2022 Annual Report
Cancer has no borders. Neither do we.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-37686
BEIGENE, LTD.
(Exact Name of Registrant as Specified in its Charter)
Cayman Islands
(State or other jurisdiction of incorporation or organization)
98-1209416
(I.R.S. Employer Identification No.)
c/o Mourant Governance Services (Cayman) Limited
94 Solaris Avenue, Camana Bay
Grand Cayman
Cayman Islands KY1-1108
(Address of principal executive offices, including zip code)
+1 (345) 949 4123
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
American Depositary Shares, each representing 13 Ordinary
Shares, par value $0.0001 per share
Ordinary Shares, par value $0.0001 per share*
BGNE
06160
The NASDAQ Global Select Market
The Stock Exchange of Hong Kong Limited
*Included in connection with the registration of the American Depositary Shares ("ADSs") with the U.S. Securities and Exchange Commission. The ordinary shares are not listed for
trading in the United States but are listed for trading on The Stock Exchange of Hong Kong Limited ("HKEx").
Securities registered pursuant to Section 12(g) of the Act: The RMB shares are ordinary shares of the registrant issued to permitted investors in the People's Republic of China and
listed and traded on the STAR Market in Renminbi. The RMB shares are not listed for trading in the United States or on the HKEx and are not fungible with the ordinary shares listed
on the HKEx or the ADSs representing the ordinary shares listed on NASDAQ, and in no event will any RMB shares be able to be converted into the ordinary shares listed on the
HKEx or the ADSs listed on NASDAQ, or vice versa.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
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 the registrant 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 during the
preceding 12 months (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, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. :
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of
an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 30, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the ordinary shares, including in the form of
ADSs, each representing 13 ordinary shares, held by non-affiliates of the registrant was approximately $16.8 billion, based upon the closing price of the registrant’s ADSs on the
NASDAQ Global Select Market on June 30, 2022.
As of February 14, 2023, 1,356,140,180 ordinary shares, par value $0.0001 per share, were outstanding, of which 863,876,312 ordinary shares were held in the form of 66,452,024
ADSs, and 115,055,260 were RMB shares.
The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 31, 2022. Portions of such
definitive proxy statement are incorporated by reference into Part III of this Annual Report on Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
BeiGene, Ltd.
Annual Report on Form 10-K
TABLE OF CONTENTS
PART I
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Reserved
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
SIGNATURES
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Forward-Looking Statements and Market Data
This Annual Report on Form 10-K (the “Annual Report”) contains forward-looking statements that involve substantial
risks and uncertainties. We have based these forward-looking statements largely on our current expectations and projections
about future events and trends that we believe may affect our business, financial condition, and operating results. All statements
other than statements of historical facts contained in this Annual Report, including statements regarding our strategy, future
operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected
growth, are forward-looking statements. Forward looking statements often include words such as, but not limited to, “aim,”
“anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “ongoing,” “plan,”
“potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” or the negative of these terms or similar
expressions. These forward-looking statements include, among other things, statements about:
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our ability to successfully commercialize our approved medicines and to obtain approvals in additional indications and
territories for our medicines;
our ability to successfully develop and commercialize our in-licensed medicines and drug candidates and any other
medicines and drug candidates we may in-license;
our ability to further develop sales and marketing capabilities and launch and commercialize new medicines, if
approved;
our ability to maintain and expand regulatory approvals for our medicines and drug candidates, if approved;
the pricing and reimbursement of our medicines and drug candidates, if approved;
the initiation, timing, progress and results of our preclinical studies and clinical trials and our research and
development programs;
our ability to advance our drug candidates into, and successfully complete, clinical trials and obtain regulatory
approvals;
our reliance on the success of our clinical stage drug candidates;
our plans, expected milestones and the timing or likelihood of regulatory filings and approvals;
the implementation of our business model, strategic plans for our business, medicines, drug candidates and technology;
the scope of protection we (or our licensors) are able to establish and maintain for intellectual property rights covering
our medicines, drug candidates and technology;
our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property
rights and proprietary technology of third parties;
costs associated with enforcing or defending against intellectual property infringement, misappropriation or violation,
product liability and other claims;
the regulatory environment and regulatory developments in the United States, China, the United Kingdom,
Switzerland, the European Union ("EU") and other jurisdictions in which we operate;
the accuracy of our estimates regarding expenses, revenues, capital requirements and our need for additional financing;
the potential benefits of strategic collaboration and licensing agreements and our ability to enter into and maintain
strategic arrangements;
our plans and expectations to build significant technical operations and independent production capabilities for small
molecule medicines and large molecule biologics to support the global demand for both commercial and clinical
supply;
our reliance on third parties to conduct drug development, manufacturing and other services;
our ability to manufacture and supply, or have manufactured and supplied, drug candidates for clinical development
and medicines for commercial sale;
the rate and degree of market access and acceptance of our medicines and drug candidates, if approved;
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developments relating to our competitors and our industry, including competing therapies;
the size of the potential markets for our medicines and drug candidates and our ability to serve those markets;
our ability to effectively manage our growth;
our ability to attract and retain qualified employees and key personnel;
statements regarding future revenue, hiring plans, key milestones, expenses, capital expenditures, capital requirements
and share performance;
the future trading price of our American Depositary Shares ("ADS") listed on NASDAQ, our ordinary shares listed on
HKEx, and our ordinary shares issued to permitted investors in China and listed and traded on the STAR in Renminbi
("RMB Shares"), as well as the impact of securities analysts’ reports on these prices; and
the impact of the COVID-19 pandemic on our clinical development, regulatory, commercial, manufacturing, and other
operations.
These statements involve risks and uncertainties, including those that are described in "Part I-Item 1A-Risk Factors" of this
Annual Report, that may cause actual future events or results to differ materially from those expected. Given these
uncertainties, you should not place undue reliance on these forward-looking statements.
We do not assume any obligation to update any forward-looking statements whether as a result of new information, future
events or otherwise, except as required by applicable law.
This Annual Report includes statistical and other industry and market data that we obtained from industry publications and
research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies
generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee
the accuracy or completeness of such information. While we believe these industry publications and third-party research,
surveys and studies are reliable, you are cautioned not to give undue weight to this information.
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Summary of Risk Factors
Below is a summary of the material factors that make an investment in our ADSs, ordinary shares or RMB Shares
speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized
in this risk factor summary, and other risks that we face, are summarized in “Part I-Item 1A-Risk Factors” and should be
carefully considered, together with other information in this Annual Report and our other filings with the SEC, before making
an investment decision regarding our ADSs, ordinary shares or RMB shares.
• Our medicines may fail to achieve and maintain the degree of market acceptance by physicians, patients, third-party
payors, and others in the medical community necessary for commercial success.
• We have limited experience in launching and marketing our internally developed and in-licensed medicines. If we are
unable to further develop marketing and sales capabilities or enter into agreements with third parties to market and sell
our medicines, we may not be able to generate substantial product sales revenue.
• We face substantial competition, which may result in others discovering, developing, or commercializing competing
medicines before or more successfully than we do.
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The market opportunities for our medicines may be limited to those patients who are ineligible for or have failed prior
treatments and may be small.
If we or any third parties with which we may collaborate to market and sell our medicines are unable to achieve and
maintain coverage and adequate levels of reimbursement, our commercial success and business operations could be
adversely affected.
• We depend substantially on the success of the clinical development of our medicines and drug candidates. If we are
unable to successfully complete clinical development, obtain regulatory approvals and commercialize our medicines
and drug candidates, or experience significant delays in doing so, our business will be materially harmed.
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Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of earlier
studies and trials may not be predictive of future trial results.
If clinical trials of our drug candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory
authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in
completing, or ultimately be unable to complete, the development and commercialization of our drug candidates.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed
or otherwise adversely affected.
All material aspects of the research, development, manufacturing and commercialization of pharmaceutical products
are heavily regulated, and we may face difficulties in complying with or be unable to comply with such regulations,
which could have a material adverse effect on our business.
The approval processes of regulatory authorities in the United States, China, Europe and other comparable regulatory
authorities are lengthy, time consuming, costly and inherently unpredictable. If we experience delays or are ultimately
unable to obtain regulatory approval for our drug candidates, our business will be substantially harmed.
Our medicines and any future approved drug candidates will be subject to ongoing regulatory obligations and
continued regulatory review, which may result in significant additional expense and we may be subject to penalties if
we fail to comply with regulatory requirements or experience unanticipated problems with our medicines and drug
candidates.
Even if we are able to commercialize our medicines and any approved drug candidates, the medicines may become
subject to unfavorable pricing regulations or third-party reimbursement practices or healthcare reform initiatives,
which could harm our business.
• We have incurred significant net losses since our inception and anticipate that we will continue to incur net losses for
the foreseeable future and may not become profitable.
• We may need to obtain additional financing to fund our operations, and if we are unable to obtain such financing, we
may be unable to complete the development of our drug candidates or achieve profitability.
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If we are unable to obtain and maintain patent protection for our medicines and drug candidates through intellectual
property rights, or if the scope of such intellectual property rights is not sufficiently broad, third parties may compete
against us.
• We rely on third parties to manufacture some of our commercial and clinical drug supplies. Our business could be
harmed if those third parties fail to provide us with sufficient quantities of product or fail to do so at acceptable quality
levels or prices.
• We have entered into licensing and collaboration arrangements and may enter into additional collaborations, licensing
arrangements, or strategic alliances in the future, and we may not realize the benefits of such arrangements.
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If we fail to maintain an effective distribution channel for our medicines, our business and sales could be adversely
affected.
If third-party manufacturers fail to comply with manufacturing regulations, our financial results and financial condition
could be adversely affected.
If we are not able to successfully develop and/or commercialize Amgen’s oncology products, the expected benefits of
the collaboration will not materialize.
• We have significantly increased and expect to continue to increase our research, development, manufacturing, and
commercial capabilities, and we may experience difficulties in managing our growth.
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Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified
personnel.
Our business is subject to complex and evolving industry-specific laws and regulations regarding the collection and
transfer of personal data. These laws and regulations can be complex and stringent, and many are subject to change
and uncertain interpretation, which could result in claims, changes to our data and other business practices, significant
penalties, increased cost of operations, or otherwise adversely impact our business.
• We manufacture some of our medicines and intend to manufacture some of our drug candidates, if approved. Failure to
comply with regulatory requirements could result in sanctions being imposed against us and delays in completing and
receiving regulatory approvals for our manufacturing facilities, or damage to, destruction of or interruption of
production at such facilities, could delay our development plans or commercialization efforts.
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Changes in the political and economic policies of the PRC government or in relations between China and the United
States or other governments and the significant oversight and discretion the PRC government has over the conduct of
the business operations of our PRC subsidiaries may materially and adversely affect our business, financial condition,
and results of operations and may result in our inability to sustain our growth and expansion strategies.
The audit reports included in our previous annual reports on Form 10-K filed with the SEC have historically been
prepared by auditors who are not inspected fully by the Public Company Accounting Oversight Board, and as such,
investors have previously been deprived of the benefits of such inspection.
The trading prices of our ordinary shares, ADSs and/or RMB Shares can be volatile, which could result in substantial
losses to you.
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Unless the context requires otherwise, references in this report to “BeiGene,” the “Company,” “we,” “us,” and
“our” refer to BeiGene, Ltd. and its subsidiaries, on a consolidated basis.
PART I
Item 1. Business
Overview
We are a global biotechnology company that is developing and commercializing innovative and affordable oncology
medicines to improve treatment outcomes and access for patients worldwide.
We currently have three approved medicines that were discovered and developed in our own labs, including BRUKINSA®,
a small molecule inhibitor of Bruton’s Tyrosine Kinase ("BTK") for the treatment of various blood cancers; tislelizumab, an
anti-PD-1 antibody immunotherapy for the treatment of various solid tumor and blood cancers; and pamiparib, a selective small
molecule inhibitor of PARP1 and PARP2. We have obtained approvals to market BRUKINSA in the United States, the People's
Republic of China ("China" or the "PRC"), the European Union ("EU"), the United Kingdom ("UK"), Canada, Australia and
additional international markets, and tislelizumab and pamiparib in China. By leveraging our China commercial capabilities, we
have in-licensed the rights to distribute 13 approved medicines for the China market. Supported by our global clinical
development and commercial capabilities, we have entered into collaborations with world-leading biopharmaceutical
companies such as Amgen Inc. ("Amgen") and Novartis Pharma AG ("Novartis") to develop and commercialize innovative
medicines.
We are committed to advancing best and first-in-class clinical candidates internally or with like-minded partners to develop
impactful and affordable medicines for patients across the globe. Our internal clinical development capabilities are deep,
including a more than 2,700-person global clinical development and medical affairs team that is running more than 80 ongoing
or planned clinical trials in over 50 medicines and drug candidates. This includes more than 30 pivotal or potentially
registration-enabling trials across our portfolio, including our three internally discovered, approved medicines. We have
enrolled in our clinical trials more than 18,000 subjects, of which approximately one-half have been outside of China.
We have built, and are expanding, our internal manufacturing capabilities through our state-of-the-art biologic and small
molecule manufacturing facilities in China to support current and potential future demand of our medicines, and are building a
commercial-stage biologics manufacturing and clinical R&D center in New Jersey. We also work with high quality contract
manufacturing organizations ("CMOs") to manufacture our internally developed clinical and commercial products.
Since our inception in 2010, we have become a fully integrated global organization of over 9,000 employees in 29
countries and regions, including the United States, China, Europe, and Australia.
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Our Holding Company Structure
We are a holding company incorporated in the Cayman Islands with operations primarily conducted through our
subsidiaries in the United States, China, United Kingdom, Switzerland and Australia. The following diagram depicts a summary
of our corporate structure. Currently, our corporate structure contains no variable interest entities.
Our Strategy
We were founded with the vision to create an integrated biopharmaceutical company to transform the biotech industry,
creating impactful medicines that will be affordable and accessible to far more patients around the world. We have made
significant progress towards accomplishing this vision over our first 12 years and have five strategic competitive advantages
positioning us for success both near- and long-term:
1. We have built one of the world's largest, most productive and cost-effective oncology research teams with more
than 950 scientists. Their efforts have been validated by commercial approvals, clinical data, and collaborations that
have secured $1.4 billion in collaboration payments to the company. We have successfully developed three
commercially approved medicines from our internal discovery engine, including BRUKINSA and tislelizumab. We
design each research program with a differentiated biological hypothesis or a first-in-class mechanism of action. Our
lead medicine, BRUKINSA, has demonstrated superiority for both progression-free survival and overall response rate
versus ibrutinib in relapsed or refractory CLL. Our broad pipeline also includes internally developed products with the
potential to be best-in-class or first-in-class, including our BCL-2 inhibitor, BGB-11417, our HPK1 inhibitor,
BGB-15025, and BGB-16673, a BTK-targeted CDAC program that has demonstrated its potential with early data. Our
pipeline also includes many early-stage assets for targets like OX40, LAG-3, and TIM-3. We have invested in
technology platforms, including CDAC protein degraders, bispecific antibodies, tri-specific antibodies, ADC, CAR-
NK, and mRNA. Our research and innovation capabilities will ensure we discover high-quality and impactful
medicines for patients.
2. We have built a substantial global clinical development team of 2,300 people on five continents, allowing us to run
clinical trials predominantly without reliance on third party contract research organizations ("CROs"). Clinical
development accounts for over 75% of the cost and most of the time to develop a medicine. We believe that by fully
integrating these capabilities, we can create a strategic competitive advantage. By retaining clinical development
activities internally, we can decrease the costs of our trials, increase enrollment speed, and leverage technology to
ensure quality and consistency across trials and clinical sites. It also allows us to become more inclusive in the location
and number of clinical sites to help improve the diversity of patients in our trials. Our demonstrated ability to complete
large-scale, multi-regional clinical trials is one of our most important strategic competitive advantages and addresses
an immense challenge in the pharmaceutical industry.
3. We have built a strong commercial portfolio, centered around two cornerstone medicines, BRUKINSA and
tislelizumab, that are becoming primary revenue sources and will support the development of our future pipeline and
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additional combination therapies. Our hematological franchise is led by BRUKINSA, which is supported by a broad
clinical program with over 4,800 patients in 35 trials in 29 markets. We ran two extensive head-to-head studies versus
ibrutinib with over 800 patients enrolled. We are the first and only BTK inhibitor to demonstrate superior efficacy
versus ibrutinib, and the data from the head-to-head ALPINE trial were selected for the prestigious late-breaker session
at the American Society of Hematology ("ASH") meeting in late 2022, with simultaneous publication in The New
England Journal of Medicine. Based on the pooled safety data generated from our trials, we have shown a very
favorable safety profile, especially when compared to ibrutinib in cardiovascular safety, including atrial fibrillation,
ventricle arrhythmia, and hypertension. We believe BRUKINSA allows us to build a strong position in heme-oncology
with our pipeline medicines, including our BCL-2 inhibitor, in both monotherapy and combination settings. Our solid
tumor franchise is led by our anti-PD-1 monoclonal antibody, tislelizumab, which is currently approved in China in ten
indications. Tislelizumab has achieved the commercial market leader position in China in the PD-1/PDL-1 class.
Outside of China, in conjunction with our partner Novartis, we have filed applications for approval in the U.S. and EU.
With tislelizumab and the potentially best-in-class or first-in-class pipeline assets targeting OX40, TIGIT, LAG-3, and
TIM-3, we are well-positioned to build our immuno-oncology business and deliver innovative therapies and
combinations to patients.
4. We have a differentiated international commercial organization of over 3,500 people to deliver medicines to
patients around the globe. In China, the commercial team is actively driving the uptake of our internally developed and
partnered medicines across solid tumors and hematology. BRUKINSA and tislelizumab have achieved market
leadership positions in China in the BTKi and PD-1/PDL-1 classes, respectively, and we have launched and sell more
than 13 products from our business partners around the globe. In North America, our U.S. team has continued to grow
BRUKINSA sales as we launch new indications and expand to Canada. In Europe, we have built a targeted
commercial team focused on medical thought leaders in blood cancer treatments. Altogether, BRUKINSA has been
approved in over 65 markets, with additional filings pending or planned. Our strategy is to commercialize our
medicines broadly throughout the world. Our commercial capabilities have expanded into the Asia Pacific region
through our affiliates, the Latin America region, and other emerging markets through distribution partners. We have
built a global commercial organization that will drive the delivery of highly effective and differentiated medicines to
patients around the globe, and will collaborate with business partners to bridge health inequities.
5. We have financial strength. In a time when the cost of capital has risen, we are well positioned financially. We
already have substantial revenue from our cornerstone assets, which we expect to continue to grow significantly in
2023 and beyond. We expect product revenue growth to outpace our operating expense growth in the near-term, which
will allow us to continue to improve our operating leverage. We will continue to be thoughtful and strategic in how we
deploy our capital, and we are committed to generating long-term value.
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Our Commercial and Registration Stage Products
The following table summarizes the status of our commercial products and new products that are pending approval as of
February 27, 2023:
PRODUCT
LEAD INDICATIONS
U.S.: CLL/SLL, R/R MCL1,
WM & R/R MZL1; China: R/R
MCL2, R/R CLL/SLL2 & R/R
WM2; EU3: WM, R/R MZL, R/R
CLL/SLL
1L Squamous and Non-
Squamous NSCLC/ 2/3 L
NSCLC/ R/R classical
Hodgkin’s lymphoma2 / 2/3 L
HCC2/ R/R PD-L1+ UC2, MSI-H
or dMMR solid tumors, 2L
ESCC, 1L NPC, 1L GC/GEJC
3L BRCA-mutated ovarian
cancer2
MECHANISM
OF ACTION
REGULATORY
STATUS
BEIGENE
COMMERCIAL
RIGHTS
PARTNER
BTK inhibitor
Approved in more than
65 markets, incl. U.S.,
China, EU and other
markets
Global
N/A
Anti-PD-1 antibody
Approved in China;
BLA accepted in
U.S.4; MAA accepted
in EU4
Outside North
America, Japan, EU
and six other
European countries
PARP inhibitor
Approved in China
Global
N/A
Giant cell tumor of bone8 /
Skeletal Related Events (SREs)8
Anti-RANK ligand
antibody
Approved in China
Mainland China
R/R Acute lymphocytic
leukemia8
Anti-CD19 x anti-
CD3 bispecific T-
cell engager (BiTE)
Approved in China
Mainland China
R/R Multiple myeloma8
Proteasome
inhibitor
Approved in China
Mainland China
R/R adult multiple myeloma,
newly diagnosed multiple
myeloma, previously treated
follicular lymphoma
Anti-angiogenesis,
immuno-
modulation
Approved in China
Mainland China
Myelodysplastic syndromes,
acute myeloid leukemia, chronic
myelomonocytic leukemia
DNA
hypomethylation
Approved in China
Mainland China
Idiopathic multicentric
Castleman disease
IL-6 antagonist
Approved in China
Greater China
High-risk neuroblastoma2
Anti-GD2 antibody
Approved in China
Mainland China
POBEVCY® (Avastin
biosimilar)
Colorectal and lung cancers
Anti-VEGF
antibody
Approved in China
Greater China
TAFINLAR® (dabrafenib)
Melanoma5
BRAF inhibitor
Approved in China
MEKINIST® (trametinib)
Melanoma5
MEK inhibitor
Approved in China
VOTRIENT® (pazopanib)
Advance renal cell carcinoma
VEGFR inhibitor
Approved in China
AFINITOR® (everolimus)
Advanced renal cell carcinoma6
mTOR inhibitor
Approved in China
ZYKADIA® (ceritinib)
ALK + NSCLC
ALK inhibitor
Approved in China
China Broad
Markets7
China Broad
Markets7
China Broad
Markets7
China Broad
Markets7
China Broad
Markets7
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1. Approved under accelerated approval. Continued approval for this indication may be contingent upon verification and description of clinical benefit in a
confirmatory trial. 2. Conditionally approved. Full approval for these indications is contingent upon results from ongoing randomized, controlled confirmatory
clinical trials. 3. The approval is applicable to all 27 EU member states, plus Iceland, Lichtenstein and Norway. 4. U.S.: For patients with unresectable
recurrent locally advanced or metastatic ESCC after prior systemic therapy. EU: For patients with advanced or metastatic ESCC after prior systemic
chemotherapy and for patients with NSCLC including: locally advanced or metastatic NSCLC after prior chemo, in combination with chemotherapy for 1L
advanced or metastatic squamous NSCLC, and in combination with chemotherapy for 1L locally advanced or metastatic non-squamous NSCLC with no EGFR
or ALK positive mutations. 5. TAFINLAR and MEKINIST are being investigated in combination by Novartis for NSCLC indications. 6. Following
progression on or after vascular endothelial growth factor (VEGF)-targeted therapy. 7. Rights to promote and market in China's broad markets pursuant to a
Market Development Agreement with an affiliate of Novartis Pharma AG. 8. Conditionally approved. Full approval of any particular indication will depend on
the results of required post-marketing study(ies) in China.
Abbreviations: ALK = anaplastic lymphoma kinase; BLA = Biologics License Application; BRAF = B-rapidly accelerated fibrosarcoma; CLL = chronic
lymphocytic leukemia; EGFR = epidermal growth factor receptor; ESCC = esophageal squamous cell carcinoma; GC = gastric cancer; GEJC =
gastroesophageal junction cancer; HCC = hepatocellular carcinoma; MAA = marketing aothorization application; MCL = mantle cell lymphoma; MEK =
mitogen-activated protein kinase (MAPK) / Extracellular-signal regulated kinase (ERK); mTOR = Mammalian target of rapamycin; MZL = marginal zone
lymphoma; NPC = nasopharyngeal cancer; NSCLC = non-small cell lung cancer; R/R = relapsed / refractory; SLL = small lymphocytic lymphoma; UC =
urothelial carcinoma; VEGFR = vascular endothelial growth factor receptor; WM = Waldenström’s macroglobulinemia
We commercialize the following internally developed cancer medicines:
BRUKINSA
BRUKINSA is a next-generation small molecule inhibitor of BTK designed to maximize BTK occupancy and minimize
off-target binding effects. Zanubrutinib is an orally active inhibitor that covalently binds to BTK, resulting in irreversible
inactivation of the enzyme.
We are marketing BRUKINSA in the United States, China, Europe, the United Kingdom, Canada, Australia and other
markets.
In the United States, BRUKINSA received accelerated approval as a treatment for mantle cell lymphoma (MCL) in adult
patients who have received at least one prior therapy (November 2019), and has since also been approved for patients with
Waldenström’s macroglobulinemia (WM) and relapsed or refractory (R/R) marginal zone lymphoma (MZL) who have received
at least one anti-CD20-based regimen. The MCL and MZL indications were approved under accelerated approval based on
overall response rate. Continued approval for these indications may be contingent upon verification and description of clinical
benefit in a confirmatory trial. In January 2023, BRUKINSA was approved by the U.S. Food and Drug Administration (FDA)
for the treatment of adult patients with CLL or small lymphocytic lymphoma (SLL).
In Europe, BRUKINSA has received approval from the European Commission ("EC") for the treatment of adult patients
with WM who have received at least one prior therapy or for the first-line treatment of patients unsuitable for chemo-
immunotherapy, as well as for the treatment of patients with MZL and for the treatment of patients with CLL.
In China, BRUKINSA has received conditional approval for adult patients with MCL who have received at least one prior
therapy and adult patients with CLL or SLL who have received at least one prior therapy and for the treatment of patients with
R/R WM. In addition, a supplemental new drug application ("sNDA") has been accepted for review by the China National
Medical Products Administration ("NMPA") for the treatment of adult patients with treatment-naïve CLL or SLL and WM. In
December 2021, we announced the inclusion of BRUKINSA for R/R WM in the updated National Reimbursement Drug List
("NRDL") by the China National Healthcare Security Administration ("NHSA"). Currently, all three approved indications for
BRUKINSA are included in the NRDL.
BRUKINSA is approved across several indications in more than 65 markets as of February 2023.
Market Opportunity
Lymphomas are blood-borne cancers involving lymphatic cells of the immune system. They can be broadly categorized
into non-Hodgkin’s lymphoma and Hodgkin’s lymphoma. In 2022, estimated global revenues for BTK inhibitors were
approximately $8.5 billion according to published reports. Global revenues are projected to be more than $20 billion in 2026,
according to published reports.
Tislelizumab
Tislelizumab is a humanized IgG4 monoclonal antibody against the immune checkpoint receptor programmed cell death
protein 1 (PD-1) that we specifically designed to minimize binding to Fc receptor gamma (FcγR), which is believed to play an
essential role in activating phagocytosis in macrophages, to minimize its negative impact on T effector cells.
9
Tislelizumab is approved in China in ten indications, including full approval for the first-line treatment of patients with
locally advanced unresectable or metastatic gastric or gastroesophageal junction adenocarcinoma with high PD-L1 expression
in combination with fluoropyrimidine and platinum chemotherapy, first-line treatment of patients with advanced squamous
non-small cell lung cancer (NSCLC) in combination with chemotherapy, for first-line treatment of patients with advanced non-
squamous NSCLC in combination with chemotherapy, for second- or third-line treatment of patients with locally advanced or
metastatic NSCLC who progressed on prior platinum-based chemotherapy, for the treatment of patients with locally advanced
or metastatic esophageal squamous cell carcinoma (ESCC) who have disease progression following or are intolerant to first-line
standard chemotherapy, and for first-line treatment of patients with recurrent or metastatic nasopharyngeal cancer (NPC). The
NMPA also granted conditional approval for the treatment of patients with classical Hodgkin’s lymphoma (cHL) who received
at least two prior therapies, for the treatment of patients with locally advanced or metastatic urothelial carcinoma (UC) with PD-
L1 high expression whose disease progressed during or following platinum-containing chemotherapy or within 12 months of
neoadjuvant or adjuvant treatment with platinum-containing chemotherapy, for the treatment of patients with hepatocellular
carcinoma (HCC) who have received at least one systemic therapy, for patients with previously treated, locally advanced
unresectable or metastatic microsatellite instability-high (MSI-H) or mismatch repair-deficient (dMMR) solid tumors. Full
approval for these indications is contingent upon results from ongoing randomized, controlled, confirmatory clinical trials.
Tislelizumab was included in the NRDL in 2020 for cHL and UC, in 2021 for non-squamous NSCLC, squamous NSCLC and
HCC, and in 2022 for locally advanced or metastatic NSCLC, for MSI-H solid tumors, for locally advanced or metastatic ESCC
following progression or intolerance to prior first-line chemotherapy, and for first-line recurrent or metastatic NPC.
In addition, we have submitted two supplemental Biologics License Applications ("sBLAs") for tislelizumab that are under
review by the Center for Drug Evaluation ("CDE") of the NMPA, including for patients with first-line unresectable or
metastatic hepatocellular carcinoma (HCC), and in combination with chemotherapy as first-line treatment in patients with
unresectable locally advanced, recurrent or metastatic esophageal squamous cell carcinoma.
We are evaluating tislelizumab in a broad pivotal clinical program for both solid tumor and hematological indications, both
globally and in China. We have initiated or completed 17 potentially registration-enabling clinical trials in China and globally,
including 13 Phase 3 trials and four pivotal Phase 2 trials.
In January 2021, we announced a collaboration and license agreement with Novartis to develop, manufacture and
commercialize tislelizumab in the United States, Canada, Mexico, the EU, UK, Norway, Switzerland, Iceland, Liechtenstein,
Russia and Japan (the "Novartis Territory"). We retained worldwide rights to commercialize outside of the Novartis Territory
and with our proprietary products in combination with tislelizumab.
In the United States, we have filed a BLA with the FDA for tislelizumab as a treatment for patients with unresectable
recurrent locally advanced or metastatic ESCC after prior systemic therapy. In addition, Novartis has disclosed plans to submit
additional marketing applications in its territory.
Market Opportunity
Globally, the top four PD-1/PD-L1 antibody medicines had revenues of approximately $36 billion in 2022 based on public
reports. The 2022 China PD-1/L1 market (net revenue) was approximately $2.2 billion.
Global revenues are projected to be more than $50 billion by 2025 according to published reports, driven by multiple
factors including indication expansion, approvals and adoptions in earlier lines of therapies, further market penetration, and
extension of duration of therapy.
Pamiparib
Pamiparib is a selective small molecule inhibitor of poly ADP-ribose polymerase 1 (PARP1) and PARP2 enzymes.
Pamiparib has demonstrated pharmacological properties such as brain penetration and PARP-DNA complex trapping in
preclinical models. Pamiparib is currently in global clinical development as a monotherapy or in combination with other agents
for a variety of solid tumor malignancies. To date, more than 1,300 patients have been enrolled in clinical trials of pamiparib.
In China, pamiparib received conditional approval for treatment of patients with germline BRCA (gBRCA) mutation-
associated recurrent advanced ovarian, fallopian tube, or primary peritoneal cancer who have been treated with two or more
lines of chemotherapy in May 2021. Full approval for this indication is contingent upon results from ongoing corroborative
trials confirming the clinical benefit of pamiparib in this population. Pamiparib was included in the 2021 NRDL in its approved
indication.
10
We are currently commercializing, or plan to commercialize, the following cancer medicines in China under an exclusive
license from Amgen:
XGEVA®
XGEVA (denosumab) is an antibody-based RANK ligand (RANKL) inhibitor that was approved globally for the
prevention of skeletal-related events ("SREs") in patients with bone metastases from solid tumors and in patients with multiple
myeloma, and for the treatment of adults and skeletally mature adolescents with giant cell tumor of bone (GCTB). XGEVA is
approved in over 70 countries worldwide. In China, XGEVA received conditional approval in the GCTB indication in May
2019 and received conditional approval for the SRE indications in November 2020. We began marketing XGEVA in China in
July 2020. In December 2020, we announced the inclusion of XGEVA in the NRDL for the treatment of GCTB, which was
successfully renewed for inclusion in 2023.
BLINCYTO®
BLINCYTO (blinatumomab), a bispecific CD-19 directed CD3 T-cell engager, is the first and only approved bi-specific T-
cell engager (BiTE) immunotherapy. It has been approved in 60 countries for use in patients with acute lymphoblastic leukemia
(ALL). In China, BLINCYTO received conditional approval as a treatment for adult patients with R/R ALL in December 2020
and was conditionally approved in April 2022 for pediatric patients with R/R B-cell precursor ALL. We began commercializing
BLINCYTO in August 2021.
KYPROLIS®
KYPROLIS (carfilzomib), a proteasome inhibitor, has been approved in over 60 countries for use in patients with R/R
multiple myeloma (MM). It was approved in China as a treatment for patients with R/R MM in July 2021 and we began
commercializing KYPROLIS in January 2022. KYPROLIS was included on the NRDL beginning in March 2023 for its
approved indication in China.
We commercialize the following cancer medicines in China under an exclusive license from BMS:
REVLIMID®
REVLIMID (lenalidomide) is an oral immunomodulatory medicine that was approved in China in 2013 for the treatment of
multiple myeloma (MM) in combination with dexamethasone in adult patients who have received at least one prior therapy. In
February 2018, REVLIMID received NMPA approval of a new indication for the treatment of MM in combination with
dexamethasone in adult patients with previously untreated MM who are not eligible for transplant.
REVLIMID was listed on the NRDL in June 2017. In November 2019, we announced that REVLIMID received formal
inclusion on the NRDL in China for R/R multiple myeloma. In November 2020 our sNDA for the use of REVLIMID in
combination with rituximab in adult patients with previously treated follicular lymphoma was approved by the NMPA.
VIDAZA®
VIDAZA (azacitidine for injection) is a pyrimidine nucleoside analog that has been shown to reverse the effects of DNA
hypermethylation and promote subsequent gene re-expression. VIDAZA was approved in China in April 2017 for the treatment
of intermediate-2 and high-risk myelodysplastic syndromes (MDS), chronic myelomonocyte leukemia (CMML) and acute
myeloid leukemia (AML) with 20% to 30% blasts and multi-lineage dysplasia. In January 2018, VIDAZA became
commercially available in China.
In addition to REVLIMID and VIDAZA, we previously commercialized ABRAXANE® (paclitaxel albumin-bound
particles for injectable suspension), a solvent-free chemotherapy approved for use in certain patients with metastatic breast
cancer, in China until March 2020. On March 25, 2020, the NMPA suspended the importation, sales and use of ABRAXANE
in China supplied to us by BMS, and the drug was subsequently recalled by BMS and is not currently available for sale in
China. This suspension was based on inspection findings at BMS’s contract manufacturing facility in the United States.
Additionally, in October 2021, BMS provided 180-days' notice to us, which we dispute, purporting to terminate our license to
market ABRAXANE in China. We have not had any sales of ABRAXANE since the suspension and do not expect future
revenue from ABRAXANE. We have initiated an arbitration proceeding against BMS asserting that it has breached and
continues to breach the terms and conditions of the license and supply agreement. For additional information, please see the
section of this Annual Report titled “Legal Proceedings”.
11
We are commercializing or planning to commercialize the following medicines in China under an exclusive license from
EUSA Pharma:
SYLVANT®
SYLVANT (siltuximab), an interleukin-6 (IL-6) antagonist, was approved as a treatment for patients with idiopathic
multicentric Castleman disease (iMCD) who are human immunodeficiency virus (HIV) negative and human herpesvirus-8
(HHV-8) negative. SYLVANT was approved in China in December 2021 for the treatment of adult patients with multicentric
Castleman disease (MCD) who are human immunodeficiency virus (HIV) negative and human herpes virus-8 (HHV-8)
negative, also known as idiopathic MCD (iMCD).
QARZIBA®▼
QARZIBA (dinutuximab beta), a mouse-human chimeric monoclonal GD2 antibody, was granted conditional approval by
the NMPA for the treatment of high-risk neuroblastoma in patients aged 12 months and above who have previously received
induction chemotherapy and achieved at least a partial response, followed by myeloablative therapy and stem cell
transplantation, as well as patients with a history of relapsed or refractory (R/R) neuroblastoma with or without residual disease.
We began commercializing QARZIBA in December 2021.
We commercialize the following product in China under an exclusive license from Bio-Thera:
POBEVCY® (BAT1706)
POBEVCY is a biosimilar to Avastin (bevacizumab) developed by Bio-Thera Solutions, Ltd., a commercial-stage
biopharmaceutical company located in Guangzhou, China. In China, Avastin is approved for the treatment of patients with
metastatic colorectal cancer, liver cancer and NSCLC.
POBEVCY was approved by the NMPA in China in November 2021 and launched in late 2021 for the treatment of
patients with advanced, metastatic or recurrent NSCLC and metastatic colorectal cancer.
We have acquired the right to develop, manufacture and commercialize POBEVCY in China, including Hong Kong,
Macau, and Taiwan. Bio-Thera submitted a marketing application to the EMA and a BLA to the FDA in November 2020.
Reimbursement and Market Access
Our sales are largely dependent on the availability and extent of coverage and reimbursement by third party payors. In
many markets these third parties are government health systems and in some markets such as the United States there are also
private payors such as private health insurers and health systems. In 2022, we commercialized our products in 60 markets.
In China, there is one main payor, the government’s national health care coverage system, which provides Basic Medical
Insurance to the majority (greater than 95%) of China’s approximately 1.4 billion people. There are three types of coverage
plans in China at the national level that depend on if a resident lives in an urban or rural setting and if they are employed. The
different plans have different characteristics in terms of how the plan is paid for and what it covers. Coverage and
reimbursement of pharmaceuticals in China comes under the purview of the NHSA, which oversees the NRDL. The NRDL is
composed of three lists. The ‘A’ and ‘B’ list are commonly referred to as the ‘regular’ lists. The A list generally includes older,
off-patent medicines, while the B list generally includes newer medicines, some with remaining patent protection, which are
reimbursed at a lower rate compared to the A list. In 2017, a third list was added to the system, often referred to as the ‘C’ list
or the ‘negotiation’ list. This list generally includes newer innovative medicines which are accepted on the list after successful
negotiation between the NHSA and the company. Typically, inclusion on the C list is accompanied by a discount to the
prevailing list price in China for the medicine at the time of inclusion. The NRDL price for a medicine is its prevailing price in
China, but the actual reimbursement rate that is used can be modified at the provincial level. Innovatively, in the 2022 NRDL, a
price bidding process for non-exclusive drugs was undertaken on the C list to set the national reimbursement price benchmark.
Several of our medicines are listed on the NRDL. In the most recent NRDL list announced in January 2023, the following
medicines were included in the NRDL, effective March 1, 2023:
•
Tislelizumab in nine of its eligible approved indications:
–
For the treatment of adult patients with locally advanced or metastatic non-squamous non-small cell lung cancer
(NSCLC) who are negative for epidermal growth factor receptor (EGFR) and anaplastic mesenchymal lymphoma
kinase (ALK) mutations and have progressed after or are intolerant of prior chemotherapy with platinum-
containing regimens; and adult patients with locally advanced or metastatic squamous NSCLC who are negative
12
or unknown for EGFR and ALK mutations and have progressed after or are intolerant of prior chemotherapy with
platinum-containing regimens (approved in January 2022 and included in the NRDL in 2023);
For the treatment of adult patients with advanced unresectable or metastatic microsatellite instability-high (MSI-
H) or mismatch repair deficient (dMMR) solid tumors: patients with advanced colorectal cancer with disease
progression after prior treatment with fluoropyrimidines, oxaliplatin and irinotecan; patients with other advanced
solid tumors with disease progression after prior treatment and no satisfactory alternative treatment options
(approved in March 2022 and included in the NRDL in 2023);
For the treatment of patients with locally advanced or metastatic esophageal squamous cell carcinoma who have
progressed after or are intolerant of prior first-line standard chemotherapy (approved in April 2022 and included in
the NRDL in 2023);
–
–
– As a first-line treatment for patients with recurrent or metastatic nasopharyngeal cancer (approved in June 2022
and included in the NRDL in 2023);
–
–
–
–
–
For use in combination with pemetrexed and platinum chemotherapy as a first-line treatment in patients with
unresectable, locally advanced or metastatic non-squamous non-small cell lung cancer (NSCLC), with EGFR
genomic tumor aberrations negative and ALK genomic tumor negative (approved in June 2021 and included in the
NRDL in 2021);
For the treatment of patients with hepatocellular carcinoma (HCC) who have been previously treated with at least
one systemic therapy (conditionally approved in June 2021 and included in the NRDL in 2021);
For use in combination with paclitaxel and carboplatin as a first-line treatment in patients with unresectable,
locally advanced or metastatic squamous NSCLC (approved in January 2021 and included in the NRDL in 2021);
For the treatment of patients with locally advanced or metastatic urothelial carcinoma (UC) with PD-L1 high
expression whose disease progressed during or following platinum-containing chemotherapy or within 12 months
of neoadjuvant or adjuvant treatment with platinum-containing chemotherapy (conditionally approved in April
2020 and included in NRDL in 2020); and
For the treatment of patients with classical Hodgkin’s lymphoma (cHL) who have received at least two prior
therapies (conditionally approved in December 2019 and included in the NRDL in 2020).
•
BRUKINSA in all three of its approved indications:
–
–
–
For the treatment of adult patients with Waldenström’s macroglobulinemia (WM) who have received at least one
prior therapy (conditionally approved in June 2021 and included in the NRDL in 2021);
For the treatment of adult patients with MCL who have received at least one prior therapy (conditionally approved
in June 2020 and included in the NRDL in 2020); and
For the treatment of adult patients with chronic lymphocytic leukemia (CLL) /small lymphocytic lymphoma
(SLL) who have received at least one prior therapy (conditionally approved in June 2020 and included in the
NRDL in 2020).
•
Pamiparib in its approved indication:
–
For the treatment of patients with germline BRCA (gBRCA) mutation-associated recurrent advanced ovarian,
fallopian tube, or primary peritoneal cancer who have been treated with two or more lines of chemotherapy
(conditionally approved in May 2021 and included in the NRDL in 2021).
•
KYPROLIS in its approved indication as of March 1, 2023:
–
For the treatment of adult patients with relapsed or refractory multiple myeloma who have received at least two
prior therapies, including a proteasome inhibitor and an immunomodulatory agent.
•
XGEVA was successfully renewed in NRDL as of March 2023 in its approved indication:
–
For the treatment of patients with giant cell tumor of the bone (GCTB) that is unresectable or where surgical
resection is likely to result in severe morbidity (first included in NRDL in 2020).
13
Additionally, two of our medicines were listed in past NRDLs: REVLIMID was included in the 2017 NRDL negotiation
list and later received formal inclusion in the 2019 B list, while VIDAZA was listed in the 2018 NRDL negotiation list and later
received formal inclusion to the 2020 B list.
In 2018, China started a new program to centrally purchase non-exclusive medicines for the nation’s health care system
called "volume-based procurement", or "group purchasing organization" or "4+7" when the program was first piloted in 11
major cities. After the 2018 pilot program, it was implemented nationally in 2019. It is a tender-based system that provides
guaranteed volume for lowered pricing. Participation in the program requires a product to have passed a generic quality
consistency evaluation, which in turn requires passing a bioequivalence comparison to the reference listed drug (RLD). The
system offers a major portion of a market’s volume to winning bidders. More than one company can win a given tender, and
more guaranteed volume is awarded as more bidders win. The system is still evolving and, as such, the exact terms of how
many bidders win and what amount of volume are won and at what price is also evolving.
It is common in China for pharmaceutical companies to employ patient assistance programs to help patients afford their
innovative medicines. Usually these programs have been offered to patients who are self-paying. A typical program provides a
certain number of free doses to patients after a certain number of doses have been paid for. Usually these programs end when a
medicine is included in the NRDL. We offer these types of patient assistance programs to our patients.
In the United States, most health insurance coverage is provided by private insurers, often accessed via employer-
sponsored plans, and the two main public insurance programs, Medicare and Medicaid. All three types of programs usually
have some type of coverage for pharmaceutical products. Often this is through a pharmacy benefit manager ("PBM"). The
structure of the pharmacy benefit can be quite different for different beneficiaries depending on the negotiations between plan
sponsors and plan purchasers. There is no central list of covered pharmaceuticals in the United States, as there is no single
payer system. As such, the prices paid for pharmaceuticals in the United States can vary.
We offer patient assistance programs in the United States under our myBeiGene program. This program seeks to enhance
access to BRUKINSA by assisting with obtaining reimbursement, co-pay assistance when allowed, temporary supply of free
product for insurance delays, and free product assistance for some uninsured and underinsured patients. The programs also seek
to support patients and caregivers by providing education and information about BRUKINSA and its approved indications,
nurse advocates, and connecting patients to sources of support such as support groups and transportation/lodging assistance.
14
Our Pipeline Products
The following table summarizes the status of our internally-discovered drug candidates as of February 27, 2023:
ASSET
PROGRAM
PHASE 1
PHASE 2
PHASE 3
Zanubrutinib
Tislelizumab
monotherapy
+ rituximab
+/- venetoclax
+ obinutuzumab
monotherapy
+ chemotherapy
+ zanidatamab +
chemotherapy
+ sitravatinib
+ fruquintinib
+ tislelizumab
Ociperlimab
Surzebiclimab
+ tislelizumab +
chemotherapy
+ tislelzumab +
concurrent
chemoradiotherapy
+ tislelizumab +/-
LBL-007
Solid tumors
Solid tumors
BGB-A445
+ tislelizumab
+ tislelizumab
Solid tumors
Solid tumors
BGB-10188
+/- zanubrutinib
B-cell lymphoid malignancies
+/- tislelizumab
B-cell malignancies
BGB-15025
+ tislelizumab
Solid tumors
Pamiparib
BGB-3245
Lifirafenib
BGB-11417
monotherapy
+ temozolomide
Solid tumors
monotherapy
Solid tumors with BRAF mutations
+ mirdametinib
Solid tumors
monotherapy
+/- zanubrutinib
Mature B-cell malignancies
+ azacitidine +/-
posaconazole
+ dexamethasone
+/- carfilzomib
BGB-16673
monotherapy
B-cell malignancies
BGB-23339
monotherapy
Inflammation and immunology
BGB-24714
+/- chemotherapy
Solid tumors
BGB-B167
+/- tislelizumab
Solid tumors
R/R FL
Previously treated HCC, R/R cHL
R/R CLL/SLL
TN MCL and R/R MZL
TN CLL/SLL
2L advanced ESCC, 1L HCC, 2L/3L NSCLC
1L advanced ESCC, 1L GC/GEJC, 1L NPC
1L GEA
2L NSCLC
Solid tumors
2L PD-L1+ESCC, 2/3 L cervical cancer
1L PD-L1 high NSCLC
1L NSCLC
1L LS-SCLC
Solid tumors
LA NSCLC (PD-L!+)
1L maintenance platinum-sensitive GC
R/R MCL, R/R CLL/SLL
Myeloid malignancies
R/R multiple myelome with t (11;14)
Abbreviations: cHL = classical Hodgkin lymphoma; CLL = chronic lymphocytic leukemia; ESCC = esophageal squamous-cell carcinoma; FL = follicular
lymphoma; GC = gastric cancer; GEA = gastroesophageal adenocarcinoma; GEJC = gastroesophaegeal junction cancer; HCC = hepatocellular carcinoma;
MCL = mantle cell lymphoma; MZL = marginal zone lymphoma; NPC = nasopharyngeal carcinoma; NSCLC = non-small cell lung cancer; R/R = relapsed/
refractory; SCLC = small cell lung cancer; SLL = small lymphocytic lymphoma; TN = treatment treatment-naïve
15
The following table summarizes the status of our in-licensed drug candidates as of February 27, 2023:
Partner
Molecule / Asset
Indications
Phase
Commercial Rights
Sotorasib
tarlatamab ^^
acapatamab ^^
AMG 176
AMG 427 ^^
AMG 509
AMG 199 ^^
AMG 650
AMG 256
Solid tumors, CRC, NSCLC Phase 3 China
Phase 2 China
SCLC
Phase 1 China
Prostate cancer, NSCLC
Phase 1 China
Hematologic malignancies
Phase 1 China
AML
Phase 1 China
Prostate cancer
Phase 1 China
GC/GEJC
Phase 1 China
Solid tumors
Phase 1 China
Solid tumors
NSCLC
HCC, GC/GEJC
Solid tumors
Sitravatinib † + Tislelizumab
Sitravatinib † + Tislelizumab
Sitravatinib † + Tislelizumab
Zanidatamab + chemo + Tislelizumab GEA
BTC
Zanidatamab (monotherapy)
BC, GC, GEA
Zanidatamab
HER2 expressing cancers
ZW49
Phase 3 Asia, Australia, New Zealand
Phase 2 Asia, Australia, New Zealand
Phase 1 Asia, Australia, New Zealand
Phase 3 Asia, Australia, New Zealand
Phase 2 Asia, Australia, New Zealand
Phase 2 Asia, Australia, New Zealand
Phase 1 Asia, Australia, New Zealand
BGB-32451
SEA-CD70
Solid tumors
Phase 1 Asia
MDS, AML
Phase 1 Asia, Australia, New Zealand
DKN-01 + Tislelizumab + Chemo
GC/GEJC
Phase 2 Asia, Australia, New Zealand
LBL-007 + Tislelizumab
Advanced solid tumors
Phase 2 Ex-China
ABI-H3733
Chronic hepatitis B virus
Phase 1 China
^ BiTE® molecule; ^^ Half-life extended BiTE®; † XmAb® is a registered trademark of Xencor, Inc. Mirati is also conducting its own clinical studies with
sitravatinib, including the Phas3 SAPPHIRE trial in non Sq NSCLC; †† ZW25; 1 By MapKure, a JV with SpringWorks
Abbreviations: AML = acute myelogenous leukemia; BC = breast cancer; BTC = biliary tract cancers; CRC = colorectal cancer; GC = gastric cancer; GEA =
gastroesophageal adenocarcinoma; GEJC = gastroesophaegeal junction cancer; HCC = hepatocellular carcinoma; MDS = myelodysplastic syndromes; NSCLC
= non-small cell lung cancer; SCLC = small cell lung cancer
Our Commercial- and Clinical-Stage Drug Candidates
A description of our commercial- and clinical-stage drug candidates and clinical data from selected clinical trials is set
forth below. Historically, we have made available, and we intend to continue to make available, clinical data and/or topline
results from clinical trials of our drug candidates in our press releases and/or filings with the U.S. Securities and Exchange
Commission ("SEC"), the Stock Exchange of Hong Kong Limited ("HKEx"), and the Shanghai Stock Exchange ("SSE"),
copies of which are available on the Investors section of our website.
Commercial-Stage
BRUKINSA (zanubrutinib), a BTK Inhibitor
We are currently evaluating zanubrutinib in a broad pivotal clinical program globally to treat a number of B-cell
malignancies. Zanubrutinib has demonstrated sustained 24-hour BTK occupancy in both the peripheral blood and lymph node
compartments in patients. Zanubrutinib is the only BTK inhibitor to demonstrate superior progression-free survival versus
IMBRUVICA® (ibrutinib), an approved BTK inhibitor.
16
Overview of Clinical Development Program and Regulatory Status
We have announced BRUKINSA approvals around the world, including in the United States, China, the EU, the U.K.,
Canada, Australia, South Korea and Switzerland. As of December 2022, 26 additional marketing authorization applications for
BRUKINSA have been submitted and are under review, including by BeiGene and with support from our five distribution
partners: Adium Pharma in Latin America and the Caribbean, NewBridge Pharmaceuticals in the Middle East and North Africa,
Erkim in Turkey, Nanolek in Russia, and Medison in Israel.
Based on the clinical data to date, we believe that BRUKINSA has a best-in-class profile, and we are running a broad
global pivotal program in multiple indications, including 10 registration or registration-enabling clinical trials. Five of the 10
trials are Phase 3 and five are designed to be registration-enabling Phase 2 trials.
We have reported results from the monotherapy head-to-head Phase 3 trial versus ibrutinib in WM (ASPEN,
NCT03053440), which has been included in several filings globally. We have also reported results from the Phase 3 trial
comparing BRUKINSA to bendamustine and rituximab in patients with treatment-naïve (TN) CLL/SLL (SEQUOIA,
NCT03336333) and the head-to-head Phase 3 trial in R/R CLL/SLL versus ibrutinib (ALPINE, NCT03734016). Both trials are
the basis for our approvals in CLL in the U.S. and EU. Our fourth Phase 3 trial is an ongoing Phase 3 confirmatory trial in
patients with TN MCL (NCT04002297). Our fifth Phase 3 trial is an ongoing Phase 3 confirmatory trial in patients with R/R
follicular lymphoma (FL) or R/R MZL (NCT05100862). Additionally, we have five filed or ongoing Phase 2 trials that are
designed to be registration-enabling, including four monotherapy studies in R/R MCL, R/R WM, R/R CLL/SLL
(NCT03206970, NCT03332173, NCT03206918), and R/R MZL (MAGNOLIA, NCT03846427) and an ongoing pivotal Phase
2 trial in combination with GAZYVA® (obinutuzumab) in patients with R/R FL (ROSEWOOD, NCT03332017). Data from the
ROSEWOOD trial were presented at the European Hematology Association (EHA) 2022, meeting its primary endpoint.
Finally, we are also investigating zanubrutinib in several combination studies in MCL, MZL and CLL/SLL, including a Phase 3
trial in combination with venetoclax in front-line CLL/SLL.
We continue to pursue regulatory approvals for BRUKINSA globally. Besides our recent approvals in CLL/SLL in the
United States (January 2023) and EU (November 2022) we expect continued regulatory decisions for some of our global filings
this year, including potential additional approvals in more than 10 markets.
Tislelizumab, an anti-PD-1 Antibody
Tislelizumab is a humanized monoclonal antibody against the immune checkpoint receptor PD-1 that is currently being
evaluated in pivotal clinical trials globally and for which we plan to commence additional pivotal trials as a monotherapy and in
combination with standard of care to treat various solid and hematological cancers.
Overview of Clinical Development Program and Regulatory Status
BeiGene has initiated or completed 21 potentially registration-enabling clinical trials in China and globally, including 13
Phase 3 trials and four pivotal Phase 2 trials intended to support regulatory submissions globally and in China.
Our trials in lung cancer include:
•
•
•
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A global Phase 3 trial evaluating tislelizumab as a second- or third-line treatment compared to docetaxel in patients
with locally advanced or metastatic NSCLC (NCT03358875);
Two Phase 3 trials in China evaluating tislelizumab plus chemotherapy versus chemotherapy in squamous and non-
squamous NSCLC (NCT03594747 and NCT03663205, respectively);
A Phase 3 trial in China in 1L SCLC evaluating tislelizumab plus chemotherapy versus chemotherapy
(NCT04005716); and
A Phase 3 trial in China of tislelizumab in combination with platinum-based doublet chemotherapy as neoadjuvant
treatment for patients with NSCLC (NCT04379635).
Our trials in liver cancer include:
•
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A global Phase 3 trial comparing tislelizumab with sorafenib as first-line treatment for patients with HCC
(NCT03412773); and
A global single-arm pivotal Phase 2 trial in second or third line unresectable HCC (NCT03419897).
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Our trials in gastric cancer include:
•
A global Phase 3 trial of tislelizumab combined with chemotherapy versus placebo combined with chemotherapy as
first-line treatment for patients with gastric cancer (NCT03777657).
Our trials in lymphoma include:
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A Phase 3 trial in China comparing tislelizumab to salvage chemotherapy in patients with relapsed or refractory
classical Hodgkin Lymphoma (cHL; NCT04486391); and
A Phase 2 trial in China in patients with relapsed or refractory cHL (NCT03209973).
Our trials in urothelial carcinoma include:
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A Phase 3 trial in China in patients with locally advanced or metastatic urothelial carcinoma (NCT03967977); and
Phase 2 trial in China in patients with locally advanced or metastatic urothelial bladder cancer (NCT04004221).
Our trials in ESCC include:
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•
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A global Phase 3 trial comparing tislelizumab with chemotherapy as second-line treatment for patients with advanced
ESCC (NCT03430843);
A global Phase 3 trial of tislelizumab in combination with chemotherapy as first-line treatment for patients with ESCC
(NCT03783442); and
A Phase 3 trial in China of tislelizumab versus placebo in combination with chemoradiotherapy in patients with
localized ESCC (NCT03957590).
Finally, our trials in solid tumors and nasopharyngeal cancer include:
•
•
A Phase 2 trial in China in patients with MSI-H/dMMR solid tumors (NCT03736889); and
A Phase 3 trial in China and Thailand of tislelizumab combined with chemotherapy versus placebo combined with
chemotherapy as first-line treatment in patients with nasopharyngeal cancer (NCT03924986).
As of December 2022, we had enrolled over 11,000 subjects in clinical trials of tislelizumab in 31 geographies, including
more than 4,000 subjects outside of China. These studies include 11 multi-regional registrational trials that are designed for
global regulatory approvals. Data from our trials thus far suggested that tislelizumab was generally well-tolerated and exhibited
anti-tumor activity in a variety of tumor types.
Pamiparib, a PARP1 and PARP2 Inhibitor
Pamiparib is a selective small molecule inhibitor of poly ADP-ribose polymerase 1 (PARP1) and PARP2 enzymes that is
being evaluated as a potential monotherapy and in combinations for the treatment of various solid tumors. We believe that
pamiparib has the potential to be differentiated from other PARP inhibitors because of its brain penetration, greater selectivity,
strong DNA-trapping activity, and good oral bioavailability demonstrated in preclinical models.
Overview of Clinical Development Program and Regulatory Status
In China, pamiparib received conditional approval in May 2021 for treatment of patients with germline BRCA (gBRCA)
mutation-associated recurrent advanced ovarian, fallopian tube, or primary peritoneal cancer who have been treated with two or
more lines of chemotherapy. Full approval for this indication is contingent upon results from ongoing corroborative trials
confirming the clinical benefit of pamiparib in this population.
In addition, our clinical development program includes a Phase 3 trial as a maintenance therapy in patients with platinum-
sensitive recurrent OC (NCT03519230), a Phase 2 trial in first-line platinum-sensitive GC maintenance (NCT03427814), and a
Phase 1b trial in combination with temozolomide in solid tumors (NCT03150810).
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Clinical-Stage
Ociperlimab (BGB-A1217), a TIGIT Inhibitor
Ociperlimab (BGB-A1217) is an investigational humanized IgG1-variant monoclonal antibody directed against TIGIT. An
immune checkpoint molecule, ociperlimab is currently being investigated in two global Phase 3 clinical trials, the
AdvanTIG-301 (NCT04866017) and AdvanTIG-302 (NCT04746924) trials, in combination with tislelizumab in NSCLC. As of
December 2022, more than 1,600 subjects have been enrolled across the ociperlimab development program, which includes
eight global trials in patients with lung cancers, esophageal squamous cell carcinoma, and cervical cancer.
In December 2021 we announced an option, collaboration and license agreement with Novartis to develop, manufacture
and commercialize ociperlimab in North America, Europe, and Japan, as discussed further below under "Novartis Collaboration
— Option Collaboration and License Agreement for Ociperlimab".
We have completed patient enrollment in the AdvanTIG-202 trial (NCT04693234) in patients with previously treated
recurrent or metastatic cervical cancer. We expect to initiate additional pivotal clinical trials and announce data from Phase 2
trial expansion cohorts in 2023 to inform our subsequent development for ociperlimab.
Lifirafenib (BGB-283) and BGB-3245, Inhibitors of RAF
Lifirafenib is an investigational novel small molecule inhibitor with RAF monomer and dimer inhibition activities.
Lifirafenib has shown antitumor activities in preclinical models and in cancer patients with tumors harboring BRAF V600E
mutations, non-V600E BRAF mutations or KRAS/NRAS mutations. We have been developing lifirafenib for the treatment of
cancers with aberrations in the mitogen-activated protein kinase (MAPK), pathway, including BRAF gene mutations and
KRAS/NRAS gene mutations where first generation BRAF inhibitors are not effective. We believe that lifirafenib as
monotherapy or in combination with other agents may have potential for treating various malignancies such as melanoma,
NSCLC, and endometrial cancer.
BeiGene is working together with SpringWorks Therapeutics, Inc. (SpringWorks) in a global clinical collaboration and has
initiated a Phase 1b clinical trial (NCT03905148) to evaluate the safety, tolerability, and preliminary efficacy of lifirafenib in
combination with SpringWorks' investigational MEK inhibitor, mirdametinib (PD-0325901), in patients with advanced solid
tumors.
In addition to the collaboration, BeiGene and SpringWorks formed a separate company, MapKure, LLC, to develop
BGB-3245, an investigational, selective next-generation RAF kinase inhibitor discovered by BeiGene scientists. MapKure has
an ongoing Phase 1 clinical trial of BGB-3245 (NCT04249843) in patients with advanced or refractory tumors harboring
specific v-RAF murine sarcoma viral oncogene homolog B (B-RAF) genetic mutations.
Sitravatinib, a Multi-Kinase Inhibitor
In January 2018, we entered into an exclusive license agreement with Mirati Therapeutics, Inc. (Mirati) for the
development, manufacturing and commercialization of Mirati’s sitravatinib in Asia (excluding Japan and certain other
countries), Australia and New Zealand. Sitravatinib is an investigational spectrum-selective kinase inhibitor, which potently
inhibits receptor tyrosine kinases, including RET, TAM family receptors (TYRO3, Axl, MER), and split family receptors
(VEGFR2, KIT). Sitravatinib is being evaluated by Mirati in multiple clinical trials to treat patients who are refractory to prior
immune checkpoint inhibitor therapy, including a Phase 3 SAPPHIRE trial of sitravatinib in NSCLC initiated in 2019. In 2022,
as part of our collaboration with Mirati, we initiated patient enrollment for a Phase 2 clinical trial of sitravatinib in combination
with tislelizumab in locally advanced unresectable or metastatic ESCC that progressed on or after anti-PD-L1 antibody therapy
(NCT05461794).
We are evaluating sitravatinib in multiple clinical trials including a Phase 3 trial combined with tislelizumab in NSCLC
(NCT04921358).
BGB-11417, a Small Molecule Bcl-2 Inhibitor
BGB-11417 is an investigational small molecule Bcl-2 inhibitor. We have completed preclinical and investigational new
drug (IND) -enabling studies of BGB-11417, which demonstrated potent activity and high selectivity against the pro-apoptotic
protein Bcl-2. The molecule appears to be more potent than venetoclax and shows the potential to overcome resistance to
venetoclax. Further, it is more selective than venetoclax for Bcl-2 relative to Bcl-xL. Finally, we believe that it is well-
positioned to be combined with BRUKINSA. Phase 1 clinical data for non-Hodgkin's lymphoma, CLL, acute myeloid leukemia
(AML) and multiple myeloma (MM) (NCT04883957, NCT04277637, NCT04771130, and NCT04973605) were presented at
ASH 2022. We initiated patient dosing in a Phase 2 study to evaluate BCL-2 inhibitor BGB-11417 in patients with relapsed or
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refractory mantle cell lymphoma (NCT05471843) and relapsed or refractory chronic lymphocytic leukemia or small
lymphocytic lymphoma (NCT05479994) in 2022 and expect data readouts from ongoing studies in 2023.
BGB-A445, an OX40 Agonist Antibody
BGB-A445 is an investigational agonistic antibody directed to the OX40 antigen. BGB-A445 is a non-ligand competing
antibody that does not disrupt OX40 to OX40 ligand engagement. Preclinical experiments showed that BGB-A445 has
increasing effectiveness at higher doses versus an antibody that was ligand-competing, which showed falling effectiveness at
higher doses. BGB-A445 has also showed in preclinical tests the potential to be combined with several agents, such as
tislelizumab, as well as a TLR9 agonist, a PI3Kδ inhibitor, sitravatinib, and chemotherapy. We have an ongoing Phase 1 trial
(NCT04215978) of BGB-A445 in combination with tislelizumab in patients with advanced solid tumors and initiated tumor-
specific dose expansion cohorts in a Phase 1 monotherapy trial (NCT04215978) in patients with solid tumors in 2022. We
initiated patient dosing in a Phase 2 basket trial in melanoma, renal cell cancer and bladder cancer (NCT05661955).
ZW25 (Zanidatamab), a bispecific HER2-targeted antibody
Zanidatamab, a novel investigational Azymetric™ bispecific antibody targeting HER2, is currently in late-stage clinical
development with Zymeworks Inc. BeiGene has development and commercial rights to zanidatamab in Asia (excluding Japan),
Australia, and New Zealand. We are participating in three ongoing clinical studies with zanidatamab. The first is a Phase 1/2
study (NCT04215978) in HER2-positive breast and gastric cancer. The breast cancer arm combines zanidatamab with
docetaxel, and the gastric cancer arm combines zanidatamab with our PD-1 inhibitor tislelizumab and chemotherapy. The
second study HERIZON-BTC-01 (NCT04466891) is a Phase 2b study in patients with advanced or metastatic HER2-amplified
biliary tract cancers (BTC) in which zanidatamab is being used as monotherapy. Positive topline results from this trial were
announced in 2022. We initiated a global Phase 3 clinical trial (NCT05152147) examining zanidatamab in combination with
chemotherapy with and without tislelizumab in HER2-positive gastroesophageal cancer in late 2021. We completed enrollment
in 2L biliary tract cancer in 2022.
Surzebiclimab (BGB-A425), a TIM-3 Inhibitor
Surzebiclimab (BGB-A425) is an investigational humanized IgG1-variant monoclonal antibody against T-cell
immunoglobulin and mucin-domain containing-3 (TIM-3). We have an ongoing Phase 1/2 trial (NCT03744468) of
surzebiclimab in combination with tislelizumab in various solid tumors.
BGB-15025, a Small Molecule HPK1 Inhibitor
BGB-15025 is an investigational small molecule inhibitor of HPK1, which is a key negative feedback regulator of TCR
signaling. Inhibition of HPK1 leads to enhanced T-cell activation pre-clinically. In addition, preclinical studies showed that
BGB-15025 exhibits combination activity with tislelizumab and has a wide therapeutic window. We initiated a Phase 1 trial
(NCT04649385) of BGB-15025 alone and in combination with tislelizumab in patients with advanced solid tumors in 2021.
This trial is being conducted in multiple countries globally. We expect to initiate dose-expansion for BGB-15025 in 2023.
BGB-16673, a BTK-targeted CDAC
BGB-16733 is an investigational BTK-targeting chimeric degradation activation compound (CDAC) active against both
wild-type and mutant BTK. BGB-16673 has demonstrated preclinical antitumor activity in models with wild-type BTK and
models with BTK inhibitor–resistant mutations commonly observed in patients who have progressed on prior BTK inhibitor
treatment. A Phase 1 open-label, dose-escalation, and dose-expansion trial (NCT05006716) in adult patients with relapsed/
refractory (R/R) B-cell malignancies is currently enrolling.
BGB-23339, a TYK2 inhibitor
BGB-23339 is a potent, highly selective, allosteric, investigational tyrosine kinase 2 (TYK2) inhibitor discovered and
being developed by BeiGene. TYK2 is a member of the JAK family and functions as a critical mediator in cytokine signaling
pathways implicated in multiple immune-mediated disorders. Designed to target the regulatory pseudokinase (JH2) domain on
TYK2, BGB-23339 has demonstrated strong selectivity in preclinical studies with potent inhibition of interleukin (IL)-12,
IL-23, and Type 1 interferons (IFNs)—pro-inflammatory cytokines that play a determinant role in the induction of
inflammation. BGB-23339 is currently being evaluated in a Phase 1 clinical study (NCT05093270).
BGB-24714, a SMAC mimetic
BGB-24714 is an investigational Second Mitochondrial-derived Activator of Caspase (SMAC) mimetic currently enrolling
in a Phase 1 clinical trial (NCT05381909) as monotherapy or in combination with paclitaxel in advanced solid tumors.
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BGB-B167, a CEA x 4-1BB bispecific
BGB-B167 is an investigational first-in-class CEA x 4-1BB bispecific antibody. It is currently enrolling in a Phase 1
clinical trial (NCT05494762) as a monotherapy and in combination with tislelizumab in patients with selected CEA-expressing
advanced or metastatic solid tumors, including colorectal cancer (CRC).
BGB-10188 (PI3K inhibitor)
BGB-10188 is an investigational PI3Kδ inhibitor being evaluated in a Phase 1 clinical trial (NCT04282018) as
monotherapy or in combination with BRUKINSA in hematology malignancies, or in combination with tislelizumab in solid
tumors.
Our Preclinical Programs
We have a proprietary biology research platform that has allowed us to research and develop both small molecules and
biologic molecules. In the last decade, this platform has generated more than 10 clinical stage assets, including three internally-
developed molecules that have been approved by regulatory bodies in the United States, China, EU and other markets, with
other filings pending globally and planned to be submitted. The platform is a full-process technology system spanning from
early discovery to commercialization of oncology medicines based on multiple drug technology platforms that can be applied to
oncology and other fields. We have core technology platforms for the development of small molecule and antibody medicines
and the manufacturing of our own and potentially other medicines. Currently, we have over 60 pre-clinical programs and we
believe the majority have best-in-class or first-in-class potential.
We anticipate advancing multiple our preclinical drug candidates into the clinic in the next 12 months. We believe that we
have the opportunity to combine tislelizumab with our preclinical candidates to target multiple points in the cancer immunity
cycle. We also may seek to develop companion diagnostics that will help identify patients who are most likely to benefit from
the use of our medicines and drug candidates.
Manufacturing and Supply
We manufacture our medicines and drug candidates internally and in some cases with the help of third-party CMOs. The
manufacturing of our medicines and drug candidates is subject to extensive regulations that impose various procedural and
documentation requirements governing recordkeeping, manufacturing processes and controls, personnel, quality control, and
quality assurance, among others. Our manufacturing facilities and the facilities of the CMOs we use to manufacture our
medicines and drug candidates operate under current good manufacturing practice regulations ("cGMP") conditions. cGMP
regulations are requirements for the production of pharmaceuticals that will be used in humans.
Our Manufacturing Facilities
We have manufacturing facilities for small molecule drugs and large molecule biologics in Suzhou and Guangzhou, China,
respectively, to support the commercialization and potential future demand of our internally developed or in-licensed products.
Our manufacturing facility in Suzhou is over 13,000 square meters and consists of a manufacturing base for small molecule
drug products with an annual production capacity of about 100 million tablets and capsules and a biologics clinical
development production facility with 2 x 500 liters capacity to produce biologics candidates for clinical supply. The facility
meets or exceeds design criteria of the United States, EU, and China regulatory requirements. The facility has received a
manufacturing license to produce commercial volumes of BRUKINSA and pamiparib for the China market. As a result of our
growing commercial and clinical demands, we have broken ground on a new small molecule manufacturing facility nearby in
Suzhou that will have the capability to produce up to 600 million solid oral dosages annually. This approximately 50,000 square
meter facility is expected to replace our current Suzhou site and support our growing pipeline of small molecule medicines and
drug candidates.
We continue to invest in our state-of-the-art commercial-scale manufacturing facility in Guangzhou of approximately
100,000 square meters for the manufacturing of large molecule biologics. Phases 1 and 2 of the facility were completed in
September 2019 and December 2020, respectively, with 24,000 liters of single use disposable capacity. Additionally, total
capacity has been increased to 54,000 liters, with an additional expansion of 10,000 liters expected in the second quarter of
2023, which will bring the final capacity to 64,000. Phase 1 is currently approved for the end-to-end commercial production of
tislelizumab for the China market. We have purchased an adjacent tract of land to the south of the current site and initiated the
next phase of expansion to support our growing pipeline of large molecule medicines and drug candidates.
We have also commenced construction on our commercial-stage manufacturing and clinical R&D campus at the 42-acre
site at the Princeton West Innovation Park in Hopewell, New Jersey. The property, located strategically in the Interstate 95
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corridor of New Jersey, with a deep and rich talent pool, has more than one million square feet of developable real estate for
potential future expansion to cover our existing medicines and pipeline.
Contract Manufacturing Organizations
We currently rely on, and expect to continue to rely on, a limited number of third-party CMOs and CROs for the
production of some drug products and drug substances and the supply of raw materials to meet the commercial, clinical, and
preclinical needs of our medicines and drug candidates. We have adopted procedures to ensure that the production
qualifications, facilities, and processes of the third-party suppliers engaged by us comply with relevant regulatory requirements
and our internal quality and operational guidelines. We select our third-party suppliers carefully by considering a number of
factors, including their qualifications, relevant expertise, production capacity, geographic proximity, reputation, track record,
product quality, reliability in meeting delivery schedules, and business terms.
We have commercial supply and related agreements with most of our manufacturing service providers. For example, we
entered into a commercial supply agreement with Catalent Pharma Solutions, LLC ("Catalent") to produce BRUKINSA at
Catalent’s Kansas City, Missouri site for clinical and commercial use in the United States and other countries outside of China.
We currently source the active pharmaceutical ingredient for BRUKINSA from a supplier in China and are in the process of
bringing online an additional source of supply outside of China. In addition, we entered into a commercial supply agreement
with Boehringer Ingelheim Biopharmaceuticals (China) Ltd. ("Boehringer Ingelheim") for tislelizumab, which is being
manufactured at Boehringer Ingelheim’s facility in Shanghai, China. Additionally, our collaboration agreements with Novartis
include the right for Novartis to manufacture tislelizumab and ociperlimab for its territory, to be managed by Novartis
following tech transfer, and our right to conduct a specified percentage of production at our planned U.S. manufacturing site,
subject to the terms of the agreements. For our commercial and clinical stage products in-licensed from Amgen, BMS and
others, we rely on the licensors and their manufacturing facilities or their CMOs for the supply of those medicines and drug
candidates.
Our agreements with the outsourced suppliers engaged by us generally set out terms, including product quality or service
details, technical standards or methods, delivery terms, agreed price and payment, and product inspection and acceptance
criteria. We are generally allowed to return any products that fail to meet specified quality standards. Our outsourced suppliers
procure raw materials themselves. Typically, outsourced suppliers request settlement of payment within 30 days from the date
of invoice. Either party may terminate the agreements by serving notice to the other party under certain circumstances.
We generally obtain raw materials for our manufacturing activities from various suppliers who we believe have sufficient
capacity to meet our demands. Raw materials and starting materials used at our facilities in Beijing and Suzhou include active
pharmaceutical ingredients custom-made by our third-party CROs and excipients, which are commercially available from well-
known vendors that meet the requirements of the relevant regulatory agencies. The core raw materials used in manufacturing at
our Guangzhou facility are genetically modified cell lines that we have co-developed and licensed from Boehringer Ingelheim
and other third parties.
We typically order raw materials on a purchase order basis and do not enter into long-term, dedicated capacity or minimum
supply arrangements. We pay for our purchases of raw materials on credit. Credit periods granted to us by our suppliers
generally range from 30 to 60 days. Our suppliers are generally not responsible for any defects in our finished products.
Amgen Collaboration
Collaboration Agreement
On October 31, 2019, our wholly-owned subsidiary, BeiGene Switzerland GmbH ("BeiGene Switzerland"), entered into a
Collaboration Agreement with Amgen, which became effective on January 2, 2020 (as amended, the "Amgen Collaboration
Agreement"). Pursuant to the terms of the Amgen Collaboration Agreement, we are responsible for commercializing Amgen’s
oncology products XGEVA, BLINCYTO and KYPROLIS in China (excluding Hong Kong, Macao and Taiwan) for a period of
five or seven years following each product’s regulatory approval in China, as specified in the Amgen Collaboration Agreement,
with the commercialization period for XGEVA commencing following the transition of operational responsibilities for the
product. In addition, as specified in the agreement, we have the option to retain one of the three products to commercialize for
as long as the product is sold in China. The parties have agreed to equally share profits and losses for the products in China
during each product’s commercialization period. After expiration of the commercialization period for each product, the
products not retained will be transitioned back to Amgen and we will be eligible to receive tiered mid-single to low-double digit
royalties on net sales in China of each product for an additional five years.
Additionally, pursuant to the terms of the Amgen Collaboration Agreement, we and Amgen have agreed to collaborate on
the global clinical development and commercialization of a portfolio of Amgen clinical- and late-preclinical-stage oncology
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pipeline products. Starting from the commencement of the Amgen Collaboration Agreement, we and Amgen will co-fund
global development costs, with BeiGene contributing up to $1.25 billion worth of development services and cash over the term
of the collaboration. We will be eligible to receive tiered mid-single digit royalties on net sales of each product globally outside
of China, other than LUMAKRAS™ (sotorasib) ("AMG 510"), on a product-by-product and country-by-country basis, until the
latest of the expiration of the last valid patent claim, the expiration of regulatory exclusivity, or the earlier of eight years after
the first commercial sale of such product in the country of sale and 20 years from the date of first commercial sale of such
product anywhere in the world.
For each pipeline product that is approved in China, we will have the right to commercialize the product for seven years,
with the parties sharing profits and losses for the product in China equally. In addition, we will have the right to retain
approximately one of every three approved products, up to a total of six, other than AMG 510, to commercialize for as long as
each such product is sold in China. After the expiration of the seven-year commercialization period, each product will be
transitioned back to Amgen and we will be eligible to received tiered mid-single to low-double digit royalties on net sales in
China for an additional five years. The parties are subject to specified exclusivity requirements in China and the rest of the
world.
Recently, in connection with our ongoing assessment of the Collaboration Agreement cost-share contributions, we
determined that our further investment in the development of AMG 510 was no longer commercially viable for BeiGene. As a
result, in February 2023, we entered into an amendment to the Collaboration Agreement to (i) stop sharing costs with Amgen
for the further development of AMG 510 during the period starting January 1, 2023 and ending August 31, 2023; and (ii)
cooperate in good faith to prepare a transition plan with the anticipated termination of AMG 510 from the Collaboration
Agreement.
BeiGene, Ltd. has guaranteed certain obligations of BeiGene Switzerland under the Amgen Collaboration Agreement
pursuant to the terms of a separate Guarantee Agreement.
The Amgen Collaboration Agreement contains customary representations, warranties and covenants by the parties. The
agreement will continue in effect on a product-by-product basis unless terminated by either party pursuant to its terms. The
agreement may be terminated by mutual written consent of the parties, or by either party upon the other party’s uncured
material breach, insolvency, failure to comply with specified compliance provisions, or subject to a specified negotiation
mechanism, certain adverse economic impacts or the failure to meet commercial objectives. In addition, Amgen may terminate
the agreement with respect to a pipeline product in the event it suspends development of such pipeline product on specified
terms, subject to the parties determining whether to continue development of the pipeline product in China.
Share Purchase Agreement
In connection with the Amgen Collaboration Agreement, pursuant to a share purchase agreement dated October 31, 2019,
as amended, by and between BeiGene, Ltd. and Amgen (as amended, the “Share Purchase Agreement”), we issued to Amgen
206,635,013 ordinary shares in the form of 15,895,001 American Depositary Shares ("ADSs") of BeiGene, Ltd. on January 2,
2020, representing approximately 20.5% of our then outstanding shares, for an aggregate purchase price of $2.78 billion, or
$13.45 per ordinary share, or $174.85 per ADS.
Pursuant to the Share Purchase Agreement, Amgen has agreed to (i) a lock-up on sales of its shares until the earliest of (a)
the fourth anniversary of the closing, (b) the expiration or termination of the Collaboration Agreement and (c) a change of
control of BeiGene, Ltd., (ii) a standstill until the date on which it holds less than 5% of our then outstanding shares, and (iii) a
voting agreement to vote its shares on certain matters presented for shareholder approval until the later of (a) the fifth
anniversary of the closing and (b) the expiration of the standstill period, all under specified circumstances and as set forth in the
agreement. Following the later of (i) the expiration of the lock-up period and (ii) the expiration of the standstill period, Amgen
has agreed not to sell shares representing more than 5% of our then outstanding shares in any rolling 12-month period. Under
the terms of the Share Purchase Agreement, Amgen will also have specified registration rights upon expiration of the lock-up.
Additionally, we have agreed to use reasonable best efforts to provide Amgen with an opportunity to participate in subsequent
new securities offerings upon the same terms and conditions as other purchasers in the offering in an amount needed to allow
Amgen to hold up to 20.6% of our shares, subject to applicable law and HKEx rules and other specified conditions.
On March 17, 2020, BeiGene, Ltd. and Amgen entered into an Amendment No. 2 (the “Second Amendment”) to the Share
Purchase Agreement in order to account for periodic dilution from the issuance of shares by us, which agreement was restated
in its entirety on September 24, 2020 (the “Restated Second Amendment”). Pursuant to the Restated Second Amendment,
Amgen has an option (the “Direct Purchase Option”) to subscribe for additional ADSs in an amount necessary to enable it to
increase (and subsequently maintain) its ownership at approximately 20.6% of our outstanding shares. The Direct Purchase
Option is exercisable on a monthly basis, but only if Amgen’s interest in our outstanding shares at the monthly reference date is
less than 20.4%. The Direct Purchase Option (i) is exercisable by Amgen solely as a result of dilution arising from issuance of
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new shares by us under our equity incentive plans from time to time, and (ii) is subject to annual approval by our independent
shareholders each year during the term of the Restated Second Amendment. The exercise period of the Direct Purchase Option
commenced on December 1, 2020 and will terminate on the earliest of: (a) the date on which Amgen and its affiliates
collectively own less than 20% of the outstanding share capital of the Company as a result of Amgen’s sale of shares; (b) at
least 60-day advance written notice from either Amgen or the Company that such party wishes to terminate the Direct Purchase
Option; or (c) December 1, 2023. The Direct Purchase Option has no vesting period.
