BeOne Medicines Ltd. 10-Q

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. 26 Table of Contents 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’s strong third-quarter results underscore the Company’s global oncology leadership driven by our unique R&D and clinical advantages as well as the tremendous launch trajectory of BRUKINSA. In the U.S., BRUKINSA, with the broadest label of any BTK inhibitor, is now the leader in new patient starts in both frontline and relapsed/refractory (R/R) CLL in addition to all other approved B-cell malignancies. As the cornerstone of our hematology franchise, BRUKINSA shows tremendous promise for patients as a monotherapy and as a backbone for best-in-class combinations with our late-stage BCL2 inhibitor, sonrotoclax, and BTK degrader BGB-16673. In the solid tumor area, we’re expanding access to our PD-1 inhibitor, TEVIMBRA, for patients worldwide and building global commercial capabilities to support our prolific pipeline of exciting potential cancer medicines. We are laying the foundation for future franchises in breast, lung, and gastrointestinal cancers across three signature platform technologies including multi-specific antibodies, protein degraders, and antibody-drug conjugates. This progress not only highlights our achievements but also emphasizes our commitment to positively impacting patients' lives globally, fostering hope and advancements in the fight against cancer. Key highlights for the third quarter of 2024 are as follows: • Continued financial progress with $1 billion in quarterly total revenue, reduced GAAP loss and second consecutive quarter of positive non-GAAP operating income; • Strengthened franchise leadership in chronic lymphocytic leukemia (CLL) with foundational therapy BRUKINSA, global revenue of $690 million, rapidly progressing pivotal programs for late-stage hematology pipeline; and • Expanded oncology pipeline with four new molecular entities (NMEs) entering the clinic this quarter (eight year-to-date); reaffirmed on track to achieve goal to enter 10+ by end of year; in-house innovative “Fast to Proof of Concept” strategy quickly explores the clinical potential of molecules in parallel with industry leading speed of execution. Recent Developments Recent Business Developments On October 21, 2024, we announced that the Committee for Medicinal Products for Human Use of the European Medicines Agency issued positive opinions recommending an extended authorization for TEVIMBRA in gastric or gastroesophageal junction adenocarcinoma and esophageal squamous cell carcinoma (“ESCC”). On October 4, 2024, we announced that TEVIMBRA ® (tislelizumab-jsgr) is now available for commercial sale in the U.S. for the treatment of adult patients with unresectable or metastatic ESCC after prior systemic chemotherapy that did not include a PD-(L)1 inhibitor, and subsequently dosed our first TEVIMBRA patient in the U.S. On September 17, 2024, we announced that the Israeli Ministry of Health approved TEVIMBRA as monotherapy for the treatment of adult patients with unresectable or metastatic oesophageal squamous cell carcinoma after prior systemic chemotherapy. On August 26, 2024, we announced that the FDA granted Fast Track Designation to BGB-16673, an orally available investigational BTK targeting chimeric degradation activation compound, for adult patients with relapsed or refractory CLL or 27 Table of Contents small lymphocytic lymphoma who have been previously treated with at least two prior lines of therapy, including BTK inhibitor and BCL2 inhibitor. 28 Table of Contents Results of Operations The following table summarizes our results of operations for the three and nine months ended September 30, 2024 and 2023: Three Months Ended Nine Months Ended September 30, Change September 30, Change 2024 2023 $ % 2024 2023 $ % (dollars in thousands) Revenues Product revenue, net $ 993,447 $ 595,290 $ 398,157 66.9 % $ 2,661,511 $ 1,559,326 $ 1,102,185 70.7 % Collaboration revenue 8,152 186,018 (177,866) (95.6) % 20,906 265,044 (244,138) (92.1) % Total revenues 1,001,599 781,308 220,291 28.2 % 2,682,417 1,824,370 858,047 47.0 % Cost of sales - product 170,462 96,309 74,153 77.0 % 433,529 274,088 159,441 58.2 % Gross profit 831,137 684,999 146,138 21.3 % 2,248,888 1,550,282 698,606 45.1 % Operating expenses Research and development 496,179 453,259 42,920 9.5 % 1,411,283 1,284,607 126,676 9.9 % Selling, general and administrative 455,223 365,708 89,515 24.5 % 1,326,379 1,089,616 236,763 21.7 % Total operating expenses 951,402 818,967 132,435 16.2 % 2,737,662 2,374,223 363,439 15.3 % Loss from operations (120,265) (133,968) 13,703 (10.2) % (488,774) (823,941) 335,167 (40.7) % Interest income, net 10,643 26,649 (16,006) (60.1) % 40,028 57,735 (17,707) (30.7) % Other income, net 11,318 336,657 (325,339) (96.6) % 1,096 291,142 (290,046) (99.6) % (Loss) income before income taxes (98,304) 229,338 (327,642) (142.9) % (447,650) (475,064) 27,414 (5.8) % Income tax expense 23,046 13,925 9,121 65.5 % 45,255 39,091 6,164 15.8 % Net (loss) income $ (121,350) $ 215,413 $ (336,763) (156.3) % $ (492,905) $ (514,155) $ 21,250 (4.1) % Comparison of the Three Months Ended September 30, 2024 and 2023 Revenue Total revenue increased to $1,001.6 million for the three months ended September 30, 2024, from $781.3 million for the three months ended September 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 September 30, 2024 and 2023, respectively: Three Months Ended September 30, Changes 2024 2023 $ % (dollars in thousands) Product revenue $ 993,447 $ 595,290 $ 398,157 66.9 % Collaboration revenue: Research and development service revenue — 59,052 (59,052) (100.0) % Right to access intellectual property revenue — 51,978 (51,978) (100.0) % Material rights revenue — 71,980 (71,980) (100.0) % Other 8,152 3,008 5,144 171.0 % Total collaboration revenue 8,152 186,018 (177,866) (95.6) % Total Revenue $ 1,001,599 $ 781,308 $ 220,291 28.2 % 29 Table of Contents Net product revenue consisted of the following: Three Months Ended September 30, Changes 2024 2023 $ % (dollars in thousands) BRUKINSA ® $ 690,278 $ 357,695 $ 332,583 93.0 % Tislelizumab 163,351 144,352 18,999 13.2 % XGEVA ® 63,445 24,456 38,989 159.4 % BLINCYTO ® 20,215 14,870 5,345 35.9 % KYPROLIS ® 17,972 11,101 6,871 61.9 % POBEVCY ® 12,193 14,130 (1,937) (13.7) % REVLIMID ® 11,103 14,960 (3,857) (25.8) % Other 14,890 13,726 1,164 8.5 % Total product revenue $ 993,447 $ 595,290 $ 398,157 66.9 % Net product revenue increased 66.9% to $993.4 million for the three months ended September 30, 2024, compared to $595.3 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 third quarter of 2024 were positively impacted by sales of in-licensed products from Amgen in China and tislelizumab. Global revenue for BRUKINSA totaled $690.3 million in the third quarter, representing a 93.0% increase compared to the prior-year period; U.S. revenue for BRUKINSA totaled $503.7 million in the third quarter, compared to $270.1 million in the prior-year period, representing growth of 86.5%, due to quarter over quarter demand growth coming primarily from expanded use in CLL as BRUKINSA continued to gain share in CLL new patient starts. BRUKINSA revenue in Europe totaled $97.3 million in the third quarter, compared to $30.7 million in the prior-year period, representing growth of 217.2%, driven by increased market share across all major markets, including Germany, Italy, Spain, France and the UK. BRUKINSA revenue in China totaled $67.8 million, representing growth of 43.0%. BRUKINSA rest of world revenue totaled $21.4 million in the third quarter, representing growth of 125.0% compared to the prior-year period. Revenue for tislelizumab in China totaled $162.9 million in the third quarter, compared to $144.4 million in the prior-year period, representing a 12.8% increase. Certain additional tislelizumab indications are eligible for 2025 NRDL inclusion. We do not believe price reductions resulting from inclusion, if any, will be significant. Revenue for Amgen products in China totaled $101.6 million in the third quarter, compared to $50.4 million in the prior-year period, representing a 101.5% increase, driven primarily by increased XGEVA sales volume. Collaboration revenue totaled $8.2 million for the three months ended September 30, 2024, primarily related to revenue generated under the Novartis broad markets marketing and promotion agreement. Collaboration revenue totaled $186.0 million for the three months ended September 30, 2023, recognized from deferred revenue associated with the former Novartis tislelizumab and ociperlimab collaborations. Gross Margin Gross margin on global product sales increased to $823.0 million for the three months ended September 30, 2024, compared to $499.0 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 decreased to 82.8% for the three months ended September 30, 2024, from 83.8% in the comparable period of the prior year. The decrease is the result of accelerated depreciation expense of $16.9 million resulting from the move to more efficient, larger scale production lines for tislelizumab, with a similar amount to be incurred in the fourth quarter related to this move. On an adjusted basis, gross margin as a percentage of product sales increased to 84.9%, from 84.4% in the comparable period of the prior year due to proportionally higher sales mix of global BRUKINSA compared to other products in the portfolio. 30 Table of Contents Research and Development Expense Research and development expense increased by $42.9 million, or 9.5%, to $496.2 million for the three months ended September 30, 2024 from $453.3 million for the three months ended September 30, 2023. The following table summarizes external clinical, external non-clinical and internal research and development expense for the three months ended September 30, 2024 and 2023, respectively: Three Months Ended September 30, Changes 2024 2023 $ % (dollars in thousands) External research and development expense: Cost of development programs $ 149,026 $ 126,301 $ 22,725 18.0 % Upfront license and development milestone fees 5,000 15,000 (10,000) (66.7) % Amgen co-development expense 1 17,015 15,832 1,183 7.5 % Total external research and development expenses 171,041 157,133 13,908 8.9 % Internal research and development expenses 325,138 296,126 29,012 9.8 % Total research and development expenses $ 496,179 $ 453,259 $ 42,920 9.5 % Adjusted research and development expenses 2 $ 405,545 $ 396,146 $ 9,399 2.4 % 1. Our co-funding obligation for the development of the pipeline assets under the Amgen collaboration for the three months ended September 30, 2024 totaled $33.6 million, of which $17.0 million was recorded as R&D expense. The remaining $16.6 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 third quarter was primarily attributable to an increase in external costs of development programs primarily due to advancing preclinical programs into the clinic and early clinical programs into late stage, slightly offset by lower development upfront and milestone fees. Internal research and development expense increased modestly by $29.0 million, or 9.8%, to $325.1 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. Included within internal research and development expense for the three months ended September 30, 2024 is $24.9 million of accelerated depreciation expense related to the move of clinical production to larger, more efficient production lines with approximately $2.0 million remaining to be incurred in the fourth quarter. Selling, General and Administrative Expense Three Months Ended September 30, Changes 2024 2023 $ % (dollars in thousands) Selling, general and administrative expenses $ 455,223 $ 365,708 $ 89,515 24.5 % Adjusted selling, general and administrative expenses 1 $ 380,737 $ 308,493 $ 72,244 23.4 % 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. 31 Table of Contents Selling, general and administrative expense increased by $89.5 million, or 24.5%, to $455.2 million for the three months ended September 30, 2024, from $365.7 million for the three months ended September 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 45.8% in the third quarter of 2024 compared to 61.4% in the prior-year period. We expect continued investment growth in selling and marketing expenses as our product sales increase. Interest Income, Net Interest income, net decreased by $16.0 million, or 60.1%, to $10.6 million for the three months ended September 30, 2024, from $26.6 million for three months ended September 30, 2023. The decrease in interest income, net, was primarily attributable to decreased interest income resulting from lower interest rates on our cash and cash equivalents balance. Interest expense increased resulting from a higher debt balance and lower interest capitalized related to Hopewell construction in process. Other Income, Net Other income, net was $11.3 million for the three months ended September 30, 2024, primarily due to foreign exchange gains. For the three months ended September 30, 2023, other income, net was $336.7 million, primarily due to the noncash gain recorded for the receipt of ordinary shares resulting from the BMS settlement and government subsidy income, partially offset by 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 and unrealized losses on our equity investments. Income Tax Expense Income tax expense was $23.0 million for the three months ended September 30, 2024 as compared to $13.9 million for the three months ended September 30, 2023. The income tax expense for the three months ended September 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 Nine Months Ended September 30, 2024 and 2023 Revenue Total revenue increased to $2,682.4 million, or 47.0%, for the nine months ended September 30, 2024, from $1,824.4 million for the nine months ended September 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 nine months ended September 30, 2024 and 2023, respectively: Nine Months Ended September 30, Changes 2024 2023 $ % (dollars in thousands) Product revenue $ 2,661,511 $ 1,559,326 $ 1,102,185 70.7 % Collaboration revenue: Research and development service revenue — 79,432 (79,432) (100.0) % Right to access intellectual property revenue — 104,475 (104,475) (100.0) % Material rights revenue — 71,980 (71,980) (100.0) % Other 20,906 9,157 11,749 128.3 % Total collaboration revenue 20,906 265,044 (244,138) (92.1) % Total Revenue $ 2,682,417 $ 1,824,370 $ 858,047 47.0 % 32 Table of Contents Net product revenue consisted of the following: Nine Months Ended September 30, Changes 2024 2023 $ % (dollars in thousands) BRUKINSA ® $ 1,816,192 $ 877,353 $ 938,839 107.0 % Tislelizumab 467,038 408,666 58,372 14.3 % XGEVA ® 161,880 68,621 93,259 135.9 % BLINCYTO ® 53,712 40,394 13,318 33.0 % KYPROLIS ® 48,019 27,096 20,923 77.2 % POBEVCY ® 40,398 41,894 (1,496) (3.6) % REVLIMID ® 32,469 59,965 (27,496) (45.9) % Other 41,803 35,337 6,466 18.3 % Total product revenue $ 2,661,511 $ 1,559,326 $ 1,102,185 70.7 % Net product revenue increased 70.7% to $2,661.5 million for the nine months ended September 30, 2024, compared to $1,559.3 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 revenue for BRUKINSA totaled $1,816.2 million in the nine months ended September 30, 2024, representing a 107.0% increase compared to the prior-year period. U.S. revenue for BRUKINSA totaled $1,334.6 million in the nine months ended September 30, 2024, compared to $632.4 million in the prior-year period, representing growth of 111.0%. U.S. volume growth continued to accelerate in the period due primarily to demand growth coming from expanded use in CLL as BRUKINSA continued to gain share in CLL new patient starts. BRUKINSA revenue in Europe totaled $245.5 million in the nine months ended September 30, 2024, representing growth of 221.0% compared to the prior-year period, driven by continued gains in market share across all major markets. Revenue for tislelizumab in China totaled $466.4 million in the nine months ended September 30, 2024, compared to $408.7 million representing a 14.1% increase compared to the prior-year period. In the nine months ended September 30, 2024, new patient demand volume resulting from broader reimbursement and further expansion of our salesforce and hospital listings continued to drive increased market penetration and market share for tislelizumab. Certain additional tislelizumab indications are eligible for 2025 NRDL inclusion. We do not believe price reductions resulting from inclusion, if any, will be significant. Revenue for Amgen products in China totaled $263.6 million in the nine months ended September 30, 2024, compared to $136.1 million in the prior-year period, driven primarily by increased XGEVA demand since the NRDL inclusion. Collaboration revenue totaled $20.9 million for the nine months ended September 30, 2024, primarily related to revenue generated under the Novartis broad markets marketing and promotion agreement. Collaboration revenue totaled $265.0 million for the nine months ended September 30, 2023, recognized from deferred revenue associated with the former Novartis tislelizumab and ociperlimab collaborations. Gross Margin Gross margin on product sales increased to $2,228.0 million for the nine months ended September 30, 2024, compared to $1,285.2 million in the prior-year period, primarily due to increased product revenue in the current year period. On a GAAP basis, gross margin as a percentage of product sales increased to 83.7% for the nine months ended September 30, 2024, from 82.4% 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, slightly offset by the impact of accelerated depreciation expense of $16.9 million resulting from the move to more efficient, larger scale production lines for tislelizumab, with a similar amount to be incurred in the fourth quarter related to this move. On an adjusted basis, which does not include the accelerated depreciation, gross margin as a percentage of product sales increased to 84.8% for the nine months ended September 30, 2024, from 83.0% in the comparable period of the prior year. 33 Table of Contents Research and Development Expense Research and development expense increased by $126.7 million, or 9.9%, to $1,411.3 million for the nine months ended September 30, 2024 from $1,284.6 million for the nine months ended September 30, 2023. The following table summarizes external clinical, external non-clinical and internal research and development expense for the nine months ended September 30, 2024 and 2023, respectively: Nine Months Ended September 30, Changes 2024 2023 $ % (dollars in thousands) External research and development expense: Cost of development programs $ 396,659 $ 384,520 $ 12,139 3.2 % Upfront license and development milestone fees 51,528 15,000 36,528 243.5 % Amgen co-development expense 1 52,981 39,106 13,875 35.5 % Total external research and development expenses 501,168 438,626 62,542 14.3 % Internal research and development expenses 910,115 845,981 64,134 7.6 % Total research and development expenses $ 1,411,283 $ 1,284,607 $ 126,676 9.9 % Adjusted research and development expenses 2 $ 1,193,494 $ 1,121,577 $ 71,917 6.4 % 1. Our co-funding obligation for the development of the pipeline assets under the Amgen collaboration for the nine months ended September 30, 2024 totaled $104.6 million, of which $53.0 million was recorded as R&D expense. The remaining $51.6 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 nine months ended September 30, 2024 was primarily attributable to higher development milestone fees, increases in Amgen co-development expense, and higher external clinical trial costs. Internal research and development expense increased $64.1 million, or 7.6%, to $910.1 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. Included within internal research and development expenses for the nine months ended September 30, 2024 is $24.9 million of accelerated depreciation expense related to the move of clinical production to larger, more efficient production lines with approximately $2.0 million remaining to be incurred in the fourth quarter. Selling, General and Administrative Expense Nine Months Ended September 30, Changes 2024 2023 $ % (dollars in thousands) Selling, general and administrative expenses $ 1,326,379 $ 1,089,616 $ 236,763 21.7 % Adjusted selling, general and administrative expenses 1 $ 1,116,805 $ 923,254 $ 193,551 21.0 % 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. 34 Table of Contents Selling, general and administrative expense increased by $236.8 million, or 21.7%, to $1,326.4 million, for the nine months ended September 30, 2024, from $1,089.6 million for the nine months ended September 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 49.8% for the nine months ended September 30, 2024 compared to 69.9% in the prior-year period. We expect continued investment growth in selling and marketing expenses as our product sales increase. Interest Income, Net Interest income, net decreased by $17.7 million, or 30.7%, to $40.0 million for the nine months ended September 30, 2024, from $57.7 million for the nine months ended September 30, 2023. The decrease in interest income was primarily attributable to lower interest rates earned on our cash and cash equivalents. Interest expense increased resulting from a higher debt balance, slightly offset by an increase in interest capitalization related to Hopewell construction. Other Income, Net Other income, net was $1.1 million for the nine months ended September 30, 2024, primarily due to foreign exchange gains. For the nine months ended September 30, 2023, other income, net was $291.1 million, primarily due to the noncash gain recorded for the receipt of ordinary shares resulting from the BMS settlement and government subsidy income, partially offset by 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 and unrealized losses on our equity investments. Income Tax Expense Income tax expense increased to $45.3 million for the nine months ended September 30, 2024, from $39.1 million for the nine months ended September 30, 2023. The income tax expense for the nine months ended September 30, 2024 and 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. 35 Table of Contents Non-GAAP Reconciliation Three Months Ended Nine Months Ended September 30, September 30, 2024 2023 2024 2023 ( in thousands) Reconciliation of GAAP to adjusted cost of sales - products: GAAP cost of sales - products $ 170,462 $ 96,309 $ 433,529 $ 274,088 Less: Depreciation 19,589 2,320 24,618 6,680 Less: Amortization of intangibles 1,186 981 3,546 2,620 Adjusted cost of sales - products $ 149,687 $ 93,008 $ 405,365 $ 264,788 Reconciliation of GAAP to adjusted research and development: GAAP research and development $ 496,179 $ 453,259 $ 1,411,283 $ 1,284,607 Less: Share-based compensation expenses 47,670 44,150 141,121 124,126 Less: Depreciation 42,964 12,963 76,668 38,904 Adjusted research and development $ 405,545 $ 396,146 $ 1,193,494 $ 1,121,577 Reconciliation of GAAP to adjusted selling, general and administrative: GAAP selling, general and administrative $ 455,223 $ 365,708 $ 1,326,379 $ 1,089,616 Less: Share-based compensation expenses 66,933 51,969 192,890 150,710 Less: Depreciation 7,475 3,959 16,606 13,990 Less: Amortization of intangibles 78 1,287 78 1,662 Adjusted selling, general and administrative $ 380,737 $ 308,493 $ 1,116,805 $ 923,254 Reconciliation of GAAP to adjusted operating expenses GAAP operating expenses $ 951,402 $ 818,967 $ 2,737,662 $ 2,374,223 Less: Share-based compensation expenses 114,603 96,119 334,011 274,836 Less: Depreciation 50,439 16,922 93,274 52,894 Less: Amortization of intangibles 78 1,287 78 1,662 Adjusted operating expenses $ 786,282 $ 704,639 $ 2,310,299 $ 2,044,831 Reconciliation of GAAP to adjusted income (loss) from operations: GAAP loss from operations $ (120,265) $ (133,968) $ (488,774) $ (823,941) Plus: Share-based compensation expenses 114,603 96,119 334,011 274,836 Plus: Depreciation 70,028 19,242 117,892 59,574 Plus: Amortization of intangibles 1,264 2,268 3,624 4,282 Adjusted income (loss) from operations $ 65,630 $ (16,339) $ (33,247) $ (485,249) Liquidity and Capital Resources The following table represents our cash and debt balances as of September 30, 2024 and December 31, 2023: As of September 30, December 31, 2024 2023 (dollars in thousands) Cash, cash equivalents and restricted cash $ 2,713,428 $ 3,185,984 Total debt $ 1,051,316 $ 885,984 36 Table of Contents 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 September 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 $1.1 billion at September 30, 2024. The majority of those debt obligations, or approximately $863.8 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 September 30, 2024, the Company had cash remaining related to the STAR Offering proceeds of $0.8 billion. The following table provides information regarding our cash flows for the nine months ended September 30, 2024 and 2023: Nine Months Ended September 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 (215,791) (935,815) Net cash (used in) provided by investing activities (454,745) 122,588 Net cash provided by financing activities 197,972 69,430 Net effect of foreign exchange rate changes 8 (50,348) Net decrease in cash, cash equivalents, and restricted cash (472,556) (794,145) Cash, cash equivalents and restricted cash at end of period $ 2,713,428 $ 3,080,892 Operating Activities Cash used in operating activities improved $720.0 million in the nine months ended September 30, 2024, versus the prior year period due to our significantly improved revenue and $698.6 million of increase in gross margin in the current year period, offset by continued funding of our development pipeline, commercial operations and increasing working capital to support our global expansion. Investing Activities Investing activities used $454.7 million of cash in the nine months ended September 30, 2024, compared to $122.6 million of cash provided in the prior year period due primarily to a decrease in proceeds from sales and maturities of investment securities. Financing Activities Financing activities provided $198.0 million of cash in the nine months ended September 30, 2024, compared to $69.4 million in the prior year period due primarily to higher proceeds from short-term bank loans in the current year period. 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 $863.8 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. 37 Table of Contents 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 positively impacted ending cash by $8.0 thousand in the nine months ended September 30, 2024, compared to a negative impact of $50.3 million in the prior-year period. Future Liquidity and Material Cash Requirements Until such time, if ever, as we can generate sustained positive operating cash flow, we will continue to use existing cash and net proceeds from short-term financing (see Financing Activities above) to fund our capital expansion needs and business development goals. We may be required to finance our incremental cash needs through a combination of equity offerings, new 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. 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, previous 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. 38 Table of Contents Contractual and Other Obligations The following table summarizes our significant contractual obligations as of the payment due date by period as of September 30, 2024: Payments Due by Period Total Short Term Long Term (dollars in thousands) Contractual obligations Operating lease commitments $ 55,381 $ 4,595 $ 50,786 Purchase commitments 155,852 125,897 29,955 Debt obligations 1,051,316 863,803 187,513 Interest on debt 39,657 21,830 17,827 Co-development funding commitment 379,057 40,424 338,633 Funding commitment 8,156 2,025 6,131 Capital commitments 66,151 66,151 — Total $ 1,755,570 $ 1,124,725 $ 630,845 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 September 30, 2024, non-cancellable purchase commitments amounted to $155.9 million, of which $30.0 million related to minimum purchase requirements for supply purchased from contract manufacturers and $125.9 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 $863.8 million. Total long-term debt obligations are $187.5 million. See Note 10 in the Notes to the Financial Statements for further detail of our debt obligations. 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 September 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 September 30, 2024, our remaining co-development funding commitment was $379.1 million. Funding Commitment Funding commitment represents our committed capital related to two equity method investments. As of September 30, 2024, our remaining capital commitment was $8.2 million and is expected to be paid from time to time over the investment period. 39 Table of Contents Capital Commitments We had capital commitments amounting to $66.2 million for the acquisition of property, plant and equipment as of September 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 nine months ended September 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 nine months ended September 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.