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Item 7. Management’s Discussion and Analysis

2021-02-25 compared with 2020-03-02 · 275 added, 268 removed, 224 unchanged (71% of the section changed)

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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.

Information pertaining to fiscal year 2017 was included in our Annual Report on Form 10-K for the year ended December 31, 2018 beginning on page 94 under Part II, Item 7, “Management’s Discussion and Analysis of Financial Position and Results of Operations,” which was filed with the SEC on February 28, 2019.

We are a global commercial-stage biotechnology company focused on developing and commercializing innovative molecularly-targeted and immuno-oncology cancer therapeutics.

We started as a research and development company in Beijing in 2010.

Over the last ten years, we have developed into a fully-integrated global biotechnology company, with significant commercial, manufacturing, and research and development capabilities.

We have built substantial commercial capabilities in China and the United States, and are currently marketing two internally-developed drugs and three in-licensed drugs.

We also anticipate introducing five more in-licensed drugs into the China market in the next one to two years.

In the United States, we market BRUKINSA ™ (zanubrutinib) for adult patients with mantle cell lymphoma ("MCL") who have received at least one prior therapy and in China, we have received marketing approval and are in the process of launching tislelizumab for patients with classical Hodgkin’s Lymphoma ("cHL") who have received at least two prior therapies.

We have filed four additional supplementary new drug applications ("sNDA") for regulatory approvals in China and are planning for launches in these additional indications in 2020.

Our in-licensed portfolio includes ABRAXANE ® , REVLIMID ® and VIDAZA ® , which we have been marketing in China since 2017 under a license from Celgene Logistics Sàrl, a Bristol-Myers Squibb company (“BMS”).

We plan on launching additional in-licensed products in China from our collaborations, including XGEVA ® (denosumab), KYPROLIS ® (carfilzomib) and BLINCYTO ® (blinatumomab) from Amgen Inc.

("Amgen"), and SYLVANT ® (siltuximab) and QARZIBA ® ▼ (dinutuximab beta), from EUSA Pharma ("EUSA").

We have built deep clinical development capabilities, including a more than 1,100-person global clinical development team that is running over 60 ongoing or planned clinical trials that have enrolled over 7,500 patients and healthy subjects.

We are conducting late-stage clinical trials of BRUKINSA and tislelizumab, including 26 registration or registration-enabling trials in 15 discrete cancer indications.

Our internal research capabilities have yielded another late-stage asset, pamiparib, and five other internally-developed drug candidates are currently in early-stage clinical development.

In addition, we have been able to leverage our capabilities and China’s rising importance as a clinical science center to expand our clinical and pre-clinical portfolio with in-licensed drug candidates.

We are also working with high-quality contract manufacturing organizations ("CMOs") to manufacture our internally-developed commercial and clinical products in China and globally and have built state-of-the-art small molecule and biologic manufacturing facilities in China to support the launches and potential future demand of our internally-developed products.

Based on the strength of our China-inclusive global development and commercial capabilities, we have entered into collaborations with leading pharmaceutical and biotechnology companies to develop and commercialize innovative medicines in China and the Asia-Pacific region.

In October 2019, we entered into a strategic collaboration with Amgen pursuant to which we have agreed to collaborate on the commercialization of Amgen’s oncology products XGEVA, KYPROLIS and BLINCYTO in China, and the global development and future commercialization in China of up to 20 of Amgen's clinical- and late pre-clinical-stage pipeline products, including AMG 510, Amgen’s first-in-class investigational KRAS G12C inhibitor.

We are a global, commercial-stage biotechnology company focused on discovering, developing, manufacturing, and commercializing innovative medicines to improve treatment outcomes and expand access for patients worldwide.

Our research organization has delivered ten molecules into the clinic in our first ten years, including our two lead commercial medicines, BRUKINSA ® , a small molecule inhibitor of Bruton’s Tyrosine Kinase (“BTK”) for the treatment of various blood cancers, and tislelizumab, an anti-PD-1 antibody immunotherapy for the treatment of various solid tumor and blood cancers.

We are marketing BRUKINSA ® in the world’s two largest pharmaceutical markets, the United States and China, and tislelizumab in China, with an established, science-based commercial organization.

We have built state-of-the-art biologic and small molecule manufacturing facilities in China to support the potential future demand of our products, and we also work with high quality contract manufacturing organizations (“CMOs”) to manufacture our internally developed clinical and commercial products.

We are a leader in China-inclusive global clinical development, which we believe can facilitate faster and more cost-effective development of innovative medicines.

Our internal clinical development capabilities are deep, including a more than 1,600-person global clinical development team that is running more than 60 ongoing or planned clinical trials.

This includes more than 25 pivotal or registration-enabling trials for three product candidates that have enrolled more than 12,000 patients and healthy volunteers, of which approximately one-half have been outside of China, as of January 2021.

We have over 45 products and product candidates in commercial stage or clinical development, including 7 approved medicines, 5 pending approval, and over 30 in clinical development.

Supported by our development and commercial capabilities, we have entered into collaborations with world-leading biopharmaceutical companies such as Amgen and Novartis to develop and commercialize innovative medicines globally.

Since our inception in 2010 in Beijing, we have become a fully integrated global organization of over 5,300 employees in 14 countries and regions, including China, the United States, Europe and Australia.

Recent Developments

On January 13, 2020, we entered into an exclusive development and commercialization agreement for the orphan biologic products SYLVANT and QARZIBA in Greater China with EUSA Pharma ("EUSA").

Under the terms of the agreement, EUSA has granted us exclusive rights to SYLVANT in Greater China and to QARZIBA in mainland China.

Under the agreement, we have agreed to fund and undertake all clinical development and regulatory submissions in the territories, and plan to launch and commercialize both products once approved.

EUSA received a $40 million upfront payment and will be eligible to receive payments upon the achievement of regulatory and commercial milestones up to a total of $160 million.

EUSA will also be eligible to receive tiered royalties on future product sales.

On January 2, 2020, following approval by our shareholders and satisfaction of other closing conditions, we announced the closing of our global strategic oncology collaboration with Amgen for the commercialization and development in China of Amgen’s XGEVA, KYPROLIS, and BLINCYTO, and the joint global development of 20 oncology assets in Amgen’s pipeline, with BeiGene responsible for development and commercialization in China.

In connection with the collaboration, Amgen purchased a 20.5% stake in BeiGene for approximately $2.8 billion in cash at $174.85 per American Depositary Share ("ADS").

On December 27, 2019, we announced that our anti-PD-1 antibody tislelizumab received approval from the China National Medical Products Administration ("NMPA") as a treatment for patients with cHL who have received at least two prior therapies.

The new drug application ("NDA") was previously granted priority review by the NMPA.

On December 22, 2019, we announced that the NMPA accepted a supplemental new drug application (sNDA) for REVLIMID (lenalidomide), in combination with rituximab, for the treatment of patients with relapsed or refractory indolent lymphoma (follicular lymphoma or marginal zone lymphoma).

On November 14, 2019, we announced that BRUKINSA received accelerated approval from the United States Food and Drug Administration (FDA) as a treatment for MCL in adult patients who have received at least one prior therapy.

Coronavirus Disease 2019 (COVID-19)

We expect that the worldwide health crisis of the coronavirus disease (COVID-19) will have a negative impact on our operations in China, including clinical trial recruitment and participation, regulatory interactions and inspections, and commercial revenue, particularly in the first quarter of 2020 and possibly longer depending on the scope and duration of the disruption.

We continue to execute on our clinical development, regulatory and commercialization goals in China and are working to minimize delays and disruptions.

On February 17, 2021, we announced that the U.S.

Food and Drug Administration ("FDA") accepted a supplemental new drug application ("sNDA") for BRUKINSA ® for the treatment of adult patients with Waldenström’s macroglobulinemia ("WM").

The Prescription Drug User Fee Act ("PDUFA") target action date is October 18, 2021.