Novartis Collaboration
Collaboration and License Agreement for Tislelizumab
On January 11, 2021, our wholly-owned subsidiary, BeiGene Switzerland GmbH, entered into a Collaboration and License
Agreement, which became effective on February 26, 2021 (the “Novartis Collaboration and License Agreement”) with
Novartis, pursuant to which Novartis will have the right to develop, manufacture and commercialize tislelizumab in the United
States, Canada, Mexico, member countries of the European Union, United Kingdom, Norway, Switzerland, Iceland,
Liechtenstein, Russia, and Japan (the “Licensed Territory”).
Under the Novartis Collaboration and License Agreement, we received an upfront cash payment of $650 million from
Novartis. Additionally, we are eligible to receive up to $1.3 billion upon the achievement of regulatory milestones, $250 million
upon the achievement of sales milestones, and tiered royalties based on percentages of annual net sales of tislelizumab in the
Licensed Territory ranging from the high-teens to high-twenties, with customary reductions in specified circumstances.
Royalties are payable on a country-by-country basis from the time of the first commercial sale until the latest of the expiration
of the last valid patent claim, the expiration of regulatory exclusivity, or 10 years after the first commercial sale of tislelizumab
in the country of sale.
Under the Novartis Collaboration and License Agreement, we and Novartis have agreed to jointly develop tislelizumab in
the Licensed Territory, with Novartis responsible for regulatory submissions after a transition period and for commercialization
upon regulatory approvals. In addition, both companies may conduct clinical trials to explore potential combinations of
tislelizumab with other cancer treatments. We will be responsible for funding the ongoing clinical trials of tislelizumab, and
Novartis has agreed to fund any new registrational, bridging, or post-marketing studies in the Licensed Territory. Subject to
specified conditions, both parties have agreed to jointly fund other new clinical trials in the Licensed Territory agreed by the
parties, provided that each party will be responsible for funding clinical trials evaluating tislelizumab in combination with its
own- or third-party cancer treatments. We will initially be responsible for supplying tislelizumab to Novartis, with Novartis
having the right to conduct manufacturing for its use in the Licensed Territory after successful transfer of the manufacturing
process. In addition, we have an option to co-detail the product in the United States, Canada and Mexico, on an indication-by-
indication basis, funded in part by Novartis. Each party retains the worldwide right to commercialize its propriety products in
combination with tislelizumab. We retain the rights to manufacture and supply a specified percentage of commercial supply of
tislelizumab from our planned U.S. manufacturing facility to be built in Hopewell, New Jersey, subject to the terms of the
agreement.
The Novartis Collaboration and License Agreement contains customary representations, warranties and covenants by the
parties. Unless earlier terminated, the agreement will expire on a country-by-country basis upon expiration of the royalty term
in such country and in its entirety upon the expiration of all applicable royalty terms in all countries in the Licensed Territory.
We may terminate the agreement in its entirety upon written notice (i) if Novartis challenges the licensed BeiGene patents, or
(ii) if Novartis files a biologics license application for its anti-PD-1 antibody, spartalizumab, in the Licensed Territory, and we
do not elect to include spartalizumab as a licensed product under the agreement or Novartis does not divest the product
candidate, in which case Novartis would pay us a specified termination fee. The agreement may be terminated by Novartis upon
120 days’ prior written notice if delivered before first commercial sale or 180 days’ prior written notice if delivered following
first commercial sale of tislelizumab in the Licensed Territory, or by either party upon the other party’s bankruptcy or uncured
material breach.
Option, Collaboration and License Agreement for Ociperlimab
On December 19, 2021, BeiGene Switzerland GmbH entered into an Option, Collaboration and License Agreement (the
“Novartis Option, Collaboration and License Agreement”) with Novartis, pursuant to which we have granted Novartis an
exclusive time-based option to receive an exclusive license to develop, manufacture and commercialize our investigational
TIGIT inhibitor ociperlimab in the Licensed Territory.
Under the Novartis Option, Collaboration and License Agreement, we received an upfront cash payment of $300 million
from Novartis and are eligible to receive an additional payment of $600 million or $700 million upon exercise by Novartis of an
exclusive time-based option prior to mid-2023 or late-2023, respectively, subject to receipt of required antitrust approval.
24
Additionally, following option exercise, we are eligible to receive up to $745 million upon the achievement of regulatory
approval milestones, $1.15 billion upon the achievement of sales milestones, and tiered royalties based on percentages of
annual net sales of ociperlimab in the Licensed Territory ranging from the high-teens to mid-twenties, with customary
reductions in specified circumstances. Royalties are payable on a country-by-country basis from the time of the first
commercial sale until the latest of the expiration of the last valid patent claim, the expiration of regulatory exclusivity, or 10
years after the first commercial sale of ociperlimab in the country of sale.
Under the Novartis Option, Collaboration and License Agreement, during the option period, Novartis has agreed to initiate,
conduct and fund additional global clinical trials of ociperlimab in combination with tislelizumab in selected tumor types and
we have agreed to expand enrollment in two ongoing trials. Additionally, following the option exercise, the companies have
agreed to jointly develop ociperlimab in the Licensed Territory, with Novartis sharing development costs of global trials and
responsible for regulatory submissions after a transition period and for commercialization upon regulatory approvals in the
Licensed Territory. In addition, both companies may conduct clinical trials globally to explore potential combinations of
ociperlimab with other cancer treatments. We will initially be responsible for supplying ociperlimab to Novartis, with Novartis
having the right to conduct manufacturing for its use in the Licensed Territory after successful transfer of the manufacturing
process. Following approval, we have agreed to provide 50% of the co-detailing and co-field medical efforts in the United
States and have an option to co-detail up to 25% in Canada and Mexico, in each case funded in part by Novartis. Each party
retains the worldwide right to commercialize its proprietary products in combination with ociperlimab, as is the case with
tislelizumab under the parties' existing collaboration agreement. We retain the rights to manufacture and supply a specified
percentage of commercial supply of ociperlimab from our planned U.S. manufacturing facility to be built in Hopewell, New
Jersey, subject to the terms of the agreement.
The Novartis Option, Collaboration and License Agreement contains customary representations, warranties and covenants
by BeiGene and Novartis. Unless earlier terminated, the agreement will expire on a country-by-country basis upon the
expiration of the royalty term in such country. The Novartis Option, Collaboration and License Agreement will expire in its
entirety upon the expiration of all applicable royalty terms under the agreement in all countries in the Licensed Territory. The
agreement may be terminated by Novartis upon 120 days’ prior written notice if delivered before first commercial sale or 180
days’ prior written notice if delivered following first commercial sale of ociperlimab in the Licensed Territory, or by either
party upon the other party’s bankruptcy or uncured material breach. BeiGene may terminate the agreement in its entirety upon
written notice if Novartis challenges the licensed BeiGene patents. Either party may terminate the agreement in its entirety
effective immediately upon written notice to the other party (i) if the option terminates or expires, or (ii) in the event that the
license effective date has not occurred within six months after the date of the Hart-Scott-Rodino Antitrust Improvements Act
filing, subject to extension.
Celgene License and Supply Agreement
On July 5, 2017, we and Celgene Logistics Sàrl, now a wholly-owned subsidiary of BMS, entered into a License and
Supply Agreement, which we refer to as the China License Agreement and which became effective on August 31, 2017,
pursuant to which we were granted the right to exclusively distribute and promote BMS’s approved cancer therapies,
REVLIMID, VIDAZA and ABRAXANE in China, excluding Hong Kong, Macau and Taiwan. In addition, if Celgene decides
to commercialize a new oncology product through a third party in the licensed territory during the first five years of the term,
we have a right of first negotiation to obtain the right to commercialize the product, subject to certain conditions. We
subsequently assigned the agreement to our wholly-owned subsidiary, BeiGene Switzerland.
On March 25, 2020, the NMPA suspended the importation, sales and use of ABRAXANE in China supplied to us by BMS,
and the drug was subsequently recalled by BMS and is not currently available for sale in China. This suspension was based on
inspection findings at BMS’s contract manufacturing facility in the United States. Additionally, in October 2021, BMS
provided 180-days' notice to us, which we dispute, purporting to terminate our license to market ABRAXANE in China. We
have not had any sales of ABRAXANE since the suspension and do not expect future revenue from ABRAXANE. We have
initiated an arbitration proceeding against BMS asserting that it has breached and continues to breach the terms and conditions
of the license and supply agreement. For additional information, please see the section of this Annual Report titled “Legal
Proceedings”.
The term of the China License Agreement is 10 years and may be terminated by either party upon written notice in the
event of uncured material breach or bankruptcy of the other party, or if the underlying regulatory approvals for the covered
products are revoked. BMS also has the right to terminate the agreement with respect to REVLIMID at any time upon written
notice to us under certain circumstances.
The China License Agreement contains customary representations and warranties and confidentiality and mutual
indemnification provisions.
25
Intellectual Property
The proprietary nature of, and protection for, our medicines, drug candidates, and their methods of use are an important
part of our strategy to develop and commercialize novel medicines, as described in more detail below. We have filed patent
applications and obtained patents in the United States and other countries and regions, such as China and Europe, relating to our
medicines and certain of our drug candidates, and are pursuing additional patent protection for them and for our other drug
candidates and technologies. We rely on trade secrets to protect aspects of our business that are not amenable to, or that we do
not consider appropriate for, patent protection, including our manufacturing processes. We also rely on know-how, continuing
technological innovation and in-licensing opportunities to develop, strengthen, and support our development programs.
As of January 30, 2023, we owned 48 issued U.S. patents, 32 issued China patents, a number of pending U.S. and China
patent applications, and corresponding patents and patent applications internationally. In addition, we owned pending
international patent applications under the Patent Cooperation Treaty ("PCT"), which we plan to file nationally in the United
States and other jurisdictions, as well as additional priority PCT applications. With respect to any issued patents in the United
States and Europe, we may be entitled to obtain a patent term extension to extend the patent expiration date, provided that we
meet the applicable requirements for obtaining such patent term extensions. For example, in the United States, we can apply for
a patent term extension of up to five years for one of the patents covering a drug product once the product is approved by the
FDA. The exact duration of the extension depends on the time that we spend in clinical studies as well as getting approval from
the FDA. In China, the Amended PRC Patent Law provides a patent term extension of up to five years, similar to the United
States.
The key patents for our medicines and late-stage clinical drug candidates as of January 30, 2023, are summarized below:
Molecule
Territory General Subject Matter
BRUKINSA®
(Zanubrutinib)
Tislelizumab
Pamiparib
Ociperlimab
U.S.
U.S.
U.S.
U.S.
Compound and composition
Use for the treatment of autoimmune diseases
Use for the treatment of B-cell proliferative disorder
Crystalline forms
China
Compound and composition
U.S.
U.S.
U.S.
U.S.
U.S.
China
China
China
China
China
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
China
China
China
U.S.
Antibodies
Use for the treatment of cancer
Antibodies and use for the treatment of cancer
Antibodies
Antibodies
Antibodies
Antibodies
Antibodies
Antibodies
Antibodies
Compound and composition
Compound and composition
Use for the treatment of cancer
Compositions
Crystalline forms
Crystalline forms
Compound and composition
Use for the treatment of cancer
Crystalline forms
Antibodies
(1) The expected expiration does not include any additional term for patent term extensions.
Expiration1
2034
2034
2034
2037
2034
2033
2033
2033
2033
2033
2033
2033
2033
2033
2033
2031
2031
2031
2031
2036
2038
2031
2031
2036
2038
26
We currently have two in-licensed medicines in China from BMS. The key patents for them in China as of January 30,
2023 are summarized below:
Product
Territory General Subject Matter
Expiration
REVLIMID® (lenalidomide)
VIDAZA® (azacitidine)
China
China
China
China
China
Use for the treatment of multiple myeloma
Use for the treatment of multiple myeloma
Use for the treatment of multiple myeloma
Use for the treatment of multiple myeloma
No patent
2023
2023
2023
2023
N/A
Under our collaboration with Amgen, we have the right to commercialize three medicines in China. The key patents for
them in China as of January 30, 2023 are summarized below:
Product
Territory General Subject Matter
XGEVA® (denosumab)
BLINCYTO® (blinatumomab)
KYPROLIS® (carfilzomib)
China
China
China
Antibodies
Use for the treatment of pediatric acute lymphoblastic leukemia
Compound and Composition
Expiration
2022
2029
2025
Although various extensions may be available, the life of a patent and the protection it affords, is limited. REVLIMID and
VIDAZA face competition from generic medications, and we may face similar competition for our medicines and any approved
drug candidates even if we successfully obtain patent protection. The scope, validity or enforceability of our or our
collaborators' patents may be challenged in court or other authorities, and we or they may not be successful in enforcing or
defending those intellectual property rights and, as a result, may not be able to develop or market the relevant product
exclusively, which would have a material adverse effect on any potential sales of that product. Additionally, in China, the
NMPA may approve a generic version of a brand-name medicine that still has patent protection, such as has occurred with
REVLIMID. Under our license agreements with BMS and Amgen, they retain the responsibility for, but are not obligated, to
prosecute, defend and enforce the patents for these in-licensed products. As such, any issued patents may not protect us from
generic or biosimilar competition for these medicines.
The term of individual patents may vary based on the countries in which they are obtained. In most countries in which we
file, including the United States and China, the term of an issued patent is generally 20 years from the earliest claimed filing
date of a non-provisional patent application in the applicable country. In the United States, a patent’s term may be lengthened in
some cases by a patent term adjustment, which extends the term of a patent to account for administrative delays by the United
States Patent and Trademark Office ("USPTO"), in excess of a patent applicant’s own delays during the prosecution process, or
may be shortened if a patent is terminally disclaimed over a commonly owned patent having an earlier expiration date. In
addition, in certain instances, a patent term can be extended to recapture a portion of the term effectively lost in obtaining FDA
regulatory approval. However, the restoration period cannot be longer than five years and the total patent term including the
restoration period must not exceed 14 years following FDA approval. In China, the Amended PRC Patent Law provides both
patent term adjustment and patent term extension, similar to the United States.
In certain foreign jurisdictions similar extensions as compensation for regulatory delays are also available. The actual
protection afforded by a patent varies on a claim by claim and country by country basis and depends upon many factors,
including the type of patent, the scope of its coverage, the availability of any patent term extensions or adjustments, the
availability of legal remedies in a particular country and the validity and enforceability of the patent.
We may rely, in some circumstances, on trade secrets and unpatented know-how to protect aspects of our technology. We
seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with employees,
consultants, scientific advisors and contractors and invention assignment agreements with our employees. We also seek to
preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and
physical and electronic security of our information technology systems.
Additionally, we currently own a number of registered trademarks and pending trademark applications. We currently have
registered trademarks for BeiGene, our corporate logo and product names and logos in the United States, China, the EU and
other jurisdictions, and we are seeking further trademark protection for BeiGene, our corporate logo, product names and logos,
and other marks in jurisdictions where available and appropriate.
27
Competition
We operate in a highly competitive environment and our marketed products face intense competition in regulated markets
around the world. Our main competitors include other global research-based biopharmaceutical companies as well as smaller
regional and local companies. These companies participate in one or more activities including the development, production, and
promotion of products that are intended to treat diseases or indications that are like products we currently market or are in the
process of developing to market. For example:
BRUKINSA – Conventional methods of treating lymphomas vary according to the specific disease or histology, but
generally include chemotherapy, antibodies directed at CD20, a molecular marker found on the surface of B-cells, and, less
frequently, radiation. Recently, significant progress has been made in the development of new therapies for lymphomas,
including BTK inhibitors. The BTK inhibitor IMBRUVICA (ibrutinib), marketed by AbbVie and Janssen, was first approved
by the FDA in 2013 for the treatment of patients with MCL who have received at least one prior therapy. Since that time,
ibrutinib has been approved in over 90 countries and regions and has expanded its indications. Another BTK inhibitor,
AstraZeneca's CALQUENCE® (acalabrutinib), was approved by the FDA in 2017 under accelerated approval for the treatment
of patients with MCL who have received at least one prior therapy, and in November 2019 for use in adults with CLL/SLL as a
single agent or in combination with obinutuzumab. On January 27, 2023, the FDA approved Lilly's JAYPIRCA™ (pirtobrutinib,
a reversible BTK inhibitor) for the treatment of adult patients with R/R MCL after at least two lines of systemic therapy,
including a BTK inhibitor. In China, BRUKINSA competes with IMBRUVICA (ibrutinib), which received approval in 2017,
and YINUOKAI® (orelabrutinib) from Innocare, which was approved in 2020.
Tislelizumab – A number of PD-1 or PD-L1 antibody medicines have been approved by the FDA. These include Merck’s
KEYTRUDA® (pembrolizumab), BMS’s OPDIVO® (nivolumab), Roche’s TECENTRIQ® (atezolizumab), AstraZeneca’s
IMFINZI® (durvalumab), Pfizer and Merck Sereno’s BAVENCIO® (avelumab), Regeneron and Sanofi’s LIBTAYO®
(cemiplimab), and GSK's JEMPERLI® (dostarlimab). In the global setting, several PD-1 or PD-L1 antibody agents are in late-
stage clinical development in addition to tislelizumab. In China, as of February 1, 2023, there are nine other approved PD-1
antibodies: OPDIVO® (nivolumab) and KEYTRUDA® (pembrolizumab), Junshi’s TUOYI® (toripalimab), Innovent’s TYVYT®
(sintilimab), Hengrui’s AIRUIKA® (camrelizumab), Akeso's ANNIKE® (penpulimab), Gloria's YUTUO® (zimberelimab),
Henlius's HANSIZHUANG® (serplulimab) and Lepu's PUYOUHENG® (pucotenlimab). There are four approved PD-L1
antibody agents: AstraZeneca's IMFINZI® (durvalumab), Roche's TECENTRIQ® (atezolizomab), CStone's ZEJIEMEI®
(sugemalimab), and Alphamab's ENWEIDA® (envafolimab). Akeso's PD-1xCTLA-4 bispecific antibody, KAITANNI®
(cadonilimab) was approved in China. There are approximately 40 more PD-1 and PD-L1 agents in clinical development in
China.
Pamiparib – We are competing with multiple PARP inhibitors in China. AstraZeneca received approval for olaparib in
August 2018. Zai Labs obtained development and commercial rights for niraparib in China, and its NDA was approved by the
NMPA in December 2019. Fluzoparib from Hengrui/Hansoh was approved in December 2020.
Ociperlimab – We are aware of several pharmaceutical companies developing TIGIT antibodies, including Agenus, Arcus,
BMS, Compugen, Roche/Genentech, Innovent, iTeos Therapeutics, Merck KGaA, Mereo BioPharma, Seagen, Junshi, Bio-
Thera and Akeso. To our knowledge, there are currently no approved anti-TIGIT antibodies and the most advanced agent is in
Phase 3 development.
Many of the larger companies we compete with are well-capitalized and dedicate a significant number of financial
resources to support their research and development, while using business development to supplement their internal pipelines.
As a result, we must continuously invest and gain experience in the development, acquisition, and marketing of innovative and
branded medicines and drug candidates to compete effectively in both current and future markets. This requires us to devote
substantial funds and resources to R&D to prevent or slow the erosion of the sales of our existing products and potential sales of
products in development.
The main forms of competition include efficacy, safety, and cost. The long-term success of our products depends on our
ability to effectively demonstrate the value that each one of them offers to physicians, patients, and third-party payers. This
requires a much greater use of a direct sales force to realize significant revenues. We also have and will continue to enter into
co-promotion, contract sales force or other such arrangements with third parties, for example, where our own direct sales force
is not large enough or sufficiently well-aligned to achieve maximum market penetration.
Government Regulation
Government authorities in the United States, China, Europe and other jurisdictions extensively regulate the research and
clinical development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion,
advertising, distribution, post-approval monitoring and reporting, marketing, and export and import of drugs like those we are
28
developing and commercializing. Some jurisdictions also regulate drug pricing. Generally, for a new drug to be marketed,
considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific to each
regulatory authority, submitted for review and approved by the regulatory authority.
U.S. Regulation
U.S. Government Regulation and Product Approval
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act ("FDCA"), and its
implementing regulations, and biologics under the FDCA, its implementing regulations, and the Public Health Service Act
("PHSA"), and its implementing regulations.
Cancer therapies are sometimes characterized according to line of therapy, and the FDA often approves new therapies
initially only for second or third-line use. When cancer is detected early enough, first line therapy may be adequate to cure the
cancer or prolong life without a cure. Whenever first line therapy, usually chemotherapy, hormone therapy, radiation, surgery or
a combination of these, proves unsuccessful, second line therapy may be administered. Second line therapies often consist of
more chemotherapy, radiation, antibody drugs, tumor targeted small molecule drugs or a combination of these. Third line
therapies can include bone marrow transplantation, antibody and small molecule targeted therapies, and more invasive forms of
surgery. In some cases, new technologies and investigational medicines, as part of a clinical trial, may be used as any line of
therapy.
U.S. Drug Development Process
The process required by the FDA before a drug or biologic may be marketed in the United States generally involves the
following:
•
•
•
•
•
•
•
•
•
•
•
completion of preclinical laboratory tests and animal studies according to Good Laboratory Practices ("GLP")
guidance;
completion of extensive chemistry, manufacturing, and control ("CMC") studies;
submission to the FDA of an IND application, which must become effective before human clinical trials may begin;
performance of adequate and well-controlled human clinical trials according to Good Clinical Practice ("GCP"), to
establish the safety and efficacy of the proposed drug or safety, purity and potency of the proposed biologic, for the
intended use;
preparation and submission to the FDA of an NDA for a small molecule drug or a BLA for a biologic;
a determination by the FDA within 60 days of its receipt of an NDA or BLA to file the application for review;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product, or
components thereof, are produced to assess compliance with cGMP;
review of the product candidate by an FDA advisory committee, where appropriate and if applicable;
payment of user fees for FDA review of the NDA or BLA (unless a fee waiver applies);
FDA audits of some clinical trial sites to ensure compliance with GCPs; and
FDA review and approval of the NDA or licensing of the BLA.
Preclinical Studies and Clinical Trials
Once a product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include
laboratory evaluations of product chemistry, toxicity, formulation and stability, as well as in vitro and animal studies. The
conduct of the preclinical tests must comply with federal regulations and requirements, including GLP. An IND sponsor must
submit the results of the preclinical tests, together with manufacturing information, analytical data and any available clinical
data or literature, to the FDA as part of the IND. The sponsor must also include a protocol detailing, among other things, the
objectives of the initial clinical trial, dosing procedures, subject selection and exclusion criteria, the parameters to be used in
monitoring safety and the effectiveness criteria to be evaluated if the initial clinical trial lends itself to an efficacy evaluation.
Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after
receipt by the FDA, unless the FDA raises concerns or questions related to the proposed clinical trial and places the trial on a
29
clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding
concerns before the clinical trial can begin. The FDA may also impose clinical holds at any time before or during clinical trials
due to safety concerns or noncompliance and may be imposed on all products within a certain class of products. The FDA also
can impose partial clinical holds, for example, prohibiting the initiation of clinical trials of a certain duration or for a certain
dose.
All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP
regulations. These regulations require that all research subjects provide informed consent in writing before their participation in
any clinical trial. Further, an institutional review board ("IRB") must review and approve the plan for any clinical trial before it
commences at any institution, and the IRB must conduct continuing review and reapprove the study at least annually. An IRB
considers, among other things, whether the risks to individuals participating in the clinical trial are minimized and are
reasonable in relation to anticipated benefits. The IRB also approves the information regarding the clinical trial and the consent
form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until
completed. Some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a
data safety monitoring board or committee. This group provides authorization as to whether or not a trial may move forward at
designated check points based on access that only the group maintains to available data from the trial and may recommend
halting the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no
demonstration of efficacy.
Each new clinical protocol and any amendments to the protocol must be filed with the FDA as an IND amendment and
submitted to the IRBs for approval.
A sponsor who wishes to conduct a clinical trial outside of the United States may, but need not, obtain FDA authorization
to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an IND, the sponsor may submit data
from the clinical trial to the FDA in support of an NDA or BLA. The FDA will accept a well-designed and well-conducted
foreign clinical study not conducted under an IND if the study was conducted in accordance with GCP requirements, and the
FDA is able to validate the data through an onsite inspection if deemed necessary.
Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
•
•
•
Phase 1. The product is initially introduced into a small number of healthy human subjects or patients and tested for
safety, dosage tolerance, absorption, metabolism, distribution and excretion and, if possible, to gain early evidence on
effectiveness. In the case of some products for severe or life-threatening diseases, especially when the product is
suspected or known to be unavoidably toxic, the initial human testing may be conducted in patients with the target
disease or condition.
Phase 2. Involves clinical trials in a limited patient population to identify possible adverse effects and safety risks, to
preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and
optimal dosage and schedule.
Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient
population. These clinical trials are intended to evaluate the overall risk/benefit relationship of the product and provide
an adequate basis for product labeling.
In March 2022, the FDA released a final guidance entitled "Expansion Cohorts: Use in First-In-Human Clinical Trials to
Expedite Development of Oncology Drugs and Biologics," which outlines how drug developers can utilize an adaptive trial
design commonly referred to as a seamless trial design in early stages of oncology drug development (i.e., the first-in-human
clinical trial) to compress the traditional three phases of trials into one continuous trial called an expansion cohort trial.
Information to support the design of individual expansion cohorts are included in IND applications and assessed by the FDA.
Expansion cohort trials can potentially bring efficiency to drug development and reduce developmental costs and time.
Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval.
These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication and are
commonly intended to generate additional safety data regarding use of the product in a clinical setting. In certain instances, the
FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA or BLA. Failure to exhibit
due diligence with regard to conducting required Phase 4 clinical trials could result in withdrawal of approval for products.
We refer to our Phase 1 programs as dose-escalation and dose-expansion trials. In addition, we refer to some of our Phase 2
programs as pivotal or registrational programs, where the results may be used to support regulatory approval in specific
jurisdictions without the need to conduct a Phase 3 trial.
30
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and safety reports
must be submitted to the FDA and the investigators for serious and unexpected suspected AEs, any clinically important increase
in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator’s brochure, or any findings
from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the product. The sponsor
must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for
reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within
seven calendar days after the sponsor's initial receipt of the information. Phase 1, Phase 2, and Phase 3 studies may not be
completed successfully within any specified period, or at all. The FDA or the sponsor may suspend or terminate, or a data
safety monitoring board may recommend the suspension or termination of, a clinical trial at any time on various grounds,
including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can
suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the
IRB’s requirements or if the product has been associated with unexpected serious harm to subjects.
Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional
information about the chemistry and physical characteristics of the product and finalize a process for manufacturing the product
in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently
producing quality batches of the product and, among other things, the manufacturer must develop methods for testing the
identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested, and
stability studies must be conducted to demonstrate that the product does not undergo unacceptable deterioration over its shelf
life.
U.S. Expanded Access
Expanded access, sometimes called “compassionate use,” is the use of investigational products outside of clinical trials to
treat patients with serious or immediately life-threatening diseases or conditions when there are no comparable or satisfactory
alternative treatment options. There is no requirement for a company to provide expanded access to its investigational products.
However, if a company decides to make one of its investigational products available for expanded access, the FDA reviews
each request for expanded access and determines if treatment may proceed. A sponsor of an investigational drug for a serious
disease or condition is required to make available, such as by posting on its website, its policy on evaluating and responding to
requests for individual patient access to such investigational drug. This requirement applies on the earlier of the first initiation
of a Phase 2 or Phase 3 trial of the investigational drug or, as applicable, 15 days after the drug receives a designation as a
breakthrough therapy, fast track product, or regenerative advanced therapy. We make available on our website the BeiGene
contact information for requesting access to our investigational drugs and expected timeline for us to acknowledge receiving
such requests.
U.S. Review and Approval Processes
The results of product development, preclinical studies and clinical trials, along with descriptions of the CMC, analytical
tests conducted on the product, proposed labeling and other relevant information, are submitted to the FDA as part of an NDA
for a new small molecule drug or a BLA for a biologic, requesting approval to market the product. The submission of an NDA
or BLA is subject to the payment of a substantial user fee, although a waiver of such fee may be obtained under certain limited
circumstances. The sponsor of an approved NDA or BLA is also subject to an annual prescription drug product program fee.
The FDA reviews all NDAs and BLAs submitted to ensure that they are sufficiently complete for substantive review before
it accepts them for filing. The FDA may request additional information rather than accept an NDA or BLA for filing. In this
event, the NDA or BLA must be re-submitted with the additional information. The re-submitted application also is subject to
review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive
review. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended
use, and a BLA to determine whether the biologic is safe, pure, and potent for its intended use. The FDA also evaluates whether
the product’s manufacturing is cGMP-compliant to assure the product’s identity, strength, quality and purity. Before approving
an NDA or BLA, the FDA typically will inspect the facility or facilities where the product is or will be manufactured. The FDA
will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with
cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally,
before approving an NDA or BLA, the FDA may inspect one or more clinical trial sites to assure compliance with GCP and
other requirements and the integrity of the clinical data submitted to the FDA.
The approval process can be lengthy and difficult, and the FDA may refuse to approve an NDA or BLA if the applicable
regulatory criteria are not satisfied or may require additional clinical data or other data and information. Even if such data and
information are submitted, the FDA may ultimately decide that the NDA or BLA does not satisfy the criteria for approval. Data
obtained from clinical trials are not always conclusive, and the FDA may interpret data differently than we interpret the same
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data. The FDA will issue a complete response letter if the agency decides not to approve the NDA or BLA in its present form.
The complete response letter usually describes all of the specific deficiencies that the FDA identified in the NDA or BLA that
must be satisfactorily addressed before it can be approved. The deficiencies identified may be minor, for example, requiring
labeling changes, or major, for example, requiring additional clinical trials. Additionally, the complete response letter may
include recommended actions that the applicant might take to place the application in a condition for approval. If a complete
response letter is issued, the applicant may either resubmit the NDA or BLA, addressing all of the deficiencies identified in the
letter, or withdraw the application or request an opportunity for a hearing.
If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the
indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may
require that certain contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may
require post-approval studies, including Phase 4 clinical trials, to further assess a product’s safety and effectiveness after NDA
or BLA approval and may require testing and surveillance programs to monitor the safety of approved products that have been
commercialized. The FDA may also approve an NDA or BLA with a Risk Evaluation and Mitigation Strategy program 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.
Regulation of Combination Products in the United States
Certain products may be comprised of components that would normally be regulated under different types of regulatory
authorities in certain jurisdictions, and in the United States by different centers at the FDA. These products are known as
combination products. Under the FDCA, the FDA is charged with assigning a center with primary jurisdiction, or a lead center,
for review of a combination product. That determination is based on the “primary mode of action” of the combination product.
We are developing combination products using our own drug candidates and third-party drugs.
Regulation of Companion Diagnostics in the United States
If safe and effective use of a therapeutic depends on an in vitro diagnostic, then the FDA generally will require approval or
clearance of that diagnostic, known as a companion diagnostic, at the same time that the FDA approves the therapeutic product.
In August 2014, the FDA issued final guidance clarifying the requirements that will apply to approval of therapeutic products
and in vitro companion diagnostics. According to the guidance, for novel drugs, a companion diagnostic device and its
corresponding therapeutic should be approved or cleared contemporaneously by the FDA for the use indicated in the
therapeutic product’s labeling. Once cleared or approved, the companion diagnostic must adhere to post-marketing
requirements including the requirements of FDA’s quality system regulation, medical device reporting, recalls and corrections
along with product marketing requirements and limitations. Companion diagnostic manufacturers are subject to unannounced
FDA inspections at any time during which the FDA will conduct an audit of the product(s) and the company’s facilities for
compliance with its authorities.
Expedited Programs
Fast Track Designation
The FDA has a fast track program that is intended to expedite or facilitate the process for reviewing new drugs, including
biologics that meet certain criteria. Specifically, new drugs are eligible for Fast Track designation if they are intended to treat a
serious or life-threatening disease or condition for which there is no effective treatment and demonstrate the potential to address
unmet medical needs for the disease or condition. Fast track designation applies to the combination of the product and the
specific indication for which it is being studied. The sponsor of a new drug or biologic product candidate may request the FDA
to designate the product candidate as a fast track product concurrently with, or at any time after, submission of an IND, and the
FDA must determine if the product candidate qualifies for fast track designation within 60 days of receipt of the sponsor’s
request.
In addition to other benefits, such as the ability to engage in more frequent interactions with the FDA, the FDA may initiate
review of sections of a fast track product’s NDA or BLA before the application is complete. This rolling review is available if
the applicant provides, and the FDA approves, a schedule for the submission of each portion of the NDA or BLA and the
applicant pays the applicable user fee. However, the FDA’s time period goal for reviewing an application does not begin until
the last section of the NDA or BLA is submitted. Additionally, the fast track designation may be withdrawn by the FDA if the
FDA believes that the designation is no longer supported by data emerging in the clinical trial process.
Zanubrutinib was granted fast track designation by the FDA for the treatment of WM and MZL. Tislelizumab was granted
fast track designation by the FDA for the treatment of 1L HCC.
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Accelerated Approval
Under FDA’s accelerated approval regulations, the FDA may approve a drug, including a biologic, intended to treat a
serious or life-threatening disease or condition that generally provides meaningful therapeutic benefit to patients over available
treatments and demonstrates an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical
endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on
irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the
condition and the availability or lack of alternative treatments. In clinical trials, a surrogate endpoint is a marker, such as a
laboratory measurement or clinical signs of a disease or condition that is thought to predict clinical benefit but is not itself a
measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. A
product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the
completion of post-approval clinical trials to confirm the effect on irreversible morbidity or mortality or other clinical benefit.
Under the Food and Drug Omnibus Reform Act of 2022 ("FDORA"), the FDA is now permitted to require, as appropriate, that
post-approval confirmatory trials be underway prior to approval or within a specific time period after accelerated approval is
granted. Failure to conduct required post-approval studies with due diligence, or to confirm a clinical benefit during post-
marketing studies, will allow the FDA to withdraw the drug from the market and, under FDORA, the FDA has increased
authority for expedited procedures to withdraw approval of a product granted accelerated approval. In general, all promotional
materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA unless otherwise
informed by the agency.
Zanubrutinib was granted accelerated approval by FDA for the treatment of adult patients with MCL who have received at
least one prior therapy and for the treatment of adult patients with relapsed or refractory MZL who have received at least one
anti-CD20-based regimen.
Breakthrough Designation
Breakthrough therapy designation is intended to expedite the development and review of a breakthrough therapy. A drug or
biologic product candidate can be designated as a breakthrough therapy if it is intended to treat a serious or life-threatening
disease or condition and preliminary clinical evidence indicates that the drug or biologic, alone or in combination with one or
more other drugs or biologics, may demonstrate substantial improvement over existing therapies on one or more clinically
significant endpoints. A sponsor may request that a product candidate be designated as a breakthrough therapy concurrently
with, or at any time after, the submission of an IND, and the FDA must determine if the candidate qualifies for breakthrough
therapy designation within 60 days of receipt of the sponsor’s request. If so designated, the FDA shall act to expedite the
development and review of the product candidate’s marketing application, including by meeting with the sponsor throughout
the product candidate’s development, providing timely advice to the sponsor to ensure that the development program to gather
preclinical and clinical data is as efficient as practicable, involving senior managers and experienced review staff in a cross-
disciplinary review, and assigning a cross-disciplinary project lead for the FDA review team to facilitate an efficient review of
the development program and to serve as a scientific liaison between the review team and the sponsor. The designation may be
rescinded if the product candidate does not continue to meet the criteria for breakthrough therapy designation.
Zanubrutinib was granted breakthrough therapy designation by the FDA for the treatment of adult patients with MCL who
have received at least one prior therapy.
Priority Review
The FDA may grant an NDA or BLA a priority review designation, which sets the target date for FDA action on the
application at six months after the FDA accepts the application for filing. Priority review is granted where there is evidence that
the proposed product would be a significant improvement in the safety or effectiveness of the treatment, diagnosis, or
prevention of a serious condition. If criteria are not met for priority review, the application is subject to the standard FDA
review period of ten months after FDA accepts the application for filing. Priority review designation does not change the
scientific/medical standard for approval or the quality of evidence necessary to support approval.
The NDA for zanubrutinib was granted priority review by the FDA for the treatment of adult patients with MCL who have
received at least one prior therapy.
Designated Platform Technology
Under FDORA, a platform technology incorporated within or utilized by a drug or biologic is eligible for designation as a
designated platform technology if (1) the platform technology is incorporated in, or utilized by, a product approved under an
NDA or BLA; (2) preliminary evidence submitted by the sponsor of the approved or licensed product, or a sponsor that has
been granted a right of reference to data submitted in the application for such product, demonstrates that the platform
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technology has the potential to be incorporated in, or utilized by, more than one product without an adverse effect on quality,
manufacturing, or safety; and (3) data or information submitted by the applicable person indicates that incorporation or
utilization of the platform technology has a reasonable likelihood to bring significant efficiencies to the drug development or
manufacturing process and to the review process. A sponsor may request the FDA to designate a platform technology as a
designated platform technology concurrently with, or at any time after, submission of an IND application for a product that
incorporates or utilizes the platform technology that is the subject of the request. If so designated, the FDA may expedite the
development and review of any subsequent original NDA or BLA for a product that uses or incorporates the platform
technology. Designated platform technology status does not ensure that a product will be developed more quickly or receive
FDA approval. In addition, the FDA may revoke a designation if the FDA determines that a designated platform technology no
longer meets the criteria for such designation.
Pediatric Information
Under the Pediatric Research Equity Act, as amended ("PREA"), certain NDAs and BLAs and certain NDA and BLA
supplements must contain data that can be used to assess the safety and efficacy of the product candidate for the claimed
indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation
for which the product is safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial
waivers. The FDCA requires that a sponsor who is planning to submit a marketing application for a product candidate that
includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit
an initial Pediatric Study Plan, or PSP, within 60 days of an end-of-Phase 2 meeting or, if there is no such meeting, as early as
practicable before the initiation of the Phase 3 or Phase 2/3 study. The initial PSP must include an outline of the pediatric study
or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints and statistical
approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments
or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. The FDA
and the sponsor must reach an agreement on 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 data collected from preclinical studies, early phase clinical
trials and/or other clinical development programs. Unless otherwise required by regulation, PREA does not apply to a drug or
biologic for an indication for which orphan designation has been granted except that PREA will apply to an original NDA or
BLA for a new active ingredient that is orphan-designated if the drug or biologic is a molecularly targeted cancer product
intended for the treatment of an adult cancer and is directed at a molecular target that FDA determines to be substantially
relevant to the growth or progression of a pediatric cancer.
Post-Approval Requirements
Any products for which we receive FDA approval are subject to continuing regulation by the FDA, including, among other
things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety
and efficacy information, product sampling and distribution requirements, complying with certain electronic records and
signature requirements and complying with FDA promotion and advertising requirements. The FDA strictly regulates labeling,
advertising, promotion and other types of information on products that are placed on the market. Products may be promoted
only for the approved indications and in accordance with the provisions of the approved label. Further, manufacturers must
continue to comply with cGMP requirements, which are extensive and require considerable time, resources and ongoing
investment to ensure compliance. In addition, changes to the manufacturing process generally require prior FDA approval
before being implemented and other types of changes to the approved product, such as adding new indications and additional
labeling claims, are also subject to further FDA review and approval.
The Drug Supply Chain Security Act ("DSCSA") was enacted in 2013 with the aim of building an electronic system to
identify and trace certain prescription drugs distributed in the United States. The DSCSA mandates phased-in and resource-
intensive obligations for pharmaceutical manufacturers, wholesale distributors, and dispensers over a 10-year period that is
expected to culminate in November 2023. The law’s requirements include the quarantine and prompt investigation of a suspect
product to determine if it is illegitimate, and notifying trading partners and FDA of any illegitimate product. Drug
manufacturers and other parties involved in the supply chain must also meet chain of distribution requirements for product
tracking and tracing, including a requirement to place a unique product identifier on prescription drug packages. This identifier
consists of the National Drug Code, serial number, lot number and expiration date, in the form of a 2 dimensional data matrix
barcode that can be read by humans and machines.
Manufacturers and other entities involved in the manufacturing and distribution of approved products are required to
register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the
FDA and certain state agencies for compliance with cGMP and other laws. The cGMP requirements apply to all stages of the
manufacturing process, including the production, processing, sterilization, packaging, labeling, storage and shipment of the
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product. Manufacturers must establish validated systems to ensure that products meet specifications and regulatory
requirements and test each product batch or lot prior to its release.
The FDA may withdraw a product approval or revoke a biologics license if compliance with regulatory requirements is not
maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a
product may result in restrictions on the product or even complete withdrawal of the product from the market. Further, the
failure to maintain compliance with regulatory requirements may result in administrative or judicial actions, such as fines,
untitled or warning letters, holds on clinical trials, product seizures, product detention or refusal to permit the import or export
of products, refusal to approve pending applications or supplements, restrictions on marketing or manufacturing, injunctions or
civil or criminal penalties. We may undertake or be required to undertake a product recall.
Patent Term Restoration and Regulatory Exclusivity
Depending upon the timing, duration and specifics of FDA approval of the use of our drug candidates, some of our U.S.
patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of
1984, commonly referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five
years as compensation for patent term lost during product development and the FDA regulatory review process. However,
patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval
date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission
date of an NDA or BLA plus the time between the submission date of an NDA or BLA and the approval of that application,
except that this review period is reduced by any time during which the applicant failed to exercise due diligence. Only one
patent applicable to an approved product is eligible for the extension and the application for the extension must be submitted
prior to the expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any
patent term extension or restoration. In the future, if available, we intend to apply for restorations of patent term for some of our
currently owned patents beyond their current expiration dates, depending on the expected length of the clinical trials and other
factors involved in the filing of the relevant NDA or BLA; however, there can be no assurance that any such extension will be
granted to us.
Data exclusivity provisions under the FDCA can also delay the submission or the approval of certain applications. The
FDCA provides a five-year period of non-patent data exclusivity within the United States to the first applicant to gain approval
of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new
drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During
the exclusivity period, the FDA may not accept for review an abbreviated NDA, or ANDA, or a 505(b)(2) NDA submitted by
another company for another version of such drug where the applicant does not own or have a legal right of reference to all the
data required for approval. However, such an application may be submitted after four years if it contains a certification of patent
invalidity or non-infringement. The FDCA also provides three years of data exclusivity for an NDA, 505(b)(2) NDA or
supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or
sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new
indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the conditions of use associated
with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original
active agent. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an
applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and
adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.
Regulatory exclusivity in the United States can also include pediatric exclusivity and orphan drug exclusivity. Pediatric
exclusivity, if granted, provides an additional six months of exclusivity, which runs from the end of other regulatory exclusivity
or patent periods. This six-month exclusivity may be granted based on the voluntary completion of a pediatric trial in
accordance with an FDA-issued ‘‘Written Request’’ for such a trial. Orphan drug exclusivity is described below under "Orphan
Drugs."
Biosimilars and Exclusivity
The PHSA includes an abbreviated approval pathway for biological products shown to be similar to, or interchangeable
with, an FDA-licensed reference biological product. Biosimilarity, which requires that there be no clinically meaningful
differences between the biological product and the reference product in terms of safety, purity and potency, can be shown
through analytical studies, animal studies, and a clinical trial or trials. Interchangeability requires that a product is biosimilar to
the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the
reference product and, for products administered multiple times, the biologic and the reference biologic may be switched after
one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of
the reference biologic.
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A reference biologic is granted 12 years of exclusivity from the time of first licensure of the reference product. The first
biologic product submitted under the abbreviated approval pathway that is determined to be interchangeable with the reference
product is eligible for a period of exclusivity against other biologics submitted under the abbreviated approval pathway during
which time the FDA may not determine that another product is interchangeable with the same reference product for any
condition of use. The FDA may approve multiple "first" interchangeable products so long as they are all approved on the same
first day of marketing. This exclusivity period, which may be shared amongst multiple first interchangeable products, lasts for
the lesser of (i) one year after the first commercial marketing, (ii) 18 months after approval if there is no legal challenge, (iii) 18
months after the resolution in the applicant’s favor of a lawsuit challenging the biologic’s patents if an application has been
submitted, or (iv) 42 months after the application has been approved if a lawsuit is ongoing within the 42-month period.
Orphan Drugs
Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs, including biologics, intended to treat a
rare disease or condition-generally a disease or condition that affects fewer than 200,000 individuals in the United States or that
affects more than 200,000 individuals in the United States and for which there is no reasonable expectation that costs of
research and development of the product for the indication can be recovered by sales of the product in the United States.
Orphan drug designation must be requested before submitting an NDA or BLA.
After the FDA grants orphan drug designation, the generic identity of the drug or biologic and its potential orphan use are
disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the
regulatory review and approval process. The first NDA or BLA applicant to receive FDA approval for a particular active
ingredient to treat a particular disease or condition with FDA orphan drug designation is entitled to a seven-year exclusive
marketing period in the United States for that product, for that indication. Among the other benefits of orphan drug designation
are tax credits for certain research and a waiver of the NDA or BLA application user fee.
During the exclusivity period, the FDA may not approve any other applications to market the same drug for the same
disease or condition, except in limited circumstances, such as if the second applicant demonstrates the clinical superiority of its
product to the product with orphan drug exclusivity through a demonstration of superior safety, superior efficacy, or a major
contribution to patient care. “Same drug” means a drug that contains the same active moiety if it is a drug composed of small
molecules, or the same principal molecular structural features if it is composed of macromolecules and is intended for the same
use as a previously approved drug, except that if the subsequent drug can be shown to be clinically superior to the first drug, it
will not be considered to be the same drug. Orphan drug exclusivity does not prevent the FDA from approving a different drug
for the same disease or condition, or the same drug for a different disease or condition.
Zanubrutinib was granted orphan drug designation status by the FDA for the treatment of WM, CLL, MCL and MZL (3
subtypes). Tislelizumab was granted orphan drug designation status by the FDA for the treatment of ESCC, HCC and GC.
Disclosure of Clinical Trial Information
Sponsors of clinical trials of FDA-regulated products, including drugs and biologics, are required to register and disclose
certain clinical trial information, which is publicly available at www.clinicaltrials.gov. Information related to the product,
patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public
as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure
of the results of these trials can be delayed until the new product or new indication being studied has been approved.
Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.
Pharmaceutical Coverage, Pricing, and Reimbursement
In the United States and in other countries, sales of any products for which we receive regulatory approval for commercial
sale will depend in part on the availability of coverage and reimbursement from third-party payors, including government
authorities, managed care providers, private health insurers and other organizations. Patients generally rely on third-party
payors to reimburse all or part of the associated healthcare costs and no uniform policy of coverage and reimbursement for drug
products exists among third-party payors. Therefore, coverage and reimbursement for drug products can differ significantly
from payor to payor.
Additionally, the process for determining whether a payor will provide coverage for a product may be separate from the
process for setting the reimbursement rate that the payor will pay for the product. Third-party payors may limit coverage to
specific products on an approved list which might not include all of the FDA-approved products for a particular indication.
Moreover, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be
approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an
appropriate return on our investment in product development.
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Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of
medical products and services, in addition to their safety and efficacy. In order to obtain coverage and reimbursement for any
product that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate
the medical necessity and cost-effectiveness of any products, in addition to the costs required to obtain regulatory approvals. If
third-party payors do not consider a product to be cost-effective or medically-necessary compared to other available therapies,
they may not cover the product after approval as a benefit under their plans or, if they do, the level of payment may not be
sufficient to allow a company to sell its products at a profit.
In some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The
requirements governing drug pricing vary widely from country to country. For example, the European Union provides options
for its member states to restrict the range of medicinal products for which their national health insurance systems provide
reimbursement and to control the prices of medicinal products for human use. To obtain reimbursement or pricing approval,
some of these countries may require the completion of clinical trials that compare the cost effectiveness of a particular product
candidate to currently available therapies. A member state may approve a specific price for the medicinal product or it may
instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the
market. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical
products will allow favorable reimbursement and pricing arrangements for any of our product candidates. Historically, products
launched in the European Union do not follow price structures of the United States and generally prices tend to be significantly
lower.
Healthcare Reform
The U.S. government and state legislatures have shown significant interest in implementing cost containment programs to
limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement and requirements
for substitution of generic products for branded prescription drugs. Such adoption of government controls and tightening of
restrictive policies could limit payments for pharmaceuticals. For example, the Affordable Care Act (the "ACA") contains
provisions that may reduce the profitability of drug products, including increased rebates for drugs reimbursed by Medicaid
programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D
beneficiaries and annual fees based on pharmaceutical companies’ share of sales to federal health care programs. Since its
enactment, some of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject to
judicial, Congressional, and Executive challenges. As a result, it is unclear how such efforts to challenge, repeal or replace the
ACA, will impact our business.
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. For example,
the Bipartisan Budget Act of 2018 amended the ACA by increasing the point-of-sale discount that is owed by pharmaceutical
manufacturers who participate in Medicare Part D from 50% to 70% and closing the coverage gap in most Medicare drug plans.
In addition, the Budget Control Act of 2011 and the Bipartisan Budget Act of 2015 led to aggregate reductions of Medicare
payments to providers of up to 2% per fiscal year that will remain in effect through 2030 unless additional Congressional action
is taken. In relation to the COVID-19 pandemic and pursuant to subsequent legislation, this 2% reduction was periodically
suspended, but resumed on July 1, 2022. Further, the American Taxpayer Relief Act reduced Medicare payments to several
types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations
period for the government to recover overpayments to providers from three to five years.
The Centers for Medicare and Medicaid Services ("CMS") published a final rule that gives states greater flexibility in
setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the
essential health benefits required under the ACA for plans sold through such marketplaces. CMS also published a final rule to
allow Medicare Advantage Plans the option of using step therapy for Part B drugs.
There has also been heightened governmental scrutiny over the manner in which manufacturers set prices for their
marketed products, which has resulted in several Congressional inquiries and proposed bills designed to bring more
transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform
government program reimbursement methodologies for pharmaceutical products. At the federal level, President Biden directed
the FDA to work with states and Indian Tribes that propose to develop section 804 Importation Programs in accordance with
the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and the FDA’s implementing regulations.
The FDA released a final rule, which went into effect in November 2020, providing guidance for states to build and submit
importation plans for drugs from Canada. Further, authorities in Canada have passed rules designed to safeguard the Canadian
drug supply from shortages. If implemented, importation of drugs from Canada may adversely affect the price we receive for
our medicines.
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In November 2020, the U.S. Department of Health and Human Services ("HHS") finalized a regulation removing safe
harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or
through PBMs, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions
reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between PBMs and manufacturers.
Pursuant to court order, the removal and addition of the aforementioned safe harbors were delayed and recent legislation
imposed a moratorium on implementation of the rule until January 1, 2032. Further, implementation of this change and new
safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and PBM service fees are currently
under review by the Biden administration and may be amended or repealed.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control
pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product
access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from
other countries and bulk purchasing. While much of the focus of state pricing policies is limited to Medicaid, we cannot assess
the impact that these and other measures such as state transparency policies will have on our business.
Other U.S. Healthcare Laws and Compliance Requirements
We are subject to various federal and state laws targeting fraud and abuse in the healthcare industry. These laws may
impact, among other things, our sales, marketing and education programs. In addition, we may be subject to patient privacy
regulation by both the federal government and the states in which we conduct our business prior to and after receiving
regulatory approval of our product candidates. The laws that may affect our ability to operate include:
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the federal healthcare Anti-Kickback Statute ("AKS"), which prohibits, among other things, knowingly and willfully
soliciting, receiving, providing, offering or paying any remuneration (including any kickback, bribe, or rebate),
directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of
an individual, or the purchase, lease, order or recommendation or arrangement of any good, facility, item or service for
which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and
Medicaid programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers
on the one hand and prescribers, purchasers and formulary managers on the other. Although there are several statutory
exceptions and regulatory safe harbors protecting certain common activities from prosecution, they are drawn
narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may be
subject to scrutiny if they do not qualify for an exception or safe harbor. A person or entity can be found guilty of
violating the AKS without actual knowledge of the statute or specific intent to violate it. In addition, the government
may assert that a claim including items or services resulting from a violation of the AKS constitutes a false or
fraudulent claim for purposes of the federal False Claims Act ("FCA") or federal civil money penalties statute.
Violations of the AKS carry potentially significant civil fines and criminal penalties, including imprisonment, fines,
administrative federal civil monetary penalties, and exclusion from participation in federal healthcare programs. This
law applies to our marketing practices, educational programs, pricing policies and relationships with healthcare
providers, by prohibiting, among other things, soliciting, receiving, offering or providing remuneration intended to
induce the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as
the Medicare or Medicaid programs. There are safe harbor protections under the AKS for certain coordinated care and
value-based arrangements among clinicians, providers, and others. We continue to evaluate what effect, if any, these
rules will have on our business;
the federal civil and criminal false claims and civil monetary penalty laws, such as the FCA, which impose criminal
and civil penalties and authorize civil whistleblower or qui tam actions, against individuals or entities for, among other
things: knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false,
fictitious or fraudulent; knowingly making or causing a false statement or record material to a false or fraudulent claim
or obligation to pay or transmit money or property to the federal government; or knowingly concealing or knowingly
and improperly avoiding or decreasing an obligation to pay money to the federal government. In addition, the
government may assert that a claim including items and services resulting from a violation of the federal AKS
constitutes a false of fraudulent claim for purposes of the FCA. The government may deem manufacturers to have
“caused” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding
information to customers or promoting a product off-label. Companies that submit claims directly to payors may also
be liable under the FCA for the direct submission of such claims. The FCA also permits a private individual acting as a
“whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA and to share in
any monetary recovery. When an entity is determined to have violated the federal civil FCA, the government may
impose civil fines and penalties for each false claim, plus treble damages, and exclude the entity from participation in
Medicare, Medicaid and other federal healthcare programs. Our marketing and activities relating to the reporting of
wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate
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information and other information affecting federal, state and third-party reimbursement for our products, and the sale
and marketing of our products and any future product candidates are subject to scrutiny under this law;
the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), which prohibits, among other things,
knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or
obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned
by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private)
and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any
materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services
relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of
violating HIPAA without actual knowledge of the statute or specific intent to violate it;
HIPAA, as further amended by the Health Information Technology for Economic and Clinical Health Act of 2009
("HITECH"), and their respective implementing regulations, including the Final Omnibus Rule published in January
2013, which impose certain requirements on certain covered healthcare providers, health plans and healthcare
clearinghouses as well as their respective business associates who perform services for them that involve the creation,
maintenance, receipt, use, or disclosure of, individually identifiable health information, relating to the privacy, security
and transmission of individually identifiable health information. HITECH also created new tiers of civil monetary
penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave
state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the
federal HIPAA laws and seek attorneys’ fees and costs. In addition, there may be additional federal, state and non-U.S.
laws which govern the privacy and security of health and other personal information in certain circumstances, many of
which differ from each other in significant ways and may not have the same effect, thus complicating compliance
efforts;
the federal transparency requirements under the ACA, including the provision commonly referred to as the Physician
Payments Sunshine Act, which require manufacturers of drugs, devices, biologics and medical supplies for which
payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions,
to report annually to Centers for Medicare & Medicaid Services information related to payments or other transfers of
value made to physicians, nurse practitioners, certified nurse anesthetists, anesthesiologist assistants, physician
assistants, clinical nurse specialists, and certified nurse midwives as well as teaching hospitals. Manufacturers are also
required to disclose ownership and investment interest held by physicians and their immediate family members;
federal price reporting laws, which require manufacturers to calculate and report complex pricing metrics in an
accurate and timely manner to government programs;
federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities
that potentially harm consumers; and
the Foreign Corrupt Practices Act ("FCPA"), which prohibits companies and their intermediaries from making, or
offering or promising to make, improper payments to non-U.S. officials for the purpose of obtaining or retaining
business or otherwise seeking favorable treatment.
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Similarly, state privacy laws may be broader and require greater protections than HIPAA. These data privacy and security
laws may differ from each other in significant ways and often are not pre-empted by HIPAA, which may complicate
compliance efforts. For example, in June 2018, the State of California enacted the California Consumer Privacy Act of 2018
("CCPA"), which gives California residents expanded rights to access and delete their personal information, opt out of certain
personal information sharing, and receive detailed information about how their personal information is used. CCPA provides
for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach
litigation. Further, the California Privacy Rights Act ("CPRA") will create additional obligations with respect to processing and
storing personal information that are scheduled to take effect on January 1, 2023 (with certain provisions having retroactive
effect to January 1, 2022). We will continue to monitor developments related to the CPRA and anticipate additional costs and
expenses associated with CPRA compliance. Other U.S. states also are considering omnibus privacy legislation and industry
organizations regularly adopt and advocate for new standards in these areas. While the legislation and proposed regulations
including the CCPA and CPRA contain an exception for certain activities that involve PHI subject to HIPAA, we cannot yet
determine the impact the CCPA, CPRA or other such future laws, regulations and standards may have on our business.
Additionally, we are subject to state equivalents of each of the healthcare laws described above, among others, some of
which may be broader in scope and may apply to healthcare services reimbursed by any third-party payor, not just
governmental payors, but also private insurers. These laws are enforced by various state agencies and through private actions.
Some states have passed laws that require pharmaceutical companies to comply with the April 2003 Office of Inspector General
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Compliance Program Guidance for Pharmaceutical Manufacturers and/or other voluntary industry codes of conduct that restrict
the payments made to healthcare providers and other potential referral sources. Several states and local laws also impose other
marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state, require drug
manufacturers to report information related to payments and other transfers of value to physicians and other healthcare
providers, and require the registration of pharmaceutical sales representatives. State and foreign laws, including for example the
European Union General Data Protection Regulation, which became effective May 2018, also govern the privacy and security
of health information in some circumstances, many of which differ from each other in significant ways and often are not
preempted by HIPAA, thus complicating compliance efforts. There are ambiguities as to what is required to comply with these
state requirements and if we fail to comply with an applicable state law requirement we could be subject to penalties. Finally,
there are state and foreign laws governing the privacy and security of health information, many of which differ from each other
in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
In the United States, to help patients afford our approved product, we may utilize programs to assist them, including patient
assistance programs and co-pay coupon programs for eligible patients. Government enforcement agencies have shown
increased interest in pharmaceutical companies' product and patient assistance programs, including reimbursement support
services, and investigations into these programs have resulted in significant civil and criminal settlements. In addition, at least
one insurer has directed its network pharmacies to no longer accept co-pay coupons for certain specialty drugs the insurer
identified. Our co-pay coupon programs could become the target of similar insurer actions. In addition, the CMS issued
guidance to the issuers of qualified health plans sold through the ACA's marketplaces encouraging such plans to reject patient
cost-sharing support from third parties and indicating that the CMS intends to monitor the provision of such support and may
take regulatory action to limit it in the future. The CMS subsequently issued a rule requiring individual market qualified health
plans to accept third-party premium and cost-sharing payments from certain government-related entities. Furthermore, the
Office of Inspector General (“OIG”) of the HHS issued a Special Advisory Bulletin warning manufacturers that they may be
subject to sanctions under the federal anti-kickback statute and/or civil monetary penalty laws if they do not take appropriate
steps to exclude Part D beneficiaries from using co-pay coupons. Accordingly, companies exclude these Part D beneficiaries
from using co-pay coupons. It is possible that changes in insurer policies regarding co-pay coupons and/or the introduction and
enactment of new legislation or regulatory action could restrict or otherwise negatively affect these patient support programs,
which could result in fewer patients using affected products, and therefore could have a material adverse effect on our sales,
business, and financial condition.
Third party patient assistance programs that receive financial support from companies have become the subject of enhanced
government and regulatory scrutiny. The OIG has established guidelines that suggest that it is lawful for pharmaceutical
manufacturers to make donations to charitable organizations who provide co-pay assistance to Medicare patients, provided that
such organizations, among other things, are bona fide charities, are entirely independent of and not controlled by the
manufacturer, provide aid to applicants on a first-come basis according to consistent financial criteria and do not link aid to use
of a donor's product. However, donations to patient assistance programs have received some negative publicity and been the
subject of multiple government enforcement actions, related to allegations regarding their use to promote branded
pharmaceutical products over other less costly alternatives. Specifically, in recent years, there have been multiple settlements
resulting out of government claims challenging the legality of their patient assistance programs under a variety of federal and
state laws.
The scope and enforcement of these laws is uncertain and subject to rapid change in the current environment of healthcare
reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement has led to a
number of investigations, prosecutions, convictions and settlements in the healthcare industry. Ensuring that our internal
operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will
involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply
with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other
healthcare laws and regulations.
EU and UK Data Protection Laws
In the EU, the General Data Protection Regulation ("GDPR") governs the processing of personal data. The GDPR imposes
a broad range of strict requirements on companies subject to the GDPR, such as including requirements relating to having legal
bases for processing personal data relating to identifiable individuals and transferring such information outside the European
Economic Area ("EEA"), including to the U.S., providing details to those individuals regarding the processing of their personal
data, implementing safeguards to keep personal data secure, having data processing agreements with third parties who process
personal data, providing information to individuals regarding data processing activities, responding to individuals’ requests to
exercise their rights in respect of their personal data, obtaining consent of the individuals to whom the personal data relates,
reporting security and privacy breaches involving personal data to the competent national data protection authority and affected
individuals, appointing data protection officers, conducting data protection impact assessments, and record-keeping. The GDPR
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substantially increases the penalties to which we could be subject in the event of any non-compliance, including fines of up to
€20,000,000 or 4% of total annual global revenue, whichever is greater. The GDPR increases the responsibility and liability of
pharmaceutical companies in relation to processing personal data, and companies may be required to put in place additional
mechanisms to ensure compliance with the new EU data protection rules. In addition, further to the UK’s exit from the EU on
January 31, 2020, the GDPR ceased to apply in the UK at the end of the transition period on December 31, 2020. However, as
of January 1, 2021, the UK’s European Union (Withdrawal) Act 2018 incorporated the GDPR (as it existed on December 31,
2020 but subject to certain UK specific amendments) into UK law, referred to as the UK GDPR. The UK GDPR and the UK
Data Protection Act 2018 set out the UK’s data protection regime, which is independent from but aligned to the EU’s data
protection regime. Non-compliance with the UK GDPR may result in monetary penalties of up to £17.5 million or 4% of
worldwide revenue, whichever is higher. Although the UK is regarded as a third country under the EU’s GDPR, the EC has
now issued a decision recognizing the UK as providing adequate protection under the EU GDPR and, therefore, transfers of
personal data originating in the EU to the UK remain unrestricted. Like the EU GDPR, the UK GDPR restricts personal data
transfers outside the UK to countries not regarded by the UK as providing adequate protection. The UK government has
confirmed that personal data transfers from the UK to the EEA remain free flowing.
To enable the transfer of personal data outside of the EEA or the UK, adequate safeguards must be implemented in
compliance with European and UK data protection laws. On June 4, 2021, the EC issued new forms of standard contractual
clauses for data transfers from controllers or processors in the EU/EEA (or otherwise subject to the GDPR) to controllers or
processors established outside the EU/EEA (and not subject to the GDPR). The new standard contractual clauses replace the
standard contractual clauses that were adopted previously under the EU Data Protection Directive. The UK is not subject to the
EC’s new standard contractual clauses but has published a draft version of a UK-specific transfer mechanism, which, once
finalized, will enable transfers from the UK. We will be required to implement these new safeguards when conducting restricted
data transfers under the EU and UK GDPR and doing so will require significant effort and cost.
PRC Regulation
In the PRC, we operate in an increasingly complex legal and regulatory environment. We are subject to a variety of PRC
laws, rules and regulations affecting many aspects of our business. This section summarizes the principal PRC laws, rules and
regulations that we believe are relevant to our business and operations.
PRC Drug Regulation
Introduction
China heavily regulates the development, approval, manufacturing and distribution of drugs, including biologics. The legal
framework for the administration of pharmaceutical products in China was established by the Drug Administration Law of the
PRC (the "DAL"). The DAL applies to entities and individuals engaged in the development, production, trade, clinical use, as
well as supervision and administration of pharmaceutical products by regulatory agencies. It provides for a framework for
regulating pharmaceutical manufacturers, pharmaceutical trading companies, medical institutions, and the research,
development, manufacturing, distribution, packaging, pricing, and advertisement activities related to pharmaceutical products.
The Implementing Measures of the Drug Administration Law as amended in 2019 provides detailed implementation regulations
for the DAL.
The Revised DAL
The DAL, revised in 2019 (the "rDAL"), embodies an expected regulatory trend to strengthen the life-cycle management of
drugs, to balance the development of innovative drugs and generic drugs, and to enhance drug review and enforcement. It also
reflects legislative efforts to address prominent problems of the pharmaceutical industry, such as counterfeit and substandard
drugs and high drug prices.
The rDAL contains a dedicated chapter on the Marketing Authorization Holder ("MAH") system. Subject to approval by
the NMPA, MAHs will be allowed to transfer their marketing authorizations. It is uncertain whether the transferability of MAH
will offer more flexibility in structuring cross-border transactions. In addition, the implementation of the MAH system was
accompanied by a range of new requirements for the MAHs. For example, a MAH must establish a quality assurance system
and be responsible for the whole process and all aspects of preclinical research, clinical trials, manufacturing and distribution,
post-marketing research, adverse drug reaction monitoring and reporting. A foreign MAH is required to engage a local agent to
fulfill the MAH’s obligations and the foreign MAH is subject to joint and several liability in the event of any wrongdoing. It is
unclear how the scope of such joint liability will be defined.
The rDAL no longer requires the certification for GCP, good supply practice ("GSP"), and GMP. However, drug
manufacturers and drug distributors must still comply with current GMP and GSP requirements. Pursuant to the rDAL, NMPA
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and its local counterparts are directed to strengthen their surveillance of drug manufacturers and distributors, including through
regular and continuous site inspections, to ensure their compliance. It remains to be seen how clinical trial institutions will
ensure self-compliance with GCP requirements and whether there will be more inspections of clinical trial institutions.
The rDAL also requires MAHs, manufacturers, distributors, and medical institutions to establish and implement drug track
and trace systems. The NMPA will issue related standards and regulations regarding drug track and trace system. A drug
pharmacovigilance system will also be established to monitor, identify, evaluate and control adverse drug reactions and other
possible drug-related problems.
The rDAL creates an expanded access pathway for investigational drugs under which a company sponsor of a clinical trial
in China can apply to establish an expanded access treatment program for patients with life-threatening disease who otherwise
do not satisfy the inclusion criteria of a clinical trial. To quality for expanded access: (1) the drug must be used for life-
threatening diseases that lack effective treatment; (2) the drug must have demonstrated its potential efficacy based on medical
observations; (3) such use is in line with ethical principles; (4) such expanded use has been reviewed and approved (although
the approval pathway not clear), and has obtained patients’ informed consent; and (5) the drug must be used within the clinical
trial institution and used on patients with similar conditions.
The rDAL also significantly increases and expands penalties for violations. Depending on various types of violations, the
rDAL imposes different penalties, including warnings, confiscation of illegal gains, fines of up to RMB5 million (about
$725,000) or up to 30 times of illegal gains, revocation of required business and operating licenses, certificates or approval
documents for drugs, suspension of business, temporary (10 years) or permanent debarment of companies, institutions and
responsible persons, and criminal liabilities in the case of serious violations.
There are still uncertainties with respect to the interpretation and implementation of the rDAL. We plan to closely monitor
the implementation of the rDAL and its impact on our operations in China.
Regulatory Authorities and Government Reorganization
In China, the NMPA is the primary regulator for pharmaceutical products and businesses. The agency was formed from the
prior China Food and Drug Administration ("CFDA") in 2018 as part of a complete government reorganization. The NMPA is
no longer an independent agency. Its parent agency is the State Administration for Market Regulation (the "SAMR"), into
which agencies responsible for, among other areas, consumer protection, advertising, anticorruption, antitrust, fair competition
and intellectual property have been merged.
Like the CFDA, the NMPA is still the chief drug regulatory agency and implements the same laws, regulations, rules, and
guidelines as the CFDA, and it regulates almost all of the key stages of the life-cycle of pharmaceutical products, including
nonclinical studies, clinical trials, marketing approvals, manufacturing, advertising and promotion, distribution, and
pharmacovigilance (i.e., post-marketing safety reporting obligations). The CDE, which remains under the NMPA, conducts the
technical evaluation of each drug and biologic application for safety and efficacy.
The National Health Commission ("NHC") is China’s chief healthcare regulator. It is primarily responsible for overseeing
the operation of medical institutions, which also serve as clinical trial sites, and regulating the licensure of hospitals and other
medical personnel. The NHC plays a significant role in drug reimbursement. Furthermore, the NHC and its local counterparts at
or below the provincial-level of local government also oversee and organize public medical institutions’ centralized bidding and
procurement programs for pharmaceutical products. This is the primary way that public hospitals and their internal pharmacies
procure drugs.
Also, as part of the 2018 reorganization, the PRC government formed the State Medical Insurance Bureau which focuses
on regulating reimbursement under state-sponsored insurance plans.
Preclinical and Clinical Development
The NMPA requires preclinical data to support registration applications for new drugs. Preclinical work, including safety
assessment studies, must meet the GLP standards, issued in 2003 and amended in 2017. The rDAL requires the NMPA to
accredit GLP labs, and that nonclinical studies of chemical drug substances and preparations and biologics that are not yet
marketed in China be conducted in GLP-certified labs. There are no approvals required from the NMPA to conduct preclinical
studies.
A Certificate for Use of Laboratory Animals is required for performing experimentation on animals under the Regulations
for the Administration of Affairs Concerning Experimental Animals issued in 1988 and last amended in 2017, the
Administrative Measures on Good Practice of Experimental Animals issued in 1997, and the Administrative Measures on the
Certificate for Experimental Animals (Trial) issued in 2001. Applicants for this certificate must satisfy a number of conditions,
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including (1) the environment and facilities for lab animals’ living and propagating must satisfy national requirements; (2) lab
animals must be qualified and sourced from institutions with Certificates for Production of Lab Animals; and (3) the animals’
feeding and experimentation must be conducted by professionals, specialized and skilled workers, or other trained personnel.
Registration Categories
Prior to engaging with the NMPA on research and development and approval, an applicant will need to determine the
registration category for its drug candidate (which will ultimately need to be confirmed with the NMPA), which will determine
the requirements for its clinical trial and marketing application. There are five categories for small molecule drugs: Category 1
(innovative drugs) refers to drugs that have a new chemical entity that has not been marketed anywhere in the world, Category
2 (improved new drugs) refers to drugs with a new indication, dosage form, route of administration, combination, or certain
formulation changes not approved in the world, Categories 3 and 4 are for generics that reference an innovator drug (or certain
well-known generic drugs) marketed either abroad or in China, respectively, and Category 5 refers to innovative or generic
drugs that have already been marketed abroad but are not yet approved in China (i.e., imported drugs).
Therapeutic biologics follow a similar categorization, with Category 1 being new to the world. Like with small molecule
drugs, Category 1 is for innovative biologics that have not been approved inside or outside of China. Biosimilars are under
Category 3. Each of zanubrutinib, tislelizumab, pamiparib and lifirafenib is classified as Category 1 based on the defined
registration category by the NMPA. Zanubrutinib, pamiparib and tislelizumab have been approved by the NMPA as Category 1
drugs.
Expedited Programs
Priority Evaluation and Approval Programs to Encourage Innovation
The NMPA has adopted several expedited review and approval mechanisms since 2009 and created additional expedited
programs in recent years that are intended to encourage innovation. Applications for these expedited programs can be submitted
after the CTA is admitted for review by the CDE. The NMPA’s Drug Registration Rules effective from July 1, 2020 ("DRR")
provides certain categories of drugs that may be eligible for priority status, among which, the following may be particularly
relevant for us: (1) drugs that are clinically and urgently needed but insufficient in supply; (2) innovative drugs and improved
new drugs for prevention and treatment of major contagious diseases and rare diseases; (3) new pediatric drugs, (4) drugs
designated as breakthrough therapies, and (5) drugs that satisfy the conditional approval criteria.
If admitted to one of these expedited programs, an applicant will be entitled to more frequent and timely communication
with reviewers at the CDE, expedited review and approval, and more agency resources throughout the approval process.
Amgen's sBLA for BLINCYTO has been accepted by the CDE and granted priority status. Our sNDA for tislelizumab for
MSI-H/dMMR solid tumor has been accepted by the CDE and granted priority status.
Conditional Approval
NMPA also permits conditional approval of certain medicines based on early phase data. The agency has done this for
medicines that meet unmet medical needs for life-threatening illnesses and also for medicines that treat orphan indications.
Under the DRR, drugs that meet one of the three criteria might be eligible for conditional approval: (1) drugs that treat life
threatening illnesses for which there are no effective treatment or preventive methods, but their clinical trials already have the
data to prove efficacy and their clinical value is predictable, (2) drugs that are urgently needed for public health reasons, and
their clinical trials already have the data to prove efficacy and their clinical value is predictable; or (3) vaccines that are urgently
needed for major public health emergencies or otherwise deemed by the National Health Commission to be urgently needed,
and it is concluded upon evaluation that their benefits outweigh their risks. Following approval, the MAH is required to take
risk mitigation measures and complete a post-market study as required by the NMPA within a prescribed timeline.
BRUKINSA received conditional approval for the treatment of MCL in adult patients who have received at least one prior
therapy, CLL or SLL in adult patients who have received at least one prior therapy, and for adult patients with WM who have
received at least one prior therapy. Tislelizumab received conditional approval as a treatment for patients with cHL who have
received at least two prior therapies and as a treatment for patients with locally advanced or metastatic UC, a form of bladder
cancer, with PD-L1 high expression whose disease progressed during or following platinum-containing chemotherapy or within
12 months of neoadjuvant or adjuvant treatment with platinum-containing chemotherapy, and for the treatment of patients with
hepatocellular carcinoma (HCC) who have been previously treated with at least one systemic therapy. Pamiparib received
conditional approval for the treatment of patients with germline BRCA (gBRCA) mutation-associated recurrent advanced
ovarian, fallopian tube, or primary peritoneal cancer who have been treated with two or more lines of chemotherapy. XGEVA
received conditional approval for the treatment of adults and skeletally mature adolescents with giant cell tumor of the bone
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(GCTB) that is unresectable or where surgical resection is likely to result in severe morbidity and for the prevention of SREs in
patients with bone metastases from solid tumors and in patients with multiple myeloma. BLINCYTO received conditional
approvals for the treatment of both adult and pediatric patients with R/R B-cell precursor acute lymphoblastic leukemia.
KYPROLIS received conditional approval for the treatment of adult patients with R/R multiple myeloma. QARZIBA received
conditional approval for high-risk neuroblastoma.
Breakthrough Therapy Designation
Breakthrough therapy designation ("BTD") is a process designed to expedite the development and review of clinical stage,
innovative or improved new drugs that meet the following criteria: (1) they are intended to treat life threatening conditions or
conditions that have serious negative impact on the quality of life, and (2) there are no effective treatment or preventive
methods available, or there is preliminary clinical evidence indicating that they may demonstrate substantial improvement over
available therapies. Applicants of drugs designated as breakthrough therapies will be entitled to direct communications with
CDE at key states during the clinical trials, and may seek CDE’s opinion on study progress.
Amgen's KRASG12C inhibitor sotorasib was granted BTD in China for patients with KRAS p.G12C-mutated locally
advanced or metastatic NSCLC who have received at least one prior systemic therapy. BRUKINSA as a treatment for adult
patients with CLL/SLL was granted BTD in China. ZW25 (zanidatamab) as a treatment for R/R HER2-expressing biliary tract
cancer was granted BTD.
New Policies on Expediting Approval of Imported Oncology Drugs
The PRC government continues to establish measures and incentives to promote the development and swifter approval of
marketing for oncology and other innovative drugs. Beginning in May 2018, the PRC eliminated tariffs on a significant number
of imported innovative drugs, including oncology drugs, making the importation process more efficient. The PRC government
has also stated that it will explore ways to expand access to reimbursement under the state health plans for innovative drugs
(particularly for urgently needed oncology drugs).
Clinical Trials and Marketing Approval
Upon completion of preclinical studies and preliminary CMC studies, a sponsor typically needs to conduct clinical trials in
China for registering a new drug. The materials required for this application and the data requirements are determined by the
registration category. The NMPA has taken a number of steps to increase efficiency for approving CTAs, and it has also
significantly increased monitoring and enforcement of GCP to ensure data integrity.
Clinical Trial Approval
All clinical trials conducted in China for the purpose of seeking marketing approvals must be approved by the NMPA and
conducted at hospitals satisfying GCP requirements. In addition to a standalone China trial to support development, imported
drug applicants may include Chinese clinical sites as part of an international multicenter trial ("IMCT"). Domestically
manufactured drugs are not subject to foreign approval requirements, and in contrast to prior practice, the NMPA has decided to
permit those drugs to conduct development via an IMCT as well.
The rDAL has now also adopted an implied approval system for clinical trials of new drugs. Trials can proceed if after 60
business days, the applicant has not received any objections from the CDE, as opposed to the lengthier previous clinical trial
pre-approval process in which the applicant had to wait for affirmative approval. The rDAL also expands the number of trial
sites by abolishing the GCP accreditation system and requiring trial sites to follow a more simplified notification procedure.
New Policies on Clinical Value-Oriented R&D for Oncology Drugs
The NMPA finalized in November 2011 the Guideline on Clinical Value-Oriented Research and Development for
Oncology Drugs, as part of its policies intended to encourage the research and development of innovative oncology drugs with
significant clinical value, and discourage repeated research and development of “me-too” drugs with minimal or no clinical
value to patients.
Clinical Trial Register
Clinical trials conducted in China must be registered and published through the Drug Clinical Trial Information Platform
(http://www.chinadrugtrials.org.cn). Applicant are required to pre-register the trial information within one month after
obtaining the clinical trial approval to obtain the trial’s unique registration number and to complete registration of certain
follow-up information before the first subject’s enrollment in the trial. If the foregoing pre-registration and registration is not
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obtained within one year after obtaining the clinical trial approval, the applicant shall submit an explanation, and if the
procedure is not completed within three years, the clinical trial approval automatically expires.
Human Genetic Resources Regulation
The Regulation on the Administration of Human Genetic Resources ("HGR Regulation") became effective on July 1, 2019.
The HGR Regulation applies to all human genetic resources ("HGR")-related activities for R&D purposes, including sampling,
biobanking, use of HGR materials and associated data in China, and the provision or sharing of such materials or data with
foreign parties.
The HGR Regulation applies to foreign parties, including foreign entities and entities established or actually controlled by
foreign entities and individuals. As BeiGene, Ltd. is a Cayman Islands company, we and our activities in China are subject to
the HGR Regulation. Such foreign parties seeking access to China’s HGRs for scientific research, including clinical trials
intended to support marketing approval of drugs and medical devices in China, must do so only through collaborations with
Chinese parties, such as Chinese hospitals. The HGR Regulation prohibits foreign parties from independently sampling or
biobanking any China HGR in China and requires approval for the sampling of certain HGR and biobanking of all HGR by
Chinese parties. Any cross-border transfer of the HGR materials, either under an international collaboration or as a direct
export, must be on an as-needed basis and requires approval. In addition, providing HGR data to foreign parties requires a
record filing.
Another significant change is the HGR Regulation replaced the advance approval requirement with a record-filing
procedure for international collaborations on clinical trials intended to support marketing approval of drugs in China that do not
transfer HGR materials abroad, while the advance approval requirement still applies if such trials involve export of HGR
materials or the collection, testing, analysis or disposals of HGR samples during the trials are not solely conducted at the
clinical trial sites. Companies conducting global clinical trials may benefit little from this record filing procedure because those
trials would often require cross-border transfer of HGR materials and the advance approval requirement would still apply.
The HGR Regulation retains the provision in the Interim Measures for the Administration of Human Genetic Resources
issued in 1998 that parties should jointly apply for and own the patent rights arising from the results generated from
international collaborations that utilize China HGR. Subject to approval, the parties may contractually agree on how to dispose
of their patent rights and non-patent proprietary rights arising from the collaboration. As the joint ownership requirement is
rather broad, it is unclear how this requirement will be implemented in practice.
The HGR Regulation also significantly increases and expands penalties for various violations, including warnings,
disgorgement of illegal gains, confiscation of illegal HGR, fines up to RMB10 million ($1,450,000) or 5-10 times of illegal
gains in the event such illegal gains exceed RMB1 million ($145,000), and temporary (1-5 years) or permanent debarment of
companies, institutions and responsible persons from future HGR projects regulated by the HGR Regulation.
We expect that HGR-related activities will receive greater attention and focus from regulators going forward.
