ZAI LAB LIMITED You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the accompanying notes in this Annual Report on Form 10-K. This section generally discusses year-over-year comparisons between 2022 and 2021. For a discussion of year-over-year changes in our financial condition and results of operations between 2021 and 2020, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 , filed onMarch 1, 2022 . In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences elsewhere in this Annual Report on Form 10-K, including in Forward-Looking Statements and Market Data and Part I-Item 1A. Risk Factors.
Overview
We are a patient-focused, innovative, commercial-stage, global biopharmaceutical company with a substantial presence in bothGreater China andthe United States . We are focused on discovering, developing, and commercializing products that address medical conditions with significant unmet needs in the areas of oncology, autoimmune disorders, infectious diseases, and neuroscience. We intend to leverage our competencies and resources to positively impact human health inGreater China and worldwide. We currently have four commercial products that have received marketing approval in one or more territories inGreater China and thirteen programs in late-stage product development. For more information on our business, products, pipeline, and operations, see Part I-Item 1. Business. Since our inception, we have incurred net losses and negative cash flows from our operations. Substantially all of our losses have resulted from funding our research and development programs and general and administrative costs associated with our operations. Developing high-quality product candidates requires significant investment in our research and development activities over a prolonged period of time, and a core part of our strategy is to continue making sustained investments in this area. Our ability to generate profits and positive cash flow from operations over the next several years depends upon our ability to successfully market our four commercial products-ZEJULA, Optune, QINLOCK, and NUZYRA-and to successfully expand the indications for these products and develop and commercialize our other product candidates. We expect to continue to incur substantial expenses related to our research and development activities. In particular, our licensing and collaboration agreements require us to make upfront payments upon our entry into such agreements and milestone payments upon the achievement of certain development, regulatory, and sales-based milestones as well as certain royalties at tiered percentage rates based on annual net sales of the licensed products in the licensed territories. We recorded$53.4 million of research and development expense related to upfront license fees and development milestones in 2022. In addition, we expect to incur substantial costs related to the commercialization of our product candidates, in particular during the early launch phase. As we pursue our strategy of growth and development, we anticipate that our financial results will fluctuate from quarter to quarter and year to year depending in part on the balance between the success of our commercial products and the level of our research and development expenses. We cannot predict whether or when products in our pipeline, including new indications for our current commercial products, will receive regulatory approval. Further, if we receive such regulatory approval, we cannot predict whether or when we may be able to successfully commercialize such product or whether or when such product may become profitable.
Business Developments and Corporate Strategic Goals
In 2022, despite challenges from the COVID-19 pandemic inChina , sales for our four commercial products continued to increase. We expect our sales for these products to further increase in 2023, in part because of ZEJULA's continued gain of share of hospital sales for ovarian cancer inChina , the new NRDL listings for QINLOCK and NUZYRA, and the increased number of supplemental insurance plan listings for Optune. We also continued to make progress across our product pipeline. For example, we had several positive data readouts during the year, including for adagrasib in non-small cell lung cancer, efgartigimod in primary immune thrombocytopenia and generalized myasthenia gravis, and KarXT in schizophrenia. We contributed to successful registrational studies, including the LUNAR study for Tumor Treating Fields and the TRIDENT-1 study for repotrectinib. And, we increased our pipeline assets through our business development activities with our strategic collaboration with Seagen for the license of TIVDAK, which further deepened our women's cancer franchise. For more information on our commercial products and product pipeline, including status and developments in 2022, see Part I-Item 1. Business-Our Commercial Products and Part I-Item 1. Business-Our Pipeline of Product Candidates. -146- -------------------------------------------------------------------------------- We also continued to strengthen our business in 2022 through corporate developments, including key additions to our global leadership team, enhancements to our corporate governance practices, and our voluntary conversion to primary listing status on theHong Kong Stock Exchange and the subsequent inclusion of our ordinary shares in theShanghai and Shenzhen Stock Connect Programs. For example, with respect to our global leadership team, we appointedRafael G. Amado , M.D. as President, Head ofGlobal Oncology Research and Development inDecember 2022 .Dr. Amado joined us from Allogene Therapeutics and brings deep expertise in the field of oncology and significant global biopharmaceutical R&D leadership. And, as we have previously disclosed, we made other key additions to our global leadership team in 2022, including in August whenJosh Smiley became Chief Operating Officer and in November when Dr.Peter Huang became Chief Scientific Officer. With respect to corporate governance, in April, we appointedKPMG LLP , aU.S. -based auditor, to be our independent registered public accounting firm and auditor, and in July, our Board of Directors established a lead independent director role, appointing Dr.John Diekman to serve in this important position. In addition, inJanuary 2023 ,Michel Vounatsos was appointed to our Board of Directors.Mr. Vounatsos brings to the Board extensive global leadership and management experience in the biopharmaceutical industry, including more than 25 years of service at leading companies. His expertise includes significant commercial experience inChina and worldwide. Finally, our transition to primary listing status on theHong Kong Stock Exchange and participation in the Stock Connect programs should help us increase access to our business by investors inGreater China . We further discuss in the MD&A below key factors affecting our results of operations, key components and primary drivers of changes in our results of operations in 2022, and our liquidity and capital resources. In 2023, we seek to continue advancing our mission of becoming a leading global biopharmaceutical company, driving innovation in treatment options for patients inChina and beyond, by focusing on the following corporate strategic goals: accelerating medicines to patients through our R&D activities; further expanding our product pipeline through regional and global collaborations and corporate development activities; and continuing our commercial excellence and execution, including by delivering strong financial performance and preparing for the launch of eight new products and obtaining overall corporate profitability by the end of 2025. We also intend to continue building and maintaining the trust of our stakeholders by further developing and integrating ourESG Trust for Life strategy into our business and operations. For additional information on our Mission and Corporate Strategic Goals, see Part I-Item 1. Business-Our Mission and Corporate Strategic Goals.
Basis of Presentation
Our consolidated statement of operations data for the years endedDecember 31, 2022 and 2021 and our consolidated statement of financial position data as ofDecember 31, 2022 and 2021 have been derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K have been prepared in accordance withU.S. GAAP.
Factors Affecting Our Results of Operations
Research and Development Expenses
We believe our ability to successfully develop product candidates will be the primary factor affecting our long-term competitiveness, as well as our future growth and development. Developing high-quality product candidates requires a significant investment of resources over a prolonged period of time, and a core part of our strategy is to continue making sustained investments in research and development. As a result of this commitment, our pipeline of product candidates has been advancing and expanding, with thirteen late-stage clinical product candidates being investigated as ofDecember 31, 2022 . For more information on the nature of the efforts and steps necessary to develop our product candidates, see "Business" and "Regulation." -147- -------------------------------------------------------------------------------- We have financed our activities primarily through private placements, our initial public offering inSeptember 2017 and multiple follow-on offerings on Nasdaq and our secondary listing and initial public offering on theHong Kong Stock Exchange inSeptember 2020 . ThroughDecember 31, 2022 , we have raised approximately$164.6 million from private equity financing and approximately$2,462.7 million in net proceeds after deducting underwriting commissions and the offering expenses payable by us from our initial public offerings and follow-on offerings. Our operations have consumed substantial amounts of cash since inception. The net cash used in our operating activities was$367.6 million and$549.2 million in 2022 and 2021, respectively. We expect our expenditures to increase significantly in connection with our ongoing activities, particularly as we advance the clinical development of our thirteen late-stage clinical product candidates, research and develop our clinical and pre-clinical-stage product candidates, and initiate additional clinical trials of, and seek regulatory approval for, these and other future product candidates. We review such expenditures for prioritization and efficiency purposes. These expenditures include:
•expenses incurred for CROs, CMOs, investigators, and clinical trial sites that conduct our clinical studies;
•employee compensation related expenses, including salaries, benefits, and equity compensation expenses;
•expenses for licensors;
•the cost of acquiring, developing, and manufacturing clinical study materials;
•facilities 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
For more information on our research and development expenses, see Key
Components of Results of
Selling, General, and Administrative Expenses
Our selling, general, and administrative expenses consist primarily of personnel compensation and related costs, including share-based compensation for commercial and administrative personnel. Other selling, general, and administrative expenses include product distribution and promotion costs, professional service fees for legal, intellectual property, consulting, auditing, and tax services as well as other direct and allocated expenses for rent and maintenance of facilities, insurance, and other supplies used in selling, general, and administrative activities. We anticipate that our selling, general, and administrative expenses will increase in future periods to support increases in our commercial and research and development activities and as we continue to discover, develop, commercialize, and manufacture our products and assets. These increases will likely include expanded infrastructure as well as increased headcount and share-based compensation, product distribution, promotion, and insurance costs. We also anticipate incurring additional legal, compliance, accounting, and investor and public relations expenses associated with being a public company.
Our Ability to Commercialize Our Product Candidates
As ofDecember 31, 2022 , thirteen of our product candidates are in late-stage clinical development and various others are in clinical and pre-clinical development inGreater China andthe United States . Our ability to generate revenue from our product candidates is dependent on our receipt of regulatory approvals for and successful commercialization of such products, which may not occur. Certain of our product candidates may require additional pre-clinical and/or clinical development, regulatory approvals in multiple jurisdictions, manufacturing supply, substantial investment, and significant marketing efforts before we generate any revenue from product sales.
Our License Arrangements
Our 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 sales-based milestones for the relevant products under these agreements as well as certain royalties at tiered percentage rates based on annual net sales of the licensed products in the licensed territories. We recorded research and development expense related to upfront license fees and development milestones of$53.4 million and$384.1 million in 2022 and 2021, respectively. -148- --------------------------------------------------------------------------------
The COVID-19 Pandemic
Our results of operations have been, and we expect them to continue to be, adversely affected by the COVID-19 pandemic, including government actions and quarantine measures taken in response or increased infection rates after restrictions were lifted or eased, particularly in mainlandChina where our operations and product markets are primarily located. For example, the pandemic has adversely affected patient access to our products, such as through reduced hospital access during periods of lockdown or high infection rates, fewer newly diagnosed oncology patients, and delayed or interrupted treatments. The pandemic has also adversely affected our manufacturing and supply chain and our research and development, sales, marketing, and clinical trial activities. The operations of our suppliers, CROs, CMOs, and other contractors and third parties on which we rely also have been, and may continue to be, adversely affected. Although our net product revenues increased in 2022, as compared to the prior year, these revenue increases were negatively affected by the effects of the pandemic, and we expect additional adverse revenue impacts in the coming year and possibly in future years depending on the nature, severity, and duration of future effects from the pandemic.
Key Components of Results of Operations
The following table presents our results of operations ($ in thousands):
Year Ended December 31 Change
2022 2021 $ %
Revenues
Product revenue, net 212,672 144,105 68,567 48 %
Collaboration revenue 2,368 207 2,161 1044 %
Total revenues 215,040 144,312 70,728 49 %
Expenses
Cost of sales (74,018) (52,239) (21,779) 42 %
Research and development (286,408) (573,306) 286,898 (50) %
Selling, general and administrative (258,971) (218,831) (40,140) 18 %
Loss from operations (404,357) (700,064) 295,707 (42) %
Interest income 14,582 2,190 12,392 566 %
Foreign currency (loss) gain (56,403) 4,661 (61,064) (1310) %
Other income (expenses), net 3,113 (10,201) 13,314 (131) %
Loss before income tax and share of
loss from equity method investment (443,065) (703,414) 260,349 (37) %
Income tax expense - - - - %
Share of loss from equity method
investment (221) (1,057) 836 (79) %
Net loss (443,286) (704,471) 261,185 (37) %
Net loss attributable to ordinary
shareholders (443,286) (704,471) 261,185 (37) %
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Revenues
Product Revenue, Net
The following table presents the components of the Company's product revenue,
net ($ in thousands):
Year Ended December 31 Change
2022 2021 $ %
Product revenue - gross 234,009 190,180 43,829 23 %
Less: Rebates and sales returns (21,337) (46,075) 24,738 (54) %
Product revenue - net 212,672 144,105 68,567 48 %
Our product revenue is primarily derived from the sales of ZEJULA, Optune,
QINLOCK, and NUZYRA in mainland China and Hong Kong , net of sales returns and
rebates to distributors in mainland China with respect to the sales of these
products. Our net product revenue increased by $68.6 million in 2022, primarily
driven by increased sales volumes and decreased rebates. Although our sales
volumes increased, these volumes were negatively affected by the effects of the
COVID-19 pandemic, including government restrictions or lockdown measures in
mainland China , which negatively affected patient access to our products. The
decrease in rebates was primarily due to fewer products being sold at prices
prior to reduction that required such rebates. We had price reductions for
QINLOCK and NUZYRA in June 2022 , compared to price reductions for ZEJULA in
December 2020 and December 2021 .
The following table presents net revenue by product ($ in thousands):
Year Ended December 31 Change
2022 2021 $ %
ZEJULA 145,194 93,579 51,615 55 %
Optune 47,321 38,903 8,418 22 %
QINLOCK 14,957 11,620 3,337 29 %
NUZYRA 5,200 3 5,197 173233 %
Total 212,672 144,105 68,567 48 %
Collaboration Revenue
Collaboration revenue was
Cost of Sales
Cost of sales increased by
Research and Development Expenses
The following table presents the components of our research and development
expenses ($ in thousands):
Year Ended December 31 Change
2022 2021 $ %
Personnel compensation and related costs 105,561 77,227 28,334 37 %
Licensing fees 53,441 384,104 (330,663) (86) %
CROs/CMOs/Investigators expenses 100,544 82,571 17,973 22 %
Other costs 26,862 29,404 (2,542) (9) %
Total 286,408 573,306 (286,898) (50) %
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Research and development expenses decreased by
•a decrease of$330.7 million in licensing fees in connection with decreased upfront and milestone payments for our license and collaboration agreements; partially offset by
•an increase of
•an increase of
The following table presents our research and development expenses by program ($
in thousands):
Year Ended December 31 Change
2022 2021 $ %
Clinical programs 155,792 433,021 (277,229) (64) %
Pre-clinical programs 6,644 47,768 (41,124) (86) %
Unallocated research and development
expenses 123,972 92,517 31,455 34 %
Total 286,408 573,306 (286,898) (50) %
Research and development expenses attributable to clinical programs decreased by
$277.2 million and research and development expenses attributable to
pre-clinical programs decreased by $41.1 million in 2022, both decreases driven
by decreased license fees.
Although we manage our external research and development expenses by program, we do not allocate our internal research and development expenses by program because our employees and internal resources may be engaged in projects for multiple programs at any given time.
Selling, General and Administrative Expenses
The following table presents our selling, general and administrative expenses by
program ($ in thousands):
Year Ended December 31 Change
2022 2021 $ %
Personnel compensation and related costs 162,045 124,675 37,370 30 %
Professional service fees 35,414 22,901 12,513 55 %
Other costs 61,512 71,255 (9,743) (14) %
Total 258,971 218,831 40,140 18 %
Selling, general and administrative expenses increased by
•an increase of$37.4 million in personnel compensation and related costs which was primarily driven by headcount growth, particularly in commercial and administrative personnel, and grants of share options and restricted shares and the continued vesting of option and restricted share awards; and •an increase of$12.5 million in professional service fee mainly attributable to our increased legal, compliance, accounting, and investor and public relations expenses associated with being a public company and in connection with sales of ZEJULA, Optune, QINLOCK, and NUZYRA in mainlandChina andHong Kong after our commercial launch of these four commercialized products; partially offset by •a decrease of$9.7 million in other costs mainly related to selling, rental, and administrative expenses for commercial operations in mainlandChina ,Hong Kong , andTaiwan . Interest Income
Interest income increased by
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--------------------------------------------------------------------------------Foreign Currency (Loss) Gain
Foreign currency loss was
Other Income (Expenses), Net
Other income, net was$3.1 million in 2022, compared to other expense, net of$10.2 million in 2021. The shift from other expense, net to other income, net is primarily due to an increase of$7.4 million in government grant income and a decrease of$5.7 million in loss on equity investments with readily determinable fair value.
Share of Loss from
Share of loss from equity method investment decreased by$0.8 million to$0.2 million in 2022, due to increased losses from our investment inJING Medicine Technology (Shanghai) Ltd. , an entity that provides services for drug discovery and development, consultation, and transfer of pharmaceutical technology.
Income Tax Expense
There was no change in our income tax expense, which was zero in both 2022 and
2021. For more information on taxes to which we are subject in the
Critical Accounting Policies and Significant Judgments and Estimates
We prepare our financial statements in conformity withU.S. GAAP, which requires us to make judgments, estimates, and assumptions. We periodically evaluate these judgments, estimates, and assumptions based on the most recently available information, our own historical experiences, and various other assumptions 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 judgment than others in their application and require us to make significant accounting estimates. The selection of critical accounting policies, judgments and other uncertainties affecting application of those policies, and sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
Description
In mainlandChina , we sell our products to distributors, who ultimately sell the products to healthcare providers. Based on the nature of the arrangements, the performance obligations are satisfied upon the product's delivery to distributors.
Judgments and Uncertainties
Rebates are offered to distributors, consistent with pharmaceutical industry practices. The estimated amount of unpaid or unbilled rebates, if any, is recorded as a reduction of revenue. We estimate rebates based on contracted rates, sales volumes, and level of distributor inventories.
Sensitivity of Estimate to Change
Actual amounts of rebates paid or billed may differ from our estimates. We
regularly review the factors and judgments underlying these estimates and adjust
the amounts of rebates accordingly. If actual results vary from our estimates,
we also adjust these estimates accordingly, which would affect net product
revenue and earnings in the period such variances become expected or known.
-152-
--------------------------------------------------------------------------------Research and Development Expenses
Description
Research and development expenses are charged to expense as incurred when these expenditures relate to our research and development services and have no alternative future uses.
Pre-clinical and clinical trial costs are a significant component of our research and development expenses. We have a history of contracting with third parties that perform various pre-clinical and clinical trial activities on our behalf in the ongoing development of our product candidates. Expenses related to pre-clinical and clinical trials are accrued based on our estimates of the actual services performed by the third parties for the respective period.
Judgments and Uncertainties
The process of estimating our research and development expenses involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule, or when contractual milestones are met; however, some require advanced payments. We make estimates of our research and development expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time.
Sensitivity of Estimate to Change
Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting expenses that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of research and development expenses.
Share-Based Compensation
Description
Share-based awards for our employees are measured at grant date fair value and recognized as expenses (1) immediately at grant date if no vesting conditions are required; or (2) using a straight-line method over the requisite service period, which is the vesting period.
To the extent the required vesting conditions are not met resulting in forfeiture of the share-based awards, previously recognized compensation expense relating to those awards are reversed.
Judgments and Uncertainties
We determine the fair value of stock options granted to employees using the Black-Scholes option valuation model. Using this model, fair value is calculated based on assumptions with respect to (i) the expected volatility of our ADS price, (ii) the periods of time over which grantees are expected to hold their options prior to exercise (expected lives), (iii) the expected dividend yield on our ADSs, and (iv) risk-free interest rates, which are based on quotedU.S. Treasury rates for securities with maturities approximating the expected lives of the options. Expected volatility has been estimated based on actual movements in some comparable companies' stock price over the most recent historical periods equivalent to the options' expected lives. The expected term of the share options represents the average period the share options are expected to remain outstanding. As the Company does not have sufficient historical information since its IPO to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior, the expected term of options granted is derived from the average midpoint between the weighted average vesting and the contractual term, also known as the simplified method. The expected dividend yield is zero as we have never paid dividends and do not currently anticipate paying any in the foreseeable future.
Sensitivity of Estimate to Change
The assumptions used in this method to determine the fair value of our option
shares consider historical trends, macroeconomic conditions, and projections
consistent with the Company's operating strategy. Changes in these estimates can
have a significant impact on the determination of fair value of the option
shares. If factors change or different assumptions are used, our share-based
compensation expenses could be materially different for any period.
-153-
--------------------------------------------------------------------------------Income Taxes
Description
In accordance with the provisions of ASC 740, Income Taxes, we recognize in our financial statements the benefit of a tax position if the tax position 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. We estimate our liability for unrecognized tax benefits which are periodically assessed and may be affected by changing interpretations of laws, rulings by tax authorities, changes and/or developments with respect to tax audits, and expiration of the statute of limitations. The ultimate outcome for a particular tax position may not be determined with certainty prior to the conclusion of a tax audit and, in some cases, appeal or litigation process.
Judgments and Uncertainties
We consider positive and negative evidence when determining whether some portion or all of our deferred tax assets will not be realized. This assessment considers, among other matters, the nature, frequency, and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, our historical results of operations, and our tax planning strategies. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based upon the level of our historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, we believe it is more likely than not that we will not realize the deferred tax assets resulted from the tax loss carried forward in the future periods.
Sensitivity of Estimate to Change
The actual benefits ultimately realized may differ from our estimates. As each audit is concluded, adjustments, if any, are recorded in our financial statements in the period in which the audit is concluded. Additionally, in future periods, changes in facts and circumstances and new information may require us to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the changes occur. As ofDecember 31, 2022 and 2021, we did not have any significant unrecognized uncertain tax positions.
A. Liquidity and Capital Resources.
To date, we have financed our activities primarily through private placements, ourSeptember 2017 initial public offering and various follow-on offerings on Nasdaq, and ourSeptember 2020 secondary listing and initial public offering on theHong Kong Stock Exchange . ThroughDecember 31, 2022 , we have raised approximately$164.6 million in private equity financing and approximately$2,462.7 million in net proceeds after deducting underwriting commissions and the offering expenses payable by us in our initial public offering and subsequent follow-on offerings on Nasdaq and our initial public offering on theHong Kong Stock Exchange . Our operations have consumed substantial amounts of cash since inception. The net cash used in our operating activities was$367.6 million and$549.2 million in 2022 and 2021, respectively. We have commitments for capital expenditures of$9.0 million as ofDecember 31, 2022 , mainly for the purpose of plant construction and installation. We currently do not have any known events that are reasonably likely to cause a material change in the relationship between our costs and revenues. As ofDecember 31, 2022 , we had cash and cash equivalents, restricted cash, and short-term investments of$1,009.3 million . Based on our current operating plan, we expect that our cash, cash equivalents, restricted cash, and short-term investments as ofMarch 1, 2023 , will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. However, in order to bring to fruition our research and development objectives, we may ultimately need additional funding sources, and there can be no assurances that such funding will be made available to us on acceptable terms or at all. -154- -------------------------------------------------------------------------------- The following table presents information regarding our cash flows (in thousands): Year Ended December 31, Change 2022 2021 $ Net cash used in operating activities (367,642) (549,231) 181,589 Net cash provided by investing activities 420,016 249,957 170,059 Net cash (used in) provided by financing activities (1,730) 820,202 (821,932) Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash (6,274) 1,116 (7,390) Net increase in cash, cash equivalents and restricted cash 44,370 522,044 (477,674)
Net cash used in operating activities decreased by$181.6 million in 2022, primarily due to a decrease of$261.2 million in net loss and an increase of$20.4 million in adjustments to reconcile net loss to net cash used in operating activities, partially offset by a decrease of$100.0 million in net changes in operating assets and liabilities.
Net Cash Provided by Investing Activities
Net cash provided by investing activities increased by$170.1 million in 2022, primarily due to a decrease of$184.7 million in purchases of short-term investments and a decrease of$30.0 million in payments for investment in equity investee, partially offset by a decrease of$38.6 million in proceeds from maturity of short-term investments and an increase of$6.3 million in purchases of property and equipment.
Net cash used in financing activities was$1.7 million in 2022, compared to net cash provided by financing activities of$820.2 million in 2021. The shift from cash provided by to cash used in financing activities was primarily because we had proceeds of$818.9 million from our issuance of ordinary shares upon public offerings in 2021 while there were no such transactions in 2022. B. Research and Development, Patents, and Licenses For information regarding our research and development activities and expenditures, see Part I-Item 1. Business as well as the discussion elsewhere in this Management's Discussion and Analysis of Financial Condition and Results of Operations. C. Trend Information. Other than as described elsewhere in this Annual Report on Form 10-K, we are not aware of any trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material adverse effect on our revenue, income from continuing operations, profitability, liquidity, or capital resources, or that would cause our reported financial information not necessarily to be indicative of future results of operations or financial condition.
Recently Issued Accounting Standards
For more information regarding recently issued accounting standards, see Part II-Item 8. Financial Statements and Supplementary Data-Recent Accounting Pronouncements.
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