On January 29, 2021, we announced that the Shanghai Stock Exchange (the "SSE") had accepted our listing application for a proposed public offering of our ordinary shares and listing of such shares on the Science and Technology Innovation Board (the “STAR Market”) of the SSE (the “STAR Offering”).

The consummation of the STAR Offering is subject to, among other things, market conditions, shareholder approval, and applicable regulatory approvals.

On January 13, 2021, we announced that our anti-PD-1 antibody tislelizumab received approval from the China National Medical Products Administration ("NMPA") for use in combination with chemotherapy as a first-line treatment for patients with advanced squamous non-small cell lung cancer ("NSCLC").

This is the third approval in China for tislelizumab, and its first in a lung cancer indication.

On January 11, 2021, we announced a collaboration and license agreement with Novartis Pharma AG ("Novartis") 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.

We have agreed to jointly develop tislelizumab with Novartis 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 we have an option to co-detail the product in North America, funded in part by Novartis.

The transaction is expected to close in the first quarter of 2021, subject to expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

On December 27, 2020, we announced that three of our innovative oncology medicines were included in the updated National Reimbursement Drug List ("NRDL") by the China National Healthcare Security Administration (NHSA), including our internally-developed anti-PD1 antibody tislelizumab, our internally-developed BTK inhibitor BRUKINSA ® (zanubrutinib), and XGEVA ® (120-mg denosumab) from our strategic collaboration with Amgen.

On December 7, 2020, we announced that the NMPA approved BLINCYTO ® (blinatumomab) for injection for the treatment of adult patients with relapsed or refractory ("R/R") B-cell precursor acute lymphoblastic leukemia (ALL).

The biologics license application ("BLA") had been submitted by Amgen and received priority review by the Center for Drug Evaluation ("CDE") of the NMPA.

Developed by Amgen and licensed to us in China under a strategic collaboration commenced earlier in 2020, this is the first approval for BLINCYTO ® in China and our first product licensed from Amgen to be newly approved.

With this approval, BLINCYTO ® has become the first bispecific immunotherapy approved in China.

On November 19, 2020, we announced that the NMPA approved XGEVA ® (denosumab) for the prevention of skeletal-related events ("SREs") in patients with bone metastases from solid tumors and in patients with multiple myeloma ("MM").

Developed by Amgen and licensed to BeiGene in China under a strategic collaboration commenced earlier in 2020, XGEVA ® is also approved and marketed in China for the treatment of adults and skeletally mature adolescents with giant cell tumor of the bone ("GCTB") that is unresectable or where surgical resection is likely to result in severe morbidity.

Components of Operating Results

We began generating product revenue in September 2017 through our in-license agreement with BMS to distribute the approved cancer therapies ABRAXANE, REVLIMID and VIDAZA in China.

Following FDA approval on November 14, 2019, we launched our first internally developed drug, BRUKINSA, in the United States.

Product Revenue

We began generating product revenue in September 2017 through our in-license agreement with BMS to distribute the approved cancer therapies REVLIMID ® , VIDAZA ® , and ABRAXANE ® in China.

Following approval from the FDA in November 2019, we launched our first internally developed medicine, BRUKINSA ® , in the United States.

We launched our second internally developed medicine, tislelizumab, in China in March 2020 and in June 2020, we launched BRUKINSA ® in China.

In July 2020, we began selling XGEVA ® under our in-license agreement with Amgen.

Revenues from product sales are recognized when there is a transfer of control from the Company to the customer.

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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.

We expect revenue from product sales to increase in 2020 as we launch our internally developed drugs, BRUKINSA and tislelizumab, and launch additional in-licensed products from our collaborations with Amgen and EUSA and continue to expand our efforts to promote our existing commercial products.

In January 2020, we were notified that our tender offer for ABRAXANE was one of the winning tenders in China’s centralized procurement process, with a reduction from the current pricing, which is expected to take effect in the second quarter of 2020.

Once ABRAXANE is included in the centralized procurement process, we anticipate that demand will increase significantly, although at a significantly lower price than we have been charging during 2019 and into 2020, which could have a material impact on our commercialization efforts and results of operations.

To date, we have also recorded revenue from our 2017 collaboration and license agreement with BMS for tislelizumab, which was terminated in June 2019.

We expect revenue from our internal product sales to increase during 2021.

We received approval for BLINCYTO ® in China in December 2020 and plan to launch additional in-licensed products from our collaborations in 2021, and continue to expand our efforts to promote our existing commercial products.

Collaboration Revenue

We recognize collaboration revenues for amounts earned under collaborative and out-licensing arrangements.

Prior to the third quarter of 2019, we recorded revenue from our 2017 collaboration and license agreement with BMS for tislelizumab, which was terminated in June 2019.

Under this agreement, we received an upfront payment related to the license fee, which was recognized upon the delivery of the license right.

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We recognized the remainder of the deferred research and development services revenue balance upon termination of the collaboration agreement.

We also received research and development reimbursement revenue for the basket study trials that BMS opted into through the termination of the collaboration agreement.

Pursuant to the terms of the termination agreement, we received a one-time payment of $150 million in June 2019.

The entire payment was recognized in the period the termination occurred, as we had no further performance obligations under the collaboration.

We also recognized revenue for upfront license fees and milestone payments from a prior collaboration agreement with Merck KGaA, Darmstadt Germany during the years ended December 31, 2017 and 2018, respectively.

We also received research and development reimbursement revenue for the clinical trials that BMS opted into until the termination of the collaboration agreement.

Pursuant to the terms of the termination agreement, we received a one-time payment of $150 million in June 2019, which was recognized in full at that time because we had no further performance obligations under the collaboration.

We also recognized revenue for upfront license fees and milestone payments from a prior collaboration agreement with Merck KGaA, Darmstadt Germany during the year ended December 31, 2018.

Cost of Sales

Cost of sales includes the acquisition costs of our commercial products that have been sold during the period.

To date, cost of sales has consisted of the cost of products purchased from BMS and distributed in the People's Republic of China ("PRC" or "China").

Cost of sales includes the cost of products purchased from Amgen and BMS and distributed in China and the costs to manufacture our internally developed commercial products.

Also included in cost of sales are amounts paid to Amgen for its share of net sales or gross margin earned on sales of their in-licensed products.

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.

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Our research and development expenses consist of:

expenses incurred under agreements with contract research organizations, or CROs, contract manufacturing organizations, and consultants that conduct and support our clinical trials and preclinical studies;

• 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;

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• 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 drug candidates:

zanubrutinib, an investigational small molecule inhibitor of BTK;

tislelizumab, an investigational humanized monoclonal antibody against PD‑1;

pamiparib, an investigational small molecule inhibitor of PARP1 and PARP2;

lifirafenib, a novel small molecule inhibitor of both the monomer and dimer forms of BRAF;

BGB-A333, an investigational humanized monoclonal antibody against PD-L1;

BGB-A425, an investigational humanized monoclonal antibody against TIM-3;

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;

• pamiparib, an investigational selective small molecule inhibitor of PARP1 and PARP2;

• BGB-A1217, an investigational humanized monoclonal antibody against TIGIT;

• BGB-11417, an investigational small molecular inhibitor of Bcl-2;

• lifirafenib, an investigational novel small molecule inhibitor of both the monomer and dimer forms of BRAF;

• BGB-A333, an investigational humanized monoclonal antibody against PD-L1;

• BGB-A425, an investigational humanized monoclonal antibody against TIM-3.

Research and development activities also include costs associated with in-licensed drug candidates, including:

sitravatinib, an investigational, spectrum-selective kinase inhibitor in clinical development by Mirati Therapeutics, Inc.

ZW25 and ZW49, two bispecific antibody-based product candidates targeting HER2, under development by Zymeworks Inc.;

BA3071, an investigational CAB-CTLA-4 antibody, under development by BioAtla LLC.

• 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.

• zanidatamab (ZW25) and ZW49, two investigational bispecific antibody-based product candidates targeting HER2, licensed from Zymeworks Inc.

("Zymeworks");

• BA3071, an investigational CAB-CTLA-4 antibody, licensed from BioAtla, Inc.

• BAT1706, an investigational biosimilar to Avastin ® (bevacizumab), licensed from Bio-Thera Solutions, Ltd.

("Bio-Thera");

• DXP-593 and DXP-604, investigational anti-COVID-19 antibodies, licensed from Singlomics (Beijing DanXu) Biopharmaceuticals Co., Ltd.

("Singlomics").

We expense research and development costs when we incur them.

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 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-discovered drugs and drug candidates.

We are also unable to predict when, if ever, material net cash inflows will commence from sales of our drugs and drug candidates.

This is due to the numerous risks and uncertainties associated with developing such drugs and drug candidates, including the uncertainty of:

We are also unable to predict when, if ever, material net cash inflows will commence from sales of our medicines and drug candidates, if approved.

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 profile;

• establishing an appropriate safety and efficacy profile;

• establishing commercial manufacturing capabilities or making arrangements with third‑party manufacturers;

receipt of marketing approvals from applicable regulatory authorities;

successfully launching and commercializing our drugs and drug candidates, if and when approved, whether as monotherapies or in combination with our internally discovered drug candidates or third‑party products;

obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our drugs and drug candidates;

continued acceptable safety profiles of the products following approval;

• 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 internally developed 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;

• retention of key personnel.

A change in the outcome of any of these variables with respect to the development of any of our drug candidates would significantly change the costs, timing and viability associated with the development of that drug candidate.

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 research and development costs to increase significantly for the foreseeable future as our development programs progress, as we continue to support the clinical trials of our drugs and drug candidates as treatments for various cancers and as we move these drugs and drug candidates into additional clinical trials, including potential pivotal trials.

There are numerous factors associated with the successful commercialization of any of our drugs and drug candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development.

We expect research and development costs to increase significantly for the foreseeable future as our 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 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.

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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 with respect to ABRAXANE , REVLIMID , VIDAZA and tislelizumab in China and BRUKINSA in the United States and the preparation for launch and potential commercialization of our in-licensed products from our collaborations with Amgen and EUSA and internally-discovered drugs and drug candidates, if approved.

We also expect selling, general and administrative expenses to increase in future periods to support our research and development efforts, including the continuation of the clinical trials of our drugs and drug candidates as treatments for various cancers and the initiation of clinical trials for potential new indications or drug candidates.

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 with respect to tislelizumab, BRUKINSA ® , XGEVA ® and BLINCYTO ® and the preparation for potential launch and commercialization of additional in-licensed products from our collaborations and internally developed products, if approved.

We also expect selling, general and administrative expenses to increase in future periods to support our research and development efforts, including the continuation of the clinical trials of our treatments for various cancers and the initiation of clinical trials for potential new indications or drug candidates.

These cost increases will likely be due to increased promotional costs, increased headcount, increased share-based compensation expenses, expanded infrastructure and increased costs for insurance.

We also anticipate increased legal, compliance, accounting, insurance and investor and public relations expenses associated with being a public company with our ADSs and ordinary shares listed for trading on The NASDAQ Global Select Market and Hong Kong Stock Exchange, respectively.

We also incur significant legal, compliance, accounting, insurance and investor and public relations expenses associated with being a public company with our ADSs and ordinary shares listed for trading on The NASDAQ Global Select Market and The Hong Kong Stock Exchange, respectively.

Interest Income (Expense), Net

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Interest Expense

Interest expense consists primarily of interest on our long‑term bank loans and shareholder loan.

Interest expense consists primarily of interest on our bank loans and shareholder loan.

Other Income (Expense), Net

Other income consists primarily of government grants and subsidies received that involve no conditions or continuing performance obligations by us, realized and unrealized gains and losses related to foreign currency exchange rates and gains on the sale of investments.

Other income consists primarily of gains recognized related to equity investments, government grants and subsidies received that involve no conditions or continuing performance obligations by us, realized and unrealized gains and losses related to foreign currency exchange rates, unrealized gains and losses on equity securities, and realized gains and losses on the sale of investments.

Results of Operations

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The following table summarizes our results of operations for the years ended December 31, 2020 and 2019:

Year Ended December 31,

Year Ended December 31, Change

2020 2019 $ %

(dollars in thousands)

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Loss from operations (1,657,682) (959,891) (697,791) 72.7 %

Interest income (expense), net

Interest income, net 1,998 9,131 (7,133) (78.1) %

Other income, net 37,490 7,174 30,316 422.6 %

Loss before income tax expense (1,618,194) (943,586) (674,608) 71.5 %

Income tax (expense) benefit

Income tax (benefit) expense (17,671) 6,992 (24,663) (352.7) %

Net loss (1,600,523) (950,578) (649,945) 68.4 %

Net loss attributable to noncontrolling interest (3,617) (1,950) (1,667) 85.5 %

Net loss attributable to BeiGene, Ltd.

Total revenue increased by $230.0 million to $428.2 million for the year ended December 31, 2019 , from $198.2 million for the year ended December 31, 2018 .

$ (1,596,906) $ (948,628) $ (648,278) 68.3 %

Total revenue decreased by $119.3 million to $308.9 million for the year ended December 31, 2020, from $428.2 million for the year ended December 31, 2019, primarily due to the cessation of collaboration revenue following the termination of the BMS collaboration agreement in the second quarter of 2019, and the related $150.0 million termination fee that was recognized as revenue.

The following table summarizes the components of our revenue for the year ended December 31, 2020 and 2019, respectively:

Year Ended December 31, Changes

2020 2019 $ %

(dollars in thousands)

Product revenue $ 308,874 $ 222,596 $ 86,278 38.8 %

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Research and development service revenue — 27,982 (27,982) (100.0) %

Other — 150,000 (150,000) (100.0) %

Total collaboration revenue — 205,616 (205,616) (100.0) %

Net product revenue was $222.6 million for the year ended December 31, 2019 , which related primarily to sales of ABRAXANE, REVLIMID and VIDAZA in China.

We began recognizing product revenue with sales to our distributors in China, beginning in September 2017 following the closing of our strategic collaboration with BMS.

For the year ended December 31, 2019 , ABRAXANE, REVLIMID and VIDAZA represented 50%, 36% and 14%, respectively, of net product revenue for our marketed products in China.

Following FDA approval on November 14, 2019, we launched our first internally developed drug, BRUKINSA, in the United States.

We had $130.9 million product revenue for the year ended December 31, 2018 .

Collaboration revenue totaled $205.6 million for the year ended December 31, 2019 , and was comprised primarily of a $150.0 million payment received upon termination of the collaboration agreement with BMS for tislelizumab, as well as the revenue recognition of previously deferred amounts.

Total $ 308,874 $ 428,212 $ (119,338) (27.9) %

Net product revenue consisted of the following:

Year Ended December 31, Changes

2020 2019 $ %

(dollars in thousands)

Tislelizumab $ 163,358 $ — $ 163,358 NM

41,702 1,039 40,663 3,913.7 %

47,372 78,044 (30,672) (39.3) %

29,975 32,234 (2,259) (7.0) %

17,770 111,279 (93,509) (84.0) %

8,496 — 8,496 NM

Other 201 — 201 NM

Total product revenue $ 308,874 $ 222,596 $ 86,278 38.8 %

Net product revenue was $308.9 million for the year ended December 31, 2020, compared to $222.6 million in the prior year, primarily due to increased sales of our internally-developed products, BRUKINSA ® and tislelizumab, as well as initial sales of Amgen's XGEVA ® , offset by decreased sales of the BMS products in China.

Product revenue for tislelizumab reflects sales since its launch in China in March 2020.

Product revenue for BRUKINSA ® reflects sales in China since its launch in June 2020, as well as sales in the United States since its launch in November 2019.

Product revenue for XGEVA ® reflects sales in China since July 2020.

In December 2020, we announced the inclusion of tislelizumab, BRUKINSA ® , and XGEVA ® in the updated NRDL by the NHSA, effective March 2021.

