BeiGene(BGNE) - 2019 Q1 - Quarterly Report

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 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 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 ($) | Change (%) | |:---|:---|:---|:---|:---| | Assets ||||| | Cash and cash equivalents | 764,492 | 712,937 | 51,555 | 7.23% | | Short-term investments | 849,167 | 1,068,509 | (219,342) | -20.53% | | Total current assets | 1,796,730 | 1,943,842 | (147,112) | -7.57% | | Property, plant and equipment, net | 197,806 | 157,061 | 40,745 | 25.94% | | Total assets | 2,172,232 | 2,249,684 | (77,452) | -3.44% | | Liabilities ||||| | Total current liabilities | 238,809 | 246,452 | (7,643) | -3.10% | | Total non-current liabilities | 310,744 | 249,585 | 61,159 | 24.50% | | Total liabilities | 549,553 | 496,037 | 53,516 | 10.79% | | Equity ||||| | Total BeiGene, Ltd. shareholders' equity | 1,608,769 | 1,739,202 | (130,433) | -7.50% | | Total equity | 1,622,679 | 1,753,647 | (130,968) | -7.47% | Condensed Consolidated Statements of Operations This section outlines the company's revenues, expenses, and net loss over specific periods, reflecting operational performance Condensed Consolidated Statements of Operations (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | 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 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 ($) | Change (%) | |:---|:---|:---|:---|:---| | Net loss | (168,069) | (105,116) | (62,953) | 59.9% | | Other comprehensive income, net of tax of nil: ||||| | Foreign currency translation adjustments | 3,755 | 272 | 3,483 | 1280.5% | | Unrealized holding gain, net | 685 | 329 | 356 | 108.2% | | Comprehensive loss | (163,629) | (104,515) | (59,114) | 56.6% | | Comprehensive loss attributable to BeiGene, Ltd. | (163,094) | (104,059) | (59,035) | 56.7% | Condensed Consolidated Statements of Cash Flows This section details the company's cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | 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 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 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 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][22] - 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 $45.1 million were reclassified to ROU assets. This adoption did not impact the statements of operations or cash flows[31][32][35] Note 2. Fair Value Measurements This note details the fair value measurements of the company's financial assets and liabilities, categorized by valuation inputs Fair Value of Financial Assets (Amounts in thousands of U.S. Dollars) | Item | March 31, 2019 ($) | December 31, 2018 ($) | |:---|:---|:---| | Short-term investments: ||| | U.S. treasury securities | 825,435 | 1,068,509 | | U.S. agency securities | 23,732 | — | | Cash equivalents: ||| | U.S. treasury securities | 124,856 | — | | Money market funds | 59,884 | 159,810 | | Total | 1,033,907 | 1,228,319 | Note 3. Research and Development Collaborative Arrangements This note outlines the company's research and development collaboration agreements and the associated revenue recognition Collaboration Revenue (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | 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][55][56] Note 4. Business Combinations and Asset Acquisitions 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] - 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][60] Note 5. Restricted Cash and Short-term Investments This note provides details on the company's restricted cash balances and short-term investment portfolio - As of March 31, 2019, restricted cash totaled $23.9 million, comprising secured deposits for letters of credit and as security for a long-term bank loan[61] Short-term Investments (Available-for-Sale Debt Securities) (Amounts in thousands of U.S. Dollars) | Item | March 31, 2019 Fair Value ($) | 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 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 $13.1 million as of March 31, 2019[64] Note 7. Property, plant and equipment This note provides information on the company's property, plant, and equipment, including additions, disposals, and depreciation Property, Plant and Equipment, Net (Amounts in thousands of U.S. Dollars) | Item | March 31, 2019 ($) | 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] Note 8. Manufacturing Facility in Guangzhou 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][68][70] - As of March 31, 2019, $143.3 million in cash and cash equivalents and $23.9 million in restricted cash were held by BeiGene Biologics for facility construction and R&D funding[71] Note 9. Leases This note details the company's lease arrangements, including right-of-use assets, lease liabilities, and lease costs - The Company has operating leases for office and manufacturing facilities in the US, Switzerland, and China, with remaining terms up to five years. Land use rights in Guangzhou and Changping, Beijing, are also treated as operating leases[72] Lease Costs (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | |:---|:---|\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 ($) | |:---|:---|\n| Operating lease right-of-use assets | 27,518 | | Land use rights, net | 45,106 | | Total operating lease right-of-use assets | 72,624 | | Current portion of operating lease liabilities | 9,451 | | Operating lease liabilities | 19,545 | | Total lease liabilities | 28,996 | Note 10. Intangible Assets This note provides information on the company's intangible assets, including their nature, carrying amounts, and amortization Intangible Assets, Net (Amounts in thousands of U.S. Dollars) | Item | March 31, 2019 Net ($) | 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] Note 11. Income Taxes 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] - 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 $2.6 million as of March 31, 2019[82][83] Note 12. Supplemental Balance Sheet Information This note provides additional detail on specific balance sheet accounts, such as prepaid expenses and accrued liabilities Prepaid Expenses and Other Current Assets (Amounts in thousands of U.S. Dollars) | Item | March 31, 2019 ($) | 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 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] - 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] - Interest expense recognized for Q1 2019 was $0.9 million, with $0.6 million capitalized[93] Note 14. Shareholder Loan 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][95][96] - Total interest expense from the shareholder loan was $2.6 million for Q1 2019, with $0.8 million capitalized[99] Note 15. Product Revenue This note provides a breakdown of the company's net product revenue and its primary sources Net Product Sales (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | 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] Note 16. Loss Per Share 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 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] 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 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 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] - 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] Note 20. Restricted Net Assets 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][118] - 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] Note 21. Commitments and Contingencies 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] - Capital commitments amounted to $26.6 million, mainly for the BeiGene Guangzhou Factory's manufacturing facility[122] Note 22. Segment and geographic information This note provides information on the company's operating segments and geographic distribution of revenues and assets - The Company operates in one segment, with long-lived assets substantially located in the PRC[123] Total Net Revenues by Geographic Area (Amounts in thousands of U.S. Dollars) | Geographic Area | Three Months Ended March 31, 2019 ($) | 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 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][125] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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] - 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] Recent Developments 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] - 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 $10 million and eligibility for additional upfront, milestone, and royalty payments[133] Components of Operating Results This section explains the key drivers and components of the company's revenues and operating expenses - Revenue consists of product sales (ABRAXANE®, REVLIMID®, VIDAZA® in China) and collaboration revenue (upfront license fees, R&D reimbursement from Celgene). Product sales are expected to increase in 2019[134][135][136] - Research and development expenses include costs for CROs, manufacturing, preclinical/clinical activities, regulatory operations, employee-related expenses, and in-process R&D. Key internally-developed drug candidates are zanubrutinib, tislelizumab, and pamiparib[139][140] - Selling, general and administrative expenses cover product promotion, distribution, salaries, professional fees, and other administrative costs. These are expected to increase due to commercialization activities and global expansion[147] Results of Operations This section analyzes the company's financial performance, detailing changes in revenues, expenses, and net loss over the reporting periods Summary of Results of Operations (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | 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] - 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][156] - 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][159] Liquidity and Capital Resources 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 $1.2 billion as of March 31, 2019[163] Cash Flow Summary (Amounts in thousands of U.S. Dollars) | Item | Three Months Ended March 31, 2019 ($) | 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 $1.6 billion. The company expects existing capital to fund operations for at least the next 12 months but will require substantial additional funding for global development and commercialization[164][174] Contractual Obligations and Commitments This section outlines the company's significant contractual obligations and commitments, including their timing and amounts Significant Contractual Obligations as of March 31, 2019 (Amounts in thousands of U.S. Dollars) | Contractual obligations | Total ($) | 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 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] Recent Accounting Pronouncements 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] Item 3. Quantitative and Qualitative Disclosures about Market Risk 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][195] - 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] - 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][197][199] Item 4. Controls and Procedures 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] - A company-wide Enterprise Resource Planning (ERP) system was implemented in Q1 2019, leading to changes in internal controls to maintain effectiveness[203] 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 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] Item 1A. Risk Factors 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][214][217][226] - 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][282][289][378][397] - 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][311][315][322][324] - Intellectual property risks involve challenges in obtaining and maintaining patent protection globally, potential infringement lawsuits, and the difficulty of protecting trade secrets[333][344][348][363] - 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][406][412][425][429][443] - 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][462][464][475][492] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities to report[555] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - Mine Safety Disclosures are not applicable to the company[555] Item 5. Other Information This section states that there is no other information to report for the period - No other information to report[555] Item 6. Exhibits 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][557] SIGNATURES This section contains the official signatures certifying the accuracy and completeness of the report