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Item 7. Management’s Discussion and Analysis

2024-02-26 compared with 2023-02-27 · 176 added, 232 removed, 198 unchanged (67% of the section changed)

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We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this report, including those set forth under “Part I—Item 1A—Risk Factors” and under “Forward‑Looking Statements and Market Data” in this Annual Report.

We are a global biotechnology company that is developing and commercializing innovative and affordable oncology medicines to improve treatment outcomes and access for patients worldwide.

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

tislelizumab, an anti-PD-1 antibody immunotherapy for the treatment of various solid tumor and blood cancers;

and pamiparib, a selective small molecule inhibitor of PARP1 and PARP2.

We have obtained approvals to market BRUKINSA in the United States, China, EU, the UK, Canada, Australia and additional international markets, and tislelizumab in China.

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

Supported by our global clinical development and commercial capabilities, we have entered into collaborations with world-leading biopharmaceutical companies such as Amgen Inc.

("Amgen") and Novartis Pharma AG ("Novartis") to develop and commercialize innovative medicines.

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

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

This includes more than 30 pivotal or potentially registration-enabling trials across our portfolio, including our three internally discovered, approved medicines.

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

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

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

Since our inception in 2010, we have become a fully integrated global organization of over 9,000 employees in 29 countries and regions, including the United States, China, Europe, and Australia.

Non-GAAP Financial Measures

We provide certain financial measures that are not defined under accounting principals generally accepted in the United States of America (“GAAP”), commonly referred to as non-GAAP financial measures, including Adjusted Operating Expenses and Adjusted Income (Loss) from Operations and certain other non-GAAP measures, each of which include adjustments to GAAP figures.

These non-GAAP measures are intended to provide additional information on our operating performance.

Adjustments to our GAAP figures exclude, as applicable, non-cash items such as share-based compensation, depreciation and amortization.

Certain other special items or substantive events may also be included in the non-GAAP adjustments periodically when their magnitude is significant within the periods incurred.

We maintain an established non-GAAP policy that guides the determination of what items may be excluded in non-GAAP financial measures.

We believe that these non-GAAP measures, when considered together with the GAAP figures, can enhance an overall understanding of our operating performance.

The non-GAAP financial measures are included with the intent of providing investors with a more complete understanding of our historical and expected financial results and trends and to facilitate comparisons between periods and with respect to projected information.

In addition, these non-GAAP financial measures are among the indicators BeiGene’s management uses for planning and forecasting purposes and measuring our performance.

These non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, GAAP financial measures.

The non-GAAP financial measures used by BeiGene may be calculated differently from, and therefore may not be comparable to, non-GAAP financial measures used by other companies.

BeiGene made great progress in the fourth quarter and full year of 2023 toward our goal to become an impactful next-generation oncology innovator.

We have solidified our leadership in hematology with the continued success of BRUKINSA’s global launch, led by U.S.

Our cost advantaged research and development and manufacturing have enabled us to build one of the largest and most exciting oncology pipelines in the industry.

We look forward to a transformative year for BeiGene as we continue to deliver on operational excellence propelled by outstanding growth in revenue across new and existing geographies.

Key highlights for the full year 2023 are as follows:

• Continued rapid global growth with record total revenues of $634.4 million and $2.5 billion, respectively, in the fourth quarter and full year, an increase of 66.9% and 73.7% from the prior year periods;

• Strengthened leadership in hematology with global BRUKINSA® (zanubrutinib) sales of $413.0 million and $1.3 billion for the fourth quarter and full year 2023, increases of 134.6% and 128.5%;

• Progressed innovative hematology pipeline with initiation of four registrational trials for sonrotoclax, including global Phase 3 study in treatment-naïve CLL, and two global expansion cohorts for BTK CDAC in R/R CLL, R/R MCL;

• Sustained growth with diverse product and geographic revenue mix and improved operating leverage.

Recent Business Developments

On February 24, 2023, we announced that the China National Medical Products Administration ("NMPA") granted approval for our PD-1 inhibitor, tislelizumab, in combination with fluoropyrimidine and platinum chemotherapy, for the first-line treatment of patients with locally advanced unresectable or metastatic gastric or gastroesophageal junction adenocarcinoma with high PD-L1 expression.

On January 19, 2023, we announced that the U.S.

Food and Drug Administration ("FDA") approved our Bruton’s tyrosine kinase inhibitor BRUKINSA (zanubrutinib) for the treatment of adult patients with chronic lymphocytic leukemia ("CLL") or small lymphocytic lymphoma ("SLL").

On January 19, 2023, we announced that the Medicines and Healthcare products Regulatory Agency granted marketing authorizations for BRUKINSA in Great Britain for both the treatment of adult patients with CLL and the treatment of adult patients with marginal zone lymphoma ("MZL") who have received at least one prior anti-CD20-based therapy.

On January 18, 2023, we announced that the National Reimbursement Drug List ("NRDL") released by China’s National Healthcare Security Administration ("NHSA") was updated to include four new indications for our PD-1 inhibitor tislelizumab.

KYPROLIS ® (carfilzomib), a proteosome inhibitor licensed-in from Amgen, is included for the first time and XGEVA ® (denosumab), a RANKL inhibitor and another Amgen asset, successfully renewed this year.

The updated NRDL will officially take effect on March 1, 2023.

On December 30, 2022, we announced that the Center for Drug Evaluation of the China National Medical Products Administration accepted a supplemental biologics license application for tislelizumab in patients with first-line unresectable or metastatic hepatocellular carcinoma.

On November 17, 2022, we announced that the European Commission approved BRUKINSA for the treatment of adult patients with treatment-naïve or relapsed/refractory ("R/R") CLL.

On November 10, 2022, we announced that BRUKINSA was approved in Brazil for the treatment of adult patients with Waldenström’s macroglobulinemia ("WM") and adult patients with R/R MZL who have received at least one anti-CD20-based regimen.

Components of Operating Results

Product Revenue

We generate product revenue through the sale of our three internally developed products and our in-licensed medicines from our partners.

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

The Company determines transfer of control based on when the product is delivered, and title passes to the customer.

Revenues from product sales are recognized net of variable consideration resulting from rebates, chargebacks, trade discounts and allowances, sales returns allowances and other incentives.

Provisions for estimated reductions to revenue are provided for in the same period the related sales are recorded and are based on contractual terms, historical experience and trend analysis.

Collaboration Revenue

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

In January 2021, we entered into a collaboration and license agreement with Novartis, granting Novartis rights to develop, manufacture and commercialize tislelizumab in the United States, Canada, Mexico, member countries of the European Union, United Kingdom, Norway, Switzerland, Iceland, Liechtenstein, Russia, and Japan (the Novartis Territory).

There were two performance obligations identified at the outset of the agreement:

(1) the exclusive license to develop, manufacture, and commercialize tislelizumab in the Novartis Territory, transfer of know-how and use of the tislelizumab trademark and (2) conducting and completing tislelizumab R&D services.

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

The portion allocated to the license was recognized upon the delivery of the license right and transfer of know-how.

The portion of the upfront payment allocated to the tislelizumab R&D services was deferred and is being recognized as collaboration revenue as the tislelizumab R&D services are performed using a percentage of completion method.

Estimated costs to complete are reassessed on a periodic basis and any updates to the revenue earned are recognized on a prospective basis.

In December 2021, we expanded our collaboration with Novartis by entering into an option, collaboration and license agreement with Novartis to develop, manufacture and commercialize our investigational TIGIT inhibitor ociperlimab in the Novartis Territory.

In addition, we entered into an agreement with Novartis which granted us rights to market, promote and detail five approved Novartis oncology products, TAFINLAR ® (dabrafenib), MEKINIST ® (trametinib), VOTRIENT ® (pazopanib), AFINITOR ® (everolimus), and ZYKADIA ® (ceritinib), across designated regions of China referred to as “broad markets.” There were three performance obligations identified at the outset of the arrangement:

(1) a material right for the option to the exclusive product license, (2) the right to access ociperlimab in clinical trials during the option period provided to Novartis, combined with the initial transfer of BeiGene know-how, and (3) conducting ociperlimab R&D services.

The market development activities are considered immaterial in the context of the agreements.

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

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

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

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

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

The potential milestone payments that we are eligible to receive under both of the

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.

Cost of Sales

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

Additionally, cost of sales included the cost of in-licensed products purchased for sale in the PRC.

Costs to manufacture inventory in preparation for commercial launch of a product incurred prior to regulatory approval are expensed to research and development expense as incurred.

Cost of sales for newly launched products will not be recorded until the initial pre-launch inventory is depleted and additional inventory is manufactured.

To date, the Company's initial pre-launch inventory for its commercial products has been immaterial and has not had a significant impact on the Company's gross margin.

Research and Development Expenses

Research and development expenses consist of the costs associated with our research and development activities, conducting preclinical studies and clinical trials, and activities related to regulatory filings.

Our research and development expenses consist of:

• expenses incurred under agreements with contract research organizations (CROs), CMOs, and consultants that conduct and support clinical trials and preclinical studies;

• costs of comparator drugs in certain of our clinical trials;

• manufacturing costs related to pre-commercial activities;

• costs associated with preclinical activities and development activities;

• costs associated with regulatory operations;

• employee-related expenses, including salaries, benefits, travel and share-based compensation expense for research and development personnel;

• in-process research and development costs expensed as part of collaboration agreements entered into;

• other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies used in research and development activities.

Our current research and development activities mainly relate to the clinical advancement of our internally developed medicines and drug candidates:

• BRUKINSA (zanubrutinib), a small molecule inhibitor of BTK;

• tislelizumab, a humanized monoclonal antibody against PD-1;

• ociperlimab, an investigational humanized monoclonal antibody against TIGIT;

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

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

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

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

• BGB-16673, an investigational Chimeric Degradation Activating Compound ("CDAC"), targeting BTK;

• 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 (TYK2) inhibitor;

• LBL-007, a novel investigational antibody targeting the LAG-3 pathway

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

• R&D expense related to the co-development of pipeline assets under the Amgen collaboration agreement.

Our total cost share obligation to Amgen is split between R&D expense and a reduction to the R&D cost share liability;

• sitravatinib, an investigational, spectrum-selective kinase inhibitor, licensed from Mirati Therapeutics, Inc.

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

("Zymeworks");

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

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;

• retention of key personnel.

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

Research and development activities are central to our business model.

We expect continued substantial investment in research and development for the foreseeable future as our discovery and development programs progress, as we continue to support the clinical trials of our medicines and drug candidates as treatments for various cancers and as we move these medicines and drug candidates into additional clinical trials, including potential pivotal trials.

There are numerous factors associated with the successful commercialization of any of our medicines and drug candidates, including future trial design and

various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development.

Additionally, future commercial and regulatory factors beyond our control may impact our clinical development and commercial programs and plans.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of product promotion costs, distribution costs, salaries and related benefit costs, including share-based compensation for selling, general and administrative personnel.

Other selling, general and administrative expenses include professional fees for legal, consulting, auditing and tax services as well as other direct and allocated expenses for rent and maintenance of facilities, travel costs, insurance and other supplies used in selling, general and administrative activities.

We anticipate that our selling, general and administrative expenses will increase in future periods to support planned increases in commercialization activities for our approved medicines, and the preparation for potential launch and commercialization of additional in-licensed products from our collaborations and internally developed products, if approved.

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

Interest Income (Expense), Net

Interest Income

Interest income consists primarily of interest generated from our RMB-denominated cash deposits and short-term investments in money market funds, time deposits, U.S.

Treasury securities and U.S.

agency securities.

Interest Expense

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

Other (Expense) Income, Net

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

We hold significant cash in the form of RMB-denominated deposits at U.S.

functional currency entities, including a large portion of the cash generated from the STAR Market offering in December 2021.

Other (expense) income includes the revaluation gains and losses of these cash deposits based on foreign currency exchange rates.

On December 22, 2023, we announced the U.S.

Food and Drug Administration (“FDA”) has approved a label update for BRUKINSA to include superior progression-free survival (“PFS”) results from the Phase 3 ALPINE trial comparing BRUKINSA against IMBRUVICA ® (ibrutinib) in previously treated patients with relapsed or refractory (“R/R”) chronic lymphocytic leukemia (“CLL”).

On November 21, 2023, we announced an agreement to acquire an exclusive global license to Ensem Therapeutics, Inc.’s (“Ensem”) Investigational New Drug (“IND”) application-ready oral cyclin-dependent kinase 2 (“CDK2”) inhibitor.

Ensem will receive an upfront payment, and will be eligible for additional payments upon the achievement of certain development, regulatory, and commercial milestones, in addition to tiered royalties.

On November 17, 2023, we announced that the European Commission (“EC”) granted marketing authorization for BRUKINSA in combination with obinutuzumab for the treatment of adult patients with R/R follicular lymphoma (“FL”) who have received at least two prior lines of systemic therapy.

In the first quarter of 2024, we incurred $35.0 million related to milestone payments in connection with business development transactions.

Results of Operations

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Cost of sales - product 379,920 286,475 93,445 32.6 %

Gross profit 2,078,859 1,129,446 949,413 84.1 %

Operating expenses

Research and development 1,778,594 1,640,508 138,086 8.4 %

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Amortization of intangible assets 3,500 751 2,749 366.0 %

Total expenses 3,205,586 2,615,018 590,568 22.6 %

Total operating expenses 3,286,595 2,919,111 367,484 12.6 %

Loss from operations (1,207,736) (1,789,665) 581,929 (32.5) %

Interest income (expense), net 74,009 52,480 21,529 41.0 %

Other (expense) income, net (223,852) 15,904 (239,756) (1,507.5) %

Other income (expense), net 307,891 (223,852) 531,743 (237.5) %

Loss before income tax expense (825,836) (1,961,037) 1,135,201 (57.9) %

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Net loss $ (881,708) $ (2,003,815) $ 1,122,107 (56.0) %

Net loss attributable to noncontrolling interest — — — NM

Net loss attributable to BeiGene, Ltd.

$ (2,003,815) $ (1,457,816) $ (545,999) 37.5 %

Total revenue increased by $239.6 million to $1.4 billion for the year ended December 31, 2022, from $1.2 billion for the year ended December 31, 2021, primarily due to increases in sales of our internally developed products and in-licensed products, partially offset by a decrease in collaboration revenue, as the prior year period included the recognition of the majority of the $650 million upfront payment from Novartis as license revenue.

Total revenue increased by $1.0 billion to $2.5 billion for the year ended December 31, 2023, from $1.4 billion for the year ended December 31, 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 and POBEVCY.

Additionally, collaboration revenue increased due to the recognition of the remaining deferred revenue associated with the Novartis collaborations upon termination of the agreements.

The following table summarizes the components of revenue for the year ended December 31, 2023 and 2022, respectively:

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Collaboration revenue:

License revenue — 484,646 (484,646) (100.0) %

Material rights revenue 71,980 — 71,980 NM

Research and development service revenue 79,431 46,822 32,609 69.6 %

Right to access intellectual property revenue 104,477 104,994 (517) (0.5) %

Other 9,493 — 9,493 NM

Other 13,039 9,493 3,546 37.4 %

Total collaboration revenue 268,927 161,309 107,618 66.7 %

Total Revenue $ 2,458,779 $ 1,415,921 $ 1,042,858 73.7 %

Total revenue by geographic area is presented as follows (amounts in thousands of U.S.

Three Months Ended December 31, Twelve Months Ended December 31,

2023 % 2022 % 2023 % 2022 %

United States total revenue $ 313,160 49.4 % $ 155,446 40.9 % $ 1,128,219 45.9 % $ 502,626 35.5 %

Product revenue $ 313,160 49.4 % $ 125,337 33.0 % $ 945,551 38.5 % $ 389,710 27.5 %

Collaboration revenue — — % 30,109 7.9 % 182,668 7.4 % 112,916 8.0 %

China total revenue 270,552 42.6 % 203,791 53.6 % 1,101,951 44.8 % 840,032 59.3 %

Product revenue 267,282 42.1 % 203,791 53.6 % 1,093,091 44.5 % 840,032 59.3 %

Collaboration revenue 3,270 0.5 % — — % 8,860 0.3 % — — %

Europe total revenue 45,741 7.2 % 16,623 4.4 % 202,014 8.2 % 63,257 4.5 %

Product revenue 45,741 7.2 % 5,659 1.5 % 122,228 5.0 % 14,864 1.0 %

Collaboration revenue — — % 10,964 2.9 % 79,786 3.2 % 48,393 3.5 %

ROW total revenue 4,956 0.8 % 4,235 1.1 % 26,595 1.1 % 10,006 0.7 %

Product revenue 4,343 0.7 % 4,235 1.1 % 28,982 1.2 % 10,006 0.7 %

Collaboration revenue 613 0.1 % — — % (2,387) (0.1) % — — %

Total Revenue 634,409 100.0 % 380,095 100.0 % 2,458,779 100.0 % 1,415,921 100.0 %

1 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.

Net product revenue consisted of the following:

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13,960 15,213 (1,253) (8.2) %

13,696 — 13,696 NM

39,799 13,696 26,103 190.6 %

Pamiparib 6,668 5,460 1,208 22.1 %

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Total product revenue $ 2,189,852 $ 1,254,612 $ 935,240 74.5 %

Net product revenue was $1.3 billion for the year ended December 31, 2022, compared to $634.0 million in the prior year, primarily due to increased sales of BRUKINSA in the United States and China and tislelizumab in China, in-licensed sales of Amgen's BLINCYTO ® , which we began distributing in August 2021, and XGEVA, as well as Bio-Thera's POBEVCY.