The NRDL’s inclusion is expected to help expand access to these high-quality oncology treatments across China, but we expect net product revenue in China in the first quarter of 2021 to be impacted as the lower NRDL price is applied to tislelizumab, BRUKINSA ® and XGEVA ® product in the distribution channel.

Overall, we expect our internally-developed products and in-licensed products from Amgen to lead to total product revenue growth in 2021, driven by an increase in sales volumes as our launches mature.

We expect product revenue from the in-licensed products from BMS to continue to be impacted by the NMPA’s suspension of the importation, sales and use of ABRAXANE ® in China in March 2020 and the subsequent voluntary recall of ABRAXANE ® by BMS, as well as increased competition from generic products for REVLIMID ® and the loss of VBP status for VIDAZA ® .

Although the impact of COVID-19 on commercial activities in China lessened in the second half of 2020, there is continued uncertainty regarding the future potential impact of the pandemic both in China and the United States, as well as globally.

We do not expect revenue from ABRAXANE ® until the NMPA lifts its suspension on the importation, sale and use of ABRAXANE ® and qualified drug is manufactured and available for sale in China.

We do not know when the NMPA suspension of ABRAXANE ® will be lifted and when we will be able to re-commence sales of ABRAXANE ® .

We did not have any collaboration revenue during the year ended December 31, 2020.

Collaboration revenue totaled $205.6 million for the year ended December 31, 2019, comprised primarily of a $150.0 million payment received upon termination of the collaboration agreement with BMS for tislelizumab, as well as the revenue recognition of previously deferred amounts.

Additionally, we recognized $27.6 million for the reimbursement of research and development costs for the clinical trials that BMS had opted into prior to the agreement being terminated.

Collaboration revenue was $67.3 million for the year ended December 31, 2018 , and was comprised of $56.8 million for the reimbursement of research and development costs for the clinical trials that BMS had opted into, $9.1 million related to the recognition of deferred revenue for upfront fees allocated to undelivered research and development services to BMS and $1.5 million research and development services for achieving a milestone under the collaboration agreement with Merck KGaA, Darmstadt Germany.

Cost of Sales

Cost of sales increased to $71.2 million for the year ended December 31, 2019 from $28.7 million for the year ended December 31, 2018 , primarily due to increased volume of sales compared to the prior year.

Cost of sales for the year ended December 31, 2019 consisted entirely of the cost of products purchased from BMS and distributed in the PRC.

Cost of sales decreased to $70.7 million for the year ended December 31, 2020 from $71.2 million for the year ended December 31, 2019, primarily due to a change in sales mix from lower margin in-licensed products to higher margin internally-developed products.

Research and Development Expense

Research and development expense increased by $248.3 million , or 36.6% , to $927.3 million for the year ended December 31, 2019 , from $679.0 million for the year ended December 31, 2018 .

The following table summarizes external clinical, external non-clinical and internal research and development expense for the year ended December 31, 2019 and 2018 :

Research and development expense increased by $367.5 million, or 39.6%, to $1.3 billion for the year ended December 31, 2020, from $927.3 million for the year ended December 31, 2019.

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, 2020 and 2019:

Year Ended December 31, Changes

2020 2019 $ %

(dollars in thousands)

External cost of clinical-stage programs

In-process research and development expense

External cost of non-clinical-stage programs

External cost of development programs $ 502,399 $ 483,526 $ 18,873 3.9 %

Upfront license fees 109,500 50,000 59,500 119.0 %

Amgen co-development expenses 1

117,005 — 117,005 NM

Internal research and development expenses 565,973 393,812 172,161 43.7 %

Total research and development expenses $ 1,294,877 $ 927,338 $ 367,539 39.6 %

The increase in external research and development expense was primarily attributable to the advancement of our clinical and preclinical drug candidates, and included the following:

Increases of approximately $51.8 million and $64.9 million, respectively, for zanubrutinib and tislelizumab.

The expense increases were primarily due to the expansion of clinical trials, including trials that were initiated in late 2018 or early 2019, including Phase 3 studies in patients with R/R CLL and treatment-naïve patients with MCL for zanubrutinib and treatment-naïve patients with gastric cancer and esophageal cancer for tislelizumab.

In addition, the continuation of enrollment in ongoing pivotal trials for both drug candidates contributed to the period over period increase in expenses.

A decrease of $39.0 million related to in-process research and development expense due to lower upfront payments made under collaboration agreements compared to the prior year;

External spending for our non-clinical-stage programs, which was primarily related to manufacturing costs for pre-commercial activities and costs associated with our preclinical candidates.

The increase in internal research and development expense was primarily attributable to the expansion of our development organization and our clinical and preclinical pipeline, and included the following:

$66.2 million increase in employee salary and benefits, which was primarily attributable to hiring more research and development personnel to support our expanding research and development activities;

$21.9 million increase in share-based compensation expense, primarily attributable to our increased headcount, resulting in more awards being expensed related to the growing employee population;

$4.8 million increase in materials and reagent expenses, mainly in connection with the in-house manufacturing of drug candidates used for clinical purposes;

$6.9 million increase in consulting fees, which was mainly attributable to increased scientific, regulatory and development consulting activities, in connection with the advancement of our drug candidates;

$44.5 million increase of depreciation, travel, meeting and conferences, facility and IT allocable expenses, office expense, rental fees and other expenses to support the growth of our organization.

Our co-funding obligation for the development of the pipeline assets under the Amgen collaboration for the year ended December 31, 2020 totaled $231.0 million, of which $117.0 million was recorded as R&D expense.

The remaining $114.0 million was recorded as a reduction for the R&D cost share liability.

The increase in research and development expenses for the year December 31, 2020 was primarily attributable to:

• an increase of $117.0 million related to expense recognized on co-development fees to Amgen;

• an increase of $59.5 million related to license fees under collaboration agreements;

• an increase of $18.9 million in external clinical program costs, primarily due to the continued enrollment and expansion of pivotal clinical trials for our tislelizumab program and increases due to the expansion and advancement of and manufacturing costs for our earlier-stage clinical drug candidates.

Internal research and development expense increased $172.2 million, primarily attributable to the expansion of our global development organization including the internalization of previously outsourced activities and the continued development of our clinical and preclinical drug candidates, and included the following:

• $67.6 million increase of employee salary and benefits, primarily attributable to hiring more research and development personnel to support our expanding research and development activities;

• $60.3 million increase of materials and reagent expenses, primarily in connection with the in-house manufacturing of drug candidates used for clinical purposes;

• $16.7 million increase of share-based compensation expense, primarily attributable to our increased headcount, resulting in more awards being expensed related to the growing employee population;

• $30.5 million increase of facilities, depreciation, office expense, rental fees, and other expenses to support the growth of our organization.

These expense increases were partially offset by a $2.9 million decrease of consulting fees, which was primarily attributable to decreased travel, meeting and seminar expenses related to scientific, regulatory and development consulting activities.

Selling, General and Administrative Expense

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The increase was primarily attributable to the following:

$55.7 million increase in employee salary and benefits, which was primarily attributable to the hiring of more personnel to support our growing organization, including the expansion of our commercial organizations in China and the United States;

$25.1 million increase of share-based compensation expense, primarily attributable to our increased headcount, resulting in more awards being expensed related to the growing employee population;

$28.3 million increase in professional fees and consulting for general and administrative activities, including legal, recruiting, information technology, tax, accounting and audit services, mainly in connection with our growing business;

$51.9 million increase in external selling and marketing expenses, including market access studies, meeting and seminar expenses, promotional activities, and sponsorship and grant expenses;

$31.9 million increase in facility expenses, rental fees, office expenses, travel and meals expenses and other administrative expenses, primarily attributable to the global expansion of our business, including the expansion of our commercial operations in China and the United States.

Interest Income (Expense), Net

• $117.5 million increase in employee salary and benefits, which was primarily attributable to the expansion of our commercial organizations in China and the United States and the hiring of more personnel to support our growing business;

• $36.2 million increase in external commercial expenses, including selling and marketing, market access studies, meeting and seminar expenses, promotional activities, and sponsorship and grant expenses;

• $32.6 million increase in share-based compensation expense, primarily attributable to our increased headcount, resulting in more awards being expensed related to the growing employee population;

• $25.6 million increase in 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 and the United States.

Interest Income, Net

Interest income, net decreased to $2.0 million for the year ended December 31, 2020, from $9.1 million for the year ended December 31, 2019.

The decrease in interest income was primarily attributable to a decrease in interest income on our short-term investment balances.

The decrease in interest income, net, was primarily attributable to higher interest expense related to larger loan balances in 2020 and lower interest earned on our investments.

Other Income, Net

Other income, net increased by $30.3 million to $37.5 million for the year ended December 31, 2020, from $7.2 million for the year ended December 31, 2019.

The increase was mainly attributable to increases in gain on the sale of investments and government grants and subsidies received in 2019.

Income Tax (Expense) Benefit

Income tax expense was $7.0 million for the year ended December 31, 2019 compared with $15.8 million of income tax benefit for the year ended December 31, 2018 .

In the year ended December 31, 2019 , the increase in income tax expense was mainly attributable to an increase in income tax expense in certain of our PRC subsidiaries and a reduction of US deferred tax benefit attributable to increased research tax credits and stock compensation tax deductions, offset by establishment of a partial valuation allowance.

The increase was mainly attributable to the gain recognized in conjunction with the deconsolidation of MapKure, unrealized gains on equity securities, and realized gains on sales of available-for-sale securities, as well as foreign currency exchange gains.

Income Tax (Benefit) Expense

Income tax benefit was $17.7 million for the year ended December 31, 2020 compared with income tax expense of $7.0 million for the year ended December 31, 2019.

The income tax benefit for the year ended December 31, 2020 was primarily attributable to the tax benefit of U.S.

share-based compensation deductions in excess of the tax expense on income reported in certain China subsidiaries as adjusted for certain non-deductible expenses.

Liquidity and Capital Resources

Since our inception in 2010, we have incurred annual net losses and negative cash flows from our operations.

Substantially all of our losses have resulted from the funding of our research and development programs and selling, general and administrative expenses associated with our operations.

We incurred net losses of $950.6 million and $674.0 million for the years ended December 31, 2019 and 2018 , respectively.

The following table represents our cash, short-term investments, and debt balances as of December 31, 2020:

Year Ended December 31,

(in thousands)

Cash, cash equivalents and restricted cash $ 1,390,005 $ 620,775

Short-term investments $ 3,268,725 $ 364,728

Total debt $ 518,652 $ 240,695

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 $1.6 billion and $950.6 million for the years ended December 31, 2020 and 2019, respectively.

As of December 31, 2020, we had an accumulated deficit of $3.6 billion.

Our primary use of cash is to fund our research and development activities and to support the commercialization of our products in China and the United States and planned additional product launches in China and the United States.

Our operating activities used $750.3 million and $547.7 million for the years ended December 31, 2019 and 2018 , respectively.

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.

As of December 31, 2019 , we had cash, cash equivalents, restricted cash and short-term investments of $985.5 million , including approximately $123.7 million in cash and cash equivalents and $2.0 million of restricted cash held by our joint venture, BeiGene Biologics, to continue phased construction of our commercial biologics facility in Guangzhou, China and to fund research and development of our biologics drug candidates in China.

On January 2, 2020, we received approximately $2.8 billion from the sale of our ADSs to Amgen in connection with the closing of our strategic collaboration, which is not included in our December 31, 2019 financial statements.

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, 2020 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 January 29, 2021, the Shanghai Stock Exchange (the "SSE") accepted our listing application for a proposed public offering of our ordinary shares and listing of such shares on the Science and Technology Innovation Board (the “STAR Market”) of the SSE (the “STAR Offering”).

The STAR Offering will be conducted within the PRC, and such shares will be issued to and subscribed for by investors in Renminbi (“RMB”) in the PRC and listed and traded on the STAR Market in RMB (the “RMB Shares”).

The number of RMB Shares (including the over-allotment option) to be issued will not exceed 132,313,549 ordinary shares, representing no more than 10% of the sum of the total number of our issued ordinary shares as of January 7, 2021 and the total number of RMB Shares to be issued in the STAR Offering.

The STAR Offering is subject to, among other things, market conditions, the approval of our shareholders, and applicable regulatory approvals.

On January 11, 2021, we entered into a collaboration and license agreement with Novartis Pharma AG ("Novartis") 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.

Under the agreement, we will receive an upfront cash payment of $650 million from Novartis, which is not included in our cash balance as of December 31, 2020, upon closing of the transaction, which is subject to the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

The following table provides information regarding our cash flows for the years ended December 31, 2020 and 2019:

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Cash, cash equivalents and restricted cash at beginning of period $ 620,775 $ 740,713

Net cash (used in) provided by operating activities

Net cash provided by (used in) investing activities

Net cash used in operating activities (1,283,461) (750,269)

Net cash (used in) provided by investing activities (3,168,366) 554,163

Net cash provided by financing activities 5,202,826 85,680

Net effect of foreign exchange rate changes 18,231 (9,512)

Net (decrease) increase in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash 769,230 (119,938)

Cash, cash equivalents and restricted cash at end of period $ 1,390,005 $ 620,775

The use of cash in all periods presented resulted primarily from our net losses, adjusted for non-cash charges and changes in components of working capital.

The primary use of our cash, cash equivalents and short-term investments in all periods presented was to fund research and development, regulatory and other clinical trial costs, selling costs and related supporting administrative expenses.

Our prepaid expenses and other current assets, accounts payable and accrued expense balances in all periods presented were affected by the timing of vendor invoicing and payments.

Operating Activities

Operating activities used $750.3 million of cash for the year ended December 31, 2019 , which resulted principally from our net loss of $950.6 million and an increase in our net operating assets and liabilities of $10.8 million , offset by non-cash charges of $211.1 million .

The increase in our net operating assets was primarily due to an increase of $8.6 million in prepaid expenses and other current assets primarily related to prepayments to CROs for clinical trials, an increase of $20.8 million in

other non-current assets primarily related to prepayments for acquiring long-term assets, an increase of $29.8 million in accounts receivable on products sales from our collaboration with BMS, a decrease of $28.0 million in deferred revenue, an increase of $12.3 million in inventories, and an increase of $11.5 million in operating lease right-of-use assets, all of which had a negative impact on operating cash flow.

These cash uses were partially offset by an increase of $66.3 million in accounts payable and accrued expenses related to payments for external research and development costs, payroll-related costs and selling, general and administrative expenses to support our growing business, an increase of $8.5 million in other long-term liabilities primary related to government subsidies, and a decrease in unbilled receivables of $8.6 million related to the BMS collaboration, an increase of $7.6 million in taxes payable, and an increase of $9.2 million in operating lease liabilities, all of which have a positive impact on operating cash flow.

Our non-cash charges and other adjustments to our net loss during the year ended December 31, 2019 primarily consisted of $134.2 million of share-based compensation expense, $69.0 million of acquired in-process research and development related to upfront payments in our license agreements with Ambrx, BioAtla, Seattle Genetics and termination of our collaboration agreement with Merck KGaA, Darmstadt Germany, $8.0 million of non-cash interest expense and $18.6 million of depreciation expense, offset by $9.2 million related to deferred tax benefits, $3.9 million of amortization of bond discount and $5.6 million of disposal gain on available-for-sale securities and property and equipment.

Operating activities used $547.7 million of cash for the year ended December 31, 2018, which resulted principally from our net loss of $674.0 million and an increase in our net operating assets and liabilities of $17.2 million , offset by non-cash charges of $143.5 million .

The increase in our net operating assets was primarily due to an increase of $46.3 million in prepaid expenses and other current assets primarily related to prepayments to CROs for clinical trials, an increase of $40.2 million in other non-current assets primarily related to prepayments for acquiring long-term assets, an increase of $11.6 million in accounts receivable on products sales from our collaboration with BMS, a decrease of $9.1 million in deferred revenue, an increase of $5.3 million in inventories and a decrease of $3.4 million in taxes payable, all of which had a negative impact on operating cash flow.

These cash uses were partially offset by an increase of $74.0 million in accounts payable and accrued expenses related to payments for external research and development costs, payroll-related costs and selling, general and administrative expenses to support our growing business, an increase of $17.0 million in other long-term liabilities primary related to government subsidies, and a decrease in unbilled receivables of $7.7 million related to the BMS and other collaborations, all of which have a positive impact on operating cash flow.

Our non-cash charges and other adjustments to our net loss during the year ended December 31, 2018 primarily consisted of $87.1 million of share-based compensation expense, $70.0 million of acquired in-process research and development related to upfront payments in our license agreements with Mirati and Zymeworks, $7.8 million of non-cash interest expense and $10.4 million of depreciation expense, offset by $21.9 million related to deferred tax benefits, $8.0 million of amortization of bond discount and $1.9 million of disposal gain on available-for-sale securities and property and equipment.

Cash flows from operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities.

Operating activities used $1.3 billion of cash for the year ended December 31, 2020, which resulted principally from our net loss of $1.6 billion, partially offset by non-cash charges of $166.5 million and a decrease in our net operating assets and liabilities of $150.6 million.

The non-cash charges were primarily driven by share-based compensation expense, offset by amortization of the research and development cost share liability.

The decrease in working capital were driven largely by increases in accounts payable, accrued expenses and other liabilities, offset by increases in inventory and prepaid expenses.

Operating activities used $750.3 million of cash for the year ended December 31, 2019, which resulted principally from our net loss of $950.6 million and an increase in our net operating assets and liabilities of $10.8 million, partially offset by non-cash charges of $211.1 million.

The increase in working capital was driven primarily by increases in accounts receivable and other non-current assets, as well as a decrease in deferred revenue, offset by increases in accounts payable and accrued expenses.

Investing Activities

Investing activities provided $554.2 million of cash for the year ended December 31, 2019 , which was primarily due to cash proceeds from the sale and maturities of investment securities of $1.9 billion , partially offset by purchases of investment securities of $1.2 billion , $69.0 million of in-process research and development related to our license agreements with Ambrx, BioAtla, Seattle Genetics and the termination of our collaboration agreement with Merck KGaA, Darmstadt Germany, and capital expenditures of $89.6 million primarily related to our Guangzhou and Suzhou manufacturing facilities.

Investing activities used $637.6 million of cash for the year ended December 31, 2018, which was primarily due to purchases of investment securities of $2.6 billion , $70.0 million of in-process research and development related to our license agreements with Mirati and Zymeworks, $38.3 million of total costs related to the acquisition of our Changping facility, and capital expenditures of $70.3 million primarily related to our Guangzhou and Suzhou manufacturing facilities.

These cash uses were offset by sales and maturities of investment securities of $2.2 billion .

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 used $3.2 billion of cash for the year ended December 31, 2020, consisting of $5.7 billion in purchases of investment securities, $117.5 million of capital expenditures, and $109.5 million upfront collaboration payments, all of which were offset by sales and maturities of investment securities of $2.8 billion.

Investing activities provided $554.2 million of cash for the year ended December 31, 2019, which was primarily due to cash proceeds from the sale and maturities of investment securities of $1.9 billion, partially offset by purchases of investment securities of $1.2 billion, $69.0 million of upfront payments related to our license agreements and the termination of our collaboration agreement with Merck KGaA, Darmstadt Germany, and capital expenditures of $89.6 million.

Financing Activities

Financing activities provided $85.7 million of cash for the year ended December 31, 2019 , which was primarily due to $67.5 million from bank loans to fund our Guangzhou manufacturing facility and Shanghai working capital and $47.0 million from the exercise of employee share options.

These sources of cash were partially offset by $32.8 million for repayments of our Suzhou manufacturing facility and Shanghai working capital bank loans.

Financing activities provided $1.7 billion of cash for the year ended December 31, 2018, which was primarily due to $757.6 million of net proceeds from our follow-on public offering of ADSs in January 2018, $869.7 million of net proceeds from our follow-on public offering in August 2019 and the initial listing of our ordinary shares on The Hong Kong Stock Exchange Limited in August 2018, $42.3 million from a new long-term bank loan to fund our Guangzhou manufacturing

facility, and $29.7 million from the exercise of employee share options.

These sources of cash were partially offset by a $8.7 million repayment of a bank loan for our Suzhou manufacturing facility.

Cash flows from financing activities consist primarily of sale of ordinary shares and ADSs through equity offerings, issuance and repayment of short-term and long-term debt, and proceeds from the sale of ordinary shares and ADSs through employee equity compensation plans.

Financing activities provided $5.2 billion of cash for the year ended December 31, 2020.

This consisted primarily of $2.8 billion received from our collaboration with Amgen and $2.1 billion from a registered direct offering of ordinary shares to certain existing investors.

Other inflows included $93.1 million from the exercise of employee share options and proceeds from the issuance of shares through our employee share purchase plan, and $433.9 million from loan proceeds.

These inflows were partially offset by $144.3 million of repayment of principal under the Shareholder Loan with GET and $28.7 million of cash consideration paid for the acquisition of the remaining 5% minority interest in our subsidiary BeiGene Biologics Co., Ltd.("BeiGene Biologics").

Financing activities provided $85.7 million of cash for the year ended December 31, 2019.

This consisted primarily of $67.5 million from bank loans to fund our Guangzhou manufacturing facility and working capital requirements and $47.0 million from the exercise of employee share options.

These inflows were partially offset by $32.8 million for repayments of our Suzhou manufacturing facility and working capital bank loans.

Effects of Exchange Rates on Cash

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Since the reporting currency of the Company is the U.S.

dollar, periods of volatility may have a significant impact on our consolidated cash balances.

dollar, periods of volatility in exchange rates may have a significant impact on our consolidated cash balances.

Operating Capital Requirements

We have exclusive rights to distribute and promote BMS’s approved cancer therapies in China, for which we began recognizing revenue in the third quarter of 2017.

We received accelerated approval from the FDA for BRUKINSA as a treatment for MCL in adult patients who have received at least one prior therapy on November 14, 2019;

and regulatory approval from the NMPA for tislelizumab as a treatment for patients with cHL who have received at least two prior therapies on December 27, 2019.

We launched BRUKINSA in the United States in November 2019 and expect to launch tislelizumab in China in 2020.

However, we do not expect to generate significant revenue from product sales of our internally-developed drugs and drug candidates unless and until we obtain regulatory approval for additional indications of our currently approved drugs.

We anticipate that we will continue to generate losses for the foreseeable future as we continue the development of, and seek regulatory approvals for, our drugs and drug candidates, commercialize our approved products and prepare for commercialization and begin to commercialize any future approved products.

As a growing public company, we will continue to incur additional costs associated with our operations.

In addition, we expect to incur significant commercialization expenses for product sales, marketing and manufacturing of our in-licensed drug products as well as our internally developed products that are either approved or in late-stage clinical trials.

We may need additional funding prior to generating sufficient cash from operations to fund our continuing operations.

Based on our current operating plan, we expect that our existing cash, cash equivalents and short-term investments as of December 31, 2019 , will enable us to fund our operating expenses and capital expenditures requirements for at least the next 12 months after the date that the financial statements included in this report are issued.

In addition to the cash, cash equivalents and short-term investments as of December 31, 2019 , we received $2.8 billion in cash upon Amgen's purchase of a 20.5% equity stake in the Company on January 2, 2020.

We expect that our expenses will continue to increase substantially as we fund our ongoing research and clinical development efforts, including our ongoing and planned pivotal trials for zanubrutinib, tislelizumab and pamiparib, both in China and globally, and the shared development costs of Amgen's 20 oncology pipeline products and additional in-licensed drug candidates;

our other ongoing and planned clinical trials;

regulatory filing and registration of our late-stage drug candidates;

expansion of our commercial operations in China and the U.S.

and the launch of our in-licensed commercial drug portfolio and late-stage drug candidates globally;

business development and manufacturing activities;

and working capital and other general corporate purposes.

We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we expect in our current operating plan.

Because of the numerous risks and uncertainties associated with the development and commercialization of our drugs and drug candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures necessary to complete the development and commercialization of our drug candidates.

We expect to continue to incur losses for the foreseeable future and expect these losses to increase in the near term, as we continue to develop and seek regulatory approvals for our product candidates, expand our research and manufacturing facilities and activities, and commercialize both our internally developed and in-licensed products.

The size of our future net losses will depend, in part, on the number and scope of our development programs and the associated costs of those programs, our ability to generate product revenue, and the timing and amount of payments we make or receive from arrangements with third parties.

If any of our products and product 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 future capital requirements will depend on many factors, including:

our ability to successfully commercialize our internally developed and in-licensed drugs;

• our ability to successfully commercialize our internally developed and in-licensed medicines and drug candidates, if approved;

• the costs, timing and outcome of regulatory reviews and approvals;

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• the initiation, progress, timing, costs and results of nonclinical studies and clinical trials for our other programs and potential drug candidates;

the number and characteristics of the drugs and drug candidates we pursue;

• the number and characteristics of the medicines and drug candidates we pursue;

• the costs of establishing or expanding commercial manufacturing capabilities or securing necessary supplies from third-party manufacturers;

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• the extent to which we acquire or in‑license other products and technologies;

our ability to maintain and establish collaboration arrangements on favorable terms, if at all.

• our ability to establish and maintain collaboration arrangements on favorable terms, if at all.

Until such time, if ever, as we can generate substantial product revenue, 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 SEC rules, 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.

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.

On May 11, 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, at which time we may file another shelf registration statement that will be effective for up to three years from filing.

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 or ordinary 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 technologies, future revenue streams or 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.

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 products or drug candidates, future revenue streams or 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.

Contractual Obligations and Commitments

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Payments Due by Period

Less Than More Than

Total 1 Year 1–3 Years 3–5 Years 5 Years

(in thousands)

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Debt obligations 518,652 335,015 15,019 63,106 105,512

Interest on debt 59,021 22,238 16,593 13,196 6,994

Co-development funding commitment 1,019,009 259,000 760,009 — —

Pension plan 8,113 1,357 2,714 2,714 1,328

Capital commitments 44,972 44,972 — — —

Total $ 1,820,935 $ 720,371 $ 852,727 $ 111,090 $ 136,747

Operating Lease Commitments

We lease office or manufacturing facilities in Beijing, Shanghai, Suzhou and Guangzhou, PRC and office facilities in the United States in California, Massachusetts and New Jersey and Basel, Switzerland under non-cancelable operating leases expiring on different dates.

Payments under operating leases are expensed on a straight-line basis over the periods of the respective leases.

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, 2019 , purchase commitments amounted to $128.5 million , of which $97.2 million related to minimum purchase requirements for supply purchased from contract manufacturing organizations and $31.3 million related to binding purchase order obligations of inventory from BMS.

We do not have any minimum purchase requirements for inventory from BMS.

As of December 31, 2020, purchase commitments amounted to $123.4 million, of which $101.3 million related to minimum purchase requirements for supply purchased from CMOs and $22.1 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

Long-Term Bank Loans

On April 4, 2018, BeiGene Guangzhou Biologics Manufacturing Co., Ltd.

("BeiGene Guangzhou Factory") entered into a nine-year loan agreement with China Construction Bank to borrow RMB580.0 million at a floating interest rate benchmarked against prevailing interest rates of certain PRC financial institutions.

The loan is secured by BeiGene Guangzhou Factory’s land use right.

Interest expense is paid quarterly until the loan is fully settled.

As of December 31, 2019 , we have drawn down the entire $83.3 million (RMB 580.0 million ) in aggregate principal amount of this loan.

Maturity dates range from 2021 to 2027.

Shareholder Loan

On March 7, 2017, BeiGene Biologics entered into a Shareholder Loan Contract with Guangzhou GET Technology Development Co., Ltd.

(now Guangzhou High-tech Zone Technology Holding Group Co., Ltd.) ("GET"), pursuant to which, GET provided a shareholder loan to BeiGene Biologics in the principal amount of RMB900.0 million at a fixed 8% annual interest rate.

The term of the shareholder loan is 72 months, commencing from the actual drawdown date of April 14, 2017 and ending on April 13, 2023, unless converted earlier.

On April 14, 2017, we drew down the entire RMB900.0 million from GET, which remains outstanding as of December 31, 2019 .

The following table summarizes our short-term debt and long-term bank loans as of December 31, 2020 (amounts in thousands, except for percentage data):

Lender Agreement Date Line of Credit Term Maturity Date Interest Rate December 31, 2020

China Construction Bank April 4, 2018 RMB580,000 9-year April 4, 2027 (1) 307 2,000

China Minsheng Bank (the "Senior Loan") September 24, 2020 $200,000 (2) 5.8% 198,320 1,294,010

Zhuhai Hillhouse (the "Related Party Loan") September 24, 2020 RMB500,000 (3) 5.8% 15,326 100,000

Other short-term debt (4) 121,062 789,918

Total short-term debt 335,015 2,185,928

China Construction Bank April 4, 2018 RMB580,000 9-year April 4, 2027 (1) 88,584 578,000

China Merchants Bank January 22, 2020 (5) 9-year January 20, 2029 (5) 53,641 350,000

China Merchants Bank November 9, 2020 RMB378,000 9-year November 8, 2029 (6) 41,412 270,206

Total long-term bank loans 183,637 1,198,206

The outstanding borrowings bear a floating interest rate benchmarking RMB loan interest rates of financial institutions in the PRC.

The loan interest rate was 4.9% as of December 31, 2020.

$120.0 million of the Senior Loan was designated to fund the JV share repurchase and repayment of the shareholder loan and $80.0 million was designated for general working capital purposes.

The Senior Loan has an original maturity date of October 8, 2021, which is the first anniversary of the first date of utilization of the loan.

We may extend the original maturity date for up to two additional twelve-month periods.

On October 9, 2020, we drew down $80.0 million of the working capital facility and $118.3 million of the acquisition facility to be used for the JV share repurchase.

RMB100.0 million of the Related Party Loan was designated for general corporate purposes and RMB400.0 million was designated for repayment of the Senior Loan, including principal, interest and fees.

The loan matures at the earlier of:

(i) November 9, 2021, which is one month after the Senior Loan maturity date, if not extended, or (ii) ten business days after the Senior Loan is fully repaid.

On September 30, 2020, we drew down the first tranche of $14.7 million (RMB100.0 million).

We entered into additional short-term working capital loans with China Industrial Bank and China Merchants Bank to borrow up to RMB1.5 billion in aggregate, with maturity dates ranging from April 19, 2021 to December 16, 2021 during the year ended December 31, 2020.

The weighted average interest rate for the short-term working capital loans was approximately 4.4% as of December 31, 2020.

On January 22, 2020, our BeiGene Guangzhou Factory subsidiary entered into a nine-year bank loan with China Merchants Bank to borrow up to RMB1.1 billion at a floating interest rate benchmarked against prevailing interest rates of certain PRC financial institutions.

In connection with our short-term loan agreements with China Merchants Bank entered into during the year ended December 31, 2020, the line of credit was reduced from RMB1.1 billion to RMB350.0 million.

The loan interest rate was 4.4% as of December 31, 2020.

The outstanding borrowings bear a floating interest rate benchmarking RMB loan interest rates of financial institutions in the PRC.

The loan interest rate was 4.3% as of December 31, 2020.

Interest on Debt

Interest on bank loans and the Related Party Loan 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 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, 2020, our remaining co-development funding commitment was $1.0 billion.

We maintain a defined benefit pension plan in Switzerland.

