Zai Lab stock rallies on regulatory optimism in China’s oncology sector

Zai Lab Limited (NASDAQ: ZLAB) surged 7.58% on May 16, 2025, closing at $30.93, amid renewed investor optimism about China’s accelerated regulatory pathways for oncology treatments. The $3.39 billion biotech company significantly outperformed broader biotech indices and sector peers, benefiting from a shift in investor sentiment toward cross-border pharmaceutical plays following a marked thaw in U.S.-China biopharma cooperation.

The rally, driven by speculation around faster approvals by China’s National Medical Products Administration (NMPA), reignited focus on Zai Lab’s pipeline of innovative oncology candidates, including ZL-1310 and repotrectinib. With multiple regulatory filings accepted by Chinese authorities in recent weeks, Zai Lab has emerged as a key beneficiary of improving regulatory and diplomatic alignment in the life sciences sector.

Why Did Zai Lab Shares Rise Sharply on May 16, 2025?

Zai Lab’s stock rise on Friday was underpinned by strong sentiment surrounding China’s willingness to accelerate review timelines for novel oncology therapies developed by domestic and foreign-partnered biopharmaceutical firms. This shift in regulatory posture appears to be part of a broader reform effort by the NMPA to facilitate faster market access for critical treatments, particularly in high-burden disease areas such as lung, gastric, and cervical cancers.

Investors interpreted the move as a significant tailwind for Zai Lab, which holds several late-stage oncology candidates currently under review or near pivotal trial initiation in China. A report circulated earlier in the week suggested that NMPA officials were engaged in expedited consultations regarding multiple biologics license applications (BLAs), including Zai Lab’s submission for TIVDAK, a first-in-class treatment for recurrent and metastatic cervical cancer.

Market watchers noted that Zai Lab’s share price began gaining traction shortly after trading opened, with volume exceeding 1.01 million shares—nearly ten times the average daily volume of just over 100,000. The stock hit an intraday high of $30.97 before settling slightly lower at close, still marking one of its strongest single-day performances this quarter.

What Are the Key Drugs Driving Zai Lab’s Oncology Strategy?

At the center of Zai Lab’s oncology-focused growth strategy are three drug candidates with strong commercial and clinical potential in the Chinese market. These include ZL-1310, an antibody-drug conjugate (ADC) targeting DLL3 in small cell lung cancer (SCLC); repotrectinib, a next-generation ROS1/TRK inhibitor for solid tumors; and TIVDAK, licensed from Seagen and Genmab, which has shown efficacy in cervical cancer populations with limited therapeutic options.

ZL-1310 is particularly notable as it represents one of the few China-originated ADCs with promising early-stage data. The candidate, which is in Phase 1 trials, demonstrated an overall response rate (ORR) of 74% in heavily pretreated SCLC patients. The company is preparing for a pivotal single-arm study in second-line settings, with expectations of a regulatory filing based on accelerated approval pathways if trial outcomes continue to reflect high efficacy and manageable toxicity.

Meanwhile, repotrectinib is currently under review for multiple tumor types. Zai Lab has submitted a supplemental new drug application (sNDA) in China targeting NTRK-positive solid tumors. The asset was originally developed by Turning Point Therapeutics, later acquired by Bristol Myers Squibb, with Zai Lab retaining rights in greater China.

The third major oncology asset, TIVDAK, recently cleared acceptance for a biologics license application by the NMPA. TIVDAK targets tissue factor-expressing cancer cells and has already secured accelerated approval from the U.S. Food and Drug Administration (FDA). Zai Lab’s efforts to secure local approval reinforce its strategy to bring globally developed but locally relevant therapies into China’s growing oncology market.

How Is U.S.-China Pharma Collaboration Influencing Cross-Border Biotech Stocks?

Zai Lab’s stock surge also reflects a broader macro shift in how global investors are valuing China-linked biotech companies. With recent signs of stabilizing U.S.-China diplomatic relations, including high-level engagements around technology and health cooperation, investor confidence in cross-border pharmaceutical ventures has improved.

According to institutional trading data compiled on May 16, hedge funds and active managers added to positions in biotech names with dual exposure to U.S. R&D and Chinese commercialization. Zai Lab, BeiGene, and Hutchmed were among the primary beneficiaries of this rotation. Analysts attributed the renewed interest to reduced perceived regulatory risk and greater confidence in predictable market entry timelines, especially for therapies aligned with public health priorities in China.

The thaw in bilateral relations also coincides with NMPA’s embrace of more transparent review processes and its participation in global harmonization efforts such as the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (ICH). This positioning has made Chinese regulatory bodies more attractive for multinationals seeking faster Asian launches.

What Do Analysts and Institutions Think About Zai Lab’s Valuation and Pipeline?

Zai Lab’s valuation, pegged at approximately $3.4 billion post-rally, remains modest relative to the potential market opportunity for its lead oncology candidates. Analysts have consistently pointed to the company’s strong licensing model, under which it has acquired China rights to a portfolio of assets with established global validation.

Jefferies maintained a Buy rating on the stock earlier this month, citing the likelihood of a positive regulatory outcome for ZL-1310 and near-term revenue visibility from approved assets like ZEJULA (niraparib), a PARP inhibitor co-developed with GSK and already launched in China. Institutional interest, as tracked via 13F filings, shows steady accumulation from U.S. healthcare-focused funds, particularly those with a China-emerging-market tilt.

Despite these positives, there remains a level of caution among analysts regarding pricing pressures and volume-based procurement programs in China. However, oncology therapies, particularly those with novel mechanisms, remain partially insulated from centralized procurement trends, offering margin resilience for companies like Zai Lab.

Can Zai Lab Sustain Momentum and Deliver Long-Term Growth?

Looking ahead, Zai Lab’s ability to sustain its share price momentum will depend on several critical execution milestones. Chief among them is the successful completion of its pivotal trial for ZL-1310, expected to begin enrollment in the coming quarters. Positive data from this study could pave the way for conditional marketing approval, potentially marking one of the first homegrown ADC launches in China.

Investors will also monitor the commercial performance of newly approved therapies such as QINLOCK for GIST and NUZYRA for community-acquired pneumonia and skin infections. Although these assets are not part of the oncology portfolio, their uptake could validate Zai Lab’s broader commercialization infrastructure in China and support diversification beyond cancer therapies.

In the longer term, Zai Lab aims to balance its licensing-driven model with greater emphasis on in-house R&D. Its internal pipeline includes multiple early-stage programs in immunology and neurology, although oncology is likely to remain the core value driver in the medium term.

With geopolitical risks moderating and China’s regulatory system becoming more innovation-friendly, Zai Lab’s unique positioning at the intersection of U.S. clinical innovation and Chinese commercialization puts it in an enviable spot to capitalize on both markets.