What changed in this filing

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Item 1A. Risk Factors

2024-11-12 compared with 2024-08-07 · 82 added, 67 removed, 1410 unchanged (10% of the section changed)

The following section includes material factors that we believe may adversely affect our business and operations.

You should carefully consider the risks and uncertainties described below and all information contained in this Quarterly Report, including our financial statements and the related notes and “Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding to invest in our ADSs, ordinary shares or RMB Shares.

You should carefully consider the risks and uncertainties described below and all information contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”), including our financial statements and the related notes and “Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding to invest in our ADSs, ordinary shares or RMB Shares.

The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects.

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• We may need to obtain additional financing to fund our operations, and if we are unable to obtain such financing, we may be unable to complete the development of our drug candidates or achieve profitability.

• If we are unable to obtain and maintain patent protection for our medicines and drug candidates through intellectual property rights, or if the scope of such intellectual property rights is not sufficiently broad, third parties may compete against us.

• If we are unable to obtain and maintain patent protection for our medicines and drug candidates, we may lose market exclusivities in our medicines.

• We rely on third parties to manufacture some of our commercial and clinical drug supplies.

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• 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.

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

• The PRC government may intervene or influence our operations at any time, and has the ability to exert significant oversight and control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations and limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless.

• There are uncertainties regarding the interpretation and enforcement of Chinese laws, rules and regulations, and rules and regulations in China can change quickly with little advance notice.

• Filing or other procedures with the China Securities Regulatory Commission (“CSRC”) or other Chinese regulatory authorities may be required in connection with issuing our equity securities to foreign investors under Chinese law, and, if required, we cannot predict whether we will be able, or how long it will take us, to complete such filing or other procedures.

If we fail to complete a filing with the CSRC, our future offering application may be impacted and we may be subject to penalties, sanctions and fines imposed by the CSRC and relevant departments of the State Council.

• 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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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.

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

As of September 30, 2024 and December 31, 2023, we had an accumulated deficit of $8.5 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.

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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 $404.2 million and $857.7 million of net cash during the six months ended June 30, 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 $215.8 million and $935.8 million of net cash during the nine months ended September 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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We cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the future may adversely affect our financial condition, results of operations, and cash flows.

The value of the RMB against the U.S.

dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy proposed or adopted by the PRC, Australia and other governments.

It is difficult to predict how market forces or PRC, Australia, other governments outside the U.S.

government policies may impact the exchange rate of the RMB and the U.S.

dollar or any other currencies in the future.

There remains significant international pressure on China to adopt a more flexible currency policy, including from the U.S.

government, which has threatened to label China as a “currency manipulator,” which could result in greater fluctuation of the RMB against the U.S.

Substantially all of our revenues are denominated in U.S.

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government issued or guaranteed investments will not occur.

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

At September 30, 2024, we had approximately $966.1 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 $2.6 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.

We had cash and cash equivalents of $2.7 billion, $3.2 billion and $3.9 billion, restricted cash of $11.5 million, $14.2 million and $5.5 million and short-term investments of nil, $2.6 million and $665.3 million as of September 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.

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

Treasury securities as of June 30, 2024.

Treasury securities as of September 30, 2024.

To the extent we invest in U.S.

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Risks Related to Our Intellectual Property

If we are unable to obtain and maintain patent protection for our medicines and drug candidates through intellectual property rights, or if the scope of such intellectual property rights is not sufficiently broad, third parties may compete against us.

*If we are unable to obtain and maintain patent protection for our medicines and drug candidates, we may lose market exclusivities in our medicines.

Our success depends in large part on our ability to protect our valuable innovations including medicines, drug candidates and proprietary technologies by obtaining, maintaining and enforcing our intellectual property rights, including patent rights.

We seek to protect our innovations that we consider commercially important by filing patent applications in the U.S., the PRC, Europe and other territories, or relying on trade secrets or regulatory exclusivities.

However, filing, prosecuting and maintaining patents/patent applications on our medicines or drug candidates in all countries throughout the world could be prohibitively expensive.

The patentability requirements across countries vary and the laws of different countries do not provide patent protection to pharmaceutical inventions to the same extent.

Therefore, our patent applications may not be granted in all countries and the issued patents can have various scope and strength throughout the world.

However, filing, prosecuting and maintaining patents/patent applications in all countries worldwide could be prohibitively expensive.

As the patent laws of different countries vary, our patent applications may not be granted in all countries and the issued patents may have various scope and enforceabilities.

In addition, different countries may provide varying regulatory exclusivities to pharmaceutical drugs, and some countries provide no regulatory exclusivities.

Consequently, we may not be able to have the same protection or exclusivities to our medicines or drug candidates in all countries throughout the world.

Consequently, we may not have the same patent protection or exclusivities to our medicines or drug candidates in all countries worldwide.

Further, given the amount of time required for the development, testing and regulatory review of new drug candidates, patents protecting such drug candidates might expire before or shortly after such drug candidates are commercialized.

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The issued patents and pending patent applications, if issued, for our medicines and drug candidates are expected to expire on various dates as described in “Part I—Item 1—Business—Intellectual Property” of our Annual Report.

Upon the expiration of our issued patents or patents that may be issued from our pending patent applications, we may no longer have exclusivities on the corresponding medicines or drug candidates.

Upon expiration, we may no longer have exclusivities on the corresponding medicines or drug candidates.

Moreover, issued patents may be invalidated for a number of reasons, including known or unknown prior art, deficiencies in the patent applications or the lack of novelty or inventive step of the underlying invention or technology.

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*We have been and may further become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful.

Our patent rights relating to our medicines and drug candidates could be found invalid or unenforceable if challenged in court or before government patent authorities.

Third parties may infringe our patent rights or misappropriate or otherwise violate our intellectual property rights.

Our patent rights relating to our medicines and drug candidates could be found invalid, unenforceable or not infringed by a court or government patent authorities.

Third parties may infringe, misappropriate or otherwise violate our intellectual property rights.

Litigation may be necessary to enforce or defend our intellectual property rights or to protect our trade secrets.

This can be expensive and time consuming.

Any claims that we assert against perceived infringers could also provoke these parties to challenge the validity or enforceability of our patents.

The third parties may also challenge the validity or enforceability of our patents.

When a generic drug company files an Abbreviated New Drug Application (“ANDA”) with the FDA seeking approval to market a generic version of any of our products before the expiration of Orange Book listed patents (“OB Patents”) covering such products, this will most likely trigger ANDA litigation.

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(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.

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 regarding BRUKINSA.

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

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or abroad, even outside the context of litigation.

Such mechanisms include ex parte re-examination, inter partes review, post-grant review, derivation and equivalent proceedings in non-U.S.

jurisdictions, such as opposition proceedings.

Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover and protect our medicines or drug candidates.

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Such a loss of patent protection could have a material adverse impact on our business.

*Lawsuits claiming infringing of intellectual property rights of third parties could be costly and time consuming and could prevent or delay us from developing or commercializing our medicines or drug candidates.

*Lawsuits alleging infringing of intellectual property rights of third parties could be costly and time consuming and could prevent or delay us from developing or commercializing our medicines or drug candidates.

We respect third parties’ valid intellectual property rights and diligently manage any freedom to operate risks associated with our medicines and drug candidates.

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As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our medicines and drug candidates may give rise to claims of infringement of the patent rights of others.

On June 13, 2023, Pharmacyclics LLC (“Pharmacyclics”) filed a complaint in the U.S.

For example, on June 13, 2023, Pharmacyclics LLC (“Pharmacyclics”) filed a complaint in the U.S.

District Court for the District of Delaware against us and one of our subsidiaries, alleging that BRUKINSA infringes a Pharmacyclics’ patent issued on June 13, 2023.

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Defense of these claims, regardless of their merit, could involve substantial litigation expense and divert our technical personnel, management personnel, or both from their normal responsibilities.

Even in the absence of litigation, we may seek to obtain licenses from third parties to avoid the risks of litigation, and if a license is available, it could impose costly royalty and other fees and expenses on us.

If third parties bring successful claims against us for infringement of their intellectual property rights, we may be subject to injunctive or other equitable relief, which could prevent us from developing and commercializing one or more of our medicines and drug candidates.

In the event of a successful claim against us of infringement or misappropriation, or a settlement by us of any such claims, we may have to pay substantial damages, including treble damages and attorneys’ fees in the case of willful infringement, pay royalties or redesign our infringing medicines and drug candidates, which may be impossible or require substantial time and cost.

In the event of an adverse result in any such litigation, or even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our medicines or drug candidates, which could result in substantial upfront and/or royalty payment.

Even in the absence of litigation, we may seek to obtain licenses from third parties to mitigate freedom to operate risks and as a result, could impose costly royalty and other fees and expenses on us.

*If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

We may also be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers or collaboration partners.

We may also be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of others.

In addition to our issued patent and pending patent applications, we rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position and to protect our medicines and drug candidates.

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Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time- consuming, and the outcome is unpredictable.

If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that technology or information to compete with us and our competitive position would be harmed.

If any of our trade secrets were lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that technology or information to compete with us and our competitive position would be harmed.

Furthermore, many of our employees, including our senior management, were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors.

Some of these employees, including members of our senior management, executed proprietary rights, non-disclosure and in some cases non-competition agreements in connection with their previous employment.

Some of these employees executed proprietary rights, non-disclosure and in some cases non-competition agreements in connection with their previous employment.

Our employees may also have access to trade secrets of our collaboration partners.

Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer.

If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.

Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

Although we try our best to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have misappropriated trade secrets or other proprietary information, of any such employees’ former employers.

For example, in September 2024, AbbVie filed a lawsuit alleging misappropriation of certain trade secrets concerning our Bruton’s tyrosine kinase degrader program, including lead compound BGB-16673.

Defending against such claims could result in substantial costs and be a distraction to management.

If we fail in defending any such claims, we may need to pay monetary damages and lose valuable intellectual property rights.

Risks Related to Our Reliance on Third Parties

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Approval from the HGRAC is required for the initiation of clinical trials involving the collection of human genetic materials in China.

We do not expect the previous HGRAC delay to affect the conduct of the clinical trials in China for our drug candidates, other than assets that are part of the Amgen collaboration.

We do not expect the previous HGRAC delay to affect the conduct of the clinical trials in China for our drug candidates.

The Amgen collaboration involves numerous risks, including unanticipated costs and diversion of our management’s attention from our other drug discovery and development business.

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To further enhance the administration of China HGR, in 2021, the Chinese government adopted amendments to the Criminal Code, which criminalize the illegal collection of China HGR, the illegal transfer of China HGR materials outside of China, and the transfer of China HGR data to non-PRC parties or entities established or actually controlled by them without going through security review and assessment.

Also in 2021, the PRC Biosecurity Law became effective, giving the Ministry of Science and Technology, China’s major regulatory authority of HGR, significantly more power and discretion to regulate HGR and it is expected that the overall regulatory landscape for Chinese HGR will continue to evolve and become even more rigorous.

Also in 2021, the PRC Biosecurity Law became effective.

The Biosecurity Law establishes an integrated system to regulate biosecurity-related activities in China, including the security regulation of HGR and biological resources.

The Biosecurity Law for the first time expressly declared that China has sovereignty over its HGR and further endorsed the HGR Regulation by recognizing the fundamental regulatory principles and systems established by it over the utilization of Chinese HGR by foreign entities in China.

Although the Biosecurity Law does not provide any specific new regulatory requirements on HGR, as it is a law adopted by China’s highest legislative authority, it gives the National Health Commission, China’s major regulatory authority of HGR, significantly more power and discretion to regulate HGR and it is expected that the overall regulatory landscape for Chinese HGR will continue to evolve and become even more rigorous.

In addition, the interpretation and application of data protection laws in China are often uncertain and in flux.

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Our testing may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses.

In the event we identify significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner, the market price of our shares could decline if investors and others lose confidence in the reliability of our financial statements, we could be subject to sanctions or investigations by the SEC, HKEx, China Securities Regulatory Commission (the “CSRC”), SSE or other applicable regulatory authorities, and our business could be harmed.

In the event we identify significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner, the market price of our shares could decline if investors and others lose confidence in the reliability of our financial statements, we could be subject to sanctions or investigations by the SEC, HKEx, CSRC, SSE or other applicable regulatory authorities, and our business could be harmed.

If we engage in acquisitions or strategic collaborations, this may increase our capital requirements, dilute our shareholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.

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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, effective as of September 2022.

Moreover, the CAC promulgated the Measures for the Security Assessment of Cross-border Data Transmission (effective September 2022) and the Provisions on Promoting and Standardizing Cross-Border Data Flows (effective March 2024), which provide certain clarification and relaxation to the compliance mechanisms for cross-border transfer of personal information, and provide several exemptions from undergoing security assessment, obtaining personal information protection certification, or entering into prescribed agreement for cross-border transfer of personal information for businesses.

The provisions also explicitly state that data processors are not required to conduct data security assessment for cross-border important data transfers if the concerning data has not been notified or published as important data by relevant departments or regions.

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;

(ii) personal information transferred overseas by operators of critical information infrastructure or a data processor that has processed personal data of more than one million persons;

(iii) personal information transferred overseas by a data processor who has already provided personal data of 100,000 persons or sensitive personal data of 10,000 persons overseas since January 1 of last year;

(ii) personal information transferred overseas by operators of critical information infrastructure;

(iii) non-sensitive personal data of more than 1 million persons or sensitive personal data of more than 10,000 persons transferred overseas since January 1 of the current year;

or (iv) other circumstances as requested by the CAC.

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There are still uncertainties as to the exact scope of network product or service or data processing activities that will or may affect national security, and the PRC government authorities may have discretion in the interpretation and enforcement of these measures.

Additionally, the CAC published the draft Administrative Regulations on Cyber Data Security (“Draft Cyber Data Security Regulations”), pursuant to which data processors shall apply for cybersecurity review if they engage in (i) merger, reorganization or division of internet platform operators with significant data resources related to national security, economic development or public interests that affects or may affect national security;

(ii) overseas listing while processing over one million users’ personal information;

(iii) Hong Kong listing that affects or may affect national security;

or (iv) other data processing activities that affect or may affect national security.

The Draft Cyber Data Security Regulations further require data processors processing important data or going public overseas to conduct annual data security self-assessment and submit an assessment report to the CAC before January 31 each year.

As the Draft Cyber Data Security Regulations were released only for public comment, the final version and the effective date thereof may be subject to change with substantial uncertainty.

There remain uncertainties as to how widespread the cybersecurity review requirement and the enforcement action will be and what effect they will have on the life sciences sector generally and the Company in particular.

Additionally, the State Council published the Administrative Regulations on Cyber Data Security (“Cyber Data Security Regulations”, effective January 1, 2025), pursuant to which data processors are required to identify and report important data.

Important data processors shall further adopt specific measures to secure the important data, such as designing the personnel and management institution responsible for the network data security, conducting risk assessment for the sharing, entrusted processing and joint processing of important data, and submit the annual risk assessment reports to competent authorities.

Furthermore, data processors shall be subject to national security review if their cyber data processing activities affect or may affect national security.

There remain uncertainties as to how widespread the cybersecurity or national security review requirement and the enforcement action will be and what effect they will have on the life sciences sector generally and the Company in particular.

China’s regulators may impose penalties for non-compliance ranging from fines or suspension of operations, and the imposition of any such penalties on our business could cause a material adverse effect on our business, financial condition, results of operations, prospects and the trading price of our ordinary shares, ADSs and RMB Shares, and could lead to our delisting from Nasdaq.

As of the date of this report, we have not received any notice from any Chinese regulatory authority identifying us as a “critical information infrastructure operator,” “online platform operator” or “data processor,” or requiring us to go through the cybersecurity review procedures pursuant to the Revised Cybersecurity Review Measures and the Draft Cyber Data Security Regulations.

As of the date of this Quarterly Report, we have not received any notice from any Chinese regulatory authority identifying us as a “critical information infrastructure operator,” “online platform operator” or “data processor” requiring us to go through the cybersecurity review procedures pursuant to the Revised Cybersecurity Review Measures or national security review under the Cyber Data Security Regulations.

However, there remains uncertainty as to how the regulations if enacted as currently proposed, will be interpreted or implemented and whether the Chinese regulatory authorities will adopt additional regulations.

We intend to closely monitor the evolving laws and regulations in this area and take all reasonable measures to mitigate compliance risks, we cannot guarantee that our business and operations will not be adversely affected by the potential impact of the Revised Cybersecurity Review Measures, the Draft Cyber Data Security Regulations or other laws and regulations related to privacy, data protection and information security.

We intend to closely monitor the evolving laws and regulations in this area and take all reasonable measures to mitigate compliance risks, we cannot guarantee that our business and operations will not be adversely affected by the potential impact of the Revised Cybersecurity Review Measures, the Cyber Data Security Regulations or other laws and regulations related to privacy, data protection and information security.

Additionally, the Standing Committee of the National People’s Congress of the PRC promulgated the PIPL, which expands data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals in China, and the processing of personal information of persons in China outside of China if such processing is for purposes of providing products and services to, or analyzing and evaluating the behavior of, persons in China.

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Risks Related to Our Doing Business in the PRC

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.

Due to our operations in China, our business, results of operations, financial condition and prospects may be influenced by economic, legal and social conditions in the PRC or changes in government relations between China and the U.S.

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

Due to our operations in China, our business, results of operations, financial condition and prospects may be influenced to a significant degree by economic, political, legal and social conditions in the PRC or changes in government relations between China and the U.S.

or other governments.

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and China with respect to trade policies, data sharing, treaties, government regulations and tariffs.

China’s economy differs from the economies of other countries in many respects, including with respect to the level of development, growth rate, amount of government involvement and oversight upon foreign exchange.

While China’s economy has experienced significant growth over the past four decades, growth has been uneven across different regions and among various economic sectors.

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Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us.

For example, our financial condition and results of operations may be adversely affected by government oversight of capital investments or changes in tax regulations that are currently applicable to us.

For example, our financial condition and results of operations may be adversely affected by government regulation over capital investments or changes in tax regulations that are currently applicable to us.

In addition, in the past the Chinese government implemented certain measures, including interest rate increases, to manage the pace of economic growth and prevent the economy from overheating.

These measures may cause decreased economic activity in China, which may adversely affect our business and results of operations.

The PRC government has the ability to exert oversight over any offering of securities conducted overseas and/or foreign investment in China-based issuers, and, as a result, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless.

The PRC government has indicated its intent to exert more oversight over securities offerings and other capital markets activities that are conducted overseas and foreign investment in China-based companies.

If the PRC authorities attempt to exercise such oversight or administration through regulation over our PRC subsidiaries, we could be required to restructure our operations to comply with such regulations or potentially cease operations in the PRC entirely, which could adversely affect our business, results of operations and financial condition.

Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless.

For example, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using the variable interest entity (“VIE”) structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement.

*The PRC government may intervene or influence our operations at any time, and has the ability to exert significant oversight and control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations and limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless.

The Chinese government may intervene or influence our operations at any time, or may exert control over operations of our business, which could result in a material change in our operations and/or the value of our securities.

Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.

For example, the PRC government has indicated its intent to exert more oversight and control over securities offerings and other capital markets activities that are conducted overseas and foreign investment in China-based companies.

If the PRC authorities attempt to exercise such control or influence through regulation over our PRC subsidiaries, we could be required to restructure our operations to comply with such regulations or potentially cease operations in the PRC entirely, which could adversely affect our business, results of operations and financial condition.

Any such action, once taken by the PRC government, could result in a material change in our operations, and could also significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless.

Additionally, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using the variable interest entity (“VIE”) structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement.

For example, in July 2021, the relevant PRC government authorities made public the Securities Opinions, which emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas listed companies.

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In addition, implementation of industry-wide regulations directly targeting our operations could cause the value of our securities to significantly decline.

Therefore, investors of our company face potential uncertainty from actions taken by the government authorities affecting our business.

Any intervention by the PRC government in our operations could undermine our business plan and cause the value of an investment in the Company to significantly decline or become worthless.

Historically, there has been legislation implemented which put our ADSs at risk of potential delisting.

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The risk and uncertainty associated with a potential delisting would have a negative impact on the price of our ADSs, ordinary shares and RMB Shares.

There are uncertainties regarding the interpretation and enforcement of Chinese laws, rules and regulations.

*There are uncertainties regarding the interpretation and enforcement of Chinese laws, rules and regulations, and rules and regulations in China can change quickly with little advance notice.

A large portion of our operations are conducted in China through our Chinese subsidiaries.

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In particular, on account of the relatively new implementation of certain laws, rules and regulations, the non-precedential nature of court decisions, and the discretion such laws, rules and regulations give to the relevant regulator in enforcement, the interpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent.

In addition, the legal system is based in part on government policies and rules which may quickly be amended from time to time.

In addition, the legal system is based in part on government policies and rules which may quickly be amended from time to time with little advance notice.

As a result, we may not be aware of our violation of these policies and rules until after the occurrence of the violation.

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It may be difficult for overseas regulators to conduct investigations or collect evidence within China.

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

In China, there are significant 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, 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.

4 unchanged sentences

Any administrative and court proceedings in the jurisdictions in which we operate, including China may be protracted, resulting in substantial costs and diversion of resources and management attention.

Since administrative and court authorities have discretion in interpreting and implementing statutory and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection.

Since administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection.

These uncertainties may impede our ability to enforce the contracts we have entered and could materially and adversely affect our business, financial condition and results of operations.

5 unchanged sentences

There are uncertainties with respect to the interpretation and implementation of the Securities Opinions and the Overseas Listing Trial Measures.

The PRC government may promulgate relevant laws, rules and regulations to impose additional obligations and liabilities on overseas listed China-based companies regarding data security, cross-border data flow, and compliance with China’s securities laws.

The PRC government may promulgate relevant laws, rules and regulations to impose additional and significant obligations and liabilities on overseas listed China-based companies regarding data security, cross-border data flow, and compliance with China’s securities laws.

As a company with operations in China and stock listings in and outside of China, it is uncertain whether or how these laws, rules and regulations and their interpretation and implementation may affect us.

3 unchanged sentences

Numerous regulations, guidelines and other measures have been or are expected to be adopted in China under the umbrella of or in addition to the Cyber Security Law and Data Security Law.

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.

As there are still uncertainties regarding the interpretation and implementation of such regulatory guidance, 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, 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.

The Overseas Listing Trial Measures, the relevant guidelines and their implementation may continue to evolve.

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

If we fail to complete a filing with the CSRC for any of our follow-on offerings, we may be subject to penalties, sanctions and fines imposed by the CSRC and relevant departments of the State Council.

As of the date of this report, we have not received any inquiry, notice, warning or sanction regarding completing filing or other procedures in connection with offering our equity securities on Nasdaq or Hong Kong Stock Exchange from the CSRC or any other Chinese regulatory authorities that have jurisdiction over our operations.

As of the date of this Quarterly Report, we have not received any inquiry, notice, warning or sanction regarding completing filing or other procedures in connection with offering our equity securities on Nasdaq or Hong Kong Stock Exchange from the CSRC or any other Chinese regulatory authorities that have jurisdiction over our operations.

However, there remains uncertainty as to the interpretation and implementation of regulatory requirements related to securities offerings and other capital markets activities outside of China.

24 unchanged sentences

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

As of September 30, 2024 and December 31, 2023, these restricted assets totaled $4.5 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.

127 unchanged sentences

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 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.

As of November 1, 2024, 1,386,034,320 ordinary shares, par value $0.0001 per share, were outstanding, of which 868,958,610 ordinary shares were held in the form of 66,842,970 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.

8 unchanged sentences

The price of our ADSs, ordinary shares and/or RMB Shares could also be adversely affected by trading of our securities on other markets.

We may decide at some point in the future to delist our RMB Shares from the STAR Market, and our shareholders may approve such delisting.

We cannot predict the effect such delisting of our RMB Shares on the STAR Market would have on the market price of our ADSs on Nasdaq or our ordinary shares on the HKEx.

We may decide at some point in the future to delist our securities from one or more of the stock exchanges where they are currently traded, subject to our shareholders’ approval if required.

We cannot predict the effect such delisting of our securities from one or more of the stock exchanges would have on the market price of our securities on the other stock exchanges.

Additionally, the listing and trading of our equity securities in multiple jurisdictions and multiple markets has resulted in increased compliance obligations and costs for us, and we may face the risk of significant intervention by regulatory authorities in these jurisdictions and markets, such as inquiries, investigations, enforcement actions and other regulatory proceedings by regulatory authorities.

In addition, we may be subject to securities litigation filed with the courts in China by the investors with respect to the RMB Shares traded on the STAR Market.

Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of the ordinary shares, ADSs and/or RMB Shares for return on your investment.

113 unchanged sentences

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 52% of our outstanding ordinary shares as of August 2, 2024.

Our directors, executive officers and principal shareholders beneficially owned approximately 51% of our outstanding ordinary shares as of November 1, 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.

44 unchanged sentences

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