as if the Group had paid cash for the services provided by the non-employees in accordance with ASC 505.(w) Income taxesIncome tax expense includes (a) deferred tax expense, which generally represents the net change in the deferred tax asset or liability balance during the yearplus any change in valuation allowances; (b) current tax expense, which represents the amount of tax currently payable to or receivable from a taxingauthority; and (c) non-current tax expense, which represents the increases and decreases in amounts related to uncertain tax positions from prior periods andnot settled with cash or other tax attributes.The Group recognizes deferred tax assets and liabilities for temporary differences between the financial statement and income tax bases of assets andliabilities, which are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance isprovided 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 Taxes, which requires that realization of an uncertain income taxposition be recognized in the financial statements. The benefit to be recorded in the financial statements is the amount most likely to be realized assuming areview by tax authorities having all relevant information and applying current conventions. It is the Group's policy to recognize interest and penalties relatedto unrecognized tax benefits, if any, as a component of income tax expense. No unrecognized tax benefits and related interest and penalties were recorded inany of the periods presented.(x) Earnings (loss) per shareBasic earnings (loss) per ordinary share is computed by dividing net income (loss) attributable to ordinary shareholders by weighted average number ofordinary shares outstanding during the period.The Group's convertible preferred shares are participating securities as the preferred shares participate in undistributed earnings on an as-if-converted basis.Accordingly, the Group uses the two-class method whereby undistributed net income is allocated on a pro rata basis to each participating share to the extentthat each class may share income for the period. Undistributed net loss is not allocated to preferred shares because they are not contractually obligated toparticipate in the loss allocated to the ordinary shares.F-14Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) Diluted earnings (loss) per ordinary share reflects the potential dilution that could occur if securities were exercised or converted into ordinary shares. TheGroup had convertible preferred shares, warrants, stock options and non-vested restricted shares, which could potentially dilute basic earnings (loss) per sharein the future. To calculate the number of shares for diluted earnings (loss) per share, the effect of the convertible redeemable preferred shares and warrants iscomputed using the as-if-converted method; the effect of the stock options and non-vested restricted shares is computed using the treasury stock method. Thecomputation of diluted earnings (loss) per share does not assume exercise or conversion of securities that would have an anti‑dilutive effect.(y) Segment informationIn accordance with ASC 280, Segment Reporting, the Group's chief operating decision maker, the Chief Executive Officer, reviews the consolidated resultswhen 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 reporting. As the Group's long-lived assets are substantially locatedin and derived from the PRC, no geographical segments are presented.(z) Concentration of risksConcentration of suppliersThe following suppliers accounted for 10% or more of research and development expenses for the years ended December 31, 2016, 2017 and 2018: Year ended December 31, 2016 2017 2018 $ $ $ A 14,625,500 * * B * 7,651,617 * C * 7,104,015 * D * * 25,515,178 E * * 14,664,364 *Represents less than 10% of research and development expenses for the years ended December 31, 2016, 2017 and 2018.Concentration of credit riskFinancial instruments that are potentially subject to significant concentration of credit risk consist of cash and cash equivalents, short-term investments, andprepayments to suppliers. The carrying amounts of cash and cash equivalents and short-term investments represent the maximum amount of loss due to creditrisk. As of December 31, 2017 and 2018, all of the Group’s cash and cash equivalents and short-term investments were held by major financial institutionslocated in the PRC and international financial institutions outside of the PRC which management believes are of high credit quality and continuallymonitors the credit worthiness of these financial institutions. With respect to the prepayments to suppliers, the Group performs on-going credit evaluations ofthe financial condition of these suppliers. Foreign currency riskRenminbi (“RMB”) is not a freely convertible currency. The State Administration of Foreign Exchange, under the authority of the People's 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 internationaleconomic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. The cash and cash equivalents ofthe Group included aggregated amounts of RMB25,660,869 and RMB26,878,093, which were denominated in RMB, as of December 31, 2017 and 2018,respectively, representing 2% and 6% of the cash and cash equivalents as of December 31, 2017 and 2018, respectively.F-15Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) (aa) Share consolidation (“reverse stock split”)On August 30, 2017, the Company effected a six-to-one share consolidation of all the ordinary shares and preferred shares. All number of shares, par valueand per share amounts for all periods presented in these consolidated financial statements and accompanying notes have been adjusted retrospectively, whereapplicable, to reflect this share consolidation.(ab) Recent accounting pronouncementsIn February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize leases on balance sheet and disclose keyinformation about leasing arrangements. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and leaseliability on the balance sheet for all leases with terms of longer than 12 months. Leases will be classified as finance or operating, with classification affectingthe pattern and classification of expense recognition in the income statement. The standard is effective on January 1, 2019, with early adoption permitted.The Group adopted the new standard on January 1, 2019 and used the effective date as the date of initial application. In July 2018, the FASB issued anupdate that provided an additional transition option that allows companies to continue applying the guidance under the lease standard in effect at that timein the comparative periods presented in the consolidated financial statements. Companies that elect this option would record a cumulative-effect adjustmentto the opening balance of retained earnings on the date of adoption. The Group elected this optional transition method. As of December 31, 2018, the Grouphas $3.3 million of future minimum operating lease commitments that are not currently recognized on its consolidated balance sheets (see Note 19).Therefore, the Group would expect changes to its consolidated balance sheets for the recognition of these and any additional leases entered into in the futureupon adoption.In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based PaymentAccounting, which intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. The ASU expands thescope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based payments to employees) to include share-basedpayments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will besubstantially aligned. The ASU supersedes Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees. The amendments in this ASU are effectivefor public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but noearlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. As of December 31, 2018, there was $93,822 of totalunrecognized compensation expense related to unvested non-employee options or restricted shares. The Group does not expect the requirements of ASU2018-07 will have a material impact on the consolidated financial statements.In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): The amendments in ASU 2018-13 eliminate the requirements todisclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, valuation processes for Level 3 fair valuemeasurements, and policy for timing of transfers between levels. ASU 2018-13 also provides clarification in the measurement uncertainty disclosure byexplaining that the disclosure is to communicate information about the uncertainty in measurement as of the reporting date. In addition, ASU 2018-13 addedthe following requirements: changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair valuemeasurements held at the end of the reporting period; and range and weighted average of significant unobservable inputs used in Level 3 fair valuemeasurements. Finally, ASU 2018-13 updated language to further encourage entities to apply materiality when considering de minimis for disclosurerequirements. The guidance will be applied retrospectively for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years,with the exception of amendments to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used forLevel 3 fair value measurements, and the narrative description of measurement uncertainty which will be applied prospectively. Early adoption is permitted.The Group does not expect the requirements of ASU 2018-13 will have a material impact on the consolidated financial statements.F-16Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the 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 thecounterparty is a customer and precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contractswith customers if the counterparty is not a customer for that transaction. The update is effective in fiscal years beginning after December 15, 2019, andinterim periods therein, and early adoption is permitted for entities that have adopted ASC 606. This guidance should be applied retrospectively to the dateof initial application of Topic 606. The Group is currently evaluating the impact on its financial statements of adopting this guidance.3.Cash and cash equivalents As of December 31, 2017 2018 $ $ Cash at bank and in hand 204,008,828 36,778,028 Cash equivalents 25,651,320 26,173,579 229,660,148 62,951,607 Denominated in: US$ 224,878,393 58,253,341 RMB (note (i)) 3,927,163 3,916,262 Hong Kong dollar (”HK$"） — 19,890 Australia dollar ("A$") 854,592 762,114 229,660,148 62,951,607 Note:(i)Certain cash and bank balances denominated in RMB were deposited with banks in the PRC. The conversion of these RMB denominated balances intoforeign currencies is subject to the rules and regulations of foreign exchange control promulgated by the PRC government. 4.Short-term investmentShort-term investment primarily comprises of the time deposits with original maturities between three months and one year. For the year ended December 31,2018, the Group recorded the interest income of $2.4 million from the short-term investments in the consolidated statements of operations. 5.InventoriesThe Group’s inventory balance of $3,822 as of December 31, 2018 is a finished drug product purchased from Tesaro Inc.(“Tesaro”) for distribution in HongKong.6.Investments in equity investeesIn June 2017, the Group entered into an agreement with three third-parties to launch JING Medicine Technology (Shanghai) Ltd. (“JING”), an entity whichwill provide services for drug discovery and development, consultation and transfer of pharmaceutical technology. The capital contribution by the Groupwas RMB26.3 million (or $4.0 million) in cash, representing 20% of the equity interest of JING. RMB13.1 million (or $1.9 million) of which was paid by theGroup in 2017, and the remainder RMB13.2 million (or $2.1 million) was paid in 2018. The Group accounts for this investment using the equity method ofaccounting because the Group does not control the investee but has the ability to exercise significant influence over the operating and financial policies ofthe investee. The Group recorded its share of loss in this investee of $249,652 and $586,551 for the year ended December 31, 2017 and 2018, respectively.In October 2016, the Group invested $500,000 in a private company over which the Group does not have significant influence or control and accounted forthe investment using cost method of accounting. In April 2017, the Group disposed its investment to Quan Venture Fund I, L.P. for cash consideration ofapproximately $500,000 and no gain/loss was recognized upon disposal (Note 13).F-17Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) 7.Property and equipment, netProperty and equipment consist of the following: As of December 31, 2017 2018 $ $ Office equipment 273,339 384,088 Electronic equipment 160,772 599,495 Vehicle 81,360 77,460 Laboratory equipment 1,686,133 3,916,615 Manufacturing equipment 2,832,726 9,368,930 Leasehold improvements 3,227,150 4,607,975 Construction in progress 4,252,894 3,747,838 12,514,374 22,702,401 Less: accumulated depreciation (660,610) (2,207,919)Property and equipment, net 11,853,764 20,494,482 Depreciation expenses for the years ended December 31, 2016, 2017 and 2018 were $198,224, $545,705 and $1,634,377, respectively.8.Income TaxCayman Islands (“Cayman”)Zai Lab Limited and ZLIP Holding Limited are incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, Zai Lab Limited and ZLIPHolding Limited are not subject to tax on income or capital gain. Additionally, the Cayman Islands does not impose a withholding tax on payments ofdividends 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 toincome tax.Australia (“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 taxableincome for all periods presented, therefore, no provision for income taxes is required.U.S. (“US”)Zai Lab (US) LLC. is incorporated in U.S. and is subject to U.S. federal corporate income tax at a rate of 21%. Zai Lab (US) LLC. is also subject to stateincome 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 is incorporated in Hong Kong. Companies registered in Hong Kong are subject to Hong Kong profits tax on the taxableincome as reported in their respective statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is16.5% in Hong Kong. For the years ended December 31, 2016, 2017 and 2018, Zai Lab (Hong Kong) Limited did not make any provisions for Hong Kongprofit 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 law, Zai Lab(Hong Kong) Limited is exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance ofdividends.F-18Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) PRCZai Lab (Shanghai) Co., Ltd., Zai Lab (Suzhou) Co., Ltd., and Zai Biopharmaceutical (Suzhou) Co., Ltd. are subject to the statutory rate of 25% in accordancewith the Enterprise Income Tax law (the "EIT Law").No provision for income taxes has been required to accrue because the Company and all of its owned subsidiaries are in cumulative loss positions for all theperiods presented.Loss before income taxes consists of: Year ended December 31, 2016 2017 2018 $ $ $ Cayman 2,454,660 3,886,673 1,218,542 BVI — 8,375 1,873 PRC 26,111,094 40,971,742 127,711,113 HK 8,010,908 6,240,462 7,777,758 US — — 2,350,761 AUST 935,550 (723,076) 14,848 37,512,212 50,384,176 139,074,895 Reconciliations of the differences between the PRC statutory income tax rate and the Group’s effective income tax rate for the years ended December 31,2016, 2017 and 2018 are as follows: Year ended December 31, 2016 2017 2018 $ $ $ Statutory income tax rate 25% 25% 25%Share-based compensations (2.92%) (3.27%) (1.93%)Non-deductible expenses (1.59%) (0.79%) (0.38%)Prior year tax filing adjustment — — 1.55%Effect of different tax rate of subsidiary operation in other jurisdictions (3.33%) (3.06%) (0.76%)Changes in valuation allowance (17.16%) (17.88%) (23.48%)Effective income tax rate — — — The principal components of the deferred tax assets and liabilities are as follows: Year ended December 31, 2016 2017 2018 $ $ $ Deferred tax assets: Depreciation of property and equipment, net 3,892 5,964 14,827 Government grants 166,336 187,762 186,811 Net operating loss forwards 8,086,361 17,075,387 49,726,611 Less: valuation allowance (8,256,589) (17,269,113) (49,928,249)Deferred tax assets, net — — — The Group considers positive and negative 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 assumptionsrequire significant judgment and the forecasts of future taxable income are consistent with the plans and estimates the Group is using to manage theunderlying businesses. Valuation allowances are established for deferred tax assets based on a more likely than not threshold. The Group’s ability to realizedeferred tax assets depends on its ability to generate sufficient taxable income within the carry forward periods provided for in the tax law. In 2017 and 2018,the Group has determined that the deferred tax assets on temporary differences and netF-19Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) operating loss carry forwards are related to certain subsidiaries, for which the Group is not able to conclude that the future realization of those net operatingloss 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 ofDecember 31, 2017 and 2018. Amounts of operating loss carry forwards were $34,716,071, $72,137,289 and $204,693,365 for the year ended December 31,2016, 2017 and 2018, respectively, which are expected to expire from 2020 to 2028.Movement of the valuation allowance is as follows: 2017 2018 $ $ Balance as of January 1, (8,256,589) (17,269,113)Additions (9,012,524) (32,659,136)Balance as of December 31, (17,269,113) (49,928,249) Uncertainties exist with respect to how the current income tax law in the PRC applies to the Group’s overall operations, and more specifically, with regard totax residency status. The EIT Law includes a provision specifying that legal entities organized outside of the PRC will be considered residents for Chineseincome tax purposes if the place of effective management or control is within the PRC. The implementation rules to the EIT Law provide that non-residentlegal entities will be considered PRC residents if substantial and overall management and control over the manufacturing 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 doesnot believe that the legal entities organized outside of the PRC within the Group should be treated as residents for EIT Law purposes. If the PRC taxauthorities subsequently determine that the Company and its subsidiaries registered outside the PRC should be deemed resident enterprises, the Companyand its subsidiaries registered outside the PRC will be subject to the PRC income taxes, at a rate of 25%. The Group is not subject to any other uncertain taxposition. 9.Short-term borrowingsOn June 25, 2018, Zai Lab (Suzhou) Co. Ltd. entered into a three-year facility agreement for RMB25,000,000 (or $3,642,616) with a local commercial bank,and the outstanding borrowing under this agreement was RMB 20,000,000 (or $2,914,093) as of December 31, 2018, which will be due in 2019. Theborrowing is guaranteed by Zai Lab (Shanghai) Co. Ltd., with an average interest rate of 4.785%. The agreement does not contain any financial covenants orrestrictions.On December 12, 2018, Zai Biopharmaceutical (Suzhou) Co. Ltd. entered into a three-year facility agreement for RMB40,000,000 (or $5,828,185) with alocal commercial bank, the outstanding borrowing under this agreement was RMB 5,000,000 (or $728,523) as of December 31, 2018, which will be due in2019. The borrowing is guaranteed by Zai Lab (Shanghai) Co., Ltd., with average interest rate of 4.785%. The agreement does not contain any financialcovenants or restrictions. 10.Other payablesOther payables consist of followings: As of December 31, 2017 2018 $ $ Payroll 1,607,740 3,699,169 Professional service fee 714,764 1,564,070 Payables for purchase of property and equipment 413,657 1,708,663 Payables for purchase of intangible assets — 225,158 Others 365,298 569,783 3,101,459 7,766,843 F-20Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) 11.Convertible preferred shares and warrantsUpon the completion of the Company's IPO on September 20, 2017, all of the outstanding Series A1, A2, B1, B2 and C convertible preferred shares wereconverted into 28,905,083 ordinary shares. The history of the issuance of the preferred shares is as following:In August 2014 and April 2015, the Company issued 6,244,443 Series A1 convertible preferred shares (“Series A1 Preferred Shares”) and 8,442,221 Series A2convertible preferred shares (“Series A2 Preferred Shares”) with a par value $0.00006 per share to a group of investors for a cash consideration of $8,028,572or $1.2857 per share and $18,278,572 or $2.1651 per share, respectively. In August 2014, $2,000,000 in convertible loans issued in March and April of 2014to certain investors who purchased Series A1 Preferred Shares were converted into 2,222,222 Series A1 Preferred Shares in connection with the offering at aper share price of $0.90.On December 31, 2015, as an inducement to participate in the contemplated issuance of Series B1 Preferred Shares and Series B2 Preferred Shares, theCompany entered into an agreement with one investor to issue warrants to purchase up to 461,808 Series A2 Preferred Shares at $2.1651 per share, as adjustedfrom time to time pursuant to the agreement. The fair value of the warrants of $1,980,000 was expensed on the date of issuance (as opposed to being treated asa cost of equity issuance because the warrants would have become exercisable after the passage of time in the absence of an equity offering).In January and April 2016, the Company issued 5,562,335 Series B1 convertible preferred shares (“Series B1 Preferred Shares”) and 3,973,096 Series B2convertible preferred shares (“Series B2 Preferred Shares”) with a par value of $0.00006 per share to a group of investors including existing preferred shareinvestors for a cash consideration of $53,100,000 or $9.5464 per share and $53,100,000 or $13.3649 per share, respectively.In June 2017, the Company issued 1,998,958 Series C convertible redeemable preferred shares (“Series C Preferred Shares”) with a par value of $ 0.00006 pershare to a group of investors including existing preferred share investors for a cash consideration of $30,000,000 or $15.0078 per share. On July 19, 2017, the investor holding the warrants exercised the warrants to purchase 461,808 Series A2 Preferred Shares at $2.1651 per share.The key terms of the Series A1, A2, B1, B2 and C Preferred Shares are as follows:Conversion rightsEach holder of Series A1, A2, B1 and B2 Preferred Shares shall have the right, at such holder’s sole discretion, to convert all or any portion of the Series A1,A2, B1 and B2 Preferred Shares into ordinary shares based on a one-for-one basis at any time. The initial conversion price is the issuance price of Series A1,A2, B1 and B2 Preferred Shares.Each holder of Series C Preferred Shares shall have the right, at such holders’ sole discretion, to convert all or any portion of the Series C Preferred Shares intoordinary shares based at any time. The initial conversion price shall equal the lower of (1) the issuance price of Series C Preferred Shares and (2) CalculatedPrice which is one hundred percent minus the discount rate of fifteen percent (the “Discount Rate”) multiplied by the offering price of the ordinary shares ofthe Company to the public on the date of the Qualified Initial Public Offering (“QIPO”). The Discount Rate will increase at increments of an additional twopercent as of the first day of each successive six months period after June 2018 but shall in no event exceed twenty percent.The conversion price of Series A1, A2, B1, B2 and C Preferred Shares is subject to adjustment in the event of (1) stock splits, share combinations, sharedividends and distribution, recapitalizations and similar events, and (2) issuance of new securities at a price per share less than the conversion price in effecton the date of or immediately prior to such issuance. In that case, the conversion price shall be reduced concurrently to the subscription price of suchissuance.The Series A1, A2, B1, B2 and C Preferred Shares will be automatically converted into ordinary shares at the then applicable conversion price upon theearlier of (1) the closing of a QIPO, or (2) the date specified by written consent or agreement of majority holders of Series A1, A2, B1, B2 and C PreferredShares.F-21Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) Voting rightsThe Series A1, A2, B1, B2 and C Preferred Shares are entitled to vote with ordinary shareholders on an as-converted basis. The holders of the Preferred Sharesalso have certain veto rights including, but not limited to, an increase or decrease in the total number of directors and change of board composition,appointment or removal of senior management, approval of business plan and operating budget, dividend declaration, any merger, split, reorganization orconsolidation.DividendsThe holders of Series A1, A2, B1, B2 and C Preferred Share may be entitled to receive dividends accruing at the rate of 8% per annum of the issuance price ofPreferred Shares (the “Dividend Rate”). For holders of Series C Preferred Shares, the Dividend Rate shall increase by an additional one percent per annum foreach successive six months period after June 2018 but shall in no event exceed ten percent.In addition, holders of Series A1, A2, B1, B2 and C Preferred Shares are also entitled to dividends on the Company's ordinary shares on an as if convertedbasis and must be paid prior to any payment on ordinary shares. All dividends shall be payable only when, as, and if declared by the Board of Directors andshall be noncumulative.Liquidation preferenceIn the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of Series A1 and A2 Preferred Sharesare entitled to receive, prior to any distribution to the holders of ordinary shares, an amount per share equal to the Series A original issue price, plus accruedbut unpaid dividends (the "Series A Preference Amount").In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of Series B1 and B2 Preferred Sharesare entitled to receive, prior to any distribution to the holders of ordinary shares, an amount per share equal the Series B original issue price plus five percent(5%) simple interest on such Series B issue price accrued annually from the applicable Series B issue date, plus accrued but unpaid dividends (the "Series BPreference Amount").In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of Series C Preferred Shares areentitled to receive, prior to any distribution to the holders of any other class or series of equity securities, an amount per share equal the issuance price ofSeries C Preferred Shares plus non-compounding simple interest accruing at five percent (5%) per annum on the issuance price and plus any accrued butunpaid dividends (the "Series C Preference Amount").In the event insufficient funds are available to pay in full the Preference Amount in respect of each preferred shareholders, the sequence of liquidation right ofall series of preferred shares was as follows:(1) Series C Preferred Shares;(2) Series B1 and B2 Preferred Shares;(3) Series A1 and A2 Preferred Shares.After the Preference Amount has been paid, any remaining funds or assets legally available for distribution shall be distributed pro rata among the preferredshareholders together with ordinary shares.A liquidation event includes, (1) any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary; the exclusive licensing of allor substantially all of the Group Companies’ intellectual property, taken as a whole, to a third party; (2) any sale of all or substantially all of the assets of theGroup to a third party unaffiliated with any member of the Group; or (3) the transfer (whether by merger, reorganization or other transaction) in which amajority of the outstanding voting power of the Company is transferred (excluding any sale of shares by the Company for capital raising purposes).F-22Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) RedemptionIn the event that a QIPO had not been completed by June 2022, holders of the Series C Preferred Shares may at any time thereafter require that the Companyredeem all of the Series C Preferred Shares held by such holder at a redemption price per share equal to the sum of (1) an amount equal to the original issuanceprice, and (2) an additional amount which would result in holders of Series C Preferred Shares receiving an internal rate of return of fifteen percent after takinginto consideration the payment of issuance price of Series C Preferred Shares and all prior distributions received.The key terms of the warrants were as follows:Vesting dateThe warrants were vested on April 1, 2016.Exercise periodIf not previously exercised, the warrants shall expire on the earlier of (1) the sixth (6th) anniversary of the issue date or (2) ninety (90) days prior to the dateon which the Company consummates a QIPO.The Company has classified the Series A1, A2, B1, B2 and C Preferred Shares as mezzanine equity as these convertible preferred shares are redeemable uponthe occurrence of a conditional event outside of the Company’s control (i.e. a liquidation event or failure to complete the QIPO within required period). Theholders of the Series A1, A2, B1, B2 and C Preferred Shares have a liquidation preference and will not receive the same form of consideration upon theoccurrence of the conditional event as the ordinary shareholders would. The holders of the Series A1, A2, B1, B2 and C Preferred Shares have the ability toconvert the instrument into the Company's ordinary shares. The conversion option of the convertible preferred shares did not qualify for bifurcationaccounting because the conversion option was clearly and closely related to the host instrument and the underlying ordinary shares are not publicly tradednor readily convertible into cash.The Company has determined that there was no beneficial conversion feature ("BCF") attributable to the Series A1, A2, B1, B2 and C Preferred Shares, as theeffective conversion price was greater than the fair value of the ordinary shares on the respective commitment date.The Company concluded that redemption of that the Series A1, A2, B1, B2 and C Preferred Shares was not probable due to the remote likelihood of aliquidation event and the expected successful QIPO within five years. Therefore, no adjustment was made to the initial carrying amount of the Series A1, A2,B1, B2 and C Preferred Shares.The warrants are freestanding instruments and are recorded as liabilities in accordance with ASC480. The Series A1, A2, B1, B2 and C Preferred Shares wereinitially recorded as mezzanine equity equal to the proceeds received. The warrants are initially recognized at fair value, with subsequent changes in fairvalue recorded in gain or loss. For the year ended December 31, 2016, the Company recognized a loss from the increase in fair value of the warrants of $1.9million. For the year ended December 31, 2017, the Company recognized a gain from the decrease in fair value of the warrants of $0.2 million.12.Loss per shareBasic and diluted net loss per share for each of the years presented are calculated as follow: For the year ended December 31, 2016 2017 2018 Numerator: Net loss attributable to ordinary shareholders (37,512,212) (50,384,176) (139,074,895)Denominator: Weighted average number of ordinaryshares-basic and diluted 9,439,028 21,752,757 52,609,810 Net loss per share-basic and diluted (3.97) (2.32) (2.64)F-23Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) The Group has determined that its convertible preferred shares are participating securities as the preferred shares participate in undistributed earnings on anas-if-converted basis. The holders of the preferred shares are entitled to receive dividends on a pro rata basis, as if their shares had been converted intoordinary shares. Accordingly, the Group used the two-class method of computing earnings per share, for ordinary and preferred shares according toparticipation rights in undistributed earnings, However, undistributed net loss is only allocated to ordinary shareholders because holders of preferred shareswere not contractually obligated to share losses.As a result of the Group’s net loss for the three years ended December 31, 2016, 2017 and 2018, preferred shares, share options, non-vested restricted sharesand warrants outstanding in the respective periods were excluded from the calculation of diluted loss per share as their inclusion would have been anti-dilutive. As of December 31, 2016 2017 2018 Number of Series A1 Shares outstanding 8,466,665 — — Number of Series A2 Shares outstanding 8,442,221 — — Number of Series B1 Shares outstanding 5,562,335 — — Number of Series B2 Shares outstanding 3,973,096 — — Share options 7,228,141 6,548,377 8,761,735 Non-vested restricted shares 2,309,490 693,333 1,112,001 Warrants 461,808 — — 13.Related party transactionsThe table below sets forth the major related party and the relationship with the Group as of December 31, 2018: Company Name Relationship with the GroupQuan Venture Fund I, L.P. Significantly influenced by Samantha Du, founder, chairman and CEO of theCompany Qiagen (Suzhou) Translational Medicine Co., Ltd. Significant influence held by Samantha Du’s immediate family In 2018, the Group incurred $125,679 research and development expense with Qiagen (Suzhou) Translational Medicine Co., Ltd. for drug research anddevelopment services.On April 30, 2017, the Group disposed its investment in a cost method investee to Quan Venture Fund I, L.P. for a cash consideration of $500,000 and nogain/loss was recognized upon disposal.14.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 ofDirectors. Under the 2015 Plan, the Board of Directors may grant options to purchase ordinary shares to management including officers, directors, employeesand 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”). In March 2016, the Group granted 1,157,793 share options to certain of the Group’s management and employees at an exercise price of $1.2 per share. Theseoptions granted have a contractual term of 10 years and generally vest over a five year period, with 20% of the awards vesting anniversary year after the grantdate.F-24Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) In August 2016, the Group granted 1,760,368 share options to certain of the Group’s management and employees at an exercise price of $1.74 per share,respectively. These options granted have a contractual term of 10 years and generally vest over a five year period, with 20% of the awards vesting on theanniversary of the grant date each year.In August and December 2016, the Group granted 416 and 416 share options to certain individual advisors of the Group at an exercise price of $1.74 pershare. These options granted have a contractual term of 10 years and generally vest over a three year period, with 33.33% of the awards vesting anniversaryyear after the grant date.In May 2017, the Group granted 158,313 share options to certain management and employees of the Group at an exercise price of $3.0 per share under the2015 Plan. These options granted have a contractual term of 10 years and generally vest over a four or five year period, with 25% or 20% of the awardsvesting on each annual anniversary after the grant date.In May 2017, the Group granted 4,583 share options to certain individual advisors of the Group at an exercise price of $3.0 per share. These options grantedhave a contractual term of 10 years and generally vest over a three year period, with 33.33% of the awards vesting anniversary year after the grant date.In connection with the completion of the IPO, the Board of Directors has approved the 2017 Equity Incentive Plan (the “2017 Plan”) and all equity-basedawards subsequent to the IPO would be granted under the 2017 Plan.In September 2017, the Group granted 101,584 share options to certain management and employees of the Group at an exercise price of $18.0 per share underthe 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 vestingbeginning on the anniversary date one year after the grant date.In 2018, the Group granted 2,759,750 share options to certain management and employees of the Group at the exercise price ranging from $17.60 to $24.58per 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 awardsvesting beginning on the anniversary date one year after the grant date.Before 2018, the binomial option-pricing model was applied in determining the estimated fair value of the options granted. The model requires the input ofhighly subjective assumptions including the estimated expected stock price volatility and, the exercise multiple for which employees are likely to exerciseshare options. For expected volatilities, the Group has made reference to the historical price volatilities of ordinary shares of several comparable companies inthe same industry as the Group. For the exercise multiple, prior to the IPO, the Group had no historical exercise patterns as reference, thus the exercisemultiple is based on management's estimation, which the Group believes is representative of the future exercise pattern of the options. The risk-free rate forperiods within the contractual life of the option is based on the U.S. treasury bonds with maturity similar to the maturity of the options as of valuation datesplus a China country risk premium. Prior to the completion of the Company’s IPO, the estimated fair value of the ordinary shares, at the option grant dates,was determined with assistance from an independent third-party valuation firm. The Group's management is ultimately responsible for the determination ofthe estimated fair value of its ordinary shares. With the completion of the Company’s IPO, a public trading market for the ADSs has been established, theCompany uses the current share price as the fair value of underlying ordinary shares.From 2018, the Group changed to use the Black-Scholes option valuation model going forward in determining the estimated fair value of the optionsgranted, because the new technique or model is expected to produce a better estimate of fair value. The change in valuation technique is accounted for as achange in accounting estimate under ASC 250 and applied prospectively to new awards.F-25Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) The following table presents the assumptions used to estimate the fair values of the share options granted in the years presented: March 2016 August 2016 December 2016 May 2017 September 2017 2018 Risk-free rate of return 2.8% 2.5% 3.4% 3.2% 3.5% 2.7%-3.2% Contractual life of option 10 years 10 years 10 years 10 years 10 years 10 years Expected term n/a n/a n/a n/a n/a 6.5 years Estimated volatility rate 70% 70% 70% 70% 70% 70%Expected dividend yield 0% 0% 0% 0% 0% 0%Fair value of underlying ordinary shares 7.14 8.04 8.04 9.60 27.93 17.60-24.58 A summary of option activity under the Plan during the years ended December 31, 2016, 2017 and 2018 is presented below: Number ofoptions Weightedaverage exerciseprice Weightedaverageremainingcontractual term Aggregateintrinsic value $ Years $ Outstanding at January 1, 2016 4,309,232 0.60 9.68 18,874,438 Granted 2,918,993 1.53 — — Forfeited (84) 1.74 — — Outstanding at December 31, 2016 7,228,141 0.97 9.00 53,677,170 Granted 264,480 8.76 — — Exercised (100,834) 0.65 — — Forfeited (843,410) 1.11 — — Outstanding at December 31, 2017 6,548,377 1.28 8.06 130,668,851 Granted 2,759,750 21.15 — — Exercised (256,065) 0.76 — — Forfeited (290,327) 3.73 — — Outstanding at December 31, 2018 8,761,735 7.47 7.80 138,009,758 Vested and Exercisable as of December 31, 2018 3,321,376 1.01 6.93 73,775,871 Vested or expected to vest as of December 31, 2018 8,761,735 7.47 7.80 138,009,758 F-26Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) The weighted-average grant-date fair value of the options granted in 2016, 2017 and 2018 were $6.94, $13.92 and $14.03 per share, respectively. The Grouprecorded compensation expense related to the options of $3,524,733, $4,751,933 and $9,403,059 for the year ended December 31, 2016, 2017 and 2018,respectively, which were classified in the accompanying consolidated statements of operations as follows: Year ended December 31, 2016 2017 2018 $ $ $ Selling, general and administrative 1,472,993 2,215,282 4,428,266 Research and development 2,051,740 2,536,651 4,974,793 Total 3,524,733 4,751,933 9,403,059 As of December 31, 2018, there was $46,006,585 of total unrecognized compensation expense related to unvested share options granted. That cost isexpected to be recognized over a weighted-average period of 2.80 years.Ordinary shares issued to Red Kingdom Investment Limited ("Red Kingdom")Red Kingdom is a company incorporated in the British Virgin Islands in August 2013 and owned by a group of senior management including the ChiefExecutive Officer of the Company (the "CEO") of the Company and advisors of the Group and third-party investors. Red Kingdom has no activities and doesnot have employees. All the shareholders of the Red Kingdom have delegated their voting rights to the CEO of the Company.On April 3, 2014, the Company issued 8,083,333 shares to Red Kingdom which are corresponding to the total outstanding shares of Red Kingdom for totalconsideration of $141,971. One share of Red Kingdom is entitled to indirectly all of the economic rights associated with the underlying ordinary shares ofthe Company. Of these shares, 7,847,500 shares were held by members of senior management and certain advisors of the Group, who paid par value.In April and May 2014, Red Kingdom entered into restricted share arrangements with the members of senior management and one of the advisors of theGroup to secure their services, pursuant to which all of their 6,459,167 and 350,000 ordinary shares of the Red Kingdom respectively became subject totransfer restrictions (the “Restricted Shares” and the “Advisor Restricted Shares”). The 1,038,333 shares the Company issued to Red Kingdom correspondedto the shares of Red Kingdom held by advisors of the Group, purchased for par value in 2014 are not subject to the transfer restrictions or other repurchaserights, and so were considered vested immediately at the date of grant and expensed.On December 15, 2015, 1,921,000 unvested Restricted Shares granted to the CEO were deemed vested by the Company and the unrecognized share-basedcompensation of $1,152,600 as of the modification date was immediately recognized as compensation expense in the consolidated statements of operations.On June 15, 2017, pursuant to the Board’s resolution, Red Kingdom distributed all of the ordinary shares that it held in the Group to all Red Kingdomshareholders, in accordance with the Articles of Association of Red Kingdom. All the prior restricted share arrangements in force as of the distribution datebetween Red Kingdom and members of senior management and advisors were amended to assign the rights and obligations of Red Kingdom thereunder tothe Group (the “Transfer”). Before the Transfer, 811,667 restricted shares of Red Kingdom have been vested and 1,329,999 non-vested restricted shares ofRed Kingdom have been repurchased by Red Kingdom due to the termination of employment by certain members of senior management and allocated to thefounders of Red Kingdom at par value in 2017.Non-vested restricted sharesOn August 10, 2015, the Company entered into a restricted share arrangement with an individual advisor to secure their services, for 166,667 ordinary sharesauthorized for grant. In general, restrictions limit the sale or transfer of these shares during a three year period, and restrictions lapse proportionately over thethree year period. During the three year period the Company upon voluntary or involuntary termination of service agreement by the individual advisor willrepurchase unvested restricted shares at par (the “Repurchase Right”). On July 15, 2016 and August 25, 2016, 58,333 and 75,000 ordinary shares wereauthorized for grant to the individual advisor with the same Repurchase Right. The Repurchase Right terminates over the three years commencing August 10,2015, July 15, 2016 and August 25, 2016 in 36 equal monthly instalments thereafter, orF-27Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) immediately prior to the consummation of an IPO of the Company. Any additional securities or cash received as the result of ownership of such shares, suchas a share dividend, become subject to restriction in the same manner. For all restricted shares, the individual advisor has delegated his voting rights to theCEO of the Company. This arrangement has been accounted for as a reverse stock split followed by the grant of a restricted stock award under a performance-based plan. Accordingly, the Group measures the fair value at the date the services are completed which is monthly.In March and May 2017, pursuant to the board resolution of the Company, the Repurchase Right to all the remaining 2,100,000 non-vested restricted sharesof the CEO which were subject to the restricted share arrangement dated April 3, 2014 was removed and the unrecognized share-based compensation of$840,000 as of the modification date was immediately recognized as an expense in the consolidated statements of operations.In September 2017, pursuant to the successful IPO of the Company, the Repurchase Right to all the remaining 134,516 non-vested restricted shares of theindividual advisor which were subject to the restricted share arrangement dated August 10, 2015, July 15, 2016 and August 25, 2016 was terminated and theunrecognized share-based compensation of $2,421,288 as of the modification date was immediately recognized as an expense in the consolidated statementsof operations.On September 20, 2017, 50,000 ordinary shares were authorized for grant to the independent directors. One third of the restricted shares shall vest and bereleased from the restrictions on each yearly anniversary from the date of the agreement. Upon termination of the independent directors' service with theGroup for any reason, any shares that are outstanding and not yet vested will be immediately be forfeited.In 2018, 62,500 ordinary shares were authorized for grant to the independent directors, respectively. The restricted shares shall vest and be released from therestrictions in full on the first anniversary from the date of the agreement. Upon termination of the independent directors' service with the Group for anyreason, any shares that are outstanding and not yet vested will be immediately be forfeited.In 2018, 694,500 ordinary shares were authorized for grant to certain management. One fifth of the restricted shares shall vest and be released from therestrictions on each yearly anniversary from the date of the agreement. Upon termination of the certain management's service with the Group for any reason,any shares that are outstanding and not yet vested will be immediately be forfeited.The Group measured the fair value of the non-vested restricted shares as of respective grant dates, and recognized the amount as compensation expense overthe deemed service period using a graded vesting attribution model on a straight-line basis.The following table summarized the Group’s non-vested restricted share activity in 2018: Numbersof non-vestedrestricted shares Weightedaverage grantdatefair value $ Non-vested as of January 1, 2018 693,333 2.57 Granted 757,000 20.73 Vested (338,332) 1.95 Non-vested as of December 31, 2018 1,112,001 15.13 As of December 31, 2018, there was $14,386,103 of total unrecognized compensation expense related to non-vested restricted shares. The Group recordedcompensation expense related to the restricted shares of $1,400,545, $5,179,173 and $2,826,584 for the year ended December 31, 2016, 2017 and 2018,respectively, which were classified in the accompanying consolidated statements of operations as follows: Year ended December 31, 2016 2017 2018 $ $ $ Selling, general and administrative 825,822 3,848,165 2,206,046 Research and development 574,723 1,331,008 620,538 Total 1,400,545 5,179,173 2,826,584 F-28Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) 15.Accumulated other comprehensive lossThe movement of accumulated other comprehensive loss is as follows: Foreigncurrencytranslationadjustments $ Balance as of January 1, 2016 (103,620)Other comprehensive loss (594,912)Balance as of December 31, 2016 (698,532)Other comprehensive income 1,148,440 Balance as of December 31, 2017 449,908 Other comprehensive income 2,211,821 Balance as of December 31, 2018 2,661,729 16.Licenses and collaborative arrangementThe following is a description of the Group’s significant collaboration agreements for the year ended December 31, 2016, 2017 and 2018.License and collaboration agreement with TesaroIn September 2016, the Group entered into a collaboration, development and license agreement with Tesaro, under which the Group obtained an exclusivelicense for certain patents and know-how that Tesaro licensed from Merck, Sharp & Dohme Corp. (a subsidiary of Merck & Co. Inc.), or Merck Corp., andAstraZeneca UK Limited to develop, manufacture, use, sell, import and commercialize Tesaro’s proprietary PARP inhibitor, niraparib, in mainland China,Hong Kong and Macau, or the licensed territory, in the licensed field of treatment, diagnosis and prevention of any human diseases or conditions (other thanprostate cancer). Tesaro has the option to elect to co-promote the licensed products in the Group’s licensed territory.Under the terms of the agreement, the Group made an upfront payment of $15.0 million to Tesaro which was recorded as a research and development expensein 2016. If the Group successfully develops and commercializes the licensed products, the Group will make a milestone payment to Tesaro for theachievement of a certain development milestone event. In addition, if Tesaro does not exercise its co-promotion option, the Group will pay Tesaro milestonepayments for the achievement of certain sales milestone events, and also tiered royalties at certain percentages of net sales of the licensed products, until thelater of the expiration of the last-to-expire licensed patent covering the licensed product, the expiration of regulatory exclusivity for the licensed product, orthe tenth anniversary of the first commercial sale of the licensed product, in each case on a product-by-product and region-by-region basis.License and collaboration agreement with Paratek Bermuda Ltd. (“Paratek”)In April 2017, the Group entered into a collaboration, development and license agreement with Paratek, under which the Group obtained both an exclusivelicense under certain patents and know-how of Paratek and an exclusive sub-license under certain intellectual property that Paratek licensed from TuftsUniversity to develop, manufacture, use, sell, import and commercialize omadacycline in mainland China, Hong Kong, Macau and Taiwan, or licensedterritory, in the field of all human therapeutic and preventative uses other than biodefense, or the licensed field. Paratek retains the right to manufacture thelicensed product in the licensed territory for use outside the licensed territory. The Group also granted to Paratek a non-exclusive license to certain ofintellectual property for Paratek Bermuda Ltd.F-29Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) Under the terms of the agreement, the Group made an upfront payment of $7.5 million to Paratek which was recorded as a research and development expensein 2017. The Group made a milestone payment of $5.0 million to Paratek for the achievement of milestone upon receipt of the first regulatory approval forthe Product in the U.S. in 2018. The Group will make further milestone payments to Paratek for the achievement of certain development milestone and salesmilestone event. In addition, the Group will pay to Paratek tiered royalties at certain percentage rates on the net sales of licensed products, until the later ofthe abandonment, expiration or invalidation of the last-to-expire licensed patent covering the licensed product, or the eleventh anniversary of the firstcommercial sale of the licensed product, in each case on a product-by-product and region-by-region basis.The Group has the right to terminate this agreement for any or no reason by providing Paratek with prior written notice with no penalty.License and collaboration agreement with Five Prime Therapeutics, Inc. (“Five Prime”)On December 19, 2017, the Group and Five Prime entered into an exclusive license agreement for FPA144 in Greater China and global strategic developmentcollaboration.Under the terms of the agreement, Five Prime has granted the Group an exclusive license to develop and commercialize FPA144 in the Greater Chinaterritory: China, Hong Kong, Macau, and Taiwan. The Group will be responsible for conducting the Phase III FIGHT trial in Greater China, includingscreening, enrolment and treatment of patients, and for commercialization of FPA144 in the Greater China territory. Five Prime will manufacture and supplyFPA144 for the study. A Joint Steering Committee will be formed between the companies to oversee development, regulatory and commercializationactivities in Greater China.The Group made an upfront payment of $5.0 million in January 2018, and made a milestone payment of $2.0 million to Five Prim for the achievement of amilestone by enrolling the first patient in Phase III FIGHT trail of the Product in China in October 2018. The Group will make further milestone payments forthe achievement of certain development and regulatory milestones to Five Prime. In addition, the Group will pay to Five Prime a royalty percentage on netsales of FPA144 in Greater China. And the Group is also eligible to receive a royalty from Five Prime on net sales of FPA144 outside of Greater China.License and collaboration agreement with Entasis Therapeutics Holdings Inc.(“Entasis”)On April 25, 2018, the Group entered into an exclusive license agreement with Entasis, under which the Group obtained an exclusive right to develop andcommercialize Entasis’s broad-spectrum intravenous inhibitor of β-lactamases or ETX2514 in the Asia-Pacific region for the treatment of a variety of seriousmultidrug-resistant infections caused by Acinetobacter baumannii.The Group paid $5.0 million upfront fees to Entasis upon entering the agreement in 2018. And the Group will make future milestone payments upon theachievement of contractually specified development, regulatory and sales milestones, plus royalties.The Group has the right to terminate this agreement at any time by providing written notice of termination to Entasis.License and collaboration agreement with Crescendo Biologics Ltd. (“Crescendo”)On May 25, 2018, the Group and Crescendo entered into an exclusive, worldwide licensing agreement, under which the Group will develop, commercialize,and manufacture a topical, innovative antibody VH domain therapeutic for potential application in inflammatory indications.Under the terms of the agreement, Crescendo granted to the group a worldwide exclusive license to develop and commercialize its drug candidate for allindications. The Group will be responsible for conducting all regulatory filings, clinical studies, and commercialization activities, with both companiesparticipating in a Joint Development Committee.The Group paid $2.0 million upfront fees to Crescendo in 2018. And the Group will provide development, regulatory, and commercial milestones formultiple indications. Crescendo will also be eligible to receive tiered royalties on global sales.F-30Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) The Group has the right to terminate this agreement at any time by providing written notice of termination to Crescendo.License and collaboration agreement with Novocure Limited (“Novocure”)On September 10, 2018, the Group entered into an exclusive license agreement with Novocure for Tumor Treating Fields, including the brand name Optunein Greater China and a global strategic development collaboration.Under the terms of agreement, Novocure granted the Group an exclusive license to commercialize Tumor Treating Fields in China, Hong Kong, Macau andTaiwan. The Group will be responsible for regulatory submissions in Greater China and will work to establish Tumor Treating Fields as an oncologytreatment in this territory.The Group paid $15.0 million upfront fees to Novocure in 2018 and will make future milestone payments upon the achievement of contractually certaindevelopment, regulatory and commercial milestones. Novocure will also be eligible to receive a royalty on net sales of the licensed products in GreaterChina.The Group has the right to terminate this agreement at any time by providing written notice of termination to Novocure.License and collaboration agreement with MacroGenics Inc. (“MacroGenics”)On November 29, 2018, the Group entered into an exclusive collaboration and license agreement with MarcroGenics to develop and commercializeMargetuximab, MGD013 and TRIDENT™ Molecule in Greater China.Under the terms of agreement, MacroGenics granted the Group regional development and commercialization rights for these programs in mainland China,Hong Kong, Macau and Taiwan. The Group will lead clinical development in its territory by leveraging its regulatory and clinical development expertise andbroad regional network of investigators. As part of the collaborative clinical development effort, the Group and MacroGenics intend to initiate a global studyusing combination regimens containing margetuximab in order to maximize potential clinical benefit in gastric cancer, the fifth most common cancer in theworld and the second most common in China.The Group paid upfront fee of $25.0 million to MacroGenics in January 2019, and will make future milestone payments upon the achievement of potentialdevelopment and regulatory-based milestone payments. In addition, the Group would pay MacroGenics royalties on annual net sales of the assets, which maybe subject to adjustment in specified circumstances.The Group has the right to terminate this agreement at any time by providing written notice of termination to MacroGenics.As noted above, the Group has entered into various license and collaboration agreements with third party licensors to develop and commercialize drugcandidates. Based on the terms of these agreements the Group is contingently obligated to make additional material payments upon the achievement ofcertain contractually defined milestones. The Group made $0.3 million and $7.0 million milestone payment under these agreements for the years endedDecember 31, 2017 and 2018, respectively. Based on management’s evaluation of the progress of each project noted above, the licensors will be eligible toreceive from the Group up to an aggregate of approximately $1,118.3 million in future milestone payments upon the achievement of contractually specifieddevelopment milestones, such as regulatory approval for the drug candidates, which may be before the Group has commercialized the drug or received anyrevenue from sales of such drug candidate, which may never occur.17.Restricted net assetsThe Group's ability to pay dividends may depend on the Group receiving distributions of funds from its PRC subsidiary. Relevant PRC statutory laws andregulations permit payments of dividends by the Group's PRC subsidiary only out of its retained earnings, if any, as determined in accordance with PRCaccounting standards and regulations. The results of operations reflected in the consolidated financial statements prepared in accordance with U.S. GAAPdiffer from those reflected in the statutory financial statements of the Group's PRC subsidiary.F-31Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) In accordance with the Company law of the PRC, a domestic enterprise is required to provide statutory reserves of at least 10% of its annual after-tax profituntil such reserve has reached 50% of its respective registered capital based on the enterprise's PRC statutory accounts. A domestic enterprise is also requiredto provide discretionary surplus reserve, at the discretion of the Board of Directors, from the profits determined in accordance with the enterprise's PRCstatutory accounts. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. The Group's PRCsubsidiary was established as domestic invested enterprise and therefore is subject to the above mentioned restrictions on distributable profits.During the years ended December 31, 2017 and 2018, no appropriation to statutory reserves was made because the PRC subsidiary had substantial lossesduring such periods.As a result of these PRC laws and regulations subject to the limit discussed above that require annual appropriations of 10% of after-tax income to be setaside, prior to payment of dividends, as general reserve fund, the Group's PRC subsidiary is restricted in their ability to transfer a portion of their net assets tothe Group.Foreign exchange and other regulation in the PRC may further restrict the Group's PRC subsidiary from transferring funds to the Group in the form ofdividends, loans and advances. As of December 31, 2017 and 2018, amounts restricted are the paid-in capital of the Group's PRC subsidiaries, whichamounted to $80,951,618 and $90,951,618, respectively.18.Employee defined contribution planFull time employees of the Group in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits,medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that the Group's PRCsubsidiary make contributions to the government for these benefits based on certain percentages of the employees' salaries. The Group has no legalobligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were $288,666,$579,094 and $1,424,873 for the years ended December 31, 2016, 2017 and 2018, respectively.19.Commitments and Contingencies(a)Operating lease commitmentsThe Group leases office facilities under operating leases expiring on different dates. Payments under operating leases are expensed on a straight-line basisover the periods of their respective leases, and the terms of the leases do not contain rent escalation, contingent rent, renewal, or purchase options.There are no restrictions placed upon the Group by entering into these leases. Total expenses under these operating leases were $285,742, $916,612 and$1,494,456 for the years ended December 31, 2016, 2017 and 2018, respectively.Future minimum lease payments under operating lease agreements at December 31, 2018 were as follows: Year endedDecember 31, $ 2019 2,168,770 2020 1,007,476 2021 164,418 2022 and thereafter — Total lease commitment 3,340,664 (b)Purchase commitmentsAs of December 31, 2018, the Group’s commitments related to purchase of property and equipment contracted but not yet reflected in the consolidatedfinancial statement was $1,454,796 which is expected to be incurred within one year.F-32Zai Lab LimitedNotes to the consolidated financial statementsFor the years ended December 31, 2016, 2017 and 2018(In U.S. dollars ("$") except for number of shares) (c)ContingenciesThe Group is a party to or assignee of license and collaboration agreements that may require it to make future payments relating to milestone fees androyalties on future sales of licensed products (Note 16).20.Subsequent eventsIn January 2019, the Group terminated the license agreement with UCB Biopharma Sprl (“UCB”), under which the Group obtained an exclusive andworldwide license under certain patents and know-how of UCB to develop, manufacture, use, sell, import and commercialize UCB’s proprietary antibodyUCB3000, or the licensed compound, or ZL-1101 for the treatment, prevention and diagnosis of any human diseases. The license that the Group retained wasreverted back to UCB immediately upon termination of the license agreement and the Group has no continuing obligations (financial or otherwise)thereunder.In February 2019, the Group granted 5,000 share options to certain management and employees of the Group at the exercise price of $29.12per share underthe 2017 Plan. These options granted have a contractual term of 10 years and generally vest over a three year period, with 33.33% of the awards vesting onthe anniversary date one year after the grant date.In March 2019, the Group granted 168,500 share options to certain management and employees of the Group at the exercise price of $27.75 per share underthe 2017 Plan. These options granted have a contractual term of 10 years and generally vest over a five year period, with 20% of the awards vesting on theanniversary date one year after the grant date.In January 2019, 50,000 ordinary shares were authorized for grant to the independent directors of the Group. The restricted shares shall vest and be releasedfrom the restrictions in full on the first anniversary from the date of the agreement.In March 2019, 45,000 ordinary shares were authorized for grant to certain management and employees of the Group. One fifth of the restricted shares shallvest and be released from the restrictions on each yearly anniversary of the date of the agreement. F-33 Additional financial information of parent company -Financial statements schedule IZai Lab LimitedFinancial information of parent companyCondensed balance sheets(In U.S. dollars ("$") except for number of shares) As of December 31, 2017 2018 $ $ Assets Current assets: Cash and cash equivalents 181,910,618 745,980 Short-term investment — 200,350,000 Prepayments and other current assets 450,333 2,912,408 Total current assets 182,360,951 204,008,388 Investment in subsidiaries 54,885,326 48,747,970 Total assets 237,246,277 252,756,358 Liabilities and shareholders' deficits Liabilities Current liabilities: Other payables 593,317 504,645 Total current liabilities 593,317 504,645 Deferred income 1,482,000 1,170,000 Total liabilities 2,075,317 1,674,645 Shareholders' equity Ordinary shares (par value of US$0.00006 per share; 83,333,333 shares authorized, 49,803,050 and 58,006,967 shares outstanding as of December 31, 2017 and 2018, respectively) 2,995 3,481 Subscription receivable (18) — Additional paid-in capital 345,269,688 498,043,011 Accumulated deficit (110,551,613) (249,626,508)Additional other comprehensive income 449,908 2,661,729 Total shareholders' equity 235,170,960 251,081,713 Total liabilities and shareholders' equity 237,246,277 252,756,358 F-34 Additional financial information of parent company -Financial statements schedule IZai Lab LimitedFinancial information of parent companyCondensed statements of operations and comprehensive loss(In U.S. dollars ("$") except for number of shares) Year Ended December 31, 2016 2017 2018 $ $ $ Operating Expenses: Research and development — — (234,185)General and administrative (534,660) (4,114,144) (4,250,655)Loss from operations (534,660) (4,114,144) (4,484,840)Interest income — 50,060 3,041,842 Changes in fair value of warrants (1,920,000) 200,000 — Equity in loss of subsidiaries (35,057,552) (46,598,092) (137,943,897)Other income — 78,000 312,000 Loss before income tax (37,512,212) (50,384,176) (139,074,895)Income tax expense — — — Net loss attributable to ordinary shareholders (37,512,212) (50,384,176) (139,074,895)Net loss (37,512,212) (50,384,176) (139,074,895)Other comprehensive (loss) income, net of tax of nil: Foreign currency translation adjustment (594,912) 1,148,440 2,211,821 Comprehensive loss (38,107,124) (49,235,736) (136,863,074) F-35 Additional financial information of parent company -Financial statements schedule IZai Lab LimitedFinancial information of parent companyCondensed statements of cash flows(In U.S. dollars ("$") except for number of shares) Year Ended December 31, 2016 2017 2018 $ $ $ Cash flows from Operating activities: Net loss (37,512,212) (50,384,176) (139,074,895)Adjustments to reconcile net loss to net cash provided by operating activities: Amortization of deferred income — (78,000) (312,000)Share based compensation 534,660 3,346,039 1,408,110 Change of fair value of warrants 1,920,000 (200,000) — Equity in loss of subsidiaries 35,057,552 46,598,092 137,943,897 Changes in operating assets and liabilities: Prepayments and other current assets — (450,333) (2,462,075)Other payables — 553,317 (48,672)Deferred income — 1,560,000 — Net cash provided by operating activities — 944,939 (2,545,635) Cash flows from investing activities: Purchases of short-term investments — — (200,350,000)Investment in subsidiaries (84,501,020) (31,707,566) (118,773,187)Net cash used in investing activities (84,501,020) (31,707,566) (319,123,187) Cash flows from financing activities: Proceed from issuance of convertible preferred shares, net of issuance cost 106,200,000 29,100,000 — Proceeds from exercise of warrants — 1,000,000 — Proceeds from exercises of stock options — 65,500 195,711 Proceeds from issuance of ordinary shares upon public offerings — 160,424,994 141,000,000 Payment of public offering costs — (2,730,299) (691,527)Net cash provided by financing activities 106,200,000 187,860,195 140,504,184 Effect of foreign exchange rate changes on cash and cash equivalent — — — Net increase (decrease) in cash and cash equivalents 21,698,980 157,097,568 (181,164,638)Cash and cash equivalents-beginning of the year 3,114,070 24,813,050 181,910,618 Cash and cash equivalents-end of the year 24,813,050 181,910,618 745,980 F-36 Additional financial information of parent company -Financial statements schedule IZai Lab LimitedFinancial information of parent companyNotes to schedule I(In U.S. dollars ("$") except for number of shares)1. Schedule I has been provided pursuant to the requirements of Rule 12-04(a) and 5-04(c) of Regulation S-X, which require condensed financial informationas to the financial position, changes in financial position and results of operations of a parent company as of the same dates and for the same periods forwhich audited consolidated financial statements have been presented when the restricted net assets of consolidated subsidiaries exceed 25 percent ofconsolidated net assets as of the end of the most recently completed fiscal year.2. The condensed financial information has been prepared using the same accounting policies as set out in the consolidated financial statements except thatthe equity method has been used to account for investments in its subsidiaries. For the parent company, the Company records its investments in subsidiariesunder the equity method of accounting as prescribed in ASC 323, Investments-Equity Method and Joint Ventures. Such investments are presented on theCondensed Balance Sheets as ‘‘Investment in subsidiaries’’. Ordinarily under the equity, an investor in an equity method investee would cease to recognizeits share of the losses of an investee once the carrying value of the investment has been reduced to nil absent an undertaking by the investor to providecontinuing support and fund losses. For the purpose of this Schedule I, the parent company has continued to reflect its share, based on its proportionateinterest, of the losses of subsidiaries regardless of the carrying value of the investment even though the parent company is not obligated to providecontinuing support or fund losses.3. As of December 31, 2017 and 2018, there were no material contingencies, significant provisions of long term obligations, mandatory dividend orredemption requirements of redeemable stocks or guarantees of the Company.F-37CONFIDENTIAL Exhibit 10.15 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION.LICENSE AND COLLABORATION AGREEMENTThis License and Collaboration Agreement (this “Agreement”) is made as of September 10th, 2018 (the “EffectiveDate”), by and between NovoCure Limited, a corporation organized and existing under the laws of Jersey (“NVCR”), having aregistered address at Second Floor, No. 4 The Forum, Grenville Street, St. Helier, Jersey JE2 4UF, and Zai Lab (Shanghai) Co.,Ltd., a limited company organized under the laws of P.R. of China (“Zai”), having a place of business at 4560 Jinke Rd, Bldg. 1, 4/F,Pudong, Shanghai, China, 201210. NVCR and Zai are referred to in this Agreement individually as a “Party” and collectively as the“Parties.”RecitalsWhereas, NVCR is an oncology company that has developed proprietary TT Fields delivery systems (including a deviceknown as Optune) for the treatment of cancer and controls certain patents and know-how relating to its TT Fields therapy and deliverysystem, and NVCR is seeking a partner for development and commercialization of the Licensed Product in the Territory;Whereas, Zai is a company engaged in the research, development and commercialization of pharmaceutical and medicaldevice products in the greater China region; andWhereas, Zai wishes to obtain from NVCR an exclusive license to develop and commercialize the Licensed Product in theTerritory, and NVCR is willing to grant such a license to Zai, all in accordance with the terms and subject to the conditions set forthherein.AgreementNow, Therefore, in consideration of the foregoing premises and the covenants contained herein, the receipt and sufficiencyof which are acknowledged, the Parties hereby agree as follows:ARTICLE 1DEFINITIONSThe terms of this Agreement with the initial letters capitalized, whether used in the singular or plural, shall have themeanings set forth below or, if not listed below, the meaning designated in places throughout this Agreement. 1.1“Active Product” means a medical device or system.  Execution VersionCONFIDENTIAL 1.2“Affiliate” means, with respect to an Entity, any Entity that controls, is controlled by, or is under common controlwith such Entity, for so long as such control exists. For the purpose of this definition only, “control” (including, with correlativemeaning, the terms “controlled by” and “under the common control”) means the actual power, either directly or indirectly through oneor more intermediaries, to direct or cause the direction of the management and policies of an Entity, whether by the ownership of morethan fifty percent (50%) of the voting stocking of such Entity, by contract or otherwise.1.3“Applicable Laws” means collectively all laws, regulations, ordinances, decrees, judicial and administrativeorders (and any license, franchise, permit or similar right granted under any of the foregoing) and any policies and other requirementsof any applicable Governmental Authority that govern or otherwise apply to a Party’s activities in connection with this Agreement.1.4“AQSIQ” means the General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ) ofChina. 1.5“Bridging Study” means an additional Clinical Trial consisting of up to fifty (50) patients from the Territory thatallows extrapolation of a foreign pivotal data package to support Regulatory Approval of such Licensed Product in the Territory.1.6“Business Day” means a day other than a Saturday, Sunday or a day on which banking institutions in NewYork, United States, or Shanghai, China are required by Applicable Laws to remain closed.1.7“Calendar Quarter” means the respective periods of three consecutive calendar months ending on March 31,June 30, September 30 and December 31.1.8“Calendar Year” means each 12-month period commencing on January 1.1.9“CMDE” means Center for Medical Device Evaluation of China and any successor agency(ies) or authoritythereto having substantially the same function. 1.10 “cGMP” means all applicable current Good Manufacturing Practices, including, as applicable, (a) the principlesdetailed in the U.S. Current Good Manufacturing Practices, 21 C.F.R. Parts 4, 210, 211, 601, 610 and 820, (b) European Directive2003/94/EC and Eudralex 4, (c) the principles detailed in the International Conference on Harmonization's Q7 guidelines, and (d) theequivalent Applicable Laws in any relevant country or region, each as may be amended and applicable from time to time.1.11“Clinical Trial” means any human clinical trial of a Licensed Product in the Field.1.12“Change of Control” means, with respect to a Party:THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 2 Execution VersionCONFIDENTIAL (a)the acquisition by any individual, Entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)of the Securities Exchange Act of 1934, as amended) who or which constitute(s) a Third Party of beneficial ownership (within themeaning of Rule 13d‑3 promulgated under the Securities Exchange Act of 1934, as amended) of fifty percent (50%) or more of thecombined voting power of the then-outstanding voting securities of such Party entitled to vote generally in the election of directors ofsuch Party (the “Outstanding Voting Securities”);(b)the consummation of any acquisition, merger or consolidation of such Party by any Third Party (a“Business Combination Transaction”), unless immediately following such Business Combination Transaction, the Persons who werethe beneficial owners of the Outstanding Voting Securities immediately prior to such Business Combination Transaction beneficiallyown, directly or indirectly, fifty percent (50%) or more of the combined voting power of the then-outstanding voting securities entitledto vote generally in the election of directors of the corporation or other Entity resulting from such Business Combination Transaction(including a corporation or other Entity which as a result of such transaction owns the then-outstanding securities of such Party or all orsubstantially all of such Party’s assets either directly or through one or more subsidiaries); or(c)such Party or any of its Affiliates sells or transfers to any Third Party in one or more relatedtransactions properties or assets representing all or substantially all of such Party’s business or assets to which the subject matter of thisAgreement relates.1.13“Commercialization” or “Commercialize” means all activities directed to marketing, promoting, advertising,exhibiting, distributing, detailing, selling (and offering for sale or contracting to sell) or otherwise commercially exploiting (includingpricing and reimbursement activities) a Licensed Product in the Field in the Territory (including importing and exporting activitieswithin the Territory in connection therewith); provided, however, that Commercialization shall exclude manufacturing activities(including manufacturing activities related to Commercialization).1.14“Commercialization Plan” means, with respect to a Licensed Product, the written strategic and tactical plans,timelines and budget for the Commercialization of such Licensed Product in the Field and in the Territory.1.15“Commercially Reasonable Efforts” means, the performance of obligations or tasks in a manner consistent withthe reasonable practices of companies in the medical devices and biopharmaceutical industries having similar financial resourcesallocated for the development and commercialization of a product having similar technical and regulatory factors and similar marketpotential, profit potential and strategic value, and that is at a similar stage in its development or product life cycle as the LicensedProduct, taking into account all relevant factors, in each case based on [***]. Commercially Reasonable Efforts requires [***].THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 3 Execution VersionCONFIDENTIAL 1.16“Confidential Information” of a Party means, subject to Section 10.2, all Know-How, unpublished patentapplications and other non-public information and data of a financial, commercial, business, operational or technical nature of suchParty that is disclosed by or on behalf of such Party or any of its Affiliates or otherwise made available to the other Party or any of itsAffiliates, in each case in connection with this Agreement or the Confidentiality Agreement, whether made available orally, visually, inwriting or in electronic form. All New IP shall be Confidential Information of NVCR.1.17“Control” or “Controlled” means the possession by a Party (whether by ownership, license or otherwise) of, (a)with respect to any tangible Know-How, the legal authority or right to physical possession of such tangible Know-How, with the rightto provide such tangible Know-How to the other Party on the terms and conditions set forth herein, or (b) with respect to Patents,intangible Know-How or other intellectual property rights, the legal authority or right to grant a license, sublicense, access or right touse (as applicable) under such Patents, intangible Know-How or other intellectual property rights to the other Party on the terms andconditions set forth herein, in each case of (a) and (b), without breaching the terms of any agreement with a Third Party in existence asof the time such Party or its Affiliates would first be required hereunder to grant the other Party such access, right to use or (sub)licenseor incurring any additional fee or charge.1.18“Cover” means, with respect to a Patent, a Valid Claim of such Patent would (absent a license thereunder orownership thereof) be infringed by the manufacture, use, sale or importation of the applicable product. Cognates of the word “Cover”shall have correlative meanings.1.19“Develop” or “Development” or “Developing” means all development activities for any Licensed Product thatare directed to obtaining Regulatory Approval(s) of such Licensed Product and to support appropriate usage for such Licensed Productin the Field, including: all clinical activities, testing and studies of such Licensed Product; safety, tolerability and pharmacologicalstudies conducted in connection with the Clinical Trials of such Licensed Product; distribution of such Licensed Product for use inClinical Trials (including placebos and comparators); statistical analyses; the preparation, filing and prosecution of any application forRegulatory Approval for such Licensed Product in the Territory, with respect to Development activities conducted under the TerritoryDevelopment Plan; development activities directed to label expansion (including prescribing information) or obtaining RegulatoryApproval for one or more additional Indications following initial Regulatory Approval; development activities conducted after receiptof Regulatory Approval that are required or requested in writing by a Regulatory Authority as a condition of, or in connection with,obtaining or maintaining a Regulatory Approval; and pharmacoeconomic studies relating to the Indication for which the applicableLicensed Product is being developed; in each case above, including investigator- or institution-sponsored studies for which a Party isproviding material or assistance or otherwise has written obligations to such investigator or institution; and all regulatory activitiesrelated to any of the foregoing; provided, however, that Development shall exclude Commercialization and manufacturing activities(including manufacturing activities related to Development).THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 4 Execution VersionCONFIDENTIAL 1.20“Dollar” or “$” means the U.S. dollar, and “$” shall be interpreted accordingly.1.21“Entity” means a partnership, limited partnership, limited liability partnership, corporation, limited liabilitycompany, business trust, joint stock company, trust, incorporated association, joint venture or similar entity or organization.1.22“FDA” means the United States Food and Drug Administration or any successor entity thereto.1.23 “Field” means all human therapeutic (including the treatment of side effects) and preventative uses in the fieldof oncology.1.24“First Commercial Sale” means, with respect to any Licensed Product in any country or jurisdiction, the firstsale of such Licensed Product to a Third Party for distribution, use or consumption in such country or jurisdiction after RegulatoryApprovals, as applicable, have been obtained for such Licensed Product in such country or jurisdiction.1.25“Fully Burdened Manufacturing Cost” means, with respect to any Licensed Product supplied by or on behalfof NVCR to Zai hereunder if such Licensed Product (or any precursor or intermediate thereof) is manufactured by a Third Partymanufacturer [***].1.26“GAAP” means United States generally accepted accounting principles, consistently applied.1.27“GBM” means glioblastoma.1.28“GCP” means all applicable Good Clinical Practice standards for the design, conduct, performance, monitoring,auditing, recording, analyses and reporting of Clinical Trials, including, as applicable (a) as set forth in the International Conference onHarmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use Harmonized Tripartite Guideline forGood Clinical Practice (CPMP/ICH/135/95) and any other guidelines for good clinical practice for trials on medicinal products in theTerritory and (b) the equivalent Applicable Laws in the region in the Territory, each as may be amended and applicable from time totime and in each case, that provide for, among other things, assurance that the clinical data and reported results are credible andaccurate and protect the rights, integrity, and confidentiality of trial subjects.1.29“GLP” means all applicable Good Laboratory Practice standards, including, as applicable, as set forth in thethen-current good laboratory practice standards promulgated or endorsed by the FDA, as defined in 21 C.F.R. Part 58, and theequivalent Applicable Laws in the region in the Territory, each as may be amended and applicable from time to time.