What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-26 · 109 added, 129 removed, 245 unchanged (49% of the section changed)

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

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

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

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

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

Our fourth quarter and full year results demonstrate our tremendous growth as a global oncology powerhouse, reinforced by the continued success of BRUKINSA and the development of one of the most prolific solid tumor pipelines in oncology with multiple data readouts expected in 2025.

BRUKINSA is now the unequivocal leader in new CLL patient starts in the U.S., holds the broadest label of any BTK inhibitor and serves as the cornerstone of our hematology franchise, showing immense promise as a backbone alongside our late stage BCL2 inhibitor, sonrotoclax, and our potential first-in-class BTK CDAC.

We are also building future solid tumor franchises in breast, lung, and gastrointestinal cancers by leveraging our platforms in multi-specific antibodies, protein degraders and antibody-drug conjugates.

2025 marks an inflection point as we anticipate achieving positive GAAP operating income and operating cash flow alongside our intention to change our name to BeOne with our new NASDAQ ticker, ONC.

Key highlights for the full year 2024 are as follows:

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

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

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

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

• Total global revenues of $1.1 billion and $3.8 billion, respectively, in the fourth quarter and full year, increases of 77.8% and 55.0%, respectively, compared to the prior year periods;

• Narrowed GAAP operating loss and achieved full-year positive non-GAAP operating income

• Global BRUKINSA revenues of $828.0 million and $2.6 billion for the fourth quarter and full year 2024, increases of 100.5% and 104.9%, respectively, compared to the prior year periods;

• Progressed pivotal-stage programs for BCL2 inhibitor sonrotoclax and BTK CDAC BGB-16673;

• Advanced six and thirteen NMEs into the clinic in the fourth quarter and full year, respectively;

• Anticipate multiple data readouts for innovative solid tumor programs in 1H 2025.

Recent Business Developments

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

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

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

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

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

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

On January 13, 2025 we participated in the 43 rd Annual J.P.

Morgan Healthcare Conference and announced that we expect to achieve positive operating income for full year 2025 pursuant to generally accepted accounting principles.

On December 27, 2024, we announced that the U.S.

Food and Drug Administration (“FDA”) approved TEVIMBRA ® (tislelizumab-jsgr), in combination with platinum and fluoropyrimidine-based chemotherapy, for the first-line treatment of unresectable or metastatic HER2-negative gastric or gastroesophageal junction adenocarcinoma in adults whose tumors express PD-L1 (≥1).

On December 23, 2024, we announced that our American Depository Shares will begin trading on the Nasdaq Global Select Market under our new ticker symbols “ONC” as of January 2, 2025.

On December 12, 2024, we announced entering into a global licensing agreement with CSPC Zhongqi Pharmaceutical Technology (Shijiazhuang) Co., Ltd.

for SYH2039, a novel methionine adenosyltransferase 2A (MAT2A)-inhibitor being explored for solid tumors.

On November 27, 2024, we announced that the European Commission approved TEVIMBRA ® in combination with chemotherapy for the first-line treatment of esophageal squamous cell carcinoma and gastric or gastroesophageal junction adenocarcinoma.

On November 19, 2024, we announced entering into a settlement agreement with MSN Pharmaceuticals, Inc.

and MSN Laboratories Private Ltd.

resolving patent litigation related to MSN’s Abbreviated New Drug Application seeking approval to market a generic version of BRUKINSA ® (zanubrutinib) in the U.S.

On November 14, 2024, we announced our intention to change the Company’s name to “BeOne Medicines Ltd.” confirming our commitment to develop innovative medicines to eliminate cancer by partnering with the global community to serve as many patients as possible.

Implementation of our new name is subject to shareholder approval to be sought at a future shareholder meeting.

Results of Operations

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Selling, general and administrative 1,831,056 1,508,001 323,055 21.4 %

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

Total operating expenses 3,784,351 3,286,595 497,756 15.1 %

Loss from operations (568,199) (1,207,736) 639,537 (53.0) %

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

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

Interest income, net 47,836 74,009 (26,173) (35.4) %

Other (expense) income, net (12,638) 307,891 (320,529) (104.1) %

Loss before income tax expense (533,001) (825,836) 292,835 (35.5) %

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Net loss $ (644,786) $ (881,708) $ 236,922 (26.9) %

Total revenue increased by $1.0 billion to $2.5 billion for the year ended December 31, 2023, from $1.4 billion for the year ended December 31, 2022, primarily due to increased sales of our internally developed products, BRUKINSA and tislelizumab, as well as increased sales of in-licensed products, most notably from the Amgen products and POBEVCY.

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

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

Year Ended December 31, Changes

2023 2022 $ %

(dollars in thousands)

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

Collaboration revenue:

Material rights revenue 71,980 — 71,980 NM

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

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

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

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

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

Total revenue increased by $1.4 billion to $3.8 billion for the year ended December 31, 2024, from $2.5 billion for the year ended December 31, 2023, primarily due to increased sales of BRUKINSA, as well as increased sales of in-licensed products from Amgen and tislelizumab.

Collaboration revenue decreased year over year due to the recognition of the remaining deferred revenue associated with the Novartis collaborations upon termination of the agreements in 2023.

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

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

Year Ended December 31,

2024 % 2023 %

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36,028 76,018 (39,990) (52.6) %

39,799 13,696 26,103 190.6 %

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

Other 60,042 43,302 16,740 38.7 %

Total product revenue $ 3,779,546 $ 2,189,852 $ 1,589,694 72.6 %

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

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

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

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

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

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

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

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

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

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

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

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

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

Cost of Sales

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

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

Net product revenue was $3.8 billion for the year ended December 31, 2024, compared to $2.2 billion in the prior year, primarily due to increased sales of BRUKINSA globally, driven by significant growth in the U.S.

In addition, product revenues in 2024 were positively impacted by growth from in-licensed products from Amgen and tislelizumab.

Global sales of BRUKINSA totaled $2.6 billion for the year ended December 31, 2024, representing a 104.9% increase compared to the prior year.

sales of BRUKINSA totaled $2.0 billion for the year ended December 31, 2024 compared to $945.6 million in the prior year, representing growth of 106.3%.

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 new patient starts in CLL and all other approved indications.

In addition, U.S.

sales were also positively impacted in the fourth quarter of 2024 by seasonality and the timing of customer order patterns of approximately $30.0 million.

BRUKINSA sales in the EU totaled $358.8 million for the year ended December 31, 2024, representing growth of 193.6% compared to the prior-year period, driven by continued gains in market share across all major markets.

BRUKINSA sales in China totaled $258.1 million for the year ended December 31, 2024, representing growth of 33.2% compared to the prior year.

Sales of tislelizumab totaled $620.8 million for the year ended December 31, 2024, representing a 15.7% increase compared to the prior year.

Certain additional tislelizumab indications have been included in the 2025 NRDL.

There were no price reductions resulting from inclusion.

Collaboration revenue totaled $30.7 million for the year ended December 31, 2024, primarily related to revenue generated under the Novartis broad markets marketing and promotion agreement and royalty revenue under the Amgen collaboration.

Collaboration revenue totaled $268.9 million for the year ended December 31, 2023, primarily related to the recognition of the remaining deferred revenue associated with the former Novartis tislelizumab and ociperlimab collaborations which were terminated in the prior year.

Gross margin on global product sales increased to $3.2 billion, or 84.3% as a percentage of sales, for the year ended December 31, 2024, compared to $1.8 billion, or 82.7% as a percentage of sales, for the year ended December 31, 2023, primarily due to proportionately higher sales mix of BRUKINSA compared to other products in our portfolio, partially offset by the impact of accelerated depreciation expense of $32.7 million resulting from the move to more efficient, larger scale production lines for tislelizumab.

On an adjusted basis, which does not include the accelerated depreciation, gross margin as a percentage of product sales increased to 85.5% for the year ended December 31, 2024, from 83.2% in the comparable period of the prior year.

Research and Development Expense

Research and development expense increased by $174.7 million, or 9.8%, to $2.0 billion for the year ended December 31, 2024, from $1.8 billion for the year ended December 31, 2023.

The following table summarizes the external cost of development programs, upfront license fees, and internal research and development expense for the years ended December 31, 2023 and 2022:

The following table summarizes the external cost of development programs, upfront license and development milestone fees, and internal research and development expense for the years ended December 31, 2024 and 2023:

Year Ended December 31, Changes

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Cost of development programs $ 539,446 $ 551,417 $ (11,971) (2.2) %

Upfront license fees 46,800 68,665 (21,865) (31.8) %

Upfront license and development milestone fees 114,049 46,800 67,249 143.7 %

Amgen co-development expenses 1

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

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

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

Internal research and development expense increased $123.7 million, or 12.3%, to $1.1 billion from $1.0 billion for the year ended December 31, 2022, and was primarily attributable to the expansion of our global development organization and our clinical and preclinical drug candidates, as well as our continued efforts to internalize research and clinical trial activities.

The increase in external research and development expenses for the year ended December 31, 2024 was primarily attributable to higher upfront license and development milestone fees and increases in Amgen co-development expense, partially offset by lower external clinical trial costs.

Internal research and development expense increased $97.6 million, or 8.7%, to $1.2 billion for the year ended December 31, 2024 from $1.1 billion in the prior year, 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 year ended December 31, 2024 is $27.1 million of accelerated depreciation expense related to the move of clinical production to larger, more efficient production lines.

Selling, General and Administrative Expense

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Selling, general and administrative expense increased by $323.1 million, or 21.4%, to $1.8 billion for the year ended December 31, 2024, from $1.5 billion for the year ended December 31, 2023.

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

The increase was due to continued investment in the global commercial launch of BRUKINSA primarily in the U.S.

Selling, general and administrative expenses as a percentage of product sales were 48.4% for the year ended December 31, 2024 compared to 68.9% 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 increased by $21.5 million, or 41.0%, to $74.0 million for the year ended December 31, 2023, compared to $52.5 million for the year ended December 31, 2022.

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

Other Income (Expense), Net

Interest income, net decreased by $26.2 million, or 35.4%, to $47.8 million for the year ended December 31, 2024, compared to $74.0 million for the year ended December 31, 2023.

The decrease in interest income was primarily attributable to lower interest rates earned on our cash and cash equivalents and lower cash balances in interest-bearing investments.

Interest expense increased resulting from a higher debt balance, partially offset by an increase in interest capitalization related to Hopewell construction.

Other (Expense) Income, Net

Other expense, net for the year ended December 31, 2024 was $12.6 million, due to foreign exchange losses, primarily from holding net monetary assets denominated in the RMB at certain U.S.

dollar functional entities, including BeiGene, Ltd.

(the “Parent Company”), and unrealized losses on equity investments, partially offset by government subsidy income.

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

dollar compared to the RMB and the revaluation impact of RMB-denominated deposits held in U.S.

functional currency subsidiaries and unrealized losses on equity investments.

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

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

functional currency subsidiaries and unrealized losses on our equity investments.

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

dollar functional currency subsidiaries and unrealized losses on equity investments.

Income Tax Expense

Income tax expense was $111.8 million for the year ended December 31, 2024 compared with $55.9 million for the year ended December 31, 2023.

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

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

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

The income tax expense for the year ended December 31, 2024 was primarily attributable to higher pre-tax income resulting in current U.S.

tax expense determined after other special tax deductions and research and development tax credits, including tax expense of $12.1 million due to the impact of tax reserves on uncertain tax positions related to research and development tax credits, lower taxable income in China, higher tax expense in certain EU and ROW jurisdictions and the deferred impact of the Company’s unremitted earnings in the U.S.

The Company’s tax expense for 2024 reflects the historic allocation of pre-tax earnings and losses among our significant jurisdictions.

This allocation and resulting tax expense depends on various factors including the level of income and unremitted earnings generated in the U.S., and amount of research and development costs incurred in China and therefore may vary from the historic allocation.

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

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

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

This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.

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Depreciation 25,417 15,774

Amortization of intangibles 95 3,500

Adjusted selling, general and administrative $ 1,549,864 $ 1,284,689

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Amortization of intangibles 4,824 7,239

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

Adjusted income (loss) from operations $ 45,356 $ (752,473)

Liquidity and Capital Resources

The following table represents our cash, short-term investments, and debt balances as of December 31, 2023:

The following table represents our cash and debt balances as of December 31, 2024 and 2023:

Year Ended December 31,

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Cash, cash equivalents and restricted cash $ 2,638,747 $ 3,185,984

Short-term investments $ 2,600 $ 665,251

Total debt $ 1,018,013 $ 885,984

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As of December 31, 2024, we had an accumulated deficit of $8.6 billion.

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

Based on our current operating plan, we expect that our existing cash and cash equivalents as of December 31, 2023 will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months after the date that the financial statements included in this report are issued.

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

of $886.0 million at December 31, 2023.

To date, we have financed our existing operations and investments in long-term assets principally through proceeds from public and private offerings of our securities, proceeds from debt and our collaborations, and since the third quarter of 2024 cash flow from operations.

Based on our current operating plan, we expect that our existing cash and cash equivalents as of December 31, 2024 will enable us to fund our operating expenses and planned long-term investments 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 the Parent Company of $1.0 billion at December 31, 2024.

The majority of those debt obligations, or approximately $762.1 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.

As of December 31, 2024, BeiGene, Ltd.

will require loans or distributions from subsidiaries in fiscal year 2025 to fund its operations (see Note 10 in the Notes to the Financial Statements for further discussion of deferred taxes on the U.S.

unremitted earnings expected to be distributed to the Parent Company).

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 a consolidated basis.

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 RMB192.60 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.

5 unchanged sentences

Net cash used in operating activities (140,631) (1,157,453)

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

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

Net cash (used in) provided by investing activities (548,350) 60,004

Net cash provided by financing activities 193,449 416,478

Net effect of foreign exchange rate changes (51,705) (8,082)

2 unchanged sentences

Operating Activities

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

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

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

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

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

dollar and the related revaluation of foreign currencies held by U.S.

functional currency subsidiaries, partially offset by non-cash charges and adjustments of $374.8 million, and by a decrease in our net operating assets and liabilities of $132.4 million.

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

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

Cash used in operating activities improved versus the prior year due to our significantly improved revenue and $1.1 billion increase in gross margin in the current year and a decrease in cash used to fund working capital, offset by continued funding of our development pipeline, and commercial operations to support our global expansion.

Investing Activities

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

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

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

Investing activities used $548.4 million of cash for the year ended December 31, 2024, compared to $60.0 million of cash provided in the prior year due primarily to a decrease in proceeds from sales and maturities of investment securities, partially offset by a decrease in capital expenditures.

Financing Activities

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

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

Financing activities provided $193.4 million of cash for the year ended December 31, 2024, compared to $416.5 million of cash provided in the prior year period due primarily to a net reduction in short-term debt borrowings.

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

We expect to repay approximately $851.5 million of loans in 2025 and expect to be able to re-finance those on a consistent basis with our historical experience, with the cost of those borrowings depending on prevailing interest rates and credit spreads.

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

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.

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 denominated in U.S.

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

As noted above, we hold RMB denominated cash in our Parent Company (largely arising from the STAR Offering) and incur foreign currency gains or losses when remeasuring such cash to the U.S.

In the year ended December 31, 2024, we incurred realized losses on cash of $16.5 million that is included in the reconciling items between net loss and net cash used in operating activities on the consolidated statements of cash flows primarily related to the remeasurement of RMB denominated cash to USD.

The RMB denominated cash in our Parent Company, however, is required to be used to fund RMB denominated expenditures and thus foreign currency gains or losses on such cash does not affect our ability to fund those expenditures.

We also have substantial operations in China, where the functional currency is the RMB and as such the net cash flows are translated to the U.S.

dollar for financial reporting.

This process generates translation gains and losses on RMB-denominated cash held in China that are included in the effects of foreign exchange rate changes on the consolidated statements of cash flows, as such translation gains and losses are excluded from cash flows from operating, investing and financing activities.

Future Liquidity and Material Cash Requirements

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Operating Lease Commitments

We lease office or manufacturing facilities in Beijing, Shanghai, Suzhou and Guangzhou in China;

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

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

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

Basel, Switzerland;

and office or manufacturing facilities in Beijing, Shanghai, Suzhou and Guangzhou 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.

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Purchase Commitments

As of December 31, 2023, purchase commitments amounted to $169.2 million, of which $41.2 million related to minimum purchase requirements for supply purchased from CMOs and $128.0 million related to binding purchase order obligations of inventory from BMS and Amgen.

We do not have any minimum purchase requirements for inventory from BMS or Amgen.

As of December 31, 2024, purchase commitments amounted to $131.9 million, of which $32.5 million related to minimum purchase requirements for supply purchased from CMOs and $99.4 million related to binding purchase order 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 $688.4 million.

Total debt obligations coming due in the next twelve months are $851.5 million.

Total long-term debt obligations are $166.5 million.

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

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

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

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

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As of December 31, 2024, we are in compliance with all covenants of our material debt agreements.

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

See above regarding Liquidity and Capital Resources and Note 12 in the Notes to the Financial Statements for further detail of our debt obligations.

Interest on bank loans is paid quarterly until the respective loans are fully settled.

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Funding Commitment

Funding commitment represents our committed capital related to two of our equity method investments in the amount of $15.1 million.

Funding commitment represents our committed capital related to two of our equity method investments.

As of December 31, 2024, our remaining capital commitment was $7.4 million and is expected to be paid from time to time over the investment period.

We maintain a defined benefit pension plan in Switzerland.

Funding contributions under the defined benefit pension plan are equivalent to $3.6 million per year based on annual funding contributions in effect as of December 31, 2023 to achieve fully funded status where the market value of plan assets equals the projected benefit obligations.

Future funding requirements will be subject to change as a result of future changes in staffing and compensation levels, various actuarial assumptions and actual investment returns on plan assets.

We maintain a defined benefit pension plan in Switzerland that is collectively financed by employer and employee contributions.

As of December 31, 2024, the plan was unfunded $16.4 million, with $3.9 million of employer contributions expected in 2025.

The timing and amount of future long-term funding requirements will vary as a result of future changes in staffing and compensation levels, various actuarial assumptions and actual investment returns on plan assets.

In the event of an underfunding, Switzerland pension foundations can levy additional contributions on the employer.

Capital Commitments

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

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

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

We had capital commitments amounting to $48.3 million for the acquisition of property, plant and equipment as of December 31, 2024, related to various facilities across the globe.

Critical Accounting Estimates

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We base our sales returns allowance on estimated distributor inventories, customer demand as reported by third-party sources, and actual returns history, as well as other factors, as appropriate.

For newly launched products where actual returns history is not yet available, the sales returns allowance is initially calculated based on benchmarking data from similar products and industry experience.

If the historical or benchmarking data we use to calculate these estimates do not properly reflect future returns, then a change in the allowance would be made in the period in which such a determination is made and revenues in that period could be materially affected.

Any changes from the historical trend rates are considered in determining the current sales return allowance.

To date, sales returns have not been significant.

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At December 31, 2024, our existing deferred revenue balance was less than $1.0 million, and collaboration revenue is not expected to be a significant driver of our financial results until if and when additional agreements are entered into.

Measurement of Research and Development Expenses

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

Measurement of Accrued Research and Development Expenses

Clinical trial costs are a significant component of our research and development expenses and are recognized as the related services are incurred and measured at the cost expected to be paid for those services.

As such, certain of our research and development expenses in any one period are an estimate by us as to the amount incurred for that period but not yet invoiced to us by the service provider.

We have a history of contracting with third parties that perform various clinical trial activities on behalf of us in the ongoing development of our product candidates.

Expenses related to clinical trials are accrued based on our estimates of the actual services performed by the third parties for the respective period.

Expenses related to clinical trials not yet invoiced are accrued based on our estimates of the actual services performed by the third parties for the respective period.

If the contracted amounts are modified (for instance, as a result of changes in the clinical trial protocol or scope of work to be performed), we will modify the related accruals accordingly on a prospective basis.

Revisions in the scope of a contract are charged to expense in the period in which the facts that give rise to the revision become reasonably certain.

The process of estimating our external research and development expenses involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs.

The majority of our service providers invoice us in arrears for services performed, on a pre‑determined schedule or when contractual milestones are met;

however, some require advanced payments.

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

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

Revisions in the scope of a contract are charged to expense in the period in which the facts that give rise to the revision become probable.

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

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

Currently, we are in a three-year cumulative book loss position and as required by ASC 740, we provided a valuation allowance on all of our deferred tax assets.

Subsequent Measurement of Long-Lived Assets

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

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

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

unanticipated competition;

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

What changed 10-K

Item 7. Management’s Discussion and Analysis