During 2022, we continued to see increased patient demand in China for tislelizumab and BRUKINSA due to the inclusion on the National Reimbursement Drug List ("NRDL"), and this demand more than offset the effect of the related price reductions.

Global sales of BRUKINSA totaled $564.7 million for the year ended December 31, 2022, representing a 159.0% increase compared to the prior year;

Net product revenue was $2.2 billion for the year ended December 31, 2023, compared to $1.3 billion in the prior year, primarily due to increased sales volume of BRUKINSA in the U.S., Europe and China and increased sales volume of tislelizumab in China slightly offset by lower selling price due to expansion in NRDL listing.

In addition, there were increased sales of our Amgen in-licensed products due to a new marketing strategy.

Global sales of BRUKINSA totaled $1.3 billion for the year ended December 31, 2023, representing a 128.5% increase compared to the prior year and U.S.

sales of BRUKINSA totaled $945.6 million for the year ended December 31, 2023 compared to $389.7 million in the prior year, representing growth of 142.6%.

sales accelerated in the period, driven by increased uptake in MCL, WM and MZL.

BRUKINSA sales in China totaled $150.3 million for the year ended December 31, 2022, representing growth of 48.6% compared to the prior year, driven by a significant increase in all approved indications, including CLL/SLL.

sales continued to accelerate in the period, driven by the approval and launch of BRUKINSA for adult patients with CLL and SLL.

BRUKINSA sales in China totaled $193.8 million for the year ended December 31, 2023, representing growth of 28.9% compared to the prior year, driven by an increase in all approved indications.

BRUKINSA sales in the EU and rest of world totaled $122.2 million and $28.8 million, respectively, for the year ended December 31, 2023, representing growth of 722.3% and 194.8%, respectively, compared to the prior-year period, driven by a significant increase in all approved indications, specifically in CLL, SLL and WM.

Sales of tislelizumab in China totaled $536.6 million for the year ended December 31, 2023, representing a 26.9% increase compared to the prior year.

During the year ended December 31, 2022, new patient demand from broader reimbursement and further expansion of our salesforce and hospital listings continued to drive increased market penetration and market share for tislelizumab.

During the year ended December 31, 2023, new patient demand on account of broader reimbursement in NRDL listing and further expansion of our salesforce and hospital listings continued to drive increased market penetration and market share for tislelizumab.

Full year 2023 sales of tislelizumab included two negative adjustments totaling $13.2 million for distributor channel inventory compensation as a result of inclusion in the March 2023 and January 2024 NRDL lists.

Product revenues for the year ended December 31, 2021 were negatively impacted by adjustments of $57.5 million as a result of compensating distributors for products previously sold at the pre-NRDL price, which remained in the distribution channel, due to the first inclusion of tislelizumab, BRUKINSA, and XGEVA in the updated NRDL effective March 1, 2021 and additional indications for tislelizumab, BRUKINSA and pamiparib effective January 1, 2022.

During the year ended December 31, 2021, the inclusion of tislelizumab, BRUKINSA, XGEVA, and pamiparib in the NRDL significantly increased patient demand that more than offset the net effect of price reductions as a result of NRDL inclusion.

Collaboration revenue totaled $542.3 million for the year ended December 31, 2021, of which $484.6 million was recognized upon delivery of the tislelizumab license right and transfer of know-how to Novartis, $53.7 million was recognized from deferred revenue for R&D services performed during the year ended December 31, 2021 under both the tislelizumab and ociperlimab collaborations, and $4.0 million was recognized from deferred revenue for Novartis' right to access ociperlimab over the option period (see Note 4 to our consolidated financial statements included in this Annual Report on Form 10-K).

Collaboration revenue totaled $268.9 million for the year ended December 31, 2023, primarily related to the recognition of the remaining deferred revenue associated with the Novartis collaborations upon termination of the agreements during 2023.

Collaboration revenue consisted of $79.4 million recognized from deferred revenue for R&D services performed during the year ended December 31, 2023 under both the tislelizumab and ociperlimab collaborations, $104.5 million recognized from deferred revenue for Novartis’ right to access ociperlimab over the option period, $72.0 million recognized from deferred material right revenue associated with the ociperlimab collaboration upon termination and $13.0 million recognized related primarily to revenue generated under the broad markets marketing and promotion agreement.

Collaboration revenue totaled $161.3 million for the year ended December 31, 2022, of which $46.8 million was recognized from deferred revenue for R&D services performed during the year ended December 31, 2022 under both the tislelizumab and ociperlimab collaborations, $105.0 million was recognized from deferred revenue for Novartis’ right to access ociperlimab over the option period, and $9.5 million was recognized related to the sale of tislelizumab clinical supply to Novartis (see Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K).We expect collaboration revenue to decrease for the year ended December 31, 2024 due to the recent terminations with Novartis.

Cost of Sales

Cost of sales increased to $286.5 million for the year ended December 31, 2022 from $164.9 million for the year ended December 31, 2021, primarily due to increased product sales of tislelizumab, BRUKINSA and XGEVA, as well as initial sales of BLINCYTO ® , which we began selling in August 2021, and initial sales of KYPROLIS and POBEVCY.

Gross margin on global product sales increased to $968.1 million for the year ended December 31, 2022, compared to $469.1 million for the year ended December 31, 2021, primarily due to increased product revenue in the current year period.

Gross margin as a percentage of product sales increased to 77.2% for the year ended December 31, 2022, from 74.0% in the prior year.

The increase is primarily due to proportionally higher sales mix of global BRUKINSA sales and sales of tislelizumab in China compared to lower margin sales of in-licensed products and lower costs per unit for both BRUKINSA and tislelizumab, partially offset by a lower average selling price for both BRUKINSA and tislelizumab.

Cost of sales increased to $379.9 million for the year ended December 31, 2023 from $286.5 million for the year ended December 31, 2022, primarily due to increased sales volume of BRUKINSA and tislelizumab as well as sales of in-licensed products from Amgen in China.

Gross margin on global product sales increased to $1.8 billion, or 82.7% as a percentage of sales, for the year ended December 31, 2023, compared to $1.0 billion, or 77.2% as a percentage of sales, for the year ended December 31, 2022, primarily due to increased revenue volume, regional price mix in the current year period and slightly lower per unit costs due to higher production volumes.

Research and Development Expense

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Total research and development expenses $ 1,778,594 $ 1,640,508 $ 138,086 8.4 %

Adjusted research and development expense 2

$ 1,558,960 $ 1,474,919 $ 84,041 5.7 %

Our co-funding obligation for the development of the pipeline assets under the Amgen collaboration for the year ended December 31, 2023 totaled $108.6 million, of which $53.3 million was recorded as R&D expense.

The remaining $55.3 million was recorded as a reduction for the R&D cost share liability.

The decrease in external research and development expenses for the year ended December 31, 2022 was primarily attributable to lower upfront license fees under collaboration agreements, lower external spending related to fees paid to CROs as we internalize previously outsourced activities, and a decrease in the expense recognized on co-development fees to Amgen.

Internal research and development expense increased $220.9 million, or 28.2%, to $1.0 billion and was primarily attributable to the expansion of our global development organization and our clinical and preclinical drug candidates, as well as our continued efforts to internalize research and clinical trial activities, and included the following:

• $114.7 million increase of employee salary and benefits, primarily attributable to hiring more research and development personnel to support our expanding research and development activities;

• $57.6 million increase of materials and reagent expenses, primarily in connection with the in-house manufacturing of drug candidates used for clinical purposes;

• $47.6 million increase of facilities, depreciation, office expense, rental fees, and other expenses to support the growth of our organization;

• $25.0 million increase of share-based compensation expense, primarily attributable to our increased headcount of research and development employees, resulting in more awards being expensed;

• $24.0 million decrease of consulting fees, including decreased meeting expense related to scientific, regulatory and development consulting activities, in connection with the advancement of our drug candidates.

Adjusted research and development expense is intended to provide investors and others with information about our performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items.

Refer to Non-GAAP Financial Measures and Non-GAAP Reconciliation in this MD&A for more information about, and a detailed reconciliation of, these items.

The increase in external research and development expenses for the year ended December 31, 2023 was primarily attributable to higher external clinical trial costs for BRUKINSA, on account of comparator drug purchases, and due to a ramp up of clinical studies for sonrotoclax (BGB-11417) as well as clinical supply and preclinical trial costs for certain other assets in our portfolio.

The increase was partially offset by lower external clinical trial costs for TEVIMBRA (tislelizumab) and ociperlimab due to certain studies winding down, lower upfront license fees under collaboration agreements and a decrease in the expense recognized on co-development fees to Amgen.

Internal research and development expense increased $123.7 million, or 12.3%, to $1.1 billion from $1.0 billion for the year ended December 31, 2022, 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.

Selling, General and Administrative Expense

Selling, general and administrative expense increased by $287.7 million, or 29.1%, to $1,277.9 million for the year ended December 31, 2022, from $990.1 million for the year ended December 31, 2021.

The increase was primarily attributable to the following:

• $176.4 million increase of employee salary and benefits, which was primarily attributable to the hiring of personnel to support our growing business, including the expansion of our commercial organizations in China, the United States, Canada, Europe and emerging markets;

• $46.0 million increase in external commercial-related expenses, including market research, market access studies and promotional activities, related to the growth of our global commercial organization, as we continue to build our worldwide footprint and capabilities;

• $37.5 million increase of share-based compensation expense, primarily attributable to our increased headcount of sales and administrative employees, resulting in more awards being expensed;

• $27.8 increase of professional fees, consulting, recruiting, information technology, tax, accounting and audit services, and facility expenses, rental fees, office expenses, and other administrative expenses, primarily attributable to the global expansion of our business, including the expansion of our commercial operations in China, the United States and Europe.

Interest Income (Expense), Net

Interest income (expense), net increased by $68.2 million, or 433.1%, to $52.5 million of net interest income for the year ended December 31, 2022, from $15.8 million of net interest expense for the year ended December 31, 2021.

The increase in interest income (expense), net, was primarily attributable to increased interest income resulting from the increase in cash balances resulting from the STAR Offering proceeds in the fourth quarter of 2021, as well as higher interest rates earned on our cash, cash equivalents and short-term investments.

Other (Expense) Income, Net

Other (expense) income, net decreased by $239.8 million to $223.9 million of expense for the year ended December 31, 2022, from $15.9 million of income for the year ended December 31, 2021.

The increase in expense for the year ended December 31, 2022 was primarily related to foreign exchange losses resulting from the strengthening of the U.S.

Year Ended December 31, Changes

2023 2022 $ %

(dollars in thousands)

Selling, general and administrative expense $ 1,504,501 $ 1,277,852 $ 226,649 17.7 %

Adjusted selling, general and administrative expense 1

$ 1,284,689 $ 1,077,977 $ 206,712 19.2 %

Adjusted selling, general and administrative expense is intended to provide investors and others with information about our performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items.

Refer to Non-GAAP Financial Measures and Non-GAAP Reconciliation in this MD&A for more information about, and a detailed reconciliation of, these items.

Selling, general and administrative expense increased by $226.6 million, or 17.7%, to $1.5 billion for the year ended December 31, 2023, from $1.3 billion for the year ended December 31, 2022.

The increase was primarily attributable to the expansion of our commercial organizations primarily in the U.S.

Interest Income, Net

Interest income, net increased by $21.5 million, or 41.0%, to $74.0 million for the year ended December 31, 2023, compared to $52.5 million for the year ended December 31, 2022.

