PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2019 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents BeiGene, Ltd.'s unaudited condensed consolidated financial statements, covering balance sheets, operations, comprehensive loss, cash flows, and equity, with detailed notes on business and accounting policies [Condensed Consolidated Balance Sheets](index=4&type=section&id=BEIGENE%2C%20LTD.%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (Amounts in thousands of U.S. Dollars) | Item | March 31, 2019 ($) | December 31, 2018 ($) | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | **Assets** ||||| | Cash and cash equivalents | 764,492 | 712,937 | 51,555 | 7.23% | | Short-term investments | 849,167 | 1,068,509 | (219,342) | -20.53% | | Total current assets | 1,796,730 | 1,943,842 | (147,112) | -7.57% | | Property, plant and equipment, net | 197,806 | 157,061 | 40,745 | 25.94% | | Total assets | 2,172,232 | 2,249,684 | (77,452) | -3.44% | | **Liabilities** ||||| | Total current liabilities | 238,809 | 246,452 | (7,643) | -3.10% | | Total non-current liabilities | 310,744 | 249,585 | 61,159 | 24.50% | | Total liabilities | 549,553 | 496,037 | 53,516 | 10.79% | | **Equity** ||||| | Total BeiGene, Ltd. shareholders' equity | 1,608,769 | 1,739,202 | (130,433) | -7.50% | | Total equity | 1,622,679 | 1,753,647 | (130,968) | -7.47% | [Condensed Consolidated Statements of Operations](index=6&type=section&id=BEIGENE%2C%20LTD.%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) This section outlines the company's revenues, expenses, and net loss over specific periods, reflecting operational performance Condensed Consolidated Statements of Operations (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | Three Months Ended March 31, 2018 ($) | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | Product revenue, net | 57,421 | 23,250 | 34,171 | 147.0% | | Collaboration revenue | 20,412 | 9,294 | 11,118 | 119.6% | | Total revenues | 77,833 | 32,544 | 45,289 | 139.1% | | Cost of sales - product | (15,261) | (4,550) | (10,711) | 235.4% | | Research and development | (178,351) | (109,700) | (68,651) | 62.6% | | Selling, general and administrative | (57,645) | (28,915) | (28,730) | 99.4% | | Total expenses | (251,588) | (143,353) | (108,235) | 75.5% | | Loss from operations | (173,755) | (110,809) | (62,946) | 56.8% | | Net loss | (168,069) | (105,116) | (62,953) | 59.9% | | Net loss attributable to BeiGene, Ltd. | (167,640) | (104,596) | (63,044) | 60.3% | | Net loss per share, basic and diluted | (0.22) | (0.16) | (0.06) | 37.5% | | Net loss per American Depositary Share ("ADS"), basic and diluted | (2.81) | (2.03) | (0.78) | 38.4% | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=BEIGENE%2C%20LTD.%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20LOSS) This section presents the company's net loss and other comprehensive income/loss components, providing a complete view of changes in equity from non-owner sources Condensed Consolidated Statements of Comprehensive Loss (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | Three Months Ended March 31, 2018 ($) | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | Net loss | (168,069) | (105,116) | (62,953) | 59.9% | | Other comprehensive income, net of tax of nil: ||||| | Foreign currency translation adjustments | 3,755 | 272 | 3,483 | 1280.5% | | Unrealized holding gain, net | 685 | 329 | 356 | 108.2% | | Comprehensive loss | (163,629) | (104,515) | (59,114) | 56.6% | | Comprehensive loss attributable to BeiGene, Ltd. | (163,094) | (104,059) | (59,035) | 56.7% | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=BEIGENE%2C%20LTD.%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section details the company's cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | Three Months Ended March 31, 2018 ($) | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | Net cash used in operating activities | (171,975) | (104,501) | (67,474) | 64.6% | | Net cash provided by (used in) investing activities | 172,416 | (394,352) | 566,768 | -143.7% | | Net cash provided by financing activities | 42,964 | 763,901 | (720,937) | -94.4% | | Net increase in cash, cash equivalents, and restricted cash | 47,670 | 268,492 | (220,822) | -82.2% | | Cash, cash equivalents, and restricted cash at end of period | 788,383 | 508,094 | 280,289 | 55.2% | [Consolidated Statements of Shareholders' Equity](index=10&type=section&id=BEIGENE%2C%20LTD.%20CONSOLIDATED%20STATEMENTS%20OF%20SHAREHOLDERS%27%20EQUITY) This section tracks changes in the company's shareholders' equity, including ordinary shares, additional paid-in capital, and accumulated deficit Consolidated Statements of Shareholders' Equity (Amounts in thousands of U.S. Dollars) | Item | Balance at December 31, 2018 ($) | Balance at March 31, 2019 ($) | Change ($) | |:---|:---|:---|:---| | Ordinary Shares Amount | 77 | 78 | 1 | | Additional Paid-In Capital | 2,744,814 | 2,777,474 | 32,660 | | Accumulated Other Comprehensive Income | 1,526 | 6,072 | 4,546 | | Accumulated Deficit | (1,007,215) | (1,174,855) | (167,640) | | Total BeiGene, Ltd. shareholders' equity | 1,739,202 | 1,608,769 | (130,433) | | Noncontrolling Interests | 14,445 | 13,910 | (535) | | Total Equity | 1,753,647 | 1,622,679 | (130,968) | [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=BEIGENE%2C%20LTD.%20NOTES%20TO%20THE%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies and specific line items [Note 1. Description of Business, Basis of Presentation and Consolidation and Significant Accounting Policies](index=11&type=section&id=1.%20Description%20of%20Business%2C%20Basis%20of%20Presentation%20and%20Consolidation%20and%20Significant%20Accounting%20Policies) This note describes BeiGene, Ltd.'s business, basis of financial statement presentation, consolidation principles, and significant accounting policies - BeiGene, Ltd. is a commercial-stage biotechnology company focused on developing and commercializing innovative molecularly targeted and immuno-oncology drugs for cancer treatment. The company is dual-listed on NASDAQ (February 2016) and HKEx (August 2018)[21](index=21&type=chunk)[22](index=22&type=chunk) - The company adopted new lease accounting standards (ASU No. 2016-2 and related ASUs) effective January 1, 2019, recognizing a lease liability of **$27.4 million** and corresponding right-of-use (ROU) assets of **$26.0 million**. Land use rights of **$45.1 million** were reclassified to ROU assets. This adoption did not impact the statements of operations or cash flows[31](index=31&type=chunk)[32](index=32&type=chunk)[35](index=35&type=chunk) [Note 2. Fair Value Measurements](index=14&type=section&id=2.%20Fair%20Value%20Measurements) This note details the fair value measurements of the company's financial assets and liabilities, categorized by valuation inputs Fair Value of Financial Assets (Amounts in thousands of U.S. Dollars) | Item | March 31, 2019 ($) | December 31, 2018 ($) | |:---|:---|:---| | **Short-term investments:** ||| | U.S. treasury securities | 825,435 | 1,068,509 | | U.S. agency securities | 23,732 | — | | **Cash equivalents:** ||| | U.S. treasury securities | 124,856 | — | | Money market funds | 59,884 | 159,810 | | **Total** | **1,033,907** | **1,228,319** | [Note 3. Research and Development Collaborative Arrangements](index=15&type=section&id=3.%20Research%20and%20Development%20Collaborative%20Arrangements) This note outlines the company's research and development collaboration agreements and the associated revenue recognition Collaboration Revenue (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | Three Months Ended March 31, 2018 ($) | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | Reimbursement of research and development costs | 18,174 | 7,555 | 10,619 | 140.6% | | Research and development service revenue | 2,238 | 1,739 | 499 | 28.7% | | **Total** | **20,412** | **9,294** | **11,118** | **119.6%** | - Collaboration revenue primarily stems from an agreement with Celgene for tislelizumab, including R&D reimbursement and service revenue. A prior agreement with Merck KGaA was terminated in December 2018[53](index=53&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) [Note 4. Business Combinations and Asset Acquisitions](index=16&type=section&id=4.%20Business%20Combinations%20and%20Asset%20Acquisitions) This note describes the company's business combinations and asset acquisitions, including their financial impact - In September 2018, BeiGene (Guangzhou) Co., Ltd. acquired Baiji Shenzhou (Guangzhou) Pharmaceuticals Co., Ltd. for **$0.6 million**, primarily for a drug distribution license, classified as an asset acquisition[58](index=58&type=chunk) - In October 2018, BeiGene (Hong Kong) Co., Ltd. acquired Beijing Innerway Bio-tech Co., Ltd. for **$38.7 million**, primarily for a building and associated land use right, also classified as an asset acquisition[59](index=59&type=chunk)[60](index=60&type=chunk) [Note 5. Restricted Cash and Short-term Investments](index=16&type=section&id=5.%20Restricted%20Cash%20and%20Short-term%20Investments) This note provides details on the company's restricted cash balances and short-term investment portfolio - As of March 31, 2019, restricted cash totaled **$23.9 million**, comprising secured deposits for letters of credit and as security for a long-term bank loan[61](index=61&type=chunk) Short-term Investments (Available-for-Sale Debt Securities) (Amounts in thousands of U.S. Dollars) | Item | March 31, 2019 Fair Value ($) | December 31, 2018 Fair Value ($) | |:---|:---|:---|\n| U.S. treasury securities | 825,435 | 1,068,509 | | U.S. agency securities | 23,732 | — | | **Total** | **849,167** | **1,068,509** | [Note 6. Inventories](index=17&type=section&id=6.%20Inventories) This note details the composition and valuation of the company's inventory balances - Inventories, consisting entirely of finished goods product purchased from Celgene for distribution in the PRC, decreased from **$16.2 million** as of December 31, 2018, to **$13.1 million** as of March 31, 2019[64](index=64&type=chunk) [Note 7. Property, plant and equipment](index=17&type=section&id=7.%20Property%2C%20plant%20and%20equipment) This note provides information on the company's property, plant, and equipment, including additions, disposals, and depreciation Property, Plant and Equipment, Net (Amounts in thousands of U.S. Dollars) | Item | March 31, 2019 ($) | December 31, 2018 ($) | |:---|:---|:---|\n| Property, plant and equipment, at cost | 82,550 | 77,296 | | Less accumulated depreciation | (23,267) | (19,722) | | Construction in progress | 138,523 | 99,487 | | **Property, plant and equipment, net** | **197,806** | **157,061** | - Construction in progress, primarily for the Guangzhou manufacturing facility, increased by **$39.0 million** to **$138.5 million** as of March 31, 2019. Depreciation expense for the three months ended March 31, 2019, was **$3.1 million**, up from **$2.0 million** in the prior year period[65](index=65&type=chunk) [Note 8. Manufacturing Facility in Guangzhou](index=19&type=section&id=8.%20Manufacturing%20Facility%20in%20Guangzhou) This note describes the joint venture and funding for the company's commercial-scale biologics manufacturing facility in Guangzhou - BeiGene HK and Guangzhou GET Technology Development Co., Ltd. (GET) established BeiGene Biologics, a joint venture, to build a commercial scale biologics manufacturing facility in Guangzhou. BeiGene HK holds a **95%** equity interest[67](index=67&type=chunk)[68](index=68&type=chunk)[70](index=70&type=chunk) - As of March 31, 2019, **$143.3 million** in cash and cash equivalents and **$23.9 million** in restricted cash were held by BeiGene Biologics for facility construction and R&D funding[71](index=71&type=chunk) [Note 9. Leases](index=19&type=section&id=9.%20Leases) This note details the company's lease arrangements, including right-of-use assets, lease liabilities, and lease costs - The Company has operating leases for office and manufacturing facilities in the US, Switzerland, and China, with remaining terms up to five years. Land use rights in Guangzhou and Changping, Beijing, are also treated as operating leases[72](index=72&type=chunk) Lease Costs (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | |:---|:---|\n| Operating lease cost | 3,393 | | Variable lease cost | 297 | | Short-term lease cost | 133 | | **Total lease cost** | **3,823** | Supplemental Balance Sheet Information Related to Leases (Amounts in thousands of U.S. Dollars) | Item | As of March 31, 2019 ($) | |:---|:---|\n| Operating lease right-of-use assets | 27,518 | | Land use rights, net | 45,106 | | **Total operating lease right-of-use assets** | **72,624** | | Current portion of operating lease liabilities | 9,451 | | Operating lease liabilities | 19,545 | | **Total lease liabilities** | **28,996** | [Note 10. Intangible Assets](index=21&type=section&id=10.%20Intangible%20Assets) This note provides information on the company's intangible assets, including their nature, carrying amounts, and amortization Intangible Assets, Net (Amounts in thousands of U.S. Dollars) | Item | March 31, 2019 Net ($) | December 31, 2018 Net ($) | |:---|:---|:---|\n| Product distribution rights | 6,313 | 6,500 | | Trading license | 528 | 672 | | **Total finite-lived intangible assets** | **6,841** | **7,172** | - Amortization expense for intangible assets increased to **$0.3 million** for the three months ended March 31, 2019, from **$0.2 million** in the prior year period. Expected amortization for the remainder of 2019 is approximately **$1.0 million**[80](index=80&type=chunk) [Note 11. Income Taxes](index=21&type=section&id=11.%20Income%20Taxes) This note details the company's income tax expense, deferred tax assets and liabilities, and unrecognized tax benefits - The Company reported an income tax expense of **$0.5 million** for the three months ended March 31, 2019, a shift from an income tax benefit of **$3.4 million** in the same period of 2018. This change is primarily due to increased income in U.S. and certain China subsidiaries, offset by U.S. R&D tax credits[81](index=81&type=chunk) - Valuation allowances have been provided for deferred tax assets in Australia, Switzerland, and certain China subsidiaries where realization is not considered more likely than not. Gross unrecognized tax benefits were **$2.6 million** as of March 31, 2019[82](index=82&type=chunk)[83](index=83&type=chunk) [Note 12. Supplemental Balance Sheet Information](index=22&type=section&id=12.%20Supplemental%20Balance%20Sheet%20Information) This note provides additional detail on specific balance sheet accounts, such as prepaid expenses and accrued liabilities Prepaid Expenses and Other Current Assets (Amounts in thousands of U.S. Dollars) | Item | March 31, 2019 ($) | December 31, 2018 ($) | |:---|:---|:---|\n| Prepaid research and development costs | 66,817 | 58,673 | | Prepaid taxes | 9,078 | 10,479 | | Interest receivable | 2,580 | 3,096 | | Other | 11,466 | 9,694 | | **Total** | **89,941** | **81,942** | Accrued Expenses and Other Payables (Amounts in thousands of U.S. Dollars) | Item | March 31, 2019 ($) | December 31, 2018 ($) | |:---|:---|:---|\n| Compensation related | 18,540 | 35,887 | | External research and development activities related | 46,889 | 34,588 | | Commercial activities | 9,437 | 10,433 | | Individual income tax and other taxes | 8,626 | 8,030 | | Sales rebates and returns related | 3,366 | 4,749 | | Professional fees and other | 3,879 | 6,727 | | **Total** | **90,737** | **100,414** | [Note 13. Long-term Bank Loans](index=23&type=section&id=13.%20Long-term%20Bank%20Loans) This note describes the company's long-term bank loan agreements, including terms, outstanding balances, and interest expenses - BeiGene (Suzhou) has a RMB120,000 loan at **7% interest**, with **$8.9 million** (RMB60,000) remaining, due September 30, 2019[91](index=91&type=chunk) - BeiGene Guangzhou Factory has a nine-year RMB580,000 loan with China Construction Bank at a floating interest rate (**4.9% for Q1 2019**). As of March 31, 2019, **$77.5 million** (RMB520,000) has been drawn, with **$36.7 million** drawn in Q1 2019[92](index=92&type=chunk) - Interest expense recognized for Q1 2019 was **$0.9 million**, with **$0.6 million** capitalized[93](index=93&type=chunk) [Note 14. Shareholder Loan](index=23&type=section&id=14.%20Shareholder%20Loan) This note details the shareholder loan agreement, including its terms, interest rate, and debt-to-equity conversion feature - BeiGene Biologics has a RMB900,000 shareholder loan from GET, bearing **8% annual interest**, with a **72-month term** ending April 13, 2023. The loan includes a debt-to-equity conversion feature[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) - Total interest expense from the shareholder loan was **$2.6 million** for Q1 2019, with **$0.8 million** capitalized[99](index=99&type=chunk) [Note 15. Product Revenue](index=24&type=section&id=15.%20Product%20Revenue) This note provides a breakdown of the company's net product revenue and its primary sources Net Product Sales (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | Three Months Ended March 31, 2018 ($) | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | Product revenue – gross | 58,536 | 23,485 | 35,051 | 149.2% | | Less: Rebates and sales returns | (1,115) | (235) | (880) | 374.5% | | **Product revenue – net** | **57,421** | **23,250** | **34,171** | **147.0%** | - Net product revenue is derived from sales of ABRAXANE®, REVLIMID®, and VIDAZA® in China under a distribution license from Celgene[100](index=100&type=chunk) [Note 16. Loss Per Share](index=25&type=section&id=16.%20Loss%20Per%20Share) This note presents the calculation of basic and diluted net loss per share for the company Loss Per Share (Amounts in thousands of U.S. Dollars, except per share data) | Item | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | |:---|:---|:---|\n| Net loss attributable to BeiGene, Ltd. | (167,640) | (104,596) | | Weighted average shares outstanding, basic and diluted | 774,750,255 | 670,510,605 | | Net loss per share, basic and diluted | (0.22) | (0.16) | | Net loss per American Depositary Share ("ADS"), basic and diluted | (2.81) | (2.03) | [Note 17. Share-Based Compensation Expense](index=25&type=section&id=17.%20Share-Based%20Compensation%20Expense) This note details the company's share-based compensation plans, grants, and associated expenses - The company granted options for **590,967 ordinary shares** and restricted share units for **2,266,550 ordinary shares** under the 2016 Plan during Q1 2019[107](index=107&type=chunk) Share-Based Compensation Expense (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | Three Months Ended March 31, 2018 ($) | |:---|:---|:---|\n| Research and development | 15,771 | 12,052 | | Selling, general and administrative | 10,621 | 5,344 | | **Total** | **26,392** | **17,396** | [Note 18. Accumulated Other Comprehensive Income](index=26&type=section&id=18.%20Accumulated%20Other%20Comprehensive%20Income) This note outlines the components and movements of the company's accumulated other comprehensive income Movement of Accumulated Other Comprehensive Income (Amounts in thousands of U.S. Dollars) | Item | Foreign Currency Translation Adjustments ($) | Gains on Available-for-Sale Securities ($) | Total ($) | |:---|:---|:---|:---|\n| Balance as of December 31, 2018 | (212) | 1,738 | 1,526 | | Other comprehensive income before reclassifications | 3,861 | 1,495 | 5,356 | | Amounts reclassified from accumulated other comprehensive income | — | (810) | (810) | | Net-current period other comprehensive income | 3,861 | 685 | 4,546 | | **Balance as of March 31, 2019** | **3,649** | **2,423** | **6,072** | [Note 19. Shareholders' Equity](index=26&type=section&id=19.%20Shareholders%27%20Equity) This note provides details on changes in the company's shareholders' equity, including capital raises and share issuances - On August 8, 2018, the Company completed an IPO on the Hong Kong Stock Exchange and a follow-on public offering, selling **65,600,000 ordinary shares** for net proceeds of **$869.7 million**[114](index=114&type=chunk) - On January 22, 2018, the Company completed a follow-on public offering of ADSs, representing **96,534,750 ordinary shares**, for net proceeds of **$757.6 million**[115](index=115&type=chunk) [Note 20. Restricted Net Assets](index=28&type=section&id=20.%20Restricted%20Net%20Assets) This note explains restrictions on the net assets of PRC subsidiaries and their impact on dividend payments - PRC statutory laws and regulations restrict the ability of PRC subsidiaries to pay dividends, requiring at least **10%** of annual after-tax profit to be set aside as statutory reserves until it reaches **50%** of registered capital[117](index=117&type=chunk)[118](index=118&type=chunk) - As of March 31, 2019, restricted net assets of PRC subsidiaries amounted to **$105.7 million**, up from **$93.3 million** as of December 31, 2018[120](index=120&type=chunk) [Note 21. Commitments and Contingencies](index=28&type=section&id=21.%20Commitments%20and%20Contingencies) This note discloses the company's significant purchase and capital commitments and potential contingencies - As of March 31, 2019, the Company had purchase commitments of **$56.1 million** for finished goods inventory from Celgene[121](index=121&type=chunk) - Capital commitments amounted to **$26.6 million**, mainly for the BeiGene Guangzhou Factory's manufacturing facility[122](index=122&type=chunk) [Note 22. Segment and geographic information](index=28&type=section&id=22.%20Segment%20and%20geographic%20information) This note provides information on the company's operating segments and geographic distribution of revenues and assets - The Company operates in one segment, with long-lived assets substantially located in the PRC[123](index=123&type=chunk) Total Net Revenues by Geographic Area (Amounts in thousands of U.S. Dollars) | Geographic Area | Three Months Ended March 31, 2019 ($) | Three Months Ended March 31, 2018 ($) | |:---|:---|:---|\n| PRC | 57,421 | 23,250 | | United States | 13,268 | 6,041 | | Other | 7,144 | 3,253 | | **Total** | **77,833** | **32,544** | [Note 23. Subsequent Event](index=28&type=section&id=23.%20Subsequent%20Event) This note describes significant events that occurred after the balance sheet date but before the financial statements were issued - On April 9, 2019, the Company entered into a global co-development and collaboration agreement with BioAtla LLC for the CAB-CTLA-4 antibody (BA3071), involving an upfront payment of **$20 million** and potential milestone payments and royalties[123](index=123&type=chunk)[125](index=125&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and operational results for the three months ended March 31, 2019, compared to the same period in 2018, highlighting revenue drivers, expense trends, liquidity, capital resources, and critical accounting policies [Overview](index=30&type=section&id=Overview) This section provides a high-level summary of BeiGene's business, strategic focus, and global operational presence - BeiGene is a commercial-stage biotechnology company focused on developing and commercializing innovative molecularly-targeted and immuno-oncology drugs for cancer treatment[128](index=128&type=chunk) - Lead drug candidates include zanubrutinib (BTK inhibitor), tislelizumab (PD-1 inhibitor), and pamiparib (PARP1/PARP2 inhibitor), all in Phase 2 or 3 pivotal trials globally and/or in China[128](index=128&type=chunk) - The company has evolved into a fully-integrated global biotechnology company with operations in China, the United States, Europe, and Australia, including a global clinical development team and growing commercial team[129](index=129&type=chunk) [Recent Developments](index=31&type=section&id=Recent%20Developments) This section highlights key recent corporate and R&D collaboration agreements and their financial implications - On April 9, 2019, BeiGene entered a global co-development and collaboration agreement with BioAtla LLC for the CAB-CTLA-4 antibody (BA3071), involving an upfront payment of **$20 million** and potential milestone payments and royalties[132](index=132&type=chunk) - On March 6, 2019, the company announced a global R&D collaboration with Ambrx, Inc. for next-generation biologics, with Ambrx receiving an upfront payment of **$10 million** and eligibility for additional upfront, milestone, and royalty payments[133](index=133&type=chunk) [Components of Operating Results](index=31&type=section&id=Components%20of%20Operating%20Results) This section explains the key drivers and components of the company's revenues and operating expenses - Revenue consists of product sales (ABRAXANE®, REVLIMID®, VIDAZA® in China) and collaboration revenue (upfront license fees, R&D reimbursement from Celgene). Product sales are expected to increase in 2019[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) - Research and development expenses include costs for CROs, manufacturing, preclinical/clinical activities, regulatory operations, employee-related expenses, and in-process R&D. Key internally-developed drug candidates are zanubrutinib, tislelizumab, and pamiparib[139](index=139&type=chunk)[140](index=140&type=chunk) - Selling, general and administrative expenses cover product promotion, distribution, salaries, professional fees, and other administrative costs. These are expected to increase due to commercialization activities and global expansion[147](index=147&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, detailing changes in revenues, expenses, and net loss over the reporting periods Summary of Results of Operations (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | Three Months Ended March 31, 2018 ($) | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | Total revenues | 77,833 | 32,544 | 45,289 | 139% | | Total expenses | (251,588) | (143,353) | (108,235) | 76% | | Loss from operations | (173,755) | (110,809) | (62,946) | 57% | | Net loss attributable to BeiGene, Ltd. | (167,640) | (104,596) | (63,044) | 60% | - Net product revenue increased by **$34.2 million** (**147%**) to **$57.4 million**, driven by sales of ABRAXANE®, REVLIMID®, and VIDAZA® in China[151](index=151&type=chunk) - Research and development expense increased by **$68.7 million** (**62.6%**) to **$178.4 million**, primarily due to the advancement and expansion of clinical trials for zanubrutinib, tislelizumab, and lifirafenib, and increased employee salaries and benefits[155](index=155&type=chunk)[156](index=156&type=chunk) - Selling, general and administrative expense increased by **$28.7 million** (**99.4%**) to **$57.6 million**, mainly due to hiring more personnel for commercial expansion in China and increased share-based compensation[157](index=157&type=chunk)[159](index=159&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's cash position, funding requirements, and ability to meet its short-term and long-term obligations - The company incurred net losses of **$168.1 million** and **$105.1 million** for the three months ended March 31, 2019 and 2018, respectively, with an accumulated deficit of **$1.2 billion** as of March 31, 2019[163](index=163&type=chunk) Cash Flow Summary (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | Three Months Ended March 31, 2018 ($) | |:---|:---|:---|\n| Net cash used in operating activities | (171,975) | (104,501) | | Net cash provided by (used in) investing activities | 172,416 | (394,352) | | Net cash provided by financing activities | 42,964 | 763,901 | | Net increase in cash, cash equivalents, and restricted cash | 47,670 | 268,492 | | Cash, cash equivalents, and restricted cash at end of period | 788,383 | 508,094 | - As of March 31, 2019, cash, cash equivalents, restricted cash, and short-term investments totaled **$1.6 billion**. The company expects existing capital to fund operations for at least the next **12 months** but will require substantial additional funding for global development and commercialization[164](index=164&type=chunk)[174](index=174&type=chunk) [Contractual Obligations and Commitments](index=40&type=section&id=Contractual%20Obligations%20and%20Commitments) This section outlines the company's significant contractual obligations and commitments, including their timing and amounts Significant Contractual Obligations as of March 31, 2019 (Amounts in thousands of U.S. Dollars) | Contractual obligations | Total ($) | Less Than 1 Year ($) | 1–3 Years ($) | 3–5 Years ($) | More Than 5 Years ($) | |:---|:---|:---|:---|:---|:---|\n| Operating lease commitments | 33,103 | 8,675 | 18,706 | 5,618 | 104 | | Purchase commitments | 56,135 | 56,135 | — | — | — | | Debt obligations | 241,594 | 8,940 | 267 | 162,922 | 69,465 | | Capital commitments | 26,647 | 26,647 | — | — | — | | **Total** | **357,479** | **100,397** | **18,973** | **168,540** | **69,569** | [Critical Accounting Policies and Significant Judgments and Estimates](index=41&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) This section discusses the accounting policies that require management's most difficult, subjective, or complex judgments - No material changes to critical accounting policies were reported for the three months ended March 31, 2019, compared to the Annual Report[188](index=188&type=chunk) [Recent Accounting Pronouncements](index=41&type=section&id=Recent%20Accounting%20Pronouncements) This section provides an overview of new accounting standards adopted or pending adoption and their potential impact - Information regarding recent accounting pronouncements is detailed in Note 1 to the condensed consolidated financial statements[190](index=190&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the company's exposure to market risks, including interest rate risk, credit risk, and foreign currency exchange rate risk, and the potential impact of these risks on its financial condition and results of operations - The company is exposed to interest rate risk, credit risk (from distributors and financial institutions), and foreign currency exchange rate risk (RMB, AUD, CHF, EUR)[191](index=191&type=chunk)[195](index=195&type=chunk) - A hypothetical **100-basis point** change in market interest rates would impact the fair value of the investment portfolio by **$2.9 million** as of March 31, 2019[193](index=193&type=chunk) - RMB is not freely convertible for capital account transactions, and its value is affected by China's economic conditions and foreign exchange policies, posing risks for U.S. dollar conversions and financial reporting[196](index=196&type=chunk)[197](index=197&type=chunk)[199](index=199&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of March 31, 2019, and notes the implementation of a company-wide ERP system as a significant change in internal control over financial reporting - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2019[202](index=202&type=chunk) - A company-wide Enterprise Resource Planning (ERP) system was implemented in Q1 2019, leading to changes in internal controls to maintain effectiveness[203](index=203&type=chunk) PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, and other disclosures relevant to the company's operations [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings that are believed to have a material adverse effect on its business, financial condition, results of operations, or cash flows, though litigation can still have an adverse impact - The company is not currently involved in any legal proceedings that are expected to have a material adverse effect on its business[206](index=206&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks that could adversely affect the company's business, including those related to clinical development, regulatory approvals, commercialization, financial position, intellectual property, reliance on third parties, industry operations, doing business in the PRC, and risks specific to its American Depositary Shares and Ordinary Shares - The company faces substantial risks in clinical development and regulatory approval, including potential delays, failures to demonstrate safety and efficacy, and the lengthy, expensive, and unpredictable nature of the approval process[208](index=208&type=chunk)[214](index=214&type=chunk)[217](index=217&type=chunk)[226](index=226&type=chunk) - Commercialization risks include failure to achieve market acceptance, limited manufacturing capability, reliance on third-party manufacturers and distributors, and intense competition from other pharmaceutical companies[277](index=277&type=chunk)[282](index=282&type=chunk)[289](index=289&type=chunk)[378](index=378&type=chunk)[397](index=397&type=chunk) - Financial risks include a limited operating history, significant net losses, the need for substantial additional financing, potential dilution from future capital raises, and exposure to foreign currency fluctuations[309](index=309&type=chunk)[311](index=311&type=chunk)[315](index=315&type=chunk)[322](index=322&type=chunk)[324](index=324&type=chunk) - Intellectual property risks involve challenges in obtaining and maintaining patent protection globally, potential infringement lawsuits, and the difficulty of protecting trade secrets[333](index=333&type=chunk)[344](index=344&type=chunk)[348](index=348&type=chunk)[363](index=363&type=chunk) - Operational risks include dependence on key personnel, challenges in managing rapid organizational growth, compliance costs as a public company, and potential liabilities from product claims, environmental issues, and cybersecurity breaches[400](index=400&type=chunk)[406](index=406&type=chunk)[412](index=412&type=chunk)[425](index=425&type=chunk)[429](index=429&type=chunk)[443](index=443&type=chunk) - Risks specific to doing business in the PRC include a highly regulated and evolving pharmaceutical industry, political and economic uncertainties, legal interpretation and enforcement ambiguities, and restrictions on currency exchange and data transfer[458](index=458&type=chunk)[462](index=462&type=chunk)[464](index=464&type=chunk)[475](index=475&type=chunk)[492](index=492&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=83&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[555](index=555&type=chunk) [Item 3. Defaults Upon Senior Securities](index=83&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities to report[555](index=555&type=chunk) [Item 4. Mine Safety Disclosures](index=83&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Mine Safety Disclosures are not applicable to the company[555](index=555&type=chunk) [Item 5. Other Information](index=83&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report for the period - No other information to report[555](index=555&type=chunk) [Item 6. Exhibits](index=83&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed as part of, or incorporated by reference into, the Quarterly Report on Form 10-Q, including certifications and XBRL financial statements - The exhibit index includes certifications from the Principal Executive Officer and Principal Financial Officer, and XBRL formatted financial statements[556](index=556&type=chunk)[557](index=557&type=chunk) [SIGNATURES](index=85&type=section&id=SIGNATURES) This section contains the official signatures certifying the accuracy and completeness of the report

Drug Development and Regulatory Approval - The company has invested a significant portion of its efforts and financial resources in the development of its existing drug candidates, which are still in clinical development [302]. - The company received a Breakthrough Therapy designation for zanubrutinib for the treatment of adult patients with mantle cell lymphoma (MCL) in January 2019, but this designation does not guarantee a faster development process or ultimate approval by the FDA [316]. - The regulatory approval processes in the U.S., China, and Europe are lengthy and unpredictable, typically taking many years following the commencement of preclinical studies and clinical trials [318]. - The company may experience significant delays in obtaining regulatory approval for its drug candidates if it is required to conduct additional clinical trials or if the results of these trials are not positive [313]. - The company faces risks related to clinical development, including difficulties in patient enrollment and competition with other clinical trials for drug candidates in the same therapeutic areas [306]. - The company must demonstrate the safety and efficacy of its drug candidates through extensive clinical trials before obtaining regulatory approval, which involves substantial time and financial resources [311]. - The company may incur additional costs or experience delays in completing the development and commercialization of its drug candidates if clinical trials fail to demonstrate safety and efficacy [310]. - The company’s ability to commercialize its drug candidates may be impaired if significant clinical trial or regulatory delays occur [314]. - The company’s drug candidates could be delayed or fail to receive regulatory approval due to various factors, including failure to demonstrate safety and effectiveness [320]. - The company’s business will be substantially harmed if it is ultimately unable to obtain regulatory approval for its drug candidates [317]. - The company’s drug candidates are classified as Category 1 in China, which is favorable for regulatory review and approval [325]. - The absence of patent-linkage and data exclusivity in China increases the risk of early generic competition [328]. - The FDA and NMPA may impose significant penalties for non-compliance with regulatory requirements, which could adversely affect the company’s operations [338]. - The company’s drugs will be subject to ongoing regulatory obligations, which may result in significant additional expenses [338]. - The company has reported numerous adverse events (AEs) in clinical trials, some leading to patient death, which could impact recruitment and trial completion [335]. - Regulatory authorities may require post-marketing studies or impose restrictions on marketing if safety issues arise [343]. - The company may face significant regulatory delays if safety or efficacy issues arise with combination therapies [347]. - The regulatory environment is evolving rapidly, and changes could affect the commercial advantages of Category 1 designations [327]. - Delays in clinical trials could significantly harm the commercial prospects and financial condition of the company [323]. - The regulatory approval process for drugs varies significantly by country, impacting the commercial launch and revenue generation [351]. Financial Performance and Funding - The company has incurred significant net losses since inception, with an accumulated deficit of $1.0 billion as of December 31, 2018 [407]. - The company recorded negative net cash flows from operating activities of $547.7 million in 2018, primarily due to a net loss of $674.0 million [413]. - The company expects to continue incurring losses for the foreseeable future as it expands drug development and seeks regulatory approvals [408]. - The company has generated revenues from the sale of drugs in China licensed from Celgene since September 2017, but has no internally-developed products approved for commercial sale [405]. - The company anticipates requiring further funding through public or private offerings, debt financing, and collaboration arrangements [415]. - Future funding requirements will depend on clinical trial progress, regulatory approvals, and marketing costs [415][416]. - The company generated product revenue in China since September 2017, but these revenues are insufficient to support operations [415]. - As of December 31, 2018, the company had cash and cash equivalents of $712.9 million and short-term investments of $1.1 billion [429]. - The company may need to obtain additional financing to fund operations and complete the development of primary drug candidates [412]. Market and Competitive Landscape - The company faces substantial competition from larger pharmaceutical and biotechnology companies, which may hinder its ability to commercialize drugs successfully [385]. - The market opportunities for the company's drugs may be limited to patients who are ineligible for or have failed prior treatments, potentially resulting in a small addressable patient population [388]. - The company plans to focus on international markets, particularly China, for growth, but may face risks related to collaboration and licensing arrangements [399]. - The company’s ability to commercialize drugs may be hindered by unfavorable pricing regulations or third-party reimbursement practices [350]. - In the U.S., obtaining coverage and reimbursement for drugs is a lengthy and costly process, with no guarantee of adequate reimbursement rates [353]. - In China, the inclusion of drugs in the National Reimbursement Drug List (NRDL) is uncertain, affecting reimbursement amounts for patients [354]. - Third-party payors increasingly demand predetermined discounts from list prices, complicating reimbursement availability for new drugs [355]. - Legislative changes in the U.S., China, and the EU may increase the difficulty and cost of obtaining regulatory approvals and affect drug pricing [361]. - The commercialization of drugs may be hindered by limited market acceptance among physicians and patients, impacting revenue generation [376]. Manufacturing and Supply Chain - The company has limited manufacturing capabilities and relies on third-party manufacturers, which poses risks to product availability [372]. - The company has an exclusive license to commercialize Celgene's cancer therapies in China, requiring significant investment in salesforce and marketing [381]. - The approval process for drug candidates is complex and costly, with no guarantee of success, potentially limiting market potential [370]. - The company must navigate varying regulatory requirements across different countries, which could delay or prevent drug introduction [367]. - The company has not yet demonstrated the ability to launch and commercialize any drug candidates, which may involve higher risks, longer timelines, and increased costs compared to experienced companies [382]. - The company is exposed to risks associated with relying on a limited number of third-party manufacturers, including potential disruptions in supply and compliance with regulatory standards [480]. - The company may face delays or additional costs if third-party manufacturers do not pass regulatory inspections, impacting the commercial supply of drug products [486]. - The company has agreements with multiple suppliers for raw materials, but reliance on sole source suppliers poses a risk of supply interruptions that could materially harm its business [482]. Intellectual Property and Legal Risks - The company may face challenges in obtaining and maintaining patent protection for its drug candidates, impacting competitive advantage [430]. - The company’s issued patents and pending applications may expire before commercialization, limiting exclusivity [439]. - The company may need to raise additional capital, which could lead to shareholder dilution and operational restrictions [420]. - The company may face challenges in protecting its intellectual property rights globally, particularly in non-U.S. jurisdictions where patent enforcement may be weaker [440]. - The company holds trademark registrations and applications, but failure to secure trademark protection for primary brands could adversely affect its business [442]. - Competitors may exploit the company's technologies in jurisdictions without patent protection, potentially leading to competition from infringing drugs [443]. - The company may incur significant costs and time in litigation to enforce its intellectual property rights, with no guarantee of success [445]. - There is a risk that the company's patent rights could be found invalid or unenforceable if challenged, which could materially impact its business [447]. - The company is aware of U.S. patents relevant to its drug candidates that are set to expire between 2023 and 2031, which could affect its commercialization strategy [453]. - The company may not be able to obtain patent term extensions, which could allow competitors to launch products after patent expiration, harming its business [459]. - Changes in patent law could diminish the value of patents, impacting the company's ability to protect its drug candidates [460]. - The company relies on trade secrets for competitive advantage, but breaches of confidentiality agreements could lead to loss of proprietary information [462]. - The company may face claims related to the use of former employers' intellectual property by its employees, which could result in litigation and associated costs [464]. Collaborations and Partnerships - The company relies on third-party licensing agreements for various drug candidates, which impose obligations that, if not met, could lead to termination of these agreements and significant financial penalties [469]. - The company is dependent on third-party contract research organizations (CROs) for conducting preclinical studies and clinical trials, and any failure by these CROs to meet their obligations could substantially harm the company's business [470]. - The company anticipates that its future revenues will depend on effective collaboration with partners for drug development and regulatory approval, highlighting the importance of these relationships [475]. - The strategic collaboration with Celgene involves risks, including the potential failure to achieve expected revenue and cost synergies, which could adversely affect the company's financial results [492]. - The company faces significant competition in establishing strategic partnerships, which may hinder its ability to secure collaborations for drug candidates deemed too early in development [493]. - Collaborations involving the company's drugs and drug candidates are subject to numerous risks, including collaborators having significant discretion in determining their efforts and resources [494]. - Collaborators may not pursue development and commercialization of drug candidates based on clinical trial results or changes in strategic focus due to competitive drugs [494]. - Delays in clinical trials or insufficient funding for trials may occur, potentially leading to abandonment of drug candidates [494]. - Collaborators could independently develop competing drugs, impacting the company's market position [494]. - Marketing and distribution rights may not be adequately supported by collaborators, affecting product reach [494]. - Intellectual property rights may not be properly maintained by collaborators, leading to potential litigation risks [494]. - Disputes with collaborators could delay or terminate research and development efforts, diverting management resources [494]. - Termination of collaborations may necessitate additional capital for further development or commercialization of drug candidates [494]. - Collaborators may co-own intellectual property, limiting the company's exclusive rights to commercialization [494].

BeiGene (NASDAQ:BGNE) Q4 2018 Earnings Conference Call February 27, 2019 6:00 PM ET Company Participants Howard Liang - Chief Financial Officer and Chief Strategy Officer John Oyler - Chairman, Co-Founder and Chief Executive Officer Xiaobin Wu - General Manager of China and President of BeiGene, Ltd. Eric Hedrick - Interim Chief Medical Officer, Immuno-Oncology Conference Call Participants Vikram Purohit - Morgan Stanley & Co. LLC Yaron Werber - Cowen and Company, LLC Ziyi Chen - Goldman Sachs & Co. Katheri ...

Business Highlights - BeiGene expanded its team to over 2,200 people and made key hires[7] - The company significantly expanded commercial capabilities and demonstrated success with its existing portfolio[7] - BeiGene is well-positioned for 2019, a potentially transformational year with key launches, data readouts, and potential filings[7] Clinical & Regulatory Progress - Zanubrutinib achieved an 84% ORR (Overall Response Rate) and 59% CR (Complete Response) in MCL (Mantle Cell Lymphoma) in China[9] - Zanubrutinib also showed an 80% ORR and 2% CR in CLL/SLL (Chronic Lymphocytic Leukemia/Small Lymphocytic Lymphoma) in China[9] - Tislelizumab achieved an 86% ORR in cHL (classical Hodgkin's Lymphoma) in a China pivotal trial[9] - BeiGene initiated 7 late-stage trials for PD-1, totaling 11 ongoing trials[9] Manufacturing Expansion - BeiGene is constructing a biologics manufacturing facility in Guangzhou with an investment of over $300 million[14] - The Guangzhou facility will have a 100,000 square meter manufacturing site and a 24,000-liter commercial-scale biologics manufacturing facility[14] - The first phase of the Guangzhou manufacturing plant is planned to be completed in 2019[14] Financial Performance - BeiGene had $1,809 million in cash and short-term investments as of December 31, 2018[112] - Total revenue for 2018 was $198 million, including $131 million in product revenue and $67 million in collaboration revenue[114] - R&D expense was $679 million in 2018, compared to $269 million in 2017[115]