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 5 Execution VersionCONFIDENTIAL 1.30“Governmental Authority” means any federal, state, national, state, provincial or local government, or politicalsubdivision thereof, or any multinational organization or any authority, agency or commission entitled to exercise any administrative,executive, judicial, legislative, police, regulatory or taxing authority or power, or any court or tribunal (or any department, bureau ordivision thereof, or any governmental arbitrator or arbitral body).1.31“Indication” means a separate and distinct tumor type that a Licensed Product is intended to treat, prevent, cure,or ameliorate, or that is the subject of a Clinical Trial and where it is intended that the data and results of such Clinical Trial (ifsuccessful) shall be used to support a Regulatory Submission and approval that is intended to result in distinct labeling within theindications section of the label relevant to usage in such tumor type that is separate and distinct from another tumor type.1.32“Invention” means any information, discovery, improvement, modification, process, method, design, protocol,formula, data, invention, algorithm, forecast, profile, strategy, plan, result, know-how and trade secret, patentable or otherwise, that isdiscovered, generated, conceived or reduced to practice by or on behalf of either Party (including by its Affiliates, employees, agents orcontractors), whether solely or jointly, in the course of the performance of this Agreement, including all rights, title and interest in andto the intellectual property rights therein and thereto.1.33“Know-How” means any non-public information, including discoveries, improvements, modifications,processes, methods, assays, designs, protocols, SOPs, formulas, data, inventions, algorithms, forecasts, profiles, strategies, plans,results, know-how and trade secrets (in each case, patentable, copyrightable or otherwise), but excluding any Patents and physicalsubstances.1.34“Licensed Product” means any TT Fields treatment and TT Fields delivery system developed by NVCR and/orits Affiliates, including the device branded as Optune® in the United States (whether alone as the sole Active Product or as acombination with other Active Product(s)).1.35“Minimal Reimbursement Price” means a minimal monthly reimbursement price per Licensed Product equal tothe greater of [***].1.36“Net Sales” means with respect to a Licensed Product, the gross amount billed or invoiced by or for the benefitof Zai and its Affiliates, licensees and sublicensees (each of the foregoing, a “Seller”) to Third Parties (“Buyers”) in bona fide arm’slength transactions with respect to such Licensed Product, less the following deductions, in each case to the extent actually allowed,paid, accrued or specifically allocated with respect to such Licensed Product, and not otherwise recovered by or reimbursed to Seller:(a)transportation charges and other charges directly related thereto, such as insurance, in each case, to theextent actually incurred and not charged to or reimbursed by the customer;THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 6 Execution VersionCONFIDENTIAL (b)sales, excise taxes or VAT paid by the Seller imposed specifically upon the sale of such LicensedProduct and actually paid by Zai to the relevant tax authority for the sale of the Licensed Product, but not including any tax assessedagainst the income derived from such sale;(c)discounts and chargebacks actually granted, allowed or incurred, and deducted, solely in connectionwith the sale of such Licensed Product that are not otherwise attributable to other products of Zai and its Affiliates, provided however,that where any such discount is based on sales of a bundled set of products in which is included, the discount may be deducted underthis Section 1.35(c) only to the extent allocated to such Licensed Product on a pro rata basis;(d)allowances or credits to such Buyer actually given and not in excess of the selling price of suchLicensed Product on account of rejection, outdating, recalls or return of such Licensed Product;(e)amounts written off by reason of uncollectible debt if and when actually written off or allowed, aftercommercially reasonable debt collection efforts have been exhausted, provided that [***]; and(f)rebates or reimbursements to wholesalers and other distributors, pharmacies and other retailers, buyinggroups (including group purchasing organizations), health care insurance carriers, pharmacy benefit management companies, healthmaintenance organizations, Governmental Authorities, or other institutions or health care organizations, where such payments are inthe ordinary course of business and not attributable to other products of Zai and its Affiliates.No deduction shall be made for any item of cost incurred by any Seller in Developing or Commercializing LicensedProducts except as permitted pursuant to clauses (a) to (f) of the foregoing sentence; provided that Licensed Products transferred toBuyers in connection with clinical and non-clinical research and trials, Licensed Product samples, compassionate sales or use, or anindigent program or similar bona fide arrangements in which a Seller agrees to forego a normal profit margin for good faith businessreasons shall give rise to Net Sales only to the extent that any Seller invoices or receives amounts therefor. [***] If a single item fallsinto more than one of the categories set forth in clauses (a)-(f) above, such item may not be deducted more than once.Such amounts shall be determined from the books and records of the Seller, and shall be calculated in accordance withGAAP.Sales between Zai and its Affiliates and sublicensees shall be disregarded for purposes of calculating Net Sales except ifsuch purchaser is an end user, in which case such sales will give rise to Net Sales. Otherwise, the subsequent sale of such LicensedProduct by such Affiliate or sublicensee shall be included in the calculation of Net Sales.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 7 Execution VersionCONFIDENTIAL With respect to any sale of any Licensed Product in a given country for any substantive consideration other than monetaryconsideration on arm’s length terms (which has the effect of reducing the invoiced amount below what it would have been in theabsence of such non-monetary consideration), for purposes of calculating the Net Sales, such Licensed Product shall be deemed to besold exclusively for cash at the average Net Sales price charged to Third Parties for cash sales of such Licensed Product in suchcountry during the applicable reporting period (or if there were only de minimis cash sales in such country, at the fair market value asdetermined in good faith based on pricing in comparable markets).Net Sales shall be calculated on an accrual basis, in a manner consistent with Zai’s accounting policies for external reportingpurposes, as consistently applied, in accordance with GAAP.1.37“NMPA” means the National Medical Products Administration of the People’s Republic of China and anysuccessor agency(ies) or authority thereto having substantially the same function. 1.38“NSCLC” means non-small-cell lung carcinoma.1.39“NVCR IP” means NVCR Know-How and NVCR Patents.1.40“NVCR Know-How” means all Know-How Controlled by NVCR as of the Effective Date or at any timeduring the Term that is necessary or reasonably useful for the Development, or Commercialization of Licensed Products in the Field inthe Territory, including all Know-How within the New IP; provided, however, that NVCR Know-How shall exclude all Know-Howthat comes into NVCR’s Control as a result of a Change of Control of NVCR.1.41“NVCR Patents” means all Patents in the Territory Controlled by NVCR as of the Effective Date or at any timeduring the Term that Cover a Licensed Product in the Field, including all Patents in the Territory claiming New IP; provided, however,that NVCR Patents shall exclude all Patents that come into NVCR’s Control as a result of a Change of Control of NVCR. Exhibit Aincludes the NVCR Patents that are owned or exclusively licensed by NVCR and that are existing as of the Effective Date; provided,that, for the avoidance of doubt, any Patent that otherwise meets the definition of a NVCR Patent shall still be considered a NVCRPatent even if such Patent is not identified on Exhibit A.1.42“Optune Trademarks” means the trademarks containing the words “Optune” set forth on Schedule 1.41,including all applications and registrations Controlled by NVCR and/or its Affiliates therefor in the Territory.1.43“Patents” means any U.S., foreign, international or regional patent application or patent in any jurisdiction(including any provisional, non-provisional, divisional, continuation or continuation-in-part application, and any patents that issuethereon); and any reissue, renewal, re-examination, substitution, extension or addition of any of the foregoing patents or applications;and any foreign equivalents of any of the foregoing (as more fully set forth in this Agreement).THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 8 Execution VersionCONFIDENTIAL 1.44“Patent Prosecution” means activities directed to (a) preparing, filing and prosecuting applications (of all types)for any Patent, (b) managing any interference, opposition, re-issue, reexamination, supplemental examination, invalidation proceedings(including inter partes or post-grant review proceedings), revocation, nullification, or cancellation proceeding relating to the foregoing,(c) deciding whether to abandon or maintain Patent(s), (d) listing in regulatory publications (as applicable), (e) patent term extensionapplications and maintenance, and (f) settling any interference, opposition, reexamination, invalidation, revocation, nullification orcancellation proceeding.1.45“Person” means any individual, unincorporated organization or association, governmental authority or agencyor Entity.1.46“PRC” means the People’s Republic of China, which for the purposes of this Agreement shall exclude HongKong, Macau and Taiwan.1.47“Product Improvement” means any improvement made [***].1.48“Product Updates” means any improvement made [***].1.49“Regulatory Approval” means, with respect to a Licensed Product in a country or region in the Territory, allapprovals that are necessary for the commercial sale of such Licensed Product for use in the Field in such country or region in theTerritory, excluding any pricing and reimbursement approvals except to the extent required by Applicable Law to sell the LicensedProduct in such country or region.1.50“Regulatory Authority” means any applicable Governmental Authority responsible for granting RegulatoryApprovals or any pricing or reimbursement approvals, as applicable, for Licensed Products, including the NMPA, CMDE, AQSIAand any corresponding national or regional regulatory authorities.1.51“Regulatory Submissions” means any filing, application or submission with any Regulatory Authority,including authorizations, approvals or clearances arising from the foregoing, including Regulatory Approvals and any pricing orreimbursement approvals, as applicable, and all correspondence or communication with or from the relevant Regulatory Authority, aswell as minutes of any material meetings, telephone conferences or discussions with the relevant Regulatory Authority, in each case,with respect to a Licensed Product.1.52“RMB” means the official currency of the PRC.1.53“Sanctioned Country” means, at any time, a country or territory that is itself the subject or target of anySanctions (at the time of this Agreement, Cuba, Iran, North Korea, Sudan and Syria).1.54“Sanctions” means (a) economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the United States government and administered by the U.S. Treasury Department’s Office of Foreign AssetsControl (“OFAC”), the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom, and(b) economic or financial sanctions imposed, administered or enforced from time to time by the United States State Department, theUnited States Department of Commerce or the United States Department of the Treasury.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 9 Execution VersionCONFIDENTIAL 1.55“Sanctions List” means any of the lists of specifically designated nationals or designated Persons held by theU.S. government and administered by OFAC, the United States State Department, the United States Department of Commerce or theUnited States Department of the Treasury or the United Nations Security Council or any similar list maintained by the EuropeanUnion, any other EU Member State or any other U.S. government entity, in each case as the same may be amended, supplemented orsubstituted from time to time.1.56“Specifications” mean the requirements and standards for each Licensed Product to be supplied by NVCR toZai under this Agreement as set forth on Schedule 1.55 attached hereto, as amended or supplemented in writing in accordance with thisAgreement.1.57“Tax” or “Taxes” means any present or future taxes, levies, imposts, duties, charges, assessments or fees of anynature (including any interest thereon). For the avoidance of doubt, Taxes includes value add taxes (“VAT”).1.58“Territory” means the PRC, Hong Kong, Macau and Taiwan (each of which for purposes of this Agreementshall each be deemed a region).1.59“Third Party” means any Person other than a Party or an Affiliate of a Party.1.60“TT Fields” means Tumor Treating Fields, or TTFields, which are low intensity, alternating electric fields thatdisrupt cell division through physical interactions with key molecules during mitosis in solid tumor cancers.1.61“TT Fields Multi-Regional Clinical Study” means a global Clinical Trial of the Licensed Product sponsored byNVCR for an Indication which includes Clinical Trials to be conducted in multiple regions, including the PRC, in accordance with a[***] Plan.1.62“United States” means the United States of America.1.63“Valid Claim” means: (a) a claim in an issued Patent that has not: (i) expired or been canceled; (ii) been declaredinvalid by an unreversed and unappealable or unappealed decision of a court or other appropriate body of competent jurisdiction; (iii)been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise; or (iv) been abandoned in accordance with or aspermitted by the terms of this Agreement or by written agreement of the Parties; or (b) a claim that has been pending [***] or less fromthe date that the first action on the merits (excluding restriction requirements, notices to file missing parts, and the like) was received ina patent application in which such claim is examined, and that has not been abandoned (without the possibility of refiling) or finallyrejected by the applicable Governmental Authority or court (and from which no appeal is or can be taken). For clarity, if a claim iscanceled and refiled in a continuing application, the period of pendency is calculated from the date that the first action on the merits asto that claim was first received.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 10 Execution VersionCONFIDENTIAL 1.64Additional Definitions. The following table identifies the location of definitions set forth in various Sections ofthis Agreement:TermSectionAgreementIntroductionAlliance ManagerSection 3.1Anti-Corruption LawsSection 11.7(a)(i)Arbitration NoticeSection 15.3(a)ArbitratorsSection 15.3(b)Business Combination TransactionSection 1.12(b)BuyersSection 1.35ClaimsSection 12.1Clinical Supply AgreementSection 7.1Commercial Supply AgreementSection 7.2Competing ProductSection 2.4(a)Competing ProgramSection 2.6Confidentiality AgreementSection 16.6Continuing Technology TransferSection 4.1Development TargetSection 5.2Development Target DeadlineSection 5.2Disclosing PartySection 10.1(a)Disclosure ScheduleArticle 11DisputeSection 15.1DivestitureSection 2.5Effective DateIntroductionEx-Territory InfringementSection 13.3Examined PartySection 9.7Executive OfficersSection 3.2(f)Global Brand ElementsSection 8.4(b)[***] PlanSection 5.3(a)Indemnified PartySection 12.3Indemnifying PartySection 12.3Initial Technology TransferSection 4.1JDCSection 3.2(f)(ii)JSCSection 3.2(a)LicenseSection 2.1LossesSection 12.1New IPSection 13.1(a)NMPA Submission TimelineSection 5.1(c)NVCRIntroductionNVCR IndemniteesSection 12.1Outstanding Voting SecuritiesSection 1.12(a)Party/PartiesIntroductionTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 11 Execution VersionCONFIDENTIAL Paying PartySection 9.8(c)Product InfringementSection 13.3Product MarksSection 13.5PublicationSection 10.4Receiving PartySection 10.1(a)RecipientSection 9.8(c)RepresentativesSection 10.1(c)Review PeriodSection 10.4(a)Royalty TermSection 9.3(b)RulesSection 15.3(a)Safety AgreementSection 6.5(a)SellerSection 1.35Supply Agreement Term SheetSection 7.3Technology TransferSection 4.1TermSection 14.1Territory Development PlanSection 5.4VATSection 1.56ZaiIntroductionZai IndemniteesSection 12.2 ARTICLE 2LICENSE2.1License Grants to Zai.(a)Subject to the terms and conditions of this Agreement, NVCR hereby grants to Zai (i) an exclusive,royalty-bearing license, with the right to grant sublicenses solely in accordance with Section 2.2, under the NVCR IP and anyRegulatory Approvals and Regulatory Submissions owned and held by NVCR or its Affiliates in the Territory to Develop, distribute,use, sell, offer for sale, import and otherwise Commercialize Licensed Products in the Field in the Territory (the “License”) and (ii) anon-exclusive license, with the right to grant sublicenses solely in accordance with Section 2.2, under the NVCR IP to perform theDevelopment activities [***] to the extent permitted by this Agreement. (b) On a Licensed Product-by-Licensed Product basis, unless and until the Parties reach any alternativeagreement on the supply of the Licensed Products, Zai shall purchase and NVCR shall supply the Licensed Products for Zai’sDevelopment and Commercialization of the Licensed Products in the Territory pursuant to Clinical Supply Agreement andCommercial Supply Agreement in accordance with Article 7. The Commercial Supply Agreement shall contain the customary changecontrol provisions to address any Product Updates, certain Product Improvements, incremental changes to the Specifications, orincremental improvements to the Licensed Product. If the Product Improvements are so significant that such Licensed Product willneed to be approved by the Regulatory Authorities as a new product, then a new or amended Commercial Supply Agreement shall beentered into between NVCR and Zai. THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 12 Execution VersionCONFIDENTIAL 2.2Right to Sublicense.(a)Subject to the terms and conditions of this Agreement, Zai shall have the right to grant sublicenses ofthe License: (i) to its Affiliates, provided that (A) such sublicense shall automatically terminate if such sublicensee ceases to be anAffiliate of Zai, and (B) Zai’s right to grant sublicenses shall not apply to Affiliates who become Affiliates after the Effective Date as aresult of any stock or asset acquisition involving Zai; and (ii) subject to Section 5.8 and NVCR’s prior written approval, to contractresearch organizations, distributors and other Third Party subcontractors for the sole purpose of, with respect to the License,performing Zai’s obligations with respect to the Development, and Commercialization of Licensed Products in the Field in theTerritory. Notwithstanding the foregoing, except for sublicenses of the License to its Affiliates in accordance with Section 2.2(a)(i),Zai shall obtain NVCR’s prior written consent if Zai wishes to sublicense any of Zai’s rights or obligations under this Agreement withrespect to any region within the Territory. Notwithstanding the grant of any sublicense hereunder, Zai shall remain liable for anybreach or default of the applicable terms and conditions of this Agreement by any of its sublicensees.(b)Zai will not grant a sublicense to any sublicensee that has been debarred or disqualified by a Regulatory Authority. Zai will ensure that, prior to engaging any sublicensee that such sublicensee is subject to written agreementcontaining the following terms and conditions: (i) each such sublicensee must protect and keep confidential any ConfidentialInformation of the Parties, including in accordance with Article 10; (ii) NVCR has the right to audit (either by itself or through Zai orZai’s designee) the books and records of each such sublicensee in accordance with this Agreement (including pursuant to Section 9.7);(iii) the sublicense does not impose any payment obligations or liability on NVCR; (iv) each sublicense shall contain the sameindemnification and intellectual property assignment provisions as in this Agreement; and (v) the sublicense is otherwise consistentwith the terms of this Agreement. Zai will promptly provide a copy of the executed agreement with each sublicensee to NVCR, whichcopy may be redacted to remove financial terms. Zai shall ensure that its sublicensees comply with the terms and conditions of thisAgreement and Zai will remain directly responsible for all of its obligations under this Agreement that have been delegated orsublicensed to any sublicensee.2.3No Implied Licenses; Negative Covenant. Except as expressly set forth herein, neither Party shall acquire anylicense or other intellectual property interest, by implication or otherwise, under any trademarks, Patents or patent applications of theother Party. Zai shall not, and shall not permit any of its Affiliates or sublicensees to, practice any NVCR IP outside the scope of theLicense.2.4Non-Compete.(a)Subject to Section 2.5, during the Term, Zai shall not, and shall ensure that its Affiliates andsublicensees hereunder do not, directly or indirectly, engage in, independently or for or with any Third Party, any [***](a “CompetingProduct”) in the Territory, other than Licensed Products in accordance with this Agreement.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 13 Execution VersionCONFIDENTIAL (b)During the Term, NVCR shall not, and shall ensure that its Affiliates and sublicensees hereunder donot, directly or indirectly, engage in, independently or for or with any Third Party, any development or commercialization of aCompeting Product in the Territory and in the Field, other than Licensed Products in accordance with this Agreement. NVCR shalluse, and cause its Affiliates or Third Parties acting on its behalf to use, good faith efforts to design, develop, label, market, and/or sellany Competing Product for use outside the Field in humans in the Territory in such a way that would prevent or discourage any use ofsuch Competing Product in the Field in the Territory.2.5Acquisition of Competing Programs. If a Third Party becomes an Affiliate of Zai, or otherwise assumes thisAgreement, after the Effective Date through merger, acquisition, consolidation or other similar transactions with Zai, then regardless ofwhether such transaction results in a Change of Control of Zai, if as of the date of the closing of such transaction, such Affiliate or anyAffiliate of such new Affiliate was engaged in the research, development, manufacture or commercialization of a product that wouldcompete with any Licensed Product (a “Competing Program”), then Zai and its new Affiliate will have [***] to wind down (i.e.,discontinue all development and commercialization) or complete the Divestiture of such Competing Program. “Divestiture” means thesale or transfer or exclusive license of rights to the Competing Program to a Third Party without the retention or reservation of anyrights, license or interest (other than solely an economic interest and, in the event of termination, customary residual rights) in suchCompeting Program.2.6Control & Management of Licensed Products. Zai shall use Licensed Products for Development andCommercialization as expressly contemplated by this Agreement. Zai shall not, and shall not permit its Affiliate or any Third Party anyre-use any component of the Licensed Products that are disposable (i.e., arrays), reverse engineering of the Licensed Products or anycomponent thereof, diversion of any Licensed Product, inappropriate disposal of Licensed Product, failure to collecting LicensedProduct upon treatment stoppage. 2.7No Diversion. Zai and its Affiliates shall not, and shall contractually obligate (and use CommerciallyReasonable Efforts to enforce such contractual obligation) its and their licensees and sublicensees not to, directly or indirectly, activelypromote, market, distribute, import, sell or have sold any Licensed Product, including via the Internet or mail order, to any Third Partyor to any address or Internet Protocol address or the like outside of the Territory or for purposes of medical tourism from countries inwhich NVCR is developing or commercializing the Licensed Product. Zai shall not engage, and shall not permit its Affiliates andsublicensees to engage, in any advertising or promotional activities relating to any Licensed Product for use directed primarily tocustomers or other buyers or users of such product residing or located in any country or jurisdiction outside the Territory, or solicitorders from any prospective purchaser residing or located in any country or jurisdiction outside the Territory. If Zai or its Affiliates orsublicensees receives any order for a Licensed Product for use from a prospective purchaser located or residing in a country orjurisdiction outside the Territory, Zai shall immediately refer that order to NVCR and shall not accept any such orders. Zai shall notdeliver or tender (or cause to be delivered or tendered), nor permit its Affiliates and sublicensees to, deliver or tender (or cause to bedelivered or tendered) any Licensed Product for use outside the Territory.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 14 Execution VersionCONFIDENTIAL ARTICLE 3GOVERNANCE3.1Alliance Managers. Each Party shall appoint an individual to act as its alliance manager under this Agreement assoon as practicable after the Effective Date (the “Alliance Manager”), which Zai Alliance Manager shall be fluent in English. TheAlliance Managers shall: (a) serve as the primary points of contact between the Parties for the purpose of providing the other Party withinformation on the progress of a Party’s activities under this Agreement; (b) be responsible for facilitating the flow of information andotherwise promoting communication, coordination and collaboration between the Parties, provided that all communications betweenthe Parties shall be in English; (c) facilitate the prompt resolution of any disputes; and (d) attend JSC (as a non-voting participant) andJDC meetings. An Alliance Manager may also bring any matter to the attention of the JSC or JDC if such Alliance Managerreasonably believes that such matter warrants such attention. Each Party may replace its Alliance Manager at any time upon writtennotice to the other Party.3.2Joint Steering Committee.(a)Formation. Within [***], the Parties shall establish a joint steering committee (the “JSC”) to monitorand coordinate the Development and Commercialization of Licensed Products in the Field in the Territory. The JSC will be composedof an equal number of representatives from each Party and a minimum of [***] representatives of each Party, with (i) at least [***]senior-level representatives from Zai who are fluent in English, (ii) at least [***] representative of each Party that have directknowledge and expertise in the development and commercialization of products similar to Licensed Products.(b)Role. The JSC shall (i) provide a forum for the discussion of the Parties’ activities under thisAgreement; (ii) review and discuss the overall strategy for the Development and Commercialization of Licensed Products in the Fieldin the Territory; (iii) review and discuss the initial Territory Development Plan and review, discuss, and approve any amendmentsthereto in accordance with Section 5.4; (iv) review and discuss any material amendments to the [***] Plan that are related to theTerritory in accordance with Section 5.3(c); (v) review, discuss, and approve the Commercialization Plan and amendments theretoincluding the reimbursement price for the Licensed Product in the Territory; (vi) establish and oversee the JDC as necessary oradvisable to further the purpose of this Agreement; (vii) discuss potential implications of Zai’s decision to file and hold RegulatorySubmissions, Regulatory Approvals and any pricing or reimbursement approvals, as applicable, for Licensed Products in the Territoryin its own name; (viii) discuss and approve clinical supply arrangements; (ix) review and discuss annually a charitable care strategy(covering compassionate sales or use, or an indigent program) for the Licensed Products in the Field in the Territory; and (x) performsuch other functions as expressly set forth in this Agreement or allocated to the JSC by the Parties’ written agreement.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 15 Execution VersionCONFIDENTIAL (c)Limitation of Authority. The JSC shall only have the powers expressly assigned to it in this Article 3and elsewhere in this Agreement and shall not have the authority to: (i) modify or amend the terms and conditions of this Agreement;(ii) waive either Party’s compliance with the terms and conditions of this Agreement; or (iii) determine any issue in a manner thatwould conflict with the express terms and conditions of this Agreement.(d)Meetings. The JSC shall hold meetings at such times as it elects to do so, but shall meet no lessfrequently than [***] per Calendar Year, in a manner and at a location as agreed upon by the Parties. Each Party shall bear its ownexpenses related to participation in and attendance at such meetings by its respective JSC representatives.(e)Non-Member Attendance. Each Party may from time to time invite a reasonable number ofparticipants, in addition to its representatives, to attend the JSC meetings in a non-voting capacity; provided that if either Party intendsto have any Third Party (including any consultant) attend such a meeting, such Party will provide prior written notice to the otherParty. Such Party will also ensure that such Third Party is bound by confidentiality and non-use obligations consistent with the termsof this Agreement.(f)Decision-Making. All decisions of the JSC shall be made by unanimous vote, with each Party’srepresentatives collectively having one vote. If after reasonable discussion and good faith consideration of each Party’s view on aparticular matter before the JSC, the JSC cannot reach a decision as to such matter within [***] days after such matter was brought tothe JSC for resolution, such matter shall be referred to the Chief Executive Officer of NVCR (or an executive officer of NVCRdesignated by the Chief Executive Officer of NVCR who has the power and authority to resolve such matter) and the Chief ExecutiveOfficer of Zai (or an executive officer of Zai designated by the Chief Executive Officer of Zai who has the power and authority toresolve such matter) (collectively, the “Executive Officers”) for resolution. If the Executive Officers cannot resolve such matter within[***] days after such matter has been referred to them, then:(i)Zai shall have the final decision-making authority with respect to (1) Development ofLicensed Products in the Field in the Territory which are not part of the [***] Plan and would not reasonably be expected to have amaterially adverse effect on a global study or Development, manufacture or Commercialization of Licensed Products outside theTerritory and (2) subject to clause (3) of Section 3.2(f)(ii), Commercialization of Licensed Products, including sales force deploymentdecisions, in the Field in the Territory; provided that: (3) Zai shall not make any decision that is inconsistent with its obligations to useCommercially Reasonable Efforts to Develop and Commercialize the Licensed Products in the Field and in the Territory or wouldreasonably be expected to (A) materially adversely affect the continued Development or Commercialization of Licensed Productsoutside the Territory or the Field; or (B) cause NVCR to be in violation of Applicable Laws as the owner and holder of RegulatorySubmissions, Regulatory Approvals and any pricing or reimbursement approvals, as applicable, for Licensed Products in the Territory.In the event that NVCR believes that any decision made by Zai pursuant to this Section 3.2(f)(i) is inconsistent with clauses (1)through (3) of this Section 3.2(f)(i), then NVCR shall so notifyTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 16 Execution VersionCONFIDENTIAL Zai, and Zai’s decision shall not go into effect unless and until (x) Zai, within [***] days of such notification, refers such matter to anindependent Third Party expert selected by mutual agreement of the Parties who has at least [***] years of experience in the medicaldevice and/or oncology therapeutic field (or who has such other similar credentials as mutually agreed by the Parties), and (y) suchThird Party expert decides that Zai’s decision is not in conflict with clause (3) of this Section 3.2(f)(i). Such Third Party expert shall beinstructed to render its decision within [***] days of the date that such matter is referred to such Third Party expert, with the costs forsuch independent Third Party expert to be shared equally by the Parties. Except in cases of fraud or manifest error on the part of suchThird Party expert, the decision of such Third Party expert shall be final and binding on the Parties (and, for clarity, such matter shallnot be subject to the dispute resolution procedures set forth in Article 15);(ii)NVCR shall have the final decision-making authority with respect to (1) any Development,manufacture or Commercialization activities in the Territory which is reasonably expected to have a materially adverse effect on aglobal study or Development, manufacture or Commercialization of Licensed Products outside the Territory (provided that NVCRshall not make any such decision that would materially increase Zai’s obligations above those set forth in the initial [***] Plan agreedbetween the Parties without Zai’s written consent), (2) any research, Development, manufacturing or Commercialization of LicensedProducts outside the Territory or the Field, and (3) the level of reimbursement of a Licensed Product in the Territory if thereimbursement price proposed for the Licensed Product is less than the Minimal Reimbursement Price. The Parties acknowledge thatthe healthcare market and reimbursement systems in China are evolving and shall continue to review pricing and reimbursementstrategies for Licensed Products. The Parties may mutually agree, in writing, to amend the Minimal Reimbursement Price in the future.Notwithstanding the foregoing, NVCR shall not make any decisions that would materially affect Zai’s ability to comply withApplicable Laws or cause Zai to breach any Applicable Laws.(g)Joint Development Committee. The JSC shall promptly establish a joint development committee (the“JDC”), which is subject to the supervision and oversight of the JSC, to review, discuss, coordinate and share information regarding (i)the Development of Licensed Products in the Territory, (ii) the progress of the Regulatory Approvals and Regulatory Submissions forLicensed Products in the Territory, and (iii) data generated (for which each Party has the right to reference in regulatory filings) fromthe other Party’s and their licensees’ ongoing and future Clinical Trials and filings for obtaining Registration Certification for medicaldevices for all indications for the Licensed Products. The JDC will meet with a frequency and in a manner as determined by the JSC.The JSC shall resolve any disputes that arise within the JDC within [***] days after any such matter is brought to the JSC forresolution. In no event shall the authority of the JDC exceed the authority of the JSC. Each Party shall be responsible for all of its ownexpenses of participating in the JDC.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 17 Execution VersionCONFIDENTIAL ARTICLE 4TECHNOLOGY TRANSFERS4.1Technology Transfer. NVCR shall use good faith efforts to, within [***] days of the Effective Date, provideand transfer to Zai the NVCR Know-How which shall be that exists on the Effective Date and was not previously provided to Zai (the“Initial Technology Transfer”). Thereafter, during the Term, NVCR shall (a) at each meeting of the JSC (and, in any event, on aquarterly basis if any JSC meeting is not held in a particular Calendar Quarter), provide Zai with a summary of additional NVCRKnow-How (if any) developed or included in the License and details of any Product Updates and Product Improvements developed[***], (b) transfer any such NVCR Know-How and Product Updates to Zai [***], and (c) provide Zai with reasonable access toNVCR personnel involved in the research and Development of Licensed Products, either in person at NVCR’s facility or byteleconference (the “Continuing Technology Transfer,” and together with the Initial Technology Transfer, the “TechnologyTransfer”). Thereafter, during the Term, at JSC meetings, NVCR shall keep Zai reasonably informed of NVCR’s Developmentactivity as it relates to Zai’s Development and Commercialization in the Territory. For the avoidance of doubt, NVCR personnel shallnot be obligated to travel to Zai’s facilities, and NVCR’s transfer obligations under this Section 4.1 shall apply solely to the extent theNVCR Know-How is reasonably necessary to support Zai’s Development and Commercialization of the Licensed Product in the Fieldin the Territory in accordance with this Agreement.ARTICLE 5DEVELOPMENT PROGRAM5.1Diligence and Responsibilities.(a)Zai shall be responsible for and use Commercially Reasonable Efforts to (i) Develop LicensedProducts in the Field in the Territory in accordance with the Territory Development Plan, (ii) perform the Development activitiesassigned to Zai [***], and (iii) Commercialize Licensed Products in the Field in the Territory.(b)Zai shall use Commercially Reasonable Efforts to conduct the tasks assigned to it in the TerritoryDevelopment Plan, and the tasks [***] and achieve the objectives set forth therein. Zai shall conduct such tasks in a timely,professional manner and in compliance with the Territory Development Plan and [***] Plan, as applicable, and all Applicable Laws,including GLP, GCP and cGMP. NVCR may conduct such tasks assigned to it, and any other activities assigned to it under thisAgreement, through one or more Affiliate or Third Party designees.(c)No later than [***] days following the Effective Date, the Parties will cooperate to finalize, and shallmutually agree upon prior to attachment to this Agreement in Exhibit B, a written timeline (the “NMPA Submission Timeline”) forRegulatory Submissions to the NMPA, which NMPA Submission Timeline may be amended upon mutual agreement by the Partiesfrom time to time. Zai will develop the timelines for other indications within [***] days after the Effective Date.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 18 Execution VersionCONFIDENTIAL 5.2Development Target. Zai shall, (a) within [***] months of the [***], obtain Regulatory Approval for theLicensed Product for the same Indication in the Territory; provided, however, [***], Zai shall obtain Regulatory Approval for theLicensed Product for the same Indication in the Territory within [***] months of the [***]; (b) [***] within [***] months after theEffective Date; and (c) [***] within (i) [***] months after [***], or (ii) [***] months after [***] (each such Zai obligation a“Development Target” and each such corresponding deadline a “Development Target Deadline”); provided that each suchDevelopment Target Deadline shall be extended by [***] days or such other period of time as agreed in writing by the Parties if (x) Zaidemonstrates to NVCR that Zai has utilized Commercially Reasonable Efforts to achieve the corresponding Development Target bythe corresponding Development Target Deadline and (y) such inability to achieve such Development Target by the correspondingDevelopment Target Deadline is due to (i) reasons outside of Zai’s control including changes to the regulatory process or ApplicableLaws, or delays caused by Governmental Authorities including delays in providing necessary approvals or responses; or (ii) NVCRexercising its final decision making authority with Zai’s objection.5.3[***] Plan.(a)NVCR’s global Development of Licensed Products will be conducted pursuant to a writtendevelopment plan (as amended from time to time in accordance with this Section 5.3, the “[***] Plan”), which the Parties agree shallinclude (i) TT Fields Multi-Regional Clinical Studies for (1) the NSCLC Indication, (2) the pancreatic cancer Indication, and (3) theovarian cancer Indication, for each of which, Zai [***]; and (ii) a [***].(b)The Parties shall discuss and agree upon the initial [***] Plan within [***] days following theEffective Date. In addition to Zai’s Development activities under the Territory Development Plan, Zai shall [***]. The [***] Plan shallinclude (i) an outline only of NVCR’s global Clinical Trials for Licensed Products, (ii) details and timelines of the [***], (iii) detailsand timelines of any other Development activities [***], and (iv) [***], which for each of the TT Fields Multi-Regional Clinical Studies for the NSCLC Indication, the pancreatic cancer Indication and the ovarian cancer Indication, shall be up to [***], using itsCommercially Reasonable Efforts.(c)From time to time, NVCR may make and implement amendments to the then-current [***] Plan. Tothe extent such amendments are (x) material, and (y) relate to the Territory, NVCR shall submit such proposed amendments to the JSCfor review and discussion before adopting such amendments.5.4Territory Development Plan. Except for the activities [***] pursuant to Section 5.3, all Development by Zai ofLicensed Products in the Territory under this Agreement shall be conducted pursuant to a written development plan (as amended fromtime to time in accordance with this Section 5.4 and Section 3.2, the “Territory Development Plan”), which Territory DevelopmentPlan shall contain in reasonable detail all major Development activities (including all Clinical Trials) for Licensed Products in theTerritory and the timelines for achieving such activities. Attached hereto as Exhibit C is an initialTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 19 Execution VersionCONFIDENTIAL draft of the Territory Development Plan and attached hereto as Exhibit B is a NMPA Submission Timeline for the indications ofrecurrent and newly diagnosed GBM. From time to time as needed thereafter, Zai shall propose amendments to the TerritoryDevelopment Plan in consultation with NVCR and submit such proposed updated or amended Territory Development Plan to the JSCfor review, discussion and approval. Once approved by the JSC, the amended Territory Development Plan shall become effective. Forclarity, the Territory Development Plan and amendments thereto must be consistent with the [***] Plan and the [***] Plan shall takeprecedent in case of any conflict or inconsistency between the Territory Development Plan and the [***] Plan.5.5Development Costs. Zai shall be solely responsible for all costs and expenses incurred by or on behalf of Zai inthe Development of Licensed Products in the Territory, including the performance of Development activities under the TerritoryDevelopment Plan and the Development activities [***] and shall provide for reimbursement of NVCR’s costs for the assistanceprovided to Zai in the Development of Licensed Products in the Territory, including the costs incurred in acting as the holder of theRegulatory Approvals and Regulatory Submissions of the Licensed Products on behalf of Zai in the Territory.5.6Development Reports. The status, progress and results of Zai’s Development activities under this Agreementand NVCR’s development activities for the Licensed Product in the Field outside the Territory will be discussed at meetings of theJSC. At least [***] Business Days before each regularly scheduled JSC meeting, Zai will provide the JSC with a written reportdetailing its Development activities and the results thereof, covering subject matter at a level of detail reasonably required by NVCRand sufficient to enable NVCR to determine Zai’s compliance with its diligence obligations pursuant to Section 5.1. In addition, Zaiwill make available to NVCR such additional information about its Development activities as may be reasonably requested by NVCRfrom time to time. All updates and reports generated pursuant to this Section 5.6 shall be the Confidential Information of Zai.5.7Data Exchange and Use. In addition to its adverse event and safety data reporting obligations pursuant toSection 6.5, each Party shall promptly provide the other Party with copies of all data and results and all supporting documentation (e.g.protocols, CRFs, analysis plans) controlled by such Party that are generated by or on behalf of such Party or its Affiliates orsublicensees, if applicable, in the Development of Licensed Products; provided that NVCR shall only be required to provide Zai suchdata, results and documentation to the extent it comprises NVCR Know-How and is reasonably necessary or useful for Zai’sDevelopment and Commercialization of the Licensed Products in the Field and in the Territory. Zai shall have the right to use andreference such data and results provided by NVCR, without additional consideration, for the purpose of obtaining and maintainingRegulatory Approval and any pricing or reimbursement approvals, as applicable, of Licensed Products in the Field and in the Territory.NVCR and its designees shall have the right to use and reference such data and results provided by Zai, without additionalconsideration, for the purpose of obtaining and maintaining Regulatory Approval and any pricing or reimbursement approvals, asapplicable, of Licensed Products outside the Field or the Territory.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 20 Execution VersionCONFIDENTIAL 5.8Subcontractors. Zai shall have the right to engage subcontractors for purposes of conducting activities assignedto it under this Agreement or for which it is responsible under this Agreement, to the extent such subcontractors are set forth in theinitial Territory Development Plan approved by NVCR or the [***] Plan, or otherwise with NVCR’s prior written consent. Zai shallcause any subcontractor engaged by it to be bound by written obligations of confidentiality and non-use consistent with this Agreementprior to performing any activities. Zai shall cause its subcontractors to assign to Zai (or, in the case of academic institutions and ThirdParty manufacturers, use reasonable efforts to cause such subcontractor to so assign) all intellectual property made by suchsubcontractor in the course of performing such subcontracted work. Zai shall remain directly responsible for any obligations under thisAgreement that have been delegated or subcontracted to any subcontractor and shall be directly responsible for the performance of itssubcontractors.5.9Records. Zai will maintain appropriate records in either tangible or electronic form of (a) all significantDevelopment and Commercialization events and activities conducted by it or on its behalf related to a Licensed Product; and (b) allsignificant information generated by it or on its behalf in connection with Development or Commercialization of a Licensed Product under this Agreement, in each case in accordance with Zai’s usual documentation and cGMP record retention practices. Such recordswill be in sufficient detail to properly reflect, in a good scientific manner, all significant work done and the results of studies and trialsundertaken and, further, will be at a level of detail appropriate for patent and regulatory purposes. Zai will document all non-clinicalstudies and Clinical Trials in formal written study reports according to Applicable Laws and national and international guidelines.Upon NVCR’s request, Zai will, and will cause its Affiliates and Sublicensees, to provide to NVCR copies of such records (includingaccess to relevant databases, if any) of Development and Commercialization activities to the extent necessary or useful for theDevelopment and Commercialization of the Licensed Product outside the Territory, including for regulatory and patent purposes. Allsuch records, reports, information and data provided will be subject to the confidentiality provisions of Article 10. ARTICLE 6REGULATORY6.1Holder of Regulatory Approvals and Regulatory Submissions. NVCR shall initially be the holder ofRegulatory Approvals and Regulatory Submission for Licensed Products in the Territory. At Zai’s request during the Term, (a) theJSC will discuss in good faith whether to transfer manufacturing responsibilities for Licensed Products for the Territory to Zai, and (b)the Parties will discuss in good faith whether to enable Zai to hold Regulatory Approvals and Regulatory Submissions in the Territory, including any pricing or reimbursement approvals, whether by transfer to Zai of such Regulatory Approvals and RegulatorySubmissions or through the submission of a new application for Regulatory Approval in the Territory submitted by Zai, in each case((a) or (b)), to the extent permitted by Applicable Law and in accordance therewith. If agreed by the Parties, NVCR shall reasonablycooperate with Zai, at Zai’s expense, to enable Zai to hold any or all such Regulatory Approvals and Regulatory Submissions.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 21 Execution VersionCONFIDENTIAL 6.2Zai’s Responsibilities.(a)Zai shall be responsible [***] for all regulatory activities leading up to and including the obtaining ofRegulatory Approvals and any pricing or reimbursement approvals, as applicable, for Licensed Products from Regulatory Authoritiesin the Field and in the Territory, provided that, Zai shall conduct such regulatory activities (and any and all regulatory activitiesdelegated to Zai in this Agreement or by NVCR during the Term in connection with the Development and Commercialization of theLicensed Product in the Territory during such time that NVCR is the holder of Regulatory Approvals and Regulatory Submissions forthe Licensed Product in the Territory) as the express, exclusive, and authorized legal agent of record for NVCR in the Territory, andprovided further, that such actions shall be taken on behalf of NVCR and for the benefit of Zai in the Territory. Promptly after theEffective Date and from time to time during the Term, the Parties shall conduct such actions and execute such documents as arerequired for Zai to act as NVCR’s express, exclusive, and authorized legal agent of record in the Territory. Notwithstanding theforegoing, to the extent permitted under Applicable Laws, Zai may file, obtain and maintain (on behalf of NVCR, which will be theholder of) Regulatory Submissions, Regulatory Approvals and any pricing or reimbursement approvals, as applicable, for LicensedProducts in the Territory.(b)Zai shall promptly provide to NVCR for review and comment drafts of all Regulatory Submissionsprepared by or on behalf of Zai, including English summaries thereof. NVCR shall have the right to review and comment on suchRegulatory Submissions and Zai shall consider in good faith any comments received from NVCR and incorporate all comments thatare reasonable or necessary for protecting NVCR’s interest as licensor of the Licensed Product or holder of the Regulatory Submissionor Regulatory Approval in the Territory. In addition, each Party shall promptly notify the other Party of any Regulatory Submissionsand any comments or other correspondences related thereto submitted to or received from any Regulatory Authority in the Territoryand shall provide the other Party with copies thereof as soon as reasonably practicable. If any such Regulatory Submission, commentor correspondence is not in English, Zai shall also promptly provide NVCR with a written English summary of any comments or othercorrespondences received from a Regulatory Authority with respect to a Regulatory Submission.(c)Each Party shall promptly provide the other Party with notice after receiving notice of any meeting ordiscussion with any Regulatory Authority in the Territory related to any Licensed Product in the Field. Zai shall lead any such meetingor discussion, provided, however, that NVCR or its designee shall have the right, but not the obligation, to attend and participate insuch meeting or discussion. If NVCR elects not to attend such meeting or discussion, Zai shall provide NVCR with a written summarythereof in English promptly following such meeting or discussion.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 22 Execution VersionCONFIDENTIAL 6.3NVCR’s Responsibilities. Except if filed or obtained by Zai in its own name, solely as permitted under Section6.1, NVCR shall own and hold all Regulatory Submissions, Regulatory Approvals and any pricing or reimbursement approvals, asapplicable, for Licensed Products in the Field and in the Territory for the benefit of Zai, and shall, promptly upon Zai’s request,provide access to and copies of such Regulatory Submissions, Regulatory Approvals and any pricing or reimbursement approvals toZai, as applicable. NVCR shall reasonably cooperate with Zai in obtaining any Regulatory Approvals and any pricing orreimbursement approvals, as applicable, for a Licensed Product in the Field and in the Territory including by providing, to the extentControlled by NVCR, prompt access to clinical data, and other data, information, and documentation for Licensed Products in theField, that is included in the NVCR Know-How, including any Regulatory Approvals or Regulatory Submissions for the LicensedProducts in the Field in the Territory and outside the Territory (which are reasonably useful in the Territory).6.4Right of Reference. Each Party hereby grants to the other Party the right of reference to all RegulatorySubmissions pertaining to Licensed Products in the Field submitted by or on behalf of such Party or its Affiliates in and outside theTerritory. Zai may use such right of reference to NVCR’s Regulatory Submissions solely for the purpose of seeking, obtaining andmaintaining Regulatory Approval and any pricing or reimbursement approvals, as applicable, of Licensed Products in the Field in theTerritory as NVCR’s authorized legal agent and exclusive general distributor of record or on its own behalf to the extent permitted byApplicable Laws and this Agreement. NVCR may use the right of reference to Zai’s Regulatory Submissions, if any, solely for thepurpose of seeking, obtaining and maintaining regulatory approval of Licensed Products outside the Territory or, to the extentpermitted pursuant to this Agreement, in the Territory. Each Party shall bear its own costs and expenses associated with providing theother Party with the right of reference and sharing of data and information pursuant to this Section 6.4.6.5Adverse Events Reporting.(a)Promptly following the Effective Date, but in no event later than [***] days thereafter, Zai and NVCRshall develop and agree in a written agreement to worldwide safety and pharmacovigilance procedures for the Parties with respect toLicensed Products, such as safety data sharing and exchange, adverse events reporting and prescription events monitoring (the “SafetyAgreement”). Such Safety Agreement shall describe the obligations of both Parties with respect to the coordination of collection,investigation, reporting and exchange of information between the Parties concerning adverse events or any other safety issue of anysignificance and product quality and product complaints involving adverse events, in each case with respect to Licensed Products andsufficient to permit each Party and its Affiliates, licensees or sublicensees to comply with its legal obligations with respect thereto,including, for clarity, NVCR’s obligations as the owner or holder of Regulatory Approvals and Regulatory Submissions for theLicensed Product in the Territory, as applicable.(b)Zai shall maintain an adverse event database for Clinical Trials conducted in the Territory under theTerritory Development Plan [***]. Zai shall be responsible for reporting to the applicable Regulatory Authorities in the Territory, onNVCR’s behalf during such time that NVCR is the holder of Regulatory Approvals and Regulatory Submissions for the LicensedProduct in the Territory, all quality complaints, adverse events and safety dataTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 23 Execution VersionCONFIDENTIAL related to Licensed Products for all Clinical Trials conducted in the Territory under the Territory Development Plan or the [***] Plan,as well as responding, on NVCR’s behalf during such time that NVCR is the holder of Regulatory Approvals and RegulatorySubmissions for the Licensed Product in the Territory, to safety issues and to all requests of Regulatory Authorities related to LicensedProducts in the Field and in the Territory. Zai shall provide to NVCR access to Zai’s adverse event database for the Territory. NVCRshall maintain a global adverse event database for Clinical Trials conducted under the [***] Plan at [***] cost and expense, except forany costs allocated to [***] pursuant to Section 5.5. 6.6Safety and Regulatory Audits. Upon reasonable notification, NVCR or its representatives shall be entitled toconduct an audit of safety and regulatory systems, procedures or practices of Zai, its Affiliates, sublicenses or subcontractors (includingClinical Trial sites) relating to Licensed Products no more often than [***] Calendar Year. Zai shall promptly notify NVCR of anyinspection of Zai, its Affiliates, sublicenses or subcontractors (including Clinical Trial sites) by any Regulatory Authority relating toLicensed Products and shall provide NVCR with all information pertinent thereto. NVCR shall have the right, but not the obligation,to be present at and participate in any such inspection. 6.7Notice of Regulatory Action. If any Regulatory Authority takes or gives notice of its intent to take anyregulatory action with respect to any activity of Zai relating to any Licensed Product, then Zai shall notify NVCR of such contact,inspection or notice or action within [***] hours thereof. NVCR shall have the right to review and comment on any responses toRegulatory Authorities that pertain to a Licensed Product, provided that Zai shall have the final decision-making authority with respectto such responses to the extent relating solely to such Licensed Product in the Field and in Territory and such responses would nothave any negative impact on the research, Development, manufacturing or Commercialization of any Licensed Product outside theTerritory, but shall incorporate all such reasonable comments of NVCR during such time that NVCR is the holder of RegulatoryApprovals and Regulatory Submissions for the Licensed Product in the Territory. The costs and expenses of any regulatory action inthe Territory shall be borne solely by [***]. 6.8No Harmful Actions. If NVCR believes that Zai is taking or intends to take any action with respect to the Licensed Product that could have a material adverse impact upon the regulatory status of the Licensed Product outside the Territory, NVCR will have the right to bring the matter to the attention of the JSC and the Parties will discuss in good faith to resolve suchconcern. Without limiting the foregoing, unless the Parties otherwise agree: (a) Zai will not communicate with any RegulatoryAuthority having jurisdiction outside the Territory, unless so ordered by such Regulatory Authority, in which case Zai willimmediately notify NVCR of such order; and (b) Zai will not submit any Regulatory Submissions or seek regulatory approvals for theLicensed Product outside the Territory. To the extent practicable, NVCR will provide Zai with any information that reasonably couldaffect the Development or Commercialization of the Licensed Product in the Territory, prior to making such information public.6.9Notification of Threatened Action. Each Party will immediately notify the other Party of any information itreceives regarding any threatened or pending action, inspection or communication by any Regulatory Authority, which may affect thesafety or efficacy claims of any Licensed Product or the continued marketing of any Licensed Product. Upon receipt of suchinformation, the Parties will consult with each other in an effort to arrive at a mutually acceptable procedure for taking appropriateaction.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 24 Execution VersionCONFIDENTIAL ARTICLE 7SUPPLY7.1Development Supply. NVCR shall have the sole right, through a Third Party contract manufacturer, tomanufacture and supply to Zai all Licensed Products required by Zai for Development use in the Territory under the TerritoryDevelopment Plan and for Zai’s [***] responsibilities under the [***] Plan, including the conduct of TT Fields Multi-Regional ClinicalStudies. The Parties shall use good faith efforts to enter into an agreement pursuant to which NVCR would supply such LicensedProducts for such Development use by Zai (“Clinical Supply Agreement”) within [***], pursuant to which:(a)Except as set forth in Section 7.1(b), NVCR shall supply the Licensed Products pursuant to thisSection 7.1 at a transfer price equal to [***].(b)For a TT Fields Multi-Regional Clinical Study, NVCR shall supply Licensed Products to Zaisufficient to conduct activities in the Territory contemplated under the TT Fields Multi-Regional Clinical Studies [***].7.2Commercial Supply. The Parties shall use Commercially Reasonable Efforts to agree [***] on the principalterms of a commercial supply agreement (the “Commercial Supply Agreement”) pursuant to which Zai shall purchase commercialsupply of a Licensed Product from NVCR at [***] in order to fulfill Zai’s obligations under this Agreement, which terms shall beconsistent with the terms and conditions of this Agreement and the terms and conditions of any agreement between NVCR and itsThird Party manufacturing partner(s), to the extent applicable to commercial supply of Licensed Product in the Field in the Territory. Zai shall purchase its commercial requirements for Licensed Product in the Territory from NVCR pursuant to the Commercial SupplyAgreement. 7.3Supply Agreements. The Parties agree that the Clinical Supply Agreement and Commercial Supply Agreementshall contain terms substantially consistent with those contained in the supply agreement term sheet attached hereto as Exhibit D (the“Supply Agreement Term Sheet”) subject to deviations agreed by the Parties. ARTICLE 8COMMERCIALIZATION8.1Commercialization Diligence. Zai shall be responsible for, and shall use Commercially Reasonable Efforts toCommercialize each Licensed Product that has obtained Regulatory Approval in the Field in the Territory, provided that, Zai shallCommercialize each such Licensed Product (during such time that NVCR is the holder of Regulatory Approvals and RegulatorySubmissions for the Licensed Product in the Territory) as the exclusive general distributor of NVCR in the Territory, and providedfurther, that Zai will book all product sales for the Licensed Product in the Territory. Promptly after the Effective Date and from timeto time during the Term, the Parties shall execute such documents and conduct such actions as are required for Zai to act as NVCR’s exclusive general distributor in the Territory and to book sales for the Licensed Product in the Territory in accordance with thisAgreement. Zai shall conduct all Commercialization of Licensed Products in the Field in the Territory in accordance with theCommercialization Plan for such Licensed Product and all Applicable Laws, at [***].THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 25 Execution VersionCONFIDENTIAL 8.2Commercialization Plan. The Commercialization Plan with respect to a Licensed Product shall contain inreasonable detail the major Commercialization activities, including revenue targets, planned for such Licensed Product in the Territoryand estimated timelines for achieving such activities. Attached hereto as Exhibit E is an initial draft of the Commercialization Plan forthe use of the Licensed Product in treating recurrent and newly diagnosed GBM. From time to time Zai shall propose updates oramendments to the Commercialization Plan and Zai shall submit the proposed updated or amended Commercialization Plan to the JSCfor review, discussion, and approval before adopting such update or amendment.8.3Commercialization Reports. Zai will update the JSC at each regularly scheduled JSC meeting regarding Zai’sCommercialization activities with respect to the Licensed Products in the Territory. Each such update will be in a form to be agreed bythe JSC and will summarize Zai’s, its Affiliates’ and Sublicensees’ significant Commercialization activities with respect to the LicensedProducts in the Territory, covering subject matter at a level of detail reasonably required by NVCR and sufficient to enable NVCR todetermine Zai’s compliance with its diligence obligations pursuant to Section 8.1. In addition, Zai will make available to NVCR suchadditional information about its Commercialization activities as may be reasonably requested by NVCR from time to time. For clarity, Zai will not be required to include information in its updates and reports under this Section 8.3 that it does not otherwise create for itsown internal purposes. All updates and reports generated pursuant to this Section 8.3 shall be the Confidential Information of Zai.8.4Coordination of Development and Commercialization Activities.(a)Within [***] days after the Effective Date, Zai shall use Commercially Reasonable Efforts to establisha patient support system for the Development and Commercialization of Licensed Products in the Territory and other infrastructures inthe Territory that are reasonably necessary to enable Zai, its Affiliates, and its sublicensees, to exercise its rights and perform itsobligations under this Agreement in relation to Development and Commercialization of the Licensed Products in the Field and in theTerritory and NVCR shall provide reasonable support. Zai shall [***].(b)Zai acknowledges that NVCR may decide to develop and adopt certain distinctive colors, logos,images, symbols, and trademarks to be used in connection with the Development and Commercialization of Licensed Products on aglobal basis (such branding elements, collectively, the “Global Brand Elements”). NVCR shall own all rights in such Global BrandElements, and shall grant Zai the exclusive right to use such Global Brand Elements in connection with the Development andCommercialization of Licensed Products in the Field and in the Territory. Zai shall Develop and Commercialize Licensed Products inthe Territory in a manner consistent with the Global Brand Elements.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 26 Execution VersionCONFIDENTIAL (c)Zai acknowledges that NVCR has developed certain manuals, instruction booklets and other writtenmaterials for use, Development and/or Commercialization of the Licensed Products. NVCR hereby grants Zai an exclusive license touse, distribute, disseminate, reproduce, publicly display, and translate such materials solely as necessary for Zai use, Developmentand/or Commercialization of the Licensed Products in the Territory during the Term and for no other purpose. Zai will [***]. ARTICLE 9PAYMENTS9.1Upfront Payment. Zai shall pay to NVCR a one-time, non-refundable, non-creditable upfront payment of fifteenmillion Dollars ($15,000,000) within [***] Business Days after the Effective Date.9.2Milestone Payments. Zai shall notify NVCR in writing of the achievement by or on behalf of Zai, its Affiliatesor sublicensees of any milestone event set forth in this Section 9.2 promptly after the occurrence thereof, and Zai shall pay NVCR eachnon-refundable, non-creditable milestone payment set forth in the tables below within [***] calendar days of the achievement of suchmilestone event by or on behalf of Zai, its Affiliates or sublicensees. Milestone EventMilestone PaymentDevelopment Milestones1. [***]$[***]2. [***] $[***]Regulatory Milestones3. [***]$[***]4. [***]$[***]5. [***]$[***]6. [***]$[***] Net Sales Milestones7. Calendar Year’s Net Sales of all Licensed Products in the Territory exceeds $[***]$[***]8. Calendar Year’s Net Sales of all Licensed Products in the Territory exceeds $[***]$[***]9. Calendar Year’s Net Sales of all Licensed Products in the Territory exceeds $[***]$[***] THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 27 Execution VersionCONFIDENTIAL (a)Milestone Conditions.(i)Each milestone payment set forth above shall be payable only once.(ii)If any Net Sales milestone event occurs for a particular Licensed Product without one of theprior Net Sales milestone events occurring for such Licensed Product, then the milestone payment to be made with respect to the priormilestone event for such Licensed Product shall be paid at the same time as the payment for the subsequent milestone event for suchLicensed Product.9.3Royalty Payments to NVCR.(a)Royalty Rates. Subject to the remainder of this Section 9.3, Zai shall make quarterly non-refundable,non-creditable royalty payments to NVCR on the Net Sales of all Licensed Products sold in the Territory, calculated by multiplying theapplicable royalty rate set forth below by the corresponding amount of incremental, aggregated Net Sales of all Licensed Products soldin the Territory in the applicable Calendar Year. For each Calendar Year, the below tiered royalties are calculated such that the highertiered royalties are only paid after the annual Net Sales exceed the top threshold of the previous tier.Calendar Year, Net Sales of All Licensed Products in the TerritoryRoyalty Rate1. <$[***][***]%2. $[***] - $[***][***]%3. >$[***][***]% (b)Royalty Term. The royalty payments payable under this Section 9.3 shall be payable on a LicensedProduct-by-Licensed Product and region-by-region basis from the First Commercial Sale of such Licensed Product in such region inthe Territory until the latest of: (i) the [***] anniversary of the date of the First Commercial Sale of such Licensed Product in suchregion; (ii) the expiration of the last Valid Claim (including any patent term adjustments or extensions) within the NVCR Patents thatCovers such Licensed Product (including composition of matter, method of use or making) in such region and (iii) the last to expireregulatory exclusivity period for such Licensed Product (the “Royalty Term”).THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 28 Execution VersionCONFIDENTIAL (c)Royalty Reductions.(i)Third Party Payments. If the Parties agree that a license under any Patent controlled by aThird Party in a region in the Territory is necessary for the manufacture or Commercialization of the Licensed Product that is sold oroffered for sale in such region, then Zai shall have the right to deduct from the royalty payment that would otherwise have been dueunder Section 9.3(a) with respect to Net Sales of such Licensed Product in such region in a particular Calendar Quarter an amountequal to [***] of the royalties paid by Zai to such Third Party pursuant to such license on account of the sale of such Licensed Productin such region during such Calendar Quarter, subject to Section 9.3(c)(ii). In the event NVCR disputes whether such Third Partylicense is necessary, the matter shall be referred to the chief patent counsels of Zai and NVCR, or such other person at each Partyholding a similar position designated by Zai or NVCR. The chief patent counsels shall meet promptly to discuss and resolve the matter.In the event that the chief patent counsels cannot agree on a resolution to the matter, then the Parties shall refer such matter forresolution to an independent patent attorney mutually agreed upon by the Parties who has at least [***] of experience in the biologicsfield and/or medical devices field (or who has such other similar credentials as mutually agreed by the Parties), and such attorney’sdecision on the matter shall be binding upon the Parties (and, for clarity, such matter shall not be subject to the dispute resolutionprocedures set forth in Article 15).(ii)Royalty Floor. Notwithstanding the foregoing, during any Calendar Quarter in the RoyaltyTerm for a Licensed Product in a particular region in the Territory, the operation of Section 9.3(c), individually or in combination shallnot reduce the final royalty rate to [***]. (d)Royalty Reports and Payments. Within [***] days after the end of each Calendar Quarter,commencing with the Calendar Quarter during which the First Commercial Sale of the first Licensed Product is made anywhere in theTerritory, Zai shall provide NVCR with a report that contains the following information for the applicable Calendar Quarter, on a Licensed Product-by-Licensed Product and region-by-region basis: (i) the amount of Net Sales of such Licensed Product, (ii) acalculation of the royalty payment due on such Net Sales, including any royalty reduction made in accordance with Section 9.3(c), and(iii) the exchange rate used for converting any Net Sales recorded in a currency other than Dollars. Promptly following the delivery ofthe applicable quarterly report, NVCR shall invoice Zai for the royalties due to NVCR with respect to Net Sales by Zai, its Affiliatesand their respective sublicensees for such Calendar Quarter, and Zai shall pay such amounts to NVCR in Dollars within [***]following Zai’s receipt of such invoice, provided that, if a government or regulatory action (or inaction) prevents Zai from making suchpayment to NVCR within such [***] period, then Zai shall have up to [***] following its receipt of such invoice from NVCR to remitsuch payment to NVCR.9.4Payments to Third Parties. Except as expressly set forth herein, each Party shall be solely responsible for anypayments due to Third Parties under any agreement entered into by such Party, with respect to the Licensed Product, as a result ofactivities hereunder.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 29 Execution VersionCONFIDENTIAL 9.5Currency; Exchange Rate. All payments to be made by Zai to NVCR or NVCR to Zai under this Agreementshall be made in Dollars by electronic funds transfer in immediately available funds to a bank account designated in writing by NVCRor Zai, as applicable. Conversion of Net Sales recorded in local currencies shall be converted to Dollars at the exchange rate set forth inThe Wall Street Journal or any successor thereto for the last day of the Calendar Quarter in which the applicable payment obligationbecame due and payable.9.6Late Payments. Any payments or portions thereof due hereunder that are not paid on the date such payments aredue under this Agreement shall bear interest at a rate equal to the lesser of: (a) [***] percentage points above the prime rate aspublished by The Wall Street Journal or any successor thereto on the first day of each Calendar Quarter in which such payments areoverdue or (b) the maximum rate permitted by Applicable Laws; in each case calculated on the number of days such payment isdelinquent, compounded monthly.9.7Financial Records and Audits. During the Term and for [***] years thereafter, each Party shall maintaincomplete and accurate records in sufficient detail to permit the other Party to confirm the accuracy of the amount of royalty paymentsand other amounts payable under this Agreement. Upon reasonable prior notice, such records shall be open during regular businesshours for a period of five years from the creation of individual records for examination by an independent certified public accountantselected by the examining Party and reasonably acceptable to the other Party for the sole purpose of verifying for the examining Partythe accuracy of the financial reports furnished by the other Party (the “Examined Party”) pursuant to this Agreement or of anypayments made, or required to be made by such Examined Party, pursuant to this Agreement. Such audits shall not occur more oftenthan [***]. Such auditor shall not disclose the Examined Party’s Confidential Information to the examining Party or to any Third Party,except to the extent such disclosure is necessary to verify the accuracy of the financial reports furnished by the Examined Party or theamount of payments by the Examined Party under this Agreement. The Examined Party will pay any amounts shown to be owed tothe examining Party but unpaid within [***] days after the accountant’s report, plus interest (as set forth in Section 9.6) from theoriginal due date. The examining Party shall bear the full cost of such audit unless such audit reveals an underpayment by theExamined Party of more than [***] of the amount actually due for the time period being audited, in which case the Examined Partyshall reimburse the examining Party for the costs for such audit.9.8Taxes. (a)Taxes on Income. Except as set forth in this Section 9.8 each Party shall be solely responsible for thepayment of any and all income Taxes levied on account of all payments it receives under this Agreement.(b)Sales Taxes and VAT. [***] shall bear any and all sales, use, VAT, transaction and transfer taxesand other similar charges (and any related interest and penalties) imposed on, or payable with respect to, such license or property;provided, however, that if Zai is required to withhold any Taxes (including withholding taxes as valued-added taxes), the provisions ofSection 9.8(c) shall apply to such withheld VAT Taxes.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 30 Execution VersionCONFIDENTIAL (c)Tax Cooperation. The Parties agree to cooperate with one another in accordance with ApplicableLaws and use reasonable efforts to minimize Tax withholding or similar obligations in respect of royalties, milestone payments, andother payments made by each Party to the other Party under this Agreement. To the extent either Party (the “Paying Party”) is requiredto deduct and withhold Taxes on any payment to the other Party (the “Recipient”), the Paying Party shall notify the Recipient of suchrequirement prior to making the payment to the Recipient and provide such assistance to the Recipient, including the provision of suchdocumentation as may be required by a tax authority, as may be reasonably necessary in the Recipient’s efforts to claim an exemptionfrom or reduction of such taxes. The Paying Party shall, in accordance with Applicable Laws, deduct or withhold taxes from theamount due, remit such taxes to the appropriate tax authority when due, and furnish the Recipient with proof of payment of such taxeswithin [***] days following the payment. If taxes are paid to a tax authority, the Paying Party shall provide reasonable assistance tothe Recipient to obtain a refund of taxes withheld, or obtain a credit with respect to taxes paid. To the extent such amounts are paid tothe appropriate tax authority, such amounts shall be treated for all purposes of this Agreement as having been paid to the Recipient.ARTICLE 10CONFIDENTIALITY; PUBLICATION10.1Duty of Confidence. Subject to the other provisions of this Article 10:(a)Except to the extent expressly authorized by this Agreement, all Confidential Information of a Party(the “Disclosing Party”) shall be maintained in confidence and otherwise safeguarded, and not published or otherwise disclosed, bythe other Party (the “Receiving Party”) and its Affiliates for the Term and [***] years thereafter;(b)the Receiving Party may only use any Confidential Information of the Disclosing Party to the extentreasonably necessary to perform its obligations or exercise its rights under this Agreement; and(c)a Receiving Party may disclose Confidential Information of the Disclosing Party to: (i) such ReceivingParty’s Affiliates, licensees and sublicensees; and (ii) employees, directors, agents, contractors, consultants and advisors of theReceiving Party and its Affiliates and sublicensees (collectively, “Representatives”), in each case to the extent reasonably necessary toperform its obligations or exercise its rights under this Agreement; provided that such Persons are bound by legally enforceableobligations to maintain the confidentiality of the Disclosing Party’s Confidential Information in a manner consistent with theconfidentiality provisions of this Agreement; provided that each Party shall remain responsible for any failure by its Affiliates, licenseesand sublicensees, and its and its Affiliates’ and licensees’ and sublicensees’ respective employees, directors, agents, consultants,advisors, and contractors, to treat such Confidential Information as required under this Section 10.1 (as if such Affiliates, licensees,sublicensees employees, directors, agents, consultants, advisors and contractors were Parties directly bound to the requirements of thisSection 10.1).THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 31 Execution VersionCONFIDENTIAL 10.2Exemptions. Information of a Disclosing Party will not be deemed to be Confidential Information of suchDisclosing Party to the extent that the Receiving Party can demonstrate through competent evidence that such information:(a)is known by the Receiving Party or any of its Affiliates without an obligation of confidentiality at thetime of its receipt from the Disclosing Party, and not through a prior disclosure by or on behalf of the Disclosing Party, as documentedby the Receiving Party’s business records;(b)is generally available to the public before its receipt from the Disclosing Party;(c)became generally available to the public or otherwise part of the public domain after its disclosure bythe Disclosing Party and other than through any act or omission of the Receiving Party or any of its Representatives in breach of thisAgreement;(d)is subsequently disclosed to the Receiving Party or any of its Affiliates without obligation ofconfidentiality by a Third Party who may rightfully do so and is not under a conflicting obligation of confidentiality to the DisclosingParty; or(e)is developed by the Receiving Party or any of its Affiliates independently and without use of orreference to any Confidential Information received from the Disclosing Party, as documented by the Receiving Party’s businessrecords.10.3Authorized Disclosures. Notwithstanding the obligations set forth in Section 10.1, a Party may disclose theother Party’s Confidential Information (including this Agreement and the terms herein) to the extent such disclosure is reasonablynecessary in the following situations:(a)(i) the Patent Prosecution of NVCR Patents as contemplated by this Agreement; (ii) regulatory filingsand other filings with Governmental Authorities (including Regulatory Authorities), as necessary for the Development, manufacturingor Commercialization of a Licensed Product (solely in the Territory in accordance with this Agreement, with respect to disclosures byZai); or (iii) subject to Section 10.5, complying with Applicable Laws, including regulations promulgated by securities exchanges;(b)disclosure of this Agreement, its terms and the status and results of Development or Commercializationactivities to actual or bona fide potential investors, acquirors, (sub)licensees, lenders and other financial or commercial partners solelyfor the purpose of evaluating or carrying out an actual or potential investment, acquisition, (sub)license, debt transaction orcollaboration; provided that in each such case on the condition that such Persons are bound by confidentiality and non-use obligationsconsistent with this Agreement or customary for such type and scope of disclosure;THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 32 Execution VersionCONFIDENTIAL (c)such disclosure is required by judicial or administrative process (including in filings with GovernmentalAuthorities), provided that in such event such Party shall, to the extent practical and legally permissible, promptly notify the other Partyin writing of such required disclosure and provide the other Party an opportunity to challenge or limit the disclosure obligations.Confidential Information that is disclosed by judicial or administrative process shall remain otherwise subject to the confidentiality andnon-use provisions of this Article 10, and the Party disclosing Confidential Information pursuant to Applicable Laws or court ordershall take all steps reasonably necessary, including seeking of confidential treatment or a protective order, to ensure the continuedconfidential treatment of such Confidential Information; or(d)disclosure pursuant to Section 10.5.Notwithstanding the foregoing, in the event a Party is required or permitted to make a disclosure of the other Party’sConfidential Information pursuant to clause (ii) or (iii) of Section 10.3(a), it will, except where impracticable, give reasonable advancenotice to the other Party of such disclosure and use reasonable efforts to secure confidential treatment of such information. In anyevent, each Party agrees to take all reasonable action to avoid disclosure of Confidential Information of the other Party hereunder.10.4Publications. Upon completion of a Clinical Trial and evaluation by NVCR of all data from such study, orupon early termination or abandonment of such study, upon prior written approval by NVCR, Zai may publicly present or publish anyClinical Trial data, non-clinical data or any associated results or conclusions generated by or on behalf of Zai pursuant to thisAgreement solely for non-commercial purposes and solely to the extent that such data, results and conclusions are specific to theTerritory and the Field (each such proposed presentation or publication, a “Publication”), provided that Zai may only make suchPublication in accordance with NVCR’s global publication strategy with respect to Licensed Products, and subject to the additionallimitations set forth in this Section 10.4.(a)Review Period. A copy of such disclosure will be given to NVCR for review at least [***] days priorto the date of submission for publication or of public disclosure (“Review Period”). NVCR will complete its review within the ReviewPeriod and will have authority to require that Zai delete from the disclosure any reference to NVCR’s ConfidentialInformation. Notwithstanding the Review Period, Zai shall not make any such publication without the written approval of NVCR (notto be unreasonably withheld), nor allow any other publication in connection therewith.(b)Patent Filings. Subject to the provisions of the subparagraph (a) above, if during the Review Period,NVCR notifies Zai that it desires patent applications to be filed on any Inventions disclosed or contained in the disclosures, Zai willdefer publication or other disclosure for a period, not to exceed an additional [***] days, sufficient to permit NVCR or its designee tohave filed or to file any desired patent applications.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 33 Execution VersionCONFIDENTIAL 10.5Publicity; Use of Names.(a)The Parties agree that the material terms of this Agreement are the Confidential Information of bothParties, subject to the special authorized disclosure provisions set forth in Section 10.3 and this Section 10.5. The Parties shall agree ona joint press release announcing this Agreement whose substance and the date and the time of the announcement shall be agreed by theParties. No other disclosure of the existence or the terms of this Agreement may be made by either Party or its Affiliates except asprovided in Section 10.3 and this Section 10.5. Each Party shall have the right to use the other Party’s name and logo in presentations,its website, collateral materials and corporate overviews to describe the collaboration relationship, as well as in taglines of pressreleases issued in accordance with this Section 10.5; provided that when Zai uses NVCR’s corporate name in all publicity relating tothis Agreement, including the initial press release and all subsequent press releases, and Zai shall include an accompanied explanatorytext such as “Licensed from Novocure”; further provided that a Party will use the other Party’s corporate name only in such mannerthat the distinctiveness, reputation, and validity of any trademarks and corporate or trade names of the other Party shall not be impaired,and in a manner consistent with best practices it uses with respect to its other collaborators.(b)A Party may disclose this Agreement in securities filings with the Securities and ExchangeCommission or equivalent foreign agency to the extent required by Applicable Laws. In such event, the Party seeking such disclosureshall prepare a draft confidential treatment request and proposed redacted version of this Agreement to request confidential treatmentfor this Agreement, and the other Party agrees to promptly (and in any event, no more than [***] Business Days after receipt of suchconfidential treatment request and proposed redactions) give its input in a reasonable manner in order to allow the Party seekingdisclosure to file its request within the time lines prescribed by Applicable Laws. The Party seeking such disclosure shall reasonablyconsider any comments thereto provided by the other Party within such [***] Business Day period.ARTICLE 11REPRESENTATIONS, WARRANTIES, AND COVENANTSThe representations and warranties of each Party set forth in this Article 11 are made by the respective Party as of theEffective Date, subject to the information disclosed by such Party in the Disclosure Schedule attached hereto as Schedule 11 (the“Disclosure Schedule”).11.1Representations, Warranties of Each Party. Each Party represents and warrants to the other Party as of theEffective Date that:(a)it is a corporation or limited company duly organized, validly existing, and in good standing under thelaws of the jurisdiction of its organization, and it has the full right, power and authority to enter into this Agreement and to perform itsobligations hereunder; andTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 34 Execution VersionCONFIDENTIAL (b)this Agreement has been duly executed by it and is legally binding upon it, enforceable in accordancewith its terms, and does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by whichit may be bound, nor violate any material Applicable Laws or regulation of any court, governmental body or administrative or otheragency having jurisdiction over it.11.2Representations and Warranties of NVCR. NVCR represents and warrants to Zai that as of the EffectiveDate:(a)it has the right under the NVCR IP to grant the Licenses to Zai, and it has not granted any license orother right under the NVCR IP that is inconsistent with the License;(b)there is no pending litigation, nor has NVCR received any written notice from any Third Party,asserting or alleging that the Development, manufacture or Commercialization of the Licensed Product prior to the Effective Dateinfringed or misappropriated the intellectual property rights of such Third Party;(c)there are no pending or, to NVCR’s knowledge, no threatened (in writing), adverse actions, suits orproceedings against NVCR involving the NVCR IP or Licensed Product;(d)the NVCR IP includes (i) all Know-How Controlled by NVCR or its Affiliates that is necessary, or toNVCR’s knowledge reasonably useful, to Develop and Commercialize Licensed Products in the Field in the Territory as suchDevelopment and Commercialization is currently being conducted by NVCR or contemplated to be conducted by the Partieshereunder, and (ii) all Patents in the Territory that are owned or licensed by NVCR or its Affiliates that Cover a Licensed Product inthe Field in the Territory.(e)NVCR has complied with in material aspects with all material Applicable Laws applicable to (i) theprosecution and maintenance of the NVCR Patents and (ii) its Development and manufacture of Licensed Products in the Field;(f)(i) NVCR has obtained, or caused its Affiliates to obtain, assignments from the inventors of all rightsand embodiments in and to the NVCR IP that is solely owned by NVCR or its Affiliates, (ii) to its actual knowledge, all suchassignments are valid and enforceable, and (iii) to its actual knowledge, the inventorship of the NVCR Patents that are solely owned byNVCR or its Affiliates is properly identified on each issued patent or patent application in such NVCR Patents; and(g)NVCR and its Affiliates have taken commercially reasonable efforts consistent with industry practicesto protect the secrecy, confidentiality and value of all NVCR Know-How that constitutes trade secrets under Applicable Laws.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 35 Execution VersionCONFIDENTIAL (h)the Specifications attached hereto as Schedule 1.55 for the Licensed Product to be delivered to Zaiunder this Agreement are the same as the specifications for such Licensed Product procured by NVCR as of the Effective Date fordevelopment or commercialization in the United States and as required under the applicable regulatory approval for the LicensedProduct outside the Territory.11.3Representations and Warranties of Zai. Zai represents and warrants to NVCR that as of the Effective Date:(a)there are no legal claims, judgments or settlements against or owed by Zai or any of its Affiliates, orpending or, to Zai’s actual knowledge, threatened, legal claims or litigation, in each case, relating to antitrust, anti-competition, anti-bribery or corruption violations;(b)Zai has sufficient financial wherewithal to (i) perform all of its obligations pursuant to this Agreement,and (ii) meet all of its obligations that come due in the ordinary course of business; and(c)Zai has, or can readily obtain, sufficient technical, clinical, and regulatory expertise to perform all of itsobligations pursuant to this Agreement, including its obligations relating to Development and Commercialization, and obtainingRegulatory Approvals.11.4Covenants of Zai. Zai covenants to NVCR that:(a)in the course of performing its obligations or exercising its rights under this Agreement, Zai shallcomply with all Applicable Laws, including, as applicable, cGMP, GCP, and GLP standards, and shall not employ or engage anyPerson who has been debarred by any Regulatory Authority, or, to Zai’s knowledge, is the subject of debarment proceedings by aRegulatory Authority;(b)Zai will only engage Clinical Trial sites under the Territory Development Plan and the [***] Plan thatconduct all Clinical Trials in compliance with Applicable Laws, including GCP and the ICH Guidelines, and are approved by theNMPA;(c)Zai and its Affiliates will not use any employees or contractors in the Development, manufacture orCommercialization of the Licensed Product who are, or have been, debarred or disqualified by any Regulatory Authority;(d)Zai or its Affiliates shall not alter, modify, adapt, disassemble or reverse engineer the Licensed Productor any part thereof, or attempt to do the same to the Licensed Product or any part thereof; and(e)Zai and its Affiliates shall comply with all of NVCR’s storage, handling, standard operatingprocedures, patient support protocols, quality standards, guidelines, and any other similar internal standards.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 36 Execution VersionCONFIDENTIAL 11.5Covenants of NVCR. NVCR covenants to Zai that during the Term:(a)in the course of performing its obligations or exercising its rights under this Agreement, NVCR shallcomply with all Applicable Laws applicable to its Development and manufacture of Licensed Products pursuant to this Agreement;(b)All Licensed Products supplied by NVCR to Zai under this Agreement will comply with and bemanufactured in accordance with the Specifications, subject to any supply agreement and any related quality agreement.11.6NO OTHER WARRANTIES. EXCEPT AS EXPRESSLY STATED IN THIS Article 11, (A) NOREPRESENTATION, CONDITION OR WARRANTY WHATSOEVER IS MADE OR GIVEN BY OR ON BEHALF OFNVCR OR ZAI; AND (B) ALL OTHER CONDITIONS AND WARRANTIES WHETHER ARISING BY OPERATION OFLAW OR OTHERWISE ARE EXPRESSLY EXCLUDED, INCLUDING ANY CONDITIONS AND WARRANTIES OFMERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.11.7Compliance with Anti-Corruption Laws.(a)Notwithstanding anything to the contrary in this Agreement, Zai agrees that:(i)it shall not, in the performance of this Agreement, perform any actions that are prohibited bylocal and other anti-corruption laws (including the provisions of the United States Foreign Corrupt Practices Act, collectively “Anti-Corruption Laws”) that may be applicable to one or both Parties;(ii)it shall adhere to its own internal anti-corruption policies and shall not, in the performance ofthis Agreement, directly or indirectly, make any payment, or offer or transfer anything of value, or agree or promise to make anypayment or offer or transfer anything of value, to a government official or government employee, to any political party or anycandidate for political office or to any other Third Party with the purpose of influencing decisions related to either Party or its businessin a manner that would violate Anti-Corruption Laws;(iii)Zai represents and warrants that, to its knowledge, neither Zai nor any of its Affiliates, or itsor their directors, officers, employees, distributors, agents, representatives, sales intermediaries or other Third Parties acting on behalf ofZai or any of its Affiliates has taken any action in violation of any applicable Anti-Corruption Laws.(iv)it will maintain records (financial and accounting) and supporting documentation related tothe subject matter of the Agreement reasonably sufficient to document or verify compliance with the provisions of this Section 11.7,and upon request of NVCR, up to once per year and upon reasonable and at least [***] Business Days’ advance notice, will provide aThird Party auditor mutually acceptable to the PartiesTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 37 Execution VersionCONFIDENTIAL (as confirmed in writing) with access to such records for purposes of verifying compliance with the provisions of this Section 11.7.Written acceptance of a proposed Third Party auditor may not be unreasonably withheld. It is expressly agreed that the costs related tothe Third Party auditor will be fully paid by NVCR, and that any auditing activities may not unduly interfere with the normal businessoperations of Zai and shall not continue for more than [***] Business Days without the written consent of Zai. Zai may require theThird Party auditor to enter into a reasonable confidentiality agreement in connection with such an audit. For the avoidance of doubt,the scope of the aforementioned audit shall be limited to the financial and accounting records and documentation of the subject matterof the Agreement; Zai is not obligated to provide any other such records or documentation.(b)To its knowledge as of the Effective Date, neither Zai nor any of its subsidiaries nor any of theirAffiliates, directors, officers, employees, distributors, agents, representatives, sales intermediaries or other Third Parties acting on behalfof Zai or any of its subsidiaries or any of their Affiliates:(i)has taken any action in violation of any applicable anticorruption law, including the U.S.Foreign Corrupt Practices Act (15 U.S.C. §78 dd-1 et seq.); or(ii)has corruptly, offered, paid, given, promised to pay or give, or authorized the payment orgift of anything of value, directly or(iii)indirectly, to any Public Official (as defined in Section 11.7(d) below), for the purposes of:(1)influencing any act or decision of any Public Official in his official capacity;(2)inducing such Public Official to do or omit to do any act in violation of his lawfulduty;(3)securing any improper advantage; or(4)inducing such Public Official to use his or her influence with a government,governmental entity, or commercial enterprise owned or controlled by any government (including state-owned or controlledveterinary or medical facilities) in obtaining or retaining any business whatsoever.(c)As of the Effective Date, none of the officers, directors (excluding the independent director whoseidentity has been disclosed to NVCR), employees of Zai or of any of its Affiliates, in each case that are employed or reside outside theUnited States, are themselves Public Officials.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 38 Execution VersionCONFIDENTIAL (d)For purposes of this Section 11.7, “Public Official” means (i) any officer, employee or representativeof any regional, federal, state, provincial, county or municipal government or government department, agency or other division; (ii) anyofficer, employee or representative of any commercial enterprise that is owned or controlled by a government, including any state-owned or controlled veterinary or medical facility; (iii) any officer, employee or representative of any public international organization,such as the African Union, the International Monetary Fund, the United Nations.11.8Compliance with Anti-Corruption and OFAC Laws. Zai, and all of its internal procedures where applicable,comply with all applicable Sanctions and requirements thereof, including through appropriate screening of all of its business partners,directors, officers and employees with respect to Sanctioned Countries and against Sanctions Lists, as well as Persons that are fiftypercent (50%) or more owned or controlled by a Person targeted by Sanctions. During the five (5) years prior to the Effective Date, Zaihas not been involved in any violation of Sanctions. Zai has not received any written notification from a Governmental Authority that itis in breach of Sanctions and, to Zai’s knowledge, (to the extent Zai actually knows or should reasonably have known), no action, suitor proceeding by or before any Governmental Authority involving Zai with respect to Sanctions is pending or threatened.ARTICLE 12INDEMNIFICATION12.1By Zai. Zai shall indemnify and hold harmless NVCR, its Affiliates, and their respective directors, officers,employees and agents (individually and collectively, the “NVCR Indemnitee(s)”) from and against all losses, liabilities, damages andexpenses (including reasonable attorneys’ fees and costs) (individually and collectively, “Losses”) incurred in connection with anyclaims, demands, actions or other proceedings by any Third Party, including by the NMPA or any other Regulatory Authority withjurisdiction in the Territory, (individually and collectively, “Claims”) to the extent arising from (a) Zai’s actions (or omissions) in theperformance of its obligations with respect to Regulatory Submissions and interactions with Regulatory Authorities, in each case, as anagent of NVCR in the Territory, other Development and/or Commercialization activities, including the promotion, selling, storing,handling and/or distribution of a Licensed Product and product liability claims relating to the Licensed Product, by Zai or any of itsAffiliates or Sublicensees, (b) the [***] of Zai or its Affiliates or sublicensees, or (c) Zai’s breach of any of its representations orwarranties made in or pursuant to this Agreement or any covenants or obligations set forth in or entered into pursuant to thisAgreement, in each case of clauses (a) through (c) above, except to the extent such Losses or Claims arise out of an NVCRIndemnitee’s negligence or willful misconduct, breach of this Agreement, or material failure to abide by any Applicable Laws.12.2By NVCR. NVCR shall indemnify and hold harmless Zai, its Affiliates, and their directors, officers, employeesand agents (individually and collectively, the “Zai Indemnitee(s)”) from and against all Losses incurred in connection with Claimsagainst such Zai Indemnitee to the extent arising from (a) the Development, manufacture orTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 39 Execution VersionCONFIDENTIAL Commercialization of the Licensed Products by or on behalf of NVCR or any of its Affiliates or sublicensees (not including Zai or itsAffiliates or sublicensees), including product liability claims, in each case outside of the Territory, (b) the [***] of NVCR or itsAffiliates hereunder, or (c) NVCR’s breach of any of its representations or warranties made in or pursuant to this Agreement or anycovenants or obligations set forth in or entered into pursuant to this Agreement, in each case of clauses (a) through (c) above, except tothe extent such Losses or Claims arise out of any of a Zai Indemnitee’s negligence or willful misconduct, breach of this Agreement ormaterial failure to abide by any Applicable Laws.12.3Indemnification Procedure. If either Party is seeking indemnification under Section 12.1 or 12.2, it shallinform the other Party (the “Indemnifying Party”) of the claim giving rise to the obligation to indemnify pursuant to such Section(s)within [***] Business Days after receiving written notice of the claim (it being understood and agreed, however, that the failure ordelay by an Indemnified Party to give such notice of a claim shall not affect the indemnification provided hereunder except to theextent the Indemnifying Party shall have been actually and materially prejudiced as a result of such failure or delay to give notice). TheIndemnifying Party shall have the right to assume the defense of any such claim for which it is obligated to indemnify the IndemnifiedParty. The Indemnified Party shall cooperate with the Indemnifying Party and the Indemnifying Party’s insurer as the IndemnifyingParty may reasonably request, and at the Indemnifying Party’s cost and expense. The Indemnified Party shall have the right toparticipate, at its own expense and with counsel of its choice, in the defense of any claim that has been assumed by the IndemnifyingParty. Neither Party shall have the obligation to indemnify the other Party in connection with any settlement made without theIndemnifying Party’s written consent, which consent shall not be unreasonably withheld, conditioned or delayed. If the Parties cannotagree as to the application of Section 12.1 or 12.2 as to any claim, pending resolution of the dispute pursuant to Article 15, the Partiesmay conduct separate defenses of such claims, with each Party retaining the right to claim indemnification from the other Party inaccordance with Section 12.1 or 12.2 upon resolution of the underlying claim.12.4Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL,CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES ARISING FROM OR RELATING TO ANYBREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 12.4 IS INTENDED TO OR SHALL LIMIT ORRESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTION 12.1, OR 12.2, ORDAMAGES AVAILABLE FOR A PARTY’S BREACH OF ITS OBLIGATIONS HEREUNDER RELATING TOCONFIDENTIALITY.12.5Insurance. Zai shall procure and maintain insurance during the Term and continue to purchase and maintain fora period of five (5) years thereafter, including product liability insurance (and to the extent not included in such product liabilityinsurance, Clinical Trials insurance), adequate to cover its obligations hereunder and which is consistent with normal business practicesof prudent companies similarly situated at all times during which any Licensed Product is being clinically tested in human subjects orcommercially distributedTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 40 Execution VersionCONFIDENTIAL or sold in the Territory. Without limiting the foregoing, such insurance coverage shall include additional insured status for NVCR andbe, for product liability, [***] per occurrence and to the extent not included in such product liability insurance, for Clinical Trials, aminimum of [***] per loss occurrence, and in no event less than [***] in the aggregate. Such insurance shall not be construed tocreate a limit of Party’s liability with respect to its indemnification obligations under Section 12.1. Zai shall provide NVCR withevidence of such insurance, and copy(ies) of the additional insured endorsement, upon request and shall provide NVCR with writtennotice at least [***] days prior to the cancellation, non-renewal or material changes in such insurance. Such insurance shall not beconstrued to create a limit of Zai’s liability with respect to its indemnification obligations under this Article 12.ARTICLE 13INTELLECTUAL PROPERTY13.1Inventions.(a)Ownership. Zai agrees and acknowledges that it is unlikely that Zai would create or own any newintellectual property as a result of Zai’s Development or Commercialization activities in the Territory. If any intellectual property isgenerated by or on behalf of Zai as a result of Zai’s Development or Commercialization activities in the Territory (the “New IP”), Zaiagrees and hereby assigns all such New IP to NVCR and such New IP shall be solely owned by NVCR and shall be included in theNVCR IP and licensed to Zai in the Field in the Territory under Section 2.1.(b)Disclosure. Zai shall promptly disclose to NVCR all Inventions within the New IP, including allinvention disclosures or other similar documents submitted to Zai by its or its Affiliates’ employees, agents, or independent contractorsrelating thereto, and shall also promptly respond to reasonable requests from NVCR for additional information relating thereto.(c)Assignment of New IP. Zai shall and hereby does assign to NVCR all right, title and interest in and toall New IP. Zai shall take (and cause its Affiliates, sublicensees and their employees, agents, and contractors to take) such furtheractions reasonably requested by NVCR to evidence such assignment and to assist NVCR in obtaining patent and other intellectualproperty rights protection for the New IP. Zai shall obligate its Affiliates, sublicensees and contractors to assign all New IP to Zai (ordirectly to NVCR) so that Zai can comply with its obligations under this Section 13.1, and Zai shall promptly obtain such assignment.13.2Patent Prosecution.(a)NVCR Patents.(i)As between the Parties, NVCR shall have the right to control the Patent Prosecution of allNVCR Patents at NVCR’s expense.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 41 Execution VersionCONFIDENTIAL (ii)NVCR shall consult with Zai and keep Zai reasonably informed of the Patent Prosecutionof the NVCR Patents in the Territory and shall provide Zai with all material correspondence received from any patent authority in theTerritory in connection therewith. In addition, NVCR shall provide Zai with drafts of all proposed material filings and correspondenceto any patent authority in the Territory in connection with the Patent Prosecution of the NVCR Patents for Zai’s review and commentprior to the submission of such proposed filings and correspondence. Further, NVCR shall notify Zai of any decision to cease PatentProsecution or maintenance of any NVCR Patents in the Territory. NVCR will consider Zai’s comments on Patent Prosecution butwill have final decision-making authority under this Section 13.2(a)(ii). (b)Cooperation. Each Party shall provide the other Party all reasonable assistance and cooperation in thePatent Prosecution efforts under this Section 13.2, including providing any necessary powers of attorney and executing any otherrequired documents or instruments for such prosecution.13.3Patent Enforcement.(a)Notice. Each Party shall notify the other within [***] Business Days of becoming aware of anyalleged or threatened infringement by a Third Party of any of the NVCR Patents in the Territory, and any related declaratory judgmentor equivalent action alleging the invalidity, unenforceability or non-infringement of any NVCR Patents (collectively “ProductInfringement”).(b)Enforcement Rights. NVCR shall have the first right to bring and control any legal action to enforceNVCR Patents against any Product Infringement in the Territory at its own expense as it reasonably determines appropriate, andNVCR shall consider in good faith the interests of Zai in such enforcement of the NVCR Patents. If NVCR or its designee fails toabate such Product Infringement in the Territory or to file an action to abate such Product Infringement in the Territory within [***] days after a written request from Zai to do so, or if NVCR discontinues the prosecution of any such action after filing without abatingsuch infringement, then Zai shall have the right to enforce the NVCR Patents against such Product Infringement in the Territory at itsown expense as it reasonably determines appropriate; provided that Zai shall not enter into any settlement admitting the invalidity of, orotherwise impairing, any NVCR Patent without the prior written consent of NVCR.(c)Cooperation. At the request of the Party bringing an action related to Product Infringement, the otherParty shall provide reasonable assistance in connection therewith, including by executing reasonably appropriate documents,cooperating in discovery and joining as a party to the action if required by Applicable Law to pursue such action, at each such Party’ssole cost and expense.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 42 Execution VersionCONFIDENTIAL 13.4Infringement of Third Party Rights.(a)Notice. If any Licensed Product used or sold by Zai, its Affiliates or sublicensees becomes the subjectof a Third Party’s claim or assertion of infringement of a Patent or other intellectual property rights in the Territory that are owned orcontrolled by such Third Party, Zai shall promptly notify NVCR within [***] days after receipt of such claim or assertion and suchnotice shall include a copy of any summons or complaint (or the equivalent thereof) received regarding the foregoing along with anEnglish summary of such summons or complaint. Thereafter, the Parties shall promptly meet to consider the claim or assertion and theappropriate course of action and may, if appropriate, agree on and enter into a “common interest agreement” wherein the Parties agreeto their shared, mutual interest in the outcome of such potential dispute. The Parties shall assert and not waive the joint defenseprivilege with respect to any communications between the Parties in connection with the defense of such claim or assertion.(b)Defense. In the event that a claim is brought against either Party alleging the infringement, violation ormisappropriation of any Third Party intellectual property right based on the manufacture, use, sale or importation of the LicensedProducts in the Field and in the Territory, the Parties shall promptly meet to discuss the defense of such claim, and the Parties shall, asappropriate, enter into a joint defense agreement with respect to the common interest privilege protecting communications regardingsuch claim in a form reasonably acceptable to the Parties. 13.5Product Trademarks. Subject to Section 8.4, the Parties agree to use the Optune Trademarks for marketingLicensed Products in the Territory and shall cooperate in good faith and jointly select other trademarks, logos, and trade names thatconform with NVCR’s global branding strategies for marketing Licensed Products in the Territory (together with the OptuneTrademarks, the “Product Marks”). Zai shall not use any other trademarks or house marks of NVCR (including NVCR’s corporatename) or any trademark confusingly similar thereto without NVCR’s prior written consent. NVCR shall own all rights in the ProductMarks in the Territory and shall register and maintain the Product Marks in the Territory that it determines reasonably necessary, atNVCR’s cost and expense; provided that NVCR shall grant Zai a royalty free exclusive license to use such Product Marks inconnection with the sale, offer for sale and other Commercialization activities of the Licensed Products in the Territory during theTerm, with the right to sublicense following the provisions of Section 2.2. All goodwill and reputation generated by Zai’s use of theProduct Marks shall inure to the exclusive benefit of NVCR. Zai shall not by any act or omission use the Product Marks in any mannerthat disparages or reflects adversely on NVCR or its products, technologies, business or reputation. Zai shall not take any action thatwould interfere with or prejudice NVCR’s ownership or registration of the Product Marks, the validity of the Product Marks. Zaifurther agrees to use the Product Marks in accordance with such brand usage guidelines and quality standards as may be reasonablyestablished by NVCR and communicated to Zai from time to time in writing, or as may be agreed to by the Parties from time to time inwriting. Zai shall submit to NVCR for approval, prior to their use, all product labels, product brochures, advertisements, and othermaterials and material changes thereto upon which Zai uses the Product Marks; provided that, (a) NVCR will approve or disapproveany such materials within [***] Business Days of Zai’s submission; provided that if NVCR fails to respond within such period of time,such materials will be deemed approved if they are consistent with NVCR’s brand usage guidelines; furtherTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 43 Execution VersionCONFIDENTIAL provided NVCR shall use good faith to approve or disapprove such materials within a period of time specified by Zai if Zai requestsNVCR to provide an expedited approval for certain materials, and (b) following NVCR’s approval in accordance with sub-clause (a),Zai will be free to use such materials without the necessity to obtain NVCR’s approval for any subsequent use as long as suchmaterials are not substantially different from the materials approved by NVCR.ARTICLE 14TERMS AND TERMINATION14.1Term. This Agreement shall be effective as of the Effective Date, and shall continue, on a region-by-region and Licensed Product-by-Licensed Product basis, in effect until [***] (the “Term”). On a region-by-region basis, upon [***], theLicense in such region shall become fully paid-up, perpetual, irrevocable and exclusive.14.2Termination(a)Termination by Zai for Convenience. At any time, Zai may terminate this Agreement by providingwritten notice of termination to NVCR, which notice includes (i) an effective date of termination [***] months after the date of thenotice if the First Commercial Sale of any Licensed Product has not occurred in the Field in the Territory as of the date of such notice,or (ii) an effective date of termination [***] months after the date of the notice if the First Commercial Sale of any Licensed Product inthe Field in the Territory has occurred as of the date of such notice.(b)Termination for Material Breach. If [***], then the non-breaching Party may deliver notice of suchbreach to the other Party stating the cause, and proposed remedy if any. For all such [***], the allegedly breaching Party shall have[***] from such notice to dispute or cure such breach, provided that if such breach is not reasonably capable of cure within such [***]period, but is capable of cure within [***] from such notice, the breaching Party may submit, within [***] of such notice, a reasonablecure plan to remedy such breach as soon as possible and in any event prior to the end of such [***] period, and, upon such submission,the [***] cure period shall be automatically extended for so long as the breaching Party continues to use diligent efforts to cure suchbreach in accordance with the cure plan, but for no more than [***] additional days. If [***], the matter shall be addressed under thedispute resolution provisions in Article 15, and the termination shall not become effective unless and until it has been determined underArticle 15 that the allegedly breaching Party is in material breach of this Agreement and has failed to cure such breach within the timeperiods provided in this Section 14.2(b); provided that [***], if either Party disputes [***], the Parties agree to resolve the dispute asexpeditiously as possible under Article 15, but in any event within [***] days after the occurrence of such dispute. It is understood andacknowledged that during the pendency of such a dispute, all of the terms and conditions of this Agreement shall remain in effect andthe Parties shall continue to perform all of their respective obligations hereunder. A [***] shall be treated as a material breach of thisAgreement and notwithstanding the foregoing provisions in this Section 14.2(b), [***] shall have [***] days to cure any breach [***];provided that, if a government or regulatory action (or inaction) prevents [***] within such [***] day period, the Parties shall discuss ingood faith to extend such [***] day period.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 44 Execution VersionCONFIDENTIAL (c)Termination for Diligence Failure. Notwithstanding any other provision in Section 14.2(b), Zai’sfailure to perform its diligence obligations under Sections 5.1 or 8.1 shall be presumed to constitute a curable material breach of thisAgreement, and if such material breach remains uncured or is determined to be uncurable, each, in accordance with Sections 14.2(b)and 14.2(c), NVCR may, at its sole discretion, terminate this Agreement immediately upon notice to Zai. If Zai believes such materialbreach can be cured, and Zai provides to NVCR, within [***] days of NVCR’s notice to Zai, a statement of how such material breachcan be cured, NVCR shall have [***] days from receipt of such statement to dispute such statement. If the Parties cannot agree onwhether such material breach can be cured, the matter shall be addressed under the dispute resolution provisions in Article 15, and thetermination shall not become effective unless and until it has been determined under Article 15 that such material breach cannot becured or, if it is determined that such material breach can be cured, Zai fails to cure such material breach within the time periods forcure as set forth in Section 14.2(b). If it is determined or NVCR does not dispute that such material breach can be cured, Zai will havethe right to cure such material breach within the time periods for the cure as set forth in Section 14.2(b).(d)Termination for Patent Challenge. Except to the extent the following is unenforceable under thelaws of a particular jurisdiction, NVCR may terminate this Agreement in its entirety, immediately if Zai or its Affiliates or Sublicensees, individually or in association with any other person or entity, commences a legal action challenging the validity, enforceability orscope of any Patents owned or Controlled by NVCR anywhere in the world.(e)Termination for Insolvency. Each Party shall have the right to terminate this Agreement upondelivery of written notice to the other Party in the event that (a) such other Party files in any court or agency pursuant to any statute orregulation of any jurisdiction a petition in bankruptcy or insolvency or for reorganization or similar arrangement for the benefit ofcreditors or for the appointment of a receiver or trustee of such other Party or its assets, (b) such other Party is served with aninvoluntary petition against it in any insolvency proceeding and such involuntary petition has not been stayed or dismissed within [***]of its filing, or (c) such other Party makes an assignment of substantially all of its assets for the benefit of its creditors.(f)Full Force and Effect During Notice Period. This Agreement shall remain in full force and effectuntil the expiration of the applicable termination notice period. For clarity, if any milestone event is achieved during the terminationnotice period, then the corresponding milestone payment is accrued and Zai shall remain responsible for the payment of such milestonepayment even if the due date of such milestone payment may come after the effective date of the termination.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 45 Execution VersionCONFIDENTIAL 14.3Effect of Termination. Upon the termination (but not the expiration) of this Agreement:(a)Licenses. The License and all other rights granted by NVCR to Zai under the NVCR IP andcopyrights and trademarks owned or Controlled by NVCR shall terminate and all sublicenses granted by Zai shall also terminate.(b)Regulatory Submissions. Upon NVCR’s written request, Zai shall provide NVCR with copies of allRegulatory Submissions for Licensed Products. To the extent Zai has obtained any ownership interest in a Regulatory Submission, andto the extent permissible under Applicable Law and commercially feasible, Zai shall assign to NVCR or shall provide NVCR with aright of reference with respect to such Regulatory Submissions, as NVCR determines at its reasonable discretion, at [***] cost andexpense. In addition, upon NVCR’s written request, Zai shall, at [***] cost and expense, provide to NVCR copies of all materialrelated documentation, including material non-clinical, preclinical and clinical data that are held by or reasonably available to Zai, itsAffiliates or sublicensees. The Parties shall discuss and establish appropriate arrangements with respect to safety data exchange,provided that NVCR will assume all safety and safety database activities no later than [***] months after termination.(c)Inventory. At NVCR’s election and request, Zai shall transfer to NVCR or its designee some or allinventory of Licensed Products (including all disposable (i.e., arrays), replacement components, Licensed Products retrieved afterstoppage the like) then in the possession or control of Zai, its Affiliates or sublicensees.(d)Wind Down and Transition. Zai shall be responsible, at [***] cost and expense, for the wind-downof Zai’s, its Affiliates’ and its sublicensees’ Development, manufacture and Commercialization activities for Licensed Products. Zaishall, and shall cause its Affiliates and sublicensees to, reasonably cooperate with NVCR to facilitate orderly transition of the Development, manufacture and Commercialization of Licensed Products to NVCR or its designee, including (i) using reasonableefforts to assign or amend as appropriate, upon request of NVCR, any agreements or arrangements with Third Party vendors(including distributors) to Develop, manufacture, promote, distribute, sell or otherwise Commercialize Licensed Products or, to theextent any such Third Party agreement or arrangement is not assignable to NVCR, reasonably cooperating with NVCR to arrange tocontinue to provide such services for a reasonable time after termination; (ii) using reasonable efforts, to the extent it does not disruptany of Zai’s other operations as determined in its sole discretion, to transfer employees and independent contractors of Zai or itsAffiliates, or its or their contractors, who provide technical support, or similar support, to users of the Licensed Product to NVCR or itsdesignee; and (iii) to the extent that Zai or its Affiliate is performing any activities described above in (i) and (ii), reasonablycooperating with NVCR to transfer such activities to NVCR or its designee and continuing to perform such activities on NVCR’sbehalf for a reasonable time after termination until such transfer is completed.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 46 Execution VersionCONFIDENTIAL (e)Ongoing Clinical Trial. If, at the time of such termination, Zai or its Affiliates are conducting anyClinical Trials, then, at NVCR’s election on a Clinical Trial-by-Clinical Trial basis: (i) to the extent permissible under Applicable Lawand commercially feasible, Zai shall, and shall cause its Affiliates to, cooperate with NVCR to transfer the conduct of such ClinicalTrial to NVCR or its designees and complete such transfer promptly and, in any case, within [***] months after the terminationeffective date, and NVCR shall assume any and all liability for the conduct of such transferred Clinical Trial after the effective date ofsuch transfer (except to the extent arising prior to the transfer date or from any willful misconduct or negligent act or omission by Zai,its Affiliates or their respective employees, agents and contractors); and (ii) Zai shall, at [***] cost and expense, orderly wind-down theconduct of any such Clinical Trial that is not assumed by NVCR under clause (i) above.(f)Return of Confidential Information. At NVCR’s election, Zai shall return (at NVCR’s expense) ordestroy all tangible materials comprising, bearing or containing any Confidential Information of NVCR that are in Zai’s or itsAffiliates’ or sublicensees’ possession or control and provide written certification of such destruction; provided that Zai may retain onecopy of such Confidential Information for its legal archives solely to monitor compliance with its obligations herein, and providedfurther, that Zai shall not be required to destroy electronic files containing such Confidential Information that are made in the ordinarycourse of its business information back-up procedures pursuant to its electronic record retention and destruction practices that apply toits own general electronic files and information.(g)NVCR’s Responsibilities. Notwithstanding any provision to the contrary in this Section 14.3, if thisAgreement is terminated by Zai under Section 14.2(b) or Section 14.2(e), NVCR shall be responsible for [***] and NVCR shall [***].14.4Termination Press Releases. In the event of termination of this Agreement for any reason, and subject to theprovisions of Section 10.3, the Parties shall cooperate in good faith to coordinate public disclosure of such termination and the reasonstherefor, and shall not, except to the extent required by Applicable Laws, disclose such information without the prior approval of theother Party. The principles to be observed in such disclosures shall be accuracy, compliance with Applicable Laws and regulatoryguidance documents, and reasonable sensitivity to potential negative investor reaction to such news.14.5Survival. Expiration or termination of this Agreement shall not relieve the Parties of any obligation accruingprior to such expiration or termination. Without limiting the foregoing, the provisions of Article 1 (as applicable), Article 10, Article 12,Article 15, and Article 16 (as applicable), and Sections 5.7 (if a termination, only with respect to NVCR’s use rights), 5.8 (with respectto responsibility for subcontractors), 9.7, 11.6, 13.1, 14.3, 14.4, 14.5, and 14.6 shall survive the expiration or termination of thisAgreement.14.6Termination Not Sole Remedy. Termination is not the sole remedy under this Agreement and, whether or nottermination is effected and notwithstanding anything contained in this Agreement to the contrary, all other remedies shall remainavailable except as agreed to otherwise herein.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 47 Execution VersionCONFIDENTIAL ARTICLE 15DISPUTE RESOLUTION15.1General. The Parties recognize that a dispute may arise relating to this Agreement (a “Dispute”). Any Dispute,including Disputes that may involve the Affiliates of any Party, shall be resolved in accordance with this Article 15.15.2Negotiation; Escalation. The Parties shall negotiate in good faith and use reasonable efforts to settle anyDispute under this Agreement. Any Dispute as to the breach, enforcement, interpretation or validity of this Agreement shall be referredto the Executive Officers for attempted resolution. In the event the Executive Officers are unable to resolve such Dispute within [***]days of such Dispute being referred to them, then, upon the written request of either Party to the other Party, the Dispute shall besubject to arbitration in accordance with Section 15.3.15.3Arbitration.(a)In the event of a Dispute that cannot be resolved between the Parties or the Executive Officers as setforth in Section 15.2, either Party shall be free to institute binding arbitration with respect to such Dispute in accordance with thisSection 15.3 upon written notice to the other Party (an “Arbitration Notice”) and seek remedies as may be available. Any Disputeunresolved under this Section 15.3 shall be settled by binding arbitration administered by International Chamber of Commerce (or anysuccessor entity thereto) and in accordance with its arbitration rules and procedures then in effect, as modified in this Section 15.3 (the“Rules”), except to the extent such rules are inconsistent with this Section 15.3, in which case this Section 15.3 shall control. Theproceedings and decisions of the arbitration shall be confidential, final and binding on the Parties, and judgment upon the award ofsuch arbitrator may be entered in any court having jurisdiction thereof.(b)Upon receipt of an Arbitration Notice by a Party, the applicable Dispute shall be resolved by final andbinding arbitration before a panel of three (3) arbitrators (the “Arbitrators”), with each arbitrator having not less than fifteen (15) yearsof experience in the medical device industry and subject matter expertise with respect to the matter subject to arbitration. AnyArbitrator chosen hereunder shall have educational training and industry experience sufficient to demonstrate a reasonable level ofscientific, financial, medical and industry knowledge relevant to the particular Dispute. Each Party shall promptly select one Arbitratoreach, which selections shall in no event be made later than [***] days after receipt of the Arbitration Notice. The third Arbitrator shallbe chosen promptly by mutual agreement of the Arbitrators chosen by the Parties, but in no event later than [***] days after the datethat the last of such Arbitrators was appointed.(c)Each Party shall bear its own costs and expenses (including legal fees and expenses) relating to thearbitration proceeding, except that the fees of the Arbitrators and other related costs of the arbitration shall be shared equally by theParties, unless the Arbitrators determine that a Party has incurred unreasonable expenses due to vexatious or bad faith positions takenby the other Party, in which event the Arbitrators may make an award of all or any portion of such expenses (including legal fees andexpenses) so incurred.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 48 Execution VersionCONFIDENTIAL (d)The Arbitrators shall be required to render the decision in writing and to comply with, and the awardshall be limited by, any express provisions of this Agreement relating to damages or the limitation thereof. No Arbitrator shall have thepower to award punitive damages under this Agreement regardless of whether any such damages are contained in a proposal, and suchaward is expressly prohibited.(e)The Arbitrators’ decision and award shall be made within [***] of the filing of the arbitration demand,and the Arbitrators shall agree to comply with this schedule before accepting appointment. However, this time limit may be extendedby agreement of the Parties or by the Arbitrators. The Arbitrators shall be authorized to award compensatory damages, but shall not beauthorized to reform, modify or materially change this Agreement. The Arbitrators shall, within [***] days after the conclusion of thehearing, issue a written award and statement of decision describing the material facts and the grounds for the conclusions on which theaward is based, including the calculation of any damages awarded. The decision of the Arbitrators shall be final, conclusive andbinding on the Parties and enforceable by any court of competent jurisdiction.(f)Unless the Parties otherwise agree in writing, during the period of time that any arbitration proceedingis pending under this Agreement, (A) the Parties shall [***]; and (B) in the event that the subject of the Dispute relates to the exerciseby a Party of a termination right hereunder, including in the case of a material breach of this Agreement, the effectiveness of suchtermination shall be stayed until the conclusion of the proceedings under this Section 15.3.(g)All arbitration proceedings and decisions of the Arbitrators under this Section 15.3 shall be deemedConfidential Information of both Parties under Article 10. The arbitration proceedings shall take place in [***], in the Englishlanguage.(h)Notwithstanding the foregoing, any dispute, controversy or claim relating to the scope, validity,enforceability or infringement of any patent rights or trademark rights shall be submitted to a court of competent jurisdiction in thecountry in which such patent rights or trademark rights were granted or arose. Nothing in this Section 15.3 will preclude either Partyfrom seeking equitable relief or interim or provisional relief from a court of competent jurisdiction, including a temporary restrainingorder, preliminary injunction or other interim equitable relief, concerning a Dispute either prior to or during any arbitration if necessaryto protect the interests of such Party or to preserve the status quo pending the arbitration proceeding.ARTICLE 16MISCELLANEOUS16.1Force Majeure. Neither Party shall be held liable to the other Party nor be deemed to have defaulted under orbreached this Agreement for failure or delay in performing any obligation under this Agreement to the extent such failure or delay iscaused by or results from causes beyond the reasonable control of the affected Party, including embargoes, war, acts of war (whetherwar be declared or not), acts of terrorism, insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances (except fora strike, lockout or labor disturbance with respect to the non-performing Party’s respective employees or agents), fire, floods,earthquakes or other acts of God, or any generally applicable action orTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 49 Execution VersionCONFIDENTIAL inaction by any Governmental Authority (but excluding any government action or inaction that is specific to such Party, its Affiliates orsublicensees, such as revocation or non-renewal of such Party’s license to conduct business). The affected Party shall notify the otherParty in writing of such force majeure circumstances as soon as reasonably practical, and shall promptly undertake and continuediligently all reasonable efforts necessary to cure such force majeure circumstances or to perform its obligations despite the ongoingcircumstances.16.2Assignment. This Agreement may not be assigned or otherwise transferred, nor may any right or obligationhereunder be assigned or transferred, by either Party without the prior written consent of the other Party, except in whole: (a) by Zai toan Affiliate of Zai; (b) by NVCR to an Affiliate of NVCR; or (c) by NVCR to a similarly situated Third Party in the Field only inconnection with a sale of all or substantially all assets that are pertinent to the Licensed Product. Any attempted assignment not inaccordance with this Section 16.2 shall be null and void and of no legal effect. The terms and conditions of this Agreement shall bebinding upon, and shall inure to the benefit of, the Parties and their respected successors and permitted assigns.16.3Severability. If any one or more of the provisions contained in this Agreement is held invalid, illegal orunenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any waybe affected or impaired thereby, unless the absence of the invalidated provision(s) adversely affects the substantive rights of the Parties.The Parties shall in such an instance use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legaland enforceable provision(s) that, insofar as practical, implement the purposes of this Agreement.16.4Notices. All notices that are required or permitted hereunder shall be in writing and sufficient if deliveredpersonally, sent by electronic mail (provided that a read receipt is received and retained by sender and such notice by electronic mail ispromptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by nationally-recognized overnightcourier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:If to NVCR:NovoCure Limited.Second FloorNo.4 The ForumGrenville StreetSt. HelierJerseyJE2 4UF[***] THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 50 Execution VersionCONFIDENTIAL with a copy to:Novocure Inc.20 Valley Stream Parkway, Suite 300Malvern, PA 19355[***] and Sidley Austin LLP787 Seventh AvenueNew York, NY 10019[***] and Sidley Austin LLPOne South DearbornChicago, IL 60603[***] If to Zai:Zai Lab (Shanghai) Co., Ltd.4560 Jinke Rd, Bldg. 1, 4/FPudong, Shanghai, China, 201210[***] with a copy to:Ropes & Gray LLP36F, Park Place1601 Nanjing Road WestShanghai 200040[***] or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordanceherewith. Any such notice shall be deemed to have been given: (a) when delivered if personally delivered or sent by electronic mail ona Business Day (or if delivered or sent on a non-Business Day, then on the next Business Day); (b) on the Business Day after dispatchif sent by nationally-recognized overnight courier; or (c) on the fifth Business Day following the date of mailing if sent by mail.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 51 Execution VersionCONFIDENTIAL 16.5Governing Law. This Agreement, and all claims or causes of action (whether in contract, tort or statute) thatmay be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement or thebreach thereof (including any claim or cause of action based upon, arising out of or related to any representation or warranty made inor in connection with this Agreement or as an inducement to enter into this Agreement), shall be governed by, and enforced inaccordance with, the internal laws of the [***], including its statutes of limitations.16.6Entire Agreement; Amendments. This Agreement, together with the Exhibits hereto, contains the entireunderstanding of the Parties with respect to the collaboration and the licenses granted hereunder. Any other express or impliedagreements and understandings, negotiations, writings and commitments, either oral or written, in respect to the collaboration and thelicenses granted hereunder are superseded by the terms of this Agreement. The Exhibits to this Agreement are incorporated herein byreference and shall be deemed a part of this Agreement. This Agreement may be amended, or any term hereof modified, only by awritten instrument duly executed by authorized representative(s) of both Parties. The Parties agree that, effective as of the EffectiveDate, in the event of a conflict between this Agreement and that certain Mutual Non-Disclosure Agreement between Zai Lab (HongKong) Limited and NVCR dated as of May 15, 2018 (the “Confidentiality Agreement”), this Agreement shall govern, and thatdisclosures made to either Party, directly or indirectly, prior to the Effective Date pursuant to the Confidentiality Agreement shall besubject to the confidentiality and non-use provisions of this Agreement. The foregoing shall not be interpreted as a waiver of anyremedies available to either Party or its Affiliates as a result of any breach, prior to the Effective Date, by the other Party or its Affiliatesof such Party’s or its Affiliate’s obligations pursuant to the Confidentiality Agreement.16.7Headings. The captions to the several Articles, Sections and subsections hereof are not a part of this Agreement,but are merely for convenience to assist in locating and reading the several Articles and Sections of this Agreement.16.8Independent Contractors. It is expressly agreed that NVCR and Zai shall be independent contractors and thatthe relationship between the two Parties shall not constitute a partnership, joint venture or agency. Neither NVCR nor Zai shall havethe authority to make any statements, representations or commitments of any kind, or to take any action that is binding on the otherParty without the prior written consent of the other Party.16.9Waiver. Any waiver of any provision of this Agreement shall be effective only if in writing and signed byNVCR and Zai. No waiver by a Party of any default under this Agreement will be a waiver of a future or subsequent default. Thefailure or delay of any Party in exercising any rights under this Agreement will not constitute a waiver of any such right, and any singleor partial exercise of any particular right by any Party will not exhaust the same or constitute a waiver of any other right provided inthis Agreement.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 52 Execution VersionCONFIDENTIAL 16.10Waiver of Rule of Construction. Each Party has had the opportunity to consult with counsel in connectionwith the review, drafting and negotiation of this Agreement. Accordingly, the rule of construction that any ambiguity in this Agreementshall be construed against the drafting Party shall not apply.16.11Cumulative Remedies. No remedy referred to in this Agreement is intended to be exclusive, but each shall becumulative and in addition to any other remedy referred to in this Agreement or otherwise available under Applicable Laws.16.12Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to doall such other acts, as necessary or appropriate in order to carry out the purposes and intent of this Agreement. 16.13Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemedan original, but all of which together shall constitute one and the same instrument. Each Party shall be entitled to rely on the delivery ofexecuted pdf copies of counterpart execution pages of this Agreement and such pdf copies shall be legally effective to create a validand binding agreement among the Parties.{Signature Page Follows} THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 53 Execution VersionCONFIDENTIAL In Witness Whereof, the Parties intending to be bound have caused this License and Collaboration Agreement to beexecuted by their duly authorized representatives as of the Effective Date. NOVOCURE LIMITED ZAI LAB (SHANGHAI) CO., LTD. By:/s/ William F. Doyle By:/s/ Samantha Du Name:William F. Doyle Name:Samantha Du Title:Executive Chairman Title:Chairman & CEO  List of Exhibits Schedule 1.41:[***]Schedule 1.55:[***]Schedule 11:[***] Exhibit A:NVCR PatentsExhibit B:NMPA Submission TimelineExhibit C:Territory Development PlanExhibit D:Supply Agreement Term SheetExhibit E:Commercialization Plan  Schedule 1.41[***]  Schedule 1.55[***]  Schedule 11Disclosure Schedule  Exhibit ANVCR Patents  Exhibit BNMPA Submission Timeline  Exhibit CTerritory Development Plan  Exhibit DSupply Agreement Term Sheet  Exhibit ECommercialization Plan CONFIDENTIAL Exhibit 10.16 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION.COLLABORATION AGREEMENTThis Collaboration Agreement (“Agreement”), effective as of November 29, 2018 (the “Effective Date”), is entered into byand between MacroGenics, Inc., a Delaware corporation with a place of business at 9704 Medical Center Drive, Rockville, MD 20850(“MacroGenics”), and Zai Lab (Shanghai) Co., Ltd., a P.R. of China company with a place of business at 4560 Jinke Rd, Bldg. 1, 4/F,Pudong, Shanghai, China, 201210 (“Zai”). MacroGenics and Zai may be referred to herein individually as a “Party” or collectively asthe “Parties.”Recitals:A.MacroGenics has expertise in, and platforms for, the discovery and development of products for the treatment ofpatients with cancer, inflammatory and infectious diseases.B.Zai has expertise in the research, development and commercialization of pharmaceutical products.C.Zai and MacroGenics desire to enter into collaboration for the development of MacroGenics’ anti-HER2 Antibodyknown as margetuximab, a therapeutic bi-specific binding protein directed against PD-1 and LAG3 and a therapeutic [***] directedagainst [***] based on MacroGenics’ proprietary Trident™ platform, including in combination with other agents such as MacroGenics’anti-PD-1 Antibody known as MGA012, and if approved for commercialization, the commercialization of Product(s) (defined below) inthe Territory, all upon the terms and conditions set forth in this Agreement.D.MacroGenics desires to grant to Zai, and Zai desires to receive, an exclusive license for all Indications in the Fieldfor all pharmaceutical forms of a Licensed Compound and Products for the Territory, upon the terms and conditions set forth in thisAgreement.In consideration of the foregoing premises and the mutual covenants herein contained, the Parties hereby agree as follows:Agreement:1.Definitions. Unless specifically set forth to the contrary herein, the following capitalized terms, whether used in the singular orplural, shall have the respective meanings set forth below:1.1“Acting Improperly” has the meaning set forth in Section 4.4(a).1.2“Affiliate” means with respect to any Party, any person or entity controlling, controlled by or under commoncontrol with such Party. For purposes of this Section 1.2, “control” means (a) in the case of a corporate entity, direct or indirectownership of at least fifty percent (50%) or more of the stock or shares having the right to vote for the election of directors of suchcorporate entity and (b) in the case of an entity that is not a corporate entity, the possession, directly or indirectly, of the power to direct,or cause CONFIDENTIAL Exhibit 10.16 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION.the direction of, the management or policies of such entity, whether through the ownership of voting securities, by contract orotherwise. 1.3“Antibody” means a [***] molecule whose Fv encodes for a [***] and comprises or contains: (a) one or moreimmunoglobulin variable domains; or (b) fragments, variants, modifications or derivatives of such immunoglobulin variable domains;or (c) the nucleic acid consisting of a sequence of nucleotides encoding (or complementary to a nucleic acid encoding) the foregoingmolecules in (a) or (b).1.4“Anti-Corruption Laws” means the U.S. Foreign Corrupt Practices Act, as amended, the UK Bribery Act 2010, asamended, and any other applicable anti- corruption laws and laws for the prevention of fraud, racketeering, money laundering orterrorism, including those within the Territory.1.5“Applicable Laws and Regulations” means all international, national, federal, state, regional, provincial,municipal and local government laws, rules, and regulations that apply to either Party or to the conduct of the Collaboration under thisAgreement including cGMP, GCP, GBPS, and the laws, rules and regulations of the ICH, the United States and the Territory, each asmay be then in effect, as applicable and amended from time to time.1.6“Biosimilar Product” means, with respect to a Product (but specifically excluding any MGA012 componentthereof) sold in a Country or Region, a product that: (a) is marketed by a Third Party that has not obtained the rights to such product asa Sublicensee or distributor of, or through any other contractual relationship with, Zai or any of its Affiliates or Sublicensees; (b)contains the same or similar amino acid sequence as the applicable Product; and (c) with respect to a Region or Country of theTerritory, has been granted Regulatory Approval as a biosimilar or interchangeable biological product by the applicable RegulatoryAuthority in such Region or Country according to a biosimilar regulatory pathway that is materially equivalent to that of Section 351(k)of the US Public Health Service Act (42 U.S.C. § 262(k)), as may be amended, or any subsequent or superseding law, statute orregulation.1.7“BLA” means (a) a Biologics License Application or New Drug Application (“NDA”) filed with the FDA formarketing approval of a Product or any successor applications or procedures, and all supplements and amendments that may be filedwith respect to the foregoing, or similar filings outside the Territory with applicable Regulatory Authorities, for approval tocommercially market, import and sell a Product, or (b) similar filings in the Territory with applicable Regulatory Authorities, includingthe CFDA, for approval to commercially market, import and sell a Product. The term BLA shall exclude pricing and reimbursementapprovals.1.8“Business Day” means a day on which banking institutions in Washington, DC, USA, Hong Kong, and Beijing,PRC are open for business, excluding any Saturday or Sunday.1.9“Calendar Quarter” means the respective periods of three (3) consecutive calendar months ending on March 31,June 30, September 30 and December 31.1.10“Calendar Year” means the respective periods of twelve (12) months commencing on January 1 and ending onDecember 31.1.11“CFDA” means China Food and Drug Administration, or any successor agency thereto.  1.12cGMP” or “current Good Manufacturing Practices” means current Good Manufacturing Practices as set forthin the FDCA and the Public Health Service Act (the “PHS Act”), and in regulations at 21 C.F.R. Parts 210, 211 and 600, as in effect atthe time when any Product is being manufactured for clinical development or commercial use, when any Product is being sold or whenany clinical trial regarding a Product is being conducted, provided, and to the extent applicable to such clinical trial, as such regulationsare interpreted and enforced by the FDA, including as set forth in applicable guidance documents issued by the FDA, and inaccordance with applicable, generally accepted industry standards, and the equivalent legal requirements in other applicablejurisdictions, including within the Territory, all as the same may be amended from time to time.1.13“Clinical Data” means all data generated or arising from the conduct of a Clinical Trial or other Developmentefforts under this Agreement.1.14“Clinical Trial” means a Phase I Clinical Trial, Phase II Clinical Trial, Phase III Clinical Trial, Phase IV ClinicalTrial or Registration Trial, as applicable. 1.15“CMC” means Chemistry Manufacturing and Controls.1.16“CMO” means a contract manufacturing organization.1.17“Collaboration” means the program established under this Agreement, which includes collaborativeDevelopment of Products.1.18“Combination Product” mean (a) any single product comprising both (i) a Licensed Compound (or HER2Trident Product, Margetuximab Product or MGD013 Product) and (ii) one or more other therapies or pharmaceutically activecompounds or substances that is not a Licensed Compound; (b) any sale of a Product with another therapy(ies) or product(s) for asingle invoice price; or (c) any sale of a Product as part of a bundle with other therapy(ies), product(s) or service(s) (i.e., where aProduct and such other therapy(ies), product(s) or service(s) are sold for a single invoice price or where a discount, rebate or otheramount that reduces the price of a Product is provided in exchange for (or otherwise conditioned upon) the purchase of such othertherapy(ies), product(s) or services), to the extent not described in clause (a) or (b). The Licensed Compound (or HER2 Trident Product,Margetuximab Product or MGD013 Product) portion of any Combination Product shall be deemed the “Licensed Component” and theother portion of such Combination Product (including MGA012 or any other product Controlled by MacroGenics with respect toCombination Regimens) shall be deemed the “Other Component”, and each Combination Product shall be deemed a Producthereunder. 1.19“Combination Regimen” means, individually or collectively, as context requires, (a) a therapeutic combinationcomprising MGA012 and a Margetuximab Product or (b) a combination comprising MGA012 and a HER2 Trident Product, in eachcase ((a) and (b)) in concurrent or sequential administration. 1.20“Combination Regimen Study” means, a Clinical Trial of a Combination Regimen conducted under the GlobalDevelopment Plan or Territory Specific Development Plan in the Field in the Territory.1.21“Commercial Supply Agreement” has the meaning set forth in Section 5.1(b).THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 2  1.22“Commercialization” or “Commercialize” means activities taken before and after obtaining RegulatoryApproval relating specifically to the pre-launch, launch, promotion, marketing, sales force recruitment, sale and distribution of apharmaceutical product and post-launch medical activities, including: (a) distribution for commercial sale; (b) strategic marketing, salesforce, detailing, advertising, and market and product support; (c) medical education and liaison and any Phase IV Clinical Trials unlessrequired as a condition for approval, to the extent permitted by this Agreement; (d) all customer support and product distribution,invoicing and sales activities; and (e) all post-approval regulatory activities, including those necessary to maintain RegulatoryApprovals.1.23“Commercialization Plan” means a Commercialization plan, to be updated from time to time, the first of whichshall be provided in writing to MacroGenics at least [***] months before the estimated Completion of the first Registration Trial, andwhich shall include: [***]1.24“Commercially Reasonable Efforts” means with respect to the efforts to be expended by a Party with respect toany objective under this Agreement, reasonable, good faith efforts to accomplish such objective as such Party would normally use toaccomplish a similar objective of such Party under similar circumstances, it being understood and agreed that with respect to theCommercialization of a Licensed Compound and Products, such efforts shall be similar to those efforts and resources commonly usedby pharmaceutical or biopharmaceutical companies, as applicable, of comparable size and resources to such Party for a similarbiological or pharmaceutical product owned by it or to which it has rights, which product is at a similar stage in its development orproduct life and is of similar market potential taking into account efficacy, safety, approved labeling, the competitiveness of alternativeproducts in the marketplace, the patent and other proprietary position of the product, and the likelihood of Regulatory Approval giventhe regulatory structure involved.1.25“Completion” or “Completed” for a clinical trial means the [***].1.26“Confidential Information” means any and all non-public scientific, pre-clinical, clinical, regulatory,manufacturing, marketing, financial and commercial information and data, in any tangible or intangible form, including all Know‑howsubject to Section 9.7(c).1.27“Control,” “Controls” or “Controlled by” means (except as used in Section 1.2), with respect to any item of orright under Patents or Know‑how, the extent of the ability of a Party (whether through ownership or license, other than pursuant to thisAgreement) to grant access to, or a license or sublicense of, such item or right as provided for herein without violating the terms of anyagreement or other arrangement with any Third Party or creating a payment obligation upon such Party (unless either (a) the other Partyagrees to bear the applicable portion of such payment pursuant to Section 9.7 or otherwise or (b) such payment obligation arises undera MacroGenics Required Third Party Agreement), in each case, existing at the time such Party would be required hereunder to grantthe other Party such access or license or sublicense.1.28“[***]” has the meaning set forth in Section 7.4(b).1.29“[***]” has the meaning set forth in Section 7.4(b).1.30“Country” means for the purposes of this Agreement each of PRC and Taiwan.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 3  1.31“Cover” means, with respect to a product, technology, process or method, that, in the absence of possession ofthe right (by ownership, license or otherwise) under a Valid Claim, the practice or exploitation of such product, technology, process ormethod would infringe such Valid Claim (or, in the case of a Valid Claim that has not yet issued, would infringe such Valid Claim if itwere to issue).1.32“CRO” means a clinical research organization.1.33“Data Exclusivity Period” means the period, if any, during which the CFDA (or, in regions or countries otherthan the PRC, an equivalent regulatory agency) prohibits reference, without the consent of the owner of a BLA, to the clinical and otherdata that is contained in such BLA and that is not published or publicly available outside of such BLA.1.34“Deadlock” has the meaning set forth in Section 2.1(d).1.35“Depot Subcontractor” means any subcontractor engaged by Zai to store, distribute, handle or otherwisepossess Licensed Compounds, MGA012 or Product that was provided by MacroGenics to supply a Clinical Trial.1.36“Develop” or “Development” or “Developing” means research, discovery, and preclinical and clinical drug orbiological development activities, including toxicology, formulation, statistical analysis, preclinical and Clinical Trials (but excludingPhase IV Clinical Trials unless required as a condition for approval) and regulatory affairs, approval and registration, in each case, of aLicensed Compound or a Product in the Field.1.37“Development Costs” means all costs incurred in connection with any Development activities, including (i) siteinvestigator fees and monitoring costs, (ii) contract research organization and site management organization fees (iii) data managementcosts (iv) safety surveillance and reporting costs (v) patient costs, (vi) drug comparator and standard-of-care drug costs, (vii) drugadministration costs, (viii) development, validation, and procurement costs related to any companion diagnostic product, and (ix)central and local lab costs.1.38“Dispute” means any dispute, claim, or controversy (other than matters that are within the decision-makingauthority of the JSC or a Party pursuant to Section 2.1(d), or are expressly stated herein to require the consent of both Parties) arisingfrom or related to this Agreement or to the interpretation, application, breach, termination, or validity of this Agreement, including anyclaim of inducement of this Agreement by fraud or otherwise.1.39“Executive Officer” means, with respect to either Party, the Chief Executive Officer of such Party (or his or herdesignee who will be a senior executive directly reporting to the Chief Executive Officer of such Party and with authority to bind suchParty). 1.40“FDA” means the United States Food and Drug Administration, or any successor agency thereto.1.41“FDCA” means the Federal Food, Drug and Cosmetic Act, as amended.1.42“Field” means all human fields of use (including treatment and diagnosis), provided, however, that in the case ofany Licensed Compound or Products covered by a Patent or other intellectualTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 4  property right licensed in one or more MacroGenics Third Party Agreement, “Field” shall be limited to the minimum extent necessary tocomply with the terms of such MacroGenics Third Party Agreement for so long as such limitation is necessary to avoid a breach of theMacroGenics Third Party Agreement.1.43“Financial Officers” has the meaning set forth in Section 3.6(c).1.44“First Change of Control of Zai” means, the first occurrence of any of the following: (a) a transaction or seriesof related transactions pursuant to the same set of transactional documents in which a developer or marketer of healthcare relatedproducts and or services (including a biotechnology or pharmaceutical company) becomes the owner of more than fifty percent (50%)of the combined voting power of Zai’s outstanding securities, or (b) the sale, lease or other transfer to a developer or marketer ofhealthcare related products and or services (including a biotechnology or pharmaceutical company) of all or substantially all of Zai’sassets or business to which this Agreement relates; provided however that First Change of Control of Zai shall not include: (i) theissuance by Zai of securities of Zai in a bona fide financing transaction or series of related bona fide financing transactions, either inprivate placement, public offering or otherwise; (ii) the purchase of Zai’s stock on the public market by one or more investors that arenot biotechnology company or pharmaceutical companies; and/or (iii) any transaction that takes Zai private, or consolidates orreallocates stock ownership among Zai’s existing investors. 1.45“First Commercial Sale” means, with respect to any Product, the first sale to a Third Party for end use orconsumption of such Product in the Territory after Regulatory Approval has been granted by the Regulatory Agency for the Product inthe Territory.1.46“FTE” means [***] hours of work devoted to in direct support of specified Manufacturing, conducted by one ormore qualified employees of MacroGenics or its Affiliate. For clarity, any individual contributing less than [***] hours per CalendarYear (or equivalent pro-rata portion thereof for the period beginning on the Effective Date and ending on the last day of the firstCalendar Year) shall be deemed a fraction of an FTE on a pro-rata basis. 1.47 “FTE Cost” means, with respect to any period and MacroGenics or its Affiliate, the FTE Rate multiplied by thenumber of FTEs expended by MacroGenics or its Affiliate during such period; provided that Zai shall not be charged twice for any FTECost if such FTE Cost is already included as a component of Manufacturing Expenses payable under this Agreement.1.48 “FTE Rate” means a rate of [***] per FTE per Calendar Year (pro-rated for the period beginning on theEffective Date and ending on the last day of the first Calendar Year); provided, however, that such rate shall be increased or decreasedannually beginning on January 1, 2019 by the applicable CPI Adjustment. The FTE Rate is [***] and covers [***].1.49“Fully Burdened Manufacturing Cost” or “FBMC” means, with respect to Licensed Compounds, MGA012 andProducts supplied by or on behalf of MacroGenics or its Affiliate hereunder, [***] of (1) MacroGenics’ manufacturing cost of goodsproduced, if Manufactured by MacroGenics or its Affiliate or (2) [***], in each case ((1) and (2)) as determined for each stage of themanufacturing process, including [***] (except, in the case of (1), to the extent [***], or in the case of (2), to the extent [***]) andapplicable FTE Costs, all in accordance with GAAP. Such Fully Burdened Manufacturing Cost shall further include [***].THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 5  1.50“GAAP” means U.S. Generally Accepted Accounting Principles as the same may be in effect from time to time.1.51“GBPS” means the General Biological Products Standards as set forth in 21 C.F.R. Part 610, to the extentapplicable to the Collaboration.1.52“GCP” or “Good Clinical Practices” means current Good Clinical Practices as set forth in the Applicable Lawsand Regulations, such as FDCA and the PHS Act and regulations set forth at 21 C.F.R. Part 312, as well as (but not limited to) therequirements set forth in Directive 2001/20/EC of the European Parliament and of the Council of 4 April 2001 and CommissionDirective 2005/28/EC of 8 April 2005, to the extent applicable to a clinical trial regarding any Product, as such obligations areinterpreted and enforced by the applicable Regulatory Authority (e.g., FDA and Member States of the European Union), and asinterpreted under prevailing industry standards, including standards of medical ethics, applicable guidance documents issued by theFDA and any other Regulatory Authority, including ICH GCP, the informed consent requirements set forth in 21 C.F.R. Part 50 and theequivalent legal requirements in other applicable jurisdictions, the requirements relating to Institutional Review Boards set forth in 21C.F.R. Part 56 and the equivalent legal requirements in other applicable jurisdictions, including within the Territory, all as the same maybe amended from time to time.1.53“Global Branding Strategy” has the meaning set forth in Section 4.2.1.54“Global Clinical Trial” means a global clinical trial program for a Licensed Compound (or a Product)undertaken by MacroGenics or its Affiliates or permitted assigns or licensees, which includes one or more investigator sites within andoutside the Territory.1.55“Global Development Plan” means the written Development plan attached to this Agreement as Exhibit Cintended to support Development and Regulatory Approval of Licensed Compound(s) and Product in the Field both within the Territoryand outside of the Territory, as may be updated and amended periodically in form and substance approved by the JSC in accordancewith Section 3.3 and otherwise at times requested by the JDC or JSC.1.56“GLP” or “Good Laboratory Practices” means the recognized rules governing the conduct of non-clinicalsafety studies and ensuring the quality, integrity and reliability of study data as set forth in Applicable Laws and Regulations, such as 21C.F.R. Part 58, and the equivalent legal requirements in other applicable jurisdictions, including within the Territory, all as the samemay be amended from time to time.1.57“Government Official” means any Person employed by or acting on behalf of a government, government-owned or -controlled entity or public international organization; any political party, party official or candidate; any Person who holds orperforms the duties of an appointment, office or position created by custom or convention; and any Person who holds himself out to bethe authorized intermediary of any of the foregoing.1.58“Health Insurance Portability and Accountability Act” or “HIPAA” means the act enacted by the U.S.Congress in 1996 and took effect in 2003 that strictly dictates the parameters thatTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 6  identifiable private health information (PHI) can be shared outside of the research environment, as amended.1.59“[***] Trident” means a therapeutic trivalent, [***] protein which binds to the [***] and which is generatedfrom MacroGenics’ proprietary Trident™ platform, in the form existing as of the Effective Date, provided that, in the eventMacroGenics (or its Affiliates or sublicensees) develops one (1) or more other form(s) of such [***] protein during the Term that areControlled by MacroGenics, then, upon written request of Zai, the definition of [***] Trident shall include such other form(s).1.60“[***] Trident Product” means a product that incorporates a biopharmaceutical form of HER2 Trident as anactive ingredient.1.61“ICH” means the International Conference on Harmonisation.1.62“Improvement Plan” has the meaning set forth in Section 4.4(c)(i).1.63“Incyte Agreement” means that certain Global Collaboration and License Agreement between MacroGenics andIncyte Corporation effective as of October 24, 2017 as may be amended or restated from time to time. 1.64“IND” means an Investigational New Drug application, or similar application or submission for approval toconduct human clinical investigations filed with or submitted to a Regulatory Authority in conformance with the requirements of suchRegulatory Authority.1.65“Indemnifying Party” means the Party that is obligated to indemnify the Indemnitee under Section 12.1.66“Indemnitee” means either the Zai Indemnitee or the MacroGenics Indemnitee, as applicable.1.67“Independent Ethics Committee” or “IEC” means an independent body (a review board or a committee,institutional, regional, national, or supranational), constituted of medical professionals and non-medical members, whose responsibilityit is to ensure the protection of the rights, safety and well-being of human subjects involved in a trial and to provide public assurance ofthat protection, by, among other things, reviewing and approving / providing favorable opinion on, the trial protocol, the suitability ofthe investigator(s), facilities, and the methods and material to be used in obtaining and documenting informed consent of the trialsubjects, all to the extent required by the Applicable Laws and Regulations or by the applicable Regulatory Authority. The legal status,composition, function, operations and regulatory requirements pertaining to IEC may differ among countries, but should allow theIndependent Ethics Committee to act in agreement with GCP as described in this guideline.1.68“Indication” means a separate and distinct disease, disorder or medical condition in humans or non-humananimals classified as a three-character category in International Statistical Classification of Diseases and Related Health Problems (or“ICD”) 10-CM published by the World Health Organization, for which a Product can be used to diagnose, treat or prevent, which use isthe subject of a separate Regulatory Filing to support a Regulatory Approval for such use.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 7  1.69“Informed Assent Form” or “IAF” means an agreement to participate by subjects who are not able to giveconsent, either because they are minors or because they are legally incompetent.1.70“Informed Consent Form” or “ICF” means a document that outlines a patient’s rights during participation in aclinical trial. It also discusses the potential risks and benefits associated with participation, including all available data on previousstudies. The ICF must be signed by the patient or authorized caregiver before entrance is granted into a study.1.71“In-License Party” has the meaning set forth in Section 9.7(a).1.72“Investigational Review Board” or “IRB” means in accordance with 45 C.F.R. 46, Protection of HumanSubjects (Revised November 13, 2001) and 21 C.F.R. 45, Subpart C, IRB Functions and Operations, (as amended June 18, 1991 andother applicable regulations), an independent body comprising medical, scientific, and nonscientific members, whose responsibility isto ensure the protection of the rights, safety, and well-being of the subjects involved in a clinical trial. It may also be referred to as anIEC in accordance with ICH E6, Section 1.27.1.73“Jointly Owned IP” has the meaning set forth in Section 13.1(c).1.74“Jointly Owned Patents” has the meaning set forth in Section 13.2(b)(i).1.75“Jointly Owned Product Patents” means those Jointly Owned Patents that solely and exclusively Cover (i.e.,that do not also Cover the composition of matter of, or the method of using, any other product) (a) the composition of matter of aProduct, or (b) the method of using such Product as a therapeutic, prophylactic or diagnostic, in each case ((a) and (b)) in the Territory,but excluding all Jointly Owned Patents that Cover MGA012 (including its use), in whole or in part (including as a component of aCombination Regimen). 1.76“Joint Development Committee” or “JDC” has the meaning set forth in Section 2.1(h)(i)(1).1.77“Joint Commercialization Committee” or “JCC” has the meaning set forth in Section 2.1(h)(ii)(1).1.78“Joint Steering Committee” or “JSC” has the meaning set forth in Section 2.1 (a).1.79“Know-how” means (a) any proprietary scientific or technical information, results and data of any typewhatsoever, in any tangible or intangible form whatsoever, including databases, practices, methods, techniques, specifications,formulations, formulae, knowledge, know-how, skill, experience, test data including pharmacological, medicinal chemistry, biological,chemical, biochemical, toxicological and clinical test data, analytical and quality control data, stability data, studies and procedures, andmanufacturing process and development information, results and data and (b) any proprietary biological, chemical or physicalmaterials.1.80“Licensed Compound” means, individually, Margetuximab, MGD013 and HER2 Trident, as context requires(and collectively, referred to as “Licensed Compounds”).THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 8  1.81“License Payment” means each of the Upfront Payment, milestone payments under Section 7.2 and royaltypayments under Section 7.3 (collectively the “License Payments”)1.82“Licensing Transaction” has the meaning set forth in Section 10.3(d)(ii)(C).1.83“[***]” means that certain License Agreement by and between [***] effective as of [***] as may be amended orrestated from time to time.1.84“Losses” has the meaning set forth in Section 12.1.1.85“MacroGenics Indemnitee” has the meaning set forth in Section 12.1.1.86“MacroGenics Licensed Know‑how” means the Know‑how (excluding any Patents) that is Controlled byMacroGenics as of the Effective Date or MacroGenics or any of its Affiliates at any time during the Term, that is: (a) related to aLicensed Compound, or the Combination Regimen that includes [***] and (b) necessary or reasonably useful for Zai to exercise therights licensed to it pursuant to this Agreement or to perform its obligations under this Agreement with respect to the Territory.“MacroGenics Licensed Know-how” shall specifically exclude any Know-how l[***].1.87“MacroGenics Licensed Patents” means the Patents in the Territory Controlled by MacroGenics as of theEffective Date or MacroGenics or any of its Affiliates at any time during the Term that: (a) claim the composition of matter of aLicensed Compound or a Product, including in the Combination Regimen that includes [***] itself), (b) would be infringed byDeveloping or Commercializing a Licensed Compound or any Product, including as a component of the Combination Regimen ([***])but for the license granted hereunder, (c) would be infringed by use of [***] in a Combination Regimen but for the license grantedhereunder or (d) are otherwise necessary or reasonably useful for Zai to Develop and Commercialize Licensed Compounds andProducts in accordance with this Agreement, including as a component of the Combination Regimen ([***]). The MacroGenicsLicensed Patents [***]. “MacroGenics Licensed Patents” shall [***]. 1.88“MacroGenics Licensed Technology” means the MacroGenics Licensed Patents and the MacroGenics LicensedKnow-how.1.89“MacroGenics Licensed Trademarks” means any and all Trademarks [***].1.90“MacroGenics Outside Cost Share” has the meaning set forth in Section 3.5(b).1.91“MacroGenics Platform Patents” means all MacroGenics Licensed Patents other than MacroGenics Product-Specific Patents. 1.92“MacroGenics Product-Specific Patent” means each MacroGenics Licensed Patent that solely and exclusivelyCovers (i.e., that does not also Cover the composition of matter of, or the method of using, any other product): (a) the composition ofmatter of a Product, or (b) the method of using such Product as a therapeutic, prophylactic or diagnostic, in each case ((a) and (b)) inthe Territory, but excluding all MacroGenics Licensed Patents that Cover [***], in whole or in part, (including as a component of aCombination Regimen).THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 9  1.93“MacroGenics Third Party Agreement” means each of (i) the [***], (ii) the Incyte Agreement, (iii) the [***],(iv) such other license agreements between MacroGenics and its Third Party licensor under which MacroGenics in-licenses intellectualproperty from such Third Party for MacroGenics and/or its Affiliates and/or sublicensees to manufacture the Product and such license isnecessary for MacroGenics and/or its Affiliates to manufacture and supply the Product to Zai under this Agreement (the agreementsdescribed in (i) through (iv), “MacroGenics Required Third Party Agreements”) and (v) any Other Third Party Agreement betweenMacroGenics and its Third Party licensor that is entered into after the Effective Date and for which Zai elects to obtain a sublicenseunder Section 9.7 (the agreements described in (v), “MacroGenics Other Third Party Agreements”) ((i) through (v), collectivelyreferred to as the “MacroGenics Third Party Agreements”). 1.94“Major Safety Issue” means, with respect to a Product, any of the following: (a) an adverse safety profile of aProduct, or receipt or generation by a Party of any safety, tolerability or other data, indicating or signaling, as measured by safety andefficacy evaluation criteria and methodology customarily used by a majority of clinicians conducting studies on similar products in theapplicable region (including Region) or country (including Country), that such Product has or would have serious risks for medicalapplications in humans to require a recall, withdrawal, or similar action; or (b) any notice, information or correspondence received by aParty from a Regulatory Authority, or any action taken by a Regulatory Authority, in each case, indicates that Regulatory Approval isunlikely to be granted therefor or, if already granted, the Regulatory Approval therefor would likely be revoked or materially amended,or causes the Regulatory Approval therefor not to be granted or, if already granted, to be revoked or materially amended. In the eventthat MacroGenics, its Affiliates and their sublicensees of such Product discontinue the global Development, Manufacturing andCommercialization of such Product as a result of events or circumstances of the type described in (a) and/or (b) of this Section 1.93,such discontinuance shall be conclusive evidence that such events or developments are Major Safety Issues.1.95“Manufacture” or “Manufacturing” means all operations involved in the manufacturing (including processdevelopment activities, quality assurance and quality control testing (including test method development and in-process, release andstability testing, if applicable), storage, releasing, packaging and importation of a Licensed Compound or a Product) to supply LicensedCompounds and Product for Development under the Global Development Plan and Territory Specific Development Plan andCommercialization under the Commercialization Plan. For purposes of clarification “Manufacturing” is not included in Development orCommercialization.1.96“[***]” means the specific [***] for (including any associated Know-how Controlled by MacroGenics or any ofits Affiliates necessary for the then-current process) the [***] at the time of the [***] described in Section 5.4(b) and as furtherdeveloped by MacroGenics.1.97“Margetuximab” means the therapeutic Antibody which binds to the HER2/Neu receptor described in [***].1.98“Margetuximab Product” means a product that incorporates a biopharmaceutical form of Margetuximab as anactive ingredient.1.99 “MGA012” means the anti-PD-1 Antibody coded as “MGA012”, as further described [***].THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 10  1.100“MGA012 Commercial Forecasts” has the meaning set forth in Section 5.1(a).1.101“MGD013” means the therapeutic bi-specific molecule which binds to PD-1 and LAG-3 and which is generatedfrom MacroGenics’ proprietary DART® platform, as further described [***].1.102“MGD013 Product” means a product that incorporates a biopharmaceutical form of MGD013 as an activeingredient. 1.103“[***]” means that certain [***], Inc. effective as of [***], as may be amended or restated from time to time. 1.104“Net Sales” means the gross amount invoiced for Products sold by Zai or its Related Parties in the Territoryinitially and directly to Third Parties which are not Related Parties after deducting, if not previously deducted, from the amountinvoiced, the following, in each case to the extent included in the gross invoice price:(a)reasonable trade, quantity and cash discounts and rebates (including wholesaler inventory managementfees), chargebacks, and retroactive price reductions or allowances actually allowed or granted from the billed amount;(b)credits or allowances actually granted upon claims, rejections or returns of such sales of Products,including recalls and amounts credited or repaid because of retroactive price reductions specifically identifiable to the Product;(c)taxes imposed on the production, sale, import, delivery or use of the Product (including sales, use,excise or value added taxes but excluding income taxes), duties or other governmental charges (including charges for product testingrequired for importation) levied on or measured by the billing amount when included in billing, as adjusted for rebates and refunds; and(d)costs incurred for importing (including transportation, freight and insurance, and warehousing in theTerritory).Such amounts shall be determined from the books and records of Zai or its Related Party, maintained in accordance withInternational Financial Reporting Standards (IFRS) or such similar accounting principles, consistently applied. Zai further agrees, indetermining such amounts, it shall use Zai’s then-current standard procedures and methodology, including Zai ’s then-current standardexchange rate methodology for the translation of foreign currency sales into US Dollars or, in the case of Sublicensees, such similarmethodology, consistently applied. Without limiting the generality of the foregoing, non-invoiced transfers or dispositions of Productfor charitable, compassionate use, promotional (including samples, in amounts reasonably customary in the industry), non-clinical,clinical, or regulatory purposes shall be excluded from Net Sales, as will sales or transfers of Product among a Party and its RelatedParties unless such Party or Related Party is the end user of such Product, but rather the Net Sales shall be deemed to have arisen uponthe subsequent sale or transfer of Product to Third Parties.If Zai or any of its Related Parties sells a Product as a Licensed Component of a Combination Product in the Territory in anyCalendar Quarter, then Net Sales shall be calculated by multiplying the Net Sales of the Combination Product during such CalendarQuarter by the fraction A/(A+B), where A is the average Net Sales per unit sold of the Licensed Component when sold separately in theTerritory duringTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 11  such Calendar Year (calculated by determining the Net Sales of the Licensed Component during such Calendar Quarter in accordancewith the definition of Net Sales set forth herein and dividing such Net Sales by the number of units of the Licensed Component duringsuch Calendar Quarter) and B is the average Net Sales per unit sold of the Other Component(s) included in the Combination Productwhen sold separately during such Calendar Quarter (calculated by determining the Net Sales of such Other Component(s) sold duringsuch Calendar Quarter by applying the definition of Net Sales set forth herein as if it applied to sales of such Other Component(s) anddividing such Net Sales by the number of units of such Other Component(s) sold during such Calendar Quarter).For purposes of calculating the average Net Sales per unit sold of a Licensed Component and Other Component(s) of aCombination Product, any of the deductions described herein that apply to such Combination Product shall be allocated among sales ofthe Licensed Component and sales of the Other Component(s) included in such Combination Product as follows: (i) deductions that areattributable solely to the Licensed Component or one of the Other Component(s) shall be allocated solely to Net Sales of the LicensedComponent or such Other Component, as applicable, and (ii) all other deductions shall be allocated among sales of the LicensedComponent and sales of the Other Component(s) in proportion to Zai’s and MacroGenics’ mutual agreement of the fair market value ofthe Licensed Component and the Other Component(s).In the event that no separate sales of the Licensed Component or any Other Component(s) included in a Combination Productare made by Zai or its Related Parties, during a Calendar Quarter in which such Combination Product is sold, the average Net Sales perunit sold in the above described equation shall be replaced with Zai’s and MacroGenics’ mutual agreement of the fair market value ofthe Licensed Component and each of the Other Component(s) included in such Combination Product.1.105“Other Jointly Owned Patents” means all Jointly Owned Patents other than Jointly Owned Product Patents.1.106“Other Third Party Agreement” has the meaning set forth in Section 9.7(a).1.107“[***]” means all [***] Development and Regulatory Approval of the Product [***] but [***] Developmentand Regulatory Approval of the Product [***] the Territory and [***]) Development Costs incurred by or on behalf of Zai,MacroGenics or a Related Party outside the Territory in connection with the conduct of the Development Plan in support of theDevelopment of the Licensed Compounds and Products for the Territory in accordance with such Development Plan.1.108“Patent(s)” means (a) all patents and patent applications in any country (including Country), region (includingRegion) or supranational jurisdiction and (b) any provisionals, substitutions, divisions, continuations, continuations in part, reissues,renewals, registrations, confirmations, reexaminations, extensions, supplementary protection certificates and the like, of any suchpatents or patent applications.1.109“Patent Prosecution” means the responsibility for (a) preparing, filing, prosecuting, and pursuing registrationof, applications (of all types) for any Patent (b) for maintaining any Patent, and (c) for managing any interference or oppositionproceeding relating to the foregoing.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 12  1.110“Payment Taxes” means VAT and income taxes withholding required under Applicable Law to be paid to atax authority in the Territory.1.111“Permitted Subcontractors” has the meaning set forth in Section 3.7.1.112“Person” means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership,corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or othersimilar entity or organization, including a government or political subdivision, department or agency of a government.1.113“Phase I Clinical Trial” means a human clinical trial, or the relevant portion of such trial, of a Product inpatients in any country (including Country or Region) in accordance with GCP that generally provides for the first introduction intohumans of a Product and intended to determine safety, metabolism and pharmacokinetic properties and clinical pharmacology of aProduct in health patients, or that would otherwise satisfy the requirements of Applicable Laws and Regulations for such country inwhich such human clinical trial is conducted, such as 21 C.F.R. § 312.21(a), relating to human clinical trials conducted in the UnitedStates, or any successor regulation thereto or foreign equivalents.1.114“Phase II Clinical Trial” means a human clinical trial, or the relevant portion of such trial, conducted inpatients with a Product, in accordance with GCP and intended to demonstrate efficacy and a level of safety in the particular Indicationtested, as well as to obtain a preliminary Indication of the unit or daily dosage regimen required, or that would otherwise satisfy therequirements of Applicable Laws and Regulations of the country (including Country or Region) in which such human clinical trial isconducted, such as 21 C.F.R. § 312.21(b), relating to human clinical trials conducted in the United States, or any successor regulationthereto or foreign equivalents.1.115“Phase III Clinical Trial” means a human clinical trial, or the relevant portion of such trial, in any country thatis conducted in accordance with GCPs and the results of which are intended to be used as a pivotal study to establish both safety andefficacy of a Product as a basis for a BLA submitted to the FDA, CFDA or the appropriate Regulatory Authority of such other country(including Country or Region), or that would otherwise satisfy the requirements of 21 C.F.R. § 312.21(c), or any successor regulationthereto or foreign equivalents.1.116“Phase IV Clinical Trial” means a human clinical trial conducted after the Regulatory Approval of a Product ina country (including Country or Region), which trial is conducted (a) voluntarily to enhance scientific knowledge of such Product (e.g.,for expansion of product labeling or dose optimization); or (b) conducted due to a request or requirement of a Regulatory Authority of acountry (including Country or Region).1.117“PRC” means the People’s Republic of China, which for purposes of this Agreement, excludes the Hong KongSpecial Administrative Region, the Macau Special Administrative Region, and Taiwan.1.118“Product” means, individually, each of Margetuximab Product, MGD013 Product and HER2 Trident Product,including in each case, as a component of a Combination Regimen, and collectively, the “Products”.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 13  1.119“Product Brand” has the meaning set forth in Section 4.2.1.120“Qualified CMO” has the meaning set forth in Section 5.4.1.121“Region” means individually and collectively Hong Kong Special Administrative Region, and Macau SpecialAdministrative Region.1.122“Registration Trial” means the first clinical trial which is designed to support Regulatory Approval for theProduct in a Country or Region in the Territory.1.123“Regulatory Approval” means a BLA approval from the relevant Regulatory Authority in a region (includingRegion) or country (including Country) to market and sell a Product in such region or country.1.124“Regulatory Authority” means any applicable government regulatory authority involved in granting approvalsfor the conduct of clinical trials or the manufacturing, marketing, reimbursement or pricing, as applicable, of a Product, including in theUnited States, the FDA and in the PRC, the CFDA, and any successor governmental authority having substantially the same function.1.125“Regulatory Submissions” means any filing, application, or submission with any Regulatory Authority,including authorizations, approvals or clearances arising from the foregoing, including INDs, BLAs, NDAs, and Regulatory Approvals,and all correspondence or communication with or from the relevant Regulatory Authority, as well as minutes of any material meetings,telephone conferences or discussions with the relevant Regulatory Authority, in each case, with respect to a Product.1.126“Related Party” means, with respect to a Party, its Affiliates and (Sub)licensees.1.127“Requesting Party” has the meaning set forth in Section 8.2.1.128“[***]” has the meaning set forth in Section 5.4.1.129“[***]” has the meaning set forth in Section 5.4.1.130“[***]” has the meaning set forth in Section 5.4.1.131“Rolling Net Sales” has the meaning set forth in Section 5.4.1.132“[***]” has the meaning set forth in Section 5.4(a).1.133“[***] Period” has the meaning set forth in Section 5.4(a).1.134“Royalty Term” means, with respect to sales of a Product in the Territory, on a Country-by-Country andRegion-by-Region basis, the time period beginning on the First Commercial Sale of such Product in the Territory and expiring on thelatest of the following dates:(a)the [***] of the date of First Commercial Sale of the Product in the applicable Country or Region, as thecase may be;THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 14  (b)the expiration in the Territory of the last-to-expire MacroGenics Licensed Patent having a Valid ClaimCovering the composition, Manufacture, use, sale or importation of the Product in the applicable Country or Region, as the case maybe; or(c)the expiration of the latest Data Exclusivity Period for the Product in the applicable Country or Region,as the case may be.1.135“SIAC” has the meaning set forth in Section 14.3.1.136“Site Regulatory Package” or “SRP” means a set of investigational site-specific regulatory documents such as,to the extent required by the applicable Regulatory Authority: Form FDA 1572 (or an equivalent document used in a region (includingRegion) or country (including Country) in the Territory that identifies any relationships that pose a potential conflict of interest for aninvestigator or other person whose responsibilities are critical to conduct of a clinical trial), principal investigator curriculum vitae,signed protocol signature page, site-specific ICF/IAF (back-translated into English if the local language is other than English),investigator brochure, clinical trial agreement, clinical trial approval, IRB/IEC approval, study site qualification documents, privacyrequirements (e.g., HIPAA), IRB/IEC membership, and other country (including Country)-specific or region (including Region)-specificrequirements.1.137“SOPHIA” means the Phase III Clinical Trial entitled “A Phase 3, Randomized Study of Margetuximab PlusChemotherapy vs Trastuzumab Plus Chemotherapy in the Treatment of Patients With HER2+ Metastatic Breast Cancer Who HaveReceived Prior Anti-HER2 Therapies and Require Systemic Treatment” ongoing as of the Effective Date, as the protocol for suchclinical trial may be amended or updated from time to time.1.138“Study Material(s)” means Licensed Compounds, MGA012 and Product formulated in accordance with theapplicable specifications as adopted by MacroGenics and laws, rules and regulations of the United States and in the Territory (a) forpreclinical activities, and (b) for administration to subjects in Clinical Trials. 1.139“Sublicensee” means a Third Party that is granted a sublicense under the licenses granted to a Party under thisAgreement, as permitted under this Agreement.1.140“Term” has the meaning set forth in Section 15.1.1.141“[***]” or “[***]” means Manufacture of Margetuximab by Zai, in the Territory, either itself or through aQualified CMO, solely for Commercialization of Margetuximab Products (including as part of a Margetuximab Combination Regimen)by Zai, its Affiliates and Sublicensees in the Field in the Territory under this Agreement (but for clarity, (x) no other LicensedCompounds or Products and (y) not outside of the Field or outside of the Territory). [***] shall exclude product/quality release whichshall be conducted by MacroGenics.1.142“[***]” has the meaning set forth in Section 5.4(b).1.143“Territory” means the PRC, Hong Kong Special Administrative Region, Macau Special Administrative Region,and Taiwan.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 15  1.144“Territory Development Costs” has the meaning set forth in Section 3.6(a).1.145“Territory Specific Development Plan” means the written plan for Development of the Licensed Compoundsand Products in the Field in the Territory that is primarily intended to support Regulatory Approval of the Product in the Territory (and,for clarity, not outside the Territory) and not otherwise included within the Global Development Plan.1.146“Territory Subjects Enrolled” means that portion of the Total Subjects Enrolled in the Territory for theapplicable Clinical Trial. 1.147“Third Party” means an entity other than (a) Zai and its Affiliates, and (b) MacroGenics and its Affiliates.1.148“Total Amount” has the meaning set forth in Section 7.4(b).1.149“Total Manufacturing Cost” has the meaning set forth in Section 5.4.1.150“Total Subjects Enrolled” means, with respect to a given Clinical Trial, the total number of study subjectsenrolled in such Clinical Trial worldwide. 1.151“Trademark(s)” means all trade names, logos, common law trademarks and service marks, trademark andservice mark registrations and applications throughout the world.1.152“Trademark Prosecution” means the responsibility for (a) preparing, filing, and seeking registration of,trademark applications (of all types) for any Trademark, (b) for maintaining any Trademark, and (c) for managing any interference oropposition proceeding relating to the foregoing.1.153“Triggered Third Party Payments” is defined in Section 9.7(c).1.154“United States” or “US” means the United States of America and its territories and possessions, including theCommonwealth of Puerto Rico and the U.S. Virgin Islands.1.155“US Dollars” means United States Dollars, the lawful currency of the US.1.156“Valid Claim” means a claim of: (a) an issued and unexpired Patent included within the MacroGenics LicensedPatents in a country (including Country or Region) which has not been revoked or held unenforceable or invalid by a decision of acourt or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and hasnot been abandoned, disclaimed or admitted to be invalid or unenforceable through reissue, disclaimer or otherwise; or (b) a pendingpatent application that has been filed in good faith and that has not been cancelled, withdrawn, or abandoned and has not been pendingfor more than [***] years from the earliest priority date, provided that, if a claim ceases to be a Valid Claim by reason of the foregoingsubclause (b), then such claim shall again be deemed a Valid Claim in the event such claim subsequently issues.1.157“Zai Audit” has the meaning set forth in Section 4.4(f). 1.158“Zai Indemnitees” has the meaning set forth in Section 12.2. THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 16  1.159“Zai Licensed Know‑how” means all Know-how (excluding any Patent) Controlled by Zai or any of itsAffiliates as of the Effective Date or at any time during the Term that is: (a) related to a Licensed Compound, Product or CombinationRegimen (including MGA012 as a component of a Combination Regimen) and (b) incorporated or used by Zai or its Affiliates inconnection with the Development, Manufacture or Commercialization of the Licensed Compounds or Products (including as part of aCombination Regimen) in the Territory; and (c) necessary or reasonably useful for MacroGenics to exercise the rights licensed to orretained by it under this Agreement or perform its obligations under this Agreement. The term Zai Licensed Know-how shall also bedeemed to include Zai’s interest in any Know‑how jointly owned pursuant to Section 13.1(c).1.160“Zai Licensed Patents” means any and all Patents Controlled by Zai or any of its Affiliates at any time duringthe Term that: (a) claim or cover any data, result or invention conceived, created or reduced to practice in the course of conducting theCollaboration solely by or on behalf of Zai or any of its Affiliates specifically in relation to a Licensed Compound, Product orCombination Regimen (including in relation to MGA012 as a component of a Combination Regimen) and (b) Zai’s interest in anyPatent jointly owned pursuant to Section 13.1(c). 1.161[***]” has the meaning set forth in Section 5.4(b). 1.162“[***]” means [***] [***]. 2.Governance2.1Joint Steering Committee(a)Membership. The Parties hereby establish a joint steering committee (the “Joint Steering Committee”or “JSC”), to coordinate and oversee activities on which the Parties collaborate under this Agreement. The JSC shall consist of [***]representatives from each Party. [***] shall [***] the initial chairperson of the JSC. Thereafter, the role of chairperson shall [***]. EachParty may replace its appointed JSC representatives at any time upon reasonable written notice to the other Party. The initialrepresentatives and chair of the JSC shall be established within [***] days after the Effective Date. The chair shall have theresponsibility to call regular meetings, circulate meeting agendas at least [***] days prior to each regular JSC meeting, draft minutes foreach JSC meeting and circulate such minutes for both Parties’ written approval. The chair shall have no other authority or special votingpower.(b)Responsibilities. The responsibilities of the JSC shall be:(i)to provide a vehicle by which the Parties may share information regarding the overallstrategy for the Collaboration;(ii)review, discuss and approve each of the Global Development Plan (with respect to theregulatory activities, non-clinical and clinical Development activities under the Global Development Plan that are to be conducted inthe Territory (the “Territory Specific Activities”)), Territory Specific Development Plan, Commercialization Plan, and updates oramendments thereto andTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 17  to share and discuss the progress of activities under each of the Global Development Plan and Territory Specific Development Plan[***];(iii)to facilitate the exchange of information between the Parties with respect to the activitieshereunder and to establish procedures for the efficient sharing of information necessary for the Parties to fulfill their respectiveresponsibilities with respect the Collaboration;(iv)to share and discuss the data generated by or on behalf of the Parties in the course ofperformance towards the goals set forth in the Global Development Plan, Territory Specific Development Plan andCommercialization Plan, respectively;(v)to coordinate Development and Commercialization strategies, allocate resources and settimelines, in each case to facilitate the activities under the Global Development Plan, Territory Specific Development Plan andCommercialization Plan, respectively;(vi)to establish an overall regulatory strategy for Products in the Territory that is consistentwith and complements the worldwide regulatory strategy being implemented by MacroGenics for the Products;(vii)to create any subcommittees (including the JDC and JCC) as agreed in writing by bothParties, to oversee the activities of such subcommittees, and to seek to resolve any issues that such subcommittees cannot resolve;(viii)to establish an overall strategy for the filing, prosecution and maintenance ofMacroGenics Licensed Patents, MacroGenics Licensed Trademarks and Zai Licensed Patents in the Territory and Patent andTrademark term extensions; and(ix)to perform such other functions as expressly set forth in this Agreement or as appropriateto further the purposes of this Agreement, as determined by the Parties.(c)Decision-Making. The JSC shall make decisions [***], with each Party’s representatives collectivelyhaving [***] and at least [***] representative from each Party present.(d)Deadlocks; Final Decision-Making Authority. In the event the JSC cannot reach an agreementregarding any matter within the JSC’s authority for a period of [***] days (a “Deadlock”), then either Party may [***], and if a Partymakes an election to refer a matter to the Executive Officers, the Executive Officers shall [***]. If the Executive Officers are unable toreach consensus on any such matter within [***] days after its submission to them, the Deadlock shall be resolved in accordance withthe provisions of this Section 2.1(d):(i)Except for those Deadlocks set forth in Section 2.1(d)(ii) for which [***] shall have the finaldecision-making authority, [***] shall have the final decision-making authority with respect to all Deadlocks, including regarding:(1)Manufacturing of Licensed Compounds, MGA012 or Products. [***] will useCommercially Reasonable Efforts to mitigate and minimize any adverse effect such decision may have on the Development, RegulatoryApproval or Commercialization of the Licensed Compounds orTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 18  Products in the Territory. In making such decision [***] will in good faith [***] countries and regions, [***] (if impacted) in which theLicensed Compound or Products are being Developed or Commercialized and [***] shall not make any decision that will require [***]to take any action that is inconsistent with any requirement or recommendation of any Regulatory Authority in the Territory or prevent[***] from taking any action required by Regulatory Authority in order to obtain or maintain Regulatory Approval for the Product inthe Territory;(2)global Development of Licensed Compounds, MGA012 and Products, includingthe conduct of all Global Clinical Trials; and(3)global Commercialization of Licensed Compounds, MGA012 and Products.(ii)[***] shall have the final decision-making authority on all Deadlocks pertaining solely andspecifically to any of the following: (A) Development and regulatory activities (subject to [***] right to [***] (an any [***])) [***],including for each Clinical Trial conducted [***] and the regulatory strategy and plan for obtaining Regulatory Approval of the Product[***], in each case, included in the [***] under the Global Development Plan and the Territory Specific Development Plan, and (B)Commercialization activities (consistent with the Global Branding Strategy for such Product in accordance with Section 4.2) of theLicensed Compounds and Products in the Field [***], provided that such decision under the foregoing (A) or (B) shall not have anymaterial adverse effect on the Development, Regulatory Approval, Manufacture or Commercialization of the Licensed Compounds,MGA012 or Products [***]. All disputes that are not subject to the decision making authority of the Parties under Section 2.1(c)(i) and (ii), shall be subject tobinding arbitration in accordance with Section 14. Notwithstanding Section 2.1(d)(i) or (ii), no exercise of a Party’s unilateral decision-making authority on any such matters may, withoutthe other Party’s prior written consent, be used to (a) make a determination as to whether a particular milestone or other criteria hasbeen achieved or that any if its obligations under this Agreement has been fulfilled, (b) amend or add to such Party’s consent orapproval rights or otherwise expand or reduce its obligations provided under this Agreement, (c) impose any requirements that theother Party take or decline to take any action that would result in a violation of Applicable Laws and Regulations or any agreement withany Third Party (including any MacroGenics Third Party Agreements) or the infringement of intellectual property rights of any ThirdParty, (d) make a decision that is expressly stated to require the consent or approval of the other Party, (e) otherwise conflict with thisAgreement or (f) increase the other Party’s obligations (including payment obligations) or reduces the other Party’s rights under thisAgreement without such other Party’s written consent.(e)JSC Meetings. JSC meetings shall be held [***], or on any other schedule mutually agreed by theParties. With the consent of the representatives of each Party serving on the JSC, other representatives of each Party may attendmeetings as non-voting observers (provided such non-voting observers have confidentiality obligations to such Party that are at least asstringent as those set forth in this Agreement). A JSC meeting may be held either in person or by audio, video or internet teleconferencewith the consent of each Party. Meetings of the JSC shall be effective only if at least [***] of each Party is present or participating. EachParty shall be responsible for all of its own expenses of participating in theTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 19  JSC meetings. The Parties shall alternate hosting the in-person meeting, and the Party hosting is responsible for preparing andcirculating the minutes of the JSC meetings.(f)Duration of JSC. The JSC shall continue to exist until the first to occur of (a) the Parties mutuallyagreeing in writing to disband the JSC or (b) termination of this Agreement in accordance with the terms hereof.(g)Limitations. The JSC shall have no authority other than that expressly set forth in this Section 2.1 and,specifically, shall have no authority (a) to amend or interpret this Agreement, or (b) to determine whether or not a breach of thisAgreement has occurred.(h)Subcommittees. Any Subcommittee (including the JDC and JCC) established by the JSC hereundershall be composed of [***]. Each Party may replace its subcommittee representatives upon written notice to the other Party. Alldecisions of a Subcommittee shall be made by unanimous vote, with each Party’s representatives having one vote. In the event theParties are unable to reach a unanimous vote with respect to a matter, such matter shall be referred to the JSC for resolution.(i)Joint Development Committee. (1)General. Within [***] days of the Effective Date, the Parties shall establish a jointdevelopment committee (the “Joint Development Committee” or the “JDC”) to oversee (1) the day-to-day Development of theLicensed Compounds and Products and the execution of the Global Development Plan and Territory Specific Development Plan, (2) theprogress of the Regulatory Approvals and Regulatory Submissions for the Licensed Compounds and Products, (3) to share informationregarding proposed Clinical Trial sites in the Territory, and (4) such other Development related activities delegated to it by theJSC. Each Party shall appoint three [***] to the JDC, each of whom shall be an officer or employee of the applicable Party havingsufficient knowledge regarding Development of the Licensed Compounds and Products.(2)Meetings. While the Parties are developing and conducting Clinical Trials forLicensed Compounds and Products in the Territory, the JDC shall meet at least [***] per Calendar Quarter. The Parties shall endeavorto schedule meetings of the JDC at least [***] months in advance.(ii)Joint Commercialization Committee.(1)General. Within [***] days of initiating a Registration Trial, the Parties shallestablish a joint commercialization committee (the “Joint Commercialization Committee” or the “JCC”) to oversee and coordinate(1) the day-to-day Commercialization of the Licensed Compounds and Products in the Territory and the execution of theCommercialization Plan, including review of branding, marketing strategy, Product positioning, pricing and reimbursement strategy (tothe extent legally permissible), (2) the progress of Commercialization activities for the Licensed Compounds and Products, and (3) suchother Commercialization related activities delegated to it by the JSC. Each Party shall appoint [***] representatives to the JCC, each ofwhom shall be an officer or employee of the applicable Party having sufficient knowledge regarding Commercialization of the LicensedCompounds and Products.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 20  (2)Meetings. While the Parties are Commercializing Licensed Compounds andProducts in the Territory, the JCC shall meet at least [***] per Calendar Quarter. The Parties shall endeavor to schedule meetings of theJCC at least [***] months in advance.3.Development3.1Zai Responsibilities. Zai shall use Commercially Reasonable Efforts to Develop Products in the Territory inaccordance with this Agreement, the Global Development Plan and Territory Specific Plan with the goal of achieving RegulatoryApproval of Products in the Territory. Zai shall use Commercially Reasonable Efforts to conduct all activities described in the GlobalDevelopment Plan and Territory Specific Plan. Zai shall not Develop any combination of Margetuximab Product or [***] (in each case,solely in accordance herewith) unless otherwise mutually agreed by the Parties, and any Clinical Trial to be conducted hereunder [***]in each instance. Notwithstanding the foregoing, either Party may propose to develop a Combination Regimen in the Territory using[***] that is [***] and such development shall be subject to the mutual agreement of the Parties, which agreement shall not beunreasonably withheld. Specifically, [***] shall not unreasonably withhold such consent provided that (a) Zai has used CommerciallyReasonable Efforts to develop the Combination Regimen utilizing [***], (b) Zai has commenced [***] for a Margetuximab Product inaccordance with Exhibit C, and (c) there exists a [***] such that development of [***] for at least [***] months or the nature of suchissue makes it improbable for it to be resolved in less than [***] months.3.2Without limiting Section 3.1, in the Territory:(a)Zai ’s responsibilities shall include, using Commercially Reasonable Efforts to conduct the followingactivities: (i) conducting all Clinical Trials (other than [***]) required for Regulatory Approval of Products in the Territory, (ii) as soonas reasonably practicable after the Effective Date conducting an [***], (iii) the submission of all INDs in the Territory; (iv) interactionwith the Regulatory Authorities in the Territory; (v) translation of necessary documents required for Regulatory Approval in theTerritory; (vi) recruiting, qualifying and establishing Clinical Trial sites for the Territory, including the preparation, collection, review,approval and translation of all documentation (including Site Regulatory Packages, as applicable) required by Regulatory Authoritiesfor the participating Clinical Trial sites in the Territory, (vii) monitoring of all clinical trial sites in the Territory for Clinical Trials that arepart of the Territory Specific Development Plan or for the Territory Specific Activities under the Global Development Plan; and (viii)providing reasonable assistance to MacroGenics with submissions to and interactions with the FDA and other Regulatory Authoritiesoutside of the Territory at MacroGenics’ request and expense; provided, however, that with respect to the provision of data, informationand materials, such obligation to assist shall not require Zai to generate any data not within its possession or control; and(b)Zai shall use Commercially Reasonable Efforts to support other additional Development activitiesresponsive to unique regulatory or commercial requirements in the Territory as set forth in the Territory Specific Development Plan orunder the Global Development Plan.3.3Development Plans. The Development of the Product in the Territory under this Agreement shall be governed bythe Global Development Plan and Territory Specific Development Plan, which may be revised from time to time in accordance with thisSection 3.3. During the Term, the Global Development Plan and Territory Specific Development Plan shall contain in reasonable detailthe majorTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 21  Development and regulatory activities conducted by or on behalf of Zai (or its Affiliates or Sublicensees), including those necessary to(i) with respect to the Territory Specific Activities under the Global Development Plan, conduct the [***] in Section 3.2(a)(ii) above, (ii)seek Regulatory Approval and progress clinical Development for (A) Margetuximab [***], (B) Margetuximab [***] in the Territory,and (C) [***] Clinical Trials that include [***], in each case of (A) through (C) in the Territory and subject to review and change as setforth in Section 3.3(b), and (iii) the estimated timelines for achieving such activities until such Regulatory Approval in each Country orRegion in the Territory has been obtained. In accordance with Section 2.1(b)(ii), the JDC shall review and submit to the JSC forapproval, and the JSC shall review and approve the Global Development Plan and each Territory Specific Development Plan and anyupdates or amendments to the Global Development Plan or a Territory Specific Development Plan. The initial Global Development Planand Territory Specific Development Plan are attached hereto as Exhibit C. To the extent the Development activities and Clinical Trialscontemplated under 3.3(ii) are not included under the Global Development Plan, such Development activities and Clinical Trials shallbe included under the Territory Specific Development Plan, unless otherwise mutually agreed by the Parties in writing. For clarity, Zaishall not be permitted to exercise its unilateral decision-making authority under Section 2.1(d)(ii)(A) to reduce or eliminate Zai’sobligations to conduct the Development activities and Clinical Trials contemplated by the foregoing 3.3. (a)Review of Development. The JDC shall review the progress of the conduct of the Global DevelopmentPlan and Territory Specific Development Plan at each meeting of the JDC.(b)Review of the Global Development Plan and Territory Specific Development Plan. On no less than[***], the JDC shall review the Global Development Plan with respect to its conduct in the Territory and Territory SpecificDevelopment Plan, as appropriate, and recommend any amendment, and any changes (which for the Global Development Plan shall belimited to its conduct in the Territory) to such plans based on development, regulatory and commercialization considerations in theTerritory consistent with Zai’s using Commercially Reasonable Efforts, which shall be submitted to and subject to the approval by theJSC. Once approved by the JSC, the Parties agree that any such updated Global Development Plan or Territory Specific DevelopmentPlan shall supersede and replace, as applicable, the then-current Territory Specific Development Plan and Global Development Planwith respect to the Territory.3.4MacroGenics Responsibilities. As between the Parties, MacroGenics (itself or through its Affiliates or licensees)shall use Commercially Reasonable Efforts for Developing the Products outside of the Territory and completing and funding (or havingcompleted and funded) [***] Trident. Without limiting the foregoing, MacroGenics’ responsibilities shall include, either by itself orthrough its Affiliates or licensees, using Commercially Reasonable Efforts (a) to conduct [***] in such Clinical Trial; and (b) to conductthose Development activities assigned to MacroGenics under the Global Development Plan or Territory Specific DevelopmentPlan. MacroGenics agrees to provide reasonable assistance to Zai with submissions to and interactions with the CFDA and otherRegulatory Authorities necessary to obtain Regulatory Approval for the Products in the Territory at [***].3.5Conduct of Development. Zai shall use Commercially Reasonable Efforts to conduct the Development activitiesunder the Territory Specific Development Plan and those Development activities allocated to Zai under the Global Development Plan(including the Territory Specific Activities) and to achieve the Development goals as described in those Territory Specific Activitiesunder the Global Development Plan and Territory Specific Development Plan. All such activities shall be conducted inTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 22  compliance with: (a) the terms and conditions of this Agreement; (b) the Global Development Plan and Territory Specific DevelopmentPlan, as updated from time to time; (c) all applicable GLP, GCP and applicable cGMP requirements, including those specified by theICH; and (d) all Applicable Laws and Regulations. MacroGenics shall conduct its activities under this Agreement in compliance with:(a) the terms and conditions of this Agreement; (b) the Global Development Plan, as updated from time to time; (c) all applicable GLP,GCP and applicable cGMP requirements, including those specified by the ICH; and (d) all Applicable Laws and Regulations. 3.6Development Costs.(a)Territory Specific. Zai shall be responsible for all [***] with the conduct of (i) the [***] under theGlobal Development Plan or (ii) the Territory Specific Development Plan, including in each case ((i) and (ii)) the applicable cost of the[***] (the “Territory Development Costs”). Costs for [***] MacroGenics to Zai are addressed in Section 5.1(c). (b)Outside Territory. Zai shall be responsible for the [***], and, as between the Parties, MacroGenicsshall be responsible for all [***] other than the [***] (the “[***]”). (c)Reconciliation/Reimbursement. Within [***] days after [***], MacroGenics shall submit to a financeofficer designated by MacroGenics and a finance officer designated by Zai (the “Finance Officers”) a report setting forth a good faithestimate of the Outside Development Costs and Territory Development Costs it incurred in [***]. Within [***] days following the endof such quarter, MacroGenics shall update such report to reflect the final amount of Outside Development Costs and TerritoryDevelopment Costs incurred by it in [***]. Such report shall specify in reasonable detail all such costs and shall include reasonablydetailed supporting documentation, and, any additional documentation reasonably requested by Zai shall be promptly provided. Within[***] days after [***], Zai shall notify MacroGenics in writing if it disagrees with the calculation of such payments owed toMacroGenics by Zai along with a detailed explanation thereof, and within [***] following Macrogenics’ receipt of such notice fromZai, the Finance Officers shall promptly confer and attempt to resolve in good faith the amount of the reimbursement payment owed toMacroGenics by Zai, such that all Territory Development Costs and the [***] are borne [***] and the MacroGenics Outside Cost Sharefor [***] is borne [***]. With respect to each such reimbursement payment owed to MacroGenics, Zai shall (or any of its Affiliatesshall) submit such payment to MacroGenics (or any of its designated Affiliates) within [***] Business Days after the end of such [***]period. In the event of any disagreement with respect to the calculation of any such payment under this Sections 3.6(c), any undisputedportion of such payment shall be paid in accordance with the foregoing timetable specified in this Section 3.6(c), and the remaining,disputed portion shall be paid within [***]after the date [***]. In addition, following the Effective Date, each Party shall consider ingood faith other reasonable procedures proposed by the other Party for sharing financial information in order to permit each Party toclose its books in a periodic timely manner. For the avoidance of doubt, no cost or expense shall be counted more than once incalculating Territory Development Costs and Outside Development Costs, even if such costs or expense falls into more than one of thecost categories that comprise [***]. 3.7Subcontractors. Each Party shall have the right to engage Third Party contractors to perform any portion of itsobligations under this Agreement (each such subcontractor, a “Permitted Subcontractor”), provided, however, [***]. Any suchPermitted Subcontractor engaged by Zai hereunderTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 23  shall be required to agree in writing to be bound by terms regarding maintaining the confidentiality of proprietary information that areno less stringent than those contained in this Agreement and regarding ownership of intellectual property that are consistent with thosecontained in this Agreement. Zai’s use of Permitted Subcontractors shall not relieve it of any of its obligations pursuant to thisAgreement.3.8Clinical Trial Data. All Clinical Data generated under this Agreement, including under the Territory SpecificDevelopment Plan or the Global Development Plan, shall be [***]. [***] by Applicable Laws and Regulations, shall [***]) to [***] allof [***] Clinical Data. [***] shall provide a copy of all such Clinical Data to [***] promptly following generation thereof, but in anyevent, on a schedule reasonably agreed by the JSC.3.9Information and Cooperation. In addition to the obligations under Section 3.8, each Party shall useCommercially Reasonable Efforts to reasonably cooperate with the other Party in relation to the work under this Agreement and keepthe other Party informed of its Development and Commercialization (including promotional) activities reasonably related to the workunder this Agreement, and shall provide to the other Party, as appropriate, regular summary updates. If reasonably necessary for a Partyto perform its work under this Agreement or to exercise its rights under this Agreement, or in the case of MacroGenics, to further theDevelopment, including clinical or regulatory programs, or Commercialization of a Licensed Compound, or a Product outside theTerritory (or inside the Territory in connection with a Global Clinical Trial) or MGA012 inside or outside the Territory, that Party mayrequest that the other Party provide more detailed information and data regarding the updates it earlier provided, and the other Partyshall promptly provide the requesting Party with information and data as is reasonably available and reasonably related to the workunder this Agreement. Neither Party is required to generate additional data or prepare additional reports (except to the extent required tocomply with safety reporting requirements under Applicable Laws and Regulations) to comply with the foregoing obligation. All suchreports, information and data provided shall be subject to Section 10.1. 3.10MacroGenics’ Development in Territory and Global Clinical Trials. MacroGenics shall not have the right toconduct non-clinical Development and clinical Development (in connection with Global Clinical Trials) in the Field in the Territorywhich are not specified in the Global Development Plan without Zai’s prior written consent (such consent not to be unreasonablywithheld, conditioned or delayed) (“MacroGenics Territory Activities”). If so consented by Zai, MacroGenics shall control and beresponsible for conducting such MacroGenics Territory Activities, including the interaction with Regulatory Authority in the Territoryin connection therewith, and all associated Development Costs incurred by MacroGenics in the conduct of such Development shall beborne [***] by [***]. 4.Commercialization4.1Overview. [***] shall have [***] (subject to Sections 2.1(c) and (d)) for [***] of the Commercialization ofProducts in the Territory [***], including developing and executing a plan for commercial launch, obtaining all required approvalsfrom Regulatory Authorities for Commercialization (including reimbursement activities), marketing and promotion, booking sales anddistribution and performance of related services, providing customer support, including handling medical queries, and performing otherrelated functions. Zai shall use Commercially Reasonable Efforts to Commercialize the Products. [***] shall [***] Commercializationactivities at regular meetings of the JSC as contemplated by Section 2.1(e). As between Zai and MacroGenics, Zai shall [***] Productsin the Territory, and shallTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 24  have [***] Products in the Territory. [***] shall [***] in connection with all such Commercialization activities in the Territory. [***]shall provide [***] in the Territory within [***] days after such [***] [***] shall have [***] the Commercialization of Products [***]at [***], including obtaining all required approvals from Regulatory Authorities for Commercialization (including reimbursementactivities), marketing and promotion, booking sales and distribution and performance of related services, providing customer support,including handling medical queries, and performing other related functions.4.2Product Labeling; Promotional Materials. Zai shall reasonably cooperate with MacroGenics and its designees toestablish a global branding strategy for the Products worldwide. Zai shall Commercialize the Products in the Territory under theworldwide brand and consistent with the global branding strategy, in each case, specified by MacroGenics (the “Product Brand” and“Global Branding Strategy”, respectively), except to the extent such branding is not practicable in the Territory or not permitted byany applicable Regulatory Authority in the Territory, in which case MacroGenics and Zai shall agree on an alternate Territory specific Product Brand or MacroGenics may make an adjustment to the Global Branding Strategy, as MacroGenics deems appropriate. Exceptfor the depiction of trademarks, logos and other symbols that are intended to identify MacroGenics’ as a company or the manufactureror owner of a Product, Zai shall be responsible for designing and supplying the printable artworks of Product labeling in electronicversion and promotional materials for the Products for the Territory. Zai shall be responsible for how and the manner in which Productsshall be presented and described in the Territory to the medical community in any promotional materials for a Product intended to bedisseminated in the Territory, and the placement of the name and logos of Zai therein, in each case as permitted by Applicable Law andconsistent with the Product Brand and labeling for the Products approved by the applicable Regulatory Authority, and consistent withthe Global Branding Strategy.4.3Sales and Distribution(a)Orders and Sales. [***] shall [***] handling all returns, order processing, invoicing and collection,distribution, and inventory and receivables for the Products throughout the Territory. [***] shall have the [***] establishing andmodifying the terms and conditions with respect to the sale of the Products in the Territory, including any terms and conditions relatingto or affecting the price at which the Products shall be sold, discounts available to any Third Party payers (including managed careproviders, indemnity plans, unions, self-insured entities, and government payer, insurance or contracting programs), any discountattributable to payments on receivables, distribution of the Products, and credits, price adjustments, or other discounts and allowances tobe granted or refused; provided, however, that Zai shall act in good faith when doing the foregoing.(b)Pricing. [***] shall [***] pricing of the Products in the Territory, with the understanding that Zai shallalso be solely responsible for preparing and implementing the reimbursement strategy for the Products in the Territory. MacroGenicsshall, subject to any restrictions imposed under Applicable Laws and Regulations, use reasonable efforts to provide all the data deemednecessary by MacroGenics and within its possession or control so as to support any application by Zai for desired medicalreimbursement rates in the Territory.4.4Compliance. Each Party shall comply with the terms of this Agreement and all Applicable Laws and Regulationsrelating to activities performed or to be performed by such Party (or its Affiliates, contractor(s) or Sublicensee(s)) under or in relation tothe Commercialization of the Products pursuant to this Agreement. Notwithstanding the foregoing, Zai agrees, on behalf of itself, itsofficers, directors andTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 25  employees and on behalf of its Affiliates, agents, representatives, consultants, and Permitted Subcontractors (together with Zai, the “ZaiRepresentatives”) that for the performance of its obligations hereunder:(a)The Zai Representatives shall not directly or indirectly pay, offer or promise to pay, or authorize the payment ofany money, or give, offer or promise to give, or authorize the giving of anything else of value, to: (i) any Government Official in orderto influence official action; (ii) any Person (whether or not a Government Official) (a) to influence such Person to act in breach of a dutyof good faith, impartiality or trust (“Acting Improperly”), (b) to reward such Person for Acting Improperly, or (c) where such Personwould be Acting Improperly by receiving the money or other thing of value; (iii) any other Person while knowing or having reason toknow that all or any portion of the money or other thing of value shall be paid, offered, promised or given to, or shall otherwise benefit,a Government Official in order to influence official action for or against either Party in connection with the matters that are the subjectof this Agreement; or (iv) any Person to reward that Person for Acting Improperly or to induce that Person to Act Improperly.(b)The Zai Representatives shall not, directly or indirectly, solicit, receive or agree to accept any paymentof money or anything else of value in violation of the Anti-Corruption Laws.(c)Zai and the other Zai Representatives shall comply with the Anti-Corruption Laws and shall not take any actionthat shall, or would reasonably be expected to, cause either Party (or its Affiliates) to be in violation of any such laws. In furtherance ofthe foregoing, Zai acknowledges and confirms the following:(i)Zai has reviewed its internal programs in relation to the Anti-Corruption Laws and the abilityof the Zai representatives to adhere to such laws in performance of its obligations hereunder in advance of the signing of thisAgreement and warrants that it and the other Zai Representatives can and shall continue to comply with such Anti-Corruption Laws inperformance of its obligations hereunder and further represents and warrants that should either Party identify in writing to the otherParty any measures that should be reasonably taken to improve Zai Representatives’ compliance with such Anti-Corruption Laws forthe performance of its obligations hereunder (the “Improvement Plan”), Zai shall use Commercially Reasonable Efforts to implementsuch Improvement Plan within [***] (which shall in any event not be in excess of [***] calendar months) from the date theImprovement Plan is delivered to the receiving Party. In the absence of the full implementation by Zai of such Improvement Plan within[***] calendar month period, MacroGenics shall be entitled to terminate this Agreement, upon written notice to Zai with immediateeffect, to be relieved of any obligations, and to seek compensation from Zai;(ii)To the best of Zai’s and its Affiliates’ knowledge after reasonable diligence, no Zai Representativethat shall participate or support Zai’s performance of its obligations hereunder has, directly or indirectly, (x) paid, offered or promisedto pay, or authorized the payment of any money; (y) given, offered or promised to give, or authorized the giving of anything else ofvalue; or (z) solicited, received or agreed to accept any payment of money or anything else of value, in each case ((x), (y) and (z)), inviolation of the Anti-Corruption Laws during the [***] preceding the date of this Agreement.(iii)To the best of Zai ’s and its Affiliates’ knowledge, none of its intellectual property rights,technology, contracts, materials, or licenses or other assets that are the subject of thisTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 26  Agreement, other than those provided by or on behalf of MacroGenics, were procured in violation of any Anti-Corruption Laws.(d)Zai, on behalf of itself and the Zai Representatives, represents and warrants to MacroGenics that all informationprovided by Zai and the Zai Representatives to MacroGenics in any anti-bribery and corruption due diligence checklist, similar duediligence process performed by MacroGenics or its Affiliates or inquiry by MacroGenics related to Zai ’s or the Zai Representativescompliance with Anti-Corruption Laws is true, complete and correct in all material respects at the date it was provided and that anymaterial changes in circumstances relevant to the answers provided in such exercise shall be promptly disclosed to MacroGenics.(e)Zai shall promptly provide MacroGenics with written notice of the following events: (i) Upon becoming awareof any actual, alleged, or potential breach or violation by Zai or any Zai Representative of any representation, warranty or undertakingset forth in this Section 4.4; or (ii) Upon receiving a formal notification that it is the target of a formal investigation by a governmentauthority for any violation of any Anti-Corruption Law or upon receipt of information from any of the Zai Representatives that any ofthem is the target of a formal investigation by a government authority for a violation of any Anti-Corruption Law.(f)For [***] years following the expiration or earlier termination of the Agreement, Zai shall for thepurpose of auditing and monitoring the performance of its compliance with this Agreement and particularly this Section 4.4 permitMacroGenics, its Affiliates, any auditors of any of them and any government authority to have reasonable access to any premises of Zaior other Zai Representatives used in connection with this Agreement, together with a right to reasonably access personnel and recordsthat relate to this Agreement (“Zai Audit”). Zai shall provide or procure that the Zai Representatives shall provide all co-operation asreasonably requested by MacroGenics for the purposes of the Zai Audit, with the understanding that MacroGenics shall be responsiblefor all costs and fees of any Zai Audit and MacroGenics shall procure that any auditor enters into a confidentiality agreement consistentwith the confidentiality provisions elsewhere in this Agreement in all material respects.(g)On the occurrence of any of the following events:(i)MacroGenics becomes aware of, whether or not through a Zai Audit, that Zai (or any other ZaiRepresentative) is in breach or violation of any representation, warranty or undertaking in Section 4.4 or of the Anti-Corruption Laws;or(ii)Notification is received by MacroGenics that a suspected or actual violation of an Anti-Corruption Law has occurred by Zai or any other Zai Representative;MacroGenics shall have the right, in addition to any other rights or remedies under this Agreement or to which MacroGenics may beentitled in law or equity, to take such steps as are reasonably necessary in order to avoid a potential violation or continuing violation byMacroGenics or any of its Affiliates of the Anti-Corruption Laws, including by requiring that Zai agrees to and uses CommerciallyReasonable Efforts to implement any curative actions requested by MacroGenics. In the event that Zai refuses to agree to all of thecurative actions requested by MacroGenics (and provided that MacroGenics has (x) provided Zai with an explanation in reasonabledetail as to why MacroGenics considers such actions necessary, (y) given Zai a reasonable opportunity to review and comment uponthe proposed actions and to provide its view as toTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 27  the necessity or usefulness of these to address the event concerned, and (z) considered such comments in good faith), MacroGenicsshall be entitled to terminate this Agreement in its entirety with immediate effect. Any termination of this Agreement pursuant to thisSection 4.4 shall be treated as a termination for breach by Zai of this Agreement and the consequences of termination shall apply andadditionally: (1) subject to the accrued rights of the Parties prior to termination, MacroGenics shall have no liability to Zai for any fees,reimbursements or other compensation or for any loss, cost, claim or damage resulting, directly or indirectly, from such termination;and (2) any amounts that would otherwise be payable to Zai pursuant to this Agreement in its entirety, as applicable, including any thenoutstanding and unpaid claims for payment shall be null and void to the extent permissible under Applicable Laws and Regulations.(h)Zai shall be responsible for any breach of any representation, warranty or undertaking in this Section 4.4or of the Anti-Corruption Laws by any Zai Representative.(i)MacroGenics may disclose the terms of this Agreement or any action taken under this Section 4.4 toprevent a potential violation or continuing violation of applicable Anti-Corruption Laws, including the identity of Zai and the paymentterms, to any government authority if MacroGenics determines, upon advice of counsel, that such disclosure is necessary.4.5Commercialization Diligence(a)Prior to Submission of First BLA. For each Product under Development, prior to the submission of thefirst BLA to the first Regulatory Authority in the Territory, Zai shall submit to the JCC for review and submission to the JSC for reviewand approval, a written summary plan for the Commercialization in the Territory for each such Product under Development, as well asupdates and amendments thereto. Thereafter, Zai shall regularly report on its Commercialization activities at meetings of the JSC. Suchreports shall cover subject matter at a level of detail similar to that which Zai affords its senior executives with respect to similar Zaiproducts. All such plans and information shall be presented for discussion purposes, and Zai agrees to consider in good faith anycomments or suggestions MacroGenics may make with respect to Commercialization of Products.(b)Following Regulatory Approval. Zai shall use Commercially Reasonable Efforts to Commercializeeach Product in the Territory after Regulatory Approval for such Product is obtained.5.Manufacture and Supply5.1Supply of Products(a)Responsibility. MacroGenics shall be responsible for the Manufacture, either by itself or through one ormore Third Parties selected by MacroGenics at its sole discretion, of (i) all Licensed Compounds, MGA012 and Product required for theClinical Trials described in the Global Development Plan and Territory Specific Development Plan, (ii) subject to Section 5.4, allcommercial supplies of Product required by Zai for the Commercialization of Products in the Territory, and (iii) either (A) [***], inaccordance with the terms and conditions of the [***], to make [***] a reasonably sufficient quantity based on demand, or (B) solely inthe event that [***] the Manufacture and supply of [***], to make supply of [***]available in a reasonably sufficient quantity based ondemand, in each case ((A) and (B)) in the Territory for the Commercialization of the Combination Regimen in the Territory after theRegulatoryTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 28  Approval of such Combination Regimen in the Territory, in each case ((i) through (iii)) in accordance with this Section 5.1, except asthe Parties may otherwise agree in writing. The Parties agree and acknowledge that subsection (iii) above shall not be construed asrequiring MacroGenics to guarantee the [***] to Zai’s requirement, either to Zai for clinical use or for sale in the Territory by [***] orany other [***], but shall be construed as requiring MacroGenics to endeavor to fulfill [***] provided by Zai for use in clinicaldevelopment and/or pursuant to the Commercial Supply Agreement (“[***]”). In the event of a [***], MacroGenics shall [***] tofulfill a [***] as if MacroGenics was [***]. (b)Supply Agreements. Within [***] months after the Effective Date, the Parties shall enter intonegotiations for a supply agreement governing the clinical supply of Product to Zai for its requirements of Product for Developmenthereunder in the Territory. Within [***] months after the Effective Date, the Parties shall enter into negotiations for a supply agreementgoverning the clinical supply of MGA012 to Zai for its requirements of MGA012 in the conduct of the Development hereunder ofLicensed Compounds and Products solely as a component of a Combination in the Territory (which supply agreement will be subject tothe Incyte Agreement). Within [***] months (but no later than [***] months) prior to the projected commercial launch date of theProduct in any Country or Region in the Territory, the Parties shall negotiate and enter into a supply agreement governing thecommercial supply of Product to Zai for its requirements of Product for Commercialization in the Territory (the “Commercial SupplyAgreement”), with such Commercial Supply Agreement including pricing, payment, and delivery terms consistent with the provisionsset forth in Sections 5.1(c) and 5.1(d). The supply agreements shall provide other customary terms and conditions, such as acceptanceand rejection procedures, forecast and order procedures, release documentations and audit rights by Zai and for MacroGenics and Zai todiscuss and agree upon a Third Party supplier for Products in the event of certain material supply failures (as determined in accordancewith criteria to be mutually agreed by the Parties thereunder). In addition, the Commercial Supply Agreement shall include furtherprovisions for the commercial supply of Product in the Territory, including procedures for the MGA012 Commercial Forecasts. (c)Price; Payment.(i)The price of (A) clinical quantities of Licensed Compounds and Product ordered by Zaiunder Section 5.1(a)(i) for use under the Territory Specific Activities under the Global Development Plan shall be equal to [***] ofMacroGenics’ Fully-Burdened Manufacturing Costs, (B) clinical quantities of Licensed Compounds and Product for use ordered byZai under Section 5.1(a)(i) for use under a Territory Specific Development Plan, or commercial quantities of Product ordered by Zaiunder Section 5.1(a)(ii), shall be equal to [***] of MacroGenics’ Fully-Burdened Manufacturing Costs for such LicensedCompounds and Products (subject to adjustment in accordance with Section 5.4 or Section 5.5 below, as applicable). MacroGenics’supply of clinical quantities of MGA012 pursuant to Section 5.1(a)(i) shall be at no cost to Zai. (ii)All payments due hereunder to MacroGenics shall be paid to MacroGenics in US Dollarsno later than [***] days following the receipt of the applicable invoice.(d)Delivery. Unless otherwise agreed by the parties in writing, all shipments shall be shipped [***].THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 29  5.2Manufacturing Specifications. All Study Materials and commercial supplies of Product shall be manufactured inaccordance with the specifications (i) determined by MacroGenics, (ii) subject to Section 5.3, consistent with those Territory specificspecifications required by the applicable Regulatory Authority in the Territory provided by Zai to MacroGenics in writing, and (iii) incompliance with all regulatory requirements and all Applicable Laws and Regulations, as further set forth in the supply agreements andrelated quality agreements.5.3Change of Manufacturing Process. MacroGenics shall reasonably inform Zai of developments in matters ofprocess development and Manufacture of Products, and shall consult with Zai with respect to the development and Manufacture processes of Products adopted by MacroGenics to the extent necessary to obtain Regulatory Approval(s) of the same in the Territory,all as described in further detail in the supply agreements and quality agreements. In addition, MacroGenics shall implement changesrequired by Regulatory Authority in the Territory to the extent commercially practicable, provided that Zai shall bear any and allincremental costs resulting from any changes to the manufacturing specifications required by the applicable Regulatory Authority in theTerritory but not by any of the Regulatory Authorities outside the Territory, and the supply agreements and quality agreements shallprovide the mechanism for such implementation. In the event it is not commercially practicable for MacroGenics or its supplier toimplement a change required by a Regulatory Authority in the Territory, the Parties shall explore the potential engagement of anotherThird Party supplier to implement a Manufacturing process that incorporates such required change. Each Party shall promptly notifythe other Party of any information that may impact approvability or regulatory status (before or after approval) of Products of which itis aware and reasonably believes may impact the regulatory status before or after Regulatory Approval of a Product or CombinationRegimen in the Territory.5.4Margetuximab Manufacturing Cost Control. With respect to the commercial supply of Margetuximab hereunder, from and after the date that is [***] monthsfrom [***], in the event that both (i) the [***]of (A) the [***] for Margetuximab supplied by or on behalf of MacroGenics to Zaihereunder [***] (B) the[***] of such Margetuximab during the corresponding period (such Net Sales the “Rolling Net Sales”) (such[***], the “[***]”) is [***]than [***] (the “[***]”), and (ii) Zai reasonably, and in good faith, believes that either [***] or a [***]reasonably acceptable to both Parties (a “[***]”) in the Territory is able to [***] equivalent (including, in quantity, quality and form) ata [***] that is at least [***] than MacroGenics’ [***] for commercial supply of Margetuximab, as reasonably demonstrated by Zai viadelivery to MacroGenics of competent written [***] documentation showing that [***] or such [***] has historically (within the mostrecent three (3) year period) [***] consistent with the foregoing at such [***], then Zai shall provide MacroGenics with written noticeof such belief along with such documentation (the “[***] Notice”), then MacroGenics may [***] (in accordance with Section 5.4(a)below) and, to the extent applicable, Zai may [***] (in accordance with Section 5.4(b) below). For purposes hereof, “TotalManufacturing Cost” means [***].