What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-02 compared with 2023-05-04 · 227 added, 110 removed, 302 unchanged (53% of the section changed)

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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, EU and other jurisdictions in which we operate;

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;

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statements regarding future revenue, hiring plans, key milestones, expenses, capital expenditures, capital requirements and share performance;

the future trading price of our ADSs, ordinary shares and RMB Shares, and impact of securities analysts’ reports on these prices;

and the impact of the COVID-19 pandemic on our clinical development, regulatory, commercial, manufacturing, and other operations.

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.

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We are a global biotechnology company that is discovering and developing innovative oncology treatments that are more accessible and affordable to cancer patients worldwide.

We currently have three approved medicines that were discovered and developed in our own labs, including BRUKINSA ® , a small molecule inhibitor of Bruton’s Tyrosine Kinase (“BTK”) for the treatment of various blood cancers;

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 European Union (“EU”), the UK, Canada, Australia and additional international markets, and tislelizumab and pamiparib in China.

By leveraging our China commercial capabilities, we have in-licensed the rights to distribute 13 approved medicines for the China market.

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.

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We are committed to advancing best and first-in-class clinical candidates internally or with like-minded partners to develop impactful and affordable medicines for patients across the globe.

Our internal clinical development capabilities are deep, including a more than 2,700-person global clinical development team that is running more than 80 ongoing or planned clinical trials in over 50 medicines and drug candidates.

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 enrolled in our clinical trials more than 18,000 subjects, of which approximately one-half have been outside of China.

We have built, and are expanding, our internal manufacturing capabilities through our state-of-the-art biologic and small molecule manufacturing facilities in China to support current and potential future demand of our medicines, and are building a commercial-stage biologics manufacturing and clinical R&D center in New Jersey.

We also work with high quality contract manufacturing organizations (“CMOs”) to manufacture our internally developed clinical and commercial products.

Since our inception in 2010, we have become a fully integrated global organization of over 9,400 employees in 30 countries and regions, including the United States, China, Europe, and Australia.

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 April 20, 2023, we announced the global RATIONALE 305 trial met its primary endpoint of overall survival, with tislelizumab in combination with chemotherapy demonstrating superior overall survival (“OS”) compared with chemotherapy in patients with advanced unresectable or metastatic gastric or gastroesophageal junction (“G/GEJ”) adenocarcinoma, regardless of PD-L1 status.

No new safety signals were identified for tislelizumab.

On March 21, 2023, we announced that the last piece of structural steel was laid at our Hopewell, NJ campus.

This new facility will provide state-of-the-art commercial-stage U.S.

biologic pharmaceutical manufacturing, late-stage research and clinical development capabilities that complement the company’s existing capabilities around the world.

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.

Components of Operating Results

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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:

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Under this agreement, we received an upfront cash payment, which was allocated between the three performance obligations identified in the agreement based on the relative standalone selling prices of the performance obligations.

The portion allocated to the material right was deferred and will be recognized at the earlier of when Novartis exercises the option and the license is delivered or the expiration of the option period.

The portion of the transaction price allocated to Novartis' right to access ociperlimab in its own clinical trials during the option period and the initial transfer of BeiGene know-how was deferred and is being recognized over the expected option period.

The portion of the transaction price allocated to the ociperlimab R&D services was deferred and is being recognized as collaboration revenue as the ociperlimab R&D services are performed over the expected option period.

The option exercise fee under the ociperlimab agreement is contingent upon Novartis exercising its right, and is considered fully constrained until the option is exercised.

The 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.

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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.

Cost of Sales

Cost of sales includes the costs to manufacture our internally developed commercial products, as well as costs to purchase tislelizumab from Boehringer Ingelheim.

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.

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• 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 inhibitor;

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

• BGB-15025, an investigational hematopoietic progenitor kinase 1 (HPK1) inhibitor;

• BGB-A445, an investigational non-ligand competing OX40 monoclonal antibody;

• BGB-16673, an investigational Chimeric Degradation Activating Compound, targeting BTK;

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

• Surzebiclimab (BGB-A425), an investigational humanized monoclonal antibody against TIM-3;

• BGB-10188, an investigational PI3Kδ inhibitor;

• BGB-23339, a potent, allosteric investigational tyrosine kinase 2 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;

• BGB-B167, an investigational carcinoembryonic antigen (CEA) and 4-1BB bispecific antibody (CEA x 4-1BB bispecific);

• 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:

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• retention of key personnel.

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

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 these medicines and drug candidates into additional clinical trials, including potential pivotal trials.

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.

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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.

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.

Results of Operations

The following table summarizes our results of operations for the three months ended March 31, 2023 and 2022:

Three Months Ended

March 31, Change

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

(dollars in thousands)

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Interest income, net 15,070 11,431 3,639 31.8 % 31,086 21,502 9,584 44.6 %

Other income, net 18,303 11,967 6,336 52.9 %

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) %

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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 first quarter of 2022 (see “Notes to the Condensed Consolidated Financial Statements, Note 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 March 31, 2023 and 2022

Total revenue increased to $447.8 million for the three months ended March 31, 2023, from $306.6 million for the three months ended March 31, 2022, primarily due to an increase in sales of BRUKINSA and tislelizumab, as well as increased sales of our in-licensed products from Amgen, sales of POBEVCY ® from Bio-Thera, and additional collaboration revenue from our agreements with Novartis.

The following table summarizes the components of revenue for the three months ended March 31, 2023 and 2022, respectively:

Comparison of the Three Months Ended June 30, 2023 and 2022

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

March 31, Changes

June 30, Changes

2023 2022 $ %

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Right to access intellectual property revenue 26,248 26,248 — — %

Other 4,444 5,377 (933) (17.4) %

Other 1,705 — 1,705 NM

Total collaboration revenue 41,516 37,061 4,455 12.0 %

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Three Months Ended

March 31, Changes

June 30, Changes

2023 2022 $ %

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Total product revenue $ 553,745 $ 304,511 $ 249,234 81.8 %

Net product revenue increased 56.9% to $410.3 million for the three months ended March 31, 2023, compared to $261.6 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 first quarter of 2023 were positively impacted by sales of Bio-Thera's POBEVCY, as well as Amgen's XGEVA in China.

During the quarter ended March 31, 2023, we continued to see increased patient demand in China for tislelizumab and BRUKINSA due to the inclusion on the National Reimbursement Drug List (NRDL), and this demand more than offset the effect of the related price reductions.

Global sales of BRUKINSA totaled $211.4 million in the first quarter, representing a 102.6% increase compared to the prior-year period;

sales of BRUKINSA totaled $138.8 million in the first quarter, compared to $67.9 million in the prior-year period, representing growth of 104.4%.

sales continued to accelerate in the quarter, driven by continued uptake in all approved indications.

BRUKINSA sales in China totaled $48.1 million in the first quarter, representing growth of 43.5% compared to the prior-year period, driven by a significant increase in all approved indications, including chronic lymphocytic leukemia (CLL) and small lymphocytic lymphoma (SLL).

Sales of tislelizumab in China totaled $114.9 million in the first quarter, compared to $87.6 million in the prior-year period, representing a 31.0% increase.

In the first quarter, new patient demand from broader reimbursement and hospital listings continued to drive increased market penetration and market share for tislelizumab.

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;

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%.

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 $37.5 million for the three months ended March 31, 2023, of which $6.8 million was recognized from deferred revenue for R&D services performed during the three months ended March 31, 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 $4.4 million was recognized related to the sale of tislelizumab and ociperlimab clinical supply to Novartis.

Collaboration revenue totaled $45.1 million for the three months ended March 31, 2022, of which $13.4 million was recognized from deferred revenue for R&D services performed during the three months ended March 31, 2022 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 $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).

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 $81.8 million for the three months ended March 31, 2023 from $65.2 million for the three months ended March 31, 2022, primarily due to increased product sales of BRUKINSA and tislelizumab, as well as sales of XGEVA and POBEVCY.

Gross margin on global product sales increased to $328.5 million for the three months ended March 31, 2023, compared to $196.3 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 80.1% for the three months ended March 31, 2023, from 75.1% in the comparable period of the prior year.

The increase is primarily due lower costs per unit for both BRUKINSA and tislelizumab, as well as a proportionally higher sales mix of global BRUKINSA compared to lower margin sales of in-licensed products.

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.

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 $18.7 million, or 4.8%, to $408.6 million for the three months ended March 31, 2023 from $389.9 million for the three months ended March 31, 2022.

The following table summarizes external clinical, external non-clinical and internal research and development expense for the three months ended March 31, 2023 and 2022, respectively:

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

March 31, Changes

June 30, Changes

2023 2022 $ %

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Cost of development programs $ 129,623 $ 106,111 $ 23,512 22.2 %

Upfront license fees — — — NM

Amgen co-development expense 1

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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 March 31, 2023 totaled $35.2 million, of which $17.8 million was recorded as R&D expense.

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 decrease in external research and development expenses in the first quarter was primarily attributable to a decrease in Amgen co-development expense, partially offset by increases in external clinical and preclinical trial costs for certain assets in our portfolio.

Internal research and development expense increased $20.6 million, or 8.5%, to $262.2 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:

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;

• $7.1 million increase of materials and reagent expenses, primarily in connection with the in-house manufacturing of drug candidates used for clinical purposes;

• $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;

• $4.3 million decrease of facilities, depreciation, office expense, rental fees, and other expenses;

• $2.2 million decrease of consulting fees, which was mainly attributable to decreased meeting expense related to scientific, regulatory and development consulting activities, in connection with the advancement of our drug candidates.

• $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;

• $2.9 million increase of consulting fees, which was mainly attributable to activities in the United States and Europe.

Selling, General and Administrative Expense

Selling, general and administrative expense increased by $33.9 million, or 11.5%, to $328.5 million for the three months ended March 31, 2023, from $294.6 million for the three months ended March 31, 2022.

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:

• $17.5 million increase of external commercial-related expenses, including market research, sales and marketing, consulting and conference related expenses, related to the growth of our global commercial organization, as we continue to build our worldwide footprint and capabilities;

• $9.8 million increase of professional fees, consulting, recruiting, information technology, tax, accounting and audit services, and facility expenses, rental fees, office expenses, and other administrative expenses, primarily attributable to the global expansion of our business, including the expansion of our commercial operations in China, the United States and Europe;

• $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;

• $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 $5.9 million, or 59.0%, to $16.0 million of net interest income for the three months ended March 31, 2023, from $10.1 million of net interest income for three months ended March 31, 2022.

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 Income, Net

Other income, net was $18.3 million for the three months ended March 31, 2023, primarily due to government subsidy income in China.

For the three months ended March 31, 2022, other income, net, was $12.0 million, which was due to government subsidy income and foreign exchange gains resulting from the strengthening of RMB in the period and the revaluation impact of foreign currencies held in U.S.

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 $11.5 million for the three months ended March 31, 2023 as compared to $13.9 million for the three months ended March 31, 2022.

The income tax expense for the three months ended March 31, 2023 and 2022 was primarily attributable to current China tax expense for certain subsidiaries determined after certain non-deductible expenses and current U.S.

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

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.

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)

519,658 233,072 $ 286,586 123.0 %

264,314 192,522 71,792 37.3 %

45,005 41,576 3,429 8.2 %

44,165 29,008 15,157 52.3 %

27,764 19,798 7,966 40.2 %

25,524 21,396 4,128 19.3 %

15,995 8,405 7,590 90.3 %

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;

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%.

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

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 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;

• $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;

• $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.

Liquidity and Capital Resources

The following table represents our cash, short-term investments, and debt balances as of March 31, 2023 and December 31, 2022:

March 31, December 31,

The following table represents our cash, short-term investments, and debt balances as of June 30, 2023 and December 31, 2022:

June 30, December 31,

(dollars in thousands)

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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 associated with our operations, as well as to support the commercialization of our products globally.

We recognized net losses of $348.4 million and $435.2 million for the three months ended March 31, 2023 and March 31, 2022, respectively.

As of March 31, 2023, we had an accumulated deficit of $7.4 billion.

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 March 31, 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.

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.

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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 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 following table provides information regarding our cash flows for the three months ended March 31, 2023 and 2022:

Three Months Ended

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

(dollars in thousands)

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Net cash provided by investing activities 308,863 869,103

Net cash used in financing activities (19,868) (11,267)

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 in cash, cash equivalents, and restricted cash (331,271) (28,437)

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

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

Operating activities used $563.8 million of cash in the three months ended March 31, 2023, principally from our net loss of $348.4 million and an increase in our net operating assets and liabilities of $294.1 million, partially offset by non-cash charges of $78.7 million.

The increase in working capital was driven largely by the seasonality of receivables and compensation-related payments.

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

Operating activities used $236.6 million of cash in the three months ended March 31, 2022, which resulted principally from our net loss of $435.2 million, partially offset by a decrease in our net operating assets and liabilities of $117.7 million and by non-cash charges of $80.9 million.

The decrease in working capital was driven largely by the collection of the $300 million upfront fee from Novartis for ociperlimab, partially offset by seasonality of working capital due to compensation-related payments.

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.

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.

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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 $241.1 million of cash in the three months ended March 31, 2023, consisting of sales and maturities of investment securities of $377.0 million, partially offset by capital expenditures of $125.6 million, $9.3 million in purchases of long-term investments, and $1.1 million in purchases of investment securities.

Investing activities provided $210.4 million of cash in the three months ended March 31, 2022, consisting of sales and maturities of investment securities of $331.0 million, offset by $0.5 million in purchases of investment securities, capital expenditures of $45.1 million, and $75.0 million of acquired in-process research and development.

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 used $19.9 million of cash in the three months ended March 31, 2023, consisting primarily of $1.5 million of repayment of long-term bank loans and $50.0 million of repayment of short-term bank loan, which were partially offset by $31.6 million from the exercise of employee share options and proceeds from the issuance of shares through our employee share purchase plan.

Financing activities used $11.3 million of cash in the three months ended March 31, 2022, consisting primarily of $73.1 million repayment of short-term bank loans, which were partially offset by $50.0 million of proceeds from short-term bank loans and $11.9 million from the exercise of employee share options and proceeds from the issuance of shares through our employee share purchase plan.

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

4 unchanged sentences

The impact of foreign currency deposits being translated into the U.S.

dollar positively impacted ending cash by $11.3 million in the three months ended March 31, 2023, compared to a positive impact of $9.0 million in the prior-year period.

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 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.

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.

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Contractual and Other Obligations

The following table summarizes our significant contractual obligations as of the payment due date by period as of March 31, 2023:

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

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Purchase Commitments

As of March 31, 2023, purchase commitments amounted to $76.1 million, of which $45.4 million related to minimum purchase requirements for supply purchased from contract manufacturers and $30.7 million related to binding purchase obligations of inventory from BMS and Amgen.

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.

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We are funding our portion of the co-development costs by contributing cash and development services.

As of March 31, 2023, our remaining co-development funding commitment was $560.5 million.

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 March 31, 2023, our remaining capital commitment was $11.3 million and is expected to be paid from time to time over the investment period.

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 March 31, 2023, the total research and development commitment amounted to $20.9 million.

As of June 30, 2023, the total research and development commitment amounted to $18.0 million.

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 March 31, 2023 to achieve fully funded status where the market value of plan assets equals the projected benefit obligations.

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 $407.0 million for the acquisition of property, plant and equipment as of March 31, 2023, which were mainly for our manufacturing and clinical R&D campus in Hopewell, NJ, additional capacity at the Guangzhou and Suzhou manufacturing facilities, and new building for Beijing Innerway Bio-tech Co., Ltd.

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 expect to make a significant investment in our future manufacturing and clinical R&D center in the United States, a 42-acre site that will be constructed in Hopewell, NJ.

We purchased this site for $75.2 million and announced its groundbreaking on April 29, 2022.

We expect significant capital expenditures as we build out the Hopewell facility over the next several years.

We also enter into agreements in the ordinary course of business with contract research organizations to provide research and development services.

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.

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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

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

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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 months ended March 31, 2023, as compared to those described in the section titled “Part I – Item 2 – 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 months ended March 31, 2023 , see “Part I – Item 1 – Financial Statements—Notes to the Condensed Consolidated Financial Statements—1.

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.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis