What changed in this filing

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Item 1A. Risk Factors

2024-08-07 compared with 2024-05-08 · 41 added, 34 removed, 1436 unchanged (5% of the section changed)

21 unchanged sentences

• All material aspects of the research, development, manufacturing and commercialization of pharmaceutical products are heavily regulated, and we may face difficulties in complying with or be unable to comply with such regulations, which could have a material adverse effect on our business.

• The approval processes of regulatory authorities in the United States, China, Europe and other comparable regulatory authorities are lengthy, time consuming, costly, and inherently unpredictable.

• The approval processes of regulatory authorities in the U.S., China, Europe and other comparable regulatory authorities are lengthy, time consuming, costly, and inherently unpredictable.

If we experience delays or are ultimately unable to obtain regulatory approval for our drug candidates, our business will be substantially harmed.

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• We manufacture some of our medicines and intend to manufacture some of our drug candidates, if approved.

Failure to comply with regulatory requirements could result in sanctions being imposed against us and delays in completing and receiving regulatory approvals for our manufacturing facilities, or damage to, destruction of or interruption of production at such facilities, could delay our development plans or commercialization efforts.

• Changes in the political and economic policies of the PRC government or in relations between China and the United States or other governments and the oversight and discretion the PRC government has over the conduct of the business operations of our PRC subsidiaries may materially and adversely affect our business, financial condition, and results of operations and may result in our inability to sustain our growth and expansion strategies.

Failure to comply with regulatory requirements could result in sanctions being imposed against us and delays in receiving regulatory approvals for our manufacturing facilities, or damage to, destruction of or interruption of production at such facilities, could delay our development plans or commercialization efforts.

• Changes in the political and economic policies of the PRC government or in relations between China and the U.S.

or other governments and the oversight and discretion the PRC government has over the conduct of the business operations of our PRC subsidiaries may materially and adversely affect our business, financial condition, and results of operations and may result in our inability to sustain our growth and expansion strategies.

• The trading prices of our ordinary shares, ADSs, and/or RMB Shares can be volatile, which could result in substantial losses to you.

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• economic weakness;

• compliance with tax, employment, immigration and labor laws for employees traveling abroad;

• compliance with tax, employment, immigration and labor laws for employees traveling internationally;

• the effects of applicable non-U.S.

4 unchanged sentences

• business interruptions resulting from geo-political actions, including trade disputes, war and terrorism, public health crises or natural disasters, including earthquakes, volcanoes, typhoons, floods, hurricanes and fires;

• economic and political instability, including as may result from the uncertainty surrounding the 2024 U.S.

presidential election;

• international military conflicts and related sanctions.

47 unchanged sentences

The timing and full impact of such reforms is uncertain and could prevent us from commercializing our medicines and drug candidates in a timely manner.

In addition, the U.S.

Supreme Court’s July 2024 decision to overturn established case law giving deference to regulatory agencies’ interpretations of ambiguous statutory language has introduced uncertainty regarding the extent to which the FDA’s regulations, policies and decisions may become subject to increasing legal challenges, delays, and/or changes.

The process of obtaining regulatory approvals and compliance with laws and regulations require the expenditure of substantial time and financial resources.

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• failure to satisfy regulatory conditions regarding endpoints, patient population, available therapies and other requirements for our clinical trials in order to support marketing approval on an accelerated basis or at all;

• a delay in or the inability of health authorities to complete regulatory inspections of our development activities, regulatory filings or manufacturing operations, whether as a result of a global pandemic or other reasons, or our failure to satisfactorily complete such inspections;

• a delay in or the inability of health authorities to complete regulatory inspections of our development activities, regulatory filings or manufacturing operations, whether as a result of a public health crisis, government shutdown, resource shortages or other reasons, or our failure to satisfactorily complete such inspections;

• our failure to conduct a clinical trial in accordance with regulatory requirements or our clinical trial protocols;

1 unchanged sentence

For example, in 2022, the FDA extended the Prescription Drug User Fee Act goal date for the supplemental new drug application (“sNDA”) for BRUKINSA as a treatment for adult patients with chronic lymphocytic leukemia or small lymphocytic lymphoma by three months, to allow time to review additional clinical data submitted by us, which was deemed a major amendment to the sNDA.

Additionally, in 2022, the FDA deferred action on the BLA for tislelizumab as a second-line treatment for patients with unresectable or metastatic ESCC, citing only the inability to complete inspections due to COVID-19 related restrictions on travel.

In 2022, the FDA deferred action on the BLA for tislelizumab as a second-line treatment for patients with unresectable or metastatic ESCC, citing only the inability to complete inspections due to COVID-19 related restrictions on travel.

Additionally, the FDA has recently deferred approval for tislelizumab in first-line unresectable, recurrent, locally advanced, or metastatic ESCC on account of a delay in scheduling clinical site inspections.

Our development activities, regulatory filings and manufacturing operations also could be harmed or delayed by a shutdown of the U.S.

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or another jurisdiction by the FDA or comparable foreign regulatory authority may be subject to certain conditions or may not be accepted at all.

The FDA will generally not consider the data from a foreign clinical trial not conducted under an IND unless (i) the trial was well-designed and well-conducted in accordance with good clinical practice (“GCP”) requirements, including requirements for the design, conduct, performance, monitoring, auditing, recording, analysis, and reporting of clinical trials in a way that provides assurance that the data and reported results are credible and accurate and that the rights, safety, and well-being of trial subjects are protected, and (ii) the FDA is able to validate the data from the trial through an onsite inspection, if necessary.

In cases where data from foreign clinical trials are intended to serve as the sole basis for marketing approval in the U.S., the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S.

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or the applicable jurisdiction.

If the FDA or any comparable foreign regulatory authority does not accept such data, it would result in the need for additional trials, which could be costly and time-consuming, and which may result in drug candidates that we may develop not receiving approval for commercialization in the applicable jurisdiction.

*Our medicines and any future approved drug candidates will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our medicines and drug candidates.

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As a result, we have incurred losses in most periods since our inception, other than periods when we were profitable due to revenue recognized from up-front license fees from collaboration agreements or the settlement of legal proceedings.

As of March 31, 2024 and December 31, 2023, we had an accumulated deficit of $8.2 billion and $8.0 billion, respectively.

As of June 30, 2024 and December 31, 2023, we had an accumulated deficit of $8.3 billion and $8.0 billion, respectively.

Substantially all of our operating losses have resulted from costs incurred in connection with our research and development programs and from selling, general and administrative expenses associated with our operations.

10 unchanged sentences

Our operations have consumed substantial amounts of cash since inception.

Our operating activities used $1.2 billion, $1.5 billion and $1.3 billion of net cash during the years ended December 31, 2023, 2022 and 2021, respectively, and used $308.6 million and $563.8 million of net cash during the three months ended March 31, 2024 and 2023, respectively.

Our operating activities used $1.2 billion, $1.5 billion and $1.3 billion of net cash during the years ended December 31, 2023, 2022 and 2021, respectively, and used $404.2 million and $857.7 million of net cash during the six months ended June 30, 2024 and 2023, respectively.

We recorded negative net cash flows from operating activities in 2023, 2022 and 2021 primarily due to our net losses of $0.9 billion, $2.0 billion and $1.5 billion, respectively.

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government issued or guaranteed investments will not occur.

At March 31, 2024, we had approximately $803.2 million invested in government money market funds and $42.9 million invested in time deposits.

At June 30, 2024, we had approximately $897.9 million invested in government money market funds.

Downgrades to the U.S.

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The carrying amounts of cash and cash equivalents, restricted cash and short-term investments represent the maximum amount of loss due to credit risk.

We had cash and cash equivalents of $2.8 billion, $3.2 billion and $3.9 billion, restricted cash of $14.1 million, $14.2 million and $5.5 million and short-term investments of nil, $2.6 million and $665.3 million as of March 31, 2024, December 31, 2023 and 2022, respectively, most of which are deposited in financial institutions outside of China.

We had cash and cash equivalents of $2.6 billion, $3.2 billion and $3.9 billion, restricted cash of $25.3 million, $14.2 million and $5.5 million and short-term investments of nil, $2.6 million and $665.3 million as of June 30, 2024, December 31, 2023 and 2022, respectively, most of which are deposited in financial institutions outside of China.

As required by the PRC securities laws, the net proceeds from our offering on the STAR Market of the Shanghai Stock Exchange (the “STAR Offering”) must be used in strict compliance with the planned uses as disclosed in the PRC prospectus for the STAR Offering as well as our proceeds management policy for the STAR Offering approved by our board of directors.

2 unchanged sentences

As of December 31, 2023, our short-term investments consisted of U.S.

Treasury securities, provided that as of March 31, 2024 we no longer held any U.S.

Treasury securities.

Treasury securities, provided that we no longer held any U.S.

Treasury securities as of June 30, 2024.

To the extent we invest in U.S.

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and MSN Laboratories Private Ltd.

(collectively “MSN”), in the United States District Court for the District of New Jersey, in response to Sandoz’s and MSN’s notices informing their filings of ANDAs with the FDA.

(collectively “MSN”), in the U.S.

District Court for the District of New Jersey, in response to Sandoz’s and MSN’s notices informing their filings of ANDAs with the FDA.

For additional information on this litigation, please see the section of this Quarterly Report titled “Legal Proceedings”.

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Our business could be harmed if those third parties fail to comply with manufacturing regulations, provide us with insufficient quantities of product or provide product at unacceptable quality levels or prices.

Although we manufacture commercial supply of tislelizumab, zanubrutinib, and pamiparib at our manufacturing facilities in China, and are progressing towards the completion of our commercial-stage biologics manufacturing and clinical R&D center in New Jersey and a new small molecule manufacturing campus in Suzhou, China, we continue to rely on outside vendors to manufacture supplies and process some of our medicines and drug candidates.

Although we manufacture commercial supply of tislelizumab, zanubrutinib, and pamiparib at our manufacturing facilities in China, and recently opened our commercial-stage biologics manufacturing and clinical R&D center in New Jersey and a new small molecule manufacturing campus in Suzhou, China, we continue to rely on outside vendors to manufacture supplies and process some of our medicines and drug candidates.

For example, we have entered into a commercial supply agreement for tislelizumab with Boehringer Ingelheim Biopharmaceuticals (China) Ltd.

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Oyler, our Co-Founder, Chief Executive Officer and Chairman of the board of directors;

Xiaobin Wu, Ph.D., our President, Chief Operating Officer and General Manager of China;

Julia Wang, our Chief Financial Officer;

and the other principal members of our management and scientific teams play a critical role in the Company’s operation and development.

Xiaobin Wu, Ph.D., our President and Chief Operating Officer;

Aaron Rosenberg, our Chief Financial Officer;

and the other principal members of our management and scientific teams play a critical role in the Company’s operations and development.

Although we have employment agreements or offer letters with each of our executive officers, these agreements do not prevent our executives from terminating their employment with us at any time.

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*We manufacture some of our medicines and intend to manufacture some of our drug candidates, if approved.

We currently have multiple manufacturing facilities in China.

We are also constructing a commercial-stage biologics manufacturing and clinical R&D center in New Jersey, U.S., and a new small molecule manufacturing campus in Suzhou, China.

These facilities may encounter unanticipated delays and expenses due to a number of factors, including regulatory requirements.

If construction or expansion, regulatory evaluation and/or approval of our facilities are delayed, we may not be able to manufacture sufficient quantities of our medicines and drug candidates, which would limit our development and commercialization activities and our opportunities for growth.

We recently opened our commercial-stage biologics manufacturing and clinical R&D center in New Jersey and a new small molecule manufacturing campus in Suzhou, China.

These facilities may encounter unanticipated delays and expenses in startup operations due to a number of factors, including regulatory requirements.

If expansion, regulatory evaluation and/or approval of our facilities are delayed, we may not be able to manufacture sufficient quantities of our medicines and drug candidates, which would limit our development and commercialization activities and our opportunities for growth.

Cost overruns associated with constructing or maintaining our facilities could require us to raise additional funds from other sources.

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The Data Security Law prohibits entities and individuals in China from providing any foreign judicial or law enforcement authority with any data stored in China without approval from competent PRC authority and sets forth the legal liabilities of entities and individuals found to be in violation of their data protection obligations, including rectification order, warning, fines, suspension of relevant business, and revocation of business permits or licenses.

Moreover, the CAC promulgated the Measures for the Security Assessment of Cross-border Data Transmission, which became effective as of September 1, 2022.

Moreover, the CAC promulgated the Measures for the Security Assessment of Cross-border Data Transmission, effective as of September 2022.

According to these measures, personal data processors are subject to security assessment prior to any cross-border transfer of data if the transfer involves (i) important data;

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According to the official announcement, the action was initiated based on the National Security Law of the People’s Republic of China (the “National Security Law”), the Cyber Security Law and the Cybersecurity Review Measures.

Effective February 15, 2022, the CAC, together with 12 other PRC governmental authorities, promulgated the Revised Cybersecurity Review Measures, pursuant to which critical information infrastructure operators procuring network products and services and online platform operators carrying out data processing activities, which affect or may affect national security, shall conduct a cybersecurity review.

Effective as of February 2022, the CAC, together with 12 other PRC governmental authorities, promulgated the Revised Cybersecurity Review Measures, pursuant to which critical information infrastructure operators procuring network products and services and online platform operators carrying out data processing activities, which affect or may affect national security, shall conduct a cybersecurity review.

In addition, online platform operators possessing personal information of more than one million users seeking to be listed on foreign stock markets must apply for a cybersecurity review.

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Our financial and operating performance may be adversely affected by government shutdowns, public health crises, natural catastrophes, or other business interruptions outside of our control.

Our global operations and those of our third-party contractors and collaborators expose us to natural or man-made disasters, such as earthquakes, hurricanes, floods, fires, explosions, public health crises, such as epidemics or pandemics, terrorist activity, wars, or other business interruptions outside of our control.

Our global operations and those of our third-party contractors and collaborators expose us to natural or man-made disasters, such as earthquakes, hurricanes, floods, fires, explosions, public health crises, such as epidemics or pandemics, terrorist activity, wars, political uncertainty, or other business interruptions outside of our control.

Furthermore, we do not maintain any insurance other than property insurance for some of our buildings, vehicles and equipment.

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Failure to take timely and appropriate measures to meet any of these or similar regulatory requirements could materially affect our current corporate governance practices and business operations and our compliance costs may increase significantly.

In addition, the Security Review Rules, effective as of January 18, 2021, embody China’s continued efforts to provide a legal regime for national security review comparable to similar procedures in other jurisdictions, such as CFIUS review in the U.S.

In addition, the Security Review Rules embody China’s continued efforts to provide a legal regime for national security review comparable to similar procedures in other jurisdictions, such as CFIUS review in the U.S.

There are still uncertainties with respect to the interpretation, implementation and enforcement of the Security Review Rules.

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In China, there are legal and other obstacles to providing information needed for regulatory investigations or litigations initiated outside China.

According to Article 177 of the PRC Securities Law, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the PRC territory, which may increase the difficulties you face in protecting your interests.

According to Article 177 of the PRC Securities Law, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the PRC territory, which may increase the difficulties you face in protecting your interests.

According to the Revised Confidentiality and Archives Administration Provisions, where overseas securities regulators or relevant competent authorities request to inspect, investigate or collect evidence from Chinese domestic companies concerning their overseas offering and listing or their securities firms and securities service providers that undertake securities business for such Chinese domestic companies, such inspection, investigation and evidence collection must be conducted under the cross-border regulatory cooperation mechanism, and the CSRC or competent authorities of the Chinese government will provide necessary assistance pursuant to bilateral and multilateral cooperation mechanism.

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As the relevant regulations, guidelines and measures continue to evolve, we cannot assure investors that we will be able to comply with new regulatory requirements relating to our future overseas capital-raising activities outside of China and we may become subject to more stringent requirements with respect to matters including data privacy and cross-border investigation and enforcement of legal claims.

In February 2023, the CSRC released the Overseas Listing Trial Measures and five relevant guidelines, which took effect on March 31, 2023, requiring Chinese companies that have already directly or indirectly offered and listed securities in overseas markets to fulfil their filing obligations and report relevant information to the CSRC within three working days after conducting a follow-on offering of equity securities on the same overseas market.

In February 2023, the CSRC released the Overseas Listing Trial Measures and five relevant guidelines, requiring Chinese companies that have already directly or indirectly offered and listed securities in overseas markets to fulfill their filing obligations and report relevant information to the CSRC within three working days after conducting a follow-on offering of equity securities on the same overseas market.

We may have to go through this filing process for any follow-on offerings we conduct on Nasdaq or Hong Kong Stock Exchange.

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In addition, registered share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary.

As of March 31, 2024 and December 31, 2023, these restricted assets totaled $4.3 billion and $4.1 billion, respectively.

As of June 30, 2024 and December 31, 2023, these restricted assets totaled $4.3 billion and $4.1 billion, respectively.

Our PRC subsidiaries generate primarily all of their revenue in RMB, which is not freely convertible into other currencies.

1 unchanged sentence

In response to the persistent capital outflow in the PRC and RMB’s depreciation against the U.S.

dollar in the fourth quarter of 2016, the People’s Bank of China (“PBOC”) and China’s State Administration of Foreign Exchange (“SAFE”) promulgated a series of measures relating to oversight of capital flow, including stricter vetting procedures for domestic companies to remit foreign currency for overseas investments, dividends payments and shareholder loan repayments.

dollar, the People’s Bank of China (“PBOC”) and China’s State Administration of Foreign Exchange (“SAFE”) promulgated a series of measures relating to oversight of capital flow in 2016, including stricter vetting procedures for domestic companies to remit foreign currency for overseas investments, dividends payments and shareholder loan repayments.

The PRC government may continue to strengthen its oversight of capital flow, and more regulations and substantial vetting process may be put forward by the SAFE for cross-border transactions.

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We may be the target of this type of litigation in the future.

Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, and, if adversely determined, could have a material adverse effect on our business, financial condition, and results of operations.

Securities litigation against us could result in substantial costs and/or reputational harm and divert our management’s attention from other business concerns, and, if adversely determined, could have a material adverse effect on our business, financial condition, and results of operations.

Future sales of our ordinary shares, ADSs, and/or RMB Shares in the public market could cause the ordinary share, ADS, and/or RMB Share price to fall.

1 unchanged sentence

These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

As of May 3, 2024, 1,359,524,369 ordinary shares, par value $0.0001 per share, were outstanding, of which 866,105,747 ordinary shares were held in the form of 66,623,519 ADSs, each representing 13 ordinary shares, and 115,055,260 were RMB Shares.

As of August 2, 2024, 1,379,529,263 ordinary shares, par value $0.0001 per share, were outstanding, of which 890,252,363 ordinary shares were held in the form of 68,480,951 ADSs, each representing 13 ordinary shares, and 115,055,260 were RMB Shares.

We filed a registration statement on Form S-3 with the SEC on behalf of certain shareholders on May 9, 2023, registering 298,738,765 ordinary shares, including 222,835,028 ordinary shares in the form of 17,141,156 ADSs to be resold by the selling shareholders identified therein and in any related prospectus supplement from time to time.

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Our corporate actions are substantially controlled by our directors, executive officers and other principal shareholders, who can exert significant influence over important corporate matters, which may reduce the price of our ordinary shares, ADSs, and/or RMB Shares and deprive shareholders of an opportunity to receive a premium for their ordinary shares, ADSs, and/or RMB Shares.

Our directors, executive officers and principal shareholders beneficially owned approximately 53% of our outstanding ordinary shares as of May 3, 2024.

Our directors, executive officers and principal shareholders beneficially owned approximately 52% of our outstanding ordinary shares as of August 2, 2024.

These shareholders, if acting together, could exert substantial influence over matters such as electing directors and approving material mergers, acquisitions or other business combination transactions.

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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 1A. Risk Factors