The increase in interest income, net, was primarily attributable to higher interest rates earned on our cash, cash equivalents and short-term investments and lower interest expense due to an increase in interest capitalization related to the Hopewell construction.

Other Income (Expense), Net

Other income, net for the year ended December 31, 2023 was $307.9 million, primarily due to the noncash gain of $362.9 million recorded for the receipt of our ordinary shares as consideration for our settlement with BMS and government subsidy income, partially offset by foreign exchange 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 and unrealized losses on equity investments.

For the year ended December 31, 2022, other expense, net was $223.9 million primarily related to foreign exchange losses resulting from the strengthening of the U.S.

dollar and the revaluation impact of foreign currencies held in U.S.

functional currency subsidiaries.

Also contributing to the increase in expense was an increase in the unrealized loss on our equity investments.

functional currency subsidiaries and unrealized losses on our equity investments.

These losses were partially offset by increased income from government subsidies.

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Income tax expense was $55.9 million for the year ended December 31, 2023 compared with $42.8 million for the year ended December 31, 2022.

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

tax expense, as a result of amendments to Internal Revenue Code (IRC) Section 174 pursuant to the 2017 Tax Cuts and Jobs Act, which took effect January 1, 2022, and eliminates the ability to fully deduct research and development expenditures in the year incurred, and requires capitalization and amortization.

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

tax expense, as a result of capitalization and amortization of research and development expenditures required pursuant to Internal Revenue Code Section 174.

Other current tax expense was primarily attributable to foreign non-creditable withholding taxes.

In December 2021, the Organization for Economic Cooperation and Development (“OECD”) enacted model rules for a new global minimum tax framework (“BEPS Pillar Two”), and various governments around the world have enacted, or are in the process of enacting legislation on this.

While we do not anticipate that this will have a material impact on our tax provision or effective tax rate, we will continue to monitor and assess pending legislation and implementation by individual countries and evaluate the potential impact on our business in future periods.

This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.

Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Non-GAAP Reconciliation

Year Ended December 31,

( in thousands)

Reconciliation of GAAP to adjusted cost of sales - products:

GAAP cost of sales - products $ 379,920 $ 286,475

Depreciation 8,578 —

Amortization of intangibles 3,739 3,225

Adjusted cost of sales - products $ 367,603 $ 283,250

Reconciliation of GAAP to adjusted research and development:

GAAP research and development $ 1,778,594 $ 1,640,508

Share-based compensation expenses 163,550 139,348

Depreciation 56,084 26,241

Adjusted research and development $ 1,558,960 $ 1,474,919

Reconciliation of GAAP to adjusted selling, general and administrative:

GAAP selling, general and administrative $ 1,504,501 $ 1,277,852

Share-based compensation expenses 204,038 163,814

Depreciation 15,774 36,061

Adjusted selling, general and administrative $ 1,284,689 $ 1,077,977

Reconciliation of GAAP to adjusted operating expenses

GAAP operating expenses $ 3,286,595 $ 2,919,111

Share-based compensation expenses 367,588 303,162

Depreciation 71,858 62,302

Amortization of intangibles 3,500 751

Adjusted operating expenses $ 2,843,649 $ 2,552,896

Reconciliation of GAAP to adjusted loss from operations:

GAAP loss from operations $ (1,207,736) $ (1,789,665)

Share-based compensation expenses 367,588 303,162

Depreciation 80,436 62,302

Amortization of intangibles 7,239 3,976

Adjusted loss from operations $ (752,473) $ (1,420,225)

Liquidity and Capital Resources

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Total debt $ 885,984 $ 538,117

We have incurred annual net losses and negative cash flows from operations since inception, resulting from the funding of our research and development programs and selling, general and administrative expenses associated with our operations, as well as to support the commercialization of our products globally.

We have incurred annual net losses and negative cash flows from operations since inception, resulting from the cost of funding our research and development programs and selling, general and administrative expenses associated with our operations, as well as supporting the commercialization of our products globally.

We incurred net losses of $0.9 billion and $2.0 billion for the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, we had an accumulated deficit of $8.0 billion.

To date, we have financed our operations principally through proceeds from public and private offerings of our securities and proceeds from our collaborations, together with product sales since September 2017.

Based on our current operating plan, we expect that our existing cash, cash equivalents and short-term investments as of December 31, 2022 will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months after the date that the financial statements included in this report are issued.

On December 15, 2021, we completed the initial public offering on the SSE.

To date, we have financed our operations principally through proceeds from public and private offerings of our securities, proceeds from debt, sales of marketable 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 and cash equivalents as of December 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.

We have also financed our operations and investments with proceeds from debt incurred primarily from various banks both through our subsidiaries and BeiGene, Ltd.

of $886.0 million at December 31, 2023.

The majority of those debt obligations, or approximately $547.2 million, owed by BeiGene, Ltd., have due dates within the next 12 months.

We believe we will have sufficient cash and cash equivalents and other sources of capital to be able to repay and/or refinance those debt obligations.

On December 15, 2021, we completed our initial public offering on the STAR Market of the Shanghai Stock Exchange (the “STAR Offering”).

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”).

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In this offering, we sold 115,055,260 ordinary shares.

Net proceeds after deducting underwriting commissions and offering expenses were $3.4 billion.

Net proceeds after deducting underwriting commissions and offering expenses were $3.4 billion (RMB 21.7 billion).

As required by the PRC securities laws, the net proceeds from the STAR Offering must be used in compliance with the planned uses as disclosed in the PRC prospectus as well as our proceeds management policy for the STAR Offering approved by our board of directors.

In January 2021, we entered into a collaboration and license agreement with Novartis, granting Novartis rights to develop, manufacture and commercialize tislelizumab in North America, Europe, and Japan.

Under the agreement, we received an upfront cash payment of $650 million from Novartis.

In addition, we and Novartis entered into an agreement granting us rights to market, promote and detail five approved Novartis oncology products.

Under the terms of the agreement, we received an upfront cash payment of $300 million in January 2022.

As of December 31, 2023, the Company had cash remaining related to the STAR Offering proceeds of $1.2 billion.

The following table provides information regarding our cash flows for the years ended December 31, 2023 and 2022:

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Net cash provided by investing activities 60,004 1,077,123

Net cash (used in) provided by financing activities (18,971) 3,636,911

Net cash provided by (used in) financing activities 416,478 (18,971)

Net effect of foreign exchange rate changes (8,082) (69,383)

Net (decrease) increase in cash, cash equivalents and restricted cash (507,850) 2,992,882

Net decrease in cash, cash equivalents and restricted cash (689,053) (507,850)

Cash, cash equivalents and restricted cash at end of period $ 3,185,984 $ 3,875,037

Operating Activities

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

Cash flows from operating activities is determined indirectly by taking net loss and adjusting for certain non-cash items and changes in assets and liabilities related to operations.

Operating activities used $1.2 billion of cash for the year ended December 31, 2023, which resulted principally from our net loss of $881.7 million, and by an increase in our net operating assets and liabilities of $370.5 million, partially offset by non-cash charges and adjustments of $94.8 million.

The non-cash charges and adjustments were primarily driven by share-based compensation expense, charges for acquired in-process research and development costs, and depreciation and amortization expense, offset by two non-cash gains related to the share settlement from the BMS arbitration and amortization of the research and development cost share liability.

The increase in working capital was driven largely by increases in accounts receivable and inventory and a decrease in deferred revenue, partially offset by increases in accounts payable and accrued expenses and other current liabilities.

Operating activities used $1.5 billion of cash for the year ended December 31, 2022, which resulted principally from our net loss of $2.0 billion, inclusive of $223.9 million of other losses due primarily to the strengthening of the U.S.

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The decrease in working capital was driven largely by decreases in accounts receivable and prepaid expenses and an increase in taxes payable, partially offset by a decrease in deferred revenue and an increase in inventories.

Operating activities used $1.3 billion of cash for the year ended December 31, 2021, which resulted principally from our net loss of $1.5 billion and an increase in our net operating assets and liabilities of $118.3 million, partially offset by non-cash charges and adjustments of $277.4 million.

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

The increase in working capital was driven

largely by increases in accounts receivable, inventory and prepaid expenses, offset by increases in accounts payable, accrued expenses and other liabilities and deferred revenue resulting from the upfront option payment from Novartis.

Investing Activities

Cash flows from investing activities consist primarily of capital expenditures, investment purchases, sales, maturities, and disposals, and upfront payments related to our collaboration agreements.

Investing activities provided $60.0 million of cash for the year ended December 31, 2023, consisting of $673.2 million in sales and maturities of investment securities, partially offset by $561.9 million of capital expenditures, $15.0 million upfront collaboration payments, $19.4 million in purchases of intangible assets, $14.9 million in purchases of long-term investments and $2.1 million in purchases of short-term investment securities.

Investing activities provided $1.1 billion of cash for the year ended December 31, 2022, consisting of $1.6 billion in sales and maturities of investment securities, partially offset by $325.4 million of capital expenditures, $143.7 million upfront collaboration payments, $15.9 million in purchases of long-term investments and $1.5 million in purchases of short-term investment securities.

Investing activities provided $640.7 million of cash for the year ended December 31, 2021, consisting of $2.1 billion in purchases of short-term investment securities, $262.9 million of capital expenditures, $43.4 million in purchases of intangible assets, $43.5 million in purchases of long-term investments and $8.5 million upfront collaboration payments, all of which were offset by sales and maturities of investment securities of $3.1 billion.

Financing Activities

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

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

Financing activities provided $416.5 million of cash for the year ended December 31, 2023, consisting primarily of $661.5 million from proceeds of short-term loans, $55.7 million from the exercise of employee share options and proceeds from the issuance of shares through our employee share purchase plan and $22.5 million from proceeds of long-term bank loans, partially offset by $309.6 million of repayments on short-term loans and $13.7 million of repayments on long-term bank loans.

Our borrowing and repayment cycle is dictated by the short-term maturities of our debt and the ability to increase our borrowings is dependent on interest rates, credit spreads, bank lending capacity and other factors.

We expect to repay approximately $688.4 million of loans in 2024 and expect to be able to re-finance those on a consistent basis with our historical experience, with the cost of those borrowings depending on prevailing interest rates and credit spreads.

Financing activities used $19.0 million of cash for the year ended December 31, 2022, consisting primarily of $417.1 million of repayment of short-term loans, partially offset by $313.8 million from proceeds of short-term loans, $47.0 million from the exercise of employee share options and proceeds from the issuance of shares through our employee share purchase plan and $37.4 million from proceeds of long-term bank loans.

Financing activities provided $3.6 billion of cash for the year ended December 31, 2021, consisting primarily of $3.4 billion of net proceeds from our STAR Offering in December 2021, $406.4 million from proceeds of short-term loans, $92.8 million from the exercise of employee share options and proceeds from the issuance of shares through our employee share purchase plan, $50.0 million from the sale of our shares to Amgen, and $16.8 million from proceeds of long-term bank loans.

These inflows were partially offset by $321.8 million of repayment of short-term loans.

Effects of Exchange Rates on Cash

We have substantial operations in the PRC, which generate a significant amount of RMB-denominated cash from product sales and require a significant amount of RMB-denominated cash to pay our obligations.

Additionally, on December 15, 2021, we received RMB21.7 billion in net proceeds from the STAR Offering.

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

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

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

dollar but do not affect the ability to pay our RMB-denominated liabilities.

Future Liquidity and Material Cash Requirements

Until such time, if ever, as we can generate substantial product revenue sufficient to cover our costs and capital investments, we may be required to finance our cash needs through a combination of equity offerings, debt financings, collaboration agreements, strategic alliances, licensing arrangements, government grants, and other available sources.

Under the rules of the SEC, we currently qualify as a “well-known seasoned issuer,” which allows us to file shelf registration statements to register an unspecified amount of securities that are effective upon filing.

In May 2020, we filed such a shelf registration statement with the SEC for the issuance of an unspecified amount of ordinary shares (including in the form of ADSs), preferred shares, various series of debt securities and/or warrants to purchase any of such securities, either individually or in units, from time to time at prices and on terms to be determined at the time of any such offering.

This registration statement was effective upon filing and will remain in effect for up to three years from filing, prior to which time we may file another shelf registration statement that will be effective for up to three years from filing.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a holder of ADSs, ordinary shares, or RMB Shares.

Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends, and may require the issuance of warrants, which could potentially dilute your ownership interest.

If we raise additional funds through collaboration agreements, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our medicines or drug candidates, future revenue streams or

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.

We plan to fund our material cash requirements with cash on hand.

Contractual and Other Obligations

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Funding commitment 8,905 2,213 6,692

Research and development commitment 22,327 5,829 16,498

Pension plan 14,995 3,577 11,418

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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;

office facilities in California, Massachusetts, Maryland, and New Jersey in the U.S.;

and in Basel, Switzerland under non-cancelable operating leases expiring on various dates.

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Total long-term debt obligations are $197.6 million.

We have numerous financial and non-financial covenants on our debt obligations with various banks and other lenders.

Some of these covenants include cross-default provisions that could require acceleration of repayment of our loans in the event of default.

However, our debt is primarily short-term in nature.

Any acceleration would be a matter of months but may impact our ability to refinance our debt obligations if an event of default occurs.

As of December 31, 2023, we are in compliance with all covenants of our material debt agreements.

See Note 12 in the Notes to the Financial Statements for further detail of our debt obligations.

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

As of December 31, 2022, our remaining co-development funding commitment was $0.6 billion.

As of December 31, 2023, our remaining co-development funding commitment was $483.7 million.

Funding Commitment

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As of December 31, 2023, our remaining capital commitment was $8.9 million and is expected to be paid from time to time over the investment period.

Research and Development Commitment

We entered into long-term research and development agreements, which includes obligations to make upfront payments and fixed quarterly payments over the next four years.

As of December 31, 2022, the total research and development commitment amounted to $22.3 million.

We maintain a defined benefit pension plan in Switzerland.

Funding obligations under the defined benefit pension plan are equivalent to $2.6 million per year based on annual funding contributions in effect as of December 31, 2022 to achieve fully funded status where the market value of plan assets equals the projected benefit obligations.

Funding contributions under the defined benefit pension plan are equivalent to $3.6 million per year based on annual funding contributions in effect as of December 31, 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 $404.9 million for the acquisition of property, plant and equipment as of December 31, 2022, which were mainly for our manufacturing and clinical R&D campus in Hopewell, NJ, additional capacity at the Guangzhou and Suzhou manufacturing facilities, and new building for Beijing Innerway Bio-tech Co., Ltd.

Other Obligations

We expect to make a significant investment in our future manufacturing facility in the United States, a 42-acre site that will be constructed in Hopewell, NJ, and for which we purchased for $75.2 million.

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

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

These contracts are generally cancellable at any time by us with prior written notice.

We also enter into collaboration agreements with institutions and companies to license intellectual property.

We may be obligated to make future development, regulatory and commercial milestone payments and royalty payments on future sales of specified products associated with these agreements.

Payments under these agreements generally become due and payable upon achievement of such milestones or sales.

These commitments are not recorded on our balance sheet because the achievement and timing of these milestones are not fixed and determinable.

When the achievement of these milestones or sales have occurred, the corresponding amounts are recognized in our financial statements.

We had capital commitments amounting to $333.5 million for the acquisition of property, plant and equipment as of December 31, 2023, which were mainly for our manufacturing and clinical R&D campus in Hopewell, New Jersey, additional capacity at the Guangzhou and Suzhou manufacturing facilities, and a new building for Beijing Innerway Bio-tech Co., Ltd.

We are making a significant investment in our future manufacturing facility in the U.S., a 42-acre site that is being constructed in Hopewell, New Jersey.

We purchased this site for $75.2 million, announced its groundbreaking on April 29, 2022 and have $502.4 million of construction in process related to the project as of December 31, 2023.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses.

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These significant assumptions are forward looking and could be affected by future economic, regulatory and market conditions.

Research and Development Expenses

At December 31, 2023, our existing deferred revenue balance was less than $1.0 million, and collaboration revenue is not expected to be a significant driver of our financial results until if and when additional agreements are entered into.

Measurement of Research and Development Expenses

Clinical trial costs are a significant component of our research and development expenses.

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however, some require advanced payments.

We make estimates of our expenses as of each balance sheet date in our financial statements based on facts and circumstances known to

us at that time.

We make estimates of our expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time.

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting expenses that are too high or too low in any particular period.

To date, we have not made any material adjustments to our prior estimates of research and development expenses.

Measurement of Deferred Tax Assets

Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years.

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A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Subsequent Measurement of Long-Lived Assets

We test long-lived assets, which include property, plant and equipment and intangible assets with finite useful lives, for impairment at least annually and whenever events or circumstances change that indicate impairment may have occurred.

A significant amount of judgment is involved in determining if an indicator of impairment has occurred.

Such indicators may include, among others and without limitation:

a significant decline in our expected future cash flows;

a sustained, significant decline in the trading prices of our ADSs, our ordinary shares, and/or our RMB Shares and market capitalization;

a significant adverse change in legal factors or in the business climate of our segment;

unanticipated competition;

and slower growth rates.

For the years ended December 31, 2023, 2022 and 2021, we determined there was no impairment of the value of our long-lived assets.

Recent Accounting Pronouncements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis