Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. In addition to historical information, this discussion and analysis contains forward‑looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward‑looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this report, including those set forth under “Part I—Item 1A—Risk Factors” and under “Forward‑Looking Statements and Market Data” in this Annual Report.
Non-GAAP Financial Measures
We provide certain financial measures that are not defined under accounting principals 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
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:
• 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; and
• Anticipate multiple data readouts for innovative solid tumor programs in 1H 2025.
Recent Business Developments
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.
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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.
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Results of Operations
Comparison of the Years Ended December 31, 2024 and 2023
The following table summarizes our results of operations for the years ended December 31, 2024 and 2023:
Year Ended December 31, Change
2024 2023 $ %
(dollars in thousands)
Revenues
Product revenue, net $ 3,779,546 $ 2,189,852 $ 1,589,694 72.6 %
Collaboration revenue 30,695 268,927 (238,232) (88.6) %
Total revenues 3,810,241 2,458,779 1,351,462 55.0 %
Cost of sales - product 594,089 379,920 214,169 56.4 %
Gross profit 3,216,152 2,078,859 1,137,293 54.7 %
Operating expenses
Research and development 1,953,295 1,778,594 174,701 9.8 %
Selling, general and administrative 1,831,056 1,508,001 323,055 21.4 %
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, 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) %
Income tax expense 111,785 55,872 55,913 100.1 %
Net loss $ (644,786) $ (881,708) $ 236,922 (26.9) %
Revenue
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.
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Total revenue by geographic area is presented as follows (amounts in thousands of U.S. dollars) 1 :
Year Ended December 31,
2024 % 2023 %
United States total revenue $ 1,957,498 51.4 % $ 1,128,219 45.9 %
Product revenue 1,950,530 51.2 % 945,551 38.5 %
Collaboration revenue 6,968 0.2 % 182,668 7.4 %
China total revenue 1,411,307 37.0 % 1,101,951 44.8 %
Product revenue 1,390,699 36.5 % 1,093,091 44.5 %
Collaboration revenue 20,608 0.5 % 8,860 0.3 %
Europe total revenue 362,626 9.5 % 202,014 8.2 %
Product revenue 359,507 9.4 % 122,228 5.0 %
Collaboration revenue 3,119 0.1 % 79,786 3.2 %
ROW total revenue 78,810 2.1 % 26,595 1.1 %
Product revenue 78,810 2.1 % 28,982 1.2 %
Collaboration revenue — — % (2,387) (0.1) %
Total Revenue 3,810,241 100.0 % 2,458,779 100.0 %
1 Net product revenues by geographic area are based upon the location of the customer, and net collaboration revenue is recorded in the jurisdiction in which the related income is expected to be sourced from.
Net product revenue consisted of the following:
Year Ended December 31, Changes
2024 2023 $ %
(dollars in thousands)
BRUKINSA ®
$ 2,644,226 $ 1,290,396 $ 1,353,830 104.9 %
Tislelizumab 620,836 536,620 84,216 15.7 %
XGEVA ®
224,403 92,828 131,575 141.7 %
BLINCYTO ®
74,331 54,342 19,989 36.8 %
KYPROLIS ®
66,171 39,799 26,372 66.3 %
POBEVCY ®
53,509 56,547 (3,038) (5.4) %
REVLIMID ®
36,028 76,018 (39,990) (52.6) %
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 $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. and Europe. 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. U.S. 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%. 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 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.
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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
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 and development milestone fees, and internal research and development expense for the years ended December 31, 2024 and 2023:
Year Ended December 31, Changes
2024 2023 $ %
(dollars in thousands)
External research and development expense:
Cost of development programs $ 539,446 $ 551,417 $ (11,971) (2.2) %
Upfront license and development milestone fees 114,049 46,800 67,249 143.7 %
Amgen co-development expenses 1
75,165 53,315 21,850 41.0 %
Total external research and development expenses 728,660 651,532 77,128 11.8 %
Internal research and development expenses 1,224,635 1,127,062 97,573 8.7 %
Total research and development expenses $ 1,953,295 $ 1,778,594 $ 174,701 9.8 %
Adjusted research and development expense 2
$ 1,668,368 $ 1,558,960 $ 109,408 7.0 %
1. Our co-funding obligation for the development of the pipeline assets under the Amgen collaboration for the year ended December 31, 2024 totaled $148.4 million, of which $75.2 million was recorded as R&D expense. The remaining $73.2 million was recorded as a reduction for 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 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.
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Selling, General and Administrative Expense
Year Ended December 31, Changes
2024 2023 $ %
(dollars in thousands)
Selling, general and administrative expense $ 1,831,056 $ 1,508,001 $ 323,055 21.4 %
Adjusted selling, general and administrative expense 1
$ 1,549,864 $ 1,284,689 $ 265,175 20.6 %
1. Adjusted selling, general and administrative expense is intended to provide investors and others with information about our performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. Refer to Non-GAAP Financial Measures and Non-GAAP Reconciliation in this MD&A for more information about, and a detailed reconciliation of, these items.
Selling, general and administrative expense increased by $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 due to continued investment in the global commercial launch of BRUKINSA primarily in the U.S. and Europe. 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 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. 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, 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, 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. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
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Non-GAAP Reconciliation
Year Ended December 31,
2024 2023
( in thousands)
Reconciliation of GAAP to adjusted cost of sales - products:
GAAP cost of sales - products $ 594,089 $ 379,920
Less: Depreciation 42,707 8,578
Less: Amortization of intangibles 4,729 3,739
Adjusted cost of sales - products $ 546,653 $ 367,603
Reconciliation of GAAP to adjusted research and development:
GAAP research and development $ 1,953,295 $ 1,778,594
Less: Share-based compensation expenses 186,113 163,550
Less: Depreciation 98,814 56,084
Adjusted research and development $ 1,668,368 $ 1,558,960
Reconciliation of GAAP to adjusted selling, general and administrative:
GAAP selling, general and administrative $ 1,831,056 $ 1,508,001
Less: Share-based compensation expenses 255,680 204,038
Less: Depreciation 25,417 15,774
Less: Amortization of intangibles 95 3,500
Adjusted selling, general and administrative $ 1,549,864 $ 1,284,689
Reconciliation of GAAP to adjusted operating expenses
GAAP operating expenses $ 3,784,351 $ 3,286,595
Less: Share-based compensation expenses 441,793 367,588
Less: Depreciation 124,231 71,858
Less: Amortization of intangibles 95 3,500
Adjusted operating expenses $ 3,218,232 $ 2,843,649
Reconciliation of GAAP to adjusted loss from operations:
GAAP loss from operations $ (568,199) $ (1,207,736)
Plus: Share-based compensation expenses 441,793 367,588
Plus: Depreciation 166,938 80,436
Plus: Amortization of intangibles 4,824 7,239
Adjusted income (loss) from operations $ 45,356 $ (752,473)
Liquidity and Capital Resources
The following table represents our cash and debt balances as of December 31, 2024 and 2023:
Year Ended December 31,
2024 2023
(in thousands)
Cash, cash equivalents and restricted cash $ 2,638,747 $ 3,185,984
Total debt $ 1,018,013 $ 885,984
We have incurred annual net losses and negative cash flows from operations since inception, resulting from the cost of funding our research and development programs and selling, general and administrative expenses associated with our operations, as well as supporting the commercialization of our products globally. We incurred net losses of $0.6 billion and $0.9 billion for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $8.6 billion.
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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. 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”). 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 December 31, 2024, the Company had cash remaining related to the STAR Offering proceeds of $0.6 billion.
The following table provides information regarding our cash flows for the years ended December 31, 2024 and 2023:
Year Ended December 31,
2024 2023
(in thousands)
Cash, cash equivalents and restricted cash at beginning of period $ 3,185,984 $ 3,875,037
Net cash used in operating activities (140,631) (1,157,453)
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)
Net decrease in cash, cash equivalents and restricted cash (547,237) (689,053)
Cash, cash equivalents and restricted cash at end of period $ 2,638,747 $ 3,185,984
Operating Activities
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
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
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.
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Effects of Exchange Rates on Cash
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. dollar. 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
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 cash on hand.
Contractual and Other Obligations
The following table summarizes our significant contractual obligations as of December 31, 2024:
Payments Due by Period
Total Short-term Long-term
(in thousands)
Contractual obligations:
Operating lease commitments $ 68,534 $ 19,824 $ 48,710
Purchase commitments 131,944 110,423 21,521
Debt obligations 1,018,013 851,529 166,484
Interest on debt 55,230 39,856 15,374
Co-development funding commitment 335,261 225,251 110,010
Funding commitment 7,404 1,838 5,566
Pension plan 16,405 3,922 12,483
Capital commitments 48,347 48,347 —
Total $ 1,681,138 $ 1,300,990 $ 380,148
Operating Lease Commitments
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. The aggregate future minimum payments under these non-cancelable operating leases are summarized in the table above.
Purchase Commitments
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.
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Debt Obligations and Interest
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 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. Any acceleration would be a matter of months but may impact our ability to refinance our debt obligations if an event of default occurs. As of December 31, 2024, we are in compliance with all covenants of our material debt agreements. 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. 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 Commitments
Under our collaboration with Amgen, we are responsible for co-funding global clinical development costs for the licensed 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/or development services. As of December 31, 2024, our remaining co-development funding commitment was $335.3 million.
Funding Commitment
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.
Pension Plan
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 $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
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 accounting principles generally accepted in the United States of America. 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. 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.
Certain of these estimates are considered critical as they involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our consolidated financial statements. Our critical accounting estimates are summarized below. See Note 2 to our consolidated financial statements included in this Annual Report for a description of our significant accounting policies.
Revenue Recognition
We recognize revenue when we transfer control of goods or services to our customers. Revenue is measured as the amount of consideration we expect to receive in exchange for goods and services. We generate revenue from product sales and revenue transactions with our collaboration partners.
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Product Revenue
To determine the appropriate transaction price for our product sales at the time we recognize a sale to a direct customer, we estimate any rebates, chargebacks or discounts that ultimately will be due to the direct customer and other customers in the distribution chain under the terms of our contracts. Significant judgments are required in making these estimates. We include variable consideration in the transaction price to the extent it is probable that a significant reversal will not occur and estimate variable consideration from rebates, chargebacks, trade discounts and allowances, sales returns allowances, and other incentives using the expected value method.
Estimates for variable consideration for which reserves are established at the time of sale include government and commercial rebates, provisions for acceptance of NRDL pricing, chargebacks, trade discounts and allowances, sales returns allowances and other incentives that are offered within contracts between the Company and our customers, health care providers and other indirect customers. Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as our historical experience, current contractual and statutory requirements, channel inventory levels, specific known market events and trends, industry data and forecasted customer buying and payment patterns. 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. To date, sales returns have not been significant.
Actual amounts of consideration ultimately received may differ from our estimates. We will reassess estimates for variable consideration periodically. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.
Collaboration Revenue
Our collaborative arrangements may contain more than one unit of account, or performance obligation, including grants of licenses to intellectual property rights, agreements to provide research and development services and other deliverables. As part of the accounting for these arrangements, we must develop assumptions that require significant judgments to determine the standalone selling price for each performance obligation identified in the contract.
Standalone selling prices for licenses of intellectual property and the right to access and use intellectual property during an option period performance obligations are determined based on the probability-weighted present value of forecasted cash flows associated with the intellectual property. Stand-alone selling prices for research and development services performance obligations are based on the present value of estimated clinical trial costs plus a reasonable margin.
The estimates of standalone selling prices involve management’s key assumptions such as revenue growth rate, estimated clinical trial costs, mark-up rate, probability of technical and regulatory success, and discount rates. These significant assumptions are forward looking and could be affected by future economic, regulatory and market conditions.
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 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 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 probable.
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 differ from amounts ultimately paid in any one period. To date, we have not made any material adjustments to our prior estimates of research and development expenses.
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Measurement of Deferred Tax Assets
Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as from net operating losses and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income rely heavily on estimates that are based on a number of factors, including historical experience and short-range and long-range business forecasts. 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
We test long-lived assets, which include property, plant and equipment and intangible assets with finite useful lives, for impairment at least annually and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others and without limitation: a significant decline in our expected future cash flows; 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; unanticipated competition; and slower growth rates. For the years ended December 31, 2024, 2023 and 2022, we determined there was no impairment of the value of our long-lived assets.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements included in this Annual Report for information regarding recent accounting pronouncements.