BeOne Medicines Ltd. 10-Q

bgne-20230630 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________________________ FORM 10-Q ___________________________________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-37686 BEIGENE, LTD. (Exact name of registrant as specified in its charter) Cayman Islands 98-1209416 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) c/o Mourant Governance Services (Cayman) Limited 94 Solaris Avenue, Camana Bay Grand Cayman Cayman Islands KY1-1108 (Address of principal executive offices) (Zip Code) +1 ( 345 ) 949-4123 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered American Depositary Shares, each representing 13 Ordinary Shares, par value $0.0001 per share BGNE The NASDAQ Global Select Market Ordinary Shares, par value $0.0001 per share* 06160 The Stock Exchange of Hong Kong Limited *Included in connection with the registration of the American Depositary Shares with the Securities and Exchange Commission. The ordinary shares are not listed for trading in the United States but are listed for trading on The Stock Exchange of Hong Kong Limited. As of July 31, 2023, 1,376,270,056 ordinary shares, par value $0.0001 per share, were outstanding, of which 871,565,851 ordinary shares were held in the form of 67,043,527 American Depositary Shares, each representing 13 ordinary shares, and 115,055,260 were RMB shares. Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ Table of Contents BeiGene, Ltd. Quarterly Report on Form 10-Q TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION 3 Item 1. Financial Statements 3 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31 Item 3. Quantitative and Qualitative Disclosures about Market Risk 48 Item 4. Controls and Procedures 49 PART II. OTHER INFORMATION 51 Item 1. Legal Proceedings 51 Item 1A. Risk Factors 51 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 110 Item 3. Defaults Upon Senior Securities 110 Item 4. Mine Safety Disclosures 110 Item 5. Other Information 110 Item 6. Exhibits 111 SIGNATURES 114 2 Table of Contents PART I. FINANCIAL INFORMATION Item 1. Financial Statements BEIGENE, LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands of U.S. Dollars (“$”), except for number of shares and per share data) As of June 30, December 31, Note 2023 2022 $ $ (unaudited) (audited) Assets Current assets: Cash and cash equivalents 3,410,368 3,869,564 Short-term restricted cash 5 9,693 196 Short-term investments 5 105,693 665,251 Accounts receivable, net 10 299,282 173,168 Inventories 6 321,333 282,346 Prepaid expenses and other current assets 10 255,050 216,553 Total current assets 4,401,419 5,207,078 Long-term restricted cash 5 1,513 5,277 Property, plant and equipment, net 7 1,031,938 845,946 Operating lease right-of-use assets 99,422 109,960 Intangible assets, net 8 46,895 40,616 Other non-current assets 10 147,549 170,413 Total non-current assets 1,327,317 1,172,212 Total assets 5,728,736 6,379,290 Liabilities and shareholders' equity Current liabilities: Accounts payable 266,975 294,781 Accrued expenses and other payables 10 454,950 467,352 Deferred revenue, current portion 4 159,034 213,861 Tax payable 9 17,074 25,189 Operating lease liabilities, current portion 23,508 24,041 Research and development cost share liability, current portion 4 62,516 114,335 Short-term debt 11 421,052 328,969 Total current liabilities 1,405,109 1,468,528 Non-current liabilities: Long-term bank loans 11 207,426 209,148 Deferred revenue, non-current portion 4 24,276 42,026 Operating lease liabilities, non-current portion 25,821 34,517 Deferred tax liabilities 9 15,652 15,996 Research and development cost share liability, non-current portion 4 208,775 179,625 Other long-term liabilities 10 43,118 46,095 Total non-current liabilities 525,068 527,407 Total liabilities 1,930,177 1,995,935 Commitments and contingencies 18 Equity: Ordinary shares, US$ 0.0001 par value per share; 9,500,000,000 shares authorized; 1,376,251,336 and 1,356,140,180 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively 137 135 Additional paid-in capital 11,752,019 11,540,979 Accumulated other comprehensive loss 15 ( 143,687 ) ( 77,417 ) Accumulated deficit ( 7,809,910 ) ( 7,080,342 ) Total equity 3,798,559 4,383,355 Total liabilities and equity 5,728,736 6,379,290 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents BEIGENE, LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands of U.S. Dollars (“$”), except for number of shares and per share data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, Note 2023 2022 2023 2022 $ $ $ $ Revenues Product revenue, net 12 553,745 304,511 964,036 566,084 Collaboration revenue 4 41,516 37,061 79,026 82,114 Total revenues 595,261 341,572 1,043,062 648,198 Expenses Cost of sales - product 95,990 71,173 177,779 136,410 Research and development 422,764 378,207 831,348 768,122 Selling, general and administrative 395,034 331,403 723,533 625,976 Amortization of intangible assets 188 188 375 376 Total expenses 913,976 780,971 1,733,035 1,530,884 Loss from operations ( 318,715 ) ( 439,399 ) ( 689,973 ) ( 882,686 ) Interest income, net 15,070 11,431 31,086 21,502 Other expense, net ( 63,818 ) ( 129,617 ) ( 45,515 ) ( 117,650 ) Loss before income taxes ( 367,463 ) ( 557,585 ) ( 704,402 ) ( 978,834 ) Income tax expense 9 13,674 8,141 25,166 22,090 Net loss ( 381,137 ) ( 565,726 ) ( 729,568 ) ( 1,000,924 ) Net loss per share ( 0.28 ) ( 0.42 ) ( 0.54 ) ( 0.75 ) Weighted-average shares outstanding—basic and diluted 1,360,224,377 1,336,463,026 1,357,211,308 1,334,252,648 Net loss per American Depositary Share (“ADS”) ( 3.64 ) ( 5.50 ) ( 6.99 ) ( 9.75 ) Weighted-average ADSs outstanding—basic and diluted 104,632,644 102,804,848 104,400,870 102,634,819 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents BEIGENE, LTD. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Amounts in thousands of U.S. Dollars (“$”)) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 $ $ $ $ Net loss ( 381,137 ) ( 565,726 ) ( 729,568 ) ( 1,000,924 ) Other comprehensive income (loss), net of tax of nil: Foreign currency translation adjustments ( 86,519 ) ( 97,459 ) ( 73,172 ) ( 88,085 ) Unrealized holding income (loss), net 1,846 ( 2,445 ) 6,902 ( 12,315 ) Comprehensive loss ( 465,810 ) ( 665,630 ) ( 795,838 ) ( 1,101,324 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents BEIGENE, LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands of U.S. Dollars (“$”)) (Unaudited) Six Months Ended June 30, Note 2023 2022 $ $ Operating activities: Net loss ( 729,568 ) ( 1,000,924 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 42,346 32,061 Share-based compensation expenses 14 178,693 146,860 Unrealized losses on equity investments 5 2,178 23,529 Amortization of research and development cost share liability 4 ( 22,669 ) ( 45,583 ) Deferred income tax (expense) benefits ( 15 ) 555 Other items, net 767 6,360 Changes in operating assets and liabilities: Accounts receivable ( 131,923 ) 307,430 Inventories ( 53,598 ) ( 31,633 ) Other assets ( 30,627 ) 32,335 Accounts payable ( 32,678 ) ( 30,362 ) Accrued expenses and other payables ( 8,082 ) 21,168 Deferred revenue ( 72,577 ) ( 76,737 ) Other liabilities 88 ( 1,581 ) Net cash used in operating activities ( 857,665 ) ( 616,522 ) Investing activities: Purchases of property, plant and equipment ( 247,055 ) ( 95,421 ) Purchase of intangible asset — — Purchases of investments ( 11,582 ) ( 11,504 ) Proceeds from sale or maturity of investments 567,500 1,051,028 Purchase of in-process research and development — ( 75,000 ) Net cash provided by investing activities 308,863 869,103 Financing activities: Proceeds from long-term loan 11 15,771 — Repayment of long-term loan 11 — — Proceeds from short-term loans 11 161,846 67,586 Repayment of short-term loans 11 ( 66,574 ) ( 115,405 ) Proceeds from option exercises and employee share purchase plan 35,169 18,972 Net cash provided by (used in) financing activities 146,212 ( 28,847 ) Effect of foreign exchange rate changes, net ( 50,873 ) ( 71,212 ) Net decrease in cash, cash equivalents, and restricted cash ( 453,463 ) 152,522 Cash, cash equivalents, and restricted cash at beginning of period 3,875,037 4,382,887 Cash, cash equivalents, and restricted cash at end of period 3,421,574 4,535,409 Supplemental cash flow information: Cash and cash equivalents 3,410,368 4,531,137 Short-term restricted cash 9,693 333 Long-term restricted cash 1,513 3,939 Income taxes paid 32,529 24,436 Interest paid 10,015 12,899 Supplemental non-cash information: Capital expenditures included in accounts payable and accrued expenses 95,404 58,676 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents BEIGENE, LTD. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Amounts in thousands of U.S. Dollars (“$”), except for number of shares) (Unaudited) Attributable to BeiGene, Ltd. Ordinary Shares Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Shares Amount $ $ $ $ $ Balance at December 31, 2022 1,356,140,180 135 11,540,979 ( 77,417 ) ( 7,080,342 ) 4,383,355 Use of shares reserved for share option exercises ( 98,774 ) — — — — — Exercise of options, ESPP and release of RSUs 6,610,695 1 28,656 — — 28,657 Share-based compensation — — 75,322 — — 75,322 Other comprehensive income — — — 18,403 — 18,403 Net loss — — — — ( 348,431 ) ( 348,431 ) Balance at March 31, 2023 1,362,652,101 136 11,644,957 ( 59,014 ) ( 7,428,773 ) 4,157,306 Use of shares reserved for share option exercises 220,116 — — — — — Exercise of options, ESPP and release of RSUs 13,379,119 1 3,691 — — 3,692 Share-based compensation — — 103,371 — — 103,371 Other comprehensive loss — — — ( 84,673 ) — ( 84,673 ) Net loss — — — — ( 381,137 ) ( 381,137 ) Balance at June 30, 2023 1,376,251,336 137 11,752,019 ( 143,687 ) ( 7,809,910 ) 3,798,559 Balance at December 31, 2021 1,334,804,281 133 11,191,007 17,950 ( 5,076,527 ) 6,132,563 Cost from issuance of ordinary shares — — ( 152 ) — — ( 152 ) Use of shares reserved for share option exercises ( 2,850,328 ) — — — — — Exercise of options, ESPP and release of RSUs 2,851,316 — 11,880 — — 11,880 Share-based compensation — — 65,555 — — 65,555 Other comprehensive loss — — — ( 496 ) — ( 496 ) Net loss — — — — ( 435,198 ) ( 435,198 ) Balance at March 31, 2022 1,334,805,269 133 11,268,290 17,454 ( 5,511,725 ) 5,774,152 Use of shares reserved for share option exercises 5,016,232 — — — — — Exercise of options, ESPP and release of RSUs 9,817,923 1 7,091 — — 7,092 Share-based compensation — — 81,305 — — 81,305 Other comprehensive loss — — — ( 99,904 ) — ( 99,904 ) Net loss — — — — ( 565,726 ) ( 565,726 ) Balance at June 30, 2022 1,349,639,424 134 11,356,686 ( 82,450 ) ( 6,077,451 ) 5,196,919 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents BEIGENE, LTD. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”), except for number of shares and per share data) (Unaudited) 1. Description of Business, Basis of Presentation and Consolidation and Significant Accounting Policies Description of business BeiGene, Ltd. (the “Company”, “BeiGene”, “it”, “its”) is a global biotechnology company that is discovering and developing innovative oncology treatments that are more accessible and affordable to cancer patients worldwide. The Company currently has three approved medicines that were internally discovered and developed, including BRUKINSA ® , a small molecule inhibitor of Bruton’s Tyrosine Kinase for the treatment of various blood cancers; tislelizumab, an anti-PD-1 antibody immunotherapy for the treatment of various solid tumor and blood cancers; and pamiparib, a selective small molecule inhibitor of PARP1 and PARP2. The Company has obtained approvals to market BRUKINSA in the United States, the People's Republic of China (“China” or the “PRC”), the European Union, the United Kingdom, Canada, Australia and additional international markets, and tislelizumab and pamiparib in China. By leveraging its strong commercial capabilities, the Company has in-licensed the rights to distribute an additional 14 approved medicines for the China market. Supported by its global clinical development and commercial capabilities, the Company has entered into collaborations with world-leading biopharmaceutical companies such as Amgen Inc. (“Amgen”) and Novartis Pharma AG (“Novartis”) to develop and commercialize innovative medicines. The Company is committed to advancing best and first-in-class clinical candidates internally or with like-minded partners to develop impactful and affordable medicines for patients across the globe. The Company has conducted more than 120 clinical trials in-house, with over 21,000 subjects enrolled in approximately 45 regions. This includes more than 35 pivotal or potentially registration-enabling trials across its portfolio, including three internally discovered, approved medicines. The Company has built, and is expanding, its internal manufacturing capabilities. The Company is building a commercial-stage biologics manufacturing and clinical R&D center in New Jersey, in addition to its state-of-the-art biologic and small molecule manufacturing facilities in China to support current and potential future demand of its medicines. The Company also works with high quality global contract manufacturing organizations (“CMOs”) to manufacture its internally developed clinical and commercial products. Since its inception in 2010, the Company has become a fully integrated global organization of over 10,000 employees worldwide, including the United States, China, Europe and Australia. Basis of presentation and consolidation The accompanying condensed consolidated balance sheet as of June 30, 2023, the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2023 and 2022, the condensed consolidated statements of cash flows for the six months ended June 30, 2023 and 2022, and the condensed consolidated statements of shareholders' equity for the three and six months ended June 30, 2023 and 2022, and the related footnote disclosures are unaudited. The accompanying unaudited interim condensed financial statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), including guidance with respect to interim financial information and in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. These financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”). The unaudited interim condensed consolidated interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all normal recurring adjustments, necessary to present a fair statement of the results for the interim periods presented. Results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results expected for the full fiscal year or for any future annual or interim period. The unaudited interim condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant intercompany transactions and balances between the Company and its subsidiaries are eliminated upon consolidation. Use of estimates 8 Table of Contents The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Areas where management uses subjective judgment include, but are not limited to, estimating the useful lives of long-lived assets, estimating variable consideration in product sales and collaboration revenue arrangements, identifying separate accounting units and determining the standalone selling price of each performance obligation in the Company’s revenue arrangements, assessing the impairment of long-lived assets, valuation and recognition of share-based compensation expenses, realizability of deferred tax assets, estimating uncertain tax positions, valuation of inventory, estimating the allowance for credit losses, determining defined benefit pension plan obligations, measurement of right-of-use assets and lease liabilities and the fair value of financial instruments. Management bases the estimates on historical experience, known trends and various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities and reported amounts of revenues and expenses. Actual results could differ from these estimates. Revision of prior period financial statements The Company evaluates the recoverability of its deferred tax assets on a jurisdiction-by-jurisdiction basis by assessing the adequacy of future expected taxable income from all sources, including reversal of temporary differences, forecasted operating earnings and available tax planning strategies in accordance with ASC 740. This assessment is subject to a high degree of subjectivity, as the sources of income rely heavily on estimates that are based on a number of factors, including historical experience and short-range and long-range business forecasts. A valuation allowance is provided when the Company determines that it is more-likely-than-not that some portion or all of a deferred tax asset will not be realized. Prior to the third quarter of 2022, the Company determined that the majority of its net deferred tax assets (primarily in the U.S.) were realizable on a more-likely-than-not basis, primarily due to cumulative pre-tax income at the taxpaying entity and the weighting of available positive and negative evidence. Accordingly, no valuation allowance was previously recorded related to those deferred tax assets. In October 2022, in connection with the preparation of its condensed consolidated financial statements for the three and nine months ended September 30, 2022, the Company reassessed its position on the realizability of its net deferred tax assets and determined that the negative evidence associated with cumulative losses at the consolidated financial statement level are not able to be overcome by other positive evidence, and therefore, a valuation allowance should be applied to its net deferred tax asset balance. The Company determined the previous conclusion to not apply a valuation allowance to certain net deferred tax assets was an error. In accordance with Staff Accounting Bulletin (SAB) No. 99, “Materiality,” and SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the error and determined that the related impact was not material to any of its previously issued financial statements, but that correcting the cumulative impact of the error would be significant to its statements of operations for the three and nine months ended September 30, 2022. Accordingly, the Company has revised the three and six months ended June 30, 2022 condensed consolidated financial statements and related notes included herein to record a valuation allowance against the Company’s net deferred tax asset balance for all periods presented. A summary of revisions to previously reported financial statements is presented in Note 2, Revision of Prior Period Financial Statements. Note 9, Income Taxes and Note 13, Loss Per Share have been updated to reflect the revision. The Company will also correct previously reported financial information for this error in its future filings, as applicable. Recent accounting pronouncements New accounting standards which have not yet been adopted In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements . This update requires leasehold improvements associated with common control leases be amortized by the lessee over the useful life of the leasehold improvements to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset (the leased asset) through a lease. However, if the lessor obtained the right to control the use of the underlying asset through a lease with another entity not within the same common control group, the amortization period may not exceed the amortization period of the common control group. Further, leasehold improvements associated with common control leases be accounted for as a transfer between entities under common control through an adjustment to equity if, and when, the lessee no longer controls the use of the underlying asset. Those leasehold improvements are subject to the impairment guidance in Topic 360, Property, Plant, and Equipment . This update is effective for annual periods beginning after December 15, 2023, and early application is permitted. This guidance should be applied either (i) prospectively to all new leasehold improvements recognized on or after the date of initial application; (ii) prospectively to all new and existing leasehold improvements recognized on or after the date of initial application, with any remaining unamortized balance of existing leasehold improvements amortized over their remaining useful life to the common control group determined at that date; or (iii) retrospectively to the beginning of the period in which the entity first applied Topic 842, with any leasehold improvements that otherwise would not have been amortized or impaired recognized through a cumulative-effect adjustment to the opening 9 Table of Contents balance of retained earnings at the beginning of the earliest period presented in accordance with Topic 842. The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated financial statements. Significant accounting policies For a more complete discussion of the Company’s significant accounting policies and other information, the unaudited interim condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report for the year ended December 31, 2022. There have been no material changes to the Company’s significant accounting policies as of and for the six months ended June 30, 2023, as compared to the significant accounting policies described in the Annual Report. 2. Revision of Prior Period Financial Statements As discussed in Note 1, the Company revised certain prior period financial statements to correct an error related to the valuation of net deferred tax assets, the impact of which was immaterial to its previously filed financial statements for the three and six months ended June 30, 2022 (See Note 1). Specifically, a valuation allowance should have been recorded on all net deferred tax assets and such a valuation allowance was not previously recorded. A summary of revisions to the Company’s previously reported financial statements for the comparative periods presented within this Quarterly Report on Form 10-Q is presented below. Condensed Consolidated Statements of Operations (unaudited) Three Months Ended Six Months Ended June 30, 2022 June 30, 2022 As Reported Adjustments As Revised As Reported Adjustments As Revised $ $ $ $ $ $ Income tax expense 13,864 ( 5,723 ) 8,141 26,889 ( 4,799 ) 22,090 Net loss ( 571,449 ) 5,723 ( 565,726 ) ( 1,005,723 ) 4,799 ( 1,000,924 ) Net loss per share ( 0.43 ) 0.01 ( 0.42 ) ( 0.75 ) — ( 0.75 ) Net loss per American Depositary Share (“ADS”) ( 5.56 ) 0.06 ( 5.50 ) ( 9.80 ) 0.05 ( 9.75 ) Condensed Consolidated Statements of Comprehensive Loss (unaudited) Three Months Ended Six Months Ended June 30, 2022 June 30, 2022 As Reported Adjustments As Revised As Reported Adjustments As Revised $ $ $ $ $ $ Net loss ( 571,449 ) 5,723 ( 565,726 ) ( 1,005,723 ) 4,799 ( 1,000,924 ) Comprehensive loss ( 671,353 ) 5,723 ( 665,630 ) ( 1,106,123 ) 4,799 ( 1,101,324 ) 10 Table of Contents Condensed Consolidated Statement of Cash Flows (unaudited) Six Months Ended June 30, 2022 As Reported Adjustments As Revised $ $ $ Operating activities: Net loss ( 1,005,723 ) 4,799 ( 1,000,924 ) Adjustments to reconcile net loss to net cash used in operating activities: Deferred income tax benefits 7,550 ( 6,995 ) 555 Changes in operating assets and liabilities: Other assets 32,315 20 32,335 Accrued expenses and other payables 19,525 1,643 21,168 Other liabilities ( 2,114 ) 533 ( 1,581 ) Net cash used in operating activities ( 616,522 ) — ( 616,522 ) Condensed Consolidated Statement of Stockholders' Equity (unaudited) Accumulated Deficit Total Equity As Reported Adjustments As Revised As Reported Adjustments As Revised $ $ $ $ $ $ Balance at December 31, 2021 ( 4,966,103 ) ( 110,424 ) ( 5,076,527 ) 6,242,987 ( 110,424 ) 6,132,563 Net loss ( 434,274 ) ( 924 ) ( 435,198 ) ( 434,274 ) ( 924 ) ( 435,198 ) Balance at March 31, 2022 ( 5,400,377 ) ( 111,348 ) ( 5,511,725 ) 5,885,500 ( 111,348 ) 5,774,152 Net loss ( 571,449 ) 5,723 ( 565,726 ) ( 571,449 ) 5,723 ( 565,726 ) Balance at June 30, 2022 ( 5,971,826 ) ( 105,625 ) ( 6,077,451 ) 5,302,544 ( 105,625 ) 5,196,919 3. Fair Value Measurements The Company measures certain financial assets and liabilities at fair value. Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows: Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability. The Company considers an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and considers an inactive market to be one in which there are infrequent or few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. 11 Table of Contents The following tables present the Company’s financial assets and liabilities measured and recorded at fair value on a recurring basis using the above input categories as of June 30, 2023 and December 31, 2022: Quoted Price in Active Market for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs As of June 30, 2023 (Level 1) (Level 2) (Level 3) $ $ $ Cash equivalents Money market funds 847,781 — — Short-term investments (Note 5): U.S. Treasury securities 105,693 — — Prepaid expenses and other current assets (Note 5): Convertible debt instrument — — 5,190 Other non-current assets (Note 5): Equity securities with readily determinable fair values 2,300 1,077 — Convertible debt instrument — — 3,000 Total 955,774 1,077 8,190 Quoted Price in Active Market for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs As of December 31, 2022 (Level 1) (Level 2) (Level 3) $ $ $ Cash equivalents Money market funds 758,114 — — Short-term investments (Note 5): U.S. Treasury securities 665,251 — — Prepaid expenses and other current assets (Note 5): Convertible debt instrument — — 5,190 Other non-current assets (Note 5): Equity securities with readily determinable fair values 3,307 706 — Convertible debt instrument — — 3,000 Total 1,426,672 706 8,190 The Company's cash equivalents are highly liquid investments with original maturities of 3 months or less. Short-term investments represent the Company's investments in available-for-sale debt securities. The Company determines the fair value of cash equivalents and available-for-sale debt securities using a market approach based on quoted prices in active markets. The Company's equity securities carried at fair value consist of holdings in common stock and warrants to purchase additional shares of common stock of Leap Therapeutics, Inc. (“Leap”), which were acquired in connection with a collaboration and license agreement entered into in January 2020 and in Leap's underwritten public offering in September 2021. The common stock investment in Leap, a publicly-traded biotechnology company, is measured and carried at fair value and classified as Level 1. The warrants to purchase additional shares of common stock in Leap are classified as a Level 2 investment and are measured using the Black-Scholes option-pricing valuation model, which utilizes a constant maturity risk-free rate and reflects the term of the warrants, dividend yield and stock price volatility, that is based on the historical volatility of similar companies. Refer to Note 5, Restricted Cash and Investments for details of the determination of the carrying amount of private equity investments without readily determinable fair values and equity method investments. The Company holds convertible notes issued by two private biotech companies. The Company has elected the fair value option method of accounting for the convertible notes. Accordingly, the convertible notes are remeasured at fair value on a recurring basis using Level 3 inputs, with any changes in the fair value option recorded in other income, net. As of June 30, 2023 and December 31, 2022, the fair values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and short-term debt approximated their carrying values due to their short-term nature. Long-term 12 Table of Contents bank loans approximate their fair value due to the fact that the related interest rates approximate the rates currently offered by financial institutions for similar debt instrument of comparable maturities. 4. Collaborative and Licensing Arrangements The Company has entered into collaborative arrangements for the research and development, manufacture and/or commercialization of medicines and drug candidates. To date, these collaborative arrangements have included out-licenses of and options to out-license internally developed products and drug candidates to other parties, in-licenses of products and drug candidates from other parties, and profit- and cost-sharing arrangements. These arrangements may include non-refundable upfront payments, contingent obligations for potential development, regulatory and commercial performance milestone payments, cost-sharing and reimbursement arrangements, royalty payments, and profit sharing. Out-Licensing Arrangements For the three and six months ended June 30, 2023 and 2022, the Company’s collaboration revenue primarily consisted of research and development services revenue and right to access intellectual property revenue from its collaboration agreements with Novartis for tislelizumab and ociperlimab. The following table summarizes total collaboration revenue recognized for the three and six months ended June 30, 2023 and 2022: Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 Revenue from Collaborators $ $ $ $ Research and development service revenue 13,563 10,813 20,380 24,240 Right to access intellectual property revenue 26,248 26,248 52,497 52,497 Other 1,705 — 6,149 5,377 Total 41,516 37,061 79,026 82,114 Novartis Tislelizumab Collaboration and License In January 2021, the Company entered into a collaboration and license agreement with Novartis, granting Novartis rights to develop, manufacture and commercialize tislelizumab in North America, Europe, and Japan (“Novartis Territory”). The Company and Novartis have agreed to jointly develop tislelizumab in these licensed countries, with Novartis responsible for regulatory submissions after a transition period and for commercialization upon regulatory approvals. In addition, both companies may conduct clinical trials globally to explore combinations of tislelizumab with other cancer treatments, and the Company has an option to co-detail the product in North America, funded in part by Novartis. Under the agreement the Company received an upfront cash payment of $ 650,000 from Novartis. The Company is eligible to receive up to $ 1,300,000 upon the achievement of regulatory milestones, $ 250,000 upon the achievement of sales milestones, and royalties on future sales of tislelizumab in the licensed territory. Under the terms of the agreement, the Company is responsible for funding ongoing clinical trials of tislelizumab, Novartis has agreed to fund new registrational, bridging, or post-marketing studies in its territory, and each party will be responsible for funding clinical trials evaluating tislelizumab in combination with its own or third party products. Each party retains the worldwide right to commercialize its propriety products in combination with tislelizumab. The Company evaluated the Novartis agreement under ASC 606 as all the material units of account within the agreement represented transactions with a customer. The Company identified the following material components under the agreement: (1) exclusive license for Novartis to develop, manufacture, and commercialize tislelizumab in the Novartis Territory, transfer of know-how and use of the tislelizumab trademark; (2) conducting and completing ongoing trials of tislelizumab (“tislelizumab R&D services”); and (3) supplying Novartis with required quantities of the tislelizumab drug product, or drug substance, upon receipt of an order from Novartis. The Company determined that the license, transfer of know-how and use of trademarks are not distinct from each other and represent a single performance obligation. The tislelizumab R&D services represent a material promise and were determined to be a separate performance obligation at the outset of the agreement as the promise is distinct and has standalone value to Novartis. The Company evaluated the supply component of the contract and noted the supply will not be provided at a 13 Table of Contents significant incremental discount to Novartis. The Company concluded that, for the purpose of ASC 606, the provision related to providing clinical and commercial supply of tislelizumab in the Novartis Territory was an option but not a performance obligation of the Company at the outset of the Novartis collaboration agreement. A performance obligation for the clinical and commercial supply will be established as quantities of drug product or drug substance are ordered by Novartis. The Company determined that the transaction price as of the outset of the arrangement was the upfront payment of $ 650,000 . The potential milestone payments that the Company is eligible to receive were excluded from the transaction price, as all milestone amounts were fully constrained due to uncertainty of achievement. The transaction price was allocated to the two identified performance obligations based on a relative fair value basis. The standalone selling price of the license, transfer of know-how and use of trademarks performance obligation was determined using the adjusted market assessment approach. Based on the valuation performed by the Company, the standalone selling price of the license, transfer of know-how and use of trademarks was valued at $ 1,231,000 . The standalone selling price of the tislelizumab R&D services was valued at $ 420,000 using a cost plus margin valuation approach. Based on the relative standalone selling prices of the two performance obligations, $ 484,646 of the total transaction price was allocated to the license and $ 165,354 was allocated to the tislelizumab R&D services. The Company satisfied the license performance obligation at a point in time when the license was delivered and the transfer of know-how completed which occurred during the six months ended June 30, 2021. As such, the Company recognized the entire amount of the transaction price allocated to the license as collaboration revenue during the six months ended June 30, 2021. The portion of the transaction price allocated to the tislelizumab R&D services was deferred and is being recognized as collaboration revenue as the tislelizumab R&D services are performed using a percentage-of-completion method. Estimated costs to complete are reassessed on a periodic basis and any updates to the revenue earned are recognized on a prospective basis. The Company recognized R&D service revenue of $ 11,770 and $ 16,796 during the three and six months ended June 30, 2023, respectively, and $ 9,021 and $ 20,656 during the three and six months ended June 30, 2022, respectively. The Company also recognized other collaboration revenue of $ 1,344 and $ 5,013 during the three and six months ended June 30, 2023, respectively, and nil and $ 5,377 during the three and six ended June 30, 2022, respectively, related to the sale of tislelizumab clinical supply to Novartis in conjunction with the collaboration. Ociperlimab Option, Collaboration and License Agreement and China Broad Market Development Agreement In December 2021, the Company expanded its collaboration with Novartis by entering into an option, collaboration and license agreement with Novartis to develop, manufacture and commercialize the Company's investigational TIGIT inhibitor ociperlimab in the Novartis Territory. In addition, the Company and Novartis entered into an agreement granting the Company rights to market, promote and detail five approved Novartis oncology products, TAFINLAR ® (dabrafenib), MEKINIST ® (trametinib), VOTRIENT ® (pazopanib), AFINITOR ® (everolimus), and ZYKADIA ® (ceritinib), across designated regions of China referred to as “broad markets.” In the first quarter of 2022, the Company initiated marketing and promotion of these five products. Under the terms of the option, collaboration and license agreement, the Company received an upfront cash payment of $ 300,000 in January 2022 from Novartis and would have received an additional payment of $ 600,000 or $ 700,000 in the event Novartis exercised its exclusive time-based option prior to mid-2023 or between then and late-2023, respectively. Following option exercise, the Company is eligible to receive up to $ 745,000 upon the achievement of regulatory approval milestones, $ 1,150,000 upon the achievement of sales milestones, and royalties on future sales of ociperlimab in the Novartis Territory. Subject to the terms of the option, collaboration and license agreement, during the option period, Novartis has agreed to initiate and fund additional global clinical trials with ociperlimab and the Company has agreed to expand enrollment in two ongoing trials. Following the option exercise, Novartis has agreed to share development costs of global trials. Following approval, the Company has agreed to provide 50 percent of the co-detailing and co-field medical efforts in the United States, and has an option to co-detail up to 25 percent in Canada and Mexico, funded in part by Novartis. Each party retains the worldwide right to commercialize its propriety products in combination with ociperlimab, as is the case with tislelizumab under the tislelizumab collaboration and license agreement. The existing tislelizumab collaboration and license agreement was not modified as a result of the ociperlimab option, collaboration and license agreement. The Company evaluated the Novartis agreements under ASC 606 as the units of account within the agreement represented transactions with a customer. The Company identified the following material promises under the agreement: (1) exclusive option for Novartis to license the rights to develop, manufacture, and commercialize ociperlimab in the Novartis Territory; (2) Novartis' right to access ociperlimab in its own clinical trials during the option period; (3) initial transfer of BeiGene know-how; and (4) conducting and completing ongoing trials of ociperlimab during the option period (“ociperlimab R&D Services”, together with “tislelizumab R&D services”, “R&D services”). The market development activities are considered immaterial in the context of the contracts. 14 Table of Contents The Company concluded that, at the inception of the agreement, the option for the exclusive product license constitutes a material right as it represents a significant and incremental discount to the fair value of the exclusive product license that Novartis would not have received without entering into the agreement and is therefore considered a distinct performance obligation. The Company determined that Novartis' right to access ociperlimab in its own trials over the option period and the initial transfer of know-how were not distinct from each other, as the right to access ociperlimab has limited value without the corresponding know-how transfer, and therefore should be combined into one distinct performance obligation. The ociperlimab R&D Services represent a material promise and were determined to be a separate performance obligation at the outset of the agreement as the promise is distinct and has standalone value to Novartis. The Company determined the transaction price at the outset of the arrangement as the upfront payment of $ 300,000 . The option exercise fee is contingent upon Novartis exercising its right and is considered fully constrained until the option is exercised. Additionally, the milestone and royalty payments are not applicable until after the option is exercised, at which point the likelihood of meeting milestones, regulatory approval and meeting certain sales thresholds will be assessed. The transaction price was allocated to the three identified performance obligations based on a relative fair value basis. The standalone selling price of the material right for the option to the exclusive product license was calculated as the incremental discount between (i) the value of the license determined using a discounted cash flow method adjusted for probability of the option being exercised and (ii) the expected option exercise fee using the most-likely-amount method at option exercise. The standalone selling price of the combined performance obligation for Novartis' right to access ociperlimab for its own clinical trials during the option period and the initial transfer of BeiGene know-how was determined using a discounted cash flow method. The standalone selling price of the ociperlimab R&D Services was determined using an expected cost plus margin approach. Based on the relative standalone selling prices of the three performance obligations, $ 71,980 of the total transaction price was allocated to the material right, $ 213,450 was allocated to Novartis' right to use ociperlimab in its own clinical trials during the option period and the transfer of BeiGene know-how, and $ 14,570 was allocated to the ociperlimab R&D Services. The Company will satisfy the material right performance obligation at a point in time at the earlier of when Novartis exercises the option and the license is delivered or the expiration of the option period. As such, the entire amount of the transaction price allocated to the material right was deferred. The portion of the transaction price allocated to Novartis' right to access ociperlimab in its own clinical trials during the option period and the initial transfer of BeiGene know-how was deferred and is being recognized over the expected option period. The portion of the transaction price allocated to the ociperlimab R&D Services was deferred and is being recognized as collaboration revenue as the ociperlimab R&D Services are performed over the expected option period. The Company recognized collaboration revenue of $ 26,248 and $ 52,497 related to Novartis right to access ociperlimab in clinical trials and the transfer of know how performance obligation during the three and six months ended June 30, 2023, respectively, and $ 26,248 and $ 52,497 during the three and six months ended June 30, 2022, respectively. The Company recognized R&D service revenue of $ 1,792 and $ 3,583 during the three and six months ended June 30, 2023 and $ 1,792 and $ 3,584 during the three and six months ended June 30, 2022, respectively. The Company also recognized other collaboration revenue of $ 1,861 and $ 2,636 related primarily to revenue generated under the broad markets marketing and promotion agreement in conjunction with the collaboration during the three and six months ended June 30, 2023, respectively. In July 2023, the Company entered into a Mutual Termination and Release Agreement (the "Termination Agreement") to mutually terminate the ociperlimab option, collaboration and license agreement with Novartis, effective immediately. Pursuant to the Termination Agreement, the Company regained full, global rights to develop, manufacture and commercialize ociperlimab. In-Licensing Arrangements Amgen In October 2019, the Company entered into a global strategic oncology collaboration with Amgen (“Amgen Collaboration Agreement”) for the commercialization and development in China, excluding Hong Kong, Taiwan and Macau, of Amgen’s XGEVA ® , KYPROLIS ® and BLINCYTO ® , and the joint global development of a portfolio of oncology assets in Amgen’s pipeline, with BeiGene responsible for development and commercialization in China. The agreement became effective on January 2, 2020, following approval by the Company's shareholders and satisfaction of other closing conditions. Under the agreement, the Company is responsible for the commercialization of XGEVA, KYPROLIS and BLINCYTO in China for five or seven years . Amgen is responsible for manufacturing the products globally and will supply the products to the Company at an agreed upon price. The Company and Amgen will share equally in the China commercial profits and losses during the commercialization period. Following the commercialization period, the Company has the right to retain one product and is entitled to receive royalties on sales in China for an additional five years on the products not retained. XGEVA was approved in China in 2019 for patients with giant cell tumor of the bone and in November 2020 for the prevention of skeletal-related events in cancer patients with bone metastases. In July 2020, the Company began commercializing XGEVA in China. In 15 Table of Contents December 2020, BLINCYTO was approved in China for injection for the treatment of adult patients with relapsed or refractory (R/R) B-cell precursor acute lymphoblastic leukemia (ALL). In July 2021, KYPROLIS was conditionally approved in China for injection in combination with dexamethasone for the treatment of adult patients with R/R multiple myeloma. In April 2022, BLINCYTO was conditionally approved for injection for the treatment of pediatric patients with R/R CD19-positive B-cell precursor ALL. Amgen and the Company are also jointly developing a portfolio of Amgen oncology pipeline assets under the collaboration. The Company is responsible for conducting clinical development activities in China and co-funding global development costs by contributing cash and development services up to a total cap of $ 1,250,000 . Amgen is responsible for all development, regulatory and commercial activities outside of China. For each pipeline asset that is approved in China, the Company will receive commercial rights for seven years from approval. The Company has the right to retain approximately one out of every three approved pipeline assets, other than LUMAKRAS ® (sotorasib), Amgen's KRAS G12C inhibitor, for commercialization in China. The Company and Amgen will share equally in the China commercial profits and losses during the commercialization period. The Company is entitled to receive royalties from sales in China for pipeline assets returned to Amgen for five years after the seven-year commercialization period. The Company is also entitled to receive royalties from global sales of each product outside of China (with the exception of LUMAKRAS). On April 20, 2022, the parties entered into the First Amendment to Amgen Collaboration Agreement, which amends certain terms and conditions relating to the financial responsibilities of the parties in connections with the development and commercialization of certain Amgen proprietary products for the treatment of oncology-related diseases and conditions. In connection with the Company’s ongoing assessment of the Amgen Collaboration Agreement cost-share contributions, the Company determined that further investment in the development of LUMAKRAS was no longer commercially viable for BeiGene. As a result, in February 2023, the Company and Amgen entered into the Second Amendment to the Amgen Collaboration Agreement to (i) stop sharing costs with Amgen for the further development of LUMAKRAS during the period starting January 1, 2023 and ending August 31, 2023; and (ii) cooperate in good faith to prepare a transition plan with the anticipated termination of LUMAKRAS from the Amgen Collaboration Agreement. The Amgen Collaboration Agreement is within the scope of ASC 808, as both parties are active participants and are exposed to the risks and rewards dependent on the commercial success of the activities performed under the agreement. The Company is the principal for product sales to customers in China during the commercialization period and recognizes 100 % of net product revenue on these sales. Amounts due to Amgen for its portion of net product sales will be recorded as cost of sales. Cost reimbursements due to or from Amgen under the profit share will be recognized as incurred and recorded to cost of sales; selling, general and administrative expense; or research and development expense, based on the underlying nature of the related activity subject to reimbursement. Costs incurred for the Company's portion of the global co-development funding are recorded to research and development expense as incurred. In connection with the Amgen Collaboration Agreement, a Share Purchase Agreement (“SPA”) was entered into by the parties in October 2019. On January 2, 2020, the closing date of the transaction, Amgen purchased 15,895,001 of the Company's ADSs for $ 174.85 per ADS, representing a 20.5 % ownership stake in the Company. Per the SPA, the cash proceeds shall be used as necessary to fund the Company's development obligations under the Amgen Collaboration Agreement. Pursuant to the SPA, Amgen also received the right to designate one member of the Company's board of directors, and Anthony Hooper joined the Company's board of directors as the Amgen designee in January 2020. Amgen relinquished its right to appoint a designated director to the Company's board of directors in January 2023. In determining the fair value of the common stock at closing, the Company considered the closing price of the common stock on the closing date of the transaction and included a lack of marketability discount because the shares are subject to certain restrictions. The fair value of the shares on the closing date was determined to be $ 132.74 per ADS, or $ 2,109,902 in the aggregate. The Company determined that the premium paid by Amgen on the share purchase represents a cost share liability due to the Company's co-development obligations. The fair value of the cost share liability on the closing date was determined to be $ 601,857 based on the Company's discounted estimated future cash flows related to the pipeline assets. The total cash proceeds of $ 2,779,241 were allocated based on the relative fair value method, with $ 2,162,407 recorded to equity and $ 616,834 recorded as a research and development cost share liability. The cost share liability is being amortized proportionately as the Company contributes cash and development services to its total co-development funding cap. 16 Table of Contents Amounts recorded related to the Company's portion of the co-development funding on the pipeline assets for the three and six months ended June 30, 2023 and 2022 were as follows: Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 $ $ $ $ Research and development expense 5,457 24,393 23,274 46,789 Amortization of research and development cost share liability 5,271 23,764 22,669 45,583 Total amount due to Amgen for BeiGene's portion of the development funding 10,728 48,157 45,943 92,372 As of June 30, 2023 Remaining portion of development funding cap 549,765 As of June 30, 2023 and December 31, 2022, the research and development cost share liability recorded in the Company's balance sheet was as follows: As of June 30, December 31, 2023 2022 $ $ Research and development cost share liability, current portion 62,516 114,335 Research and development cost share liability, non-current portion 208,775 179,625 Total research and development cost share liability 271,291 293,960 The total reimbursement due to (from) Amgen under the commercial profit-sharing agreement for product sales is classified in the income statement for the three and six months ended June 30, 2023 and 2022 as follows: Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 $ $ $ $ Cost of sales - product 4,011 2,449 1,184 3,478 Research and development ( 1,769 ) 657 1,311 898 Selling, general and administrative ( 17,552 ) ( 13,661 ) ( 29,388 ) ( 26,642 ) Total ( 15,310 ) ( 10,555 ) ( 26,893 ) ( 22,266 ) The Company purchases commercial inventory from Amgen to distribute in China. Inventory purchases amounted to $ 20,146 and $ 39,277 during the three and six months ended June 30, 2023, respectively, and $ 22,462 and $ 30,061 during the three and six months ended June 30, 2022, respectively. Net amounts receivable from Amgen as of June 30, 2023 was $ 11,069 and net amounts payable to Amgen as of December 31, 2022 was $ 54,064 , respectively. 5. Restricted Cash and Investments Restricted Cash The Company’s restricted cash balance of $ 11,206 and $ 5,473 as of June 30, 2023 and December 31, 2022, respectively, primarily consists of RMB-denominated cash deposits held in designated bank accounts for collateral for letters of credit. The Company classifies restricted cash as current or non-current based on the term of the restriction. In addition to the restricted cash balances above, the Company is required by the PRC securities law to use the proceeds from the STAR Offering in strict compliance with the planned uses as disclosed in the PRC prospectus as well as those disclosed in the Company's proceeds management policy approved by the board of directors. 17 Table of Contents Short-Term Investments Short-term investments as of June 30, 2023 consisted of the following available-for-sale debt securities: Gross Gross Fair Value Amortized Unrealized Unrealized (Net Carrying Cost Gains Losses Amount) $ $ $ $ U.S. Treasury securities 107,802 — 2,109 105,693 Total 107,802 — 2,109 105,693 Short-term investments as of December 31, 2022 consisted of the following available-for-sale debt securities: Gross Gross Fair Value Amortized Unrealized Unrealized (Net Carrying Cost Gains Losses Amount) $ $ $ $ U.S. Treasury securities 674,262 — 9,011 665,251 Total 674,262 — 9,011 665,251 As of June 30, 2023, the Company's available-for-sale debt securities consisted entirely of short-term U.S. treasury securities, which were determined to have zero risk of expected credit loss. Accordingly, no allowance for credit loss was recorded as of June 30, 2023. Equity Securities with Readily Determinable Fair Values Leap Therapeutics, Inc. (Leap) In January 2020, the Company purchased $ 5,000 of Series B mandatorily convertible, non-voting preferred stock of Leap in connection with a strategic collaboration and license agreement the Company entered into with Leap. The Series B shares were subsequently converted into shares of Leap common stock and warrants to purchase additional shares of common stock upon approval of Leap's shareholders in March 2020. In September 2021, the Company purchased $ 7,250 of common stock in Leap's underwritten public offering. As of June 30, 2023, the Company's ownership interest in the outstanding common stock of Leap was 6.2 % based on information from Leap. Inclusive of the shares of common stock issuable upon the exercise of the currently exercisable warrants, the Company's interest is approximately 9.8 % based on information from Leap. The Company measures the investment in the common stock and warrants at fair value, with changes in fair value recorded to other income, net. The Company recorded an unrealized gain of $ 470 and unrealized loss of $ 636 for the three and six months ended June 30, 2023, respectively, and unrealized losses of $ 5,908 and $ 22,661 for the three and six months ended June 30, 2022, respectively, in the consolidated statements of operations. As of June 30, 2023 and December 31, 2022, the fair value of the common stock and warrants were as follows: As of June 30, December 31, 2023 2022 $ $ Fair value of Leap common stock 2,300 3,307 Fair value of Leap warrants 1,077 706 Private Equity Securities without Readily Determinable Fair Values The Company invests in equity securities of certain companies whose securities are not publicly traded and fair value is not readily determinable and where the Company has concluded it does not have significant influence based on its ownership percentage and other factors. These investments are recorded at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company held investments of $ 59,209 and $ 57,054 in equity securities without readily determinable fair values as of June 30, 2023 and December 31, 2022, respectively. The Company recorded no gain during the three months ended and a gain of $ 1,081 for the six months ended June 30, 2023, respectively, and a gain of $ 366 for the three and six months ended June 30, 2022, respectively, related to observable price changes in orderly transactions for similar investments of the same issuer to other income, net in the consolidated statements of operations. 18 Table of Contents Equity-Method Investments The Company records equity-method investments at cost and subsequently adjusts the basis based on the Company's ownership percentage in the investee's income and expenses, as well as dividends, if any. The Company holds equity-method investments totaling $ 30,020 and $ 27,710 as of June 30, 2023 and December 31, 2022, respectively, that it does not consider to be individually significant to its financial statements. The Company recorded net unrealized losses of $ 2,480 and $ 2,624 for the three and six months ended June 30, 2023, respectively, and net unrealized losses of $ 647 and $ 1,234 for the three and six months ended June 30, 2022, respectively, to other income, net in the consolidated statements of operations. 6. Inventories The Company’s inventory balance consisted of the following: As of June 30, December 31, 2023 2022 $ $ Raw materials 109,048 88,957 Work in process 31,472 20,886 Finished goods 180,813 172,503 Total inventories 321,333 282,346 7. Property, Plant and Equipment, Net Property, plant and equipment, net are recorded at cost and consisted of the following: As of June 30, December 31, 2023 2022 $ $ Land 65,485 65,485 Building 214,080 222,448 Manufacturing equipment 172,844 175,679 Laboratory equipment 170,424 158,908 Leasehold improvement 53,366 53,786 Software, electronics and office equipment 72,839 47,483 Property, plant and equipment, at cost 749,038 723,789 Less: accumulated depreciation ( 201,406 ) ( 171,470 ) Construction in progress 484,306 293,627 Property, plant and equipment, net 1,031,938 845,946 In November 2021, the Company purchased a 42 -acre site located in Hopewell, NJ for $ 75,197 . The total purchase price was allocated between the land and an existing building on the property based on their relative fair values. The Company is constructing a biologics manufacturing facility and research and development center on the land. As of June 30, 2023, the Company has construction in process of $ 314,707 related to the Hopewell facility construction. Depreciation expense was $ 21,307 and $ 40,332 for the three and six months ended June 30, 2023, respectively, and $ 14,461 and $ 30,041 for the three and six months ended June 30, 2022, respectively. 19 Table of Contents 8. Intangible Assets Intangible assets as of June 30, 2023 and December 31, 2022 are summarized as follows: As of June 30, 2023 December 31, 2022 Gross Gross carrying Accumulated Intangible carrying Accumulated Intangible amount amortization assets, net amount amortization assets, net $ $ $ $ $ $ Finite-lived intangible assets: Product distribution rights 7,500 ( 4,375 ) 3,125 7,500 ( 4,000 ) 3,500 Developed products 49,388 ( 5,618 ) 43,770 41,235 ( 4,119 ) 37,116 Trading license 816 ( 816 ) — 816 ( 816 ) — Total finite-lived intangible assets 57,704 ( 10,809 ) 46,895 49,551 ( 8,935 ) 40,616 Product distribution rights consist of distribution rights on the approved cancer therapies licensed from Bristol-Myers Squibb Company (“BMS”) as part of the BMS collaboration. The Company is amortizing the product distribution rights, as a single identified asset, over a period of 10 years from the date of acquisition. Developed products represent the post-approval milestone payments under license and commercialization agreements. The Company is amortizing the developed products over the remainder of the respective product patent or the term of the commercialization agreements. Trading license represents the Guangzhou drug distribution license acquired in September 2018. The Company amortized the drug distribution trading license over the remainder of the initial license term through February 2020. The trading license has been renewed through February 2024. Amortization expense for developed products is included in cost of sales - product in the accompanying consolidated statements of operations. Amortization expense for product distribution rights and the trading licenses is included in operating expenses in the accompanying consolidated statements of operations. The weighted-average life for each finite-lived intangible assets is approximately 12 years. Amortization expense was as follows: Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 $ $ $ $ Amortization expense - Cost of sales - product 840 812 1,639 1,644 Amortization expense - Operating expense 188 188 375 376 Total 1,028 1,000 2,014 2,020 Estimated amortization expense for each of the five succeeding years and thereafter, as of June 30, 2023 is as follows: Year Ending December 31, Cost of Sales - Product Operating Expenses Total $ $ $ 2023 (remainder of year) 1,857 375 2,232 2024 3,714 750 4,464 2025 3,714 750 4,464 2026 3,714 750 4,464 2027 3,714 500 4,214 2028 and thereafter 27,057 — 27,057 Total 43,770 3,125 46,895 9. Income Taxes Income tax expense was $ 13,674 and $ 25,166 for the three and six months ended June 30, 2023, respectively. Income tax expense was $ 8,141 and $ 22,090 for the three and six months ended June 30, 2022. The income tax expense for the three and 20 Table of Contents six months ended June 30, 2023 and 2022 was primarily attributable to current China tax expense due to certain non-deductible expenses and current U.S. tax expense determined after other special tax deductions and research and development tax credits. On a quarterly basis, the Company evaluates the realizability of deferred tax assets by jurisdiction and assesses the need for a valuation allowance. In assessing the realizability of deferred tax assets, the Company considers historical profitability, evaluation of scheduled reversals of deferred tax liabilities, projected future taxable income and tax-planning strategies. Valuation allowances have been provided on deferred tax assets where, based on all available evidence, it was considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. After consideration of all positive and negative evidence, as of June 30, 2023, the Company will maintain a full valuation allowance against its net deferred tax assets. As of June 30, 2023, the Company had gross unrecognized tax benefits of $ 12,524 . The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly change within the next 12 months. The Company’s reserve for uncertain tax positions increased by $ 559 and $ 969 in the three and six months ended June 30, 2023 primarily due to U.S. federal and state tax credits and incentives. The Company has elected to record interest and penalties related to income taxes as a component of income tax expense. As of June 30, 2023 and December 31, 2022, the Company's accrued interest and penalties, where applicable, related to uncertain tax positions were not material. The Company conducts business in a number of tax jurisdictions and, as such, is required to file income tax returns in multiple jurisdictions globally. As of June 30, 2023, Australia tax matters are open to examination for the years 2013 through 2023, China tax matters are open to examination for the years 2013 through 2023, Switzerland tax matters are open to examination for the years 2018 through 2023, and U.S. federal tax matters are open to examination for years 2015 through 2023. Various U.S. states and other non-US tax jurisdictions in which the Company files tax returns remain open to examination for 2012 through 2023. 10. Supplemental Balance Sheet Information Prepaid expenses and other current assets consist of the following: As of June 30, December 31, 2023 2022 $ $ Prepaid research and development costs 72,391 71,488 Prepaid manufacturing cost 69,319 58,950 Prepaid taxes 18,485 20,478 Other receivables 36,866 22,777 Interest receivable 1,992 3,039 Prepaid insurance 7,593 3,664 Short-term deposit for sales rebates 7,198 1,510 Other current assets 41,206 34,647 Total 255,050 216,553 Other non-current assets consist of the following: 21 Table of Contents As of June 30, December 31, 2023 2022 $ $ Goodwill 109 109 Prepayment of property and equipment 13,140 22,025 Prepaid supply cost (1) 30,539 48,642 Prepaid VAT 1,734 804 Rental deposits and other 6,420 7,054 Long-term investments 95,607 91,779 Total 147,549 170,413 (1) Represents payments for future supply purchases under the license agreement with Luye Pharma Group and facility expansion under commercial supply agreements. The payments are providing future benefit to the Company through credits on commercial supply purchases. Accrued expenses and other payables consist of the following: As of June 30, December 31, 2023 2022 $ $ Compensation related 135,719 184,775 External research and development activities related 91,108 139,168 Commercial activities 65,506 51,806 Individual income tax and other taxes 38,486 18,815 Sales rebates and returns related 85,591 41,817 Other 38,540 30,971 Total 454,950 467,352 Other long-term liabilities consist of the following: As of June 30, December 31, 2023 2022 $ $ Deferred government grant income 34,865 38,176 Pension liability 7,996 7,760 Other 257 159 Total 43,118 46,095 22 Table of Contents 11. Debt The following table summarizes the Company's short-term and long-term debt obligations as of June 30, 2023 and December 31, 2022: Lender Agreement Date Line of Credit Term Maturity Date Interest Rate As of June 30, 2023 December 31, 2022 $ RMB $ RMB China Construction Bank April 4, 2018 RMB 580,000 9 -year April 4, 2027 (1) 10,343 75,000 7,250 50,000 China Merchants Bank January 22, 2020 (2) 9 -year January 20, 2029 (2) 5,024 36,429 1,450 10,000 China Merchants Bank November 9, 2020 RMB 378,000 9 -year November 8, 2029 (3) 5,516 40,000 5,437 37,500 China Minsheng Bank (the “Senior Loan”) September 24, 2020 $ 200,000 (4) 4.3 % 150,000 1,087,666 150,000 1,034,554 Shanghai Pudong Development Bank February 25, 2022 $ 50,000 1 -year February 25, 2023 2.2 % — — 50,000 344,851 China Merchants Bank June 5, 2023 RMB 400,000 1 -year June 4, 2024 3.2 % 55,164 400,000 — — HSBC Bank May 4, 2023 RMB 340,000 1 -year May 3, 2024 4.7 % 46,889 340,000 — — China Industrial Bank May 30, 2023 RMB 200,000 1 -year May 29, 2024 2.8 % 27,582 200,000 — — Other short-term debt (5) 120,534 874,000 114,832 792,000 Total short-term debt 421,052 3,053,095 328,969 2,268,905 China Construction Bank April 4, 2018 RMB 580,000 9 -year April 4, 2027 (1) 64,818 470,000 75,395 520,000 China Merchants Bank January 22, 2020 (2) 9 -year January 20, 2029 (2) 41,176 298,571 47,847 330,000 China Merchants Bank November 9, 2020 RMB 378,000 9 -year November 8, 2029 (3) 44,200 320,500 49,369 340,500 China CITIC Bank July 29, 2022 RMB 480,000 10 -year July 28, 2032 (6) 57,232 415,000 36,537 252,000 Total long-term bank loans 207,426 1,504,071 209,148 1,442,500 1. The outstanding borrowings bear floating interest rates benchmarking RMB loan interest rates of financial institutions in the PRC. The loan interest rate was 4.5 % as of June 30, 2023. The loan is secured by BeiGene Guangzhou Factory's land use right and certain Guangzhou Factory fixed assets in the first phase of the Guangzhou manufacturing facility's build out. The Company repaid $ 3,483 (RMB 25,000 ) during the six months ended June 30, 2023. 2. On January 22, 2020, BeiGene Guangzhou Biologics Manufacturing Co., Ltd.(“BeiGene Guangzhou Factory”) entered into a nine-year bank loan with China Merchants Bank to borrow up to RMB 1,100,000 at a floating interest rate benchmarked against prevailing interest rates of certain PRC financial institutions. The loan is secured by Guangzhou Factory's second land use right and fixed assets placed into service upon completion of the second phase of the Guangzhou manufacturing facility's build out. In connection with the Company's short-term loan agreements with China Merchants Bank entered into during the year ended December 31, 2020, the borrowing capacity was reduced from RMB 1,100,000 to RMB 350,000 . The loan interest rate was 4.1 % as of June 30, 2023. The Company repaid $ 731 (RMB 5,000 ) during the six months ended June 30, 2023. BeiGene Guangzhou Biologics Manufacturing Co., Ltd. is a company incorporated under the laws of the PRC on March 3, 2017 and a wholly owned subsidiary of BeiGene Biologics. 3. The outstanding borrowings bear floating interest rates benchmarking RMB loan interest rates of financial institutions in the PRC. The loan interest rate was 4.0% as of June 30, 2023. The loan is secured by fixed assets placed into service upon completion of the third phase of the Guangzhou manufacturing facility's build out. The Company repaid $ 2,518 (RMB 17,500 ) during the six months ended June 30, 2023. 4. In September 2020, the Company entered into a loan agreement with China Minsheng Bank for a total loan facility of up to $ 200,000 (“Senior Loan”), of which $ 120,000 was designated to fund the purchase of noncontrolling equity interest in BeiGene Biologics Co., Ltd. (“BeiGene Biologics”) from Guangzhou GET Technology Development Co., Ltd. (now Guangzhou High-tech Zone Technology Holding Group Co., Ltd.) (“GET”) and repayment of the loan provided by GET (“Shareholder Loan”) and $ 80,000 was designated for general working capital purposes. The Senior Loan had an original maturity date of October 8, 2021, which was the first anniversary of the first date of utilization of the loan. The Company may extend the original maturity date for up to two additional 12 month periods. On October 8, 2021, the Company extended the maturity date for twelve months to October 8, 2022 and repurposed the Senior Loan for general working capital purposes. On September 30, 2022, the Company entered into an amendment and restatement agreement with China Minsheng Bank to extend the maturity date to October 9, 2023. BeiGene Biologics Co., Ltd. is a company incorporated under the laws of the PRC on January 25, 2017 and an indirectly wholly owned subsidiary of the Company. 5. During the years ended December 31, 2022 and 2021, the Company entered into short-term working capital loans with China Industrial Bank and China Merchants Bank to borrow up to RMB 875,000 in aggregate, with maturity dates ranging from December 15, 2022 to September 18, 2023. The Company repaid $ 16,574 (RMB 117,000 ) and drew down $ 28,174 (RMB 199,000 ) during the six months ended June 30, 2023.The weighted average interest rate for the short-term working capital loans was approximately 2.6 % as of June 30, 2023. 6. In July 2022, the Company entered into a 10-year bank loan agreement with China CITIC Bank to borrow up to RMB 480,000 at a floating interest rate benchmarked against prevailing interest rates of certain PRC financial institutions. The Company drew down $ 22,502 (RMB 163,000 ) during the six months ended June 30, 2023. The weighted average loan interest rate was 4.1 % as of June 30, 2023. The loan is secured by BeiGene Suzhou Co., Ltd.'s land use right. Interest Expense 23 Table of Contents Interest expense recognized for the three and six months ended June 30, 2023 was $ 4,891 and $ 9,465 , respectively, among which, $ 428 and $ 772 was capitalized, respectively. Interest expense recognized for the three and six months ended June 30, 2022 was $ 5,456 and $ 10,984 , respectively, among which, $ 654 and $ 1,935 was capitalized, respectively. 12. Product Revenue The Company’s product revenue is primarily derived from the sale of its internally developed products BRUKINSA in the United States China, and other regions, and tislelizumab and pamiparib in China; XGEVA, BLINCYTO and KYPROLIS in China under a license from Amgen; REVLIMID ® and VIDAZA ® in China under a license from BMS; and POBEVCY ® in China under a license from Bio-Thera. The table below presents the Company’s net product sales for the three and six months ended June 30, 2023 and 2022. Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 $ $ $ $ Product revenue – gross 667,328 342,885 1,176,933 638,273 Less: Rebates and sales returns ( 113,583 ) ( 38,374 ) ( 212,897 ) ( 72,189 ) Product revenue – net 553,745 304,511 964,036 566,084 The following table disaggregates net product sales by product for the three and six months ended June 30, 2023 and 2022: Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 $ $ $ $ BRUKINSA ® 308,276 128,747 519,658 233,072 Tislelizumab 149,464 104,879 264,314 192,522 REVLIMID ® 21,847 19,916 45,005 41,576 XGEVA ® 23,968 15,509 44,165 29,008 POBEVCY ® 13,438 12,983 27,764 19,798 BLINCYTO ® 14,578 9,530 25,524 21,396 KYPROLIS ® 11,052 4,092 15,995 8,405 VIDAZA ® 3,930 3,434 7,119 8,946 Pamiparib 1,919 2,022 3,725 4,577 Other 5,273 3,399 10,767 6,784 Total product revenue – net 553,745 304,511 964,036 566,084 The following table presents the roll-forward of accrued sales rebates and returns for the six months ended June 30, 2023 and 2022: Six Months Ended June 30, 2023 2022 $ $ Balance at beginning of the period 41,817 59,639 Accrual 212,897 72,189 Payments ( 169,123 ) ( 60,316 ) Balance at end of the period 85,591 71,512 24 Table of Contents 13. Loss Per Share The following table reconciles the numerator and denominator in the computations of basic and diluted loss per share: Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 $ $ $ $ Numerator: Net loss ( 381,137 ) ( 565,726 ) ( 729,568 ) ( 1,000,924 ) Denominator: Weighted average shares outstanding—basic and diluted 1,360,224,377 1,336,463,026 1,357,211,308 1,334,252,648 For the three and six months ended June 30, 2023 and 2022, the computation of basic loss per share using the two-class method was not applicable as the Company was in a net loss position, and the effects of all share options, restricted shares, restricted share units and ESPP shares were excluded from the calculation of diluted loss per share, as their effect would have been anti-dilutive. 14. Share-Based Compensation Expense 2016 Share Option and Incentive Plan In January 2016, in connection with the Company's initial public offering (“IPO”) on the Nasdaq Stock Market, the board of directors and shareholders of the Company approved the 2016 Share Option and Incentive Plan (the “2016 Plan”), which became effective in February 2016. The Company initially reserved 65,029,595 ordinary shares for the issuance of awards under the 2016 Plan, plus any shares available under the 2011 Option Plan (the “2011 Plan”), and not subject to any outstanding options as of the effective date of the 2016 Plan, along with underlying share awards under the 2011 Plan that are cancelled or forfeited without issuance of ordinary shares. As of June 30, 2023, ordinary shares cancelled or forfeited under the 2011 Plan that were carried over to the 2016 Plan totaled 5,166,822 . In December 2018, the shareholders approved an amended and restated 2016 Plan to increase the number of shares authorized for issuance by 38,553,159 ordinary shares, as well as amend the cap on annual compensation to independent directors and make other changes. In June 2020, the shareholders approved an Amendment No. 1 to the 2016 Plan to increase the number of shares authorized for issuance by 57,200,000 ordinary shares and to extend the term of the plan through April 13, 2030. The number of shares available for issuance under the 2016 Plan is subject to adjustment in the event of a share split, share dividend or other change in the Company’s capitalization. During the six months ended June 30, 2023, the Company granted options for 9,396,660 ordinary shares and restricted share units for 29,453,021 ordinary shares under the 2016 Plan. As of June 30, 2023, options and restricted share units for ordinary shares outstanding under the 2016 Plan totaled 64,070,175 and 68,073,668 , respectively. As of June 30, 2023, share-based awards to acquire 38,873,106 ordinary shares were available for future grant under the 2016 Plan. In order to continue to provide incentive opportunities under the 2016 Plan, the Board of Directors and shareholders of the Company approved an amendment to the 2016 Plan (the “Amendment No. 2”), which became effective as of June 22, 2022, to increase the number of authorized shares available for issuance under the 2016 Plan by 66,300,000 ordinary shares, or 5 % of the Company's outstanding shares as of March 31, 2022. 2018 Inducement Equity Plan In June 2018, the board of directors of the Company approved the 2018 Inducement Equity Plan (the “2018 Plan”) and reserved 12,000,000 ordinary shares to be used exclusively for grants of awards to individuals that were not previously employees of the Company or its subsidiaries, as a material inducement to the individual’s entry into employment with the Company or its subsidiaries within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. The 2018 Plan was approved by the board of directors upon recommendation of the compensation committee, without shareholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. The terms and conditions of the 2018 Plan, and the forms of award agreements to be used thereunder, are substantially similar to the 2016 Plan and the forms of award agreements thereunder. In August 2018, in connection with the Hong Kong IPO, the board of directors of the Company approved an amended and restated 2018 Plan to implement changes required by the listing rules of the Stock Exchange of Hong Kong Limited (“HKEX”). 25 Table of Contents As of June 30, 2023, there were no options or restricted share units for ordinary shares outstanding under the 2018 Plan. Upon the effectiveness of Amendment No. 2 to the 2016 Plan, on June 22, 2022, the 2018 Plan was terminated to the effect that no new equity awards shall be granted under the plan but the outstanding equity awards under the plan shall continue to vest and/or be exercisable in accordance with their terms. 2018 Employee Share Purchase Plan In June 2018, the shareholders of the Company approved the 2018 Employee Share Purchase Plan (the “ESPP”). Initially, 3,500,000 ordinary shares of the Company were reserved for issuance under the ESPP. In December 2018, the board of directors of the Company approved an amended and restated ESPP to increase the number of shares authorized for issuance by 3,855,315 ordinary shares to 7,355,315 ordinary shares. In June 2019, the board of directors adopted an amendment to revise the eligibility criteria for enrollment in the plan. In June 2021, the board of directors of the Company adopted the third amended and restated ESPP to include certain technical amendments under U.S. tax rules and to consolidate the changes in the prior amendment, effective on September 1, 2021. The ESPP allows eligible employees to purchase the Company’s ordinary shares (including in the form of ADSs) at the end of each offering period, which will generally be six months , at a 15 % discount to the market price of the Company’s ADSs at the beginning or the end of each offering period, whichever is lower, using funds deducted from their payroll during the offering period. Eligible employees are able to authorize payroll deductions of up to 10 % of their eligible earnings, subject to applicable limitations. As of June 30, 2023, 2,735,219 ordinary shares were available for future issuance under the ESPP. The following tables summarizes the shares issued under the ESPP: Market Price 1 Purchase Price 2 Issuance Date Number of Ordinary Shares Issued ADS Ordinary ADS Ordinary Proceeds February 28, 2023 930,582 $ 171.10 $ 13.16 $ 145.44 $ 11.19 $ 10,414 August 31, 2022 861,315 $ 171.66 $ 13.20 $ 145.91 $ 11.22 $ 9,667 February 28, 2022 667,160 $ 210.52 $ 16.19 $ 178.94 $ 13.76 $ 9,183 1 The market price is the lower of the closing price on the Nasdaq Stock Market on the issuance date or the offering date, in accordance with the terms of the ESPP. 2 The purchase price is the price which was discounted from the applicable market price, in accordance with the terms of the ESPP. The following table summarizes total share-based compensation expense recognized for the three and six months ended June 30, 2023 and 2022: Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 $ $ $ $ Research and development 45,948 37,107 79,976 52,082 Selling, general and administrative 57,381 44,198 98,741 58,542 Total 103,329 81,305 178,717 110,624 26 Table of Contents 15. Accumulated Other Comprehensive Loss The movement of accumulated other comprehensive loss was as follows: Unrealized Foreign Currency Gains/(Losses) on Pension Translation Available-for-Sale Liability Adjustments Securities Adjustments Total $ $ $ $ Balance as of December 31, 2022 ( 62,523 ) ( 9,011 ) ( 5,883 ) ( 77,417 ) Other comprehensive (loss) income before reclassifications ( 73,172 ) 6,902 — ( 66,270 ) Net-current period other comprehensive (loss) income ( 73,172 ) 6,902 — ( 66,270 ) Balance as of June 30, 2023 ( 135,695 ) ( 2,109 ) ( 5,883 ) ( 143,687 ) 16. Shareholders’ Equity Share Purchase Agreement In September 2021, the Company issued an aggregate of 165,529 ADSs, representing 2,151,877 ordinary shares, to Amgen for a total consideration of $ 50,000 , in a private placement pursuant to a Share Purchase Agreement dated October 31, 2019, as amended on December 6, 2019, September 24, 2020 and January 30, 2023 by and between Amgen and Company. STAR Offering In December 2021, the Company completed an initial public offering of (“STAR Offering”) on the Science and Technology Innovation Board (STAR Market) of the Shanghai Stock Exchange (“SSE”). The shares offered in the STAR Offering were issued to and subscribed for by permitted investors in the People’s Republic of China (“PRC”) in Renminbi (“RMB Shares”). The public offering price of the RMB Shares was RMB 192.60 per ordinary share, or $ 391.68 per ADS. In this offering, the Company sold 115,055,260 ordinary shares. Net proceeds after deducting underwriting discounts and commission and offering expenses were $ 3,392,616 . As required by the PRC securities laws, the net proceeds from the STAR Offering must be used in strict compliance with the planned uses as disclosed in the PRC prospectus as well as the Company's proceeds management policy for the STAR Offering approved by the board of directors. 17. Restricted Net Assets The Company’s ability to pay dividends may depend on the Company receiving distributions of funds from its PRC subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by the Company’s PRC subsidiaries only out of the subsidiary's retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the condensed consolidated financial statements prepared in accordance with GAAP differ from those reflected in the statutory financial statements of the Company’s PRC subsidiaries. In accordance with the company law of the PRC, a domestic enterprise is required to provide statutory reserves of at least 10 % of its annual after-tax profit until such reserve has reached 50 % of its respective registered capital based on the enterprise’s PRC statutory accounts. A domestic enterprise is also required to provide discretionary surplus reserve, at the discretion of the board of directors, from the profits determined in accordance with the enterprise’s PRC statutory accounts. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. The Company’s PRC subsidiaries were established as domestic enterprises and therefore are subject to the above-mentioned restrictions on distributable profits. As a result of these PRC laws and regulations, including the requirement to make annual appropriations of at least 10 % of after-tax income and set aside as general reserve fund prior to payment of dividends, the Company’s PRC subsidiaries are restricted in their ability to transfer a portion of their net assets to the Company. Foreign exchange and other regulations in the PRC may further restrict the Company's PRC subsidiaries from transferring funds to the Company in the form of dividends, loans and advances. As of June 30, 2023 and December 31, 2022, the net assets of the Company’s PRC subsidiaries amounted to $ 3,305,583 and $ 3,548,881 , respectively. 27 Table of Contents 18. Commitments and Contingencies Purchase Commitments As of June 30, 2023, the Company had purchase commitments amounting to $ 104,115 , of which $ 40,295 related to minimum purchase requirements for supply purchased from contract manufacturing organizations and $ 63,820 related to binding purchase obligations of inventory from BMS and Amgen. The Company does not have any minimum purchase requirements for inventory from BMS or Amgen. Capital Commitments The Company had capital commitments amounting to $ 381,187 for the acquisition of property, plant and equipment as of June 30, 2023, which were mainly for the Company’s manufacturing and clinical R&D campus in Hopewell, NJ, additional capacity at the Guangzhou and Suzhou manufacturing facilities, and new building for Beijing Innerway Bio-tech Co., Ltd. Co-Development Funding Commitment Under the Amgen Collaboration Agreement, the Company is responsible for co-funding global development costs for the Amgen oncology pipeline assets up to a total cap of $ 1,250,000 . The Company is funding its portion of the co-development costs by contributing cash and development services. As of June 30, 2023, the Company's remaining co-development funding commitment was $ 549,765 . Research and Development Commitment The Company entered into a long-term research and development agreement in June 2021, which includes obligations to make an upfront payment and fixed quarterly payments over the next four years . As of June 30, 2023, the total research and development commitment amounted to $ 17,990 . Funding Commitment The Company had committed capital related to two equity method investments in the amount of $ 15,057 . As of June 30, 2023, the remaining capital commitment was $ 10,557 and is expected to be paid from time to time over the investment period. Pension Commitment The Company maintains a defined benefit pension plan in Switzerland. Funding obligations under the defined benefit pension plan are equivalent to $ 2,627 per year based on annual funding contributions in effect as of June 30, 2023 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. Other Business Agreements The Company enters into agreements with contract research organizations (“CROs”) to some extent to provide research and development services. These contracts are generally cancellable at any time by us with prior written notice. The Company also enters into collaboration agreements with institutions and companies to license intellectual property. The Company may be obligated to make future development, regulatory and commercial milestone payments and royalty payments on future sales of specified products associated with its collaboration agreements. Payments under these agreements generally become due and payable upon achievement of such milestones or sales. These commitments are not recorded on the Company's balance sheet because the achievement and timing of these milestones are not fixed and determinable. When the achievement of these milestones or sales have occurred, the corresponding amounts are recognized in the Company’s financial statements. Legal Proceedings In the ordinary course of business, the Company may be subject to legal proceedings, claims and litigation as the Company operates in an industry susceptible to patent legal claims. The Company accounts for estimated losses with respect to legal proceedings and claims when such losses are probable and estimable. Legal costs associated with these matters are expensed when incurred. 28 Table of Contents 19. Segment and Geographic Information The Company operates in one segment: pharmaceutical products. Its chief operating decision maker is the Chief Executive Officer, who makes operating decisions, assesses performance and allocates resources on a consolidated basis. The Company’s long-lived assets are primarily located in the PRC and the U.S. Net product revenues by geographic area are based upon the location of the customer, and net collaboration revenue is recorded in the jurisdiction in which the related income is expected to be sourced from. Total product revenues by geographic area are presented as follows: Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 $ $ $ $ PRC 293,919 212,429 540,828 403,164 United States 223,540 88,381 362,307 156,269 Rest of world 36,286 3,701 60,901 6,651 Total 553,745 304,511 964,036 566,084 Total collaboration revenues by geographic area are presented as follows: Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 $ $ $ $ PRC 1,861 — 2,636 — United States 28,809 25,943 54,523 57,480 Rest of world 10,846 11,118 21,867 24,634 Total 41,516 37,061 79,026 82,114 20. Subsequent Events On July 28, 2023 (the “Signing Date”), a credit facility agreement (the “Credit Agreement”) was entered into by and between the Company, as the borrower, and China Merchants Bank Co., Ltd., as the lender (the “Lender”). The Credit Agreement provides for a $ 400 million uncommitted and unsecured credit facility (the “Credit Facility”), pursuant to which each loan issued has a term up to one year, provided that all loans must be repaid within eighteen months of the Signing Date. Loans under the Credit Facility have a floating interest rate based on the secured overnight financing rate plus an applicable margin and are calculated daily from the date the loan is utilized and settled on a quarterly basis. The proceeds of the loans under the Credit Facility are available to finance the working capital needs and for daily operations of the Company and its subsidiaries. The Credit Agreement contains financial covenants that require the Company to uphold certain ratios of liabilities to ownership equity, maintain specified amounts of both consolidated net assets and consolidated cash balance, and reach a certain amount of annual sales revenue for products, all which are tested either quarterly or annually. The Credit Agreement also contains operating covenants including, among other things, (i) maintaining its listing status on The Stock Exchange of Hong Kong Limited and The Science and Technology Innovation Board of the Shanghai Stock Exchange, (ii) preserving interest reserve in the account with the Lender, (iii) limitations on the incurrence of certain additional indebtedness, and (iv) preservation of ownership of key patents and other covenants surrounding the Company’s intellectual property. Other certain covenants, representations and warranties, and events of default, are contained in the Credit Agreement, many of which would be breached or triggered solely to the extent they have a material adverse effect on the Company’s ability to perform its obligations under the Credit Agreement or affect the Company’s normal operations. As of the date of this report, no borrowings were outstanding under the Credit Agreement. On August 1, 2023, the Company entered into a Settlement and Termination Agreement (the “Settlement Agreement”) with BMS-Celgene and certain of its affiliates relating to the termination of the parties’ ongoing contractual relationships, the 29 Table of Contents previously-disclosed ongoing arbitration proceeding concerning ABRAXANE ® (the “Arbitration”), the License and Supply Agreement (“LSA”), the Amended and Restated Quality Agreement (the “QA”), and the Share Subscription Agreement (the “SSA”), entered into by the parties in 2017 and 2018. Pursuant to the Settlement Agreement, the parties agreed to mutually dismiss the Arbitration and BMS-Celgene and its affiliates agreed to transfer 23,273,108 ordinary shares of the Company originally purchased in 2017, in each case subject to and in accordance with the terms and conditions of the Settlement Agreement. The Company has no payment obligation in exchange for the transferred shares pursuant to the Settlement Agreement. Furthermore, the parties agreed to terminate the LSA and QA on December 31, 2023, subject to the Company’s right to continue selling all inventory of Revlimid and Vidaza until sold out or December 31, 2024, whichever is earlier. The Settlement Agreement provides for a settlement and release by each party of claims arising from or relating to the Arbitration, the LSA, the QA and the SSA, as well as other disputes and potential disputes between the parties, in each case subject to and in accordance with the terms and conditions of the Agreement. 30 Table of Contents Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Cautionary Note Regarding Forward-Looking Statements You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements (unaudited) and related notes included in the section of this Quarterly Report on Form 10-Q (this “Quarterly Report”), titled “Part I – Item 1 – Financial Statements.” We have revised our prior period financial statements to reflect the correction of an error, the impact of which was immaterial to our previously filed financial statements, as described in this Quarterly Report in “Notes to the Condensed Consolidated Financial Statements, Note 1. Description of Business, Basis of Presentation and Consolidation and Significant Accounting Policies” and “Note 2. Revision of Prior Period Financial Statements”. This Quarterly Report contains forward-looking statements t hat involve substantial risks and uncertainties. These forward-looking statements are based on management’s current expectations and projections about future events and trends that may affect the business, financial condition, and operating results. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. Forward-looking statements often include words such as “aim,” “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these terms or other similar expressions. These forward-looking statements, include, but are not limited to, statements regarding: our ability to successfully commercialize our approved medicines and to obtain approvals in additional indications and territories for our medicines; our ability to successfully develop and commercialize our in-licensed medicines and drug candidates and any other medicines and drug candidates we may in-license; our ability to further develop sales and marketing capabilities and launch and commercialize new medicines, if approved; our ability to maintain and expand regulatory approvals for our medicines and drug candidates, if approved; the pricing and reimbursement of our medicines and drug candidates, if approved; the initiation, timing, progress and results of our preclinical studies and clinical trials and our research and development programs; our ability to advance our drug candidates into, and successfully complete, clinical trials and obtain regulatory approvals; our reliance on the success of our clinical stage drug candidates; our plans, expected milestones and the timing or likelihood of regulatory filings and approvals; the implementation of our business model, strategic plans for our business, medicines, drug candidates and technology; the scope of protection we (or our licensors) are able to establish and maintain for intellectual property rights covering our medicines, drug candidates and technology; our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights and proprietary technology of third parties; costs associated with enforcing or defending against intellectual property infringement, misappropriation or violation, product liability and other claims; the regulatory environment and regulatory developments in the United States, China, the United Kingdom (“UK”), Switzerland, the European Union ("EU") and other jurisdictions in which we operate; the accuracy of our estimates regarding expenses, revenues, capital requirements and our need for additional financing; the potential benefits of strategic collaboration and licensing agreements and our ability to enter into strategic arrangements; our plans and expectations to build significant technical operations and independent production capabilities for small molecule medicines and large molecule biologics to support the global demand for both commercial and clinical supply; our reliance on third parties to conduct drug development, manufacturing and other services; our ability to manufacture and supply, or have manufactured and supplied, drug candidates for clinical development and medicines for commercial sale; the rate and degree of market access and acceptance of our medicines and drug candidates, if approved; developments relating to our competitors and our industry, including competing therapies; the size of the potential markets for our medicines and drug candidates and our ability to serve those markets; our ability to effectively manage our growth; our ability to attract and retain qualified employees and key personnel; statements regarding future revenue, hiring plans, key milestones, expenses, capital expenditures, capital requirements and share performance; and the future trading price of our ADSs, ordinary shares and RMB Shares, and impact of securities analysts’ reports on these prices. These statements involve risks and uncertainties, including those that are described in “Part II – Item 1A – Risk Factors” of this Quarterly Report, that may cause actual future events or results to differ materially from those expected. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date hereof. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. This Quarterly Report includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, you are cautioned not to give undue weight to this information. Unless the context requires otherwise, in this Quarterly Report, the terms “BeiGene,” the “Company,” “we,” “us” and “our” refer to BeiGene, Ltd., a Cayman Islands holding company with operations conducted by its subsidiaries, and its subsidiaries, on a consolidated basis. Overview We are a global biotechnology company that is discovering and developing innovative oncology treatments that are more accessible and affordable to cancer patients worldwide. 31 Table of Contents We currently have three approved medicines that were internally discovered and developed, including BRUKINSA ® , a small molecule inhibitor of Bruton’s Tyrosine Kinase (“BTK”) for the treatment of various blood cancers; tislelizumab, an anti-PD-1 antibody immunotherapy for the treatment of various solid tumor and blood cancers; and pamiparib, a selective small molecule inhibitor of PARP1 and PARP2. We have obtained approvals to market BRUKINSA in the United States, China, the EU, the UK, Canada, Australia and additional international markets, and tislelizumab and pamiparib in China. By leveraging our strong commercial capabilities, we have in-licensed the rights to distribute an additional 14 approved medicines for the China market. Supported by our global clinical development and commercial capabilities, we have entered into collaborations with world-leading biopharmaceutical companies such as Amgen Inc. (“Amgen”) and Novartis Pharma AG (“Novartis”) to develop and commercialize innovative medicines. We are committed to advancing best and first-in-class clinical candidates internally or with like-minded partners to develop impactful and affordable medicines for patients across the globe. We have conducted more than 120 clinical trials in-house, with over 21,000 subjects enrolled in approximately 45 regions. This includes more than 35 pivotal or potentially registration-enabling trials across our portfolio, including our three internally discovered, approved medicines. We have built, and are expanding, our internal manufacturing capabilities. The Company is building a commercial-stage biologics manufacturing and clinical R&D center in New Jersey, in addition to our state-of-the-art biologic and small molecule manufacturing facilities in China to support current and potential future demand of our medicines. We also work with high quality global contract manufacturing organizations (“CMOs”) to manufacture our internally developed clinical and commercial products. Since our inception in 2010, we have become a fully integrated global organization of over 10,000 employees worldwide, including the United States, China, Europe, and Australia. Recent Developments Recent Business Developments On July 21, 2023, we announced that the Committee for Medicinal Products for Human Use of the European Medicines Agency issued a positive opinion recommending approval for tislelizumab as monotherapy for the treatment of adult patients with unresectable, locally advanced or metastatic esophageal squamous cell carcinoma after prior platinum-based chemotherapy. On July 12, 2023, we announced the U.S. Food and Drug Administration ("FDA") accepted for review our supplemental new drug application for BRUKINSA in combination with obinutuzumab for the treatment of adult patients with relapsed or refractory follicular lymphoma after at least two prior lines of therapy. BRUKINSA was previously granted Fast Track and Orphan designation for this indication. The FDA has assigned a target action date in the first quarter of 2024, under the Prescription Drug User Fee Act. On July 10, 2023, we announced entering into an agreement with DualityBio for BeiGene to acquire an exclusive option for a global clinical and commercial license to an investigational, preclinical antibody drug conjugate therapy for patients with select solid tumors. On July 10, 2023, we announced we regained full, global rights to develop, manufacture and commercialize investigational TIGIT inhibitor ociperlimab as a result of a mutual decision with Novartis to terminate the Option, Collaboration and License Agreement with Novartis pursuant to which BeiGene granted Novartis an exclusive time-based option to receive such rights in North America, Europe, and Japan. On July 4, with Luye Pharma Group ("Luye"), we announced that Luye's 's innovative formulation, Goserelin Microspheres for Injection (Baituowei), was approved by China’s National Medical Products Administration on June 30, 2023, for the treatment of prostate cancer in patients who need to be treated with an androgen deprivation therapy. This product is the world’s first and only formulation of long-acting goserelin microspheres approved for launch, and the two companies have officially kicked off a strategic partnership for its commercialization. On May 30, 2023, we announced that BRUKINSA was approved by Health Canada for the treatment of adult patients with chronic lymphocytic leukemia. On May 6, 2023, we announced that the China National Medical Products Administration approved four applications for BRUKINSA, including two supplemental new drug applications for treatment-naïve adults with chronic lymphocytic leukemia or small lymphocytic lymphoma and Waldenström's macroglobulinemia, and two supplemental applications for conversions from conditional approval to regular approval. 32 Table of Contents Components of Operating Results Revenue Product Revenue We generate product revenue through the sale of our three internally developed products and our in-licensed medicines from our partners. Revenues from product sales are recognized when there is a transfer of control from the Company to the customer. The Company determines transfer of control based on when the product is delivered, and title passes to the customer. Revenues from product sales are recognized net of variable consideration resulting from rebates, chargebacks, trade discounts and allowances, sales returns allowances and other incentives. Provisions for estimated reductions to revenue are provided for in the same period the related sales are recorded and are based on contractual terms, historical experience and trend analysis. Collaboration Revenue We recognize collaboration revenue for amounts earned under collaborative and out-licensing arrangements. In January 2021, we entered into a collaboration and license agreement with Novartis, granting Novartis rights to develop, manufacture and commercialize tislelizumab in the United States, Canada, Mexico, member countries of the EU, UK, Norway, Switzerland, Iceland, Liechtenstein, Russia, and Japan (the Novartis Territory). There were two performance obligations identified at the outset of the agreement: (1) the exclusive license to develop, manufacture, and commercialize tislelizumab in the Novartis Territory, transfer of know-how and use of the tislelizumab trademark and (2) conducting and completing tislelizumab R&D services. Under this agreement, we received an upfront cash payment, which was allocated between the two performance obligations identified in the agreement based on the relative standalone selling prices of the performance obligations. The portion allocated to the license was recognized upon the delivery of the license right and transfer of know-how. The portion of the upfront payment allocated to the tislelizumab R&D services was deferred and is being recognized as collaboration revenue as the tislelizumab R&D services are performed using a percentage of completion method. Estimated costs to complete are reassessed on a periodic basis and any updates to the revenue earned are recognized on a prospective basis. In December 2021, we expanded our collaboration with Novartis by entering into an option, collaboration and license agreement with Novartis to develop, manufacture and commercialize our investigational TIGIT inhibitor ociperlimab in the Novartis Territory. In addition, we entered into an agreement with Novartis which granted us rights to market, promote and detail five approved Novartis oncology products, TAFINLAR ® (dabrafenib), MEKINIST ® (trametinib), VOTRIENT ® (pazopanib), AFINITOR ® (everolimus), and ZYKADIA ® (ceritinib), across designated regions of China referred to as “broad markets.” There were three performance obligations identified at the outset of the arrangement: (1) a material right for the option to the exclusive product license, (2) the right to access ociperlimab in clinical trials during the option period provided to Novartis, combined with the initial transfer of BeiGene know-how, and (3) conducting ociperlimab R&D services. The market development activities are considered immaterial in the context of the agreements. Under this agreement, we received an upfront cash payment, which was allocated between the three performance obligations identified in the agreement based on the relative standalone selling prices of the performance obligations. The portion allocated to the material right was deferred and will be recognized at the earlier of when Novartis exercises the option and the license is delivered or the expiration or termination of the option. The portion of the transaction price allocated to Novartis' right to access ociperlimab in its own clinical trials during the option period and the initial transfer of BeiGene know-how was deferred and is being recognized over the expected option period. The portion of the transaction price allocated to the ociperlimab R&D services was deferred and is being recognized as collaboration revenue as the ociperlimab R&D services are performed over the expected option period. The option exercise fee under the ociperlimab agreement is contingent upon Novartis exercising its right, and is considered fully constrained until the option is exercised or terminated. The potential milestone payments that we are eligible to receive under both of the Novartis collaborations were excluded from the initial transaction prices, as all milestone amounts are variable consideration and were fully constrained due to uncertainty of achievement. Performance-based milestones will be recognized when the milestone event is achieved or when the risk of revenue reversal is remote. Sales-based milestones and royalties will be recognized when the underlying sales occur. In July 2023, we entered into a Mutual Termination and Release Agreement (the "Termination Agreement") to mutually terminate the ociperlimab option, collaboration and license agreement with Novartis, effective immediately. Pursuant to the Termination Agreement, we regained full, global rights to develop, manufacture and commercialize ociperlimab. 33 Table of Contents Expenses Cost of Sales Cost of sales includes the costs to manufacture our internally developed commercial products, as well as costs to purchase our internally developed products from commercial manufacturing organizations. Additionally, cost of sales included the cost of in-licensed products purchased for sale in the PRC. Costs to manufacture inventory in preparation for commercial launch of a product incurred prior to regulatory approval are expensed to research and development expense as incurred. Cost of sales for newly launched products will not be recorded until the initial pre-launch inventory is depleted and additional inventory is manufactured. To date, the Company's initial pre-launch inventory for its commercial products has been immaterial and has not had a significant impact on the Company's gross margin. Research and Development Expenses Research and development expenses consist of the costs associated with our research and development activities, conducting preclinical studies and clinical trials, and activities related to regulatory filings. Our research and development expenses consist of: • expenses incurred under agreements with contract research organizations (“CROs”), CMOs, and consultants that conduct and support clinical trials and preclinical studies; • costs of comparator drugs in certain of our clinical trials; • manufacturing costs related to pre-commercial activities; • costs associated with preclinical activities and development activities; • costs associated with regulatory operations; • employee-related expenses, including salaries, benefits, travel and share-based compensation expense for research and development personnel; • in-process research and development costs expensed as part of collaboration agreements entered into; and • other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies used in research and development activities. Our current research and development activities mainly relate to the clinical advancement of our internally developed medicines and drug candidates: • BRUKINSA® (zanubrutinib), a small molecule inhibitor of BTK; • tislelizumab, a humanized monoclonal antibody against PD-1; • ociperlimab, an investigational humanized monoclonal antibody against TIGIT; • Sonrotoclax (BGB-11417), an investigational small molecular inhibitor of Bcl-2; • BGB-16673, an investigational Chimeric Degradation Activating Compound (CDAC), targeting BTK; • pamiparib, a selective small molecule inhibitor of PARP1 and PARP2; • BGB-15025, an investigational hematopoietic progenitor kinase 1 (HPK1) inhibitor; • BGB-A445, an investigational non-ligand competing OX40 monoclonal antibody; • Surzebiclimab (BGB-A425), an investigational humanized monoclonal antibody against TIM-3; • BGB-10188, an investigational PI3Kδ inhibitor; • Lifirafenib, an investigational small molecule inhibitor with RAF monomer and dimer inhibition activities; • BGB-24714, an investigational second mitochondrial-derived activator of caspase (SMAC) mimetic; 34 Table of Contents • BGB-B167, an investigational carcinoembryonic antigen (CEA) and 4-1BB bispecific antibody (CEA x 4-1BB bispecific); and • LBL-007, a novel investigational antibody targeting the LAG-3 pathway. The Company stopped clinical development of BGB-23339, a potent, allosteric investigational tyrosine kinase 2 inhibitor, in systematic use due to change in the competitive landscape and prioritization of our internal R&D portfolio during the three months ended June 30, 2023. Research and development activities also include costs associated with in-licensed drug candidates, including: • R&D expense related to the co-development of pipeline assets under the Amgen collaboration agreement. Our total cost share obligation to Amgen is split between R&D expense and a reduction to the R&D cost share liability; • sitravatinib, an investigational, spectrum-selective kinase inhibitor, licensed from Mirati Therapeutics, Inc.; and • ZW25 (zanidatamab), an investigational bispecific antibody-based product candidates targeting HER2, licensed from Zymeworks Inc. We expense research and development costs when incurred. We record costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as subject enrollment, clinical site activations or information our vendors provide to us. We expense the manufacturing costs of our internally developed products that are used in clinical trials as they are incurred as research and development expense. We do not allocate employee‑related costs, depreciation, rental and other indirect costs to specific research and development programs because these costs are deployed across multiple product programs under research and development and, as such, are separately classified as unallocated research and development expenses. At this time, it is difficult to estimate or know for certain, the nature, timing and estimated costs of the efforts that will be necessary to complete the development of our internally developed and in-licensed medicines and drug candidates. This is due to the numerous risks and uncertainties associated with developing such medicines and drug candidates, including the uncertainty of: • successful enrollment in and completion of clinical trials; • establishing an appropriate safety and efficacy profile; • establishing and maintaining commercial manufacturing capabilities or making arrangements with third‑party manufacturers; • receipt of marketing and other required approvals from applicable regulatory authorities; • successfully launching and commercializing our medicines and drug candidates, if and when approved, whether as monotherapies or in combination with our medicines and drug candidates or third‑party products; • market acceptance, pricing and reimbursement; • obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our medicines and drug candidates; • continued acceptable safety and efficacy profiles of the products following approval; • sufficient supply of the products following approval; • competition from competing products; and • retention of key personnel. A change in the outcome of any of these variables with respect to the development of our medicines and drug candidates could significantly change the costs, timing and viability associated with the commercialization or development of that medicine or drug candidate. Research and development activities are central to our business model. We expect continued substantial investment in research and development for the foreseeable future as our discovery and development programs progress, as we continue to support the clinical trials of our medicines and drug candidates as treatments for various cancers and as we move our medicines 35 Table of Contents 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. Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of product promotion costs, distribution costs, salaries and related benefit costs, including share-based compensation for selling, general and administrative personnel. Other selling, general and administrative expenses include professional fees for legal, consulting, auditing and tax services as well as other direct and allocated expenses for rent and maintenance of facilities, travel costs, insurance and other supplies used in selling, general and administrative activities. We anticipate that our selling, general and administrative expenses will increase in future periods to support planned increases in commercialization activities for our approved medicines, and the preparation for potential launch and commercialization of additional in-licensed products from our collaborations and internally developed products, if approved. We also incur significant legal, compliance, accounting, insurance and investor and public relations expenses associated with being a public company with our ADSs, ordinary shares and RMB Shares listed for trading on The Nasdaq Global Select Market, The Hong Kong Stock Exchange and The STAR Market of the Shanghai Stock Exchange, respectively. Interest Income (Expense), Net Interest Income Interest income consists primarily of interest generated from our RMB-denominated cash deposits and short-term investments in money market funds, time deposits, U.S. Treasury securities and U.S. agency securities. Interest Expense Interest expense consists primarily of interest on our bank loans and related party loan. Other Income (Expense), Net Other income (expense), net consists primarily of gains and losses recognized related to fluctuations in foreign currency exchange rates, gains and losses on equity investments, government grants and subsidies received that involve no conditions or continuing performance obligations by us, unrealized gains and losses on equity securities, and realized gains and losses on the sale of investments. We hold significant cash in the form of RMB-denominated deposits at U.S. functional currency entities, including a large portion of the cash generated from the STAR Market offering in December 2021. Other income (expense), net includes the revaluation gains and losses of these cash deposits based on foreign currency exchange rates. 36 Table of Contents Results of Operations The following table summarizes our results of operations for the three and six months ended June 30, 2023 and 2022: Three Months Ended Six Months Ended June 30, Change June 30, Change 2023 2022 1 $ % 2023 2022 1 $ % (dollars in thousands) Revenues Product revenue, net $ 553,745 $ 304,511 $ 249,234 81.8 % $ 964,036 $ 566,084 $ 397,952 70.3 % Collaboration revenue 41,516 37,061 4,455 12.0 % 79,026 82,114 (3,088) (3.8) % Total revenues 595,261 341,572 253,689 74.3 % 1,043,062 648,198 394,864 60.9 % Expenses Cost of sales - product 95,990 71,173 24,817 34.9 % 177,779 136,410 41,369 30.3 % Research and development 422,764 378,207 44,557 11.8 % 831,348 768,122 63,226 8.2 % Selling, general and administrative 395,034 331,403 63,631 19.2 % 723,533 625,976 97,557 15.6 % Amortization of intangible assets 188 188 — — % 375 376 (1) (0.3) % Total expenses 913,976 780,971 133,005 17.0 % 1,733,035 1,530,884 202,151 13.2 % Loss from operations (318,715) (439,399) 120,684 (27.5) % (689,973) (882,686) 192,713 (21.8) % Interest income, net 15,070 11,431 3,639 31.8 % 31,086 21,502 9,584 44.6 % Other expense, net (63,818) (129,617) 65,799 (50.8) % (45,515) (117,650) 72,135 (61.3) % Loss before income taxes (367,463) (557,585) 190,122 (34.1) % (704,402) (978,834) 274,432 (28.0) % Income tax expense 13,674 8,141 5,533 68.0 % 25,166 22,090 3,076 13.9 % Net loss $ (381,137) $ (565,726) $ 184,589 (32.6) % $ (729,568) $ (1,000,924) $ 271,356 (27.1) % 1 We revised certain prior period financial statements for an error related to the valuation of net deferred tax assets, the impact of which was immaterial to our previously filed financial statements in the second quarter of 2022 (see “Notes to the Condensed Consolidated Financial Statements, Note 1. Description of Business, Basis of Presentation and Consolidation and Significant Accounting Policies” and “Note 2. Revision of Prior Period Financial Statements” included in this Quarterly Report on Form 10-Q). Comparison of the Three Months Ended June 30, 2023 and 2022 Revenue Total revenue increased to $595.3 million for the three months ended June 30, 2023, from $341.6 million for the three months ended June 30, 2022, primarily due to an increase in sales of BRUKINSA and tislelizumab, as well as increased sales of our in-licensed products from Amgen, and additional collaboration revenue from our agreements with Novartis. The following table summarizes the components of revenue for the three months ended June 30, 2023 and 2022, respectively: Three Months Ended June 30, Changes 2023 2022 $ % (dollars in thousands) Product revenue $ 553,745 $ 304,511 $ 249,234 81.8 % Collaboration revenue: Research and development service revenue 13,563 10,813 2,750 25.4 % Right to access intellectual property revenue 26,248 26,248 — — % Other 1,705 — 1,705 NM Total collaboration revenue 41,516 37,061 4,455 12.0 % Total Revenue $ 595,261 $ 341,572 $ 253,689 74.3 % 37 Table of Contents Net product revenues consisted of the following: Three Months Ended June 30, Changes 2023 2022 $ % (dollars in thousands) BRUKINSA ® $ 308,276 $ 128,747 $ 179,529 139.4 % Tislelizumab 149,464 104,879 44,585 42.5 % REVLIMID ® 21,847 19,916 1,931 9.7 % XGEVA ® 23,968 15,509 8,459 54.5 % POBEVCY ® 13,438 12,983 455 3.5 % BLINCYTO ® 14,578 9,530 5,048 53.0 % KYPROLIS ® 11,052 4,092 6,960 170.1 % VIDAZA ® 3,930 3,434 496 14.4 % Pamiparib 1,919 2,022 (103) (5.1) % Other 5,273 3,399 1,874 55.1 % Total product revenue $ 553,745 $ 304,511 $ 249,234 81.8 % Net product revenue increased 81.8% to $553.7 million for the three months ended June 30, 2023, compared to $304.5 million in the prior-year period, primarily due to continued increases in sales of BRUKINSA in the United States and China and tislelizumab in China. In addition, product revenues in the second quarter of 2023 were positively impacted by sales of in-licensed products from Amgen in China. During the quarter ended June 30, 2023, we continued to see increased patient demand in China for tislelizumab and BRUKINSA due to broader reimbursement and increase in market share, and this demand more than offset the effect of the related price reductions. Global sales of BRUKINSA totaled $308.3 million in the second quarter, representing a 139.4% increase compared to the prior-year period; U.S. sales of BRUKINSA totaled $223.5 million in the second quarter, compared to $88.4 million in the prior-year period, representing growth of 152.9%. U.S. sales continued to accelerate in the first full quarter after the approval and launch of BRUKINSA for adult patients with chronic lymphocytic leukemia (CLL) and small lymphocytic lymphoma (SLL). BRUKINSA sales in China totaled $48.5 million, representing growth of 32.2% over the prior-year period, driven by increases in all approved indications. BRUKINSA rest of world sales totaled $36.3 million in the second quarter, representing growth of 880.0% compared to the prior-year period, primarily driven by a significant increase in all approved indications, including chronic lymphocytic leukemia (CLL) and small lymphocytic lymphoma (SLL) in Europe. Sales of tislelizumab in China totaled $149.5 million in the second quarter, compared to $104.9 million in the prior-year period, representing a 42.5% increase. In the second quarter, new patient demand from broader reimbursement and hospital listings continued to drive increased market penetration and market share for tislelizumab. We believe that our strategy of expanding our salesforce and hospital listings and continuing to seek expanded labels in broad indications will allow us to increase our market share. Collaboration revenue totaled $41.5 million for the three months ended June 30, 2023, of which $13.6 million was recognized from deferred revenue for R&D services performed during the three months ended June 30, 2023 under both the tislelizumab and ociperlimab collaborations, $26.2 million was recognized from deferred revenue for Novartis' right to access ociperlimab over the option period and $1.7 million was recognized primarily related to the sale of tislelizumab and ociperlimab clinical supply to Novartis and revenue generated under the broad markets marketing and promotion agreement. Collaboration revenue totaled $37.1 million for the three months ended June 30, 2022, of which $10.8 million was recognized from deferred revenue for R&D services performed during the three months ended June 30, 2022 under both the tislelizumab and ociperlimab collaborations and $26.2 million was recognized from deferred revenue for Novartis' right to access ociperlimab over the option period (see Note 4 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q). Cost of Sales Cost of sales increased to $96.0 million for the three months ended June 30, 2023 from $71.2 million for the three months ended June 30, 2022, primarily due to increased product sales of BRUKINSA and tislelizumab, as well as sales of in-licensed products from Amgen in China. 38 Table of Contents Gross Margin Gross margin on global product sales increased to $457.8 million for the three months ended June 30, 2023, compared to $233.3 million in the prior-year period, primarily due to increased product sales in the current year period. Gross margin as a percentage of product sales increased to 82.7% for the three months ended June 30, 2023, from 76.6% in the comparable period of the prior year. The increase is primarily due to proportionally higher sales mix of global BRUKINSA compared to lower margin sales of in-licensed products, as well as lower costs per unit for both BRUKINSA and tislelizumab in China. Research and Development Expense Research and development expense increased by $44.6 million, or 11.8%, to $422.8 million for the three months ended June 30, 2023 from $378.2 million for the three months ended June 30, 2022. The following table summarizes external clinical, external non-clinical and internal research and development expense for the three months ended June 30, 2023 and 2022, respectively: Three Months Ended June 30, Changes 2023 2022 $ % (dollars in thousands) External research and development expense: Cost of development programs $ 129,623 $ 106,111 $ 23,512 22.2 % Amgen co-development expense 1 5,457 24,393 (18,936) (77.6) % Total external research and development expenses 135,080 130,504 4,576 3.5 % Internal research and development expenses 287,684 247,703 39,981 16.1 % Total research and development expenses $ 422,764 $ 378,207 $ 44,557 11.8 % 1 Our co-funding obligation for the development of the pipeline assets under the Amgen collaboration for the three months ended June 30, 2023 totaled $10.8 million, of which $5.5 million was recorded as R&D expense. The remaining $5.3 million was recorded as a reduction of the R&D cost share liability . The increase in external research and development expenses in the second quarter was primarily attributable to increases in external clinical trial costs for BRUKINSA and sonrotoclax (BGB-11417) and preclinical trial costs for certain assets in our portfolio, partially offset by a decrease in Amgen co-development expense and lower external clinical trial costs for tislelizumab. Internal research and development expense increased $40.0 million, or 16.1%, to $287.7 million, and was primarily attributable to the expansion of our global discovery and development organization, as well as our continued efforts to internalize research and clinical trial activities, and included the following: • $22.8 million increase of employee salary and benefits, primarily attributable to hiring more research and development personnel to support our expanding research and development activities; • $15.0 million increase in facilities, depreciation, office expense, rental fees, and other expenses, which was partially offset by a $14.1 million decrease in clinical inventory in the period for tislelizumab; • $8.8 million increase of share-based compensation expense, primarily attributable to our increased headcount of research and development employees, resulting in more awards being expensed; • $4.6 million increase of travel and meeting expenses, which was mainly due to travel normalizing and key conferences in connection with the advancement of our drug candidates; and • $2.9 million increase of consulting fees, which was mainly attributable to activities in the United States and Europe. 39 Table of Contents Selling, General and Administrative Expense Selling, general and administrative expense increased by $63.6 million, or 19.2%, to $395.0 million for the three months ended June 30, 2023, from $331.4 million for the three months ended June 30, 2022. The increase was primarily attributable to the following: • $40.1 million increase of external commercial-related expenses, including grants and sponsorships, meetings, conferences and seminars, marketing and promotional activities, and market access studies and analytics, related to commercial expansion in the United States and Europe driven by the launch of BRUKINSA in CLL; • $18.8 million increase of employee salary and benefits, primarily attributable to hiring more commercial and medical affairs personnel to support our commercial expansion activities; • $13.2 million increase of share-based compensation expense, primarily attributable to our increased headcount of sales and administrative employees, resulting in more awards being expensed; and • $8.5 million decrease of professional fees, consulting and other administrative expenses, primarily attributable to increased legal fees related to increased arbitration activities for the three months ended June 30, 2022. Interest Income, Net Interest income, net increased by $3.6 million, or 31.8%, to $15.1 million of net interest income for the three months ended June 30, 2023, from $11.4 million of net interest income for three months ended June 30, 2022. The increase in interest income, net, was primarily attributable to increased interest income resulting from higher interest rates on our cash and short-term investment balances. Other Expense, Net Other expense, net was $63.8 million for the three months ended June 30, 2023, primarily due to foreign exchange losses resulting from the strengthening of the U.S. dollar compared to the RMB in the period and the revaluation impact of foreign currencies held in U.S. functional currency subsidiaries, partially offset by government subsidy income. The decrease in other expense, net, was primarily due to reduced RMB-denominated cash held by U.S. functional currency entities compared to the prior year period. For the three months ended June 30, 2022, other expense, net, was $129.6 million, which was primarily due to foreign exchange losses resulting from the strengthening of the U.S. dollar compared to the RMB in the period and the revaluation impact of foreign currencies held in U.S. functional currency subsidiaries, partially offset by unrealized losses on our equity investments. Income Tax Expense Income tax expense was $13.7 million for the three months ended June 30, 2023 as compared to $8.1 million for the three months ended June 30, 2022. The income tax expense for the three months ended June 30, 2023 and 2022 was primarily attributable to current China tax expense due to certain non-deductible expenses and current U.S. tax expense determined after other special tax deductions and research and development tax credits. Comparison of the Six Months Ended June 30, 2023 and 2022 Revenue Total revenue increased to $1,043.1 million, or 60.9%, for the six months ended June 30, 2023, from $648.2 million for the six months ended June 30, 2022, primarily due to increased sales of our internally developed products, BRUKINSA and tislelizumab, as well as increased sales of in-licensed products, most notably from the Amgen products. 40 Table of Contents The following table summarizes the components of revenue for the six months ended June 30, 2023 and 2022, respectively: Six Months Ended June 30, Changes 2023 2022 $ % (dollars in thousands) Product revenue $ 964,036 $ 566,084 $ 397,952 70.3 % Collaboration revenue: Research and development service revenue 20,380 24,240 (3,860) (15.9) % Right to access intellectual property revenue 52,497 52,497 — — % Other 6,149 5,377 772 14.4 % Total collaboration revenue 79,026 82,114 (3,088) (3.8) % Total Revenue $ 1,043,062 $ 648,198 $ 394,864 60.9 % Net product revenues consisted of the following: Six Months Ended June 30, Changes 2023 2022 $ % (dollars in thousands) BRUKINSA ® 519,658 233,072 $ 286,586 123.0 % Tislelizumab 264,314 192,522 71,792 37.3 % REVLIMID ® 45,005 41,576 3,429 8.2 % XGEVA ® 44,165 29,008 15,157 52.3 % POBEVCY ® 27,764 19,798 7,966 40.2 % BLINCYTO ® 25,524 21,396 4,128 19.3 % KYPROLIS ® 15,995 8,405 7,590 90.3 % VIDAZA ® 7,119 8,946 (1,827) (20.4) % Pamiparib 3,725 4,577 (852) (18.6) % Other 10,767 6,784 3,983 58.7 % Total product revenue $ 964,036 $ 566,084 $ 397,952 70.3 % Net product revenue increased 70.3% to $964.0 million for the six months ended June 30, 2023, compared to $566.1 million in the prior year period, primarily due to increased sales of BRUKINSA in the United States and China and increased sales of tislelizumab in China. In addition, there were increased sales of our in-licensed products from Amgen. Global sales of BRUKINSA totaled $519.7 million in the six months ended June 30, 2023, representing a 123.0% increase compared to the prior year period; U.S. sales of BRUKINSA totaled $362.3 million in the six months ended June 30, 2023, compared to $156.3 million in the prior year period, representing growth of 131.8%. U.S. sales continued to accelerate in the period, driven by the approval and launch of BRUKINSA for adult patients with chronic lymphocytic leukemia (CLL) and small lymphocytic lymphoma (SLL). BRUKINSA sales in China totaled $96.5 million in the six months ended June 30, 2023, representing growth of 37.6% compared to the prior year period, driven by an increase in all approved indications. BRUKINSA rest of world sales totaled $60.8 million in the six months ended June 30, 2023, representing growth of 814.4% compared to the prior-year period, driven by a significant increase in all approved indications, including CLL and SLL in Europe. Sales of tislelizumab in China totaled $264.3 million in the six months ended June 30, 2023, compared to $192.5 million representing a 37.3% increase compared to the prior year period. In the six months ended June 30, 2023, new patient demand from broader reimbursement and further expansion of our salesforce and hospital listings continued to drive increased market penetration and market share for tislelizumab. Collaboration revenue totaled $79.0 million for the six months ended June 30, 2023, of which $20.4 million was recognized from deferred revenue for R&D services performed during the six months ended June 30, 2023 under both the tislelizumab and ociperlimab collaborations, $52.5 million was recognized from deferred revenue for Novartis' right to access ociperlimab over the option period, and $6.1 million was recognized primarily related to the sale of tislelizumab clinical supply 41 Table of Contents to Novartis and revenue generated under the broad markets marketing and promotion agreement. Collaboration revenue totaled $82.1 million for the six months ended June 30, 2022, of which $24.2 million was recognized from deferred revenue for R&D services performed during the six months ended June 30, 2022, $52.5 million was recognized from deferred revenue for Novartis' right to access ociperlimab over the option period, and $5.4 million was recognized related to the sale of tislelizumab clinical supply to Novartis (see Note 4 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q). Cost of Sales Cost of sales increased to $177.8 million for the six months ended June 30, 2023 from $136.4 million for the six months ended June 30, 2022, primarily due to increased product sales of BRUKINSA and tislelizumab as well as sales of in-licensed products from Amgen in China. Gross Margin Gross margin on product sales increased to $786.3 million for the six months ended June 30, 2023, compared to $429.7 million in the prior year period, primarily due to increased product revenue in the current year period. Gross margin as a percentage of product sales increased to 81.6% for the six months ended June 30, 2023, from 75.9% in the comparable period of the prior year. The increase is primarily due to a proportionally higher sales mix of global BRUKINSA compared to lower margin sales of in-licensed products and lower per unit costs for BRUKINSA and tislelizumab, partially offset by the impact of lower selling prices in China from the listing of tislelizumab and BRUKINSA on the updated NRDL. Research and Development Expense Research and development expense increased by $63.2 million, or 8.2%, to $831.3 million for the six months ended June 30, 2023 from $768.1 million for the six months ended June 30, 2022. The following table summarizes external clinical, external non-clinical and internal research and development expense for the six months ended June 30, 2023 and 2022, respectively: Six Months Ended June 30, Changes 2023 2022 $ % (dollars in thousands) External research and development expense: Cost of development programs $ 258,219 $ 232,009 $ 26,210 11.3 % Amgen co-development expense 1 23,274 46,789 (23,515) (50.3) % Total external research and development expenses 281,493 278,798 2,695 1.0 % Internal research and development expenses 549,855 489,324 60,531 12.4 % Total research and development expenses $ 831,348 $ 768,122 $ 63,226 8.2 % 1 Our co-funding obligation for the development of the pipeline assets under the Amgen collaboration for the six months ended June 30, 2023 totaled $45.9 million, of which $23.3 million was recorded as R&D expense. The remaining $22.7 million was recorded as a reduction of the R&D cost share liability . The increase in external research and development expenses in the six months ended June 30, 2023 was primarily attributable to increases in external clinical trial costs for BRUKINSA and sonrotoclax (BGB-11417) and preclinical trial costs for certain assets in our portfolio, partially offset by a decrease in Amgen co-development expense and lower external clinical trial costs for tislelizumab. Internal research and development expense increased $60.5 million, or 12.4%, to $549.9 million and was primarily attributable to the expansion of our global development organization and our clinical and preclinical drug candidates, as well as our continued efforts to internalize research and clinical trial activities, and included the following: • $39.5 million increase of employee salary and benefits, primarily attributable to hiring more research and development personnel to support our expanding research and development activities; • $12.0 million increase of share-based compensation expense, primarily attributable to our increased headcount of research and development employees, resulting in more awards being expensed related to the growing research and development employee population; 42 Table of Contents • $11.0 million increase of facilities, depreciation, office expense, rental fees, lab consumables and other expenses to support the growth of our organization, partially offset by a $7.0 million decrease in clinical inventory; and • $5.0 million increase in meetings, seminars and travel expenses mainly attributable to increased meetings and conferences travel normalizing. Selling, General and Administrative Expense Selling, general and administrative expense increased by $97.6 million, or 15.6%, to $723.5 million, for the six months ended June 30, 2023, from $626.0 million for the six months ended June 30, 2022. The increase was primarily attributable to the following: • $68.2 million increase in external commercial-related expenses, including market research, sales and marketing, consulting and conference related expenses, related to the growth of our global commercial organization, including commercial expansion of BRUKINSA in CLL in the United States and Europe, as we continue to build our worldwide footprint and capabilities; • $18.9 million increase of employee salary and benefits, which was primarily attributable to the expansion of our commercial organizations in the United States, Europe, Canada, China and emerging markets, and the hiring of personnel to support our growing business; • $19.9 million increase of share-based compensation expense, primarily attributable to our increased headcount of sales and administrative employees, resulting in more awards being expensed related to the growing sales and administrative employee population; • $9.4 million decrease in general and administrative and other expenses primarily attributable to increased legal fees related to increased arbitration activities for the prior six months period ended June 30, 2022. Interest Income (Expense), Net Interest income (expense), net increased by $9.6 million, or 44.6%, to $31.1 million of net interest income for the six months ended June 30, 2023, from $21.5 million of net interest expense for six months ended June 30, 2022. The increase in interest income was primarily attributable to higher interest rates earned on our cash, cash equivalents and short-term investments. Other Expense, Net Other expense, net decreased to $45.5 million of net other expense for the six months ended June 30, 2023, from $117.7 million for the six months ended June 30, 2022. The decrease in expense was primarily related to foreign exchanges losses resulting from the strengthening of the U.S. dollar compared to the RMB and the revaluation impact of RMB-denominated deposits held in U.S. functional currency subsidiaries being greater in the prior-year period. Also contributing to the decrease in expense was decrease in the unrealized loss on our equity investment in Leap Therapeutics. Income Tax Expense Income tax expense increased to $25.2 million for the six months ended June 30, 2023, from $22.1 million for the six months ended June 30, 2022. The income tax expense for the six months ended June 30, 2023 and June 30, 2022 was primarily attributable to current China tax expense due to certain non-deductible expenses and current U.S. tax expense determined after other special deductions and research and development tax credits. 43 Table of Contents Liquidity and Capital Resources The following table represents our cash, short-term investments, and debt balances as of June 30, 2023 and December 31, 2022: As of June 30, December 31, 2023 2022 (dollars in thousands) Cash, cash equivalents and restricted cash $ 3,421,574 $ 3,875,037 Short-term investments $ 105,693 $ 665,251 Total debt $ 628,478 $ 538,117 With the exception of the periods in which we received upfront payments from out-licensing rights to tislelizumab to Novartis, and prior to that BMS, we have incurred 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 to support the commercialization of our products and our global operations. We recognized net losses of $381.1 million and $729.6 million for the three and six months ended June 30, 2023, respectively, and net losses of $565.7 million and $1.0 billion for the three and six months ended June 30, 2022, respectively. As of June 30, 2023, we had an accumulated deficit of $7.8 billion. To date, we have financed our operations principally through proceeds from public and private offerings of our securities and proceeds from our collaborations, together with product sales since September 2017. Based on our current operating plan, we expect that our existing cash, cash equivalents and short-term investments as of June 30, 2023 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. In January 2021, we entered into a collaboration and license agreement with Novartis, granting Novartis rights to develop, manufacture and commercialize tislelizumab in North America, Europe, and Japan. Under the agreement, we received an upfront cash payment of $650 million from Novartis. In December 2021, we expanded our collaboration with Novartis by entering into an option, collaboration and license agreement with Novartis to develop, manufacture and commercialize our investigational TIGIT inhibitor ociperlimab in the Novartis Territory. In addition, we and Novartis entered into an agreement granting us rights to market, promote and detail five approved Novartis oncology products, in certain areas of China, referred to as the "broad markets". Under the terms of the agreement, we received an upfront cash payment of $300 million in January 2022. The ociperlimab option, collaboration and license agreement was terminated in July 2023. The following table provides information regarding our cash flows for the six months ended June 30, 2023 and 2022: Six Months Ended June 30, 2023 2022 (dollars in thousands) Cash, cash equivalents and restricted cash at beginning of period $ 3,875,037 $ 4,382,887 Net cash used in operating activities (857,665) (616,522) Net cash provided by investing activities 308,863 869,103 Net cash provided by (used in) financing activities 146,212 (28,847) Net effect of foreign exchange rate changes (50,873) (71,212) Net (decrease) increase in cash, cash equivalents, and restricted cash (453,463) 152,522 Cash, cash equivalents and restricted cash at end of period $ 3,421,574 $ 4,535,409 Operating Activities Cash flows from operating activities is net loss adjusted for certain non-cash items and changes in assets and liabilities. Operating activities used $857.7 million of cash in the six months ended June 30, 2023, principally from our net loss of $729.6 million and an increase in our net operating assets and liabilities of $329.4 million, partially offset by non-cash charges of $201.3 million. 44 Table of Contents The increase in net operating assets and liabilities was primarily driven by increased working capital associated with our growth in product sales. The non-cash charges were primarily the result of share-based compensation expense, depreciation and amortization expense, offset by amortization of the research and development cost share liability. Net loss for the three months ended June 30, 2023 includes $63.8 million of other losses due primarily to the strengthening of the U.S. dollar and the related revaluation of RMB-denominated deposits held by U.S. functional currency subsidiaries. Operating activities used $616.5 million of cash in the six months ended June 30, 2022, which resulted principally from our net loss of $1.0 billion, partially offset by a decrease in our net operating assets and liabilities of $220.6 million and by non-cash charges of $163.8 million. Net loss for the three months ended June 30, 2022 includes $129.6 million of other losses due primarily to the strengthening of the U.S. dollar and the related revaluation of RMB-denominated deposits held by U.S. functional currency subsidiaries. The decrease in working capital was driven largely by decreases in accounts receivable (due to the receipt of the upfront from Novartis related to the ociperlimab collaboration), decreases in prepaid assets and other non-current assets, and an increase in taxes payable, partially offset by increases in inventories and decreases in accounts payable, accrued expenses, deferred revenue and other long-term liabilities. The non-cash charges were primarily driven by share-based compensation expense, depreciation and amortization expense, and unrealized loss on our Leap investment, offset by amortization of the research and development cost share liability and deferred income tax benefits. Investing Activities Cash flows from investing activities consist primarily of capital expenditures, investment purchases, sales, maturities, and disposals, and upfront payments related to our collaboration agreements. Investing activities provided $308.9 million of cash in the six months ended June 30, 2023, consisting of sales and maturities of investment securities of $567.5 million, partially offset by capital expenditures of $247.1 million, and $11.6 million in purchases of investment securities. Investing activities provided $869.1 million of cash in the six months ended June 30, 2022, consisting of sales and maturities of investment securities of $1,051.0 million, offset by $11.5 million in purchases of investment securities, capital expenditures of $95.4 million, and $75.0 million of acquired in-process research and development. Financing Activities Cash flows from financing activities consist primarily of sale of ordinary shares, RMB Shares and ADSs through equity offerings, issuance and repayment of short-term and long-term debt, and proceeds from the sale of ordinary shares and ADSs through employee equity compensation plans. Financing activities provided $146.2 million of cash in the six months ended June 30, 2023, consisting primarily of $15.8 million of net proceeds from long-term bank loans, $161.8 million of proceeds from short-term bank loans and $35.2 million from the exercise of employee share options and proceeds from the issuance of shares through our employee share purchase plan, which were partially offset by $66.6 million in repayments of short-term bank loans. Financing activities used $28.8 million of cash in the six months ended June 30, 2022, consisting primarily of $115.4 million repayment of short-term bank loans, which were partially offset by $67.6 million of proceeds from short-term bank loans and $19.0 million from the exercise of employee share options and proceeds from the issuance of shares through our employee share purchase plan. Effects of Exchange Rates on Cash We have substantial operations in the PRC, which generate a significant amount of RMB-denominated cash from product sales and require a significant amount of RMB-denominated cash to pay our obligations. We hold a significant amount of RMB-denominated deposits at our China subsidiaries. Since the reporting currency of the Company is the U.S. dollar, periods of volatility in exchange rates may have a significant impact on our consolidated cash balances as they are translated into U.S. dollars. The impact of foreign currency deposits being translated into the U.S. dollar negatively impacted ending cash by $50.9 million in the six months ended June 30, 2023, compared to a negative impact of $71.2 million in the prior-year period. Future Liquidity and Material Cash Requirements Until such time, if ever, as we can generate substantial product revenue sufficient to cover our costs and capital investments, we may be required to finance our cash needs through a combination of equity offerings, debt financings, collaboration agreements, strategic alliances, licensing arrangements, government grants, and other available sources. Under the 45 Table of Contents rules of the SEC, we currently qualify as a “well-known seasoned issuer,” which allows us to file shelf registration statements to register an unspecified amount of securities that are effective upon filing. In May 2020, we filed such a shelf registration statement with the SEC for the issuance of an unspecified amount of ordinary shares (including in the form of ADSs), preferred shares, various series of debt securities and/or warrants to purchase any of such securities, either individually or in units, from time to time at prices and on terms to be determined at the time of any such offering. This registration statement was effective upon filing and will remain in effect for up to three years from filing, prior to which time we may file another shelf registration statement that will be effective for up to three years from filing. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a holder of ADSs, ordinary shares, or RMB Shares. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends, and may require the issuance of warrants, which could potentially dilute your ownership interest. If we raise additional funds through collaboration agreements, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our medicines or drug candidates, future revenue streams or research programs, or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings, collaborations or other sources when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market products or drug candidates that we would otherwise prefer to develop and market ourselves. Our material cash requirements in the short- and long-term consist of the following operational, capital, and manufacturing expenditures, a portion of which contain contractual or other obligations. We plan to fund our material cash requirements with our current financial resources together with our anticipated receipts of accounts receivable, product sales and royalty revenues, and reimbursements we expect to receive under our existing collaboration and license agreements. Contractual and Other Obligations The following table summarizes our significant contractual obligations as of the payment due date by period as of June 30, 2023: Payments Due by Period Total Short Term Long Term (dollars in thousands) Contractual obligations Operating lease commitments $ 53,220 $ 13,074 $ 40,146 Purchase commitments 104,115 63,820 40,295 Debt obligations 628,478 421,052 207,426 Interest on debt 46,169 17,246 28,923 Co-development funding commitment 549,765 126,688 423,077 Funding commitment 10,557 2,625 7,932 Research and development commitment 17,990 5,959 12,031 Pension plan 7,986 2,627 5,359 Capital commitments 381,187 381,187 — Total $ 1,799,467 $ 1,034,278 $ 765,189 Operating Lease Commitments 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 office facilities 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 June 30, 2023, purchase commitments amounted to $104.1 million, of which $40.3 million related to minimum purchase requirements for supply purchased from contract manufacturers and $63.8 million related to binding purchase obligations of inventory from BMS and Amgen. We do not have any minimum purchase requirements for inventory from BMS or Amgen. 46 Table of Contents Debt Obligations and Interest Total debt obligations coming due in the next twelve months is $421.1 million. Total long-term debt obligations are $207.4 million. See Note 11 in the Notes to the Financial Statements for further detail of our debt obligations. Interest on bank loans is paid quarterly until the respective loans are fully settled. For the purpose of contractual obligations calculation, current interest rates on floating rate obligations were used for the remainder contractual life of the outstanding borrowings. Co-Development Funding Commitment Under the Amgen collaboration, we are responsible for co-funding global development costs for the licensed Amgen 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 development services. As of June 30, 2023, our remaining co-development funding commitment was $549.8 million. Funding Commitment Funding commitment represents our committed capital related to two equity method investments. As of June 30, 2023, our remaining capital commitment was $10.6 million and is expected to be paid from time to time over the investment period. Research and Development Commitment We entered into a long-term research and development agreement in June 2021, which includes obligations to make fixed quarterly payments over the next four years. As of June 30, 2023, the total research and development commitment amounted to $18.0 million. Pension Plan We maintain a defined benefit pension plan in Switzerland. Funding obligations under the defined benefit pension plan are equivalent to $2.6 million per year based on annual funding contributions in effect as of June 30, 2023 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 $381.2 million for the acquisition of property, plant and equipment as of June 30, 2023, which were mainly for our manufacturing and clinical R&D campus in Hopewell, NJ, and additional capacity at the Guangzhou and Suzhou manufacturing facilities. Other Business Agreements We are making a significant investment in our future manufacturing and clinical R&D center in the United States, a 42-acre site that is being constructed in Hopewell, NJ. We purchased this site for $75.2 million, announced its groundbreaking on April 29, 2022 and have $314.7 million of construction in process related to the project. We expect continued significant capital expenditures as we build out the Hopewell facility over the next several years. We also enter into agreements with contract research organizations to some extent to provide research and development services. These contracts are generally cancellable at any time by us with prior written notice. We also enter into collaboration agreements with institutions and companies to license intellectual property. We may be obligated to make future development, regulatory and commercial milestone payments and royalty payments on future sales of specified products associated with these agreements. Payments under these agreements generally become due and payable upon achievement of such milestones or sales. These commitments are not recorded on our balance sheet because the achievement and timing of these milestones are not fixed and determinable. When the achievement of these milestones or sales have occurred, the corresponding amounts are recognized in our financial statements. Legal Proceedings In the ordinary course of business, the Company may be subject to legal proceedings, claims and litigation as the Company operates in an industry susceptible to patent legal claims. The Company accounts for estimated losses with respect to legal 47 Table of Contents proceedings and claims when such losses are probable and estimable. Legal costs associated with these matters are expensed when incurred. Critical Accounting Policies and Significant Judgments and Estimates Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses. We evaluate our estimates and judgments on an ongoing basis, and our actual results may differ from these estimates. These include, but are not limited to, estimating the useful lives of long-lived assets, estimating variable consideration in product sales and collaboration revenue arrangements, estimating the incremental borrowing rate for operating lease liabilities, identifying separate accounting units and the standalone selling price of each performance obligation in the Company's revenue arrangements, assessing the impairment of long-lived assets, valuation and recognition of share-based compensation expenses, realizability of deferred tax assets and the fair value of financial instruments. We base our estimates on historical experience, known trends and events, contractual milestones and other various factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. There have been no material changes to our critical accounting policies as of and for the three and six months ended June 30, 2023, as compared to those described in the section titled “Part II – Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2022. For new accounting policies adopted during the three and six months ended June 30, 2023 , see “Part I – Item 1 – Financial Statements—Notes to the Condensed Consolidated Financial Statements—1. Description of Business, Basis of Presentation and Consolidation and Significant Accounting Policies—Significant accounting policies” in this Quarterly Report on Form 10-Q. Recent Accounting Pronouncements See Note 1 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for information regarding recent accounting pronouncements. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Interest and Credit Risk Financial instruments that are potentially subject to credit risk consist of cash, cash equivalents, restricted cash and short-term investments. The carrying amounts of cash, cash equivalents, restricted cash and short-term investments represent the maximum amount of loss due to credit risk. We had cash and cash equivalents of $3.4 billion and $3.9 billion, restricted cash of $11.2 million and $5.5 million, and short-term investments of $0.1 billion and $0.7 billion as of June 30, 2023 and December 31, 2022, respectively. Our cash and cash equivalent are deposited with various major reputable financial institutions located within or outside the PRC. The deposits placed with these financial institutions are not protected by statutory or commercial insurance. In the event of bankruptcy of one of these financial institutions, we may be unlikely to claim our deposits back in full. We believe that these financial institutions are of high credit quality, and we continually monitor the credit worthiness of these financial institutions. On June 30, 2023, our short-term investments consisted of U.S. treasury securities. We believe that the U.S. treasury securities are of high credit quality and continually monitor the credit worthiness of these institutions. The primary objectives of our investment activities are to preserve principal, provide liquidity, and maximize income without significant increasing risk. Our primary exposure to market risk relates to fluctuations in the interest rates, which are affected by changes in the general level of PRC and U.S. interest rates. Given the short‑term nature of our cash equivalents, we believe that a sudden change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operation. We estimate that a hypothetical 100-basis point increase or decrease in market interest rates would result in a decrease o f $0.4 million or an increase of $0.4 million, respe ctively, as of June 30, 2023. We do not believe that our cash, cash equivalents and short-term investments have significant risk of default or illiquidity. While we believe our cash, cash equivalents, and short-term investments do not contain excessive risk, we cannot provide absolute assurance that in the future investments will not be subject to adverse changes in market value. We had accounts receivable, net of $299.3 million and $173.2 million as of June 30, 2023 and December 31, 2022, respectively. Accounts receivable, net represent amounts arising from product sales and amounts due from our collaboration 48 Table of Contents partners. We monitor economic conditions to identify facts or circumstances that may indicate receivables are at risk of collection. To date, we have not experienced any significant losses with respect to the collection of our accounts receivable. Foreign Currency Exchange Rate Risk We are exposed to foreign exchange risk arising from various currency exposures. Our reporting currency is the U.S. dollar, but a portion of our operating transactions and assets and liabilities are in other currencies, such as RMB, Euro, and Australian dollar. While we hold significant amounts of RMB, and are subject to foreign currency exchange risk upon revaluation or translation into our reporting currency, we expect to utilize our existing RMB cash deposits in the operation of our China business over the next several years, and as a result, have not used derivative financial instruments to hedge exposure to such risk. RMB is not freely convertible into foreign currencies for capital account transactions. The value of RMB against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions and China’s foreign exchange prices. Since 2005, the RMB has been permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. The RMB compared to the U.S. dollar depreciated approximately 4.9% in the six months ended June 30, 2023 and depreciated approximately 8.2% in the year ended December 31, 2022, respectively. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. To the extent that we need to convert U.S. dollars into RMB for capital expenditures, working capital and other business purposes, appreciation of RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. Conversely, if we decide to convert RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares, strategic acquisitions or investments or other business purposes, appreciation of the U.S. dollar against RMB would have a negative effect on the U.S. dollar amount available to us. In addition, a significant depreciation of the RMB against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our foreign cash balances and trade receivables. Further, volatility in exchange rate fluctuations may have a significant impact on the foreign currency translation adjustments recorded in other comprehensive income (loss). We have not used derivative financial instruments to hedge exposure to foreign exchange risk. Currency Convertibility Risk A significant portion of our expenses, assets, and liabilities are denominated in RMB. In 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China (the “PBOC”). However, the unification of exchange rates does not imply that the RMB may be readily convertible into U.S. dollars or other foreign currencies. All foreign exchange transactions continue to take place either through the PBOC or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approvals of foreign currency payments by the PBOC or other institutions require submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts. Additionally, the value of RMB is subject to changes in the PRC central government policies and international economic and political developments affecting supply and demand in the PRC foreign exchange trading system market. Effects of Inflation Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation has had a material effect on our results of operations during the six months ended June 30, 2023. Item 4. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Based on their evaluation, required by paragraph (b) of Rules 13a-15 or 15d-15, promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act are effective, at a reasonable assurance level, as of June 30, 2023, to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in U.S. Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required 49 Table of Contents disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, and management necessarily was required to apply its judgment in designing and evaluating the controls and procedures. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a‑15(d) and 15d‑15(d) of the Exchange Act that occurred during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 50 Table of Contents PART II. OTHER INFORMATION Item 1. Legal Proceedings. From time to time we may become involved in legal proceedings or be subject to claims of a nature considered ordinary course in our business, including the intellectual property litigation described herein. Most of the issues raised by such claims are highly complex and subject to substantial uncertainties. For a description of risks relating to these legal proceedings, see “Part II – Item 1A – Risk Factors” of this Quarterly Report, including the discussion under the headings entitled “Risks Related to Our Intellectual Property.” The outcome of any such proceedings, regardless of the merits, is inherently uncertain; therefore, assessing the likelihood of loss and any estimated damages is difficult and subject to considerable judgment. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. ABRAXANE ® On June 26, 2020, following the suspension and recall of ABRAXANE ® in China supplied to us by Celgene Logistics Sàrl, a Bristol-Myers Squibb Company (referred to elsewhere in this report as BMS, but for this paragraph only, “BMS-Celgene”), we initiated an arbitration proceeding at the International Chamber of Commerce against BMS-Celgene (the "Arbitration") asserting that it had breached and continued to breach the terms and conditions of the License and Supply Agreement entered into by BeiGene and BMS-Celgene in July 2017 (the "LSA") and the Amended and Restated Quality Agreement (the "QA" and collectively with the LSA, the “BMS-Celgene License”). Under the BMS-Celgene License, we alleged that BMS-Celgene was obligated, among other things, to ensure the continuity and adequacy of its supply of ABRAXANE to us. In the Arbitration, we sought (i) a declaration that BMS-Celgene was and continued to be in breach of the BMS-Celgene License, (ii) a declaration that BMS-Celgene acted with gross negligence and/or willful misconduct, (iii) an award of damages, and (iv) such other relief as the arbitrators deemed appropriate. BMS-Celgene responded in part by submitting a counterclaim against us seeking to recover approximately $30 million in costs that it contends it incurred as part of the ABRAXANE recall. In October 2021, BMS-Celgene delivered a notice to us purporting to terminate the BMS-Celgene License with respect to ABRAXANE ® and providing 180-days' notice that it was withdrawing ABRAXANE from the range of products for sale or distribution in China pursuant to Section 2.6 of the BMS-Celgene License. Thereafter, we amended our claims to add a claim for wrongful termination of the BMS-Celgene License with respect to ABRAXANE. A hearing was held in the Arbitration in June 2022. Prior to a decision being issued in the Arbitration, on August 1, 2023, we entered into a Settlement and Termination Agreement (the “Settlement Agreement”) with BMS-Celgene and certain of its affiliates relating to the termination of the parties’ ongoing contractual relationship, the Arbitration, the LSA, the QA, and the Share Subscription Agreement (the “SSA”), entered into by the parties in 2017 and 2018. Pursuant to the Settlement Agreement, the parties agreed to mutually dismiss the Arbitration and BMS-Celgene and its affiliates agreed to transfer 23,273,108 of our ordinary shares originally purchased in 2017, in each case subject to and in accordance with the terms and conditions of the Settlement Agreement. We have no payment obligation in exchange for the transferred shares pursuant to the Settlement Agreement. Furthermore, the parties agreed to terminate the LSA and QA on December 31, 2023, subject to our right to continue selling all inventory of Revlimid and Vidaza until sold out or December 31, 2024, whichever is earlier. The Settlement Agreement provides for a settlement and release by each party of claims arising from or relating to the Arbitration, the LSA, the QA and the SSA, as well as other disputes and potential disputes between the parties, in each case subject to and in accordance with the terms and conditions of the Agreement. BRUKINSA ® On June 13, 2023, Pharmacyclics LLC (“Pharmacyclics”) filed a complaint in the U.S. District Court for the District of Delaware against the Company and its subsidiary, BeiGene USA, Inc., alleging that BRUKINSA infringes a Pharmacyclics’ patent issued on June 13, 2023. Pharmacyclics seeks a declaration of infringement, unspecified monetary damages and other relief. This litigation is ongoing and no trial date has been scheduled at this time. The Company intends to vigorously defend against the claims. Item 1A. Risk Factors. The following section includes material factors that we believe may adversely affect our business and operations. You should carefully consider the risks and uncertainties described below and all information contained in this Quarterly Report, including our financial statements and the related notes and “Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding to invest in our ADSs, ordinary shares or RMB Shares. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our ADSs, ordinary shares or RMB Shares could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we 51 Table of Contents currently deem immaterial also may impair our business operations. Please refer to the explanation of the qualifications and limitation on forward-looking statements set forth at the outset of “Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The risk factors denoted with a “*”, if any, are newly added or have been materially updated from our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”). Summary of Risk Factors Below is a summary of the material factors that make an investment in our American Depositary Shares (“ADSs”) listed on Nasdaq, our ordinary shares listed on The Stock Exchange of Hong Kong Limited, and our ordinary shares issued to permitted investors in China and listed and traded on the Science and Technology Innovation Board of the Shanghai Stock Exchange in Renminbi (“RMB Shares”) speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, are set forth herein and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the U.S. Securities and Exchange Commission (“SEC”), before making an investment decision regarding our ADSs, ordinary shares or RMB Shares. • Our medicines may fail to achieve and maintain the degree of market acceptance by physicians, patients, third-party payors, and others in the medical community necessary for commercial success. • We have limited experience in launching and marketing our internally developed and in-licensed medicines. If we are unable to further develop marketing and sales capabilities or enter into agreements with third parties to market and sell our medicines, we may not be able to generate substantial product sales revenue. • We face substantial competition, which may result in others discovering, developing, or commercializing competing medicines before or more successfully than we do. • The market opportunities for our medicines may be limited to those patients who are ineligible for or have failed prior treatments and may be small. • If we or any third parties with which we may collaborate to market and sell our medicines are unable to achieve and maintain coverage and adequate levels of reimbursement, our commercial success and business operations could be adversely affected. • We depend substantially on the success of the clinical development of our medicines and drug candidates. If we are unable to successfully complete clinical development, obtain regulatory approvals and commercialize our medicines and drug candidates, or experience significant delays in doing so, our business will be materially harmed. • Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. • If clinical trials of our drug candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our drug candidates. • If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected. • All material aspects of the research, development, manufacturing and commercialization of pharmaceutical products are heavily regulated, and we may face difficulties in complying with or be unable to comply with such regulations, which could have a material adverse effect on our business. • The approval processes of regulatory authorities in the United States, China, Europe and other comparable regulatory authorities are lengthy, time consuming, costly, and inherently unpredictable. If we experience delays or are ultimately unable to obtain regulatory approval for our drug candidates, our business will be substantially harmed. • Our medicines and any future approved drug candidates will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our medicines and drug candidates. 52 Table of Contents • Even if we are able to commercialize our medicines and any approved drug candidates, the medicines may become subject to unfavorable pricing regulations or third-party reimbursement practices or healthcare reform initiatives, which could harm our business. • We have incurred significant net losses since our inception and anticipate that we will continue to incur net losses for the foreseeable future and may not become profitable. • We may need to obtain additional financing to fund our operations, and if we are unable to obtain such financing, we may be unable to complete the development of our drug candidates or achieve profitability. • If we are unable to obtain and maintain patent protection for our medicines and drug candidates through intellectual property rights, or if the scope of such intellectual property rights is not sufficiently broad, third parties may compete against us. • We rely on third parties to manufacture some of our commercial and clinical drug supplies. Our business could be harmed if those third parties fail to provide us with sufficient quantities of product or fail to do so at acceptable quality levels or prices. • We have entered into licensing and collaboration arrangements and may enter into additional collaborations, licensing arrangements, or strategic alliances in the future, and we may not realize the benefits of such arrangements. • If we fail to maintain an effective distribution channel for our medicines, our business and sales could be adversely affected. • If third-party manufacturers fail to comply with manufacturing regulations, our financial results and financial condition could be adversely affected. • If we are not able to successfully develop and/or commercialize Amgen’s oncology products, the expected benefits of the collaboration will not materialize. • We have significantly increased and expect to continue to increase our research, development, manufacturing, and commercial capabilities, and we may experience difficulties in managing our growth. • Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel. • Our business is subject to complex and evolving industry-specific laws and regulations regarding the collection and transfer of personal data. These laws and regulations can be complex and stringent, and many are subject to change and uncertain interpretation, which could result in claims, changes to our data and other business practices, significant penalties, increased cost of operations, or otherwise adversely impact our business. • We manufacture some of our medicines and intend to manufacture some of our drug candidates, if approved. Failure to comply with regulatory requirements could result in sanctions being imposed against us and delays in completing and receiving regulatory approvals for our manufacturing facilities, or damage to, destruction of or interruption of production at such facilities, could delay our development plans or commercialization efforts. • Changes in the political and economic policies of the PRC government or in relations between China and the United States or other governments, and the significant oversight and discretion the PRC government has over the conduct of the business operations of our PRC subsidiaries may materially and adversely affect our business, financial condition, and results of operations and may result in our inability to sustain our growth and expansion strategies. • The audit reports included in our previous annual reports on Form 10-K filed with the SEC have historically been prepared by auditors who are not inspected fully by the Public Company Accounting Oversight Board, and as such, investors have previously been deprived of the benefits of such inspection. • The trading prices of our ordinary shares, ADSs, and/or RMB Shares can be volatile, which could result in substantial losses to you. 53 Table of Contents Risks Related to Clinical Development and Commercialization of Our Medicines and Drug Candidates Our medicines may fail to achieve and maintain the degree of market acceptance by physicians, patients, third-party payors, and others in the medical community necessary for commercial success. Our medicines may fail to achieve and maintain sufficient market acceptance by physicians, patients, third-party payors, and others in the medical community. For example, current cancer treatments like chemotherapy and radiation therapy are well established in the medical community, and doctors may continue to rely on these treatments to the exclusion of our medicines. If our medicines do not achieve and maintain an adequate level of market acceptance, the sales of our medicines may be limited and we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of our medicines will depend on a number of factors, including: the clinical indications for which our medicines are approved; physicians, hospitals, cancer treatment centers, and patients considering our medicines safe and effective; government agencies, professional societies, practice management groups, insurance carriers, physicians’ groups, private health and science foundations, and organizations recommending our medicines and reimbursement; the perceived advantages and relative cost of alternative treatments; the prevalence and severity of any side effects; product labeling, including limitations or warnings, or product insert requirements of regulatory authorities; the timing of market introduction of our medicines as well as competitive medicines; the availability of adequate coverage, reimbursement and pricing by third-party payors and government authorities; and the effectiveness of our sales and marketing efforts. Even if our medicines achieve market acceptance, we may not be able to maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our medicines, are more cost effective or render our medicines obsolete. We have limited experience in launching and marketing our internally developed and in-licensed medicines. If we are unable to further develop marketing and sales capabilities or enter into agreements with third parties to market and sell our medicines, we may not be able to generate substantial product sales revenue. We became a commercial-stage company in 2017, when we entered into a license and supply agreement with Celgene Logistics Sàrl, now a Bristol-Myers Squibb Company (“BMS”), to commercialize three of BMS’s approved cancer therapies, in the People's Republic of China (“PRC” or “China”). In October 2019, we entered into a collaboration with Amgen for its commercial-stage oncology products and a portfolio of clinical- and late-preclinical-stage oncology pipeline products. We received the first approvals for our internally developed drug candidates in late 2019 in the United States, in 2020 in China, and in 2021 in Europe. Given this, we have limited experience in commercializing our internally developed and in-licensed medicines, including building and managing a commercial team, conducting a comprehensive market analysis, obtaining state licenses and reimbursement, and managing distributors and a sales force for our medicines. As a result, our ability to successfully commercialize our medicines may involve more inherent risk, take longer, and cost more than it would if we were a company with substantial experience in launching medicines. If we are unable to, or decide not to, further develop internal sales, marketing, and commercial distribution capabilities for any or all of our medicines in any country or region, we will likely pursue collaborative arrangements regarding the sales and marketing of our medicines. However, there can be no assurance that we will be able to establish or maintain such collaborative arrangements, or if we are able to do so, that they will have effective sales forces. We would have little or no control over the marketing and sales efforts of such third parties, and our revenue from product sales may be lower than if we had commercialized our medicines ourselves. There can be no assurance that we will be able to further develop and successfully maintain internal sales and commercial distribution capabilities or establish or maintain relationships with third-party collaborators to successfully commercialize any medicine, and as a result, we may not be able to generate substantial product sales revenue. We face substantial competition, which may result in others discovering, developing, or commercializing competing medicines before or more successfully than we do. The development and commercialization of new medicines is highly competitive. We face competition from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell medicines or are pursuing the development of medicines for the treatment of cancer for which we are commercializing our medicines or developing our drug candidates. For example, BRUKINSA, tislelizumab, and pamiparib face substantial competition, and some of our products face or are expected to face competition from generic therapies. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing, and commercialization. 54 Table of Contents Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize medicines that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than our medicines. Our competitors also may obtain approval from regulatory authorities for their medicines more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market and/or slow our regulatory approval. Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved medicines than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific, management and marketing personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. The market opportunities for our medicines may be limited to those patients who are ineligible for or have failed prior treatments and may be small. In markets with approved therapies, we have and expect to initially seek approval of our drug candidates as a later stage therapy for patients who have failed other approved treatments. Subsequently, for those medicines that prove to be sufficiently beneficial, if any, we would expect to seek approval as a second-line therapy and potentially as a first-line therapy, but there is no guarantee that our medicines and drug candidates, even if approved, would be approved for second-line or first-line therapy. Our projections of both the number of people who have the diseases we are targeting, as well as the subset of people with these diseases in a position to receive later stage therapy and who have the potential to benefit from treatment with our medicines and drug candidates, may prove to be inaccurate or based on imprecise data. Further, new studies may change the estimated incidence or prevalence of these cancers. The number of patients may turn out to be lower than expected. Additionally, the potentially addressable patient population for our medicines and drug candidates may be limited or may not be amenable to treatment with our medicines and drug candidates. Even if we obtain significant market share for our medicines and drug candidates, because the potential target populations are small, we may never achieve profitability without obtaining regulatory approval for additional indications, including use as a first- or second-line therapy. *If we or any third parties with which we may collaborate to market and sell our medicines are unable to achieve and maintain coverage and adequate levels of reimbursement, our commercial success and business operations could be adversely affected. Our ability or the ability of any third parties with which we collaborate to commercialize our medicines successfully will depend in part on the extent to which reimbursement for these medicines is available on adequate terms, or at all, from government health administration authorities, private health insurers and other organizations. In the United States and markets in other countries, patients generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Sales of our medicines will depend substantially, both domestically and abroad, on the extent to which the costs of our medicines will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. Without third-party payor reimbursement, patients may not be able to obtain or afford prescribed medications. Third-party payors also are seeking to encourage the use of generic or biosimilar products or entering into sole source contracts with healthcare providers, which could effectively limit the coverage and level of reimbursement for our medicines and have an adverse impact on the market access or acceptance of our medicines. In addition, reimbursement guidelines and incentives provided to prescribing physicians by third party payors may have a significant impact on the prescribing physicians’ willingness and ability to prescribe our products. For additional information, please see the section of our Annual Report titled “Part I —Item 1 — Business — Government Regulation — Pharmaceutical Coverage, Pricing, and Reimbursement.” A primary trend in the global healthcare industry is cost containment. Government authorities and these third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. In the United States, no uniform policy of coverage and reimbursement for drugs exists among third-party payors. As a result, obtaining coverage and reimbursement approval of a drug from a government or other third-party payor is a time-consuming and costly process that could require us to provide to each payor supporting scientific, clinical and cost- effectiveness data for the use of our medicines on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. The principal decisions about reimbursement for new medicines are typically made by the 55 Table of Contents Centers for Medicare and Medicaid Services (the “CMS”). They decide whether and to what extent a new medicine will be covered and reimbursed under Medicare and private payors tend to follow CMS to a substantial degree. Factors payors consider in determining reimbursement are based on whether the product is: a covered benefit under its health plan; safe, effective and medically necessary; appropriate for the specific patient; cost-effective; and neither experimental nor investigational. Coverage may be more limited than the purposes for which the medicine is approved by the United States Food and Drug Administration (“FDA”) or comparable regulatory authorities in other countries. Even if we obtain coverage for a given medicine, the resulting reimbursement rates might not be adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up evaluations required following the use of our medicines. Patients are unlikely to use our medicines unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of the medicine. Because some of our medicines and drug candidates have a higher cost of goods than conventional therapies and may require long-term follow-up evaluations, the risk that coverage and reimbursement rates may be inadequate for us to achieve profitability may be greater. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Furthermore, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. We cannot be sure that reimbursement will be available for any product candidate that we commercialize and, if reimbursement is available, the level of reimbursement. In addition, many pharmaceutical manufacturers must calculate and report certain price reporting metrics to the government, such as average sales price and best price. Penalties may apply in some cases when such metrics are not submitted accurately and timely. In China, drug prices are typically lower than in the United States and Europe, and until recently, the market has been dominated by generic drugs. Government authorities regularly review the inclusion or removal of medicines from China’s National Drug Catalog for Basic Medical Insurance, Work-related Injury Insurance and Maternity Insurance, or the National Reimbursement Drug List (the “NRDL”), or provincial or local medical insurance catalogues for the National Medical Insurance Program, and the tier under which a medicine will be classified, both of which affect the amounts reimbursable to program participants for their purchases of those medicines. There can be no assurance that our medicines and any approved drug candidates will be included in the NRDL or provincial reimbursements lists, or if they are, that they will be included at a price that allows us to be commercially successful. Products included in the NRDL have typically been generic and essential drugs. Innovative drugs similar to our medicines and drug candidates have historically been more limited on their inclusion in the NRDL due to the affordability of the Chinese government’s Basic Medical Insurance, although this has been changing in recent years. For example, BRUKINSA, tislelizumab, pamiparib, XGEVA and KYPROLIS have been included in the NRDL. While the demand for these medicines has generally increased after inclusion in the NRDL, there can be no assurance that demand will continue to increase and such increases will be sufficient to offset the reduction in the prices and our margins, which could have a material adverse effect on our business, financial condition and results of operations. We prepare for the NRDL negotiations in China for our eligible medicines/indications annually. If any of these medicines/indications are not included in the NRDL or included at a significantly lower price, the revenues for such medicines could be limited, which could have a material adverse effect on our business, financial condition and results of operations. Increasingly, third-party payors are requiring that companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that reimbursement will be available for any medicine that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Reimbursement may impact the demand for, or the price of, any medicine which we commercialize. Obtaining or maintaining reimbursement for our medicines may be particularly difficult because of the higher prices often associated with medicines administered under the supervision of a physician. If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any medicine and drug candidate that we in-license or successfully develop. There may be significant delays in obtaining reimbursement for approved medicines, and coverage may be more limited than the purposes for which the medicine is approved by regulatory authorities. Moreover, eligibility for reimbursement does not imply that any medicine will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim payments for new medicines, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Payment rates may vary according to the use of the medicine and the clinical setting in which it is used, may be based on payments allowed for lower cost medicines that are already reimbursed, and may be incorporated into existing payments for other services. Net prices for medicines may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future weakening of laws that presently restrict imports of medicines from countries where they may be sold at lower prices than in the United States. Our inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for our medicines and 56 Table of Contents any new medicines that we develop could have a material adverse effect on our business, our operating results, and our overall financial condition. We intend to seek approval to market our medicines and drug candidates in the United States, China, Europe and in other jurisdictions. In some countries, such as those in Europe, the pricing of drugs and biologics is subject to governmental control, which can take considerable time even after obtaining regulatory approval. Market acceptance and sales of our medicines will depend significantly on the availability of adequate coverage and reimbursement from third-party payors for our medicines and may be affected by existing and future health care reform measures. We have operations in the United States, China, Europe, and other markets and plan to expand in these and new markets on our own or with collaborators, which exposes us to risks of conducting business in international markets. We are currently developing and commercializing or plan to commercialize our medicines in international markets, including China, Europe and other markets outside of the United States, either on our own or with third party collaborators or distributors. Our international business relationships subject us to additional risks that may materially adversely affect our ability to attain or sustain profitable operations, including: • efforts to enter into collaboration or licensing arrangements with third parties in connection with our international sales, marketing and distribution efforts may increase our expenses or divert our management’s attention from the acquisition or development of drug candidates; • difficulty of effective enforcement of contractual provisions in local jurisdictions; • potential third-party patent rights or potentially reduced protection for intellectual property rights; • unexpected changes in tariffs, trade barriers and regulatory requirements, including the loss of normal trade status between China and the United States or actions taken by U.S. or China governmental authorities on companies with significant operations in the U.S. and China, such as us; • economic weakness, including inflation; • compliance with tax, employment, immigration and labor laws for employees traveling abroad; • the effects of applicable non-U.S. tax structures and potentially adverse tax consequences; • currency fluctuations, which could result in increased operating expenses and reduced revenue; • workforce uncertainty and labor unrest; • failure of our employees and contracted third parties to comply with Office of Foreign Asset Control rules and regulations and the Foreign Corrupt Practices Act and other anti-bribery and corruption laws; • business interruptions resulting from geo-political actions, including trade disputes, war and terrorism, public health crises, such as the COVID-19 pandemic, or natural disasters, including earthquakes, volcanoes, typhoons, floods, hurricanes and fires; and • international military conflicts and related sanctions. These and other risks, including the risks described in “Risks Related to Our Doing Business in the PRC”, may materially adversely affect our ability to attain or sustain revenue in international markets. The illegal distribution and sale by third parties of counterfeit versions of our medicines or stolen products could have a negative impact on our reputation and business. Third parties might illegally distribute and sell counterfeit or unfit versions of our medicines, which do not meet our or our collaborators’ rigorous manufacturing and testing standards. A patient who receives a counterfeit or unfit medicine may be at risk for a number of dangerous health consequences. Our reputation and business could suffer harm as a result of counterfeit or unfit medicines sold under our or our collaborators’ brand name(s). In addition, thefts of inventory at warehouses, plants or while in- transit, which are not properly stored and which are sold through unauthorized channels, could adversely impact patient safety, our reputation and our business. 57 Table of Contents We depend substantially on the success of the clinical development of our medicines and drug candidates. If we are unable to successfully complete clinical development, obtain regulatory approvals and commercialize our medicines and drug candidates, or experience significant delays in doing so, our business will be materially harmed. Our business depends on the successful development, regulatory approval and commercialization of our medicines and other drug candidates we may develop. We have invested a significant portion of our efforts and financial resources in the development of our medicines and drug candidates. The success of our medicines and drug candidates depends on several factors, including: • successful enrollment in, and completion of, clinical trials, as well as completion of preclinical studies; • favorable safety and efficacy data from our clinical trials and other studies; • receipt of regulatory approvals; • the performance by contract research organizations (“CROs”) or other third parties we may retain of their duties to us in a manner that complies with our protocols and applicable laws and that protects the integrity of the resulting data; • obtaining and maintaining patent, trade secret and other intellectual property protection and regulatory exclusivity; • ensuring that we do not infringe, misappropriate or otherwise violate the valid patent, trade secret or other intellectual property rights of third parties; • successfully launching our medicines and drug candidates, if and when approved; • obtaining favorable reimbursement from third-party payors for our medicines and drug candidates, if and when approved; • competition with other products; • continued acceptable safety profile following regulatory approval; and • manufacturing or obtaining sufficient supplies of our medicines, drug candidates and any competing drug products that may be necessary for use in clinical trials for evaluation of our drug candidates and commercialization of our medicines. If we do not achieve and maintain one or more of these factors in a timely manner or at all, we could experience significant delays in our ability or be unable to obtain additional regulatory approvals for and/or to successfully commercialize our medicines and drug candidates, which would materially harm our business and we may not be able to generate sufficient revenues and cash flows to continue our operations. Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. Clinical development is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our drug candidates may not be predictive of the results of later-stage clinical trials, and initial or interim results of a trial may not be predictive of the final results. Drug candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same drug candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, including genetic differences, patient adherence to the dosing regimen and other trial protocol elements and the rate of dropout among clinical trial participants. In the case of any trials we conduct, results may differ from earlier trials due to the larger number of clinical trial sites and additional countries involved in such trials. A number of companies in our industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Our future clinical trial results may not be favorable. Even if our future clinical trial results show favorable efficacy and durability of anti-tumor responses, not all patients may benefit. For certain drugs, including checkpoint inhibitors, and in certain indications, it is likely that the majority of patients may not respond to the agents at all, some responders may relapse after a period of response, and certain tumor types may appear particularly resistant. 58 Table of Contents If clinical trials of our drug candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our drug candidates. Before obtaining regulatory approval for the sale of our drug candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of our drug candidates in humans. We may experience numerous unexpected events during, or as a result of, clinical trials that could delay or prevent our ability to receive regulatory approval or commercialize our drug candidates, including but not limited to: regulators, institutional review boards (“IRBs”), or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; our inability to reach agreements on acceptable terms with CROs and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly; manufacturing issues, including problems with manufacturing, supply quality, compliance with good manufacturing practice ("GMP"), or obtaining sufficient quantities of a drug candidate for use in a clinical trial or for commercialization; clinical trials of our drug candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon drug development programs; the number of patients required for clinical trials of our drug candidates may be larger than we anticipate, enrollment may be insufficient or slower than we anticipate or patients may drop out at a higher rate than we anticipate; our third-party contractors, including clinical investigators, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; we might have to suspend or terminate clinical trials of our drug candidates for various reasons, including a finding of a lack of clinical response or other unexpected characteristics or a finding that participants are being exposed to unacceptable health risks; regulators, IRBs or ethics committees may require that we or our investigators suspend or terminate clinical research or not rely on the results of clinical research for various reasons, including noncompliance with regulatory requirements; the cost of clinical trials of our drug candidates may be greater than we anticipate; and the supply or quality of our medicines and drug candidates, companion diagnostics or other materials necessary to conduct clinical trials of our drug candidates or commercialization of our medicines may be insufficient or inadequate. If we are required to conduct additional clinical trials or other testing of our drug candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our drug candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if they raise safety concerns, we may be delayed in obtaining regulatory approval for our drug candidates, or not obtain regulatory approval at all; obtain approval for indications that are not as broad as intended; have the drug removed from the market after obtaining regulatory approval; be subject to additional post-marketing testing requirements; be subject to warning labels or restrictions on how the drug is distributed or used; or be unable to obtain reimbursement or obtain reimbursement at a commercially viable level for use of the drug. Significant clinical trial delays may also increase our development costs and could shorten any periods during which we have the exclusive right to commercialize our drug candidates or allow our competitors to bring drugs to market before we do. This could impair our ability to commercialize our drug candidates and may harm our business and results of operations. If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected. The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until its conclusion. We have and may continue to experience difficulties in patient enrollment in our clinical trials for a variety of reasons, including the size and nature of the patient population and the patient eligibility criteria defined in the protocol, competition from competing companies, and natural disasters or public health epidemics. Our clinical trials will likely compete with other clinical trials for drug candidates that are in the same therapeutic areas as our drug candidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Because the number of qualified clinical investigators and clinical trial sites is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites. Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could delay or prevent completion of these trials and adversely affect our ability to advance the development of our drug candidates. 59 Table of Contents Risks Related to Regulatory Approval and Extensive Government Regulation All material aspects of the research, development, manufacturing and commercialization of pharmaceutical products are heavily regulated, and we may face difficulties in complying with or be unable to comply with such regulations, which could have a material adverse effect on our business. All jurisdictions in which we conduct or intend to conduct our pharmaceutical-industry activities regulate these activities in great depth and detail. We are currently focusing our activities in the major markets of the United States, China, Europe, and other select countries and regions. These geopolitical areas all strictly regulate the pharmaceutical industry, and in doing so they employ broadly similar regulatory strategies, including regulation of product development and approval, manufacturing, and marketing, sales and distribution of products. However, there are differences in the regulatory regimes-some minor, some significant-that make for a more complex and costly regulatory compliance burden for a company like ours that plans to operate in each of these regions. Additionally, the China National Medical Products Administration’s (“NMPA”) reform of the medicine and approval system may face implementation challenges. The timing and full impact of such reforms is uncertain and could prevent us from commercializing our medicines and drug candidates in a timely manner. The process of obtaining regulatory approvals and compliance with appropriate laws and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable requirements at any time during the product development process, approval process, or after approval, may subject us to administrative or judicial sanctions. These sanctions could include a regulator’s refusal to approve pending applications, withdrawal of an approval, license revocation, a clinical hold, voluntary or mandatory product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties. The failure to comply with these regulations could have a material adverse effect on our business. For example, on March 25, 2020, the NMPA suspended the importation, sales and use of ABRAXANE in China supplied to us by BMS, and the drug was subsequently recalled by BMS and is not currently available for sale in China. This suspension was based on inspection findings at BMS’s contract manufacturing facility in the United States. We have not had any sales of ABRAXANE since the suspension and do not expect future revenue from ABRAXANE. For additional information, please see the section of this Quarterly Report titled “Legal Proceedings”. Additionally, although we have obtained regulatory approvals of our medicines, regulatory authorities could suspend or withdraw these approvals. In any event, the receipt of regulatory approval does not assure the success of our commercialization efforts for our medicines. We may be subject to anti-kickback, false claims laws, physician payment transparency laws, fraud and abuse laws or similar healthcare and security laws and regulations in the United States and other jurisdictions, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished sales. Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any products for which we obtain regulatory approval. Our operations are subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act (“FCA”), and physician payment sunshine laws and regulations. These laws may impact, among other things, our proposed sales, marketing and education programs. In addition, we are subject to patient privacy regulation by both the federal government and the states in which we conduct our business. For additional information, please see the section of our Annual Report, titled “Part I —Item 1 — Business — Government Regulation — Other U.S. Healthcare Laws and Compliance Requirements.” Additionally, we are subject to state equivalents of each of the healthcare laws described above, among others, some of which may be broader in scope and may apply to healthcare services reimbursed by any third-party payor, not just governmental payors, but also private insurers. These laws are enforced by various state agencies and through private actions. Some states have passed laws that require pharmaceutical companies to comply with the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and/or other voluntary industry codes of conduct that restrict the payments made to healthcare providers and other potential referral sources. Several states and local laws also impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state, require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, and require the registration of pharmaceutical sales representatives. In addition, the approval, commercialization, and other activities for our medicines and drug candidates outside the United States subjects us to non-U.S. equivalents of the healthcare laws such as those mentioned above, among other non-U.S. laws. As with the state equivalents mentioned above, some of these non-U.S. laws may be broader in scope. There are ambiguities as to what is required to comply with these state requirements, and if we fail to comply with an applicable state law requirement, we could be subject to penalties. It is possible that we may make grants to independent charitable foundations that help financially needy patients with their premium, co-pay, and co-insurance obligations. If we choose to do so, and if we or our vendors or donation recipients are deemed to fail to comply with relevant laws or regulations in the operation of these programs, we could be subject to damages, fines, penalties, or other criminal, civil, or administrative sanctions or enforcement actions. We cannot ensure that our 60 Table of Contents compliance controls and procedures will be sufficient to protect against acts of our employees, business partners, or vendors that may violate the laws or regulations of the jurisdictions in which we operate. Regardless of whether we have complied with the law, a government investigation could impact our business practices, harm our reputation, divert the attention of management, increase our expenses, and reduce the availability of foundation support for our patients who need assistance. Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including penalties, fines and/or exclusion or suspension from federal and state healthcare programs such as Medicare and Medicaid and debarment from contracting with the U.S. government. In addition, private individuals have the ability to bring actions on behalf of the U.S. government under the federal FCA as well as under the false claims laws of several states. Neither the U.S. government nor the U.S. courts have provided definitive guidance on the applicability of fraud and abuse laws to our business. Law enforcement authorities are increasingly focused on enforcing these laws, and it is possible that some of our practices may be challenged under these laws. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, individual imprisonment, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. Furthermore, if any of the physicians or other providers or entities with whom we do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs, which may adversely affect our business. If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs, we could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. We participate in the Medicaid Drug Rebate Program, the 340B program, the U.S. Department of Veterans Affairs, Federal Supply Schedule (“FSS”) pricing program, and the Tricare Retail Pharmacy program, which require us to disclose average manufacturer pricing, and, in the future may require us to report the average sales price for certain of our drugs to the Medicare program. Pricing and rebate calculations vary across products and programs, are complex, and are often subject to interpretation by us, governmental or regulatory agencies and the courts. Furthermore, regulatory and legislative changes, and judicial rulings relating to these programs and policies (including coverage expansion), have increased and will continue to increase our costs and the complexity of compliance, have been and will continue to be time-consuming to implement, and could have a material adverse effect on our results of operations, particularly if CMS or another agency challenges the approach we take in our implementation. For example, in the case of our Medicaid pricing data, if we become aware that our reporting for a prior quarter was incorrect or has changed as a result of recalculation of the pricing data, we are generally obligated to resubmit the corrected data for up to three years after those data originally were due. Such restatements increase our costs and could result in an overage or underage in our rebate liability for past quarters. Price recalculations also may affect the ceiling price at which we are required to offer our products under the 340B program and give rise to an obligation to refund entities participating in the 340B program for overcharges during past quarters impacted by a price recalculation. Civil monetary penalties can be applied if we are found to have knowingly submitted any false price or product information to the government, if we are found to have made a misrepresentation in the reporting of our average sales price, if we fail to submit the required price data on a timely basis, or if we are found to have charged 340B covered entities more than the statutorily mandated ceiling price. Additionally, our agreement to participate in the 340B program or our Medicaid drug rebate agreement could be terminated, in which case federal payments may not be available under Medicaid or Medicare Part D for our covered outpatient drugs. Additionally, if we overcharge the government in connection with our arrangements with FSS or Tricare Retail Pharmacy, we are required to refund the difference to the government. Failure to make necessary disclosures and/or to identify contract overcharges can result in allegations against us under the FCA and other laws and regulations. Unexpected refunds to the government, and responding to a government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Further, legislation may be introduced that, if passed, would, among other things, further expand the 340B program to additional covered entities or would require participating manufacturers to agree to provide 340B discounted pricing on drugs used in an inpatient setting, and any additional future changes to the definition of average manufacturer price or the Medicaid rebate amount could affect our 340B ceiling price calculations and negatively impact our results of operations. Additionally, 61 Table of Contents certain pharmaceutical manufacturers are involved in ongoing litigation regarding contract pharmacy arrangements under the 340B program. The outcome of those judicial proceedings and the potential impact on the way in which manufacturers extend discounts to covered entities through contract pharmacies remain uncertain. *The approval processes of regulatory authorities in the United States, China, Europe and other comparable regulatory authorities are lengthy, time consuming, costly, and inherently unpredictable. If we experience delays or are ultimately unable to obtain regulatory approval for our drug candidates, our business will be substantially harmed. Before obtaining regulatory approvals for the commercial sale of any drug candidate for a target indication, we must demonstrate in preclinical studies and well-controlled clinical trials, and, with respect to approval in the United States, to the satisfaction of the FDA, that the drug candidate is safe and effective, or the biologic drug candidate is safe, pure, and potent, for use for that target indication and that the manufacturing facilities, processes and controls are adequate. In addition to preclinical and clinical data, the new drug application (“NDA”) or biologics license application (“BLA”) must include comprehensive information regarding the chemistry, manufacturing and controls (“CMC”) for the drug candidate. Obtaining approval of an NDA or BLA is a lengthy, expensive and uncertain process, and approval may not be obtained. If we submit an NDA or BLA to the FDA, the FDA decides whether to accept or reject the submission for filing. We cannot be certain that a submission will be accepted for filing and review by the FDA. Regulatory authorities outside of the United States, such as the NMPA and European Medicines Agency (“EMA”), also have requirements for approval of medicines for commercial sale with which we must comply prior to marketing in those areas. Regulatory requirements, approval processes and review periods can vary from country to country and could delay or prevent the introduction of our drug candidates. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and obtaining regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Seeking regulatory approvals outside of the United States could require additional nonclinical studies or clinical trials, which could be costly and time consuming. For all of these reasons, we may not obtain regulatory approvals on a timely basis, if at all. The processes required to obtain approval by the FDA, the NMPA, the EMA, and other comparable regulatory authorities is complex, costly, unpredictable and typically takes many years following the commencement of preclinical studies and clinical trials and depends on numerous factors, including the substantial discretion of the regulatory authorities. Regulatory approval is never guaranteed. Furthermore, we have limited experience in obtaining regulatory approvals for our drug candidates, including preparing the required materials for regulatory submission and navigating the regulatory approval process. As a result, our ability to successfully obtain regulatory approval for our drug candidates may involve more inherent risk, take longer, and cost more than it would if we were a company with substantial experience in obtaining regulatory approvals. Our drug candidates could be delayed or fail to receive regulatory approval for many reasons, including: • failure to begin or complete clinical trials due to disagreements with regulatory authorities; • failure to demonstrate that a drug candidate is safe and effective or that a biologic candidate is safe, pure, and potent for its proposed indication; • failure of clinical trial results to meet the level of statistical significance required for approval; • reporting or data integrity issues related to our clinical trials; • disagreement with our interpretation of data from preclinical studies or clinical trials; • changes in approval policies or regulations that render our preclinical and clinical data insufficient for approval or require us to amend our clinical trial protocols; • regulatory requests for additional analyses, reports, data, nonclinical studies and clinical trials, or questions regarding interpretations of data and results and the emergence of new information regarding our drug candidates or other products; • failure to satisfy regulatory conditions regarding endpoints, patient population, available therapies and other requirements for our clinical trials in order to support marketing approval on an accelerated basis or at all; • a delay in or the inability of health authorities to complete regulatory inspections of our development activities, regulatory filings or manufacturing operations, whether as a result of a global pandemic or other reasons, or our failure to satisfactorily complete such inspections; 62 Table of Contents • our failure to conduct a clinical trial in accordance with regulatory requirements or our clinical trial protocols; and • clinical sites, investigators or other participants in our clinical trials deviating from a trial protocol, failing to conduct the trial in accordance with regulatory requirements, or dropping out of a trial. For example, in June 2022, the FDA extended the Prescription Drug User Fee Act goal date for the supplemental new drug application (“sNDA”) for BRUKINSA as a treatment for adult patients with chronic lymphocytic leukemia or small lymphocytic lymphoma by three months to January 2023, to allow time to review additional clinical data submitted by us, which was deemed a major amendment to the sNDA. Additionally, in July 2022, the FDA deferred action on the BLA for tislelizumab as a second-line treatment for patients with unresectable or metastatic ESCC. In the FDA's general advice letter communicating the deferral of action, the FDA cited only the inability to complete inspections due to COVID-19 related restrictions on travel as the reason for the deferral. As of the date hereof, the FDA has not provided a new anticipated action date. Delays in the completion of a clinical trial of any of our drug candidates will increase our costs, slow down our drug development and approval process, and jeopardize our ability to commence product sales and generate revenues for that candidate. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our drug candidates. Our development activities, regulatory filings and manufacturing operations also could be harmed or delayed by a shutdown of the U.S. government, including the FDA, or governments and regulatory authorities in other jurisdictions. If the FDA or other health authorities are delayed or unable to complete required regulatory inspections of our development activities, regulatory filings or manufacturing operations due to government shutdown, public health crises, or other reasons, or we do not satisfactorily complete such inspections, our business could be materially harmed. We are currently conducting and may in the future conduct clinical trials for our drug candidates outside the U.S., and the FDA and comparable foreign regulatory authorities may not accept data from such trials. We are currently conducting and may in the future conduct clinical trials for our drug candidates outside the U.S., including in China. The acceptance of data from clinical trials conducted outside the U.S. or another jurisdiction by the FDA or comparable foreign regulatory authority may be subject to certain conditions or may not be accepted at all. The FDA will generally not consider the data from a foreign clinical trial not conducted under an IND unless (i) the trial was well-designed and well-conducted in accordance with good clinical practice (“GCP”) requirements, including requirements for the design, conduct, performance, monitoring, auditing, recording, analysis, and reporting of clinical trials in a way that provides assurance that the data and reported results are credible and accurate and that the rights, safety, and well-being of trial subjects are protected, and (ii) the FDA is able to validate the data from the trial through an onsite inspection, if necessary. In cases where data from foreign clinical trials are intended to serve as the sole basis for marketing approval in the U.S., the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice; (ii) the trials were performed by clinical investigators of recognized competence; and (iii) the data may be considered valid without the need for an on-site inspection by the FDA or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. Additionally, the FDA’s clinical trial requirements, including sufficient size of patient populations and statistical powering must be met. Many foreign regulatory authorities have similar approval requirements. In addition, such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA or any comparable foreign regulatory authority will accept data from trials conducted outside of the U.S. or the applicable jurisdiction. If the FDA or any comparable foreign regulatory authority does not accept such data, it would result in the need for additional trials, which could be costly and time-consuming, and which may result in drug candidates that we may develop not receiving approval for commercialization in the applicable jurisdiction. Our medicines and any future approved drug candidates will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our medicines and drug candidates. Our medicines and any additional drug candidates that are approved will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy, and other post-marketing information, including both federal and state requirements in the United States and requirements of comparable regulatory authorities in China, Europe and other regions. As such, we and our collaborators will be subject to ongoing review and periodic inspections to assess compliance with applicable post-approval regulations. Additionally, to the extent we want to make certain changes to the approved medicines, product labeling, or manufacturing processes, we will need to submit new applications or supplements to regulatory authorities for approval. 63 Table of Contents Manufacturers and manufacturers’ facilities are required to comply with extensive FDA, NMPA, EMA and comparable regulatory authority requirements, including, in the United States, ensuring that quality control and manufacturing procedures conform to GMP regulations. As such, we and our contract manufacturers are and will be subject to continual review and inspections to assess compliance with GMP and adherence to commitments made in any NDA, BLA or other marketing application, and previous responses to any inspection observations. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control. The failure to comply with these requirements could have a material adverse effect on our business. For example, on March 25, 2020, the NMPA suspended the importation, sales and use of ABRAXANE in China supplied to us by BMS, and the drug was subsequently recalled by BMS and is not currently available for sale in China. This suspension was based on inspection findings at BMS’s contract manufacturing facility in the United States. We have not had any sales of ABRAXANE since the suspension and do not expect future revenue from ABRAXANE. For additional information, please see the section of this Quarterly Report titled “Legal Proceedings”. The regulatory approvals for our medicines and any approvals that we receive for our drug candidates are and may be subject to limitations on the approved indicated uses for which the medicine may be marketed or to the conditions of approval, which could adversely affect the medicine’s commercial potential or contain requirements for potentially costly post-marketing testing and surveillance to monitor the safety and efficacy of the medicine or drug candidate. The FDA, NMPA, EMA or comparable regulatory authorities may also require a Risk Evaluation Mitigation Strategy (“REMS”) program or comparable program as a condition of approval of our drug candidates or following approval. In addition, if the FDA, NMPA, EMA or a comparable regulatory authority approves our drug candidates, we will have to comply with requirements including, for example, submissions of safety and other post-marketing information and reports, establishment registration, as well as continued compliance with GMP and GCP for any clinical trials that we conduct post-approval. The FDA, NMPA, EMA or comparable regulatory authorities may seek to impose a consent decree or withdraw marketing approval if compliance with regulatory requirements is not maintained or if problems occur after the drug reaches the market. Later discovery of previously unknown problems with our medicines or drug candidates or with our drug’s manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of our medicines, withdrawal of the product from the market, or voluntary or mandatory product recalls; • fines, untitled or warning letters, or holds on clinical trials; • refusal by the FDA, NMPA, EMA or comparable regulatory authorities to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license approvals or withdrawal of approvals; • product seizure or detention, or refusal to permit the import or export of our medicines and drug candidates; and • injunctions or the imposition of civil or criminal penalties. The FDA, NMPA, EMA and other regulatory authorities strictly regulate the marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for their approved indications and for use in accordance with the provisions of the approved label. The FDA, NMPA, EMA and other regulatory authorities actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. The policies of the FDA, NMPA, EMA and of other regulatory authorities may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our drug candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad, particularly in China, where the regulatory environment is constantly evolving. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any regulatory approval that we may have obtained and we may not achieve or sustain profitability. In addition, if we obtain accelerated approval or conditional approval of any of our drug candidates, as we have done with the accelerated approval of BRUKINSA in the United States and China and certain approvals of tislelizumab, pamiparib, XGEVA, BLINCYTO, KYPROLIS and QARZIBA in China, we will be required to conduct a confirmatory study to verify the predicted clinical benefit and may also be required to conduct post-marketing safety studies. The Food and Drug Omnibus Reform Act of 2022 (“FDORA”) granted the FDA the authority to require, as appropriate, that a post-approval confirmatory study or studies be underway prior to granting accelerated approval or within a specified time period after the date accelerated 64 Table of Contents approval is granted. FDORA also gave the FDA increased authority to withdraw approval of a drug granted accelerated approval on an expedited basis if the sponsor fails to conduct such studies in a timely manner or such studies fail to verify clinical benefit. While operating under accelerated approval, we will be subject to certain restrictions that we would not be subject to upon receiving regular approval. For example, the FDA generally requires that all advertising and promotional materials be submitted to the FDA for review prior to dissemination or publication for products receiving accelerated approval, which could adversely impact the timing of the commercial launch of the product. Even if we are able to commercialize our medicines and any approved drug candidates, the medicines may become subject to unfavorable pricing regulations or third-party reimbursement practices or healthcare reform initiatives, which could harm our business. The regulations that govern regulatory approvals, pricing and reimbursement for new therapeutic products vary widely from country to country. Historically, products launched in Europe do not follow price structures of the U.S. and generally prices tend to be significantly lower. Countries in Europe provide options to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost effectiveness of a particular product candidate to currently available therapies. Countries may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or licensing approval is granted. In some non-U.S. markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain regulatory approval for a drug in a particular country, but then be subject to price regulations that delay our commercial launch of the drug and negatively impact our revenues and results of operations. Our ability to commercialize our medicines successfully also will depend in part on the extent to which reimbursement for these medicines and related treatments will be available on adequate terms, or at all, from government health administration authorities, private health insurers and other organizations. For additional information, please see the section of this Quarterly Report titled “Part II — Item 1A — Risk Factors Risks Related to Clinical Development and Commercialization of Our Medicines and Drug Candidates — If we or any third parties with which we may collaborate to market and sell our medicines are unable to achieve and maintain coverage and adequate level of reimbursement, our commercial success and business operations could be adversely affected.” In China, the government launched a national program for volume-based, centralized drug procurement with minimum quantity commitments in an attempt to negotiate lower prices from drug manufacturers and reduce the price of drugs. Under the program, one of the key determining factors for a successful bid is the price. The Chinese government will award a contract to the lowest bidders who are able to satisfy the quality and quantity requirements. The successful bidders will be guaranteed a sale volume for at least a year. A volume guarantee gives the winner an opportunity to gain or increase market share. The volume guarantee is intended to make manufacturers more willing to cut their prices to win a bid. It may also enable manufacturers to lower their distribution and commercial costs. Many types of drugs are covered under the program, including drugs made by international pharmaceutical companies and generics made by domestic Chinese manufacturers. For example, in January 2020, ABRAXANE and its generic forms were included in the program. We won the bid and became one of the three companies who were awarded a government contract, with a price for sales of ABRAXANE under the government contract that would have been significantly lower than the price that we had been charging. On March 25, 2020, the NHSA removed ABRAXANE from the volume-based procurement list due to the NMPA’s decision to suspend the importation, sales and use of ABRAXANE, which has adversely impacted our business and results of operations. In August 2020, VIDAZA ® and its generic forms were included for bidding in the program. We did not win the bid for VIDAZA, which has resulted in the drug being restricted from use in public hospitals, which account for a large portion of the market, and a decline in sales revenue. Moreover, the program may change how generic drugs are priced and procured in China and is likely to accelerate the replacement of originator drugs with generics. We cannot be sure whether there will be any changes to the program in the future. The implementation of the program may negatively impact our existing commercial operations in China as well as our strategies on how to commercialize our drugs in China, which could have a material adverse effect on our business, financial condition and results of operations. 65 Table of Contents Although China adopted changes to its patent law to include patent term extension and an early resolution mechanism for pharmaceutical patent disputes, key provisions of the law remain unclear and/or subject to implementing regulations. The absence of effective regulatory exclusivity for pharmaceutical products in China could further increase the risk of early generic or biosimilar competition with our medicines in China. In the United States, a law commonly referred to as “Hatch-Waxman Act” provides the opportunity for patent-term restoration of up to five years to reflect patent term lost during certain portions of product development and the FDA regulatory review process. The Hatch-Waxman Act also provides for patent linkage, pursuant to which FDA will stay approval of certain follow-on new drug applications during the pendency of litigation between the follow-on applicant and the patent holder or licensee, for a period of up to 30 months. Finally, the Hatch-Waxman Act provides for regulatory exclusivity that can prevent submission or approval of certain follow-on marketing applications. For example, U.S. law provides a five-year period of exclusivity to the first applicant to obtain approval of a new chemical entity and three years of exclusivity protecting certain innovations to previously approved active ingredients where the applicant was required to conduct new clinical trials to obtain approval for the modification. Similarly, the Orphan Drug Act provides seven years of market exclusivity for certain drugs to treat rare diseases. These provisions, which are designed to promote innovation, can prevent competing products from entering the market for a certain period of time after marketing approval for the innovative product. In China, however, laws on data exclusivity (referred to as regulatory data protection) are still developing. The PRC Patent Law (as amended in 2020, the “Amended PRC Patent Law”) contains both patent term extension and a mechanism for early resolution of patent disputes. Accordingly, NMPA and NIPA jointly issued the Implementation Measures for the Early Settlement Mechanism of Drug Patent Disputes (for Trial Implementation). However, the provisions for patent term extension are unclear and/or remain subject to the approval of implementing regulations that are still in draft form or have not yet been proposed, leading to uncertainty about their scope and implementation. Until the relevant implementing regulations for patent term extension in the Amended PRC Patent Law are implemented, and until data exclusivity is adopted and implemented, we may be subject to earlier generic or biosimilar competition in China than in the United States and other jurisdictions with stronger regulatory data protection for pharmaceutical products. Undesirable adverse events caused by our medicines and drug candidates could interrupt, delay or halt clinical trials, delay or prevent regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following any regulatory approval. Undesirable adverse events (“AEs”) caused by our medicines and drug candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval, or could result in limitations or withdrawal following approvals. If the conduct or results of our trials or patient experience following approval reveal a high and unacceptable severity or prevalence of AEs, our trials could be suspended or terminated and regulatory authorities could order us to cease further development of, or deny approval of, our drug candidates or require us to cease commercialization following approval. As is typical in the development of pharmaceutical products, drug-related AEs and serious AEs (“SAEs”) have been reported in our clinical trials. Some of these events have led to patient deaths. Drug-related AEs or SAEs could affect patient recruitment or the ability of enrolled subjects to complete the trial and could result in product liability claims. Any of these occurrences may harm our reputation, business, financial condition and prospects significantly. In our periodic and current reports filed with the SEC and our press releases and scientific and medical presentations released from time to time we disclose clinical results for our drug candidates, including the occurrence of AEs and SAEs. Each such disclosure speaks only as of the date of the data cutoff used in such report, and we undertake no duty to update such information unless required by applicable law. Also, a number of immune-related adverse events (“IRAEs”) have been associated with treatment with checkpoint inhibitors such as tislelizumab, including immune-mediated pneumonitis, colitis, hepatitis, endocrinopathies, nephritis and renal dysfunction, skin adverse reactions, and encephalitis. These IRAEs may be more common in certain patient populations (potentially including elderly patients) and may be exacerbated when checkpoint inhibitors are combined with other therapies. Additionally, undesirable side effects caused by our medicines and drug candidates, or caused by our medicines and drug candidates when used in combination with other drugs, could potentially cause significant negative consequences, including: • regulatory authorities could delay or halt pending clinical trials; • we may suspend, delay or alter development of the drug candidate or marketing of the medicine; • regulatory authorities may withdraw approvals or revoke licenses of the medicine, or we may determine to do so even if not required; 66 Table of Contents • regulatory authorities may require additional warnings on the label; • we may be required to implement a REMS for the drug, as is the case with REVLIMID, or, if a REMS is already in place, to incorporate additional requirements under the REMS, or to develop a similar strategy as required by a regulatory authority; • we may be required to conduct post-marketing studies; and • we could be sued and held liable for harm caused to subjects or patients. Any of these events could prevent us from achieving or maintaining market acceptance of the particular drug or drug candidate, and could significantly harm our business, results of operations, financial condition, and prospects. If safety, efficacy, or other issues arise with any medical product that is used in combination with our medicines, we may be unable to market such medicine or may experience significant regulatory delays or supply shortages, and our business could be materially harmed. We plan to develop certain of our medicines and drug candidates for use as a combination therapy. If a regulatory authority revokes its approval of the other therapeutic that we use in combination with our medicines or drug candidates, we will not be able to market our medicines or drug candidates in combination with such revoked therapeutic. If safety or efficacy issues arise with these or other therapeutics that we seek to combine with our medicines and drug candidates in the future, we may experience significant regulatory delays, and we may be required to redesign or terminate the applicable clinical trials. In addition, if manufacturing or other issues result in a supply shortage of any component of our combination medicines or drug candidates, we may not be able to complete clinical development of our drug candidates on our current timeline or at all, or we may experience disruptions in the commercialization of our approved medicines. For example, we have in-licensed drug candidates from third parties to conduct clinical trials in combination with our drug candidates. We may rely on those third parties to manufacture the in-licensed drug candidates and may not have control over their manufacturing process. If these third parties encounter any manufacturing difficulties, disruptions or delays and are not able to supply sufficient quantities of drug candidates, our drug combination study program may be delayed. For additional information, please see the section of this Quarterly Report titled “Part II — Item 1A — Risk Factors — Risks Related to Our Reliance on Third Parties — We rely on third parties to manufacture some of our commercial and clinical drug supplies. Our business could be harmed if those third parties fail to provide us with sufficient quantities of product or fail to do so at acceptable quality levels or prices.” *Recently enacted and future legislation may increase the difficulty and cost for us to obtain regulatory approval of and commercialize our medicines and drug candidates and affect the prices we may obtain. In the United States, China, Europe and some other jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding healthcare that could prevent or delay regulatory approval of our drug candidates, restrict or regulate post-approval activities and affect our ability to profitably sell our medicines and any drug candidates for which we obtain regulatory approval. We expect that healthcare reform measures may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved medicine. For additional information, please see the section of our Annual Report titled “Part I — Item 1 — Business – Government Regulation – Healthcare Reform.” For example, the Inflation Reduction Act of 2022 (“IRA”) contains several provisions that may impact our business to varying degrees, including provisions that reduce the out-of-pocket spending cap for Medicare Part D beneficiaries from $7,050 to $2,000 starting in 2025, thereby effectively eliminating the coverage gap; impose new manufacturer financial liability on certain drugs under Medicare Part D; allow the U.S. government to negotiate Medicare Part B and Part D price caps for certain high-cost drugs and biologics without generic or biosimilar competition; require companies to pay rebates to Medicare for certain drug prices that increase faster than inflation; and delay until January 1, 2032 the implementation of the U.S. Department of Health and Human Services (“HHS”) rebate rule that would have limited the fees that pharmacy benefit managers can charge. Further, under the IRA, orphan drugs are exempted from the Medicare drug price negotiation program, but only if they have one orphan designation and for which the only approved indication is for that disease or condition. If a product receives multiple rare disease designations or has multiple approved indications, it may not qualify for the orphan drug exemption. The implementation of the IRA is currently subject to ongoing litigation challenging the constitutionality of the IRA’s Medicare drug price negotiation program. The effects of the IRA on our business and the healthcare industry in general is not yet known. In addition, President Biden has issued multiple executive orders that have sought to reduce prescription drug costs. In February 2023, HHS issued a proposal in response to an executive order from President Biden that includes a proposed prescription drug pricing model that will test whether targeted Medicare payment adjustments will sufficiently incentivize manufacturers to complete confirmatory trials for drugs approved through the FDA’s accelerated approval pathway. Although a number of these proposed measures may require additional legislation to become effective, both the Biden administration and 67 Table of Contents Congress have indicated that they will continue to seek new legislative measures to control drug costs. Legislative and regulatory proposals have also been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect the demand for our product candidates, if we obtain regulatory approval; our ability to set a price that we believe is fair for our approved products; our ability to generate revenue and achieve or maintain profitability; the level of taxes that we are required to pay; and the availability of capital. Risks Related to Our Financial Position and Need for Additional Capital We have incurred significant net losses since our inception and anticipate that we will continue to incur net losses for the foreseeable future and may not become profitable. Investment in pharmaceutical drug development is highly capital-intensive and speculative. It entails substantial upfront capital expenditures and significant risk that a drug candidate will fail to gain regulatory approval or become commercially viable. We continue to incur significant expenses related to our ongoing operations. As a result, we have incurred losses in each period since our inception, except in the third quarter of 2017 and the first quarter of 2021, when we were profitable due to revenue recognized from up-front license fees from collaboration agreements. As of June 30, 2023 and December 31, 2022, we had an accumulated deficit of $7.8 billion and $7.1 billion, respectively. Substantially all of our operating losses have resulted from costs incurred in connection with our research and development programs and from selling, general and administrative expenses associated with our operations. We expect to continue to incur losses for the foreseeable future, although we expect these losses to decrease in the near term as product sales growth exceeds expense growth. We expect expenses to continue to increase as we continue to expand our development of, and seek regulatory approvals for, our drug candidates, and our manufacturing facilities, commercialize our medicines and launch new medicines, if approved, maintain and expand regulatory approvals, contribute up to $1.25 billion to the global development of a portfolio of Amgen pipeline assets under our collaboration agreement, and commercialize the medicines that we have licensed from Amgen, BMS and other parties and any other medicines that we may successfully develop or license. Typically, it takes many years to develop one new drug from the time it is discovered to when it is available for treating patients. In addition, we will continue to incur costs associated with operating as a public company. We will also incur costs in support of our growth as a global biotechnology company. The size of our future net losses will depend, in part, on the number and scope of our drug development programs and the associated costs of those programs, the cost of our manufacturing activities, the cost of commercializing our approved products, our ability to generate revenues and the timing and amount of milestones and other payments we make or receive with arrangements with third parties. If we fail to achieve market acceptance for our medicines or if promising drug candidates fail in clinical trials or do not gain regulatory approval, or if approved, fail to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research, development, manufacturing and commercialization efforts, expand our business or continue our operations. We may need to obtain additional financing to fund our operations, and if we are unable to obtain such financing, we may be unable to complete the development of our drug candidates or achieve profitability. Our portfolio of drug candidates will require the completion of clinical development, regulatory review, scale up and availability of manufacturing resources, significant marketing efforts and substantial investment before they can provide us with product sales revenue. Additionally, we are investing in the manufacturing and commercialization of our approved medicines. Our operations have consumed substantial amounts of cash since inception. Our operating activities used $1.5 billion, $1.3 billion and $1.3 billion of net cash during the years ended December 31, 2022, 2021 and 2020, respectively, and used $857.7 million and $616.5 million of net cash during the six months ended June 30, 2023 and 2022, respectively. We recorded negative net cash flows from operating activities in 2022, 2021 and 2020 primarily due to our net losses of $2.0 billion, $1.5 billion and $1.6 billion, respectively. Although we recorded positive net cash flows from operating activities in 2017, primarily due to the upfront fees received from the BMS collaboration, we cannot assure you that we will be able to generate positive cash flows from operating activities in the future. Our liquidity and financial condition may be materially and adversely affected by the negative net cash flows, and we cannot assure you that we will have sufficient cash from other sources to fund our operations. If we resort to other financing activities to generate additional cash, we will incur financing costs and we cannot guarantee that we will be able to obtain the financing on terms acceptable to us, or at all, and if we raise financing by issuing further equity securities your interest in our 68 Table of Contents company may be diluted. If we have negative operating cash flows in the future, our liquidity and financial condition may be materially and adversely affected. We expect to continue to spend substantial amounts on drug discovery, advancing the clinical development of our drug candidates, contributing to the global development of a portfolio of Amgen pipeline assets, developing our manufacturing capabilities and securing drug supply, and launching and commercializing our and our collaborators' medicines and any additional drug candidates for which we receive regulatory approval, including building and maintaining a commercial organization to address markets in China, the United States and other countries. Since September 2017, we have generated revenues from the sale of medicines in China licensed from BMS, and since the fourth quarter of 2019, we have generated revenues from our internally developed medicines. These revenues are not sufficient to support our operations. Although it is difficult to predict our liquidity requirements, based upon our current operating plan, we believe that we have sufficient cash, cash equivalents and short-term investments to meet our projected operating requirements for at least the next 12 months. However, we believe that our existing cash, cash equivalents and short-term investments may not be sufficient to enable us to complete all global development or launch all of our current medicines and drug candidates for the currently anticipated indications and to invest in additional programs. Accordingly, we may require further funding through public or private offerings, debt financing, collaboration and licensing arrangements or other sources. With uncertainty in the capital markets, adequate additional funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or commercialization efforts. Our inability to obtain additional funding when we need it could seriously harm our business. Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our technologies or drug candidates. We may seek additional funding through a combination of equity offerings, debt financings, collaborations and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a holder of our shares. The incurrence of additional indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in certain additional restrictive covenants, such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. In addition, issuance of additional equity securities, or the possibility of such issuance, may cause the market price of our shares to decline. In the event that we enter into collaborations or licensing arrangements in order to raise capital, we may be required to accept unfavorable terms, including relinquishing or licensing to a third party on unfavorable terms our rights to technologies or drug candidates that we otherwise would seek to develop or commercialize ourselves or potentially reserve for future potential arrangements when we might be able to achieve more favorable terms. Fluctuations in exchange rates could result in foreign currency exchange losses and could materially reduce the value of your investment. We incur portions of our expenses, and derive revenues, in currencies other than the U.S. dollar or Hong Kong dollar, in particular, the RMB, the Euro, and Australian dollar. As a result, we are exposed to foreign currency exchange risk as our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates. We do not regularly engage in hedging transactions to protect against uncertainty in future exchange rates between particular foreign currencies and the U.S. dollar. Fluctuations in the value of the U.S. dollar against currencies in countries in which we operate could have a negative impact on our results of operations. We cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the future may adversely affect our financial condition, results of operations, and cash flows. The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy proposed or adopted by the PRC, Australia and other governments. It is difficult to predict how market forces or PRC, Australia, other governments outside the U.S. and U.S. government policies may impact the exchange rate of the RMB and the U.S. dollar or any other currencies in the future. There remains significant international pressure on China to adopt a more flexible currency policy, including from the U.S. government, which has threatened to label China as a “currency manipulator,” which could result in greater fluctuation of the RMB against the U.S. dollar. Substantially all of our revenues are denominated in U.S. dollars and RMB, our costs are denominated in U.S. dollars, Australian dollars and RMB, and a large portion of our financial assets and a significant portion of our debt is denominated in U.S. dollars and RMB. To the extent that we need to convert U.S. dollars into RMB for our operations, appreciation of the 69 Table of Contents RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive. Conversely, if we decide to convert RMB into U.S. dollars for the purpose of making payments for dividends or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount we would receive. In addition, there are limited instruments available for us to reduce our foreign currency risk exposure at reasonable costs. Furthermore, we are also currently required to obtain approval from or registration with appropriate government authorities or designated banks before converting significant sums of foreign currencies into RMB. All of these factors could materially and adversely affect our business, financial condition, results of operations, and prospects, and could reduce the value of, and any dividends payable on, our shares in foreign currency terms. *Our business, profitability and liquidity may be adversely affected by deterioration in the credit quality of, or defaults by, our distributors and customers or by actual events or concerns involving the liquidity, default, or non-performance of financial institutions, including the U.S. government, and an impairment in the carrying value of our short-term investments could negatively affect our consolidated results of operations. We are exposed to the risk that our distributors and customers may default on their obligations to us as a result of bankruptcy, lack of liquidity, operational failure or other reasons. As we continue to expand our business, the amount and duration of our credit exposure will be expected to increase, as will the breadth of the entities to which we have credit exposure. Although we regularly review our credit exposure to specific distributors and customers that we believe may present credit concerns, default risks may arise from events or circumstances that are difficult to detect or foresee. Furthermore, actual events involving reduced liquidity, defaults, non-performance or other adverse developments that affect financial institutions, or concerns or rumors about any such events, have in the past and may in the future lead to market-wide liquidity problems. For example, in March 2023, Silvergate Bank, La Jolla, California, announced its decision to voluntarily liquidate its assets and wind down operations, Silicon Valley Bank, Santa Clara, California (“SVB”), was closed by the California Department of Financial Protection and Innovation, and Signature Bank, New York, New York, was closed by the New York State Department of Financial Services, and, in each case the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver. Since then, additional financial institutions have experienced similar failures and have been placed into receivership . These events lead to volatility and declines in the market for bank stock and questions regarding confidence in depository institutions. At the time of closure, we maintained limited cash deposits at SVB. While the FDIC has since stated that all depositors of SVB will be made whole and we have received access to our funds held at SVB, there is no guarantee that the federal government would similarly guarantee depositors in the event of a future bank closure. Investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could adversely impact our ability to meet our operating expenses or result in breaches of our financial or contractual obligations which could have material adverse impact on our liquidity and our projected business operations, financial condition and results of operations. As a result of uncertain political, credit and financial market conditions, including the potential of the U.S. government to default on the payment of its obligations for a period of time due to federal debt ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the U.S. government pose credit default and liquidity risks. A payment default or delay by the U.S. government, or continued uncertainty surrounding the U.S. debt ceiling, could result in a variety of adverse effects for financial markets, market participants and U.S. and global economic conditions. In addition, U.S. debt ceiling and budget deficit concerns have increased the possibility a downgrade in the credit rating of the U.S. government and could result in economic slowdowns or a recession in the U.S. No assurance can be made that losses or significant deterioration in the fair value of our U.S. government issued or guaranteed investments will not occur. At June 30, 2023, we had approximately $847.8 million invested in government money market funds and $105.7 million invested directly in U.S. Treasury securities or U.S. government agency securities issued or guaranteed by government-sponsored entities. Downgrades to the U.S. credit rating could affect the stability of securities issued or guaranteed by the U.S. government and the valuation or liquidity of our portfolio of such investment securities. The carrying amounts of cash and cash equivalents, restricted cash and short-term investments represent the maximum amount of loss due to credit risk. We had cash and cash equivalents of $3.4 billion, $3.9 billion and $4.4 billion, restricted cash of $11.2 million, $5.5 million and $7.2 million and short-term investments of $0.1 billion, $665.3 million and $2.2 billion as of June 30, 2023, December 31, 2022 and 2021, respectively, most of which are deposited in financial institutions outside of China. As required by the PRC securities laws, the net proceeds from the STAR Offering must be used in strict compliance with the planned uses as disclosed in the PRC prospectus for the STAR Offering as well as our proceeds management policy for the STAR Offering approved by our board of directors. Although our cash and cash equivalents in China are deposited with various major reputable financial institutions, the deposits placed with these financial institutions are not protected by statutory 70 Table of Contents or commercial insurance. In the event of bankruptcy of one of these financial institutions, we may be unlikely to claim our deposits back in full. As of June 30, 2023 and December 31, 2022, our short-term investments consisted of U.S. Treasury securities. Although we continually monitor the credit worthiness of these institutions, concerns about, or a default by, one institution in the U.S. market, could lead to significant liquidity problems, losses or defaults by other institutions, which in turn could adversely affect us. Risks Related to Our Intellectual Property If we are unable to obtain and maintain patent protection for our medicines and drug candidates through intellectual property rights, or if the scope of such intellectual property rights is not sufficiently broad, third parties may compete against us. Our success depends in large part on our ability to protect our medicines, drug candidates and proprietary technology from competition by obtaining, maintaining and enforcing our intellectual property rights, including patent rights. We seek to protect the medicines, drug candidates and technology that we consider commercially important by filing patent applications in the United States, the PRC, Europe and other territories, relying on trade secrets or pharmaceutical regulatory protection or employing a combination of these methods. This process is expensive and time-consuming, and we may not be able to file, prosecute, maintain, enforce or license all necessary or desirable patents and/or patent applications at a reasonable cost or in a timely manner. As a result, we may not be able to prevent competitors from developing and commercializing competitive drugs in all such fields and territories. Patents may be invalidated and patent applications may not be granted for a number of reasons, including known or unknown prior art, deficiencies in the patent applications or the lack of novelty of the underlying invention or technology. It is also possible that we will fail to identify patentable aspects of our research and development output in time to obtain patent protection. Although we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and any other third parties, any of these parties may breach such agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection. In addition, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases, not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications or that we were the first to file for patent protection of such inventions. Furthermore, the PRC and the United States have adopted the “first-to-file” system under which whoever first files a patent application will be awarded the patent if all other patentability requirements are met. Under the first-to-file system, third parties may be granted a patent relating to a technology which we invented. In addition, under the PRC Patent Law, any organization or individual that applies for a patent in a foreign country for an invention or utility model accomplished in China is required to report to the National Intellectual Property Administration, or NIPA, for security examination. Otherwise, if an application is later filed in China, the patent right will not be granted. The coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Even if patent applications we license or own currently or in the future issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive advantage. In addition, the patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent offices in the United States, the PRC and other countries. We may be subject to a third-party preissuance submission of prior art to the United States Patent and Trademark Office (the “USPTO”) or become involved in opposition, derivation, revocation, re-examination, post-grant and inter partes review, or interference proceedings or similar proceedings in foreign jurisdictions challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our medicines or drug candidates and compete directly with us without payment to us, or result in our inability to manufacture or commercialize medicines or drug candidates without infringing, misappropriating or otherwise violating third-party patent rights. Moreover, we may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as oppositions in a foreign patent office, that challenge the priority of our invention or other features of patentability of our patents and patent applications. Such challenges 71 Table of Contents may result in loss of patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology, medicines, and drug candidates. Such proceedings also may result in substantial costs and require significant time from our scientists and management, even if the eventual outcome is favorable to us. Consequently, we do not know whether any of our medicines or drug candidates will be protectable or remain protected by valid and enforceable patents. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner. Furthermore, although various extensions may be available, the life of a patent and the protection it affords, is limited. For example, the approved cancer therapies we have licensed from BMS in China face competition from generic medications, and we may face similar competition for our approved medicines even if we successfully obtain patent protection. Manufacturers of generic drugs may challenge the scope, validity or enforceability of our patents, and we may not be successful in enforcing or defending those intellectual property rights and, as a result, may not be able to develop or market the relevant product exclusively, which would have a material adverse effect on any potential sales of that product. The issued patents and pending patent applications, if issued, for our medicines and drug candidates are expected to expire on various dates as described in “Part I-Item 1-Business-Intellectual Property” of our Annual Report. Upon the expiration of our issued patents or patents that may issue from our pending patent applications, we will not be able to assert such patent rights against potential competitors and our business and results of operations may be adversely affected. Given the amount of time required for the development, testing and regulatory review of new drug candidates, patents protecting such drug candidates might expire before or shortly after such drug candidates are commercialized. As a result, our patents and patent applications may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. Moreover, some of our patents and patent applications are, and may in the future be, co-owned with or licensed from third parties. If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners or the licensors of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects. We may not be able to protect our intellectual property rights throughout the world. If we fail to adequately protect our intellectual property rights, our competitive position could be impaired and our business could be materially harmed. Filing, prosecuting, maintaining and defending patents on drugs or drug candidates in all countries throughout the world could be prohibitively expensive for us, and our intellectual property rights in some countries can have a different scope and strength than in the United States. In addition, the laws of certain countries do not protect intellectual property rights to the same extent as U.S. laws do, particularly those relating to biopharmaceutical products. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing drugs made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own drugs and further, may export otherwise infringing drugs to non-U.S. jurisdictions where we have patent protection, but where enforcement rights are not as strong as those in the United States. These drugs may compete with our medicines and drug candidates and our patent rights or other intellectual property rights may not be effective or adequate to prevent them from competing. In addition, we may not be able to enforce patents that we in-license from third parties, who may delay or decline to enforce patents in the licensed territory. We currently hold issued trademark registrations and have trademark applications pending, any of which may be the subject of a governmental or third-party objection, which could prevent the maintenance or issuance of the same. If we are unsuccessful in obtaining trademark protection for our primary brands, we may be required to change our brand names, which could materially adversely affect our business. Moreover, as our products mature, our reliance on our trademarks to differentiate us from our competitors will increase, and as a result, if we are unable to prevent third parties from adopting, registering or using trademarks and trade dress that infringe, dilute or otherwise violate our trademark rights, our business could be materially adversely affected. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop. 72 Table of Contents We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful. Our patent rights relating to our medicines and drug candidates could be found invalid or unenforceable if challenged in court or before government patent authorities. Competitors may infringe our patent rights or misappropriate or otherwise violate our intellectual property rights. To counter infringement or unauthorized use, litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of our own intellectual property rights or the proprietary rights of others. This can be expensive and time consuming. Any claims that we assert against perceived infringers could also provoke these parties to assert counterclaims against us challenging the validity or enforceability of our patents or alleging that we infringe their intellectual property rights. In addition, generic drug companies may in the future file an Abbreviated New Drug Application (“ANDA”) with the FDA seeking approval to market a generic version of our products, or our competitors’ products, before the expiration of the patents covering such products, which may trigger ANDA litigation over the associated patent. Settlements and related licensing agreements resulting from ANDA litigation can be challenged and have the potential to generate additional litigation which can be costly. The success of such litigation depends on the strength of the patents covering the branded product and the manufacturer’s ability to prove infringement. The outcome of such litigation is inherently uncertain and may result in potential loss of market exclusivity for the product which may have a significant financial impact on product revenue. Furthermore, the Federal Trade Commission (“FTC”) has brought lawsuits to challenge ANDA litigation settlements as anti-competitive. If we engage in ANDA litigation, we may also face an FTC challenge with respect to the related settlement which may result in additional expense or penalty. Many of our current and potential competitors have the ability to dedicate substantially greater resources to enforce and/or defend their intellectual property rights than we can. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. An adverse result in any litigation proceeding could put our patents, as well as any patents that may issue in the future from our pending patent applications, at risk of being invalidated, held unenforceable or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include ex parte re-examination, inter partes review, post-grant review, derivation and equivalent proceedings in non-U.S. jurisdictions, such as opposition proceedings. Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover and protect our medicines or drug candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity of our patents, for example, we cannot be certain that there is no invalidating prior art of which we, our patent counsel, and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our medicines or drug candidates. Such a loss of patent protection could have a material adverse impact on our business. We may not be able to prevent misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the United States. *If we are sued for infringing intellectual property rights of third parties, such litigation could be costly and time consuming and could prevent or delay us from developing or commercializing our medicines or drug candidates. Our commercial success depends in part on our avoiding infringement of the valid patents and other intellectual property rights of third parties. We bear the risk that our products may be found to infringe patents owned or licensed by third parties, including research-based and generic pharmaceutical companies and individuals. We are aware of numerous issued patents and pending patent applications belonging to third parties that exist in fields of our medicines and drug candidates. There may also be third-party patents or patent applications of which we are currently unaware, and given the dynamic area in which we operate, additional patents are likely to be issued that relate to aspects of our business. There is a substantial amount of litigation and other claims and proceedings involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries generally. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our medicines and drug candidates may give rise to claims of infringement of the patent rights of others. Third parties may assert that we are using technology in violation of their patent or other proprietary rights. For example, on June 13, 2023, Pharmacyclics LLC (“Pharmacyclics”) filed a complaint in the U.S. District Court for the District of Delaware against us and one of our subsidiaries, alleging that BRUKINSA infringes a Pharmacyclics’ patent issued on June 13, 2023. For additional information on this litigation, please see the section of this Quarterly Report titled “Legal Proceedings”. 73 Table of Contents Defense of these claims, regardless of their merit, could involve substantial litigation expense and divert our technical personnel, management personnel, or both from their normal responsibilities. Even in the absence of litigation, we may seek to obtain licenses from third parties to avoid the risks of litigation, and if a license is available, it could impose costly royalty and other fees and expenses on us. If third parties bring successful claims against us for infringement of their intellectual property rights, we may be subject to injunctive or other equitable relief, which could prevent us from developing and commercializing one or more of our medicines and drug candidates. In the event of a successful claim against us of infringement or misappropriation, or a settlement by us of any such claims, we may have to pay substantial damages, including treble damages and attorneys’ fees in the case of willful infringement, pay royalties or redesign our infringing medicines and drug candidates, which may be impossible or require substantial time and cost. In the event of an adverse result in any such litigation, or even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our medicines or drug candidates. Any such license might not be available on reasonable terms or at all. In the event that we are unable to obtain such a license, we would be unable to further develop and commercialize one or more of our medicines and drug candidates, which could harm our business significantly. We may also elect to enter into license agreements in order to settle patent infringement claims or to resolve disputes prior to litigation, and any such license agreements may require us to pay royalties and other fees that could significantly harm our business. We are aware of patents in the U.S. and some other jurisdictions with claims covering certain antibodies that are relevant to tislelizumab for which patents are expected to expire in 2023 or 2024; complexes of irreversible BTK inhibitors that are relevant to BRUKINSA for which the patent is expected to expire in 2027; the use of PARP inhibitors to treat certain cancers that are relevant to pamiparib for which patents are expected to expire between 2027 and 2031; and the use of TIGIT antagonist in combination with PD-1 binding antagonist to treat cancers that are relevant to the use of ociperlimab in combination with tislelizumab for which patents are expected to expire in 2034. Although we believe that the relevant claims of these patents would likely be held invalid, we can provide no assurance that a court or an administrative agency would agree with our assessment. If the validity of the relevant claims of one or more of these patents were to be upheld upon a validity challenge, and our related medicine was approved for sale in the United States before the expiration of the relevant patents, we would need a license to commercialize the medicine in the United States before the expiration of the relevant patents. In addition, depending upon the circumstances, we may need licenses for jurisdictions outside of the United States where we wish to commercialize a particular medicine before the expiration of corresponding patents covering that medicine. In such cases, we can provide no assurance that we would be able to obtain a license or licenses on commercially reasonable terms or at all, which could materially and adversely affect our business. Even if litigation or other proceedings are resolved in our favor, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the market price of our shares. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements. Periodic maintenance fees on any issued patent are due to be paid to the USPTO and other patent agencies in several stages over the lifetime of the patent. The USPTO and other patent agencies require compliance with a number of procedural, documentary, fee payment, and other similar provisions during the patent application process. Although an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees, and failure to properly legalize and submit formal documents. In any such event, our competitors might be able to enter the market, which would have a material adverse effect on our business. If we do not obtain patent term extension and regulatory exclusivity for our medicines, our business may be materially harmed. Depending upon the timing, duration and specifics of FDA marketing approval of our medicines and drug candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act. However, we may 74 Table of Contents not be granted an extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. In addition, although the Amended PRC Patent Law includes patent term extension, the patent term extension provision of the law is unclear and/or remains subject to the approval of implementing regulations that are still in draft form and soliciting comments, leading to uncertainty about its scope and implementation. As a result, the patents we have in the PRC are not yet eligible to be extended for patent term lost during clinical trials and the regulatory review process. If we are unable to obtain patent term extension or term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations, and prospects could be materially harmed. Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our medicines or drug candidates. The laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. There could be changes in the laws of foreign jurisdictions that may impact the value of our patent rights or our other intellectual property rights. If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed. We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers. In addition to our issued patent and pending patent applications, we rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position and to protect our medicines and drug candidates. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties that have access to them, such as our employees, corporate collaborators, outside scientific collaborators, sponsored researchers, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. However, any of these parties may breach such agreements and disclose our proprietary information, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time- consuming, and the outcome is unpredictable. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that technology or information to compete with us and our competitive position would be harmed. Furthermore, many of our employees, including our senior management, were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these employees, including members of our senior management, executed proprietary rights, non-disclosure and in some cases non-competition agreements in connection with their previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management. In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and scientific personnel. If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could be required to pay monetary damages or could lose license rights that are important to our business. We have entered into license agreements with third parties providing us with rights under various third-party patents and patent applications. These license agreements impose diligence, development or commercialization timelines and milestone payment, royalty, insurance and other obligations on us. If we fail to comply with our obligations under our current or future license agreements, our counterparties may have the right to terminate these agreements, in which event we might not be able to develop, manufacture or market any medicine or drug candidate that is covered by the licenses provided for under these 75 Table of Contents agreements or we may face claims for monetary damages or other penalties under these agreements. Such an occurrence could diminish the value of these products and our company. Termination of the licenses provided for under these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements. Risks Related to Our Reliance on Third Parties We rely on third parties to manufacture some of our commercial and clinical drug supplies. Our business could be harmed if those third parties fail to provide us with sufficient quantities of product or fail to do so at acceptable quality levels or prices. Although we manufacture commercial supply of tislelizumab, zanubrutinib, and pamiparib at our manufacturing facilities in China, and are constructing a commercial-stage biologics manufacturing and clinical R&D center in New Jersey and a new small molecule manufacturing campus in Suzhou, China, we continue to rely on outside vendors to manufacture supplies and process some of our medicines and drug candidates. For example, we have entered into a commercial supply agreement for tislelizumab with Boehringer Ingelheim Biopharmaceuticals (China) Ltd. (“Boehringer Ingelheim”) and entered into a commercial supply agreement for BRUKINSA with Catalent Pharma Solutions, LLC (“Catalent”). In addition, we generally rely on our collaboration partners and their third-party manufacturers for supply of in-licensed medicines in China. We have limited experience in manufacturing or processing our medicines and drug candidates on a commercial scale. Additionally, we have limited experience in managing the manufacturing process, and our process may be more difficult or expensive than the approaches currently in use. Although we intend to use our own manufacturing facilities, we also intend to use third parties as part of our manufacturing process and for the clinical and commercial supply of our medicines and drug candidates. Our anticipated reliance on a limited number of third-party manufacturers exposes us to the following risks: • we may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and regulatory authorities must evaluate and/or approve any manufacturers as part of their regulatory oversight of our medicines and drug candidates. This evaluation would require new testing and GMP-compliance inspections by regulatory authorities; • our manufacturers may have little or no experience with manufacturing our medicines and drug candidates, and therefore may require a significant amount of support from us in order to implement and maintain the infrastructure and processes required to manufacture our medicines and drug candidates; • our third-party manufacturers might be unable to timely manufacture our medicines and drug candidates or produce the quantity and quality required to meet our clinical and commercial needs, if any. This may, in the future, require us to transfer manufacturing technology to a different manufacturer or use a different process, each of which would be both time consuming and costly and potentially require us to conduct comparative studies to determine bioequivalence of the new and prior manufacturers' products or the new and old processes; • manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies in the United States to ensure strict compliance with GMP requirements and other government regulations and by other comparable regulatory authorities for corresponding non-U.S. requirements. Manufacturers may be unable to comply with these GMPs which may result in fines and civil penalties, suspension of production, suspension, delay or withdrawal of product approval, or product seizure or recall. We do not have control over third-party manufacturers’ compliance with these regulations and requirements; • we may not own, or may have to share, the intellectual property rights to some of the technology used and improvements made by our third-party manufacturers in the manufacturing process for our medicines and drug candidates; • raw materials and components used in the manufacturing process, particularly those for which we have no other source or supplier, may not be available or may not be suitable or acceptable for use due to material or component defects; • our contract manufacturers and drug component suppliers may be subject to disruptions in their business, including unexpected demand for or shortage of raw materials or components, cyber-attacks on supplier systems, labor disputes or shortage and inclement weather, as well as natural or man-made disasters or pandemics; and • manufacturing partners may require us to fund capital improvements to support scale-up of manufacturing and related activities to the extent our drug candidates or medicines become approved for commercial sale. 76 Table of Contents For example, on March 25, 2020, the NMPA suspended the importation, sales and use of ABRAXANE in China supplied to us by BMS, and the drug was subsequently recalled by BMS and is not currently available for sale in China. This suspension was based on inspection findings at BMS’s contract manufacturing facility in the United States. We have not had any sales of ABRAXANE since the suspension and do not expect future revenue from ABRAXANE. For additional information, please see the section of this Quarterly Report titled “Legal Proceedings”. Each of these risks could delay or prevent the completion of our clinical trials or the approval of any of our drug candidates, result in higher costs or adversely impact development of our drug candidates or commercialization of our medicines. In addition, we will rely on third parties to perform certain specification tests on our medicines and drug candidates prior to delivery to patients. If these tests are not appropriately done and test data are not reliable, patients could be put at risk of serious harm and regulatory authorities could place significant restrictions on our company until deficiencies are remedied. Currently, the raw materials for our manufacturing activities are supplied by multiple source suppliers, although portions of our supply chain may rely on sole source suppliers. We have agreements for the supply of drug materials with manufacturers or suppliers that we believe have sufficient capacity to meet our demands. In addition, we believe that adequate alternative sources for such supplies exist. However, there is a risk that, if supplies are interrupted, it would materially harm our business. Manufacturers of drug and biological products often encounter difficulties in production, particularly in scaling up or out, validating the production process, and assuring high reliability of the manufacturing process (including the absence of contamination). These problems include logistics and shipping, difficulties with production costs and yields, quality control, including stability of the product, product testing, operator error, availability of qualified personnel, as well as compliance with strictly enforced federal, state and non-U.S. regulations. Furthermore, if contaminants are discovered in the supply of our medicines and drug candidates or in the manufacturing facilities, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. We cannot assure you that any stability failures or other issues relating to the manufacture of our medicines and drug candidates will not occur in the future. Additionally, our manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our manufacturers were to encounter any of these difficulties, or otherwise fail to comply with their contractual obligations, our ability to provide our medicines for commercial sale and our drug candidates to patients in clinical trials would be jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of clinical trials, increase the costs associated with maintaining clinical trial programs and, depending upon the period of delay, require us to begin new clinical trials at additional expense or terminate clinical trials completely. *We have entered into licensing and collaboration arrangements and may enter into additional collaborations, licensing arrangements, or strategic alliances in the future, and we may not realize the benefits of such arrangements. We have entered into licensing and collaboration agreements and may enter into additional collaboration, licensing arrangements, or strategic alliances with third parties that we believe will complement or augment our research, development and commercialization efforts. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing shareholders, or disrupt our management and business. In August 2017, we acquired Celgene's commercial operations in China and an exclusive license to Celgene's (now BMS’s) commercial cancer portfolio in China, REVLIMID, VIDAZA and ABRAXANE. On March 25, 2020, the NMPA suspended the importation, sales and use of ABRAXANE in China supplied to us by BMS, and the drug was subsequently recalled by BMS and is not currently available for sale in China. This suspension was based on inspection findings at BMS’s contract manufacturing facility in the United States. We have not had any sales of ABRAXANE since the suspension and do not expect future revenue from ABRAXANE. For additional information, please see the section of this Quarterly Report titled “Legal Proceedings”. In 2019, we entered into a strategic collaboration with Amgen with respect to its commercial-stage oncology products XGEVA, BLINCYTO and KYPROLIS and a portfolio of clinical- and late-preclinical-stage oncology pipeline products. In January 2021, we entered into a collaboration and license agreement with Novartis Pharma AG (“Novartis”), granting Novartis rights to develop, manufacture and commercialize our anti-PD-1 antibody tislelizumab in North America, Japan, the EU, and six other European countries. In December 2021, we entered into an option, collaboration and license agreement with Novartis to develop, manufacture and commercialize our investigational TIGIT inhibitor, ociperlimab, in North America, Europe, and Japan, but that agreement was terminated in July 2023, pursuant to a mutual termination and release agreement, whereby we regained full, global rights to develop, manufacture and commercialize ociperlimab. Our strategic collaborations with Amgen, Novartis and BMS involve numerous risks. We cannot be certain that we will achieve the financial and other benefits that led us to enter into the collaborations. Moreover, we may not achieve the revenue and cost synergies expected from our collaborations for their commercial products in China, and our management’s attention may be diverted from our drug discovery and development business. These synergies are inherently uncertain, and are subject 77 Table of Contents to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and are beyond our control. If we achieve the expected benefits, they may not be achieved within the anticipated time frame. Lastly, strategic collaborations can be terminated for various reasons. For example, our strategic collaboration with Celgene for the development and commercialization of tislelizumab, which we entered into in connection with the license agreement in 2017, was terminated in June 2019 in advance of the acquisition of Celgene by BMS, and we received a termination notice in October 2021 to terminate our license agreement for ABRAXANE in China. Similarly, we recently mutually terminated our agreement with Novartis regarding rights to develop, manufacture and commercialize ociperlimab. Additionally, from time to time, we may enter into joint ventures with other companies. Establishment of a joint venture involves significant risks and uncertainties, including (i) our ability to cooperate with our strategic partner, (ii) our strategic partner having economic, business, or legal interests or goals that are inconsistent with ours, and (iii) the potential that our strategic partner may be unable to meet its economic or other obligations, which may require us to fulfill those obligations alone. We face significant competition in seeking appropriate strategic partners, and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic collaboration or other alternative arrangements for our medicines and drug candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our medicines and drug candidates as having the requisite potential to demonstrate safety and efficacy or commercial viability. If and when we collaborate with a third party for development and commercialization of a medicine or drug candidate, we can expect to relinquish some or all of the control over the future success of that medicine or drug candidate to the third party. For any medicines or drug candidates that we may seek to in-license from third parties, we may face significant competition from other pharmaceutical or biotechnology companies with greater resources or capabilities than us, and any agreement that we do enter may not result in the anticipated benefits. Collaborations involving our medicines and drug candidates are subject to numerous risks, which may include the following: • collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration; • collaborators may not pursue development and commercialization of our drug candidates and medicines or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to the acquisition of competitive drugs, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon a drug candidate, repeat or conduct new clinical trials, or require a new formulation of a drug candidate for clinical testing; • collaborators could independently develop, or develop with third parties, drugs that compete directly or indirectly with our medicines or drug candidates; • a collaborator with marketing and distribution rights to one or more medicines may not commit sufficient resources to their marketing and distribution or may set prices that reduce the profitability of the medicines; • collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; • disputes may arise between us and a collaborator that cause the delay or termination of the research, development or commercialization of our medicines and drug candidates, or that result in costly litigation or arbitration that diverts management attention and resources; • collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable medicines and drug candidates; and • collaborators may own or co-own intellectual property covering our medicines and drug candidates that results from our collaborating with them, and in such cases, we would not have the exclusive right to commercialize such intellectual property. As a result, we may not be able to realize the benefit of current or future collaborations, licensing arrangements or strategic alliances for our medicines and drug candidates if we are unable to successfully integrate such products with our existing operations and company culture, which could delay our timelines or otherwise adversely affect our business. We also cannot be 78 Table of Contents certain that, following a strategic transaction or license, we will be able to fulfill all of our contractual obligations in a timely manner or achieve the revenue, specific net income or other goals that justify such transaction. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a drug candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we fail to maintain an effective distribution channel for our medicines, our business and sales could be adversely affected. We rely on third-party distributors to distribute our approved medicines. For example, we rely on sole third-party distributors to distribute some of our in-licensed approved medicines in China and multiple third-party distributors for the distribution of our internally developed medicines. We also expect to rely on third-party distributors to distribute our other internally developed and in-licensed medicines, if approved. Our ability to maintain and grow our business will depend on our ability to maintain an effective distribution channel that ensures the timely delivery of our medicines. However, we have relatively limited control over our distributors, who may fail to distribute our medicines in the manner we contemplate. For example, while we have long-standing business relationship with our sole distributor for the in-licensed products from BMS, the agreement we entered into with our sole distributor can be terminated by either party upon six months’ written notice. If price controls or other factors substantially reduce the margins our distributors can obtain through the resale of our medicines to hospitals, medical institutions and sub-distributors, they may terminate their relationship with us. While we believe alternative distributors are readily available, there is a risk that, if the distribution of our medicines is interrupted, our sales volumes and business prospects could be adversely affected. If third-party manufacturers fail to comply with manufacturing regulations, our financial results and financial condition could be adversely affected. Before a third party can begin commercial manufacture of our medicines, they are subject to regulatory inspections of their manufacturing facilities, processes and quality systems. Due to the complexity of the processes used to manufacture drug and biological products, any potential third-party manufacturer may be unable to initially pass regulatory inspections in a timely or cost-effective manner in order for us to obtain regulatory approval. If contract manufacturers do not pass their inspections by the relevant regulatory authorities, our commercial supply of drug product or substance will be significantly delayed and may result in significant additional costs, including the delay or denial of any marketing application for our drug candidates or disruption in sales. In addition, drug and biological manufacturing facilities are continuously subject to inspection by regulatory authorities, before and after drug approval, and must comply with GMPs. Our or our collaborators' contract manufacturers may encounter difficulties in achieving quality control and quality assurance and may experience shortages in qualified personnel. In addition, contract manufacturers’ failure to achieve and maintain high manufacturing standards in accordance with applicable regulatory requirements, or the incidence of manufacturing errors, could result in patient injury, product liability claims, product shortages, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could seriously harm our business. If a third-party manufacturer with whom we or our collaborators' contract is unable to comply with manufacturing regulations, we may also be subject to fines, unanticipated compliance expenses, recall or seizure of our drugs, product liability claims, total or partial suspension of production and/or enforcement actions, including injunctions, and criminal or civil prosecution. These possible sanctions could materially adversely affect our financial results and financial condition. On March 25, 2020, the NMPA suspended the importation, sales and use of ABRAXANE in China supplied to us by BMS, and the drug was subsequently recalled by BMS and is not currently available for sale in China. This suspension was based on inspection findings at BMS’s contract manufacturing facility in the United States. We have not had any sales of ABRAXANE since the suspension and do not expect future revenue from ABRAXANE. For additional information, please see the section of this Quarterly Report titled “Legal Proceedings”. *If we are not able to successfully develop and/or commercialize Amgen’s oncology products, the expected benefits of the collaboration will not materialize. We have a collaboration agreement with Amgen pursuant to which we and Amgen have agreed to collaborate on the commercialization of Amgen’s oncology products XGEVA, BLINCYTO and KYPROLIS in China, and the global development and commercialization in China of a portfolio of Amgen's clinical- and late-preclinical-stage pipeline products. Amgen has paused or stopped development of some of the pipeline assets due to portfolio prioritization, and the parties expect that the development plan for the pipeline assets will continue to evolve over time. In connection with our ongoing assessment of the collaboration agreement cost-share contributions, we determined that our further investment in the development of LUMAKRAS (sotorasib) (“AMG 510”), a first-in-class KRAS G12C inhibitor, was no longer commercially viable for BeiGene. As a result, in February 2023, we entered into an amendment to the collaboration agreement to (i) stop sharing costs with Amgen for the further development of AMG 510 during the period starting January 1, 2023 and ending August 31, 2023; and (ii) cooperate in good faith to prepare a transition plan with the anticipated termination of AMG 510 from the Collaboration 79 Table of Contents Agreement. Additionally, for the period between 2020 and 2022, we were advised by Amgen that its applications to the Human Genetic Resources Administration of China (“HGRAC”) to obtain approval to conduct clinical studies in China for the pipeline assets were delayed. Approval from the HGRAC is required for the initiation of clinical trials involving the collection of human genetic materials in China. We do not expect the previous HGRAC delay to affect the conduct of the clinical trials in China for our drug candidates, other than assets that are part of the Amgen collaboration. The Amgen collaboration involves numerous risks, including unanticipated costs and diversion of our management’s attention from our other drug discovery and development business. There can be no assurance that we will be able to successfully develop and commercialize Amgen’s oncology products in China, which could disrupt our business and harm our financial results. *We may rely on third parties to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our medicines and drug candidates and our business could be substantially harmed. We have relied upon and plan to continue to rely to some extent upon third-party CROs to monitor and manage data and provide other services for our ongoing preclinical and clinical programs. We may rely on these parties for execution of our preclinical studies and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities. We, our CROs for our clinical programs and our clinical investigators are required to comply with GCPs, which are regulations and guidelines enforced by regulatory authorities for all of our drug candidates in clinical development. If we or any of our CROs or clinical investigators fail to comply with applicable GCPs and other regulatory requirements, the clinical data generated in our clinical trials may be deemed unreliable and regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. In addition, our pivotal clinical trials must be conducted with drug product produced under GMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. We could also be subject to government investigations and enforcement actions. If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. In addition, our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our ongoing clinical and nonclinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they or our clinical investigators obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our drug candidates. As a result, our results of operations and the commercial prospects for our drug candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed. Switching or adding additional CROs involves additional cost and delays, which can materially influence our ability to meet our desired clinical development timelines. There can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse effect on our business, financial condition and prospects. Risks Related to Our Industry, Business and Operations We have significantly increased and expect to continue to increase our research, development, manufacturing, and commercial capabilities, and we may experience difficulties in managing our growth. At the beginning of 2022, we had approximately 8,000 employees, and we ended the year with approximately 9,000 employees, an increase of 15%. As of the date of this Quarterly Report, we had over 10,000 employees. We expect to continue our growth. Most of our employees are full-time. As our research, development, manufacturing and commercialization plans and strategies evolve, we must add a significant number of additional managerial, operational, drug development, clinical, regulatory affairs, manufacturing, sales, marketing, financial and other personnel in the United States, China, Europe and other regions. Our recent growth and any anticipated future growth will impose significant added responsibilities on members of management, including: • identifying, recruiting, integrating, maintaining, and motivating additional employees; • managing the growth in our research, clinical operations, commercial, and supporting functions; • managing our internal development efforts effectively, including the clinical and regulatory review process for our drug candidates, while complying with our contractual obligations to third parties; and 80 Table of Contents • improving our operational, financial and management controls, reporting systems and procedures. Our future financial performance and our ability to develop and commercialize our medicines and drug candidates will depend, in part, on our ability to effectively manage our recent growth and any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities. We currently rely, and for the foreseeable future will continue to rely, on certain independent organizations, advisors and consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, if at all. If we are not able to effectively manage our growth and further expand our organization by hiring new employees and expanding our groups of consultants and contractors as needed, we may not be able to successfully implement the tasks necessary to further develop, manufacture and commercialize our medicines and drug candidates and, accordingly, may not achieve our research, development, manufacturing and commercialization goals. *Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel. Xiaodong Wang, Ph.D., our Co-Founder, Chairman of our scientific advisory board, and director; John V. Oyler, our Co-Founder, Chief Executive Officer and Chairman of the board of directors; Xiaobin Wu, Ph.D., our President, Chief Operating Officer and General Manager of China; Julia Wang, our Chief Financial Officer; and the other principal members of our management and scientific teams play a critical role in the Company's operation and development. Although we have employment agreements or offer letters with each of our executive officers, these agreements do not prevent our executives from terminating their employment with us at any time. We do not maintain “key person” insurance for any of our executives or other employees. The loss of the services of any of these persons could impede the achievement of our research, development and commercialization objectives. To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided share option, restricted share unit and restricted share grants that vest over time or based on performance conditions. The value to employees of these equity grants that may be significantly affected by movements in our share price that are beyond our control and may be insufficient to counteract more lucrative offers from other companies. Although we have employment agreements or offer letters with our key employees, any of our employees could leave our employment at any time, with or without notice. Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our success. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating and executing our discovery, clinical development, manufacturing and commercialization strategy. The loss of the services of our executive officers or other key employees and consultants could impede the achievement of our research, development, manufacturing and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executives, key employees or consultants may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel or consultants on acceptable terms, given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited. Our business is subject to complex and evolving industry-specific laws and regulations regarding the collection and transfer of personal data. These laws and regulations can be complex and stringent, and many are subject to change and uncertain interpretation, which could result in claims, changes to our data and other business practices, significant penalties, increased cost of operations, or otherwise adversely impact our business. Regulatory authorities around the world have implemented industry-specific laws and regulations that affect the collection and transfer of personal data. For example, in China, the Regulation on the Administration of Human Genetic Resources promulgated by the State Council (the “HGR Regulation”), which became effective in 2019, applies to activities that involve 81 Table of Contents sampling, biobanking, use of HGR materials and associated data, in China, and provision of such to foreign parties. The HGR Regulation prohibits both onshore or offshore entities established or actually controlled by foreign entities and individuals from sampling or biobanking any China HGR in China and require approval for the sampling of certain HGR and biobanking of all HGR by Chinese parties. Approval for any export or cross-border transfer of the HGR material is required, and transfer of China HGR data by Chinese parties to foreign parties or entities established or actually controlled by them also requires the Chinese parties to file, before the transfer, a copy of the data to the HGR administration for record. The HGR Regulation also requires that foreign parties ensure the full participation of Chinese parties in international collaborations and all records and data must be shared with the Chinese parties. For information about applications under the HGR Regulation for clinical studies in China that are part of the Amgen - BeiGene Collaboration, see the risk factor entitled “If we are not able to successfully develop and/or commercialize Amgen’s oncology products, the expected benefits of the collaboration will not materialize.” Further to the draft HGR implementing rules, the Cyberspace Administration of China (“CAC”) released the final Measures of Cross-Border Data Transfer Security Assessment on July 7, 2022 (effective as of September 1, 2022), under which any transfer of certain “important data” out of China shall trigger a security assessment to be conducted by the Chinese government. The term “important data” is a broadly defined term under the Cybersecurity Law and Data Security Law, and further clarifications need to be put in place by the Chinese government before international companies could find a practical way to comply. However, under the latest draft Important Data Identification Rules, HGR data is classified as “important data,” and if the guidance is finalized as is, it can be expected that this new cross-border data transfer rule may create considerable additional regulatory burdens on international companies' human gene-involved R&D activities in China ( i.e. , adding a third layer of CAC's regulatory approval in addition to HGRAC's and NMPA's). If the Chinese parties fail to comply with data protection laws, regulations and practice standards, and our research data is obtained by unauthorized persons, used or disclosed inappropriately or destroyed, it could result in a loss of our confidential information and subject us to litigation and government enforcement actions. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our or our collaborators’ practices, potentially resulting in suspension of relevant ongoing clinical trials or the initiation of new trials, confiscation of HGR samples and associated data and administrative fines, disgorgement of illegal gains, or temporary or permanent debarment of our or our collaborators’ entities and responsible persons from further HGR projects and, consequently, a de-facto ban on the debarred entities from initiating new clinical trials in China. So far, the HGR administration has disclosed a number of HGR violation cases. In one case, the sanctioned party was the Chinese subsidiary of a multinational pharmaceutical company that was found to have illegally transferred certain HGR materials to CROs for conducting certain unapproved research. In addition to a written warning and confiscation of relevant HGR materials, the Chinese subsidiary of the multinational pharmaceutical company was requested by the HGR administration to take rectification measures and at the same time banned from submitting any HGR applications until the HGR administration was satisfied with the rectification results, which rendered it unable to initiate new clinical trials in China until the ban was lifted. In another case, a public hospital was found to have illegally transferred certain HGR data to a university in Europe, and that hospital was eventually subject to the same ban. To further tighten the control of China HGR, the Chinese government adopted amendments to the Criminal Code, effective as of March 1, 2021, which criminalize the illegal collection of China HGR, the illegal transfer of China HGR materials outside of China, and the transfer of China HGR data to foreign parties or entities established or actually controlled by them without going through security review and assessment. An individual who is convicted of any of these violations may be subject to public surveillance, criminal detention, a fixed-term imprisonment of up to 7 years, and/or a criminal fine. On April 15, 2021, the Biosecurity Law became effective. The Biosecurity Law establishes an integrated system to regulate biosecurity-related activities in China, including the security regulation of HGR and biological resources. The Biosecurity Law for the first time expressly declared that China has sovereignty over its HGR and further endorsed the HGR Regulation by recognizing the fundamental regulatory principles and systems established by it over the utilization of Chinese HGR by foreign entities in China. Although the Biosecurity Law does not provide any specific new regulatory requirements on HGR, as it is a law adopted by China’s highest legislative authority, it gives China’s major regulatory authority of HGR, i.e., the Ministry of Science and Technology, significantly more power and discretion to regulate HGR and it is expected that the overall regulatory landscape for Chinese HGR will evolve and become even more rigorous. In addition, the interpretation and application of data protection laws in China and elsewhere are often uncertain and in flux. We expect that these areas will receive greater and continued attention and scrutiny from regulators and the public going forward, which could increase our compliance costs and subject us to heightened risks and challenges associated with data security and protection. If we are unable to manage these risks, we could become subject to significant penalties, including fines, suspension of business and revocation of required licenses, and our reputation and results of operations could be materially and adversely affected. 82 Table of Contents We manufacture some of our medicines and intend to manufacture some of our drug candidates, if approved. Failure to comply with regulatory requirements could result in sanctions being imposed against us and delays in completing and receiving regulatory approvals for our manufacturing facilities, or damage to, destruction of or interruption of production at such facilities, could delay our development plans or commercialization efforts. We currently have manufacturing facilities in Beijing, Guangzhou, and Suzhou, China. We are also constructing a commercial-stage biologics manufacturing and clinical R&D center in New Jersey, United States, and a new small molecule manufacturing campus in Suzhou, China. These facilities may encounter unanticipated delays and expenses due to a number of factors, including regulatory requirements. If construction or expansion, regulatory evaluation and/or approval of our facilities are delayed, we may not be able to manufacture sufficient quantities of our medicines and drug candidates, which would limit our development and commercialization activities and our opportunities for growth. Cost overruns associated with constructing or maintaining our facilities could require us to raise additional funds from other sources. For example, we may not be able to complete the construction and validation of and obtain regulatory approval for the new manufacturing and clinical R&D center in New Jersey, the new manufacturing campus in Suzhou and manufacturing facility expansion in Guangzhou in a timely or economic manner. In addition to the similar manufacturing risks described in “Risks Related to Our Reliance on Third Parties,” our manufacturing facilities are subject to inspection in connection with clinical development and new drug approvals and ongoing, periodic inspection by the FDA, NMPA, EMA or other comparable regulatory agencies to ensure compliance with GMP and other regulatory requirements. Historically, some manufacturing facilities in China have had difficulty meeting the FDA’s, NMPA's or EMA's standards. Our failure to follow and document our adherence to such GMP regulations or other regulatory requirements may lead to significant delays in the availability of products for clinical or commercial use, may result in the termination of or a hold on a clinical trial, or may delay or prevent filing or approval of marketing applications for our drug candidates or the commercialization of our medicines. We also may encounter problems with the following: • achieving adequate or clinical-grade materials that meet FDA, NMPA, EMA or other comparable regulatory agency standards or specifications with consistent and acceptable production yield and costs; • shortages of qualified personnel, raw materials or key contractors; and • ongoing compliance with GMP regulations and other requirements of the FDA, NMPA, EMA or other comparable regulatory agencies. Failure to comply with applicable regulations could also result in sanctions being imposed on us, including fines, injunctions, civil penalties, a requirement to suspend or put on hold one or more of our clinical trials, failure of regulatory authorities to grant marketing approval of our drug candidates, delays, suspension or withdrawal of approvals, supply disruptions, license revocation, seizures or recalls of drug candidates or medicines, operating restrictions and criminal prosecutions, any of which could harm our business. Developing advanced manufacturing techniques and process controls is required to fully utilize our facilities. Advances in manufacturing techniques may render our facilities and equipment inadequate or obsolete. To supply commercial quantities for our marketed products, produce our medicines in the quantities that we believe will be required to meet anticipated market demand, and to supply clinical drug material to support the continued growth of our clinical programs, we will need to increase, or “scale up,” the production process by a significant factor over the initial level of production, which will require substantial additional expenditures and various regulatory approvals and permits. If we are unable to do so, are delayed, or if the cost of this scale up is not economically feasible for us or we cannot find a third-party supplier, we may not be able to produce our medicines in a sufficient quantity to meet future demand. If our manufacturing facilities or the equipment in them is damaged or destroyed, we may not be able to quickly or inexpensively replace our manufacturing capacity or replace it at all. In the event of a temporary or protracted loss of the facilities or equipment, we might not be able to transfer manufacturing to a third party. Even if we could transfer manufacturing to a third party, the shift would likely be expensive and time-consuming, particularly since the new facility would need to comply with the necessary regulatory requirements and we would need regulatory agency approval before selling any medicines manufactured at that facility. Any interruption in manufacturing operations at our manufacturing facilities could result in our inability to satisfy the demands of our clinical trials or commercialization. Any disruption that impedes our ability to manufacture our drug candidates or medicines in a timely manner could materially harm our business, financial condition and operating results. Currently, we maintain insurance coverage against damage to our property, plant and equipment in amounts we believe are reasonable. However, our insurance coverage may not reimburse us, or may not be sufficient to reimburse us, for any expenses 83 Table of Contents or losses we may suffer. We may be unable to meet our requirements for our drug candidates and medicines if there were a catastrophic event or interruption or failure of our manufacturing facilities or processes. We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance requirements, including establishing and maintaining internal controls over financial reporting. We may be exposed to potential risks if we are unable to comply with these requirements. As a public company listed in the United States, Hong Kong and Shanghai, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the listing rules of the Nasdaq Stock Market (Nasdaq), The Stock Exchange of Hong Kong Limited (the “HKEx”) and the STAR Market of the Shanghai Stock Exchange (the “SSE”), and incur significant legal, accounting and other expenses to comply with applicable requirements. These rules impose various requirements on public companies, including requiring certain corporate governance practices. Our management and other personnel devote a substantial amount of time to these requirements. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly. For example, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluations and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Such compliance may require that we incur substantial accounting expenses and expend significant management efforts. Our testing may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. In the event we identify significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner, the market price of our shares could decline if investors and others lose confidence in the reliability of our financial statements, we could be subject to sanctions or investigations by the SEC, HKEx, China Securities Regulatory Commission (the “CSRC”), SSE or other applicable regulatory authorities, and our business could be harmed. If we engage in acquisitions or strategic collaborations, this may increase our capital requirements, dilute our shareholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks. From time to time, we may evaluate various acquisitions and strategic collaborations, including licensing or acquiring complementary products, intellectual property rights, technologies or businesses. Any completed, in-process or potential acquisition or strategic collaboration may entail numerous risks, including: • increased operating expenses and cash requirements; • the assumption of additional indebtedness or contingent or unforeseen liabilities; • the issuance of our equity securities; • assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel; • the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition; • retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships; • risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing drugs or drug candidates and regulatory approvals; and • our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs. In addition, if we undertake acquisitions or strategic collaborations, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. For example, in connection with our transaction with Amgen, we issued to Amgen a total of 206,635,013 ordinary shares in the form of ADSs in January 2020, representing 20.5% of the then issued share capital of the Company after giving effect to the share issuance, which resulted in Amgen becoming our largest shareholder and the ownership of our existing shareholders being diluted. 84 Table of Contents PRC regulations and rules concerning mergers and acquisitions, including the Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors (the “M&A Rules”), and other regulations and rules with respect to mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex. For example, the M&A Rules require that the Ministry of Commerce of the PRC (the “MOFCOM”) be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Moreover, according to the Anti-Monopoly Law of the PRC, which was amended in June 2022 and became effective as of August 1, 2022, and the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings issued by the State Council, the concentration of business undertakings by way of mergers, acquisitions or contractual arrangements that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance to the State Administration for Market Regulation (the “SAMR”) when the threshold is crossed and such concentration shall not be implemented without the clearance of prior notification. In addition, the Measures for Security Review of Foreign Investment jointly issued by the National Development and Reform Commission and MOFCOM and the Regulations on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprise by Foreign Investors (the “Security Review Rules”) issued by the MOFCOM specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire the de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOFCOM, and the rules prohibit any activities attempting to bypass a security review by structuring the transaction through, among other things, trusts, entrustment or contractual control arrangements. We may also be subject to similar review and regulations in other jurisdictions, such as the laws and regulations on foreign investment in the United States under the jurisdiction of the Committee on Foreign Investment in the United States (the “CFIUS”) and other agencies, including the Foreign Investment Risk Review Modernization Act (the “FIRRMA”), which became effective in February 2020. Furthermore, according to the Overseas Listing Trial Measures, if a Chinese overseas listed company issues overseas listed securities to acquire assets, such issuance would be subject to filing requirements with the CSRC. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval or filing processes, including obtaining approval from or filing with CFIUS, the SAMR, the MOFCOM, the CSRC or other agencies may delay or inhibit our ability to complete such transactions. It is unclear whether those complementary businesses we may acquire in the future would be deemed to be in an industry that raises “national defense and security” or “national security” concerns. However, CFIUS, SAMR, MOFCOM, CSRC or other government agencies may publish explanations in the future determining that certain complementary business is in an industry subject to the security review, in which case our future acquisitions in the United States and the PRC, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand our market share through future acquisitions would as such be materially and adversely affected. If we fail to comply with the U.S. Foreign Corrupt Practices Act or other anti-bribery and corruption laws, our reputation may be harmed and we could be subject to penalties and significant expenses that have a material adverse effect on our business, financial condition and results of operations. We are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”). The FCPA generally prohibits us from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. We are also subject to the anti-bribery and corruption laws of other jurisdictions, particularly China. The anti-bribery laws in China generally prohibit companies and their intermediaries from making payments to government officials for the purpose of obtaining or retaining business or securing any other improper advantage. As our business has expanded, the applicability of the FCPA and other anti-bribery and corruption laws to our operations has increased. We do not fully control the interactions our employees, distributors and third-party promoters have with hospitals, medical institutions and doctors, and they may try to increase sales volumes of our products through means that constitute violations of United States, PRC or other countries’ anti-corruption and related laws. Although we have policies and procedures designed to ensure that we, our employees and our agents comply with anti- bribery laws, there is no assurance that such policies or procedures will prevent our agents, employees and intermediaries from engaging in bribery activities. If we, due to either our own deliberate or inadvertent acts or those of others, fail to comply with applicable anti-bribery and corruption laws, our reputation could be harmed and we could incur criminal or civil penalties, including but not limited to imprisonment, criminal 85 Table of Contents and civil fines, suspension of our ability to do business with the government, denial of government reimbursement for our products and/or exclusion from participation in government healthcare programs, other sanctions and/or significant expenses, which could have a material adverse effect on our business. If we or our CROs or contract manufacturing organizations (“CMOs”) fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on our business. We and third parties, such as our CROs or CMOs, are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and waste. In addition, our construction projects can only be put into operation after certain regulatory procedures with the relevant administrative authorities in charge of environmental protection, health and safety have been completed. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and waste. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and such liability could exceed our insurance coverage. We also could incur significant costs associated with civil or criminal fines and penalties. Although we maintain workers’ compensation insurance to cover us for costs and expenses that we may incur due to injuries to our employees resulting from the use of or exposure to hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage, use or disposal of biological or hazardous materials. In addition, we may be required to incur substantial costs to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development, manufacturing or commercialization efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions. Our information technology systems, or those used by our contractors or collaborators, may fail or suffer security breaches, which could result in a material disruption of our product development and commercialization efforts. Despite the implementation of security measures, our information technology systems and those of our contractors and collaborators, are vulnerable to damage from internal or external events, such as computer viruses, unauthorized access, natural disasters, terrorism, war, and telecommunication and electrical failures, which can compromise the confidentiality, integrity and availability of the systems. Although to our knowledge we have not experienced any material system failure or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our research, development, manufacturing, regulatory and commercialization efforts and our business operations. In the ordinary course of our business, we collect and store sensitive data, including, among other things, legally protected patient health information, personally identifiable information about our employees, intellectual property, and proprietary business information. We manage and maintain our applications and data utilizing on-site systems and outsourced vendors. These applications and data encompass a wide variety of business-critical information, including research and development information, commercial information and business and financial information. Because information systems, networks and other technologies are critical to many of our operating activities, shutdowns or service disruptions at our company or vendors that provide information systems, networks, or other services to us pose increasing risks. Such disruptions may be caused by events such as computer hacking, phishing attacks, ransomware, dissemination of computer viruses, worms and other destructive or disruptive software, denial of service attacks and other malicious activity, as well as power outages, natural disasters (including extreme weather), terrorist attacks or other similar events. Such events could cause loss of data, damage to systems and data and leave us unable to utilize key business systems or access important data needed to operate our business. Our contractors and collaborators have faced, and in the future may face, similar risks, and service disruptions or security breaches of their systems could adversely affect our security, leave us without access to important systems, products, raw materials, components, services or information or expose our confidential data. In addition, system redundancy may be ineffective or inadequate, and our disaster recovery planning may not be sufficient to cover all eventualities. Significant events could result in a disruption of our operations, damage to our reputation or a loss of revenues. In addition, we may not have adequate insurance coverage to compensate for any losses associated with such events. We could be subject to risks caused by misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of information maintained in the information systems and networks of our company and our vendors, including personal information of our employees and patients, and company and vendor confidential data. In addition, outside parties may attempt to penetrate our systems or those of our vendors or fraudulently induce our personnel or the personnel of our vendors to disclose sensitive information in order to gain access to our data and/or systems. Like other companies, we and our third-party 86 Table of Contents vendors have on occasion experienced, and will continue to experience, threats to our or their data and systems, including malicious codes and viruses, phishing, email compromise attacks, ransomware, or other cyber-attacks. The number and complexity of these threats continue to increase over time. If a material breach of our information technology systems or those of our vendors occurs, we could be required to expend significant amounts of money and other resources to respond to these threats or breaches and to repair or replace information systems or networks and could suffer financial loss or the loss of valuable confidential information. In addition, we could be subject to regulatory actions and/or claims made by individuals and groups in private litigation involving privacy issues related to data collection and use practices and other data privacy laws and regulations, including claims for misuse or inappropriate disclosure of data, as well as unfair or deceptive practices. Although we develop and maintain systems and controls designed to prevent these events from occurring, and we have processes to identify and mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly sophisticated. Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely. As we outsource more of our information systems to vendors, engage in more electronic transactions with payors and patients, and rely more on cloud-based information systems, the related security risks will increase and we will need to expend additional resources to protect our technology and information systems. In addition, there can be no assurance that our internal information technology systems or those of our contractors and collaborators, as well as our and their efforts to implement adequate security and control measures, will be sufficient to protect us against breakdowns, service disruptions, data deterioration or loss in the event of a system malfunction, or prevent data from being stolen or corrupted in the event of a cyberattack, security breach, ransomware, industrial espionage attack or insider threat attack that could adversely affect our business and operations and/or result in the loss or exposure of critical, proprietary, private, confidential or otherwise sensitive data, which could result in financial, legal, business or reputational harm to us. *The increasing use of artificial intelligence-based software (including machine learning) and social media platforms may result in reputation harm or liability or could otherwise adversely affect our business. The use of artificial intelligence-based software is increasingly being used in the biopharmaceutical and global healthcare industries. As with many developing technologies, artificial intelligence-based software presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. For example, algorithms may be flawed; data sets may be insufficient, of poor quality, or contain biased information; and inappropriate or controversial data practices by data scientists, engineers, and end-users could impair results. If the analyses that artificial intelligence applications assist in producing are deficient or inaccurate, we could be subjected to competitive harm, potential legal liability, and brand or reputational harm. Furthermore, use of artificial intelligence-based software may lead to the release of confidential information which may impact our ability to realize the benefit of our intellectual property. Relatedly, social media platforms are increasingly being used to communicate about our products and the diseases our medicines and drug candidates are designed to treat. Social media practices in the biopharmaceutical industry continue to evolve and regulations relating to such use are not always clear and create uncertainty and risk of noncompliance with regulations applicable to our business. For example, patients may use social media channels to comment on the effectiveness of a product or to report an alleged adverse event. When such disclosures occur, there is a risk that we may fail to monitor and comply with applicable adverse event reporting obligations. There is also a risk of negative or inaccurate posts about us on social media, including criticism regarding our medicines or drug candidates. The immediacy of social media precludes us from having real-time control over postings made regarding our company, medicines or drug candidates. Our reputation could be damaged by negative publicity posted on social media platforms which we may not be able to timely reverse. If any of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face restrictive regulatory actions or incur other harm to our business. Our failure to comply with data protection laws and regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results. In the United States, Europe, China, and many other jurisdictions where we operate, we are subject to laws and regulations that address privacy, personal information protection and data security at both the federal and State levels. Numerous laws and regulations, including, without limitation, privacy laws (such as the European Union's General Data Protection Regulation (“GDPR”) or similar laws), security breach notification laws (such as Australia's amendment to the Privacy Act), health information privacy laws (such as the United States' Health Insurance Portability and Accountability Act (“HIPAA”) and the Human Genetic Resources Administration of China's rules), and consumer protection laws (such as the United States' Federal Trade Commission's unfair or deceptive practices rules or California's Consumer Privacy Act and California's Privacy Rights Act), govern the collection, use, disclosure and protection of health-related and other personal information. A subset of these laws also have strict requirements governing the cross-border transmission of personal information (see the risk factor entitled “ Compliance with the Data Security Law of the People’s Republic of China (the “Data Security Law”), Cybersecurity Review Measures, Personal Information Protection Law of the People’s Republic of China (the “PIPL”), regulations and guidelines 87 Table of Contents relating to the multi-level protection scheme (the “MLPS”) and any other future laws and regulations may entail significant expenses and could materially affect our business .”). The legal and regulatory landscape around data privacy is rapidly changing with countries, states and other localities passing new laws and regulations every year. Tracking and complying with these laws and regulations requires significant time and expenses and could materially affect our business. By way of example and without limitation, these laws may require updating of contracts, informed consent forms, clinical trial protocols and privacy notices; changes to company procedures; limiting what personal information we collect, who has access to it and how/where we use it; performing internal assessments; changes to the security and hosting solution of our systems; specific reporting and remediation efforts in the event of a data breach; and even opening our business up for external assessments by government bodies. Given the variability and evolving state of these laws, we face uncertainty as to the exact interpretation of the new requirements, and we may face challenges in implementing all measures required by regulators or courts in their interpretation. Additionally, we may experience a reportable data breach (see the risk factor entitled “ Our information technology systems, or those used by our contractors or collaborators, may fail or suffer security breaches, which could result in a material disruption of our product development and commercialization efforts ”). Any failure or perceived failure by us to comply with applicable laws and regulations could subject us to significant administrative, civil or criminal fines or other penalties and negatively impact our reputation. For severe violations, in some countries these laws even allow courts and government agencies to delay or halt transfer of personal information, require deletion of personal information, or even order we stop collection, use or other processing of personal information in that country. All of these could materially harm our business, prospects, and financial condition or even disrupt our operations. These laws apply not just to us, but also to those vendors working on our behalf, as well as our business partners. Any actual or perceived failure of them to comply with these laws and regulations could impact the services they provide to us, our collaborations with them and our reputation; additionally, there is a risk of liability flowing to us under certain contractual and/or legal conditions. Compliance with the Data Security Law of the People’s Republic of China (the “Data Security Law”), Cybersecurity Review Measures, Personal Information Protection Law of the People’s Republic of China (the “PIPL”), regulations and guidelines relating to the multi-level protection scheme (the “MLPS”) and any other future laws and regulations may entail significant expenses and could materially affect our business. China has implemented extensive data protection, privacy and information security rules and is considering a number of additional proposals relating to these subject areas. We face significant uncertainties and risks related to these laws, regulations and policies, some of which were only recently enacted, and the interpretation of these legal requirements by government regulators as applied to biotechnology companies like us. For example, we do not maintain, nor do we intend to maintain in the future, personally identifiable health information of patients in China. We do, however, collect and maintain de-identified or pseudonymized health data for clinical trials in com