Funding obligations under the defined benefit pension plan are equivalent to $1.4 million per year based on annual funding contributions in effect as of December 31, 2020 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 $42.1 million for the acquisition of property, plant and equipment as of December 31, 2019 , which was primarily for BeiGene Guangzhou Factory’s manufacturing facility and expansion of BGC's research and development activities in Guangzhou, China.

We had capital commitments amounting to $45.0 million for the acquisition of property, plant and equipment as of December 31, 2020, which was primarily for BeiGene Guangzhou Factory’s manufacturing facility, expansion of BGC's research and development activities in Guangzhou, China, and research and development operations at our Changping facility in Beijing, China.

Other Business Agreements

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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 its collaboration agreements.

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.

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Off‑Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off‑balance sheet arrangements, as defined under SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets.

During the periods presented we did not have, and we do not currently have, any off‑balance sheet arrangements, as defined under SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to

as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets.

Critical Accounting Policies

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Revenue Recognition

Effective January 1, 2018, we adopted Accounting Standards Codification, Topic 606, Revenue from Contracts with Customers (“ASC 606”).

For further information regarding the impact of adoption, see Note 2 Recent Accounting Pronouncements.

Effective January 1, 2018, we adopted Accounting Standards Codification, Topic 606, Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective approach.

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.

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Product Revenue

Our product revenues are generated from the sale of ABRAXANE, REVLIMID, and VIDAZA to our product distributor in China, our sole customer in China.

The first tier distributor subsequently resells the products to second tier distributors, who ultimately sell the products to health care providers and patients.

Following FDA approval on November 14, 2019, we began selling our first internally developed drug, BRUKINSA, in the United States to specialty pharmacies and specialty distributors, our U.S.

The Company generates product revenue in China through the sale of its internally developed drugs tislelizumab and BRUKINSA ® , and the sale of in-licensed products in China through its agreements with Amgen and BMS.

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 revenue from the sale of BRUKINSA ® .

In China, the Company sells its internally developed products to multiple distributors, who in turn sell the products 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.

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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.

In China, rebates, including price compensation credits, are offered to distributors, consistent with pharmaceutical industry practices.

In China, rebates are offered to distributors.

We record a provision for rebates at the time of sale based on contracted rates and historical redemption rates.

Assumptions used to establish the provision include the level of distributor inventories, sales volumes and contract pricing and estimated acceptance of government pricing or reimbursement amounts (such as provincial acceptance of the National Reimbursement Drug List pricing in the PRC).

We regularly review the information related to these estimates and adjust the provision accordingly.

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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, specific known market events and trends, industry data and forecasted customer buying and payment patterns.

product revenues and related reserves for variable consideration were not significant for the year ended December 31, 2019 as we did not begin generating product revenue in the United States until after BRUKINSA received FDA approval on November 14, 2019.

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.

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Collaboration Revenue

At contract inception, we analyze our 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, we first determine 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.

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The portion of the transaction price allocated to research and development services performance obligations is deferred and recognized as collaboration revenue overtime as delivery or performance of such services occurs.

R&D reimbursement revenue for revenue attributable to the clinical trials that BMS opted into is recognized as delivery or performance of such services occurs.

R&D reimbursement revenue for revenue attributable to the clinical trials that BMS had opted into is recognized as delivery or performance of such services occurs.

Milestone Payments:

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Milestones related to our 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.

Due to the uncertainty involved in meeting these development-based targets, they

are generally fully constrained at contract inception.

We will assess whether the variable consideration is fully constrained each reporting period based on the facts and circumstances surrounding the clinical trials.

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Regulatory milestones are included in the transaction price in the period regulatory approval is obtained.

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, we recognize 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).

Research and Development Expenses

Research and development expenses represent costs associated with the collaborative arrangements, which primarily include (1) payroll and related costs (including share‑based compensation) associated with research and development personnel;

Research and development expenses represent costs associated with our research and development activities, which primarily include (1) payroll and related costs (including share‑based compensation) associated with research and development personnel;

(2) costs related to clinical trials and preclinical testing of our technologies under development;

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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.

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.

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Royalties owed on sales of the products licensed pursuant to the agreements are expensed in the period the related revenues are recognized.

Share‑Based Compensation

Awards Granted to Employees

We apply ASC 718, Compensation—Stock Compensation ("ASC 718") to account for our employee share‑based payments.

In accordance with ASC 718, we determine whether an award should be classified and accounted for as a liability award or equity award.

All our 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.

We have 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.

We use 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 we revise these estimates in the future, the share‑based payments could be materially impacted in the period of revision, as well as in following periods.

We, with the assistance of an independent third‑party valuation firm, determined the estimated fair value of the share options granted to employees using a binomial option pricing model.

Awards Granted to Non‑Employees

We have accounted for equity instruments issued to non‑employees in accordance with the provisions of ASC 718, Share-based payments , 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 measurement date of the fair value of the equity instrument issued is the date on which the counterparty’s performance is completed as there is no associated performance commitment.

The expense is recognized in the same manner as if we had paid cash for the services provided by the non‑employees in accordance with ASC 505‑50, Equity‑based payments to non‑employees .

We estimate 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, we recognize incremental compensation cost in the period the modification occurs.

For unvested awards, we recognize 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 we recognize is the cost of the original award.

Significant Factors, Assumptions, and Methodologies Used in Determining Fair Value

The fair value of each share option grant is estimated using the binomial option‑pricing model.

The model requires the input of highly subjective assumptions including the estimated expected share price volatility and, the share price upon which (i.e.

the exercise multiple) the employees are likely to exercise share options.

The trading history and observation period of our own share price movement has not been long enough to match the life of the share option.

Therefore, we estimate our expected share price volatility based on the historical volatility of a group of similar companies, which are publicly‑traded.

When selecting these public companies on which we have based our expected share price volatility, we selected companies with characteristics similar to us, including the invested capital’s value, business model, development stage, risk profiles, position within the industry, and with historical share price information sufficient to meet the contractual life of our share‑based awards.

We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own share price becomes available.

For the exercise multiple, we were not able to develop an exercise pattern as reference, thus the exercise multiple is based on management’s estimation, which we believe is representative of the future exercise pattern of the options.

The risk‑free interest rates for the periods within the contractual life of the option are based on the U.S.

Treasury yield curve in effect during the period the options were granted.

Expected dividend yield is based on the fact that we have never paid, and do not expect to pay cash dividends in the foreseeable future.

The assumptions adopted to estimate the fair value of share options using the binomial option pricing model were as follows:

Year Ended December 31,

Risk-free interest rate

Expected exercise multiple

Expected volatility

Expected dividend yield

Contractual life (years)

We are also required to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods if actual forfeitures differ from our estimates.

We use historical data to estimate pre‑vesting option forfeitures and record share‑based compensation expense only for those awards that are expected to vest.

To the extent that actual forfeitures differ from our estimates, the difference is recorded as a cumulative adjustment in the period the estimates were revised.

These assumptions represented our best estimates, but the estimates involve inherent uncertainties and the application of our judgment.

As a result, if factors change and we use significantly different assumptions or estimates when valuing our share options, our share‑based compensation expense could be materially different.

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 following table summarizes total share-based compensation expense recognized for the years ended December 31, 2019 and 2018 :

Year Ended December 31,

(in thousands)

Research and development

Selling, general and administration

As of December 31, 2019 , there was $364.2 million of total unrecognized share-based compensation expense, net of estimated forfeitures, related to unvested share-based awards which are expected to be recognized over a weighted-average period of 2.4 years.

As of December 31, 2018 , there was $289.9 million of total unrecognized share-based compensation expense, net of estimated forfeitures, related to unvested share-based awards which are expected to be recognized over a weighted-average period of 2.6 years.

In future periods, our share-based compensation expense is expected to increase as a result of recognizing our existing unrecognized share-based compensation for awards that will vest and as we issue additional share-based awards to attract and retain our employees.

We use the liability method of accounting for income taxes.

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We evaluate our 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.

We recognize 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.

We recognize 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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis