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United States securities and exchange commission logo
September 29, 2021
Billy Cho
Chief Financial Officer
Zai Lab, Ltd.
4560 Jinke Road
Bldg. 1, Fourth Floor
Pudong
Shanghai, China
Re: Zai Lab, Ltd.
Form 10-K for
Fiscal Year Ended December 31, 2020
Filed March 1, 2021
File No. 001-38205
Dear Mr. Cho:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for Fiscal Year Ended December 31, 2020
Part I
Item 1. Business, page 1
1. At the onset of Part 1,
provide prominent disclosure about the legal and operational risks
associated with being
based in or having the majority of the company s operations in
China. Your disclosure
should make clear whether these risks could result in a material
change in your
operations and/or the value of your ADSs or could significantly limit or
completely hinder your
ability to offer or continue to offer securities to investors and
cause the value of such
securities to significantly decline or be worthless. Your disclosure
should address how
recent statements and regulatory actions by China s government, such
as those related data
security or anti-monopoly concerns, has or may impact the
company s ability to
conduct its business, accept foreign investments, or list on an U.S. or
Billy Cho
FirstName LastNameBilly Cho
Zai Lab, Ltd.
Comapany 29,
September NameZai
2021 Lab, Ltd.
September
Page 2 29, 2021 Page 2
FirstName LastName
other foreign exchange. Your Business section should address, but not
necessarily be
limited to, the risks highlighted in Part 1.
2. At the onset of Part 1, clearly disclose how you will refer to the
holding company and
subsidiaries when providing the disclosure throughout the document so
that it is clear to
investors which entity the disclosure is referencing and which
subsidiaries or entities are
conducting the business operations. Refrain from using terms such as
we or our when
describing activities or functions of a subsidiary with a different
domicile than the holding
company. Disclose clearly the entity (including the domicile) in which
investors are
purchasing their interest.
3. On page 1 and as a separate risk factor under Item 1A, disclose each
permission that you
or your subsidiaries are required to obtain from Chinese authorities
to operate and issue
these securities to foreign investors, including approvals needed to
transfer scientific data
as discussed on page 89. State whether you or your subsidiaries are
covered by
permissions requirements from the CSRC, CAC or any other entity, and
state
affirmatively whether you have received all requisite permissions and
whether any
permissions have been denied, including those related to the transfer
of scientific data.
4. In your Business section and as a separate risk factor, provide a
clear description of how
cash is transferred through your organization. Disclose your
intentions to distribute
earnings or settle amounts owed. Quantify any cash flows and transfers
of other assets by
type that have occurred between the holding company and its
subsidiaries and direction of
transfer. Quantify any dividends or distributions that a subsidiary
has made to the holding
company, which entity made such transfer, and their tax consequences.
Similarly quantify
dividends or distributions made to U.S. investors, the source, and
their tax consequences.
Describe any restrictions on foreign exchange and your ability to
transfer cash between
entities, across borders, and to U.S. investors. Describe any
restrictions and limitations on
your ability to distribute earnings from your businesses, including
subsidiaries, to the
parent company and U.S. investors.
Summary of Significant Risk Factors, page iii
5. In your summary of risk factors, disclose the risks that your
corporate structure and being
based in or having the majority of the company s operations in China
poses to investors.
In particular, describe the significant regulatory, liquidity, and
enforcement risks with
cross-references to the more detailed discussion of these risks in
your risk factor
disclosure. For example, specifically discuss risks arising from the
legal system in China,
including risks and uncertainties regarding the enforcement of laws
and that rules and
regulations in China can change quickly with little advance notice;
and the risk that the
Chinese government may intervene or influence your operations at any
time, or may exert
more control over offerings conducted overseas and/or foreign
investment in China-based
issuers, which could result in a material change in your operations
and/or the value of
your ADSs. Acknowledge any risks that any actions by the Chinese
government to exert
Billy Cho
Zai Lab, Ltd.
September 29, 2021
Page 3
more oversight and control over offerings that are conducted overseas
and/or foreign
investment in China-based issuers could significantly limit or
completely hinder your
ability to offer or continue to offer securities to investors and
cause the value of such
securities to significantly decline or be worthless.
Item 1A. Risk Factors, page 61
6. Revise your risk factors to acknowledge that if the PRC government
determines that your
offshore corporate structure does not comply with PRC regulations, or
if these regulations
change or are interpreted differently in the future, your shares may
decline in value or
become worthless if you are unable to assert your contractual control
rights over the assets
of your PRC subsidiaries that conduct all or substantially all of your
operations.
7. Given the Chinese government s significant oversight and discretion
over the conduct of
your business, please revise to separately highlight the risk that the
Chinese government
may intervene or influence your operations at any time, which could
result in a material
change in your operations and/or the value of your ADSs. Also, given
recent statements
by the Chinese government indicating an intent to exert more oversight
and control over
offerings that are conducted overseas and/or foreign investment in
China-based issuers,
acknowledge the risk that any such action could significantly limit or
completely hinder
your ability to offer or continue to offer securities to investors and
cause the value of such
securities to significantly decline or be worthless.
8. In light of recent events indicating greater oversight by the
Cyberspace Administration of
China over data security, particularly for companies seeking to list
on a foreign exchange,
please revise your disclosure to explain how this oversight impacts
your business and your
offering and to what extent you believe that you are compliant with
the regulations or
policies that have been issued by the CAC to date.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Tracie Mariner at (202) 551-3744 or Kevin Vaughn at
(202) 551-
3494 if you have questions regarding comments on the financial statements and
related matters.
FirstName LastNameBilly Cho Sincerely,
Comapany NameZai Lab, Ltd.
Division of
Corporation Finance
September 29, 2021 Page 3 Office of Life
Sciences
FirstName LastName