(a)[***]. For each instance in which the [***] is achieved as contemplated in this Section 5.4 above,MacroGenics shall have the option (in its sole discretion) to elect, to subsequently (i)THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 30  reduce the royalty payable by Zai pursuant to Section 7.3 on Net Sales of Margetuximab Manufactured and supplied by MacroGenics toZai under this Agreement by [***], or (ii) in lieu of any royalty payable by Zai pursuant to Section 7.3 for such Margetuximab, supplyMargetuximab to Zai at [***] (the “[***]”). MacroGenics may exercise the [***], if at all, by providing written notice of such exerciseto Zai within [***] days of the date of MAcroGenics receipt of such RMA Threshold Notice (“[***] Period”). Such written noticeshall specify whether MacroGenics is electing the means under (i) or (ii) under this Section 5.4(a) to reduce the Rolling MargetuximabCost and if the means under (i) is elected, the initial amount by which MacroGenics shall reduce the royalty payable toZai. MacroGenics shall subsequently have the right to adjust such reduction by providing [***] days prior written notification to Zaiprior to such adjustment. (b)[***]. Subject to Section 5.4(d), in the event that (i) MacroGenics does not exercise the [***] prior tothe expiration of the [***] Period or (ii) if MacroGenics timely exercises the [***] set forth in Section 5.4(a)(ii) but the [***] is [***],then Zai shall have the option (“[***]”) to conduct [***]. Zai may exercise the [***], if at all, by providing written notice of suchexercise to MacroGenics [***]. Such written notice shall specify whether [***] elects that it or its [***] or both, as applicable, the“[***]”) will conduct [***] pursuant to the [***]. (c)Activities Post [***]. If Zai exercises the [***] in accordance with Section 5.4(b), MacroGenics and Zaishall use Commercially Reasonable Efforts to conduct the activities necessary or useful to [***] to conduct [***] using the [***] assoon as practicable, including performance of a [***] pursuant to a mutually agreed [***] and budget whereby [***] would transfer (tothe extent not previously transferred) the [***] to the [***]. Following the initial [***], MacroGenics shall use CommerciallyReasonable Efforts to disclose and/or make available to Zai any [***] (to the extent not previously transferred) that comes intoexistence from time to time and to the extent used in the [***]. Zai would bear [***] of all costs and expenses of such [***] pursuantto this Section 5.4(c). MacroGenics hereby grants to [***] a non-exclusive, non-transferable license, with right to sublicense solely toits Affiliates or a [***], to the [***] (and any Patents Controlled by MacroGenics that claim or cover the [***]) to [***] and [***] inthe Field in the Territory, which license shall become effective only upon exercise of the [***]. At MacroGenics’ request (at its solediscretion and election), the Parties will negotiate and enter into a [***] pursuant to which [***] would undertake CommerciallyReasonable Efforts to [***] (or [***]would cause its [***]) [***], its [***] and licensees’ [***] (and [***]) on commerciallyreasonable terms. Such [***] shall provide for supply of [***] (and [***]) to MacroGenics by Zai based on [***] of its [***] (as suchdefinition is applied to Zai mutatis mutandis) and other commercially reasonable terms that are generally consistent with the [***]. Forclarity, in the event Zai exercises the [***], after Zai has established a [***] of the [***] for the [***] and [***] after the completion ofa [***] to Zai, MacroGenics shall have no further obligations under this Agreement to [***] to [***] hereunder, including pursuant toSection 5.1(a)(ii). (d)First Change of Control of Zai. Notwithstanding the foregoing, Zai’s rights under Sections 5.4(b) and5.4(c) shall terminate upon the First Change of Control of Zai if at such time Zai has not exercised the [***]. THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 31  5.5Third Party Obligations; MacroGenics Third Party Agreements. All licenses and other rights granted to Zaiunder this Agreement are subject to the rights and obligations of MacroGenics under the MacroGenics Third Party Agreements. Zai willcomply with all applicable provisions of the MacroGenics Third Party Agreements and Zai agrees to (and shall cause its Related Partiesto) timely perform and take such actions as may be required to allow MacroGenics to comply with its obligations thereunder, includingto provide to MacroGenics such information and reports as it reasonably requires, comply with reasonable requests for access to Zai’s(and its Related Parties’) records or facilities or otherwise cooperate with MacroGenics, including with respect to any financial andregulatory reporting, audit and payment obligations under each MacroGenics Third Party Agreement, insofar as they pertain to aLicensed Compound, MGA012 or any Product or Zai’s (and its Related Parties’) activities hereunder. Zai shall pay its share ofTriggered Third Party Payments in accordance with Section 7.5.6.Regulatory6.1Overview. Zai shall develop an overall regulatory strategy and plan for obtaining Regulatory Approval of theProduct in the Territory to be included in the Global Development Plan and Territory Specific Development Plan and approved by theJSC.6.2Regulatory Submissions.(a)MacroGenics or its designee shall hold and own all Regulatory Submissions as set forth in Section9.1(e), and Zai shall promptly provide all original copies of Regulatory Submissions (including all updates thereof) to MacroGenics.(b)Zai shall be responsible for in MacroGenics’ or its designee’s name, at [***], (x) the filing and obtainingall Regulatory Submissions, (y) responding to inquiries and correspondence from the Regulatory Authorities responsible for regulatorymatters in the Territory, and (z) the monitoring of all clinical experiences through the pharmacovigilance exchange between the Partiesand submission of all required reports throughout clinical Development and Commercialization, in each case as required by RegulatoryAuthority in the Territory and in compliance with all Applicable Laws and Regulations. MacroGenics shall be responsible for providingto Zai any revisions to the investigator’s brochure and CMC information required for regulatory submissions and responses toRegulatory Authorities in the Territory. MacroGenics (or its designee) shall have a right to participate (and Zai may otherwise request MacroGenics to participate) in meetings with the Regulatory Authorities if it is reasonably likely that there would be discussions on theagenda about (i) the Product beyond the scope of Zai’s Development of the Product in the Territory (e.g., CMC matters, data fromclinical trials MacroGenics conducted) or (ii) MGA012. Each Party shall provide information to the other Party as necessary andreasonably consult with the other Party regarding any filings, and regarding significant or material notices, actions or requests from orby Regulatory Authorities. Each Party shall, at the other Party’s request, review and comment on filings, submissions, and responses toRegulatory Authorities related to any Product.6.3Right of Reference. MacroGenics hereby grants to Zai a right of reference to all Regulatory Submissionspertaining to the Product and MGA012 (solely in connection with the Combination Regimen) in the Field in the Territory to the extentnecessary for Zai to Develop and Commercialize the Products (including as part of the Combination Regimen) in accordance with thisAgreement, including obtaining and maintaining Regulatory Approval of the Products (including as part of the Combination Regimen)in Field in the Territory in accordance with this Agreement.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 32  6.4Records of Correspondence with Regulatory Authorities. Following each substantive communication (whetherby phone or in person) with a Regulatory Authority regarding matters arising under this Agreement, Zai shall prepare a record of suchmeeting in accordance with its standard business practices (e.g., written minutes) and provide to MacroGenics a copy of such record. Zai’s occasional inadvertent failure to provide such record to MacroGenics shall not itself be deemed a material breach of thisAgreement, and Zai shall provide such record to MacroGenics promptly after discovery of such inadvertent failure, provided that theforegoing shall not relieve Zai from, and Zai shall be responsible (at [***]) for, any and all liability and costs incurred by or on behalfof MacroGenics and its Affiliates as a result of such failure.6.5Safety Management Plan. The Parties shall conduct in good faith and agree upon a safety management plan(“SMP”), which will detail the Clinical Trial specific responsibilities, processes and other matters to ensure that adverse eventnotification and reporting requirements meet current health agency regulations and guidelines worldwide, as further detailed in ExhibitD. Zai shall cause its Related Parties and Permitted Subcontractors to submit all such information, data and reports required under theSMP directly to MacroGenics (or its designee) as applicable. 7.Payments7.1Upfront Payment.(a)Within [***] days after the Effective Date, Zai shall pay to MacroGenics Twenty Five Million USDollars (US$25,000,000) (the “Upfront Payment”), which shall be [***]. (b)In the event that MacroGenics does not obtain Regulatory Approval of Margetuximab in the UnitedStates (using the SOPHIA results and other pertinent data) by December 31, 2020, then [***]. 7.2Development Milestone Payments.(a)On a Product-by-Product basis, Zai shall pay to MacroGenics the milestone payments listed below forthe first achievement of the corresponding milestone event, which in each case shall be non-refundable, and non-creditable. For clarity,there shall be only three Products for the purpose of the payment provisions under this Agreement, and all products comprisingMargetuximab shall be deemed a single Product, all Products comprising MGD013 shall be deemed a single Product and all productscomprising [***] Trident shall also be deemed a single Product. Each milestone payment shall be payable only once under thisAgreement for the applicable Product, or, if applicable to Margetuximab Product, MGD013 Product and [***] Trident Product, once foreach such Product.Milestone EventMilestone Payment(i)[***][***] (ii)[***][***] THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 33  (iii)[***][***] (iv)[***](A)[***][***](B)[***][***](C)[***][***] (v)[***](A)[***][***](B)[***][***](C)[***][***] (vi)[***](A)[***][***](B)[***][***](C)[***][***](D)[***][***] (vii)[***][***] (viii)[***][***] (ix)[***][***] (x)[***][***][***][***][***][***][***]* For clarity, in the event that no patients are dosed in a Clinical Trial that would otherwise be subject to the foregoing milestones, then the nextequivalent Clinical Trial where the applicable milestone criteria are met will be used for purposes of such milestone hereunder. THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 34  (b)Zai shall provide written notification to MacroGenics of the achievement by or on behalf of Zai or itsRelated Party of each of the milestones described in Sections 7.2(a)(i), (ii), (iii), (vii), (viii), (ix) and (x) within [***] Business Daysafter such achievement. MacroGenics shall provide written notification to Zai of the achievement of each of the milestones described inSections 7.2(a)(iv), (v) and (vi) within [***] Business Days after such achievement. In addition, MacroGenics shall provide Zai with acomplete list of milestone payments subject to payment under Section 7.6(a) for MacroGenics Required Third Party Agreements andSection 7.6(b) for Triggered Third Party Payments under the MacroGenics Other Third Party Agreements, and Zai shall provide writtennotification to MacroGenics of the achievement of each such milestone event by or on behalf of Zai or its Related Party.7.3Product Royalties. Zai shall pay to MacroGenics a royalty at the rate determined [***]. After the Royalty Termfor a particular Product in a particular Country or Region, subject to Section 7.7, the license granted to Zai under this Agreement forsuch Product in such Country or Region shall otherwise become perpetual, irrevocable, fully paid and royalty free.7.4Royalty Adjustments. The following adjustments shall be made, on a Product-by-Product, Country-by-Countryand Region-by-Region basis, to the royalties payable pursuant to Section 7.3, provided that in no event shall the aggregate [***].(a)Biosimilar Product Market Effect. If there is no longer a Valid Claim within the MacroGenics LicensedPatents covering a given Product in a Country or Region in the Territory, then Zai may [***].(b)[***]. On a Product-by-Product basis, and with respect to a Margetuximab Product for so long as the[***] has not occurred pursuant to Section 5.4(b), in the event that [***] (such sum, the “Total Amount”) is [***] (the “[***]” and[***], the “[***]”), then [***]. For clarity with respect to a Margetuximab Product, (i) in the event MacroGenics exercises the [***]under Section 5.4(a)(ii), then this Section 7.4(b) shall no longer apply; and (ii) upon the occurrence of the [***] pursuant to Section5.4(c), then [***].7.5Royalty Floor. In no event shall the royalty reductions available to Zai to under this Agreement, collectively orindividually, reduce the royalties payable to MacroGenics for a given Calendar Quarter to less than [***] or [***] of the amountotherwise payable under Section 7.3 with respect to an applicable Product.7.6Payments For Third Party Agreements (a)MacroGenics Required Third Party Agreements. MacroGenics shall be responsible for all paymentsto MacroGenics’ other parties under the MacroGenics Required Third Party Agreements. Zai shall reimburse MacroGenics for suchpayments according to the following percentages:(i)Royalties based on Net Sales of Products in the Territory: [***].(ii)Payments, including license maintenance fees and milestone payments, that result fromactivities or events other than (i): [***].THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 35  (b)Other Third Party Agreements. In the event that a Party owes the other Party any Triggered ThirdParty Payments to the other Party, such Party shall reimburse the other Party at least [***] days prior to the applicable payment date forsuch Triggered Third Party Payment specified under the applicable Other Third Party Agreement. Such Party’s obligation under thisSection 7.6(b) with respect to the payment of Triggered Third Party Payments under a given MacroGenics Other Third Party Agreementor Other Third Party Agreement for which MacroGenics elects to obtain a sublicense pursuant to Section 9.7 shall terminate upontermination of the In-License Party’s obligation to pay such Triggered Third Party Payments under the terms of such MacroGenicsOther Third Party Agreement or Other Third Party Agreement. 7.7Payment of Milestones. All payments based on milestone achievements shall be due and payable within [***]days after the event for which the payment is due, subject to any shorter deadline that is set forth in the applicable Other Third PartyAgreement.7.8Reports; Payments(a)Net Sales Quarterly Reports. During the Term, following the First Commercial Sale of a Product in theTerritory, Zai shall furnish to MacroGenics:(i)a quarterly written report for the Calendar Quarter showing the Net Sales of all Productssubject to royalty payments sold by Zai and its Related Parties in the Territory during the reporting period and the royalties payableunder this Agreement; and(ii)a quarterly report for the Calendar Quarter showing the Triggered Third Party Payments,Zai’s royalties payable to Third Parties on Net Sales made during such Calendar Quarter and any royalty adjustments taken by Zaipursuant to Section 7.4, with such detail as shall reasonably allow MacroGenics to determine the basis for such quarterly costs. (b)Submission and Payment Schedule(i)Reports under this Section 7.8 shall be due on the [***] Calendar Day following the closeof each Calendar Quarter.(ii)Royalties (including those within the Triggered Third Party Payments) shown to haveaccrued by each report shall, unless otherwise specified under this Agreement, be due and payable [***] days after the date suchreport is due.7.9Payment Exchange Rate. All payments to be made by Zai to MacroGenics under this Agreement shall be made inUS Dollars by bank wire transfer in immediately available funds to a bank account in the United States designated in writing byMacroGenics. For invoices that Zai shall forward to MacroGenics, Zai shall use an exchange rate as published by the Wall StreetJournal as of the close of business on the last business day of the preceding month, or such other source as the Parties may agree inwriting. Zai shall take all possible steps to ensure all payments are made to MacroGenics under this Agreement, including by payingfrom non-Territory sources.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 36  7.10Taxes. All taxes applicable to the Development, Manufacture, Commercialization, use, import, distribution orsale of Products in the Territory or assessable on any payments made by Zai to MacroGenics under this Agreement shall be paid by[***], subject to the following: (a)License Payments. Zai shall deduct or withhold from the License Payments made to MacroGenics[***]. Zai shall furnish to MacroGenics appropriate evidence of the payment (including official receipts) of all Payment Taxes or otheramount required by Applicable Laws and Regulations. Zai shall use Commercially Reasonable Efforts to obtain any credits or refundsavailable for VAT taxes paid by Zai. MacroGenics shall reimburse Zai for [***]. (b)Other Payments Due To MacroGenics. [***] shall bear [***] of the Payment Taxes due for paymentsdue to [***], other than License Payments. [***] shall ensure by the payment of additional amounts to [***] that [***] receives the fullamount due for each such payment as set forth under this Agreement as if no deduction or withholding of such taxes had taken place. 8.Record Keeping and Inspections and Audits8.1Records(a)Research, Development, Manufacturing and Commercialization Activities. Each Party shall maintainappropriate records of: (i) all research, Development, Manufacturing and Commercialization events and activities conducted by it or onits behalf related to a Product (including as part of the Combination Regimen), and all costs in connection therewith, as applicable; and(ii) all significant information generated by it or on its behalf in connection with Development of Licensed Compounds and Products(including as part of the Combination Regimen) under this Agreement, in each case in accordance with such Party’s usualdocumentation and record retention practices, provided, that, without limiting the foregoing, Zai shall be required to maintainappropriate records of all information generated by it or on its behalf in connection with the use of MGA012 and research andDevelopment of Licensed Compounds and Products related thereto under this Agreement. Such records shall be in sufficient detail toproperly reflect, in good scientific manner, all significant work done and results of studies and trials undertaken, and further shall be ata level of detail appropriate for patent and regulatory purposes. Upon the reasonable request of a Party, the other Party shall make suchrecords available to the requesting Party. Each Party shall cause its Related Parties and Permitted Subcontractors to comply with thisSection 8.1(a).(b)Records for Zai Payments. Without limiting the foregoing under Section 8.1(a), Zai shall keepcomplete and accurate records in sufficient detail to (i) ensure that MacroGenics receives the full amount of royalties payable to it underSection 7.3 and Triggered Third Party Payments payable under Section 7.5, and (ii) reasonably allow MacroGenics to determine thebasis for the MacroGenics Outside Cost Share. At the reasonable request of MacroGenics, Zai shall make such records available toMacroGenics.(c)MacroGenics’ FBMC and Development Costs. MacroGenics shall keep complete and accurate recordswith such detail as shall reasonably allow Zai to determine the basis for such FBMC, the Territory Development Costs and the [***]. Atthe reasonable request of Zai, MacroGenics shall make such records available to Zai.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 37  8.2Audit Rights. Upon the written request of a Party (“Requesting Party”) with reasonable advance notice and notmore than [***] in each Calendar Year, the other Party shall permit an independent certified public accounting firm of internationallyrecognized standing selected by Requesting Party and reasonably acceptable to the other Party, at [***], to have access during normalbusiness hours to such of the records as may be reasonably necessary to verify the that the correct amounts have been paid to suchParty under this Agreement during any Calendar Year ending not more than [***] months prior to the date of such request. Theaccounting firm shall disclose to the Requesting Party only whether the reports are correct or incorrect and the specific detailsconcerning any discrepancies. No other information shall be provided to Requesting Party in connection with this audit right. This rightto audit shall remain in effect throughout the life of this Agreement and for a period of [***] years after the termination of thisAgreement (and thereafter until [***]).8.3Discrepancies. If such accounting firm identifies a discrepancy, the other Party shall pay Requesting Party theamount of the discrepancy within [***] days of the date Requesting Party delivers to the other Party such accounting firm’s writtenreport so concluding, or as otherwise agreed upon by the Parties. The fees charged by such accounting firm shall be paid by RequestingParty unless the underpayment by the other Party exceeded [***] of the amount owed for such Calendar Year, in which case the otherParty shall pay to Requesting Party the reasonable fees charged by such accounting firm.8.4Confidentiality. Each Party shall treat all information of the other Party subject to review under this Section 8 inaccordance with the confidentiality and non-use provisions of this Agreement, and shall cause its accounting firm to enter into anacceptable confidentiality agreement with the audited Party and any applicable Related Parties, obligating it or them to retain all suchinformation in confidence pursuant to such confidentiality agreement.9.Licenses9.1License to Zai.(a)Licensed Compounds and Products. Subject to the terms and conditions of this Agreement,MacroGenics hereby grants to Zai an exclusive, royalty-bearing license (or sublicense, as applicable), with the right to grant sublicenses(subject to Section 9.1(d)), under the MacroGenics Licensed Technology and the MacroGenics Licensed Trademarks to conduct theDevelopment (subject to MacroGenics’ reserved rights to conduct Development under Section 9.1(g)) activities allocated to Zai underthe Global Development Plan and Territory Specific Development Plan, and to Commercialize and otherwise distribute, sell, offer forsale and import Products in the Field in the Territory during the Term. For clarity, except to the extent expressly set forth in Section 5.4with respect to Margetuximab, Zai shall not have the right to Manufacture the Licensed Compounds or Product (including as part of anyCombination Regimen), but the foregoing license under this Section 9.1(a) does include the right to sell, offer for sale, and importProducts in the Field in the Territory that have been Manufactured using the [***] [***] Controlled by MacroGenics or its AffiliatesCovering the Manufacture of the Licensed Compounds or Products (including as part of any Combination Regimen, [***]).THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 38  (b)Subject to the terms and conditions of this Agreement, MacroGenics hereby grants to Zai an exclusive,royalty-bearing license (or sublicense, as applicable), with the right to grant sublicenses (subject to Section 9.1(d)), under theMacroGenics Licensed Technology to utilize MGA012 in the conduct of the Development (subject to MacroGenics’ reserved rights toconduct Development under Section 9.1(g)) activities allocated to Zai under the Global Development Plan and Territory SpecificDevelopment Plan of Licensed Compounds and Products solely as a component of a Combination Regimen, which for clarity shallinclude the conduct of one or more Combination Regimen Study(ies), and, following Regulatory Approval of such CombinationRegimen, to market and promote such Combination Regimen (which right to market and promote shall be co-exclusive withMacroGenics) in accordance with the approved label in the Field in the Territory during the Term. (c)Notwithstanding anything to the contrary hereunder, with respect to any MacroGenics LicensedTechnology which MacroGenics Controls pursuant to the license granted to MacroGenics from Incyte under the Incyte Agreement, theforegoing sublicenses granted to Zai under Sections 9.1(a) and (b) shall be non-exclusive. (d)Sublicensees. In no event shall Zai grant any sublicense to any of the rights granted to it pursuant toSection 9.1(a) without MacroGenics’ prior written consent, not to be unreasonably withheld. Each sublicense granted by Zai shall be inwriting and consistent with this Agreement and subject thereto, and Zai shall remain responsible to MacroGenics for the compliance ofeach such Sublicensee with the terms and conditions of this Agreement, including, with respect to the financial and other obligationsdue under this Agreement. Zai shall provide a complete copy of each such sublicense (and all amendments or restatements thereof) toMacroGenics so that MacroGenics can confirm Zai’s compliance with the foregoing, with reasonable redactions solely to the extent (i) pertaining to technology and products that are not licensed under this Agreement other than (A) products that bind or affect a PD-1receptor, (B) products that bind or affect a HER2 receptor, or (C) technology and products that related to the foregoing (A) or (B), and(ii) with respect to (i), not necessary to determine Zai’s compliance with this Agreement. Each sublicense granted by Zai under thisAgreement shall permit the conversion of such sublicense to a direct license with MacroGenics at MacroGenics’ sole option (anddiscretion) in the event this Agreement is terminated and, upon such conversion, MacroGenics shall be responsible for all formerobligations of Zai under such sublicense. Zai shall include in each such sublicense a requirement obligating such Sublicensee tocooperate with MacroGenics.(e)Regulatory Approvals. MacroGenics or its designee shall own and hold all Regulatory Submissions,subject to the requirements of Section 6.2. Zai hereby assigns, transfers and conveys (and to the extent a present assignment isprohibited by Applicable Laws and Regulations, shall assign) to MacroGenics all of Zai’s (and its Affiliates’ and Sublicensees’) right,title and interest in and to such Regulatory Submissions. (f)Limitations. During the Term, Zai shall not (either by itself, or with or through a Related Party or ThirdParty) (i) Develop or Commercialize any Product, (ii) utilize any Clinical Data or (iii) practice the MacroGenics Licensed Technology,in each case ((i), (ii) and (iii)) outside of the scope of this Agreement.(g)MacroGenics Retained Rights. MacroGenics shall retain the following: (i) the right to Manufacture orhave Manufactured MGA012, the Licensed Compounds and Products in the Territory; (ii) all rights to conduct non-clinicalDevelopment in the Territory and clinical Development inTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 39  the Territory in connection with a Global Clinical Trial; and (iii) all rights not otherwise granted to Zai inside and outside theTerritory. For clarity, notwithstanding the licenses granted to Zai pursuant to Section 9.1, no right or license is granted by MacroGenicsto Zai under the MacroGenics Licensed Technology or MacroGenics Licensed Trademarks with respect to any compound or productcovered by such MacroGenics Licensed Technology or MacroGenics Licensed Trademarks, including without limitation, any OtherComponent of a Combination Product, other than the Licensed Compounds and Products solely in accordance with Section 9.1(a) anduse of MGA012 solely in accordance with Section 9.1(b).9.2License to MacroGenics. Zai hereby grants to MacroGenics a royalty-free (except as set forth below in thisSection 9.2 and in Section 15.6 upon certain termination of this Agreement), worldwide, perpetual, irrevocable license, with the right togrant sublicenses (through multiple tiers), under the Zai Licensed Patents and Zai Licensed Know-how that is incorporated into anyProduct by Zai as part of its activities under this Agreement to develop, make, have made, use, sell, offer for sale and import LicensedCompounds, Products, Combination Regimens, MGA012 or products containing or incorporating MGA012 (whether as amonotherapy, multi-therapy, combination or otherwise), in all cases without any obligation to obtain Zai’s prior consent. The licensegranted pursuant to this Section 9.2 shall be non-exclusive in the Territory solely to permit MacroGenics to conduct activities assignedto it under the Territory Specific Development Plan or Global Development Plan, exclusive (even as to Zai and its Affiliates) in the restof the world outside the Territory and in the Territory with respect to MGA012 or products containing or incorporating MGA012(whether as a monotherapy, multi-therapy, combination or otherwise). For clarity, the license granted to MacroGenics under thisSection 9.2 shall (a) not include the right to any compound proprietary to Zai, its Affiliates or (Sub)licensees by reason of suchcompounds being included in a combination product or Combination Regimen with a Licensed Compound or MGA012, and (b) besubject to the Triggered Third Party Payments in the event any such Zai Licensed Patents and/or Zai Licensed Know-How are subject toan Other Third Party Agreement for which MacroGenics elects to obtain a sublicense under pursuant to Section 9.7. The licensegranted to MacroGenics under this Section 9.2 shall survive expiration or termination of this Agreement, subject to MacroGenics’continuing payment of any such Triggered Third Party Payments. In the event that both (x) the Agreement is terminated by Zaipursuant to Section 15.3 (but MacroGenics does not exercise its option in accordance with Section 15.6(a)(iii)(2)), and (y) prior to theeffective date of such termination (as contemplated in the foregoing (x)), the Parties have enrolled in the Territory under the TerritorySpecific Activities or Territory Specific Plan greater than [***] of [***] and/or greater than [***], then MacroGenics agrees to pay toZai, on a Country-by-Country and Region-by-Region basis in the Territory, a royalty at a rate of [***] of [***] during the RoyaltyTerm, which royalty shall further be subject to Section 7.4 (in which case Net Sales, Royalty Term and Section 7.4 shall be appliedmutatis mutandis, provided that, for clarity, subsection (b) of the defined Royalty Term shall be based on the Zai Licensed Patents andnot the MacroGenics License Patents. 9.3Clinical Data Licenses. Subject to the terms and conditions of this Agreement (particularly Section 9.1(g)(ii)), MacroGenics hereby grants to Zai an exclusive, royalty-free, license, with the right to grant sublicenses, during the Term to use all (a)Clinical Data and (b) other data Controlled by MacroGenics, in each case as necessary or reasonably useful for Zai to exercise its rightsor fulfill its obligations under this Agreement solely with respect to the Development and Commercialization of Licensed Compoundsand Products (including as part of the Combination Regimen) in the Field in the Territory hereunder. At Zai’s request, MacroGenicsshall provide a copy of the foregoing Clinical Data (not already in Zai’s possession) on a schedule reasonably acceptable to Zai.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 40  9.4Negative Covenant. Each Party covenants that, except to the extent Third Parties generally are lawfully permittedto do so without a granted license from or other contractual right with the other Party, it shall not use or practice any of the other Party’sintellectual property rights licensed to it under this Section 9 except for the purposes expressly permitted in the applicable license grant.9.5No Implied Licenses. Except as explicitly set forth in this Agreement, neither Party grants any license, express orimplied, under its intellectual property rights to the other Party.9.6Diversion(a)Each Party hereby covenants and agrees that it shall not, either directly or indirectly, promote, market,distribute, import, sell or have sold Products, including via the Internet or mail order, to any Third Party, address or Internet Protocoladdress in the other Party’s territory.(b)If any of the Products are diverted into the other Party’s territory (the “Unauthorized Territory”) foruse (excluding use by or on behalf of MacroGenics, its Affiliates and licensees for MacroGenics Territory Activities) or sale therein(“Unauthorized Activity”), the following shall apply: (i) if such Products were diverted by an identifiable customer, distributor,employee, consultant or agent of the source Party (each an “Unauthorized Person”) then, upon the request of the other Party, thesource Party shall not sell such Products to, or allow the sale of such Products by, such Unauthorized Person (including by requiring thediscontinuation of sales of such Product or enforcement of contractual obligations against such Unauthorized Person) for the remainingTerm and shall use Commercially Reasonable Efforts to buy back all such Products from such Unauthorized Person within [***]business days of such request from the other Party; or (ii) the source Party shall use Commercially Reasonable Efforts to investigate thelocation of such diverted Products and buy them back; but, if and to the extent that, the source Party elects not to, or is unable to, buyback the applicable diverted Products, then the other Party may, in its sole discretion, buy back the applicable diverted Products, andthe source Party shall reimburse the other Party for all reasonable costs incurred by such other Party in connection with the buy-back orlost sales of any such diverted Products.9.7Other Third Party Agreements. (a)If after the Effective Date, either Party enters into a license agreement in which it would Control (in thecase of MacroGenics, other than under the MacroGenics Required Third Party Agreements) any Patents or Know-how licensed from aThird Party that would fall under the definitions of MacroGenics Licensed Patents or MacroGenics Licensed Know-how (in the case ofMacroGenics), or Zai Licensed Patents or Zai Licensed Know-how (in the case of Zai), (each, an “Other Third Party Agreement”),then such Party (the “In-License Party”) shall promptly notify the other Party in writing of the terms and conditions of such OtherThird Party Agreement, including a description of such Patents or Know-how, any restrictions on use, obligations required to beundertaken by, or otherwise applicable to, any (sub)license and any Triggered Third Party Payment that would be payable if the otherParty elects to obtain a sublicense under such Patents or Know-how.(b)Unless the other Party agrees in writing to be responsible for, and subject to all of the applicable terms ofthe Other Third Party Agreement to the extent that would be applicable to the rights (sub)licensed hereunder to such Party (including toreimburse the In-License Party for all Triggered Third Party Payments), then MacroGenics Licensed Patents or MacroGenics LicensedKnow-how (in the case ofTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 41  MacroGenics as the In-License Party), or Zai Licensed Patents or Zai Licensed Know-how (in the case of Zai as the In-License Party)shall not include such Patents or Know-how in-licensed pursuant to such Other Third Party Agreement. (c)“Triggered Third Party Payment” means, with respect to an Other Third Party Agreement for which aParty elects to obtain a sublicense under this Section 9.7, [***] of any payments that the In-License Party would be obligated to pay theThird Party licensor of such Other Third Party Agreement in connection with the grant of a sublicense to the other Party, including[***] payable by the In-License Party pursuant to such Other Third Party Agreement.9.8Future MacroGenics Required Third Party Agreements. Subject to any written contractual obligations with aThird Party, MacroGenics shall keep Zai apprised of any negotiations it undertakes after the Effective Date to enter into a MacroGenicsRequired Third Party Agreement which if executed, would require Zai to reimburse MacroGenics under Section 7.5(a) for paymentsmade by MacroGenics under such MacroGenics Required Third Party Agreement, provide Zai the opportunity to comment on the termsand conditions being negotiated for such MacroGenics Required Third Party Agreement and shall consider any such commentsprovided by Zai in good faith. Within [***] days after the execution of such MacroGenics Required Third Party Agreement,MacroGenics shall provide a copy of such executed MacroGenics Required Third Party Agreement; provided that MacroGenics shallhave the right to redact Confidential Information from such copy that is not relevant to Zai’s obligation to reimburse MacroGenicsaccording to Section 7.5(a) for costs incurred by MacroGenics under such MacroGenics Required Third Party Agreement.10.Confidentiality; Publication10.1Nondisclosure Obligation(a)Definition and Restrictions. All Confidential Information disclosed by one Party to the other Party atany time, including before the Effective Date or after the expiration or termination of this Agreement, shall be maintained in confidenceby the receiving Party and shall not be disclosed by the receiving Party to any Third Party or used by the receiving Party for anypurpose except as set forth herein without the prior written consent of the disclosing Party, during the Term and for a period of [***]years thereafter; provided that, with respect to Confidential Information that is confidential information of a Third Party, including withregard to MGA012, to which a Party has an obligation of confidentiality or non-use under an agreement with such Third Party,including the Incyte Agreement, the confidentiality and non-use obligations in this Agreement shall (A) further include such additionalconfidentiality and non-use obligations as such Party is required to undertake with respect to such confidential information pursuant tosuch Third Party agreement, and (B) continue beyond such [***] year period for so long as such Party is required to maintain suchconfidential information as confidential pursuant to such Third Party agreement (including a MacroGenics Third Party Agreement), including the Incyte Agreement. The following shall not be deemed Confidential Information for purposes of the restrictions set forth inthis Section 10.1(a):(i)Information that is known by the receiving Party at the time of its receipt, and not through aprior disclosure by the disclosing Party, as documented by the receiving Party’s business records;THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 42  (ii)Information that is or becomes part of the public domain through no wrongful act or fault onthe part of the receiving Party;(iii)Information that is subsequently disclosed to the receiving Party by a Third Party who maylawfully do so and is not under an obligation of confidentiality to the disclosing Party; and(iv)Information that is developed by the receiving Party independently of ConfidentialInformation received from the disclosing Party, as documented by the receiving Party’s business records.(b)Combinations. Any combination of features or disclosures shall not be deemed to fall within theexclusions set forth in Section 10.1(a) merely because individual features are published or available to the general public or in therightful possession of the receiving Party unless the combination itself and principle of operation are published or available to thegeneral public or in the rightful possession of the receiving Party.(c)Permitted Disclosures. Notwithstanding the restrictions set forth in Section 10.1(a), the receiving Partymay disclose Confidential Information of the other Party to:(i)governmental or other regulatory agencies in order to obtain Patents or to gain or maintainapproval to conduct clinical trials or to market Products, but such disclosure may be only to the extent reasonably necessary to obtainPatents or authorizations; or(ii)as the receiving Party deems necessary to be disclosed, to its Affiliates, agents, consultants, orother Third Parties for the Development, Manufacture (with respect to MacroGenics permitted disclosures, provided that this shalladditionally apply to [***] with respect to its [***] solely in the event Zai exercises its option to [***] pursuant to Section 5.4(b)) orCommercialization of Product(s), or in connection with a licensing transaction or contractual obligation related to such Product(s) orloan, financing or investment or acquisition, merger, consolidation or similar transaction (or for such entities to determine their interestin performing such activities or to determine their rights and obligations as a result of completing such transactions) or in order toperform its obligations or exercise its rights under this Agreement, in each case on the condition that any Third Parties, other thanRegulatory Authorities, to whom such disclosures are made agree to be bound by confidentiality and non-use obligations substantiallysimilar to those contained in this Agreement; provided that the term of confidentiality and non-use applicable to such Third Parties shallbe no less than [***] years (but of shorter duration if [***]; provided that with respect to any Confidential Information of MacroGenicshereunder that MacroGenics informed Zai in writing at or prior to the time of disclosure to Zai that such Confidential Information (eitherin itself or as a category of information) constitutes confidential information under the Incyte Agreement such shorter duration may notbe less than [***] years) from the date of disclosure to them, provided further, that with respect to Confidential Information of a Partythat constitutes (a) a trade secret, such confidentiality and non-use obligations shall apply for so long as such information constitutes atrade secret under Applicable Laws and Regulations, or (b) confidential information of a Third Party, such confidentiality and non-useobligations shall apply for so long as such Party is required to keep such information confidential under such Third Party agreement(including a MacroGenics Third Party Agreement), but only if such Party informs the other Party in writing of such additionalobligations and identifies to the other Party at the time of disclosure the information subject to such additional obligations. Withoutlimiting the foregoing or remainder of this Section 10.1, with respect to Confidential Information of MacroGenics disclosed to ZaiTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 43  hereunder that at the time of disclosure to Zai, MacroGenics identifies such confidential information as a trade secret under the IncyteAgreement, prior to Zai disclosing such trade secret to a Third Party (to the extent permitted hereunder), Zai must expresslycontractually bind the Third Party to obligations to keep the trade secret confidential to the extent protected as a trade secret underApplicable Laws and Regulations.(d)Disclosure Required by Judicial or Administrative Process. If a Party is required by judicial oradministrative process to disclose Confidential Information of the other Party that is subject to the non-disclosure provisions of thisSection 10.1, such Party shall promptly inform the other Party of the disclosure that is being sought in order to provide the other Partyan opportunity to challenge or limit the disclosure obligations. Confidential Information that is disclosed by judicial or administrativeprocess shall remain otherwise subject to the confidentiality and non-use provisions of this Section 10.1, and the Party disclosingConfidential Information pursuant to law or court order shall take all steps reasonably necessary, including obtaining an order ofconfidentiality, to ensure the continued confidential treatment of such Confidential Information, including, by using not less than thesame level of efforts to secure such confidential treatment of such information as it would to protect its own Confidential Information oflike nature from disclosure.(e)Obligations Upon Termination. Upon the termination or expiration of this Agreement, or upon theearlier request of either Party, the receiving Party shall return to the disclosing Party, all of the disclosing Party’s ConfidentialInformation, including all copies thereof, provided that the receiving Party may retain one copy for archival purposes, and providedfurther, that a receiving Party shall not be required to destroy electronic files containing such Confidential Information of the disclosingParty that are made in the ordinary course of its business information back-up procedures pursuant to its electronic record retention anddestruction practices that apply to its own general electronic files and information, and any such retained copies shall continue to besubject to the confidentiality and non-use obligations in accordance with this Agreement.10.2Publication(a)Publication of Results. Zai and MacroGenics each acknowledge the other Party’s interest in publishingthe results of its activities under the Collaboration in order to obtain recognition within the scientific community and to advance thestate of scientific knowledge. Each Party also recognizes the mutual interest in obtaining valid patent protection and in protectingbusiness interests and trade secret information. The JSC shall establish procedures for review of publications related to theCollaboration, ensuring that, except for disclosures permitted pursuant to Section 10.1, either Party and its employees wishing to make apublication related to work performed under this Agreement shall deliver to the other Party a copy of the proposed written publicationor an outline of an oral disclosure at least [***] days prior to submission for publication or for presentation. Publications related toGlobal Clinical Trials conducted by MacroGenics or its Affiliates or permitted licensees in which the majority of patients reside outsidethe Territory shall not be subject to this Section 10.2, provided that MacroGenics shall use commercially reasonable efforts to provideZai with a copy of such proposed written publication prior to publication thereof for Zai’s review (but not approval). (b)Review of Publications and Presentations(i)The reviewing Party shall have the right (a) to propose modifications to the publication orpresentation for patent reasons, trade secret reasons, or for purposes of removing theTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 44  Confidential Information of the reviewing Party, or (b) to request a reasonable delay in publication or submission for presentation inorder to protect trade secret or patentable information.(ii)If the reviewing Party requests the removal of the reviewing Party’s Confidential Informationor a delay, the publishing Party shall remove such Confidential Information and if requested by the reviewing Party delay submissionfor publication or submission for presentation for a period of [***] days to enable patent applications protecting such Party’s rights insuch Confidential Information to be filed in accordance with Section 13 below. (iii)Upon expiration of such [***] days and satisfaction of any other conditions imposed by theJSC, the publishing Party shall be free to proceed with the publication or submission for presentation.(iv)Upon request of the Party seeking publication, the reviewing Party shall consider expeditingthe time frames set forth in this Section 10.2.(v)If the reviewing Party requests modifications to the publication or submission forpresentation, the publishing Party shall edit such publication to prevent disclosure of the Confidential Information of the reviewingParty.10.3Publicity; Use of Names(a)Press Releases. The Parties shall issue the press release included in this Agreement as Exhibit Fannouncing the execution of this Agreement. A Party may issue any subsequent press release relating to this Agreement or activitiesconducted hereunder upon prior written approval of the other Party, such approval not to be unreasonably withheld or delayed;provided, however, that no approval of the other Party shall be required if a subsequent press release or securities filing solely disclosesthe information that (1) a milestone under this Agreement has been achieved or any payments associated therewith have been received;(2) the filing or approval of a BLA generally has occurred (provided, however, that specific dates of filing shall not be disclosed); (3)initiation of any clinical trial; and (4) commercial launch of a Product or any information that has previously been approved anddisclosed as permitted by this Section 10.3(a). In the case of items (1) to (4) of the preceding sentence, the disclosing Party shallprovide the other Party a copy of such proposed disclosures at least [***] business days prior to the proposed release and consider ingood faith any comments the other Party may make, where practicable, and in light of any reporting obligations of such disclosingParty under Applicable Laws and Regulations, including the rules and regulations promulgated by the United States Securities andExchange Commission or any other governmental agency.(b)No Other Use of Company Names. Neither Party shall use the name, trademark, trade name or logo ofthe other Party or its employees in any publicity or news release relating to this Agreement or its subject matter without the prior expresswritten permission of the other Party.(c)Approved Press Releases. In addition and notwithstanding anything to the contrary herein, (a) if therelevant text of a proposed press release has already previously been reviewed and approved for disclosure by the other Party then suchtext may be disclosed or republished in such proposed press release provided that the Party issuing such press release provides notice tothe other Party of such press release at least [***] business days prior to the issuance of such press release, whereTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 45  practicable, and (b) if the relevant text of a proposed public announcement such as a corporate presentation or comments to analysts orinvestors has already previously been reviewed and approved for disclosure by the other Party (whether in the form of an approvedpress release or prior approved presentation materials, Q&A script or the like) then such text may be included in such proposed publicannouncement (but not a press release) without resubmission and review by the other Party.(d)Existence of Agreement(i)No Disclosure. Neither Party shall disclose the existence or terms of this Agreement pursuantto a press release or otherwise except as provided in this Section 10.3(d).(ii)Permitted Disclosures(A)Notwithstanding the terms of this Section 9.7(c), either Party shall be permitted todisclose the existence and terms of this Agreement and the conduct of the Collaboration under this Agreement, to the extent required, inthe reasonable opinion of such Party’s legal counsel, to comply with Applicable Laws and Regulations, including the rules andregulations promulgated by the United States Securities and Exchange Commission or any other governmental agency. The disclosingParty shall take reasonable and lawful actions to avoid or minimize the degree of such disclosure.(B)Either Party may also disclose the existence and terms of this Agreement to itsattorneys, accountants and advisors, and to potential acquirors, in connection with a potential acquisition or other change of controltransaction and to existing and potential investors or lenders of such Party, as a part of their due diligence investigations, or to potentiallicensees or to potential and current permitted assignees in each case under an agreement to keep the terms of this Agreementconfidential under terms of confidentiality and non-use substantially similar to the terms contained in this Agreement and to use suchconfidential information solely for the purpose of the contemplated transaction. (C)Each Party may also disclose the existence and terms of this Agreement pursuant totransactions related to the research, Development, Manufacture or Commercialization or exploitation of a Licensed Compound,MGA012 or any Product (“Licensing Transactions”), in each case under an agreement to keep the terms of this Agreementconfidential under terms of confidentiality and non-use substantially similar to the terms contained in this Agreement and to use suchconfidential information solely for the purpose of the contemplated transaction. The transactions described in Section 10.3(d)(ii)(B)shall not be deemed Licensing Transactions for purposes of this Section 10.3(d)(ii)(C).11.Representations and Warranties11.1Representations and Warranties of MacroGenics. MacroGenics represents and warrants to Zai that, as of theEffective Date:(a)it has the full right, power and authority to enter into this Agreement, to perform the Collaboration, andto grant the licenses contemplated under Section 9, and the fulfillment of its obligations and performance of its activities hereunder donot materially conflict with, violate, or breach or constitute a default under any contractual obligation or court or administrative order bywhich MacroGenics is bound;THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 46  (b)all necessary consents, approvals and authorizations of all government authorities and other personsrequired to be obtained by MacroGenics as of the Effective Date in connection with the execution, delivery and performance of thisAgreement have been obtained;(c)for purposes of Sections 1.86 and 1.87, no Affiliates of MacroGenics’ exist as of the Effective Date.(d)it Controls the right, title and interest in and to the MacroGenics Licensed Patents and MacroGenicsLicensed Know-how, and has the right to grant to Zai the licenses under such MacroGenics Licensed Patents and MacroGenicsLicensed Know-how that it purports to grant hereunder and has not granted any Third Party rights under such MacroGenics LicensedPatents and MacroGenics Licensed Know-how that would interfere or be inconsistent with Zai’s rights hereunder;(e)to its knowledge, except for those licensed or sublicensed under the MacroGenics Third PartyAgreement, the MacroGenics Licensed Patents and MacroGenics Licensed Know-how are not subject to any other Third Partyagreements or existing royalty or other payment obligations to any Third Party;(f)to its knowledge, the issued Patents in the MacroGenics Licensed Patents are valid and enforceable;(g)there are no action, suit, inquiry, investigation or other proceeding threatened, pending, or ongoing byany Third Party that challenges or threatens the validity or enforceability of any of the MacroGenics Licensed Patents. In the event thatMacroGenics receives written notice of any such action or proceeding, it shall notify Zai in writing; and(h)there are no action, suit, inquiry, investigation or other proceeding threatened, pending, or ongoing byany Third Party (and it is not aware of any grounds therefor) that alleges the use of the MacroGenics Licensed Patents or thedevelopment, manufacture, commercialization, and use of the Products would infringe intellectual property rights of any Third Party(and it has not received any notice alleging such an infringement). In the event that MacroGenics receives written notice of any suchaction or proceeding, it shall notify Zai in writing.11.2Representations and Warranties of Zai. Zai represents and warrants to MacroGenics that as of the EffectiveDate:(a)it has the full right, power and authority to enter into this Agreement, to perform the Collaboration, togrant the licenses granted hereunder, and the fulfillment of its obligations and performance of its activities hereunder do not materiallyconflict with, violate, or breach or constitute a default under any contractual obligation or court or administrative order by which Zai isbound;(b)all necessary consents, approvals and authorizations of all government authorities and other personsrequired to be obtained by Zai as of the Effective Date in connection with the execution, delivery and performance of this Agreementhave been obtained; and(c)no Zai Licensed Patents or Zai Licensed Know-how exist as of the Effective Date that are or would be (i)necessary for the Development, Manufacture or Commercialization of or (ii)THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 47  incorporated into, in each case ((i) and (ii)) the Licensed Compounds or Products (including the Combination Regimen). 11.3Covenant. Each Party hereby covenants to the other Party that it will not, and will not permit its Affiliates,(Sub)licensees or anyone acting on its or their behalf to, grant or otherwise convey to any Third Party any rights that would interfere orbe inconsistent with such other Party’s rights hereunder.11.4No Other Representations or Warranties. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NOREPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OFMERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR NON-MISAPPROPRIATION OFTHIRD PARTY INTELLECTUAL PROPERTY RIGHTS, IS MADE OR GIVEN BY OR ON BEHALF OF A PARTY. ALLREPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBYEXPRESSLY EXCLUDED.12.Indemnification12.1By Zai. Zai agrees to indemnify and hold harmless MacroGenics, its Affiliates, and their directors, officers,employees and agents (individually and collectively, the “MacroGenics Indemnitee(s)”) from and against all losses, liabilities,damages and expenses (including reasonable attorneys’ fees and costs) incurred in connection with any claims, demands, actions orother proceedings by any Third Party (individually and collectively, “Losses”) first arising after the Effective Date to the extent arisingfrom (a) activities by Zai or any of its Related Parties or Permitted Subcontractors with respect to the research, Development, use,Manufacture (in the event it becomes entitled to do so Section 5.4), Commercialization, import, distribution, or sale of LicensedCompounds or Products or any other exercise of their rights or performance of their obligations hereunder, (b) the use by Zai or any ofits Related Parties or Permitted Subcontractors of the MacroGenics Licensed Patents or MacroGenics Licensed Know‑how, (c) the [***]of Zai, or (d) Zai’s breach of this Agreement, except to the extent such Losses arise out of any of MacroGenics Indemnitee’s [***] ofthis Agreement.12.2By MacroGenics. MacroGenics agrees to indemnify and hold harmless Zai, its Affiliates, and their directors,officers, employees and agents (individually and collectively, the “Zai Indemnitee(s)”) from and against all Losses to the extent arisingfrom (a) activities by MacroGenics or any of its Related Parties or Permitted Subcontractors with respect to the research, Development,use, Manufacture, Commercialization or sale of Products for the purpose of Commercialization or sale of Products by MacroGenics orits Related Parties (which for clarity, excludes Zai, its Affiliates and Sublicensees), (b) the [***] of MacroGenics, (c) the use byMacroGenics or any of its Related Parties or Permitted Subcontractors of the Zai Licensed Patents or Zai Licensed Know‑how, or (d)MacroGenics’ breach of this Agreement, except to the extent such Losses arise out of any of Zai Indemnitee’s [***] of this Agreement.12.3Defense. If any such claims or actions are made, the Indemnitee shall be defended at the Indemnifying Party’ssole expense by counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnitee, provided that the Indemniteemay, at its own expense, also be represented by counsel of its own choosing. The Indemnifying Party shall have the sole right to controlthe defense of any such claim or action, subject to the terms of this Section 12.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 48  12.4Settlement. The Indemnifying Party may settle any such claim, demand, action or other proceeding or otherwiseconsent to an adverse judgment (a) with prior written notice to the Indemnitee but without the consent of the Indemnitee where the onlyliability to the Indemnitee is the payment of money and the Indemnifying Party makes such payment, provided such settlement wouldnot subject the Indemnitee to an injunction or otherwise adversely impact any of the Indemnitee’s rights under this Agreement orconstitute an admission of guilt or wrongdoing by the Indemnitee, or (b) in all other cases, only with the prior written consent of theIndemnitee, such consent not to be unreasonably withheld.12.5Notice. The Indemnitee shall notify the Indemnifying Party promptly of any claim, demand, action or otherproceeding under Section 12.1 or Section 12.2 and shall reasonably cooperate with all reasonable requests of the Indemnifying Partywith respect thereto.12.6Permission by Indemnifying Party. The Indemnitee may not settle any such claim, demand, action or otherproceeding or otherwise consent to an adverse judgment in any such action or other proceeding or make any admission as to liability orfault without the express written permission of the Indemnifying Party. Provided, however, that such permission shall not be required ifsuch settlement does not involve (a) any admission of legal wrongdoing by the other Party’s Indemnitee(s), or (b) the imposition of anyequitable relief against the other Party’s Indemnitee(s).12.7Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL,CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES OR FOR LOST PROFITS ARISING FROM ORRELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCHDAMAGES. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 12.7 IS INTENDED TO OR SHALL LIMITOR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTION 12, OR DAMAGESAVAILABLE FOR A PARTY’S BREACH OF CONFIDENTIALITY OBLIGATIONS IN SECTION 10.13.Inventions; Patent Provisions13.1Ownership of Intellectual Property(a)Ownership of MacroGenics IP. As between MacroGenics and Zai, MacroGenics shall remain the soleand exclusive owner of all MacroGenics Licensed Patents, MacroGenics Licensed Trademarks and MacroGenics Licensed Know-howthat exist as of the Effective Date.(b)Ownership of Zai IP. As between Zai and MacroGenics, Zai shall remain the sole and exclusive ownerof all Zai Licensed Patents and Zai Licensed Know-how that exists as of the Effective Date.(c)Ownership of IP Generated under the Collaboration. MacroGenics shall own all data, results andinventions, whether patentable or not, conceived or reduced to practice in the course of conducting the Collaboration solely byMacroGenics, its Affiliates or its or its Affiliates’ respective consultants or subcontractors, together with all intellectual property rightstherein. Zai shall own all data, results and inventions, whether patentable or not, conceived or reduced to practice in the course ofconducting the Collaboration solely by Zai or its Affiliates or its or its Affiliates’ respective consultants or subcontractors, together withall intellectual property rights therein. MacroGenics and Zai shall jointly ownTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 49  all data, results and inventions, whether patentable or not, conceived or reduced to practice jointly by MacroGenics (or its Affiliates orits or its Affiliates’ respective consultants or subcontractors) on one hand and Zai (or its Affiliates or its or its Affiliates’ respectiveconsultants or subcontractors) on the other hand (“Jointly Owned IP”), together with all intellectual property rights therein, with eachParty owning an undivided half interest and the right to exploit without the duty of accounting or seeking consent from the other Partyto the extent to be permitted under Applicable Laws and Regulations.13.2Patent and Trademark Filing, Prosecution and Maintenance(a)Overall Strategy. The JSC shall establish an overall strategy for the filing, prosecution and maintenanceof MacroGenics Licensed Patents, MacroGenics Licensed Trademarks, Jointly Owned Patents and Zai Licensed Patents in the Territory.(b)Prosecution(i)The responsibility for Patent Prosecution and Trademark Prosecution related to a Patent orTrademark that is within the MacroGenics Licensed Patents and MacroGenics Licensed Trademarks or the Zai Licensed Patents that isowned solely by a Party shall be the responsibility of such Party, except that (A) Zai shall have the right (but not the obligation), at itselection and cost and expense, to file, prosecute and maintain, in the name of MacroGenics, MacroGenics Product-Specific Patents (butfor clarity, excluding MacroGenics Platform Patents) and MacroGenics Licensed Trademarks in the Territory, (B) MacroGenics shallhave the right (but not the obligation), at its election and cost and expense, to file, prosecute and maintain, in the name of Zai, ZaiLicensed Patents that are specific to the Product (i.e., do not Cover any product that is not a Product, such Zai Licensed Patents, the“Zai Product-Specific Patent”) (within the scope of the exclusive license granted by Zai to MacroGenics pursuant to Section 9.2)outside the Territory. In accordance with Section 13.2(b)(v) below, MacroGenics shall be responsible for undertaking the PatentProsecution with respect to Patents jointly owned by the Parties (the “Jointly Owned Patents”) outside the Territory and Zai shall beresponsible for undertaking the Patent Prosecution with respect to Jointly Owned Patents in the Territory, and each shall do as directedby the JSC. (ii)In the event that Zai elects not to undertake the Patent Prosecution for the MacroGenicsProduct-Specific Patents in the Territory, Zai shall notify MacroGenics at least [***] days before any such patent rights would becomeabandoned or otherwise forfeited, and MacroGenics shall have the right (but not the obligation), at its sole cost and expense, toundertake the Patent Prosecution of such MacroGenics Product-Specific Patents. Thereafter, any MacroGenics Product-Specific Patentsthat are the subject of such opt-out notice by Zai shall cease to be MacroGenics Licensed Patents for all purposes under this Agreement,including for purposes of the license granted by MacroGenics to Zai under Section 9.1. In the event that MacroGenics elects not toundertake the Patent Prosecution for the Zai Product-Specific Patents outside the Territory, MacroGenics shall notify Zai at least [***]days before any such patent rights would become abandoned or otherwise forfeited, and Zai shall have the right (but not theobligation), [***], to undertake the Patent Prosecution of such Zai Product-Specific Patents outside the Territory. With respect to JointlyOwned Patents, in the event that the prosecuting Party elects not to undertake the Patent Prosecution for the Jointly Owned Patents inthe Territory (with respect to Zai) or outside the Territory (with respect to MacroGenics), the prosecuting Party shall notify the non-prosecuting Party at least [***]days before any such patent rights would become abandoned or otherwise forfeited, and the previouslynon-prosecuting Party shall have the right (but not the obligation), to undertake the Patent Prosecution of such Jointly Owned Patents insuch territory and become theTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 50  prosecuting Party therefor. The right to assume Patent Prosecution of a MacroGenics Product-Specific Patent, Zai Product-SpecificPatent or Jointly Owned Patent shall not apply in the event such a patent application would become abandoned or otherwise forfeited asa result of the prosecuting Party (x) discontinuing Patent Prosecution of such patent application but also filing a continuation applicationclaiming the same invention or (y) settling an opposition to obtain a license to a competing patent. (iii)The prosecuting Party shall keep the JSC and the other Party informed of the status of allmatters affecting Patent Prosecution and Trademark Prosecution of MacroGenics Licensed Patents, MacroGenics Licensed Trademarksand Jointly Owned Patents in the Territory, and the Zai Product-Specific Patents outside the Territory, including providing a copy of allpatent applications filed hereunder and any material correspondence from or with any governmental authorities (including theapplicable patent office) to the JSC and the other Party in sufficient time to allow for review and comment by the non-prosecuting Party,and timely consulting with the non-prosecuting Party and its patent counsel on the strategy and content of submissions to suchgovernmental authorities in advance of any submissions. Timely advice and suggestions of the non-prosecuting Party and its patentcounsel shall be taken into consideration in good faith by the prosecuting Party and its patent counsel in connection with suchfiling. With respect to the MacroGenics Product-Specific Patents, Zai (if the prosecuting Party) shall pursue in good faith all reasonableclaims requested by MacroGenics for the Territory. (iv)Any dispute regarding Patent Prosecution and Trademark Prosecution of MacroGenicsLicensed Patents, MacroGenics Licensed Trademarks, Zai Product-Specific Patent (outside the Territory only) or Jointly Owned Patentsthat cannot be resolved by intellectual property counsel of the Parties, shall be resolved by the JSC.(v)Without limiting the generality of the foregoing, MacroGenics shall prosecute and maintainJointly Owned Patents outside the Territory and Zai shall prosecute and maintain Joint Owned Patents in the Territory, and eachprosecuting Party shall instruct its counsel to provide copies of correspondence and filings directly to the other Party and otherwisepermit the other Party to participate with the prosecuting Party in any of the activities of such counsel with respect to the Patent andTrademark Prosecution of such Jointly Owned Patents. Before taking any material step in the Patent Prosecution or Jointly OwnedPatents, the prosecuting Party and its counsel shall allow the other Party a reasonable opportunity to comment on the action proposed tobe taken, and agrees to incorporate in such filings all reasonable comments of the other Party. All Patent Prosecution of Jointly OwnedPatents shall be in the names of both MacroGenics and Zai.(vi)Zai’s rights and obligations under this Section 13.2 with respect to MarcoGenics LicensedPatents are secondary to and shall be subject to any Third Party rights and obligations under the applicable MacroGenics Third PartyAgreements.(c)Patent and Trademark Invalidations. The JSC shall decide whether and how to undertake activitiesintended to invalidate pending or issued Third Party Patents in the Territory that cover the composition, use or manufacture of LicensedCompounds or Products. 13.3Costs of Patent and Trademark Prosecution(a)Costs. All out-of-pocket costs for Patent Prosecution and Trademark Prosecution of a Party’s solelyowned Patent or Trademark and for maintaining a Party’s solelyTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 51  owned Patent or Trademark shall be [***], except that [***] of all out-of-pocket costs for Patent Prosecution of the MacroGenicsPlatform Patents in the Territory shall be borne by [***] and [***] borne by [***]. All out-of-pocket costs for Patent Prosecution ofJointly Owned Patents and for maintaining Jointly Owned Patents in the Territory shall be [***]. In the event Zai assumes theresponsibility to conduct the Patent Prosecution of MacroGenics Product-Specific Patents and MacroGenics Licensed Trademarks inthe Territory under Section 13.2(b)(i)(A), the costs of such activities conducted by or on behalf of Zai shall be borne [***]. In theevent MacroGenics assumes the responsibility to conduct the Patent Prosecution of the Zai Product-Specific Patents outside theTerritory under Section 13.2(b)(i)(B), the costs of such activities conducted by or on behalf of MacroGenics shall be borne [***].13.4Patent and Trademark Prosecution Cooperation. With respect to all Patent Prosecution and TrademarkProsecution related to pending or issued Patents and Trademarks included in MacroGenics Licensed Patents in the Territory,MacroGenics Licensed Trademarks in the Territory or Zai Product-Specific Patents outside the Territory, each Party shall:(a)execute all further instruments to document their respective ownership consistent with this Agreement asreasonably requested by the other Party;(b)make its employees, agents and consultants reasonably available to the other Party (or to the otherParty’s authorized attorneys, agents or representatives), to the extent reasonably necessary to enable the appropriate Party hereunder toundertake its Patent Prosecution and Trademark Prosecution responsibilities;(c)cooperate, if necessary and appropriate, with the other Party in gaining Patent and Trademark termextensions; and(d)endeavor in good faith to coordinate its efforts under this Agreement with the other Party to minimize oravoid interference with the Patent Prosecution and Trademark Prosecution of the other Party’s Patents and Trademarks.13.5Enforcement(a)Notice. Each Party shall promptly provide, but in no event later than [***] days, the other with writtennotice reasonably detailing any known or alleged infringement in the Territory (or with respect to Zai Licensed Patents or JointlyOwned Patents, inside the Territory or outside the Territory) of any Patent or Trademark owned by the other Party and subject to alicense under this Agreement. The notifying Party will provide the other Party with all evidence available to it supporting its belief ofsuch infringement.(b)Enforcement of Intellectual Property Rights(i)Except as expressly set forth in this Section 13.5, the sole owner (as between the Parties) of aPatent, Trademark, Know‑how or Confidential Information shall have the exclusive right to institute and direct legal proceedingsagainst any Third Party believed to be infringingTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 52  such Patent or Trademark or misappropriating or otherwise violating such Know‑how or Confidential Information.(ii)Zai shall have the initial right (but not the obligation) to institute and direct legal proceedingsin the Territory against any Third Party believed to be infringing in the Territory MacroGenics Product-Specific Patents and Product-specific claims within other MacroGenics Licensed Patents (in each case within the scope of the exclusive license granted byMacroGenics to Zai under this Agreement) or Jointly Owned Product Patents, in each case that Covers a Product (excluding MGA012) sold within the Territory. Zai agrees to discuss the foregoing in good faith with MacroGenics. If Zai (x) does not initiate any actionagainst such violation of such MacroGenics Product-Specific Patents, Product-specific claims within other MacroGenics LicensedPatents or Jointly Owned Product Patents solely with respect to Products (excluding MGA012) in the Territory, including bycommencement of a lawsuit against the accused person if necessary or obtain settlement thereof (in accordance with this Agreement),within [***] months after receiving notice of such infringement of such MacroGenics Licensed Patents, Product-specific claims withinother MacroGenics Licensed Patents or Jointly Owned Product Patents, or (y) if such action is initiated within such period, ceases topursue or withdraws from such action, then in each case ((x) and (y)) MacroGenics shall be entitled (but shall not be obligated) to takeall actions reasonably necessary to abate such violation in the Territory, including commencement of a lawsuit against the accusedThird Party if necessary.(iii)[***] shall have the first right (but not the obligation) to institute and direct legal proceedingsagainst any Third Party believed to be infringing Zai Product-Specific Patents and Product-specific claims within other Zai LicensedPatents (within the scope of the exclusive license granted by Zai to MacroGenics under this Agreement) outside the Territory or OtherJointly Owned Patents outside the Territory. [***] agrees to discuss the foregoing in good faith with [***]. If [***] (x) does notinitiate any action against such violation of the Zai Product-Specific Patents or Product-specific claims within other Zai Licensed Patentsoutside the Territory or Other Jointly Owned Patents outside the Territory, as applicable, including by commencement of a lawsuitagainst the accused person if necessary or obtain settlement thereof (in accordance with this Agreement), within [***] months afterreceiving notice of such infringement of such Zai Product-Specific Patents or Product-specific claims within other Zai Licensed Patentsor Other Jointly Owned Patents, or (y) if such action is initiated within such period, ceases to pursue or withdraws from such action,then in each case ((x) and (y)) [***] shall be entitled (but shall not be obligated) to take all actions reasonably necessary to abate suchviolation outside the Territory with respect to the Zai Product-Specific Patents or Product-specific claims within other Zai LicensedPatents or outside the Territory with respect to the Other Jointly Owned Patents, including commencement of a lawsuit against theaccused Third Party if necessary.(iv)All amounts recovered from enforcement of any such rights by either Party in the Territory(or with respect to Zai Product-Specific Patents or Product-specific claims within other Zai Licensed Patents outside the Territory orJointly Owned Patents in the Territory or outside the Territory) relating to the intellectual property licensed under this Agreement shallbe first used to reimburse each Party’s costs and expenses incurred in connection with such action, and any remainder of such recovery,other than amounts recovered as lost profits, shall be retained by (i) Zai if Zai is the Party instituting the action, provided that anyremainder retained by Zai shall be treated as Net Sales and shall be subject to Zai ’s royalty payment obligations at the applicable ratespecified in Section 7.3; (ii) shared between MacroGenics and Zai [***] if MacroGenics is the Party instituting the action during theTerm in the Territory where MacroGenics has the first right to enforce, or retained by MacroGenics if MacroGenics isTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 53  the Party instituting the action during the Term in the Territory where MacroGenics exercised its backup right to enforce; and (iii)MacroGenics if MacroGenics is the Party instituting the action with respect to a Zai Product-Specific Patent or Product-specific claimswithin other Zai Licensed Patents (A) during the Term or (B) after the Term and has exercised its option under Section 15.6(a)(iii)(2) orZai terminates this Agreement for MacroGenics’ breach under Section 15.2, provided that any remainder retained by MacroGenics shallbe treated in the same as Net Sales were treated during the Term and shall be subject to MacroGenics royalty payment obligations orThird Party Triggered Payments, to the extent applicable, at the applicable rate specified in Section 15.6(a)(iii)(2) or 15.6(b)(ii).(c)Cooperation in Enforcement Proceedings. For any action by a Party pursuant to subsection (b) above,in the event that such Party is unable to initiate or prosecute such action solely in its own name, the other Party shall join such actionvoluntarily and shall execute all documents necessary for such Party to initiate, prosecute and maintain such action. If either Zai orMacroGenics initiates an enforcement action pursuant to Section 13.5(b), then the other Party shall cooperate to the extent reasonablynecessary and at the first Party’s sole expense (except for the expenses of the non-controlling Party’s counsel, if any). Upon thereasonable request of the Party instituting any such action, such other Party shall join the suit and can be represented in any such legalproceedings using counsel of its own choice. Each Party shall assert and not waive the joint defense privilege with respect to allcommunications between the Parties reasonably the subject thereof.(d)Status; Settlement. The Parties shall keep each other informed of the status of and of their respectiveactivities regarding any enforcement action pursuant to Section 13.5(b). Neither Party shall settle any litigation or legal proceeding inthe Territory to enforce MacroGenics Licensed Patents against a Third Party selling a Product that binds to or otherwise affects theHER2/Neu receptor (with respect to a Margetuximab Product), or [***] (with respect to a [***] Trident Product) or MacroGenicsLicensed Trademarks without the other Party’s written authorization. Zai will not enter into any settlement of any action described inthis Section 13.5 that admits to the invalidity, unpatentability, narrowing of scope or unenforceability of the MacroGenics LicensedPatents or the Jointly Owned Patents in any manner, incurs any financial liability on the part of MacroGenics or requires an admissionof liability, wrongdoing or fault on the part of MacroGenics, in each case without MacroGenics’ prior written consent. MacroGenicswill not enter into any settlement of any action described in this Section 13.5 that admits to the invalidity, unpatentability, narrowing ofscope or unenforceability of the Zai Licensed Patents or the Jointly Owned Patents in any manner, incurs any financial liability on thepart of Zai or requires an admission of liability, wrongdoing or fault on the part of Zai, in each case without Zai’s prior written consent. 13.6Defense(a)Notice of Allegations. Each Party shall notify the other in writing of any allegations it receives from aThird Party that the manufacture, production, use, development, sale, offer for sale, import or distribution of any Product or practice of any MacroGenics Licensed Technology or Zai Licensed Patents or Zai Licensed Know-how licensed by a Party under this Agreementor Jointly Owned Patents infringes the intellectual property rights of such Third Party in the Territory or with respect to the Zai LicensedPatents, Zai Licensed Know-how or Jointly Owned Patents outside the Territory. Such notice shall be provided promptly, but in noevent after more than [***] Business Days, following receipt of such allegations.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 54  (b)Notice of Suit. In the event that a Party receives notice that it or any of its Affiliates have beenindividually or collectively named as a defendant (or defendants) in a legal proceeding by a Third Party alleging infringement of aThird Party’s Patents issued (i) in the Territory as a result of the manufacture, production, use, development, sale, offer for sale, import or distribution of Products or any MacroGenics Licensed Technology or Zai Licensed Patents or Zai Licensed Know-how licensed by aParty under this Agreement or Jointly Owned Patents, or (ii) outside the Territory as a result of the practice of any Zai Licensed Patents,Zai Licensed Know-how or Jointly Owned Patents, such Party shall immediately notify the other Party in writing and in no event notifysuch other Party later than [***] Business Days after the receipt of such notice. Such written notice shall include a copy of anysummons or complaint (or the equivalent thereof) received regarding the foregoing. Each Party shall assert and not waive the jointdefense privilege with respect to all communications between the Parties reasonably the subject thereof. In such event, the Parties shallagree how best to mitigate or control the defense of any such legal proceeding; provided however, that if either Party or any of itsAffiliates have been individually named as a defendant in a legal proceeding relating to the alleged infringement of a Third Party’sissued Patents in the Territory as a result of the manufacture, production, use, development, sale or distribution of Products, the otherParty shall be allowed to join in such action, at its own expense.(c)Status; Settlement. The Parties shall keep each other informed of the status of and of their respectiveactivities regarding any litigation or settlement thereof initiated by a Third Party as contemplated under Section 13.6(a) or Section13.6(b); provided, however, that no settlement or consent judgment or other voluntary final disposition of a suit under thisSection 13.6(c) may be undertaken by a Party without the consent of the other Party which consent shall not be unreasonably withheld,conditioned or delayed.14.Dispute Resolution14.1Exclusive Dispute Resolution Mechanism. The Parties agree that the procedures set forth in this Section 14 shallbe the exclusive mechanism for resolving any Dispute between the Parties that may arise from time to time pursuant to this Agreementrelating to either Party’s rights or obligations hereunder that is not resolved through good faith negotiation between the Parties. For theavoidance of doubt, this Section 14 shall not apply to any decision with respect to which a Party has final decision-making authorityhereunder. Any Dispute, including Disputes that may involve the parent company, subsidiaries, or Affiliates under common control ofany Party, shall be resolved in accordance with this Section 14.14.2Resolution by Executive Officers. Except as otherwise provided in this Section 14, in the event of any Disputeregarding the construction or interpretation of this Agreement or the rights, duties or liabilities of either Party hereunder, the Parties shallfirst attempt in good faith to resolve such Dispute by negotiation and consultation between themselves. In the event that such Dispute isnot resolved on such basis within [***] Business Days (unless otherwise agreed by the Parties) after being submitted to the JSC, eitherParty may, by written notice to the other Party, refer the Dispute to the Executive Officer of each Party for attempted resolution by goodfaith negotiation within [***] Business Days after such notice is received (unless otherwise agreed by the Parties). Each Party may, inits discretion, seek resolution of any and all Disputes that are not resolved under this Section 14.2 in accordance with Section 14.3.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 55  14.3Arbitration. If the Parties fail to resolve the Dispute pursuant to Section 14.2, and a Party desires to pursueresolution of the Dispute, the Dispute shall be referred to and finally resolved by arbitration administered by the Singapore InternationalArbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”)for the time being in force, which rules are deemed incorporated by reference in this clause. The seat of the arbitration shall be inSingapore, and the arbitration tribunal shall consist of three arbitrators, of whom each Party shall designate one in accordance with theappointment procedures provided in the SIAC Rules and the chairs shall be selected by the tribunal in accordance the SIAC Rules. Thelanguage of the arbitration shall be English.14.4Costs of Dispute Resolution. Each Party shall be solely responsible for the costs it incurs to resolve a Disputeexcept for the costs of engaging arbitrators which shall be [***].15.Terms and Termination15.1Term. Unless earlier terminated, this Agreement shall continue in effect until the expiration of the Royalty Term(“Term”), and thereafter Zai has no remaining payment obligations with respect to the Products pursuant to Section 7.3 above andMacroGenics shall have no further obligations hereunder. 15.2Termination for Cause. This Agreement may be terminated as a whole, or in part with respect to [***] TridentProducts or Margetuximab Products or Combination Regimens only, at any time during the Term upon written notice by either Party ifthe other Party is in material breach of its material obligations under this Agreement and, in each case, has not cured such breach within[***] days after notice requesting cure of the breach (other than for non-payment which shall be cured within [***]days). Notwithstanding the foregoing, in the event there is a good faith dispute as to whether such termination is appropriate, thetermination shall not become effective unless and until such dispute is resolved in favor of the Party seeking such breach.15.3Termination for Convenience. At any time after the second (2nd) anniversary of the Effective Date, Zai mayterminate this Agreement in its entirety for any or no reason upon [***] days’ written notice to MacroGenics.15.4Termination for Safety and End of Global Development. MacroGenics may terminate this Agreement in itsentirety or on a Product-by-Product or Region-by-Region basis upon [***] days’ written notice if a Major Safety Issue has occurredwith respect to a Product before First Commercial Sale of the Product in the Territory and MacroGenics, its Affiliates and otherlicensees have all discontinued the global Development, Manufacturing and Commercialization activities with respect to such Productand announced such discontinuation through a press release or other public announcement.15.5Termination for Force Majeure. This Agreement may be terminated at any time during the Term upon writtennotice by either Party in accordance with Section 16.1.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 56  15.6Effect of Termination.(a)If MacroGenics terminates this Agreement pursuant to Section 15.2 for cause based on material breachby Zai, Section 15.4 or Section 15.5, or if Zai terminates this Agreement pursuant to Section 15.3 or 15.5:(i)Zai shall pay any amounts due pursuant to Section 3.6 and Section 7 prior to the date oftermination;(ii)For the avoidance of doubt, the licenses and sublicenses granted to Zai under Sections 9.1(a)and 9.3 shall terminate;(iii)The following shall apply:(1)The license granted to MacroGenics under Section 9.2 shall survive;(2)Zai hereby grants MacroGenics the exclusive option to convert the non-exclusive license granted to MacroGenics under Section 9.2 to an exclusive license and to expand such license to include the Territoryby providing written notice to Zai of such election within [***] days of the effective date of termination of this Agreement. In theevent that MacroGenics exercises its option hereunder within such [***] day period, then the non-exclusive license granted toMacroGenics by Zai pursuant to Section 9.2 shall automatically (without any further action required on the part of either Party) convertto an exclusive license and the license shall automatically encompass the Territory as of the effective date of such notice, and thereafter,MacroGenics agrees to pay to Zai, on a Country-by-Country and Region-by-Region basis in the Territory, a royalty at a rate of either(a) [***], if [***], or (b) [***], if [***] as contemplated by Section 9.2(b), in each case ((a) or (b)) of MacroGenics’ Net Sales ofLicensed Compounds and Products in the Territory during the Royalty Term, which royalty shall further be subject to Section 7.4 (inwhich case Net Sales, Royalty Term and Section 7.4 shall be applied mutatis mutandis, provided that, for clarity, that subsection (b) ofthe defined Royalty Term shall be based on the Zai Licensed Patents (for which MacroGenics maintains the exclusive license fromZai) and not the MacroGenics Licensed Patents); provided that in the event of a termination of this Agreement by Zai pursuant toSection 15.3, the foregoing royalty shall be in lieu of (and not in addition to) the royalty contemplated by Section 9.2. (iv)Zai shall return to MacroGenics or its designee all Products (including all LicensedCompounds) and all MGA012 within its possession or control and arrange for the Zai Sublicensees to return to MacroGenics or itsdesignee all Products (including all Licensed Compounds) and MGA012 within such Zai Sublicensees’ possession or control;(v)Zai shall cease to Develop and Commercialize all Licensed Compounds and Products(including all Combination Regimen and Combination Products), including immediately stopping enrollment of subjects (unlessotherwise directed in writing by MacroGenics) into any Clinical Trial being conducted by the Parties and at MacroGenics’ sole electioneither wind-down (including to cease administering Licensed Compounds or Products to Clinical Trial subjects and conducting ClinicalTrial procedures on Clinical Trial subjects, to the extent medically advisable) or transition to MacroGenicsTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 57  (or its designee) any Clinical Trial then be conducted by Zai, but in all cases in a timely manner and in accordance with all ApplicableLaws and Regulations;(vi)Zai shall cease all marketing and promotion of MGA012 as a component of a CombinationRegimen, including as part of a Combination Product. (vii)for the Products (including Licensed Compounds), Zai shall assign and promptly transfer toMacroGenics, [***], all of Zai’s right, title and interest, if any, in and to (A) all Regulatory Submissions (such as Regulatory Approvals,INDs, BLAs, NDAs, and drug master files) and clinical trial agreements (to the extent assignable and not cancelled) for suchProducts(s), to the extent that MacroGenics elects to continue development of such Product(s); (B) all data, including clinical data,materials and information of any kind or nature whatsoever, in Zai ’s possession or in the possession of its Affiliates or its or theirrespective agents related to such Product(s); (C) all trademarks related to such Products (if such termination occurs after approval ofsuch trademark by a Regulatory Authority); and (D) all material information, and any other information reasonably requested andrequired by MacroGenics, relating to the manufacture of such Products;(viii)all sublicenses under the rights granted pursuant to Section 9.1(b) shall terminate, unlessconverted to a direct license under Section 9.1(b) subject to terms and conditions to be agreed between MacroGenics and suchsublicensee; and(ix)MacroGenics shall revoke (and Zai shall allow revocation of) any powers of attorney for anyMacroGenics Licensed Patents that Zai holds as of the time of such termination; and(b)If Zai terminates this Agreement pursuant to Sections 15.2 for cause based on material breach byMacroGenics, the following shall apply; provided that MacroGenics’ failure to supply Product or MGA012 to Zai (other than due toMacroGenics’ gross negligence or willful misconduct) shall not constitute a material breach by MacroGenics:(i)Section 15.6 (a) clauses (i), (ii), (v), (vi), (viii) and (ix) shall apply, clause (iv) shall applysubject to MacroGenics’ payment to Zai for the Fully Burdened Manufacturing Costs for the Products transferred to MacroGenicsthereunder, and clause (vii) shall apply subject to MacroGenics’ payment to Zai in a commercially reasonable form and amount to beagreed by the Parties at the time of such termination as consideration for Regulatory Submissions, clinical trial agreements, data,materials, information and trademarks generated by or on behalf of Zai or its Affiliates or sublicensees under this Agreement and relatedto Products; (ii)the license granted to MacroGenics under Section 9.2 shall survive (subject to MacroGenics’continuing payment of any Triggered Third Party Payments to Zai) and thereafter, MacroGenics agrees to pay to Zai, on a country-by-country basis outside the Territory, a royalty at a rate of [***], which royalty shall further be subject to Section 7.4 (in which case NetSales, Royalty Term and Section 7.4 shall be applied mutatis mutandis, provided that, for clarity, that subsection (b) of the definedRoyalty Term shall be based on the Zai Licensed Patents (for which MacroGenics maintains the exclusive license from Zai) and notthe MacroGenics Licensed Patents).THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 58  15.7Survival. The following provisions shall survive the termination or expiration of this Agreement for any reason:Sections 1, 3.8, 4.4(f), 4.4(g), 7.3, 7.8, 7.9, 7.10, 8, 9.2, 10.1, 10.3, 11.4, 12, 13.1, 14, 15.6, 15.7, 16. In addition, the other applicableprovisions of Section 7 shall survive such expiration or termination of this Agreement in its entirety to the extent required to make finalreimbursements, reconciliations or other payments incurred or accrued prior to the date of termination or expiration. 16.Miscellaneous16.1Force Majeure. Neither Party shall be held liable to the other Party nor be deemed to have defaulted under orbreached this Agreement for failure or delay in performing any obligation under this Agreement to the extent such failure or delay iscaused by or results from causes beyond the reasonable control of the affected Party including embargoes, war, acts of war (whetherwar be declared or not), insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, fire, floods, or other acts of God, or acts, omissions or delays in acting by any governmental authority or the other Party (“Force Majeure”). The affected Partyshall notify the other Party of such force majeure circumstances as soon as reasonably practical, and shall promptly undertake allreasonable efforts necessary to cure such force majeure circumstances. In the event a Party is unable to perform its obligations underthis Agreement due to Force Majeure for a period of [***] days, the other Party shall have the option of unilaterally terminating thisAgreement upon providing [***] days written notice.16.2Section 365(n) of the Bankruptcy Code. All rights and licenses granted under or pursuant to any section of thisAgreement are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of rights to“intellectual property” as defined under Section 101(35A) of the U.S. Bankruptcy Code. The Parties shall retain and may fully exerciseall of their respective rights and elections under the U.S. Bankruptcy Code. The Parties agree that a Party that is a licensee of such rightsunder this Agreement shall retain and may fully exercise all of its rights and elections under the U.S. Bankruptcy Code, and that uponcommencement of a bankruptcy proceeding by or against the licensing Party (such Party, the “Involved Party”) under the U.S.Bankruptcy Code, the other Party (such Party, the “Noninvolved Party”) shall be entitled to a complete duplicate of or complete accessto (as such Noninvolved Party deems appropriate), any such intellectual property and all embodiments of such intellectual property,provided the Noninvolved Party continues to fulfill its payment or royalty obligations as specified herein in full. Such intellectualproperty and all embodiments thereof shall be promptly delivered to the Noninvolved Party (a) upon any such commencement of abankruptcy proceeding upon written request therefor by the Noninvolved Party, unless the Involved Party elects to continue to performall of its obligations under this Agreement or (b) if not delivered under (a) above, upon the rejection of this Agreement by or on behalfof the Involved Party upon written request therefor by Noninvolved Party. The foregoing is without prejudice to any rights theNoninvolved Party may have arising under the U.S. Bankruptcy Code or other Applicable Laws and Regulations.16.3Assignment. Neither Party may assign its rights and obligations under this Agreement without the prior writtenconsent of the other Party, provided that each Party may assign its rights and obligations under this Agreement, without such consentfrom the other Party, to its Affiliate or any successor in interest in connection with the sale of all or substantially all of its assets or a saleof all or substantially of the business related to a Licensed Compound or a Product, or a merger, acquisition or other similartransactions. For the avoidance of doubt, the terms and conditions of this Agreement shall be binding on the permitted successors andassignees of each Party.THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 59  16.4Severability. If any one or more of the provisions contained in this Agreement is held invalid, illegal orunenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any waybe affected or impaired thereby, unless the absence of the invalidated provision(s) adversely affects the substantive rights of the Parties.The Parties shall in such an instance use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legaland enforceable provision(s) which, insofar as practical, implement the purposes of this Agreement.16.5Notices. All notices which are required or permitted hereunder shall be in writing and sufficient if deliveredpersonally, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent bynationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed asfollows:if to MacroGenics, to:9704 Medical Center DriveRockville, MD 20850[***] with copy to: (which shall not constitutenotice)Goodwin Procter LLPExchange Place100 Northern Ave.Boston, MA 02210[***] if to Zai, to: 4560 Jinke Rd, Bldg. 1, 4/FPudong, Shanghai, China, 201210[***]or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordanceherewith. Any such notice shall be deemed to have been given upon receipt.16.6Applicable Law. All questions of inventorship shall be determined in accordance with U.S. patent laws. Inrespect to all other Patent issues related to the enforceability or validity of a Patent, the laws of the jurisdiction in which the applicablePatent is filed or granted shall govern. Except as otherwise indicated, in all other respects, the right and obligations of the Parties underthis Agreement shall be governed by and construed in accordance with the laws of [***].16.7Entire Agreement; Amendments. The Agreement contains the entire understanding of the Parties with respect tothe subject matter hereof, including the Collaboration and licenses granted hereunder. All express or implied agreements andunderstandings, either oral or written, with regard to the subject matter hereof, including the Collaboration and the licenses grantedhereunder, are superseded by the terms of this Agreement, including the Existing CDA. The Agreement may be amended, or any termhereof modified, only by a written instrument duly executed by authorized representatives of both PartiesTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 60  hereto. The “Existing CDA” means that certain Mutual Confidentiality Agreement between the Parties effective as of [***]. Anyconfidential information disclosed by the Parties pursuant to the Existing CDA shall be deemed to constitute Confidential Informationunder this Agreement. 16.8Headings. The captions to the several Sections hereof are not a part of the Agreement, but are merely forconvenience to assist in locating and reading the several Sections and Sections of this Agreement.16.9Independent Contractors. It is expressly agreed that MacroGenics and Zai shall be independent contractors andthat the relationship between the two Parties shall not constitute a partnership, joint venture or agency. Neither MacroGenics nor Zaishall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall bebinding on the other Party, without the prior written consent of the other Party.16.10Waiver. The waiver by either Party of any right hereunder, or the failure of the other Party to perform, or abreach by the other Party, shall not be deemed a waiver of any other right hereunder or of any other breach or failure by such otherParty whether of a similar nature or otherwise.16.11Cumulative Remedies. No remedy referred to in this Agreement is intended to be exclusive, but each shall becumulative and in addition to any other remedy referred to in this Agreement or otherwise available under law.16.12Waiver of Rule of Construction. Each Party has had the opportunity to consult with counsel in connection withthe review, drafting and negotiation of this Agreement. Accordingly, the rule of construction that any ambiguity in this Agreement shallbe construed against the drafting Party shall not apply.16.13Counterparts. The Agreement may be executed in two or more counterparts, each of which shall be deemed anoriginal, but all of which together shall constitute one and the same instrument.16.14Further Assurances. Each Party shall duly execute and deliver, or cause to be duly executed and delivered,such further instruments and do and cause to be done such further acts and things, including the filing of such assignments, agreements,documents and instruments, as may be necessary or as the other Party may reasonably request in connection with this Agreement or tocarry out more effectively the provisions and purposes, or to better assure and confirm unto such other Party its rights and remediesunder this Agreement.16.15Construction. Except where the context otherwise requires, wherever used, the singular shall include the plural,the plural the singular, the use of any gender shall be applicable to all genders and the word “or” is used in the inclusive sense(and/or). Whenever this Agreement refers to a number of days, unless otherwise specified, such number refers to calendar days. Thecaptions of this Agreement are for convenience of reference only and in no way define, describe, extend or limit the scope or intent ofthis Agreement or the intent of any provision contained in this Agreement. The words “include”, “includes” and “including” shall bedeemed to be followed by the phrase “without limitation”. References to “Section” or “Sections” are references to the numberedsections of this Agreement, unless expressly stated otherwise. All dollars are United States Dollars. Unless the context otherwiserequires, countries shall include territories. References to any specific law or article, section or other division thereof, shall be deemed toinclude the then-current amendments or any replacement law thereto. THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.REDACTED MATERIAL IS MARKED WITH [***] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIESAND EXCHANGE COMMISSION. 61  The Parties have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date. Zai Lab (Shanghai) Co., Ltd. MacroGenics, Inc. By:/s/Tao Fu By:/s/Scott KoenigName:Tao Fu Name:Scott KoenigTitle:President Title:CEO Chop/Corporate Seal:  Exhibit A Application No.Publication No.Patent No.Filing DateTitle[***][***][***][***][***] CountryApplication No.Publication No.Patent No.[***][***][***][***] CONFIDENTIAL Exhibit BMacroGenics Licensed Trademarks[***] CONFIDENTIAL Exhibit CGlobal Development Plan and Territory Specific Development Plan[***]  Exhibit D SAFETY MANAGEMENT PLAN COMPONENTS [***]  Exhibit E Product Royalty RatesApplicableProductAggregate Net Sales thresholdof the applicable Products inthe Territory:Then the Product RoyaltyRate Percentage shall be(%):MargetuximabProductsOn that portion of aggregate Net Sales in a Calendar Year less than [***][***]On the portion of Net Sales in a Calendar Year equal to or greater than [***] but less than [***][***]On that portion of Net Sales in a Calendar Year greater than [***] 20MGD013ProductsAll[***][***] TridentProductsAll[***] [***]  Exhibit F Press Release MacroGenics and Zai Lab Announce Exclusive Collaboration and LicenseAgreement to Develop and Commercialize Margetuximab, MGD013 andTRIDENT™ Molecule in Greater China-Comprehensive collaboration across three MacroGenics’ pipeline programs to accelerate and expand ongoingdevelopment-Expand Zai Lab’s late-stage clinical pipeline with margetuximab and obtain rights to first-in-class dual checkpointinhibitor, MGD013-Jointly conduct global studies across multiple indications, including HER2 positive gastric cancer with margetuximab-MacroGenics to receive $25 million upfront cash payment and potential future milestones and royaltiesROCKVILLE, MD, and SHANGHAI, China, Nov. 29, 2018 (GLOBE NEWSWIRE) – MacroGenics (NASDAQ: MGNX), aclinical-stage biopharmaceutical company focused on discovering and developing innovative monoclonal antibody-based therapeuticsfor the treatment of cancer, and Zai Lab Limited (NASDAQ: ZLAB), a Shanghai-based innovative biopharmaceutical company,announced today that the companies have entered into an exclusive collaboration and license agreement involving three immuno-oncology (I-O) programs from MacroGenics’ pipeline of product candidates: •Margetuximab, an immune-optimized anti-HER2 monoclonal antibody currently being evaluated in Phase 3 metastatic breastcancer with anticipated topline results in the first quarter of 2019. •MGD013, a first-in-class bispecific DART® molecule designed to provide coordinate blockade of PD-1 and LAG-3 for thepotential treatment of a range of solid tumors and hematological malignancies. •An undisclosed multi-specific TRIDENT™ molecule in preclinical development.Zai Lab obtains regional development and commercialization rights for these programs in mainland China, Hong Kong, Macau andTaiwan. Zai Lab will lead clinical development in its territory by leveraging its regulatory and clinical development expertise and broadregional network of investigators. As part of the collaborative clinical development effort, Zai Lab and MacroGenics intend to initiate aglobal study using combination regimens containing margetuximab in order to maximize potential clinical benefit in gastric cancer, thefifth most common cancer in the world and the second most common in China.“We believe Zai Lab is an ideal partner to enable us to expand MacroGenics’ global efforts to address patient populations with highunmet medical needs such as gastric cancer,” said Scott Koenig, M.D., Ph.D., President and Chief Executive Officer of MacroGenics.“Zai has a strong track record of rapidly progressing the development of innovative product candidates in China and is well on its way to building itscommercial platform. Zai is strongly positioned to take advantage of a growing pharmaceutical market in this region.”Dr. Samantha Du, Chief Executive Officer of Zai Lab said, “MacroGenics is a leader in the immuno-oncology field and we are thrilledto enter into this comprehensive strategic collaboration for a broad set of innovative assets. We believe we can build off the promising,previously reported results from MacroGenics’ clinical studies of margetuximab in HER2-positive breast and gastric cancer, which arehighly synergistic operationally with our other existing pipeline programs. We also look forward to working with MacroGenics inadvancing MGD013, an exciting first-in-class I-O program that will help distinguish our pipeline and create combination opportunitieswith our other oncology assets. We believe this collaboration significantly increases the value of our oncology portfolio and is anotherstep in establishing Zai as a leader in the field of innovative cancer treatments.”Under the terms of the agreement, MacroGenics will receive an upfront cash payment of $25 million and will be eligible to receive upto $140 million in potential development and regulatory-based milestone payments. In addition, Zai Lab would pay MacroGenicsdouble-digit royalties on annual net sales of the assets, which may be subject to adjustment in specified circumstances. Zai Lab to Host Webcast and Conference CallZai Lab will host a webcast and conference call to discuss the collaboration and license agreement on Thursday, November 29th, at8:30 a.m. ET.Zai Lab Investor Conference Call DetailsDate: Thursday, November 29, 2018Time: 8:30 a.m. EDTDial-In Details: 1-866-394-4355 (US); 1-314-888-4344 (International); 4006828609 (China) Conference ID: 5874458A live webcast and replay will be available on the Investor section of Zai Lab’s website at http://ir.zailaboratory.com. A slidepresentation will accompany the webcast and will also be available on Zai Lab’s website. About MacroGenics' Margetuximab ProgramMargetuximab is an Fc-optimized monoclonal antibody that targets the human epidermal growth factor receptor 2,or HER2, oncoprotein. HER2 is expressed by tumor cells in breast, gastric, and other solid tumor cancers, making it a key marker forbiologic therapy. MacroGenics has completed enrollment of its pivotal Phase 3 SOPHIA study, which is evaluating the treatment ofrelapsed/refractory HER2-positive metastatic breast cancer patients. MacroGenics anticipates disclosure of topline PFS results from thistrial in the first quarter of 2019. In addition to being studied in metastatic breast cancer, margetuximab is also being studied incombination with an anti-PD-1 agent in a Phase 2 clinical trial in gastric cancer, for which data was recently presented at the 2018European Society of Medical Oncology (ESMO) Congress. About MacroGenics' MGD013 ProgramMGD013 is a first-in-class bispecific DART molecule designed to provide coordinate blockade of two immunecheckpoint molecules expressed on T cells, PD-1 and LAG-3, for the potential treatment of a range of solid tumors and hematologicalmalignancies. MacroGenics recently established the dose and schedule for MGD013 administration and has initiated dose expansion inup to nine tumor types. About MacroGenics, Inc.MacroGenics is a clinical-stage biopharmaceutical company focused on discovering and developing innovativemonoclonal antibody-based therapeutics for the treatment of cancer. The company generates its pipeline of product candidatesprimarily from its proprietary suite of next-generation antibody-based technology platforms, which have applicability across broadtherapeutic domains. The combination of MacroGenics' technology platforms and protein engineering expertise has allowed thecompany to generate promising product candidates and enter into several strategic collaborations with global pharmaceutical andbiotechnology companies. For more information, please see MacroGenics’ website at www.macrogenics.com. MacroGenics,the MacroGenics logo and DART and TRIDENT are trademarks or registered trademarks of MacroGenics, Inc.About Zai LabZai Lab is a Shanghai-based innovative biopharmaceutical company focused on bringing transformative medicinesfor cancer, autoimmune and infectious diseases to patients in China and around the world. Zai Lab’s experienced team has securedpartnerships with leading global biopharma companies, generating a broad pipeline of innovative drug candidates targeting the fast-growing segments of China's pharmaceutical market and addressing unmet medical needs. Zai Lab's vision is to become a fullyintegrated biopharmaceutical company, discovering, developing, manufacturing and commercializing its partners' and its own productsin order to impact human health worldwide.MacroGenics’ Cautionary Note on Forward-Looking StatementsAny statements in this press release about future expectations, plans and prospects for MacroGenics, includingstatements about the company's strategy, future operations, clinical development of the company's therapeutic candidates, milestone oropt-in payments from the company's collaborators, the company's anticipated milestones and future expectations and plans andprospects for the company and other statements containing the words "subject to", "believe", "anticipate", "plan", "expect", "intend","estimate", "project", "may", "will", "should", "would", "could", "can", the negatives thereof, variations thereon and similar expressions,or by discussions of strategy constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 andSection 21E of the Securities Exchange Act of 1934. Actual results may differ materially from those indicated by such forward-lookingstatements as a result of various important factors, including: the uncertainties inherent in the initiation and enrollment of future clinicaltrials, expectations of expanding ongoing clinical trials, availability and timing of data from ongoing clinical trials, expectations forregulatory approvals, other matters that could affect the availability or commercial potential of MacroGenics’ product candidates andother risks described in the company's filings with the Securities and Exchange Commission. In addition, the forward-lookingstatements included in this press release represent MacroGenics’ views only as of the date hereof. MacroGenics anticipates thatsubsequent events and developments will cause the company's views to change. However, while the company may elect to updatethese forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so, except as maybe required by law. These forward-looking statements should not be relied upon as representing MacroGenics’ views as of any datesubsequent to the date hereof. Zai Lab Forward-Looking StatementsThis press release contains statements about future expectations, plans and prospects for Zai Lab, including,without limitation, statements regarding business strategy, plans and objectives for future operations and other statements containingwords such as "anticipates", “believes”, "expects", “plans” and other similar expressions. Such statements constitute forward-lookingstatements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements ofhistorical fact nor are they guarantees or assurances of future performance. Forward-looking statements are based on ZaiLab's expectations and assumptions as of the date of this press release and are subject to inherent uncertainties, risks and changes incircumstances that may differ materially from those contemplated by the forward-looking statements. Actual results may differmaterially from those indicated by such forward-looking statements as a result of various important factors, including but not limited to(1) Zai Lab’s ability to obtain additional future funding, (2) Zai Lab’s results of clinical and pre-clinical development of its drugcandidates, (3) the content and timing of decisions made by the relevant regulatory authorities regarding regulatory approvals of ZaiLab’s drug candidates, (4) Zai Lab’s ability to generate revenue from its drug candidates, and (5) other factors discussed in ZaiLab's Annual Report on Form 20-F for the fiscal year ended December 31, 2017 and its other filings with the Securities and ExchangeCommission. Zai Lab anticipates that subsequent events and developments will cause Zai Lab’s expectations and assumptions tochange and undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of newinformation, future events or otherwise, except as may be required by law. These forward-looking statements should not be relied uponas representing Zai Lab’s views as of any date subsequent to the date of this press release.MacroGenics Contacts:Jim Karrels, Senior Vice President, CFOMacroGenics, Inc.1-301-251-5172, info@macrogenics.com Karen Sharma, Senior Vice PresidentMacDougall Biomedical Communications1-781-235-3060, ksharma@macbiocom.com Zai Lab Contacts:Billy Cho, CFO+86 137 6151 2501 billy.cho@zailaboratory.com Media: Nancie Steinberg / Robert Flamm, Ph.D.Burns McClellan, on behalf of Zai Lab212-213-0006, nsteinberg@burnsmc.com / rflamm@burnsmc.com Investors: Jill SteierBurns McClellan, on behalf of Zai Lab212-213-0006, jsteier@burnsmc.com  Exhibit 10.18 FOURTH AMENDED AND RESTATED FOUNDER EMPLOYMENT AGREEMENTTHIS FOURTH AMENDED AND RESTATED FOUNDER EMPLOYMENT AGREEMENT (“Agreement”) is madeand entered into as of December 1, 2018 (the “Effective Date”), by and between Zai Lab Limited, a limited company incorporatedunder the laws of the Cayman Islands (the “Company”), and Samantha (Ying) Du, an individual (the “Founder”).WHEREAS, the Company and the Founder previously entered into that certain Third Amended and Restated FounderEmployment Agreement dated as of November 10, 2017 (the “Existing Agreement”); andWHEREAS, the Company and the Founder desire to amend and replace the Existing Agreement in its entirety with theterms and conditions set forth in this Agreement.NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, and for other goodand valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:1.Employment. The Founder’s employment under the terms of this Agreement will commence as of the EffectiveDate and will continue until terminated in accordance with Section 4 (the “Employment Period”).1.1.Duties and Responsibilities. The Company agrees to employ the Founder as the Chairperson and ChiefExecutive Officer of the Company, to render such services and to perform such duties and responsibilities as are normally associatedwith and inherent in the aforementioned role and the capacity in which the Founder is employed, as well as such other duties andresponsibilities as shall from time to time be assigned to the Founder by the Board of Directors of the Company (the “Board”).1.2.Acceptance of Employment. The Founder accepts such employment set out in Section 1.1 and agreesto faithfully perform and render the services required of the Founder under this Agreement. Except for reasonable vacations, absencesdue to temporary illness, and activities that may be mutually agreed to by the parties, the Founder shall devote substantially all of hertime, attention and energies during normal business hours and such evenings and weekends as may be reasonably required for thedischarge of her duties to the Company and the performance of the Founder’s duties and responsibilities under this Agreement.1.3.Positions with Subsidiaries/Affiliates. If requested by the Board and agreed upon by the Founder, theFounder agrees to serve without additional compensation if elected, nominated or appointed as an officer and/or director of theCompany and any of the subsidiaries or affiliates of the Company and in one or more executive offices of any of the subsidiaries oraffiliates of the Company, provided that the Founder is indemnified for serving in any and all such capacities pursuant to theindemnification provisions set forth in the bylaws of such subsidiaries and/or affiliates.1  1.4.Conflicts of Interest. The Founder has reviewed with the Board the present directorships, ownership(legal and beneficial, direct and indirect) interests and other positions or roles held by the Founder or her associate(s) in all suchbusiness organizations or arrangements which may be directly competitive or directly in conflict with the Company. The Founderagrees to review with the Board any potential directorships, ownership (legal and beneficial, direct and indirect) interests and otherpositions or roles with business organizations or arrangements which may be directly competitive or directly in conflict with theCompany. The Founder or her associate(s) is precluded from owning an interest (legal and beneficial, direct and indirect) in anothercompany or serving as an employee, director, consultant, advisor or member of such other company that may be directly competitive ordirectly in conflict with the Company until such interest is presented to the Board and the Board consents to such interest oremployment. The Company further acknowledges and agrees that, subject to the prior written approval by a majority of the Board(which majority shall exclude the Founder if the Founder is a then-current member of the Board) and consistent with the terms of theCompliance Agreement (as defined below), the Founder may serve on the boards of directors and advisory boards of other companieswhich are not in direct competition or not in direct conflict with the Company and its subsidiaries and affiliates, provided that suchservice does not interfere with the performance of the Founder’s duties hereunder. Notwithstanding any of the foregoing, theFounder’s interest in, and affiliation with, Quan Venture Fund I, LP, and its affiliates is not deemed to conflict with her responsibilitiesto the Company or interfere with her performance of her duties hereunder.2.Reserved.3.Compensation, Benefits and Expense Reimbursements.3.1.Base Salary. In consideration for the agreement of the Founder to be employed under this Agreement,during the Employment Term, the Founder shall receive from the Company an annual base salary (as it may be adjusted from time totime, the “Base Salary”) of US$620,000, with the understanding that, at the sole discretion of the Company, up to an aggregate of (a)fifty percent (50%) of the Base Salary may be paid by the Company or one or more subsidiaries of the Company domiciled in theCayman Islands (each such subsidiary, a “Cayman Subsidiary”), (b) thirty percent (30%) of the Base Salary may be paid by one ormore subsidiaries of the Company domiciled in the People’s Republic of China (each, a “PRC Subsidiary”), and (c) twenty percent(20%) of the Base Salary may be paid by one or more subsidiaries of the Company domiciled in the United States (each, a “U.S.Subsidiary”), in each case, pursuant to a short-form labor contract between the Founder and such Cayman Subsidiary, PRCSubsidiary, or U.S. Subsidiary, as applicable, identified by the Company, to the extent required by or desirable under applicable laws.The Base Salary, and all other compensation and reimbursement under the Agreement, may be provided through a human resourcesservice or similar organization. The Company shall pay such Base Salary in arrears on the last working day (Monday to Friday) ofeach month in accordance with the standard payroll procedures of the Company (as they may be modified from time to time). TheBase Salary will be subject to review by the Board or the Compensation Committee of the Board (the “Compensation Committee”)and adjustments will be made by the Board or the Compensation Committee based upon its respective normal performance reviewpractices.2  3.2.Stock Options. During the Employment Period, the Founder may, from time to time, be entitled toreceive options to purchase ordinary shares of the Company or its affiliates and other equity-based incentives as and when determinedby the Board or the Compensation Committee, in its respective sole and exclusive discretion.3.3.Bonus. During the Employment Period, the Founder may be entitled to receive an annual bonus with atarget equal to 70% of the Base Salary (the “Target Bonus”), the actual amount of which shall be determined by the Board or theCompensation Committee in its respective discretion. Any annual bonus earned hereunder shall be paid not later than March 15thfollowing the end of the calendar year to which it relates and otherwise in accordance with the Company’s bonus plan as in effect fromtime to time. The Company’s current practice, which is subject to change, is to pay annual bonuses to employees in January of thecalendar year following the calendar year to which the annual bonus relates.3.4.Fringe Benefits. During the Employment Period, the Founder will be entitled to the fringe benefits thatare made available to employees of the Company and such other benefits as are determined by the Board or the CompensationCommittee, in its respective sole and exclusive discretion, it being understood that the Founder shall continue to receive the fringebenefits provided under the Existing Agreement.3.5.Reimbursements. During the Employment Period, the Founder will be reimbursed, in accordance withthe practice applicable to employees of the Company from time to time, for all reasonable traveling expenses and other disbursementsincurred by her for or on behalf of the Company in the performance of her duties hereunder upon presentation by the Founder ofappropriate documentation.3.6.Deductions. Recognizing that the Founder is an employee for all purposes, the Company or asubsidiary of the Company shall deduct from any compensation payable to the Founder the sums which the Company or suchsubsidiary is required by law to deduct, including, but not limited to, government state withholding taxes, social security taxes and statedisability insurance and mandatory provident funds, and the Company or such subsidiary shall pay any amounts so deducted to theapplicable governmental entities and agents entitled to receive such payments.4.Termination of Employment.4.1.Death or Disability. If the Founder dies during the Employment Period, the Founder’s employment bythe Company hereunder shall automatically terminate on the date of the Founder’s death. If, during the Employment Period, theFounder is incapacitated or disabled by accident, sickness or otherwise so as to render her mentally or physically incapable ofperforming the services required to be performed by her under this Agreement for a period of ninety (90) consecutive days or longer,or for ninety (90) days during any six- (6-) month period (such condition being herein referred to as “Disability”), the Company, at itsoption, may terminate the Founder’s employment under this Agreement immediately upon giving her notice to that effect. In the caseof a Disability, until the Founder becomes eligible for disability income under the Company’s disability income insurance (if any) oruntil the Company terminates the Founder’s employment in accordance with the foregoing, whichever occurs first, the Founder will beentitled3  to receive compensation, at the rate and in the manner provided in Section 3.1, notwithstanding any such physical or mental disability.Termination pursuant to this Section 4.1 is referred to in this Agreement as a “Death/Disability Termination”.(a)Substitution. The Board may designate another employee to act in the Founder’s place duringany period of Disability suffered by the Founder during the Employment Period. Notwithstanding any such designation, the Foundershall continue to receive the Base Salary and benefits in accordance with Section 3 of this Agreement until the Founder becomeseligible for disability income under the Company’s disability income insurance (if any) or until the termination of the Founder’semployment, whichever occurs first.(b)Disability Income Payments. While receiving disability income payments under theCompany’s disability income insurance, if any (the “Disability Payments”), the Founder shall remain entitled to receive the Base Salaryunder Section 3.1, which shall be reduced by any Disability Payments received by the Founder, and shall continue to participate in allother compensation and benefits in accordance with Sections 3.2, 3.3 and 3.4 until the date of the Founder’s termination ofemployment.(c)Verification of Disability. If any question arises as to whether during any period the Founderis disabled through any illness, injury, accident or condition of either a physical or psychological nature so as to be unable to performsubstantially all of the Founder’s duties and responsibilities hereunder, the Founder may, and at the request of the Company shall,submit to a medical examination by a physician selected by the Company to whom the Founder or the Founder’s guardian has noreasonable objection to determine whether the Founder is so disabled and such determination shall for the purposes of this Agreementbe conclusive of the issue. If such question arises and the Founder fails to submit to such medical examination, the Company’sdetermination of the issue shall be binding on the Founder.4.2.Termination by the Company for Cause. The Company, on recommendation from the Board(excluding the Founder if the Founder is a then current member of the Board), may terminate the employment of the Founderhereunder at any time during the Employment Period for Cause (as defined below) (such termination being referred to in thisAgreement as a “Termination for Cause”) by giving the Founder notice of such termination, upon the giving of which suchtermination shall take effect immediately. For the purpose of this Agreement, “Cause” means any one of the following grounds:(a)repeated drunkenness or use of illegal drugs which adversely interferes with the performanceof the Founder’s obligations and duties to or for the Company;(b)the Founder’s conviction of a felony, or any crime involving fraud or misrepresentation orviolation of applicable securities laws;(c)gross mismanagement by the Founder of the business and affairs of the Company or anysubsidiary or affiliate of the Company which directly results in a material loss to the Company and for which the Company hasreasonable proof was committed by the Founder;(d)material violation of any material terms of this Agreement or the Compliance Agreement (asdefined below); or4  (e)a conclusive finding by an independent fact finder appointed by the Board of any willfulmisconduct, dishonesty or acts of moral turpitude by the Founder which is materially detrimental to the interests and well-being of theCompany and its subsidiaries and affiliates, including, without limitation, harm to its business or reputation.4.3.Termination by the Company without Cause. The Company, on recommendation from the Board(excluding the Founder if the Founder is a then-current member of the Board), may terminate the employment of the Founderhereunder other than for Cause at any time upon thirty (30) days advance written notice to the Founder (such termination beingreferred to in this Agreement as a “Termination without Cause”).4.4.Termination by the Founder for Good Reason. The Founder may terminate her employment hereunderat any time for Good Reason (as defined below) by giving the Company written notice of such termination, provided that such noticespecifies: (a) the basis for termination and (b) the effective date of termination (such termination being referred to in this Agreement asa “Termination for Good Reason”). For purposes of this Agreement, the term “Good Reason” shall mean (i) any materialdiminution of the Founder’s duties or responsibilities hereunder (except in each case in connection with the Termination for Cause orpursuant to Section 4.1) or the assignment to the Founder of duties or responsibilities that are materially inconsistent with the Founder’sthen current position; (ii) any material breach of this Agreement by the Company which is not cured within ten (10) business day daysafter written notice thereof is given to the Company; or (iii) a relocation of the Founder (other than any relocation requested by theFounder) from the place of assignment of the Founder by the Company as of the Effective Date to a location more than thirty (30)kilometers from such location, other than on a temporary basis not to exceed a period equal to six (6) consecutive calendar months.4.5.Termination by the Founder without Good Reason. The Founder may terminate her employmenthereunder without Good Reason at any time upon reasonable notice by the Founder to the Board of no fewer than thirty (30) calendardays (such termination being referred to in this Agreement as a “Termination without Good Reason”).5.Effect of Termination.5.1.Termination for Cause or without Good Reason.(a)Upon the termination of the Founder’s employment hereunder pursuant to a Termination forCause or a Termination without Good Reason, neither the Founder nor her beneficiary or estate will have any further rights or claimsagainst the Company, its affiliates or its subsidiaries under this Agreement except to receive the following (in the aggregate, the “FinalCompensation”):(i)the unpaid portion of the Base Salary provided for in Section 3.1, computed on apro rata basis up to (and including) the effective date of such termination;(ii)reimbursement for any expenses for which the Founder has not been reimbursed asprovided in Section 3.5, provided that that the Founder submits all such expenses andrequired supporting documentation within sixty (60) days of the effective date of suchtermination; and5  (iii)any additional compensation as may be expressly required under applicable law.(b)Final Compensation (other than any expense reimbursement, which shall be paid withinthirty (30) days after such reimbursement is submitted in accordance with subsection (ii) above) will be paid to the Founder withinthirty (30) days following the date of termination (or such shorter period required by law).5.2.Termination upon Death or Disability.(a)Upon the termination of the Founder’s employment hereunder pursuant to a Death/DisabilityTermination, neither the Founder nor her beneficiary or estate will have any further rights or claims against the Company, its affiliatesor its subsidiaries under this Agreement except to receive the following:(i)Final Compensation in accordance with Section 5.1; and(ii)an aggregate amount equal to one (1) months’ Base Salary plus an amount equal toone month of the Company’s portion of monthly premiums payable immediately prior to theeffective date of such termination with respect to health, dental, and vision insurancecoverage for the Founder, payable in accordance with the Company’s normal payrollpractices, subject to Sections 5.5, 5.6 and 5.7.(b)Notwithstanding anything to the contrary in any agreement between the Founder and theCompany, upon a Death/Disability Termination, the Founder, or her beneficiaries or estate (as applicable), will be entitled to onehundred percent (100%) accelerated vesting of any then-outstanding unvested stock options, restricted stock or other equity awardsgranted to the Founder by the Company, subject to Sections 5.5 (in the case of a termination by the Company due to Disability), 5.6and 5.7.5.3.Termination without Cause or for Good Reason.(a)Upon the termination of the Founder’s employment hereunder pursuant to a Terminationwithout Cause or a Termination for Good Reason, neither the Founder nor her beneficiary or estate will have any further rights orclaims against the Company, its affiliates or its subsidiaries under this Agreement except to receive the following (in the aggregate, the“Severance Payments”):(i)Final Compensation in accordance with Section 5.1;(ii)an aggregate payment equal to eighteen (18) months’ Base Salary;(iii)an aggregate payment equal to eighteen (18) months of the Company’s portion ofmonthly premiums payable immediately prior to the effective date of such termination withrespect to health, dental, and vision insurance coverage for the Founder; and6  (iv)a payment equal to a pro-rated Target Bonus (determined by multiplying theTarget Bonus by a fraction, the numerator of which is the number of days during the fiscalyear of termination that Founder is employed by the Company and the denominator of whichis three hundred and sixty-five (365)), payable at the same time bonuses for such year arepaid to other senior executives of the Company.(b)Subject to Sections 5.5, 5.6 and 5.7, Severance Payments (other than Final Compensation)will be provided in the form of salary continuation, payable in equal installments in accordance with the Company’s normal payrollpractices during the eighteen- (18) month period following the effective date of the termination of the Founder’s employment, providedthat the first such payment will be made on the next regular pay day following the date on which the Release of Claims (as definedbelow) becomes effective and irrevocable and will be retroactive to effective date of the termination of the Founder’s employment.(c)Notwithstanding anything to the contrary in any agreement between the Founder and theCompany, upon a Termination without Cause or a Termination for Good Reason, the Founder will be entitled to one hundred percent(100%) accelerated vesting of any then-outstanding unvested stock options, restricted stock or other equity awards granted to theFounder by the Company, subject to Sections 5.5, 5.6 and 5.7.5.4.Change in Control Termination.(a)Upon the termination of the Founder’s employment hereunder pursuant to a Terminationwithout Cause or a Termination for Good Reason within twelve (12) months following a Change in Control (such termination beingreferred to in this Agreement as a “Change in Control Termination”), neither the Founder nor her beneficiary or estate will have anyfurther rights or claims against the Company, its affiliates or its subsidiaries under this Agreement except to receive the following (inthe aggregate, the “Enhanced Severance Payments”):(i)Final Compensation in accordance with Section 5.1;(ii)an aggregate payment equal to eighteen (18) months’ Base Salary;(iii)an aggregate payment equal to eighteen (18) months of the Company’s portion ofmonthly premiums payable immediately prior to the effective date of such termination withrespect to health, dental, and vision insurance coverage for the Founder; and(iv)a payment equal to the sum of (x) six (6) months’ Base Salary, (y) two times theTarget Bonus and (z) six (6) months of the Company’s portion of monthly premiums payableimmediately prior to the effective date of such termination with respect to health, dental, andvision insurance coverage for the Founder.7  (b)Subject to Sections 5.5, 5.6 and 5.7, other than Final Compensation, Enhanced SeverancePayments will be paid as follows: (i) the amounts under Section 5.4(a)(ii) and Section 5.4(a)(iii) will be provided in the form of salarycontinuation, payable in equal installments in accordance with the Company’s normal payroll practices during the eighteen- (18-)month period following the effective date of the termination of the Founder’s employment, provided that the first such payment will bemade on the next regular pay day following the date on which the Release of Claims (as defined below) becomes effective andirrevocable and will be retroactive to effective date of the termination of the Founder’s employment, and (ii) the amount under Section5.4(a)(iv) will be paid in a lump sum on the next regular pay day following the date on which the Release of Claims (as defined below)becomes effective and irrevocable.(c)Notwithstanding anything to the contrary in any agreement between the Founder and theCompany, upon a Change in Control Termination, the Founder will be entitled to one hundred percent (100%) accelerated vesting ofany then-outstanding unvested stock options, restricted stock or other equity awards granted to the Founder by the Company, subject toSections 5.5, 5.6 and 5.7.(d)For purposes of this Agreement, “Change in Control” means the occurrence of any of thefollowing:(i)any one person, or more than one person acting as a group (“Person”), acquiresownership of the stock of the Company that, together with the stock held by such Person,constitutes more than 50% of the total voting power of the stock of the Company, except thatany change in the ownership of the stock of the Company as a result of a private financing ofthe Company that is approved by the Board will not be considered a Change in Control;(ii)a majority of members of the Board is replaced during any twelve- (12-) monthperiod by directors whose appointment or election is not endorsed by a majority of themembers of the Board prior to the date of the appointment or election; or(iii)any Person acquires (or has acquired during the twelve- (12- ) month periodending on the date of the most recent acquisition by such person or persons) assets from theCompany that have a total gross fair market value equal to or more than 50% of the totalgross fair market value of all of the assets of the Company immediately prior to suchacquisition or acquisitions. For purposes of this subsection (iii), gross fair market valuemeans the value of the assets of the Company, or the value of the assets being disposed of,determined without regard to any liabilities associated with such assets.For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation thatenters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with theCompany. Further and for the avoidance8  of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to re-domicile the Company in ajurisdiction other than its original jurisdiction of incorporation, or (ii) its sole purpose is to create a holding company that willbe owned in substantially the same proportions by the persons who held the Company’s securities immediately before suchtransaction. With regard to any payment considered to be nonqualified deferred compensation under Section 409A (asdefined below), to the extent applicable, that is payable upon a Change in Control, to avoid the imposition of an additionaltax, interest or penalty under Section 409A (as defined below), no amount will be payable unless such change in controlconstitutes a “change in control event” within the meaning of Section 1.409A-3(i)(5) of the Treasury Regulations.5.5.Conditions to Receipt of Severance. The receipt of any payments and benefits pursuant to Sections 5.2– 5.4 (other than Final Compensation) is conditioned on the Founder signing and not revoking a separation agreement and release ofclaims in a form reasonably satisfactory to the Company (the “Release of Claims”), provided that such separation agreement andrelease of claims becomes effective and irrevocable no later than sixty (60) days following the termination date (such deadline, the“Release Deadline”). If the Release of Claims does not become effective by the Release Deadline, the Founder will forfeit any rightsto severance or benefits (other than Final Compensation) under this Agreement. In no event will severance payments or benefits (otherthan Final Compensation) be paid or provided under this Agreement until such Release of Claims becomes effective andirrevocable. If the sixty (60) day period following termination referred to herein extends through two (2) taxable years, to the extentrequired to comply with Section 409A, such amount will be paid in the second taxable year (but within the sixty (60) day period)following the Founder’s termination.5.6.Section 409A. Notwithstanding anything to the contrary in this Agreement, if at the time theFounder’s employment terminates, the Founder is a “specified employee,” as defined below, any and all amounts payable under thisAgreement on account of such separation from service that would (but for this provision) be payable within six (6) months followingthe date of termination, shall instead be paid on the next business day following the expiration of such six- (6-) month period or, ifearlier, upon the Founder’s death; except (a) to the extent of amounts that do not constitute a deferral of compensation within themeaning of Treasury regulation Section 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in Section1.409A-1(b)(9)(iii), as determined by the Company in its reasonable good faith discretion); (b) benefits which qualify as exceptedwelfare benefits pursuant to Treasury regulation Section 1.409A-1(a)(5); or (c) other amounts or benefits that are not subject to therequirements of Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”). For purposes ofthis Agreement, all references to “termination of employment” and correlative phrases shall be construed to require a “separation fromservice” (as defined in Section 1.409A-1(h) of the Treasury regulations after giving effect to the presumptions contained therein), andthe term “specified employee” means an individual determined by the Company to be a specified employee under Treasury regulationSection 1.409A-1(i). 5.7.Limitations on Payments. Notwithstanding anything in this Agreement or elsewhere to the contrary, inthe event that any payment or benefit received or to be received by the Founder under this Agreement or otherwise (collectively, the“Payments”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this9  Section 5.7, be subject to the excise tax imposed by Section 4999 of the Code, then the Payments shall be reduced (but not below zero)to the extent, but only to the extent, needed to ensure that no portion of the Payments constitutes a “parachute payment” within themeaning of Section 280G of the Code; provided, that no reduction in the Payments shall be made by reason of this Section 5.7 unless,on an after-tax basis taking into account the excise tax imposed by Section 4999 of the Code together with all applicable income taxes,the Payments payable to the Founder would be greater than if such reduction had not been made. Any reduction in the Paymentsrequired by the immediately preceding sentence shall be applied, first, against any cash severance payments, then against otherpayments and benefits to which Q&A 24(c) of Section 1.280G-1 of the Treasury Regulations does not apply, and finally against allremaining payments and benefits.6.Compliance Agreement. The Founder agrees that the Compliance Agreement (as defined in the ExistingAgreement) remains in full force and effect, and the terms and conditions thereof are specifically incorporated herein by reference.7.Standards of Conduct. The Founder will conduct herself in an ethical and professional manner at all times and inaccordance with any employee policies or guidelines which the Company may issue from time to time.8.Indemnification.8.1.Indemnification. In the event that (a) the Founder was or is a party or is threatened to be made a partyto any Proceeding (as defined below) by reason of the Founder’s Corporate Status (as defined below) or (b) the Founder was or is aparty or is threatened to be made a party to any Proceeding by or in the right of the Company to procure a judgment in its favor byreason of the Founder’s Corporate Status, the Founder shall be indemnified by the Company against all Expenses and Liabilitiesincurred or paid by the Founder in connection with such Proceeding to the maximum extent permitted by applicable law (referred toherein as “Indemnifiable Amounts”). For purposes hereof, the terms (i) “Proceeding” means any threatened, pending or completedclaim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any otherproceeding, whether civil, criminal, administrative, arbitrative or investigative, whether formal or informal, (ii) “Corporate Status”means the status of the Founder as an employee and/or director of the Company, as applicable, (iii) “Expenses” means all fees, costsand expenses incurred in connection with any Proceeding, including, without limitation, reasonable attorneys’ fees, disbursements andretainers, fees and disbursements of expert witnesses, private investigators and professional advisors (including, without limitation,accountants, counsels and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing andbinding costs, telephone and fax transmission charges, postage, delivery services, secretarial services and other disbursements andexpenses and (iv) “Liabilities” means judgments, damages, liabilities, losses, penalties, excise taxes, and fines.8.2.Advancement of Expenses. The Company agrees that the Company shall pay to the Founder allIndemnifiable Amounts incurred by the Founder in connection with any Proceeding, including a Proceeding by the right of theCompany, in advance of the final disposition of such Proceeding, as the same are incurred, provided that the Founder provides theCompany with a written undertaking to repay the amount of Indemnifiable Amounts if it is finally determined by a court of competentjurisdiction that the Founder is not entitled under this Agreement to indemnification with respect to such Indemnifiable Amounts.10  8.3.Limitation on Indemnification. The Founder shall not be entitled to any indemnification under thisSection 8 if the Founder knowingly violated any duty, responsibility or obligation imposed under this Agreement, the ComplianceAgreement or any Company policy.8.4.Change in Law. To the extent that a change in applicable law (whether by statute or judicial decision)shall permit broader indemnification or advancement of expenses than is provided under this Agreement, the Founder shall be entitledto such broader indemnification and advancements, and this Agreement shall be deemed to be amended to such extent.9.Representations and Warranties of the Company. The Company represents and warrants to the Founder thatthe execution of this Agreement by the Company has been duly authorized by resolution of the Board.10.Representations and Warranties of the Founder. The Founder represents and warrants to the Company that:(i) the Founder has the proper skill, training and background so as to be able to perform under the terms of this Agreement in acompetent and professional manner; (ii) the Founder will not infringe any intellectual property rights including patent, copyright,trademark, trade secret or other proprietary right of any person; and (iii) the Founder will not use any trade secrets or confidentialinformation for purposes other than for the furtherance of the business of the Company and will not use any trade secrets orconfidential information owned by any third party.11.Enforcement. It is the desire and intent of the parties hereto that the provisions of this Agreement will beenforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.Accordingly, to the extent that a restriction contained in this Agreement is more restrictive than permitted by the laws of anyjurisdiction whose law may be deemed to govern the review and interpretation of this Agreement, the terms of such restriction, for thepurpose only of the operation of such restriction in such jurisdiction, will be the maximum restriction allowed by the laws of suchjurisdiction and such restriction will be deemed to have been revised accordingly herein. A court having jurisdiction over an actionarising out of or seeking enforcement of any restriction contained in this Agreement may modify the terms of such restriction inaccordance with this Section 11.12.Dispute Resolution. In the event the parties hereto are unable to settle a dispute between them regarding thisAgreement through friendly consultation, such dispute shall be referred to and finally settled by arbitration administered by JAMS inaccordance its Employment Arbitration Rules & Procedures (the “Arbitration Rules”) in effect, which rules are deemed to beincorporated by reference into this Section 12 applying the laws of the State of New York, without regard to any principles of conflictsof laws that would result in the application of the laws of another jurisdiction. The arbitration tribunal shall consist of three (3)arbitrators to be appointed according to the Arbitration Rules (the “Arbitration Board”). The Arbitration Board shall decide any suchdispute or claim strictly in accordance with the governing law specified in Section 14.5. Judgment upon any arbitral award renderedhereunder may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of theaward and an order of enforcement, as the case may be. The costs and expenses of the arbitration, including the fees of the ArbitrationBoard, shall be borne equally by each party to the dispute or claim, and each party shall pay its own fees, disbursements and othercharges of its counsel; provided that the11  Arbitration Board shall have the right to allocate the costs and expenses between each party as the Arbitration Board deems equitable.Any award made by the Arbitration Board shall be final and binding on each of the parties that were parties to the dispute. The partiesexpressly agree to waive the applicability of any laws and regulations that would otherwise give the right to appeal the decisions of theArbitration Board so that there shall be no appeal to any court of law for the award of the Arbitration Board, and a party shall notchallenge or resist the enforcement action taken by any other party in whose favor an award of the Arbitration Board was given. Notwithstanding this agreement to arbitrate, the parties agree that either party may seek provision remedies such as a temporaryrestraining order or a preliminary injunction from a court of competent jurisdiction in aid of arbitration. As a material part of thisagreement to arbitrate claims, the parties expressly waive all rights to a jury trial in court on all statutory or other claims. The partiesacknowledge and agree that no claims will be arbitrated on a class action or collective action basis. 13.Covenant Against Assignment. The Founder may not assign any rights or delegate any of the duties of theFounder under this Agreement. As used in this provision, “assignment” and “delegation” shall mean any sale, gift, pledge,hypothecation, encumbrance, or other transfer of all or any portion of the rights, obligations, or liabilities in or arising from thisAgreement to any person or entity, whether by operation of law or otherwise, and regardless of the legal form of the transaction inwhich the attempted transfer occurs.14.Miscellaneous.14.1.Notices. Any notice, request, demand or other communication required or permitted to be given to aparty pursuant to the provisions of this Agreement will be in writing and will be effective and deemed given under this Agreement onthe earliest of: (i) the date of personal delivery, (ii) the date of transmission by facsimile or e-mail, with confirmed transmission andreceipt, (iii) two (2) days after deposit with an internationally-recognized courier or overnight service such as Federal Express or DHL,or (iv) five (5) days after mailing via certified mail, return receipt requested. All notices not delivered personally or by facsimile will besent with postage and other charges prepaid and properly addressed to the party to be notified at the address set forth on the signaturepages hereto.14.2.Time. Time is of the essence in performance of the rights and obligations under this Agreement.14.3.Survival. The provisions set forth in Sections 5, 6, 8, 11, 12 and 14 of this Agreement (and any otherprovisions necessary to give effect to such provisions) shall survive the termination of this Agreement.14.4.Binding Agreement; Benefit. The provisions of this Agreement will be binding upon and will inure tothe benefit of the respective heirs, legal representatives and successors of the parties hereto.14.5.Governing Law. This Agreement will be governed by, and construed and enforced in accordancewith, the laws of the State of New York, without giving effect to its principles or rules of conflict laws to the extent such principles orrules would require or permit the application of the laws of another jurisdiction.12  14.6.Waiver of Breach. The waiver by either party of a breach of any provision of this Agreement by theother party must be in writing and will not operate or be construed as a waiver of any subsequent breach by such other party.14.7.Entire Agreement; Amendments. This Agreement contains the entire agreement between the partieswith respect to the subject matter hereof and supersedes all prior agreements or understanding among the parties with respect thereto,including, without limitation, the Existing Agreement. This Agreement may be amended only by an agreement in writing signed byeach of the parties hereto.14.8.Headings. The Section headings contained in this Agreement are for reference purposes only and willnot affect in any way the meaning or interpretation of this Agreement.14.9.Severability. Subject to the provisions of Section 11 above, any provision of this Agreement that isprohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition orunenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdictionwill not invalidate or render unenforceable such provision in any other jurisdiction.14.10.Assignment. This Agreement is personal in its nature and the parties hereto shall not, without theconsent of the other party hereto, assign or transfer this Agreement or any rights or obligations hereunder; provided, however, that therights and obligations of the Company hereunder shall be assignable and delegable in connection with any subsequent merger,consolidation, sale of all or substantially all of the assets or shares of the Company or similar transaction involving the Company or asuccessor corporation.14.11. Further Assurances. The Founder agrees to execute, acknowledge, seal and deliver such furtherassurances, documents, applications, agreements and instruments, and to take such further actions, as the Company may reasonablyrequest in order to accomplish the purposes of this Agreement.14.12.Costs. Each of the parties shall pay all costs and expenses incurred or to be incurred by such party innegotiating and preparing this Agreement and in closing and carrying out the transactions contemplated by this Agreement.14.13.Interpretation of Agreement. This Agreement has been negotiated at arm’s length between personsknowledgeable in the matters dealt with in this Agreement. In addition, each party has been represented by experienced andknowledgeable legal counsel. Accordingly, any rule of law, or any legal decision that would require interpretation of any ambiguitiesin this Agreement against the party that has drafted it, is of no application and is waived.14.14.Counterparts. The parties may execute this Agreement in any number of counterparts and, as sodelivered, the counterparts shall together constitute one and the same document. The parties agree that each such counterpart is anoriginal and shall be binding upon all of the parties, even though all of the parties are not signatories to the same counterpart.13  14.15.No Third-Party Rights. Nothing in this Agreement is intended to grant to any third party (other thanthe parties’ respective successors in title and permitted assigns) any right to enforce any term of this Agreement or to confer on anythird party (other than the parties’ respective successors in title and permitted assigns) any benefits under this Agreement. No personwho is not a party to this Agreement shall have any right to enforce any term of this Agreement.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 14  IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ZAI LAB LIMITED FOUNDER: By:/s/Peter Wirth By:/s/Samantha (Ying) Du Peter Wirth Samantha (Ying) Du Chairman, Compensation Committee Address: Address: 4560 Jinke Road, Bldg. 1, 4F On File with the CompanyPudong, Shanghai, 201210, China SIGNATURE PAGE OF EMPLOYMENT AGREEMENT Exhibit 10.19 AMENDED AND RESTATED EMPLOYMENT AGREEMENTWilliam Ki Chul Cho THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into onMarch 22, 2019 (the “Effective Date”), by and between Zai Lab (Hong Kong) Ltd., a limited company incorporated under the laws ofHong Kong whose registered office is at Room 1902, 19/F, Lee Garden One, 33 Hysan Avenue, Causeway Bay, Hong Kong (the“Company”), and William Ki Chul Cho, an individual (the “Employee”) whose correspondence address is XXX and whose USpassport number is XXX. RECITALSWHEREAS, the Company and its Affiliates are engaged in the business of researching, developing, manufacturing,commercialization of drug products in the pharmaceutical industry, including and without limitation to sales and marketing of bothsmall molecule and large molecule therapeutics (the “Business of the Group”);WHEREAS, the Company and the Employee previously entered into that certain Employment Agreement, dated as ofMarch 5, 2018 (the “Existing Agreement”); andWHEREAS, the Company and the Employee desire to amend and replace the Existing Agreement in its entirety with theterms and conditions set forth in this Agreement.AGREEMENTNOW, THEREFORE, in consideration of the promises and the respective covenants and agreements of the parties, and forgood and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:1.EMPLOYMENT. From the Effective Date and throughout the time for which the Employee’s employment under thisAgreement is not terminated, the Company agrees to continue the employment of the Employee and the Employee agrees to continueemployment with the Company.1.1.Employment by Company. The Company agrees to employ the Employee as the Chief Financial Officer of theCompany. In addition, the Employee shall serve as the Chief Financial Officer of Zai Lab Limited, a limited company incorporatedunder the laws of the Cayman Islands and the ultimate parent corporation of the Company (the “Parent Company”) without furthercompensation. The Employee agrees to render such services and to perform such duties and responsibilities as are normally associatedwith and inherent in the aforementioned roles and the capacities in which the Employee is employed, as well as such other duties andresponsibilities as shall from time to time be assigned to the Employee by the Chief Executive Officer of the Company. The Employeeshall report directly to the Chief Executive Officer of the Company and/or the Chief Executive Officer of the Parent Company or suchother senior executive officer of the Company or Parent Company as designated by the Chief Executive Officer or the Board ofDirectors (the “Board”) of the Parent Company.1 1.2.Acceptance of Employment. The Employee accepts such employment set out in Section 1.1 and agrees tofaithfully perform and render the services required of the Employee under this Agreement. Except for activities that may be mutuallyagreed to by the parties and other absences consistent with the policies of the Company then in effect, the Employee shall devote hisentire business time, attention and energies as may be reasonably required for the discharge of his duties to the Business of TheGroup, and the performance of the Employee’s duties and responsibilities under this Agreement. 1.3.Positions with Affiliates. If requested by the Company and agreed upon by the Employee, the Employee agreesto serve without additional compensation if elected, nominated or appointed as an officer and/or director of the Company, the ParentCompany and any of the subsidiaries or affiliates of the Company or the Parent Company (collectively, “Affiliates”) and in one ormore executive offices of any Affiliate, provided that the Employee is indemnified for serving in any and all such capacities pursuant tothe indemnity provisions set forth in the bylaws of such Affiliate.1.4.Conflicts of Interest. The Employee has reviewed with the Board the present directorships, ownership (legal andbeneficial, direct and indirect) interests and other positions or roles held by the Employee or his associate(s) in all such businessorganizations or arrangements which may be directly competitive or directly in conflict with the Company or the ParentCompany. The Employee agrees to review with the Board any potential directorships, ownership (legal and beneficial, direct andindirect) interests and other positions or roles with business organizations or arrangements which may be directly competitive ordirectly in conflict with the Company or the Parent Company. The Employee or his associate(s) is precluded from owning an interest(legal and beneficial, direct and indirect) in another company or serving as an employee, director, consultant, advisor or member ofsuch another company that may be directly competitive or directly in conflict with the Company or the Parent Company until suchinterest is presented to the Board and the Board consents to such interest or employment. The Company and the Parent Companyfurther acknowledge and agree that, subject to the prior written approval by a majority of the Board (which majority shall exclude theEmployee if the Employee is a then current member of the Board) and consistent with the terms of the Compliance Agreement (asdefined below), the Employee may serve on the boards of directors and advisory boards of other companies which is not in directcompetition or not in direct conflict with the Company or the Parent Company provided that such service does not interfere with theperformance of the Employee’s duties hereunder.2.PLACE OF PERFORMANCE. The Employee shall discharge his responsibilities at such corporate locations of theParent Company as is reasonably determined by the Chief Executive Officer of the Company and/or the Chief Executive Officer of theParent Company. The Company or the Parent Company may require that the Employee travel in furtherance of the Business of theGroup, to the extent necessary and/or substantially consistent with the then present business travel obligations of employees atsubstantially the same service level as the Employee.2 3.COMPENSATION BENEFITS AND EXPENSE REIMBURSEMENTS. 3.1Base Salary. In consideration for the agreement of the Employee to be employed under this Agreement, theEmployee shall receive from the Company an annual base salary (“Base Salary”) of US$400,000. This Base Salary, and all othercompensation and reimbursement under the Agreement, may be provided through a human resources service organization, and will bepayable in such installments as are applicable to employees of the Company at substantially the same service level as theEmployee. The Base Salary to be paid to the Employee will be subject to reduction for payroll tax withholdings legally required (ifany) or such other reductions properly and reasonably requested by the Employee. The Company shall pay such Base Salary inarrears on the last working day (Monday to Friday) of each month in accordance with the standard payroll procedures of theCompany. The Employee’s Base Salary will be subject to review and adjustments will be made based upon the Company’s normalperformance review practices.3.2Equity Incentives.3.2.1Stock Option. For the avoidance of doubt, the Employee acknowledges, agrees and confirms that (i)as of the date of this Agreement, the Employee has been granted, in accordance with the provisions of the Existing Agreement and theParent Company’s 2017 Equity incentive Plan (the “Plan”), (A) an option to purchase 400,000 American Depositary Shares(“ADSs”) representing ordinary shares of the Parent Company (the “Existing Option”), as evidenced by that certain OptionAgreement dated of [ ], 2018 and entered into by and between the Parent Company and the Employee (the “Option Agreement”) and(B) 100,000 ADSs representing ordinary shares of the Parent Company (the “Existing Restricted Stock Grant”), as evidenced bythat certain Restricted Stock Agreement dated as of [ ], 2018 and entered into by and between the Employee and the Parent Company(the “Restricted Stock Agreement”); (ii) this Agreement does not modify or otherwise supplement the terms and conditionspertaining to the Existing Option or the Existing Restricted Stock Grant; and (iii) the Employee has no further rights or claims to anyadditional options or equity incentive awards other than the Existing Option and the Existing Restricted Stock Grant. The Plan, theOption Agreement and the Restricted Stock Agreement are incorporated herein by reference.3.3Bonuses. 3.3.1Annual Bonus. During the Employment Period, the Employee may be eligible to receive an annualbonus with a target equal to 40% of the Base Salary (the “Target Bonus”), the actual amount of which shall be determined by theBoard or the Compensation Committee in its respective discretion. Any annual bonus earned hereunder shall be paid not later thanMarch 15th following the end of the calendar year to which it relates and otherwise in accordance with the Company’s bonus plan asin effect from time to time.3.3.2Sign-on Bonus. The Employee will be eligible to receive a cash payment of US$300,000 (the“Sign-On Bonus”) on the seven-month anniversary of his continuous employment with the Company (calculated as of a start date ofMarch 5, 2018), provided that the Employee remains employed with the Company on the date of such anniversary. The Companywill withhold all applicable income taxes on such amount, and will pay the net amount to the Employee with the regularly scheduledpayroll for such month of payment. In the event that the employee’s employment is terminated by the Company for3 cause within the three (3) year period following March 5, 2018, the Employee will repay to the Company the full amount of the Sign-On Bonus within thirty (30) days following the date of termination. In the event that the Employee resigns from the Company prior tothe third anniversary of March 5, 2018, he will repay to the Company a prorated portion of the Sign-On Bonus based on the number offull and partial months remaining in such three (3) year period as of the date of such termination of employment, with such repaymentbeing made on or prior to the Employee’s last working day with the Company.3.4Fringe Benefits. During the Employment Period, the Employee will be eligible for the fringe benefits that aremade available to employees of the Company and such other benefits as are determined by the Board or the Compensation Committeeof the Board, in its respective discretion. Any benefit plan participation will be subject to the terms and conditions of the applicableplan, applicable Company policy and applicable law.3.5Reimbursements. During the Employment Period, the Employee will be reimbursed, in accordance with thepractice applicable to employees of the Company from time to time, for all reasonable traveling expenses and other disbursementsincurred by him for or on behalf of the Company in the performance of his duties hereunder upon presentation by the Employee ofappropriate vouchers. The Employee’s right to payment or reimbursement for business expenses hereunder shall be subject to thefollowing additional rules: (i) the amount of expenses eligible for payment or reimbursement during any calendar year shall not affectthe expenses eligible for payment or reimbursement in any other calendar year, (ii) payment or reimbursement shall be made by theCompany as soon as reasonably practicable following the time that the applicable expense is submitted by the Employee to theCompany and in no event later than December 31 of the calendar year following the calendar year in which the expense or paymentwas incurred and (iii) the right to payment or reimbursement shall not be subject to liquidation or exchange for any other benefit.3.6Deductions. Recognizing that the Employee is an employee for all purposes, the Company shall deduct from anycompensation payable to the Employee the sums which the Company is required by law to deduct, including, but not limited to,government state withholding taxes, social security taxes and state disability insurance and mandatory provident funds, and theCompany shall pay any amounts so deducted to the applicable governmental entities and agents entitled to receive such payments.4.INVOLUNTARY TERMINATION.4.1Disability. If the Employee dies, then the Employee’s employment by the Company hereunder shallautomatically terminate on the date of the Employee’s death. If the Employee is incapacitated or disabled by accident, sickness orotherwise so as to render him mentally or physically incapable of performing the services required to be performed by him under thisAgreement for a period of ninety (90) consecutive days or longer, or for ninety (90) days during any six (6) month period (suchcondition being herein referred to as “Disability”), the Company, at its option, may terminate the Employee’s employment under thisAgreement immediately upon giving him notice to that effect. In the case of a Disability, until the Employee becomes eligible fordisability income under the Company’s disability income insurance (if any) or until the Company shall have terminated the Employee’sservice in accordance with the foregoing, whichever shall first occur, to the extent permitted by the terms of the Company’s plans, theEmployee will be entitled to receive compensation, at the rate and in the manner provided in Section 3, notwithstanding any suchphysical or mental disability. Termination pursuant to this Section 4 is hereinafter referred to as an4 “Involuntary Termination”.4.2Substitution. The Board or its designee may designate another employee to act in the Employee’s place duringany period of Disability suffered by the Employee during the Employment Period. Notwithstanding any such designation, theEmployee shall continue to receive the Employee’s Base Salary and benefits in accordance with Section 3 of this Agreement until theEmployee becomes eligible for disability income under the Company’s disability income insurance (if any) or until the termination ofthe Employee’s employment, whichever shall first occur.4.3Disability Income Payments. While receiving disability income payments under the Company’s disability incomeinsurance (if any), the Employee shall not be entitled to receive any Base Salary under Section 3.1, but shall continue to participate inall other compensation and benefits in accordance with Section 3.3 until the date of the Employee’s termination of employment.4.4Verification of Disability. If any question shall arise as to whether during any period the Employee is disabledthrough any illness, injury, accident or condition of either a physical or psychological nature so as to be unable to perform substantiallyall of the Employee’s duties and responsibilities hereunder, the Employee may, and at the request of the Company shall, submit to amedical examination by a physician selected by the Company to whom the Employee or the Employee’s guardian has no reasonableobjection to determine whether the Employee is so disabled and such determination shall for the purposes of this Agreement beconclusive of the issue. If such question shall arise and the Employee shall fail to submit to such medical examination, the Company’sdetermination of the issue shall be binding on the Employee.5.TERMINATION FOR CAUSE BY THE COMPANY. The Company, on recommendation from the Board, mayterminate the employment of the Employee hereunder at any time during the Employment Period for “Cause” (such termination beinghereinafter referred to as a “Termination for Cause”) by giving the Employee notice of such termination, upon the giving of whichsuch termination shall take effect immediately. For the purpose of this Section 5, “Cause” means any one of the following grounds, asdetermined by the Board in its reasonable judgment: (i)repeated drunkenness or use of illegal drugs which adversely interferes with the performance of the Employee’sobligations and duties in the Company; (ii)the Employee’s conviction of a felony, or any crime involving fraud or misrepresentation or violation ofapplicable securities laws; (iii)gross mismanagement by the Employee of the business and affairs of the Company or any subsidiary of theCompany which directly results in a material loss to the Company and for which the Company has reasonableproof was committed by the Employee; (iv)material violation of any material terms of this Agreement or the Compliance Agreement (as defined below); or5 (v)a conclusive finding by an independent fact finder appointed by the Board for any willful misconduct, dishonestyor acts of moral turpitude by the Employee which is materially detrimental to the interests and well-being of theCompany and its subsidiaries, including, without limitation, harm to its business or reputation.6.TERMINATION WITHOUT CAUSE BY THE COMPANY. The Company, on recommendation from the Board, mayterminate the employment of the Employee hereunder at any time during the Employment Period without “Cause” (such terminationbeing hereinafter called a “Termination Without Cause”) by giving the Employee notice of such termination. The termination ofservice under this Section 6 will take effect upon the giving of reasonable advance notice of not less than thirty (30) calendar days.7.TERMINATION BY THE EMPLOYEE.7.1Without Good Reason. The Employee may terminate his services hereunder at any time without Good Reason(as defined below) (such termination being referred to hereinafter as a “Voluntary Termination”). A Voluntary Termination will bedeemed to be effective following reasonable notice by the Employee of not less than thirty (30) calendar days.7.2With Good Reason. The Employee may terminate his services hereunder at any time for Good Reason (asdefined below) by giving the Company written notice of such termination, provided that such notice specifies: (i) the basis fortermination and (ii) the effective date of termination (such termination being hereinafter referred to as a “Termination for GoodReason”). For purposes of this Agreement, the term “Good Reason” shall mean (a) any material diminution of the Employee’s dutiesor responsibilities hereunder (except in each case in connection with the Termination for Cause or pursuant to Section 4.1) or theassignment to the Employee of duties or responsibilities that are materially inconsistent with the Employee’s then current position; (b)any material breach of the Agreement by the Company which is not cured within ten (10) business day days after written notice thereofis given to the Company; or (c) a relocation of the Employee (other than any relocation requested by the Employee) from the place ofinitial assignment of the Employee by the Company to a location more than thirty (30) kilometers from such location, other than on atemporary basis not to exceed a period equal to six (6) consecutive calendar months.8.EFFECT OF TERMINATION ON SERVICES. 8.1Voluntary Termination or a Termination for Cause. 8.1.1Upon the termination of the Employee’s employment hereunder pursuant to a VoluntaryTermination or a Termination for Cause, neither the Employee nor his beneficiary or estate will have any further rights or claimsagainst the Company or any Affiliates under this Agreement except to receive the following (in the aggregate, the “FinalCompensation”): (i)the unpaid portion of the Base Salary provided for in Section 3.1, computed on a pro rata basis up to(and including) the effective date of such termination;6 (ii)reimbursement for any expenses for which the Employee shall not have theretofore been reimbursed asprovided in Section 3.5, provided that the Employee submits all such expenses and required supportingdocumentation within sixty (60) days of the effective date of such termination; and (iii)if required by applicable law or Company policy, pay at the rate of the Base Salary for any accrued byunused vacation time as of the effective date of such termination.8.1.2 Final Compensation (other than expense reimbursement, which shall be paid within thirty (30) daysafter such reimbursement is submitted in accordance with subsection (ii) above) will be paid to the Employee within thirty (30) daysfollowing the date of termination (or such shorter period required by law).8.2Involuntary Termination. Upon the termination of the Employee’s employment hereunder pursuant to anInvoluntary Termination in accordance with Section 4 hereof, neither the Employee nor his beneficiary or estate will have any furtherrights or claims against the Company or any Affiliates under this Agreement except to receive: (i)Final Compensation in accordance with Section 8.1; (ii)an aggregate amount equal to one (1) month’s Base Salary; and (iii)an amount equal to one (1) month of the Company’s portion of monthly premiums for health, dentaland vision insurance benefits as in effect for the Employee immediately prior to the effective date ofsuch termination, payable in accordance with the Company’s normal payroll policies and at the samerate and in the same manner as set forth in Sections 3.1 and 3.4 hereof, plus any additionalcompensation as may be expressly required under applicable law.8.3Termination Without Cause or Termination for Good Reason. 8.3.1Upon the termination of the Employee’s employment hereunder pursuant to a Termination WithoutCause or a Termination for Good Reason, neither the Employee nor his beneficiary or estate will have any further rights or claimsagainst the Company or any of its Affiliates under this Agreement except to receive the following (in the aggregate, the “SeverancePayments”): (i)Final Compensation in accordance with Section 8.1; (ii)an aggregate amount equal to the Base Salary (i) for six (6) months if such termination occurs prior tothe third (3rd) anniversary of March 5, 2018, or (ii) for twelve (12) months if such termination occurson or following the third (3rd) anniversary of March 5, 2018, (in either case, such six (6) months ortwelve (12) months, the “Severance Period”), payable from the effective date of such termination inaccordance with the Company’s normal payroll policies and at the same rate and in the same manneras set forth in Sections 3.1 and 3.4 hereof, plus any additional compensation as may be expresslyrequired under applicable law; and7 (iii)an aggregate amount equal to the Company’s portion of monthly premiums for health, dental andvision insurance benefits as in effect for the Employee immediately prior to the effective date of suchtermination (i) for six (6) months if such termination occurs prior to the third (3rd) anniversary ofMarch 5, 2018, or (ii) for twelve (12) months if such termination occurs on or following the third (3rd)anniversary of March 5, 2018, payable from the effective date of such termination in accordance withthe Company’s normal payroll policies and at the same rate and in the same manner as set forth inSections 3.1 and 3.4 hereof, plus any additional compensation as may be expressly required underapplicable law.8.3.2Subject to Sections 8.5, 14 and 15, Severance Payments (other than Final Compensation) will beprovided in the form of salary continuation, payable in equal installments in accordance with the Company’s normal payroll practices,during the Severance Period, provided that the first such payment will be made on the next regular pay day following the date onwhich the Release of Claims (as defined below) becomes effective and irrevocable and will be retroactive to effective date of thetermination of the Employee’s employment.8.4Change in Control Termination. 8.4.1Upon the termination of the Employee’s employment hereunder pursuant to a Termination WithoutCause or a Termination for Good Reason within twelve (12) months following a Change in Control (such termination being referred toin this Agreement as a “Change in Control Termination”), neither the Employee nor his beneficiary or estate will have any furtherrights or claims against the Company or any Affiliates under this Agreement except to receive the following (in the aggregate, the“Enhanced Severance Payments”): (i)Final Compensation in accordance with Section 8.1; (ii)an aggregate amount equal to twelve (12) months’ Base Salary; (iii)an aggregate amount equal to twelve (12) months of the Company’s portion of monthly premiums forhealth, dental and vision insurance benefits as in effect for the Employee immediately prior to theeffective date of such termination, payable in accordance with the Company’s normal payroll policiesand at the same rate and in the same manner as set forth in Sections 3.1 and 3.4 hereof, plus anyadditional compensation as may be expressly required under applicable law; and (iv)a payment equal to pro-rated Target Bonus for the year of such employment termination (determinedby multiplying the Target Bonus by a fraction, the numerator of which is the number of days duringthe fiscal year of termination that Employee is employed by the Company and the denominator ofwhich is three hundred and sixty-five (365)), payable at the same time bonuses for such year are paidto other senior executives of the Company (the “Pro-rated Bonus”).8 8.4.2Subject to Sections 8.5, 14 and 15, Enhanced Severance Payments (other than Final Compensation)will be provided in the form of salary continuation, payable in equal installments in accordance with the Company’s normal payrollpractices, during the twelve (12) month period following the Change in Control Termination, provided that the first such payment willbe made on the next regular pay day following the date on which the Release of Claims becomes effective and irrevocable and will beretroactive to effective date of the termination of the Employee’s employment.8.4.3Notwithstanding anything to the contrary in any agreement between the Employee and theCompany, upon a Change in Control Termination, the Employee will be entitled to one hundred percent (100%) accelerated vesting ofany then-outstanding unvested stock options, restricted stock or other equity awards granted to the Employee by the Parent Company,Subject to Sections 8.5, 14 and 15.8.4.4For purposes of this Agreement, “Change in Control” means the occurrence of any of thefollowing:(a)any one person, or more than one person acting as a group (“Person”), acquiresownership of the stock of the Parent Company that, together with the stock held by such Person, constitutes more than 50% of the totalvoting power of the stock of the Parent Company, except that any change in the ownership of the stock of the Parent Company as aresult of a private financing of the Parent Company that is approved by the Board will not be considered a Change in Control;(b)a majority of members of the Board is replaced during any twelve- (12-) month period bydirectors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointmentor election; or(c)any Person acquires (or has acquired during the twelve- (12- ) month period ending onthe date of the most recent acquisition by such person or persons) assets from the Parent Company that have a total gross fair marketvalue equal to or more than 50% of the total gross fair market value of all of the assets of the Parent Company immediately prior tosuch acquisition or acquisitions. For purposes of this subsection (c), gross fair market value means the value of the assets of the ParentCompany, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.For purposes of this definition, Persons will be considered to be acting as a group if they are owners of acorporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the ParentCompany. Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to re-domicile the Parent Company in a jurisdiction other than its original jurisdiction of incorporation, or (ii) its sole purpose is to create aholding company that will be owned in substantially the same proportions by the Persons who held the Parent Company’s securitiesimmediately before such transaction.9 8.4.5Liquidated Damages. The parties acknowledge and agree that damages which will result to theEmployee for a Termination Without Cause or other breach of this Agreement by the Company shall be extremely difficult orimpossible to establish or prove, and agree that the Severance Payments and Enhanced Severance Payments shall constitute liquidateddamages for any breach of this Agreement by the Company through the date of termination. The Employee agrees that, except forsuch other payments and benefits to which the Employee may be eligible as expressly provided by the terms of this Agreement or anyapplicable benefit plan, such liquidated damages shall be in lieu of all other claims that the Employee may make by reason oftermination of her/his employment or any such breach of this Agreement and that, as a condition to receiving the Severance Paymentsand/or Enhanced Severance Payments (as applicable), the Employee will execute the Release of Claims. 8.5Release. The obligation of the Company to make any payments and benefits (other than Final Compensation) toor on behalf of the Employee under Sections 8.2, 8.3 and 8.4 is conditioned on the Employee signing and not revoking a separationagreement and release of claims in a form reasonably satisfactory to the Company (the “Release of Claims”) and provided that theRelease of Claims becomes effective and irrevocable no later than sixty (60) days following the termination date (such deadline, the“Release Deadline”). If the Release of Claims does not become effective by the Release Deadline, the Employee will forfeit anyrights to severance or benefits (other than Final Compensation) under this Agreement. In no event will Severance Payments,Enhanced Severance Payments or benefits (other than Final Compensation) be paid or provided until the Release of Claims becomeseffective and irrevocable. 9.COMPLIANCE AGREEMENT. The Employee agrees that the Compliance Agreement (as defined in the ExistingAgreement) remains in full force and effect, and the terms and conditions thereof are specifically incorporated herein by reference. Theobligation of the Company to make any payments (other than Final Compensation) to or on behalf of the Employee under Section 8.3or Section 8.4 above is expressly conditioned upon the Employee’s continued performance of the Employee’s obligations under theCompliance Agreement.10.STANDARDS OF CONDUCT. The Employee will conduct himself in an ethical and professional manner at all timesand in accordance with any Employee policies or guidelines which the Company may issue from time to time.11.INDEMNIFICATION. 11.1Indemnification. In the event that (a) the Employee was or is a party or is threatened to be made a party to anyProceeding (as defined below) by reason of the Employee’s Corporate Status (as defined below) or (b) the Employee was or is a partyor is threatened to be made a party to any Proceeding by or in the right of the Company to procure a judgment in its favor by reason ofthe Employee’s Corporate Status, the Employee shall be indemnified by the Company against all Expenses and Liabilities incurred orpaid by the Employee in connection with such Proceeding (referred to herein as “Indemnifiable Amounts”). For purposes hereof, theterms (i) “Proceeding” means any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process,investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative, arbitrative orinvestigative, whether formal or informal, (ii) “Corporate Status” means the status of the Employee as an employee and/or director ofthe Company, as10 applicable, (iii) “Expenses” means all fees, costs and expenses incurred in connection with any Proceeding, including, withoutlimitation, reasonable attorneys’ fees, disbursements and retainers, fees and disbursements of expert witnesses, private investigators andprofessional advisors (including, without limitation, accountants, counsels and investment bankers), court costs, transcript costs, fees ofexperts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services,secretarial services and other disbursements and expenses and (iv) “Liabilities” means judgments, damages, liabilities, losses, penalties,excise taxes, and fines.11.2Advancement of Expenses. The Company agrees that the Company shall pay to the Employee allIndemnifiable Amounts incurred by the Employee in connection with any Proceeding, including a Proceeding by the right of theCompany, in advance of the final disposition of such Proceeding, as the same are incurred, provided that the Employee provides theCompany with a written undertaking to repay the amount of Indemnifiable Amounts if it is finally determined by a court of competentjurisdiction that the Employee is not entitled under this Agreement to indemnification with respect to such Indemnifiable Amounts.11.3Limitation on Indemnification. The Employee shall not be entitled to any indemnification under this Section 11if the Employee knowingly violated any duty, responsibility or obligation imposed under this Agreement, the Compliance Agreementor any Company policy.11.4Change in Law. To the extent that a change in applicable law (whether by statute or judicial decision) shallpermit broader indemnification or advancement of expenses than is provided under this Agreement, the Employee shall be entitled tosuch broader indemnification and advancements, and this Agreement shall be deemed to be amended to such extent.12.REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to theEmployee that the execution of this Agreement by the Company has been duly authorized by resolution of the Board.13.REPRESENTATIONS AND WARRANTIES OF THE EMPLOYEE. The Employee represents and warrants to theCompany that: (i) the Employee has the proper skill, training and background so as to be able to perform under the terms of thisAgreement in a competent and professional manner; (ii) the Employee will not infringe any intellectual property rights including patent,copyright, trademark, trade secret or other proprietary right of any person; and (iii) the Employee will not use any Trade Secrets orConfidential Information for purposes other than for the furtherance of the interests of the Company or any of its Affiliates and will notuse any trade secrets or confidential information owned by any third party.11 14.TIMING OF PAYMENTS AND SECTION 409A. 14.1Notwithstanding anything to the contrary in this Agreement, if at the time that the Employee’s employmentterminates, the Employee is a “specified employee,” as defined below, any and all amounts payable under this Agreement on accountof such separation from service that would (but for this provision) be payable within six (6) months following the date of termination,shall instead be paid on the next business day following the expiration of such six- (6-) month period or, if earlier, upon theEmployee’s death; except (i) to the extent of amounts that do not constitute a deferral of compensation within the meaning of Treasuryregulation Section 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in Section 1.409A-1(b)(9)(iii), asdetermined by the Company in its reasonable good faith discretion); (ii) benefits which qualify as excepted welfare benefits pursuant toTreasury regulation Section 1.409A-1(a)(5); or (iii) other amounts or benefits that are not subject to the requirements of Section 409A(“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”).14.2For purposes of this Agreement, all references to “termination of employment” and correlative phrases shall beconstrued to require a “separation from service” (as defined in Section 1.409A-1(h) of the Treasury regulations after giving effect to thepresumptions contained therein), and the term “specified employee” means an individual determined by the Company to be a specifiedemployee under Treasury regulation Section 1.409A-1(i).14.3Each payment made under this Agreement shall be treated as a separate payment and the right to a series ofinstallment payments under this Agreement is to be treated as a right to a series of separate payments.14.4In no event shall the Company or any of its Affiliates have any liability relating to the failure or alleged failure ofany payment or benefit under this Agreement to comply with, or be exempt from, the requirements of Section 409A.15.LIMITATIONS ON PAYMENTS. Notwithstanding anything in this Agreement or elsewhere to the contrary, in theevent that any payment or benefit received or to be received by the Employee under this Agreement or otherwise (collectively, the“Payments”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this Section15, be subject to the excise tax imposed by Section 4999 of the Code, then the Payments shall be reduced (but not below zero) to theextent, but only to the extent, needed to ensure that no portion of the Payments constitutes a “parachute payment” within the meaningof Section 280G of the Code; provided, that no reduction in the Payments shall be made by reason of this Section 15 unless, on anafter-tax basis taking into account the excise tax imposed by Section 4999 of the Code together with all applicable income taxes, thePayments payable to the Employee would be greater than if such reduction had not been made. Any reduction in the Paymentsrequired by the immediately preceding sentence shall be applied, first, against any cash severance payments, then against otherpayments and benefits to which Q&A 24(c) of Section 1.280G-1 of the Treasury Regulations does not apply, and finally against allremaining payments and benefits.12 16.ENFORCEMENT. It is the desire and intent of the parties hereto that the provisions of this Agreement will be enforced tothe fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement issought. Accordingly, to the extent that a restriction contained in this Agreement is more restrictive than permitted by the laws of anyjurisdiction whose law may be deemed to govern the review and interpretation of this Agreement, the terms of such restriction, for thepurpose only of the operation of such restriction in such jurisdiction, will be the maximum restriction allowed by the laws of suchjurisdiction and such restriction will be deemed to have been revised accordingly herein. A court having jurisdiction over an actionarising out of or seeking enforcement of any restriction contained in this Agreement may modify the terms of such restriction inaccordance with this Section 16.17.DISPUTE RESOLUTION. In the event the parties hereto are unable to settle a dispute between them regarding thisAgreement through friendly consultation, such dispute shall be referred to and finally settled by arbitration at the Hong KongInternational Arbitration Centre in accordance with the UNCITRAL Arbitration Rules (the “UNCITRAL Rules”) in effect, whichrules are deemed to be incorporated by reference into this Section 17 applying the laws of Hong Kong, without regard to its principlesof conflicts of laws. The arbitration tribunal shall consist of three (3) arbitrators to be appointed according to the UNCITRAL Rules(the “Arbitration Board”). The language of the arbitration shall be English. The Arbitration Board shall decide any such dispute orclaim strictly in accordance with the governing law specified in Section 19.5. Judgment upon any arbitral award rendered hereundermay be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award and anorder of enforcement, as the case may be. The costs and expenses of the arbitration, including the fees of the Arbitration Board, shallbe borne equally by each party to the dispute or claim, and each party shall pay its own fees, disbursements and other charges of itscounsel; provided that the Arbitration Board shall have the right to allocate the costs and expenses between each party as theArbitration Board deems equitable. Any award made by the Arbitration Board shall be final and binding on each of the parties thatwere parties to the dispute. The parties expressly agree to waive the applicability of any laws and regulations that would otherwisegive the right to appeal the decisions of the Arbitration Board so that there shall be no appeal to any court of law for the award of theArbitration Board, and a party shall not challenge or resist the enforcement action taken by any other party in whose favor an award ofthe Arbitration Board was given.18.COVENANT AGAINST ASSIGNMENT. The Employee may not assign any rights or delegate any of the duties of theEmployee under this Agreement. As used in this provision, “assignment” and “delegation” shall mean any sale, gift, pledge,hypothecation, encumbrance, or other transfer of all or any portion of the rights, obligations, or liabilities in or arising from thisAgreement to any person or entity, whether by operation of law or otherwise, and regardless of the legal form of the transaction inwhich the attempted transfer occurs.13 19.MISCELLANEOUS.19.1Notices. Any notice, request, demand or other communication required or permitted to be given to a partypursuant to the provisions of this Agreement will be in writing and will be effective and deemed given under this Agreement on theearliest of: (i) the date of personal delivery, (ii) the date of transmission by facsimile or e-mail, with confirmed transmission and receipt,(iii) two (2) days after deposit with an internationally-recognized courier or overnight service such as Federal Express, DHL, or (iv)five (5) days after mailing via certified mail, return receipt requested. All notices not delivered personally or by facsimile will be sentwith postage and other charges prepaid and properly addressed to the party to be notified at the address set forth on the signature pageshereto.19.2Gender; Time. The parties agree that any use of words in any gender in this Agreement shall also refer to themasculine, feminine or neuter gender, as the case may require. Time is of the essence in performance of the rights and obligationsunder this Agreement.19.3Survival. Provisions of this Agreement shall survive any termination of employment if so provided in thisAgreement or if necessary or desirable to accomplish the purposes of other surviving provisions. 19.4Binding Agreement; Benefit. The provisions of this Agreement will be binding upon and will inure to thebenefit of the respective heirs, legal representatives and successors of the parties hereto.19.5Governing Law. This Agreement will be governed by, and construed and enforced in accordance with, thelaws of Hong Kong, without giving effect to its principles or rules of conflict laws to the extent such principles or rules would requireor permit the application of the laws of another jurisdiction.19.6Waiver of Breach. The waiver by either party of a breach of any provision of this Agreement by the other partymust be in writing and will not operate or be construed as a waiver of any subsequent breach by such other party.19.7Entire Agreement; Amendments. This Agreement, together with the Compliance Agreement, contains theentire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements or understandingamong the parties with respect thereto, including, without limitation, that certain offer letter dated as of January 4, 2018 and theExisting Agreement. This Agreement may be amended only by an agreement in writing signed by each of the parties hereto.19.8Headings. The Section headings contained in this Agreement are for reference purposes only and will not affectin any way the meaning or interpretation of this Agreement.19.9Severability. Subject to the provisions of Section 16 above, any provision of this Agreement that is prohibitedor unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceabilitywithout invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction will not invalidateor render unenforceable such provision in any other jurisdiction.14 19.10Assignment. This Agreement is personal in its nature and the parties hereto shall not, without the consent ofthe other party hereto, assign or transfer this Agreement or any rights or obligations hereunder, provided, however, that the rights andobligations of the Company hereunder shall be assignable and delegable in connection with any subsequent merger, consolidation, saleof all or substantially all of the assets or shares of the Company or similar transaction involving the Company or a successorcorporation.19.11Confidentiality. The Employee agrees not to disclose this Agreement or its terms to any person or entity, otherthan the Employee’s agents, advisors or representatives, except as consented to by the Company in writing or as may be required bylaw.19.12Further Assurances. The Employee agrees to execute, acknowledge, seal and deliver such further assurances,documents, applications, agreements and instruments, and to take such further actions, as the Company may reasonably request inorder to accomplish the purposes of this Agreement.19.13Costs. Each of the parties shall pay all costs and expenses incurred or to be incurred by such party innegotiating and preparing this Agreement and in closing and carrying out the transactions contemplated by this Agreement.19.14Interpretation of Agreement. This Agreement has been negotiated at arm's length between personsknowledgeable in the matters dealt with in this Agreement. In addition, each party has been represented by experienced andknowledgeable legal counsel. Accordingly, any rule of law, or any legal decision that would require interpretation of any ambiguitiesin this Agreement against the party that has drafted it, is of no application and is waived.19.15Counterparts. The parties may execute this Agreement in any number of counterparts and, as so delivered, thecounterparts shall together constitute one and the same document. The parties agree that each such counterpart is an original and shallbe binding upon all of the parties, even though all of the parties are not signatories to the same counterpart.19.16No Third-Party Rights. Nothing in this Agreement is intended to grant to any third party (other than theparties’ respective successors in title and permitted assigns) any right to enforce any term of this Agreement or to confer on any thirdparty (other than the parties’ respective successors in title and permitted assigns) any benefits under this Agreement. No person who isnot a party to this Agreement shall have any right under the Contracts (Rights of Third Parties) Ordinance (Chapter 623 of the Laws ofHong Kong) to enforce any term of this Agreement.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]15 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COMPANY: EMPLOYEE: ZAI Lab (HK) Limited William Ki Chul Cho By:/s/ Samantha Du /s/ William Ki Chul ChoPrint Name:Samantha Du Title:CEO Address:XXXAddress: 4560 Jinke Road Pudong New Area Shanghai, China 201210 E-Mail:XXXAttention:Chief Executive Officer Facsimile: E-mail: SIGNATURE PAGE OF EMPLOYMENT AGREEMENTExhibit 10.22 SECONDED AMENDED AND RESTATED EMPLOYMENT AGREEMENTTHIS SECONDED AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is entered into onDecember 28, 2019 and made effective as of December 1, 2018 (the “Effective Date”), by and between Zai Lab (US) LLC, aDelaware limited liability company (the “Company”), and Harald Reinhart, an individual whose primary address is XXX (the“Employee”).WHEREAS, Zai Lab (Hong Kong) Ltd, an Affiliate (as defined below) of the Company (“Zai Lab Hong Kong”), and theEmployee previously entered into that certain Employee Agreement dated as of May 7, 2017, as amended by that certain Amendmentdated as of August 30, 2017 (the “Amendment” and, together, the “Existing Agreement”); andWhereas, the Company and the Employee desire to amend and replace the Existing Agreement in its entirely with the termsand conditions set forth in this Agreement.NOW, THEREFORE, in consideration of the promises and the respective covenants and agreements of the parties, and forgood and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:1.Employment. The Employee’s employment under the terms of this Agreement will commence as of the EffectiveDate and will continue until terminated in accordance with Section 4 (the “Employment Period”).1.1.Duties and Responsibilities. The Company agrees to employ the Employee as the Chief MedicalOfficer, Autoimmune and Infectious Diseases of the Company and the Chief Medical Officer, Autoimmune and Infectious Diseases ofZai Lab Limited, an exempted company organized under the laws of the Cayman Islands and the ultimate parent corporation of theCompany (the “Parent Company”), to render such services and to perform such duties and responsibilities as are normally associatedwith and inherent in the aforementioned role and the capacity in which the Employee is employed, as well as such other duties andresponsibilities as shall from time to time be assigned to the Employee by the Chief Executive Officer of the Company or such person’sdesignee. The Employee shall report directly to the Chief Executive Officer of the Company and/or the Chief Executive Officer of theParent Company or such other senior executive officer of the Company as designated by the Chief Executive Officer or the Board ofDirectors (the “Board”) of the Parent Company.1.2.Acceptance of Employment. The Employee accepts such employment set out in Section 1.1 andagrees to faithfully perform and render the services required of the Employee under this Agreement. Except for reasonable vacations,absences due to temporary illness, and activities that may be mutually agreed to by the parties, the Employee shall devote substantiallyall of his time, attention and energies during normal business hours and such evenings and weekends as may be reasonably required forthe discharge of his duties to the Company and the performance of the Employee’s duties and responsibilities under this Agreement.1 1.3.Positions with Affiliates. If requested by the Company or the Parent Company, the Employee agreesto serve without additional compensation if elected, nominated or appointed as an officer and/or director of the Company and any ofthe subsidiaries, parents or other affiliates of the Company (collectively, “Affiliates”) and in one or more executive offices of any of theAffiliates of the Company, provided that the Employee is indemnified for serving in any and all such capacities pursuant to theindemnification provisions set forth in the bylaws of such affiliates.1.4.Conflicts of Interest. The Employee has reviewed with the Company the present directorships,ownership (legal and beneficial, direct and indirect) interests and other positions or roles held by the Employee or his associate(s) in allsuch business organizations or arrangements which may be directly competitive or directly in conflict with the Company. TheEmployee agrees to review with the Company any potential directorships, ownership (legal and beneficial, direct and indirect) interestsand other positions or roles with business organizations or arrangements which may be directly competitive or directly in conflict withthe Company. Except with respect to the Employee’s affiliation with Allphase Pharma Consulting, LLC, as set forth in Schedule 1 tothe Existing Agreement (the “Permitted Arrangement”), which same Schedule 1 shall be appended to this Agreement, the Employeeor his associate(s) is precluded from owning an interest (legal and beneficial, direct and indirect) in another company or serving as anemployee, director, consultant, advisor or member of such other company that may be directly competitive or directly in conflict withthe Company until such interest is presented to the Board and the Board consents to such interest or employment. The Companyfurther acknowledges and agrees that, subject to the prior written approval by a majority of the Board (which majority shall exclude theEmployee if the Employee is a then current member of the Board) and consistent with the terms of the Compliance Agreement (asdefined below), the Employee may serve on the boards of directors and advisory boards of other companies which is not in directcompetition or not in direct conflict with the Company provided that such service does not interfere with the performance of theEmployee’s duties hereunder.2.Place of Performance. The Employee shall perform services on a remote basis, with the understanding that theCompany may require that the Employee travel in furtherance of the business of the Company to the extent necessary and/orsubstantially consistent with the then-present business travel obligations of employees at substantially the same service level as theEmployee, which will include periodic trips to the Company’s headquarters in Shanghai, China.3.Compensation, Benefits and Expense Reimbursements.3.1.Base Salary. In consideration for the agreement of the Employee to be employed under thisAgreement, effective as of the Effective Date and during the Employment Period, the Employee shall receive from the Company anannual base salary (as it may be adjusted from time to time, the “Base Salary”) of US$400,000. The Base Salary, and all othercompensation and reimbursement under the Agreement, may be provided through a human resources service or similar organization.The Base Salary to be paid to the Employee will be subject to reduction for payroll tax withholdings legally required (if any) or suchother reductions properly and reasonably requested by the Employee. The Company shall pay such Base Salary in arrears on the lastworking day (Monday to Friday) of each month in accordance with the standard payroll procedures of the Company (as they may bemodified from time to time). The Base Salary will be subject to review by the Board or the Compensation Committee of the Board(the “Compensation Committee”) and adjustments will be made by the Board or the Compensation Committee based upon itsrespective normal performance review practices.2 3.2.Stock Options. Subject to the terms of the 2017 Stock Incentive Plan (the “Plan”) of ParentCompany, the Employee shall be granted an option to purchase 50,000 ordinary shares of the Parent Company (the “Option”) at anexercise price equal to the fair market value of an American Depository Share (or ADS) representing Ordinary Shares of the ParentCompany on the date of grant, which shall be the closing price of an ADS on the NASDAQ Global Market on the date of grant or, ifno closing price is reported for the date of grant, the closing price on the immediately preceding date on which a closing price wasreported. The Option so granted shall vest in accordance with the vesting schedule set out in the Additional Option Agreement (asdefined below). The Option will be subject to the terms, definitions and provisions of the Plan and the stock option agreement by andbetween the Employee and the Parent Company on or after the Effective Date (the “Additional Option Agreement”). The Employeeacknowledges, agrees and confirms that the Employee has previously been granted options to purchase up to an aggregate of 166,000Ordinary Shares of the Parent Company in accordance with the provisions of the Existing Agreement, as evidenced by those certainOption Agreements entered into by and between the Parent Company and the Employee on May 12, 2017 and on September 20, 2017(the “Existing Options”), and that (i) this Agreement (and the Additional Option Agreement) does not modify or otherwisesupplement the terms and conditions pertaining to the Existing Options and (ii) that Employee has no further rights or claims to anyadditional options or equity incentive awards other than, pursuant to the Existing Options and the Option as provided under thisSection 3.2.3.3.Bonus. The Employee may be eligible to receive an annual bonus with a target equal to 30% of theBase Salary for services provided in fiscal year 2018 and for the remainder of any annual period during the Employment Period (the“Target Bonus”). The actual amount of which shall be determined by the Board or the Compensation Committee in its respectivediscretion. Any annual bonus earned hereunder shall be paid not later than March 15th following the end of the calendar year to whichit relates and otherwise in accordance with the Company’s bonus plan as in effect from time to time. In order to receive any suchbonus, the Employee must be employed through the date that such bonus is paid.3.4.Fringe Benefits. During the Employment Period, the Employee will be eligible to receive the fringebenefits that are made available to employees of the Company and such other benefits as are determined by the Board or theCompensation Committee, in its respective sole and exclusive discretion. Any benefit plan participation will be subject to the termsand conditions of the applicable plan, applicable Company policy, and applicable law.3.5.Reimbursements. During the Employment Period, the Employee will be reimbursed, in accordancewith the practice applicable to employees of the Company from time to time, for all reasonable traveling expenses and otherdisbursements incurred by him for or on behalf of the Company in the performance of his duties hereunder upon presentation by theEmployee of appropriate documentation. The Employee’s right to payment or reimbursement for business expenses hereunder shall besubject to the following additional rules: (i) the amount of expenses eligible for payment or reimbursement during any calendar yearshall not affect the expenses eligible for payment or reimbursement in any other calendar year, (ii) payment or reimbursement shall bemade by the Company as soon as reasonably practicable following the time that the applicable expense is submitted by the Employeeto the Company and in no event later than December 31 of the calendar year following the calendar year in which the expense orpayment was incurred, and (iii) the right to payment or reimbursement shall not be subject to liquidation or exchange for any otherbenefit.3 3.6.Deductions. Recognizing that the Employee is an employee for all purposes, the Company or asubsidiary of the Company shall deduct from any compensation payable to the Employee the sums which the Company or suchsubsidiary is required by law to deduct, including, but not limited to, government state withholding taxes, social security taxes and statedisability insurance and mandatory provident funds, and the Company or such subsidiary shall pay any amounts so deducted to theapplicable governmental entities and agents entitled to receive such payments.4.Termination.4.1.Disability. If the Employee dies, then the Employee’s employment by the Company hereunder shallautomatically terminate on the date of the Employee’s death. If the Employee is incapacitated or disabled by accident, sickness orotherwise so as to render him mentally or physically incapable of performing the services required to be performed by him under thisAgreement for a period of ninety (90) consecutive days or longer, or for any ninety (90) days during any six (6) month period (suchcondition being herein referred to as “Disability”), the Company, at its option, may terminate the Employee’s employment under thisAgreement immediately upon giving him notice to that effect. In the case of a Disability, until the Employee becomes eligible fordisability income under the Company’s disability income insurance (if any) or until the Company shall have terminated the Employee’sservice in accordance with the foregoing, whichever shall first occur, to the extent permitted by the terms of the Company’s plans, theEmployee will be entitled to receive compensation, at the rate and in the manner provided in Section 3.1, notwithstanding any suchphysical or mental disability. Termination pursuant to this Section 4.1 is hereinafter referred to as an “Involuntary Termination”.4.2.Substitution. The Board or its designee may designate another employee to act in the Employee’splace during any period of Disability suffered by the Employee during the Employment Period. Notwithstanding any such designation,the Employee shall continue to receive the Base Salary and benefits in accordance with Section 3 of this Agreement until theEmployee becomes eligible for disability income under the Company’s disability income insurance (if any) or until the termination ofthe Employee’s employment, whichever occurs first.4.3.Disability Income Payments. While receiving disability income payments under the Company’sdisability income insurance, if any (the “Disability Payments”), the Employee shall not be entitled to receive any Base Salary underSection 3.1, but shall continue to participate in all other compensation and benefits in accordance with Sections 3.3, 3.4 and 3.5 untilthe date of the Employee’s termination of employment.(a)Verification of Disability. If any question arises as to whether during any period theEmployee is disabled through any illness, injury, accident or condition of either a physical or psychological nature so as to be unable toperform substantially all of the Employee’s duties and responsibilities hereunder, the Employee may, and at the request of theCompany shall, submit to a medical examination by a physician selected by the Company to whom the Employee or the Employee’sguardian has no reasonable objection to determine whether the Employee is so disabled and such determination shall for the purposesof this Agreement be conclusive of the issue. If such question arises and the Employee fails to submit to such medical examination, theCompany’s determination of the issue shall be binding on the Employee.4 4.4.Termination by the Company for Cause. The Company may terminate the employment of theEmployee hereunder at any time during the Employment Period for Cause (as defined below) (such termination being referred to inthis Agreement as a “Termination for Cause”) by giving the Employee notice of such termination, upon the giving of which suchtermination shall take effect immediately. For the purpose of this Agreement, “Cause” means any one of the following grounds, asdetermined by the Board in its reasonably judgment:(a)The Employee’s drunkenness or use of illegal drugs which interferes with the performanceof the Employee’s obligations and duties to the Company or any of its Affiliates;(b)the Employee’s commission of a felony, or any crime involving fraud, moral turpitude ormisrepresentation or violation of applicable securities laws;(c)mismanagement by the Employee of the business and affairs of the Company or anyAffiliate of the Company which results or could reasonably be expected to result in a material loss to the Company or any of itsAffiliates;(d)the Employee’s material violation of any confidentiality, non-competition, non-solicitation,no-hire or other restrictive covenant set forth in this Agreement, the Compliance Agreement (as defined below), or any other agreementbetween the Employee and the Company or any of its Affiliates or any material policy of the Company or any of its Affiliates; or; or(e)the Employee’s material failure to perform or substantial negligence in the performance ofthe Employee’s obligations and duties to the Company or any of its Affiliates, or any misconduct, dishonesty or acts of moral turpitudeby the Employee which is or could reasonably be expected to be materially detrimental to the interests and well-being of the Companyor any of its Affiliates, including, without limitation, harm to its business or reputation.4.5.Termination by the Company without Cause. The Company may terminate the employment of theEmployee hereunder at any time during the Employment Period without “Cause” (such termination referred to in this Agreement as a“Termination without Cause”).4.6.Termination by the Employee for Good Reason. The Employee may terminate his employmenthereunder at any time for Good Reason (as defined below) by giving the Company written notice of such termination, provided thatsuch notice specifies: (a) the basis for termination and (b) the effective date of termination (such termination being referred to in thisAgreement as a “Termination for Good Reason”). For purposes of this Agreement, the term “Good Reason” shall mean (i) anymaterial diminution of the Employee’s duties or responsibilities hereunder (except in each case in connection with the Termination forCause or pursuant to Section 4.1) or the assignment to the Employee of duties or responsibilities that are materially inconsistent withthe Employee’s then current position; (ii) any material breach of this Agreement by the Company which is not cured within ten (10)business day days after written notice thereof is given to the Company; or (iii) a relocation of the Employee (other than any relocationrequested by the Employee) from the place of assignment of the Employee by the Company as of the Effective Date to a location morethan thirty (30) kilometers from such location, other than on a temporary basis not to exceed a period equal to six (6) consecutivecalendar months.5 4.7.Termination by the Employee without Good Reason. The Employee may terminate his employmenthereunder without Good Reason (such termination being referred to in this Agreement as a “Termination without Good Reason”) atany time upon reasonable notice by the Employee to the Board of no fewer than thirty (30) calendar days; provided that the Companymay elect to waive all or any portion of such notice period).5.Effect of Termination.5.1.Termination for Cause or without Good Reason.(a)Upon the termination of the Employee’s employment hereunder pursuant to a Terminationfor Cause or a Termination without Good Reason, neither the Employee nor his beneficiary or estate will have any further rights orclaims against the Company, its affiliates or its subsidiaries under this Agreement except to receive the following (in the aggregate, the“Final Compensation”):(i)the unpaid portion of the Base Salary provided for in Section 3.1, computed on apro rata basis up to (and including) the effective date of such termination;(ii)reimbursement for any expenses for which the Employee has not beenreimbursed as provided in Section 3.5, provided that that the Employee submits all suchexpenses and required supporting documentation within sixty (60) days of the effective dateof such termination; and(iii)if required by applicable law or Company policy, pay at the rate of the BaseSalary for any accrued but unused vacation time as of the effective date of such termination.(b)Final Compensation (other than any expense reimbursement, which shall be paid withinthirty (30) days after such reimbursement is submitted in accordance with subsection (ii) above) will be paid to the Employee withinthirty (30) days following the date of termination (or such shorter period required by law).5.2.Involuntary Termination. Upon the termination of the Employee’s employment hereunder pursuant toan Involuntary Termination, neither the Employee nor his beneficiary or estate will have any further rights or claims against theCompany, or any of its Affiliates under this Agreement except to receive:(a)Final Compensation in accordance with Section 5.1; and(b)an aggregate amount equal to one (1) months’ Base Salary plus an amount equal to onemonth of the Company’s portion of monthly premiums payable immediately prior to the effective date of such termination with respectto health, dental, and vision insurance coverage for the Employee, payable in accordance with the Company’s normal payroll practices,subject to Sections 5.5, 5.6 and 5.7; and(c)reimbursement for any expenses for which the Employee shall not have theretofore beenreimbursed as provided in Section 3.5.6 5.3.Termination without Cause or for Good Reason.(a)Upon the termination of the Employee’s employment hereunder pursuant to a Terminationwithout Cause or a Termination for Good Reason, neither the Employee nor his beneficiary or estate will have any further rights orclaims against the Company, its affiliates or its subsidiaries under this Agreement except to receive the following (in the aggregate, the“Severance Payments”):(i)Final Compensation in accordance with Section 5.1;(ii)an aggregate payment equal to twelve (12) months’ Base Salary; and(iii)an aggregate payment equal to twelve (12) months of the Company’s portion ofmonthly premiums payable immediately prior to the effective date of such termination withrespect to health, dental, and vision insurance coverage for the Employee; and(iv)a payment equal to pro-rated Target Bonus. (determined by multiplying theTarget Bonus by a fraction, the numerator of which is the number of days during the fiscalyear of termination that Employee is employed by the Company and the denominator ofwhich is three hundred and sixty-five (365)), payable at the same time bonuses for suchyear are paid to other senior executives of the Company (the “Pro-rated Bonus”).(b)Subject to Sections 5.5, 5.6 and 5.7, Severance Payments (other than Final Compensation)will be provided in the form of salary continuation, payable in equal installments in accordance with the Company’s normal payrollpractices during the twelve- (12) month period following the effective date of the termination of the Employee’s employment, providedthat the first such payment will be made on the next regular pay day following the date on which the Release of Claims (as definedbelow) becomes effective and irrevocable and will be retroactive to effective date of the termination of the Employee’s employment.5.4.Change in Control Termination.(a)Upon the termination of the Employee’s employment hereunder pursuant to a Terminationwithout Cause or a Termination for Good Reason within twelve (12) months following a Change in Control (such termination beingreferred to in this Agreement as a “Change in Control Termination”), neither the Employee nor his beneficiary or estate will haveany further rights or claims against the Company, its affiliates or its subsidiaries under this Agreement except to receive the following(in the aggregate, the “Enhanced Severance Payments”):(i)Final Compensation in accordance with Section 5.1;(ii)an aggregate payment equal to twelve (12) months’ Base Salary;7 (iii)an aggregate payment equal to twelve (12) months of the Company’s portion ofmonthly premiums payable immediately prior to the effective date of such termination withrespect to health, dental, and vision insurance coverage for the Employee; and(iv)a payment equal to the Pro-rated Bonus.(b)Subject to Sections 5.5, 5.6 and 5.7, other than Final Compensation, Enhanced SeverancePayments will be paid as follows: the amounts under Section 5.4(a)(ii) and Section 5.4(a)(iii) will be provided in the form of salarycontinuation, payable in equal installments in accordance with the Company’s normal payroll practices during the twelve- (12-) monthperiod following the effective date of the termination of the Employee’s employment, provided that the first such payment will be madeon the next regular pay day following the date on which the Release of Claims (as defined below) becomes effective and irrevocableand will be retroactive to effective date of the termination of the Employee’s employment.(c)Notwithstanding anything to the contrary in any agreement between the Employee and theCompany, upon a Change in Control Termination, the Employee will be entitled to one hundred percent (100%) accelerated vesting ofany then-outstanding unvested stock options, restricted stock or other equity awards granted to the Employee by the Parent Company,subject to Sections 5.5, 5.6 and 5.7.(d)For purposes of this Agreement, “Change in Control” means the occurrence of any of thefollowing:(i)any one person, or more than one person acting as a group (“Person”), acquiresownership of the stock of the Parent Company that, together with the stock held by suchPerson, constitutes more than 50% of the total voting power of the stock of the ParentCompany, except that any change in the ownership of the stock of the Parent Company as aresult of a private financing of the Parent Company that is approved by the Board will notbe considered a Change in Control;(ii)a majority of members of the Board is replaced during any twelve- (12-) monthperiod by directors whose appointment or election is not endorsed by a majority of themembers of the Board prior to the date of the appointment or election; or(iii)any Person acquires (or has acquired during the twelve- (12- ) month periodending on the date of the most recent acquisition by such person or persons) assets from theParent Company that have a total gross fair market value equal to or more than 50% of thetotal gross fair market value of all of the assets of the Parent Company immediately prior tosuch acquisition or acquisitions. For purposes of this subsection (iii), gross fair marketvalue means the value of the assets of the Parent Company, or the value of the assets beingdisposed of, determined without regard to any liabilities associated with such assets.8 For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation thatenters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the ParentCompany. Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its solepurpose is to re-domicile the Parent Company in a jurisdiction other than its original jurisdiction of incorporation, or (ii) itssole purpose is to create a holding company that will be owned in substantially the same proportions by the persons whoheld the Parent Company’s securities immediately before such transaction. With regard to any payment considered to benonqualified deferred compensation under Section 409A (as defined below), to the extent applicable, that is payable upon aChange in Control, to avoid the imposition of an additional tax, interest or penalty under Section 409A (as defined below),no amount will be payable unless such change in control constitutes a “change in control event” within the meaning ofSection 1.409A-3(i)(5) of the Treasury Regulations.5.5.Conditions to Receipt of Severance. The obligation of the Company to make any payments andbenefits (other than Final Compensation) to or on behalf of the Employee under Section 5.2, 5.3 or 5.4 above is conditioned on theEmployee or, as applicable, his beneficiary or estate signing and not revoking a separation agreement and release of claims in a formreasonably satisfactory to the Company (the “Release of Claims”), provided that such separation agreement and release of claimsbecomes effective and irrevocable no later than sixty (60) days following the termination date (such deadline, the “Release Deadline”).If the Release of Claims does not become effective by the Release Deadline, the Employee or his beneficiary or estate will forfeit anyrights to severance or benefits (other than Final Compensation) under this Agreement. In no event will severance payments or benefits(other than Final Compensation) be paid or provided under this Agreement until such Release of Claims becomes effective andirrevocable. The first installment of any severance payments to which the Employee or his beneficiary or estate becomes entitled willbe paid on the Company’s next regular payday that is at least sixty (60) days following the termination date, retroactive to the dayfollowing the termination date. If the sixty (60) day period following termination referred to herein extends through two (2) taxableyears, to the extent required to comply with Section 409A, such amount will be paid in the second taxable year (but within the sixty(60) day period) following the Employee’s termination.5.6.Section 409A. Notwithstanding anything to the contrary in this Agreement, if at the time theEmployee’s employment terminates, the Employee is a “specified employee,” as defined below, any and all amounts payable underthis Agreement on account of such separation from service that would (but for this provision) be payable within six (6) monthsfollowing the date of termination, shall instead be paid on the next business day following the expiration of such six- (6-) month periodor, if earlier, upon the Employee’s death; except (a) to the extent of amounts that do not constitute a deferral of compensation withinthe meaning of Treasury regulation Section 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in Section1.409A-1(b)(9)(iii), as determined by the Company in its reasonable good faith discretion); (b) benefits which qualify as exceptedwelfare benefits pursuant to Treasury regulation Section 1.409A-1(a)(5); or (c) other amounts or benefits that are not subject to therequirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”). For purposes of this Agreement,all references to “termination of employment” and correlative phrases shall be construed to require a “separation from service” (asdefined in Section 1.409A-1(h) of the Treasury regulations after giving effect to the presumptions contained therein), and the term“specified employee” means9 an individual determined by the Company to be a specified employee under Treasury regulation Section 1.409A-1(i). Each paymentmade under this Agreement shall be treated as a separate payment and the right to a series of installment payments under thisAgreement is to be treated as a right to a series of separate payments. In no event shall the Company or any of its Affiliates have anyliability relating to the failure or alleged failure of any payment or benefit under this Agreement to comply with, or be exempt from, therequirements of Section 409A.5.7.Limitations on Payments. Notwithstanding anything in this Agreement or elsewhere to the contrary,in the event that any payment or benefit received or to be received by the Employee under this Agreement or otherwise (collectively,the “Payments”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code of1986, as amended (the “Code”), and (ii) but for this Section 5.7, be subject to the excise tax imposed by Section 4999 of the Code,then the Payments shall be reduced (but not below zero) to the extent, but only to the extent, needed to ensure that no portion of thePayments constitutes a “parachute payment” within the meaning of Section 280G of the Code; provided, that no reduction in thePayments shall be made by reason of this Section 5.7 unless, on an after-tax basis taking into account the excise tax imposed bySection 4999 of the Code together with all applicable income taxes, the Payments payable to the Employee would be greater than ifsuch reduction had not been made. Any reduction in the Payments required by the immediately preceding sentence shall be applied,first, against any cash severance payments, then against other payments and benefits to which Q&A 24(c) of Section 1.280G-1 of theTreasury Regulations does not apply, and finally against all remaining payments and benefits.6.Compliance Agreement. For the avoidance of doubt, the Compliance Agreement executed and delivered by theEmployee as of May 7, 2017 (the “Compliance Agreement”) remains in full force and effect and the terms and conditions thereof arespecifically incorporated herein by reference. The obligation of the Company to make any payments (other than the FinalCompensation) to or on behalf of the Employee under Section 5.3 or 5.4 above, and the Employee’s right to retain the same, isexpressly conditioned upon the Employee’s continued performance of the Employee’s obligations under the Compliance Agreement.7.Standards of Conduct. The Employee will conduct himself in an ethical and professional manner at all times andin accordance with any employee policies or guidelines which the Parent Company or the Company may issue from time to time.8.Indemnification.8.1.Indemnification. In the event that (a) the Employee was or is a party or is threatened to be made aparty to any Proceeding (as defined below) by reason of the Employee’s Corporate Status (as defined below) or (b) the Employee wasor is a party or is threatened to be made a party to any Proceeding by or in the right of the Company to procure a judgment in its favorby reason of the Employee’s Corporate Status, the Employee shall be indemnified by the Company against all Expenses and Liabilitiesincurred or paid by the Employee in connection with such Proceeding to the maximum extent permitted by applicable law (referred toherein as “Indemnifiable Amounts”). For purposes hereof, the terms (i) “Proceeding” means any threatened, pending or completedclaim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any otherproceeding, whether civil, criminal, administrative, arbitrative or investigative, whether formal or informal, (ii) “Corporate Status”means the status of the Employee as an employee and/or10 director of the Company, as applicable, (iii) “Expenses” means all fees, costs and expenses incurred in connection with anyProceeding, including, without limitation, reasonable attorneys’ fees, disbursements and retainers, fees and disbursements of expertwitnesses, private investigators and professional advisors (including, without limitation, accountants, counsels and investment bankers),court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmissioncharges, postage, delivery services, secretarial services and other disbursements and expenses and (iv) “Liabilities” means judgments,damages, liabilities, losses, penalties, excise taxes, and fines.8.2.Advancement of Expenses. The Company agrees that the Company shall pay to the Employee allIndemnifiable Amounts incurred by the Employee in connection with any Proceeding, including a Proceeding by the right of theCompany, in advance of the final disposition of such Proceeding, as the same are incurred, provided that the Employee provides theCompany with a written undertaking to repay the amount of Indemnifiable Amounts if it is finally determined by a court of competentjurisdiction that the Employee is not entitled under this Agreement to indemnification with respect to such Indemnifiable Amounts.8.3.Limitation on Indemnification. The Employee shall not be entitled to any indemnification under thisSection 8 if the Employee knowingly violated any duty, responsibility or obligation imposed under this Agreement, the ComplianceAgreement or any Company policy.8.4.Change in Law. To the extent that a change in applicable law (whether by statute or judicial decision)shall permit broader indemnification or advancement of expenses than is provided under this Agreement, the Employee shall beentitled to such broader indemnification and advancements, and this Agreement shall be deemed to be amended to such extent.9.Representations and Warranties of the Company. The Company represents and warrants to the Employee thatthe execution of this Agreement by the Company has been duly authorized by resolution of the Board.10.Representations and Warranties of the Employee. The Employee represents and warrants to the Companythat: (i) the Employee has the proper skill, training and background so as to be able to perform under the terms of this Agreement in acompetent and professional manner; (ii) the Employee will not infringe any intellectual property rights including patent, copyright,trademark, trade secret or other proprietary right of any person; (iii) the Employee will not use any trade secrets or confidentialinformation of the Company for purposes other than for the furtherance of the business of the Company and will not use any tradesecrets or confidential information owned by any third party; and (iv) the Employee’s signing of this Agreement and the performanceof the Employee’s obligations under it will not breach or be in conflict with any other agreement to which the Employee is a party or isbound, and the Employee is not now subject to any covenants against competition or similar covenants or any court order that couldaffect the performance of the Employee’s obligations under this Agreement..11.Enforcement. It is the desire and intent of the parties hereto that the provisions of this Agreement will beenforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.Accordingly, to the extent that a restriction contained in this Agreement is more restrictive than permitted by the laws of anyjurisdiction whose law may be deemed to govern the review and interpretation of this11 Agreement, the terms of such restriction, for the purpose only of the operation of such restriction in such jurisdiction, will be themaximum restriction allowed by the laws of such jurisdiction and such restriction will be deemed to have been revised accordinglyherein. A court having jurisdiction over an action arising out of or seeking enforcement of any restriction contained in this Agreementmay modify the terms of such restriction in accordance with this Section 11.12.Covenant Against Assignment. The Employee may not assign any rights or delegate any of the duties of theEmployee under this Agreement. As used in this provision, “assignment” and “delegation” shall mean any sale, gift, pledge,hypothecation, encumbrance, or other transfer of all or any portion of the rights, obligations, or liabilities in or arising from thisAgreement to any person or entity, whether by operation of law or otherwise, and regardless of the legal form of the transaction inwhich the attempted transfer occurs.13.Miscellaneous.13.1.Notices. Any notice, request, demand or other communication required or permitted to be given to aparty pursuant to the provisions of this Agreement will be in writing and will be effective and deemed given under this Agreement onthe earliest of: (i) the date of personal delivery, (ii) the date of transmission by facsimile or e-mail, with confirmed transmission andreceipt, (iii) two (2) days after deposit with an internationally-recognized courier or overnight service such as Federal Express or DHL,or (iv) five (5) days after mailing via certified mail, return receipt requested. All notices not delivered personally or by facsimile will besent with postage and other charges prepaid and properly addressed to the party to be notified at the address set forth on the signaturepages hereto.13.2.Time. Time is of the essence in performance of the rights and obligations under this Agreement.13.3.Binding Agreement; Benefit. The provisions of this Agreement will be binding upon and will inureto the benefit of the respective heirs, legal representatives and successors of the parties hereto.13.4.Governing Law. This Agreement will be governed by, and construed and enforced in accordancewith, the laws of the State of Delaware, without giving effect to its principles or rules of conflict laws to the extent such principles orrules would require or permit the application of the laws of another jurisdiction.13.5.Waiver of Breach. The waiver by either party of a breach of any provision of this Agreement by theother party must be in writing and will not operate or be construed as a waiver of any subsequent breach by such other party.13.6.Entire Agreement; Amendments. This Agreement, together with the Compliance Agreement,contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements orunderstanding among the parties with respect thereto, including without limitation the Existing Agreement. For the avoidance ofdoubt, the Employee acknowledges, agrees and confirms that Zai Lab Hong Kong is, effective as of the Effective Date, fully andirrevocably discharged and released from any and all obligations arising under or in connection with the Existing Agreement, with theunderstanding that the Company shall, as of the Effective Date, shall be the Employee’s employer of record. This Agreement may beamended only by an agreement in writing signed by each of the parties hereto.12 13.7.Headings. The Section headings contained in this Agreement are for reference purposes only andwill not affect in any way the meaning or interpretation of this Agreement.13.8.Severability. Subject to the provisions of Section 11 above, any provision of this Agreement that isprohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition orunenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdictionwill not invalidate or render unenforceable such provision in any other jurisdiction.13.9.Assignment. This Agreement is personal in its nature and the parties hereto shall not, without theconsent of the other party hereto, assign or transfer this Agreement or any rights or obligations hereunder; provided, however, that therights and obligations of the Company hereunder shall be assignable and delegable in connection with any subsequent merger,consolidation, sale of all or substantially all of the assets or shares of the Company or similar transaction involving the Company or asuccessor corporation.13.10. Further Assurances. The Employee agrees to execute, acknowledge, seal and deliver such furtherassurances, documents, applications, agreements and instruments, and to take such further actions, as the Company may reasonablyrequest in order to accomplish the purposes of this Agreement.13.11.Costs. Each of the parties shall pay all costs and expenses incurred or to be incurred by such partyin negotiating and preparing this Agreement and in closing and carrying out the transactions contemplated by this Agreement.13.12.Counterparts. The parties may execute this Agreement in any number of counterparts and, as sodelivered, the counterparts shall together constitute one and the same document. The parties agree that each such counterpart is anoriginal and shall be binding upon all of the parties, even though all of the parties are not signatories to the same counterpart. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 13  IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COMPANY:ZAI LAB (US) LLC EMPLOYEE:HARALD REINHART By:/s/ Samantha Du By:/s/ Harald Reinhart Address:c/o Zai Lab Limited4560 Jinke Road, Bldg. 1, 4FPudong, Shanghai, 201210, China Address:On File with the Company SIGNATURE PAGE OF EMPLOYMENT AGREEMENT Exhibit 10.26 AMENDED AND RESTATED EMPLOYMENT AGREEMENTTHIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as ofDecember 1, 2018 (the “Effective Date”), by and between Zai Lab Limited, a limited company incorporated under the laws of theCayman Islands (the “Company”), and Tao Fu, an individual (the “Employee”).WHEREAS, the Company and the Employee previously entered in that certain Employment Agreement, entered into as ofSeptember 12 and effective as of September 24, 2018 (the “Existing Agreement”); andWHEREAS, the Company and the Employee desire to amend and replace the Existing Agreement in its entirely with theterms and conditions set forth in this Agreement.NOW, THEREFORE, in consideration of the promises and the respective covenants and agreements of the parties, and forgood and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:1.Employment. The Employee’s employment under the terms of this Agreement will commence as of the EffectiveDate and will continue until terminated in accordance with Section 4 (the “Employment Period”).1.1.Duties and Responsibilities. The Company agrees to employ the Employee as the President and ChiefOperating Officer of the Company, to render such services and to perform such duties and responsibilities as are normally associatedwith and inherent in the aforementioned role and the capacity in which the Employee is employed, as well as such other duties andresponsibilities as shall from time to time be assigned to the Employee by the Chief Executive Officer of the Company or such person’sdesignee. The Employee shall report directly to the Chief Executive Officer of the Company or such other senior executive officer ofthe Company as designated by the Chief Executive Officer or the Board of Directors (the “Board”) of the Company.1.2.Acceptance of Employment. The Employee accepts such employment set out in Section 1.1 andagrees to faithfully perform and render the services required of the Employee under this Agreement. Except for reasonable vacations,absences due to temporary illness, and activities that may be mutually agreed to by the parties, the Employee shall devote substantiallyall of his time, attention and energies during normal business hours and such evenings and weekends as may be reasonably required forthe discharge of his duties to the Company and the performance of the Employee’s duties and responsibilities under this Agreement.1.3.Positions with Affiliates. If requested by the Company, the Employee agrees to serve withoutadditional compensation if elected, nominated or appointed as an officer and/or director of the Company and any of the subsidiaries,parents or other affiliates of the Company (collectively, “Affiliates”) and in one or more executive offices of any of the Affiliates of theCompany, provided that the Employee is indemnified for serving in any and all such capacities pursuant to the indemnificationprovisions set forth in the bylaws of such affiliates.1  1.4.Conflicts of Interest. The Employee has reviewed with the Company the present directorships,ownership (legal and beneficial, direct and indirect) interests and other positions or roles held by the Employee or his associate(s) in allsuch business organizations or arrangements which may be directly competitive or directly in conflict with the Company. TheEmployee agrees to review with the Company any potential directorships, ownership (legal and beneficial, direct and indirect) interestsand other positions or roles with business organizations or arrangements which may be directly competitive or directly in conflict withthe Company. The Employee or his associate(s) is precluded from owning an interest (legal and beneficial, direct and indirect) inanother company or serving as an employee, director, consultant, advisor or member of such other company that may be directlycompetitive or directly in conflict with the Company until such interest is presented to the Board and the Board consents to suchinterest or employment.2.Place of Performance. The Employee shall be based in San Francisco. The Company may require that theEmployee travel in furtherance of the business of the Company to the extent necessary and/or substantially consistent with the then-present business travel obligations of employees at substantially the same service level as the Employee.3.Compensation, Benefits and Expense Reimbursements.3.1.Base Salary. In consideration for the agreement of the Employee to be employed under thisAgreement, during the Employment Period, the Employee shall receive from the Company an annual base salary (as it may be adjustedfrom time to time, the “Base Salary”) of US$450,000, with the understanding that, at the sole discretion of the Company, up to anaggregate of (a) fifty percent (50%) of the Base Salary may be paid by the Company or one or more subsidiaries of the Companydomiciled in the Cayman Islands (each such subsidiary, a “Cayman Subsidiary”), and (b) fifty percent (50%) of the Base Salary maybe paid by one or more subsidiaries of the Company domiciled in the United States (each, a “U.S. Subsidiary”), in each case, pursuantto a short-form labor contract between the Employee and such Cayman Subsidiary, or U.S. Subsidiary, as applicable, identified by theCompany, to the extent required by or desirable under applicable laws. The Base Salary, and all other compensation andreimbursement under the Agreement, may be provided through a human resources service or similar organization. The Base Salary tobe paid to the Employee will be subject to reduction for payroll tax withholdings legally required (if any) or such other reductionsproperly and reasonably requested by the Employee. The Company shall pay such Base Salary in arrears on the last working day(Monday to Friday) of each month in accordance with the standard payroll procedures of the Company (as they may be modified fromtime to time). The Base Salary will be subject to review by the Board or the Compensation Committee of the Board (the“Compensation Committee”) and adjustments will be made by the Board or the Compensation Committee based upon its respectivenormal performance review practices.3.2.Equity Incentives. For the avoidance of doubt, the Employee acknowledges, agrees and confirms (i)that, as of the date of this Agreement, the Employee has been granted, in accordance with the provisions of the Existing Agreementand the Zai Lab Limited 2017 Equity Incentive Plan (the “Plan”), (A) an option to purchase 500,000 American Depository Sharesrepresenting ordinary shares of the Company (the “Existing Option”), as evidenced by that certain Option Agreement dated as ofSeptember 24, 2018 and entered into by and between the Company and the Employee (the “Option Agreement”) and (B) 200,000American Depository2  Shares representing ordinary shares of the Company (the “Existing Restricted Stock Award”), as evidenced by that certainRestricted Stock Agreement dated as of September 24, 2018 and entered into by and between the Parent and the Employee (the“Restricted Stock Agreement”); (ii) that this Agreement does not modify or otherwise supplement the terms and conditions pertainingto the Existing Option or the Existing Restricted Stock Award; and (iii) that the Employee has no further rights or claims to anyadditional options or equity incentive awards other than the Existing Option and the Existing Restricted Stock Award. The Plan, theOption Agreement and the Restricted Stock Agreement are incorporated herein by reference.3.3.Bonuses.(a)Annual Bonus. During the Employment Period, the Employee may be eligible to receive anannual bonus with a target equal to 45% of the Base Salary (the “Target Bonus”), the actual amount of which shall be determined bythe Board or the Compensation Committee in its respective discretion. Any annual bonus earned hereunder shall be paid not later thanMarch 15th following the end of the calendar year to which it relates and otherwise in accordance with the Company’s bonus plan asin effect from time to time. In order to receive any such bonus, the Employee must be employed through the date that such bonus ispaid.(b)Sign-on Bonus. The Employee will be eligible to receive a cash payment of US$300,000 (the“Sign-On Bonus”) on the seven-month anniversary of his continuous employment with the Company, provided that the Employeeremains employed with the Company on the date of such anniversary. The Company will withhold all applicable income taxes on suchamount, and will pay the net amount to the Employee according to the regularly scheduled payroll for such month of payment. In theevent that the Employee’s employment is terminated by the Company for Cause (as defined below) within the three (3) year periodfollowing the commencement of his employment with the Company, the Employee will repay to the Company the full amount of theSign-On Bonus within thirty (30) days following the date of termination. In the event that the Employee resigns from the Company forany reason or the Employee is terminated by the Company without Cause prior to the third anniversary of the commencement of hisemployment with the Company, he/she will repay to the Company a prorated portion of the Sign-On Bonus based on the number of fulland partial months remaining in such three (3) year period as of the date of such termination of employment, with such repaymentbeing made on or prior to the employee’s last working day with the Company.3.4.Fringe Benefits. During the Employment Period, the Employee will be eligible to receive the fringebenefits that are made available to employees of the Company and such other benefits as are determined by the Board or theCompensation Committee, in its respective sole and exclusive discretion. Any benefit plan participation will be subject to the termsand conditions of the applicable plan, applicable Company policy, and applicable law.3.5.Reimbursements. During the Employment Period, the Employee will be reimbursed, in accordancewith the practice applicable to employees of the Company from time to time, for all reasonable traveling expenses and otherdisbursements incurred by him for or on behalf of the Company in the performance of his duties hereunder upon presentation by theEmployee of appropriate documentation. The Employee’s right to payment or reimbursement for business expenses hereunder shall besubject to the following additional rules: (i) the amount of expenses eligible for payment or reimbursement during any calendar yearshall not affect the3  expenses eligible for payment or reimbursement in any other calendar year, (ii) payment or reimbursement shall be made by theCompany as soon as reasonably practicable following the time that the applicable expense is submitted by the Employee to theCompany and in no event later than December 31 of the calendar year following the calendar year in which the expense or paymentwas incurred, and (iii) the right to payment or reimbursement shall not be subject to liquidation or exchange for any other benefit.3.6.Deductions. Recognizing that the Employee is an employee for all purposes, the Company or asubsidiary of the Company shall deduct from any compensation payable to the Employee the sums which the Company or suchsubsidiary is required by law to deduct, including, but not limited to, government state withholding taxes, social security taxes and statedisability insurance and mandatory provident funds, and the Company or such subsidiary shall pay any amounts so deducted to theapplicable governmental entities and agents entitled to receive such payments.4.Involuntary Termination.4.1.Disability. If the Employee dies, then the Employee’s employment by the Company hereunder shallautomatically terminate on the date of the Employee’s death. If the Employee is incapacitated or disabled by accident, sickness orotherwise so as to render him mentally or physically incapable of performing the services required to be performed by him under thisAgreement for a period of ninety (90) consecutive days or longer, or for any ninety (90) days during any six (6) month period (suchcondition being herein referred to as “Disability”), the Company, at its option, may terminate the Employee’s employment under thisAgreement immediately upon giving him notice to that effect. In the case of a Disability, until the Employee becomes eligible fordisability income under the Company’s disability income insurance (if any) or until the Company shall have terminated the Employee’sservice in accordance with the foregoing, whichever shall first occur, to the extent permitted by the terms of the Company’s plans, theEmployee will be entitled to receive compensation, at the rate and in the manner provided in Section 3.1, notwithstanding any suchphysical or mental disability. Termination pursuant to this Section 4.1 is hereinafter referred to as an “Involuntary Termination”.4.2.Substitution. The Board or its designee may designate another employee to act in the Employee’s placeduring any period of Disability suffered by the Employee during the Employment Period. Notwithstanding any such designation, theEmployee shall continue to receive the Base Salary and benefits in accordance with Section 3 of this Agreement until the Employeebecomes eligible for disability income under the Company’s disability income insurance (if any) or until the termination of theEmployee’s employment, whichever occurs first.4.3.Disability Income Payments. While receiving disability income payments under the Company’sdisability income insurance, if any (the “Disability Payments”), the Employee shall not be entitled to receive any Base Salary underSection 3.1, but shall continue to participate in all other compensation and benefits in accordance with Sections 3.3, 3.4 and 3.5 untilthe date of the Employee’s termination of employment.4  4.4.Verification of Disability. If any question arises as to whether during any period the Employee isdisabled through any illness, injury, accident or condition of either a physical or psychological nature so as to be unable to performsubstantially all of the Employee’s duties and responsibilities hereunder, the Employee may, and at the request of the Company shall,submit to a medical examination by a physician selected by the Company to whom the Employee or the Employee’s guardian has noreasonable objection to determine whether the Employee is so disabled and such determination shall for the purposes of this Agreementbe conclusive of the issue. If such question arises and the Employee fails to submit to such medical examination, the Company’sdetermination of the issue shall be binding on the Employee.4.5.Termination by the Company for Cause. The Company may terminate the employment of theEmployee hereunder at any time during the Employment Period for Cause (as defined below) (such termination being referred to inthis Agreement as a “Termination for Cause”) by giving the Employee notice of such termination, upon the giving of which suchtermination shall take effect immediately. For the purpose of this Agreement, “Cause” means any one of the following grounds, asdetermined by the Board in its reasonably judgment:(a)The Employee’s drunkenness or use of illegal drugs which interferes with the performance ofthe Employee’s obligations and duties to the Company or any of its Affiliates;(b)the Employee’s commission of a felony, or any crime involving fraud, moral turpitude ormisrepresentation or violation of applicable securities laws;(c)mismanagement by the Employee of the business and affairs of the Company or any Affiliateof the Company which results or could reasonably be expected to result in a material loss to the Company or any of its Affiliates;(d)the Employee’s material violation of any confidentiality, non-competition, non-solicitation,no-hire or other restrictive covenant set forth in this Agreement, the Compliance Agreement (as defined below), or any other agreementbetween the Employee and the Company or any of its Affiliates or any material policy of the Company or any of its Affiliates; or; or(e)the Employee’s material failure to perform or substantial negligence in the performance of theEmployee’s obligations and duties to the Company or any of its Affiliates, or any misconduct, dishonesty or acts of moral turpitude bythe Employee which is or could reasonably be expected to be materially detrimental to the interests and well-being of the Company orany of its Affiliates, including, without limitation, harm to its business or reputation.4.6.Termination by the Company without Cause. The Company may terminate the employment of theEmployee hereunder at any time during the Employment Period without “Cause” (such termination referred to in this Agreement as a“Termination without Cause”).4.7.Termination by the Employee for Good Reason. The Employee may terminate his employmenthereunder at any time for Good Reason (as defined below) by giving the Company written notice of such termination, provided thatsuch notice specifies: (a) the basis for termination and (b) the effective date of termination (such termination being referred to in this5  Agreement as a “Termination for Good Reason”). For purposes of this Agreement, the term “Good Reason” shall mean (i) anymaterial diminution of the Employee’s duties or responsibilities hereunder (except in each case in connection with the Termination forCause or pursuant to Section 4.1) or the assignment to the Employee of duties or responsibilities that are materially inconsistent withthe Employee’s then current position; (ii) any material breach of this Agreement by the Company which is not cured within ten (10)business day days after written notice thereof is given to the Company; or (iii) a relocation of the Employee (other than any relocationrequested by the Employee) from the place of assignment of the Employee by the Company as of the Effective Date to a location morethan thirty (30) kilometers from such location, other than on a temporary basis not to exceed a period equal to six (6) consecutivecalendar months.4.8.Termination by the Employee without Good Reason. The Employee may terminate his employmenthereunder without Good Reason (such termination being referred to in this Agreement as a “Termination without Good Reason”) atany time upon reasonable notice by the Employee to the Board of no fewer than thirty (30) calendar days; provided that the Companymay elect to waive all or any portion of such notice period).5.Effect of Termination.5.1.Termination for Cause or without Good Reason.(a)Upon the termination of the Employee’s employment hereunder pursuant to a Terminationfor Cause or a Termination without Good Reason, neither the Employee nor his beneficiary or estate will have any further rights orclaims against the Company, its affiliates or its subsidiaries under this Agreement except to receive the following (in the aggregate, the“Final Compensation”):(i)the unpaid portion of the Base Salary provided for in Section 3.1, computed on apro rata basis up to (and including) the effective date of such termination;(ii)reimbursement for any expenses for which the Employee has not been reimbursedas provided in Section 3.5, provided that that the Employee submits all such expenses andrequired supporting documentation within sixty (60) days of the effective date of suchtermination; and(iii)if required by applicable law or Company policy, pay at the rate of the BaseSalary for any accrued but unused vacation time as of the effective date of such termination.(b)Final Compensation (other than any expense reimbursement, which shall be paid withinthirty (30) days after such reimbursement is submitted in accordance with subsection (ii) above) will be paid to the Employee withinthirty (30) days following the date of termination (or such shorter period required by law).6  5.2.Involuntary Termination. Upon the termination of the Employee’s employment hereunder pursuant toan Involuntary Termination, neither the Employee nor his beneficiary or estate will have any further rights or claims against theCompany, or any of its Affiliates under this Agreement except to receive:(i)Final Compensation in accordance with Section 5.1; and(ii)an aggregate amount equal to one (1) months’ Base Salary plus an amount equal toone month of the Company’s portion of monthly premiums payable immediately prior to theeffective date of such termination with respect to health, dental, and vision insurancecoverage for the Employee, payable in accordance with the Company’s normal payrollpractices, subject to Sections 5.5, 13.3 and 13.4; and(iii)reimbursement for any expenses for which the Employee shall not havetheretofore been reimbursed as provided in Section 3.5.5.3.Termination without Cause or for Good Reason.(a)Upon the termination of the Employee’s employment hereunder pursuant to a Terminationwithout Cause or a Termination for Good Reason, neither the Employee nor his beneficiary or estate will have any further rights orclaims against the Company, its affiliates or its subsidiaries under this Agreement except to receive the following (in the aggregate, the“Severance Payments”):(i)Final Compensation in accordance with Section 5.1;(ii)an aggregate payment equal to twelve (12) months’ Base Salary; and(iii)an aggregate payment equal to twelve (12) months of the Company’s portion ofmonthly premiums payable immediately prior to the effective date of such termination withrespect to health, dental, and vision insurance coverage for the Employee; and(iv)a payment equal to a pro-rated Target Bonus (determined by multiplying theTarget Bonus by a fraction, the numerator of which is the number of days during the fiscalyear of termination that Employee is employed by the Company and the denominator ofwhich is three hundred and sixty-five (365)), payable at the same time bonuses for such yearare paid to other senior executives of the Company.(b)Subject to Sections 5.5, 13.3 and 13.4, Severance Payments (other than Final Compensation)will be provided in the form of salary continuation, payable in equal installments in accordance with the Company’s normal payrollpractices during the twelve- (12) month period following the effective date of the termination of the Employee’s employment,7  provided that the first such payment will be made on the next regular pay day following the date on which the Release of Claims (asdefined below) becomes effective and irrevocable and will be retroactive to effective date of the termination of the Employee’semployment.5.4.Change in Control Termination.(a)Upon the termination of the Employee’s employment hereunder pursuant to a Terminationwithout Cause or a Termination for Good Reason within twelve (12) months following a Change in Control (such termination beingreferred to in this Agreement as a “Change in Control Termination”), neither the Employee nor his beneficiary or estate will haveany further rights or claims against the Company, its affiliates or its subsidiaries under this Agreement except to receive the following(in the aggregate, the “Enhanced Severance Payments”):(i)Final Compensation in accordance with Section 5.1;(ii)an aggregate payment equal to twelve (12) months’ Base Salary;(iii)an aggregate payment equal to twelve (12) months of the Company’s portion ofmonthly premiums payable immediately prior to the effective date of such termination withrespect to health, dental, and vision insurance coverage for the Employee; and(iv)a payment equal to the Pro-rated Bonus.(b)Subject to Sections 5.5, 13.3 and 13.4, Enhanced Severance Payments (other than FinalCompensation) will be paid as follows: the amounts under Section 5.4(a)(ii)-(iv) will be provided in the form of salary continuation,payable in equal installments in accordance with the Company’s normal payroll practices during the twelve- (12-) month periodfollowing the effective date of the termination of the Employee’s employment, provided that the first such payment will be made on thenext regular pay day following the date on which the Release of Claims (as defined below) becomes effective and irrevocable and willbe retroactive to effective date of the termination of the Employee’s employment.(c)Notwithstanding anything to the contrary in any agreement between the Employee and theCompany, upon a Change in Control Termination, the Employee will be entitled to one hundred percent (100%) accelerated vesting ofany then-outstanding unvested stock options, restricted stock or other equity awards granted to the Employee by the Company, subjectto Sections 5.5, 13.3 and 13.4.(d)For purposes of this Agreement, “Change in Control” means the occurrence of any of thefollowing:(i)any one person, or more than one person acting as a group (“Person”), acquiresownership of the stock of the Company that, together with the stock held by such Person,constitutes more than 50% of the total voting power of the stock of the Company, except8  that any change in the ownership of the stock of the Company as a result of a privatefinancing of the Company that is approved by the Board will not be considered a Change inControl;(ii)a majority of members of the Board is replaced during any twelve- (12-) monthperiod by directors whose appointment or election is not endorsed by a majority of themembers of the Board prior to the date of the appointment or election; or(iii)any Person acquires (or has acquired during the twelve- (12- ) month periodending on the date of the most recent acquisition by such person or persons) assets from theCompany that have a total gross fair market value equal to or more than 50% of the totalgross fair market value of all of the assets of the Company immediately prior to suchacquisition or acquisitions. For purposes of this subsection (iii), gross fair market valuemeans the value of the assets of the Company, or the value of the assets being disposed of,determined without regard to any liabilities associated with such assets.For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation thatenters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with theCompany. Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its solepurpose is to re-domicile the Company in a jurisdiction other than its original jurisdiction of incorporation, or (ii) its solepurpose is to create a holding company that will be owned in substantially the same proportions by the persons who held theCompany’s securities immediately before such transaction. With regard to any payment considered to be nonqualifieddeferred compensation under Section 409A (as defined below), to the extent applicable, that is payable upon a Change inControl, to avoid the imposition of an additional tax, interest or penalty under Section 409A (as defined below), no amountwill be payable unless such change in control constitutes a “change in control event” within the meaning of Section 1.409A-3(i)(5) of the Treasury Regulations.5.5.Conditions to Receipt of Severance. The obligation of the Company to make any payments andbenefits to or on behalf of the Employee under Sections 5.2-5.4 above (other than Final Compensation) is conditioned on theEmployee or, as applicable, his beneficiary or estate signing and not revoking a separation agreement and release of claims in a formreasonably satisfactory to the Company (the “Release of Claims”), provided that such separation agreement and release of claimsbecomes effective and irrevocable no later than sixty (60) days following the termination date (such deadline, the “Release Deadline”).If the Release of Claims does not become effective by the Release Deadline, the Employee or his beneficiary or estate will forfeit anyrights to severance or benefits (other than Final Compensation) under this Agreement. In no event will severance payments or benefits(other than Final Compensation) be paid or provided under this Agreement until such Release of Claims becomes effective andirrevocable. The first installment of any severance payments to which the Employee or his beneficiary or estate becomes entitled willbe paid on the Company’s next regular payday that is at least sixty (60) days following9  the termination date, retroactive to the day following the termination date. If the sixty (60) day period following termination referred toherein extends through two (2) taxable years, to the extent required to comply with Section 409A, such amount will be paid in thesecond taxable year (but within the sixty (60) day period) following the Employee’s termination.6.Compliance Agreement. The Employee agrees that the Compliance Agreement (as defined in the ExistingAgreement) remains in full force and effect, and the terms and conditions thereof are specifically incorporated herein by reference. Theobligation of the Company to make any payments (other than the Final Compensation) to or on behalf of the Employee under Section5.3 or 5.4 above, and the Employee’s right to retain the same, is expressly conditioned upon the Employee’s continued performance ofthe Employee’s obligations under the Compliance Agreement.7.Standards of Conduct. The Employee will conduct himself in an ethical and professional manner at all times andin accordance with any employee policies or guidelines which the Company may issue from time to time.8.Indemnification.8.1.Indemnification. In the event that (a) the Employee was or is a party or is threatened to be made a partyto any Proceeding (as defined below) by reason of the Employee’s Corporate Status (as defined below) or (b) the Employee was or is aparty or is threatened to be made a party to any Proceeding by or in the right of the Company to procure a judgment in its favor byreason of the Employee’s Corporate Status, the Employee shall be indemnified by the Company against all Expenses and Liabilitiesincurred or paid by the Employee in connection with such Proceeding to the maximum extent permitted by applicable law (referred toherein as “Indemnifiable Amounts”). For purposes hereof, the terms (i) “Proceeding” means any threatened, pending or completedclaim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any otherproceeding, whether civil, criminal, administrative, arbitrative or investigative, whether formal or informal, (ii) “Corporate Status”means the status of the Employee as an employee and/or director of the Company, as applicable, (iii) “Expenses” means all fees, costsand expenses incurred in connection with any Proceeding, including, without limitation, reasonable attorneys’ fees, disbursements andretainers, fees and disbursements of expert witnesses, private investigators and professional advisors (including, without limitation,accountants, counsels and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing andbinding costs, telephone and fax transmission charges, postage, delivery services, secretarial services and other disbursements andexpenses and (iv) “Liabilities” means judgments, damages, liabilities, losses, penalties, excise taxes, and fines.8.2.Advancement of Expenses. The Company agrees that the Company shall pay to the Employee allIndemnifiable Amounts incurred by the Employee in connection with any Proceeding, including a Proceeding by the right of theCompany, in advance of the final disposition of such Proceeding, as the same are incurred, provided that the Employee provides theCompany with a written undertaking to repay the amount of Indemnifiable Amounts if it is finally determined by a court of competentjurisdiction that the Employee is not entitled under this Agreement to indemnification with respect to such Indemnifiable Amounts.10  8.3.Limitation on Indemnification. The Employee shall not be entitled to any indemnification under thisSection 8 if the Employee knowingly violated any duty, responsibility or obligation imposed under this Agreement, the ComplianceAgreement or any Company policy.8.4.Change in Law. To the extent that a change in applicable law (whether by statute or judicial decision)shall permit broader indemnification or advancement of expenses than is provided under this Agreement, the Employee shall beentitled to such broader indemnification and advancements, and this Agreement shall be deemed to be amended to such extent.9.Representations and Warranties of the Company. The Company represents and warrants to the Employee thatthe execution of this Agreement by the Company has been duly authorized by resolution of the Board.10.Representations and Warranties of the Employee. The Employee represents and warrants to the Companythat: (i) the Employee has the proper skill, training and background so as to be able to perform under the terms of this Agreement in acompetent and professional manner; (ii) the Employee will not infringe any intellectual property rights including patent, copyright,trademark, trade secret or other proprietary right of any person; (iii) the Employee will not use any trade secrets or confidentialinformation of the Company for purposes other than for the furtherance of the business of the Company and will not use any tradesecrets or confidential information owned by any third party; and (iv) the Employee’s signing of this Agreement and the performanceof the Employee’s obligations under it will not breach or be in conflict with any other agreement to which the Employee is a party or isbound, and the Employee is not now subject to any covenants against competition or similar covenants or any court order that couldaffect the performance of the Employee’s obligations under this Agreement..11.Enforcement. It is the desire and intent of the parties hereto that the provisions of this Agreement will beenforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.Accordingly, to the extent that a restriction contained in this Agreement is more restrictive than permitted by the laws of anyjurisdiction whose law may be deemed to govern the review and interpretation of this Agreement, the terms of such restriction, for thepurpose only of the operation of such restriction in such jurisdiction, will be the maximum restriction allowed by the laws of suchjurisdiction and such restriction will be deemed to have been revised accordingly herein. A court having jurisdiction over an actionarising out of or seeking enforcement of any restriction contained in this Agreement may modify the terms of such restriction inaccordance with this Section 11.12.Covenant Against Assignment. The Employee may not assign any rights or delegate any of the duties of theEmployee under this Agreement. As used in this provision, “assignment” and “delegation” shall mean any sale, gift, pledge,hypothecation, encumbrance, or other transfer of all or any portion of the rights, obligations, or liabilities in or arising from thisAgreement to any person or entity, whether by operation of law or otherwise, and regardless of the legal form of the transaction inwhich the attempted transfer occurs.11  13.Miscellaneous.13.1.Notices. Any notice, request, demand or other communication required or permitted to be given to aparty pursuant to the provisions of this Agreement will be in writing and will be effective and deemed given under this Agreement onthe earliest of: (i) the date of personal delivery, (ii) the date of transmission by facsimile or e-mail, with confirmed transmission andreceipt, (iii) two (2) days after deposit with an internationally-recognized courier or overnight service such as Federal Express or DHL,or (iv) five (5) days after mailing via certified mail, return receipt requested. All notices not delivered personally or by facsimile will besent with postage and other charges prepaid and properly addressed to the party to be notified at the address set forth on the signaturepages hereto.13.2.Time. Time is of the essence in performance of the rights and obligations under this Agreement.13.3.Section 409A. Notwithstanding anything to the contrary in this Agreement, if at the time theEmployee’s employment terminates, the Employee is a “specified employee,” as defined below, any and all amounts payable underthis Agreement on account of such separation from service that would (but for this provision) be payable within six (6) monthsfollowing the date of termination, shall instead be paid on the next business day following the expiration of such six- (6-) month periodor, if earlier, upon the Employee’s death; except (a) to the extent of amounts that do not constitute a deferral of compensation withinthe meaning of Treasury regulation Section 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in Section1.409A-1(b)(9)(iii), as determined by the Company in its reasonable good faith discretion); (b) benefits which qualify as exceptedwelfare benefits pursuant to Treasury regulation Section 1.409A-1(a)(5); or (c) other amounts or benefits that are not subject to therequirements of Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”). For purposes ofthis Agreement, all references to “termination of employment” and correlative phrases shall be construed to require a “separation fromservice” (as defined in Section 1.409A-1(h) of the Treasury regulations after giving effect to the presumptions contained therein), andthe term “specified employee” means an individual determined by the Company to be a specified employee under Treasury regulationSection 1.409A-1(i). Each payment made under this Agreement shall be treated as a separate payment and the right to a series ofinstallment payments under this Agreement is to be treated as a right to a series of separate payments. In no event shall the Companyor any of its Affiliates have any liability relating to the failure or alleged failure of any payment or benefit under this Agreement tocomply with, or be exempt from, the requirements of Section 409A.13.4.Limitations on Payments. Notwithstanding anything in this Agreement or elsewhere to the contrary,in the event that any payment or benefit received or to be received by the Employee under this Agreement or otherwise (collectively,the “Payments”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for thisSection 5.7, be subject to the excise tax imposed by Section 4999 of the Code, then the Payments shall be reduced (but not below zero)to the extent, but only to the extent, needed to ensure that no portion of the Payments constitutes a “parachute payment” within themeaning of Section 280G of the Code; provided, that no reduction in the Payments shall be made by reason of this Section 5.7 unless,on an after-tax basis taking into account the excise tax imposed by Section12  4999 of the Code together with all applicable income taxes, the Payments payable to the Employee would be greater than if suchreduction had not been made. Any reduction in the Payments required by the immediately preceding sentence shall be applied, first,against any cash severance payments, then against other payments and benefits to which Q&A 24(c) of Section 1.280G-1 of theTreasury Regulations does not apply, and finally against all remaining payments and benefits.13.5.Binding Agreement; Benefit. The provisions of this Agreement will be binding upon and will inure tothe benefit of the respective heirs, legal representatives and successors of the parties hereto.13.6.Governing Law. This Agreement will be governed by, and construed and enforced in accordancewith, the laws of the State of California, without giving effect to its principles or rules of conflict laws to the extent such principles orrules would require or permit the application of the laws of another jurisdiction.13.7.Waiver of Breach. The waiver by either party of a breach of any provision of this Agreement by theother party must be in writing and will not operate or be construed as a waiver of any subsequent breach by such other party.13.8.Entire Agreement; Amendments. This Agreement, together with the Compliance Agreement,contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements orunderstanding among the parties with respect thereto, including without limitation the Existing Agreement. This Agreement may beamended only by an agreement in writing signed by each of the parties hereto.13.9.Headings. The Section headings contained in this Agreement are for reference purposes only and willnot affect in any way the meaning or interpretation of this Agreement.13.10.Severability. Subject to the provisions of Section 11 above, any provision of this Agreement that isprohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition orunenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdictionwill not invalidate or render unenforceable such provision in any other jurisdiction.13.11.Assignment. This Agreement is personal in its nature and the parties hereto shall not, without theconsent of the other party hereto, assign or transfer this Agreement or any rights or obligations hereunder; provided, however, that therights and obligations of the Company hereunder shall be assignable and delegable in connection with any subsequent merger,consolidation, sale of all or substantially all of the assets or shares of the Company or similar transaction involving the Company or asuccessor corporation.13.12. Further Assurances. The Employee agrees to execute, acknowledge, seal and deliver such furtherassurances, documents, applications, agreements and instruments, and to take such further actions, as the Company may reasonablyrequest in order to accomplish the purposes of this Agreement.13  13.13.Costs. Each of the parties shall pay all costs and expenses incurred or to be incurred by such party innegotiating and preparing this Agreement and in closing and carrying out the transactions contemplated by this Agreement.13.14.Counterparts. The parties may execute this Agreement in any number of counterparts and, as sodelivered, the counterparts shall together constitute one and the same document. The parties agree that each such counterpart is anoriginal and shall be binding upon all of the parties, even though all of the parties are not signatories to the same counterpart. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 14  IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ZAI LAB LIMITED EMPLOYEE: By:/s/Samantha Du By:/s/Tao Fu Address: Address: 4560 Jinke Road, Bldg. 1, 4F On File with the CompanyPudong, Shanghai, 201210, China SIGNATURE PAGE OF EMPLOYMENT AGREEMENT Exhibit 10.27 AMENDED AND RESTATED EMPLOYMENT AGREEMENTTHIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as ofMarch 22, 2019 (the “Effective Date”), by and between Zai Lab (US) LLC (the “Company”), and Yongjiang Hei (the“Employee”).RECITALSWHEREAS, the Company and its Affiliates are engaged in the business of researching, developing, manufacturing,commercialization of drug products in the pharmaceutical industry, including without limitation the sales and marketing of both smallmolecule and large molecule therapeutics (the “Business of the Group”);WHEREAS, the Company and the Employee previously entered into that certain Employment Agreement, dated as ofAugust 6, 2018 (the “Existing Agreement”); andWHEREAS, the Company and the Employee desire to amend and replace the Existing Agreement in its entirety with theterms and conditions set forth in this Agreement.AGREEMENTNOW, THEREFORE, in consideration of the promises and the respective covenants and agreements of the parties, and forgood and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:1.EMPLOYMENT. From the Effective Date, the Company agrees to continue the employment of the Employee and theEmployee agrees to continue employment with the Company. The period beginning on the Effective Date and ending on the date theEmployee’s employment under this Agreement is terminated is referred to herein as the “Employment Period”.1.1.Employment by Company. The Company agrees to employ the Employee as the Chief Medical Officer,Oncology of the Company. In addition, the Employee shall serve as the Chief Medical Officer, Oncology of Zai Lab Limited, alimited company incorporated under the laws of the Cayman Islands and the ultimate parent corporation of the Company (the “ParentCompany”) without further compensation. The Employee agrees to render such services and to perform such duties andresponsibilities as are normally associated with and inherent in the aforementioned roles and the capacities in which the Employee isemployed, as well as such other duties and responsibilities as shall from time to time be assigned to the Employee by the ChiefExecutive Officer of the Company or such person’s designee.1.2.Acceptance of Employment. The Employee accepts such employment set out in Section 1.1 and agrees tofaithfully perform and render the services required of the Employee under this Agreement. Except for reasonable vacations, absencesdue to temporary illness, and activities that may be mutually agreed to by the parties, the Employee shall devote his entire time,attention and energies during normal business hours and such evenings and weekends as may be reasonably required for the dischargeof his duties to the Business of The Group, and the performance of the Employee’s duties and responsibilities under this Agreement. 11.3.Positions with Affiliates. If requested by the Company, the Employee agrees to serve without additionalcompensation if elected, nominated or appointed as an officer and/or director of the Company, the Parent Company and any of thesubsidiaries or affiliates of the Company or the Parent Company (collectively, “Affiliates”) and in one or more executive offices of anyof the Affiliates.1.4.Conflicts of Interest. The Employee has reviewed with the board of directors of Zai Lab Limited (the “Board”)the present directorships, ownership (legal and beneficial, direct and indirect) interests and other positions or roles held by theEmployee or his/her associate(s) in all such business organizations or arrangements which may be directly competitive or directly inconflict with the Company or the Parent Company. The Employee agrees to review with the Board any potential directorships,ownership (legal and beneficial, direct and indirect) interests and other positions or roles with business organizations or arrangementswhich may be directly competitive or directly in conflict with the Company or the Parent Company. The Employee or his/herassociate(s) is precluded from owning an interest (legal and beneficial, direct and indirect) in another company or serving as anemployee, director, consultant, advisor or member of such another company that may be directly competitive or directly in conflict withthe Company or the Parent Company until such interest is presented to the Board and the Board consents to such interest oremployment. 2.PLACE OF PERFORMANCE. The Employee shall be based in Shanghai, China. The Company or the Parent Companymay require that the Employee travel in furtherance of the Business of the Group, to the extent necessary and/or substantially consistentwith the then present business travel obligations of employees at substantially the same service level as the Employee.3.COMPENSATION BENEFITS AND EXPENSE REIMBURSEMENTS. 3.1Base Salary. In consideration for the agreement of the Employee to be employed under this Agreement, duringthe Employment Period, the Employee shall receive from the Company an annual base salary (“Base Salary”) of US$500,000, withthe understanding that, at the sole discretion of the Company or the Parent Company, up to an aggregate of (a) sixty percent (60%) ofthe Base Salary may be paid by the Company, (b) forty percent (40%) of the Base Salary may be paid by one of more Affiliates of theCompany domiciled in China, in this case, pursuant to a short-form labor contract between you and such Affiliates, as applicable,identified by the Company, to the extent required by or desirable under applicable laws. This Base Salary, and all other compensationand reimbursement under the Agreement, may be provided through a human resources service organization. The Base Salary to bepaid to the Employee will be subject to reduction for payroll tax withholdings legally required (if any) or such other reductionsproperly and reasonably requested by the Employee. The Company (or human resources service organization, as applicable) shall paysuch Base Salary in accordance with its standard payroll procedures. The Employee’s Base Salary will be subject to review andadjustments will be made based upon the Company’s normal performance review practices.23.2Equity Incentives.3.2.1Stock Options. For the avoidance of doubt, the Employee acknowledges, agrees and confirms that(i) as of the date of this Agreement, the Employee has been granted, in accordance with the provisions of the Existing Agreement andthe Parent Company’s 2017 Equity incentive Plan (the “Plan”), (A) an option to purchase 375,000 American Depositary Shares(“ADSs”) representing ordinary shares of the Parent Company (the “Existing Option”), as evidenced by that certain OptionAgreement dated of [ ], 2018 and entered into by and between the Employee and the Parent Company (the “Option Agreement”)and (B) 125,000 ADSs representing ordinary shares of the Parent Company (the “Existing Restricted Stock Grant”), as evidencedby that certain Restricted Stock Agreement dated as of [ ], 2018 and entered into by and between the Employee and the ParentCompany (the “Restricted Stock Agreement”); (ii) this Agreement does not modify or otherwise supplement the terms and conditionspertaining to the Existing Option or the Existing Restricted Stock Grant; and (iii) the Employee has no further rights or claims to anyadditional options or equity incentive awards other than the Existing Option and the Existing Restricted Stock Grant. The Plan, theOption Agreement and the Restricted Stock Agreement are incorporated herein by reference.3.3Bonuses. 3.3.1Annual Bonus. At the conclusion of each calendar year during the Employment Period, theEmployee may be eligible to receive an annual bonus with a target equal to 50% of the Base Salary (the “Target Bonus”), the amountof which shall be determined by the Board or the Compensation Committee in its discretion. Any annual bonus earned hereunder shallbe paid not later than March 15th following the end of the calendar year to which it relates and otherwise in accordance with theCompany’s bonus plan as in effect from time to time. In order to receive any such bonus, the Employee must be employed through thedate that such bonus is paid.3.3.2Sign-on Bonus. The Employee will be eligible to receive a cash payment of US$150,000 (the“Sign-On Bonus”) on the seven-month anniversary of his continuous employment with the Company (calculated as of a start date ofAugust 6, 2018), provided that the Employee remains employed with the Company on the date of such anniversary. The Companywill withhold all applicable income taxes on such amount, and will pay the net amount to the Employee with the regularly scheduledpayroll for such month of payment. In the event that the employee’s employment is terminated by the Company for cause within thethree (3) year period following August 6, 2018, the Employee will repay to the Company the full amount of the Sign-On Bonus withinthirty (30) days following the date of termination. In the event that the Employee resigns from the Company or the employment isterminated by the Company without cause prior to the third anniversary of August 6, 2018, he will repay to the Company a proratedportion of the Sign-On Bonus based on the number of full and partial months remaining in such three (3) year period as of the date ofsuch termination of employment, with such repayment being made on or prior to the Employee’s last working day with the Company.3.4Fringe Benefits. During the Employment Period, the Employee will be eligible to receive the fringe benefits thatare made available to employees of the Company and such other benefits as are determined by the Board or the CompensationCommittee of the Board, in its respective discretion. Any benefit plan participation will be subject to the terms and conditions of theapplicable plan, applicable Company policy and applicable law.33.5Reimbursements. During the Employment Period, the Employee will be reimbursed, in accordance with thepractice applicable to employees of the Company from time to time, for all reasonable traveling expenses and other disbursementsincurred by him for or on behalf of the Company in the performance of his duties hereunder upon presentation by the Employee ofappropriate vouchers. The Employee’s right to payment or reimbursement for business expenses hereunder shall be subject to thefollowing additional rules: (i) the amount of expenses eligible for payment or reimbursement during any calendar year shall not affectthe expenses eligible for payment or reimbursement in any other calendar year, (ii) payment or reimbursement shall be made by theCompany as soon as reasonably practicable following the time that the applicable expense is submitted by the Employee to theCompany and in no event later than December 31 of the calendar year following the calendar year in which the expense or paymentwas incurred, and (iii) the right to payment or reimbursement shall not be subject to liquidation or exchange for any other benefit.3.6Deductions. Recognizing that the Employee is an employee for all purposes, the Company shall deduct from anycompensation payable to the Employee the sums which the Company is required by law to deduct, including, but not limited to,government state withholding taxes, social security taxes and state disability insurance and mandatory provident funds, and theCompany shall pay any amounts so deducted to the applicable governmental entities and agents entitled to receive such payments.4.INVOLUNTARY TERMINATION.4.1Disability. If the Employee dies, then the Employee’s employment by the Company hereunder shallautomatically terminate on the date of the Employee’s death. If the Employee is incapacitated or disabled by accident, sickness orotherwise so as to render him mentally or physically incapable of performing the services required to be performed by him under thisAgreement for a period of ninety (90) consecutive days or longer, or for any ninety (90) days during any six (6) month period (suchcondition being herein referred to as “Disability”), the Company, at its option, may terminate the Employee’s employment under thisAgreement immediately upon giving him notice to that effect. In the case of a Disability, until the Employee becomes eligible fordisability income under the Company’s disability income insurance (if any) or until the Company shall have terminated the Employee’sservice in accordance with the foregoing, whichever shall first occur, to the extent permitted by the terms of the Company’s plans, theEmployee will be entitled to receive compensation, at the rate and in the manner provided in Section 3, notwithstanding any suchphysical or mental disability. Termination pursuant to this Section 4 is hereinafter referred to as an “Involuntary Termination”.4.2Substitution. The Board or its designee may designate another employee to act in the Employee’s place duringany period of Disability suffered by the Employee during the Employment Period. Notwithstanding any such designation, theEmployee shall continue to receive the Employee’s Base Salary and benefits in accordance with Section 3 of this Agreement until theEmployee becomes eligible for disability income under the Company’s disability income insurance (if any) or until the termination ofthe Employee’s employment, whichever shall first occur.44.3Disability Income Payments. While receiving disability income payments under the Company’s disability incomeinsurance (if any), the Employee shall not be entitled to receive any Base Salary under Section 3.1, but shall continue to participate inall other compensation and benefits in accordance with Sections 3.3 until the date of the Employee’s termination of employment.4.4Verification of Disability. If any question shall arise as to whether during any period the Employee is disabledthrough any illness, injury, accident or condition of either a physical or psychological nature so as to be unable to perform substantiallyall of the Employee’s duties and responsibilities hereunder, the Employee may, and at the request of the Company shall, submit to amedical examination by a physician selected by the Company to whom the Employee or the Employee’s guardian has no reasonableobjection to determine whether the Employee is so disabled and such determination shall for the purposes of this Agreement beconclusive of the issue. If such question shall arise and the Employee shall fail to submit to such medical examination, the Company’sdetermination of the issue shall be binding on the Employee.5.TERMINATION FOR CAUSE BY THE COMPANY. The Company may terminate the employment of the Employeehereunder at any time during the Employment Period for “Cause” (such termination being hereinafter referred to as a “Terminationfor Cause”) by giving the Employee notice of such termination, upon the giving of which such termination shall take effectimmediately. For the purpose of this Section 5, “Cause” means any one of the following grounds, as determined by the Board in itsreasonable judgment: (i)the Employee’s drunkenness or use of illegal drugs which interferes with the performance of the Employee’sobligations and duties to the Company or any of its Affiliates; (ii)the Employee’s commission of a felony, or any crime involving fraud, moral turpitude or misrepresentation orviolation of applicable securities laws; (iii)mismanagement by the Employee of the business and affairs of the Company or any Affiliate of the Companywhich results or could reasonably be expected to result in a material loss to the Company or any of its Affiliates; (iv)the Employee’s violation of any confidentiality, non-competition, non-solicitation, no-hire or other restrictivecovenant set forth in this Agreement, the Compliance Agreement (as defined below) or any other agreementbetween the Employee and the Company or any of its Affiliates or any material policy of the Company or any ofits Affiliates; or (vi)the Employee’s material failure to perform or substantial negligence in the performance of the Employee’sobligations and duties to the Company or any of its Affiliates, or any misconduct, dishonesty or acts of moralturpitude by the Employee which is or could reasonably be expected to be materially detrimental to the interestsand well-being of the Company or any of its Affiliates, including, without limitation, harm to its business orreputation.56.TERMINATION WITHOUT CAUSE BY THE COMPANY. The Company may terminate the employment of theEmployee hereunder at any time during the Employment Period without “Cause” (such termination being hereinafter called a“Termination Without Cause”) by giving the Employee notice of such termination. 7.TERMINATION BY THE EMPLOYEE. 7.1Without Good Reason. The Employee may terminate his services hereunder at any time without Good Reason(as defined below) (such termination being referred to hereinafter as a “Voluntary Termination”. A Voluntary Termination will bedeemed to be effective following reasonable notice by the Employee of not less than thirty (30) calendar days, provided that theCompany may elect to waive all or any portion of such notice period.7.2With Good Reason. The Employee may terminate his services hereunder at any time for Good Reason (asdefined below) by giving the Company written notice of such termination, provided that such notice specifies: (i) the basis fortermination and (ii) the effective date of termination, which shall be no later than thirty (30) days after the date such notice is providedto the Company, provided that the Company may unilaterally select an earlier effective date (such termination being hereinafterreferred to as a “Termination for Good Reason”). For purposes of this Agreement, the term “Good Reason” shall mean (a) anymaterial diminution of the Employee’s duties or responsibilities hereunder (except in each case in connection with the Termination forCause or pursuant to Section 4.1) or the assignment to the Employee of duties or responsibilities that are materially inconsistent withthe Employee’s then-current position, provided that the Company has not cured such material diminution or materially inconsistentassignment within ten (10) business days after written notice thereof is given to the Company; (b) any material breach of theAgreement by the Company which is not cured within ten (10) business days after written notice thereof is given to the Company; or(c) an unconsented-to relocation of the Employee from the place of initial assignment of the Employee by the Company to a locationmore than thirty (30) kilometers from such location, other than on a temporary basis not to exceed a period equal to six (6) consecutivecalendar months.8.EFFECT OF TERMINATION ON SERVICES. 8.1Voluntary Termination or a Termination for Cause. 8.1.1Upon the termination of the Employee’s employment hereunder pursuant to a VoluntaryTermination or a Termination for Cause, neither the Employee nor his beneficiary or estate will have any further rights or claimsagainst the Company or any of its Affiliates under this Agreement except to receive the following (in the aggregate, the “FinalCompensation”): (i)the unpaid portion of the Base Salary provided for in Section 3.1, computed on a pro rata basis up to(and including) the effective date of such termination; (ii)and reimbursement for any expenses for which the Employee shall not have theretofore beenreimbursed as provided in Section 3.5, provided that the Employee submits all such expenses andrequired supporting documentation within sixty (60) days of the effective date of such termination; and6 (iii)if required by applicable law or Company policy, pay at the rate of the Base Salary for any accrued byunused vacation time as of the effective date of such termination.8.1.2Final Compensation (other than expense reimbursement, which shall be paid within thirty (30) daysafter such reimbursement is submitted in accordance with subsection (ii) above) will be paid to the Employee within thirty (30) daysfollowing the date of termination (or such shorter period required by law).8.2Involuntary Termination. Upon the termination of the Employee’s employment hereunder pursuant to anInvoluntary Termination in accordance with Section 4 hereof, neither the Employee nor his beneficiary or estate will have any furtherrights or claims against the Company, or any of its Affiliates under this Agreement except to receive: (i)Final Compensation in accordance with Section 8.1; (ii)an aggregate amount equal to one (1) month’s Base Salary; and (iii)an amount equal to one (1) month of the Company’s portion of monthly premiums for health, dentaland vision insurance benefits as in effect for the Employee immediately prior to the effective date ofsuch termination, payable in accordance with the Company’s normal payroll policies and at the samerate and in the same manner as set forth in Sections 3.1 and 3.4 hereof, plus any additionalcompensation as may be expressly required under applicable law.8.3Termination Without Cause or Termination for Good Reason.8.3.1Upon the termination of the Employee’s employment hereunder pursuant to a Termination WithoutCause or a Termination for Good Reason, neither the Employee nor his beneficiary or estate will have any further rights or claimsagainst the Company or any of its Affiliates under this Agreement except to receive the following (in the aggregate, the “SeverancePayments”): (i)Final Compensation in accordance with Section 8.1; (ii)an aggregate amount equal to the Base Salary (i) for six (6) months if such termination occurs prior tothe third (3rd) anniversary of August 6, 2018, or (ii) for twelve (12) months if such termination occurson or following the third (3rd) anniversary of August 6, 2018, (in either case, such six (6) months ortwelve (12) months, the “Severance Period”), payable from the effective date of such termination inaccordance with the Company’s normal payroll policies and at the same rate and in the same manneras set forth in Sections 3.1 and 3.4 hereof, plus any additional compensation as may be expresslyrequired under applicable law; and7 (iii)an aggregate amount equal to the Company’s portion of monthly premiums for health, dental andvision insurance benefits as in effect for the Employee immediately prior to the effective date of suchtermination (i) for six (6) months if such termination occurs prior to the third (3rd) anniversary ofAugust 6, 2018, or (ii) for twelve (12) months if such termination occurs on or following the third(3rd) anniversary of August 6, 2018, (in either case, such six (6) months or twelve (12) months, the“Severance Period”), payable from the effective date of such termination in accordance with theCompany’s normal payroll policies and at the same rate and in the same manner as set forth in Sections3.1 and 3.4 hereof, plus any additional compensation as may be expressly required under applicablelaw.8.3.2Subject to Sections 8.5, 14 and 15, Severance Payments (other than Final Compensation) will beprovided in the form of salary continuation, payable in equal installments in accordance with the Company’s normal payroll practices,during the Severance Period, provided that the first such payment will be made on the next regular pay day following the date onwhich the Release of Claims (as defined below) becomes effective and irrevocable and will be retroactive to effective date of thetermination of the Employee’s employment.8.4Change in Control Termination. 8.4.1Upon the termination of the Employee’s employment hereunder pursuant to a Termination WithoutCause or a Termination for Good Reason within twelve (12) months following a Change in Control (such termination being referred toin this Agreement as a “Change in Control Termination”), neither the Employee nor his beneficiary or estate will have any furtherrights or claims against the Company or any Affiliates under this Agreement except to receive the following (in the aggregate, the“Enhanced Severance Payments”): (i)Final Compensation in accordance with Section 8.1; (ii)an aggregate amount equal to twelve (12) months’ Base Salary; (iii)an aggregate amount equal to twelve (12) months of the Company’s portion of monthly premiums forhealth, dental and vision insurance benefits as in effect for the Employee immediately prior to theeffective date of such termination, payable in accordance with the Company’s normal payroll policiesand at the same rate and in the same manner as set forth in Sections 3.1 and 3.4 hereof, plus anyadditional compensation as may be expressly required under applicable law; and (iv)a payment equal to pro-rated Target Bonus for the year of such employment termination (determinedby multiplying the Target Bonus by a fraction, the numerator of which is the number of days duringthe fiscal year of termination that Employee is employed by the Company and the denominator ofwhich is three hundred and sixty-five (365)), payable at the same time bonuses for such year are paidto other senior executives of the Company (the “Pro-rated Bonus”).88.4.2Subject to Section 8.5, 14 and 15, Enhanced Severance Payments (other than Final Compensation)will be provided in the form of salary continuation, payable in equal installments in accordance with the Company’s normal payrollpractices, during the twelve (12) month period following the Change in Control Termination, provided that the first such payment willbe made on the next regular pay day following the date on which the Release of Claims becomes effective and irrevocable and will beretroactive to effective date of the termination of the Employee’s employment.8.4.3Notwithstanding anything to the contrary in any agreement between the Employee and theCompany, upon a Change in Control Termination, the Employee will be entitled to one hundred percent (100%) accelerated vesting ofany then-outstanding unvested stock options, restricted stock or other equity awards granted to the Employee by the Parent Company,subject to Section 8.5, 14 and 15.8.4.4For purposes of this Agreement, “Change in Control” means the occurrence of any of thefollowing:(i)any one person, or more than one person acting as a group (“Person”), acquiresownership of the stock of the Parent Company that, together with the stock held by such Person, constitutes more than 50% of the totalvoting power of the stock of the Parent Company, except that any change in the ownership of the stock of the Parent Company as aresult of a private financing of the Parent Company that is approved by the Board will not be considered a Change in Control;(ii)a majority of members of the Board is replaced during any twelve- (12-) month period bydirectors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointmentor election; or(iii)any Person acquires (or has acquired during the twelve- (12- ) month period ending onthe date of the most recent acquisition by such person or persons) assets from the Parent Company that have a total gross fair marketvalue equal to or more than 50% of the total gross fair market value of all of the assets of the Parent Company immediately prior tosuch acquisition or acquisitions. For purposes of this subsection (iii), gross fair market value means the value of the assets of the ParentCompany, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.For purposes of this definition, Persons will be considered to be acting as a group if they are owners of acorporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the ParentCompany. Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to re-domicile the Parent Company in a jurisdiction other than its original jurisdiction of incorporation, or (ii) its sole purpose is to create aholding company that will be owned in substantially the same proportions by the Persons who held the Parent Company’s securitiesimmediately before such transaction.98.4.5Liquidated Damages. The parties acknowledge and agree that damages which will result to theEmployee for a Termination Without Cause or other breach of this Agreement by the Company shall be extremely difficult orimpossible to establish or prove, and agree that the Severance Payments and Enhanced Severance Payments shall constitute liquidateddamages for any breach of this Agreement by the Company through the date of termination. The Employee agrees that, except forsuch other payments and benefits to which the Employee may be eligible as expressly provided by the terms of this Agreement or anyapplicable benefit plan, such liquidated damages shall be in lieu of all other claims that the Employee may make by reason oftermination of her/his employment or any such breach of this Agreement and that, as a condition to receiving the Severance Paymentsand/or Enhanced Severance Payments (as applicable), the Employee will execute the Release of Claims. 8.5Release. The obligation of the Company to make any payments and benefits (other than Final Compensation) toor on behalf of the Employee under Sections 8.2, 8.3 and 8.4 is conditioned on the Employee signing and not revoking a separationagreement and release of claims in a form reasonably satisfactory to the Company (the “Release of Claims”) and provided that theRelease of Claims becomes effective and irrevocable no later than sixty (60) days following the termination date (such deadline, the“Release Deadline”). If the Release of Claims does not become effective by the Release Deadline, the Employee will forfeit anyrights to severance or benefits (other than Final Compensation) under this Agreement. In no event will Severance Payments,Enhanced Severance Payments or benefits (other than Final Compensation) be paid or provided until the Release of Claims becomeseffective and irrevocable.9.COMPLIANCE AGREEMENT. The Employee agrees that the Compliance Agreement (as defined in the ExistingAgreement) remains in full force and effect, and the terms and conditions thereof are specifically incorporated herein by reference. Theobligation of the Company to make any payments (other than Final Compensation) to or on behalf of the Employee under Section 8.3or Section 8.4 above, and the Employee’s right to retain the same, is expressly conditioned upon the Employee’s continuedperformance of the Employee’s obligations under the Compliance Agreement.10.STANDARDS OF CONDUCT. The Employee will conduct himself in an ethical and professional manner at all timesand in accordance with any Employee policies or guidelines which the Company may issue from time to time.11.REPRESENTATIONS AND WARRANTIES OF THE EMPLOYEE. The Employee represents and warrants to theCompany that: (i) the Employee has the proper skill, training and background so as to be able to perform under the terms of thisAgreement in a competent and professional manner; (ii) the Employee will not infringe any intellectual property rights including patent,copyright, trademark, trade secret or other proprietary right of any person; (iii) the Employee will not use any trade secrets orconfidential information owned by any third party and (iv) the Employee’s signing of this Agreement and the performance of theEmployee’s obligations under it will not breach or be in conflict with any other agreement to which the Employee is a party or isbound, and the Employee is not now subject to any covenants against competition or similar covenants or any court order that couldaffect the performance of the Employee’s obligations under this Agreement.1012.ENFORCEMENT. It is the desire and intent of the parties hereto that the provisions of this Agreement will be enforced tothe fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement issought. Accordingly, to the extent that a restriction contained in this Agreement is more restrictive than permitted by the laws of anyjurisdiction whose law may be deemed to govern the review and interpretation of this Agreement, the terms of such restriction, for thepurpose only of the operation of such restriction in such jurisdiction, will be the maximum restriction allowed by the laws of suchjurisdiction and such restriction will be deemed to have been revised accordingly herein. A court having jurisdiction over an actionarising out of or seeking enforcement of any restriction contained in this Agreement may modify the terms of such restriction inaccordance with this Section 12.13.COVENANT AGAINST ASSIGNMENT. The Employee may not assign any rights or delegate any of the duties of theEmployee under this Agreement. As used in this provision, “assignment” and “delegation” shall mean any sale, gift, pledge,hypothecation, encumbrance, or other transfer of all or any portion of the rights, obligations, or liabilities in or arising from thisAgreement to any person or entity, whether by operation of law or otherwise, and regardless of the legal form of the transaction inwhich the attempted transfer occurs.14.TIMING OF PAYMENTS AND SECTION 409A. 14.1Notwithstanding anything to the contrary in this Agreement, if at the time that the Employee’s employmentterminates, the Employee is a “specified employee,” as defined below, any and all amounts payable under this Agreement on accountof such separation from service that would (but for this provision) be payable within six (6) months following the date of termination,shall instead be paid on the next business day following the expiration of such six- (6-) month period or, if earlier, upon theEmployee’s death; except (i) to the extent of amounts that do not constitute a deferral of compensation within the meaning of Treasuryregulation Section 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in Section 1.409A-1(b)(9)(iii), asdetermined by the Company in its reasonable good faith discretion); (ii) benefits which qualify as excepted welfare benefits pursuant toTreasury regulation Section 1.409A-1(a)(5); or (iii) other amounts or benefits that are not subject to the requirements of Section 409A(“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”).14.2For purposes of this Agreement, all references to “termination of employment” and correlative phrases shall beconstrued to require a “separation from service” (as defined in Section 1.409A-1(h) of the Treasury regulations after giving effect to thepresumptions contained therein), and the term “specified employee” means an individual determined by the Company to be a specifiedemployee under Treasury regulation Section 1.409A-1(i).14.3Each payment made under this Agreement shall be treated as a separate payment and the right to a series ofinstallment payments under this Agreement is to be treated as a right to a series of separate payments.14.4In no event shall the Company or any of its Affiliates have any liability relating to the failure or alleged failure ofany payment or benefit under this Agreement to comply with, or be exempt from, the requirements of Section 409A.1115.LIMITATIONS ON PAYMENTS. Notwithstanding anything in this Agreement or elsewhere to the contrary, in theevent that any payment or benefit received or to be received by the Employee under this Agreement or otherwise (collectively, the“Payments”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this Section15, be subject to the excise tax imposed by Section 4999 of the Code, then the Payments shall be reduced (but not below zero) to theextent, but only to the extent, needed to ensure that no portion of the Payments constitutes a “parachute payment” within the meaningof Section 280G of the Code; provided, that no reduction in the Payments shall be made by reason of this Section 15 unless, on anafter-tax basis taking into account the excise tax imposed by Section 4999 of the Code together with all applicable income taxes, thePayments payable to the Employee would be greater than if such reduction had not been made. Any reduction in the Paymentsrequired by the immediately preceding sentence shall be applied, first, against any cash severance payments, then against otherpayments and benefits to which Q&A 24(c) of Section 1.280G-1 of the Treasury Regulations does not apply, and finally against allremaining payments and benefits.16.MISCELLANEOUS.16.1Notices. Any notice, request, demand or other communication required or permitted to be given to a partypursuant to the provisions of this Agreement will be in writing and will be effective and deemed given under this Agreement on theearliest of: (i) the date of personal delivery, (ii) the date of transmission by facsimile or e-mail, with confirmed transmission and receipt,(iii) two (2) days after deposit with an internationally-recognized courier or overnight service such as Federal Express, DHL, or (iv)five (5) days after mailing via certified mail, return receipt requested. All notices not delivered personally or by facsimile will be sentwith postage and other charges prepaid and properly addressed to the party to be notified at the address set forth on the signature pageshereto.16.2Gender; Time. The parties agree that any use of words in any gender in this Agreement shall also refer to themasculine, feminine or neuter gender, as the case may require. Time is of the essence in performance of the rights and obligationsunder this Agreement.16.3Survival. Provisions of this Agreement shall survive any termination of employment if so provided in thisAgreement or if necessary or desirable to accomplish the purposes of other surviving provisions. 16.4Binding Agreement; Benefit. The provisions of this Agreement will be binding upon and will inure to thebenefit of the respective heirs, legal representatives and successors of the parties hereto.16.5Governing Law. This Agreement will be governed by, and construed and enforced in accordance with, thelaws of California, without giving effect to its principles or rules of conflict laws to the extent such principles or rules would require orpermit the application of the laws of another jurisdiction.16.6Waiver of Breach. The waiver by either party of a breach of any provision of this Agreement by the other partymust be in writing and will not operate or be construed as a waiver of any subsequent breach by such other party.1216.7Entire Agreement; Amendments. This Agreement, together with the Compliance Agreement, contains theentire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements (including theExisting Agreement) or understanding among the parties with respect thereto. This Agreement may be amended only by an agreementin writing signed by each of the parties hereto.16.8Headings. The Section headings contained in this Agreement are for reference purposes only and will not affectin any way the meaning or interpretation of this Agreement.16.9Severability. Subject to the provisions of Section 12 above, any provision of this Agreement that is prohibitedor unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceabilitywithout invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction will not invalidateor render unenforceable such provision in any other jurisdiction.16.10Assignment. This Agreement is personal in its nature and the parties hereto shall not, without the consent ofthe other party hereto, assign or transfer this Agreement or any rights or obligations hereunder, provided, however, that the rights andobligations of the Company hereunder shall be assignable and delegable without the Employee’s consent to any of its Affiliates or inconnection with any subsequent merger, consolidation, sale of all or substantially all of the assets or shares of the Company or similartransaction involving the Company or a successor corporation.16.11Confidentiality. The Employee agrees not to disclose this Agreement or its terms to any person or entity, otherthan the Employee’s agents, advisors or representatives, except as consented to by the Company in writing or as may be required bylaw.16.12Further Assurances. The Employee agrees to execute, acknowledge, seal and deliver such further assurances,documents, applications, agreements and instruments, and to take such further actions, as the Company may reasonably request inorder to accomplish the purposes of this Agreement.16.13Costs. Each of the parties shall pay all costs and expenses incurred or to be incurred by such party innegotiating and preparing this Agreement and in closing and carrying out the transactions contemplated by this Agreement.16.14Counterparts. The parties may execute this Agreement in any number of counterparts and, as so delivered, thecounterparts shall together constitute one and the same document. The parties agree that each such counterpart is an original and shallbe binding upon all of the parties, even though all of the parties are not signatories to the same counterpart.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]13 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COMPANY: EMPLOYEE: By:/s/ Samantha Du /s/ Yongjiang HeiPrint Name:Samantha Du Yongjiang HeiTitle:Chairperson and CEO Address:XXXAddress: Facsimile: E-mail:XXX E-Mail:XXX  Exhibit 12.1Certification by the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Samantha Du, certify that:1.I have reviewed this annual report on Form 20-F of Zai Lab Limited (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periodspresented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the Company, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles; (c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periodcovered by this report based on such evaluation; and (d)Disclosed in this report any change in the Company’s internal control over financial reporting thatoccurred during the period covered by the annual report that has materially affected, or is reasonably likely tomaterially affect, the Company’s internal control over financial reporting; and  5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or personsperforming the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the Company’s ability to record, process,summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have asignificant role in the Company’s internal control over financial reporting. Date:March 29, 2019 By:/s/ Samantha Du Samantha Du Chief Executive Office  Exhibit 12.2Certification by the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, William Cho, certify that:1.I have reviewed this annual report on Form 20-F of Zai Lab Limited (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periodspresented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the Company, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles; (c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periodcovered by this report based on such evaluation; and (d)Disclosed in this report any change in the Company’s internal control over financial reporting thatoccurred during the period covered by the annual report that has materially affected, or is reasonably likely tomaterially affect, the Company’s internal control over financial reporting; and  5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or personsperforming the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the Company’s ability to record, process,summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have asignificant role in the Company’s internal control over financial reporting. Date:March 29, 2019 By:/s/ William Cho William Cho Chief Financial Officer Exhibit 15.1Certification by the Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002In connection with the annual report of Zai Lab Limited (the “Company”) on Form 20-F for the year endedDecember 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Samantha Du, ChiefExecutive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities ExchangeAct of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial conditionand results of operations of the Company. Date:March 29, 2019 By:/s/ Samantha Du Samantha Du Chief Executive Office Exhibit 15.2Certification by the Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002In connection with the annual report of Zai Lab Limited (the “Company”) on Form 20-F for the year endedDecember 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William Cho, ChiefFinancial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities ExchangeAct of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial conditionand results of operations of the Company. Date:March 29, 2019 By:/s/ William Cho William Cho Chief Financial Officer Exhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in Registration Statement No. 333-221616 on Form S-8 of our report dated March 29, 2019, relating tothe consolidated financial statements and financial statement schedule of Zai Lab Limited and its subsidiaries (the “Group”), appearing in this Annual Reporton Form 20-F of Zai Lab Limited for the year ended December 31, 2018. /s/ Deloitte Touche Tohmatsu Certified Public Accountants LLPShanghai, ChinaMarch 29, 2019 Exhibit 23.2CONSENT LETTER To Zai Lab Limited4560 Jinke Road, Bldg. 1, Fourth FloorPudong, Shanghai 201210People’s Republic of ChinaMarch 29, 2019 Dear Sir/Madam: We hereby consent to the reference of our name under the headings “Item 6.B. Directors, Senior Management and Employees—Compensation—Employment Arrangements with Our Executive Officers—Employment Agreements with Executive Officers at Zai Lab(Shanghai) Co., Ltd.” in Zai Lab Limited’s Annual Report on Form 20-F for the year ended December 31, 2018 (the “Annual Report”),which will be filed with the Securities and Exchange Commission (the “SEC”) in the month of March 2019. We also consent to thefiling of this consent letter with the SEC as an exhibit to the Annual Report. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7of the Securities Act of 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgatedthereunder. Very truly yours, /s/Zhong Lun Law Firm Zhong Lun Law Firm北京 • 上海 • 深圳 • 广州 • 成都 • 武汉 • 重庆 • 青岛 • 杭州 • 香港 • 东京 • 伦敦 • 纽约 • 洛杉矶 • 旧金山Beijing • Shanghai • Shenzhen • Guangzhou • Chengdu • Wuhan • Chongqing • Qingdao • Hangzhou • Hong Kong • Tokyo • London • New York • Los Angeles • San Francisco 

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