Trial Exemptions and Acceptance of Foreign Data
The NMPA may be flexible on the requirements of trials and data generated in China, depending on the drug and the
existing data. The NMPA has granted waivers for all or part of trials, and has stated that it will accept data generated abroad
(even if not part of a global study), including early phase data, that meets its requirements. In 2018, the NMPA issued the
Technical Guidance Principles on Accepting Foreign Drug Clinical Trial Data (the “Guidance Principles”), as one of the
implementing rules for the Opinions on Deepening the Reform of the Evaluation and Approval Systems and Encouraging
Innovation on Drugs and Medical Devices (the “Innovation Opinion”). According to the Guidance Principles, data from foreign
clinical trials must meet authenticity, completeness and accuracy requirements and such data must be obtained in compliance
with the relevant requirements under the GCP of the International Conference on Harmonization of Technical Requirements for
Registration of Pharmaceuticals for Human Use. Sponsors must be attentive to potentially meaningful ethnic differences in the
subject population.
The NMPA now permits, and its predecessor agencies have permitted on a case-by-case basis in the past, drugs approved
outside of China to be approved in China on a conditional basis without the need for pre-approval clinical trials in China.
Specifically, in 2018, the NMPA established a program permitting drugs that have been approved within the last ten years in the
United States, EU or Japan to be approved in China without local clinical trials if they (1) prevent or treat orphan diseases, (2)
prevent or treat serious life-threatening illnesses for which there is either no effective therapy in China, or for which the foreign-
approved drug would have clear clinical advantages. Applicants for such conditional approvals will be required to establish a
risk mitigation plan and may be required to complete trials in China after the drug is approved. The CDE has developed a list of
drugs that meet these criteria.
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Clinical Trial Process and Good Clinical Practices
As in other parts of the world, clinical trials in China typically have three phases. Phase 1 refers to the initial clinical
pharmacology and human safety evaluation studies. Phase 2 refers to the preliminary evaluation of a drug candidate’s
therapeutic efficacy and safety for target indication(s) in patients. Phase 3 (often the pivotal study) refers to clinical trials to
further verify the drug candidate’s therapeutic efficacy and safety on patients with target indication(s) and ultimately provide
sufficient evidence for the review of a drug registration application. The NMPA requires that the different phases of clinical
trials in China receive ethics committee approval and comply with GCP. The NMPA conducts inspections on clinical trials
conducted in China to assess GCP compliance and may refuse to approve the drug if it finds substantial issues in the trials. In
addition, upon granting the drug registration certificate, NMPA may, at its sole discretion, require a Phase 4 trial to be
conducted by MAH within a specified period of time so as to further monitor and obtain safety and efficacy data of the drug.
Generic small molecule drugs are required to conduct a bioequivalence trial, in vitro studies or in some cases a clinical trial
to demonstrate therapeutic equivalence to an innovator drug marketed either in China or abroad or an internationally accepted
generic drug. The NMPA has released catalogues of reference products, and it released first installment of a Marketed Drug List
(China’s “Orange Book”) with information about drugs that may serve as reference products.
Pursuant to GCP, sponsors of clinical trials are responsible for proper packaging and labeling of drugs used for clinical
trials, and in double-blinded clinical trials, the investigational drugs shall be consistent with the control drug or placebo in
appearance, odor, packaging, labeling, and certain other features. Pharmaceutical packaging must comply with national and
professional standards. If there is no national or professional standard available, companies may formulate and implement its
own standards after obtaining the approval of the provincial administration for medical products or bureau of standards.
Changes in such approved packaging standards need to be re-approved. Drugs of which the packaging standards are not
approved shall not be released or marketed in China, except for those specifically supplied to the military.
New Drug Application (NDA) and Approval
Upon completion of clinical trials, a sponsor may submit clinical trial data to support marketing approval for the drug.
For domestically manufactured drugs, NDA sponsors must submit data derived from the submitted drugs in support of their
approval. Under the rDAL, upon approval of the registration application, the NMPA will issue a drug registration certificate to
the applicant which is in fact the marketing approval of the drug, and the applicant is no longer required to be equipped with
relevant manufacturing capability.
Manufacturing and Distribution
All facilities that manufacture drugs in China must receive a drug manufacturing license with an appropriate “scope of
manufacturing” from the local drug regulatory authority. This license must be renewed every five years, and the manufacturing
facility is also required to be in compliance with GMP.
Similarly, to conduct sales, importation, shipping and storage, a company must obtain a Drug Distribution License
("DDL") from the local drug regulatory authority, subject to renewal every five years. As with GMPs, companies are required
to be in compliance with GSP. One exception is that the rDAL and relevant implementation rules allow the MAH to conduct
wholesales of its drugs directly without holding a separate DDL for wholesale, however, a retail DDL would still be required if
the MHA intends to conduct direct retail to patients.
China has developed a “Two-Invoice System” to control distribution of prescription drugs. The “Two-Invoice System”
generally requires that no more than two invoices may be issued throughout the distribution chain, with one from the
manufacturer to a distributor and another from the distributor to the end-user hospital. This excludes the sale of products
invoiced from the manufacturer to its wholly owned or controlled distributors, or for imported drugs, to their exclusive
distributor, or from a distributor to its wholly owned or controlled subsidiary (or between the wholly owned or controlled
subsidiaries). However, the system still significantly limits the options for companies to use multiple distributors to reach a
larger geographic area in China. Compliance with the Two-Invoice System is a prerequisite for pharmaceutical companies to
participate in procurement processes with public hospitals, which currently provide most of China’s healthcare. Manufacturers
and distributors that fail to implement the Two-Invoice System may lose their qualifications to participate in the bidding
process. Non-compliant manufacturers may also be blacklisted from engaging in drug sales to public hospitals in a locality.
Post-Marketing Surveillance
Under the rDAL, the MAH of a drug is ultimately responsible for pharmacovigilance, including quality assurance, adverse
reaction reporting and monitoring, and product recalls. Distributors and user entities (e.g., hospitals) are also required to report,
in their respective roles, adverse reactions of the products they sell or use, and assist the MAH with any product recalls. An
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MAH for a drug that is currently under the new drug monitoring period has to report all adverse drug reactions (as opposed to
just serious adverse reactions) for that period.
Advertising and Promotion of Pharmaceutical Products
China has a strict regime for the advertising of approved medicines. No unapproved medicines may be advertised. The
definition of an advertisement is very broad, and does not expressly exclude scientific exchange. It can be any media that
directly or indirectly introduces the product to end users. There is no clear line between advertising and any other type of
promotion.
An enterprise seeking to advertise a prescription drug may do so only in medical journals jointly approved by NMPA and
the NHC, and each advertisement requires approval from a local drug regulatory authority. The content of an approved
advertisement may not be altered without filing a new application for approval.
Prescription drug advertisements are subject to strict content restrictions, which prohibit recommendations by doctors and
hospitals and guarantees of effectiveness. Advertising that includes content that is outside of the drug’s approval documentation
(off-label content) is prohibited. False advertising can result in civil suits from end users and administrative liability, including
fines. In addition to advertisements, non-promotional websites that convey information about a drug must go through a separate
approval process by a local drug regulatory authority.
Regulatory Intellectual Property Protections
The amendments to the PRC Patent Law (the “Amended PRC Patent Law”) became effective on June 1, 2021. The
Amended PRC Patent Law contains both patent term extension and a mechanism for early resolution of patent disputes, which
may be comparable to patent linkage in the United States. However, the provisions for patent term extension are unclear and/or
remain subject to the approval of implementing regulations that are still in draft form or have not yet been proposed, leading to
uncertainty about its scope and implementation.
Non-Patent Exclusivities
Regulatory Data Protection
The Innovation Opinion provided a foundation to improve and implement a system for regulatory data protection to protect
innovative drugs. This protection will be available for undisclosed clinical trial data of drugs falling into the following
categories: innovative drugs, innovative therapeutic biologics, drugs that treat orphan diseases, pediatric drugs, and drugs for
which there has been a successful patent challenge. In the Trade Agreement, China has committed to providing for effective
protection of undisclosed clinical trial or other data submitted as a condition of marketing approval.
The NMPA has published draft regulations for public comment that would set regulatory data protection for innovative
small molecule drugs at six years and for innovative therapeutic biologics at 12 years; pediatric and orphan drugs would receive
six years to run concurrently from their approval dates. Full terms of protection would require reliance on local trials or sites of
multi-center trials in China and simultaneous submissions of marketing applications in China and other countries. Submissions
in China that are up to six years later than those abroad would result in the term being reduced to 1-5 years. Submissions over
six years later in China may not receive protection.
The proposed regulations also call for a reduction in exclusivity if the marketing application is filed in China based solely
on overseas clinical data with no Chinese subjects (75% reduction) or based on supplemental “China clinical trial data” (50%
reduction). Information about the exclusivity term will be included in a Marketed Drug List (similar to the Orange Book in the
US) at the time of approval. Some mechanics of these proposed rules are not yet clear, and it is not certain when the proposed
rules will be finalized.
Patent-Related Protections
Patent Linkage
The Amended PRC Patent Law provides a cause of action to allow a patent holder to initiate a declarative action during the
regulatory review process of a drug to determine whether the drug falls within the patent scope, which may be comparable to
the patent linkage system in the United States. The system requires that the NMPA continue to review the potentially infringing
follow-on application during any lawsuit by the innovator. However, the NMPA may not approve the follow-on application
pending resolution of the patent litigation in favor of the follow-on application or for a specified period of time, whichever is
shorter.
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Patent Term Extension
The Amended PRC Patent Law provides patent term extension, similar to the United States, for the patent term lost during
the regulatory review process of a new drug upon the patent holder’s request. The extended term shall not exceed five years,
and the total patent term after market entry of the new drug shall not exceed 14 years. However, the provisions for patent term
extension are unclear and/or remain subject to the approval of implementing regulations that are still in draft form, leading to
uncertainty about the scope of implementation.
Reimbursement and Pricing
China’s national medical insurance program currently consists of two fundamental sub-programs: (1) the basic medical
insurance program for urban employees, under which urban employers are required to enroll their employees in the program
and the insurance premium is jointly contributed by the employers and employees; and (2) the basic medical insurance program
for urban and rural residents, which allows urban and rural residents who do not have employers to voluntarily participate in the
basic medical insurance program and the insurance premium is jointly contributed by the participants and the government.
Participants of the national medical insurance program and their employers, if any, are required to contribute to the payment of
insurance premiums on a monthly basis. Program participants are eligible for full or partial reimbursement of the cost of
medicines included in the NRDL. A pharmaceutical product listed in the NRDL must be clinically needed, safe, effective,
reasonably priced, easy to use, and available in sufficient quantity.
Factors that affect the inclusion of a pharmaceutical product in the NRDL include whether the product is used in large
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 the general public. Since 2016, special consideration has been given to, among others, innovative drugs
with high clinical value and drugs for serious diseases. In addition, the government has also been negotiating with
manufacturers of exclusive drugs with high clinical demands and proven effectiveness for price cuts in exchange for inclusion
into the NRDL. The version of the NRDL released in 2023 covers approximately 3,000 drugs in total, including 147 drugs for
which the prices were determined through negotiations between the drug companies and government. China has been pursuing
a policy of expediting the addition of innovative oncology drugs to this list. REVLIMID has been included in the NRDL since
2017. VIDAZA has been included in the NRDL since 2018. BRUKINSA (zanubrutinib), tislelizumab, and XGEVA (120-mg
denosumab) have been included in the NRDL since 2021. PARP inhibitor pamiparib has been included in the NRDL since
2022. KYPROLIS was included for the first time in the NRDL in January 2023, which will take effect on March 1, 2023.
Government Price Controls
China has abolished its previous government-led pricing system for drugs, and lifted the maximum retail price for most
drugs, including drugs reimbursed by government medical insurance funds, patented drugs, and some other drugs. The
government now regulates prices mainly by establishing a consolidated procurement mechanism, restructuring medical
insurance reimbursement standards and strengthening regulation of medical and pricing practices, as discussed below.
Centralized Procurement and Tenders
Under current regulations, public medical institutions owned by the government or owned by state-owned or controlled
enterprises are required to purchase pharmaceutical products through centralized online procurement processes. There are
exceptions for drugs on the National List of Essential Drugs, which must comply with their own procurement rules, and for
certain drugs subject to the central government’s special control, such as toxic, radioactive and narcotic drugs, and traditional
Chinese medicines.
The centralized procurement process takes the form of public tenders that are typically conducted once every year by
provincial or municipal-level government agencies. The bids are assessed by a committee randomly selected from a database of
experts. The committee members assess the bids based on a number of factors, including bid price, product quality, clinical
effectiveness, product safety, level of technology, the manufacturer's qualifications and reputation, after-sale services and
innovation.
Over the last decade, the government has employed various methods to improve the affordability of drugs. In 2009, the
central government announced a campaign to implement a “zero markup” policy on essential drugs among basic healthcare
institutions, which has been fully implemented nationwide. In addition, some local governments have begun to allow medical
institutions to collectively negotiate with manufacturers for a second price to further lower the already agreed bid price. The
Two-Invoice System, described above, is also designed to reduce price mark-ups brought about by multi-tier distribution
chains.
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In 2019, the government approved a volume-based, centralized drug procurement program in an effort to deepen the reform
of the medical and health sector and optimize the pricing of drugs. Drugs are selected from generic brands for volume-based,
centralized drug procurement. The selected drugs must pass the equivalence evaluation on quality and efficacy. The program is
aimed at further lowering drug costs for patients, reducing transaction costs for enterprises, regulating drug use by institutions,
and improving the centralized drug procurement and pricing system. All approved enterprises that produce drugs on the
procurement list in China may participate. Clinical effects, adverse reactions, and batch stability of the drugs will be considered,
and their consistency will be the main criteria for evaluation, while production capacity and stability of the supplier will also be
considered.
Other PRC National and Provincial Laws and Regulations
Pharmaceutical companies operating in China 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 of patient medical information and the
circumstances under which patient medical information may be released for inclusion in our information systems or released by
us to third parties. The privacy of human subjects in clinical trials is also protected under regulations. For example, clinical trial
case report forms must avoid disclosing names of human subjects.
These laws and regulations governing both the disclosure and the use of confidential patient medical information may
become more restrictive in the future, including restrictions on transfer of healthcare data. The Cybersecurity Law that took
effect in 2017 designates healthcare as a priority area that is part of critical information infrastructure, and China’s cyberspace
administration is working to finalize a draft rule on cross-border transfer of personal information.
PRC Regulation of Foreign Investment
The Foreign Investment Law of the PRC (the “Foreign Investment Law”) and its implementing rules (the “Implementing
Rules”) took effect in 2020 and replaced previous laws and regulations governing foreign investment in China. The Foreign
Investment Law and Implementing Rules establish a basic framework for access to, and the promotion and administration of
foreign investments in China. They reflected China’s legislative efforts to rationalize China’s foreign investment regulatory
regime in line with prevailing international practice and to unify legal requirements for both foreign and domestic investments.
The Implementing Rules further clarified that China would encourage and promote foreign investment, protect the lawful rights
and interests of foreign investors, and continue to improve the foreign investment environment in China.
The Foreign Investment Law establishes a pre-entry national treatment and negative list system for the administration of
foreign investments. “Pre-entry national treatment” means that the treatment afforded to foreign investors at the market access
stage shall be no less favorable than that afforded to domestic investors. “Negative list” refers to the special administrative
measures for foreign investors' access to specific fields or industries. Foreign investments outside of the negative list will be
granted national treatment. Foreign investors shall not invest in the prohibited fields as specified in the negative list, and foreign
investors who invest in the restricted fields shall comply with certain special requirements including the shareholding
percentage and citizenship of senior executives. The current industry entry clearance requirements governing foreign
investment activities in the PRC are set out in two categories, namely the Special Entry Management Measures for the Access
of Foreign Investment (Negative List) (2022 version), and the Encouraged Industry Catalogue for Foreign Investment (2022
version) (the “2022 Encouraged Industry Catalogue”). Industries not listed in these two categories are generally deemed
“permitted” for foreign investments unless specifically restricted by other applicable PRC laws or regulations. Pursuant to the
2022 Encouraged Industry Catalogue, the research, development and manufacture of innovative oncology drugs and certain
other types of pharmaceutical products belongs to the encouraged industries for foreign investment.
Regulations Relating to Product Liability
Under a law which took effect in 2021, a defective product which causes property damage or physical injury to any person
may subject the manufacturer or vendor of such product to civil liability for such damage or injury. Additionally, China's
Product Quality Law, first adopted in 1993 and amended in 2018, governs the supervision and administration of product
quality, aiming to protect the rights end-users and consumers. According to the Product Quality Law, manufacturers is liable for
the quality of products produced by them, and sellers are required take measures to ensure the quality of the products sold by
them. A manufacturer is liable for compensating for any bodily injury or property damage resulting from product defects unless
the manufacturer is able to prove that: (1) the product was not distributed; (2) the defects causing injury or damage did not exist
at the time that the product was distributed; or (3) science and technology at the time that the product was distributed was at a
level incapable of detecting the defects. A seller is liable for compensating for any bodily injury or property damage of others
caused by the defects in the product if such defects are attributable to the seller. A seller is required to pay compensation if it
fails to indicate either the manufacturer or the supplier of the defective product. A person who is injured or whose property is
damaged by the defects in the product may claim compensation from the manufacturer or the seller.
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Regulations Relating to Commercial Bribery
Pharmaceutical companies involved in a criminal investigation or administrative proceeding related to bribery are listed in
the Adverse Records of Commercial Briberies by the provincial health commissions. If a pharmaceutical company or its agent
is listed, public medical institutions located in the local provincial level region are prohibited from making any purchase from
the company for two years. Where a pharmaceutical company or its agent is listed in the adverse records on two or more
occasions within five years, all public medical institutions in China are not permitted to purchase any products from that
company for two years.
Regulations Relating to Foreign Exchange
The Foreign Exchange Administration Regulations are the principal regulations governing foreign currency exchange in
China. Under the PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade
and service-related foreign exchange transactions, may be made in foreign currencies without prior approval from the State
Administration of Foreign Exchange ("SAFE") by complying with certain procedural requirements. In contrast, approval from
or registration with appropriate government authorities or designated banks is required when RMB is to be converted into a
foreign currency and remitted out of China to pay capital expenses such as the repayment of foreign currency-denominated
loans.
Under current regulations, the capital of a foreign-invested enterprise and capital in RMB obtained by the foreign-invested
enterprise from foreign exchange settlement must not be used for the following purposes: directly or indirectly for payment
beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations; directly or indirectly
for investment in securities, unless otherwise provided by relevant laws and regulations; extending loans to non-related parties,
unless permitted by the scope of business; or paying expenses related to the purchase of real estate that is not for self-use,
except for real estate enterprises.
In 2017, new regulations were adopted which, among other things, relax the restrictions on foreign exchange inflow to
further enhance trade and investment facilitation and tighten genuineness and compliance verification of cross-border
transactions and cross-border capital flows.
In 2019, SAFE issued the Circular of the State Administration of Foreign Exchange on Further Promoting the Facilitation
of Cross-border Trade and Investment ("Circular 28"). Circular 28 allows non-investment foreign-invested enterprises to use
their capital funds to make equity investments in China, provided that such investments do not violate the effective Special
Entry Management Measures for the Access of Foreign Investment (Negative List) and the target investment projects are
genuine and in compliance with laws. The interpretation and implementation of Circular 28 in practice are subject to substantial
uncertainty.
Regulations Relating to Dividend Distributions
Foreign-invested companies may pay dividends only out of their accumulated profit, if any, as determined in accordance
with PRC accounting standards and regulations. Both PRC domestic companies and foreign invested PRC companies are
required to allocate at least 10% of their respective accumulated after-tax profits each year, if any, to fund certain capital
reserve funds until the aggregate amount of these reserve funds have reached 50% of the registered capital of the companies. A
PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained
from prior fiscal years may be distributed together with distributable profits from the current fiscal year.
Labor Laws and Social Insurance
Under Chinese law, employers must execute written labor contracts with their full-time employees and must comply with
local minimum wage standards. Employers must establish a comprehensive management system to protect the rights of their
employees, including a system governing occupational health and safety, and to truthfully inform prospective employees of the
job description, working conditions, location, occupational hazards and status of safe production as well as remuneration and
other conditions. Violations of these requirements may result in the imposition of fines and other administrative and criminal
liability in the case of serious violations.
In addition, employers must provide employees with welfare schemes covering pension insurance, unemployment
insurance, maternity insurance, work-related injury insurance, medical insurance and housing funds. These payments are made
to local administrative authorities, and any employer who fails to contribute may be fined and ordered to pay the deficit amount
within a stipulated time limit.
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Regulations Relating to Overseas Listing
On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing
by Domestic Companies, or the Overseas Listing Trial Measures, and five relevant guidelines, which will take effect from
March 31, 2023, requiring Chinese domestic companies’ overseas offerings and listings of equity securities be filed with the
CSRC.
The Overseas Listing Trial Measures clarify the scope of overseas offerings and listings by Chinese domestic companies
which are subject to the filing and reporting requirements thereunder, and provide, among others, that Chinese domestic
companies that have already directly or indirectly offered and listed securities in overseas markets prior to the effectiveness of
the Overseas Listing Trial Measures shall fulfil their filing obligations and report relevant information to the CSRC within three
working days after conducting a follow-on offering of equity securities on the same overseas market, and follow the relevant
reporting requirements within three working days upon the occurrence of any specified circumstances provided thereunder.
According to the Overseas Listing Trial Measures, if we were deemed as an indirect overseas listed Chinese domestic
company but fail to complete the filing procedures with the CSRC for any of our follow-on offerings or follow any other
reporting requirements required thereunder, we may be subject to penalties, sanctions and fines imposed by the CSRC and
relevant departments of the State Council.
Rest of World Regulation
For other countries outside of the United States and the PRC, the requirements governing the conduct of clinical trials, drug
licensing, pricing and reimbursement, and other matters impacting our business vary from country to country. In all cases,
clinical trials must be conducted in accordance with GCP requirements, applicable regulatory requirements, and the ethical
principles having their origin in the Declaration of Helsinki.
Status under Holding Foreign Companies Accountable Act
In December 2021, the SEC adopted rules (the “Final Rules”) to implement the Holding Foreign Companies Accountable
Act (the “HFCAA”). The HFCAA includes requirements for the SEC to identify issuers who file annual reports with audit
reports issued by independent registered public accounting firms located in foreign jurisdictions that the Public Company
Accounting Oversight Board (“PCAOB”) is unable to inspect or investigate completely because of a position taken by a non-
U.S. authority in the accounting firm’s jurisdiction (“Commission-Identified Issuers”). The HFCAA also requires that, to the
extent that the PCAOB has been unable to inspect an issuer’s independent registered public accounting firm for three
consecutive years since 2021, the SEC shall prohibit the issuer’s securities registered in the United States from being traded on
any national securities exchange or over-the-counter markets in the United States. In December 2022, the Accelerating Holding
Foreign Companies Accountable Act amended the HFCAA to shorten the three-year period to two years.
Under the Final Rules, the SEC adopted submission and disclosure requirements by amending Form 10-K and other annual
reporting forms and established procedures to identify issuers and prohibit the trading of the securities of certain registrants as
required by the HFCAA. Specifically, the Final Rules require each Commission-Identified Issuer to submit documentation to
the SEC annually on or before its annual report due date that establishes that it is not owned or controlled by a government
entity in its public accounting firm’s foreign jurisdiction and require additional specified disclosures by “foreign issuers” as
defined in Rule 3b-4 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The SEC
identifies an issuer as a Commission-Identified Issuer after the issuer files its annual report and on a rolling basis, and will
impose an initial trading prohibition on an issuer as soon as practicable after it has been conclusively identified as a
Commission-Identified Issuer for two consecutive years. To end an initial or subsequent trading prohibition, a Commission-
Identified Issuer must certify that it has retained a registered public accounting firm that the PCAOB has determined it is able to
inspect or investigate. To make that certification, the Commission-Identified Issuer must file financial statements that include
an audit report signed by such a registered public accounting firm.
On March 30, 2022, as expected following its adoption of the Final Rules, the SEC added BeiGene, Ltd. to its conclusive
list of issuers identified under the HFCAA, after being provisionally named as a Commission-Identified Issuer on March 8,
2022, following the filing of its annual report on Form 10-K with the SEC on February 28, 2022. Ernst & Young Hua Ming
LLP, located in the PRC, served as our independent registered public accounting firm from 2014 to 2021, including for our
annual report on Form 10-K for the year ended December 31, 2021. However, as our global business has expanded, we have
built substantial organizational capabilities outside of the PRC and have evaluated, designed and implemented business
processes and control changes. Therefore, on March 23, 2022, following a review process carried out by our audit committee,
Ernst & Young Hua Ming LLP resigned as our independent registered public accounting firm for the audits of our financial
statements and internal control over financial reporting to be filed with the SEC. On the same day, our audit committee
approved the engagement of Ernst & Young LLP, located in Boston, Massachusetts, United States, as the Company’s
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independent registered public accounting firm for the audits of our financial statements and internal control over financial
reporting for the fiscal year ending December 31, 2022. No changes were made to the accounting firms who audit our financial
statements filed with the Shanghai Stock Exchange and the Hong Kong Stock Exchange, which will remain Ernst & Young
Hua Ming LLP, located in Beijing, PRC, and Ernst & Young, located in Hong Kong, PRC, respectively.
In August 2022, the PCAOB signed a Statement of Protocol with the CSRC and the Ministry of Finance of the People's
Republic of China, taking the first step toward opening access for the PCAOB to inspect and investigate registered public
accounting firms headquartered in mainland China and Hong Kong. PCAOB staff members conducted on-site inspections and
investigations from September to November 2022, and in December 2022, the PCAOB announced that it has secured complete
access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and
confirmed that until such time as the PCAOB issues any new determination, there are no Commission-Identified Issuers at risk
of having their securities subject to a trading prohibition under the HFCAA.
Given that Ernst and Young LLP (United States) now serves as the principal accountant to audit our consolidated financial
statements to be filed with the SEC, we believe we are compliant with the HFCAA, which should preclude a further finding by
the SEC that we are a Commission-Identified Issuer and therefore the delisting of our American Depositary Shares from the
NASDAQ Global Select Market. For a detailed description of risks related to our doing business in China and status under the
HFCAA, see "Item 1A. Risk Factors - Risks Related to Our Doing Business in the PRC.".
Doing Business in the PRC
As a result of our operations in the PRC, the PRC government may exert influence over our operations at any time, which
could result in a material change in our operations and/or the value of our ADSs, ordinary shares, or RMB Shares. For example,
the PRC government has recently published new policies that significantly affected certain industries such as the education and
internet industries, and we cannot rule out the possibility that it will in the future release regulations or policies regarding any
industry that could adversely affect the business, financial condition and results of operations of our company.
Furthermore, the PRC government has also recently indicated an intent to exert more oversight and control over securities
offerings and other capital markets activities that are conducted outside of China and over foreign investment in China-based
companies. Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to
offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme
cases, become worthless. Recently, the PRC government initiated a series of regulatory actions and statements to regulate
business operations in China, including enforcement actions against illegal activities in the securities market, enhancing
supervision over China-based companies listed outside of China using the variable interest entity structure, adopting new
measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. For example,
in July 2021, the relevant PRC government authorities made public the Opinions on Intensifying Crack-Down on Illegal
Securities Activities (the "Securities Opinions") which emphasized the need to strengthen the administration over illegal
securities activities and the supervision on overseas listings by China-based companies and proposed to take measures, such as
promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-
listed companies. In November 2021, the Cyberspace Administration of China (the “CAC”) released the draft Administrative
Regulations on Cyber Data Security for public comments, which requires, among others, that a prior cybersecurity review
should be required for listing abroad of data processors which process over one million users’ personal information, and the
listing of data processors in Hong Kong which affects or may affect national security. On February 17, 2023, the CSRC
released the Overseas Listing Trial Measures, and five relevant guidelines, which will take effect from March 31, 2023,
requiring the Chinese domestic companies’ overseas offerings and listings of equity securities be filed with the CSRC.
The Chinese government may further promulgate relevant laws, rules and regulations that may impose additional and
significant obligations and liabilities on overseas listed PRC companies regarding data security, cross-border data flow, anti-
monopoly and unfair competition, and compliance with China’s securities laws. It is uncertain whether or how these new laws,
rules and regulations and the interpretation and implementation thereof may affect us, but among other things, our ability to
obtain external financing through the issuance of equity securities in the United States, Hong Kong or other markets could be
negatively affected, and as a result, the trading prices of our ADSs, ordinary shares and RMB Shares could significantly decline
or become worthless. For a detailed description of risks related to our doing business in China, please see the section of this
Annual Report titled “Item 1A. Risk Factors—Risks Related to Our Doing Business in the PRC.”
Flow of Funds with our PRC Operations
We are a holding company incorporated in the Cayman Islands with operations primarily conducted through subsidiaries in
the United States, China, United Kingdom, Switzerland and Australia. The intercompany flow of funds within the organization
is effected through capital contributions and intercompany loans. Since our formation in 2010, BeiGene, Ltd. has raised over
$10.0 billion in various public and private stock offerings as of December 31, 2022. Of this amount, $1.9 billion and RMB 18.6
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billion have been transferred as capital contributions to its operating subsidiaries; and $79 million and RMB 4.4 billion have
been transferred as intercompany loans to its operating subsidiaries. BeiGene, Ltd., by itself or through its affiliates, is also the
holder or licensee and developer of biopharmaceutical patents. Certain of these patents have been transferred to operating
subsidiaries for further development and commercialization. BeiGene’s wholly owned subsidiaries compensate each other for
the intercompany provision of goods and services on an arm’s length basis. As of December 31, 2022, BeiGene, Ltd. held $4.5
billion in cash, cash equivalents and short-term investments which are available for future investment in its programs and in our
operating subsidiaries. To date, BeiGene, Ltd. has not received any dividends or distributions from its operating subsidiaries.
Further, our board of directors has adopted a dividend policy which provides that we currently intend to retain all available
funds and earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash
dividends in the foreseeable future. Subject to applicable law and our amended and restated articles of association, any future
determination to pay dividends will be made at the discretion of our board of directors and may be based on a number of
factors, including our future operations and earnings, capital requirements and surplus, general financial condition, contractual
restrictions and other factors that our board of directors may deem relevant. This dividend policy reflects our board of directors’
current views on our financial and cash flow position. We intend to continue to review our dividend policy from time to time,
and there can be no assurance that dividends will be paid in any particular amount, if at all, for any given period.
We have never declared or paid any dividends on our ordinary shares or any other securities. If we pay dividends in the
future, in order for us to distribute dividends to our shareholders and holders of ADSs, we may rely to some extent on dividends
distributed by our PRC subsidiaries. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us, and
such distributions will be subject to PRC withholding tax. In addition, PRC regulations currently permit payment of dividends
of a PRC company only out of accumulated distributable after-tax profits, as determined in accordance with our articles of
association and the accounting standards and regulations in the PRC.
We may rely on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing
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 their own behalf in the future, the instruments governing the
debt may restrict their ability to pay dividends or make other distributions to us. Under PRC laws and regulations, our PRC
subsidiaries may pay dividends only out of their respective accumulated profits as determined in accordance with PRC
accounting standards and regulations. In addition, a wholly foreign-owned enterprise 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 aggregate amount 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 and bonus fund. In addition, registered share capital and capital reserve accounts are also
restricted from withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary. As of December 31,
2022, these restricted assets totaled $3.5 billion.
Our PRC subsidiaries generate primarily all of their revenue in RMB, which is not freely convertible into other currencies.
As a result, any restriction on currency exchange may limit the ability of our PRC subsidiaries to use their RMB revenues to
pay dividends to us. However, conversion of RMB to other currencies are permitted for the purpose of dividends according to
the PRC’s regulations on Foreign Exchange Control.
Further, in response to the persistent capital outflow in the PRC and RMB’s depreciation against the U.S. dollar in the
fourth quarter of 2016, the People’s Bank of China and the SAFE promulgated a series of capital control measures, including
stricter vetting procedures for domestic companies to remit foreign currency for overseas investments, dividends payments and
shareholder loan repayments. Such measures were relaxed in mid-2017 with the slowdown of the capital outflow and stabilizing
of the RMB. However, the PRC government may revert to strengthen its capital controls, and more restrictions and substantial
vetting process may be put forward by the SAFE for cross-border transactions falling under both the current account and the
capital account. Any limitation on the ability of our PRC subsidiaries to pay dividends or make other kinds of payments to us
could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our
business, pay dividends, or otherwise fund and conduct our business.
The PRC Enterprise Income Tax Law and its implementation rules provide that China-sourced income of foreign
enterprises, such as dividends paid by a PRC subsidiary to its equity holders that are non-PRC resident enterprises, will
normally be subject to PRC withholding tax at a rate of 10%, unless any such foreign investor’s jurisdiction of incorporation
has a tax treaty with China that provides for a reduced withholding rate arrangement and such non-PRC resident enterprises
constitute the beneficiary of such income.
Pursuant to an arrangement between Mainland China and the Hong Kong Special Administrative Region and relevant tax
regulations of the PRC, subject to certain conditions, a reduced withholding tax rate of 5% will be available for dividends from
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PRC entities provided that the recipient can demonstrate it is a Hong Kong tax resident and it is the beneficial owner of the
dividends. The government adopted regulations in 2018 which stipulate that in determining whether a non-resident enterprise
has the status as a beneficial owner, comprehensive analysis shall be conducted based on the factors listed therein and the actual
circumstances of the specific case shall be taken into consideration. Specifically, it expressly excludes an agent or a designated
payee from being considered as a “beneficial owner.” We own the PRC subsidiaries through BeiGene HK. BeiGene HK
currently does not hold a Hong Kong tax resident certificate from the Inland Revenue Department of Hong Kong, and there is
no assurance that the reduced withholding tax rate will be available.
Permissions Required from the PRC Authorities for Our Operations
We conduct our business in the PRC through our PRC subsidiaries. Our operations in the PRC are governed by PRC laws
and regulations. As of the date of this annual report, our PRC subsidiaries have obtained all requisite licenses and permits from
the PRC government authorities that are material for their business operations in the PRC, including, among others, business
licenses issued by local counterparts of the SAMR, drug manufacturing licenses, drug trade license, CTAs, drug registration
certificates, licenses for use of experimental animals, pollutant discharge licenses and permits for urban sewage discharge into
drainage pipe network. No material permissions have been denied to us by relevant government authorities in China. As of the
date of this annual report, we do not operate our businesses in China or elsewhere through variable interest entities, or VIEs,
and therefore are not subject to risks associated with contractual arrangements with VIEs. As of the date of this annual report,
we have not received any inquiry, notice, warning, or sanctions regarding our business operations and corporate structure from
the CSRC, CAC or any other PRC governmental agency that would have a material impact on our business, results of
operations or financial condition. However, given the uncertainties of interpretation and implementation of relevant laws and
regulations and the enforcement practice by government authorities, we cannot assure you that we have obtained all the permits
or licenses required for conducting our business in the PRC. If (i) we have inadvertently concluded that such permissions,
approvals, licenses or permits have been acquired or are not required, or (ii) applicable laws, regulations, or interpretations
change and we are required to obtain such permissions, approvals, licenses or permits in the future, then we may have to expend
time and costs to procure them. If we are unable to do so on commercially reasonable terms or in a timely manner, it could
cause significant disruption to our business operations and damage our reputation, which would in turn have a material adverse
effect on our business, results of operations and financial condition.
In connection with our previous issuance of securities to foreign investors in stock markets outside the PRC, under current
PRC laws, regulations and regulatory rules, as of the date of this annual report, we and our PRC subsidiaries, (i) are not
required to obtain permissions from the CSRC, (ii) are not required to go through cybersecurity review by the Cyberspace
Administration of China, or the CAC, and (iii) have not received or were denied such requisite permissions by any PRC
authority. On February 17, 2023, the CSRC released the Overseas Listing Trial Measures and five relevant guidelines, which
will take effect from March 31, 2023. The Overseas Listing Trial Measures require the Chinese domestic companies’ overseas
offerings and listings of equity shares, depositary receipts, convertible bonds, preferred shares or other equity securities be filed
with the CSRC. See “Item 1. Business – Government Regulation – PRC Regulation – Regulations Relating to Overseas
Listing”. If we were deemed as an indirect overseas listed Chinese domestic company subject to the filing requirements under
the Overseas Listing Trial Measures, our offering of equity securities on the NASDAQ Global Select Market or Hong Kong
Stock Exchange in the future would be required to be filed with the CSRC within three working days after the offering is
completed.
As of the date of this annual report, we have not received any inquiry, notice, warning or sanction regarding obtaining
approval, completing filing or other procedures in connection with offering our equity securities in overseas stock markets from
the CSRC or any other PRC governmental or regulatory authorities that have jurisdiction over our operations. However, there
remains significant uncertainty as to the interpretation and implementation of regulatory requirements related to overseas
securities offerings and other capital markets activities, including the Overseas Listing Trial Measures. If it is determined that
filing or other procedure with the CSRC or any other regulatory authority is required for issuing our equity securities in
overseas stock markets, it is uncertain whether we will be able to and how long it would take for us to complete the filing
despite our efforts. If we, for any reason, are unable to complete, or experience significant delays in completing the requisite
filing or other procedure(s), we may face sanctions by the CSRC or other Chinese regulatory authorities as applicable. These
regulatory authorities may impose fines and penalties on our operations in the PRC, limit our ability to pay dividends outside of
China, limit our operations in the PRC, delay or restrict the repatriation of funds into the PRC or take other actions that could
have a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading
price of our ADSs, ordinary shares and RMB Shares.
Cash Management Policies and Procedures
Under our Capitalization and Financing Policy, the frequency and amount of intercompany transfers of funds is determined
based on the working capital needs of our subsidiaries and intercompany transactions, and is subject to internal approval
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processes and funding arrangements. Our management reviews and monitors our cash flow forecast and working capital needs
of our subsidiaries on a regular basis. In addition, capital contributions and intercompany loan arrangements are subject to local
jurisdiction and banking regulations. In this regard, we have not faced difficulties or limitations in our ability to transfer cash
between subsidiaries in any of our operating jurisdictions.
During the normal course of our business, cash is transferred between our subsidiaries via wire transfer to and from bank
accounts to pay certain business expenses. Cash is maintained by BeiGene, Ltd. in its bank account and transferred to its
subsidiaries when necessary to strengthen our business capabilities, such as paying for new office development, or marketing
expenses. In addition, cash may be used by BeiGene, Ltd. to meet corporate expenses such as audit fees, attorneys’ fees, stock
exchange listing fees, IR/PR expenses, research and development costs and corporate administrative support expenses.
Cash is transferred between subsidiaries in the form of capital contributions or through intercompany advances or loans, as
follows:
•
•
Cash may be transferred between BeiGene HK and its operating subsidiaries in mainland China through intercompany
loans and capital contributions, and there are currently no restrictions on transferring funds between BeiGene HK and
its subsidiaries in mainland China. Cash generated from BeiGene HK is used to fund operations of its subsidiaries, and
no funds were transferred from BeiGene HK’s subsidiaries in mainland China to fund operations of other BeiGene
subsidiaries outside of mainland China for the year ended on December 31, 2021 and December 31, 2022. For the year
ended December 31, 2021 and December 31, 2022, the amount of cash transferred between BeiGene HK and its
subsidiaries in mainland China was $44 million and $351 million, respectively.
Cash may be transferred between BeiGene UK and/or BeiGene Switzerland and their respective operating subsidiaries
through intercompany fund advances and capital contributions. There are currently no restrictions on transferring funds
between BeiGene UK or BeiGene Switzerland and their respective operating subsidiaries. Cash generated from
BeiGene UK and BeiGene Switzerland are used to fund operations of their respective subsidiaries, and no funds were
transferred from BeiGene UK’s subsidiaries or from BeiGene Switzerland’s subsidiaries to fund operations of other
BeiGene subsidiaries (such as BeiGene HK and its subsidiaries in mainland China) for the year ended on December
31, 2021 and December 31, 2022. For the year ended December 31, 2021 and December 31, 2022, the amount of cash
transferred between BeiGene UK to its respective subsidiaries was $2 million and $4 million, respectively. For the
years ended December 31, 2021 and December 31, 2022, the amount of cash transferred between BeiGene Switzerland
to its respective subsidiaries was $25 million and $65 million, respectively.
Human Capital Resources
We are committed to attracting and retaining exceptional, passionate people to work with a clear purpose: creating
impactful, affordable and accessible medicines to help more patients around the world to live better. To this end, we support a
team-oriented culture based on excellence that allows all colleagues to feel valued and challenged. We provide opportunities for
employees to grow and develop in their careers, supported by competitive compensation, benefits and health and wellness
programs, and by programs that build connections among our employees worldwide.
We believe that the success of our business is fundamentally connected to the well-being of our employees. Accordingly,
we are committed to their health, safety and wellness. We offer our employees and their families innovative, flexible and
convenient health and wellness programs, including benefits that confer peace of mind around events that may require time
away from work or impact their financial well-being; that support their physical and mental health with tools and resources to
help them improve or maintain their health status and encourage healthy behaviors; and that offer choice where possible so they
can customize benefits to meet their needs and the needs of their families.
In order to support our employees during the COVID-19 pandemic, we implemented significant changes that we
determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with
government regulations. This included initiating a number of mental-health programs and offering supplemental resources that
are available to all of our employees, having our employees work from home and implementing additional safety measures for
employees continuing critical work at our offices or in the field, as well as encouraging employees to adhere to preventative
measures recommended by the World Health Organization, U.S. Centers for Disease Control and Prevention, and similar public
health authorities.
Our worldwide teams are united by a common mission. We are committed to encouraging a culture of open communication
where employees can ask questions, raise concerns and contribute creative solutions. Our management team routinely makes
themselves available to all employees, including in regular town hall events that encourage open dialogue. Fostering a culture
of accountability and compliance is also central to our human resource management. All of our employees complete trainings
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on applicable corporate policies including our global Code of Conduct; Harassment, Discrimination, and Retaliation Policy;
Conflicts of Interest Policy; Insider Trading Policy; and Anti-Corruption Policy.
We strive to provide competitive compensation and benefits programs to help meet the needs of our employees. In addition
to base salaries, these programs include potential annual discretionary bonuses, equity awards, a 401(k) plan in the United
States and pension plans in other jurisdictions, healthcare and insurance benefits, health savings and flexible spending accounts,
paid time off, family leave, and flexible work schedules, among others. In addition to our broad-based equity award programs,
we have used targeted equity-based grants with vesting conditions to facilitate retention of personnel. In addition to
compensation and benefits, we provide our employees opportunities for growth through challenging job assignments,
performance management and training opportunities. We seek to remain competitive in our compensation and benefits by
routinely benchmarking against industry peers.
As part of our mission to create the innovative medicines to serve the patients, we continue to advance our environmental,
social and governance ("ESG") efforts, including enhancing the diversity and inclusiveness of our workplace. We believe that
diversity of backgrounds and ideas inspires creativity and helps us create the innovative medicines patients need. We appreciate
one another’s differences and strengths, and are proud to be an equal opportunity employer. BeiGene does not discriminate on
the basis of race, religion, color, sex, gender identity, sexual orientation, age, non-disqualifying physical or mental disability,
national origin, veteran status or any other basis covered by applicable law. All employment is decided on the basis of
qualifications, merit, and business need. Further, we have policies in place that prohibit harassment of all kinds. We maintain an
inclusive culture where all voices are welcomed, heard, and respected.
As of January 31, 2023, we had approximately 9,200 full-time employees worldwide, with approximately 1,300 employees
in the United States and approximately 7,900 employees outside of the United States. We have also engaged and may continue
to engage independent contractors to assist us with our operations. None of our employees are represented by a labor union or
covered by a collective bargaining agreement, except as required by local laws such as in some European countries. We have
never experienced any employment-related work stoppages, we also track voluntary and involuntary turnover rates and we
consider our relations with our employees to be good.
Environmental, Social and Governance Strategy
BeiGene’s mission is to expand access to high-quality, affordable medicines to billions more people globally. We are
driven to deliver affordable medicines to all and create a more equitable and sustainable world for our patients, employees, and
our communities. In 2022, we announced our global ESG strategy, Change Is the Cure, which guides our efforts across five
focus areas: advancing global health, empowering people, innovating sustainably, supporting communities, and operating
responsibly. Within each focus area, we have identified two strategic priorities against which we have set concrete targets. We
will report our progress against these targets and announce new goals in our 2022 ESG Report which will be published in late
April 2023.
While we are at the start of our ESG journey, we are proud of the progress we have made to date. We joined the United
Nations Global Compact in 2022 and have aligned our efforts with UN Sustainable Development Goals. In 2022, we announced
new measures to understand and further mitigate our climate impacts. We will share progress on those measures and announce
new targets in our 2022 ESG Report.
We know that access to oncology treatments lags in many parts of the world, particularly in low-income countries. To help
close this health equity gap, BeiGene became a founding member of the Union for International Cancer Control’s Access to
Oncology Medicines Coalition which focuses on improving access to innovative medicines in lower-income countries and
supporting them in developing the capacity to provide proper treatment for patients.
We believe that our people are critical to our success and, as a global company, we know that sharing diverse ideas and
perspectives spurs greater innovation and enhances our ability to deliver results. Our culture celebrates and encourages the
voices of all our employees and promotes a respectful, collaborative environment. In 2020, we formed the Inclusion, Diversity,
Equity, and Awareness (“IDEA”) Council to provide a forum for U.S. employees to explore issues of diversity, equity,
inclusion, and belonging. Introduced first in the U.S., the IDEA Council is now global, with members in geographies including
Canada, Europe, China, and Australia. In 2022, we completed a three-year diversity, equity, inclusion and belonging strategy.
Details will be shared in our 2022 ESG Report.
In addition to directly supporting patients through the delivery of cutting-edge therapies, we strive to support our
communities through research, education, and sponsorships. We support patient advocacy organizations, charitable foundations,
and hospitals through cash and in-kind donations.
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More details about our ESG strategy, goals and progress to date will be available in our 2022 ESG Report, which will be
developed with reference to the Global Reporting Initiative Standards and published in late April 2023. Our previous ESG
Reports can be found online at: https://hkexir.beigene.com/governance/esg-report/.
Financial Information
The financial information required under this Item 1 is incorporated herein by reference to the section of this Annual
Report titled “Part II-Item 8-Financial Statements and Supplementary Data.” For financial information regarding our business,
please see the section of this Annual Report titled “Part II-Item 7-Management’s Discussion and Analysis of Financial
Condition and Results of Operations” of this Annual Report and our consolidated audited financial statements and related notes
included elsewhere in this Annual Report.
Corporate Information
We are an exempted company incorporated in the Cayman Islands with limited liability on October 28, 2010. Any
company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be
registered as an exempted company. Our current registered office in the Cayman Islands is located at the offices of Mourant
Governance Services (Cayman) Limited, 94 Solaris Avenue, Camana Bay, Grand Cayman KY1-1108, Cayman Islands. Our
website address is www.beigene.com. We do not incorporate the information on or accessible through our website into this
Annual Report, and you should not consider any information on, or that can be accessed through, our website as part of this
Annual Report.
We own various registered trademarks, trademark applications and unregistered trademarks and service marks, including
the name "BeiGene" and our corporate logo. All other trade names, trademarks and service marks of other companies appearing
in this Annual Report are the property of their respective holders. Solely for convenience, some of the trademarks and trade
names in this document are referred to without the ® and ™ symbols, but such references should not be construed as any
indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not
intend our use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or
sponsorship of us by, any other companies.
Available Information
We make available on or through our website certain reports and amendments to those reports that we file with or furnish
to the SEC, in accordance with the Exchange Act. These include our annual reports on Form 10-K, our quarterly reports on
Form 10-Q, and our current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a)
or 15(d) of the Exchange Act. We also make available, free of charge on our website, the reports filed with the SEC by our
executive officers, directors and 10% shareholders pursuant to Section 16 under the Exchange Act. Additionally, we make
available on our website our securities filings with the HKEx and the Shanghai Stock Exchange. We make this information
available on or through our website free of charge as soon as reasonably practicable after we electronically file the information
with, or furnish it to, the SEC, the HKEx, and the SSE. We use our website as a means of disclosing material non-public
information and for complying with our disclosure obligations under Regulation FD.
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Item 1A. Risk Factors
The following section includes material factors that we believe may adversely affect our business and operations. You
should carefully consider the risks and uncertainties described below and all information contained in this Annual Report,
including our financial statements and the related notes and “Part II-Item 7-Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” before deciding to invest in our ADSs, ordinary shares, or RMB Shares. The
occurrence of any of the events or developments described below could harm our business, financial condition, results of
operations, and growth prospects. In such an event, the market price of our ADSs, ordinary shares, and RMB Shares could
decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we
currently deem immaterial also may impair our business operations. Please refer to the explanation of the qualifications and
limitation on forward-looking statements set forth on page 1 hereof.
Risks Related to Clinical Development and Commercialization of Our Medicines and Drug Candidates
Our medicines may fail to achieve and maintain the degree of market acceptance by physicians, patients, third-party payors,
and others in the medical community necessary for commercial success.
Our medicines may fail to achieve and maintain sufficient market acceptance by physicians, patients, third-party payors,
and others in the medical community. For example, current cancer treatments like chemotherapy and radiation therapy are well
established in the medical community, and doctors may continue to rely on these treatments to the exclusion of our medicines.
If our medicines do not achieve and maintain an adequate level of market acceptance, the sales of our medicines may be limited
and we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of
our medicines will depend on a number of factors, including: the clinical indications for which our medicines are approved;
physicians, hospitals, cancer treatment centers, and patients considering our medicines safe and effective; government agencies,
professional societies, practice management groups, insurance carriers, physicians’ groups, private health and science
foundations, and organizations recommending our medicines and reimbursement; the perceived advantages and relative cost of
alternative treatments; the prevalence and severity of any side effects; product labeling, including limitations or warnings, or
product insert requirements of regulatory authorities; the timing of market introduction of our medicines as well as competitive
medicines; the availability of adequate coverage, reimbursement and pricing by third-party payors and government authorities;
and the effectiveness of our sales and marketing efforts.
Even if our medicines achieve market acceptance, we may not be able to maintain that market acceptance over time if new
products or technologies are introduced that are more favorably received than our medicines, are more cost effective or render
our medicines obsolete.
We have limited experience in launching and marketing our internally developed and in-licensed medicines. If we are
unable to further develop marketing and sales capabilities or enter into agreements with third parties to market and sell our
medicines, we may not be able to generate substantial product sales revenue.
We became a commercial-stage company in 2017, when we entered into a license and supply agreement with Celgene
Logistics Sàrl, now a Bristol Myers Squibb Company ("BMS"), to commercialize three of BMS’s approved cancer therapies, in
the People's Republic of China ("PRC" or "China"). In October 2019, we entered into a collaboration with Amgen for its
commercial-stage oncology products and a portfolio of clinical- and late-preclinical-stage oncology pipeline products. We
received the first approvals for our internally developed drug candidates in late 2019 in the United States, in 2020 in China, and
in 2021 in Europe. Given this, we have limited experience in commercializing our internally developed and in-licensed
medicines, including building and managing a commercial team, conducting a comprehensive market analysis, obtaining state
licenses and reimbursement, and managing distributors and a sales force for our medicines. As a result, our ability to
successfully commercialize our medicines may involve more inherent risk, take longer, and cost more than it would if we were
a company with substantial experience in launching medicines.
If we are unable to, or decide not to, further develop internal sales, marketing, and commercial distribution capabilities for
any or all of our medicines in any country or region, we will likely pursue collaborative arrangements regarding the sales and
marketing of our medicines. However, there can be no assurance that we will be able to establish or maintain such collaborative
arrangements, or if we are able to do so, that they will have effective sales forces. We would have little or no control over the
marketing and sales efforts of such third parties, and our revenue from product sales may be lower than if we had
commercialized our medicines ourselves.
There can be no assurance that we will be able to further develop and successfully maintain internal sales and commercial
distribution capabilities or establish or maintain relationships with third-party collaborators to successfully commercialize any
medicine, and as a result, we may not be able to generate substantial product sales revenue.
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We face substantial competition, which may result in others discovering, developing, or commercializing competing
medicines before or more successfully than we do.
The development and commercialization of new medicines is highly competitive. We face competition from major
pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number
of large pharmaceutical and biotechnology companies that currently market and sell medicines or are pursuing the development
of medicines for the treatment of cancer for which we are commercializing our medicines or developing our drug candidates.
For example, BRUKINSA, tislelizumab, and pamiparib face substantial competition, and some of our products face or are
expected to face competition from generic therapies. Potential competitors also include academic institutions, government
agencies and other public and private research organizations that conduct research, seek patent protection and establish
collaborative arrangements for research, development, manufacturing, and commercialization.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize medicines that
are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than our medicines.
Our competitors also may obtain approval from regulatory authorities for their medicines more rapidly than we may obtain
approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the
market and/or slow our regulatory approval.
Many of the companies against which we are competing or against which we may compete in the future have significantly
greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical
trials, obtaining regulatory approvals and marketing approved medicines than we do. Mergers and acquisitions in the
pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of
our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies. These third parties compete with us in recruiting and
retaining qualified scientific, management and marketing personnel, establishing clinical trial sites and patient registration for
clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
The market opportunities for our medicines may be limited to those patients who are ineligible for or have failed prior
treatments and may be small.
In markets with approved therapies, we have and expect to initially seek approval of our drug candidates as a later stage
therapy for patients who have failed other approved treatments. Subsequently, for those medicines that prove to be sufficiently
beneficial, if any, we would expect to seek approval as a second-line therapy and potentially as a first-line therapy, but there is
no guarantee that our medicines and drug candidates, even if approved, would be approved for second-line or first-line therapy.
Our projections of both the number of people who have the diseases we are targeting, as well as the subset of people with
these diseases in a position to receive later stage therapy and who have the potential to benefit from treatment with our
medicines and drug candidates, may prove to be inaccurate or based on imprecise data. Further, new studies may change the
estimated incidence or prevalence of these cancers. The number of patients may turn out to be lower than expected.
Additionally, the potentially addressable patient population for our medicines and drug candidates may be limited or may not be
amenable to treatment with our medicines and drug candidates. Even if we obtain significant market share for our medicines
and drug candidates, because the potential target populations are small, we may never achieve profitability without obtaining
regulatory approval for additional indications, including use as a first- or second-line therapy.
If we or any third parties with which we may collaborate to market and sell our medicines are unable to achieve and
maintain coverage and adequate levels of reimbursement, our commercial success and business operations could be
adversely affected.
Our ability or the ability of any third parties with which we collaborate to commercialize our medicines successfully will
depend in part on the extent to which reimbursement for these medicines is available on adequate terms, or at all, from
government health administration authorities, private health insurers and other organizations. In the United States and markets
in other countries, patients generally rely on third-party payors to reimburse all or part of the costs associated with their
treatment. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and
commercial payors is critical to new product acceptance. Sales of our medicines will depend substantially, both domestically
and abroad, on the extent to which the costs of our medicines will be paid by health maintenance, managed care, pharmacy
benefit and similar healthcare management organizations, or reimbursed by government health administration authorities,
private health coverage insurers and other third-party payors. Without third-party payor reimbursement, patients may not be
able to obtain or afford prescribed medications. Third-party payors also are seeking to encourage the use of generic or
biosimilar products or entering into sole source contracts with healthcare providers, which could effectively limit the coverage
and level of reimbursement for our medicines and have an adverse impact on the market access or acceptance of our medicines.
In addition, reimbursement guidelines and incentives provided to prescribing physicians by third party payors may have a
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significant impact on the prescribing physicians’ willingness and ability to prescribe our products. For additional information,
please see the section of this Annual Report titled “Part I —Item 1 — Business — Government Regulation — Pharmaceutical
Coverage, Pricing, and Reimbursement.”
A primary trend in the global healthcare industry is cost containment. Government authorities and these third-party payors
have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications.
In the United States, no uniform policy of coverage and reimbursement for drugs exists among third-party payors. As a
result, obtaining coverage and reimbursement approval of a drug from a government or other third-party payor is a time-
consuming and costly process that could require us to provide to each payor supporting scientific, clinical and cost-
effectiveness data for the use of our medicines on a payor-by-payor basis, with no assurance that coverage and adequate
reimbursement will be obtained. The principal decisions about reimbursement for new medicines are typically made by the
Centers for Medicare and Medicaid Services (the "CMS"). They decide whether and to what extent a new medicine will be
covered and reimbursed under Medicare and private payors tend to follow CMS to a substantial degree. Factors payors consider
in determining reimbursement are based on whether the product is: a covered benefit under its health plan; safe, effective and
medically necessary; appropriate for the specific patient; cost-effective; and neither experimental nor investigational.
Coverage may be more limited than the purposes for which the medicine is approved by the FDA or comparable regulatory
authorities in other countries. Even if we obtain coverage for a given medicine, the resulting reimbursement rates might not be
adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high.
Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up evaluations
required following the use of our medicines. Patients are unlikely to use our medicines unless coverage is provided and
reimbursement is adequate to cover a significant portion of the cost of the medicine. Because some of our medicines and drug
candidates have a higher cost of goods than conventional therapies and may require long-term follow-up evaluations, the risk
that coverage and reimbursement rates may be inadequate for us to achieve profitability may be greater.
Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or
private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be
sold at lower prices than in the United States. Furthermore, payment methodologies may be subject to changes in healthcare
legislation and regulatory initiatives.
We cannot be sure that reimbursement will be available for any product candidate that we commercialize and, if
reimbursement is available, the level of reimbursement. In addition, many pharmaceutical manufacturers must calculate and
report certain price reporting metrics to the government, such as average sales price and best price. Penalties may apply in some
cases when such metrics are not submitted accurately and timely.
In China, drug prices are typically lower than in the United States and Europe, and until recently, the market has been
dominated by generic drugs. Government authorities regularly review the inclusion or removal of medicines from China’s
National Drug Catalog for Basic Medical Insurance, Work-related Injury Insurance and Maternity Insurance, or the National
Reimbursement Drug List (the "NRDL"), or provincial or local medical insurance catalogues for the National Medical
Insurance Program, and the tier under which a medicine will be classified, both of which affect the amounts reimbursable to
program participants for their purchases of those medicines. There can be no assurance that our medicines and any approved
drug candidates will be included in the NRDL or provincial reimbursements lists, or if they are, that they will be included at a
price that allows us to be commercially successful. Products included in the NRDL have typically been generic and essential
drugs. Innovative drugs similar to our medicines and drug candidates have historically been more limited on their inclusion in
the NRDL due to the affordability of the government’s Basic Medical Insurance, although this has been changing in recent
years. For example, BRUKINSA, tislelizumab, pamiparib and XGEVA have been included in the NRDL. While the demand for
these medicines has generally increased after inclusion in the NRDL, there can be no assurance that demand will continue to
increase and such increases will be sufficient to offset the reduction in the prices and our margins, which could have a material
adverse effect on our business, financial condition and results of operations. We prepare for the NRDL negotiations in China
for our eligible medicines/indications annually. If any of these medicines/indications are not included in the NRDL or included
at a significantly lower price, the revenues for such medicines could be limited, which could have a material adverse effect on
our business, financial condition and results of operations.
Increasingly, third-party payors are requiring that companies provide them with predetermined discounts from list prices
and are challenging the prices charged for medical products. We cannot be sure that reimbursement will be available for any
medicine that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Reimbursement
may impact the demand for, or the price of, any medicine which we commercialize. Obtaining or maintaining reimbursement
for our medicines may be particularly difficult because of the higher prices often associated with medicines administered under
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the supervision of a physician. If reimbursement is not available or is available only to limited levels, we may not be able to
successfully commercialize any medicine and drug candidate that we in-license or successfully develop.
There may be significant delays in obtaining reimbursement for approved medicines, and coverage may be more limited
than the purposes for which the medicine is approved by regulatory authorities. Moreover, eligibility for reimbursement does
not imply that any medicine will be paid for in all cases or at a rate that covers our costs, including research, development,
manufacture, sale and distribution. Interim payments for new medicines, if applicable, may also not be sufficient to cover our
costs and may not be made permanent. Payment rates may vary according to the use of the medicine and the clinical setting in
which it is used, may be based on payments allowed for lower cost medicines that are already reimbursed, and may be
incorporated into existing payments for other services. Net prices for medicines may be reduced by mandatory discounts or
rebates required by government healthcare programs or private payors and by any future weakening of laws that presently
restrict imports of medicines from countries where they may be sold at lower prices than in the United States. Our inability to
promptly obtain coverage and profitable payment rates from both government-funded and private payors for our medicines and
any new medicines that we develop could have a material adverse effect on our business, our operating results, and our overall
financial condition.
We intend to seek approval to market our medicines and drug candidates in the United States, China, Europe and in other
jurisdictions. In some countries, such as those in Europe, the pricing of drugs and biologics is subject to governmental control,
which can take considerable time even after obtaining regulatory approval. Market acceptance and sales of our medicines will
depend significantly on the availability of adequate coverage and reimbursement from third-party payors for our medicines and
may be affected by existing and future health care reform measures.
We have operations in the United States, China, Europe, and other markets and plan to expand in these and new markets on
our own or with collaborators, which exposes us to risks of conducting business in international markets.
We are currently developing and commercializing or plan to commercialize our medicines in international markets,
including China, Europe and other markets outside of the United States, either on our own or with third party collaborators or
distributors. Our international business relationships subject us to additional risks that may materially adversely affect our
ability to attain or sustain profitable operations, including:
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efforts to enter into collaboration or licensing arrangements with third parties in connection with our international
sales, marketing and distribution efforts may increase our expenses or divert our management’s attention from the
acquisition or development of drug candidates;
difficulty of effective enforcement of contractual provisions in local jurisdictions;
potential third-party patent rights or potentially reduced protection for intellectual property rights;
unexpected changes in tariffs, trade barriers and regulatory requirements, including the loss of normal trade status
between China and the United States or actions taken by U.S. or China governmental authorities on companies with
significant operations in the U.S. and China, such as us;
economic weakness, including inflation;
compliance with tax, employment, immigration and labor laws for employees traveling abroad;
the effects of applicable non-U.S. tax structures and potentially adverse tax consequences;
currency fluctuations, which could result in increased operating expenses and reduced revenue;
workforce uncertainty and labor unrest;
failure of our employees and contracted third parties to comply with Office of Foreign Asset Control rules and
regulations and the Foreign Corrupt Practices Act and other anti-bribery and corruption laws; and
business interruptions resulting from geo-political actions, including trade disputes, war and terrorism, disease or
public health pandemics, such as COVID-19, or natural disasters, including earthquakes, volcanoes, typhoons, floods,
hurricanes and fires.
These and other risks, including the risks described in "Risks Related to Our Doing Business in the PRC", may materially
adversely affect our ability to attain or sustain revenue in international markets.
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The illegal distribution and sale by third parties of counterfeit versions of our medicines or stolen products could have a
negative impact on our reputation and business.
Third parties might illegally distribute and sell counterfeit or unfit versions of our medicines, which do not meet our or our
collaborators’ rigorous manufacturing and testing standards. A patient who receives a counterfeit or unfit medicine may be at
risk for a number of dangerous health consequences. Our reputation and business could suffer harm as a result of counterfeit or
unfit medicines sold under our or our collaborators’ brand name(s). In addition, thefts of inventory at warehouses, plants or
while in- transit, which are not properly stored and which are sold through unauthorized channels, could adversely impact
patient safety, our reputation and our business.
We depend substantially on the success of the clinical development of our medicines and drug candidates. If we are unable
to successfully complete clinical development, obtain regulatory approvals and commercialize our medicines and drug
candidates, or experience significant delays in doing so, our business will be materially harmed.
Our business depends on the successful development, regulatory approval and commercialization of our medicines and
other drug candidates we may develop. We have invested a significant portion of our efforts and financial resources in the
development of our medicines and drug candidates. The success of our medicines and drug candidates depends on several
factors, including:
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successful enrollment in, and completion of, clinical trials, as well as completion of preclinical studies;
favorable safety and efficacy data from our clinical trials and other studies;
receipt of regulatory approvals;
the performance by contract research organizations ("CROs") or other third parties we may retain of their duties to us
in a manner that complies with our protocols and applicable laws and that protects the integrity of the resulting data;
obtaining and maintaining patent, trade secret and other intellectual property protection and regulatory exclusivity;
ensuring that we do not infringe, misappropriate or otherwise violate the valid patent, trade secret or other intellectual
property rights of third parties;
successfully launching our medicines and drug candidates, if and when approved;
obtaining favorable reimbursement from third-party payors for our medicines and drug candidates, if and when
approved;
competition with other products;
continued acceptable safety profile following regulatory approval; and
• manufacturing or obtaining sufficient supplies of our medicines, drug candidates and any competing drug products that
may be necessary for use in clinical trials for evaluation of our drug candidates and commercialization of our
medicines.
If we do not achieve and maintain one or more of these factors in a timely manner or at all, we could experience significant
delays in our ability or be unable to obtain additional regulatory approvals for and/or to successfully commercialize our
medicines and drug candidates, which would materially harm our business and we may not be able to generate sufficient
revenues and cash flows to continue our operations.
Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and
trials may not be predictive of future trial results.
Clinical development is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure
can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our drug
candidates may not be predictive of the results of later-stage clinical trials, and initial or interim results of a trial may not be
predictive of the final results. Drug candidates in later stages of clinical trials may fail to show the desired safety and efficacy
traits despite having progressed through preclinical studies and initial clinical trials. In some instances, there can be significant
variability in safety and/or efficacy results between different trials of the same drug candidate due to numerous factors,
including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, including
genetic differences, patient adherence to the dosing regimen and other trial protocol elements and the rate of dropout among
clinical trial participants. In the case of any trials we conduct, results may differ from earlier trials due to the larger number of
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clinical trial sites and additional countries involved in such trials. A number of companies in our industry have suffered
significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising
results in earlier trials. Our future clinical trial results may not be favorable.
Even if our future clinical trial results show favorable efficacy and durability of anti-tumor responses, not all patients may
benefit. For certain drugs, including checkpoint inhibitors, and in certain indications, it is likely that the majority of patients
may not respond to the agents at all, some responders may relapse after a period of response, and certain tumor types may
appear particularly resistant.
If clinical trials of our drug candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or
do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be
unable to complete, the development and commercialization of our drug candidates.
Before obtaining regulatory approval for the sale of our drug candidates, we must conduct extensive clinical trials to
demonstrate the safety and efficacy of our drug candidates in humans. We may experience numerous unexpected events during,
or as a result of, clinical trials that could delay or prevent our ability to receive regulatory approval or commercialize our drug
candidates, including but not limited to: regulators, institutional review boards ("IRBs"), or ethics committees may not
authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; our inability to
reach agreements on acceptable terms with CROs and trial sites, the terms of which can be subject to extensive negotiation and
may vary significantly; manufacturing issues, including problems with manufacturing, supply quality, compliance with GMP,
or obtaining sufficient quantities of a drug candidate for use in a clinical trial or for commercialization; clinical trials of our
drug candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct
additional clinical trials or abandon drug development programs; the number of patients required for clinical trials of our drug
candidates may be larger than we anticipate, enrollment may be insufficient or slower than we anticipate or patients may drop
out at a higher rate than we anticipate; our third-party contractors, including clinical investigators, may fail to comply with
regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; we might have to suspend or
terminate clinical trials of our drug candidates for various reasons, including a finding of a lack of clinical response or other
unexpected characteristics or a finding that participants are being exposed to unacceptable health risks; regulators, IRBs or
ethics committees may require that we or our investigators suspend or terminate clinical research or not rely on the results of
clinical research for various reasons, including noncompliance with regulatory requirements; the cost of clinical trials of our
drug candidates may be greater than we anticipate; and the supply or quality of our medicines and drug candidates, companion
diagnostics or other materials necessary to conduct clinical trials of our drug candidates or commercialization of our medicines
may be insufficient or inadequate.
If we are required to conduct additional clinical trials or other testing of our drug candidates beyond those that we currently
contemplate, if we are unable to successfully complete clinical trials of our drug candidates or other testing, if the results of
these trials or tests are not positive or are only modestly positive or if they raise safety concerns, we may be delayed in
obtaining regulatory approval for our drug candidates, or not obtain regulatory approval at all; obtain approval for indications
that are not as broad as intended; have the drug removed from the market after obtaining regulatory approval; be subject to
additional post-marketing testing requirements; be subject to warning labels or restrictions on how the drug is distributed or
used; or be unable to obtain reimbursement or obtain reimbursement at a commercially viable level for use of the drug.
Significant clinical trial delays may also increase our development costs and could shorten any periods during which we
have the exclusive right to commercialize our drug candidates or allow our competitors to bring drugs to market before we do.
This could impair our ability to commercialize our drug candidates and may harm our business and results of operations.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or
otherwise adversely affected.
The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to
enroll a sufficient number of patients who remain in the trial until its conclusion. We have and may continue to experience
difficulties in patient enrollment in our clinical trials for a variety of reasons, including the size and nature of the patient
population and the patient eligibility criteria defined in the protocol, competition from competing companies, and natural
disasters or public health epidemics, such as the COVID-19 pandemic.
Our clinical trials will likely compete with other clinical trials for drug candidates that are in the same therapeutic areas as
our drug candidates, and this competition will reduce the number and types of patients available to us, because some patients
who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors.
Because the number of qualified clinical investigators and clinical trial sites is limited, we expect to conduct some of our
clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are
available for our clinical trials at such clinical trial sites. Even if we are able to enroll a sufficient number of patients in our
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clinical trials, delays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned
clinical trials, which could delay or prevent completion of these trials and adversely affect our ability to advance the
development of our drug candidates.
Risks Related to Regulatory Approval and Extensive Government Regulation
All material aspects of the research, development, manufacturing and commercialization of pharmaceutical products are
heavily regulated, and we may face difficulties in complying with or be unable to comply with such regulations, which could
have a material adverse effect on our business.
All jurisdictions in which we conduct or intend to conduct our pharmaceutical-industry activities regulate these activities in
great depth and detail. We are currently focusing our activities in the major markets of the United States, China, Europe, and
other select countries and regions. These geopolitical areas all strictly regulate the pharmaceutical industry, and in doing so they
employ broadly similar regulatory strategies, including regulation of product development and approval, manufacturing, and
marketing, sales and distribution of products. However, there are differences in the regulatory regimes-some minor, some
significant-that make for a more complex and costly regulatory compliance burden for a company like ours that plans to operate
in each of these regions. Additionally, the NMPA’s reform of the medicine and approval system may face implementation
challenges. The timing and full impact of such reforms is uncertain and could prevent us from commercializing our medicines
and drug candidates in a timely manner.
The process of obtaining regulatory approvals and compliance with appropriate laws and regulations require the
expenditure of substantial time and financial resources. Failure to comply with the applicable requirements at any time during
the product development process, approval process, or after approval, may subject us to administrative or judicial sanctions.
These sanctions could include a regulator’s refusal to approve pending applications, withdrawal of an approval, license
revocation, a clinical hold, voluntary or mandatory product recalls, product seizures, total or partial suspension of production or
distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties. The
failure to comply with these regulations could have a material adverse effect on our business. For example, on March 25, 2020,
the NMPA suspended the importation, sales and use of ABRAXANE® in China supplied to us by BMS, and the drug was
subsequently recalled by BMS and is not currently available for sale in China. This suspension was based on inspection
findings at BMS’s contract manufacturing facility in the United States. We have not had any sales of ABRAXANE since the
suspension and do not expect future revenue from ABRAXANE. For additional information, please see the section of this
Annual Report titled “Legal Proceedings”. Additionally, although we have obtained regulatory approvals of our medicines,
regulatory authorities could suspend or withdraw these approvals. In any event, the receipt of regulatory approval does not
assure the success of our commercialization efforts for our medicines.
We may be subject to anti-kickback, false claims laws, physician payment transparency laws, fraud and abuse laws or
similar healthcare and security laws and regulations in the United States and other jurisdictions, which could expose us to
criminal sanctions, civil penalties, contractual damages, reputational harm and diminished sales.
Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any products for
which we obtain regulatory approval. Our operations are subject to various federal and state fraud and abuse laws, including,
without limitation, the federal Anti-Kickback Statute, the federal False Claims Act ("FCA"), and physician payment sunshine
laws and regulations. These laws may impact, among other things, our proposed sales, marketing and education programs. In
addition, we are subject to patient privacy regulation by both the federal government and the states in which we conduct our
business.
Additionally, we are subject to state equivalents of each of the healthcare laws described above, among others, some of
which may be broader in scope and may apply to healthcare services reimbursed by any third-party payor, not just
governmental payors, but also private insurers. These laws are enforced by various state agencies and through private actions.
Some states have passed laws that require pharmaceutical companies to comply with the April 2003 Office of Inspector General
Compliance Program Guidance for Pharmaceutical Manufacturers and/or other voluntary industry codes of conduct that restrict
the payments made to healthcare providers and other potential referral sources. Several states and local laws also impose other
marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state, require drug
manufacturers to report information related to payments and other transfers of value to physicians and other healthcare
providers, and require the registration of pharmaceutical sales representatives. In addition, the approval, commercialization, and
other activities for our medicines and drug candidates outside the United States subjects us to non-U.S. equivalents of the
healthcare laws such as those mentioned above, among other non-U.S. laws. As with the state equivalents mentioned above,
some of these non-U.S. laws may be broader in scope. There are ambiguities as to what is required to comply with these state
requirements, and if we fail to comply with an applicable state law requirement, we could be subject to penalties.
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It is possible that we may make grants to independent charitable foundations that help financially needy patients with their
premium, co-pay, and co-insurance obligations. If we choose to do so, and if we or our vendors or donation recipients are
deemed to fail to comply with relevant laws or regulations in the operation of these programs, we could be subject to damages,
fines, penalties, or other criminal, civil, or administrative sanctions or enforcement actions. We cannot ensure that our
compliance controls and procedures will be sufficient to protect against acts of our employees, business partners, or vendors
that may violate the laws or regulations of the jurisdictions in which we operate. Regardless of whether we have complied with
the law, a government investigation could impact our business practices, harm our reputation, divert the attention of
management, increase our expenses, and reduce the availability of foundation support for our patients who need assistance.
Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including penalties, fines and/or
exclusion or suspension from federal and state healthcare programs such as Medicare and Medicaid and debarment from
contracting with the U.S. government. In addition, private individuals have the ability to bring actions on behalf of the U.S.
government under the federal FCA as well as under the false claims laws of several states. Neither the U.S. government nor the
U.S. courts have provided definitive guidance on the applicability of fraud and abuse laws to our business. Law enforcement
authorities are increasingly focused on enforcing these laws, and it is possible that some of our practices may be challenged
under these laws. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare
laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business
practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other
healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves
or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal
and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare,
Medicaid and other federal healthcare programs, contractual damages, individual imprisonment, reputational harm, diminished
profits and future earnings, and curtailment or restructuring of our operations, as well as additional reporting obligations and
oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance
with these laws. Furthermore, if any of the physicians or other providers or entities with whom we do business are found to be
not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions
from government funded healthcare programs, which may adversely affect our business.
If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other
governmental pricing programs, we could be subject to additional reimbursement requirements, penalties, sanctions and
fines, which could have a material adverse effect on our business, financial condition, results of operations and growth
prospects.
We participate in the Medicaid Drug Rebate Program, the 340B program, the U.S. Department of Veterans Affairs, Federal
Supply Schedule (“FSS”) pricing program, and the Tricare Retail Pharmacy program, which require us to disclose average
manufacturer pricing, and, in the future may require us to report the average sales price for certain of our drugs to the Medicare
program. Pricing and rebate calculations vary across products and programs, are complex, and are often subject to interpretation
by us, governmental or regulatory agencies and the courts. Furthermore, regulatory and legislative changes, and judicial rulings
relating to these programs and policies (including coverage expansion), have increased and will continue to increase our costs
and the complexity of compliance, have been and will continue to be time-consuming to implement, and could have a material
adverse effect on our results of operations, particularly if CMS or another agency challenges the approach we take in our
implementation. For example, in the case of our Medicaid pricing data, if we become aware that our reporting for a prior
quarter was incorrect or has changed as a result of recalculation of the pricing data, we are generally obligated to resubmit the
corrected data for up to three years after those data originally were due. Such restatements increase our costs and could result in
an overage or underage in our rebate liability for past quarters. Price recalculations also may affect the ceiling price at which we
are required to offer our products under the 340B program and give rise to an obligation to refund entities participating in the
340B program for overcharges during past quarters impacted by a price recalculation.
Civil monetary penalties can be applied if we are found to have knowingly submitted any false price or product information
to the government, if we are found to have made a misrepresentation in the reporting of our average sales price, if we fail to
submit the required price data on a timely basis, or if we are found to have charged 340B covered entities more than the
statutorily mandated ceiling price. Additionally, our agreement to participate in the 340B program or our Medicaid drug rebate
agreement could be terminated, in which case federal payments may not be available under Medicaid or Medicare Part D for
our covered outpatient drugs. Additionally, if we overcharge the government in connection with our arrangements with FSS or
Tricare Retail Pharmacy, we are required to refund the difference to the government. Failure to make necessary disclosures and/
or to identify contract overcharges can result in allegations against us under the FCA and other laws and regulations.
Unexpected refunds to the government, and responding to a government investigation or enforcement action, would be
expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of
operations and growth prospects.
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Further, legislation may be introduced that, if passed, would, among other things, further expand the 340B program to
additional covered entities or would require participating manufacturers to agree to provide 340B discounted pricing on drugs
used in an inpatient setting, and any additional future changes to the definition of average manufacturer price or the Medicaid
rebate amount could affect our 340B ceiling price calculations and negatively impact our results of operations. Additionally,
certain pharmaceutical manufacturers are involved in ongoing litigation regarding contract pharmacy arrangements under the
340B program. The outcome of those judicial proceedings and the potential impact on the way in which manufacturers extend
discounts to covered entities through contract pharmacies remain uncertain.
The approval processes of regulatory authorities in the United States, China, Europe and other comparable regulatory
authorities are lengthy, time consuming, costly, and inherently unpredictable. If we experience delays or are ultimately
unable to obtain regulatory approval for our drug candidates, our business will be substantially harmed.
Before obtaining regulatory approvals for the commercial sale of any drug candidate for a target indication, we must
demonstrate in preclinical studies and well-controlled clinical trials, and, with respect to approval in the United States, to the
satisfaction of the United States Food and Drug Administration ("FDA"), that the drug candidate is safe and effective, or the
biologic drug candidate is safe, pure, and potent, for use for that target indication and that the manufacturing facilities,
processes and controls are adequate. In addition to preclinical and clinical data, the new drug application ("NDA") or biologics
license application ("BLA") must include comprehensive information regarding the chemistry, manufacturing and controls
("CMC") for the drug candidate. Obtaining approval of an NDA or BLA is a lengthy, expensive and uncertain process, and
approval may not be obtained. If we submit an NDA or BLA to the FDA, the FDA decides whether to accept or reject the
submission for filing. We cannot be certain that a submission will be accepted for filing and review by the FDA.
Regulatory authorities outside of the United States, such as the China National Medical Products Administration
("NMPA") and European Medicines Agency ("EMA"), also have requirements for approval of medicines for commercial sale
with which we must comply prior to marketing in those areas. Regulatory requirements, approval processes and review periods
can vary from country to country and could delay or prevent the introduction of our drug candidates. Clinical trials conducted in
one country may not be accepted by regulatory authorities in other countries, and obtaining regulatory approval in one country
does not mean that regulatory approval will be obtained in any other country. Seeking regulatory approvals outside of the
United States could require additional nonclinical studies or clinical trials, which could be costly and time consuming. For all of
these reasons, we may not obtain regulatory approvals on a timely basis, if at all.
The processes required to obtain approval by the FDA, the NMPA, the EMA, and other comparable regulatory authorities
is complex, costly, unpredictable and typically takes many years following the commencement of preclinical studies and
clinical trials and depends on numerous factors, including the substantial discretion of the regulatory authorities. Regulatory
approval is never guaranteed. Furthermore, we have limited experience in obtaining regulatory approvals for our drug
candidates, including preparing the required materials for regulatory submission and navigating the regulatory approval process.
As a result, our ability to successfully obtain regulatory approval for our drug candidates may involve more inherent risk, take
longer, and cost more than it would if we were a company with substantial experience in obtaining regulatory approvals.
Our drug candidates could be delayed or fail to receive regulatory approval for many reasons, including:
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failure to begin or complete clinical trials due to disagreements with regulatory authorities;
failure to demonstrate that a drug candidate is safe and effective or that a biologic candidate is safe, pure, and potent
for its proposed indication;
failure of clinical trial results to meet the level of statistical significance required for approval;
reporting or data integrity issues related to our clinical trials;
disagreement with our interpretation of data from preclinical studies or clinical trials;
changes in approval policies or regulations that render our preclinical and clinical data insufficient for approval or
require us to amend our clinical trial protocols;
regulatory requests for additional analyses, reports, data, nonclinical studies and clinical trials, or questions regarding
interpretations of data and results and the emergence of new information regarding our drug candidates or other
products;
failure to satisfy regulatory conditions regarding endpoints, patient population, available therapies and other
requirements for our clinical trials in order to support marketing approval on an accelerated basis or at all;
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a delay in or the inability of health authorities to complete regulatory inspections of our development activities,
regulatory filings or manufacturing operations, whether as a result of the COVID-19 pandemic or other reasons, or our
failure to satisfactorily complete such inspections;
our failure to conduct a clinical trial in accordance with regulatory requirements or our clinical trial protocols; and
clinical sites, investigators or other participants in our clinical trials deviating from a trial protocol, failing to conduct
the trial in accordance with regulatory requirements, or dropping out of a trial.
For example, in June 2022, the FDA extended the Prescription Drug User Fee Act goal date for the supplemental new drug
application ("sNDA") for BRUKINSA as a treatment for adult patients with CLL or SLL by three months to January 2023, to
allow time to review additional clinical data submitted by us, which was deemed a major amendment to the sNDA. In July
2022, the FDA deferred action on the BLA for tislelizumab as a second-line treatment for patients with unresectable or
metastatic ESCC. In the FDA's general advice letter communicating the deferral of action, the FDA cited only the inability to
complete inspections due to COVID-19 related restrictions on travel as the reason for the deferral and did not provide a new
anticipated action date as they continue to monitor the public health situation and travel restrictions.
Delays in the completion of a clinical trial of any of our drug candidates will increase our costs, slow down our drug
development and approval process, and jeopardize our ability to commence product sales and generate revenues for that
candidate. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many
of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the
denial of regulatory approval of our drug candidates.
Our development activities, regulatory filings and manufacturing operations also could be harmed or delayed by a
shutdown of the U.S. government, including the FDA, or governments and regulatory authorities in other jurisdictions. Since
March 2020 when foreign and domestic inspections of facilities were largely placed on hold, the FDA has been working to
resume pre-pandemic levels of inspection activities, including routine surveillance, bioresearch monitoring and pre-approval
inspections. Should the FDA determine that an inspection is necessary for approval and an inspection cannot be completed
during the review cycle due to restrictions on travel, and the FDA does not determine a remote interactive evaluation to be
adequate, the agency has stated that it generally intends to issue, depending on the circumstances, a complete response letter or
defer action on the application until an inspection can be completed. During the COVID-19 pandemic, a number of companies
announced receipt of complete response letters due to the FDA's inability to complete required inspections for their
applications. Regulatory authorities outside the U.S. may adopt similar restrictions or other policy measures in response to the
ongoing COVID-19 pandemic and may experience delays in their regulatory activities. If the FDA or other health authorities
are delayed or unable to complete required regulatory inspections of our development activities, regulatory filings or
manufacturing operations, or we do not satisfactorily complete such inspections, our business could be materially harmed.
We are currently conducting and may in the future conduct clinical trials for our drug candidates outside the U.S., and the
FDA and comparable foreign regulatory authorities may not accept data from such trials.
We are currently conducting and may in the future conduct clinical trials for our drug candidates outside the U.S., including
in China. The acceptance of data from clinical trials conducted outside the U.S. or another jurisdiction by the FDA or
comparable foreign regulatory authority may be subject to certain conditions or may not be accepted at all. The FDA will
generally not consider the data from a foreign clinical trial not conducted under an IND unless (i) the trial was well-designed
and well-conducted in accordance with GCP requirements, including requirements for the design, conduct, performance,
monitoring, auditing, recording, analysis, and reporting of clinical trials in a way that provides assurance that the data and
reported results are credible and accurate and that the rights, safety, and well-being of trial subjects are protected, and (ii) the
FDA is able to validate the data from the trial through an onsite inspection, if necessary. In cases where data from foreign
clinical trials are intended to serve as the sole basis for marketing approval in the U.S., the FDA will generally not approve the
application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice;
(ii) the trials were performed by clinical investigators of recognized competence; and (iii) the data may be considered valid
without the need for an on-site inspection by the FDA or, if the FDA considers such as inspection to be necessary, the FDA is
able to validate the data through an on-site inspection or other appropriate means. Additionally, the FDA’s clinical trial
requirements, including sufficient size of patient populations and statistical powering must be met. Many foreign regulatory
authorities have similar approval requirements. In addition, such foreign trials would be subject to the applicable local laws of
the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA or any comparable foreign
regulatory authority will accept data from trials conducted outside of the U.S. or the applicable jurisdiction. If the FDA or any
comparable foreign regulatory authority does not accept such data, it would result in the need for additional trials, which could
be costly and time-consuming, and which may result in drug candidates that we may develop not receiving approval for
commercialization in the applicable jurisdiction.
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Our medicines and any future approved drug candidates will be subject to ongoing regulatory obligations and continued
regulatory review, which may result in significant additional expense and we may be subject to penalties if we fail to comply
with regulatory requirements or experience unanticipated problems with our medicines and drug candidates.
Our medicines and any additional drug candidates that are approved will be subject to ongoing regulatory requirements for
manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing
studies, and submission of safety, efficacy, and other post-marketing information, including both federal and state requirements
in the United States and requirements of comparable regulatory authorities in China, Europe and other regions. As such, we and
our collaborators 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 medicines, product labeling, or
manufacturing processes, we will need to submit new applications or supplements to regulatory authorities for approval.
Manufacturers and manufacturers’ facilities are required to comply with extensive FDA, NMPA, EMA and comparable
regulatory authority requirements, including, in the United States, ensuring that quality control and manufacturing procedures
conform to GMP regulations. As such, we and our contract manufacturers are and will be subject to continual review and
inspections to assess compliance with GMP and adherence to commitments made in any NDA, BLA or other marketing
application, and previous responses to any inspection observations. Accordingly, we and others with whom we work must
continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and
quality control. The failure to comply with these requirements could have a material adverse effect on our business. For
example, on March 25, 2020, the NMPA suspended the importation, sales and use of ABRAXANE in China supplied to us by
BMS, and the drug was subsequently recalled by BMS and is not currently available for sale in China. This suspension was
based on inspection findings at BMS’s contract manufacturing facility in the United States. We have not had any sales of
ABRAXANE since the suspension and do not expect future revenue from ABRAXANE. For additional information, please see
the section of this Annual Report titled “Legal Proceedings”.
The regulatory approvals for our medicines and any approvals that we receive for our drug candidates are and may be
subject to limitations on the approved indicated uses for which the medicine may be marketed or to the conditions of approval,
which could adversely affect the medicine’s commercial potential or contain requirements for potentially costly post-marketing
testing and surveillance to monitor the safety and efficacy of the medicine or drug candidate. The FDA, NMPA, EMA or
comparable regulatory authorities may also require a REMS program or comparable program as a condition of approval of our
drug candidates or following approval, as is the case with REVLIMID®. In addition, if the FDA, NMPA, EMA or a comparable
regulatory authority approves our drug candidates, we will have to comply with requirements including, for example,
submissions of safety and other post-marketing information and reports, establishment registration, as well as continued
compliance with GMP and good clinical practice ("GCP") for any clinical trials that we conduct post-approval.
The FDA, NMPA, EMA or comparable regulatory authorities may seek to impose a consent decree or withdraw marketing
approval if compliance with regulatory requirements is not maintained or if problems occur after the drug reaches the market.
Later discovery of previously unknown problems with our medicines or drug candidates or with our drug’s manufacturing
processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety
information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution
restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of our medicines, withdrawal of the product from the market, or
voluntary or mandatory product recalls;
fines, untitled or warning letters, or holds on clinical trials;
refusal by the FDA, NMPA, EMA or comparable regulatory authorities to approve pending applications or
supplements to approved applications filed by us or suspension or revocation of license approvals or withdrawal of
approvals;
product seizure or detention, or refusal to permit the import or export of our medicines and drug candidates; and
injunctions or the imposition of civil or criminal penalties.
The FDA, NMPA, EMA and other regulatory authorities strictly regulate the marketing, labeling, advertising and
promotion of products that are placed on the market. Drugs may be promoted only for their approved indications and for use in
accordance with the provisions of the approved label. The FDA, NMPA, EMA and other regulatory authorities actively enforce
the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted
off-label uses may be subject to significant liability. The policies of the FDA, NMPA, EMA and of other regulatory authorities
may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our
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drug candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future
legislation or administrative action, either in the United States or abroad, particularly in China, where the regulatory
environment is constantly evolving. If we are slow or unable to adapt to changes in existing requirements or the adoption of
new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any regulatory approval that
we may have obtained and we may not achieve or sustain profitability.
In addition, if we obtain accelerated approval or conditional approval of any of our drug candidates, as we have done with
the accelerated approval of BRUKINSA in the United States and China and certain approvals of tislelizumab, pamiparib,
XGEVA, BLINCYTO, KYPROLIS and QARZIBA in China, we will be required to conduct a confirmatory study to verify the
predicted clinical benefit and may also be required to conduct post-marketing safety studies. The Food and Drug Omnibus
Reform Act of 2022 (“FDORA”) recently granted the FDA the authority to require, as appropriate, that a post-approval
confirmatory study or studies be underway prior to granting accelerated approval or within a specified time period after the date
accelerated approval is granted. FDORA also gave the FDA increased authority to withdraw approval of a drug granted
accelerated approval on an expedited basis if the sponsor fails to conduct such studies in a timely manner or such studies fail to
verify clinical benefit. While operating under accelerated approval, we will be subject to certain restrictions that we would not
be subject to upon receiving regular approval. For example, the FDA generally requires that all advertising and promotional
materials be submitted to the FDA for review prior to dissemination or publication for products receiving accelerated approval,
which could adversely impact the timing of the commercial launch of the product.
Even if we are able to commercialize our medicines and any approved drug candidates, the medicines may become subject to
unfavorable pricing regulations or third-party reimbursement practices or healthcare reform initiatives, which could harm
our business.
The regulations that govern regulatory approvals, pricing and reimbursement for new therapeutic products vary widely
from country to country. Historically, products launched in Europe do not follow price structures of the U.S. and generally
prices tend to be significantly lower. Countries in Europe provide options to restrict the range of medicinal products for which
their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.
To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare
the cost effectiveness of a particular product candidate to currently available therapies. Countries may approve a specific price
for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company
placing the medicinal product on the market.
Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review
period begins after marketing or licensing approval is granted. In some non-U.S. markets, prescription pharmaceutical pricing
remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain
regulatory approval for a drug in a particular country, but then be subject to price regulations that delay our commercial launch
of the drug and negatively impact our revenues and results of operations.
Our ability to commercialize our medicines successfully also will depend in part on the extent to which reimbursement for
these medicines and related treatments will be available on adequate terms, or at all, from government health administration
authorities, private health insurers and other organizations. For additional information, please see the section of this Annual
Report titled “Part I — Item 1A — Risk Factors Risks Related to Clinical Development and Commercialization of Our
Medicines and Drug Candidates — If we or any third parties with which we may collaborate to market and sell our medicines
are unable to achieve and maintain coverage and adequate level of reimbursement, our commercial success and business
operations could be adversely affected.”
Furthermore, there continues to be scrutiny from federal and state governments over the way drug manufacturers set prices
for their marketed products. For example, there are ongoing Congressional investigations, legislation, and regulations to, among
other things, bring more transparency to drug pricing, set patient spending caps for Medicare beneficiaries, reduce the cost of
prescription drugs under Medicare, review the relationship between pricing and manufacturer’s patient programs, reform
federal and state government program reimbursement methodologies for drug products, allow importation of lower-priced
drugs from Canada, and set prices based on international reference pricing in other countries. While some of these measures can
be done through agency rulemaking, most will require statutory changes by Congress. While addressing drug pricing and
patient affordability remains a top priority for Congress, it remains to be seen if any agreement can be reached on a legislative
solution. It is therefore unclear if any regulations or legislation will be enacted to implement changes to drug pricing or federal
and state government reimbursement programs or what the impact of such changes on the marketing approvals of our drug
candidates, if any, may be.
In China, the government launched a national program for volume-based, centralized drug procurement with minimum
quantity commitments in an attempt to negotiate lower prices from drug manufacturers and reduce the price of drugs. Under the
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program, one of the key determining factors for a successful bid is the price. The government will award a contract to the
lowest bidders who are able to satisfy the quality and quantity requirements. The successful bidders will be guaranteed a sale
volume for at least a year. A volume guarantee gives the winner an opportunity to gain or increase market share. The volume
guarantee is intended to make manufacturers more willing to cut their prices to win a bid. It may also enable manufacturers to
lower their distribution and commercial costs. Many types of drugs are covered under the program, including drugs made by
international pharmaceutical companies and generics made by domestic Chinese manufacturers. For example, in January 2020,
ABRAXANE and its generic forms were included in the program. We won the bid and became one of the three companies who
were awarded a government contract, with a price for sales of ABRAXANE under the government contract that would have
been significantly lower than the price that we had been charging. On March 25, 2020, the NHSA removed ABRAXANE from
the volume-based procurement list due to the NMPA’s decision to suspend the importation, sales and use of ABRAXANE,
which has adversely impacted our business and results of operations. In August 2020, VIDAZA® and its generic forms were
included for bidding in the program. We did not win the bid for VIDAZA, which has resulted in the drug being restricted from
use in public hospitals, which account for a large portion of the market, and a decline in sales revenue. Moreover, the program
may change how generic drugs are priced and procured in China and is likely to accelerate the replacement of originator drugs
with generics. We cannot be sure whether there will be any changes to the program in the future. The implementation of the
program may negatively impact our existing commercial operations in China as well as our strategies on how to commercialize
our drugs in China, which could have a material adverse effect on our business, financial condition and results of operations.
Although China adopted changes to its patent law to include patent term extension and an early resolution mechanism for
pharmaceutical patent disputes, key provisions of the law remain unclear and/or subject to implementing regulations. The
absence of effective regulatory exclusivity for pharmaceutical products in China could further increase the risk of early
generic or biosimilar competition with our medicines in China.
In the United States, a law commonly referred to as “Hatch-Waxman Act” provides the opportunity for patent-term
restoration of up to five years to reflect patent term lost during certain portions of product development and the FDA regulatory
review process. The Hatch-Waxman Act also provides for patent linkage, pursuant to which FDA will stay approval of certain
follow-on new drug applications during the pendency of litigation between the follow-on applicant and the patent holder or
licensee, for a period of up to 30 months. Finally, the Hatch-Waxman Act provides for regulatory exclusivity that can prevent
submission or approval of certain follow-on marketing applications. For example, U.S. law provides a five-year period of
exclusivity to the first applicant to obtain approval of a new chemical entity and three years of exclusivity protecting certain
innovations to previously approved active ingredients where the applicant was required to conduct new clinical trials to obtain
approval for the modification. Similarly, the Orphan Drug Act provides seven years of market exclusivity for certain drugs to
treat rare diseases. These provisions, which are designed to promote innovation, can prevent competing products from entering
the market for a certain period of time after marketing approval for the innovative product.
In China, however, laws on data exclusivity (referred to as regulatory data protection) are still developing. The PRC Patent
Law (as amended in 2020, the “Amended PRC Patent Law”) contains both patent term extension and a mechanism for early
resolution of patent disputes. Accordingly, NMPA and NIPA jointly issued the Implementation Measures for the Early
Settlement Mechanism of Drug Patent Disputes (for Trial Implementation). However, the provisions for patent term extension
are unclear and/or remain subject to the approval of implementing regulations that are still in draft form or have not yet been
proposed, leading to uncertainty about their scope and implementation. Until the relevant implementing regulations for patent
term extension in the Amended PRC Patent Law are implemented, and until data exclusivity is adopted and implemented, we
may be subject to earlier generic or biosimilar competition in China than in the United States and other jurisdictions with
stronger regulatory data protection for pharmaceutical products.
Undesirable adverse events caused by our medicines and drug candidates could interrupt, delay or halt clinical trials, delay
or prevent regulatory approval, limit the commercial profile of an approved label, or result in significant negative
consequences following any regulatory approval.
Undesirable adverse events ("AEs") caused by our medicines and drug candidates could cause us or regulatory authorities
to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval,
or could result in limitations or withdrawal following approvals. If the conduct or results of our trials or patient experience
following approval reveal a high and unacceptable severity or prevalence of AEs, our trials could be suspended or terminated
and regulatory authorities could order us to cease further development of, or deny approval of, our drug candidates or require us
to cease commercialization following approval.
As is typical in the development of pharmaceutical products, drug-related AEs and serious AEs ("SAEs") have been
reported in our clinical trials. Some of these events have led to patient deaths. Drug-related AEs or SAEs could affect patient
recruitment or the ability of enrolled subjects to complete the trial and could result in product liability claims. Any of these
occurrences may harm our reputation, business, financial condition and prospects significantly. In our periodic and current
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reports filed with the SEC and our press releases and scientific and medical presentations released from time to time we
disclose clinical results for our drug candidates, including the occurrence of AEs and SAEs. Each such disclosure speaks only
as of the date of the data cutoff used in such report, and we undertake no duty to update such information unless required by
applicable law. Also, a number of immune-related adverse events ("IRAEs") have been associated with treatment with
checkpoint inhibitors such as tislelizumab, including immune-mediated pneumonitis, colitis, hepatitis, endocrinopathies,
nephritis and renal dysfunction, skin adverse reactions, and encephalitis. These IRAEs may be more common in certain patient
populations (potentially including elderly patients) and may be exacerbated when checkpoint inhibitors are combined with other
therapies.
Additionally, undesirable side effects caused by our medicines and drug candidates, or caused by our medicines and drug
candidates when used in combination with other drugs, could potentially cause significant negative consequences, including:
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regulatory authorities could delay or halt pending clinical trials;
we may suspend, delay or alter development of the drug candidate or marketing of the medicine;
regulatory authorities may withdraw approvals or revoke licenses of the medicine, or we may determine to do so even
if not required;
regulatory authorities may require additional warnings on the label;
we may be required to implement a Risk Evaluation Mitigation Strategy ("REMS") for the drug, as is the case with
REVLIMID, or, if a REMS is already in place, to incorporate additional requirements under the REMS, or to develop a
similar strategy as required by a regulatory authority;
we may be required to conduct post-marketing studies; and
we could be sued and held liable for harm caused to subjects or patients.
Any of these events could prevent us from achieving or maintaining market acceptance of the particular drug or drug
candidate, and could significantly harm our business, results of operations, financial condition, and prospects.
If safety, efficacy, or other issues arise with any medical product that is used in combination with our medicines, we may be
unable to market such medicine or may experience significant regulatory delays or supply shortages, and our business could
be materially harmed.
We plan to develop certain of our medicines and drug candidates for use as a combination therapy. If a regulatory authority
revokes its approval of the other therapeutic that we use in combination with our medicines or drug candidates, we will not be
able to market our medicines or drug candidates in combination with such revoked therapeutic. If safety or efficacy issues arise
with these or other therapeutics that we seek to combine with our medicines and 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 any component of our combination medicines or drug
candidates, we may not be able to complete clinical development of our drug candidates on our current timeline or at all, or we
may experience disruptions in the commercialization of our approved medicines. For example, we have in-licensed drug
candidates from third parties to conduct clinical trials in combination with our drug candidates. We may rely on those third
parties to manufacture the in-licensed drug candidates and may not have control over their manufacturing process. If these third
parties encounter any manufacturing difficulties, disruptions or delays and are not able to supply sufficient quantities of drug
candidates, our drug combination study program may be delayed. For additional information, please see the section of this
Annual Report titled “Part I — Item 1A — Risk Factors — Risks Related to Our Reliance on Third Parties — We rely on third
parties to manufacture some of our commercial and clinical drug supplies. Our business could be harmed if those third parties
fail to provide us with sufficient quantities of product or fail to do so at acceptable quality levels or prices.”
Recently enacted and future legislation may increase the difficulty and cost for us to obtain regulatory approval of and
commercialize our medicines and drug candidates and affect the prices we may obtain.
In the United States, China, Europe and some other jurisdictions, there have been a number of legislative and regulatory
changes and proposed changes regarding healthcare that could prevent or delay regulatory approval of our drug candidates,
restrict or regulate post-approval activities and affect our ability to profitably sell our medicines and any drug candidates for
which we obtain regulatory approval. We expect that healthcare reform measures may result in more rigorous coverage criteria
and in additional downward pressure on the price that we receive for any approved medicine. For example, in August 2022, the
Inflation Reduction Act of 2022 (the "IRA") was signed into law. The IRA includes several provisions that may impact our
business to varying degrees, including provisions that create a $2,000 out-of-pocket cap for Medicare Part D beneficiaries,
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impose new manufacturer financial liability on all drugs in Medicare Part D, allow the U.S. government to negotiate Medicare
Part B and Part D pricing for certain high-cost drugs and biologics without generic or biosimilar competition, require
companies to pay rebates to Medicare for drug prices that increase faster than inflation, and delay the rebate rule that would
require pass through of pharmacy benefit manager rebates to beneficiaries. Any reduction in reimbursement from Medicare or
other government programs may result in a similar reduction in payments from private payors. The implementation of cost
containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or
commercialize our medicines and drug candidates. For additional information, please see the section of this Annual Report
titled “Part I — Item 1 — Business – Government Regulation – Healthcare Reform.”
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and
promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or
whether any regulations, guidance or interpretations will be changed, or what the impact of such changes on the regulatory
approvals of our medicines and drug candidates may be.
For example, in the United States, there have been numerous judicial, administrative, executive, and legislative challenges
to certain aspects of the Affordable Care Act, and there could be additional challenges and amendments to the Affordable Care
Act in the future, which could have a material adverse impact on our business, results of operations and financial condition.
Risks Related to Our Financial Position and Need for Additional Capital
We have incurred significant net losses since our inception and anticipate that we will continue to incur net losses for the
foreseeable future and may not become profitable.
Investment in pharmaceutical drug development is highly capital-intensive and speculative. It entails substantial upfront
capital expenditures and significant risk that a drug candidate will fail to gain regulatory approval or become commercially
viable. We continue to incur significant expenses related to our ongoing operations. As a result, we have incurred losses in each
period since our inception, except in the third quarter of 2017 and the first quarter of 2021, when we were profitable due to
revenue recognized from up-front license fees from collaboration agreements. As of December 31, 2022, we had an
accumulated deficit of $7.1 billion. Substantially all of our operating losses have resulted from costs incurred in connection
with our research and development programs and from selling, general and administrative expenses associated with our
operations.
We expect to continue to incur losses for the foreseeable future, although we expect these losses to decrease in the near
term as product sales growth exceeds expense growth. We expect expenses to continue to increase as we continue to expand our
development of, and seek regulatory approvals for, our drug candidates, and our manufacturing facilities, commercialize our
medicines and launch new medicines, if approved, maintain and expand regulatory approvals, contribute up to $1.25 billion to
the global development of a portfolio of Amgen pipeline assets under our collaboration agreement, and commercialize the
medicines that we have licensed from Amgen, BMS and other parties and any other medicines that we may successfully
develop or license. Typically, it takes many years to develop one new drug from the time it is discovered to when it is available
for treating patients. In addition, we will continue to incur costs associated with operating as a public company. We will also
incur costs in support of our growth as a global biotechnology company. The size of our future net losses will depend, in part,
on the number and scope of our drug development programs and the associated costs of those programs, the cost of our
manufacturing activities, the cost of commercializing our approved products, our ability to generate revenues and the timing
and amount of milestones and other payments we make or receive with arrangements with third parties. If we fail to achieve
market acceptance for our medicines or if promising drug candidates fail in clinical trials or do not gain regulatory approval, or
if approved, fail to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future,
we may not be able to sustain profitability in subsequent periods. Our failure to become and remain profitable would decrease
the value of our company and could impair our ability to raise capital, maintain our research, development, manufacturing and
commercialization efforts, expand our business or continue our operations.
We may need to obtain additional financing to fund our operations, and if we are unable to obtain such financing, we may
be unable to complete the development of our drug candidates or achieve profitability.
Our portfolio of drug candidates will require the completion of clinical development, regulatory review, scale up and
availability of manufacturing resources, significant marketing efforts and substantial investment before they can provide us with
product sales revenue. Additionally, we are investing in the manufacturing and commercialization of our approved medicines.
Our operations have consumed substantial amounts of cash since inception. Our operating activities used $1.5 billion, $1.3
billion and $1.3 billion of net cash during the years ended December 31, 2022, 2021 and 2020, respectively. We recorded
negative net cash flows from operating activities in 2022, 2021 and 2020 primarily due to our net losses of $2.0 billion, $1.5
billion and $1.6 billion, respectively. Although we recorded positive net cash flows from operating activities in 2017, primarily
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due to the upfront fees received from the BMS collaboration, we cannot assure you that we will be able to generate positive
cash flows from operating activities in the future.
Our liquidity and financial condition may be materially and adversely affected by the negative net cash flows, and we
cannot assure you that we will have sufficient cash from other sources to fund our operations. If we resort to other financing
activities to generate additional cash, we will incur financing costs and we cannot guarantee that we will be able to obtain the
financing on terms acceptable to us, or at all, and if we raise financing by issuing further equity securities your interest in our
company may be diluted. If we have negative operating cash flows in the future, our liquidity and financial condition may be
materially and adversely affected.
We expect to continue to spend substantial amounts on drug discovery, advancing the clinical development of our drug
candidates, contributing to the global development of a portfolio of Amgen pipeline assets, developing our manufacturing
capabilities and securing drug supply, and launching and commercializing our and our collaborators' medicines and any
additional drug candidates for which we receive regulatory approval, including building and maintaining a commercial
organization to address markets in China, the United States and other countries.
Since September 2017, we have generated revenues from the sale of medicines in China licensed from BMS, and since the
fourth quarter of 2019, we have generated revenues from our internally developed medicines. These revenues are not sufficient
to support our operations. Although it is difficult to predict our liquidity requirements, based upon our current operating plan,
we believe that we have sufficient cash, cash equivalents and short-term investments to meet our projected operating
requirements for at least the next 12 months. However, we believe that our existing cash, cash equivalents and short-term
investments may not be sufficient to enable us to complete all global development or launch all of our current medicines and
drug candidates for the currently anticipated indications and to invest in additional programs. Accordingly, we may require
further funding through public or private offerings, debt financing, collaboration and licensing arrangements or other sources.
With uncertainty in the capital markets, adequate additional funding may not be available to us on acceptable terms, or at
all. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our
research and development programs or commercialization efforts. Our inability to obtain additional funding when we need it
could seriously harm our business.
Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rights
to our technologies or drug candidates.
We may seek additional funding through a combination of equity offerings, debt financings, collaborations and licensing
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 your rights as
a holder of our shares. The incurrence of additional indebtedness or the issuance of certain equity securities could result in
increased fixed payment obligations and could also result in certain additional restrictive covenants, such as limitations on our
ability to incur additional debt or issue additional equity, limitations on our ability to acquire 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 shares to decline. In the event
that we enter into collaborations or licensing arrangements in order to raise capital, we may be required to accept unfavorable
terms, including relinquishing or licensing to a third party on unfavorable terms our rights to technologies or drug candidates
that we otherwise would seek to develop or commercialize ourselves or potentially reserve for future potential arrangements
when we might be able to achieve more favorable terms.
Fluctuations in exchange rates could result in foreign currency exchange losses and could materially reduce the value of
your investment.
We incur portions of our expenses, and derive revenues, in currencies other than the U.S. dollar or Hong Kong dollar, in
particular, the RMB, the Euro, and Australian dollar. As a result, we are exposed to foreign currency exchange risk as our
results of operations and cash flows are subject to fluctuations in foreign currency exchange rates. We do not regularly engage
in hedging transactions to protect against uncertainty in future exchange rates between particular foreign currencies and the U.S.
dollar. Fluctuations in the value of the U.S. dollar against currencies in countries in which we operate could have a negative
impact on our results of operations. We cannot predict the impact of foreign currency fluctuations, and foreign currency
fluctuations in the future may adversely affect our financial condition, results of operations, and cash flows.
The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things,
changes in political and economic conditions and the foreign exchange policy proposed or adopted by the PRC, Australia and
other governments. It is difficult to predict how market forces or PRC, Australia, other governments outside the U.S. and U.S.
government policies may impact the exchange rate of the RMB and the U.S. dollar or any other currencies in the future. There
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remains significant international pressure on China to adopt a more flexible currency policy, including from the U.S.
government, which has threatened to label China as a “currency manipulator,” which could result in greater fluctuation of the
RMB against the U.S. dollar.
Substantially all of our revenues are denominated in U.S. dollars and RMB, our costs are denominated in U.S. dollars,
Australian dollars and RMB, and a large portion of our financial assets and a significant portion of our debt is denominated in
U.S. dollars and RMB. To the extent that we need to convert U.S. dollars into RMB for our operations, appreciation of the
RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive. Conversely, if we decide to
convert RMB into U.S. dollars for the purpose of making payments for dividends or for other business purposes, appreciation of
the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount we would receive.
In addition, there are limited instruments available for us to reduce our foreign currency risk exposure at reasonable costs.
Furthermore, we are also currently required to obtain approval from or registration with appropriate government authorities or
designated banks before converting significant sums of foreign currencies into RMB. All of these factors could materially and
adversely affect our business, financial condition, results of operations, and prospects, and could reduce the value of, and any
dividends payable on, our shares in foreign currency terms.
Our business, profitability and liquidity may be adversely affected by deterioration in the credit quality of, or defaults by, our
distributors and customers, and an impairment in the carrying value of our short-term investments could negatively affect
our consolidated results of operations.
We are exposed to the risk that our distributors and customers may default on their obligations to us as a result of
bankruptcy, lack of liquidity, operational failure or other reasons. As we continue to expand our business, the amount and
duration of our credit exposure will be expected to increase, as will the breadth of the entities to which we have credit exposure.
Although we regularly review our credit exposure to specific distributors and customers that we believe may present credit
concerns, default risks may arise from events or circumstances that are difficult to detect or foresee.
Also, the carrying amounts of cash and cash equivalents, restricted cash and short-term investments represent the maximum
amount of loss due to credit risk. We had cash and cash equivalents of $3.9 billion, restricted cash of $5.5 million and short-
term investments of $665.3 million as of December 31, 2022, most of which are deposited in financial institutions outside of
China. As required by the PRC securities laws, the net proceeds from the STAR Offering must be used in strict compliance
with the planned uses as disclosed in the PRC prospectus for the STAR Offering as well as our proceeds management policy for
the STAR Offering approved by our board of directors. Although our cash and cash equivalents in China are deposited with
various major reputable financial institutions, the deposits placed with these financial institutions are not protected by statutory
or commercial insurance. In the event of bankruptcy of one of these financial institutions, we may be unlikely to claim our
deposits back in full. As of December 31, 2022, our short-term investments consisted of U.S. Treasury securities.
Although we believe that the U.S. Treasury securities are of high credit quality and continually monitor the credit
worthiness of these institutions, concerns about, or a default by, one institution in the U.S. market, could lead to significant
liquidity problems, losses or defaults by other institutions, which in turn could adversely affect us.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection for our medicines and drug candidates through intellectual
property rights, or if the scope of such intellectual property rights is not sufficiently broad, third parties may compete against
us.
Our success depends in large part on our ability to protect our medicines, drug candidates and proprietary technology from
competition by obtaining, maintaining and enforcing our intellectual property rights, including patent rights. We seek to protect
the medicines, drug candidates and technology that we consider commercially important by filing patent applications in the
United States, the PRC, Europe and other territories, relying on trade secrets or pharmaceutical regulatory protection or
employing a combination of these methods. This process is expensive and time-consuming, and we may not be able to file,
prosecute, maintain, enforce or license all necessary or desirable patents and/or patent applications at a reasonable cost or in a
timely manner. As a result, we may not be able to prevent competitors from developing and commercializing competitive drugs
in all such fields and territories.
Patents may be invalidated and patent applications may not be granted for a number of reasons, including known or
unknown prior art, deficiencies in the patent applications or the lack of novelty of the underlying invention or technology. It is
also possible that we will fail to identify patentable aspects of our research and development output in time to obtain patent
protection. Although we enter into non-disclosure and confidentiality agreements with parties who have access to confidential
or patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific
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collaborators, contract manufacturers, consultants, advisors and any other third parties, any of these parties may breach such
agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent
protection. In addition, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent
applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some
cases, not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending
patent applications or that we were the first to file for patent protection of such inventions. Furthermore, the PRC and the
United States have adopted the “first-to-file” system under which whoever first files a patent application will be awarded the
patent if all other patentability requirements are met. Under the first-to-file system, third parties may be granted a patent relating
to a technology which we invented.
In addition, under the PRC Patent Law, any organization or individual that applies for a patent in a foreign country for an
invention or utility model accomplished in China is required to report to the National Intellectual Property Administration, or
NIPA, for security examination. Otherwise, if an application is later filed in China, the patent right will not be granted.
The coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be
reinterpreted after issuance. 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 any meaningful protection, prevent competitors or other third parties from
competing with us, or otherwise provide us with any competitive advantage. In addition, 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 rights are 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 courts or patent offices in the United States, the PRC and other countries. We may be subject to a third-party
preissuance submission of prior art to the United States Patent and Trademark Office (the "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 adverse determination in any
such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to
commercialize our medicines or drug candidates and compete directly with us without payment to us, or result in our inability
to manufacture or commercialize medicines or drug candidates without infringing, misappropriating or otherwise violating
third-party patent rights. Moreover, we may have to participate in interference proceedings declared by the USPTO to
determine priority of invention or in post-grant challenge proceedings, such as oppositions in a foreign patent office, that
challenge the priority of our invention or other features of patentability of our patents and patent applications. Such challenges
may result in loss of patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable,
which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit
the duration of the patent protection of our technology, medicines, and drug candidates. Such proceedings also may result in
substantial costs and require significant time from our scientists and management, even if the eventual outcome is favorable to
us. Consequently, we do not know whether any of our medicines or drug candidates will be protectable or remain protected by
valid and enforceable patents. Our competitors or other third parties may be able to circumvent our patents by developing
similar or alternative technologies or products in a non-infringing manner.
Furthermore, although various extensions may be available, the life of a patent and the protection it affords, is limited. For
example, the approved cancer therapies we have licensed from BMS in China face competition from generic medications, and
we may face similar competition for our approved medicines even if we successfully obtain patent protection. Manufacturers of
generic drugs may challenge the scope, validity or enforceability of our patents, and we may not be successful in enforcing or
defending those intellectual property rights and, as a result, may not be able to develop or market the relevant product
exclusively, which would have a material adverse effect on any potential sales of that product. The issued patents and pending
patent applications, if issued, for our medicines and drug candidates are expected to expire on various dates as described in
“Part I-Item 1-Business-Intellectual Property” of this Annual Report. Upon the expiration of our issued patents or patents that
may issue from our pending patent applications, we will not be able to assert such patent rights against potential competitors
and our business and results of operations may be adversely affected.
Given the amount of time required for the development, testing and regulatory review of new drug candidates, patents
protecting such drug candidates might expire before or shortly after such drug candidates are commercialized. As a result, our
patents and patent applications may not provide us with sufficient rights to exclude others from commercializing products
similar or identical to ours. Moreover, some of our patents and patent applications are, and may in the future be, co-owned with
or licensed from third parties. If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such
patents or patent applications, such co-owners may be able to license their rights to other third parties, including our
competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation
of any such co-owners or the licensors of our patents in order to enforce such patents against third parties, and such cooperation
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may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business,
financial conditions, results of operations, and prospects.
We may not be able to protect our intellectual property rights throughout the world. If we fail to adequately protect our
intellectual property rights, our competitive position could be impaired and our business could be materially harmed.
Filing, prosecuting, maintaining and defending patents on drugs or drug candidates in all countries throughout the world
could be prohibitively expensive for us, and our intellectual property rights in some countries can have a different scope and
strength than in the United States. In addition, the laws of certain countries do not protect intellectual property rights to the
same extent as U.S. laws do, particularly those relating to biopharmaceutical products. Consequently, we may not be able to
prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing drugs
made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in
jurisdictions where we have not obtained patent protection to develop their own drugs and further, may export otherwise
infringing drugs to non-U.S. jurisdictions where we have patent protection, but where enforcement rights are not as strong as
those in the United States. These drugs may compete with our medicines and drug candidates and our patent rights or other
intellectual property rights may not be effective or adequate to prevent them from competing. In addition, we may not be able to
enforce patents that we in-license from third parties, who may delay or decline to enforce patents in the licensed territory.
We currently hold issued trademark registrations and have trademark applications pending, any of which may be the
subject of a governmental or third-party objection, which could prevent the maintenance or issuance of the same. If we are
unsuccessful in obtaining trademark protection for our primary brands, we may be required to change our brand names, which
could materially adversely affect our business. Moreover, as our products mature, our reliance on our trademarks to
differentiate us from our competitors will increase, and as a result, if we are unable to prevent third parties from adopting,
registering or using trademarks and trade dress that infringe, dilute or otherwise violate our trademark rights, our business could
be materially adversely affected.
We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be
commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be
inadequate to obtain a significant commercial advantage from the intellectual property that we develop.
We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time
consuming and unsuccessful. Our patent rights relating to our medicines and drug candidates could be found invalid or
unenforceable if challenged in court or before government patent authorities.
Competitors may infringe our patent rights or misappropriate or otherwise violate our intellectual property rights. To
counter infringement or unauthorized use, litigation may be necessary in the future to enforce or defend our intellectual property
rights, to protect our trade secrets or to determine the validity and scope of our own intellectual property rights or the
proprietary rights of others. This can be expensive and time consuming. Any claims that we assert against perceived infringers
could also provoke these parties to assert counterclaims against us challenging the validity or enforceability of our patents or
alleging that we infringe their intellectual property rights.
In addition, generic drug companies may in the future file an Abbreviated New Drug Application (“ANDA”) with the FDA
seeking approval to market a generic version of our products, or our competitors’ products, before the expiration of the patents
covering such products, which may trigger ANDA litigation over the associated patent. Settlements and related licensing
agreements resulting from ANDA litigation can be challenged and have the potential to generate additional litigation which can
be costly. The success of such litigation depends on the strength of the patents covering the branded product and the
manufacturer’s ability to prove infringement. The outcome of such litigation is inherently uncertain and may result in potential
loss of market exclusivity for the product which may have a significant financial impact on product revenue. Furthermore, the
Federal Trade Commission (“FTC”) has brought lawsuits to challenge ANDA litigation settlements as anti-competitive. If we
engage in ANDA litigation, we may also face an FTC challenge with respect to the related settlement which may result in
additional expense or penalty.
Many of our current and potential competitors have the ability to dedicate substantially greater resources to enforce and/or
defend their intellectual property rights than we can. Accordingly, despite our efforts, we may not be able to prevent third
parties from infringing upon or misappropriating our intellectual property. An adverse result in any litigation proceeding could
put our patents, as well as any patents 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 our confidential information could be
compromised by disclosure during this type of litigation.
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In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace,
and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may
also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such
mechanisms include ex parte re-examination, inter partes review, post-grant review, derivation and equivalent proceedings in
non-U.S. jurisdictions, such as opposition proceedings. Such proceedings could result in revocation or amendment to our
patents in such a way that they no longer cover and protect our medicines or drug candidates. The outcome following legal
assertions of invalidity and unenforceability is unpredictable. With respect to the validity of our patents, for example, we cannot
be certain that there is no invalidating prior art of which we, our patent counsel, and the patent examiner were unaware during
prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part,
and perhaps all, of the patent protection on our medicines or drug candidates. Such a loss of patent protection could have a
material adverse impact on our business.
We may not be able to prevent misappropriation of our trade secrets or confidential information, particularly in countries
where the laws may not protect those rights as fully as in the United States.
If we are sued for infringing intellectual property rights of third parties, such litigation could be costly and time consuming
and could prevent or delay us from developing or commercializing our medicines or drug candidates.
Our commercial success depends in part on our avoiding infringement of the valid patents and other intellectual property
rights of third parties. We are aware of numerous issued patents and pending patent applications belonging to third parties that
exist in fields of our medicines and drug candidates. There may also be third-party patents or patent applications of which we
are currently unaware, and given the dynamic area in which we operate, additional patents are likely to issue that relate to
aspects of our business. There is a substantial amount of litigation and other claims and proceedings involving patent and other
intellectual property rights in the biotechnology and pharmaceutical industries generally. As the biotechnology and
pharmaceutical industries expand and more patents are issued, the risk increases that our medicines and drug candidates may
give rise to claims of infringement of the patent rights of others.
Third parties may assert that we are using technology in violation of their patent or other proprietary rights. Defense of
these claims, regardless of their merit, could involve substantial litigation expense and divert our technical personnel,
management personnel, or both from their normal responsibilities. Even in the absence of litigation, we may seek to obtain
licenses from third parties to avoid the risks of litigation, and if a license is available, it could impose costly royalty and other
fees and expenses on us.
If third parties bring successful claims against us for infringement of their intellectual property rights, we may be subject to
injunctive or other equitable relief, which could prevent us from developing and commercializing one or more of our medicines
and drug candidates. In the event of a successful claim against us of infringement or misappropriation, or a settlement by us of
any such claims, we may have to pay substantial damages, including treble damages and attorneys’ fees in the case of willful
infringement, pay royalties or redesign our infringing medicines and drug candidates, which may be impossible or require
substantial time and cost. In the event of an adverse result in any such litigation, or even in the absence of litigation, we may
need to obtain licenses from third parties to advance our research or allow commercialization of our medicines or drug
candidates. Any such license might not be available on reasonable terms or at all. In the event that we are unable to obtain such
a license, we would be unable to further develop and commercialize one or more of our medicines and drug candidates, which
could harm our business significantly. We may also elect to enter into license agreements in order to settle patent infringement
claims or to resolve disputes prior to litigation, and any such license agreements may require us to pay royalties and other fees
that could significantly harm our business.
We are aware of patents in the U.S. and some other jurisdictions with claims covering certain antibodies that are relevant to
tislelizumab for which patents are expected to expire in 2023 or 2024; complexes of irreversible BTK inhibitors that are
relevant to BRUKINSA for which the patent is expected to expire in 2027; the use of PARP inhibitors to treat certain cancers
that are relevant to pamiparib for which patents are expected to expire between 2027 and 2031; and the use of TIGIT antagonist
in combination with PD-1 binding antagonist to treat cancers that are relevant to the use of ociperlimab in combination with
tislelizumab for which patents are expected to expire in 2034. Although we believe that the relevant claims of these patents
would likely be held invalid, we can provide no assurance that a court or an administrative agency would agree with our
assessment. If the validity of the relevant claims of one or more of these patents were to be upheld upon a validity challenge,
and our related medicine was approved for sale in the United States before the expiration of the relevant patents, we would need
a license to commercialize the medicine in the United States before the expiration of the relevant patents. In addition, depending
upon the circumstances, we may need licenses for jurisdictions outside of the United States where we wish to commercialize a
particular medicine before the expiration of corresponding patents covering that medicine. In such cases, we can provide no
assurance that we would be able to obtain a license or licenses on commercially reasonable terms or at all, which could
materially and adversely affect our business.
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Even if litigation or other proceedings are resolved in our favor, there could be public announcements of the results of
hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to
be negative, it could have a substantial adverse effect on the market price of our shares. Such litigation or proceedings could
substantially increase our operating losses and reduce the resources available for development activities or any future sales,
marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such
litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more
effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation
of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee
payment, and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or
eliminated for noncompliance with these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and other patent agencies in several stages
over the lifetime of the patent. The USPTO and other patent agencies require compliance with a number of procedural,
documentary, fee payment, and other similar provisions during the patent application process. Although an inadvertent lapse
can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are
situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or
complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a
patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees, and
failure to properly legalize and submit formal documents. In any such event, our competitors might be able to enter the market,
which would have a material adverse effect on our business.
If we do not obtain patent term extension and regulatory exclusivity for our medicines, our business may be materially
harmed.
Depending upon the timing, duration and specifics of FDA marketing approval of our medicines and drug candidates, one
or more of our U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act. However, we may
not be granted an extension because of, for example, failing to exercise due diligence during the testing phase or regulatory
review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise
failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could
be less than we request. In addition, although the Amended PRC Patent Law includes patent term extension, the patent term
extension provision of the law is unclear and/or remains subject to the approval of implementing regulations that are still in
draft form and soliciting comments, leading to uncertainty about its scope and implementation. As a result, the patents we have
in the PRC are not yet eligible to be extended for patent term lost during clinical trials and the regulatory review process. If we
are unable to obtain patent term extension or term of any such extension is less than we request, our competitors may obtain
approval of competing products following our patent expiration, and our business, financial condition, results of operations, and
prospects could be materially harmed.
Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our medicines
or drug candidates.
The laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain
new patents or to enforce our existing patents and patents that we might obtain in the future. There could be changes in the laws
of foreign jurisdictions that may impact the value of our patent rights or our other intellectual property rights.
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 claims that 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 other proprietary information, to maintain our competitive position and to protect our medicines and drug
candidates. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with
parties that have access to them, such as our employees, corporate collaborators, outside scientific collaborators, sponsored
researchers, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and
invention or patent assignment agreements with our employees and consultants. However, any of these parties may breach such
agreements and disclose our proprietary information, and we may not be able to obtain adequate remedies for such breaches.
Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time-
consuming, and the outcome is unpredictable. If any of our trade secrets were to be lawfully obtained or independently
developed by a competitor, we would have no right to prevent them from using that technology or information to compete with
us and our competitive position would be harmed.
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Furthermore, many of our employees, including our senior management, were previously employed at other biotechnology
or pharmaceutical companies, including our competitors or potential competitors. Some of these employees, including members
of our senior management, executed proprietary rights, non-disclosure and in some cases non-competition agreements in
connection with their previous employment. Although we try to ensure that our employees 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 have used or
disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former
employer. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual
property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial
costs and be a distraction to management.
In addition, while we typically require our employees, consultants and contractors who may be involved in the
development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful
in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which
may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or
defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if
we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction
to our management and scientific personnel.
If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third
parties or otherwise experience disruptions to our business relationships with our licensors, we could be required to pay
monetary damages or could lose license rights that are important to our business.
We have entered into license agreements with third parties providing us with rights under various third-party patents and
patent applications. These license agreements impose diligence, development or commercialization timelines and milestone
payment, royalty, insurance and other obligations on us. If we fail to comply with our obligations under our current or future
license agreements, our counterparties may have the right to terminate these agreements, in which event we might not be able to
develop, manufacture or market any medicine or drug candidate that is covered by the licenses provided for under these
agreements or we may face claims for monetary damages or other penalties under these agreements. Such an occurrence could
diminish the value of these products and our company. Termination of the licenses provided for under these agreements or
reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated
agreements with less favorable terms, or cause us to lose our rights under these agreements.
Risks Related to Our Reliance on Third Parties
We rely on third parties to manufacture some of our commercial and clinical drug supplies. Our business could be harmed
if those third parties fail to provide us with sufficient quantities of product or fail to do so at acceptable quality levels or
prices.
Although we manufacture commercial supply of tislelizumab, zanubrutinib, and pamiparib at our manufacturing facilities
in China, and are constructing a commercial-stage biologics manufacturing and clinical R&D center in New Jersey and a new
small molecule manufacturing campus in Suzhou, China, we continue to rely on outside vendors to manufacture supplies and
process some of our medicines and drug candidates. For example, we have entered into a commercial supply agreement for
tislelizumab with Boehringer Ingelheim Biopharmaceuticals (China) Ltd. ("Boehringer Ingelheim") and entered into a
commercial supply agreement for BRUKINSA with Catalent Pharma Solutions, LLC ("Catalent"). In addition, we generally
rely on our collaboration partners and their third-party manufacturers for supply of in-licensed medicines in China. We have
limited experience in manufacturing or processing our medicines and drug candidates on a commercial scale. Additionally, we
have limited experience in managing the manufacturing process, and our process may be more difficult or expensive than the
approaches currently in use.
Although we intend to use our own manufacturing facilities, we also intend to use third parties as part of our manufacturing
process and for the clinical and commercial supply of our medicines and drug candidates. Our anticipated reliance on a limited
number of third-party manufacturers exposes us to the following risks:
•
•
we may be unable to identify manufacturers on acceptable terms or at all because the number of potential
manufacturers is limited and regulatory authorities must evaluate and/or approve any manufacturers as part of their
regulatory oversight of our medicines and drug candidates. This evaluation would require new testing and GMP-
compliance inspections by regulatory authorities;
our manufacturers may have little or no experience with manufacturing our medicines and drug candidates, and
therefore may require a significant amount of support from us in order to implement and maintain the infrastructure
and processes required to manufacture our medicines and drug candidates;
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•
our third-party manufacturers might be unable to timely manufacture our medicines and drug candidates or produce
the quantity and quality required to meet our clinical and commercial needs, if any. This may, in the future, require us
to transfer manufacturing technology to a different manufacturer or use a different process, each of which would be
both time consuming and costly and potentially require us to conduct comparative studies to determine bioequivalence
of the new and prior manufacturers' products or the new and old processes;
• manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies in
the United States to ensure strict compliance with good manufacturing practice ("GMP") requirements and other
government regulations and by other comparable regulatory authorities for corresponding non-U.S. requirements.
Manufacturers may be unable to comply with these GMPs which may result in fines and civil penalties, suspension of
production, suspension, delay or withdrawal of product approval, or product seizure or recall. We do not have control
over third-party manufacturers’ compliance with these regulations and requirements;
•
•
•
we may not own, or may have to share, the intellectual property rights to some of the technology used and
improvements made by our third-party manufacturers in the manufacturing process for our medicines and drug
candidates;
raw materials and components used in the manufacturing process, particularly those for which we have no other source
or supplier, may not be available or may not be suitable or acceptable for use due to material or component defects;
our contract manufacturers and drug component suppliers may be subject to disruptions in their business, including
unexpected demand for or shortage of raw materials or components, cyber-attacks on supplier systems, labor disputes
or shortage and inclement weather, as well as natural or man-made disasters or pandemics; and
• manufacturing partners may require us to fund capital improvements to support scale-up of manufacturing and related
activities to the extent our drug candidates or medicines become approved for commercial sale.
For example, on March 25, 2020, the NMPA suspended the importation, sales and use of ABRAXANE in China supplied
to us by BMS, and the drug was subsequently recalled by BMS and is not currently available for sale in China. This suspension
was based on inspection findings at BMS’s contract manufacturing facility in the United States. We have not had any sales of
ABRAXANE since the suspension and do not expect future revenue from ABRAXANE. For additional information, please see
the section of this Annual Report titled “Legal Proceedings”.
Each of these risks could delay or prevent the completion of our clinical trials or the approval of any of our drug
candidates, result in higher costs or adversely impact development of our drug candidates or commercialization of our
medicines. In addition, we will rely on third parties to perform certain specification tests on our medicines and drug candidates
prior to delivery to patients. If these tests are not appropriately done and test data are not reliable, patients could be put at risk of
serious harm and regulatory authorities could place significant restrictions on our company until deficiencies are remedied.
Currently, the raw materials for our manufacturing activities are supplied by multiple source suppliers, although portions of
our supply chain may rely on sole source suppliers. We have agreements for the supply of drug materials with manufacturers or
suppliers that we believe have sufficient capacity to meet our demands. In addition, we believe that adequate alternative sources
for such supplies exist. However, there is a risk that, if supplies are interrupted, it would materially harm our business.
Manufacturers of drug and biological products often encounter difficulties in production, particularly in scaling up or out,
validating the production process, and assuring high reliability of the manufacturing process (including the absence of
contamination). These problems include logistics and shipping, difficulties with production costs and yields, quality control,
including stability of the product, product testing, operator error, availability of qualified personnel, as well as compliance with
strictly enforced federal, state and non-U.S. regulations. Furthermore, if contaminants are discovered in the supply of our
medicines and drug candidates or in the manufacturing facilities, such manufacturing facilities may need to be closed for an
extended period of time to investigate and remedy the contamination. We cannot assure you that any stability failures or other
issues relating to the manufacture of our medicines and drug candidates will not occur in the future. Additionally, our
manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable
political environments. If our manufacturers were to encounter any of these difficulties, or otherwise fail to comply with their
contractual obligations, our ability to provide our medicines for commercial sale and our drug candidates to patients in clinical
trials would be jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of
clinical trials, increase the costs associated with maintaining clinical trial programs and, depending upon the period of delay,
require us to begin new clinical trials at additional expense or terminate clinical trials completely.
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We have entered into licensing and collaboration arrangements and may enter into additional collaborations, licensing
arrangements, or strategic alliances in the future, and we may not realize the benefits of such arrangements.
We have entered into licensing and collaboration agreements and may enter into additional collaboration, licensing
arrangements, or strategic alliances with third parties that we believe will complement or augment our research, development
and commercialization efforts. Any of these relationships may require us to incur non-recurring and other charges, increase our
near and long-term expenditures, issue securities that dilute our existing shareholders, or disrupt our management and business.
In August 2017, we acquired Celgene's commercial operations in China and an exclusive license to Celgene's (now BMS’s)
commercial cancer portfolio in China, REVLIMID, VIDAZA and ABRAXANE. On March 25, 2020, the NMPA suspended the
importation, sales and use of ABRAXANE in China supplied to us by BMS, and the drug was subsequently recalled by BMS
and is not currently available for sale in China. This suspension was based on inspection findings at BMS’s contract
manufacturing facility in the United States. We have not had any sales of ABRAXANE since the suspension and do not expect
future revenue from ABRAXANE. We have initiated an arbitration proceeding against BMS asserting that it has breached and
continues to breach the terms and conditions of the license and supply agreement. For additional information, please see the
section of this Annual Report titled “Legal Proceedings”.
In 2019, we entered into a strategic collaboration with Amgen with respect to its commercial-stage oncology products
XGEVA, BLINCYTO and KYPROLIS and a portfolio of clinical- and late-preclinical-stage oncology pipeline products. In
January 2021, we entered into a collaboration and license agreement with Novartis Pharma AG ("Novartis"), granting Novartis
rights to develop, manufacture and commercialize our anti-PD-1 antibody tislelizumab in North America, Japan, the EU, and
six other European countries. In December 2021, we entered into an option, collaboration and license agreement with Novartis
to develop, manufacture and commercialize our investigational TIGIT inhibitor, ociperlimab, in North America, Europe, and
Japan.
Our strategic collaborations with Amgen, Novartis and BMS involve numerous risks. We cannot be certain that we will
achieve the financial and other benefits that led us to enter into the collaborations. Moreover, we may not achieve the revenue
and cost synergies expected from our collaborations for their commercial products in China, and our management’s attention
may be diverted from our drug discovery and development business. These synergies are inherently uncertain, and are subject
to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and
are beyond our control. If we achieve the expected benefits, they may not be achieved within the anticipated time frame. Lastly,
strategic collaborations can be terminated for various reasons. For example, our strategic collaboration with Celgene for the
development and commercialization of tislelizumab, which we entered into in connection with the license agreement in 2017,
was terminated in June 2019 in advance of the acquisition of Celgene by BMS, and we received a termination notice in October
2021 to terminate our license agreement for ABRAXANE in China.
Additionally, from time to time, we may enter into joint ventures with other companies. Establishment of a joint venture
involves significant risks and uncertainties, including (i) our ability to cooperate with our strategic partner, (ii) our strategic
partner having economic, business, or legal interests or goals that are inconsistent with ours, and (iii) the potential that our
strategic partner may be unable to meet its economic or other obligations, which may require us to fulfill those obligations
alone.
We face significant competition in seeking appropriate strategic partners, and the negotiation process is time-consuming
and complex. Moreover, we may not be successful in our efforts to establish a strategic collaboration or other alternative
arrangements for our medicines and drug candidates because they may be deemed to be at too early of a stage of development
for collaborative effort and third parties may not view our medicines and drug candidates as having the requisite potential to
demonstrate safety and efficacy or commercial viability. If and when we collaborate with a third party for development and
commercialization of a medicine or drug candidate, we can expect to relinquish some or all of the control over the future
success of that medicine or drug candidate to the third party. For any medicines or drug candidates that we may seek to in-
license from third parties, we may face significant competition from other pharmaceutical or biotechnology companies with
greater resources or capabilities than us, and any agreement that we do enter may not result in the anticipated benefits.
Collaborations involving our medicines and drug candidates are subject to numerous risks, which may include the
following:
•
•
collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration;
collaborators may not pursue development and commercialization of our drug candidates and medicines or may elect
not to continue or renew development or commercialization programs based on clinical trial results, changes in their
strategic focus due to the acquisition of competitive drugs, availability of funding, or other external factors, such as a
business combination that diverts resources or creates competing priorities;
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•
•
•
•
•
•
•
collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon a
drug candidate, repeat or conduct new clinical trials, or require a new formulation of a drug candidate for clinical
testing;
collaborators could independently develop, or develop with third parties, drugs that compete directly or indirectly with
our medicines or drug candidates;
a collaborator with marketing and distribution rights to one or more medicines may not commit sufficient resources to
their marketing and distribution or may set prices that reduce the profitability of the medicines;
collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property
or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate
our intellectual property or proprietary information or expose us to potential liability;
disputes may arise between us and a collaborator that cause the delay or termination of the research, development or
commercialization of our medicines and drug candidates, or that result in costly litigation or arbitration that diverts
management attention and resources;
collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further
development or commercialization of the applicable medicines and drug candidates; and
collaborators may own or co-own intellectual property covering our medicines and drug candidates that results from
our collaborating with them, and in such cases, we would not have the exclusive right to commercialize such
intellectual property.
As a result, we may not be able to realize the benefit of current or future collaborations, licensing arrangements or strategic
alliances for our medicines and drug candidates if we are unable to successfully integrate such products with our existing
operations and company culture, which could delay our timelines or otherwise adversely affect our business. We also cannot be
certain that, following a strategic transaction or license, we will be able to fulfill all of our contractual obligations in a timely
manner or achieve the revenue, specific net income or other goals that justify such transaction. If we are unable to reach
agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development
of a drug candidate, reduce or delay its development program or one or more of our other development programs, delay its
potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake
development or commercialization activities at our own expense.
If we fail to maintain an effective distribution channel for our medicines, our business and sales could be adversely affected.
We rely on third-party distributors to distribute our approved medicines. For example, we rely on sole third-party
distributors to distribute some of our in-licensed approved medicines in China and multiple third-party distributors for the
distribution of our internally developed medicines. We also expect to rely on third-party distributors to distribute our other
internally developed and in-licensed medicines, if approved. Our ability to maintain and grow our business will depend on our
ability to maintain an effective distribution channel that ensures the timely delivery of our medicines. However, we have
relatively limited control over our distributors, who may fail to distribute our medicines in the manner we contemplate. For
example, while we have long-standing business relationship with our sole distributor for the in-licensed products from BMS,
the agreement we entered into with our sole distributor can be terminated by either party upon six months’ written notice. If
price controls or other factors substantially reduce the margins our distributors can obtain through the resale of our medicines to
hospitals, medical institutions and sub-distributors, they may terminate their relationship with us. While we believe alternative
distributors are readily available, there is a risk that, if the distribution of our medicines is interrupted, our sales volumes and
business prospects could be adversely affected.
If third-party manufacturers fail to comply with manufacturing regulations, our financial results and financial condition
could be adversely affected.
Before a third party can begin commercial manufacture of our medicines, they are subject to regulatory inspections of their
manufacturing facilities, processes and quality systems. Due to the complexity of the processes used to manufacture drug and
biological products, any potential third-party manufacturer may be unable to initially pass regulatory inspections in a timely or
cost-effective manner in order for us to obtain regulatory approval. If contract manufacturers do not pass their inspections by
the relevant regulatory authorities, our commercial supply of drug product or substance will be significantly delayed and may
result in significant additional costs, including the delay or denial of any marketing application for our drug candidates or
disruption in sales. In addition, drug and biological manufacturing facilities are continuously subject to inspection by regulatory
authorities, before and after drug approval, and must comply with GMPs. Our or our collaborators' contract manufacturers may
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encounter difficulties in achieving quality control and quality assurance and may experience shortages in qualified personnel. In
addition, contract manufacturers’ failure to achieve and maintain high manufacturing standards in accordance with applicable
regulatory requirements, or the incidence of manufacturing errors, could result in patient injury, product liability claims,
product shortages, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other
problems that could seriously harm our business. If a third-party manufacturer with whom we or our collaborators' contract is
unable to comply with manufacturing regulations, we may also be subject to fines, unanticipated compliance expenses, recall or
seizure of our drugs, product liability claims, total or partial suspension of production and/or enforcement actions, including
injunctions, and criminal or civil prosecution. These possible sanctions could materially adversely affect our financial results
and financial condition. On March 25, 2020, the NMPA suspended the importation, sales and use of ABRAXANE in China
supplied to us by BMS, and the drug was subsequently recalled by BMS and is not currently available for sale in China. This
suspension was based on inspection findings at BMS’s contract manufacturing facility in the United States. We have not had
any sales of ABRAXANE since the suspension and do not expect future revenue from ABRAXANE. We have initiated an
arbitration proceeding against BMS asserting that it has breached and continues to breach the terms and conditions of the
license and supply agreement. For additional information, please see the section of this Annual Report titled “Legal
Proceedings”.
If we are not able to successfully develop and/or commercialize Amgen’s oncology products, the expected benefits of the
collaboration will not materialize.
We have a collaboration agreement with Amgen pursuant to which we and Amgen have agreed to collaborate on the
commercialization of Amgen’s oncology products XGEVA, BLINCYTO and KYPROLIS in China, and the global
development and commercialization in China of a portfolio of Amgen's clinical- and late-preclinical-stage pipeline products.
Amgen has paused or stopped development of some of the pipeline assets due to portfolio prioritization, and the parties expect
that the development plan for the pipeline assets will continue to evolve over time. Additionally, Amgen has advised us that its
applications to the Human Genetic Resources Administration of China ("HGRAC") to obtain approval to conduct clinical
studies in China for the pipeline assets, including its application for LUMAKRAS (sotorasib) ("AMG 510"), a first-in-class
KRAS G12C inhibitor, were delayed between 2020 and 2022. Approval from the HGRAC is required for the initiation of
clinical trials involving the collection of human genetic materials in China. In connection with our ongoing assessment of the
Collaboration Agreement cost-share contributions, we determined that our further investment in the development of AMG 510
was no longer commercially viable for BeiGene. As a result, in February 2023, we entered into an amendment to the
Collaboration Agreement to (i) stop sharing costs with Amgen for the further development of AMG 510 during the period
starting January 1, 2023 and ending August 31, 2023; and (ii) cooperate in good faith to prepare a transition plan with the
anticipated termination of AMG 510 from the Collaboration Agreement. We do not expect the HGRAC delay to affect the
conduct of the clinical trials in China for our drug candidates, other than assets that are part of the Amgen collaboration. The
Amgen collaboration involves numerous risks, including unanticipated costs and diversion of our management’s attention from
our other drug discovery and development business. There can be no assurance that we will be able to successfully develop and
commercialize Amgen’s oncology products in China, which could disrupt our business and harm our financial results.
We rely on third parties to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry
out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or
commercialize our medicines and drug candidates and our business could be substantially harmed.
We have relied upon and plan to continue to rely to some extent upon third-party CROs to monitor and manage data and
provide other services for our ongoing preclinical and clinical programs. We rely on these parties for execution of our
preclinical studies 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, legal and regulatory requirements and
scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities. We, our CROs for our
clinical programs and our clinical investigators are required to comply with GCPs, which are regulations and guidelines
enforced by regulatory authorities for all of our drug candidates in clinical development. If we or any of our CROs or clinical
investigators fail to comply with applicable GCPs and other regulatory requirements, the clinical data generated in our clinical
trials may be deemed unreliable and regulatory authorities may require us to perform additional clinical trials before approving
our marketing applications. In addition, our pivotal clinical trials must be conducted with drug product produced under GMP
regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the
regulatory approval process. We could also be subject to government investigations and enforcement actions.
If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with
alternative CROs or to do so on commercially reasonable terms. In addition, our CROs are not our employees, and except for
remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time
and resources to our ongoing clinical and nonclinical programs. If CROs do not successfully carry out their contractual duties or
obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they or our
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clinical investigators obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for
other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval
for or successfully commercialize our drug candidates. As a result, our results of operations and the commercial prospects for
our drug candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.
Switching or adding additional CROs involves additional cost and delays, which can materially influence our ability to
meet our desired clinical development timelines. There can be no assurance that we will not encounter similar challenges or
delays in the future or that these delays or challenges will not have a material adverse effect on our business, financial condition
and prospects.
Risks Related to Our Industry, Business and Operations
We have significantly increased and expect to continue to increase our research, development, manufacturing, and
commercial capabilities, and we may experience difficulties in managing our growth.
At the beginning of 2022, we had approximately 8,000 employees, and we ended the year with more than 9,000 employees,
an increase of 15%. We expect to continue our growth. Most of our employees are full-time. As our research, development,
manufacturing and commercialization plans and strategies evolve, we must add a significant number of additional managerial,
operational, drug development, clinical, regulatory affairs, manufacturing, sales, marketing, financial and other personnel in the
United States, China, Europe and other regions. Our recent growth and any anticipated future growth will impose significant
added responsibilities on members of management, including:
•
identifying, recruiting, integrating, maintaining, and motivating additional employees;
• managing the growth in our research, clinical operations, commercial, and supporting functions;
• managing our internal development efforts effectively, including the clinical and regulatory review process for our
drug candidates, while complying with our contractual obligations to third parties; and
•
improving our operational, financial and management controls, reporting systems and procedures.
Our future financial performance and our ability to develop and commercialize our medicines and drug candidates will
depend, in part, on our ability to effectively manage our recent growth and any future growth, and our management may also
have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount
of time to managing these growth activities.
We currently rely, and for the foreseeable future will continue to rely, on certain independent organizations, advisors and
consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors
and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements.
There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors
and consultants on economically reasonable terms, if at all.
If we are not able to effectively manage our growth and further expand our organization by hiring new employees and
expanding our groups of consultants and contractors as needed, we may not be able to successfully implement the tasks
necessary to further develop, manufacture and commercialize our medicines and drug candidates and, accordingly, may not
achieve our research, development, manufacturing and commercialization goals.
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
Xiaodong Wang, Ph.D., our Co-Founder, Chairman of our scientific advisory board, and director; John V. Oyler, our Co-
Founder, Chief Executive Officer and Chairman of the board of directors; Xiaobin Wu, Ph.D., our President, Chief Operating
Officer and General Manager of China; and the other principal members of our management and scientific teams play a critical
role in the Company's operation and development. Although we have employment agreements or offer letters with each of our
executive officers, these agreements do not prevent our executives from terminating their employment with us at any time. We
do not maintain “key person” insurance for any of our executives or other employees. The loss of the services of any of these
persons could impede the achievement of our research, development and commercialization objectives.
To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided share
option, restricted share unit and restricted share grants that vest over time or based on performance conditions. The value to
employees of these equity grants that may be significantly affected by movements in our share price that are beyond our control
and may be insufficient to counteract more lucrative offers from other companies. Although we have employment agreements
or offer letters with our key employees, any of our employees could leave our employment at any time, with or without notice.
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Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical
to our success. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in
formulating and executing our discovery, clinical development, manufacturing and commercialization strategy. The loss of the
services of our executive officers or other key employees and consultants could impede the achievement of our research,
development, manufacturing and commercialization objectives and seriously harm our ability to successfully implement our
business strategy.
Furthermore, replacing executives, key employees or consultants may be difficult and may take an extended period of time
because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully
develop, gain regulatory approval of and commercialize products. Competition to hire from this limited pool is intense, and we
may be unable to hire, train, retain or motivate these key personnel or consultants on acceptable terms, given the competition
among numerous pharmaceutical and biotechnology companies for similar personnel.
We also experience competition for the hiring of scientific and clinical personnel from universities and research
institutions. Our consultants and advisors may be employed by employers other than us and may have commitments under
consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract
and retain high quality personnel, our ability to pursue our growth strategy will be limited.
Our business is subject to complex and evolving industry-specific laws and regulations regarding the collection and transfer
of personal data. These laws and regulations can be complex and stringent, and many are subject to change and uncertain
interpretation, which could result in claims, changes to our data and other business practices, significant penalties,
increased cost of operations, or otherwise adversely impact our business.
Regulatory authorities around the world have implemented industry-specific laws and regulations that affect the collection
and transfer of personal data. For example, in China, the Regulation on the Administration of Human Genetic Resources
promulgated by the State Council (the “HGR Regulation”), which became effective in 2019, applies to activities that involve
sampling, biobanking, use of HGR materials and associated data, in China, and provision of such to foreign parties. The HGR
Regulation prohibits both onshore or offshore entities established or actually controlled by foreign entities and individuals from
sampling or biobanking any China HGR in China and require approval for the sampling of certain HGR and biobanking of all
HGR by Chinese parties. Approval for any export or cross-border transfer of the HGR material is required, and transfer of
China HGR data by Chinese parties to foreign parties or entities established or actually controlled by them also requires the
Chinese parties to file, before the transfer, a copy of the data to the HGR administration for record. The HGR Regulation also
requires that foreign parties ensure the full participation of Chinese parties in international collaborations and all records and
data must be shared with the Chinese parties. For information about applications under the HGR Regulation for clinical studies
in China that are part of the Amgen- BeiGene Collaboration, see the risk factor entitled “If we are not able to successfully
develop and/or commercialize Amgen’s oncology products, the expected benefits of the collaboration will not materialize."
Further to the draft HGR implementing rules, the Cyberspace Administration of China ("CAC") released the final
Measures of Cross-Border Data Transfer Security Assessment on July 7, 2022 (effective as of September 1, 2022), under which
any transfer of certain "important data" out of China shall trigger a security assessment to be conducted by the government. The
term "important data" is a broadly defined term under the Cybersecurity Law and Data Security Law, and further clarifications
need to be put in place by the government before international companies could find a practical way to comply. However, under
the latest draft Important Data Identification Guidance, HGR data is classified as "important data," and if the guidance is
finalized as is, it can be expected that this new cross-border data transfer rule may create considerable additional regulatory
burdens on international companies' human gene-involved R&D activities in China (i.e., adding a third layer of CAC's
regulatory approval in addition to HGRAC's and NMPA's).
If the Chinese parties fail to comply with data protection laws, regulations and practice standards, and our research data is
obtained by unauthorized persons, used or disclosed inappropriately or destroyed, it could result in a loss of our confidential
information and subject us to litigation and government enforcement actions. It is possible that these laws may be interpreted
and applied in a manner that is inconsistent with our or our collaborators’ practices, potentially resulting in suspension of
relevant ongoing clinical trials or the initiation of new trials, confiscation of HGR samples and associated data and
administrative fines, disgorgement of illegal gains, or temporary or permanent debarment of our or our collaborators’ entities
and responsible persons from further HGR projects and, consequently, a de-facto ban on the debarred entities from initiating
new clinical trials in China. So far, the HGR administration has disclosed a number of HGR violation cases. In one case, the
sanctioned party was the Chinese subsidiary of a multinational pharmaceutical company that was found to have illegally
transferred certain HGR materials to CROs for conducting certain unapproved research. In addition to a written warning and
confiscation of relevant HGR materials, the Chinese subsidiary of the multinational pharmaceutical company was requested by
the HGR administration to take rectification measures and at the same time banned from submitting any HGR applications until
the HGR administration was satisfied with the rectification results, which rendered it unable to initiate new clinical trials in
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China until the ban was lifted. In another case, a public hospital was found to have illegally transferred certain HGR data to a
university in Europe, and that hospital was eventually subject to the same ban.
To further tighten the control of China HGR, the Chinese government adopted amendments to the Criminal Code, effective
as of March 1, 2021, which criminalize the illegal collection of China HGR, the illegal transfer of China HGR materials outside
of China, and the transfer of China HGR data to foreign parties or entities established or actually controlled by them without
going through security review and assessment. An individual who is convicted of any of these violations may be subject to
public surveillance, criminal detention, a fixed-term imprisonment of up to 7 years, and/or a criminal fine. On April 15, 2021,
the Biosecurity Law became effective. The Biosecurity Law establishes an integrated system to regulate biosecurity-related
activities in China, including the security regulation of HGR and biological resources. The Biosecurity Law for the first time
expressly declared that China has sovereignty over its HGR and further endorsed the HGR Regulation by recognizing the
fundamental regulatory principles and systems established by it over the utilization of Chinese HGR by foreign entities in
China. Although the Biosecurity Law does not provide any specific new regulatory requirements on HGR, as it is a law adopted
by China’s highest legislative authority, it gives China’s major regulatory authority of HGR, i.e., the Ministry of Science and
Technology, significantly more power and discretion to regulate HGR and it is expected that the overall regulatory landscape
for Chinese HGR will evolve and become even more rigorous. In addition, the interpretation and application of data protection
laws in China and elsewhere are often uncertain and in flux.
We expect that these areas will receive greater and continued attention and scrutiny from regulators and the public going
forward, which could increase our compliance costs and subject us to heightened risks and challenges associated with data
security and protection. If we are unable to manage these risks, we could become subject to significant penalties, including
fines, suspension of business and revocation of required licenses, and our reputation and results of operations could be
materially and adversely affected.
We manufacture some of our medicines and intend to manufacture some of our drug candidates, if approved. Failure to
comply with regulatory requirements could result in sanctions being imposed against us and delays in completing and
receiving regulatory approvals for our manufacturing facilities, or damage to, destruction of or interruption of production at
such facilities, could delay our development plans or commercialization efforts.
We currently have manufacturing facilities in Beijing, Guangzhou, and Suzhou, China. We are also constructing a
commercial-stage biologics manufacturing and clinical R&D center in New Jersey, United States, and a new small molecule
manufacturing campus in Suzhou, China. These facilities may encounter unanticipated delays and expenses due to a number of
factors, including regulatory requirements. If construction or expansion, regulatory evaluation and/or approval of our facilities
are delayed, we may not be able to manufacture sufficient quantities of our medicines and drug candidates, which would limit
our development and commercialization activities and our opportunities for growth. Cost overruns associated with constructing
or maintaining our facilities could require us to raise additional funds from other sources. For example, we may not be able to
complete the construction and validation of and obtain regulatory approval for the new manufacturing and clinical R&D center
in New Jersey, the new manufacturing campus in Suzhou and manufacturing facility expansion in Guangzhou in a timely or
economic manner.
In addition to the similar manufacturing risks described in “Risks Related to Our Reliance on Third Parties,” our
manufacturing facilities are subject to inspection in connection with clinical development and new drug approvals and ongoing,
periodic inspection by the FDA, NMPA, EMA or other comparable regulatory agencies to ensure compliance with GMP and
other regulatory requirements. Historically, some manufacturing facilities in China have had difficulty meeting the FDA’s,
NMPA's or EMA's standards. Our failure to follow and document our adherence to such GMP regulations or other regulatory
requirements may lead to significant delays in the availability of products for clinical or commercial use, may result in the
termination of or a hold on a clinical trial, or may delay or prevent filing or approval of marketing applications for our drug
candidates or the commercialization of our medicines. We also may encounter problems with the following:
•
•
•
achieving adequate or clinical-grade materials that meet FDA, NMPA, EMA or other comparable regulatory agency
standards or specifications with consistent and acceptable production yield and costs;
shortages of qualified personnel, raw materials or key contractors; and
ongoing compliance with GMP regulations and other requirements of the FDA, NMPA, EMA or other comparable
regulatory agencies.
Failure to comply with applicable regulations could also result in sanctions being imposed on us, including fines,
injunctions, civil penalties, a requirement to suspend or put on hold one or more of our clinical trials, failure of regulatory
authorities to grant marketing approval of our drug candidates, delays, suspension or withdrawal of approvals, supply
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disruptions, license revocation, seizures or recalls of drug candidates or medicines, operating restrictions and criminal
prosecutions, any of which could harm our business.
Developing advanced manufacturing techniques and process controls is required to fully utilize our facilities. Advances in
manufacturing techniques may render our facilities and equipment inadequate or obsolete.
To supply commercial quantities for our marketed products, produce our medicines in the quantities that we believe will be
required to meet anticipated market demand, and to supply clinical drug material to support the continued growth of our clinical
programs, we will need to increase, or “scale up,” the production process by a significant factor over the initial level of
production, which will require substantial additional expenditures and various regulatory approvals and permits. If we are
unable to do so, are delayed, or if the cost of this scale up is not economically feasible for us or we cannot find a third-party
supplier, we may not be able to produce our medicines in a sufficient quantity to meet future demand.
If our manufacturing facilities or the equipment in them is damaged or destroyed, we may not be able to quickly or
inexpensively replace our manufacturing capacity or replace it at all. In the event of a temporary or protracted loss of the
facilities or equipment, we might not be able to transfer manufacturing to a third party. Even if we could transfer manufacturing
to a third party, the shift would likely be expensive and time-consuming, particularly since the new facility would need to
comply with the necessary regulatory requirements and we would need regulatory agency approval before selling any
medicines manufactured at that facility. Any interruption in manufacturing operations at our manufacturing facilities could
result in our inability to satisfy the demands of our clinical trials or commercialization. Any disruption that impedes our ability
to manufacture our drug candidates or medicines in a timely manner could materially harm our business, financial condition and
operating results.
Currently, we maintain insurance coverage against damage to our property, plant and equipment in amounts we believe are
reasonable. However, our insurance coverage may not reimburse us, or may not be sufficient to reimburse us, for any expenses
or losses we may suffer. We may be unable to meet our requirements for our drug candidates and medicines if there were a
catastrophic event or interruption or failure of our manufacturing facilities or processes.
We incur significant costs as a result of operating as a public company, and our management is required to devote
substantial time to compliance requirements, including establishing and maintaining internal controls over financial
reporting. We may be exposed to potential risks if we are unable to comply with these requirements.
As a public company listed in the United States, Hong Kong and Shanghai, we are subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the listing rules of the Nasdaq Stock Market
(Nasdaq), The Stock Exchange of Hong Kong Limited (the "HKEx") and the STAR Market of the Shanghai Stock Exchange
(the "SSE"), and incur significant legal, accounting and other expenses to comply with applicable requirements. These rules
impose various requirements on public companies, including requiring certain corporate governance practices. Our management
and other personnel devote a substantial amount of time to these requirements. Moreover, these rules and regulations increase
our legal and financial compliance costs and make some activities more time-consuming and costly.
For example, the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") requires, among other things, that we maintain
effective internal controls for financial reporting and disclosure controls and procedures. In particular, we must perform system
and process evaluations and testing of our internal controls over financial reporting to allow management to report on the
effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Such
compliance may require that we incur substantial accounting expenses and expend significant management efforts. Our testing
may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. In the event
we identify significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner,
the market price of our shares could decline if investors and others lose confidence in the reliability of our financial statements,
we could be subject to sanctions or investigations by the SEC, HKEx, China Securities Regulatory Commission (the "CSRC"),
SSE or other applicable regulatory authorities, and our business could be harmed.
If we engage in acquisitions or strategic collaborations, this may increase our capital requirements, dilute our shareholders,
cause us to incur debt or assume contingent liabilities, and subject us to other risks.
From time to time, we may evaluate various acquisitions and strategic collaborations, including licensing or acquiring
complementary products, intellectual property rights, technologies or businesses. Any completed, in-process or potential
acquisition or strategic collaboration may entail numerous risks, including:
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increased operating expenses and cash requirements;
the assumption of additional indebtedness or contingent or unforeseen liabilities;
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the issuance of our equity securities;
assimilation of operations, intellectual property and products of an acquired company, including difficulties associated
with integrating new personnel;
the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a
strategic merger or acquisition;
retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business
relationships;
risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and
their existing drugs or drug candidates and regulatory approvals; and
our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in
undertaking the acquisition or even to offset the associated acquisition and maintenance costs.
In addition, if we undertake acquisitions or strategic collaborations, we may issue dilutive securities, assume or incur debt
obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization
expense. For example, in connection with our transaction with Amgen, we issued to Amgen a total of 206,635,013 ordinary
shares in the form of ADSs in January 2020, representing 20.5% of the then issued share capital of the Company after giving
effect to the share issuance, which resulted in Amgen becoming our largest shareholder and the ownership of our existing
shareholders being diluted.
PRC regulations and rules concerning mergers and acquisitions, including the Regulations on Mergers and Acquisitions of
Domestic Companies by Foreign Investors (the "M&A Rules"), and other regulations and rules with respect to mergers and
acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign
investors more time consuming and complex. For example, the M&A Rules require that the Ministry of Commerce of the PRC
(the "MOFCOM") be notified in advance of any change-of-control transaction in which a foreign investor takes control of a
PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have
impact on the national economic security, 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 the PRC,
which was amended in June 2022 and became effective as of August 1, 2022, and the Provisions on Thresholds for Prior
Notification of Concentrations of Undertakings issued by the State Council, the concentration of business undertakings by way
of mergers, acquisitions or contractual arrangements that allow one market player to take control of or to exert decisive impact
on another market player must also be notified in advance to the State Administration for Market Regulation (the "SAMR")
when the threshold is crossed and such concentration shall not be implemented without the clearance of prior notification. In
addition, the Measures for Security Review of Foreign Investment jointly issued by the National Development and Reform
Commission and MOFCOM and the Regulations on Implementation of Security Review System for the Merger and Acquisition
of Domestic Enterprise by Foreign Investors (the "Security Review Rules") issued by the MOFCOM specify that mergers and
acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through
which foreign investors may acquire the de facto control over domestic enterprises that raise “national security” concerns are
subject to strict review by the MOFCOM, and the rules prohibit any activities attempting to bypass a security review by
structuring the transaction through, among other things, trusts, entrustment or contractual control arrangements.
We may also be subject to similar review and regulations in other jurisdictions, such as the laws and regulations on foreign
investment in the United States under the jurisdiction of the Committee on Foreign Investment in the United States (the
"CFIUS") and other agencies, including the Foreign Investment Risk Review Modernization Act (the "FIRRMA"), which
became effective in February 2020.
Furthermore, according to the Overseas Listing Trial Measures, if a Chinese overseas listed company issues overseas listed
securities to acquire assets, such issuance would be subject to filing requirements with the CSRC.
In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the
above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required
approval or filing processes, including obtaining approval from or filing with CFIUS, the SAMR, the MOFCOM, the CSRC or
other agencies may delay or inhibit our ability to complete such transactions. It is unclear whether those complementary
businesses we may acquire in the future would be deemed to be in an industry that raises “national defense and security” or
“national security” concerns.
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However, CFIUS, SAMR, MOFCOM, CSRC or other government agencies may publish explanations in the future
determining that certain complementary business is in an industry subject to the security review, in which case our future
acquisitions in the United States and the PRC, including those by way of entering into contractual control arrangements with
target entities, may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand our market
share through future acquisitions would as such be materially and adversely affected.
If we fail to comply with the U.S. Foreign Corrupt Practices Act or other anti-bribery and corruption laws, our reputation
may be harmed and we could be subject to penalties and significant expenses that have a material adverse effect on our
business, financial condition and results of operations.
We are subject to the U.S. Foreign Corrupt Practices Act (the "FCPA"). The FCPA generally prohibits us from making
improper payments to non-U.S. officials for the purpose of obtaining or retaining business. We are also subject to the anti-
bribery and corruption laws of other jurisdictions, particularly China. The anti-bribery laws in China generally prohibit
companies and their intermediaries from making payments to government officials for the purpose of obtaining or retaining
business or securing any other improper advantage. As our business has expanded, the applicability of the FCPA and other anti-
bribery and corruption laws to our operations has increased.
We do not fully control the interactions our employees, distributors and third-party promoters have with hospitals, medical
institutions and doctors, and they may try to increase sales volumes of our products through means that constitute violations of
United States, PRC or other countries’ anti-corruption and related laws. Although we have policies and procedures designed to
ensure that we, our employees and our agents comply with anti- bribery laws, there is no assurance that such policies or
procedures will prevent our agents, employees and intermediaries from engaging in bribery activities. If we, due to either our
own deliberate or inadvertent acts or those of others, fail to comply with applicable anti-bribery and corruption laws, our
reputation could be harmed and we could incur criminal or civil penalties, including but not limited to imprisonment, criminal
and civil fines, suspension of our ability to do business with the government, denial of government reimbursement for our
products and/or exclusion from participation in government healthcare programs, other sanctions and/or significant expenses,
which could have a material adverse effect on our business.
If we or our CROs or contract manufacturing organizations (CMOs) fail to comply with environmental, health and safety
laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect
on our business.
We and third parties, such as our CROs or CMOs, are subject to numerous environmental, health and safety laws and
regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of
hazardous materials and waste. In addition, our construction projects can only be put into operation after certain regulatory
procedures with the relevant administrative authorities in charge of environmental protection, health and safety have been
completed. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials.
Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these
materials and waste. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination
or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and such liability
could exceed our insurance coverage. We also could incur significant costs associated with civil or criminal fines and penalties.
Although we maintain workers’ compensation insurance to cover us for costs and expenses that we may incur due to
injuries to our employees resulting from the use of or exposure to hazardous materials, this insurance may not provide adequate
coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be
asserted against us in connection with our storage, use or disposal of biological or hazardous materials.
In addition, we may be required to incur substantial costs to comply with current or future environmental, health and safety
laws and regulations. These current or future laws and regulations may impair our research, development, manufacturing or
commercialization efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or
other sanctions.
Our information technology systems, or those used by our contractors or collaborators, may fail or suffer security breaches,
which could result in a material disruption of our product development and commercialization efforts.
Despite the implementation of security measures, our information technology systems and those of our contractors and
collaborators, are vulnerable to damage from internal or external events, such as computer viruses, unauthorized access, natural
disasters, terrorism, war, and telecommunication and electrical failures, which can compromise the confidentiality, integrity and
availability of the systems. Although to our knowledge we have not experienced any material system failure or security 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
research, development, manufacturing, regulatory and commercialization efforts and our business operations.
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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
business information. We manage and maintain our applications and data utilizing on-site systems and outsourced vendors.
These applications and data encompass a wide variety of business-critical information, including research and development
information, commercial information and business and financial information. Because information systems, networks and other
technologies are critical to many of our operating activities, shutdowns or service disruptions at our company or vendors that
provide information systems, networks, or other services to us pose increasing risks. Such disruptions may be caused by events
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 similar events. Such events could cause loss of data, damage to systems and data and
leave us unable to utilize key business systems or access important data needed to operate our business. Our contractors and
collaborators have and in the future may face similar risks, and service disruptions or security breaches of their systems could
adversely affect our security, leave us without access to important systems, products, raw materials, components, services or
information or expose our confidential data. In addition, system redundancy may be ineffective or inadequate, and our disaster
recovery planning may not be sufficient to cover all eventualities. Significant events could result in a disruption of our
operations, damage to our reputation or a loss of revenues. In addition, we may not have adequate insurance coverage to
compensate for any losses associated with such events.
We could be subject to risks caused by misappropriation, misuse, leakage, falsification or intentional or accidental release
or loss of information maintained in the information systems and networks of our company and our vendors, including personal
information of our employees and patients, and company and vendor confidential data. In addition, outside parties may attempt
to penetrate our systems or those of our vendors or fraudulently induce our personnel 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 and our third-party
vendors have on occasion experienced, and will continue to experience, threats to our or their data and systems, including
malicious codes and viruses, phishing, business email compromise attacks, ransomware, or other cyber-attacks. The number
and complexity of these threats continue to increase over time. If a material breach of our information technology systems or
those of our vendors occurs, we could be required to expend significant amounts of money and other resources to respond to
these threats or breaches and to repair or replace information systems or networks and could suffer financial loss or the loss of
valuable confidential information. In addition, we could be subject to regulatory actions and/or claims made by individuals and
groups in private litigation involving privacy issues related to data collection and use practices and other data privacy laws and
regulations, including claims for misuse or inappropriate disclosure of data, as well as unfair or deceptive practices. Although
we develop and maintain systems and controls designed to prevent these events from occurring, and we have processes to
identify and mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires
ongoing monitoring and updating as technologies change and efforts to overcome security 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-based information systems, the related security risks will increase and we will need to expend additional
resources to protect our technology and information systems. In addition, there can be no assurance that our internal
information technology systems or those of our contractors and collaborators, as well as our and their efforts to implement
adequate security and control measures, will be sufficient to protect us against breakdowns, service disruptions, data
deterioration or loss in the event of a system malfunction, or prevent data from being stolen or corrupted in the event of a
cyberattack, security breach, ransomware, industrial espionage attack or insider threat attack that could adversely affect our
business and operations and/or result in the loss or exposure of critical, proprietary, private, confidential or otherwise sensitive
data, which could result in financial, legal, business or reputational harm to us.
Our failure to comply with data protection laws and regulations could lead to government enforcement actions and
significant penalties against us, and adversely impact our operating results.
In the United States, Europe, China, and many other jurisdictions where we operate, we are subject to laws and regulations
that address privacy, personal information protection and data security at both the federal and State levels. Numerous laws and
regulations, including, without limitation, privacy laws (such as the European Union's General Data Protection Regulation
("GDPR") or similar laws), security breach notification laws (such as Australia's amendment to the Privacy Act), health
information privacy laws (such as the United States' Health Insurance Portability and Accountability Act ("HIPAA") and the
Human Genetic Resources Administration of China's rules), and consumer protection laws (such as the United States' Federal
Trade Commission's unfair or deceptive practices rules or California's Consumer Privacy Act and California's Privacy Rights
Act), govern the collection, use, disclosure and protection of health-related and other personal information. A subset of these
laws also have strict requirements governing the cross-border transmission of personal information (see —“Compliance with
the Data Security Law of the People’s Republic of China (the “Data Security Law”), Cybersecurity Review Measures, Personal
Information Protection Law of the People’s Republic of China (the “PIPL”), regulations and guidelines relating to the multi-
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level protection scheme (the “MLPS”) and any other future laws and regulations may entail significant expenses and could
materially affect our business.”).
The legal and regulatory landscape around data privacy is rapidly changing with countries and states passing new laws and
regulations every year. Tracking and complying with these laws and regulations requires significant time and expenses and
could materially affect our business. By way of example and without limitation, these laws may require updating of contracts,
informed consent forms, clinical trial protocols and privacy notices; changes to company procedures; limiting what personal
information we collect, who has access to it and how/where we use it; performing internal assessments; changes to the security
and hosting solution of our systems; specific reporting and remediation efforts in the event of a data breach; and even opening
our business up for external assessments by government bodies.
Given the variability and evolving state of these laws, we face uncertainty as to the exact interpretation of the new
requirements, and we may face challenges in implementing all measures required by regulators or courts in their interpretation.
Additionally, we may experience a reportable data breach (see —"Our information technology systems, or those used by our
contractors or collaborators, may fail or suffer security breaches, which could result in a material disruption of our product
development and commercialization efforts"). Any failure or perceived failure by us to comply with applicable laws and
regulations could subject us to significant administrative, civil or criminal fines or other penalties and negatively impact our
reputation. For severe violations, in some countries these laws even allow courts and government agencies to delay or halt
transfer of personal information, require deletion of personal information, or even order we stop collection of personal
information in that country. All of these could materially harm our business, prospects, and financial condition or even disrupt
our operations.
These laws apply not just to us, but also to those vendors working on our behalf, as well as our business partners. Any
actual or perceived failure of them to comply with these laws and regulations could impact the services they provide to us, our
collaborations with them and our reputation; additionally, there is a risk of liability flowing to us under certain contractual and/
or legal conditions.
Compliance with the Data Security Law of the People’s Republic of China (the “Data Security Law”), Cybersecurity Review
Measures, Personal Information Protection Law of the People’s Republic of China (the “PIPL”), regulations and guidelines
relating to the multi-level protection scheme (the “MLPS”) and any other future laws and regulations may entail significant
expenses and could materially affect our business.
China has implemented extensive data protection, privacy and information security rules and is considering a number of
additional proposals relating to these subject areas. We face significant uncertainties and risks related to these laws, regulations
and policies, some of which were only recently enacted, and the interpretation of these legal requirements by government
regulators as applied to biotechnology companies like us. For example, we do not maintain, nor do we intend to maintain in the
future, personally identifiable health information of patients in China. We do, however, collect and maintain de-identified or
pseudonymized health data for clinical trials in compliance with local regulations. This data could be deemed “personal data” or
“important data” by government regulators. With China’s growing emphasis of its sovereignty over data derived from China,
the outbound transmission of de-identified or pseudonymized health data for clinical trials may be subject to the new national
security legal regime, including the Data Security Law, the Cyber Security Law of the People’s Republic of China (the “Cyber
Security Law”), the PIPL, and various implementing regulations and standards.
China’s Data Security Law provides that the data processing activities must be conducted based on “data classification and
hierarchical protection system” for the purpose of data protection and prohibits entities in China from transferring data stored in
China to foreign law enforcement agencies or judicial authorities without prior approval by the relevant PRC authority. The
classification of data is based on its importance in economic and social development, as well as the degree of harm expected to
be caused to national security, public interests, or the legitimate rights and interests of individuals or organizations if such data
is tampered with, destroyed, leaked, or illegally acquired or used.
The Cyber Security Law requires companies to take certain measures to ensure the security of their networks and data
stored on their networks. Specifically, the Cyber Security Law provides that companies adopt an MLPS, under which network
operators are required to perform obligations of security protection to ensure that the network is free from interference,
disruption or unauthorized access, and prevent network data from being disclosed, stolen or tampered. The CAC released draft
amendments to the Cyber Security Law in September 2022, which propose to impose more stringent legal liabilities for
violations. Under the MLPS, entities operating information systems must have a thorough assessment of the risks and the
conditions of their information and network systems to determine the level to which the entity’s information and network
systems belong, from the lowest Level 1 to the highest Level 5 pursuant to a series of national standards on the grading and
implementation of the classified protection of cybersecurity. The grading result will determine the set of security protection
obligations that entities must comply with and when relevant government authority examination and approval is required.
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Under the Cyber Security Law and Data Security Law, we are required to establish and maintain a comprehensive data and
network security management system that will enable us to monitor and respond appropriately to data security and network
security risks. We are obligated to notify affected individuals and appropriate Chinese regulators of and respond to any data
security and network security incidents. Establishing and maintaining such systems takes substantial time, effort and cost, and
we may not be able to establish and maintain such systems as fully as needed to ensure compliance with our legal obligations.
Despite our investment, such systems may not adequately protect us or enable us to appropriately respond to or mitigate all data
security and network security risks or incidents we may face.
Furthermore, under the Data Security Law, data categorized as “important data,” which will be determined by
governmental authorities in the form of catalogs, is to be processed and handled with a higher level of protection. The notion of
important data is not clearly defined by the Cyber Security Law or the Data Security Law. In order to comply with the statutory
requirements, we will need to determine whether we possess important data, monitor the important data catalogs that are
expected to be published by local governments and departments, perform risk assessments and ensure we are complying with
reporting obligations to applicable regulators. We may also be required to disclose to regulators business sensitive or network
security-sensitive details regarding our processing of important data and may need to pass the government security review or
obtain government approval in order to share important data with offshore recipients, which can include foreign licensors, or
share data stored in mainland China with judicial and law enforcement authorities outside of mainland China. If judicial and
law enforcement authorities outside mainland China require us to provide data stored in mainland China, and we are not able to
pass any required government security review or obtain any required government approval to do so, we may not be able to meet
the foreign authorities’ requirements. The potential conflicts in legal obligations could have adverse impacts on our operations
in and outside of mainland China. PRC regulatory authorities have also enhanced the supervision and regulation of cross-border
data transmission. The Data Security Law prohibits entities and individuals in China from providing any foreign judicial or law
enforcement authority with any data stored in China without approval from competent PRC authority, and sets forth the legal
liabilities of entities and individuals found to be in violation of their data protection obligations, including rectification order,
warning, fines, suspension of relevant business, and revocation of business permits or licenses. Moreover, the CAC
promulgated the Measures for the Security Assessment of Cross-border Data Transmission, which became effective as of
September 1, 2022. According to these measures, personal data processors are subject to security assessment prior to any cross-
border transfer of data if the transfer involves (i) important data; (ii) personal information transferred overseas by operators of
critical information infrastructure or a data processor that has processed personal data of more than one million persons; (iii)
personal information transferred overseas by a data processor who has already provided personal data of 100,000 persons or
sensitive personal data of 10,000 persons overseas since January 1 of last year; or (iv) other circumstances as requested by the
CAC. Any cross-border data transfer activities conducted in violation of the Measures for the Security Assessment of Cross-
border Data Transmission before the effectiveness of these measures are required to be rectified by March 2023. Though these
measures have already taken effect, substantial uncertainties still exist with respect to the interpretation and implementation of
these measures in practice and how they will affect our business operation.
The CAC has taken action against several Chinese internet companies listed on U.S. securities exchanges for alleged
national security risks and improper collection and use of the personal information of Chinese data subjects. According to the
official announcement, the action was initiated based on the National Security Law of the People’s Republic of China (the
“National Security Law”), the Cyber Security Law and the Cybersecurity Review Measures. Effective February 15, 2022, the
CAC, together with 12 other PRC governmental authorities, promulgated the Revised Cybersecurity Review Measures,
pursuant to which critical information infrastructure operators procuring network products and services and online platform
operators carrying out data processing activities, which affect or may affect national security, shall conduct a cybersecurity
review. In addition, online platform operators possessing personal information of more than one million users seeking to be
listed on foreign stock markets must apply for a cybersecurity review. The relevant competent governmental authorities may
also initiate a cybersecurity review against the relevant operators if the authorities believe that the network product or service or
data processing activities of such operators affect or may affect national security. There are still uncertainties as to the exact
scope of network product or service or data processing activities that will or may affect national security, and the PRC
government authorities may have discretion in the interpretation and enforcement of these measures.
Additionally, the CAC published the draft Administrative Regulations on Cyber Data Security (“Draft Cyber Data Security
Regulations”), pursuant to which data processors shall apply for cybersecurity review if they engage in (i) merger,
reorganization or division of internet platform operators with significant data resources related to national security, economic
development or public interests that affects or may affect national security; (ii) overseas listing while processing over one
million users’ personal information; (iii) Hong Kong listing that affects or may affect national security; or (iv) other data
processing activities that affect or may affect national security. The Draft Cyber Data Security Regulations further require data
processors processing important data or going public overseas to conduct annual data security self-assessment and submit an
assessment report to the CAC before January 31 each year. As the Draft Cyber Data Security Regulations were released only
for public comment, the final version and the effective date thereof may be subject to change with substantial uncertainty.
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It is unclear how widespread the cybersecurity review requirement and the enforcement action will be and what effect they
will have on the life sciences sector generally and the Company in particular. China’s regulators may impose penalties for non-
compliance ranging from fines or suspension of operations, and the imposition of any such penalties on our business could
cause a material adverse effect on our business, financial condition, results of operations, prospects and the trading price of our
ordinary shares, ADSs and RMB Shares, and could lead to our delisting from the Nasdaq. As of the date of this report, we have
not received any notice from any Chinese regulatory authority identifying us as a “critical information infrastructure operator,”
“online platform operator” or “data processor,” or requiring us to go through the cybersecurity review procedures pursuant to
the Revised Cybersecurity Review Measures and the Draft Cyber Data Security Regulations. However, there remains
uncertainty as to how the regulations if enacted as currently proposed, will be interpreted or implemented and whether the
Chinese regulatory authorities will adopt additional regulations. We intend to closely monitor the evolving laws and regulations
in this area and take all reasonable measures to mitigate compliance risks, we cannot guarantee that our business and operations
will not be adversely affected by the potential impact of the Revised Cybersecurity Review Measures, the Draft Cyber Data
Security Regulations or other laws and regulations related to privacy, data protection and information security.
Additionally, the Standing Committee of the National People’s Congress of the PRC promulgated the PIPL, which expands
data protection compliance obligations to cover the processing of personal information of persons by organizations and
individuals in China, and the processing of personal information of persons in China outside of China if such processing is for
purposes of providing products and services to, or analyzing and evaluating the behavior of, persons in China. The PIPL also
provides that critical information infrastructure operators and personal information processing entities that process personal
information meeting a volume threshold are also required to store in China personal information generated or collected in
China, and to pass a security assessment for any export of such personal information. Lastly, the PIPL contains proposals for
significant fines for serious violations of up to RMB50 million, or 5% of annual revenues from the prior year, and penalties,
including that companies found to have violated the PIPL may be ordered to suspend any related activity.
Interpretation, application and enforcement of these laws, rules and regulations evolve from time to time and their scope
may continually change, through new legislation, amendments to existing legislation or changes in enforcement. Compliance
with the Cyber Security Law, the Data Security Law and the PIPL could significantly increase the cost to us of providing our
service offerings, require significant changes to our operations or even prevent us from providing certain service offerings in
jurisdictions in which we currently operate or in which we may operate in the future. Despite our efforts to comply with
applicable laws, regulations and other obligations relating to privacy, data protection and information security, it is possible that
our practices, offerings or platform could fail to meet all of the requirements imposed by the Cyber Security Law, the Data
Security Law and/or related implementing regulations. Any failure on our part to comply with such law or regulation, or any
compromise of security that results in unauthorized access, use or release of personally identifiable information or other data, or
the perception or allegation that any of the foregoing types of failure or compromise has occurred, could damage our reputation,
discourage new and existing counterparties from contracting with us or result in investigations, fines, suspension or other
penalties by Chinese government authorities and private claims or litigation, any of which could materially adversely affect our
business, financial condition and results of operations. Even if our practices are not subject to legal challenge, the perception of
privacy concerns, whether or not valid, may harm our reputation and adversely affect our business, financial condition and
results of operations. Moreover, the legal uncertainty created by the Data Security Law and the recent Chinese government
actions could materially adversely affect our ability, on favorable terms, to raise capital in the U.S. and other markets in the
future.
If we or parties on whom we rely fail to maintain the necessary licenses for the development, manufacture, sale and
distribution of our products, our ability to conduct our business could be materially impaired.
We are required to obtain, maintain and renew various permits, licenses and certificates to develop, manufacture, promote
and sell our products. Third parties, such as distributors, third-party promoters and third-party manufacturers, on whom we may
rely to develop, manufacture, promote, sell and distribute our products may be subject to similar requirements. We and third
parties on whom we rely may be also subject to regular inspections, examinations, inquiries or audits by the regulatory
authorities, and an adverse outcome of such inspections, examinations, inquiries or audits may result in the loss or non-renewal
of the relevant permits, licenses and certificates. Moreover, the criteria used in reviewing applications for, or renewals of
permits, licenses and certificates may change from time to time, and there can be no assurance that we or the parties on whom
we rely will be able to meet new criteria that may be imposed to obtain or renew the necessary permits, licenses and certificates.
Many of such permits, licenses and certificates are material to the operation of our business, and if we or parties on whom we
rely fail to maintain or renew material permits, licenses and certificates, our ability to conduct our business could be materially
impaired. Furthermore, if the interpretation or implementation of existing laws and regulations change, or new regulations come
into effect, requiring us or parties on whom we rely to obtain any additional permits, licenses or certificates that were
previously not required to operate our business, there can be no assurance that we or parties on whom we rely will successfully
obtain such permits, licenses or certificates.
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Our financial and operating performance may be adversely affected by public health crises, natural catastrophes, or other
disasters outside of our control.
Our global operations and those of our third-party contractors and collaborators expose us to natural or man-made
disasters, such as earthquakes, hurricanes, floods, fires, explosions, public health crises, such as epidemics or pandemics,
terrorist activity, wars, or other business interruptions outside of our control. Furthermore, we do not maintain any insurance
other than property insurance for some of our buildings, vehicles and equipment. Accordingly, unexpected business
interruptions resulting from disasters could disrupt our operations and thereby result in substantial costs and diversion of
resources. For example, our Guangzhou manufacturing facility was hit by a typhoon in 2019 and although the typhoon did not
cause material damage to the facility, the boundary area and the adjacent land were flooded, causing a power outage for a few
days. Afterwards, we built a gutter along the boundary and installed waterproof electricity cables to fortify the facility and to
help prevent future interruptions. A significant disruption at either our Guangzhou or Suzhou manufacturing facilities, even on
a short-term basis, could impair our ability to timely produce products, which could have a material adverse effect on our
business, financial position and results of operations.
Our production process requires a continuous supply of electricity. We have encountered power shortages historically in
China due to restricted power supply to industrial users during summers when the usage of electricity is high and supply is
limited or as a result of damage to the electricity supply network. Because the duration of those power shortages was brief, they
had no material impact on our operations. Longer interruptions of electricity supply could result in lengthy production
shutdowns, increased costs associated with restarting production and the loss of production in progress. Any major suspension
or termination of electricity or other unexpected business interruptions could have a material adverse impact on our business,
financial condition and results of operations.
We also rely in part on third-party manufacturers to produce and process our medicines and drug candidates. Our ability to
obtain supplies of our medicines and drug candidates could be disrupted if the operations of these suppliers are affected by
man-made or natural disasters, public health epidemics or other business interruptions which could cause us to delay or cease
development or commercialization of some or all of our medicines and drug candidates. In addition, we partially rely on our
third-party research institution collaborators for conducting research and development of our drug candidates, and they may be
affected by such business interruptions, government shutdowns or withdrawn funding. For example, the ability of the FDA to
review and approve new products can be affected by a variety of factors, including government budget and funding levels, the
ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory and policy changes.
Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and
other government agencies on which our operations may rely, including those that fund research and development activities, is
subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also
slow the time necessary for new product candidates to be reviewed and/or approved by necessary government agencies, which
would adversely affect our business. If a prolonged government shutdown occurs, it could significantly impact the ability of the
FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in
order to properly capitalize and continue our operations.
In particular, the COVID-19 pandemic has impacted and could continue to negatively impact our business and our financial
performance, including causing a delay in or the inability of health authorities to complete regulatory inspections of our
development activities, regulatory filings or manufacturing operations. Our clinical development and commercial efforts could
be delayed or otherwise negatively impacted, as patients may be reluctant to go to the hospitals to receive treatment, or our
regulatory inspections or regulatory filings and approvals could be delayed. We have already experienced delays in clinical trial
recruitment. Additionally, the commercial or clinical supply of our medicines and drug candidates could be negatively impacted
due to reduced operations or a shutdown of our or our third-party manufacturing facilities, distribution channels and
transportation systems, or shortages of raw materials and drug product.
In addition, the COVID-19 pandemic resulted in significant governmental measures being implemented to control the
spread of the virus, including quarantines, travel restrictions, social distancing and business shutdowns. The extent to which
such measures are removed or new measures are put in place will depend upon how the pandemic evolves, as well as the
distribution of available vaccines, the rates at which they are administered and the emergence of new variants of the virus. As
needed, we have taken precautionary measures intended to help minimize the risk of the virus to our employees, including
temporarily requiring many employees to work remotely or suspending or limiting non-essential travel worldwide for our
employees. These measures could negatively affect our business. For instance, temporarily requiring all employees to work
remotely may induce absenteeism or employee turnover, disrupt our operations or increase the risk of a cybersecurity incident.
COVID-19 has also caused volatility in the global financial markets and threatened a slowdown in the global economy, which
may negatively affect our business, results of operations, and financial condition. The extent to which the COVID-19 pandemic
may continue to impact our business will depend on future developments, which are highly uncertain, such as the duration of
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the pandemic, the severity of COVID-19, including the continued emergence of new variants, developments or perceptions
regarding the safety of vaccines, or any additional preventative and protective actions taken to contain the pandemic or treat its
impact. Any resulting financial impact cannot be reasonably estimated at this time and may have a material adverse impact on
our business, financial condition and results of operations.
Climate change manifesting as physical or transition risks, included related environmental regulation, could have a material
adverse impact on our business operations, clients and customers.
The long-term effects of climate change are difficult to assess and predict. Our business and the activities of our clients and
customers could be impacted by climate change. Climate change could manifest as a financial risk either through changes in the
physical climate or from the process of transitioning to a low-carbon economy, including related environmental regulation of
companies with respect to risks posed by climate change.
The physical impacts of climate change may include physical risks (such as rising sea levels or frequency and severity of
extreme weather conditions), social and human effects (such as population dislocations or harm to health and well-being),
compliance costs and transition risks (such as regulatory or technology changes) and other adverse effects. The effects could
impair, for example, the availability and cost of certain products, commodities and energy (including utilities), which in turn
may impact our ability to procure goods or services required for the operation of our business at the quantities and levels we
require. Furthermore, related environmental regulation as a response to climate change could result in additional costs in the
form of taxes and investments of capital to maintain complacent with such laws. We bear losses incurred as a result of, for
example, physical damage to or destruction of our facilities, loss or spoilage of inventory, and business interruption due to
weather events that may be attributable to climate change and could materially adversely affect our business operations,
financial position or results of operation.
Product liability claims or lawsuits could cause us to incur substantial liabilities.
We face an inherent risk of product liability as a result of the commercialization of our medicines in the United States,
China, Europe and other markets, and for the clinical testing and any future commercialization of our drug candidates globally.
For example, we may be sued if our medicines or drug candidates cause or are perceived to cause injury or are found to be
otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include
allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the medicine, negligence,
strict liability or a breach of warranties. Claims could also be asserted under applicable consumer protection acts. If we cannot
successfully defend ourselves against or obtain indemnification from our collaborators for product liability claims, we may
incur substantial liabilities or be required to limit commercialization of our medicines and drug candidates. Even successful
defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability
claims may result in: decreased demand for our medicines; injury to our reputation; withdrawal of clinical trial participants and
inability to continue clinical trials; initiation of investigations by regulators; costs to defend the related litigation; a diversion of
our management’s time and resources; substantial monetary awards to trial participants or patients; product recalls, withdrawals
or labeling, marketing or promotional restrictions; loss of revenue; exhaustion of any available insurance and our capital
resources; the inability to commercialize any medicine or drug candidate; and a decline in our share price.
Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product
liability claims could prevent or inhibit the commercialization of our medicines and drug candidates. Although we currently
hold product liability coverage which we believe to be sufficient in light of our current products and clinical programs, the
amount of such insurance coverage may not be adequate, and we may be unable to maintain such insurance at a reasonable cost
or in an amount adequate to satisfy any liability that may arise, or we may not be able to obtain additional or replacement
insurance at a reasonable cost, if at all. Our insurance policies may also have various exclusions, and we may be subject to a
product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a
settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to
obtain, sufficient capital to pay such amounts. Even if our agreements with any future collaborators entitle us to indemnification
against losses, such indemnification may not be available or adequate should any claim arise.
We are subject to the risks and challenges of doing business globally, which may adversely affect our business operations.
Our business is subject to risks and challenges associated with doing business globally. Accordingly, our business and
financial results could be adversely affected due to a variety of factors, including: changes in a specific country’s or region’s
political and cultural climate or economic condition; unexpected changes in laws and regulatory requirements in local
jurisdictions; challenges in replicating or adapting our company policies and procedures to operating environments different
from that of the United States; difficulty of effective enforcement of contractual provisions in local jurisdictions; inadequate
intellectual property protection in certain countries; enforcement of anti-corruption and anti-bribery laws, such as the FCPA;
trade-protection measures or disputes, import or export licensing requirements, and fines, penalties or suspension or revocation
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of export privileges; laws and regulations on foreign investment in the United States under the jurisdiction of the CFIUS and
other agencies; the effects of applicable local tax regimes and potentially adverse tax consequences; the impact of public health
epidemics on employees, our operations and the global economy; restrictions on international travel and commerce; and
significant adverse changes in local currency exchange rates. In addition, in 2017 the United Kingdom Financial Conduct
Authority ("UKFCA"), which regulates the London Interbank Offered Rate ("LIBOR"), announced that it will no longer require
banks to submit rates for the calculation of LIBOR to the LIBOR administrator after 2021. On November 30, 2020, the UKFCA
announced a partial extension of this deadline, indicating its intention to cease the publication of the one-week and two-month
USD LIBOR settings immediately following December 31, 2021, and the remaining USD LIBOR settings immediately
following the LIBOR publication on June 30, 2023. While various replacement reference rates have been proposed, an
alternative reference rate to LIBOR has not yet been widely adopted. As such, the replacement of LIBOR could have an adverse
effect on the market for, or value of, LIBOR-linked financial instruments. Failure to manage these risks and challenges could
negatively affect our ability to expand our businesses and operations as well as materially and adversely affect our business,
financial condition and results of operations.
Future operating results could be negatively affected by changes in tax rates, the adoption of new tax legislation in the
jurisdictions in which we operate, or exposure to additional tax liabilities.
The nature of our international operations subjects us to local, state, regional and national tax laws in jurisdictions around
the world. Our future tax expense could be affected by changes in the mix of earnings in countries with differing statutory tax
rates, changes in the valuation of deferred tax assets and liabilities or changes in tax laws or their interpretation. Additionally,
tax rules governing cross-border activities are continually subject to modification intended to address concerns over base
erosion and profit shifting (BEPS) and other perceived international tax avoidance techniques as a result of both coordinated
actions by governments, such as the OECD/G20 Inclusive Framework on BEPS, and unilateral measures designed by individual
countries. For example, the Cayman Islands has enacted the International Tax Co-operation (Economic Substance) Law (2020
Revision) (the “Economic Substance Law”), which originally took effect on January 1, 2019, and which is accompanied by
Guidance on Economic Substance for Geographically Mobile Activities (Version 2.0; April 30, 2019) published by the Cayman
Islands Tax Information Authority. The Economic Substance Law embraces a global initiative to combat BEPS and
demonstrates the continued commitment of the Cayman Islands to international best practice. The Economic Substance Law
provides that relevant entities that existed before January 1, 2019 and that had been conducting relevant activities by that date
must comply with the economic substance requirements from July 1, 2019, and relevant entities that are established from
January 1, 2019 onwards must comply with the requirements from the date they commence the relevant activity. Although we
believe that we currently are not obliged to meet the economic substance requirements under the Economic Substance Law, we
cannot predict any changes to the legislation or its interpretation in the future. If we are obliged to meet certain economic
substance requirements in the future, our business and results of operations could be negatively impacted if we are required to
make changes to our business in order to gain compliance or if we fail to comply.
We have received tax rulings from various governments that have jurisdictional authority over our operations. If we are
unable to meet the requirements of such agreements, or if they expire or are renewed on less favorable terms, the result could
negatively impact our future earnings. Additionally, the European Commission has opened formal investigations into specific
tax rulings granted by several countries to specific taxpayers. While we believe that our rulings are consistent with accepted tax
ruling practices, the ultimate resolution of such activities cannot be predicted and could also have an adverse impact on future
operating results.
Risks Related to Our Doing Business in the PRC
Changes in the political and economic policies of the PRC government or in relations between China and the United States
or other governments and the significant oversight and discretion the PRC government has over the conduct of the business
operations of our PRC subsidiaries may materially and adversely affect our business, financial condition, and results of
operations and may result in our inability to sustain our growth and expansion strategies.
Due to our operations in China, our business, results of operations, financial condition and prospects may be influenced to
a significant degree by economic, political, legal and social conditions in the PRC or changes in government relations between
China and the United States or other governments. There is significant uncertainty about the future relationship between the
United States and China with respect to trade policies, treaties, government regulations and tariffs. China’s economy differs
from the economies of other countries in many respects, including with respect to the level of development, growth rate,
amount of government involvement, control of foreign exchange and allocation of resources. While China's economy has
experienced significant growth over the past four decades, growth has been uneven across different regions and among various
economic sectors. The Chinese government has implemented various measures to encourage economic development and guide
the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect
on us. For example, our financial condition and results of operations may be adversely affected by government control over
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capital investments or changes in tax regulations that are currently applicable to us. In addition, in the past the Chinese
government implemented certain measures, including interest rate increases, to manage the pace of economic growth and
prevent the economy from overheating. These measures may cause decreased economic activity in China, which may adversely
affect our business and results of operations.
The PRC government has the ability to exert substantial control over any offering of securities conducted overseas and/or
foreign investment in China-based issuers, and, as a result, may limit or completely hinder our ability to offer or continue to
offer securities to investors, and may cause the value of such securities to significantly decline or be worthless.
The PRC government has recently indicated its intent to exert more oversight and control over securities offerings and
other capital markets activities that are conducted overseas and foreign investment in China-based companies. If the PRC
authorities attempt to exercise such control or influence through regulation over our PRC subsidiaries, we could be required to
restructure our operations to comply with such regulations or potentially cease operations in the PRC entirely, which could
adversely affect our business, results of operations and financial condition. Any such action, once taken by the PRC
government, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and
cause the value of such securities to significantly decline or in extreme cases, become worthless.
For example, the PRC government recently initiated a series of regulatory actions and statements to regulate business
operations in China, including cracking down on illegal activities in the securities market, enhancing supervision over China-
based companies listed overseas using the variable interest entity structure, adopting new measures to extend the scope of
cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. For example, in July 2021, the relevant PRC
government authorities made public the Opinions on Intensifying Crack Down on Illegal Securities Activities (the "Securities
Opinions"), which emphasized the need to strengthen the administration over illegal securities activities and the supervision on
overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of
relevant regulatory systems to deal with the risks and incidents faced by China-based overseas listed companies.
Furthermore, in July 2021, the PRC government provided guidance on China-based companies raising capital outside of
China, including through arrangements called variable interest entities ("VIEs"). In light of such developments, the SEC has
imposed enhanced disclosure requirements on China-based companies seeking to register securities with the SEC. Most
recently, on February 17, 2023, the CSRC released the Overseas Listing Trial Measures and five relevant guidelines which will
take effect from March 31, 2023. According to the Overseas Listing Trial Measures, where Chinese companies that have
directly or indirectly listed securities in overseas markets conduct follow-on offering of equity securities in such overseas
markets, they shall fulfill the filing procedures with and report relevant information to the CSRC. As the Overseas Listing Trial
Measures have just been promulgated, there are substantial uncertainties as to its interpretation and implementation. We cannot
assure you that we would not be deemed as an indirect overseas listed Chinese company under the Overseas Listing Trial
Measures. If we are deemed as an indirect overseas listed Chinese company but fail to complete the filing procedures with the
CSRC for any of our follow-on offerings or follow relevant reporting requirements thereunder, we may be subject to penalties,
sanctions and fines imposed by the CSRC and relevant departments of the State Council. See also “Item 1. Business –
Government Regulation – PRC Regulation – Regulations Relating to Overseas Listing”. We are currently evaluating the
implications and potential impact of the Overseas Listing Trial Measures and will continue to closely monitor the interpretation
and implementation of the Overseas Listing Trial Measures. Due to our operations in China and stock listings in and outside of
China, the Overseas Listing Trial Measures and any future PRC, U.S. or other rules and regulations that place restrictions on
capital raising could adversely affect our business and results of operations and could significantly limit or completely hinder
our ability to offer or continue to offer our ADSs or ordinary shares to investors, and could cause the value of our ADSs or
ordinary shares to significantly decline or become worthless.
On February 24, 2023, the CSRC and other PRC governmental authorities jointly issued the revised Provisions on
Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic
Companies (the “Revised Confidentiality Provisions”), which will come into effect on March 31, 2023. According to the
Revised Confidentiality Provisions, Chinese companies that directly or indirectly conduct overseas offerings and listings, shall
strictly abide by the laws and regulations on confidentiality when providing or publicly disclosing, either directly or through
their overseas listed entities, materials to securities services providers. In the event such materials contain state secrets or
working secrets of government agencies, the Chinese companies shall first obtain approval from authorities, and file with the
secrecy administrative department at the same level with the approving authority; in the event that such materials, if divulged,
will jeopardize national security or public interest, the Chinese companies shall comply with procedures stipulated by national
regulations. The Chinese companies shall also provide a written statement of the specific sensitive information provided when
providing materials to securities service providers, and such written statements shall be retained for inspection. As the Revised
Confidentiality Provisions were recently promulgated and has not taken effect, their interpretation and implementation remain
substantially uncertain.
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Currently, these statements and regulatory actions have had no impact on our daily business operations, the ability to accept
foreign investments and list our securities on a U.S. or other foreign exchange. However, since these statements and regulatory
actions are new, it is highly uncertain how the legislative or administrative regulation making bodies will further respond and
what existing or new laws or regulations or detailed implementations and interpretations will be further modified or
promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business
operations, the ability to accept foreign investments and list our securities on a U.S., Hong Kong, or other stock exchanges.
There are still substantial uncertainties as to how PRC governmental authorities will regulate overseas listing in practice and
whether we are required to obtain any specific regulatory approvals from the CSRC, CAC or any other PRC governmental
authorities for our offshore offerings. If the CSRC, CAC or other regulatory agencies later promulgate new rules or
explanations requiring that we obtain their approvals for our future offshore offerings, we may be unable to obtain such
approvals in a timely manner, or at all, and such approvals may be rescinded even if obtained. Any such circumstance could
significantly limit or completely hinder our ability to continue to offer securities to investors and cause the value of such
securities to significantly decline or be worthless. In addition, implementation of industry-wide regulations directly targeting
our operations could cause the value of our securities to significantly decline. Therefore, investors of our company face
potential uncertainty from actions taken by the PRC government affecting our business.
The audit reports included in our previous annual reports on Form 10-K filed with the SEC have historically been prepared
by auditors who are not inspected fully by the Public Company Accounting Oversight Board (the "PCAOB"), and as such,
investors have previously been deprived of the benefits of such inspections.
Ernst & Young Hua Ming LLP, our auditor from fiscal year 2014 to fiscal year 2021, is required to undergo regular
inspections by the PCAOB as an auditor of companies that are publicly traded in the United States and a firm registered with
the PCAOB. Since Ernst & Young Hua Ming LLP is located in China, a jurisdiction where the PCAOB had been unable to
conduct inspections without the approval of the Chinese authorities, Ernst & Young Hua Ming LLP has not been and is not
currently inspected by the PCAOB. Additionally, because we have substantial operations within the PRC, a jurisdiction where
the PCAOB was previously unable to conduct inspections without the approval of the Chinese government authorities, Ernst &
Young Hua Ming LLP and the audit work that it has carried out for us in the PRC has not historically been able to be inspected
independently and fully by the PCAOB.
Inspections of other auditors conducted by the PCAOB outside the PRC have at times identified deficiencies in those
auditors’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve
future audit quality. The lack of PCAOB inspections of audit work undertaken in the PRC prevents the PCAOB from regularly
evaluating auditors’ audits and their quality control procedures. As a result, to the extent that any components of our auditor’s
work papers had been located in China, such work papers had not been subject to inspection by the PCAOB. As a result, we and
investors of our ADSs, ordinary shares and RMB Shares had been deprived of the benefits of such PCAOB inspections, which
could cause investors and potential investors of our securities to lose confidence in our audit procedures and reported financial
information and the quality of our financial statements.
Our ADSs may be delisted and our ADSs and ordinary shares prohibited from trading in the over-the-counter market to the
extent the Holding Foreign Companies Accountable Act is further revised or similar legislation is enacted. The delisting of
our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.
As part of a continued regulatory focus in the United States on access to audit and other information currently protected by
national law, in particular China’s, the Holding Foreign Companies Accountable Act ("HFCAA"), was signed into law in
December 2020. The HFCAA states if the SEC determines that we have filed audit reports issued by a registered public
accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC
shall prohibit securities from being traded on a national securities exchange or in the over-the-counter trading market in the U.S.
On March 30, 2022, as expected following its adoption of implementing rules pursuant to the HFCAA, the SEC added us to its
conclusive list of issuers identified under HFCAA, after being provisionally named as a Commission-Identified Issuer on
March 8, 2022, following the filing of our annual report on Form 10-K, which annual report was audited by Ernst & Young
Hua Ming LLP. In December 2022, the Accelerating Holding Foreign Companies Accountable Act ("AHFCAA") was signed
into law, which amended the HFCAA to shorten the three-year period to two years.
However, as our global business has expanded, we built substantial organizational capabilities outside of the PRC and we
have evaluated, designed and implemented business processes and control changes which has enabled us to engage Ernst &
Young LLP, located in Boston, Massachusetts, United States, as our independent registered public accounting firm for the
audits of our financial statements and internal control over financial reporting for the fiscal year ending December 31, 2022. We
expect that this will satisfy the PCAOB inspection requirements for the audit of our consolidated financial statements, subject to
compliance with SEC and other requirements prior to the two-year deadline of the AHFCAA.
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On August 26, 2022, the PCAOB signed a Statement of Protocol with the CSRC and the Ministry of Finance of the
People's Republic of China, for opening access for the PCAOB to inspect and investigate completely registered public
accounting firms in mainland China and Hong Kong. The PCAOB staff members conducted on-site inspections and
investigations from September to November 2022. In December 2022, the PCAOB announced that it has secured complete
access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and
confirmed that until such time as the PCAOB issues any new determination, there are no Commission-identified Issuers at risk
of having their securities subject to a trading prohibition under the HFCAA.
Given that Ernst and Young LLP (United States) now serves as the principal accountant to audit our consolidated financial
statements, we expect to be able to comply with the HFCAA and AHFCAA and certify that we have retained a registered public
accounting firm that the PCAOB has determined it is able to inspect or investigate, Ernst & Young LLP (United States), which
would preclude a further finding by the SEC that we are a Commission-Identified Issuer and therefore the delisting of our ADSs
from the Nasdaq Global Select Market.
Additionally, in October 2021, Nasdaq adopted additional listing criteria applicable to companies that primarily operate in
jurisdictions where local regulators impose secrecy laws, national security laws or other laws that restrict U.S. regulators from
accessing information relating to the issuer (a “Restrictive Market”). Under this rule, whether a jurisdiction permits PCAOB
inspection would be a factor in determining whether a jurisdiction is deemed by Nasdaq to be a Restrictive Market. China will
likely be determined to be a Restrictive Market and, as a result, Nasdaq may impose on us additional continued listing criteria
or deny continued listing of our securities on Nasdaq, and we cannot assure you whether Nasdaq or regulatory authorities would
apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and
quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it
relates to our audit.
However, these efforts may not be sufficient and ultimately may not be successful. We may also be subject to enforcement
under the HFCAA, the rules implementing the act that may be adopted by the SEC, and any other similar legislation that may
be enacted into law or executive orders that may be adopted in the future. Although we are committed to complying with the
rules and regulations applicable to listed companies in the United States, we are currently unable to predict the potential impact
on our listed status by any rules that may be adopted by the SEC under the HFCAA in the future. If we failed to comply with
those rules, it is possible that our ADSs would be delisted. The risk and uncertainty associated with a potential delisting would
have a negative impact on the price of our ADSs, ordinary shares and RMB Shares. Delisting of our ADSs would force holders
of our ADSs to sell their ADSs or convert them into our ordinary shares, which are listed for trading on the HKEx. Although
our ordinary shares are listed in Hong Kong, investors may face difficulties in converting their ADSs into ordinary shares and
migrating the ordinary shares to Hong Kong, or may have to incur increased costs or suffer losses in order to do so. Failure to
adopt effective contingency plans may also have a material adverse impact on our business and the price of our ADSs, ordinary
shares and RMB Shares.
Proceedings instituted by the SEC against five PRC-based accounting firms and any negative news about the proceedings
against these audit firms, including Ernst & Young Hua Ming LLP, could adversely affect the market price of our ADSs,
ordinary shares and/or RMB Shares.
In 2012, the SEC brought administrative proceedings against five accounting firms in China, including Ernst & Young Hua
Ming LLP, alleging that they had refused to produce audit work papers and other documents related to certain other PRC-based
companies under investigation by the SEC. In 2014, an initial administrative law decision was issued, censuring these
accounting firms and suspending four of these firms from practicing before the SEC for a period of six months. In 2015, each of
the four PRC-based accounting firms agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension
of their ability to practice before the SEC. These firms’ ability to continue to serve their clients was not affected by the
settlement. The settlement required these firms to follow detailed procedures to seek to provide the SEC with access to Chinese
firms’ audit documents via the CSRC. If these firms do not follow these procedures, the SEC could impose penalties such as
suspensions, or it could restart the administrative proceedings. Our audit committee has been aware of the policy restriction and
communicated with Ernst & Young Hua Ming LLP to ensure compliance during the completion of our audits from fiscal year
2014 to fiscal year 2021. The settlement did not require these firms to admit to any violation of law and preserves these firms’
legal defenses in the event the administrative proceeding is restarted. In the event that the SEC restarts the administrative
proceedings, depending upon the final outcome, listed companies in the United States with major PRC operations may find it
difficult or impossible to retain auditors in respect of their operations in the PRC, which could result in financial statements
being determined to not be in compliance with the requirements of the Exchange Act, including possible delisting. Moreover,
any negative news about the proceedings against these audit firms may cause investor uncertainty regarding PRC-based, U.S.-
listed companies and the market price of the ADSs, ordinary shares and/or RMB Shares may be adversely affected. As
discussed above, we have engaged Ernst & Young LLP, located in Boston, Massachusetts, United States, as our independent
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registered public accounting firm for the audits of our financial statements and internal control over financial reporting for the
fiscal year ending December 31, 2022 to be filed with the SEC.
There are uncertainties regarding the interpretation and enforcement of Chinese laws, rules and regulations.
A large portion of our operations are conducted in China through our Chinese subsidiaries. Our Chinese subsidiaries are
subject to laws, rules and regulations applicable to foreign investment in China. The Chinese legal system is a civil law system
based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited
precedential value.
In 1979, the Chinese government began to promulgate a comprehensive system of laws, rules and regulations governing
economic matters in general. The overall effect of legislation over the past four decades has significantly enhanced the
protections afforded to various forms of foreign investment in China. However, China's legal system is still developing. The
laws, rules and regulations are subject to interpretation and enforcement by PRC regulatory agencies and courts. In particular,
because these laws, rules and regulations are relatively new, because of the limited number of published decisions and the non-
precedential nature of such decisions, and because the laws, rules and regulations often give the relevant regulator significant
discretion in how to enforce them, the interpretation and enforcement of these laws, rules and regulations involve uncertainties
and can be inconsistent and unpredictable. In addition, the legal system is based in part on government policies and internal
rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. The regulations in
China can change quickly. As a result, we may not be aware of our violation of these policies and rules until after the
occurrence of the violation.
China's Foreign Investment Law and its implementing rule came into force in January 2020. The Foreign Investment Law
and its implementing rules embody an expected regulatory trend to rationalize China’s foreign investment regulatory regime in
line with prevailing international practice and the legislative efforts to unify the legal requirements for both foreign and
domestic investments. There are still uncertainties with respect to the interpretation and implementation of the Foreign
Investment Law and its implementing rules. For example, the Foreign Investment Law and its implementing rules provide that
foreign invested entities established according to the previous laws regulating foreign investment prior to its implementation
may maintain their structure and corporate governance for a five-year transition period. It is uncertain whether governmental
authorities may require us to adjust the structure and corporate governance of certain of our Chinese subsidiaries in such
transition period. Failure to take timely and appropriate measures to meet any of these or similar regulatory requirements could
materially affect our current corporate governance practices and business operations and our compliance costs may increase
significantly. In addition, the Security Review Rules, effective from January 18, 2021, embody China's continued efforts to
provide a legal regime for national security review comparable to similar procedures in other jurisdictions, such as CFIUS
review in the United States. There are still uncertainties with respect to the interpretation, implementation and enforcement of
the Security Review Rules. For example, national security remains undefined and there is no clear guidance on whether the
biotechnology industry requires security review and what factors the regulatory authority may consider in determining whether
there are security concerns. It is difficult to evaluate the impact of the Security Review Rules on our existing investments or
potential investments in China.
It may be difficult for overseas regulators to conduct investigations or collect evidence within China. In China, there are
significant legal and other obstacles to providing information needed for regulatory investigations or litigations initiated outside
China. According to Article 177 of the PRC Securities Law, which became effective in March 2020, no overseas securities
regulator is allowed to directly conduct investigation or evidence collection activities within the PRC territory. According to the
Revised Confidentiality and Archives Administration Provisions, where overseas securities regulators or relevant competent
authorities request to inspect, investigate or collect evidence from Chinese domestic companies concerning their overseas
offering and listing or their securities firms and securities service providers that undertake securities business for such Chinese
domestic companies, such inspection, investigation and evidence collection must be conducted under the cross-border
regulatory cooperation mechanism, and the CSRC or competent authorities of the Chinese government will provide necessary
assistance pursuant to bilateral and multilateral cooperation mechanism. Although the authorities in China may establish a
regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-
border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not
be efficient in the absence of a mutual and practical cooperation mechanism. While detailed interpretation of or implementation
rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct
investigations or evidence collection activities within China may further increase the difficulties you face in protecting your
interests. For risks associated with investing in us as a Cayman Islands company, see also “—Risks Related to Our Ordinary
Shares, ADSs, and RMB Shares—We are a Cayman Islands company. Because judicial precedent regarding the rights of
shareholders is more limited under Cayman Islands law than under Hong Kong law, Chinese law or U.S. law, our shareholders
may have fewer shareholder rights than they would have under Hong Kong law, Chinese law or U.S. law and may face
difficulties in protecting their interests.”
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Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of
resources and management attention. Since administrative and court authorities have significant discretion in interpreting and
implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court
proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may impede
our ability to enforce the contracts we have entered and could materially and adversely affect our business, financial condition
and results of operations.
In addition, the PRC government has announced its plans to enhance its regulatory oversight of China-based companies
listed overseas and cross-border law enforcement cooperation. The Securities Opinions called for:
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tightening oversight of data security, cross-border data flow and administration of classified information, as well as
amendments to relevant regulation to specify responsibilities of overseas listed China-based companies with respect to
data security and information security;
enhanced oversight of overseas listed companies as well as overseas equity fundraising and listing by China-based
companies; and
extraterritorial application of China’s securities laws.
There are great uncertainties with respect to the interpretation and implementation of the Securities Opinions and the newly
promulgated Overseas Listing Trial Measures. The PRC government may promulgate relevant laws, rules and regulations to
impose additional and significant obligations and liabilities on overseas listed China-based companies regarding data security,
cross-border data flow, and compliance with China’s securities laws. As a company with operations in China and stock listings
in and outside of China, it is uncertain whether or how these laws, rules and regulations and their interpretation and
implementation may affect us. However, among other things, our ability to obtain external financing through the issuance of
equity securities overseas could be adversely affected if restrictions on overseas fundraising are imposed on companies like us.
The filing or other procedures with, the CSRC or other Chinese regulatory authorities may be required in connection with
issuing our equity securities to foreign investors under Chinese law, and, if required, we cannot predict whether we will be
able, or how long it will take us, to complete such filing or other procedures. If we fail to complete a filing with the CSRC,
our future offering application may be impacted and we may be subject to penalties, sanctions and fines imposed by the
CSRC and relevant departments of the State Council.
Pursuant to the Securities Opinions, Chinese regulators are required to accelerate rulemaking related to the overseas
issuance and listing of securities outside of China, and update the existing laws and regulations related to data security, cross-
border data flow, and administration of classified information. The Securities Opinions emphasized the need to strengthen the
administration over illegal securities activities and the need to strengthen the supervision over overseas listings by Chinese
companies.
Numerous regulations, guidelines and other measures have been or are expected to be adopted under the umbrella of or in
addition to the Cyber Security Law and Data Security Law. As there are still uncertainties regarding the interpretation and
implementation of such regulatory guidance, we cannot assure investors that we will be able to comply with new regulatory
requirements relating to our future overseas capital-raising activities outside of China and we may become subject to more
stringent requirements with respect to matters including data privacy and cross-border investigation and enforcement of legal
claims.
Furthermore, on February 17, 2023, the CSRC released the Overseas Listing Trial Measures and five relevant guidelines,
which will take effect from March 31, 2023, requiring Chinese companies that have already directly or indirectly offered and
listed securities in overseas markets to fulfil their filing obligations and report relevant information to the CSRC within three
working days after conducting a follow-on offering of equity securities on the same overseas market. As the Overseas Listing
Trial Measures are newly promulgated and have not yet come into effect, their interpretation and implementation are subject to
substantial uncertainty. After the effectiveness of the Overseas Listing Trial Measures, we may have to go through the filing
process for any follow-on offerings we conduct on the NASDAQ Global Select Market or Hong Kong Stock Exchange within
three working days of the completion of our follow-on offerings. If we fail to complete a filing with the CSRC for any of our
follow-on offerings, we may be subject to penalties, sanctions and fines imposed by the CSRC and relevant departments of the
State Council.
As of the date of this report, we have not received any inquiry, notice, warning or sanction regarding completing filing or
other procedures in connection with offering our equity securities on the Nasdaq Global Select Market or Hong Kong Stock
Exchange from the CSRC or any other Chinese regulatory authorities that have jurisdiction over our operations. However, there
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remains significant uncertainty as to the interpretation and implementation of regulatory requirements related to securities
offerings and other capital markets activities outside of China. If it is determined in the future that the filing or other procedure
with the CSRC or any other regulatory authority is required for issuing our equity securities on the Nasdaq Global Select
Market or Hong Kong Stock Exchange, it is uncertain whether we will be able to and how long it would take for us to complete
the filing or other procedure, despite our best efforts. If we, for any reason, are unable to complete, or experience significant
delays in completing, the requisite relevant filing or other procedure(s), we may face sanctions by the CSRC or other Chinese
regulatory authorities. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability
to pay dividends outside of China, limit our operations in China, delay or restrict the repatriation of funds into China or take
other actions that could have a material adverse effect on our business, financial condition, results of operations and prospects,
as well as the trading price of our ADSs, ordinary shares, and RMB Shares. In addition, if the CSRC or other regulatory
authorities later promulgate new rules requiring that we obtain their approvals or complete filing or other procedures for any
future public offerings on the Nasdaq Global Select Market or Hong Kong Stock Exchange, we may be unable to obtain a
waiver of such requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative
publicity regarding such a requirement could have a material adverse effect on the trading price of our ADSs, ordinary shares,
and RMB Shares.
To operate our general business activities currently conducted in China, each of our Chinese subsidiaries is required to
obtain a business license from the local counterpart of the SAMR. Each of our Chinese subsidiaries has obtained a valid
business license from the local counterpart of the SAMR, and no application for any such license has been denied. The
pharmaceutical industry in which we operate is also highly regulated in China. Our Chinese subsidiaries are required to obtain
applicable licenses from competent Chinese government authorities for our operations in China, including drug manufacturing
licenses, drug trade license, clinical trial authorizations, drug registration certificates, licenses for use of experimental animals,
pollutant discharge licenses and permits for urban sewage discharge into drainage pipe network. We believe our PRC
subsidiaries have obtained all applicable licenses and permits which are material to our business operations in China.
PRC regulations establish complex procedures for some acquisitions conducted by foreign investors, which could make it
more difficult for us to pursue growth through acquisitions in China.
PRC regulations and rules concerning mergers and acquisitions set forth additional procedures and requirements that could
make merger and acquisition activities of PRC-based companies by foreign investors more time-consuming and complex. See
also “—Risks Related to Our Industry, Business and Operations—We incur significant costs as a result of operating as a public
company, and our management is required to devote substantial time to compliance requirements, including establishing and
maintaining internal controls over financial reporting. We may be exposed to potential risks if we are unable to comply with
these requirements.” These rules, among others, specify that mergers and acquisitions by foreign investors that raise “national
defense and security” concerns and mergers and acquisitions through which foreign investors may acquire the de facto control
over domestic enterprises that raise “national security” concerns are subject to strict review by the MOFCOM, and the rules
prohibit any activities attempting to bypass a security review by structuring the transaction through, among other things, trusts,
entrustment or contractual control arrangements. Although we believe that our business is not in an industry related to national
security, we cannot preclude the possibility that the competent PRC government authorities may publish explanations contrary
to our understanding or broaden the scope of such security reviews in the future, in which case our future acquisitions and
investment in the PRC, including those by way of entering into contractual control arrangements with target entities, may be
closely scrutinized or prohibited. Moreover, according to the Anti-Monopoly Law, the SAMR shall be notified in advance of
any concentration of undertaking if certain filing thresholds are triggered. We may grow our business in part by acquiring
complementary businesses in China. Complying with the requirements of the laws and regulations mentioned above and other
PRC regulations to complete such transactions could be time-consuming, and any required approval processes, including
obtaining approval from the SAMR, may delay or inhibit our ability to complete such transactions, which could affect our
ability to expand our business or maintain or expand our market share. Our ability to expand our business or maintain or expand
our market share through future acquisitions would as such be materially and adversely affected.
In December 2020, the NDRC and the MOFCOM promulgated the Foreign Investment Security Review Measures, which
came into effect on January 18, 2021. Under the Foreign Investment Security Review Measures, investments in military,
national defense-related areas or in locations in proximity to military facilities, or investments that would result in acquiring the
actual control of assets in certain key sectors, such as critical agricultural products, energy and resources, equipment
manufacturing, infrastructure, transport, cultural products and services, IT, Internet products and services, financial services and
technology sectors, are required to be approved by designated governmental authorities in advance. As these measures are
recently promulgated, official guidance has not been issued by the designated office in charge of such security review yet,
therefore there are great uncertainties with respect to the interpretation and implementation of the Foreign Investment Security
Review Measures. If any of our business operations were to fall under the foregoing categories, we would need to take further
actions in order to comply with these laws, regulations and rules, which may materially and adversely affect our current
corporate structure, business, financial condition and results of operations.
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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, and any 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 our business.
We are a holding company incorporated in the Cayman Islands, and we may rely on dividends and other distributions on
equity paid by our PRC subsidiaries for our cash and financing 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 their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other
distributions to us. Under PRC laws and regulations, our PRC subsidiaries may pay dividends only out of their respective
accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-
owned enterprise 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 aggregate amount of such fund reaches 50% of its registered capital. Such reserve funds cannot
be distributed to us as dividends until the liquidation of the enterprise. 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
and bonus fund. In addition, registered share capital and capital reserve accounts are also restricted from withdrawal in the
PRC, up to the amount of net assets held in each operating subsidiary. As of December 31, 2022, these restricted assets totaled
$3.5 billion.
Our PRC subsidiaries generate primarily all of their revenue in RMB, which is not freely convertible into other currencies.
As a result, any restriction on currency exchange may limit the ability of our PRC subsidiaries to use their RMB revenues to
pay dividends to us.
In response to the persistent capital outflow in the PRC and RMB’s depreciation against the U.S. dollar in the fourth
quarter of 2016, the People’s Bank of China ("PBOC") and China's State Administration of Foreign Exchange ("SAFE")
promulgated a series of capital control measures, including stricter vetting procedures for domestic companies to remit foreign
currency 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 by the SAFE for cross-border transactions falling under both the current account and the capital account.
Any limitation on the ability of our PRC subsidiaries to pay dividends or make other kinds of payments to us could materially
and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay
dividends, or otherwise fund and conduct our business.
The PRC Enterprise Income Tax Law (the "EIT Law") and its implementation rules provide that China-sourced income of
foreign enterprises, such as dividends paid by a PRC subsidiary to its equity holders that are non-PRC resident enterprises, will
normally be subject to PRC withholding tax at a rate of 10%, unless any such foreign investor’s jurisdiction of tax residency has
a tax treaty with China that provides for a reduced withholding rate arrangement and such non-PRC resident enterprises
constitute the beneficiary of such income.
Pursuant to an arrangement between mainland China and the Hong Kong Special Administrative Region (the "Hong Kong
Tax Treaty") and relevant tax regulations of the PRC, subject to certain conditions, a reduced withholding tax rate of 5% will be
available for dividends from PRC entities provided that the recipient holds at least 25% shares of the PRC entities and can
demonstrate it is a Hong Kong tax resident and it is the beneficial owner of the dividends. The China government has adopted
multiple regulations which stipulate that in determining whether a non-resident enterprise has the status as a beneficial owner,
comprehensive analysis shall be conducted based on the factors listed therein and the actual circumstances of the specific case
shall be taken into consideration. Specifically, it expressly excludes an agent or a designated payee from being considered as a
“beneficial owner.” We own the PRC subsidiaries through BeiGene (Hong Kong) Co., Limited ("BeiGene HK"), a company
incorporated under the laws of Hong Kong on November 22, 2010 and a wholly owned subsidiary of the Company. BeiGene
HK currently does not hold a Hong Kong tax resident certificate from the Inland Revenue Department of Hong Kong, and there
is no assurance that the reduced withholding tax rate will be available.
We may be treated as a resident enterprise for PRC tax purposes under the EIT Law and we may therefore be subject to
PRC income tax on our worldwide taxable income. Dividends payable to foreign investors and gains on the sale of our ADSs
or ordinary shares by our foreign investors may become subject to PRC tax.
Under the EIT Law, an enterprise established outside the PRC with “de facto management bodies” within the PRC is
considered a “resident enterprise,” meaning that it is treated in a manner similar to a Chinese enterprise for PRC enterprise
income tax purposes. The implementing rules of the EIT Law define “de facto management bodies” as “management bodies
that exercise substantial and overall management and control over the production and operations, personnel, accounting, and
properties” of the enterprise. In addition, PRC regulations specify that certain Chinese-controlled offshore incorporated
enterprises, defined as enterprises incorporated under the laws of foreign countries or territories and that have PRC enterprises
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or enterprise groups as their primary controlling shareholders, will be classified as resident enterprises if all of the following are
located or resident in China: (i) senior management personnel and departments that are responsible for daily production,
operation and management; (ii) financial and personnel decision-making bodies; (iii) key properties, accounting books,
company seal, and minutes of board meetings and shareholders’ meetings; and (iv) half or more of senior management or
directors having voting rights.
Although BeiGene, Ltd. does not have a PRC enterprise or enterprise group as its primary controlling shareholder and is
therefore not a Chinese-controlled offshore incorporated enterprise within the meaning of these regulations, in the absence of
guidance specifically applicable to us, we have applied the guidance set forth in the regulations to evaluate the tax residence
status of BeiGene, Ltd. and its subsidiaries organized outside of the PRC.
We are not aware of any offshore holding company with a corporate structure similar to ours that has been deemed a PRC
“resident enterprise” by the PRC tax authorities. Accordingly, we do not believe that our company or any of our overseas
subsidiaries should be treated as a PRC resident enterprise. 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 the term "de facto
management body." If the PRC tax authorities determine that our Cayman Islands holding company is a resident enterprise for
PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow and we may be subject to
enterprise income tax at a rate of 25% on our worldwide taxable income, as well as to PRC enterprise income tax reporting
obligations. If we are deemed a PRC resident enterprise, dividends paid on our shares and any gain realized from the transfer of
our ordinary shares may be treated as income derived from sources within the PRC. As a result, dividends paid to non-PRC
resident enterprise ADS holders or shareholders may be subject to PRC withholding tax at a rate of 10% (or 20% in the case of
non-PRC individual ADS holders or shareholders) and gains realized by non-PRC resident enterprises ADS holders or
shareholders from the transfer of our ordinary shares or ADSs may be subject to PRC tax at a rate of 10% (or 20% in the case of
non-PRC individual ADS holders or shareholders), which may be reduced or exempted according to relevant tax treaties
between PRC and the non-PRC resident enterprise/individual ADS holders' or shareholders' tax resident jurisdictions.
We and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises
or other assets attributed to a PRC establishment of a non-PRC company, or other assets attributable to a PRC
establishment of a non-PRC company.
Pursuant to Chinese regulations, an “indirect transfer” of “PRC taxable assets,” including equity interests in a PRC resident
enterprise, by non-PRC resident enterprises may be recharacterized and treated as a direct transfer of PRC taxable assets, if such
arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC
enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. When
determining whether there is a “reasonable commercial purpose” of the transaction arrangement, factors to be taken into
consideration include: whether the main value of the equity interest of the relevant offshore enterprise derives from PRC
taxable assets; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in the PRC
or if its income mainly derives from the PRC; whether the offshore enterprise and its subsidiaries directly or indirectly holding
PRC taxable assets have real commercial nature which is evidenced by their actual function and risk exposure; the duration of
existence of the business model and organizational structure; the replicability of the transaction by direct transfer of PRC
taxable assets; and the tax situation of such indirect transfer and applicable tax treaties or similar arrangements. In respect of an
indirect offshore transfer of assets of a PRC establishment, the resulting gain is to be reported on with the enterprise income tax
filing of the PRC establishment or place of business being transferred and would consequently be subject to PRC enterprise
income tax at a rate of 25%. Where the underlying transfer relates to equity investments in a PRC resident enterprise, which is
not related to a PRC establishment or place of business of a non-resident enterprise, a PRC enterprise income tax at the rate of
10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements. Late
payment of applicable tax will subject the transferor to default interest. Gains derived from the sale of shares by investors
through a public stock exchange are not subject to the PRC enterprise income tax where such shares were acquired in a
transaction through a public stock exchange. As such, the sale of the ADSs or ordinary shares on a public stock exchange will
not be subject to PRC enterprise income tax. However, the sale of our ordinary shares or ADSs originally purchased from a
stock exchange by a non-PRC resident enterprise outside a public stock exchange may be subject to PRC enterprise income tax
under these regulations.
There are uncertainties as to the application of these regulations, which may be determined by the tax authorities to be
applicable to sale of the shares of our offshore subsidiaries or investments where PRC taxable assets are involved. The
transferors and transferees may be subject to the tax filing and withholding or tax payment obligation, while our PRC
subsidiaries may be requested to assist in the filing. Furthermore, we, our non-resident enterprises and PRC subsidiaries may be
required to spend valuable resources to comply with these regulations or to establish that we and our non-resident enterprises
should not be taxed under these regulations, for our previous and future restructuring or disposal of shares of our offshore
subsidiaries, which may have a material adverse effect on our financial condition and results of operations.
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The PRC tax authorities have the discretion to make adjustments to the taxable capital gains based on the difference
between the fair value of the taxable assets transferred and the cost of investment. If the PRC tax authorities make adjustments
to the taxable income of the transactions under these regulations, our income tax costs associated with such potential
acquisitions or disposals will increase, which may have an adverse effect on our financial condition and results of operations.
Restrictions on currency exchange may limit our ability to utilize our revenue effectively.
The PRC government imposes controls on the conversion of RMB into foreign currencies and, in certain cases, the
remittance of currency out of the PRC. A portion of our revenue is denominated in RMB. Shortages in availability of foreign
currency may restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to our offshore entities for our
offshore entities to pay dividends or make other payments or otherwise to satisfy our foreign currency denominated obligations.
The RMB is currently convertible under the “current account,” which includes dividends, trade and service-related foreign
exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans, including loans
we may secure from our onshore subsidiaries. Currently, our PRC subsidiaries may purchase foreign currency for settlement of
“current account transactions,” including payment of dividends to us, without the approval of SAFE by complying with certain
procedural requirements. However, the relevant PRC governmental authorities may limit or eliminate our ability to purchase
foreign currencies in the future for current account transactions. Since a portion of our revenue is denominated in RMB, any
existing and future restrictions on currency exchange may limit our ability to utilize revenue generated in RMB to fund our
business activities outside of the PRC or pay dividends in foreign currencies to holders of our ordinary shares and the ADSs.
Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration
with, SAFE and other relevant PRC governmental authorities or designated banks. This could affect our ability to obtain foreign
currency through debt or equity financing for our subsidiaries.
Our business benefits from certain financial incentives and discretionary policies granted by local governments. Expiration
of, or changes to, these incentives or policies would have an adverse effect on our results of operations.
Local governments in the PRC have granted certain financial incentives from time to time to our PRC subsidiaries as part
of their efforts to encourage the development of local businesses. The timing, amount and criteria of government financial
incentives are determined within the sole discretion of the local government authorities and cannot be predicted with certainty
before we actually receive any financial incentive. We generally do not have the ability to influence local governments in
making these decisions. Local governments may decide to reduce or eliminate incentives 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 will satisfy 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 the government incentives currently enjoyed by us. Any reduction or elimination of
incentives would have an adverse effect on our results of operations.
Any failure to comply with PRC regulations regarding our employee equity plans and investments in offshore companies by
PRC residents may subject the PRC plan participants and PRC-resident beneficial owners or us to fines and other legal or
administrative sanctions.
We and our directors, executive officers and other employees who are PRC residents have participated in our employee
equity plans. We are an overseas listed company, and therefore, we and our directors, executive officers and other employees
who are PRC citizens or who have resided in the PRC for a continuous period of not less than one year and who have been
granted restricted share units, restricted shares, options or other forms of equity incentives or rights to acquire equity are subject
to the PRC regulations, according to which, employees, directors, supervisors and other management members participating in
any share incentive plan of an overseas publicly listed company who are PRC citizens or who are non-PRC citizens residing in
the PRC for a continuous period of not less than one year, subject to limited exceptions, are required to register with the SAFE
through a domestic qualified agent, which could be a PRC subsidiary of such overseas listed company, and complete certain
other procedures. We also face regulatory uncertainties that could restrict our ability to adopt additional equity incentive plans
for our directors and employees under PRC law. Moreover, failure to comply with the various foreign exchange registration
requirements could result in liability under PRC law for circumventing applicable foreign exchange restrictions.
The pharmaceutical industry in China is highly regulated, and such regulations are subject to change, which may affect
approval and commercialization of our medicines and drug candidates.
A large portion of our business is conducted in China. The pharmaceutical industry in China is subject to comprehensive
government regulation and supervision, encompassing the approval, registration, manufacturing, packaging, licensing and
marketing of new medicines. In recent years, the regulatory framework in China for pharmaceutical companies has undergone
significant changes, which we expect will continue. While we believe our strategies regarding research, development,
manufacturing and commercialization in China are aligned with the Chinese government's policies, they may in the future
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diverge, requiring a change in our strategies. Any such change may result in increased compliance costs on our business or
cause delays in or prevent the successful research, development, manufacturing or commercialization of our drug candidates or
medicines in China and reduce the current benefits we believe are available to us from developing and manufacturing medicines
in China.
Chinese authorities have become increasingly vigilant in enforcing laws affecting the pharmaceutical industry. Any failure
by us or our partners to maintain compliance with applicable laws and regulations or obtain and maintain required licenses and
permits may result in the suspension or termination of our business activities in China. Reports of what have come to be viewed
as significant quality-control failures by Chinese vaccine manufacturers have led to enforcement actions against officials
responsible for implementing national reforms favorable to innovative drugs (such as ours). While not directly affecting us, this
macro-industry event could cause state or private resources to be diverted away from fostering innovation and be redirected
toward regulatory enforcement, which could adversely affect our research, development, manufacturing and commercialization
activities and increase our compliance costs.
Risks Related to Our Ordinary Shares, ADSs, and RMB Shares
The trading prices of our ordinary shares, ADSs, and/or RMB Shares can be volatile, which could result in substantial
losses to you.
The trading price of our ordinary shares, ADSs, and/or RMB Shares can be volatile and fluctuate widely in response to a
variety of factors, many of which are beyond our control, including: announcements of regulatory approval or a complete
response letter, or specific label indications or patient populations for its use, or changes or delays in the regulatory review
process; announcements of therapeutic innovations, new products, acquisitions, strategic relationships, joint ventures or capital
commitments by us or our competitors; adverse actions taken by regulatory agencies with respect to our clinical trials,
manufacturing supply chain or sales and marketing activities; any adverse changes to our relationship with manufacturers or
suppliers; the results of our testing and clinical trials; the results of our efforts to acquire or license additional medicines or drug
candidates; variations in the level of expenses related to our existing medicines and drug candidates or preclinical, clinical
development and commercialization programs; any intellectual property infringement actions in which we may become
involved; announcements concerning our competitors or the pharmaceutical industry in general; the performance and
fluctuation of the market prices of other companies with significant business operations in China that have listed their securities
in Hong Kong, Shanghai or the United States; fluctuations in product revenue, sales and marketing expenses and profitability;
manufacture, supply or distribution shortages; variations in our results of operations; announcements about our results of
operations that are not in line with analyst expectations, the risk of which is enhanced because it is our policy not to give
guidance on results of operations; publication of operating or industry metrics by third parties, including government statistical
agencies, that differ from expectations of industry or financial analysts; changes in financial estimates by securities research
analysts; media reports, whether or not true, about our business, our competitors or our industry; additions to or departures of
our management; fluctuations of exchange rates between the RMB, the U.S. dollar and Hong Kong dollar; release or expiry of
lock-up or other transfer restrictions on our outstanding ordinary shares, ADSs or RMB Shares; sales or perceived potential
sales of additional ordinary shares, ADSs or RMB Shares by us, our executive officers and directors or our shareholders;
general economic and market conditions and overall fluctuations in the United States, Hong Kong or Shanghai equity markets;
changes in accounting principles; trade disputes or U.S.-China government relations; and changes or developments in the
United States, PRC, EU or global regulatory environment.
In addition, the stock market, in general, and pharmaceutical and biotechnology companies, in particular, have experienced
extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these
companies. Broad market and industry factors may negatively affect the market price of our ordinary shares, ADSs, and/or
RMB Shares, regardless of our actual operating performance.
The characteristics of capital markets in the United States, Hong Kong and Shanghai are different, which may cause
volatility in the market price of our ordinary shares, ADSs, and RMB Shares.
Our ordinary shares are listed on the HKEx in Hong Kong under the stock code "06160", our ADSs are listed on the
Nasdaq in the United States under the symbol “BGNE”, and our RMB Shares are listed on the STAR Market in the PRC under
the stock code "688235". Under current PRC laws and regulations, our ADSs and ordinary shares listed on the Nasdaq and the
HKEx are not interchangeable or fungible with the RMB Shares listed on the STAR Market, and there is no trading or
settlement between either the Nasdaq or the HKEx on the one hand, and the STAR Market on the other hand. The three markets
have different trading hours, trading characteristics (including trading volume and liquidity), trading and listing rules, and
investor bases (including different levels of retail and institutional participation). As a result of these major differences, the
trading prices of our ordinary shares, ADSs, and RMB Shares might not be the same, even allowing for currency differences.
Fluctuations in the price of our ADSs due to circumstances peculiar to its home capital market could materially and adversely
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affect the price of the ordinary shares and/or RMB Shares, and vice versa. Because of the different characteristics of the U.S.,
Hong Kong and Shanghai equity markets, the historic market prices of our ordinary shares, ADSs, and RMB Shares may not be
indicative of the performance of our securities going forward.
We may be subject to securities litigation, which is expensive and could divert management attention.
Companies that have experienced volatility in the volume and market price of their shares have been subject to an
increased incidence of securities class action litigation, particularly in our industry in recent years. We may be the target of this
type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s
attention from other business concerns, and, if adversely determined, could have a material adverse effect on our business,
financial condition, and results of operations.
Future sales of our ordinary shares, ADSs, and/or RMB Shares in the public market could cause the ordinary share, ADS,
and/or RMB Share price to fall.
The price of our ordinary shares, ADSs, and/or RMB Shares could decline as a result of sales of a large number of the
ordinary shares, ADSs, and/or RMB Shares or the perception that these sales could occur. These sales, or the possibility that
these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that
we deem appropriate.
As of February 14, 2023, 1,356,140,180 ordinary shares, par value $0.0001 per share, were outstanding, of which
863,876,312 ordinary shares were held in the form of 66,452,024 ADSs, each representing 13 ordinary shares, and 115,055,260
were RMB Shares.
We filed a registration statement on Form S-3 with the SEC on behalf of certain shareholders on May 11, 2020, registering
300,197,772 ordinary shares, including 224,861,338 ordinary shares in the form of 17,297,026 ADSs to be resold by the selling
shareholders identified therein and in any related prospectus supplement from time to time. Amgen also has specified
registration rights upon expiration of a lock-up period. Furthermore, we have registered or plan to register the offer and sale of
all securities that we have issued and may issue in the future under our equity compensation plans, including upon the exercise
of share options and vesting of restricted share units and under our employee share purchase plan. If these additional securities
are sold, or if it is perceived that they will be sold, in the public market, the trading price of our ordinary shares, ADSs and/or
RMB Shares could decline.
In addition, in the future, we may issue additional ordinary shares, ADSs, RMB Shares, or other equity or debt securities
convertible into ordinary shares, ADSs, or RMB Shares in connection with a financing, acquisition, license, litigation
settlement, employee arrangements or otherwise. Any such issuance could result in substantial dilution to our existing
shareholders and could cause the ordinary share, ADS, and/or RMB Share price to decline.
The triple listing of our ADSs, ordinary shares and RMB Shares may adversely affect the liquidity and value of our ADSs,
ordinary shares and/or RMB Shares.
Our ADSs are traded on the Nasdaq, our existing ordinary shares maintained on our Cayman register in Cayman Islands
and Hong Kong register in Hong Kong, are traded on the HKEx, and our RMB Shares are traded on the STAR Market. The
triple listing of our ADSs, ordinary shares and RMB Shares may dilute the liquidity of these securities in one or all three
markets and may adversely affect the maintenance of an active trading market for ADSs in the United States, the ordinary
shares in Hong Kong, and/or the RMB Shares in the PRC. The price of our ADSs, ordinary shares and/or RMB Shares could
also be adversely affected by trading of our securities on other markets. We may decide at some point in the future to delist our
RMB Shares from the STAR Market, and our shareholders may approve such delisting. We cannot predict the effect such
delisting of our RMB Shares on the STAR Market would have on the market price of our ADSs on the Nasdaq or our ordinary
shares on the HKEx.
We face increased regulatory scrutiny and compliance costs due to our listing on the STAR Market of the SSE.
We are subject to the applicable laws, rules and regulations governing public companies listed on the STAR Market in
addition to the various laws, rules and regulations that we are subject to in the United States and Hong Kong. The listing and
trading of our equity securities in multiple jurisdictions and multiple markets will lead to increased compliance obligations and
costs for us, and we may face the risk of significant intervention by regulatory authorities in these jurisdictions and markets,
such as inquiries, investigations, enforcement actions and other regulatory proceedings by regulatory authorities. In addition,
we may be subject to securities litigation filed with the courts in China by the investors with respect to the RMB Shares traded
on the STAR Market.
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Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of the ordinary
shares, ADSs and/or RMB Shares for return on your investment.
We intend to retain most, if not all, of our available funds and earnings to fund the development and growth of our
business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an
investment in the ordinary shares, ADSs and/or RMB Shares as a source for any future dividend income.
Our board of directors has significant discretion as to whether to distribute dividends. Even if our board of directors
decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other
things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any,
received by us from our subsidiaries, our financial condition, contractual and regulatory restrictions and other factors deemed
relevant by our board of directors. Accordingly, the return on your investment in the ordinary shares, ADSs and/or RMB Shares
will likely depend entirely upon any future price appreciation of the ordinary shares, ADSs and/or RMB Shares. There is no
guarantee that the ordinary shares, ADSs and/or RMB Shares will appreciate in value or even maintain the price at which you
purchased the ordinary shares, ADSs and/or RMB Shares. You may not realize a return on your investment in the ordinary
shares, ADSs and/or RMB Shares and you may even lose your entire investment in the ordinary shares, ADSs and/or RMB
Shares.
If securities or industry analysts do not continue to publish research or publish inaccurate or unfavorable research about
our business, the market price for the ordinary shares, ADSs and/or RMB Shares and trading volume could decline.
The trading market for the ordinary shares, ADSs and RMB Shares relies in part on the research and reports that equity
research analysts publish about us or our business. We do not control these analysts. If research analysts do not maintain
adequate research coverage or if one or more of the analysts who covers us downgrades the ordinary shares, ADSs and/or RMB
Shares or publishes inaccurate or unfavorable research about our business, the market price for the ordinary shares, ADSs and/
or RMB Shares would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports
on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume
for the ordinary shares, ADSs and/or RMB Shares to decline significantly.
Because we are a Cayman Islands company, our shareholders may have fewer shareholder rights than they would have
under Hong Kong law, Chinese law or U.S. law and may face difficulties in protecting their interests.
We are an exempted company with limited liability incorporated in the Cayman Islands. Our corporate affairs are governed
by our amended and restated memorandum and articles of association (as may be further amended from time to time), the
Companies Law (as amended) of the Cayman Islands, and the common law of the Cayman Islands. The rights of shareholders
to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors are to a
large extent governed by the common law of the Cayman Islands. This common law is derived in part from comparatively
limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding,
authority on courts in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors
under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some
jurisdictions in Hong Kong, mainland China and the United States. In particular, the Cayman Islands has a less developed body
of securities law than Hong Kong, mainland China or the United States. In addition, some states in the United States, such as
Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands.
In addition, as a Cayman Islands exempted company, our shareholders have no general rights under Cayman Islands law to
inspect corporate records and accounts or to obtain copies of lists of shareholders, with the exception that shareholders may
request a copy of the current amended and restated memorandum and articles of association. Our directors have discretion
under our amended and restated articles of association to determine whether or not, and under what conditions, our corporate
records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it
more difficult for shareholders to obtain the information needed to establish facts necessary for a shareholder action or to solicit
proxies from other shareholders in connection with a proxy contest. As a Cayman Islands company, we may not have standing
to initiate a derivative action in a Hong Kong, mainland China or U.S. federal court. As a result, shareholders may be limited in
their ability to protect their interests if they are harmed in a manner that would otherwise enable them to sue in a United States
federal court. In addition, shareholders of Cayman Islands companies may not have standing to initiate a shareholder derivative
action in Hong Kong, mainland China or U.S. federal courts.
Some of our directors and executive officers reside outside of Hong Kong and the United States and a substantial portion of
their assets are located outside of Hong Kong and the United States. As a result, it may be difficult or impossible for
shareholders to bring an action against us or against these individuals in Hong Kong or in the United States in the event that
shareholders believe that their rights have been infringed under the securities laws of Hong Kong, the United States or
otherwise. In addition, some of our directors and executive officers reside outside of China. To the extent our directors and
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executive officers reside outside of China or their assets are located outside of China, it may not be possible for investors to
effect service of process upon us or our management inside China. Even if shareholders are successful in bringing an action, the
laws of the Cayman Islands and China may render them unable to enforce a judgment against our assets or the assets of our
directors and officers. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, Hong
Kong or China, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a
foreign court of competent jurisdiction without retrial on the merits.
As a result of the above, shareholders may have more difficulty protecting their interests in the face of actions taken by
management, members of the board of directors or controlling shareholders than they would as shareholders of a Hong Kong
company, a Chinese company or a U.S. company.
Voting rights of our ADS holders are limited by the terms of the deposit agreement. The depositary for the ADSs will give us
a discretionary proxy to vote the ordinary shares underlying our ADS holders' ADSs if they do not vote at shareholders’
meetings, except in limited circumstances, which could adversely affect their interests.
Holders of our ADSs may exercise their voting rights with respect to the ordinary shares underlying their ADSs only in
accordance with the provisions of the deposit agreement. Upon receipt of voting instructions from ADS holders in the manner
set forth in the deposit agreement, the depositary for the ADSs will endeavor to vote the holder's underlying ordinary shares in
accordance with these instructions. Under our articles of association, the minimum notice period required for convening an
annual general meeting is 21 calendar days and the minimum notice period required for convening an extraordinary general
meeting is 14 calendar days. When a general meeting is convened, ADS holders may not receive sufficient notice of a
shareholders’ meeting to permit them to withdraw their ordinary shares to allow them to cast their vote with respect to any
specific matter at the meeting. In addition, the depositary and its agents may not be able to send voting instructions to ADS
holders or carry out their voting instructions in a timely manner. We will make reasonable efforts to cause the depositary to
extend voting rights to our ADS holders in a timely manner, but our ADS holders may not receive the voting materials in time
to ensure that they can vote or instruct their agent to vote their shares.
Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for
the manner in which any vote is cast or for the effect of any such vote. As a result, ADS holders may not be able to exercise
their right to vote and they may lack recourse if the ordinary shares underlying their ADSs are not voted as they requested.
Under the deposit agreement for the ADSs, the depositary will give us a discretionary proxy to vote the ordinary shares
underlying ADS holders' ADSs at shareholders’ meetings if such holders do not give voting instructions to the depositary,
unless:
•
•
•
•
we have failed to timely provide the depositary with our notice of meeting and related voting materials;
we have instructed the depositary that we do not wish a discretionary proxy to be given;
we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; or
a matter to be voted on at the meeting would have a material adverse impact on shareholders.
The effect of this discretionary proxy is that, if ADS holders fail to give voting instructions to the depositary, they cannot
prevent the ordinary shares underlying their ADSs from being voted, absent the situations described above, and it may make it
more difficult for such ADS holders to influence our management. Holders of our ordinary shares are not subject to this
discretionary proxy.
Anti-takeover provisions in our constitutional documents may discourage our acquisition by a third party, which could limit
our shareholders’ opportunity to sell their shares at a premium.
Our amended and restated memorandum and articles of association include provisions that could limit the ability of others
to acquire control of our company, could modify our structure or could cause us to engage in change-of-control transactions.
These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares, at a premium over
prevailing market prices by discouraging third parties from seeking to obtain control in a tender offer or similar transaction.
For example, our board of directors has the authority, without further action by our shareholders, to issue preferred shares
in one or more series and to fix the powers and rights of these shares, including dividend rights, conversion rights, voting rights,
terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary
shares. Preferred shares could thus be issued quickly with terms calculated to delay or prevent a change in control or make
removal of management more difficult. In addition, if our board of directors authorizes the issuance of preferred shares, the
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market price of the ordinary shares and/or ADSs may fall and the voting and other rights of the holders of our ordinary shares
and/or ADSs may be materially and adversely affected.
Furthermore, our amended and restated articles of association permit our directors to vary all or any of the rights attaching
to any class of shares in issue without the consent of shareholders but only if such variation is considered by the directors not to
have a material adverse effect upon such holders. The amended and restated articles of association provide that the holders must
consent to any such material adverse changes in the manner set out therein.
Because our directors are divided into three classes with staggered terms of three years each, shareholders can only elect or
remove a limited number of our directors in any given year. The length of these terms could present an obstacle to certain
actions, such as a merger or other change of control, which could be in the interest of our shareholders.
Our amended and restated memorandum and articles of association designate specific courts as the sole and exclusive
forum for certain types of actions and proceedings that may be initiated by our shareholders, which could limit our
shareholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Our amended and restated memorandum and articles of association provide that, unless we consent in writing to the
selection of an alternative forum, the courts of Cayman Islands will be the sole and exclusive forum for any derivative action or
proceeding brought on behalf of us, any action asserting a claim of breach of a fiduciary duty owed by any director, officer or
other employee of us to us or our shareholders, any action asserting a claim arising pursuant to any provision of the Companies
Law of the Cayman Islands as amended from time to time, or the amended and restated memorandum and articles of
association, or any action asserting a claim governed by the internal affairs doctrine (as such concept is recognized under the
U.S. laws). In connection with our offering and listing on the STAR Market, our shareholders approved the Sixth Amended and
Restated Memorandum and Articles of Association, which became effective on December 15, 2021. The Sixth Amended and
Restated Memorandum and Articles of Association provide that unless we consent in writing to the selection of an alternative
forum, the federal district courts of the United States shall be the sole and exclusive forum for resolving any complaint asserting
a cause of action arising under the Securities Act of 1933, as amended (the "Securities Act"). In addition, the Sixth Amended
and Restated Memorandum and Articles of Association provide that any person or entity purchasing or otherwise acquiring any
interest in any of our securities is deemed to have notice of and consented to these provisions; provided, however, that
shareholders cannot and will not be deemed to have waived our compliance with the U.S. federal securities laws and rules and
regulations thereunder.
These provisions may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes
with us or our directors, officers or other employees, which may discourage such lawsuits. Alternatively, if a court were to find
these provisions of our amended and restated memorandum and articles of association inapplicable to, or unenforceable in
respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving
such matters in other jurisdictions.
Our amended and restated memorandum and articles of association provide that any shareholder bringing an unsuccessful
action against us may be obligated to reimburse us for any costs we have incurred in connection with such unsuccessful
action.
Our amended and restated memorandum and articles of association provide that under certain circumstances the fees, costs,
and expenses that we incur in connection with actions or proceedings brought by any person or entity, which we refer to as
claiming parties, may be shifted to such person or entity. If a claiming party asserts any claim; initiates any proceeding; or joins,
offers substantial assistance to, or has a direct financial interest in any claim or proceeding against us, and such claiming party
or the third party that received substantial assistance from the claiming party or in whole claim the claiming party had a direct
financial interest is unsuccessful in obtaining a judgment on the merits in which the claiming party prevails, then such claiming
party shall (to the fullest extent permitted by law) be obligated to reimburse us for all fees, costs, and expenses, including but
not limited to all reasonable attorneys’ fees and other litigation expenses, that we may incur in connection with such claim or
proceeding.
Fee-shifting articles are relatively new and untested in the Cayman Islands, the United States, Hong Kong and mainland
China. The case law and potential legislative action on fee-shifting articles are evolving and there exists considerable
uncertainty regarding the validity of, and potential judicial and legislative responses to, such articles. The application of our fee-
shifting article in connection with claims under the Cayman Islands, the United States, Hong Kong or Chinese securities laws, if
any, will depend in part on future developments of the law. We cannot assure you that we will or will not invoke our fee-
shifting article in any particular dispute. Consistent with our directors’ fiduciary duties to act in the best interests of the
Company, the directors may in their sole discretion from time to time decide whether or not to enforce this article. In addition,
given the unsettled state of the law related to fee-shifting articles, such as ours, we may incur significant additional costs
associated with resolving disputes with respect to such articles, which could adversely affect our business and financial
condition.
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If a shareholder that brings any such claim or proceeding is unable to obtain the judgment sought, the attorneys’ fees and
other litigation expenses that might be shifted to a claiming party may be significant. This fee-shifting article, therefore, may
dissuade or discourage current or former shareholders (and their attorneys) from initiating lawsuits or claims against us. In
addition, it may impact the fees, contingency or otherwise, required by potential plaintiffs’ attorneys to represent our
shareholders or otherwise discourage plaintiffs’ attorneys from representing our shareholders at all. As a result, this article may
limit the ability of shareholders to affect the management and direction of our company, particularly through litigation or the
threat of litigation.
Holders of ADSs may be subject to limitations on transfer of their ADSs.
ADSs are transferable only on the books of the depositary. However, the depositary may close its books at any time or
from time to time when it deems expedient in connection with the performance of its duties. The depositary may refuse to
deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time
if we or the depositary think it is advisable to do so because of any requirement of law, government or governmental body, or
under any provision of the deposit agreement, as amended, or for any other reason, subject to ADS holders' right to cancel their
ADSs and withdraw the underlying ordinary shares. Temporary delays in the cancellation of ADSs and withdrawal of the
underlying ordinary shares may arise because the depositary has closed its transfer books or we have closed our transfer books,
the transfer of ordinary shares is blocked to permit voting at a shareholders’ meeting or we are paying a dividend on our
ordinary shares.
In addition, holders of ADSs may not be able to cancel their ADSs and withdraw the underlying ordinary shares when they
owe money for fees, taxes and similar charges and when it is necessary to prohibit withdrawals in order to comply with any
laws or governmental regulations that apply to ADSs or to the withdrawal of ordinary shares or other deposited securities.
The depositary for the ADSs is entitled to charge holders fees for various services, including annual service fees.
The depositary for the ADSs is entitled to charge holders fees for various services, including for the issuance of ADSs upon
deposit of ordinary shares, cancellation of ADSs, distributions of cash dividends or other cash distributions, distributions of
ADSs pursuant to share dividends or other free share distributions, distributions of securities other than ADSs, and annual
service fees. In the case of ADSs issued by the depositary into The Depository Trust Company ("DTC"), the fees will be
charged by the DTC participant to the account of the applicable beneficial owner in accordance with the procedures and
practices of the DTC participant as in effect at the time.
Dealings in ordinary shares registered in our Hong Kong register of members will be subject to Hong Kong stamp duty.
There is uncertainty as to whether Hong Kong stamp duty will apply to the trading or conversion of the ADSs.
In connection with our Hong Kong public offering in 2018, we established a branch register of members in Hong Kong
(the “Hong Kong share register”). Our ordinary shares that are traded on the HKEx, including those that may be converted from
ADSs, are registered on the Hong Kong share register, and the trading of these ordinary shares on the HKEx are subject to
Hong Kong stamp duty. To facilitate ADS to ordinary share conversion and trading between the Nasdaq and the HKEx, we
moved a portion of our issued ordinary shares from our Cayman share register to our Hong Kong share register.
Under the Hong Kong Stamp Duty Ordinance, any person who effects a sale or purchase of Hong Kong stock, defined as
stock the transfer of which is required to be registered in Hong Kong, is required to pay Hong Kong stamp duty. The stamp
duty is currently set at a total rate of 0.2% of the greater of the consideration for, or the value of, shares transferred, with 0.1%
payable by each of the buyer and the seller.
To the best of our knowledge, Hong Kong stamp duty has not been levied in practice on the trading or conversion of ADSs
of companies that are listed in both the United States and Hong Kong and that have maintained all or a portion of their ordinary
shares, including ordinary shares underlying ADSs, in their Hong Kong share registers. However, it is unclear whether, as a
matter of Hong Kong law, the trading or conversion of ADSs of these dual-listed companies constitutes a sale or purchase of
the underlying Hong Kong registered ordinary shares that is subject to Hong Kong stamp duty. We advise investors to consult
their own tax advisors on this matter. If Hong Kong stamp duty is determined by the competent authority to apply to the trading
or conversion of the ADSs, the trading price and the value of your investment in our ADSs or ordinary shares may be affected.
Holders of ADSs may not receive distributions on our ordinary shares or any value for them if it is illegal or impractical to
make them available.
The depositary of the ADSs has agreed to ADS holders the cash dividends or other distributions it or the custodian for the
ADSs receives on our ordinary shares or other deposited securities after deducting its fees and expenses. ADS holders will
receive these distributions in proportion to the number of our ordinary shares that their ADSs represent. However, the
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depositary is not responsible for making such payments or distributions if 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 that require registration under the Securities Act, but that are not properly registered or distributed pursuant to an
applicable exemption from registration. The depositary is not responsible for making a distribution available to any holders of
ADSs if any government approval or registration required for such distribution cannot be obtained after reasonable efforts made
by the depositary. We have no obligation to take any other action to permit the distribution of the ADSs, ordinary shares, rights
or anything else to holders of the ADSs. This means that holders of ADSs may not receive the distributions we make on our
ordinary shares or any value for them if it is illegal or impractical for us to make them available to such holders. These
restrictions may materially reduce the value of our ADSs.
Holders of ADSs may not be able to participate in rights offerings and may experience dilution of their holdings.
From time to time, we may distribute rights to our shareholders, including rights to acquire securities. Under the deposit
agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the
securities to which these rights relate are either exempt from registration under the Securities Act with respect to all holders of
ADSs or are registered under the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed
rights to third parties and may allow the rights to lapse. We may be unable to establish an exemption from registration under the
Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying
securities or to try to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to
participate in our rights offerings and may experience dilution of their holdings as a result.
Our corporate actions are substantially controlled by our directors, executive officers and other principal shareholders, who
can exert significant influence over important corporate matters, which may reduce the price of our ordinary shares, ADSs,
and/or RMB Shares and deprive shareholders of an opportunity to receive a premium for their ordinary shares, ADSs, and/
or RMB Shares.
Our directors, executive officers and principal shareholders beneficially owned approximately 55% of our outstanding
ordinary shares as of February 14, 2023. These shareholders, if acting together, could exert substantial influence over matters
such as electing directors and approving material mergers, acquisitions or other business combination transactions. This
concentration of ownership may also discourage, delay or prevent a change in control of our company, which could have the
dual effect of depriving our shareholders of an opportunity to receive a premium for their shares as part of a sale of our
company and reducing the price of our ordinary shares, ADSs, and/or RMB Shares. These actions may be taken even if they are
opposed by our other shareholders. In addition, these persons could divert business opportunities away from us to themselves or
others.
We may be a passive foreign investment company in future taxable years, which may have adverse U.S. federal income tax
consequences for U.S. shareholders.
A non-U.S. corporation will be classified as a “passive foreign investment company” ("PFIC") for any taxable year if either
(1) 75% or more of its gross income consists of certain types of passive income or (2) 50% or more of the average quarterly
value of its assets during such year produce or are held for the production of passive income. Based upon the composition of
our income and assets, we believe that we were not a PFIC for the taxable year ended December 31, 2022. Nevertheless,
because our PFIC status must be determined annually with respect to each taxable year and will depend on the composition and
character of our assets and income, including our use of proceeds from any equity offerings, and the value of our assets (which
may be determined, in part, by reference to the market value of our ADSs and ordinary shares, which may be volatile) over the
course of such taxable year, we may be a PFIC in any taxable year. The determination of whether we will be or become a PFIC
may also depend, in part, on how, and how quickly, we use our liquid assets and the cash raised in equity offerings. If we
determine not to deploy significant amounts of cash for active purposes, our risk of being a PFIC may substantially increase.
Because there are uncertainties in the application of the relevant rules and PFIC status is a factual determination made annually
after the close of each taxable year, there can be no assurance that we will not be a PFIC for the current taxable year or any
future taxable year. In addition, it is possible that the Internal Revenue Service may challenge our classification of certain
income and assets as non-passive, which may result in our being or becoming a PFIC in the current or subsequent years.
If we are a PFIC for any taxable year during a U.S. shareholder’s holding period of the ordinary shares or ADSs, then such
U.S. shareholder may incur significantly increased United States income tax on gain recognized on the sale or other disposition
of the ordinary shares or ADSs and on the receipt of distributions on the ordinary shares or ADSs to the extent such distribution
is treated as an “excess distribution” under the United States federal income tax rules. In addition, such holders may be subject
to burdensome reporting requirements.
Further, if we are classified as a PFIC for any year during which a U.S. shareholder holds our ordinary shares or ADSs, we
generally will continue to be treated as a PFIC for all succeeding years during which such U.S. shareholder holds such ordinary
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shares or ADSs. Each U.S. shareholder should consult its tax advisor regarding the PFIC rules and the U.S. federal income tax
consequences of the acquisition, ownership and disposition of the ordinary shares and ADSs.
If you are a “Ten Percent Shareholder,” you may be subject to adverse U.S. federal income tax consequences if we are
classified as a Controlled Foreign Corporation.
Each “Ten Percent Shareholder” (as defined below) in a non-U.S. corporation that is classified as a “controlled foreign
corporation” ("CFC"), for U.S. federal income tax purposes is generally required to include in income for U.S. federal tax
purposes such Ten Percent Shareholder’s pro rata share of the CFC’s “Subpart F income” and investment of earnings in U.S.
property, even if the CFC has made no distributions to its shareholders. Each Ten Percent Shareholder is also required to
include in gross income its “global intangible low-taxed income,” which is determined by reference to the income of CFCs of
which such Ten Percent Shareholder is a Ten Percent Shareholder. Ten Percent Shareholders that are corporations may be
entitled to a deduction equal to the foreign portion of any dividend when a dividend is paid. A non-U.S. corporation will
generally be classified as a CFC for U.S. federal income tax purposes if Ten Percent Shareholders own in the aggregate, directly
or indirectly, more than 50% of either the total combined voting power of all classes of stock of such corporation entitled to
vote or of the total value of the stock of such corporation. A “Ten Percent Shareholder” is a U.S. person (as defined by the
Internal Revenue Code of 1986, as amended), who owns or is considered to own 10% or more of the total combined voting
power of all classes of stock entitled to vote of such corporation or 10% of the value of all classes of stock of such corporation.
The determination of CFC status is complex and includes attribution rules, the application of which is not entirely certain.
Although we believe we are not a CFC now, we may become one or own interests in one in the future. Holders are urged
to consult their own tax advisors with respect to our potential CFC status and the consequences thereof.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
We lease all of our facilities, other than the following facilities that we own: our offices and laboratories in Changping,
Beijing, our manufacturing facility in Guangzhou, China, and the site for our planned manufacturing facility and clinical R&D
center at the Princeton Innovation Park in Hopewell, New Jersey. We lease an aggregate of approximately 91,000 square meters
of office space at approximately 42 other locations across the United States, China, and Europe, in cities such as Cambridge,
Massachusetts; Ridgefield Park, New Jersey; and Emeryville and San Mateo, California in the United States; Beijing, Shanghai,
Suzhou, and Guangzhou in China; and Basel, Switzerland, primarily for our offices and for our manufacturing facility in
Suzhou, China, pursuant to leases with various expiration dates, with the latest expiring in 2027. We believe that our facilities
are currently suitable and sufficient to meet our needs. We intend to add new facilities or expand existing facilities as we add
employees and enter new locations, and we believe that suitable additional or substitute space will be available as needed to
accommodate any such expansion of our operations.
Please refer to “Note 9: Leases” in the notes to our consolidated financial statements in this Annual Report for further
information on our real property leases.
Item 3. Legal Proceedings
From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of
our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or
taken together have a material adverse effect on our business, results of operations, financial condition or cash flows.
Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of
management resources and other factors.
On June 26, 2020, following the suspension and recall of ABRAXANE® in China supplied to us by Celgene Logistics Sàrl,
a Bristol Myers Squibb Company (referred to elsewhere in this report as BMS, but for this paragraph only, "BMS-Celgene"),
we initiated an arbitration proceeding at the International Chamber of Commerce (the ICC) against BMS-Celgene asserting that
it had breached and continues to breach the terms and conditions of the License and Supply Agreement entered into by BeiGene
and BMS-Celgene in July 2017 and a related quality agreement (collectively, the “BMS-Celgene License”). Under the BMS-
Celgene License, we allege that BMS-Celgene is obligated, among other things, to ensure the continuity and adequacy of its
supply of ABRAXANE to us. In the arbitration proceeding, we are seeking (i) a declaration that BMS-Celgene was and is in
breach of the BMS-Celgene License, (ii) a declaration that BMS-Celgene acted with gross negligence and/or willful
misconduct, (iii) an award of damages, and (iv) such other relief as the arbitrators deem appropriate. BMS-Celgene responded
in part by submitting a counterclaim against us seeking to recover approximately $30 million in costs that it contends it incurred
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as part of the ABRAXANE recall. We believe that the allegations contained in the counterclaim are without merit and are
defending the counterclaim vigorously. On October 6, 2021, BMS-Celgene delivered a notice to us purporting to terminate the
BMS-Celgene License with respect to ABRAXANE and providing 180-days' notice that it was withdrawing ABRAXANE from
the range of products for sale or distribution in China pursuant to Section 2.6 of the BMS-Celgene License. We believe that the
reasons stated in the notice do not provide a valid basis for terminating the BMS-Celgene License with respect to ABRAXANE,
and that the notice is a tactical maneuver on the part of BMS-Celgene to reduce its damages in the arbitration proceedings, and
we have amended our claims to add a claim for wrongful termination of the BMS-Celgene License with respect to
ABRAXANE. A hearing was held in the arbitration in June 2022, and no decision has been issued.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Our American Depositary Shares (“ADSs”) have been publicly traded on the NASDAQ Global Select Market under the
symbol “BGNE” since February 3, 2016. Our ordinary shares have been publicly traded on the Stock Exchange of Hong Kong
Limited under the stock code “06160” since August 8, 2018. Our ordinary shares traded in Renminbi (the “RMB Shares”) have
been publicly traded on the Science and Technology Innovation Board of the Shanghai Stock Exchange in China under the
stock code "688235" since December 15, 2021.
Shareholders
As of January 31, 2023, we had approximately 47,084 holders of record of our ordinary shares, 46,932 of which are holders
of record of our RMB Shares, and 8 holders of record of our ADSs. These number do not include beneficial owners whose
ordinary shares or ADSs are held by nominees in street name. Because many ordinary shares and ADSs are held by broker
nominees, we are unable to estimate the total number of beneficial holders represented by these record holders.
Dividend Policy
Our board of directors has adopted a dividend policy which provides that we currently intend to retain all available funds
and earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash
dividends in the foreseeable future. Subject to applicable law and our amended and restated articles of association, any future
determination to pay dividends will be made at the discretion of our board of directors and may be based on a number of
factors, including our future operations and earnings, capital requirements and surplus, general financial condition, contractual
restrictions and other factors that our board of directors may deem relevant. This dividend policy reflects our board of directors’
current views on our financial and cash flow position. We intend to continue to review our dividend policy from time to time,
and there can be no assurance that dividends will be paid in any particular amount, if at all, for any given period.
We have never declared or paid any dividends on our ordinary shares or any other securities. If we pay dividends in the
future, in order for us to distribute dividends to our shareholders and holders of ADSs, we may rely to some extent on dividends
distributed by our PRC subsidiaries. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us, and
such distributions will be subject to PRC withholding tax. In addition, PRC regulations currently permit payment of dividends
of a PRC company only out of accumulated distributable after-tax profits, as determined in accordance with our articles of
association and the accounting standards and regulations in the PRC.
Investors should not purchase our ordinary shares, RMB Shares, or ADSs with the expectation of receiving cash dividends.
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Performance Comparison Graph
This graph is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference into
any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether
made before or after the date hereof and irrespective of any general incorporation language in any such filing.
The following graph shows the total shareholder return of an investment of $100 in cash at market close on December 31,
2017 through December 31, 2022 for our ADSs, the NASDAQ Composite Index (U.S.), and the NASDAQ Biotechnology
Index.
Pursuant to applicable SEC rules, all values assume reinvestment of the full amount of any dividends, although no
dividends have been declared or paid to date. The shareholder return shown on the graph below is not necessarily indicative of
future performance, and we do not make or endorse any predictions as to future shareholder returns.
12/31/17
12/31/18
12/31/19
12/31/20
12/31/21
12/31/22
BeiGene, Ltd.
100.00
143.53
169.63
264.42
277.25
225.07
NASDAQ Composite
100.00
97.16
132.81
192.47
235.15
158.65
NASDAQ Biotechnology
100.00
91.14
114.02
144.15
144.18
129.59
Equity Compensation Plan Information
Our equity compensation plan information required by this item is incorporated by reference to the information in “Part III
—Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this
Annual Report.
Recent Sales of Unregistered Securities
None.
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Issuer Purchases of Equity Securities
None.
Taxation
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or
appreciation, and there is no taxation in the nature of inheritance tax or estate duty or withholding tax applicable to us or to any
holder of the ADSs, ordinary shares and RMB Shares. There are no other taxes likely to be material to us levied by the
Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after
execution brought within, the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands on the issue
of shares by, or any transfers of shares of, Cayman Islands companies (except those which hold interests in land in the Cayman
Islands). The Cayman 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 control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect of the ADSs, ordinary shares and RMB Shares will not be subject to taxation
in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of the ADSs,
ordinary shares or RMB Shares, as the case may be, nor will gains derived from the disposal of the ADSs, ordinary shares or
RMB Shares be subject to Cayman Islands income or corporation tax.
PRC Taxation
Under the Enterprise Income Tax Law (“EIT Law”), an enterprise established outside the PRC with a “de facto
management body” within the PRC is considered a “resident enterprise,” which means that it is treated in a manner similar to a
Chinese enterprise for PRC enterprise income tax purposes. The implementation rules of the EIT Law define “de facto
management body” as a managing body that exercises substantial and overall management and control over the production and
operations, personnel, accounting and properties of an enterprise. In addition, the Notice Regarding the Determination of
Chinese-Controlled Offshore Incorporated Enterprise as PRC Tax Resident Enterprises on the Basis of De Facto Management
Bodies (“Circular 82)”, issued by the State Administration of Taxation, which provides guidance on the determination of the tax
residence status of a Chinese-controlled offshore incorporated enterprise, defines Chinese-controlled offshore incorporated
enterprise as an enterprise that is incorporated under the laws of a foreign country or territory and that has a PRC enterprise or
enterprise group as its primary controlling shareholder. Although BeiGene, Ltd. does not have a PRC enterprise or enterprise
group as our primary controlling shareholder and is therefore not a Chinese-controlled offshore incorporated enterprise within
the meaning of Circular 82, in the absence of guidance specifically applicable to us, we have applied the guidance set forth in
Circular 82 to evaluate the tax residence status of BeiGene, Ltd. and its subsidiaries organized outside the PRC.
According to Circular 82, a Chinese-controlled offshore incorporated enterprise will be regarded as a PRC tax resident by
virtue of having a “de facto management body” in China and will be subject to PRC enterprise income tax on its worldwide
income only if all of the following criteria are met:
•
•
•
•
the primary location of the enterprise’s senior executives of the day-to-day operational management and senior
management departments performing their duties is in the PRC;
decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by
organizations or personnel in the PRC;
the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder meeting
minutes are located or maintained in the PRC; and
50% or more of voting board members or senior executives habitually reside in the PRC.
Currently, some of the members of our management team are located in China. However, we do not believe that we meet
all of the conditions outlined in the immediately preceding paragraph. BeiGene, Ltd. and its offshore subsidiaries are
incorporated outside the PRC. As a holding company, our key assets and records, including the resolutions and meeting minutes
of our board of directors and the resolutions and meeting minutes of our shareholders, are located and maintained outside the
PRC. We are not aware of any offshore holding companies with a corporate structure similar to ours that has been deemed a
PRC “resident enterprise” by the PRC tax authorities. Accordingly, we believe that BeiGene, Ltd. and its offshore subsidiaries
should not be treated as a “resident enterprise” for PRC tax purposes if the criteria for “de facto management body” as set forth
in Circular 82 were deemed applicable to us. However, as the tax residency status of an enterprise is subject to determination by
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the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body” as
applicable to our offshore entities, we will continue to monitor our tax status.
The implementation rules of the EIT Law provide that, (1) if the enterprise that distributes dividends is domiciled in the
PRC or (2) if gains are realized from transferring equity interests of enterprises domiciled in the PRC, then such dividends or
capital gains are treated as China-sourced income. It is not clear how “domicile” may be interpreted under the EIT Law, and it
may be interpreted as the jurisdiction where the enterprise is a tax resident. Therefore, if we are considered as a PRC tax
resident enterprise for PRC tax purposes, any dividends we pay to our overseas shareholders or ADS holders as well as gains
realized by such shareholders or ADS holders from the transfer of our shares or ADSs may be regarded as China-sourced
income. As a result, dividends paid to non-PRC resident enterprise ADS holders or shareholders may be subject to PRC
withholding tax at a rate of up to 10% (or 20% in the case of non-PRC individual ADS holders or shareholders) and gains
realized by non-PRC resident enterprise ADS holders or shareholders from the transfer of our ordinary shares or ADSs may be
subject to PRC tax at a rate of 10% (or 20% in the case of non-PRC individual ADS holders or shareholders). It is also unclear
whether, if we are considered a PRC resident enterprise, holders of our shares or ADSs would be able to claim the benefit of
income tax treaties or agreements entered into between China and other countries or areas.
Item 6. Reserved
Not applicable.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with
our consolidated financial statements and related notes appearing elsewhere in this Annual Report. 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 below and elsewhere in this report,
including those set forth under “Part I—Item 1A—Risk Factors” and under “Forward-Looking Statements and Market Data”
in this Annual Report.
Overview
We are a global biotechnology company that is developing and commercializing innovative and affordable oncology
medicines to improve treatment outcomes and access for patients worldwide.
We currently have three approved medicines that were discovered and developed in our own labs, including BRUKINSA®,
a small molecule inhibitor of Bruton’s Tyrosine Kinase (BTK) for the treatment of various blood cancers; tislelizumab, an anti-
PD-1 antibody immunotherapy for the treatment of various solid tumor and blood cancers; and pamiparib, a selective small
molecule inhibitor of PARP1 and PARP2. We have obtained approvals to market BRUKINSA in the United States, China, EU,
the UK, Canada, Australia and additional international markets, and tislelizumab in China. By leveraging our China commercial
capabilities, we have in-licensed the rights to distribute 13 approved medicines for the China market. Supported by our global
clinical development and commercial capabilities, we have entered into collaborations with world-leading biopharmaceutical
companies such as Amgen Inc. ("Amgen") and Novartis Pharma AG ("Novartis") to develop and commercialize innovative
medicines.
We are committed to advancing best and first-in-class clinical candidates internally or with like-minded partners to develop
impactful and affordable medicines for patients across the globe. Our internal clinical development capabilities are deep,
including a more than 2,700-person global clinical development team that is running close to 80 ongoing or planned clinical
trials in over 50 medicines and drug candidates. This includes more than 30 pivotal or potentially registration-enabling trials
across our portfolio, including our three internally discovered, approved medicines. We have enrolled in our clinical trials more
than 18,000 subjects, of which approximately one-half have been outside of China.
We have built, and are expanding, our internal manufacturing capabilities through our state-of-the-art biologic and small
molecule manufacturing facilities in China to support current and potential future demand of our medicines, and are building a
commercial-stage biologics manufacturing and clinical R&D center in New Jersey. We also work with high quality contract
manufacturing organizations (CMOs) to manufacture our internally developed clinical and commercial products.
Since our inception in 2010, we have become a fully integrated global organization of over 9,000 employees in 29
countries and regions, including the United States, China, Europe, and Australia.
Recent Business Developments
On February 24, 2023, we announced that the China National Medical Products Administration ("NMPA") granted
approval for our PD-1 inhibitor, tislelizumab, in combination with fluoropyrimidine and platinum chemotherapy, for the first-
line treatment of patients with locally advanced unresectable or metastatic gastric or gastroesophageal junction adenocarcinoma
with high PD-L1 expression.
On January 19, 2023, we announced that the U.S. Food and Drug Administration ("FDA") approved our Bruton’s tyrosine
kinase inhibitor BRUKINSA (zanubrutinib) for the treatment of adult patients with chronic lymphocytic leukemia ("CLL") or
small lymphocytic lymphoma ("SLL").
On January 19, 2023, we announced that the Medicines and Healthcare products Regulatory Agency granted marketing
authorizations for BRUKINSA in Great Britain for both the treatment of adult patients with CLL and the treatment of adult
patients with marginal zone lymphoma ("MZL") who have received at least one prior anti-CD20-based therapy.
On January 18, 2023, we announced that the National Reimbursement Drug List ("NRDL") released by China’s National
Healthcare Security Administration ("NHSA") was updated to include four new indications for our PD-1 inhibitor tislelizumab.
KYPROLIS® (carfilzomib), a proteosome inhibitor licensed-in from Amgen, is included for the first time and XGEVA®
(denosumab), a RANKL inhibitor and another Amgen asset, successfully renewed this year. The updated NRDL will officially
take effect on March 1, 2023.
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On December 30, 2022, we announced that the Center for Drug Evaluation of the China National Medical Products
Administration accepted a supplemental biologics license application for tislelizumab in patients with first-line unresectable or
metastatic hepatocellular carcinoma.
On November 17, 2022, we announced that the European Commission approved BRUKINSA for the treatment of adult
patients with treatment-naïve or relapsed/refractory ("R/R") CLL.
On November 10, 2022, we announced that BRUKINSA was approved in Brazil for the treatment of adult patients with
Waldenström’s macroglobulinemia ("WM") and adult patients with R/R MZL who have received at least one anti-CD20-based
regimen.
Components of Operating Results
Revenue
Product Revenue
We generate product revenue through the sale of our three internally developed products and our in-licensed medicines
from our partners.
Revenues from product sales are recognized when there is a transfer of control from the Company to the customer. The
Company determines transfer of control based on when the product is delivered, and title passes to the customer. Revenues
from product sales are recognized net of variable consideration resulting from rebates, chargebacks, trade discounts and
allowances, sales returns allowances and other incentives. Provisions for estimated reductions to revenue are provided for in the
same period the related sales are recorded and are based on contractual terms, historical experience and trend analysis.
Collaboration Revenue
We recognize collaboration revenue for amounts earned under collaborative and out-licensing arrangements. In January
2021, we entered into a collaboration and license agreement with Novartis, granting Novartis rights to develop, manufacture
and commercialize tislelizumab in the United States, Canada, Mexico, member countries of the European Union, United
Kingdom, Norway, Switzerland, Iceland, Liechtenstein, Russia, and Japan (the Novartis Territory). There were two
performance obligations identified at the outset of the agreement: (1) the exclusive license to develop, manufacture, and
commercialize tislelizumab in the Novartis Territory, transfer of know-how and use of the tislelizumab trademark and (2)
conducting and completing tislelizumab R&D services. Under this agreement, we received an upfront cash payment, which was
allocated between the two performance obligations identified in the agreement based on the relative standalone selling prices of
the performance obligations. The portion allocated to the license was recognized upon the delivery of the license right and
transfer of know-how. The portion of the upfront payment allocated to the tislelizumab R&D services was deferred and is being
recognized as collaboration revenue as the tislelizumab R&D services are performed using a percentage of completion method.
Estimated costs to complete are reassessed on a periodic basis and any updates to the revenue earned are recognized on a
prospective basis.
In December 2021, we expanded our collaboration with Novartis by entering into an option, collaboration and license
agreement with Novartis to develop, manufacture and commercialize our investigational TIGIT inhibitor ociperlimab in the
Novartis Territory. In addition, we entered into an agreement with Novartis which granted us rights to market, promote and
detail five approved Novartis oncology products, TAFINLAR® (dabrafenib), MEKINIST® (trametinib), VOTRIENT®
(pazopanib), AFINITOR® (everolimus), and ZYKADIA® (ceritinib), across designated regions of China referred to as “broad
markets.” There were three performance obligations identified at the outset of the arrangement: (1) a material right for the
option to the exclusive product license, (2) the right to access ociperlimab in clinical trials during the option period provided to
Novartis, combined with the initial transfer of BeiGene know-how, and (3) conducting ociperlimab R&D services. The market
development activities are considered immaterial in the context of the agreements. Under this agreement, we received an
upfront cash payment, which was allocated between the three performance obligations identified in the agreement based on the
relative standalone selling prices of the performance obligations. The portion allocated to the material right was deferred and
will be recognized at the earlier of when Novartis exercises the option and the license is delivered or the expiration of the option
period. The portion of the transaction price allocated to Novartis' right to access ociperlimab in its own clinical trials during the
option period and the initial transfer of BeiGene know-how was deferred and is being recognized over the expected option
period. The portion of the transaction price allocated to the ociperlimab R&D services was deferred and is being recognized as
collaboration revenue as the ociperlimab R&D services are performed over the expected option period.
The option exercise fee under the ociperlimab agreement is contingent upon Novartis exercising its right, and is considered
fully constrained until the option is exercised. The potential milestone payments that we are eligible to receive under both of the
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Novartis collaborations were excluded from the initial transaction prices, as all milestone amounts are variable consideration
and were fully constrained due to uncertainty of achievement. Performance-based milestones will be recognized when the
milestone event is achieved or when the risk of revenue reversal is remote. Sales-based milestones and royalties will be
recognized when the underlying sales occur.
Expenses
Cost of Sales
Cost of sales includes the costs to manufacture our internally developed commercial products, as well as costs to purchase
tislelizumab from Boehringer Ingelheim. Additionally, cost of sales included the cost of in-licensed products purchased for sale
in the PRC. Costs to manufacture inventory in preparation for commercial launch of a product incurred prior to regulatory
approval are expensed to research and development expense as incurred. Cost of sales for newly launched products will not be
recorded until the initial pre-launch inventory is depleted and additional inventory is manufactured. To date, the Company's
initial pre-launch inventory for its commercial products has been immaterial and has not had a significant impact on the
Company's gross margin.
Research and Development Expenses
Research and development expenses consist of the costs associated with our research and development activities,
conducting preclinical studies and clinical trials, and activities related to regulatory filings. Our research and development
expenses consist of:
•
•
expenses incurred under agreements with contract research organizations (CROs), CMOs, and consultants that conduct
and support clinical trials and preclinical studies;
costs of comparator drugs in certain of our clinical trials;
• manufacturing costs related to pre-commercial activities;
•
•
•
•
•
costs associated with preclinical activities and development activities;
costs associated with regulatory operations;
employee-related expenses, including salaries, benefits, travel and share-based compensation expense for research and
development personnel;
in-process research and development costs expensed as part of collaboration agreements entered into; and
other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other
supplies used in research and development activities.
Our current research and development activities mainly relate to the clinical advancement of our internally developed
medicines and drug candidates:
•
•
•
•
•
•
•
•
•
•
BRUKINSA (zanubrutinib), a small molecule inhibitor of BTK;
tislelizumab, a humanized monoclonal antibody against PD-1;
ociperlimab, an investigational humanized monoclonal antibody against TIGIT;
pamiparib, a selective small molecule inhibitor of PARP1 and PARP2;
BGB-15025, an investigational hematopoietic progenitor kinase 1 (HPK1) inhibitor;
BGB-11417, an investigational small molecular inhibitor of Bcl-2;
BGB-A445, an investigational non-ligand competing OX40 monoclonal antibody;
BGB-16673, an investigational Chimeric Degradation Activating Compound ("CDAC"), targeting BTK; and
BGB-A425, an investigational humanized monoclonal antibody against TIM-3;
BGB-10188, an investigational PI3Kδ inhibitor;
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•
•
BGB-23339, a potent, allosteric investigational tyrosine kinase 2 (TYK2) inhibitor; and
LBL-007, a novel investigational antibody targeting the LAG-3 pathway
Research and development activities also include costs associated with in-licensed drug candidates, including:
•
•
•
•
R&D expense related to the co-development of pipeline assets under the Amgen collaboration agreement. Our total
cost share obligation to Amgen is split between R&D expense and a reduction to the R&D cost share liability;
sitravatinib, an investigational, spectrum-selective kinase inhibitor, licensed from Mirati Therapeutics, Inc. ("Mirati");
ZW25 (zanidatamab) and ZW49, two investigational bispecific antibody-based product candidates targeting HER2,
licensed from Zymeworks Inc. ("Zymeworks"); and
POBEVCY® (BAT1706), a biosimilar to Avastin® (bevacizumab), licensed from Bio-Thera Solutions, Ltd. (Bio-
Thera).
We expense research and development costs when incurred. We record costs for certain development activities, such as
clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as subject enrollment,
clinical site activations or information our vendors provide to us. We expense the manufacturing costs of our internally
developed products that are used in clinical trials as they are incurred as research and development expense. We do not allocate
employee-related costs, depreciation, rental and other indirect costs to specific research and development programs because
these costs are deployed across multiple product programs under research and development and, as such, are separately
classified as unallocated research and development expenses.
At this time, it is difficult to estimate or know for certain, the nature, timing and estimated costs of the efforts that will be
necessary to complete the development of our internally developed and in-licensed medicines and drug candidates. This is due
to the numerous risks and uncertainties associated with developing such medicines and drug candidates, including the
uncertainty of:
•
•
•
•
•
successful enrollment in and completion of clinical trials;
establishing an appropriate safety and efficacy profile;
establishing and maintaining commercial manufacturing capabilities or making arrangements with third-party
manufacturers;
receipt of marketing and other required approvals from applicable regulatory authorities;
successfully launching and commercializing our medicines and drug candidates, if and when approved, whether as
monotherapies or in combination with our medicines and drug candidates or third-party products;
• market acceptance, pricing and reimbursement;
•
•
•
•
•
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our medicines and drug
candidates;
continued acceptable safety and efficacy profiles of the products following approval;
sufficient supply of the products following approval;
competition from competing products; and
retention of key personnel.
A change in the outcome of any of these variables with respect to the development of any of our medicines and drug
candidates would significantly change the costs, timing and viability associated with the commercialization or development of
that medicine or drug candidate.
Research and development activities are central to our business model. We expect continued substantial investment in
research and development for the foreseeable future as our discovery and development programs progress, as we continue to
support the clinical trials of our medicines and drug candidates as treatments for various cancers and as we move these
medicines and drug candidates into additional clinical trials, including potential pivotal trials. There are numerous factors
associated with the successful commercialization of any of our medicines and drug candidates, including future trial design and
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various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of
development. Additionally, future commercial and regulatory factors beyond our control may impact our clinical development
and commercial programs and plans.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of product promotion costs, distribution costs, salaries and
related benefit costs, including share-based compensation for selling, general and administrative personnel. Other selling,
general and administrative expenses include professional fees for legal, consulting, auditing and tax services as well as other
direct and allocated expenses for rent and maintenance of facilities, travel costs, 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 planned increases in commercialization activities for our approved medicines, and the preparation for
potential launch and commercialization of additional in-licensed products from our collaborations and internally developed
products, if approved. We also incur significant legal, compliance, accounting, insurance and investor and public relations
expenses associated with being a public company with our ADSs, ordinary shares and RMB Shares listed for trading on The
Nasdaq Global Select Market, The Hong Kong Stock Exchange and The STAR Market of the Shanghai Stock Exchange,
respectively.
Interest Income (Expense), Net
Interest Income
Interest income consists primarily of interest generated from our RMB-denominated cash deposits and short-term
investments in money market funds, time deposits, U.S. Treasury securities and U.S. agency securities.
Interest Expense
Interest expense consists primarily of interest on our bank loans and related party loan.
Other (Expense) Income, Net
Other (expense) income consists primarily of gains and losses recognized related to fluctuations in foreign currency
exchange rates, gains and losses on equity investments, government grants and subsidies received that involve no conditions or
continuing performance obligations by us, unrealized gains and losses on equity securities, and realized gains and losses on the
sale of investments. We hold significant cash in the form of RMB-denominated deposits at U.S. functional currency entities,
including a large portion of the cash generated from the STAR Market offering in December 2021. Other (expense) income
includes the revaluation gains and losses of these cash deposits based on foreign currency exchange rates.
123
Results of Operations
Comparison of the Years Ended December 31, 2022 and 2021
The following table summarizes our results of operations for the years ended December 31, 2022 and 2021:
Revenues
Product revenue, net
Collaboration revenue
Total revenues
Expenses
Cost of sales - product
Research and development
Selling, general and administrative
Amortization of intangible assets
Total expenses
Loss from operations
Interest income (expense), net
Other (expense) income, net
Loss before income tax expense
Income tax expense
Net loss
Year Ended December 31,
Change
2022
2021
$
%
(dollars in thousands)
$ 1,254,612 $
161,309
633,987 $
542,296
620,625
(380,987)
1,415,921
1,176,283
239,638
286,475
164,906
1,640,508
1,277,852
1,459,239
990,123
751
750
121,569
181,269
287,729
1
3,205,586
2,615,018
590,568
(1,789,665) (1,438,735)
(350,930)
97.9 %
(70.3) %
20.4 %
73.7 %
12.4 %
29.1 %
0.1 %
22.6 %
24.4 %
52,480
(15,757)
68,237
(433.1) %
(223,852)
15,904
(239,756)
(1,507.5) %
(1,961,037) (1,438,588)
(522,449)
42,778
19,228
23,550
(2,003,815) (1,457,816)
(545,999)
36.3 %
122.5 %
37.5 %
NM
37.5 %
Less: Net loss attributable to noncontrolling interest
—
—
—
Net loss attributable to BeiGene, Ltd.
$ (2,003,815) $ (1,457,816) $
(545,999)
Revenue
Total revenue increased by $239.6 million to $1.4 billion for the year ended December 31, 2022, from $1.2 billion for the
year ended December 31, 2021, primarily due to increases in sales of our internally developed products and in-licensed
products, partially offset by a decrease in collaboration revenue, as the prior year period included the recognition of the majority
of the $650 million upfront payment from Novartis as license revenue.
The following table summarizes the components of revenue for the year ended December 31, 2022 and 2021, respectively:
Product revenue
Collaboration revenue:
License revenue
Research and development service revenue
Right to access intellectual property revenue
Other
Total collaboration revenue
Total Revenue
Year Ended December 31,
Changes
2022
2021
$
%
(dollars in thousands)
$ 1,254,612 $
633,987 $
620,625
97.9 %
—
46,822
104,994
9,493
484,646
53,671
3,979
—
161,309
542,296
$ 1,415,921 $ 1,176,283 $
(484,646)
(6,849)
(100.0) %
(12.8) %
101,015
2,538.7 %
9,493
(380,987)
239,638
NM
(70.3) %
20.4 %
124
Net product revenue consisted of the following:
BRUKINSA®
Tislelizumab
REVLIMID®
XGEVA®
POBEVCY®
BLINCYTO®
VIDAZA®
KYPROLIS®
Pamiparib
Other
Year Ended December 31,
Changes
2022
2021
$
%
(dollars in thousands)
$
564,651 $
217,987 $
346,664
159.0 %
422,885
255,119
167,766
79,049
63,398
38,124
36,107
15,213
13,696
5,460
16,029
70,065
45,956
1,353
12,515
19,591
—
3,661
7,740
8,984
17,442
36,771
23,592
(4,378)
13,696
1,799
8,289
65.8 %
12.8 %
38.0 %
2,717.7 %
188.5 %
(22.3) %
NM
49.1 %
107.1 %
97.9 %
Total product revenue
$ 1,254,612 $
633,987 $
620,625
Net product revenue was $1.3 billion for the year ended December 31, 2022, compared to $634.0 million in the prior year,
primarily due to increased sales of BRUKINSA in the United States and China and tislelizumab in China, in-licensed sales of
Amgen's BLINCYTO®, which we began distributing in August 2021, and XGEVA, as well as Bio-Thera's POBEVCY. During
2022, we continued to see increased patient demand in China for tislelizumab and BRUKINSA due to the inclusion on the
National Reimbursement Drug List ("NRDL"), and this demand more than offset the effect of the related price reductions.
Global sales of BRUKINSA totaled $564.7 million for the year ended December 31, 2022, representing a 159.0% increase
compared to the prior year; U.S. sales of BRUKINSA totaled $389.7 million for the year ended December 31, 2022 compared
to $115.7 million in the prior year, representing growth of 237.0%. U.S. sales accelerated in the period, driven by increased
uptake in MCL, WM and MZL. BRUKINSA sales in China totaled $150.3 million for the year ended December 31, 2022,
representing growth of 48.6% compared to the prior year, driven by a significant increase in all approved indications, including
CLL/SLL.
Sales of tislelizumab in China totaled $422.9 million for the year ended December 31, 2022, representing a 65.8% increase
compared to the prior year. During the year ended December 31, 2022, new patient demand from broader reimbursement and
further expansion of our salesforce and hospital listings continued to drive increased market penetration and market share for
tislelizumab. Full year 2021 sales of tislelizumab included two negative adjustments totaling $45.6 million for distributor
channel inventory compensation as a result of inclusion in the March 2021 and January 2022 NRDL lists.
Product revenues for the year ended December 31, 2021 were negatively impacted by adjustments of $57.5 million as a
result of compensating distributors for products previously sold at the pre-NRDL price, which remained in the distribution
channel, due to the first inclusion of tislelizumab, BRUKINSA, and XGEVA in the updated NRDL effective March 1, 2021 and
additional indications for tislelizumab, BRUKINSA and pamiparib effective January 1, 2022. During the year ended December
31, 2021, the inclusion of tislelizumab, BRUKINSA, XGEVA, and pamiparib in the NRDL significantly increased patient
demand that more than offset the net effect of price reductions as a result of NRDL inclusion.
Collaboration revenue totaled $161.3 million for the year ended December 31, 2022, of which $46.8 million was
recognized from deferred revenue for R&D services performed during the year ended December 31, 2022 under both the
tislelizumab and ociperlimab collaborations, $105.0 million was recognized from deferred revenue for Novartis' right to access
ociperlimab over the option period, and $9.5 million was recognized related to the sale of tislelizumab clinical supply to
Novartis. Collaboration revenue totaled $542.3 million for the year ended December 31, 2021, of which $484.6 million was
recognized upon delivery of the tislelizumab license right and transfer of know-how to Novartis, $53.7 million was recognized
from deferred revenue for R&D services performed during the year ended December 31, 2021 under both the tislelizumab and
ociperlimab collaborations, and $4.0 million was recognized from deferred revenue for Novartis' right to access ociperlimab
over the option period (see Note 4 to our consolidated financial statements included in this Annual Report on Form 10-K).
125
Cost of Sales
Cost of sales increased to $286.5 million for the year ended December 31, 2022 from $164.9 million for the year ended
December 31, 2021, primarily due to increased product sales of tislelizumab, BRUKINSA and XGEVA, as well as initial sales
of BLINCYTO®, which we began selling in August 2021, and initial sales of KYPROLIS and POBEVCY.
Gross Margin
Gross margin on global product sales increased to $968.1 million for the year ended December 31, 2022, compared to
$469.1 million for the year ended December 31, 2021, primarily due to increased product revenue in the current year period.
Gross margin as a percentage of product sales increased to 77.2% for the year ended December 31, 2022, from 74.0% in the
prior year. The increase is primarily due to proportionally higher sales mix of global BRUKINSA sales and sales of
tislelizumab in China compared to lower margin sales of in-licensed products and lower costs per unit for both BRUKINSA and
tislelizumab, partially offset by a lower average selling price for both BRUKINSA and tislelizumab.
Research and Development Expense
Research and development expense increased by $181.3 million, or 12.4%, to $1.6 billion for the year ended December 31,
2022, from $1.5 billion for the year ended December 31, 2021. The following table summarizes the external cost of
development programs, upfront license fees, and internal research and development expense for the years ended December 31,
2022 and 2021:
Year Ended December 31,
Changes
2022
2021
$
%
(dollars in thousands)
External research and development expense:
Cost of development programs
Upfront license fees
Amgen co-development expenses1
$
469,497 $
477,761 $
(8,264)
68,665
83,500
(14,835)
98,955
115,464
(16,509)
Total external research and development expenses
637,117
676,725
(39,608)
Internal research and development expenses
Total research and development expenses
1,003,391
782,514
220,877
$ 1,640,508 $ 1,459,239 $
181,269
(1.7) %
(17.8) %
(14.3) %
(5.9) %
28.2 %
12.4 %
1. Our co-funding obligation for the development of the pipeline assets under the Amgen collaboration for the year ended December 31, 2022 totaled $195.4
million, of which $99.0 million was recorded as R&D expense. The remaining $96.4 million was recorded as a reduction for the R&D cost share liability.
The decrease in external research and development expenses for the year ended December 31, 2022 was primarily
attributable to lower upfront license fees under collaboration agreements, lower external spending related to fees paid to CROs
as we internalize previously outsourced activities, and a decrease in the expense recognized on co-development fees to Amgen.
Internal research and development expense increased $220.9 million, or 28.2%, to $1.0 billion and was primarily
attributable to the expansion of our global development organization and our clinical and preclinical drug candidates, as well as
our continued efforts to internalize research and clinical trial activities, and included the following:
•
•
•
•
•
$114.7 million increase of employee salary and benefits, primarily attributable to hiring more research and
development personnel to support our expanding research and development activities;
$57.6 million increase of materials and reagent expenses, primarily in connection with the in-house manufacturing of
drug candidates used for clinical purposes;
$47.6 million increase of facilities, depreciation, office expense, rental fees, and other expenses to support the growth
of our organization;
$25.0 million increase of share-based compensation expense, primarily attributable to our increased headcount of
research and development employees, resulting in more awards being expensed; and
$24.0 million decrease of consulting fees, including decreased meeting expense related to scientific, regulatory and
development consulting activities, in connection with the advancement of our drug candidates.
126
Selling, General and Administrative Expense
Selling, general and administrative expense increased by $287.7 million, or 29.1%, to $1,277.9 million for the year ended
December 31, 2022, from $990.1 million for the year ended December 31, 2021. The increase was primarily attributable to the
following:
•
•
•
•
$176.4 million increase of employee salary and benefits, which was primarily attributable to the hiring of personnel to
support our growing business, including the expansion of our commercial organizations in China, the United States,
Canada, Europe and emerging markets;
$46.0 million increase in external commercial-related expenses, including market research, market access studies and
promotional activities, related to the growth of our global commercial organization, as we continue to build our
worldwide footprint and capabilities;
$37.5 million increase of share-based compensation expense, primarily attributable to our increased headcount of sales
and administrative employees, resulting in more awards being expensed; and
$27.8 increase of professional fees, consulting, recruiting, information technology, tax, accounting and audit services,
and facility expenses, rental fees, office expenses, and other administrative expenses, primarily attributable to the
global expansion of our business, including the expansion of our commercial operations in China, the United States
and Europe.
Interest Income (Expense), Net
Interest income (expense), net increased by $68.2 million, or 433.1%, to $52.5 million of net interest income for the year
ended December 31, 2022, from $15.8 million of net interest expense for the year ended December 31, 2021. The increase in
interest income (expense), net, was primarily attributable to increased interest income resulting from the increase in cash
balances resulting from the STAR Offering proceeds in the fourth quarter of 2021, as well as higher interest rates earned on our
cash, cash equivalents and short-term investments.
Other (Expense) Income, Net
Other (expense) income, net decreased by $239.8 million to $223.9 million of expense for the year ended December 31,
2022, from $15.9 million of income for the year ended December 31, 2021. The increase in expense for the year ended
December 31, 2022 was primarily related to foreign exchange losses resulting from the strengthening of the U.S. dollar and the
revaluation impact of foreign currencies held in U.S. functional currency subsidiaries. Also contributing to the increase in
expense was an increase in the unrealized loss on our equity investments. These losses were partially offset by increased
income from government subsidies.
Income Tax Expense
Income tax expense was $42.8 million for the year ended December 31, 2022 compared with $19.2 million for the year
ended December 31, 2021. The income tax expense for the year ended December 31, 2022 was primarily attributable to current
China tax expense for certain subsidiaries determined after certain non-deductible expenses and current U.S. tax expense, as a
result of amendments to Internal Revenue Code (IRC) Section 174 pursuant to the 2017 Tax Cuts and Jobs Act, which took
effect January 1, 2022, and eliminates the ability to fully deduct research and development expenditures in the year incurred,
and requires capitalization and amortization. Other current tax expense was primarily attributable to foreign non-creditable
withholding taxes.
Liquidity and Capital Resources
The following table represents our cash, short-term investments, and debt balances as of December 31, 2022:
Cash, cash equivalents and restricted cash
Short-term investments
Total debt
127
Year Ended December 31,
2022
2021
(in thousands)
$
$
$
3,875,037 $
665,251 $
4,382,887
2,241,962
538,117 $
629,678
We have incurred annual net losses and negative cash flows from operations since inception, resulting from the funding of
our research and development programs and selling, general and administrative expenses associated with our operations, as well
as to support the commercialization of our products globally. We incurred net losses of $2.0 billion and $1.5 billion for the
years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $7.1
billion.
To date, we have financed our operations principally through proceeds from public and private offerings of our securities
and proceeds from our collaborations, together with product sales since September 2017. Based on our current operating plan,
we expect that our existing cash, cash equivalents and short-term investments as of December 31, 2022 will enable us to fund
our operating expenses and capital expenditure requirements for at least the next 12 months after the date that the financial
statements included in this report are issued.
On December 15, 2021, we completed the initial public offering on the SSE. The shares offered in the STAR Offering were
issued to and subscribed for by permitted investors in the People’s Republic of China ("PRC") in Renminbi ("RMB Shares").
The public offering price of the RMB Shares was RMB192.60 per ordinary share, or $391.68 per ADS. In this offering, we sold
115,055,260 ordinary shares. Net proceeds after deducting underwriting commissions and offering expenses were $3.4 billion.
As required by the PRC securities laws, the net proceeds from the STAR Offering must be used in compliance with the planned
uses as disclosed in the PRC prospectus as well as our proceeds management policy for the STAR Offering approved by our
board of directors.
In January 2021, we entered into a collaboration and license agreement with Novartis, granting Novartis rights to develop,
manufacture and commercialize tislelizumab in North America, Europe, and Japan. Under the agreement, we received an
upfront cash payment of $650 million from Novartis. In December 2021, we expanded our collaboration with Novartis by
entering into an option, collaboration and license agreement with Novartis to develop, manufacture and commercialize our
investigational TIGIT inhibitor ociperlimab in the Novartis Territory. In addition, we and Novartis entered into an agreement
granting us rights to market, promote and detail five approved Novartis oncology products. Under the terms of the agreement,
we received an upfront cash payment of $300 million in January 2022.
The following table provides information regarding our cash flows for the years ended December 31, 2022 and 2021:
Cash, cash equivalents and restricted cash at beginning of period
Net cash used in operating activities
Net cash provided by investing activities
Net cash (used in) provided by financing activities
Net effect of foreign exchange rate changes
Net (decrease) increase in cash, cash equivalents and restricted cash
Year Ended December 31,
2022
2021
(in thousands)
$
4,382,887 $
1,390,005
(1,496,619)
(1,298,723)
1,077,123
(18,971)
(69,383)
(507,850)
640,659
3,636,911
14,035
2,992,882
Cash, cash equivalents and restricted cash at end of period
$
3,875,037 $
4,382,887
Operating Activities
Cash flows from operating activities is net loss adjusted for certain non-cash items and changes in assets and liabilities.
Operating activities used $1.5 billion of cash for the year ended December 31, 2022, which resulted principally from our
net loss of $2.0 billion, inclusive of $223.9 million of other losses due primarily to the strengthening of the U.S. dollar and the
related revaluation of foreign currencies held by U.S. functional currency subsidiaries, partially offset by non-cash charges and
adjustments of $374.8 million, and by a decrease in our net operating assets and liabilities of $132.4 million. The non-cash
charges and adjustments were primarily driven by share-based compensation expense, charges for acquired in-process research
and development costs, and depreciation and amortization expense, offset by amortization of the research and development cost
share liability. The decrease in working capital was driven largely by decreases in accounts receivable and prepaid expenses and
an increase in taxes payable, partially offset by a decrease in deferred revenue and an increase in inventories.
Operating activities used $1.3 billion of cash for the year ended December 31, 2021, which resulted principally from our
net loss of $1.5 billion and an increase in our net operating assets and liabilities of $118.3 million, partially offset by non-cash
charges and adjustments of $277.4 million. The non-cash charges and adjustments were primarily driven by share-based
compensation expense, charges for acquired in-process research and development costs, and depreciation and amortization
expense, offset by amortization of the research and development cost share liability. The increase in working capital was driven
128
largely by increases in accounts receivable, inventory and prepaid expenses, offset by increases in accounts payable, accrued
expenses and other liabilities and deferred revenue resulting from the upfront option payment from Novartis.
Investing Activities
Cash flows from investing activities consist primarily of capital expenditures, investment purchases, sales, maturities, and
disposals, and upfront payments related to our collaboration agreements.
Investing activities provided $1.1 billion of cash for the year ended December 31, 2022, consisting of $1.6 billion in sales
and maturities of investment securities, partially offset by $325.4 million of capital expenditures, $143.7 million upfront
collaboration payments, $15.9 million in purchases of long-term investments and $1.5 million in purchases of short-term
investment securities.
Investing activities provided $640.7 million of cash for the year ended December 31, 2021, consisting of $2.1 billion in
purchases of short-term investment securities, $262.9 million of capital expenditures, $43.4 million in purchases of intangible
assets, $43.5 million in purchases of long-term investments and $8.5 million upfront collaboration payments, all of which were
offset by sales and maturities of investment securities of $3.1 billion.
Financing Activities
Cash flows from financing activities consist primarily of sale of ordinary shares, RMB Shares, and ADSs through equity
offerings, issuance and repayment of short-term and long-term debt, and proceeds from the sale of ADSs through employee
equity compensation plans.
Financing activities used $19.0 million of cash for the year ended December 31, 2022, consisting primarily of $417.1
million of repayment of short-term loans, partially offset by $313.8 million from proceeds of short-term loans, $47.0 million
from the exercise of employee share options and proceeds from the issuance of shares through our employee share purchase
plan and $37.4 million from proceeds of long-term bank loans.
Financing activities provided $3.6 billion of cash for the year ended December 31, 2021, consisting primarily of $3.4
billion of net proceeds from our STAR Offering in December 2021, $406.4 million from proceeds of short-term loans, $92.8
million from the exercise of employee share options and proceeds from the issuance of shares through our employee share
purchase plan, $50.0 million from the sale of our shares to Amgen, and $16.8 million from proceeds of long-term bank loans.
These inflows were partially offset by $321.8 million of repayment of short-term loans.
Effects of Exchange Rates on Cash
We have substantial operations in the PRC, which generate a significant amount of RMB-denominated cash from product
sales and require a significant amount of RMB-denominated cash to pay our obligations. Additionally, on December 15, 2021,
we received RMB21.7 billion in net proceeds from the STAR Offering. Since the reporting currency of the Company is the U.S.
dollar, periods of volatility in exchange rates may have a significant impact on our consolidated cash balances.
Future Liquidity and Material Cash Requirements
Until such time, if ever, as we can generate substantial product revenue sufficient to cover our costs and capital
investments, we may be required to finance our cash needs through a combination of equity offerings, debt financings,
collaboration agreements, strategic alliances, licensing arrangements, government grants, and other available sources. Under the
rules of the SEC, we currently qualify as a “well-known seasoned issuer,” which allows us to file shelf registration statements
to register an unspecified amount of securities that are effective upon filing. In May 2020, we filed such a shelf registration
statement with the SEC for the issuance of an unspecified amount of ordinary shares (including in the form of ADSs), preferred
shares, various series of debt securities and/or warrants to purchase any of such securities, either individually or in units, from
time to time at prices and on terms to be determined at the time of any such offering. This registration statement was effective
upon filing and will remain in effect for up to three years from filing, prior to which time we may file another shelf registration
statement that will be effective for up to three years from filing.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest
of our shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely
affect your rights as a holder of ADSs, ordinary shares, or RMB Shares. Debt financing, if available, may involve agreements
that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making
capital expenditures, or declaring dividends, and may require the issuance of warrants, which could potentially dilute your
ownership interest. If we raise additional funds through collaboration agreements, strategic alliances or licensing arrangements
with third parties, we may have to relinquish valuable rights to our medicines or drug candidates, future revenue streams or
129
research programs, or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds
through equity or debt financings, collaborations or other sources when needed, we may be required to delay, limit, reduce or
terminate our product development or commercialization efforts or grant rights to develop and market products or drug
candidates that we would otherwise prefer to develop and market ourselves.
Our material cash requirements in the short- and long-term consist of the following operational, capital, and manufacturing
expenditures, a portion of which contain contractual or other obligations. We plan to fund our material cash requirements with
our current financial resources together with our anticipated receipts of accounts receivable, product sales and royalty revenues,
and reimbursements we expect to receive under our existing collaboration and license agreements.
Contractual and Other Obligations
The following table summarizes our significant contractual obligations as of December 31, 2022:
Contractual obligations:
Operating lease commitments
Purchase commitments
Debt obligations
Interest on debt
Co-development funding commitment
Funding commitment
Research and development commitment
Pension plan
Capital commitments
Total
Operating Lease Commitments
Payments Due by Period
Total
Short-term
(in thousands)
Long-term
$
63,024 $
26,278 $
117,293
538,117
45,947
595,702
16,000
22,327
7,760
404,914
74,449
328,969
16,632
231,697
7,000
5,829
2,553
404,914
36,746
42,844
209,148
29,315
364,005
9,000
16,498
5,207
—
$
1,811,084 $
1,098,321 $
712,763
We lease office or manufacturing facilities in Beijing, Shanghai, Suzhou and Guangzhou in China; office facilities in
California, Massachusetts, Maryland, and New Jersey in the United States; and in Basel, Switzerland under non-cancelable
operating leases expiring on various dates. Payments under operating leases are expensed on a straight-line basis over the
respective lease terms. The aggregate future minimum payments under these non-cancelable operating leases are summarized in
the table above.
Purchase Commitments
As of December 31, 2022, purchase commitments amounted to $117.3 million, of which $55.3 million related to minimum
purchase requirements for supply purchased from CMOs and $61.9 million related to binding purchase order obligations of
inventory from BMS and Amgen. We do not have any minimum purchase requirements for inventory from BMS or Amgen.
Debt Obligations and Interest
Total debt obligations coming due in the next twelve months is $329.0 million. Total long-term debt obligations are $209.1
million. See Note 14 in the Notes to the Financial Statements for further detail of our debt obligations.
Interest on bank loans is paid quarterly until the respective loans are fully settled. For the purpose of contractual obligations
calculation, current interest rates on floating rate obligations were used for the remainder contractual life of the outstanding
borrowings.
Co-Development Funding Commitments
Under our collaboration with Amgen, we are responsible for co-funding global clinical development costs for the licensed
oncology pipeline assets, up to a total cap of $1.25 billion. We are funding our portion of the co-development costs by
contributing cash and/or development services. As of December 31, 2022, our remaining co-development funding commitment
was $0.6 billion.
130
Funding Commitment
Funding commitment represents our committed capital related to two of our equity method investments in the amount of
$19.0 million. As of December 31, 2022, our remaining capital commitment was $16.0 million and is expected to be paid from
time to time over the investment period.
Research and Development Commitment
We entered into long-term research and development agreements, which includes obligations to make upfront payments
and fixed quarterly payments over the next four years. As of December 31, 2022, the total research and development
commitment amounted to $22.3 million.
Pension Plan
We maintain a defined benefit pension plan in Switzerland. Funding obligations under the defined benefit pension plan are
equivalent to $2.6 million per year based on annual funding contributions in effect as of December 31, 2022 to achieve fully
funded status where the market value of plan assets equals the projected benefit obligations. Future funding requirements will
be subject to change as a result of future changes in staffing and compensation levels, various actuarial assumptions and actual
investment returns on plan assets.
Capital Commitments
We had capital commitments amounting to $404.9 million for the acquisition of property, plant and equipment as of
December 31, 2022, which were mainly for our manufacturing and clinical R&D campus in Hopewell, NJ, additional capacity
at the Guangzhou and Suzhou manufacturing facilities, and new building for Beijing Innerway Bio-tech Co., Ltd.
Other Obligations
We expect to make a significant investment in our future manufacturing facility in the United States, a 42-acre site that will
be constructed in Hopewell, NJ, and for which we purchased for $75.2 million. We expect significant capital expenditures as
we build out the Hopewell facility over the next several years.
We also enter into agreements in the ordinary course of business with CROs to provide research and development services.
These contracts are generally cancellable at any time by us with prior written notice.
We also enter into collaboration agreements with institutions and companies to license intellectual property. We may be
obligated to make future development, regulatory and commercial milestone payments and royalty payments on future sales of
specified products associated with these agreements. Payments under these agreements generally become due and payable upon
achievement of such milestones or sales. These commitments are not recorded on our balance sheet because the achievement
and timing of these milestones are not fixed and determinable. When the achievement of these milestones or sales have
occurred, the corresponding amounts are recognized in our financial statements.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The
preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported
amounts of assets, liabilities, revenues, costs and expenses. We evaluate our estimates and judgments on an ongoing basis, and
our actual results may differ from these estimates. We base our estimates on historical experience, known trends and events,
contractual milestones and other various factors that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources.
Certain of these estimates are considered critical as they involve a significant level of estimation uncertainty and have had
or are reasonably likely to have a material impact on our consolidated financial statements. Our critical accounting estimates are
summarized below. See Note 2 to our consolidated financial statements included in this Annual Report for a description of our
significant accounting policies.
Revenue Recognition
We recognize revenue when we transfer control of goods or services to our customers. Revenue is measured as the amount
of consideration we expect to receive in exchange for goods and services. We generate revenue from product sales and revenue
transactions with our collaboration partners.
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Product Revenue
To determine the appropriate transaction price for our product sales at the time we recognize a sale to a direct customer, we
estimate any rebates, chargebacks or discounts that ultimately will be due to the direct customer and other customers in the
distribution chain under the terms of our contracts. Significant judgments are required in making these estimates. We include
variable consideration in the transaction price to the extent it is probable that a significant reversal will not occur and estimate
variable consideration from rebates, chargebacks, trade discounts and allowances, sales returns allowances, and other incentives
using the expected value method.
Estimates for variable consideration for which reserves are established at the time of sale include government and
commercial rebates, provisions for acceptance of NRDL pricing, chargebacks, trade discounts and allowances, sales returns
allowances and other incentives that are offered within contracts between the Company and our customers, health care
providers and other indirect customers. Where appropriate, these estimates take into consideration a range of possible outcomes
that are probability-weighted for relevant factors such as our historical experience, current contractual and statutory
requirements, channel inventory levels, specific known market events and trends, industry data and forecasted customer buying
and payment patterns.
We base our sales returns allowance on estimated distributor inventories, customer demand as reported by third-party
sources, and actual returns history, as well as other factors, as appropriate. For newly launched products where actual returns
history is not yet available, the sales returns allowance is initially calculated based on benchmarking data from similar products
and industry experience. If the historical or benchmarking data we use to calculate these estimates do not properly reflect future
returns, then a change in the allowance would be made in the period in which such a determination is made and revenues in that
period could be materially affected. Any changes from the historical trend rates are considered in determining the current sales
return allowance. To date, sales returns have not been significant.
Actual amounts of consideration ultimately received may differ from our estimates. We will reassess estimates for variable
consideration periodically. If actual results in the future vary from our estimates, we will adjust these estimates, which would
affect net product revenue and earnings in the period such variances become known.
Collaboration Revenue
Our collaborative arrangements may contain more than one unit of account, or performance obligation, including grants of
licenses to intellectual property rights, agreements to provide research and development services and other deliverables. As part
of the accounting for these arrangements, we must develop assumptions that require significant judgments to determine the
standalone selling price for each performance obligation identified in the contract.
Standalone selling prices for licenses of intellectual property and the right to access and use intellectual property during an
option period performance obligations are determined based on the probability-weighted present value of forecasted cash flows
associated with the intellectual property. Stand-alone selling prices for research and development services performance
obligations are based on the present value of estimated clinical trial costs plus a reasonable margin.
The estimates of standalone selling prices involve management's key assumptions such as revenue growth rate, estimated
clinical trial costs, mark-up rate, probability of technical and regulatory success, and discount rates. These significant
assumptions are forward looking and could be affected by future economic, regulatory and market conditions.
Research and Development Expenses
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 clinical trial activities on behalf of us in the ongoing development of our product
candidates. Expenses related to clinical trials are accrued based on our estimates of the actual services performed by the third
parties for the respective period. If the contracted amounts are modified (for instance, as a result of changes in the clinical trial
protocol or scope of work to be performed), we will modify the related accruals accordingly on a prospective basis. Revisions
in the scope of a contract are charged to expense in the period in which the facts that give rise to the revision become
reasonably certain.
The process of estimating our external 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 expenses as of each balance sheet date in our financial statements based on facts and circumstances known to
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us at that time. 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.
Income Taxes
Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such
assets arise because of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as
from net operating losses and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits
by assessing the adequacy of future expected taxable income from all sources, including reversal of temporary differences,
forecasted operating earnings and available tax planning strategies. These sources of income rely heavily on estimates that are
based on a number of factors, including historical experience and short-range and long-range business forecasts. A valuation
allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements included in this Annual Report for information regarding recent
accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest and Credit Risk
Financial instruments that are potentially subject to credit risk consist of cash and cash equivalents, restricted cash, short
term investments and accounts receivable.
We had cash and cash equivalents of $3.9 billion, $4.4 billion and $1.4 billion, restricted cash of $5.5 million, $7.2 million
and $8.1 million, and short-term investments of $0.7 billion, $2.2 billion and $3.3 billion, at December 31, 2022, 2021 and
2020, respectively. Our cash and cash equivalents are deposited with various major reputable financial institutions located
within or without the PRC. The deposits placed with these financial institutions are not protected by statutory or commercial
insurance. In the event of bankruptcy of one of these financial institutions, we may be unlikely to claim our deposits back in
full. We believe that these financial institutions are of high credit quality, and we continually monitor the credit worthiness of
these financial institutions. At December 31, 2022, our short-term investments consisted primarily of U.S. treasury securities.
We believe that U.S. treasury securities are of high credit quality and continually monitor the credit worthiness of these
institutions.
The primary objectives of our investment activities are to preserve principal, provide liquidity, and maximize income
without significant increasing risk. Our primary exposure to market risk relates to fluctuations in the interest rates, which are
affected by changes in the general level of PRC and U.S. interest rates. Given the short-term nature of our cash equivalents, we
believe that a sudden change in market interest rates would not be expected to have a material impact on our financial condition
and/or results of operation. We estimate that a hypothetical 100-basis point increase or decrease in market interest rates would
result in a decrease of $2.1 million or increase of $2.1 million, respectively, in the fair value of our investment portfolio as of
December 31, 2022.
We do not believe that our cash, cash equivalents, and short-term investments have significant risk of default or illiquidity.
While we believe our cash, cash equivalents, and short-term investments do not contain excessive risk, we cannot provide
absolute assurance that in the future investments will not be subject to adverse changes in market value.
We had accounts receivable, net of $173.2 million, $483.1 million and $60.4 million at December 31, 2022, 2021 and
2020, respectively. Accounts receivable at December 31, 2021 included the upfront fee from Novartis of $300.0 million under
the ociperlimab agreement. Accounts receivable, net represent amounts arising from product sales and amounts due from the
our collaboration partners. We monitor economic conditions to identify facts or circumstances that may indicate receivables are
at risk of collection. To date, we have not experienced any significant losses with respect to the collection of our accounts
receivable.
Currency Convertibility Risk
A significant portion of our expenses, assets, and liabilities are denominated in RMB. In 1994, the PRC government
abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China (the
PBOC). However, the unification of exchange rates does not imply that the RMB may be readily convertible into U.S. dollars
or other foreign currencies. All foreign exchange transactions continue to take place either through the PBOC or other banks
133
authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approvals of foreign currency
payments by the PBOC or other institutions require submitting a payment application form together with suppliers’ invoices,
shipping documents and signed contracts.
Additionally, the value of the RMB is subject to changes in central government policies and international economic and
political developments affecting supply and demand in the PRC foreign exchange trading system market.
Foreign Currency Exchange Rate Risk
We are exposed to foreign exchange risk arising from various currency exposures. Our reporting currency is the
U.S. dollar, but a portion of our operating transactions and assets and liabilities are in other currencies, such as RMB, Euro, and
Australian dollar.
RMB is not freely convertible into foreign currencies for capital account transactions. The value of RMB against the U.S.
dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions and
China’s foreign exchange prices. Since 2005, the RMB has been permitted to fluctuate within a narrow and managed band
against a basket of certain foreign currencies. The RMB compared to the U.S. dollar depreciated approximately 8.2%,
appreciated approximately 2.3%, and appreciated approximately 6.3% for the years ended December 31, 2022, 2021 and 2020,
respectively. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate
between the RMB and the U.S. dollar in the future.
To the extent that we need to convert U.S. dollars into RMB for capital expenditures, working capital and other business
purposes, appreciation of RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive
from the conversion. Conversely, if we decide to convert RMB into U.S. dollars for the purpose of making payments for
dividends on our ordinary shares, strategic acquisitions or investments or other business purposes, appreciation of the U.S.
dollar against RMB would have a negative effect on the U.S. dollar amount available to us.
In addition, a significant depreciation of the RMB against the U.S. dollar may significantly reduce the U.S. dollar
equivalent of our foreign cash balances and trade receivables. Further, volatility in exchange rate fluctuations may have a
significant impact on the foreign currency translation adjustments recorded in other comprehensive income (loss). We have not
used derivative financial instruments to hedge exposure to foreign exchange risk.
Effects of Inflation
Inflation generally affects us by increasing our cost of labor and clinical development costs. We do not believe that
inflation has had a material effect on our results of operations during the year ended December 31, 2022.
Item 8. Financial Statements and Supplementary Data
The financial statements required to be filed pursuant to this item are appended to this Annual Report. An index of those
financial statements is in “Part IV—Item 15—Exhibits, Financial Statement Schedules.”
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on their evaluation, required by paragraph (b) of Rules 13a-15 or 15d-15, promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), our principal executive officer and principal financial officer have
concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act are
effective, at a reasonable assurance level, as of December 31, 2022, to ensure that information required to be disclosed in
reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods
specified in U.S. Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file
or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and
principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls
and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired
134
control objectives, and management necessarily was required to apply its judgment in designing and evaluating the controls and
procedures.
Management’s Annual Report on Internal Control Over Financial Reporting
Our 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 Exchange Act). Our internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with U.S. generally accepted accounting principles. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the
framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on our assessment and those criteria, management concluded that we maintained effective
internal control over financial reporting as of December 31, 2022.
The effectiveness of our internal control over financial reporting as of December 31, 2022, has been tested by Ernst &
Young LLP, our independent registered public accounting firm, as stated in their report which is included in “Item 8—Financial
Statements and Other Supplementary Data” in this Annual Report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required
by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended December 31, 2022 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
On October 31, 2019, our wholly-owned subsidiary, BeiGene Switzerland GmbH (“BeiGene Switzerland”), entered into a
collaboration agreement with Amgen Inc. (“Amgen”), which became effective on January 2, 2020 (as amended, the
"Collaboration Agreement"). Pursuant to the Collaboration Agreement, we agreed to collaborate on the commercialization of
Amgen’s oncology products XGEVA®, BLINCYTO® and KYPROLIS® in China, and the global development and
commercialization in China of a portfolio of Amgen's clinical- and late-preclinical-stage pipeline products. In connection with
our ongoing assessment of the Collaboration Agreement cost-share contributions, we determined that our further investment in
the development of LUMAKRAS® also known as sotorasib (“AMG 510”) was no longer commercially viable for BeiGene. As
a result, on February 26, 2023, we entered into an amendment to the Collaboration Agreement to (i) stop sharing costs with
Amgen for the further development of AMG 510 during the period starting January 1, 2023 and ending August 31, 2023; and
(ii) cooperate in good faith to prepare a transition plan with the anticipated termination of AMG 510 from the Collaboration
Agreement. The foregoing description of the terms of the amendment does not purport to be complete and is qualified in its
entirety by reference to the full text of the agreement, which the Company intends to file as an exhibit to a subsequent periodic
report.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
On March 30, 2022, the SEC added us to its conclusive list of issuers identified under the HFCAA following the filing of
our annual report on Form 10-K with the SEC on February 28, 2022, which annual report was audited by Ernst & Young Hua
Ming LLP, a registered public accounting firm in mainland China that the PCAOB previously was unable to inspect or
investigate completely, because of a position taken by an authority in the foreign jurisdiction. However, as our global business
has expanded, we have evaluated, designed and implemented business processes and control changes and built substantial
organizational capabilities outside of China. Therefore, on March 23, 2022, following a review process carried out by our audit
committee, Ernst & Young Hua Ming LLP resigned as our independent registered public accounting firm for the audit of our
financial statements and internal control over financial reporting to be filed with the SEC. On the same day, our audit
committee approved the engagement of Ernst & Young LLP, located in Boston, Massachusetts, United States, as the
Company’s independent registered public accounting firm for the audit of our financial statements and internal control over
financial reporting for the fiscal year ending December 31, 2022. Given that Ernst & Young LLP (United States) now serves as
the principal accountant to audit our consolidated financial statements, we expect to be able to comply with the HFCAA and
AHFCAA and certify that we have retained a registered public accounting firm that the PCAOB has determined it is able to
inspect or investigate which would preclude a further finding by the SEC that we are a Commission-Identified Issuer.
135
Furthermore, in August 2022, the PCAOB signed a Statement of Protocol with the CSRC and the Ministry of Finance of
the People's Republic of China, taking the first step toward opening access for the PCAOB to inspect and investigate registered
public accounting firms headquartered in mainland China and Hong Kong. PCAOB staff members conducted on-site
inspections and investigations from September to November 2022, and in December 2022, the PCAOB announced that it has
secured complete access to inspect and investigate registered public accounting firms headquartered in mainland China and
Hong Kong and confirmed that until such time as the PCAOB issues any new determination, there are no Commission-
Identified Issuers at risk of having their securities subject to a trading prohibition under the HFCAA.
To the extent known by the Company, the Company is not aware of and has no reason to believe that: any governmental
entity in the foreign jurisdiction in which the Company is incorporated or otherwise organized owns shares of any capital stock
of record of the Company; any official of the Chinese government or Hong Kong SAR is a board member or officer of the
Company or its operating subsidiaries; or that the Company’s articles of incorporation, as amended, contain any provisions
known by the Company to include any charter or charter provisions of the Chinese Communist Party. The Company has
determined that no governmental entity in mainland China or Hong Kong, directly or indirectly, possesses the power to direct
or cause the direction of the management and policies of the Company or has a controlling financial interest. The Company has
made this determination based on the fact that as of the date of this annual report, no such governmental entity has filed a
Schedule 13D or 13G, there are no material contracts with such a foreign governmental party, and there is no such foreign
government representative on the Company’s Board.
136
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to
Regulation 14A, which proxy statement will be filed with the U.S. Securities and Exchange Commission not later than 120 days
after the close of our fiscal year ended December 31, 2022.
Item 11. Executive Compensation
The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to
Regulation 14A, which proxy statement will be filed with the U.S. Securities and Exchange Commission not later than 120 days
after the close of our fiscal year ended December 31, 2022.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to
Regulation 14A, which proxy statement will be filed with the U.S. Securities and Exchange Commission not later than 120 days
after the close of our fiscal year ended December 31, 2022.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to
Regulation 14A, which proxy statement will be filed with the U.S. Securities and Exchange Commission not later than 120 days
after the close of our fiscal year ended December 31, 2022.
Item 14. Principal Accounting Fees and Services
Our independent public accounting firm is Ernst & Young LLP (PCAOB ID: 0042), located in Boston, Massachusetts,
United States. Our independent public accounting firm for the years ended December 31, 2021 and 2020 was Ernst & Young
Hua Ming LLP (PCAOB ID: 1408), located in Beijing, People's Republic of China.
The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to
Regulation 14A, which proxy statement will be filed with the U.S. Securities and Exchange Commission not later than 120 days
after the close of our fiscal year ended December 31, 2022.
137
Item 15. Exhibits, Financial Statement Schedules
PART IV
The financial statements listed in the Index to Consolidated Financial Statements beginning on page F-1 are filed as part of
this Annual Report.
No financial statement schedules have been filed as part of this Annual Report because they are not applicable, not required
or the information required is shown in the financial statements or the notes thereto.
The exhibits filed as part of this Annual Report are set forth on the Exhibit Index immediately following our consolidated
financial statements. The Exhibit Index is incorporated herein by reference.
Item 16. Form 10-K Summary
Not applicable.
138
BEIGENE, LTD.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm
Consolidated balance sheets as of December 31, 2022 and 2021
Consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020
Consolidated statements of comprehensive loss for the years ended December 31, 2022, 2021 and 2020
Consolidated statements of cash flows for the years ended December 31, 2022, 2021 and 2020
Consolidated statements of shareholders’ equity for the years ended December 31, 2022, 2021 and 2020
Notes to consolidated financial statements
Page
2
6
7
8
9
10
11
1
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of BeiGene, Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of BeiGene, Ltd. and subsidiaries (the Company) as of
December 31, 2022, the related consolidated statements of operations, comprehensive loss, shareholders' equity and cash flows
for the year ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company at December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in
conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework), and our report dated February 27, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due
to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures
that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.
2
Accrued Clinical Trial Expenses
Description of
the Matter
As of December 31, 2022, the Company recorded $138 million of accrued external research and
development expenses. As discussed in Note 2 to the consolidated financial statements, accrued
external research and development expenses consist of various costs including clinical and pre-clinical
trials, cost to develop product candidates, research services and other research and development related
costs. Expenses related to clinical trials are accrued based on estimates of the actual services performed
by third parties for the respective period. As the majority of clinical service providers invoice the
Company in arrears for services performed, the Company determines estimates based on reviewing
open contracts and purchase orders, assessing services that have been performed on its behalf, and
estimating the level of service performed and the associated costs incurred for the services.
Auditing the Company’s accrued external clinical trial expenses is especially challenging as the
determination of clinical trial activities requires judgment and estimates resulting from delays in
reporting from vendors. While the Company’s estimates of accrued clinical trial expenses are primarily
based on information received related to each study from its vendors, the Company may need to make
an estimate for additional costs incurred. These estimates are based on several factors, including
management’s knowledge of the clinical trial timelines associated with activities, invoicing to date and
the provisions in the contracts. Additionally, due to the long duration of clinical trials and the timing of
invoicing received from vendors, the actual amounts incurred are not typically known at the time the
financial statements are issued.
How We
Addressed the
Matter in Our
Audit
We evaluated and tested the design and operating effectiveness of internal controls over the Company’s
process used in determining the valuation and completeness of accrued clinical trial expenses. This
included testing controls over management’s review of the significant assumptions and other inputs
used in the estimation of accrued external clinical trial expenses, including contractual terms, estimated
expenses incurred, and total invoicing to date.
To test the accrued clinical trial expenses, our audit procedures included, among others, testing the
accuracy and completeness of the underlying data used in determining the accrued clinical trial
expenses and evaluating the assumptions and estimates used by management. To evaluate the
completeness and valuation of the accrual, we corroborated the progress of clinical trials with the
Company’s research and development personnel that oversee the clinical trials and obtained actual cost
information directly from vendors. We also tested subsequent invoices received and evaluated
contractual arrangements with vendors, including any pending change orders to assess the impact to the
accrual.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2022
Boston, Massachusetts
February 27, 2023
3
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of BeiGene, Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of BeiGene, Ltd. (the Company) as of December 31, 2021,
the related consolidated statements of operations, comprehensive loss, cash flows and shareholders' equity for each of the two
years in the period ended December 31, 2021, and the related notes (collectively referred to as the "consolidated financial
statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of the Company at December 31, 2021, and the results of its operations and its cash flows for each of the two years in the
period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities 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 reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young Hua Ming LLP
We served as the Company’s auditor from 2014 to 2022.
Beijing, People’s Republic of China
February 28, 2022,
except for the effects on the consolidated financial statements of the correction of an error as described in Notes 2 and 3, as to
which the date is
February 27, 2023
4
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of BeiGene, Ltd.
Opinion on Internal Control Over Financial Reporting
We have audited BeiGene, Ltd.’s internal control over financial reporting as of December 31, 2022, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, BeiGene, Ltd. (the Company) maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2022, the related consolidated statement
of operations, comprehensive loss, shareholders' equity and cash flows for the year ended December 31, 2022, and the related
notes and our report dated February 27, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 27, 2023
5
BEIGENE, LTD.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of U.S. Dollars (“$”), except for number of shares and per share data)
As of December 31,
Note
2022
$
2021
$
Assets
Current assets:
Cash and cash equivalents
Short-term restricted cash
Short-term investments
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Total current assets
Long-term restricted cash
Property, plant and equipment, net
Operating lease right-of-use assets
Intangible assets, net
Other non-current assets
Total non-current assets
Total assets
Liabilities and shareholders' equity
Current liabilities:
Accounts payable
Accrued expenses and other payables
Deferred revenue, current portion
Tax payable
Operating lease liabilities, current portion
Research and development cost share liability, current portion
Short-term debt
Total current liabilities
Non-current liabilities:
Long-term debt
Deferred revenue, non-current portion
Operating lease liabilities, non-current portion
Deferred tax liabilities
Research and development cost share liability, non-current portion
Other long-term liabilities
Total non-current liabilities
Total liabilities
Commitments and contingencies
Equity:
Ordinary shares, 0.0001 par value per share; 9,500,000,000 shares authorized; 1,356,140,180
and 1,334,804,281 shares issued and outstanding as of December 31, 2022 and 2021,
respectively
Additional paid-in capital
Accumulated other comprehensive (loss) income
Accumulated deficit
Total equity
Total liabilities and equity
5
6
7
13
5
10
9
11
13
13
4
12
9
4
14
14
4
9
12
4
13
22
18
3,869,564
196
665,251
173,168
282,346
216,553
5,207,078
5,277
845,946
109,960
40,616
170,413
1,172,212
6,379,290
294,781
467,352
213,861
25,189
24,041
114,335
328,969
1,468,528
209,148
42,026
34,517
15,996
179,625
46,095
527,407
1,995,935
4,375,678
328
2,241,962
483,113
242,626
270,173
7,613,880
6,881
587,605
117,431
46,679
163,049
921,645
8,535,525
262,400
558,055
187,414
21,395
21,925
120,801
427,565
1,599,555
202,113
220,289
43,041
14,169
269,561
54,234
803,407
2,402,962
135
11,540,979
(77,417)
(7,080,342)
4,383,355
6,379,290
133
11,191,007
17,950
(5,076,527)
6,132,563
8,535,525
The accompanying notes are an integral part of these consolidated financial statements.
6
BEIGENE, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands of U.S. Dollars (“$”), except for number of shares and per share data)
Revenues
Product revenue, net
Collaboration revenue
Total revenues
Expenses
Cost of sales - product
Research and development
Selling, general and administrative
Amortization of intangible assets
Total expenses
Loss from operations
Interest income (expense), net
Other (expense) income, net
Loss before income taxes
Income tax expense
Net loss
Less: net loss attributable to noncontrolling interests
Net loss attributable to BeiGene, Ltd.
Net loss per share attributable to BeiGene, Ltd., basic and diluted
Weighted-average shares outstanding, basic and diluted
Year Ended December 31,
2022
$
2021
$
2020
$
1,254,612
161,309
633,987
542,296
308,874
—
1,415,921
1,176,283
308,874
286,475
1,640,508
1,277,852
751
164,906
70,657
1,459,239
1,294,877
990,123
600,176
750
846
3,205,586
2,615,018
1,966,556
(1,789,665)
(1,438,735)
(1,657,682)
52,480
(15,757)
(223,852)
15,904
1,998
37,490
(1,961,037)
(1,438,588)
(1,618,194)
42,778
19,228
10,397
(2,003,815)
(1,457,816)
(1,628,591)
—
—
(2,003,815)
(1,457,816)
(3,617)
(1,624,974)
(1.49)
(1.21)
(1.50)
1,340,729,572
1,206,210,049
1,085,131,783
Note
15
4
11
6
12
16
16
Net loss per American Depositary Share (ADS), basic and diluted
(19.43)
(15.71)
(19.47)
Weighted-average ADSs outstanding, basic and diluted
103,133,044
92,785,388
83,471,676
The accompanying notes are an integral part of these consolidated financial statements.
7
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in thousands of U.S. Dollars (“$”), except for number of shares and per share data)
BEIGENE, LTD.
Net loss
Other comprehensive (loss) income, net of tax of nil:
Foreign currency translation adjustments
Pension liability adjustments
Unrealized holding loss, net
Comprehensive loss
Year Ended December 31,
Note
2022
$
2021
$
2020
$
(2,003,815)
(1,457,816)
(1,628,591)
18
21
18
(90,421)
365
13,714
1,865
(5,311)
(4,571)
23,603
(8,113)
(419)
(2,099,182)
(1,446,808)
(1,613,520)
Less: comprehensive loss attributable to noncontrolling interests
—
—
(3,489)
Comprehensive loss attributable to BeiGene, Ltd.
(2,099,182)
(1,446,808)
(1,610,031)
The accompanying notes are an integral part of these consolidated financial statements.
8
BEIGENE, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts in thousands of U.S. Dollars (“$”), except for number of shares and per share data)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense
Share-based compensation expense
Acquired in-process research and development
Amortization of research and development cost share liability
Unrealized losses (gains) on equity investments
Deferred income tax expense
Other items, net
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Other assets
Accounts payable
Accrued expenses and other payables
Deferred revenue
Other liabilities
Net cash used in operating activities
Cash flows from investing activities:
Purchases of property and equipment
Purchases of short-term investments
Proceeds from sale or maturity of short-term investments
Purchase of in-process research and development
Purchase of intangible assets
Purchase of long-term investments
Other investing activities
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from public offering, net of cost
Proceeds from sale of ordinary shares, net of cost
Proceeds from research and development cost share liability
Payment to acquire joint venture (JV) minority interest
Proceeds from long-term loan
Repayment of long-term loan
Proceeds from short-term loans
Repayment of short-term loans
Proceeds from option exercises and employee share purchase plan
Net cash (used in) provided by financing activities
Effect of foreign exchange rate changes, net
Net (decrease) increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash, beginning of year
Cash, cash equivalents, and restricted cash, end of year
Supplemental cash flow disclosures:
Cash and cash equivalents
Short-term restricted cash
Long-term restricted cash
Income taxes paid
Interest paid
Supplemental non-cash activities:
Accruals for capital expenditures
Purchase of in-process research and development included in accounts payable
Note
17
4
4
6
11
6
19
19
4
8
14
14
14
14
Year Ended December 31,
2021
$
2020
$
2022
$
(2,003,815)
(1,457,816)
(1,628,591)
66,278
303,162
68,665
(96,402)
21,996
2,059
9,047
304,112
(56,689)
(3,282)
(4,352)
45,627
(151,816)
(1,209)
46,457
240,712
83,500
(112,486)
(7,632)
3,377
23,510
(423,019)
(153,333)
(107,128)
20,008
140,044
407,703
(2,620)
31,789
183,481
109,500
(113,986)
(11,826)
261
(4,673)
10,363
(58,906)
(56,217)
95,835
185,012
—
(25,503)
(1,496,619)
(1,298,723)
(1,283,461)
(325,434)
(1,485)
1,563,618
(143,665)
—
(15,911)
—
1,077,123
—
—
—
—
37,372
—
313,774
(417,081)
46,964
(18,971)
(69,383)
(507,850)
4,382,887
3,875,037
(262,942)
(2,147,881)
3,146,891
(8,500)
(43,409)
(43,500)
—
640,659
3,392,616
50,000
—
—
16,838
—
406,449
(321,754)
92,762
3,636,911
14,035
2,992,882
1,390,005
4,382,887
(117,508)
(5,663,727)
2,751,075
(109,500)
—
(26,681)
(2,025)
(3,168,366)
—
4,232,017
616,834
(28,723)
110,208
(132,061)
323,697
(12,247)
93,101
5,202,826
18,231
769,230
620,775
1,390,005
3,869,564
4,375,678
1,381,950
196
5,277
29,500
25,169
95,346
—
328
6,881
15,695
29,967
53,197
75,000
307
7,748
10,596
44,130
42,762
—
The accompanying notes are an integral part of these consolidated financial statements.
9
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Amounts in thousands of U.S. Dollars (“$”), except for number of shares and per share data)
BEIGENE, LTD.
Ordinary Shares
Shares
Amount
$
Balance at December 31, 2019
801,340,698
79
Attributable to BeiGene, Ltd.
Additional
Paid-In
Capital
$
2,925,970
Accumulated
Other
Comprehensive
Income/(Loss)
Accumulated
Deficit
$
$
Total
$
(8,001)
(1,993,737)
924,311
Non-
Controlling
Interests
$
16,150
Total
$
940,461
Proceeds from issuance of
ordinary shares, net of cost
Issuance of ordinary shares in
connection with collaboration
Exercise of options, ESPP and
release of RSUs
Use of shares reserved for share
option exercises and RSU releases
Share-based compensation
Deconsolidation of a subsidiary
Acquisition of joint venture (JV)
minority interest
Other comprehensive income
Net loss
145,838,979
14
2,069,596
206,635,013
21
2,162,386
38,020,892
(1,013,641)
—
—
—
—
—
3
1
—
—
—
—
—
93,098
—
183,481
—
(19,599)
—
—
—
—
—
—
—
—
—
14,943
—
2,069,610
—
2,069,610
—
2,162,407
—
2,162,407
—
—
—
—
—
—
93,101
1
183,481
—
—
—
93,101
1
183,481
—
(3,545)
(3,545)
(19,599)
14,943
(9,116)
128
(28,715)
15,071
—
(1,624,974)
(1,624,974)
(3,617)
(1,628,591)
Balance at December 31, 2020
1,190,821,941
118
7,414,932
6,942
(3,618,711)
3,803,281
—
3,803,281
—
3,392,616
—
3,392,616
—
—
—
—
—
—
—
—
—
—
—
—
—
50,000
92,762
—
240,712
11,008
(1,457,816)
6,132,563
(152)
—
46,964
303,162
(95,367)
(2,003,815)
4,383,355
Issuance of ordinary shares in
connection with STAR Offering
Proceeds from issuance of
ordinary shares, net of cost
Exercise of options, ESPP and
release of RSUs
Use of shares reserved for share
option exercises
Share-based compensation
Other comprehensive income
Net loss
115,055,260
12
3,392,604
2,151,877
28,778,893
(2,003,690)
—
—
—
—
3
—
—
—
—
50,000
92,759
—
240,712
—
—
—
—
—
—
—
11,008
—
—
—
—
—
50,000
92,762
—
240,712
11,008
—
(1,457,816)
(1,457,816)
Balance at December 31, 2021
1,334,804,281
133
11,191,007
17,950
(5,076,527)
6,132,563
Cost from issuance of ordinary
shares
Use of shares reserved for share
option exercises
Exercise of options, ESPP and
release of RSUs
Share-based compensation
Other comprehensive loss
Net loss
—
1,375,621
19,960,278
—
—
—
—
—
2
—
—
—
(152)
—
46,962
303,162
—
—
Balance at December 31, 2022
1,356,140,180
135
11,540,979
—
—
—
—
—
—
—
—
(152)
—
46,964
303,162
(95,367)
—
(77,417)
—
(2,003,815)
(95,367)
(2,003,815)
(7,080,342)
4,383,355
The accompanying notes are an integral part of these consolidated financial statements.
10
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
1. Organization
BeiGene, Ltd. (the "Company", "BeiGene", "it", "its") is a global biotechnology company that is developing and
commercializing innovative affordable oncology medicines to improve treatment outcomes and access for patients worldwide.
The Company currently has three approved medicines that were discovered and developed in its own labs, including
BRUKINSA®, a small molecule inhibitor of Bruton’s Tyrosine Kinase (BTK) for the treatment of various blood cancers;
tislelizumab, an anti-PD-1 antibody immunotherapy for the treatment of various solid tumor and blood cancers; and pamiparib,
a selective small molecule inhibitor of PARP1 and PARP2. The Company has obtained approvals to market BRUKINSA in the
United States, the People's Republic of China (China or the PRC), the European Union (EU), the United Kingdom ("UK"),
Canada, Australia and additional international markets, and tislelizumab and pamiparib in China. By leveraging its China
commercial capabilities, the Company has in-licensed the rights to distribute 13 approved medicines for the China market.
Supported by its global clinical development and commercial capabilities, the Company has entered into collaborations with
world-leading biopharmaceutical companies such as Amgen Inc. ("Amgen") and Novartis Pharma AG ("Novartis") to develop
and commercialize innovative medicines.
The Company is committed to advancing best and first-in-class clinical candidates internally or with like-minded partners
to develop impactful and affordable medicines for patients across the globe. Its internal clinical development capabilities are
deep, including a more than 2,700-person global clinical development and medical affairs team that is running close to 80
ongoing or planned clinical trials in over 50 medicines and drug candidates. This includes more than 30 pivotal or potentially
registration-enabling trials across its portfolio, including three internally discovered, approved medicines. The Company has
enrolled in its clinical trials more than 18,000 subjects, of which approximately one-half have been outside of China.
The Company has built, and is expanding, its internal manufacturing capabilities, through its state-of-the-art biologic and
small molecule manufacturing facilities in China to support current and potential future demand of its medicines, and is
building a commercial-stage biologics manufacturing and clinical R&D center in New Jersey. The Company also works with
high quality contract manufacturing organizations ("CMOs") to manufacture its internally developed clinical and commercial
products.
Since its inception in 2010, the Company has become a fully integrated global organization of over 9,000 employees in 29
countries and regions, including the United States, China, Europe and Australia.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted
accounting principles (GAAP). The consolidated financial statements include the financial statements of the Company and its
subsidiaries. All significant intercompany transactions and balances between the Company and its wholly-owned subsidiaries
are eliminated upon consolidation.
Noncontrolling interests are recognized to reflect the portion of the equity of subsidiaries which are not attributable,
directly or indirectly, to the controlling shareholders. Prior to 2020, the Company consolidated its interests in its joint ventures,
BeiGene Biologics Co., Ltd. (BeiGene Biologics) and MapKure, LLC (MapKure), under the voting model and recognized the
minority shareholders' equity interest as a noncontrolling interest in its consolidated financial statements. In June 2020, the
Company deconsolidated MapKure and recorded an equity method investment for its remaining ownership interest in the joint
venture (see Note 6). In November 2020, the Company acquired the remaining equity interest in BeiGene Biologics.
Subsequent to the share purchase, BeiGene Biologics is a wholly owned subsidiary of the Company (see Note 8).
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the period. Areas where
management uses subjective judgment include, but are not limited to, estimating the useful lives of long-lived assets, estimating
variable consideration in product sales and collaboration revenue arrangements, identifying separate accounting units and the
11
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
standalone selling price of each performance obligation in the Company’s revenue arrangements, assessing the impairment of
long-lived assets, valuation and recognition of share-based compensation expenses, estimating uncertain tax positions, valuation
of inventory, estimating the allowance for credit losses, determining defined benefit pension plan obligations, measurement of
right-of-use assets and lease liabilities and the fair value of financial instruments. Management bases the estimates on historical
experience, known trends and various other assumptions that are believed to be reasonable, the results of which form the basis
for making judgments about the carrying values of assets and liabilities. Actual results could differ from these estimates.
Functional Currency and Foreign Currency Translation
Functional currency
The Company uses the United States dollar ("$" or U.S. dollar) as its reporting currency. Operations in subsidiaries are
recorded in the functional currency of the respective subsidiary. The determination of functional currency is based on the
criteria of Accounting Standard Codification (ASC) 830, Foreign Currency Matters.
Foreign currency translation
For subsidiaries whose functional currencies are not the U.S. dollar, the Company uses the average exchange rate for the
year and the exchange rate at the balance sheet date, to translate the operating results and financial position to U.S. dollar, the
reporting currency, respectively. Translation differences are recorded in accumulated other comprehensive loss, a component of
shareholders’ equity. Transactions denominated in currencies other than the functional currency are translated into the
functional currency at the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and
liabilities are remeasured at the exchange rates prevailing at the balance sheet date. Remeasurement exchange gains and losses
are included in the consolidated statements of operations.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and bank deposits, which are unrestricted as to withdrawal and use. The
Company considers all highly liquid investments with an original maturity date of three months or less at the date of purchase
to be cash equivalents. Cash equivalents which consist primarily of money market funds are stated at fair value.
Restricted cash
Restricted cash primarily consists of RMB-denominated cash deposits pledged in designated bank accounts as collateral for
bank loans and letters of credit. The Company classifies restricted cash as current or non-current based on the term of the
restriction.
In addition to the restricted cash balances above, the Company is required by the PRC securities law to use the proceeds
from the STAR offering in strict compliance with the planned uses as disclosed in the PRC prospectus as well as those
disclosed in the Company's proceeds management policy approved by the board of directors.
Accounts Receivable and Allowance for Credit Losses
Trade accounts receivable are recorded at their invoiced amounts, net of trade discounts and allowances as well as an
allowance for credit losses. The allowance for credit losses reflects the Company's current estimate of credit losses expected to
be incurred over the life of the receivables. The Company considers various factors in establishing, monitoring, and adjusting
its allowance for credit losses including the aging of receivables and aging trends, customer creditworthiness and specific
exposures related to particular customers. The Company also monitors other risk factors and forward-looking information, such
as country specific risks and economic factors that may affect a customer's ability to pay in establishing and adjusting its
allowance for credit losses. Accounts receivable are written off after all collection efforts have ceased.
Inventory
Prior to the regulatory approval of product candidates, the Company may incur expenses for the manufacture of drug
product to support the commercial launch of those products. Until the date at which regulatory approval has been received or is
otherwise considered probable, all such costs are recorded as research and development expenses as incurred.
12
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Inventories are stated at the lower of cost and net realizable value, with cost determined in a manner that approximates the
first-in, first-out method. The Company periodically analyzes its inventory levels, and writes down inventory that has become
obsolete, inventory that has a cost basis in excess of its estimated realizable value and inventory in excess of expected sales
requirements as cost of product sales. The determination of whether inventory costs will be realizable requires estimates by
management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory
may be required, which would be recorded in the consolidated statements of operations.
Investments
The Company's investments consist of available-for-sale debt securities, convertible note instruments, public equity
securities with readily determinable fair values, private equity securities without readily determinable fair values, and equity-
method investments. The classification of an investment is determined based on the nature of the investment, the Company's
ability and intent to hold the investment, and the degree to which the Company may exercise influence over the investee.
Available-for-sale debt securities are stated at fair value, with the unrealized gains and losses, net of tax, reported in
•
other comprehensive loss. The net carrying value of debt securities classified as available-for-sale is adjusted for
amortization of premiums and accretion of discounts to maturity. Such amortization is computed using the effective interest
method and included in interest income. Interest and dividends are included in interest income. Available-for-sale debt
securities with original maturities greater than three months at the date of purchase and less than one year from the date of
the balance sheet are classified as short-term. Available-for-sale debt securities with maturities beyond one year may be
classified as short-term marketable securities due to their highly liquid nature and because they represent the Company’s
investments that are available for current operations.
Convertible note instruments are recorded using the fair value option method of accounting. Accordingly, convertible
•
note instruments are remeasured at fair value on a recurring basis, with any changes in the fair value option recorded in
other (expense) income, net.
•
Public equity securities with readily determinable fair values are recorded at fair value. Subsequent changes in fair
value are recorded in other (expense) income, net. Derivative financial instruments to purchase public equity securities are
recorded at fair value. The estimated fair value of derivative financial instruments is determined based on the Black-
Scholes valuation model. Changes in fair value of derivative instruments are recorded in other (expense) income, net.
•
Private equity securities without readily determinable fair values and where the Company does not have significant
influence are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in
orderly transactions for the identical or a similar investment of the same issuer. Adjustments to private equity securities are
recorded in other (expense) income, net.
Equity investments in common stock or in-substance common stock where the Company has significant influence over
•
the financial and operating policies of the investee are accounted for as equity-method investments. Equity-method
investments are initially recorded at cost and subsequently adjusted based on the Company's percentage ownership in the
investee's income and expenses, as well as dividends, if any. The Company records its share of the investee's results of
operations in other (expense) income, net. The Company records impairment losses on our equity method investments if it
deems the impairment to be other-than-temporary. The Company deems an impairment to be other-than-temporary based
on various factors, including but not limited to, the length of time the fair value is below the carrying value and ability to
retain the investment to allow for a recovery in fair value.
Realized gains or losses on sales of investments are determined based on the specific identification method.
The Company regularly evaluates its investments in debt and equity for impairment. The Company recognizes an
allowance on available-for-sale debt securities when a portion of the unrealized loss is attributable to a credit loss and a
corresponding credit loss in net income. No impairment losses or allowance for credit losses on investments were recorded for
any periods presented.
13
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Property, plant and
equipment, other than land and construction in progress, are depreciated using the straight-line method over the estimated
useful lives of the respective assets as follows:
Building
Manufacturing equipment
Laboratory Equipment
Software, Electronic and Office Equipment
Leasehold Improvements
Leases
Useful Lives
20 years
3 to 10 years
3 to 5 years
3 to 5 years
Lesser of useful life or lease term
The Company applies ASC, Topic 842, Leases (ASC 842) to account for its leases. The Company determines if an
arrangement is a lease at inception. The Company has lease agreements with lease and non-lease components, which are
accounted for as a single lease component based on the Company’s policy election to combine lease and non-lease components
for its leases. Leases are classified as operating or finance leases in accordance with the recognition criteria in ASC 842-20-25.
The Company’s lease portfolio consists entirely of operating leases as of December 31, 2022. The Company’s leases do not
contain any material residual value guarantees or material restrictive covenants.
At the commencement date of a lease, the Company determines the classification of the lease based on the relevant factors
present and records a right-of-use (ROU) asset and lease liability. ROU assets represent the right to use an underlying asset for
the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and lease
liabilities are calculated as the present value of the lease payments not yet paid. Variable lease payments not dependent on an
index or rate are excluded from the ROU asset and lease liability calculations and are recognized in expense in the period which
the obligation for those payments is incurred. As the rate implicit in the Company’s leases is not typically readily available, the
Company uses an incremental borrowing rate based on the information available at the lease commencement date in
determining the present value of lease payments. This incremental borrowing rate reflects the fixed rate at which the Company
could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar
economic environment. ROU assets include any lease prepayments and are reduced by lease incentives. Operating lease
expense for lease payments is recognized on a straight-line basis over the lease term. Lease terms are based on the non-
cancelable term of the lease and may contain options to extend the lease when it is reasonably certain that the Company will
exercise that option.
Operating leases are included in operating lease right-of-use assets and operating lease liabilities on the consolidated
balance sheet. Lease liabilities that become due within one year of the balance sheet date are classified as current liabilities.
Leases with an initial lease term of 12 months or less are not recorded on the consolidated balance sheet. Lease expense for
these leases is recognized on a straight-line basis over the lease term.
Land Use Right, Net
All land in the PRC is owned by the PRC government. The PRC government may sell land use rights for a specified period
of time. Land use rights represent operating leases in accordance with ASC 842. The purchase price of land use rights
represents lease prepayments to the PRC government and is recorded as an operating lease ROU asset on the balance sheet. The
ROU asset is amortized over the remaining lease term.
In 2017, the Company acquired a land use right from the local Bureau of Land and Resources in Guangzhou for the
purpose of constructing and operating the Company's biologics manufacturing facility in Guangzhou. In 2019, the Company
acquired a second Guangzhou land use right from the local Bureau of Land and Resources. In 2021, the Company acquired two
land use rights from the local Bureau of Land and Resources to expand its biologics manufacturing facility in Guangzhou.
Guangzhou land use rights are being amortized over the respective terms of the land use rights, which are each 50 years.
14
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
In 2018, the Company acquired a land use right in conjunction with the acquisition of Beijing Innerway Bio-tech Co., Ltd.
The land use right is being amortized over the term of the land use right, which is 36 years.
In 2020, the Company acquired a land use right from the local Bureau of Land and Resources in Suzhou to construct its
research, development and manufacturing facility in Suzhou. In 2022, the Company acquired a second Suzhou land use right
from the local Bureau of Land and Resources. The land use rights are being amortized over the respective terms of the land use
rights, which are each 30 years.
Goodwill and Other Intangible Assets
Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination
that are not individually identified and separately recognized. The Company allocates the cost of an acquired entity to the assets
acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price
for acquisitions over the fair value of the net assets acquired, including other intangible assets, is recorded as goodwill.
Goodwill is not amortized, but is tested for impairment at least annually or more frequently if events or changes in
circumstances would indicate a potential impairment.
The Company has elected to first assess qualitative factors to determine whether it is more likely than not that the fair value
of the Company's reporting unit is less than its carrying amount, including goodwill. The qualitative assessment includes the
Company's evaluation of relevant events and circumstances affecting the Company's single reporting unit, including
macroeconomic, industry, and market conditions, the Company's overall financial performance, and trends in the market price
of the Company's ADSs. If qualitative factors indicate that it is more likely than not that the Company's reporting unit’s fair
value is less than its carrying amount, then the Company will perform the quantitative impairment test by comparing the
reporting unit’s carrying amount, including goodwill, to its fair value. If the carrying amount of the reporting unit exceeds its
fair value, an impairment loss will be recognized in an amount equal to that excess. For the years ended December 31, 2022,
2021 and 2020 the Company determined that there were no indicators of impairment of goodwill.
Intangible assets acquired through business combinations are recognized as assets separate from goodwill and are measured
at fair value upon acquisition. Intangible assets acquired in transactions that are not business combinations are recorded at the
allocated portion of total consideration transferred based on their relative fair value in relation to net assets acquired. Intangible
assets associated with milestone payments made to third parties subsequent to regulatory approval are recorded at cost.
Identifiable intangible assets consist of distribution rights for approved cancer therapies licensed from BMS that are amortized
on a straight-line basis over the estimated useful lives of the assets, which is 10 years; post-approval milestone payments under
license and commercialization agreements, that are amortized over the remainder of the product patent or the term of the
commercialization agreements; and trading licenses that are amortized over the initial license term.
Intangible assets with finite useful lives are tested for impairment when events or circumstances occur that could indicate
that the carrying amount of an asset may not be recoverable. When these events occur, the Company evaluates the
recoverability of the intangible assets by comparing the carrying amount of the assets to the future undiscounted cash flows
expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows
is less than the carrying amount of the assets, the Company recognizes an impairment loss based on the excess of the carrying
amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be
generated by the assets, when the market prices are not readily available. For the years ended December 31, 2022, 2021 and
2020, the Company determined that there were no indicators of impairment of its other intangible assets.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment in accordance with authoritative guidance for impairment or disposal of
long-lived assets. Long-lived assets are reviewed for events or changes in circumstances, which indicate that their carrying
value may not be recoverable. Long-lived assets are reported at the lower of carrying amount or fair value less cost to sell. For
the years ended December 31, 2022, 2021 and 2020, there was no impairment of the value of the Company’s long-lived assets.
15
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Fair Value Measurements
Fair value of financial instruments
The Company applies ASC topic 820 (ASC 820), Fair Value Measurements and Disclosures, 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 to measuring the fair value of assets and liabilities: (1) market approach; (2)
income approach; and (3) cost approach. The market approach uses prices and other relevant information generated from
market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to
convert future amounts to a single present value amount. The measurement is based on the value indicated by current market
expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace
an asset.
Financial instruments measured at fair value on a recurring basis
The following tables set forth assets measured at fair value on a recurring basis as of December 31, 2022 and 2021:
As of December 31, 2022
Cash equivalents:
Money market funds
Short-term investments (Note 6):
U.S. treasury securities
Other non-current assets (Note 6):
Equity securities with readily determinable fair values
Convertible debt instrument
Prepaid expenses and other current assets (Note 6):
Convertible debt instrument
Total
Quoted Price
in Active
Market for
Identical
Assets
(Level 1)
$
Significant
Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3)
$
758,114
665,251
3,307
—
—
1,426,672
—
—
706
—
—
706
—
—
—
3,000
5,190
8,190
16
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
As of December 31, 2021
Cash equivalents
U.S. treasury securities
Money market funds
Short-term investments (Note 6):
U.S. treasury securities
Other non-current assets (Note 6):
Equity securities with readily determinable fair values
Total
Quoted Price
in Active
Market for
Identical
Assets
(Level 1)
$
Significant
Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3)
$
107,855
315,564
2,241,962
23,809
2,689,190
—
—
—
10,306
10,306
—
—
—
—
—
The Company's cash equivalents are highly liquid investments with original maturities of 3 months or less. Short-term
investments represent the Company's investments in available-for-sale debt securities. The Company determines the fair value
of cash equivalents and available-for-sale debt securities using a market approach based on quoted prices in active markets.
The Company's equity securities carried at fair value consist of holdings in common stock and warrants to purchase
additional shares of common stock of Leap Therapeutics, Inc. (Leap), which were acquired in connection with a collaboration
and license agreement entered into in January 2020 and in Leap's underwritten public offering in September 2021. The common
stock investment in Leap, a publicly-traded biotechnology company, is measured and carried at fair value and classified as
Level 1. The warrants to purchase additional shares of common stock in Leap are classified as a Level 2 investment and are
measured using the Black-Scholes option-pricing valuation model, which utilizes a constant maturity risk-free rate and reflects
the term of the warrants, dividend yield and stock price volatility, that is based on the historical volatility of similar companies.
Refer to Note 6, Investments for details of the determination of the carrying amount of private equity investments without
readily determinable fair values and equity method investments.
The Company holds convertible notes issued by two private biotech companies. The Company has elected the fair value
option method of accounting for the convertible notes. Accordingly, the convertible notes are remeasured at fair value on a
recurring basis using Level 3 inputs.
As of December 31, 2022 and 2021, the fair values of cash and cash equivalents, restricted cash, accounts receivable,
accounts payable, and short-term debt approximated their carrying values due to their short-term nature. Long-term debt
approximates its fair value due to the fact that the related interest rates approximate the rates currently offered by financial
institutions for similar debt instrument of comparable maturities.
Revenue Recognition
The Company applies ASC, Topic 606, Revenue from Contracts with Customers (ASC 606) to account for its revenue
transactions.
Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an
amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine
revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the
following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii)
determine the 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 entity satisfies a performance obligation. The Company
only applies the five-step model to contracts when it is probable that the entity 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 determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract
to determine which performance obligations it must deliver and which of these performance obligations are distinct. The
17
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Company recognizes as revenue the amount of the transaction price that is allocated to each performance obligation when that
performance obligation is satisfied or as it is satisfied.
Product Revenue
The Company generates product revenues in China through the sale of its internally developed drugs tislelizumab,
BRUKINSA and pamiparib, and the sale of in-licensed products through its agreements with Amgen, BMS, Bio-Thera and
EUSA Pharma. Under the commercial profit share arrangement with Amgen, the Company is the principal for in-licensed
product sales to customers in China during the commercialization period and recognizes 100% of net product revenue on these
sales. Amounts due to Amgen for its portion of net product sales are recorded as cost of sales. In the United States, the
Company generates product revenues from the sale of BRUKINSA.
In China, the Company sells its internally developed products to multiple distributors, who in turn sell the product to
hospitals or pharmacies within their authorized territories to be sold ultimately to patients. In-licensed products are sold to a
first tier distributor who subsequently resells the products to second tier distributors who ultimately sell the products to health
care providers and patients. In the United States, the Company distributes BRUKINSA through specialty pharmacies and
specialty distributors. The specialty pharmacies and specialty distributors subsequently resell the product to health care
providers and patients.
The Company is the principal under the product sales as the Company controls the products with the ability to direct the
use of, and obtain substantially all the remaining benefits from the products before they are sold to the customer. For product
sales transactions, the Company has a single performance obligation which is to sell the products to its customer. The Company
includes variable consideration in the transaction price to the extent it is probable that a significant reversal will not occur and
estimates variable consideration from rebates, chargebacks, trade discounts and allowances, sales returns allowances and other
incentives using the expected value method. Revenues for product sales are recognized at a point in time when the single
performance obligation is satisfied upon delivery to the customer. The Company's payment terms are approximately 45-90
days. Actual amounts of consideration ultimately received may differ from the Company’s estimates. The Company will
reassess estimates for variable consideration periodically. If actual results in the future vary from the Company’s estimates, the
Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become
known.
Estimates for variable consideration for which reserves are established at the time of sale include government and
commercial rebates, provisions for acceptance of National Reimbursement Drug List pricing in the PRC, chargebacks, trade
discounts and allowances, sales returns allowances and other incentives that are offered within contracts between the Company
and its customers, health care providers and other indirect customers. Where appropriate, these estimates take into consideration
a range of possible outcomes that are probability-weighted for relevant factors such as our historical experience, current
contractual and statutory requirements, channel inventory levels, specific known market events and trends, industry data and
forecasted customer buying and payment patterns.
The Company bases its sales returns allowance on estimated distributor inventories, customer demand as reported by third-
party sources, and actual returns history, as well as other factors, as appropriate. For newly launched products where actual
returns history is not yet available, the sales returns allowance is initially calculated based on benchmarking data from similar
products and industry experience. If the historical or benchmarking data the Company uses to calculate these estimates do not
properly reflect future returns, then a change in the allowance would be made in the period in which such a determination is
made and revenues in that period could be materially affected. Any changes from the historical trend rates are considered in
determining the current sales return allowance. To date, sales returns have not been significant.
Collaboration Revenue
At contract inception, the Company analyzes its collaboration arrangements to assess whether they are within the scope of
ASC 808, Collaborative Arrangements (ASC 808) to determine whether such arrangements involve joint operating activities
performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on
the commercial success of such activities. For collaboration arrangements within the scope of ASC 808 that contain multiple
elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and
those that are more reflective of a vendor-customer relationship and therefore within the scope of ASC 606. For elements of
18
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and
applied consistently.
In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements,
the Company performs the five-step model under ASC 606 noted above.
The Company’s collaborative arrangements may contain more than one unit of account, or performance obligation,
including grants of licenses to intellectual property rights, agreement to provide research and development services and other
deliverables. The collaborative arrangements do not include a right of return for any deliverable. As part of the accounting for
these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price
for each performance obligation identified in the contract. In developing the stand-alone selling price for a performance
obligation, the Company considers competitor pricing for a similar or identical product, market awareness of and perception of
the product, expected product life and current market trends. In general, the consideration allocated to each performance
obligation is recognized when the respective obligation is satisfied either by delivering a good or providing a service, limited to
the consideration that is not constrained. Non-refundable payments received before all of the relevant criteria for revenue
recognition are satisfied are recorded as advances from customers.
Licenses of Intellectual Property: Upfront non-refundable payments for licensing the Company’s intellectual property are
evaluated to determine if the license is distinct from the other performance obligations identified in the arrangement. For
licenses determined to be distinct, the Company recognizes revenues from non-refundable up-front fees allocated to the license
at a point in time, when the license is transferred to the licensee and the licensee is able to use and benefit from the license.
Options to License Intellectual Property: Upfront non-refundable payments for options to license the Company’s
intellectual property are evaluated to determine if the option represents a material right and is distinct from the other
performance obligations identified in the arrangement. For options determined to be a material right and distinct, the Company
defers the non-refundable up-front fees allocated to the option and recognizes revenues at a point in time, at the earlier of when
the option is exercised or the option period expires.
Right to Access Intellectual Property during the Option Period: The portion of a transaction price allocated to the other
parties right to access the Company's intellectual property to generate their own data during an option period is deferred and
recognized as collaboration revenue over the option period on a straight-line basis as the right to use the intellectual property is
provided and the data generated.
Research and Development Services: The portion of a transaction price allocated to research and development services
performance obligations is deferred and recognized as collaboration revenue over time as delivery or performance of such
services occurs.
Milestone Payments: At the inception of each arrangement that includes development milestone payments, the Company
evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the
transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the
associated milestone value is included in the transaction price. Milestones related to the Company’s development-based
activities may include initiation of various phases of clinical trials. Due to the uncertainty involved in meeting these
development-based targets, they are generally fully constrained at contract inception. The Company will assess whether the
variable consideration is fully constrained each reporting period based on the facts and circumstances surrounding the clinical
trials. Upon changes to constraint associated with the developmental milestones, variable consideration will be included in the
transaction price when a significant reversal of revenue recognized is not expected to occur and allocated to the separate
performance obligations. Regulatory milestones are fully constrained until the period in which those regulatory approvals are
achieved due to the inherent uncertainty with the approval process. Regulatory milestones are included in the transaction price
in the period regulatory approval is obtained.
Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales,
and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later
of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been
allocated has been satisfied (or partially satisfied).
19
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Research and Development Expenses
Research and development expenses consist of the costs associated with our research and development activities,
conducting preclinical studies and clinical trials, and activities related to regulatory filings, which primarily include (i) payroll
and related costs (including share-based compensation) associated with research and development personnel, (ii) costs related to
clinical trials and preclinical testing of the Company’s technologies under development, (iii) costs to develop the product
candidates, including raw materials and supplies, product testing, depreciation, and facility related expenses, (iv) expenses for
research services provided by universities and contract laboratories, including sponsored research funding, and (v) other
research and development expenses. Research and development expenses are charged to expense as incurred when these
expenditures relate to the Company’s research and development services and have no alternative future uses.
Clinical trial costs are a significant component of the Company’s research and development expenses. The Company has a
history of contracting with third parties that perform various clinical trial activities on behalf of the Company in the ongoing
development of the Company’s product candidates. Expenses related to clinical trials are accrued based on the Company’s
estimates of the actual services performed by the third parties for the respective period. If the contracted amounts are modified
(for instance, as a result of changes in the clinical trial protocol or scope of work to be performed), the Company will modify
the related accruals accordingly on a prospective basis. Revisions in the scope of a contract are charged to expense in the period
in which the facts that give rise to the revision become reasonably certain.
The process of estimating the Company's research and development expenses involves reviewing open contracts and
purchase orders, communicating with its personnel to identify services that have been performed on its behalf and estimating
the level of service performed and the associated costs incurred for the services when the Company has not yet been invoiced or
otherwise notified of the actual costs. The majority of the Company's service providers invoice it in arrears for services
performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments.
The Company makes estimates of the expenses as of each balance sheet date in its financial statements based on facts and
circumstances known to the Company at that time. Although the Company does not expect its estimates to be materially
different from amounts actually incurred, the 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 the Company reporting expenses that are too high or too
low in any particular period. There were no material adjustments for a change in estimate to research and development expenses
in the accompanying consolidated financial statements for the years ended December 31, 2022, 2021 and 2020.
Acquired In-Process Research and Development Expense
The Company has acquired rights to develop and commercialize product candidates. Upfront payments that relate to the
acquisition of a new drug compound, as well as pre-commercial milestone payments, are immediately expensed as acquired in-
process research and development in the period in which they are incurred, provided that the new drug compound did not also
include processes or activities that would constitute a “business” as defined under GAAP, the drug has not achieved regulatory
approval for marketing and, absent obtaining such approval, has no established alternative future use. Milestone payments made
to third parties subsequent to regulatory approval are capitalized as intangible assets and amortized over the estimated
remaining useful life of the related product. Royalties owed on sales of the products licensed pursuant to the agreements are
expensed in the period the related revenues are recognized.
Government Grants
Government financial incentives that involve no conditions or continuing performance obligations of the Company are
recognized as other (expense) income, net upon receipt. In the event government grants or incentives involve continuing
performance obligations, the Company will capitalize the payment as a liability and recognize the same financial statement
caption as the performance obligation relates over the performance period.
The Company received government assistance in the form of cash primarily to support the Guangzhou manufacturing
facility build-out and research and development programs. Government assistance received related to the Guangzhou
manufacturing facility build-out was recognized as other long-term liabilities and is amortized over the same useful lives of the
related assets as depreciation expense. As of December 31, 2022 and 2021, other long-term liabilities related to the Guangzhou
manufacturing facility build-out totaled $38,118 and $44,593, respectively. For the year ended December 31, 2022,
depreciation expense is presented net of amortization of government assistance of $3,169.
20
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Government assistance received to support research and development programs was recorded as other long-term liabilities
upon receipt and is recognized as other (expense) income, net when the associated research and development programs are
completed. As of December 31, 2022 and 2021, other long-term liabilities related to research and development programs totaled
$58 and $1,759, respectively. For the year ended December 31, 2022, the Company recognized other income of $1,664 upon
the completion of a designated research and development program.
Comprehensive Loss
Comprehensive loss is defined as the changes in equity of the Company during a period from transactions and other events
and circumstances excluding transactions resulting from investments by owners and distributions to owners. Among other
disclosures, ASC 220, Comprehensive Income, requires that all items that are required to be recognized under current
accounting standards as components of comprehensive loss be reported in a financial statement that is displayed with the same
prominence as other financial statements. For each of the periods presented, the Company’s comprehensive loss includes net
loss, foreign currency translation adjustments, pension liability adjustments and unrealized holding gains/losses associated with
the available-for-sale debt securities, and is presented in the consolidated statements of comprehensive loss.
Share-Based Compensation
Awards granted to employees
The Company applies ASC 718, Compensation—Stock Compensation (ASC 718), to account for its employee share-based
payments. In accordance with ASC 718, the Company determines whether an award should be classified and accounted for as a
liability award or equity award. All the Company’s grants of share-based awards to employees were classified as equity awards
and are recognized in the financial statements based on their grant date fair values. Specifically, the grant date fair value of
share options is calculated using an option pricing model. The fair value of restricted shares and restricted share units are based
on the closing market price of our ADSs on the NASDAQ Global Select Market on the date of grant. The Company has elected
to recognize compensation expense using the straight-line method for all employee equity awards granted with graded vesting
based on service conditions provided that the amount of compensation cost recognized at any date is at least equal to the portion
of the grant-date value of the options that are vested at that date. The Company uses the accelerated method for all awards
granted with graded vesting based on performance conditions. To the extent the required vesting conditions are not met
resulting in the forfeiture of the share-based awards, previously recognized compensation expense relating to those awards are
reversed. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in the subsequent period if
actual forfeitures differ from initial estimates.
Forfeiture rates are estimated based on historical and future expectations of employee turnover rates and are adjusted to
reflect future changes in circumstances and facts, if any. Share-based compensation expense is recorded net of estimated
forfeitures such that expense is recorded only for those share-based awards that are expected to vest. To the extent the Company
revises these estimates in the future, the share-based payments could be materially impacted in the period of revision, as well as
in following periods. The Company, with the assistance of an independent third-party valuation firm, determined the estimated
fair value of the stock options granted to employees using the binomial option pricing model.
Awards granted to non-employees
The Company has accounted for equity instruments issued to non-employees in accordance with the provisions of ASC 718
and ASC 505, Equity. All transactions in which goods or services are received in exchange for equity instruments are accounted
for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more
reliably measurable. The grant date is the measurement date of the fair value of the equity instrument issued. The expense is
recognized in the same manner as if the Company had paid cash for the services provided by the non-employees in accordance
with ASC 505-50, Equity-based payments to non-employees. The Company estimated the fair value of share options granted to
non-employees using the same method as employees.
Modification of awards
A change in any of the terms or conditions of the awards is accounted for as a modification of the award. Incremental
compensation cost is measured as the excess, if any, of the fair value of the modified award over the fair value of the original
award immediately before its terms are modified, measured based on the fair value of the awards and other pertinent factors at
the modification date. For vested awards, the Company recognizes incremental compensation cost in the period the
21
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
modification occurs. For unvested awards, the Company recognizes over the remaining requisite service period, the sum of the
incremental compensation cost and the remaining unrecognized compensation cost for the original award on the modification
date. If the fair value of the modified award is lower than the fair value of the original award immediately before modification,
the minimum compensation cost the Company recognizes is the cost of the original award.
Income Taxes
The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and
are measured using enacted tax rates that will be in effect when the differences are expected to reverse. A valuation allowance
is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
The Company evaluates its uncertain tax positions using the provisions of ASC 740, Income Taxes, which prescribes a
recognition threshold that a tax position is required to meet before being recognized in the financial statements. The Company
recognizes in the financial statements the benefit of a tax position which is “more likely than not” to be sustained under
examination based solely on the technical merits of the position assuming a review by tax authorities having all relevant
information. Tax positions that meet the recognition threshold are measured using a cumulative probability approach, at the
largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. It is the
Company’s policy to recognize interest and penalties related to unrecognized tax benefits, if any, as a component of income tax
expense.
Loss Per Share
Loss per share is calculated in accordance with ASC 260, Earnings per Share. Basic loss per ordinary share is computed by
dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during
the period using the two-class method. Under the two-class method, net income is allocated between ordinary shares and
participating securities based on dividends declared (or accumulated) and participating rights in undistributed earnings as if all
the earnings for the reporting period had been distributed. The Company’s restricted shares are participating securities because
they have contractual rights to share in the profits of the Company.
However, the restricted shares do not have contractual rights and obligations to share in the losses of the Company. For the
periods presented herein, the computation of basic loss per share using the two-class method is not applicable as the Company
is in a net loss position.
Diluted loss per share is calculated by dividing net loss attributable to ordinary shareholders as adjusted for the effect of
dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares
outstanding during the period. Ordinary equivalent shares consist of the ordinary shares issuable upon the conversion of the
Company’s convertible preferred shares, if any, using the if-converted method, and ordinary shares issuable upon the
conversion of the share options and unvested restricted shares, using the treasury stock method.
Ordinary share equivalents are excluded from the computation of diluted loss per share if their effects would be anti-
dilutive. Basic and diluted loss per ordinary share is presented in the Company’s consolidated statements of operations.
Segment Information
In accordance with ASC 280, Segment Reporting, the Company’s chief operating decision maker, the Chief Executive
Officer, reviews the consolidated results when making decisions about allocating resources and assessing performance of the
Company as a whole and hence, the Company has only one reportable segment: pharmaceutical products.
Concentration of Risks
Concentration of credit risk
Financial instruments that are potentially subject to credit risk consist of cash and cash equivalents, short-term investments,
and accounts receivable.
As of December 31, 2022 and 2021, $3,869,564 and $4,375,678 were deposited with various major reputable financial
institutions located in the PRC and international financial institutions outside of the PRC, respectively. The deposits placed with
22
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
financial institutions are not protected by statutory or commercial insurance. In the event of bankruptcy of one of these financial
institutions, the Company may be unable to claim its deposits back in full. Management believes that these financial institutions
are of high credit quality and continually monitors the credit worthiness of these financial institutions. As of December 31,
2022 and 2021, the Company had short-term investments amounting to $665,251 and $2,241,962, respectively.
At December 31, 2022 and 2021, the Company’s short-term investments were comprised of U.S. treasury securities. The
Company believes that U.S. treasury securities are of high credit quality and continually monitors the credit worthiness of these
institutions.
As of December 31, 2022 and 2021, the Company had accounts receivable, net of $173,168 and $483,113, respectively.
Accounts receivable, net represent amounts arising from product sales and amounts due from its collaboration partners. The
Company monitors economic conditions to identify facts or circumstances that may indicate receivables are at risk of
collection.
Customer concentration risk
For the year ended December 31, 2022, sales to the Company's four largest product distributors, Sinopharm, Shanghai
Pharmaceutical, ASD Specialty Healthcare and China Resources represented approximately 18.1%, 15.5%, 14.2% and 12.1%
of product revenue, respectively, and collectively, represented approximately 57.0% of trade accounts receivable as of
December 31, 2022. For the year ended December 31, 2022, the Company's collaboration revenue consisted entirely of revenue
recognized under its out-licensing collaboration agreements with Novartis.
For the year ended December 31, 2021, sales to the Company's three largest product distributors, Sinopharm, China
Resources, and Shanghai Pharmaceutical represented approximately 26.0%, 19.9% and 16.7% of product revenue, respectively,
and collectively, represented approximately 23.4% of trade accounts receivable as of December 31, 2021. For the year ended
December 31, 2021, the Company's collaboration revenue consisted entirely of revenue recognized under its out-licensing
collaboration agreements with Novartis. Receivables from Novartis represented approximately 66.4% of trade accounts
receivable as of December 31, 2021, primarily due to the invoicing of the $300,000 upfront fee related to the Ociperlimab
option, collaboration and license agreement.
For the year ended December 31, 2020, sales to the Company's two largest product distributors, China Resources and
Sinopharm, represented approximately 38.7% and 25.4% of product revenue, respectively, and collectively, represented
approximately 59.6% of trade accounts receivable as of December 31, 2020.
Business, customer, political, social and economic risks
The Company participates in a dynamic biopharmaceutical industry and believes that changes in any of the following areas
could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows: changes in
the overall demand for services and products; competitive pressures due to existing competitors and new entrants; advances and
new trends in new drugs and industry standards; changes in clinical research organizations, contract manufacturers and other
key vendors; changes in certain strategic relationships or customer relationships; regulatory considerations; intellectual property
considerations; and risks associated with the Company’s ability to attract and retain employees necessary to support its growth.
The Company’s operations could be also adversely affected by significant political, economic and social uncertainties in the
PRC and in relations between the PRC and United States.
Currency convertibility risk
A significant portion of the Company’s expenses, assets and liabilities are denominated in RMB. In 1994, the PRC
government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of
China (the PBOC). However, the unification of the exchange rates does not imply that the RMB may be readily convertible into
U.S. dollar or other foreign currencies. All foreign exchange transactions continue to take place either through the PBOC or
other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approvals of foreign
currency payments by the PBOC or other institutions require submitting a payment application form together with suppliers’
invoices, shipping documents and signed contracts.
Additionally, the value of the RMB is subject to changes in central government policies and international economic and
political developments affecting supply and demand in the PRC foreign exchange trading system market.
23
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Foreign currency exchange rate risk
The Company is exposed to foreign exchange risk arising from various currency exposures. The Company's reporting
currency is the U.S. dollar, but a portion of its operating transactions and assets and liabilities are in other currencies, such as
RMB, Euro, and Australian dollar. While the Company holds significant amounts of RMB, and is subject to foreign currency
exchange risk upon revaluation or translation into the Company's reporting currency, the Company expects to utilize its existing
RMB cash deposits in the operation of its China business over the next several years, and as a result, has not used derivative
financial instruments to hedge exposure to such risk.
RMB is not freely convertible into foreign currencies for capital account transactions. The value of RMB against the U.S.
dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions and
China’s foreign exchange prices. Since July 21, 2005, the RMB is permitted to fluctuate within a narrow and managed band
against a basket of certain foreign currencies. For RMB against U.S. dollar, there was depreciation of approximately 8.2%,
appreciation of approximately 2.3% and appreciation of approximately 6.3%, in the years ended December 31, 2022, 2021 and
2020. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the
RMB and the U.S. dollar in the future.
To the extent that the Company needs to convert U.S. dollar into RMB for capital expenditures and working capital and
other business purposes, appreciation of RMB against U.S. dollar would have an adverse effect on the RMB amount the
Company would receive from the conversion. Conversely, if the Company decides to convert RMB into U.S. dollar for the
purpose of making payments for dividends on ordinary shares, strategic acquisitions or investments or other business purposes,
appreciation of U.S. dollar against RMB would have a negative effect on the U.S. dollar amount available to the Company.
In addition, a significant depreciation of the RMB against the U.S. dollar may significantly reduce the U.S. dollar
equivalent of the Company's foreign cash balances and trade receivables. Further, volatility in exchange rate fluctuations may
have a significant impact on the foreign currency translation adjustments recorded in other comprehensive income (loss). The
revaluation impact of foreign currencies held in U.S. functional currency subsidiaries may result in significant foreign exchange
gains (losses) in the consolidated statement of operations. The Company has not used derivative financial instruments to hedge
exposure to foreign exchange risk.
Revision of prior period financial statements
The Company evaluates the recoverability of its deferred tax assets on a jurisdiction-by-jurisdiction basis by assessing the
adequacy of future expected taxable income from all sources, including reversal of temporary differences, forecasted operating
earnings and available tax planning strategies in accordance with ASC 740. This assessment is subject to a high degree of
subjectivity, as the sources of income rely heavily on estimates that are based on a number of factors, including historical
experience and short-range and long-range business forecasts. A valuation allowance is provided when the Company
determines that it is more-likely-than-not that some portion or all of a deferred tax asset will not be realized.
Prior to the third quarter of 2022, the Company determined that the majority of its net deferred tax assets (primarily in the
U.S.) were realizable on a more-likely-than-not basis, primarily due to cumulative pre-tax income at the taxpaying entity and
the weighting of available positive and negative evidence. Accordingly, no valuation allowance was previously recorded related
to those deferred tax assets. In October 2022, in connection with the preparation of its condensed consolidated financial
statements for the three and nine months ended September 30, 2022, the Company reassessed its position on the realizability of
its net deferred tax assets and determined that the negative evidence associated with cumulative losses at the consolidated
financial statement level are not able to be overcome by other positive evidence, and therefore, a valuation allowance should be
applied to its net deferred tax asset balance. The Company determined the previous conclusion to not apply a valuation
allowance to certain net deferred tax assets was an error.
In accordance with Staff Accounting Bulletin (SAB) No. 99, “Materiality,” and SAB No. 108, “Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the
error and determined that the related impact was not material to any of its previously issued financial statements, but that
correcting the cumulative impact of the error would be significant to its statements of operations for the twelve months ended
December 31, 2022. Accordingly, the Company has revised the annual periods of fiscal year 2021 and 2020 consolidated
financial statements and related notes included herein to record a valuation allowance against the Company’s net deferred tax
asset balance for all periods presented. A summary of revisions to previously reported financial statements is presented in Note
3, Revision of Prior Period Financial Statements. Note 12, Income Taxes and Note 16, Loss Per Share have been updated to
24
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
reflect the revision. The Company will also correct previously reported financial information for this error in its future filings,
as applicable.
Recent Accounting Pronouncements
New accounting standards which have been adopted
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities
about Government Assistance. This update requires certain annual disclosures about transactions with a government that are
accounted for by applying a grant or contribution accounting model by analogy. This update is effective for annual periods
beginning after December 15, 2021, and early application is permitted. This guidance should be applied either prospectively to
all transactions that are reflected in financial statements at the date of initial application and new transactions that are entered
into after the date of initial application or retrospectively to those transactions. The Company adopted this standard on January
1, 2022. The adoption of this standard has been applied to existing government assistance transactions.
3. Revision of Prior Period Financial Statements
As discussed in Note 2, the Company revised certain prior period financial statements to correct an error related to the
valuation of net deferred tax assets, the impact of which was immaterial to our previously filed financial statements in the
annual periods of fiscal 2021 and 2020 (See Note 2). Specifically, a valuation allowance should have been recorded on all net
deferred tax assets and such a valuation allowance was not previously recorded. A summary of revisions to the Company’s
previously reported financial statements for the comparative periods presented within this Annual Report on Form 10-K is
presented below.
Consolidated Balance Sheet
Deferred tax assets
Total non-current assets
Total assets
Accumulated deficit
Total equity
Total liabilities and equity
As of
December 31, 2021
Adjustments
$
As Revised
$
(110,424)
(110,424)
—
921,645
(110,424)
8,535,525
As Reported
$
110,424
1,032,069
8,645,949
(4,966,103)
(110,424)
(5,076,527)
6,242,987
8,645,949
(110,424)
(110,424)
6,132,563
8,535,525
25
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Consolidated Statements of Operations
Year Ended December 31,
2021
Adjustments
Year Ended December 31,
2020
Adjustments
As Reported
As Revised
As Reported
As Revised
Income tax expense (benefit)
(25,234)
44,462
19,228
(17,671)
28,068
10,397
$
$
$
$
$
$
Net loss
Net loss attributable to
BeiGene, Ltd.
Net loss per share attributable to
BeiGene, Ltd., basic and diluted
Net loss per American
Depositary Share ("ADS")
(1,413,354)
(44,462)
(1,457,816)
(1,600,523)
(28,068)
(1,628,591)
(1,413,354)
(44,462)
(1,457,816)
(1,596,906)
(28,068)
(1,624,974)
(1.17)
(0.04)
(1.21)
(1.47)
(0.03)
(1.50)
(15.23)
(0.48)
(15.71)
(19.13)
(0.34)
(19.47)
Consolidated Statements of Comprehensive Loss
Year Ended December 31,
2021
Year Ended December 31,
2020
As Reported
Adjustments
As Revised
As Reported
Adjustments
As Revised
$
$
$
$
$
$
Net loss
(1,413,354)
(44,462)
(1,457,816)
(1,600,523)
(28,068)
(1,628,591)
Comprehensive loss
Comprehensive loss attributable
to BeiGene, Ltd.
(1,402,346)
(44,462)
(1,446,808)
(1,585,452)
(28,068)
(1,613,520)
(1,402,346)
(44,462)
(1,446,808)
(1,581,963)
(28,068)
(1,610,031)
Consolidated Statement of Cash Flows
Year Ended December 31,
Year Ended December 31,
As Reported
$
2021
Adjustments
$
As Revised
$
As Reported
$
2020
Adjustments
$
As Revised
$
(1,413,354)
(44,462)
(1,457,816)
(1,600,523)
(28,068)
(1,628,591)
(41,085)
44,462
3,377
(27,807)
28,068
261
(1,298,723)
—
(1,298,723)
(1,283,461)
—
(1,283,461)
Operating activities:
Net loss
Adjustments to reconcile net
loss to net cash used in
operating activities:
Deferred income tax
expense
Net cash used in
operating activities
26
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Consolidated Statement of Stockholders' Equity
Balance at December 31, 2019
Net loss
Balance at December 31, 2020
Net loss
Balance at December 31, 2021
As Reported
$
(1,955,843)
(1,596,906)
(3,552,749)
(1,413,354)
(4,966,103)
Accumulated Deficit
Adjustments
$
(37,894)
(28,068)
(65,962)
(44,462)
(110,424)
As Revised
$
(1,993,737)
(1,624,974)
(3,618,711)
(1,457,816)
(5,076,527)
As Reported
$
978,355
(1,600,523)
3,869,243
(1,413,354)
6,242,987
Total Equity
Adjustments
$
(37,894)
(28,068)
(65,962)
(44,462)
(110,424)
As Revised
$
940,461
(1,628,591)
3,803,281
(1,457,816)
6,132,563
4. Collaborative and Licensing Arrangements
The Company enters into collaborative arrangements for the research and development, manufacture and/or
commercialization of drug products and drug candidates. To date, these collaborative arrangements have included out-licenses
of and options to out-license internally developed products and drug candidates to other parties, in-licenses of products and
drug candidates from other parties, and profit- and cost-sharing arrangements. These arrangements may include non-refundable
upfront payments, contingent obligations for potential development, regulatory and commercial performance milestone
payments, cost-sharing and reimbursement arrangements, royalty payments, and profit sharing.
Out-Licensing Arrangements
During the three years ended December 31, 2022, the Company’s collaboration revenue related to its out-licensing
collaborative agreements has consisted of upfront license fees, research and development services revenue and right to access
intellectual property revenue from its collaboration agreements with Novartis for tislelizumab and ociperlimab.
The following table summarizes total collaboration revenue recognized for the years ended December 31, 2022, 2021 and
2020:
Revenue from Collaborators
License revenue
Research and development service revenue
Right to access intellectual property revenue
Other
Total
Novartis
Tislelizumab Collaboration and License
Year Ended December 31,
2022
$
2021
$
2020
$
—
484,646
46,822
104,994
9,493
161,309
53,671
3,979
—
542,296
—
—
—
—
—
In January 2021, the Company entered into a collaboration and license agreement with Novartis, granting Novartis rights to
develop, manufacture and commercialize tislelizumab in North America, Europe, and Japan (the "Novartis Territory"). The
Company and Novartis have agreed to jointly develop tislelizumab in these licensed countries, with Novartis responsible for
regulatory submissions after a transition period and for commercialization upon regulatory approvals. In addition, both
companies may conduct clinical trials globally to explore combinations of tislelizumab with other cancer treatments, and the
Company has an option to co-detail the product in North America, funded in part by Novartis.
Under the agreement the Company received an upfront cash payment of $650,000 from Novartis. The Company is eligible
to receive up to $1,300,000 upon the achievement of regulatory milestones, $250,000 upon the achievement of sales milestones,
and royalties on future sales of tislelizumab in the licensed territory. Under the terms of the agreement, the Company is
responsible for funding ongoing clinical trials of tislelizumab, Novartis has agreed to fund new registrational, bridging, or post-
marketing studies in its territory, and each party will be responsible for funding clinical trials evaluating tislelizumab in
27
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
combination with its own or third party products. Each party retains the worldwide right to commercialize its propriety products
in combination with tislelizumab.
The Company evaluated the Novartis agreement under ASC 606 as all the material units of account within the agreement
represented transactions with a customer. The Company identified the following material components under the agreement: (1)
exclusive license for Novartis to develop, manufacture, and commercialize tislelizumab in the Novartis Territory, transfer of
know-how and use of the tislelizumab trademark; (2) conducting and completing ongoing trials of tislelizumab (R&D services);
and (3) supplying Novartis with required quantities of the tislelizumab drug product, or drug substance, upon receipt of an order
from Novartis.
The Company determined that the license, transfer of know-how and use of trademarks are not distinct from each other and
represent a single performance obligation. The R&D services represent a material promise and were determined to be a separate
performance obligation at the outset of the agreement as the promise is distinct and has standalone value to Novartis. The
Company evaluated the supply component of the contract and noted the supply will not be provided at a significant incremental
discount to Novartis. The Company concluded that, for the purpose of ASC 606, the provision related to providing clinical and
commercial supply of tislelizumab in the Novartis Territory was an option but not a performance obligation of the Company at
the outset of the Novartis collaboration agreement. A performance obligation for the clinical and commercial supply will be
established as quantities of drug product or drug substance are ordered by Novartis.
The Company determined that the transaction price as of the outset of the arrangement was the upfront payment of
$650,000. The potential milestone payments that the Company is eligible to receive were excluded from the transaction price,
as all milestone amounts were fully constrained due to uncertainty of achievement. The transaction price was allocated to the
two identified performance obligations based on a relative fair value basis. The standalone selling price of the license, transfer
of know-how and use of trademarks performance obligation was determined using the adjusted market assessment approach
based on the probability-weighted present value of forecasted cash flows associated with out-licensing tislelizumab in the
Novartis Territory. The standalone selling price of the R&D services was valued using a cost plus margin valuation approach
based on the present value of estimated tislelizumab clinical trial costs plus a reasonable margin. Based on the relative
standalone selling prices of the two performance obligations, $484,646 of the total transaction price was allocated to the license
and $165,354 was allocated to the R&D services. The estimates of the standalone selling prices involved management's key
assumptions such as revenue growth rate, estimated clinical trial costs, mark-up rate, probability of technical and regulatory
success, and discount rates. These significant assumptions are forward looking and could be affected by future economic,
regulatory and market conditions.
The Company satisfied the license performance obligation at a point in time when the license was delivered and the
transfer of know-how completed which occurred during the year ended December 31, 2021. As such, the Company recognized
the entire amount of the transaction price allocated to the license as collaboration revenue during the year ended December 31,
2021. The portion of the transaction price allocated to the R&D services was deferred and is being recognized as collaboration
revenue as the R&D services are performed using a percentage-of-completion method. Estimated costs to complete are
reassessed on a periodic basis and any updates to the revenue earned are recognized on a prospective basis. The Company
recognized R&D service revenue of $39,655 and $53,421 during the years ended December 31, 2022 and 2021, respectively.
The Company also recognized other collaboration revenue of $9,493 related to the sale of tislelizumab clinical supply to
Novartis in conjunction with the collaboration during the years ended December 31, 2022.
Ociperlimab Option, Collaboration and License Agreement and China Broad Market Development Agreement
In December 2021, the Company expanded its collaboration with Novartis by entering into an option, collaboration and
license agreement with Novartis to develop, manufacture and commercialize the Company's investigational TIGIT inhibitor
ociperlimab in the Novartis Territory. In addition, the Company and Novartis entered into an agreement granting the Company
rights to market, promote and detail five approved Novartis oncology products, TAFINLAR® (dabrafenib), MEKINIST®
(trametinib), VOTRIENT® (pazopanib), AFINITOR® (everolimus), and ZYKADIA® (ceritinib), across designated regions of
China referred to as “broad markets.” In the first quarter of 2022, the Company initiated marketing and promotion of these five
products.
Under the terms of the option, collaboration and license agreement, the Company received an upfront cash payment of
$300,000 in January 2022 from Novartis and will receive an additional payment of $600,000 or $700,000 in the event Novartis
exercises its exclusive time-based option prior to mid-2023 or between then and late-2023, respectively. Following option
28
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
exercise, the Company is eligible to receive up to $745,000 upon the achievement of regulatory approval milestones,
$1,150,000 upon the achievement of sales milestones, and royalties on future sales of ociperlimab in the Novartis Territory.
Subject to the terms of the option, collaboration and license agreement, during the option period, Novartis has agreed to initiate
and fund additional global clinical trials with ociperlimab and the Company has agreed to expand enrollment in two ongoing
trials. Following the option exercise, Novartis has agreed to share development costs of global trials. Following approval, the
Company has agreed to provide 50 percent of the co-detailing and co-field medical efforts in the United States, and has an
option to co-detail up to 25 percent in Canada and Mexico, funded in part by Novartis. Each party retains the worldwide right to
commercialize its propriety products in combination with ociperlimab, as is the case with tislelizumab under the tislelizumab
collaboration and license agreement. The existing tislelizumab collaboration and license agreement was not modified as a result
of the ociperlimab option, collaboration and license agreement.
The Company evaluated the Novartis agreements under ASC 606 as the units of account within the agreement represented
transactions with a customer. The Company identified the following material promises under the agreement: (1) exclusive
option for Novartis to license the rights develop, manufacture, and commercialize ociperlimab in the Novartis Territory; (2)
Novartis' right to access ociperlimab in its own clinical trials during the option period; (3) initial transfer of BeiGene know-
how; and (4) conducting and completing ongoing trials of ociperlimab during the option period (R&D Services). The market
development activities are considered immaterial in the context of the contracts.
The Company concluded that, at the inception of the agreement, the option for the exclusive product license constitutes a
material right as it represents a significant and incremental discount to the fair value of the exclusive product license that
Novartis would not have received without entering into the agreement and is therefore considered a distinct performance
obligation. The Company determined that Novartis' right to access ociperlimab in its own trials over the option period and the
initial transfer of know-how were not distinct from each other, as the right to access ociperlimab has limited value without the
corresponding know-how transfer, and therefore should be combined into one distinct performance obligation. The R&D
Services represent a material promise and were determined to be a separate performance obligation at the outset of the
agreement as the promise is distinct and has standalone value to Novartis.
The Company determined the transaction price as of the outset of the arrangement was the upfront payment of $300,000.
The option exercise fee is contingent upon Novartis exercising its right and is considered fully constrained until the option is
exercised. Additionally, the milestone and royalty payments are not applicable until after the option is exercised, at which point
the likelihood of meeting milestones, regulatory approval and meeting certain sales thresholds will be assessed. The transaction
price was allocated to the three identified performance obligations based on a relative fair value basis. The standalone selling
price of the material right for the option to the exclusive product license was calculated as the incremental discount between (i)
the value of the license determined using a discounted cash flow method adjusted for probability of the option being exercised
and (ii) the expected option exercise fee using the most-likely-amount method at option exercise. The standalone selling price
of the combined performance obligation for Novartis' right to access ociperlimab for its own clinical trials during the option
period and the initial transfer of BeiGene know-how was determined using a discounted cash flow method. The standalone
selling price of the R&D Services was determined using an expected cost plus margin approach. Based on the relative
standalone selling prices of the three performance obligations, $71,980 of the total transaction price was allocated to the
material right, $213,450 was allocated to Novartis' right to use ociperlimab in its own clinical trials during the option period and
the transfer of BeiGene know-how, and $14,570 was allocated to the R&D Services.
The Company will satisfy the material right performance obligation at a point in time at the earlier of when Novartis
exercises the option and the license is delivered or the expiration of the option period. As such, the entire amount of the
transaction price allocated to the material right was deferred. The portion of the transaction price allocated to Novartis' right to
access ociperlimab in its own clinical trials during the option period and the initial transfer of BeiGene know-how was deferred
and is being recognized over the expected option period. The portion of the transaction price allocated to the R&D Services was
deferred and is being recognized as collaboration revenue as the R&D Services are performed over the expected option period.
The Company recognized collaboration revenue of $104,994 and $3,979 related to Novartis right to access ociperlimab in
clinical trials and the transfer of know how performance obligation during the years ended December 31, 2022 and 2021,
respectively, and R&D service revenue of $7,167 and $250 during the years ended December 31, 2022 and 2021, respectively.
29
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
In-Licensing Arrangements - Commercial
Amgen
In October 2019, the Company entered into a global strategic oncology collaboration with Amgen ("Amgen Collaboration
Agreement") for the commercialization and development in China, excluding Hong Kong, Taiwan and Macau, of Amgen’s
XGEVA®, KYPROLIS®, and BLINCYTO®, and the joint global development of a portfolio of oncology assets in Amgen’s
pipeline, with BeiGene responsible for development and commercialization in China. The agreement became effective on
January 2, 2020, following approval by the Company's shareholders and satisfaction of other closing conditions.
Under the agreement, the Company is responsible for the commercialization of XGEVA, KYPROLIS and BLINCYTO in
China for five or seven years. Amgen is responsible for manufacturing the products globally and will supply the products to the
Company at an agreed upon price. The Company and Amgen will share equally in the China commercial profits and losses
during the commercialization period. Following the commercialization period, the Company has the right to retain one product
and is entitled to receive royalties on sales in China for an additional five years on the products not retained. XGEVA was
approved in China in 2019 for patients with giant cell tumor of the bone and in November 2020 for the prevention of skeletal-
related events in cancer patients with bone metastases. In July 2020, the Company began commercializing XGEVA in China. In
December 2020, BLINCYTO was approved in China for injection for the treatment of adult patients with relapsed or refractory
(R/R) B-cell precursor acute lymphoblastic leukemia (ALL). In July 2021, KYPROLIS was conditionally approved in China for
injection in combination with dexamethasone for the treatment of adult patients with R/R multiple myeloma. In April 2022,
BLINCYTO was conditionally approved for injection for the treatment of pediatric patients with R/R CD19-positive B-cell
precursor ALL.
Amgen and the Company are also jointly developing a portfolio of Amgen oncology pipeline assets under the
collaboration. The Company is responsible for conducting clinical development activities in China and co-funding global
development costs by contributing cash and development services up to a total cap of $1,250,000. Amgen is responsible for all
development, regulatory and commercial activities outside of China. For each pipeline asset that is approved in China, the
Company will receive commercial rights for seven years from approval. The Company has the right to retain approximately one
out of every three approved pipeline assets, other than LUMAKRAS (sotorasib) ("AMG 510"), Amgen's KRAS G12C
inhibitor, for commercialization in China. The Company and Amgen will share equally in the China commercial profits and
losses during the commercialization period. The Company is entitled to receive royalties from sales in China for pipeline assets
returned to Amgen for five years after the seven-year commercialization period. The Company is also entitled to receive
royalties from global sales of each product outside of China (with the exception of AMG 510). Amgen advised the Company
that its applications to the Human Genetic Resources Administration of China ("HGRAC") to obtain approval to conduct
clinical studies in China for the pipeline assets, including its application for AMG 510, were delayed between 2020 and 2022.
In connection with our ongoing assessment of the Collaboration Agreement cost-share contributions, we determined that our
further investment in the development of AMG 510 was no longer commercially viable for BeiGene. As a result, in February
2023, we entered into an amendment to the Collaboration Agreement to (i) stop sharing costs with Amgen for the further
development of AMG 510 during the period starting January 1, 2023 and ending August 31, 2023; and (ii) cooperate in good
faith to prepare a transition plan with the anticipated termination of AMG 510 from the Collaboration Agreement.
The Amgen Collaboration Agreement is within the scope of ASC 808, as both parties are active participants and are
exposed to the risks and rewards dependent on the commercial success of the activities performed under the agreement. The
Company is the principal for product sales to customers in China during the commercialization period and will recognize 100%
of net product revenue on these sales. Amounts due to Amgen for its portion of net product sales will be recorded as cost of
sales. Cost reimbursements due to or from Amgen under the profit share will be recognized as incurred and recorded to cost of
sales; selling, general and administrative expense; or research and development expense, based on the underlying nature of the
related activity subject to reimbursement. Costs incurred for the Company's portion of the global co-development funding are
recorded to research and development expense as incurred.
In connection with the Amgen Collaboration Agreement, a Share Purchase Agreement (SPA) was entered into by the
parties on October 31, 2019. On January 2, 2020, the closing date of the transaction, Amgen purchased 15,895,001 of the
Company's ADSs for $174.85 per ADS, representing a 20.5% ownership stake in the Company. Per the SPA, the cash proceeds
shall be used as necessary to fund the Company's development obligations under the Amgen Collaboration Agreement.
Pursuant to the SPA, Amgen also received the right to designate one member of the Company's board of directors, and Anthony
30
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Hooper joined the Company's board of directors as the Amgen designee in January 2020. Amgen relinquished its right to
appoint a designated director to the Company's board of directors in January 2023.
On April 20, 2022, the parties entered into the First Amendment to Amgen Collaboration Agreement, which amends
certain terms and conditions relating to the financial responsibilities of the parties in connections with the development and
commercialization of certain Amgen proprietary products for the treatment of oncology-related diseases and conditions.
In determining the fair value of the common stock at closing, the Company considered the closing price of the common
stock on the closing date of the transaction and included a lack of marketability discount because the shares are subject to
certain restrictions. The fair value of the shares on the closing date was determined to be $132.74 per ADS, or $2,109,902 in the
aggregate. The Company determined that the premium paid by Amgen on the share purchase represents a cost share liability
due to the Company's co-development obligations. The fair value of the cost share liability on the closing date was determined
to be $601,857 based on the Company's discounted estimated future cash flows related to the pipeline assets. The estimation of
future cash flows involved management assumptions of revenue growth rates and probability of technical and regulatory
success of the pipeline assets. The total cash proceeds of $2,779,241 were allocated based on the relative fair value method,
with $2,162,407 recorded to equity and $616,834 recorded as a research and development cost share liability. The cost share
liability is being amortized proportionately as the Company contributes cash and development services to its total co-
development funding cap.
Amounts recorded related to the cash proceeds received from the Amgen collaboration for the year ended December 31,
2020 were as follows:
Fair value of equity issued to Amgen
Fair value of research and development cost share liability
Total cash proceeds
Year Ended December 31, 2020
$
2,162,407
616,834
2,779,241
Amounts recorded related to the Company's portion of the co-development funding on the pipeline assets for the years
ended December 31, 2022, 2021 and 2020 were as follows:
Research and development expense
Amortization of research and development cost share liability
Total amount due to Amgen for BeiGene's portion of the
development funding
Remaining portion of development funding cap
Year Ended December 31,
2021
2022
$
98,955
96,402
$
115,464
112,486
2020
$
117,005
113,986
195,357
227,950
230,991
As of December 31,
2022
595,702
As of December 31, 2022 and 2021, the research and development cost share liability recorded in the Company's balance
sheet was as follows:
Research and development cost share liability, current portion
Research and development cost share liability, non-current portion
Total research and development cost share liability
31
As of December 31,
2022
$
114,335
179,625
293,960
2021
$
120,801
269,561
390,362
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
The net reimbursement due under the commercial profit-sharing agreement for in-line product sales is classified in the
consolidated statements of operations for the three years ended December 31, 2022 as follows:
Cost of sales - product
Selling, general and administrative
Research and development
Total
5,898
(54,865)
(1,216)
(50,183)
Year Ended December 31,
2021
2022
$
$
1,893
(45,152)
423
(42,836)
2020
$
(1,210)
(9,750)
(660)
(11,620)
The Company purchases commercial inventory from Amgen to distribute in China. Total inventory purchases amounted to
$71,720, $110,303 and 38,392, respectively, during the year ended December 31, 2022, 2021 and 2020. Net amounts payable to
Amgen as of December 31, 2022 and 2021 were $54,064 and $106,790, respectively.
In-Licensing Arrangements - Development
The Company has in-licensed the rights to develop, manufacture and, if approved, commercialize multiple development
stage drug candidates globally or in specific territories. These arrangements typically include non-refundable upfront payments,
contingent obligations for potential development, regulatory and commercial performance milestone payments, cost-sharing
arrangements, royalty payments, and profit sharing.
Upfront and milestone payments made under these arrangements for the years ended December 31, 2022, 2021 and 2020
are set forth below. All upfront and development milestones were expensed to research and development expense. All
regulatory and commercial milestones were capitalized as intangible assets and are being amortized over the remainder of the
respective product patent or the term of the commercialization agreements.
Payments due to collaboration partners
Upfront payments
Development milestone payments
Regulatory and commercial milestone payments Intangible asset
Total
Classification
Research and development expense
Research and development expense
Our significant license agreements are described below:
Shandong Luye Pharmaceutical Co., Ltd.
Year Ended December 31,
2022
$
68,665
5,500
—
74,165
2021
$
83,500
15,000
43,394
141,894
2020
$
109,500
15,800
—
125,300
In December 2022, the Company entered into an exclusive license agreement with Shandong Luye Pharmaceutical Co.,
Ltd. ("Luye") to develop (exclusive of indications for which Luye has submitted the drug marketing authorization application to
the China National Medical Products Administration) and commercialize Luye's proprietary goserelin acetate extended-release
microspheres for intramuscular injection known as LY01005 in mainland China. Under the terms of the agreement, the
Company paid Luye an upfront license payment of $48,665, exclusive of VAT, which was recognized as in-process research
and development expense, and a prepayment of $30,000 to be applied toward future supply purchases in December 2022. Luye
is also eligible to receive future milestone payments upon achievement of certain regulatory milestones. Luye is also eligible to
receive tiered royalties on net sales. Luye is considered a related party due to a significant common shareholder. That
shareholder has different representatives serving on each companies' respective board of directors.
Shoreline Biosciences, Inc.
In June 2021, the Company entered into an exclusive worldwide strategic collaboration with Shoreline Biosciences, Inc.
(Shoreline) to develop and commercialize a portfolio of natural killer (NK)-based cell therapeutics with Shoreline's induced
pluripotent stem cells (iPSC) NK cell technology and the Company's research and clinical development capabilities for different
malignancies. Under the collaboration, the Company and Shoreline are working jointly to develop cell therapies for four
32
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
designated therapeutic targets, with an option to expand the collaboration at a future date. Clinical development is being led by
the Company globally, with Shoreline responsible for clinical manufacturing. The Company has commercial rights globally,
with Shoreline having an option to retain commercialization rights in the United States and Canada for two targets. Under the
terms of the agreement, Shoreline received a $45,000 upfront payment in January 2022 and is eligible to receive additional
R&D funding, milestone payments and royalties based upon the achievement of certain development, regulatory, and
commercial milestones. The upfront payment was expensed to research and development expense during the year ended
December 31, 2021 in accordance with the Company's acquired in-process research and development expense policy.
Nanjing Leads Biolabs, Inc.
In December 2021, the Company entered into a license and collaboration agreement with Nanjing Leads Biolabs, Inc.
(Leads Biolabs) for worldwide research, development and manufacturing rights and exclusive commercialization rights outside
of China to LBL-007, a novel investigational antibody targeting the LAG-3 pathway. Under the terms of the agreement, Leads
Biolabs received an upfront payment of $30,000 in January 2022 and is eligible to receive up to $742,000 in clinical
development, regulatory approval and sales milestones. Leads Biolabs is also eligible to receive tiered royalties on future sales
in the licensed territory. The upfront payment was expensed to research and development expense during the year ended
December 31, 2021 in accordance with the Company's acquired in-process research and development expense policy.
EUSA Pharma
In January 2020, the Company entered into an exclusive development and commercialization agreement with EUSA
Pharma (EUSA) for the orphan biologic products SYLVANT® (siltuximab) and QARZIBA® (dinutuximab beta) in China.
Under the terms of the agreement, EUSA granted the Company exclusive rights to SYLVANT in greater China and to
QARZIBA in mainland China. Under the agreement, the Company is funding and undertaking all clinical development and
regulatory submissions in the territories, and commercializing both products once approved. EUSA received a $40,000 upfront
payment upon contract execution and is eligible to receive additional payments upon the achievement of regulatory and
commercial milestones up to a total of $120,000. The upfront payment was expensed to research and development expense
during the year ended December 31, 2020 in accordance with the Company's acquired in-process research and development
expense policy. In 2021, QARZIBA and SYLVANT were approved and launched in mainland China and greater China,
respectively. The approvals triggered regulatory milestone payments that were capitalized as intangible assets and are being
amortized over the remaining term of the license agreement. EUSA is receiving tiered royalties on SYLVANT product sales,
which the Company records as cost of sales in the period the respective sales are generated.
Assembly Biosciences, Inc.
In July 2020, the Company entered into a collaboration agreement with Assembly Biosciences, Inc. (Assembly) for
Assembly's portfolio of three clinical-stage core inhibitor candidates for the treatment of patients with chronic hepatitis B virus
(HBV) infection in China. Under the terms of the agreement, Assembly granted BeiGene exclusive rights to develop and
commercialize ABI-H0731, ABI-H2158 and ABI-H3733 in China, including Hong Kong, Macau, and Taiwan. BeiGene is
responsible for development, regulatory submissions, and commercialization in China. Assembly retains full worldwide rights
outside of the partnered territory for its HBV portfolio. Assembly received an upfront payment of $40,000 and is eligible to
receive payments upon achievement of development, regulatory and commercial milestones up to a total of $503,750.
Assembly is also eligible to receive tiered royalties on net sales. The upfront payment was expensed to research and
development expense during the year ended December 31, 2020 in accordance with the Company's acquired in-process research
and development expense policy.
Bio-Thera Solutions, Ltd.
In August 2020, the Company entered into a license, distribution and supply agreement with Bio-Thera Solutions, Ltd.
(Bio-Thera) for Bio-Thera's POBEVCY® (BAT1706), a biosimilar to Avastin® (bevacizumab) in China. The agreement became
effective on September 10, 2020 upon approval of Bio-Thera's shareholders, and was subsequently assigned by the Company to
its affiliate BeiGene (Guangzhou) Co., Ltd. (BeiGene Guangzhou) on September 18, 2020, as permitted by the agreement.
Under the terms of the agreement, Bio-Thera agreed to grant BeiGene the right to develop, manufacture, and commercialize
POBEVCY in China, including Hong Kong, Macau, and Taiwan. Bio-Thera retained rights outside of the partnered territory.
Bio-Thera received an upfront payment of $20,000 in October 2020 and is eligible to receive payments upon the achievement
of regulatory and commercial milestones up to a total of $145,000. The upfront payment was expensed to research and
33
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
development expense during the year ended December 31, 2020 in accordance with the Company's acquired in-process research
and development expense policy. In November 2021, POBEVCY obtained regulatory approval, and was subsequently
launched, in China, triggering a milestone payment that was capitalized as an intangible asset that is being amortized over the
remaining term of the license agreement. Bio-Thera is also receiving tiered royalties on product sales, which the Company
records as cost of sales in the period the respective sales are generated.
Other
In addition to the collaborations discussed above, the Company has entered into additional collaborative arrangements
during the years ended December 31, 2022, 2021 and 2020. The Company may be required to pay additional amounts upon the
achievement of various development and commercial milestones under these agreements. The Company may also incur
significant research and development costs if the related product candidate were to advance to late-stage clinical trials. In
addition, if any products related to these collaborations are approved for sale, the Company may be required to pay significant
milestones upon approval and milestones and/or royalties on future sales. The payment of these amounts, however, is
contingent upon the occurrence of various future events, which have a high degree of uncertainty of occurrence.
5. Restricted Cash
The Company’s restricted cash balance of $5,473 and $7,209 as of December 31, 2022 and 2021, respectively, primarily
consist of RMB-denominated cash deposits held in designated bank accounts for collateral for letters of credit. The Company
classifies restricted cash as current or non-current based on term of restriction.
In addition to the restricted cash balances above, the Company is required by the PRC securities law to use the proceeds
from the STAR offering in strict compliance with the planned uses as disclosed in the PRC prospectus as well as those
disclosed in the Company's proceeds management policy approved by the board of directors.
6. Investments
Short-Term Investments
Short-term investments as of December 31, 2022 consisted of the following available-for-sale debt securities:
U.S. treasury securities
Total
Amortized
Cost
$
674,262
674,262
Gross
Unrealized
Gains
$
Gross
Unrealized
Losses
$
—
—
9,011
9,011
Short-term investments as of December 31, 2021 consisted of the following available-for-sale debt securities:
U.S. treasury securities
Total
Amortized
Cost
$
2,245,662
2,245,662
Gross
Unrealized
Gains
$
Gross
Unrealized
Losses
$
—
—
3,700
3,700
Fair Value
(Net Carrying
Amount)
$
665,251
665,251
Fair Value
(Net Carrying
Amount)
$
2,241,962
2,241,962
The Company does not consider the investments in U.S. treasury securities to be other-than-temporarily impaired at
December 31, 2022. As of December 31, 2022, the Company's available-for-sale debt securities consisted entirely of short-term
U.S. treasury securities, which were determined to have zero risk of expected credit loss. Accordingly, no allowance for credit
loss was recorded as of December 31, 2022.
34
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Equity Securities with Readily Determinable Fair Values
Leap Therapeutics, Inc. (Leap)
In January 2020, the Company purchased $5,000 of Series B mandatorily convertible, non-voting preferred stock of Leap
in connection with a strategic collaboration and license agreement the Company entered into with Leap. The Series B shares
were subsequently converted into shares of Leap common stock and warrants to purchase additional shares of common stock
upon approval of Leap's shareholders in March 2020. In September 2021, the Company purchased $7,250 of common stock in
Leap's underwritten public offering. As of December 31, 2022, the Company's ownership interest in the outstanding common
stock of Leap was 7.4% based on information from Leap. Inclusive of the shares of common stock issuable upon the exercise of
the currently exercisable warrants, the Company's interest is approximately 11.7%. The Company measures the investment in
the common stock and warrants at fair value, with changes in fair value recorded to other (expense) income, net. During the
years ended December 31, 2022, 2021 and 2020, the Company recorded unrealized (losses) gains of $(30,102), $9,386 and
$12,479, respectively, in the consolidated statement of operations, respectively.
As of December 31, 2022 and 2021, the fair value of the common stock and warrants was as follows:
Fair value of Leap common stock
Fair value of Leap warrants
Private Equity Securities without Readily Determinable Fair Values
As of December 31,
2022
$
3,307
706
2021
$
23,809
10,306
The Company invests in equity securities of certain companies whose securities are not publicly traded and fair value is not
readily determinable and where the Company has concluded it does not have significant influence based on its ownership
percentage and other factors. These investments are recorded at cost minus impairment, if any, plus or minus changes resulting
from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company
held investments of $57,054 and $43,722 in equity securities without readily determinable fair values as of December 31, 2022
and 2021, respectively. The Company recorded gains of $5,065 related to observable price changes in orderly transactions for
similar investments of the same issuer for the year ended December 31, 2022 to other (expense) income, net in the consolidated
statements of operations. There were no adjustments to the carrying values of these securities for the years ended December 31,
2021 and 2020.
Equity-Method Investments
The Company records equity-method investments at cost and subsequently adjusts the basis based on the Company's
ownership percentage in the investees' income and expenses, as well as dividends, if any. The Company holds equity-method
investments totaling $27,710 and $22,955 as of December 31, 2022 and 2021, respectively, that it does not consider to be
individually significant to its financial statements. The Company recorded unrealized losses of $3,682, $1,796 and $491 for the
years ended December 31, 2022, 2021 and 2020, respectively, to other (expense) income, net in the consolidated statements of
operations.
7. Inventories
The Company’s inventory balance consisted of the following:
Raw materials
Work in process
Finished goods
Total inventories
35
As of December 31,
2022
$
88,957
20,886
172,503
282,346
2021
$
78,140
9,397
155,089
242,626
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
8. Manufacturing Facility in Guangzhou, China
Manufacturing legal entity structure
BeiGene Shanghai, originally established as a wholly-owned subsidiary of BeiGene (Hong Kong) Co., Ltd. (BeiGene HK),
and currently a wholly-owned subsidiary of BeiGene Biologics, as described below, provides clinical development services for
BeiGene affiliates and is the clinical trial authorization (CTA) holder and marketing authorization application (MAA) holder for
tislelizumab in China.
In March 2017, BeiGene HK, a wholly owned subsidiary of the Company, and Guangzhou GET Technology Development
Co., Ltd. (now Guangzhou High-tech Zone Technology Holding Group Co., Ltd.) (GET), entered into a definitive agreement to
establish a commercial scale biologics manufacturing facility in Guangzhou, Guangdong Province, PRC. BeiGene HK and GET
entered into an Equity Joint Venture Contract (the “JV Agreement”).
Under the terms of the JV Agreement, BeiGene HK made an initial cash capital contribution of RMB200,000 and a
subsequent contribution of one or more biologics assets in exchange for a 95% equity interest in BeiGene Biologics. GET made
a cash capital contribution of RMB100,000 to BeiGene Biologics, representing a 5% equity interest in BeiGene Biologics. In
addition, on March 7, 2017, BeiGene Biologics entered into a contract with GET, under which GET agreed to provide a
RMB900,000 loan (the "Shareholder Loan”) to BeiGene Biologics. In September 2019, BeiGene Biologics completed the first
phase of construction of a biologics manufacturing facility in Guangzhou, through a wholly owned subsidiary, the BeiGene
Guangzhou Biologics Manufacturing Co., Ltd. (BeiGene Guangzhou Factory), to manufacture biologics for the Company and
its subsidiaries.
BeiGene HK and BeiGene Biologics subsequently entered into an Equity Transfer Agreement to transfer 100% of the
equity interest of BeiGene Shanghai to BeiGene Biologics, as required by the JV agreement, such that the CTA holder and
MAA holder for tislelizumab in China was controlled by BeiGene Biologics. Upon the transfer of equity in BeiGene Shanghai,
BeiGene HK's equity interest in BeiGene Shanghai became 95%.
In September 2020, BeiGene HK entered into a share purchase agreement (the "JV Share Purchase Agreement") with GET
to acquire GET’s 5% equity interest in BeiGene Biologics for a total purchase price of $28,723 (RMB195,262). The transaction
was finalized in November 2020 upon completion of the business registration filing. The share purchase was recorded as an
equity transaction. The carrying amount of the noncontrolling interest balance of $9,116 was adjusted to nil to reflect the
increase in BeiGene HK’s ownership interest to 100%, and the difference in the fair value of the consideration paid and the
carrying amount of the noncontrolling interest of $19,599 was recorded to additional paid in capital. In connection with the JV
Share Purchase Agreement, BeiGene Biologics repaid the outstanding principal of the Shareholder Loan of $132,061
(RMB900,000) and accrued interest of $36,558 (RMB249,140).
In connection with the JV share purchase, the Company entered into a loan agreement with China Minsheng Bank for a
total loan facility of up to $200,000 (the "Senior Loan"), of which $120,000 was used to fund the JV share repurchase and
repayment of the shareholder loan and $80,000 could be used for general working capital purposes. The Company may extend
the original maturity date for up to two additional twelve month periods. In October 2020, the Company drew down $80,000 of
the working capital facility and $118,320 of the acquisition facility to be used for the JV share repurchase. On October 9, 2021,
the Company repaid $198,320 and drew down $200,000 from the Senior Loan. In addition, the Company entered into a loan
agreement with Zhuhai Hillhouse Zhaohui Equity Investment Partnership (Zhuhai Hillhouse) for a total loan facility of $73,640
(RMB500,000) (the "Related Party Loan"), of which $14,728 (RMB100,000) can be used for general corporate purposes and
$58,912 (RMB400,000) can only be applied towards the repayment of the Senior Loan facility, including principal, interest and
fees. The Company drew down $15,693 (RMB100,000) of the Related Party Loan as of December 31, 2021 and repaid the loan
in full in November of 2022. See Note 14 for further discussion of the loans.
9. Leases
The Company has operating leases for office and manufacturing facilities in the United States, Switzerland, and China. The
leases have remaining lease terms of up to five years, some of which include options to extend the leases that have not been
included in the calculation of the Company’s lease liabilities and ROU assets. The Company has land use rights, which
represent land acquired for the biologics manufacturing facility in Guangzhou, the land acquired for the Company's research,
development and office facility in Changping, Beijing, and the land acquired for the Company's research, development and
manufacturing facility in Suzhou. The land use rights represent lease prepayments and are expensed over the remaining term of
36
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
the rights, which is 50 years for the Guangzhou land use rights, 36 years for the Changping land use right, and 30 years for the
Suzhou land use rights. The Company also has certain leases with terms of 12 months or less for certain equipment, office and
lab space, which are expensed and not recorded on the balance sheet.
The components of lease expense were as follows:
Year Ended December 31,
2021
2022
$
$
22,536
4,892
1,823
29,251
2020
$
18,271
2,465
1,018
21,754
Operating lease cost
Variable lease cost
Short-term lease cost
Total lease cost
25,938
6,834
1,299
34,071
Supplemental balance sheet information related to leases was as follows:
Operating lease right-of-use assets
Land use rights, net
Total operating lease right-of-use assets
Current portion of operating lease liabilities
Operating lease liabilities, non-current portion
Total lease liabilities
Maturities of operating lease liabilities are as follows:
Year ending December 31, 2023
Year ending December 31, 2024
Year ending December 31, 2025
Year ending December 31, 2026
Year ending December 31, 2027
Total lease payments
Less imputed interest
Present value of lease liabilities
As of December 31,
2022
$
2021
$
56,008
53,952
109,960
24,041
34,517
58,558
60,762
56,669
117,431
21,925
43,041
64,966
$
26,278
21,647
11,312
2,821
966
63,024
(4,466)
58,558
Other supplemental information related to leases is summarized below:
Operating cash flows used in operating leases
ROU assets obtained in exchange for new operating lease liabilities
Weighted-average remaining lease term (years)
Weighted-average discount rate
37
Year ended December 31,
2022
$
28,064
22,278
2021
$
19,962
37,454
2020
$
17,571
17,634
As of December 31,
2022
2021
3
5.76 %
3
5.15 %
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
10. Property, Plant and Equipment, Net
Property, plant and equipment, net are recorded at cost less accumulated depreciation and consisted of the following:
Land
Laboratory equipment
Leasehold improvements
Building
Manufacturing equipment
Software, electronics and office equipment
Property and equipment, at cost
Less: Accumulated depreciation
Construction in progress
Property, plant and equipment, net
As of December 31,
2022
$
2021
$
65,485
158,908
53,786
222,448
175,679
47,483
723,789
65,485
118,203
50,288
144,083
119,585
27,404
525,048
(171,470)
(124,286)
293,627
845,946
186,843
587,605
In November 2021, the Company purchased a 42-acre site located in Hopewell, NJ for $75,197. The total purchase price
was allocated between the land and an existing building on the property based on their relative fair values. The Company is
constructing a biologics manufacturing facility and research and development center on the land.
Construction in progress (CIP) as of December 31, 2022 and 2021 primarily related to the construction of the
manufacturing and clinical R&D campus in Hopewell, a new building for Beijing Innerway Bio-tech Co., Ltd., and additional
capacity at the Guangzhou and Suzhou manufacturing facilities. CIP by fixed asset class are summarized as follows:
Building
Manufacturing equipment
Laboratory equipment
Other
Total
As of December 31,
2022
$
224,392
33,332
12,256
23,647
293,627
2021
$
90,229
63,361
17,178
16,075
186,843
Depreciation expense for the years ended December 31, 2022, 2021 and 2020 were $62,302, $44,742 and $30,943,
respectively.
11. Intangible Assets
Intangible assets as of December 31, 2022 and December 31, 2021 are summarized as follows:
Finite-lived intangible assets:
Product distribution rights
Developed products
Trading license
Total finite-lived intangible assets
December 31, 2022
December 31, 2021
Gross
carrying
amount
$
Accumulated
amortization
Intangible
assets, net
$
$
Gross
carrying
amount
$
Accumulated
amortization
Intangible
assets, net
$
$
7,500
41,235
816
49,551
(4,000)
(4,119)
(816)
(8,935)
3,500
37,116
—
40,616
7,500
43,394
816
51,710
(3,250)
(965)
(816)
(5,031)
4,250
42,429
—
46,679
38
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Product distribution rights consist of distribution rights for the approved cancer therapies licensed from BMS as part of the
BMS collaboration. The Company is amortizing the product distribution rights, as a single identified asset, over the term of the
license agreement of 10 years from the date of acquisition. Developed products represent the post-approval milestone payments
under license and commercialization agreements. The Company is amortizing the developed products over the remainder of the
respective product patent or the term of the commercialization agreements. Trading license represents the Guangzhou drug
distribution license acquired in September 2018. The Company amortized the drug distribution trading license over the
remainder of the initial license term through February 2020. The trading license has been renewed through February 2024.
Amortization expense for developed products is included in cost of sales - product in the accompanying consolidated
statements of operations. Amortization expense for product distribution rights and trading licenses is included in operating
expenses in the accompanying consolidated statements of operations. The weighted-average life for each finite-lived intangible
assets is approximately 12 years. Amortization expense is as follows:
Amortization expense - Cost of sales - product
Amortization expense - Operating expense
Total
2022
$
Year Ended December 31,
2021
3,225
751
3,976
$
965
750
1,715
2020
$
—
846
846
Estimated amortization expense for each of the five succeeding years and thereafter, as of December 31, 2022 is as follows:
Year Ending December 31,
2023
2024
2025
2026
2027
2028 and thereafter
Total
12. Income Taxes
Cost of Sales -
Product
$
Operating Expenses
$
Total
$
3,170
3,170
3,170
3,170
3,170
21,266
37,116
750
750
750
750
500
—
3,500
3,920
3,920
3,920
3,920
3,670
21,266
40,616
The components of income (loss) before income taxes are as follows:
Year Ended December 31,
2022
$
2021
$
2020
$
(583,610)
67,744
(606,752)
34,923
(369,066)
33,608
(866,759) (1,282,736)
(1,445,171)
(1,961,037) (1,438,588) (1,618,194)
PRC
U.S.
Other
Total
39
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
The current and deferred components of the income tax expense (benefit) from continuing operations are as follows:
Current Tax Expense (Benefit):
PRC
U.S.
Other
Total
Deferred Tax Expense (Benefit):
PRC
U.S.
Other
Total
Income Tax (Benefit) Expense
Year Ended December 31,
2022
$
2021
$
2020
$
27,905
4,844
6,547
39,296
3,480
—
2
3,482
42,778
15,252
16,121
(9)
(5,678)
805
16,048
68
10,511
4,919
(35)
(1,704)
3,180
19,228
(114)
—
—
(114)
10,397
The reconciliation of the statutory tax rate to our effective income tax rate is as follow:
Loss before tax
China statutory tax rate
Expected taxation at China statutory tax rate
Foreign and preferential tax rate differential
Non-deductible expenses
Stock compensation expenses
Effect of tax rate change
Change in valuation allowance
Research tax credits and incentives
Taxation for the year
Effective tax rate
Year Ended December 31,
2022
$
2021
$
2020
$
(1,961,037)
(1,438,588)
(1,618,194)
25 %
25 %
25 %
(490,259)
(359,647)
(404,549)
288,133
185,874
218,473
30,598
(2,826)
8,436
33,872
(27,411)
(22,032)
—
229,550
(49,116)
42,778
—
254,768
(31,530)
19,228
(3,827)
237,153
(23,257)
10,397
(2.2) %
(1.3) %
(0.6) %
40
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Significant components of deferred tax assets (liabilities) are as follows:
Deferred tax assets (liabilities):
Accruals and reserves
Net operating losses carryforward
Stock-based compensation
Research tax credits
Depreciable and amortizable assets
Lease liability obligation
R&D and other capitalized costs
Right of use asset
Gross deferred tax assets
Less valuation allowance
Net deferred tax liabilities
Year Ended December 31,
2022
$
2021
$
2020
$
97,896
862,214
19,700
86,000
798,563
10,348
63,156
84,766
625,114
14,982
82,060
937,069
11,571
—
33,512
358,425
13,981
58,835
724,779
9,066
—
(10,098)
(11,322)
(8,843)
1,927,779
1,744,240
1,189,755
(1,943,775) (1,758,409) (1,200,547)
(15,996)
(14,169)
(10,792)
Valuation allowances have been provided on deferred tax assets where, based on all available evidence, it was considered
more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods.
After consideration of all positive and negative evidence, the Company believes that as of December 31, 2022,
it is more likely than not that certain deferred tax assets will not be realized for our subsidiaries in Australia, Switzerland, the
United States, and for certain subsidiaries in China. For the years ended December 31, 2022 and 2021, there were increases in
the valuation allowance of $229,550 and $254,768, respectively. Adjustments may be required in the future if the Company
estimates that the amount of deferred tax assets to be realized is more or less than the net amount recorded.
As of December 31, 2022 and 2021, the Company had net operating losses of approximately $5,077,247 and $3,644,981,
respectively. As of December 31, 2022, net operating losses were primarily comprised of: $1,633,101 from entities in the PRC
which expire in years 2024 through 2032; $3,397,529 derived from Switzerland which expires in years 2025 through 2029; and,
$26,079 derived from entities in the United States that have an indefinite carryforward. The Company has approximately
$108,861 of U.S. research tax credits which will expire between 2036 and 2042, if not utilized.
The gross unrecognized tax benefits for the years ended December 31, 2022, 2021 and 2020 were as follows:
Beginning balance, as of January 1
Additions based on tax positions related to prior tax years
Reductions based on tax positions related to prior tax years
Additions based on tax positions related to the current tax year
Reductions based on lapse of statute of limitations
Ending balance, as of December 31
Year Ended December 31,
2022
$
9,925
—
—
1,630
—
11,555
2021
$
2020
$
7,123
—
—
2,802
—
9,925
4,633
—
—
2,497
(7)
7,123
Current and prior year additions include an assessment of U.S. federal and state tax credits and incentives. None of the
unrecognized tax benefits as of December 31, 2022 would impact the consolidated income tax rate if ultimately recognized due
to valuation allowances. The Company does not anticipate that the amount of existing unrecognized tax benefits will
significantly change within the next 12 months.
41
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
The Company has elected to record interest and penalties related to income taxes as a component of income tax expense.
For the years ended December 31, 2022, 2021 and 2020, the Company's accrued interest and penalties, where applicable,
related to uncertain tax positions were not material.
The Company conducts business in a number of tax jurisdictions and, as such, is required to file income tax returns in
multiple jurisdictions globally. As of December 31, 2022, Australia tax matters are open to examination for the years 2013
through 2022, China tax matters are open to examination for the years 2012 through 2022, Switzerland tax matters are open to
examination for the years 2018 through 2022, and U.S. federal tax matters are open to examination for years 2015 through
2022. Various U.S. states and other non-US tax jurisdictions in which the Company files tax returns remain open to
examination for 2012 through 2022.
The Company qualifies for the Technology Advanced Service Enterprises (TASE) and High and New Technology
Enterprise (HNTE) status for certain subsidiaries in China, which expire at the end of 2025. The income tax benefits attributable
to this status for the year ended December 31, 2022 is approximately $3,894, or less than $0.01 per share outstanding.
As of December 31, 2022, the Company asserts indefinite reinvestment on the excess of the financial reporting bases over
tax bases in the Company's investments in foreign subsidiaries to the extent reversal would incur a significant tax liability. A
deferred tax liability has not been established for the approximately $2,379 of cumulative undistributed foreign earnings.
Determination of the unrecognized deferred tax liability is not practicable due to the uncertainty and overall complexity of the
hypothetical calculation.
13. Supplemental Balance Sheet Information
Changes in the allowance for credit losses related to trade accounts receivable consist of the following:
Year Ended December 31,
2021
2020
2022
$
$
112
309
—
(6)
415
—
109
—
3
112
As of December 31,
2022
$
71,488
20,478
22,777
3,039
3,664
58,950
1,510
34,647
216,553
2021
$
87,239
58,579
12,010
5,052
1,695
78,538
2,982
24,078
270,173
Beginning balance, as of January 1
Provision charged to selling, general and administrative expenses
Amounts written-off, net of recoveries of amounts previously reserved
Exchange rate changes
Ending balance, as of December 31
Prepaid expenses and other current assets consist of the following:
415
(219)
1
14
211
Prepaid research and development costs
Prepaid taxes
Other receivables
Interest receivable
Prepaid insurance
Prepaid manufacturing cost
Short-term deposit
Other current assets
Total
42
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Other non-current assets consist of the following:
Goodwill
Prepayment of property and equipment
Prepaid supply cost (1)
Prepaid VAT
Rental deposits and other
Long-term investments
Total
As of December 31,
2022
$
109
22,025
48,642
804
7,054
91,779
170,413
2021
$
109
14,140
24,237
17,162
6,609
100,792
163,049
(1) Represents payments for future supply purchases under the license agreement with Luye and facility expansion under
commercial supply agreements. The payments are providing future benefit to the Company through credits on commercial
supply purchases.
Accrued expenses and other payables consisted of the following:
Compensation related
External research and development activities related
Commercial activities
Individual income tax and other taxes
Sales rebates and returns related
Other
Total accrued expenses and other payables
Other long-term liabilities consist of the following:
Deferred government grant income
Pension liability
Other
Total other long-term liabilities
14. Debt
As of December 31,
2022
$
184,775
139,168
51,806
18,815
41,817
30,971
467,352
2021
$
139,966
213,922
71,560
45,661
59,639
27,307
558,055
As of December 31,
2022
2021
$
38,176
7,760
159
46,095
$
46,352
7,814
68
54,234
The following table summarizes the Company's short-term and long-term debt obligations as of December 31, 2022 and
2021:
Lender
Agreement
Date
Line of Credit
Term Maturity Date
Interest
Rate
As of December 31,
2022
2021
China Construction Bank
April 4, 2018
RMB580,000
9-year
April 4, 2027
China Merchants Bank
China Merchants Bank
January 22,
2020
November 9,
2020
(2)
9-year
RMB378,000
9-year
January 20,
2029
November 8,
2029
(1)
(2)
(3)
$
7,250
RMB
50,000
$
1,255
RMB
8,000
1,450
10,000
1,569
10,000
5,437
37,500
—
—
43
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
China Minsheng Bank
(the "Senior Loan")
Zhuhai Hillhouse (the
"Related Party Loan")
Shanghai Pudong
Development Bank
Other short-term debt (6)
Total short-term debt
September 24,
2020
September 24,
2020
February 25,
2022
$200,000
RMB500,000
(4)
(5)
$50,000
1-year
February 25,
2023
China Construction Bank
April 4, 2018
RMB580,000
9-year
April 4, 2027
China Merchants Bank
China Merchants Bank
China CITIC Bank
Total long-term debt
January 22,
2020
November 9,
2020
(2)
9-year
RMB378,000
9-year
July 29, 2022
RMB480,000
10-
year
January 20,
2029
November 8,
2029
July 28, 2032
4.3% 150,000
1,034,554
200,000
1,274,535
4.5%
—
—
15,693
100,000
2.2 %
50,000
344,851
—
—
114,832
328,969
792,000
2,268,905
209,048
427,565
1,332,197
2,724,732
(1)
(2)
(3)
(7)
75,395
520,000
89,444
570,000
49,369
340,500
53,353
340,000
47,847
330,000
59,316
378,000
36,537
209,148
252,000
1,442,500
—
202,113
—
1,288,000
1.
2.
3.
4.
5.
6.
7.
The outstanding borrowings bear floating interest rates benchmarking RMB loan interest rates of financial institutions in the PRC. The loan interest rate
was 4.7% as of December 31, 2022. The Company repaid $1,171 (or RMB8,000) during the year ended December 31, 2022. The loan is secured by
BeiGene Guangzhou Factory's land use right and certain Guangzhou Factory fixed assets in the first phase of the Guangzhou manufacturing facility's
build out.
On January 22, 2020, BeiGene Guangzhou Biologics Manufacturing Co., Ltd.("BeiGene Guangzhou Factory") entered into a nine-year bank loan with
China Merchants Bank to borrow up to RMB1,100,000 at a floating interest rate benchmarked against prevailing interest rates of certain PRC financial
institutions. The loan is secured by Guangzhou Factory's second land use right and fixed assets that will be placed into service upon completion of the
second phase of the Guangzhou manufacturing facility's build out. In connection with the Company's short-term loan agreements with China Merchants
Bank entered into during the year ended December 31, 2020, the borrowing capacity was reduced from RMB1,100,000 to RMB350,000. The loan interest
rate was 4.4% as of December 31, 2022. The Company repaid $1,484 (RMB10,000) during the year ended December 31, 2022. BeiGene Guangzhou
Biologics Manufacturing Co., Ltd. is a company incorporated under the laws of the PRC on March 3, 2017 and a wholly owned subsidiary of BeiGene
Biologics.
The outstanding borrowings bear floating interest rates benchmarking RMB loan interest rates of financial institutions in the PRC. The loan interest rate
was 4.0% as of December 31, 2022. The loan is secured by fixed assets that will be placed into service upon completion of the third phase of the
Guangzhou manufacturing facility's build out.
In September 2020, the Company entered into a loan agreement with China Minsheng Bank for a total loan facility of up to $200,000, of which $120,000
was designated to fund the JV share purchase and repayment of the Shareholder Loan and $80,000 was designated for general working capital purposes.
The Senior Loan had an original maturity date of October 8, 2021, which was the first anniversary of the first date of utilization of the loan. The Company
may extend the original maturity date for up to two additional twelve month periods. On October 8, 2021, the Company extended the maturity date for
twelve months to October 8, 2022 and repurposed the Senior Loan for general working capital purposes. On September 30, 2022, the Company entered
into an amendment and restatement agreement with China Minsheng Bank to extend the maturity date. On October 10, 2022, the Company repaid
$200,000 and drew down $150,000 from the Senior Loan.
In September 2020, the Company entered into a loan agreement with Zhuhai Hillhouse Zhaohui Equity Investment Partnership (Zhuhai Hillhouse) for a
total loan facility of $73,640 (RMB500,000), of which $14,728 (RMB100,000) can be used for general corporate purposes and $58,912 (RMB400,000)
can only be applied towards the repayment of the Senior Loan facility, including principal, interest and fees. The loan originally matured at the earlier of:
(i) November 9, 2021, which is one month after the Senior Loan maturity date, if not extended, or (ii) 10 business days after the Senior Loan is fully
repaid. On October 8, 2021, the Company extended the maturity date of the Related Party Loan to the earlier of: (i) November 9, 2022, which is one
month after the Senior Loan maturity date, if not extended, or (ii) 10 business days after the Senior Loan is fully repaid. On October 10, 2022, the
Company repaid in full the outstanding borrowing in the amount of $13,980 (RMB100,000). Zhuhai Hillhouse is a related party of the Company, as it is
an affiliate of Hillhouse Capital. Hillhouse Capital is a shareholder of the Company, and a Hillhouse Capital employee is a member of the Company's
board of directors.
During the three years ended December 31, 2022, the Company entered into additional short-term working capital loans with China Industrial Bank and
China Merchants Bank to borrow up to RMB2,435,000 in aggregate, with maturity dates ranging from January 19, 2021 to September 18, 2023. The
Company drew down $113,774 (RMB792,000) during the year ended December 31, 2022. The Company repaid $200,446 (RMB1,332,197) of the short-
term loans during the year ended. December 31, 2022. The weighted average interest rate for the short-term working capital loans was approximately
2.6% as of December 31, 2022.
In July 2022, the Company entered into a 10-year bank loan agreement with China CITIC Bank to borrow up to RMB480,000 at a floating interest rate
benchmarked against prevailing interest rates of certain PRC financial institutions. The loan interest rate was 4.2% as of December 31, 2022. The loan is
secured by BeiGene Suzhou Co., Ltd.'s land use right. The Company drew down $37,372 (RMB252,000) during the year ended December 31, 2022.
44
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Contractual Maturities of Debt Obligations
The aggregate contractual maturities of all borrowings due subsequent to December 31, 2022 are as follows:
Maturity dates
Year ending December 31, 2023
Year ending December 31, 2024
Year ending December 31, 2025
Year ending December 31, 2026
Year ending December 31, 2027
Thereafter
Total
Interest Expense
Amounts
$
328,969
29,412
35,136
44,697
44,697
55,206
538,117
Interest on bank loans and the Related Party Loan is paid quarterly until the respective loans are fully settled. Interest
expense recognized for the years ended December 31, 2022, 2021 and 2020 amounted to $21,699, $29,263 and $18,309,
respectively, among which, $2,594, $1,054 and $338 was capitalized, respectively.
15. Product Revenue
The Company’s product revenue is primarily derived from the sale of its internally developed products BRUKINSA in the
United States and China, and tislelizumab and pamiparib in China; REVLIMID® and VIDAZA® in China under a license from
BMS; XGEVA, BLINCYTO and KYPROLIS in China under a license from Amgen; and POBEVCY in China under a license
from Bio-Thera.
The table below presents the Company’s net product sales for the years ended December 31, 2022, 2021 and 2020.
Product revenue - gross
Less: Rebates and sales returns
Product revenue - net
Year Ended December 31,
2022
$
2021
$
2020
$
1,438,440
(183,828)
1,254,612
748,824
(114,837)
633,987
324,672
(15,798)
308,874
45
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
The following table disaggregates net product revenue by product for the years ended December 31, 2022, 2021 and 2020.
BRUKINSA®
Tislelizumab
REVLIMID®
XGEVA®
POBEVCY®
BLINCYTO®
KYPROLIS®
VIDAZA®
Pamiparib
ABRAXANE®
Other
Year Ended December 31,
2021
$
2020
$
2022
$
564,651
422,885
217,987
255,119
79,049
63,398
38,124
36,107
13,696
15,213
5,460
—
16,029
70,065
45,956
1,353
12,515
—
19,591
3,661
—
7,740
41,702
163,358
47,372
8,496
—
—
—
29,975
—
17,770
201
Total product revenue - net
1,254,612
633,987
308,874
The following table presents the roll-forward of accrued sales rebates and returns for the years ended December 31, 2022
and December 31, 2021.
Beginning balance, as of January 1
Accrual
Payment
Ending balance, as of December 31
16. Loss Per Share
Loss per share was calculated as follows:
Numerator:
Net loss
Less: Net loss attributable to noncontrolling interest
Net loss attributable to BeiGene, Ltd.
Denominator:
Year Ended December 31,
2022
$
59,639
183,828
2021
$
11,874
114,837
(201,650)
(67,072)
41,817
59,639
Year Ended December 31,
2022
$
2021
$
2020
$
(2,003,815)
(1,457,816)
—
—
(2,003,815)
(1,457,816)
(1,628,591)
(3,617)
(1,624,974)
Weighted average shares outstanding for computing basic and diluted
loss per share
Net loss per share attributable to BeiGene, Ltd., basic and diluted
1,340,729,572
1,206,210,049
1,085,131,783
(1.49)
(1.21)
(1.50)
For the years ended December 31, 2022, 2021 and 2020, the computation of basic loss per share using the two-class
method was not applicable, as the Company was in a net loss position.
46
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
The effects of all share options and restricted share units were excluded from the calculation of diluted loss per share as
their effect would have been anti-dilutive during the years ended December 31, 2022, 2021 and 2020.
17. Share-Based Compensation
2016 Share Option and Incentive Plan
In January 2016, in connection with its U.S. IPO, the board of directors and shareholders of the Company approved the
2016 Share Option and Incentive Plan (the “2016 Plan”), which became effective in February 2016. The Company initially
reserved 65,029,595 ordinary shares for the issuance of awards under the 2016 Plan, plus any shares available under the 2011
Option Plan (the “2011 Plan”), and not subject to any outstanding options as of the effective date of the 2016 Plan, along with
underlying share awards under the 2011 Plan that are cancelled or forfeited without issuance of ordinary shares. As of
December 31, 2022, ordinary shares cancelled or forfeited under the 2011 Plan that were carried over to the 2016 Plan totaled
5,166,653. The 2016 Plan provided for an annual increase in the shares available for issuance, to be added on the first day of
each fiscal year, beginning on January 1, 2017, equal to the lesser of (i) five percent (5)% of the outstanding shares of the
Company's ordinary shares on the last day of the immediately preceding fiscal year or (ii) such number of shares determined by
the Company’s board of directors or the compensation committee. On January 1, 2018, 29,603,616 ordinary shares were added
to the 2016 Plan under this provision. However, in August 2018, in connection with the Hong Kong IPO, the board of directors
of the Company approved an amended and restated 2016 Plan to remove this "evergreen" provision and implement other
changes required by the Hong Kong Stock Exchange (HKEx) rules. In December 2018, the shareholders of the Company
approved a second amended and restated 2016 Plan to increase the number of shares authorized for issuance by 38,553,159
ordinary shares, as well as amend the cap on annual compensation to independent directors and make other changes. In June
2020, the shareholders approved an Amendment No. 1 to the 2016 Plan to increase the number of shares authorized for issuance
by 57,200,000 ordinary shares and to extend the term of the plan through April 13, 2030. The number of shares available for
issuance under the 2016 Plan is subject to adjustment in the event of a share split, share dividend or other change in the
Company’s capitalization.
As of December 31, 2022, share-based awards to acquire 75,034,504 ordinary shares were available for future grant under
the 2016 Plan.
In order to continue to provide incentive opportunities under the 2016 Plan, the Board of Directors and shareholders of the
Company approved an amendment to the 2016 Plan (the "Amendment No. 2"), which became effective as of June 22, 2022, to
increase the number of authorized shares available for issuance under the 2016 Plan by 66,300,000 ordinary shares, or 5%, of
the Company's outstanding shares as of March 31, 2022.
2018 Inducement Equity Plan
In June 2018, the board of directors of the Company approved the 2018 Inducement Equity Plan (the “2018 Plan”) and
reserved 12,000,000 ordinary shares to be used exclusively for grants of awards to individuals who were not previously
employees of the Company or its subsidiaries, as a material inducement to the individual’s entry into employment with the
Company or its subsidiaries, within the meaning of Rule 5635(c)(4) of the NASDAQ Listing Rules. The 2018 Plan was
approved by the board of directors upon recommendation of the compensation committee, without shareholder approval
pursuant to Rule 5635(c)(4) of the NASDAQ Listing Rules. The terms and conditions of the 2018 Plan, and the forms of award
agreements to be used thereunder, are substantially similar to the 2016 Plan and the forms of award agreements thereunder. In
August 2018, in connection with the listing of the Company’s ordinary shares on the HKEx, the board of directors of the
Company approved an amended and restated 2018 Plan to implement changes required by the HKEx rules.
Upon the effectiveness of Amendment No. 2 to the 2016 Plan, on June 22, 2022, the 2018 Plan was terminated to the effect
that no new equity awards shall be granted under the plan but the outstanding equity awards under the plan shall continue to
vest and/or be exercisable in accordance with their terms.
2018 Employee Share Purchase Plan
In June 2018, the shareholders of the Company approved the 2018 Employee Share Purchase Plan (the
ESPP). Initially, 3,500,000 ordinary shares of the Company were reserved for issuance under the ESPP. In August 2018, in
connection with the Hong Kong IPO, the board of directors of the Company approved an amended and restated ESPP to
remove an “evergreen” share replenishment provision originally included in the plan and implement other changes required by
47
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
the HKEx rules. In December 2018, the shareholders of the Company approved a second amended and restated ESPP to
increase the number of shares authorized for issuance by 3,855,315 ordinary shares to 7,355,315 ordinary shares. The ESPP
allows eligible employees to purchase the Company’s ordinary shares (including in the form of ADSs) at the end of each
offering period, which will generally be six months, at a 15% discount to the market price of the Company’s ADSs at the
beginning or the end of each offering period, whichever is lower, using funds deducted from their payroll during the offering
period. Eligible employees are able to authorize payroll deductions of up to 10% of their eligible earnings, subject to applicable
limitations.
The following tables summarizes the shares issued under the ESPP:
Issuance Date
August 31, 2022
February 28, 2022
August 31, 2021
February 26, 2021
August 31, 2020
February 28, 2020
Market Price1
Purchase Price2
Number of
Ordinary
Shares Issued
ADS
Ordinary
ADS
Ordinary
Proceeds
861,315 $
171.66 $
13.20 $
145.91 $
667,160 $
210.52 $
16.19 $
178.94 $
425,386 $
308.30 $
23.72 $
262.06 $
436,124 $
236.30 $
18.18 $
200.86 $
485,069 $
164.06 $
12.62 $
139.45 $
425,425 $
145.54 $
11.20 $
123.71 $
11.22 $
13.76 $
20.16 $
15.45 $
10.73 $
9.52 $
9,667
9,183
8,575
6,738
5,203
4,048
1 The market price is the lower of the closing price on the NASDAQ Stock Market on the issuance date or the offering date, in accordance with the terms of the
ESPP.
2 The purchase price is the price which was discounted from the applicable market price, in accordance with the terms of the ESPP.
As of December 31, 2022, 3,666,071 ordinary shares were available for future issuance under the ESPP.
Share options
Generally, share options have a contractual term of 10 years and vest over a three- to five-year period, with the first tranche
vesting one calendar year after the grant date or the service relationship start date and the remainder of the awards vesting on a
monthly basis thereafter. Restricted shares and restricted share units generally vest over a four-year period, with the first tranche
vesting one calendar year after the grant date or the service relationship start date and the remainder of the awards vesting on a
yearly basis thereafter, or sometimes vest upon the achievement of pre-specified performance conditions.
48
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
The following table summarizes the Company’s share option activities under the 2011, 2016 and 2018 Plans:
Outstanding at December 31, 2019
Granted
Exercised
Forfeited
Outstanding at December 31, 2020
Granted
Exercised
Forfeited
Outstanding at December 31, 2021
Granted
Exercised
Forfeited
Outstanding at December 31, 2022
Exercisable as of December 31, 2022
Vested and expected to vest at December 31,
2022
Number of
Options
108,417,254
8,999,536
(29,707,587)
(2,717,488)
84,991,715
6,244,524
(17,233,853)
(1,797,498)
72,204,888
12,516,816
(5,898,217)
(2,296,634)
76,526,853
58,017,219
73,842,956
Weighted
Average
Exercise
Price
$
Weighted
Average
Grant
Date Fair
Value
$
Weighted
Average
Remaining
Contractual
Term
Years
Aggregate
Intrinsic Value
$
7.15
12.40
6.40
3.96
13.54
2.82
7.22
5.27
26.46
4.52
13.27
7.08
12.34
4.63
16.46
7.85
5.67
7.60
416,509
367,110
52,258
5.33 745,340,712
4.2 673,364,735
5.2 734,904,195
As of December 31, 2022, the unrecognized compensation cost related to 15,825,737 unvested share options expected to
vest was $88,859. This unrecognized compensation will be recognized over an estimated weighted-average amortization period
of 2.4 years.
The total fair value of employee share option awards vested during the years ended December 31, 2022, 2021 and 2020
was $62,548, $53,571 and $55,127, respectively.
Fair value of options
The Company uses the binomial option-pricing model in determining the estimated fair value of the options granted. The
model requires the input of highly subjective assumptions including the estimated expected stock price volatility and, the
exercise multiple for which employees are likely to exercise share options. For expected volatilities, the trading history and
observation period of the Company’s own share price is used in conjunction with historical price volatilities of ordinary shares
of several comparable companies in the same industry as the Company. For the exercise multiple, the Company was not able to
develop an exercise pattern as reference, thus the exercise multiple is based on management’s estimation, which the Company
believes is representative of the future exercise pattern of the options. The risk-free rate for periods within the contractual life of
the option is based on the U.S. Treasury Bills yield curve in effect at the time of grant.
The following table presents the range of fair values and the assumptions used to estimate those fair values of the share
options granted in the years presented:
Fair value of ordinary share
Risk-free interest rate
Expected exercise multiple
Expected volatility
Expected dividend yield
Contractual life
Year Ended December 31,
2022
$5.51 ~ $9.04
1.8% ~ 3.9%
2.8
51% ~ 60%
0%
10 years
2021
$9.94 ~ $14.97
1.1% ~ 1.7%
2.8
51% ~ 59%
0%
10 years
2020
$4.95 ~ $11.89
0.6% ~ 1.1%
2.8
58% ~ 59%
0%
10 years
49
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
Restricted shares
The following table summarizes the Company’s restricted share activities under the 2016 Plan:
Outstanding at December 31, 2019
Granted
Vested
Forfeited
Outstanding at December 31, 2020
Numbers
of Shares
Weighted-
Average
Grant Date Fair
Value
$
75,000
—
(75,000)
—
—
2.27
—
2.27
—
—
The Company had no restricted share activities during the year ended December 31, 2022 and 2021.
As of December 31, 2022, all compensation cost related to restricted shares was fully recognized.
Restricted share units
The following table summarizes the Company's restricted share unit activities under the 2016 and 2018 Plans:
Outstanding at December 31, 2019
Granted
Vested
Forfeited
Outstanding at December 31, 2020
Granted
Vested
Forfeited
Outstanding at December 31, 2021
Granted
Vested
Forfeited
Outstanding at December 31, 2022
Expected to vest at December 31, 2022
Numbers
of Shares
Weighted-
Average
Grant Date Fair
Value
$
26,852,267
18,820,581
(7,302,828)
(3,493,048)
34,876,972
17,173,767
(10,703,381)
(5,264,376)
36,082,982
38,707,669
(12,533,586)
(6,859,892)
55,397,173
47,392,282
10.72
14.20
10.88
11.36
12.50
25.58
12.23
15.82
18.33
12.46
16.37
16.72
14.87
14.87
As of December 31, 2022, the unrecognized compensation cost related to unvested restricted share units expected to vest
was $580,815. This unrecognized compensation will be recognized over an estimated weighted-average amortization period of
2.9 years.
Share-based compensation expense
The following table summarizes total share-based compensation cost recognized for the years ended December 31, 2022,
2021 and 2020:
Research and development
Selling, general and administrative
Total
50
Year Ended December 31,
2022
$
139,348
163,814
303,162
2021
$
114,357
126,355
240,712
2020
$
92,999
90,482
183,481
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
18. Accumulated Other Comprehensive (Loss) Income
The movement of accumulated other comprehensive (loss) income was as follows:
Foreign Currency
Translation
Adjustments
Unrealized
Gains/Losses on
Available-for-Sale
Securities
Pension Liability
Adjustments
$
$
$
December 31, 2020
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive (loss) income (1)
Net-current period other comprehensive (loss) income
December 31, 2021
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive (loss) income (1)
Net-current period other comprehensive (loss) income
December 31, 2022
14,184
13,714
—
13,714
27,898
871
(8,113)
(4,504)
309
(67)
(4,571)
(3,700)
1,556
1,865
(6,248)
Total
$
6,942
9,519
1,489
11,008
17,950
(90,421)
(5,311)
(446)
(96,178)
—
(90,421)
(62,523)
—
(5,311)
(9,011)
811
365
(5,883)
811
(95,367)
(77,417)
(1) The amounts reclassified from accumulated other comprehensive (loss) income were included in other (expense)
income, net in the consolidated statements of operations.
19. Shareholders’ Equity
During the years ended December 31, 2022, 2021 and 2020, the Company completed the following equity offerings:
In January 2020, the Company sold 15,895,001 ADSs, representing a 20.5% ownership stake in the Company, to Amgen
for aggregate cash proceeds of $2,779,241, or $174.85 per ADS, pursuant to the Share Purchase Agreement executed in
connection with the Amgen Collaboration Agreement. On March 17, 2020, BeiGene, Ltd. and Amgen entered into an
Amendment No. 2 (the “Second Amendment”) to the Share Purchase Agreement in order to account for periodic dilution from
the issuance of shares by the Company, which was restated in its entirety on September 24, 2020 (the “Restated Second
Amendment”). Pursuant to the Restated Second Amendment, Amgen has an option (the “Direct Purchase Option”) to subscribe
for additional ordinary shares of the Company in the form of ADSs (the “Additional Shares”) in an amount necessary to enable
it to increase (and subsequently maintain) its ownership at approximately 20.6% of the Company's outstanding shares. The
Direct Purchase Option is exercisable on a monthly basis, but only if Amgen’s interest in the outstanding shares of the
Company at the monthly reference date is less than 20.4%. The Direct Purchase Option (i) will be exercisable by Amgen solely
as a result of dilution arising from issuance of new shares under the Company's equity incentive plans from time to time, and
(ii) is subject to annual approval by the Company's independent shareholders each year during the term of the Restated Second
Amendment. The exercise period of the Direct Purchase Option commenced on December 1, 2020 and will terminate on the
earliest of: (a) the date on which Amgen and its affiliates collectively own less than 20% of the outstanding share capital of the
Company as a result of Amgen’s sale of shares; (b) at least 60-day advance written notice from either Amgen or the Company
that such party wishes to terminate the Direct Purchase Option; or (c) December 1, 2023. The Direct Purchase Option has no
vesting period.
In July 2020, the Company issued 145,838,979 ordinary shares, par value $0.0001, to eight existing investors, including
entities associated with Hillhouse Capital and Baker Bros. Advisors LP, as well as Amgen, in a registered direct offering under
the Company's effective Registration Statement on Form S-3 (File No. 333-238181). Each ordinary share was sold for a
purchase price of $14.2308 per share ($185.00 per ADS), resulting in net proceeds, after offering expenses, of $2,069,610.
Amgen purchased 29,614,832 ordinary shares for $421,443 as part of this offering. The offering was made without an
underwriter or a placement agent, and as a result the Company did not pay any underwriting discounts or commissions in
connection with the offering.
51
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
In September 2021, upon Amgen's exercise of its Direct Purchase Option, the Company issued an aggregate of 165,529
ADSs, representing 2,151,877 ordinary shares, to Amgen Inc. for a total consideration of $50,000, in a private placement
pursuant to a Share Purchase Agreement dated October 31, 2019, as amended on December 6, 2019 and September 24, 2020 by
and between Amgen and Company.
In December 2021, the Company completed an initial public offering of (STAR Offering) on the Science and Technology
Innovation Board (STAR Market) of the Shanghai Stock Exchange (SSE). The shares offered in the STAR Offering were
issued to and subscribed for by permitted investors in the People’s Republic of China (PRC) in Renminbi (RMB Shares). The
public offering price of the RMB Shares was RMB192.60 per ordinary share, or $391.68 per ADS. In this offering, the
Company sold 115,055,260 ordinary shares. Net proceeds after deducting underwriting commission and offering expenses were
$3,392,616. As required by the PRC securities laws, the net proceeds from the STAR Offering must be used in strict
compliance with the planned uses as disclosed in the PRC prospectus as well as the Company's proceeds management policy
for the STAR Offering approved by the board of directors.
20. Restricted Net Assets
The Company’s ability to pay dividends may depend on the Company receiving distributions of funds from its PRC
subsidiaries. Relevant PRC laws and regulations permit payments of dividends by the Company’s PRC subsidiaries only out of
its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of
operations reflected in the consolidated financial statements prepared in accordance with GAAP differ from those reflected in
the statutory financial statements of the Company’s PRC subsidiaries.
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 profit until such reserve has reached 50% of its respective registered capital based on the enterprise’s
PRC statutory accounts. A domestic enterprise is also required to provide discretionary surplus reserve, at the discretion of the
Board of Directors, from the profits determined in accordance with the enterprise’s PRC statutory accounts. The
aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. The Company’s
PRC subsidiaries were established as domestic invested enterprises and therefore were subject to the above-mentioned
restrictions on distributable profits.
During the years ended December 31, 2022, 2021 and 2020, no appropriation to statutory reserves was made, because the
PRC subsidiaries had an accumulated deficit as of the end of such periods.
As a result of these PRC laws and regulations, including the requirement to make annual appropriations of at least 10% of
after-tax income and set aside as general reserve fund prior to payment of dividends, the Company’s PRC subsidiaries are
restricted in their ability to transfer a portion of their net assets to the Company.
Foreign exchange and other regulations in the PRC may further restrict the Company’s PRC subsidiaries from transferring
funds to the Company in the form of dividends, loans, and advances. As of December 31, 2022 and 2021, amounts restricted
were the net assets of the Company’s PRC subsidiaries, which amounted to 3,548,881 and $760,476, respectively.
21. Employee Benefit Plans
Defined Contribution Plans
Full-time employees of the Company 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 Company’s PRC subsidiaries make contributions to the government for these benefits
based on certain percentages of the employees’ salaries. The Company has no legal obligation for the benefits beyond the
contributions made. The total amounts for such employee benefits, which were expensed as incurred, were $83,860, $63,772
and $23,717 for the years ended December 31, 2022, 2021 and 2020, respectively.
The Company maintains a defined contribution 401(k) savings plan (the "401(k) Plan") for U.S. employees. The 401(k)
Plan covers all U.S. employees, and allows participants to defer a portion of their annual compensation on a pretax basis. In
addition, the Company has a matching contribution to the 401(k) Plan, which, in the 2021 plan year, matched dollar for dollar
of eligible contributions up to 4%. Company contributions to the 401(k) plan totaled $10,298, $7,483 and $4,840 in the years
ended December 31, 2022, 2021 and 2020, respectively.
52
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
The Company maintains a government mandated program to cover its employees in Switzerland for pension, death, or
disability. The program is considered a defined contribution plan. Employer and employee contributions are made based on
various percentages of salaries and wages that vary based on employee age and other factors. Company contributions into the
program amounted to $3,887, $2,986, and $2,960 in the years ended December 31, 2022, 2021 and 2020, respectively.
Employee benefit expenses for the remaining subsidiaries were immaterial.
Defined Benefit Plan
The Company maintains a defined benefit pension plan covering its employees in Switzerland (the "Swiss Plan"). This plan
is a government mandated fund that provides benefits to employees upon retirement, death, or disability. Contributions are
made based on various percentages of participants' salaries and wages determined based on participants' age and other factors.
As of December 31, 2022 and 2021, the projected benefit obligations under the Swiss Plan were approximately $45,835 and
$34,517, respectively, and plan assets were approximately $38,075 and $26,703, respectively. The funded status of the Swiss
Plan is included in other long-term liabilities in the accompanying consolidated balance sheets. The initial determination of the
pension liability was recorded as other comprehensive loss during the year ended December 31, 2020 and subsequently
amortized as a component of net periodic pension cost (see Note 18).
The Company's annual contribution to the Swiss Plan is estimated to be approximately $2,553 in 2023 and is expected to
evolve thereafter proportionally with changes in staffing and compensation levels, actuarial assumptions and actual investment
returns on plan assets.
The following table reflects the total expected benefit payments to Swiss Plan participants and have been estimated based
on the same assumptions used to measure the Company's benefit obligations as of December 31, 2022:
Year(s)
2023
2024
2025
2026
2027
2028 – 2032
Total
22. Commitments and Contingencies
Purchase Commitments
Amounts
$
68
545
442
260
755
7,185
9,255
As of December 31, 2022, the Company had purchase commitments amounting to $117,293, of which $55,346 related to
minimum purchase requirements for supply purchased from contract manufacturing organizations and $61,947 related to
binding purchase order obligations of inventory from BMS and Amgen. The Company does not have any minimum purchase
requirements for inventory from BMS or Amgen.
Capital commitments
The Company had capital commitments amounting to $404,914 for the acquisition of property, plant and equipment as of
December 31, 2022, which were mainly for the Company’s manufacturing and clinical R&D campus in Hopewell, NJ,
additional capacity at the Guangzhou and Suzhou manufacturing facilities, and a new building for Beijing Innerway Bio-tech
Co., Ltd.
Co-development funding commitment
Under the Amgen Collaboration Agreement, the Company is responsible for co-funding global clinical development costs
for the Amgen oncology pipeline assets up to a total cap of $1,250,000. The Company is funding its portion of the co-
53
BEIGENE, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”),
except for number of shares and per share data)
development costs by contributing cash and/or development services. As of December 31, 2022, the Company's remaining co-
development funding commitment was $595,702.
Research and Development Commitment
The Company entered into long-term research and development agreements, which include obligations to make upfront
payments and fixed quarterly payments over the next four years. As of December 31, 2022, the total research and development
commitment amounted to $22,327.
Funding Commitment
The Company had committed capital related to two equity method investments in the amount of $19,000. As of
December 31, 2022, the remaining capital commitment was $16,000 and is expected to be paid from time to time over the
investment period.
Other Business Agreements
The Company enters into agreements in the ordinary course of business with contract research organizations (CROs) to
provide research and development services. These contracts are generally cancellable at any time by the Company with prior
written notice.
The Company also enters into collaboration agreements with institutions and companies to license intellectual property.
The Company may be obligated to make future development, regulatory and commercial milestone payments and royalty
payments on future sales of specified products associated with its collaboration agreements. Payments under these agreements
generally become due and payable upon achievement of such milestones or sales. These commitments are not recorded on the
consolidated balance sheet because the achievement and timing of these milestones are not fixed and determinable. When the
achievement of these milestones or sales have occurred, the corresponding amounts are recognized in the consolidated financial
statements.
23. Segment and Geographic Information
The Company operates in one segment: pharmaceutical products. Its chief operating decision maker is the Chief Executive
Officer, who makes operating decisions, assesses performance, and allocates resources on a consolidated basis.
The Company’s long-lived assets are primarily located in the PRC and the U.S.
Net product revenues by geographic area are based upon the location of the customer, and net collaboration revenue is
recorded in the jurisdiction in which the related income is expected to be sourced from. Total net revenues by geographic area
are presented as follows:
PRC
U.S.
ROW
Total
Year Ended December 31,
2022
$
840,032
502,626
2021
$
517,173
495,265
73,263
1,415,921
163,845
1,176,283
2020
$
290,646
18,228
—
308,874
PRC revenues for each of the three years in the period ended December 31, 2022 consisted entirely of product sales. U.S.
revenues for the year ended December 31, 2022 consisted of collaboration revenues of $112,916 and BRUKINSA product sales
of $389,710, respectively. U.S. revenues for the year ended December 31, 2021 consisted of collaboration revenue of $379,607
and BRUKINSA product sales of $115,658, respectively. U.S. revenues for the year ended December 31, 2020 consisted
entirely of BRUKINSA product sales. Rest of world revenues for each of the year ended December 31, 2022 consisted of
collaboration revenues of $48,393 and product sales of $24,870, respectively. Rest of world revenues for each of the year ended
December 31, 2021 consisted primarily of collaboration revenues.
54
Supplementary Information
The Company's unaudited quarterly information has been prepared on a basis consistent with the audited financial
statements and includes all adjustments that the Company considers necessary for a fair presentation of the information shown.
The operating results for any fiscal quarter are not necessarily indicative of the operating results for a full fiscal year or for any
future period and there can be no assurances that any trend reflected in such results will continue in the future.
As discussed in Note 2, the Company revised certain prior period financial statements to correct an error related to the
valuation of net deferred tax assets, the impact of which was immaterial to its previously filed financial statements in the annual
periods of fiscal 2021 and 2020. The following table summarizes the unaudited statements of operations for each quarter of
2022 and 2021 (in thousands except share and per share amounts).
2022
Total revenues
Loss from operations
Net loss
Net loss attributable to BeiGene, Ltd.
Net loss per share attributable to BeiGene, Ltd.,
basic and diluted
2021
Total revenues
Income (loss) from operations
Net income (loss)
Net income (loss) attributable to BeiGene, Ltd.
Net income (loss) per share attributable to
BeiGene, Ltd., basic
Net income (loss) per share attributable to
BeiGene, Ltd., diluted
March 31,
June 30,
September 30,
December 31,
Quarter Ended
$
$
$
306,626
(443,287)
(435,198)
(435,198)
341,572
(439,399)
(565,726)
(565,726)
387,628
(438,357)
(557,556)
(557,556)
$
380,095
(468,622)
(445,335)
(445,335)
(0.33)
(0.42)
(0.41)
(0.33)
March 31,
June 30,
September 30,
December 31,
Quarter Ended
$
$
$
605,872
70,167
55,580
55,580
0.05
0.04
149,992
(474,838)
(484,604)
(484,604)
206,440
(462,325)
(438,114)
(438,114)
(0.41)
(0.36)
(0.41)
(0.36)
$
213,979
(571,739)
(590,678)
(590,678)
(0.48)
(0.48)
55
Exhibit Index
Exhibit Description
Sixth Amended and Restated
Memorandum and Articles of Association
of the Registrant, as currently in effect
Deposit Agreement dated February 5, 2016
by and among the Company, the
Depositary and holders of the American
Depositary Receipts
Amendment No. 1 to Deposit Agreement,
dated April 11, 2016, by and among the
Registrant, Citibank, N.A. and holders of
the American Depositary Receipts
Letter Agreement, dated as of July 11,
2016, between the Registrant and Citibank,
N.A.
Form of Letter Agreement between the
Registrant and Citibank, N.A.
Form of American Depositary Receipt
(included in Exhibit 4.1.1)
Specimen Certificate for Ordinary Shares
Second Amended and Restated Investors’
Rights Agreement, dated as of April 21,
2015, by and among the Registrant and
certain shareholders named therein
Amendment No. 1 to Second Amended
and Restated Investors’ Rights Agreement,
dated January 26, 2016, by and among the
Registrant and certain shareholders named
therein
Registration Rights Agreement, dated as of
November 16, 2016, by and among the
Registrant and the investors named therein
Amendment No. 1 to Registration Rights
Agreement, dated December 1, 2020,
between the Company and the Investors
.1
.2
.3
.4
.1
.2
.1
.2
Filed/ Furnished
Herewith
Incorporated by Reference
Herein from Form or Sche
dule
8-K
(Exhibit 3.1)
SEC File/
Reg. Number
Filing Date
12/17/2021 001-37686
8-K
(Exhibit 4.1)
8-K
(Exhibit 4.1)
10-Q
(Exhibit 4.7)
10-Q
(Exhibit 4.9)
S-1
(Exhibit 4.3)
S-1
(Exhibit 4.4)
2/11/2016
001-37686
4/11/2016
001-37686
8/10/2016
001-37686
5/10/2017
001-37686
12/9/2015 333-207459
10/16/2015 333-207459
S-1
(Exhibit 10.21)
1/27/2016 333-207459
8-K
(Exhibit 4.1)
8-K
(Exhibit 10.1)
11/17/2016 001-37686
12/2/2020
001-37686
Description of the Registrant's Securities
Registered Pursuant to Section 12 of the
Securities Exchange Act of 1934
X
Exhibit
No.
3.1
4.1
4.2
4.3
4.4
4.5
4.6
Collaboration, License and Commercial Agreements
10.1#
.1# License and Supply Agreement, dated July
5, 2017, by and between the Registrant and
Celgene Logistics Sàrl
10-Q
(Exhibit 10.3)
11/13/2017 001-37686
Exhibit
No.
.2
10.2
10.3##
10.4##
.1#
#
.2
.3
.4
Exhibit Description
Assignment and Assumption Agreement,
dated December 29, 2017, by and between
the Registrant and BeiGene Switzerland
GmbH
Share Subscription Agreement, dated July
5, 2017, by and between Celgene
Switzerland LLC and the Registrant
Letter Agreement, dated June 14, 2019, by
and among the Registrant, BeiGene
Switzerland GmbH, Celgene Corporation
and Celgene Switzerland LLC, to
terminate the Amended and Restated
Exclusive License and Collaboration
Agreement, dated August 31, 2017
Share Purchase Agreement, dated October
31, 2019, by and between the Registrant
and Amgen Inc.
Amendment No. 1 to Share Purchase
Agreement, dated December 6, 2019, by
and between the Registrant and Amgen
Inc.
Restated Amendment No. 2 to Share
Purchase Agreement, dated September 24,
2020, by and between the Registrant and
Amgen Inc.
Amendment No. 3 to Share Purchase
Agreement, dated January 30, 2023, by
and between the Registrant and Amgen
Inc.
Filed/ Furnished
Herewith
Incorporated by Reference
Herein from Form or Sche
dule
10-K
(Exhibit 10.6.1)
Filing Date
3/2/2020
SEC File/
Reg. Number
001-37686
8-K
(Exhibit 10.1)
10-Q
(Exhibit 10.1)
7/6/2017
001-37686
8/8/2019
001-37686
10-K
(Exhibit 10.9)
10-K
(Exhibit 10.10)
3/2/2020
001-37686
3/2/2020
001-37686
8-K
(Exhibit 10.1)
9/24/2020
001-37686
X
Exhibit
No.
10.5##
10.6
.1#
#
.2#
#
Exhibit Description
Collaboration Agreement, dated October
31, 2019, by and among the Registrant,
BeiGene Switzerland GmbH and Amgen
Inc.
First Amendment to Collaboration
Agreement, dated April 20, 2022, by and
among the Registrant, BeiGene
Switzerland GmbH and Amgen Inc.
Guarantee, dated October 31, 2019, by and
between the Registrant and Amgen Inc.
.2#
#
.1#
#
10.7##
Collaboration and License Agreement,
dated January 11, 2021, by and between
BeiGene Switzerland GmbH and Novartis
Pharma AG
Option, Collaboration and License
Agreement, dated December 19, 2021, by
and between BeiGene Switzerland GmbH
and Novartis Pharma AG
Equity and Other Compensation Plans
10.8†
2011 Option Plan, as amended and form of
option agreements thereunder
10.9†
.1† Second Amended and Restated 2016 Share
Option and Incentive Plan
.2† Amendment No. 1 to the Second Amended
and Restated 2016 Share Option and
Equity Plan
.3† Amendment No. 2 to the Second Amended
and Restated 2016 Share Option and
Equity Plan
.4† Form of Global Restricted Share Unit
Award Agreement for Non-Employee
Directors under the Second Amended and
Restated 2016 Share Option and Incentive
Plan
.5† Form of Global Restricted Share Unit
Award Agreement for Employees under
the Second Amended and Restated 2016
Share Option and Incentive Plan
.6† Form of Global Restricted Share Unit
Award Agreement for Consultants under
the Second Amended and Restated 2016
Share Option and Incentive Plan
.7† Form of Global Non-Qualified Share
Option Agreement for Employees under
the Second Amended and Restated 2016
Share Option and Incentive Plan
.8† Form of Global Non-Qualified Share
Option Agreement for Non-Employee
Directors under the Second Amended and
Restated 2016 Share Option and Incentive
Plan
.9† Form of Global Non-Qualified Share
Option Agreement for Non-Employee
Consultants under the Second Amended
and Restated 2016 Share Option and
Incentive Plan
Filed/ Furnished
Herewith
Incorporated by Reference
Herein from Form or Sche
dule
10-K
(Exhibit 10.11)
Filing Date
3/2/2020
SEC File/
Reg. Number
001-37686
10-Q
(Exhibit 10.1)
8/8/2022
001-37686
10-K
(Exhibit 10.12)
10-Q
(Exhibit 10.1)
3/2/2020
001-37686
5/6/2021
001-37686
10-K
(Exhibit 10.7.2)
2/28/2022
001-37686
S-1
(Exhibit 10.1)
8-K
(Exhibit 10.1)
8-K
(Exhibit 10.1)
8-K
(Exhibit 10.1)
10-Q
(Exhibit 10.4)
10-Q
(Exhibit 10.2)
10-Q
(Exhibit 10.3)
10-Q
(Exhibit 10.1)
10-Q
(Exhibit 10.7)
10/16/2015 333-207459
12/12/2018 001-37686
6/17/2020
001-37686
6/22/2022
001-37686
8/8/2022
001-37686
11/9/2022
001-37686
11/9/2022
001-37686
11/9/2022
001-37686
8/8/2022
001-37686
10-Q
(Exhibit 10.8)
8/8/2022
001-37686
10.10†
.1† Third Amended and Restated 2018
Employee Share Purchase Plan
10-Q
(Exhibit 10.7)
8/5/2021
001-37686
Exhibit Description
Filed/ Furnished
Herewith
Exhibit
No.
10.11†
10.12†
Senior Executive Cash Incentive Bonus
Plan
Independent Director Compensation
Policy, as amended
Agreements with Executive Officers and Directors
Form of Indemnification Agreement,
10.14†
entered into between the Registrant and its
directors and officers
10.15†
10.16†
10.17†
10.18†
10.19†
16.1
21.1
Employment Agreement, dated April 25,
2017, by and between the Registrant and
John V. Oyler
.1† Executive Employment Agreement, dated
April 28, 2018, by and between BeiGene
(Beijing) Co., Ltd. and Xiaobin Wu
.2† Employment Apportionment Agreement,
dated March 1, 2020, by and between
BeiGene (Beijing) Co., Ltd., BeiGene
Guangzhou Biologics Manufacturing Co.,
Ltd. and Xiaobin Wu
Offer letter, dated May 29, 2020, by and
between the Registrant and Julia Wang
Consulting Agreement, dated February 24,
2021, by and between the Registrant and
Xiaodong Wang
Employment Agreement, dated December
30, 2021, by and between BeiGene
(Shanghai) Co., Ltd. and Lai Wang
Letter from Ernst & Young Hua Ming LLP
addressed to the U.S. Securities and
Exchange Commission dated March 25,
2022
List of Subsidiaries of the Registrant
X
Incorporated by Reference
Herein from Form or Sche
dule
S-1
(Exhibit 10.19)
8-K
(Exhibit 10.1)
SEC File/
Reg. Number
Filing Date
1/19/2016 333-207459
2/22/2022
001-37686
S-1
(Exhibit 10.3)
8-K
(Exhibit 10.1)
10-Q
(Exhibit 10.1)
10-Q
(Exhibit 10.2)
10-Q
(Exhibit 10.9)
10-K
(Exhibit 10.20)
10-K
(Exhibit 10.20)
1/19/2016 333-207459
4/26/2017
001-37686
8/9/2018
001-37686
5/11/2020
001-37686
8/5/2021
001-37686
2/25/2021
001-37686
2/28/2022
001-37686
8-K
(Exhibit 16.1)
3/25/2022
001-37686
Exhibit
No.
23.1
23.2
31.1
31.2
32.1*
99.1
101.INS
101.SCH
101.CAL
101.LAB
101.PRE
101.DEF
104
Exhibit Description
Consent of Ernst & Young LLP
Consent of Ernst & Young Hua Ming LLP
Certification of Principal Executive Officer
pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002
Certification of Principal Financial Officer
pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002
Certification of Principal Executive Officer
and Principle Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Disclosure Regarding Foreign Jurisdictions
that Prevent Inspections
Inline XBRL Instance Document - the
instance document does not appear in the
interactive data file because its XBRL tags
are embedded within the Inline XBRL
document
Inline XBRL Taxonomy Extension
Schema Document
Inline XBRL Taxonomy Extension
Calculation Linkbase Document
Inline XBRL Taxonomy Extension Label
Linkbase Document
Inline XBRL Taxonomy Extension
Presentation Linkbase Document
Inline XBRL Taxonomy Extension
Definition Linkbase Document
Cover Page Interactive Data File
(formatted as inline XBRL with applicable
taxonomy extension information contained
in Exhibits 101.*)
Incorporated by Reference
Herein from Form or Sche
dule
Filing Date
SEC File/
Reg. Number
Filed/ Furnished
Herewith
X
X
X
X
X
X
X
X
X
X
X
X
† Indicates a management contract or any compensatory plan, contract or arrangement.
# Confidential treatment has been granted by the U.S. Securities and Exchange Commission as to certain portions of this
exhibit omitted and filed separately.
## Certain portions of the exhibit have been omitted by means of redacting a portion of the text and replacing it with
"[*]", because they are both (i) not material and (ii) the type of information that the Registrant treats as private or
confidential.
*
Furnished herewith.
Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 27, 2023
BEIGENE, LTD.
By:
/s/ JOHN V. OYLER
John V. Oyler
Chief Executive Officer and Chairman
(Principal Executive Officer)
CORPORATE OFFICERS
John V. Oyler
Chairman, Co-Founder & CEO
BOARD OF DIRECTORS
John V. Oyler
Chairman, Co-Founder & CEO
Margaret Dugan
Dracen Pharmaceuticals
SHAREHOLDER MEETING
June 15, 2023
8:30 a.m. local time
The Offices of Mourant
Governance Services
(Cayman) Limited
94 Solaris Avenue
Camana Bay
Xiaobin Wu
President, Chief Operating
Officer and General Manager of
China
Julia Wang
Chief Financial Officer
Lai Wang
Global Head of R&D
Chan Lee
Senior Vice President, General
Counsel
Donald W. Glazer
Chairman of the Board of GMO Grand Cayman KY1-1108
Trust
Cayman Islands
EMPLOYEES
over 9,000 (as of December 31,
2022)
STOCK CODES
Nasdaq: BGNE
HKEX: 06160
SSE: 688235
INVESTOR RELATIONS
Kevin Mannix
+1 857-302-5189
Gabrielle Zhou
+86 10-5895-8058
ir@beigene.com
Michael Goller
Baker Brothers Investments
Anthony C. Hooper
Consultant of Amgen Inc.
Ranjeev Krishana
Baker Brothers Investments
Thomas Malley
Mossrock Capital, LLC
Alessandro Riva
Intima Bioscience
Corazon (Corsee) D. Sanders
Formerly of Bristol Myers
Squibb Corporation
Xiaodong Wang
Chairman of Scientific Advisory
Board & Co-Founder
Michael Qingqing Yi
Hillhouse Capital