Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements (unaudited) and related notes included in the section of this Quarterly Report on Form 10-Q (this “Quarterly Report”), titled “Part I – Item 1 – Financial Statements.” This Quarterly Report contains forward-looking statements t hat involve substantial risks and uncertainties. These forward-looking statements are based on management’s current expectations and projections about future events and trends that may affect the business, financial condition, and operating results. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. Forward-looking statements often include words such as “aim,” “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these terms or other similar expressions. These forward-looking statements include, among other things, statements about: our ability to successfully commercialize our approved medicines and to obtain approvals in additional indications and territories for our medicines; our ability to successfully develop and commercialize our in-licensed medicines and drug candidates and any other medicines and drug candidates we may in-license; our ability to further develop sales and marketing capabilities and launch and commercialize new medicines, if approved; our ability to maintain and expand regulatory approvals for our medicines and drug candidates, if approved; the pricing and reimbursement of our medicines and drug candidates, if approved; the initiation, timing, progress and results of our preclinical studies and clinical trials and our research and development programs; our ability to advance our drug candidates into, and successfully complete, clinical trials and obtain regulatory approvals; our reliance on the success of our clinical stage drug candidates; our plans, expected milestones and the timing or likelihood of regulatory filings and approvals; the implementation of our business model, strategic plans for our business, medicines, drug candidates and technology; the scope of protection we (or our licensors) are able to establish and maintain for intellectual property rights covering our medicines, drug candidates and technology; our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights and proprietary technology of third parties; costs associated with enforcing or defending against intellectual property infringement, misappropriation or violation, product liability and other claims; the regulatory environment and regulatory developments in the United States (“U.S.”), China, the United Kingdom (“UK”), Switzerland, the European Union (“EU”) and other jurisdictions in which we operate; the accuracy of our estimates regarding expenses, revenues, including collaboration revenue, capital requirements and our need for additional financing; the potential benefits of strategic collaboration and licensing agreements and our ability to enter into and maintain strategic arrangements; our construction and operation of independent production facilities for small molecule medicines and large molecule biologics, as well as clinical R&D facilities, to support the global demand for both commercial and clinical supply; our reliance on third parties to conduct drug development, manufacturing and other services; our ability to manufacture and supply, or have manufactured and supplied, drug candidates for clinical development and medicines for commercial sale; the rate and degree of market access and acceptance of our medicines and drug candidates, if approved; developments relating to our competitors and our industry, including competing therapies; the size of the potential markets for our medicines and drug candidates and our ability to serve those markets; our ability to effectively manage our growth; our ability to attract and retain qualified employees and key personnel; statements regarding future revenue, key milestones, expenses, capital expenditures, capital requirements and share performance; and the future trading price of our ADSs, ordinary shares and RMB Shares, and impact of securities analysts’ reports on these prices. These statements involve risks and uncertainties, including those that are described in “Part II—Item 1A—Risk Factors” of this Quarterly Report, that may cause actual future events or results to differ materially from those expected. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We do not assume any obligation to update any forward-looking statements where as a result of new information or otherwise, except as required by law. This Quarterly Report includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, you are cautioned not to give undue weight to this information. Unless the context requires otherwise, in this Quarterly Report, the terms “BeiGene,” the “Company,” “we,” “us” and “our” refer to BeiGene, Ltd., a Cayman Islands holding company with operations conducted by its subsidiaries, and its subsidiaries, on a consolidated basis.
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Non-GAAP Financial Measures
We provide certain financial measures that are not defined under accounting principles 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.
Overview
BeiGene reduced GAAP operating loss and achieved positive adjusted operating income during the quarter with rapidly increasing global revenues and continued financial discipline. Having now reached this milestone, we will further build on our differentiated, strategic capabilities as a leading, global oncology innovator.
BRUKINSA is emerging as the BTKi class leader in the U.S. in new patient starts across all approved indications, demonstrating the strength of its clinical efficacy and safety data, and is the only BTKi to demonstrate superior efficacy versus ibrutinib in a head-to-head trial. With our leadership in hematology, we are working to expand into other highly prevalent cancer types, backed by one of the largest oncology research teams in the industry.
Key highlights for the second quarter of 2024 are as follows:
• Generated total revenues of $929 million in the second quarter, an increase of 56% from the prior-year period;
• Reduced GAAP operating loss and achieved non-GAAP operating income;
• Strengthened hematology leadership with global BRUKINSA revenues of $637 million, an increase of 107% from the prior-year period;
• Advanced pivotal programs for BCL2 inhibitor sonrotoclax and BTK-targeted degrader BGB-16673; and
• Advanced innovative solid tumor pipeline of more than 15 investigational molecules, including ADCs, multispecific antibodies, and targeted therapies for lung, breast, and gastrointestinal cancers.
Recent Developments
Recent Business Developments
On July 23, 2024, we announced the opening of our flagship U.S. facility in Hopewell, New Jersey, at the Princeton West Innovation Campus, which houses state-of-the-art biologics manufacturing capabilities and a clinical research and development center that further bolster our differentiated model as an oncology innovator.
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Results of Operations
The following table summarizes our results of operations for the three and six months ended June 30, 2024 and 2023:
Three Months Ended Six Months Ended
June 30, Change June 30, Change
2024 2023 $ % 2024 2023 $ %
(dollars in thousands)
Revenues
Product revenue, net $ 921,146 $ 553,745 $ 367,401 66.3 % $ 1,668,064 $ 964,036 $ 704,028 73.0 %
Collaboration revenue 8,020 41,516 (33,496) (80.7) % 12,754 79,026 (66,272) (83.9) %
Total revenues 929,166 595,261 333,905 56.1 % 1,680,818 1,043,062 637,756 61.1 %
Cost of sales - product 138,132 95,990 42,142 43.9 % 263,067 177,779 85,288 48.0 %
Gross profit 791,034 499,271 291,763 58.4 % 1,417,751 865,283 552,468 63.8 %
Operating expenses
Research and development 454,466 422,764 31,702 7.5 % 915,104 831,348 83,756 10.1 %
Selling, general and administrative 443,729 395,034 48,695 12.3 % 871,156 723,533 147,623 20.4 %
Amortization of intangible assets — 188 (188) (100.0) % — 375 (375) (100.0) %
Total operating expenses 898,195 817,986 80,209 9.8 % 1,786,260 1,555,256 231,004 14.9 %
Loss from operations (107,161) (318,715) 211,554 (66.4) % (368,509) (689,973) 321,464 (46.6) %
Interest income, net 13,225 15,070 (1,845) (12.2) % 29,385 31,086 (1,701) (5.5) %
Other expense, net (11,984) (63,818) 51,834 (81.2) % (10,222) (45,515) 35,293 (77.5) %
Loss before income taxes (105,920) (367,463) 261,543 (71.2) % (349,346) (704,402) 355,056 (50.4) %
Income tax expense 14,485 13,674 811 5.9 % 22,209 25,166 (2,957) (11.7) %
Net loss $ (120,405) $ (381,137) $ 260,732 (68.4) % $ (371,555) $ (729,568) $ 358,013 (49.1) %
Comparison of the Three Months Ended June 30, 2024 and 2023
Revenue
Total revenue increased to $929.2 million for the three months ended June 30, 2024, from $595.3 million for the three months ended June 30, 2023, due to an increase in sales of BRUKINSA, tislelizumab, and our in-licensed products from Amgen, partially offset by a decrease in collaboration revenue. Collaboration revenue decreased due to termination of the Novartis collaborations in the prior year.
The following table summarizes the components of revenue for the three months ended June 30, 2024 and 2023, respectively:
Three Months Ended
June 30, Changes
2024 2023 $ %
(dollars in thousands)
Product revenue $ 921,146 $ 553,745 $ 367,401 66.3 %
Collaboration revenue:
Research and development service revenue — 13,563 (13,563) (100.0) %
Right to access intellectual property revenue — 26,248 (26,248) (100.0) %
Other 8,020 1,705 6,315 370.4 %
Total collaboration revenue 8,020 41,516 (33,496) (80.7) %
Total Revenue $ 929,166 $ 595,261 $ 333,905 56.1 %
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Net product revenues consisted of the following:
Three Months Ended
June 30, Changes
2024 2023 $ %
(dollars in thousands)
BRUKINSA ®
$ 637,399 $ 308,276 $ 329,123 106.8 %
Tislelizumab
158,410 149,464 8,946 6.0 %
XGEVA ®
55,054 23,968 31,086 129.7 %
BLINCYTO ®
19,131 14,578 4,553 31.2 %
KYPROLIS ®
15,936 11,052 4,884 44.2 %
POBEVCY ®
11,572 13,438 (1,866) (13.9) %
REVLIMID ®
9,133 21,847 (12,714) (58.2) %
Other 14,511 11,122 3,389 30.5 %
Total product revenue $ 921,146 $ 553,745 $ 367,401 66.3 %
Net product revenue increased 66.3% to $921.1 million for the three months ended June 30, 2024, compared to $553.7 million in the prior-year period, primarily due to continued increases in sales of BRUKINSA globally, driven by significant growth in the U.S. and Europe. In addition, product revenues in the second quarter of 2024 were positively impacted by sales of in-licensed products from Amgen in China and tislelizumab.
Global sales of BRUKINSA totaled $637.4 million in the second quarter, representing a 106.8% increase compared to the prior-year period; U.S. sales of BRUKINSA totaled $479.4 million in the second quarter, compared to $223.5 million in the prior-year period, representing growth of 114.4%, as BRUKINSA gained share in treatment-naïve (“TN”) CLL, and is now the BTKi class leader in new-patient share in CLL. In addition U.S. sales were also positively impacted by timing of customer order patterns of approximately $15.0 million. BRUKINSA sales in Europe totaled $81.4 million in the second quarter, compared to $26.3 million in the prior-year period, representing growth of 209.2%, driven by increased market share across all major markets, primarily in Germany, Italy, Spain, France and the UK. BRUKINSA sales in China totaled $63.6 million, representing growth of 31.2%. BRUKINSA rest of world sales totaled $13.0 million in the second quarter, representing growth of 31.0% compared to the prior-year period.
Sales of tislelizumab in China totaled $158.3 million in the second quarter, compared to $149.5 million in the prior-year period, representing a 5.9% increase.
Sales of Amgen products in China totaled $90.1 million in the second quarter, compared to $49.6 million in the prior-year period, representing a 81.7% increase, driven primarily by increased XGEVA sales volume.
Collaboration revenue totaled $8.0 million for the three months ended June 30, 2024, primarily related to revenue generated under the Novartis broad markets marketing and promotion agreement. Collaboration revenue totaled $41.5 million for the three months ended June 30, 2023, recognized from deferred revenue associated with the former Novartis tislelizumab and ociperlimab collaborations.
Cost of Sales
Cost of sales increased to $138.1 million for the three months ended June 30, 2024 from $96.0 million for the three months ended June 30, 2023, primarily due to increased product sales of BRUKINSA and tislelizumab, as well as sales of in-licensed products from Amgen in China.
Gross Margin
Gross margin on global product sales increased to $783.0 million for the three months ended June 30, 2024, compared to $457.8 million in the prior-year period, primarily due to increased product sales in the current year period. Gross margin as a percentage of product sales increased to 85.0% for the three months ended June 30, 2024, from 82.7% in the comparable period of the prior year. The increase is primarily due to proportionally higher sales mix of global BRUKINSA compared to other products in the portfolio.
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Research and Development Expense
Research and development expense increased by $31.7 million, or 7.5%, to $454.5 million for the three months ended June 30, 2024 from $422.8 million for the three months ended June 30, 2023. The following table summarizes external clinical, external non-clinical and internal research and development expense for the three months ended June 30, 2024 and 2023, respectively:
Three Months Ended
June 30, Changes
2024 2023 $ %
(dollars in thousands)
External research and development expense:
Cost of development programs $ 124,762 $ 129,623 $ (4,861) (3.8) %
Upfront license and development milestone fees 11,500 — 11,500 NM
Amgen co-development expense 1
22,482 5,457 17,025 312.0 %
Total external research and development expenses 158,744 135,080 23,664 17.5 %
Internal research and development expenses 295,722 287,684 8,038 2.8 %
Total research and development expenses $ 454,466 $ 422,764 $ 31,702 7.5 %
Adjusted research and development expenses 2
$ 382,509 $ 363,735 $ 18,774 5.2 %
1. Our co-funding obligation for the development of the pipeline assets under the Amgen collaboration for the three months ended June 30, 2024 totaled $44.4 million, of which $22.5 million was recorded as R&D expense. The remaining $21.9 million was recorded as a reduction of the R&D cost share liability.
2. 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 in the second quarter was primarily attributable to an increase in Amgen co-development expense related to timing of study costs and higher development milestone fees.
Internal research and development expense increased modestly by $8.0 million, or 2.8%, to $295.7 million, and was primarily attributable to the expansion of our global development organization and our clinical and preclinical drug candidates, as well as our continued efforts to internalize research and clinical trial activities and control spend.
Selling, General and Administrative Expense
Three Months Ended
June 30, Changes
2024 2023 $ %
(dollars in thousands)
Selling, general and administrative expenses $ 443,729 $ 395,034 $ 48,695 12.3 %
Adjusted selling, general and administrative expenses 1
$ 363,922 $ 331,607 $ 32,315 9.7 %
1. 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 $48.7 million, or 12.3%, to $443.7 million for the three months ended June 30, 2024, from $395.0 million for the three months ended June 30, 2023. The increase was primarily attributable to investing in the expansion of our commercial activities to support our product launches, primarily BRUKINSA in the U.S. and Europe to drive continued revenue and margin expansion. Selling, general and administrative expenses as a percentage of product sales were 48.2% in the second quarter of 2024 compared to 71.3% in the prior-year period. We expect selling and marketing expenses to increase in 2024 as product sales increase and we expect selling, general and administrative expenses as a percentage of revenue to decrease gradually throughout 2024.
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Interest Income, Net
Interest income, net decreased by $1.8 million, or 12.2%, to $13.2 million for the three months ended June 30, 2024, from $15.1 million for three months ended June 30, 2023. The decrease in interest income, net, was primarily attributable to decreased interest income resulting from lower interest rates on our cash balance. Interest expense remained flat as the increase in interest expense resulting from a higher debt balance was offset by higher interest capitalized related to Hopewell construction in process.
Other Expense, Net
Other expense, net was $12.0 million for the three months ended June 30, 2024, primarily due to foreign exchange losses. For the three months ended June 30, 2023, other expense, net was $63.8 million, primarily due to foreign exchange losses resulting from the strengthening of the U.S. dollar compared to the RMB in the period and the revaluation impact of foreign currencies held in U.S. functional currency subsidiaries. The decrease in other expense, net, was primarily due to reduced RMB-denominated cash held by U.S. functional currency entities compared to the prior-year period.
Income Tax Expense
Income tax expense was $14.5 million for the three months ended June 30, 2024 as compared to $13.7 million for the three months ended June 30, 2023. The income tax expense for the three months ended June 30, 2024 and 2023 was primarily attributable to current U.S. tax expense determined after other special tax deductions and research and development tax credits, current Switzerland tax expense based on year to date earnings, and current China tax expense due to certain non-deductible expenses.
Comparison of the Six Months Ended June 30, 2024 and 2023
Revenue
Total revenue increased to $1,680.8 million, or 61.1%, for the six months ended June 30, 2024, from $1,043.1 million for the six months ended June 30, 2023, primarily due to increased sales of our internally developed products, BRUKINSA and tislelizumab, as well as increased sales of in-licensed products, most notably from the Amgen products.
The following table summarizes the components of revenue for the six months ended June 30, 2024 and 2023, respectively:
Six Months Ended
June 30, Changes
2024 2023 $ %
(dollars in thousands)
Product revenue $ 1,668,064 $ 964,036 $ 704,028 73.0 %
Collaboration revenue:
Research and development service revenue — 20,380 (20,380) (100.0) %
Right to access intellectual property revenue — 52,497 (52,497) (100.0) %
Other 12,754 6,149 6,605 107.4 %
Total collaboration revenue 12,754 79,026 (66,272) (83.9) %
Total Revenue $ 1,680,818 $ 1,043,062 $ 637,756 61.1 %
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Net product revenues consisted of the following:
Six Months Ended
June 30, Changes
2024 2023 $ %
(dollars in thousands)
BRUKINSA ®
$ 1,125,914 $ 519,658 $ 606,256 116.7 %
Tislelizumab
303,687 264,314 39,373 14.9 %
XGEVA ®
98,435 44,165 54,270 122.9 %
BLINCYTO ®
33,497 25,524 7,973 31.2 %
KYPROLIS ®
30,047 15,995 14,052 87.9 %
POBEVCY ®
28,205 27,764 441 1.6 %
REVLIMID ®
21,366 45,005 (23,639) (52.5) %
Other 26,913 21,611 5,302 24.5 %
Total product revenue $ 1,668,064 $ 964,036 $ 704,028 73.0 %
Net product revenue increased 73.0% to $1,668.1 million for the six months ended June 30, 2024, compared to $964.0 million in the prior-year period, primarily due to increased sales of BRUKINSA in the U.S. and China and increased sales of tislelizumab in China. In addition, there were increased sales of our in-licensed products from Amgen.
Global sales of BRUKINSA totaled $1,125.9 million in the six months ended June 30, 2024, representing a 116.7% increase compared to the prior-year period. U.S. sales of BRUKINSA totaled $830.8 million in the six months ended June 30, 2024, compared to $362.3 million in the prior-year period, representing growth of 129.3%. U.S. sales continued to accelerate in the period, as BRUKINSA gained share in TN CLL and emerged as the BTKi class leader in new-patient share in CLL. BRUKINSA sales in Europe totaled $148.2 million in the six months ended June 30, 2024, representing growth of 223.5% compared to the prior-year period, driven by continued gains in market share across all major markets.
Sales of tislelizumab in China totaled $303.5 million in the six months ended June 30, 2024, compared to $264.3 million representing a 14.8% increase compared to the prior-year period. In the six months ended June 30, 2024, 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.
Sales of Amgen products in China totaled $162.0 million in the six months ended June 30, 2024, compared to $85.7 million in the prior-year period, driven primarily by increased XGEVA sales volume.
Collaboration revenue totaled $12.8 million for the six months ended June 30, 2024, primarily related to revenue generated under the Novartis broad markets marketing and promotion agreement. Collaboration revenue totaled $79.0 million for the six months ended June 30, 2023, recognized from deferred revenue associated with the former Novartis tislelizumab and ociperlimab collaborations.
Cost of Sales
Cost of sales increased to $263.1 million for the six months ended June 30, 2024 from $177.8 million for the six months ended June 30, 2023, primarily due to increased product sales of BRUKINSA and tislelizumab as well as sales of in-licensed products from Amgen in China.
Gross Margin
Gross margin on product sales increased to $1,405.0 million for the six months ended June 30, 2024, compared to $786.3 million in the prior-year period, primarily due to increased product revenue in the current year period. Gross margin as a percentage of product sales increased to 84.2% for the six months ended June 30, 2024, from 81.6% in the comparable period of the prior year. The increase is primarily due to a proportionally higher sales mix of global BRUKINSA compared to other products in the portfolio.
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Research and Development Expense
Research and development expense increased by $83.8 million, or 10.1%, to $915.1 million for the six months ended June 30, 2024 from $831.3 million for the six months ended June 30, 2023. The following table summarizes external clinical, external non-clinical and internal research and development expense for the six months ended June 30, 2024 and 2023, respectively:
Six Months Ended
June 30, Changes
2024 2023 $ %
(dollars in thousands)
External research and development expense:
Cost of development programs $ 247,633 $ 258,219 $ (10,586) (4.1) %
Upfront license and development milestone fees 46,528 — 46,528 NM
Amgen co-development expense 1
35,966 23,274 12,692 54.5 %
Total external research and development expenses 330,127 281,493 48,634 17.3 %
Internal research and development expenses 584,977 549,855 35,122 6.4 %
Total research and development expenses $ 915,104 $ 831,348 $ 83,756 10.1 %
Adjusted research and development expenses 2
$ 787,949 $ 725,431 $ 62,518 8.6 %
1. Our co-funding obligation for the development of the pipeline assets under the Amgen collaboration for the six months ended June 30, 2024 totaled $71.0 million, of which $36.0 million was recorded as R&D expense. The remaining $35.0 million was recorded as a reduction of the R&D cost share liability.
2. 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 in the six months ended June 30, 2024 was primarily attributable to higher development milestone fees and increases in Amgen co-development expense, partially offset by lower external clinical trial costs as certain programs wind down and we continue efforts to internalize research and clinical trial activities.
Internal research and development expense increased $35.1 million, or 6.4%, to $585.0 million and was primarily attributable to the expansion of our global development organization and our clinical and preclinical drug candidates, as well as our continued efforts to internalize research and clinical trial activities.
Selling, General and Administrative Expense
Six Months Ended
June 30, Changes
2024 2023 $ %
(dollars in thousands)
Selling, general and administrative expenses $ 871,156 $ 723,533 $ 147,623 20.4 %
Adjusted selling, general and administrative expenses 1
$ 736,068 $ 614,761 $ 121,307 19.7 %
1. 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 $147.6 million, or 20.4%, to $871.2 million, for the six months ended June 30, 2024, from $723.5 million for the six months ended June 30, 2023. The increase was primarily attributable to investing in the expansion of our commercial activities to support our product launches, primarily BRUKINSA in the U.S. and Europe to drive continued revenue and margin expansion. Selling, general and administrative expenses as a percentage of product sales were 52.2% for the six months ended June 30, 2024 compared to 75.1% in the prior-year period. We expect selling and marketing expenses to increase in 2024 as product sales increase and we expect selling, general and administrative expenses as a percentage of revenue to decrease gradually throughout 2024.
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Interest Income, Net
Interest income, net decreased by $1.7 million, or 5.5%, to $29.4 million for the six months ended June 30, 2024, from $31.1 million for the six months ended June 30, 2023. The decrease in interest income was primarily attributable to lower interest rates earned on our cash and cash equivalents. Interest expense remained flat as the increase in interest expense resulting from a higher debt balance was offset by higher interest capitalized related to Hopewell construction in process.
Other Expense, Net
Other expense, net decreased to $10.2 million for the six months ended June 30, 2024, from $45.5 million for the six months ended June 30, 2023. The decrease in expense was primarily related to foreign exchanges losses resulting from the strengthening of the U.S. dollar compared to the RMB and the revaluation impact of RMB-denominated deposits held in U.S. functional currency subsidiaries being greater in the prior-year period.
Income Tax Expense
Income tax expense decreased to $22.2 million for the six months ended June 30, 2024, from $25.2 million for the six months ended June 30, 2023. The income tax expense for the six months ended June 30, 2024 and June 30, 2023 was primarily attributable to current U.S. tax expense determined after other special deductions and research and development tax credits, current Switzerland tax expense based on year to date earnings, and current China tax expense due to certain non-deductible expenses.
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Non-GAAP Reconciliation
Three Months Ended Six Months Ended
June 30, June 30,
2024 2023 2024 2023
( in thousands)
Reconciliation of GAAP to adjusted cost of sales - products:
GAAP cost of sales - products $ 138,132 $ 95,990 $ 263,067 $ 177,779
Less: Depreciation 2,684 2,180 5,029 4,360
Less: Amortization of intangibles 1,177 840 2,360 1,639
Adjusted cost of sales - products $ 134,271 $ 92,970 $ 255,678 $ 171,780
Reconciliation of GAAP to adjusted research and development:
GAAP research and development $ 454,466 $ 422,764 $ 915,104 $ 831,348
Less: Share-based compensation expenses 55,406 45,948 93,451 79,976
Less: Depreciation 16,551 13,081 33,704 25,941
Adjusted research and development $ 382,509 $ 363,735 $ 787,949 $ 725,431
Reconciliation of GAAP to adjusted selling, general and administrative:
GAAP selling, general and administrative $ 443,729 $ 395,034 $ 871,156 $ 723,533
Less: Share-based compensation expenses 75,288 57,381 125,957 98,741
Less: Depreciation 4,519 6,046 9,131 10,031
Adjusted selling, general and administrative $ 363,922 $ 331,607 $ 736,068 $ 614,761
Reconciliation of GAAP to adjusted operating expenses
GAAP operating expenses $ 898,195 $ 817,986 $ 1,786,260 $ 1,555,256
Less: Share-based compensation expenses 130,694 103,329 219,408 178,717
Less: Depreciation 21,070 19,127 42,835 35,972
Less: Amortization of intangibles — 188 — 375
Adjusted operating expenses $ 746,431 $ 695,342 $ 1,524,017 $ 1,340,192
Reconciliation of GAAP to adjusted income (loss) from operations:
GAAP loss from operations $ (107,161) $ (318,715) $ (368,509) $ (689,973)
Plus: Share-based compensation expenses 130,694 103,329 219,408 178,717
Plus: Depreciation 23,754 21,307 47,864 40,332
Plus: Amortization of intangibles 1,177 1,028 2,360 2,014
Adjusted income (loss) from operations $ 48,464 $ (193,051) $ (98,877) $ (468,910)
Liquidity and Capital Resources
The following table represents our cash and debt balances as of June 30, 2024 and December 31, 2023:
As of
June 30, December 31,
2024 2023
(dollars in thousands)
Cash, cash equivalents and restricted cash $ 2,617,931 $ 3,185,984
Total debt $ 1,036,928 $ 885,984
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With the exception of the periods in which we received upfront payments from out-licensing rights to tislelizumab to Novartis, and prior to that BMS, and the third quarter of 2023 where we recorded a large noncash gain from the BMS settlement and accelerated deferred revenue recognition from the Novartis terminations, we have incurred GAAP net losses and negative cash flows from operations since inception, resulting from the funding of our research and development programs and selling, general and administrative expenses to support the commercialization of our products and our global operations. We recognized a net loss of $120.4 million and $371.6 million for the three and six months ended June 30, 2024, respectively, and net losses of $381.1 million and $729.6 million for three and six months ended June 30, 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $8.3 billion.
To date, we have financed our operations principally through proceeds from public and private offerings of our common stock (including ADSs), proceeds from debt, and 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 June 30, 2024 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 $1.0 billion at June 30, 2024. The majority of those debt obligations, or approximately $851.7 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”). The public offering price of the RMB Shares was RMB 192.60 per ordinary share, or $391.68 per ADS. In this offering, we sold 115,055,260 ordinary shares. 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. As of June 30, 2024, the Company had cash remaining related to the STAR Offering proceeds of $0.9 billion.
The following table provides information regarding our cash flows for the six months ended June 30, 2024 and 2023:
Six Months Ended
June 30,
2024 2023
(dollars in thousands)
Cash, cash equivalents and restricted cash at beginning of period $ 3,185,984 $ 3,875,037
Net cash used in operating activities (404,160) (857,665)
Net cash (used in) provided by investing activities (320,863) 308,863
Net cash provided by financing activities 185,310 146,212
Net effect of foreign exchange rate changes (28,340) (50,873)
Net decrease in cash, cash equivalents, and restricted cash (568,053) (453,463)
Cash, cash equivalents and restricted cash at end of period $ 2,617,931 $ 3,421,574
Operating Activities
Cash flows from operating activities is net loss adjusted for certain non-cash items and changes in assets and liabilities.
Operating activities used $404.2 million of cash in the six months ended June 30, 2024, principally from our net loss of $371.6 million and an increase in our net operating assets and liabilities of $268.8 million, partially offset by non-cash charges of $236.2 million.
The increase in net operating assets and liabilities was primarily driven by increased working capital associated with our growth in product sales. The non-cash charges were primarily driven by share-based compensation expense, depreciation and amortization expense, offset by amortization of the research and development cost share liability.
Operating activities used $857.7 million of cash in the six months ended June 30, 2023, principally from our net loss of $729.6 million and an increase in our net operating assets and liabilities of $329.4 million, partially offset by non-cash charges of $201.3 million.
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The increase in net operating assets and liabilities was primarily driven by increased working capital associated with our growth in product sales. The non-cash charges were primarily the result of share-based compensation expense, depreciation and amortization expense, offset by amortization of the research and development cost share liability. Net loss for the three months ended June 30, 2023 includes $63.8 million of other losses due primarily to the strengthening of the U.S. dollar and the related revaluation of RMB-denominated deposits held by U.S. functional currency subsidiaries.
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 used $320.9 million of cash in the six months ended June 30, 2024, consisting of capital expenditures of $266.5 million, purchase of IPR&D assets of $31.8 million, purchase of intangible assets of $4.7 million, $20.5 million in purchases of long-term investments and other investing activities, partially offset by sales and maturities of investment securities of $2.7 million.
Investing activities provided $308.9 million of cash in the six months ended June 30, 2023, consisting of sales and maturities of investment securities of $567.5 million, partially offset by capital expenditures of $247.1 million, and $11.6 million in purchases of investment securities.
Financing Activities
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 $185.3 million of cash in the six months ended June 30, 2024, consisting primarily of $9.1 million of net proceeds from long-term loans, $324.4 million of proceeds from short-term loans and $20.4 million from the exercise of employee share options and proceeds from the issuance of shares through our employee share purchase plan, which were partially offset by $14.0 million in repayments of long-term loans and $157.5 million in repayments of short-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 $851.7 million of loans in the next 12 months 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 provided $146.2 million of cash in the six months ended June 30, 2023, consisting primarily of $15.8 million of net proceeds from long-term bank loans, $161.8 million of proceeds from short-term bank loans and $35.2 million from the exercise of employee share options and proceeds from the issuance of shares through our employee share purchase plan, which were partially offset by $66.6 million in repayment of short-term bank 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. We hold a significant amount of RMB-denominated deposits at our China subsidiaries. Since the reporting currency of the Company is the U.S. dollar, periods of volatility in exchange rates may have a significant impact on our consolidated cash balances as they are translated into U.S. dollars. The impact of foreign currency deposits being translated into the U.S. dollar negatively impacted ending cash by $28.3 million in the six months ended June 30, 2024, compared to a negative impact of $50.9 million in the prior-year period.
Future Liquidity and Material Cash Requirements
Until such time, if ever, as we can generate substantial product revenue sufficient to cover our costs and capital investments, we may be required to finance our cash needs through a combination of equity offerings, debt financings, collaboration agreements, strategic alliances, licensing arrangements, government grants, and other available sources. Under the rules of the U.S. Securities and Exchange Commissions (“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 2023, 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.
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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 our investors’ 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.
Furthermore, our ability to raise additional capital may be adversely impacted by worsening global economic conditions, with disruptions to, and volatility in, the credit and financial markets in the U.S. and worldwide, resulting from the effects of inflationary pressures, recent and potential future bank failures and otherwise. If these conditions persist and deepen, we could experience an inability to access additional capital or our liquidity could otherwise be impacted, which could in the future negatively affect our capacity for certain corporate development transactions or our ability to make other important, opportunistic investments. 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 and product sales.
Contractual and Other Obligations
The following table summarizes our significant contractual obligations as of the payment due date by period as of June 30, 2024:
Payments Due by Period
Total Short Term Long Term
(dollars in thousands)
Contractual obligations
Operating lease commitments $ 58,835 $ 11,082 $ 47,753
Purchase commitments 120,366 91,544 28,822
Debt obligations 1,036,928 851,657 185,271
Interest on debt 60,841 40,772 20,069
Co-development funding commitment 412,647 80,312 332,335
Funding commitment 8,154 2,025 6,129
Capital commitments 62,576 62,576 —
Total $ 1,760,347 $ 1,139,968 $ 620,379
Operating Lease Commitments
We lease office facilities in the U.S. and Switzerland, and office and manufacturing facilities in China under non-cancelable operating leases expiring on various dates. Payments under operating leases are expensed on a straight-line basis over the respective lease terms. The aggregate future minimum payments under these non-cancelable operating leases are summarized in the table above.
Purchase Commitments
As of June 30, 2024, non-cancellable purchase commitments amounted to $120.4 million, of which $28.8 million related to minimum purchase requirements for supply purchased from contract manufacturers and $91.5 million related to binding purchase obligations of inventory from Amgen. We do not have any minimum purchase requirements for inventory from Amgen.
Debt Obligations and Interest
Total debt obligations coming due in the next twelve months is $851.7 million. Total long-term debt obligations are $185.3 million. See Note 10 in the Notes to the Financial Statements for further detail of our debt obligations.
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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 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 debt obligations if an event of default occurs. As of June 30, 2024, we were in compliance with all covenants of our material debt agreements.
Interest on bank loans is paid quarterly until the respective loans are fully settled. For the purpose of contractual obligations calculation, current interest rates on floating rate obligations were used for the remainder contractual life of the outstanding borrowings.
Co-Development Funding Commitment
Under the Amgen collaboration, we are responsible for co-funding global development costs for the licensed Amgen oncology pipeline assets up to a total cap of $1.25 billion. We are funding our portion of the co-development costs by contributing cash and development services. As of June 30, 2024, our remaining co-development funding commitment was $412.6 million.
Funding Commitment
Funding commitment represents our committed capital related to two equity method investments. As of June 30, 2024, our remaining capital commitment was $8.2 million and is expected to be paid from time to time over the investment period.
Capital Commitments
We had capital commitments amounting to $62.6 million for the acquisition of property, plant and equipment as of June 30, 2024, related to various facilities across the globe, including the manufacturing and clinical R&D campus in Hopewell, New Jersey.
Critical Accounting Policies and Significant Judgments and Estimates
Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses. We evaluate our estimates and judgments on an ongoing basis, and our actual results may differ from these estimates. These include, but are not limited to, estimating the useful lives of long-lived assets, estimating variable consideration in product sales and collaboration revenue arrangements, estimating the incremental borrowing rate for operating lease liabilities, identifying separate accounting units and the standalone selling price of each performance obligation in the Company’s revenue arrangements, assessing the impairment of long-lived assets, valuation and recognition of share-based compensation expenses, realizability of deferred tax assets and the fair value of financial instruments. We base our estimates on historical experience, known trends and events, contractual milestones and other various factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.
There have been no material changes to our critical accounting policies as of and for the three and six months ended June 30, 2024, as compared to those described in the section titled “Part I—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023.
For new accounting policies adopted during the three and six months ended June 30, 2024, see “Part I—Item 1—Financial Statements—Notes to the Condensed Consolidated Financial Statements—1. Description of Business, Basis of Presentation and Consolidation and Significant Accounting Policies—Significant accounting policies” in this Quarterly Report on Form 10-Q.