You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with our condensed consolidated
financial statements (unaudited) and related notes included in the section of
this Quarterly Report on Form 10-Q (this "Quarterly Report"), titled
"Item 1-Financial Statements." This Quarterly Report contains forward-looking
statements that are based on management's beliefs and assumptions and on
information currently available to management. All statements other than
statements of historical facts contained in this Quarterly Report are
forward-looking statements. In some cases, you can identify forward-looking
statements by the following words: "aim," "anticipate," "believe," "can,"
"continue," "could," "estimate," "expect," "goal," "intend," "may," "ongoing,"
"plan," "potential," "predict," "project," "seek," "should," "target," "will,"
"would," or the negative of these terms or other similar expressions, although
not all forward-looking statements contain these words. These forward-looking
statements, include, but are not limited to, statements regarding: our ability
to successfully commercialize our approved drugs and to obtain approvals in
additional indications and territories for our drugs; our ability to
successfully commercialize our in-licensed drugs in China and any other drugs we
may in-license; our ability to successfully develop and commercialize oncology
assets licensed from Amgen in China pursuant to our global strategic oncology
collaboration with Amgen; our ability to further develop sales and marketing
capabilities and launch new drugs, if approved; our ability to maintain and
expand regulatory approvals for our drugs and drug candidates, if approved; the
pricing and reimbursement of our drugs and drug candidates, if approved; the
initiation, timing, progress and results of our preclinical studies and clinical
trials and our research and development programs; our ability to advance our
drug candidates into, and successfully complete, clinical trials; our reliance
on the success of our clinical-stage drug candidates; our plans, expected
milestones and the timing or likelihood of regulatory filings and approvals; the
implementation of our business model, strategic plans for our business, drugs,
drug candidates and technology; the scope of protection we (or our licensors)
are able to establish and maintain for intellectual property rights covering our
drugs, drug candidates and technology; the scope of protection we (or our
licensors) are able to establish and maintain for intellectual property rights
covering our drugs, drug candidates and technology; our ability to operate our
business without infringing, misappropriating or otherwise violating the
intellectual property rights and proprietary technology of third parties; costs
associated with enforcing or defending against intellectual property
infringement, misappropriation or violation, product liability and other claims;
regulatory developments in the United States, the People's Republic of China
("China" or "PRC"), the United Kingdom, the European Union and other
jurisdictions; the accuracy of our estimates regarding expenses, revenues,
capital requirements and our need for additional financing; the potential
benefits of strategic collaboration and licensing agreements and our ability to
enter into strategic arrangements; our ability to maintain and establish
collaborations or licensing agreements; our reliance on third parties to conduct
drug development, manufacturing and other services; our ability to manufacture
and supply, or have manufactured and supplied, drug candidates for clinical
development and drugs for commercial sale; the rate and degree of market access
and acceptance and reimbursement for our drugs and drug candidates, if approved;
developments relating to our competitors and industry, including competing
therapies; the size of the potential markets for our drugs and drug candidates
and our ability to serve those markets; our ability to effectively manage our
growth; our ability to attract and retain qualified employees and key personnel;
statements regarding future revenue, hiring plans, expenses, capital
expenditures, capital requirements and share performance; the future trading
price of our ADSs and ordinary shares, and impact of securities analysts'
reports on these prices; the impact of the COVID-19 pandemic on the Company's
clinical development, commercial and other operations; and other risks and
uncertainties, including those listed under "Part II-Item 1A-Risk Factors" of
this Quarterly Report. These statements involve risks, uncertainties and other
factors that may cause actual results, levels of activity, performance or
achievements to be materially different from the information expressed or
implied by these forward-looking statements. Given these uncertainties, you
should not place undue reliance on these forward-looking statements. Factors
that may cause actual results to differ materially from current expectations
include, among other things, those described in "Part II-Item 1A-Risk Factors"
of this Quarterly Report. These forward-looking statements speak only as of the
date hereof. Except as required by law, we assume no obligation to update or
revise these forward-looking statements for any reason, even if new information
becomes available in the future. Unless the context requires otherwise, in this
Quarterly Report, the terms "BeiGene," the "Company," "we," "us" and "our" refer
to BeiGene, Ltd. and its subsidiaries, on a consolidated basis.
Overview
We are a global, commercial-stage biotechnology company focused on discovering,
developing, manufacturing, and commercializing innovative medicines to improve
treatment outcomes and access for patients worldwide. We started as a research
and development company in Beijing in 2010. Over the last ten years, we have
developed into a fully-integrated global biotechnology company, with significant
commercial, manufacturing, and research and development capabilities.

We have built substantial commercial capabilities in China and the United States
and are currently marketing both internally developed drugs and in-licensed
drugs. In the United States, we market BRUKINSA® (zanubrutinib) for adult
patients with mantle cell lymphoma ("MCL") who have received at least one prior
therapy. In China, we market BRUKINSA® in two indications: for adult patients
with chronic lymphocytic leukemia ("CLL") /small lymphocytic lymphoma ("SLL")
who have received at least one prior therapy, and for adult patients with MCL
who have received at least one prior therapy. In China,
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we also market tislelizumab in two indications: for patients with classical
Hodgkin's Lymphoma ("cHL") who have received at least two prior therapies, and
for patients with locally advanced or metastatic urothelial carcinoma ("UC"), a
form of bladder cancer, with PD-L1 high expression whose disease progressed
during or following platinum-containing chemotherapy or within 12 months of
neoadjuvant or adjuvant treatment with platinum-containing chemotherapy.
We have filed additional new or supplementary new drug applications for
regulatory approvals in China or elsewhere for our internally developed products
and are planning for launches in these additional drugs or indications in 2020
and beyond. Our commercial portfolio also includes the following drugs
in-licensed from third parties: REVLIMID®, VIDAZA® and ABRAXANE®, which we have
been marketing in China since 2017 under a license from Celgene Logistics Sàrl,
a Bristol Myers Squibb company ("BMS"), and XGEVA® (denosumab), from Amgen Inc.
("Amgen"), which we began commercializing in July 2020. On March 25, 2020, we
announced that the National Medical Products Administration ("NMPA") suspended
the importation, sales and use of ABRAXANE® in China supplied to us by Celgene
Corporation, a BMS company, and the drug was subsequently recalled by BMS and is
not currently available for sale in China. We plan on launching additional
in-licensed products in China from our collaborations, including KYPROLIS®
(carfilzomib) and BLINCYTO® (blinatumomab) from Amgen, and SYLVANT® (siltuximab)
and QARZIBA® ? (dinutuximab beta), from EUSA Pharma ("EUSA").
We have built deep clinical development capabilities, including a more than
1,350-person global clinical development team that is running over 70 ongoing or
planned clinical trials in more than 35 countries that have enrolled over 10,000
patients and healthy subjects. We are conducting late-stage clinical trials of
BRUKINSA® and tislelizumab, including 27 registration or registration-enabling
trials in at least 15 discrete cancer indications. Our internal research
capabilities have yielded another late-stage asset, pamiparib, for which we have
filed a new drug application ("NDA") in China, and five other internally
developed drug candidates that are currently in early-stage clinical
development. In addition, we have been able to leverage our capabilities and
China's rising importance as a clinical science center and commercial market to
expand our clinical and pre-clinical portfolio with in-licensed drug candidates.
We are also working with high-quality contract manufacturing organizations
("CMOs") to manufacture our internally developed clinical and commercial
products in China and globally and have built state-of-the-art small molecule
and biologic manufacturing facilities in China to support the launches and
potential future demand of our products.
Based on the strength of our China-inclusive global development and commercial
capabilities, we have entered into collaborations with leading pharmaceutical
and biotechnology companies to develop and commercialize innovative medicines in
China and the Asia-Pacific region. In October 2019, we entered into a strategic
collaboration with Amgen pursuant to which we have agreed to collaborate on the
commercialization of Amgen's oncology products XGEVA®, KYPROLIS® and BLINCYTO®
in China, and the global development and future commercialization in China of a
portfolio of Amgen's clinical- and late pre-clinical-stage pipeline products,
including sotorasib (AMG 510), Amgen's investigational KRAS G12C inhibitor.
Recent Developments
Recent Business Developments
On July 27, 2020, we announced that the Center for Drug Evaluation ("CDE") of
the NMPA granted priority review status to the accepted NDA of pamiparib, our
investigational inhibitor of PARP1 and PARP2, for the treatment of patients with
deleterious or suspected deleterious germline BRCA-mutated advanced ovarian,
fallopian tube, or primary peritoneal cancer who have been treated with two or
more lines of chemotherapy.
On July 20, 2020, we announced that we entered into a collaboration in China
with Assembly Biosciences, Inc. ("Assembly") for Assembly's portfolio of three
clinical-stage hepatitis B virus ("HBV") core inhibitor candidates for the
treatment of patients with chronic HBV infection. Under the terms of the
agreement, Assembly granted us exclusive rights to develop and commercialize
ABI-H0731, ABI-H2158 and ABI-H3733 in China, including Hong Kong, Macau, and
Taiwan. ABI-H0731 and ABI-H2158 are both in ongoing Phase 2 clinical trials and
ABI-H3733 is in Phase 1 development. We will be responsible for development,
regulatory submissions, and commercialization in China. Assembly retains full
worldwide rights outside of the partnered territory for its HBV portfolio.
Assembly received an upfront cash payment and is eligible to receive milestone
payments pending successful development and commercialization of the licensed
candidates. In addition, Assembly is eligible to receive tiered royalties of net
sales. We will contribute initial funding for clinical development in China,
after which the development costs for the territory will be shared equally by
the parties.
On July 15, 2020, we announced the closing of a registered direct offering of
145,838,979 ordinary shares to certain existing investors. Each ordinary share
was sold for a purchase price of $14.2308 per share ($185 per American
Depositary Share ("ADS")), resulting in gross proceeds of approximately $2.08
billion and net proceeds, after estimated offering expenses, of approximately
$2.07 billion. The offering was made without an underwriter or a placement agent
and as a result we did not pay any underwriting discounts or commissions in
connection with this offering.
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On July 1, 2020, we announced that the CDE of the NMPA accepted a supplemental
new drug application ("sNDA") of tislelizumab for the treatment of patients with
previously treated unresectable hepatocellular carcinoma ("HCC"), the most
common form of liver cancer.
On July1, 2020, we began commercializing XGEVA® in China for the treatment of
giant cell tumor of bone ("GCTB"). This marked the first Amgen product that was
transitioned to us for commercialization in China since the commencement of our
global strategic oncology collaboration in January 2020. Amgen gained approval
from the NMPA for XGEVA® in May 2019 for the treatment of adults and skeletally
mature adolescents (defined by at least one mature long bone and with a body
weight ? 45 kg) with GCTB that is unresectable or where surgical resection is
likely to result in severe morbidity. In addition, an sNDA for XGEVA® as a
prevention for skeletal-related events in patients with multiple myeloma and in
patients with bone metastases from solid tumors was accepted by the CDE of the
NMPA in April 2020 and is currently under review.
On June 19, 2020, we announced that the CDE of the NMPA accepted an sNDA of
tislelizumab in combination with chemotherapy for first-line treatment of
patients with advanced non-squamous non-small cell lung cancer ("NSCLC").
On June 18, 2020, we announced that our marketing authorization application
("MAA") for BRUKINSA® for the treatment of patients with Waldenström's
macroglobulinemia (WM) who have received at least one prior therapy or as
first-line treatment for patients unsuitable for chemo-immunotherapy was
accepted for regulatory review by the European Medicines Agency ("EMA").
On June 3, 2020, we announced that BRUKINSA® received approval from the NMPA in
two indications, which are (1) the treatment of adult patients with CLL/SLL who
have received at least one prior therapy, and (2) the treatment of adult
patients with MCL who have received at least one prior therapy. Both NDAs were
previously granted priority review by the CDE of the NMPA.
On May 26, 2020, we announced that we entered into a clinical collaboration
agreement with Hutchison China MediTech Limited ("Chi-Med") to evaluate the
safety, tolerability and efficacy of combining two of Chi-Med's drug candidates,
surufatinib and fruquintinib, with tislelizumab, for the treatment of various
solid tumor cancers, in the U.S., Europe, China and Australia.
On May 21, 2020, we announced an exclusive distribution agreement with Medison
Pharma Ltd. ("Medison") for Medison to commercialize BRUKINSA® in Israel and the
acceptance of an NDA in Israel for BRUKINSA® for the treatment of patients with
MCL who have received at least one prior therapy.
Coronavirus Disease 2019 (COVID-19)
We expect that the worldwide health crisis of COVID-19 will continue to have a
negative impact on our operations, including commercial sales, regulatory
interactions and inspections, and clinical trial recruitment and participation.
Although the impact of COVID-19 on our operations in China lessened in the
second quarter of 2020, there remains uncertainty regarding the future impact of
the pandemic both in China as well as globally. We are striving to minimize
delays and disruptions, and continue to execute on our commercialization,
regulatory and clinical development goals globally.
Components of Operating Results
Revenue
We began generating product revenue in September 2017 through our in-license
agreement with BMS to distribute the approved cancer therapies REVLIMID®,
VIDAZA®, and ABRAXANE® in China. Following approval from the U.S. Food and Drug
Administration ("FDA") on November 14, 2019, we launched our first internally
developed drug, BRUKINSA®, in the United States. We launched our second
internally developed drug, tislelizumab, in China in March 2020. In June 2020,
we launched BRUKINSA® in China.
Revenues from product sales are recognized when there is a transfer of control
from the Company to the customer. The Company determines transfer of control
based on when the product is delivered, and title passes to the customer.
Revenues from product sales are recognized net of variable consideration
resulting from rebates, chargebacks, trade discounts and allowances, sales
returns allowances and other incentives. Provisions for estimated reductions to
revenue are provided for in the same period the related sales are recorded and
are based on contractual terms, historical experience and trend analysis. We
expect revenue from our internal product sales to increase throughout 2020. We
began commercializing XGEVA® in China in July of 2020 and plan on launching
additional in-licensed products from our collaborations with Amgen and EUSA in
2020 and 2021, and continue to expand our efforts to promote our existing
commercial products.
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To date, we also recorded revenue from our 2017 collaboration and license
agreement with BMS for tislelizumab, which was terminated in June 2019. Under
this agreement, we received an upfront payment related to the license fee, which
was recognized upon the delivery of the license right. Additionally, the portion
of the upfront payment related to the reimbursement of undelivered research and
development services was deferred and recognized over the performance period of
the collaboration arrangement. We recognized the remainder of the deferred
research and development services revenue balance upon termination of the
collaboration agreement. We also received research and development reimbursement
revenue for the clinical trials that BMS opted into until the termination of the
collaboration agreement. Pursuant to the terms of the termination agreement, we
received a one-time payment of $150 million in June 2019, which was recognized
in full at that time because we had no further performance obligations under the
collaboration.
Expenses
Cost of Sales
Cost of sales includes the cost of products purchased from BMS and distributed
in China and the costs to manufacture our internally developed commercial
products. Costs to manufacture inventory in preparation for commercial launch of
a product incurred prior to regulatory approval are expensed to research and
development expense as incurred. Cost of sales for newly launched products will
not be recorded until the initial pre-launch inventory is depleted and
additional inventory is manufactured.
Research and Development Expenses
Research and development expenses consist of the costs associated with our
research and development activities, conducting preclinical studies and clinical
trials and activities related to regulatory filings. Our research and
development expenses consist of:
•expenses incurred under agreements with contract research organizations
("CROs"), CMOs, and consultants that conduct and support clinical trials and
preclinical studies;
•costs of comparator drugs in certain of our clinical trials;
•manufacturing costs related to pre-commercial activities;
•costs associated with preclinical activities and development activities;
•costs associated with regulatory operations;
•employee-related expenses, including salaries, benefits, travel and share-based
compensation expense for research and development personnel;
•in-process research and development costs expensed as part of collaboration
agreements entered into; and
•other expenses, which include direct and allocated expenses for rent and
maintenance of facilities, insurance and other supplies used in research and
development activities.
Our current research and development activities mainly relate to the clinical
advancement of our internally developed drugs and drug candidates:
•BRUKINSA® (zanubrutinib), a small molecule inhibitor of BTK;
•tislelizumab, a humanized monoclonal antibody against PD-1;
•pamiparib, an investigational selective small molecule inhibitor of PARP1 and
PARP2;
•lifirafenib, an investigational novel small molecule inhibitor of both the
monomer and dimer forms of BRAF;
•BGB-A333, an investigational humanized monoclonal antibody against PD-L1;
•BGB-A425, an investigational humanized monoclonal antibody against TIM-3;
•BGB-A1217, an investigational humanized monoclonal antibody against TIGIT; and
•BGB-11417, an investigational small molecular inhibitor of Bcl-2.
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Research and development activities also include costs associated with
in-licensed drug candidates, including:
•sitravatinib, an investigational, spectrum-selective kinase inhibitor in
clinical development by Mirati Therapeutics, Inc. ("Mirati");
•zanidatamab (ZW25) and ZW49, two bispecific antibody-based product candidates
targeting HER2, under development by Zymeworks Inc.;
•BA3071, an investigational CAB-CTLA-4 antibody, under development by BioAtla
LLC ("BioAtla"); and
•R&D expense related to the co-development of pipeline assets under the Amgen
collaboration agreement. Our total cost share obligation to Amgen is split
between R&D expense and a reduction to R&D cost share liability.
We expense research and development costs when we incur them. We record costs
for certain development activities, such as clinical trials, based on an
evaluation of the progress to completion of specific tasks using data such as
subject enrollment, clinical site activations or information our vendors provide
to us. We expense the manufacturing costs of our internally developed products
that are used in clinical trials as they are incurred as research and
development expense. We do not allocate employee­related costs, depreciation,
rental and other indirect costs to specific research and development programs
because these costs are deployed across multiple product programs under research
and development and, as such, are separately classified as unallocated research
and development expenses.
At this time, it is difficult to estimate or know for certain, the nature,
timing and estimated costs of the efforts that will be necessary to complete the
development of our internally developed drugs and drug candidates. We are also
unable to predict when, if ever, material net cash inflows will commence from
sales of our drugs and drug candidates, if approved. This is due to the numerous
risks and uncertainties associated with developing such drugs and drug
candidates, including the uncertainty of:
•successful enrollment in and completion of clinical trials;
•establishing an appropriate safety and efficacy profile;
•establishing commercial manufacturing capabilities or making arrangements with
third­party manufacturers;
•receipt of marketing and other required approvals from applicable regulatory
authorities;
•successfully launching and commercializing our drugs and drug candidates, if
and when approved, whether as monotherapies or in combination with our
internally developed drugs and drug candidates or third­party products;
•market acceptance, pricing and reimbursement;
•obtaining and maintaining patent and trade secret protection and regulatory
exclusivity for our drugs and drug candidates;
•continued acceptable safety and efficacy profiles of the products following
approval;
•sufficient supply of the products following approval;
•competition from competing products; and
•retention of key personnel.
A change in the outcome of any of these variables with respect to the
development of any of our drugs and drug candidates would significantly change
the costs, timing and viability associated with the commercialization or
development of that drug or drug candidate.
Research and development activities are central to our business model. We expect
research and development costs to increase significantly for the foreseeable
future as our development programs progress, as we continue to support the
clinical trials of our drugs and drug candidates as treatments for various
cancers and as we move these drugs and drug candidates into additional clinical
trials, including potential pivotal trials. There are numerous factors
associated with the successful commercialization of any of our drugs and drug
candidates, including future trial design and various regulatory requirements,
many of which cannot be determined with accuracy at this time based on our stage
of development. Additionally, future commercial and regulatory factors beyond
our control may impact our clinical development and commercial programs and
plans.

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Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of product
promotion costs, distribution costs, salaries and related benefit costs,
including share-based compensation for selling, general and administrative
personnel. Other selling, general and administrative expenses include
professional fees for legal, consulting, auditing and tax services as well as
other direct and allocated expenses for rent and maintenance of facilities,
travel costs, insurance and other supplies used in selling, general and
administrative activities. We anticipate that our selling, general and
administrative expenses will increase in future periods to support planned
increases in commercialization activities with respect to tislelizumab,
BRUKINSA® and XGEVA® and the preparation for potential launch and
commercialization of additional in-licensed products from our collaborations
with Amgen and EUSA and internally developed drugs and drug candidates, if
approved. We also expect selling, general and administrative expenses to
increase in future periods to support our research and development efforts,
including the continuation of the clinical trials of our drugs and drug
candidates as treatments for various cancers and the initiation of clinical
trials for potential new indications or drug candidates. These cost increases
will likely be due to increased promotional costs, increased headcount,
increased share-based compensation expenses, expanded infrastructure and
increased costs for insurance. We also incur significant legal, compliance,
accounting, insurance and investor and public relations expenses associated with
being a public company with our ADSs and ordinary shares listed for trading on
The NASDAQ Global Select Market and The Hong Kong Stock Exchange, respectively.
Interest Income (Expense), Net
Interest Income
Interest income consists primarily of interest generated from our cash and
short-term investments in money market funds, time deposits, U.S. Treasury
securities and U.S. agency securities.
Interest Expense
Interest expense consists primarily of interest on our long-term bank loan and
shareholder loan.
Other Income, Net
Other income consists primarily of gains recognized related to equity method
investments, government grants and subsidies received that involve no conditions
or continuing performance obligations by us, realized and unrealized gains and
losses related to foreign currency exchange rates, unrealized gains and losses
on equity securities, and realized gains and losses on the sale of investments.
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Results of Operations
The following table summarizes our results of operations for the three and six
months ended June 30, 2020 and 2019:
                                                     Three Months Ended                                                                                                       Six Months Ended
                                                          June 30,                                                    Change                                                      June 30,                            Change
                                                  2020                2019                 $                   %                 2020                2019                    $                    %

                                                                                                                (dollars in thousands)
Revenues
Product revenue, net                          $   65,635          $  58,142          $    7,493                12.9  %       $  117,694          $  115,563          $        2,131               1.8  %
Collaboration revenue                                  -            185,204            (185,204)             (100.0) %                -             205,616                (205,616)           (100.0) %
Total revenues                                    65,635            243,346            (177,711)              (73.0) %          117,694             321,179                (203,485)            (63.4) %

Expenses


Cost of sales                                     14,307             17,839              (3,532)              (19.8) %           28,456              33,100                  (4,644)            (14.0) %
Research and development                         285,968            228,760              57,208                25.0  %          590,270             407,111                 183,159              45.0  %
Selling, general and administrative              124,049             82,248              41,801                50.8  %          231,130             139,893                  91,237              65.2  %
Amortization of intangible assets                    188                332                (144)              (43.4) %              471                 663                    (192)            (29.0) %
Total expenses                                   424,512            329,179              95,333                29.0  %          850,327             580,767                 269,560              46.4  %
Loss from operations                            (358,877)           (85,833)           (273,044)              318.1  %         (732,633)           (259,588)               (473,045)            182.2  %
Interest income, net                               1,108              2,886              (1,778)              (61.6) %            7,798               7,363                     435               5.9  %
Other income, net                                 19,976               (878)             20,854            (2,375.2) %           23,657                 850                  22,807           2,683.2  %
Loss before income taxes                        (337,793)           (83,825)           (253,968)              303.0  %         (701,178)           (251,375)               (449,803)            178.9  %
Income tax (benefit) expense                      (1,475)             2,129              (3,604)             (169.3) %               79               2,648                  (2,569)            (97.0) %
Net loss                                        (336,318)           (85,954)           (250,364)              291.3  %         (701,257)           (254,023)               (447,234)            176.1  %
Less: Net loss attributable to
noncontrolling interest                           (1,116)              (384)               (732)              190.6  %           (2,320)               (813)                 (1,507)            185.4  %
Net loss attributable to BeiGene, Ltd.        $ (335,202)         $ (85,570)         $ (249,632)              291.7  %       $ (698,937)         $ (253,210)         $     (445,727)            176.0  %


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Comparison of the Three Months Ended June 30, 2020 and 2019
Revenue
Total revenue decreased to $65.6 million for the three months ended June 30,
2020, from $243.3 million for the three months ended June 30, 2019, primarily
due to the cessation of collaboration revenue following the termination of the
BMS collaboration agreement in the second quarter of 2019. The following table
summarizes the components of revenue for the three months ended June 30, 2020
and 2019, respectively:
                                                                 Three Months Ended
                                                                       June 30,                                             Changes
                                                               2020               2019                 $                    %

                                                                                     (dollars in thousands)
Product revenue                                             $ 65,635          $  58,142          $    7,493                  12.9  %
Collaboration revenue:
Reimbursement of research and development costs                    -              9,460              (9,460)               (100.0) %
Research and development service revenue                           -             25,744             (25,744)               (100.0) %
Other                                                              -            150,000            (150,000)               (100.0) %
Total                                                       $ 65,635          $ 243,346          $ (177,711)                (73.0) %


Net product revenues consisted of the following:


                               Three Months Ended
                                    June 30,                                Changes
                              2020           2019             $             %

                                           (dollars in thousands)
Tislelizumab               $ 29,417       $      -       $ 29,417          NM
BRUKINSA®                     6,974              -          6,974          NM
REVLIMID®                    17,219         16,373            846          5.2  %
VIDAZA®                      11,789          7,038          4,751         67.5  %
ABRAXANE®                       236         34,731        (34,495)       (99.3) %
Total product revenue      $ 65,635       $ 58,142       $  7,493         12.9  %


Net product revenue increased 12.9% to $65.6 million for the three months ended
June 30, 2020, compared to $58.1 million in the prior year period, primarily due
to sales of tislelizumab in China and BRUKINSA® in the United States and China,
partially offset by decreased product sales of ABRAXANE®. Product revenues in
the second quarter of 2020 were positively impacted by sales of our internally
developed products, tislelizumab and BRUKINSA®, and the lessening impact of
COVID-19 on our commercial activities in China as the country gradually resumed
regular business.
We expect product revenue from our in-licensed products to continue to be
impacted by the NMPA's suspension of the importation, sales and use of ABRAXANE®
in China in March 2020 and the subsequent voluntary recall of ABRAXANE® by BMS,
together with increased competition from generic products. Although the impact
of COVID-19 on commercial activities in China lessened in the second quarter of
2020 compared to the first quarter of 2020, there remains uncertainty regarding
the future impact of the pandemic both in China as well as globally. We do not
expect revenue from ABRAXANE® until the NMPA lifts its suspension on the
importation, sale and use of ABRAXANE® and qualified drug is manufactured and
available for sale in China. We do not know when the NMPA suspension of
ABRAXANE® will be lifted and when we will be able to re-commence sales of
ABRAXANE® in China.
We did not have any collaboration revenue for the three months ended June 30,
2020 due to the termination of the collaboration agreement with BMS for
tislelizumab in the second quarter of 2019.
Cost of Sales
Cost of sales decreased to $14.3 million for the three months ended June 30,
2020 from $17.8 million for the three months ended June 30, 2019, primarily due
to a decreased volume of in-licensed sales compared to the prior year period.

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Research and Development Expense
Research and development expense increased by $57.2 million, or 25.0%, to $286.0
million for the three months ended June 30, 2020 from $228.8 million for the
three months ended June 30, 2019. The following table summarizes external
clinical, external non-clinical and internal research and development expense
for the three months ended June 30, 2020 and 2019, respectively:
                                                                       Three Months Ended
                                                                            June 30,                                            Changes
                                                                     2020               2019                $                   %

                                                                                         (dollars in thousands)
External cost of clinical-stage programs                         $ 121,313          $ 102,960          $ 18,353                  17.8  %
Upfront license fees and milestones                                      -             20,000           (20,000)               (100.0) %
External cost of non-clinical-stage programs                         7,164             11,566            (4,402)                (38.1) %
Amgen co-development expense1                                       28,337                  -            28,337                NM
Internal research and development expenses                         129,154             94,234            34,920                  37.1  %
Total research and development expenses                          $ 285,968          $ 228,760          $ 57,208                  25.0  %


1 Our co-funding obligation for the development of the pipeline assets under the
Amgen collaboration for the three months ended June 30, 2020 totaled $55.9
million, of which $28.3 million was recorded as R&D expense. The remaining $27.6
million was recorded as a reduction of the R&D cost share liability.
The increase in external research and development expense was primarily
attributable to the advancement of our clinical drug candidates, and included
the following:
•increases of approximately $16.6 million and $4.1 million, respectively, for
zanubrutinib and tislelizumab, primarily due to the continued enrollment and
expansion of pivotal clinical trials;
•an increase of $28.3 million related to expense recognized on co-development
fees to Amgen;
•a decrease of $20.0 million related to license fees under collaboration
agreements; and
•external spending for our non-clinical-stage programs was primarily related to
manufacturing costs for pre-commercial activities and costs associated with our
preclinical candidates.
The increase in internal research and development expense was primarily
attributable to the expansion of our global development organization and our
clinical and preclinical drug candidates, and included the following:
•$17.0 million increase of employee salary and benefits, primarily attributable
to hiring more research and development personnel to support our expanding
research and development activities;
•$5.6 million increase of share-based compensation expense, primarily
attributable to our increased headcount, resulting in more awards being expensed
related to the growing employee population;
•$12.7 million increase of materials and reagent expenses, primarily in
connection with the in-house manufacturing of drug candidates used for clinical
purposes;
•$1.0 million decrease of consulting fees, which was mainly attributable to
decreased travel and meeting expense related to scientific, regulatory and
development consulting activities, in connection with the advancement of our
drug candidates; and
•$0.7 million increase of facilities, depreciation, office expense, rental fees,
and other expenses to support the growth of our organization.

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Selling, General and Administrative Expense
Selling, general and administrative expense increased by $41.8 million, or
50.8%, to $124.0 million for the three months ended June 30, 2020, from $82.2
million for the three months ended June 30, 2019. The increase was primarily
attributable to the following:
•$20.1 million increase of employee salary and benefits, which was primarily
attributable to the hiring of more personnel to support our growing
organization, including the expansion of our commercial organizations in China
and the United States;
•$7.3 million increase of share-based compensation expense, primarily
attributable to our increased headcount, resulting in more awards being expensed
related to the growing employee population;
•$6.8 million increase of professional fees and consulting for general and
administrative activities, including legal, recruiting, information technology,
tax, accounting and audit services, primarily in connection with our growing
business;
•$2.5 million increase in external selling and marketing expenses, including
market access studies, meeting and seminar expenses, promotional activities, and
sponsorship and grant expenses; and
•$5.1 million increase in facility expenses, rental fees, office expenses, and
other administrative expenses, primarily attributable to the global expansion of
our business, including the expansion of our commercial operations in China and
the United States.
Interest Income, Net
Interest income, net decreased by $1.8 million, or 61.6%, to $1.1 million for
the three months ended June 30, 2020, from $2.9 million for three months ended
June 30, 2019. The decrease in interest income, net, was primarily attributable
to increased interest expense, compared to the prior year period.
Other Income, Net
Other income, net increased to $20.0 million of net other income for the
three months ended June 30, 2020, from $0.9 million of net other expense for the
three months ended June 30, 2019. The increase was mainly attributable to the
gain recognized in conjunction with the deconsolidation of MapKure, changes in
fair value on equity method investments where the fair value option was elected,
and realized gains on sales of available-for-sale securities, offset by foreign
currency exchange losses.
Income Tax Expense
Income tax benefit was $1.5 million for the three months ended June 30, 2020, as
compared to an income tax expense of $2.1 million for the three months ended
June 30, 2019. The income tax benefit for the three months ended June 30, 2020
was primarily attributable to income reported in certain China subsidiaries,
offset by the tax benefit of deferred U.S. stock-based compensation deductions.
The current U.S. tax was reduced by windfall stock-based compensation deductions
and research and development tax credits. The income tax expense for the three
months ended June 30, 2019 was primarily attributable to income reported in the
United States and certain China subsidiaries, offset by U.S. research and
development tax credits and other special tax deductions.

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Comparison of the Six Months Ended June 30, 2020 and 2019
Revenue
Total revenue decreased to $117.7 million for the six months ended June 30,
2020, from $321.2 million for the six months ended June 30, 2019, primarily due
to the cessation of collaboration revenue following the termination of the BMS
collaboration agreement in the second quarter of 2019, and the related $150.0
million termination fee that was recognized as revenue. The following table
summarizes the components of revenue for the six months ended June 30, 2020 and
2019, respectively:
                                                                   Six Months Ended
                                                                       June 30,                                              Changes
                                                                2020               2019                 $                    %

                                                                                     (dollars in thousands)
Product revenue                                             $ 117,694          $ 115,563          $    2,131                   1.8  %
Collaboration revenue:
Reimbursement of research and development costs                     -             27,634             (27,634)               (100.0) %
Research and development service revenue                            -             27,982             (27,982)               (100.0) %
Other                                                               -            150,000            (150,000)               (100.0) %
Total                                                       $ 117,694          $ 321,179          $ (203,485)                (63.4) %



Net product revenues consisted of the following:


                                 Six Months Ended
                                     June 30,                                 Changes
                               2020            2019             $             %

                                            (dollars in thousands)
Tislelizumab               $  49,943       $       -       $ 49,943          NM
BRUKINSA®                      7,691               -          7,691          NM
REVLIMID®                     24,847          39,957        (15,110)       (37.8) %
VIDAZA®                       17,832          13,741          4,091         29.8  %
ABRAXANE®                     17,381          61,865        (44,484)       (71.9) %
Total product revenue      $ 117,694       $ 115,563       $  2,131          1.8  %


Net product revenue increased 1.8% to $117.7 million for the six months ended
June 30, 2020, compared to $115.6 million in the prior year period, primarily
due to sales of tislelizumab in China in 2020, as well as sales of BRUKINSA® in
the United States and China, partially offset by decreased sales of ABRAXANE®
and REVLIMID®. Product revenues in the first half of 2020 were negatively
impacted by the COVID-19 pandemic, increased generic competition, and the
suspension of ABRAXANE® in China by the NMPA in March 2020. Product revenues in
the first half of 2020 were positively impacted by sales of our internally
developed products, tislelizumab and BRUKINSA®. Product revenue for tislelizumab
reflects sales since its launch in China in March 2020, and product sales for
BRUKINSA® reflect sales since its launch in China in June 2020, as well as sales
in the United States during the period.
We expect product revenue from our in-licensed products to continue to be
impacted by the NMPA's suspension of the importation, sales and use of ABRAXANE®
in China in March 2020 and the subsequent voluntary recall of ABRAXANE® by BMS,
as well as increased competition from generic products. Although the impact of
COVID-19 on commercial activities in China lessened in the second quarter of
2020 compared to the first quarter of 2020, there remains uncertainty regarding
the future impact of the pandemic both in China as well as globally. We do not
expect revenue from ABRAXANE® until the NMPA lifts its suspension on the
importation, sale and use of ABRAXANE® and qualified drug is manufactured and
available for sale in China. We do not know when the NMPA suspension of
ABRAXANE® will be lifted and when we will be able to re-commence sales of
ABRAXANE®.
We did not have any collaboration revenue for the six months ended June 30, 2020
due to the termination of the collaboration agreement with BMS for tislelizumab
in the second quarter of 2019.
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Cost of Sales
Cost of sales decreased to $28.5 million for the six months ended June 30, 2020
from $33.1 million for the six months ended June 30, 2019, primarily due to a
decreased volume of in-licensed sales compared to the prior year period.
Research and Development Expense
Research and development expense increased by $183.2 million, or 45.0%, to
$590.3 million for the six months ended June 30, 2020 from $407.1 million for
the six months ended June 30, 2019. The following table summarizes external
clinical, external non-clinical and internal research and development expense
for the six months ended June 30, 2020 and 2019, respectively:
                                                                        Six Months Ended
                                                                            June 30,                                             Changes
                                                                     2020               2019                $                   %

                                                                                         (dollars in thousands)
External cost of clinical-stage programs                         $ 216,212          $ 181,661          $  34,551                 19.0  %
Upfront license fees and milestones                                 48,000             30,000             18,000                 60.0  %
External cost of non-clinical-stage programs                        18,999             21,623             (2,624)               (12.1) %
Amgen co-development expense1                                       56,703                  -             56,703                NM
Internal research and development expenses                         250,356            173,827             76,529                 44.0  %
Total research and development expenses                          $ 590,270          $ 407,111          $ 183,159                 45.0  %


1 Our co-funding obligation for the development of the pipeline assets under the
Amgen collaboration for the six months ended June 30, 2020 totaled $111.9
million, of which $56.7 million was recorded as R&D expense. The remaining $55.2
million was recorded as a reduction of the R&D cost share liability.
The increase in external research and development expense was primarily
attributable to the advancement of our clinical drug candidates, and included
the following:
•increases of approximately $21.1 million and $10.1 million, respectively, for
zanubrutinib and tislelizumab, primarily due to the continued enrollment and
expansion of pivotal clinical trials;
•an increase of $56.7 million related to expense recognized on co-development
fees to Amgen;
•an increase of $18.0 million related to license fees under collaboration
agreements, including $13.0 million of increased upfront payments compared to
the same period last year, as well as a $5.0 million milestone payment accrued
in the first quarter of 2020; and
•external spending for our non-clinical-stage programs was primarily related to
manufacturing costs for pre-commercial activities and costs associated with our
preclinical candidates.
The increase in internal research and development expense was primarily
attributable to the expansion of our global development organization and
development of our clinical and preclinical drug candidates, and included the
following:
•$30.0 million increase of employee salary and benefits, primarily attributable
to hiring more research and development personnel to support our expanding
research and development activities;
•$10.2 million increase of share-based compensation expense, primarily
attributable to our increased headcount, resulting in more awards being expensed
related to the growing employee population;
•$24.7 million increase of materials and reagent expenses, primarily in
connection with the in-house manufacturing of drug candidates used for clinical
purposes;
•$3.0 million decrease of consulting fees, which was primarily attributable to
decreased travel and meeting expense related to scientific, regulatory and
development consulting activities, in connection with the advancement of our
drug candidates; and
•$14.6 million increase of facilities, depreciation, office expense, rental
fees, and other expenses to support the growth of our organization.
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Selling, General and Administrative Expense
Selling, general and administrative expense increased by $91.2 million, or
65.2%, to $231.1 million for the six months ended June 30, 2020, from $139.9
million for the six months ended June 30, 2019. The increase was primarily
attributable to the following:
•$41.0 million increase of employee salary and benefits, which was primarily
attributable to the hiring of more personnel to support our growing
organization, including the expansion of our commercial organizations in China
and the United States;
•$14.5 million increase of share-based compensation expense, primarily
attributable to our increased headcount, resulting in more awards being expensed
related to the growing employee population;
•$16.9 million increase of professional fees and consulting for general and
administrative activities, including legal, recruiting, information technology,
tax, accounting and audit services, primarily in connection with our growing
business;
•$2.0 million increase in external selling and marketing expenses, including
market access studies, meeting and seminar expenses, promotional activities, and
sponsorship and grant expenses; and
•$16.8 million increase in facility expenses, rental fees, office expenses, and
other administrative expenses, primarily attributable to the global expansion of
our business, including the expansion of our commercial operations in China and
the United States.
Interest Income, Net
Interest income, net increased by $0.4 million, or 5.9%, to $7.8 million for the
six months ended June 30, 2020, from $7.4 million for six months ended June 30,
2019. The increase in interest income was primarily attributable to interest
income on cash and short-term investment balances exceeding interest expense on
our long-term debt.
Other Income, Net
Other income, net increased to $23.7 million of net other income for the
six months ended June 30, 2020, from $0.9 million of net other income for the
six months ended June 30, 2019. The increase was mainly attributable to the gain
recognized in conjunction with the deconsolidation of MapKure, unrealized gains
on equity securities and realized gains on sales of available-for-sale
securities, offset by foreign currency exchange losses.
Income Tax Expense
Income tax expense was $0.08 million for the six months ended June 30, 2020, as
compared to an income tax expense of $2.6 million for the six months ended June
30, 2019. The income tax expense for the six months ended June 30, 2020 was
primarily attributable to income reported in certain China subsidiaries offset
by the tax benefit of deferred U.S. stock-based compensation deductions. The
current U.S. tax was reduced by windfall stock-based compensation deductions and
research and development tax credits. The income tax expense for the six months
ended June 30, 2019 was primarily attributable to income reported in the United
States and certain China subsidiaries, offset by U.S. research and development
tax credits and other special tax deductions.
Liquidity and Capital Resources
Since our inception in 2010, we have incurred annual net losses and negative
cash flows from our operations. Substantially all of our operating losses have
resulted from the funding of our research and development programs and selling,
general and administrative expenses associated with our operations. We incurred
net losses of $336.3 million and $701.3 million, respectively, for the three and
six months ended June 30, 2020, and net losses of $86.0 million and $254.0
million for the three and six months ended June 30, 2019. As of June 30, 2020,
we had an accumulated deficit of $2.7 billion. Our primary use of cash is to
fund our research and development activities and to support the
commercialization of our products in China and the United States and planned
additional product launches. Our operating activities used $604.9 million and
$218.1 million during the six months ended June 30, 2020 and 2019, respectively.
We have financed our operations principally through proceeds from public and
private offerings of our securities and proceeds from our collaboration
agreements, together with product sales since September 2017.
As of June 30, 2020, we had cash, cash equivalents, restricted cash, and
short-term investments of $3.2 billion, including approximately $118.2 million
of cash, cash equivalents and restricted cash held by our joint venture, BeiGene
Biologics, to continue phased construction of our commercial biologics facility
in Guangzhou, China and to fund research and development
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of our biologics drug candidates in China. Restricted cash of $4.9 million
primarily consists of RMB-denominated cash deposits pledged in designated bank
accounts as collateral for bank loans and letters of credit. On July 15, 2020,
we received approximately $2.1 billion from a registered direct offering of
ordinary shares to certain existing investors, which is not included in our
financial statements for the three and six months ended June 30, 2020.
The following table provides information regarding our cash flows for the
six months ended June 30, 2020 and 2019:
                                                                                  Six Months Ended
                                                                                      June 30,
                                                                               2020                2019

                                                                                   (in thousands)
Cash, cash equivalents and restricted cash at beginning of period         $   620,775          $ 740,713
Net cash used in operating activities                                        (604,886)          (218,076)
Net cash (used in) provided by investing activities                        (1,544,864)           364,425
Net cash provided by financing activities                                   2,883,161             58,346
Net effect of foreign exchange rate changes                                    (4,287)            (2,732)
Net increase in cash, cash equivalents, and restricted cash                   729,124            201,963
Cash, cash equivalents and restricted cash at end of period               $ 

1,349,899 $ 942,676




Use of Funds
The use of cash in all periods presented resulted primarily from our net losses,
adjusted for non-cash charges and changes in components of working capital. The
primary use of our cash, cash equivalents and short-term investments in all
periods presented was to fund research and development, regulatory and other
clinical trial costs, selling costs and related supporting administrative
expenses. Our prepaid expenses and other current assets, accounts payable and
accrued expense balances in all periods presented were affected by the timing of
vendor invoicing and payments.
Operating Activities
Operating activities used $604.9 million of cash in the six months ended June
30, 2020, which resulted principally from our net loss of $701.3 million,
partially offset by a decrease in our net operating assets and liabilities of
$28.7 million and by non-cash charges of $67.7 million related primarily to
stock-based compensation expense, depreciation and amortization and other
non-cash charges. The decrease in our net operating assets and liabilities was
primarily due to an increase of $79.3 million in accounts payable and accrued
expenses related to external research and development costs, which includes our
co-development obligations to Amgen, a decrease of $9.1 million in accounts
receivable, net, on product sales, an increase in operating lease liabilities of
$7.4 million, and a decrease in other non-current assets of $2.6 million, all of
which had a positive impact on operating cash flow. These cash inflows were
partially offset by an increase of $54.6 million in prepaid expenses and other
current assets primarily related to prepayments to CROs for clinical trials, an
increase of $7.5 million in operating lease right-of-use assets, a decrease of
$3.0 million in taxes payable, and an increase of $4.7 million in inventory, all
of which had a negative impact on operating cash flow. Our non-cash charges and
other adjustments to our net loss during the six months ended June 30, 2020
primarily consisted of $83.7 million of share-based compensation expense, $43.0
million of acquired in-process research and development related to license
agreements in the period, $15.6 million of depreciation and amortization
expense, and $5.1 million of interest expense, offset by $55.2 million for
amortization of a research and development cost share liability related to the
Amgen collaboration, and $11.3 million of unrealized gains from equity method
investments.
Operating activities used $218.1 million of cash in the six months ended June
30, 2019, which resulted principally from our net loss of 254.0 million, which
was inclusive of the $150.0 million payment recognized in revenue in connection
with the termination of the BMS collaboration agreement for tislelizumab, and an
increase in our net operating assets and liabilities of $76.0 million, offset by
non-cash charges of $112.0 million related primarily to stock-based compensation
expense, depreciation and amortization and other non-cash charges. The increase
in our net operating assets and liabilities was primarily due to an increase of
$17.1 million related to collections on product sales from our collaboration
with BMS, an increase of $32.8 million in inventories, an increase of $3.6
million in operating lease right-of-use assets, an increase of $10.3 million in
other non-current assets primarily related to VAT prepayments, an increase of
$14.5 million in prepaid expenses and other current assets primarily related to
prepayments to CROs for clinical trials, a decrease of $3.7 million in taxes
payable, and a decrease of $28.0 million in deferred revenue, all of which had a
negative impact on operating cash flow. These cash uses were partially offset by
an increase of $25.0 million in accounts payable and accrued expenses related to
payments for external research and development costs, a decrease of $8.6 million
in unbilled receivables related to the BMS collaboration, and an increase of
$0.4 million in operating lease liabilities and other long-term liabilities, all
of which had a positive impact on operating cash flows. Our non-cash charges and
other adjustments to our net loss during the six months ended June 30, 2019
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primarily consisted of $59.0 million of share-based compensation expense, $49.0
million of acquired in-process research and development related to our license
agreements with Ambrx Inc. ("Ambrx") and BioAtla, and termination of the
collaboration agreement with Merck KGaA, Darmstadt Germany, $7.1 million of
depreciation and amortization expense, and $3.8 million of non-cash interest
expense, offset by $3.7 million of bond discount amortization, $1.5 million
related to deferred tax benefits, and $1.8 million of disposal gain on
available-for-sale securities.
Investing Activities
Investing activities used $1.5 billion of cash in the six months ended June 30,
2020, consisting of $2.4 billion in purchases of investment securities, $43.0
million of acquired in-process research and development, capital expenditures of
$54.1 million, and cash outflows for the deconsolidation of a subsidiary of $2.0
million, all of which were offset by sales and maturities of investment
securities of $997.2 million.
Investing activities provided $364.4 million of cash in the six months ended
June 30, 2019, consisting of sales and maturities of investment securities of
$1,167.5 million, which was offset by $710.8 million in purchases of investment
securities, $49.0 million of acquired in-process research and development
related to the license agreements with Ambrx and BioAtla and termination of the
collaboration agreement with Merck KGaA, Darmstadt Germany, and capital
expenditures of $43.3 million primarily related to our Guangzhou and Suzhou
manufacturing facilities.
Financing Activities
Financing activities provided $2.9 billion of cash in the six months ended June
30, 2020, consisting primarily of $2.8 billion received from our collaboration
with Amgen, of which $2.2 billion was recorded as equity, and $0.6 billion was
recorded as a research and development cost share liability. Additionally, we
received $28.2 million from the exercise of employee share options and proceeds
from the issuance of shares through our employee share purchase plan, $49.5
million from proceeds of a long-term bank loan, and $26.2 million from proceeds
of a short-term bank loan.
Financing activities provided $58.3 million of cash in the six months ended June
30, 2019, consisting of $43.7 million from a long-term bank loan to fund our
Guangzhou manufacturing facility, a $4.0 million capital contribution from
investors for the noncontrolling interest of MapKure, and $10.6 million from the
exercise of employee share options.
Effects of Exchange Rates on Cash
We have substantial operations in the PRC, which generate a significant amount
of RMB-denominated cash from product sales and require a significant amount of
RMB-denominated cash to pay our obligations. Since the reporting currency of the
Company is the U.S. dollar, periods of volatility may have a significant impact
on our consolidated cash balances.
Operating Capital Requirements
We have exclusive rights to distribute and promote three of BMS's approved
cancer therapies in China, for which we began recognizing revenue in the third
quarter of 2017. On November 14, 2019, we received accelerated approval from the
FDA for BRUKINSA® as a treatment for MCL in adult patients who have received at
least one prior therapy; on December 26, 2019, we received regulatory approval
from the NMPA for tislelizumab as a treatment for patients with cHL who have
received at least two prior therapies; and on June 3, 2020, we received approval
from the NMPA for BRUKINSA® in two indications, (i) the treatment of adult
patients with CLL/ SLL who have received at least one prior therapy, and (ii)
the treatment of adult patients with MCL who have received at least one prior
therapy. We launched BRUKINSA® in the United States in November 2019 and
launched tislelizumab in China in March 2020 and BRUKINSA® in China in July
2020. However, we do not expect to generate significant revenue from product
sales of our internally developed drugs and drug candidates unless and until we
obtain regulatory approvals for additional indications of our currently approved
drugs. We anticipate that we will continue to generate losses for the
foreseeable future as we continue the development of, and seek regulatory
approvals for, our drugs and drug candidates, commercialize our approved
products and prepare for commercialization and begin to commercialize any future
approved products. As a growing public company, we will continue to incur
additional costs associated with our operations. In addition, we expect to incur
significant commercialization expenses for product sales, marketing and
manufacturing of our in-licensed drug products as well as our internally
developed products that are either approved or in late-stage clinical trials. We
may need additional funding prior to generating sufficient cash from operations
to fund our continuing operations.
Based on our current operating plan, we expect that our existing cash, cash
equivalents and short-term investments as of June 30, 2020, will enable us to
fund our operating expenses and capital expenditures requirements for at least
the next 12 months after the date that the financial statements included in this
report are issued. We expect that our expenses will continue to increase
substantially as we fund our ongoing research and clinical development efforts,
including our ongoing and planned pivotal trials for zanubrutinib, tislelizumab
and pamiparib, both in China and globally, and the shared development
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costs of a portfolio of Amgen's oncology pipeline products and additional
in-licensed drug candidates; our other ongoing and planned clinical trials;
regulatory filings and registration of our late-stage drug candidates; expansion
of our commercial operations in China and the U.S. and the launch of our
in-licensed commercial drug portfolio and late-stage drug candidates globally;
business development and manufacturing activities; and working capital and other
general corporate purposes. We have based our estimates on assumptions that may
prove to be wrong, and we may use our available capital resources sooner than we
expect in our current operating plan. Because of the numerous risks and
uncertainties associated with the development and commercialization of our drugs
and drug candidates, we are unable to estimate the amounts of increased capital
outlays and operating expenditures necessary to complete the development and
commercialization of our drugs and drug candidates.
Our future capital requirements will depend on many factors, including:
•our ability to successfully commercialize our internally developed and
in-licensed drugs;
•the costs, timing and outcome of regulatory reviews and approvals;
•the ability of our drug candidates to progress through clinical development
successfully;
•the initiation, progress, timing, costs and results of nonclinical studies and
clinical trials for our other programs and potential drug candidates;
•the number and characteristics of the drugs and drug candidates we pursue;
•the costs of establishing or expanding commercial manufacturing capabilities or
securing necessary supplies from third-party manufacturers;
•the costs of preparing, filing and prosecuting patent applications, maintaining
and enforcing our intellectual property rights and defending intellectual
property-related claims;
•the costs of establishing and expanding our commercial operations and the
success of those operations;
•the extent to which we acquire or in-license other products and technologies;
and
•our ability to maintain and establish collaboration arrangements on favorable
terms, if at all.
Until such time, if ever, as we can generate substantial product revenue, we may
be required to finance our cash needs through a combination of equity offerings,
debt financings, collaboration agreements, strategic alliances, licensing
arrangements, government grants and other available sources. Under the rules of
the SEC, we currently qualify as a "well-known seasoned issuer," which allows us
to file shelf registration statements to register an unspecified amount of
securities that are effective upon filing. On May 11, 2020, we filed such a
shelf registration statement with the SEC for the issuance of an unspecified
amount of ordinary shares (including in the form of ADSs), preferred shares,
various series of debt securities and/or warrants to purchase any of such
securities, either individually or in units, from time to time at prices and on
terms to be determined at the time of any such offering. This registration
statement was effective upon filing and will remain in effect for up to three
years from filing, prior to which time we plan to file another shelf
registration statement that will be effective for up to three years from filing.
To the extent that we raise additional capital through the sale of equity or
convertible debt securities, the ownership interest of our shareholders will be
diluted, and the terms of these securities may include liquidation or other
preferences that adversely affect your rights as a holder of ADSs or ordinary
shares. Debt financing, if available, may involve agreements that include
covenants limiting or restricting our ability to take specific actions, such as
incurring additional debt, making capital expenditures or declaring dividends
and may require the issuance of warrants, which could potentially dilute your
ownership interest. If we raise additional funds through collaboration
agreements, strategic alliances or licensing arrangements with third parties, we
may have to relinquish valuable rights to our technologies, future revenue
streams or research programs or to grant licenses on terms that may not be
favorable to us. If we are unable to raise additional funds through equity or
debt financings, collaborations or other sources when needed, we may be required
to delay, limit, reduce or terminate our product development or
commercialization efforts or grant rights to develop and market products or drug
candidates that we would otherwise prefer to develop and market ourselves.

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Contractual Obligations and Commitments
The following table summarizes our significant contractual obligations as of the
payment due date by period at June 30, 2020:
                                                                                         Payments Due by Period
                                                                             Less Than                                                More Than
                                                           Total               1 Year           1-3 Years          3-5 Years           5 Years
                                                                                             (in thousands)

Contractual obligations
Operating lease commitments                            $    49,271          $  15,396          $  23,576          $  10,181          $     118
Purchase commitments                                       126,864             34,390             49,345             22,328             20,801
Debt obligations                                           317,716             26,061            167,099             40,238             84,318
Co-development funding commitment                        1,138,057            292,557            623,000            222,500                  -
Capital commitments                                         61,017             61,017                  -                  -                  -
Total                                                  $ 1,692,925          $ 429,421          $ 863,020          $ 295,247          $ 105,237


Operating Lease Commitments
We lease office or manufacturing facilities in Beijing, Shanghai, Suzhou,
Guangzhou and other cities in China, and office facilities in the United States
in California, Maryland, Massachusetts and New Jersey, and in Basel, Switzerland
under non-cancelable operating leases expiring on different dates. Payments
under operating leases are expensed on a straight-line basis over the periods of
the respective leases. The aggregate future minimum payments under these
non-cancelable operating leases are summarized in the table above.
Purchase Commitments
As of June 30, 2020, purchase commitments amounted to $126.9 million, of which
$105.1 million related to minimum purchase requirements for supply purchased
from CMOs and $21.7 million related to binding purchase obligations of inventory
from BMS. We do not have any minimum purchase requirements for inventory from
BMS or Amgen.
Debt Obligations
Short-term Bank Loans
On January 13, 2020, BeiGene (Shanghai) Co., Ltd. entered into a one-year loan
agreement with China Industrial Bank to borrow up to RMB200.0 million at a fixed
interest rate of 5.6%. During the six months ended June 30, 2020, we drew down
$20.1 million (RMB140.0 million) of the loan. Interest will be paid quarterly
until the loan is fully settled. As of June 30, 2020 the amount outstanding
under the loan agreement was $19.8 million (RMB140.0 million).
On May 21, 2020, BeiGene (Beijing) Co., Ltd. entered into a one-year loan
agreement with China Merchants Bank to borrow up to RMB100.0 million. On May 27,
2020, we drew down $3.0 million (RMB21.5 million) at a fixed interest rate of
4.35%. On June 28, 2020, we drew down an additional $3.1 million
(RMB21.7 million) of the loan at a fixed interest rate of 4.5%. Interest will be
paid quarterly until the loan is fully settled. As of June 30, 2020 the amount
outstanding under the loan agreement was $6.1 million (RMB43.1 million).
Long-term Bank Loans
On April 4, 2018, BeiGene Guangzhou Biologics Manufacturing Co., Ltd. ("BeiGene
Guangzhou Factory") entered into a nine-year loan agreement with China
Construction Bank to borrow RMB580.0 million at a floating interest rate
benchmarked against prevailing interest rates of certain PRC financial
institutions. The loan is secured by BeiGene Guangzhou Factory's land use right
and certain Guangzhou Factory fixed assets of the first phase of the Guangzhou
manufacturing facility build out with a total carrying amount of $142.1 million.
Interest expense will be paid quarterly until the loan is fully settled. As of
June 30, 2020, we have drawn down the entire $82.1 million (RMB580.0 million) in
aggregate principal amount of this loan. Maturity dates range from 2021 to 2027.
On January 22, 2020, BeiGene Guangzhou Factory entered into a nine-year bank
loan with China Merchants Bank to borrow up to RMB1.1 billion at a floating
interest rate benchmarked against prevailing interest rates of certain PRC
financial institutions. The loan will be secured by Guangzhou Factory's second
land use right and fixed assets that will be placed into service upon completion
of the second phase of the Guangzhou manufacturing facility build out. Interest
is paid quarterly until
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the loan is fully settled. As of June 30, 2020, we have drawn down $49.5 million
(RMB350.0 million) of the loan. The loan interest rate was 4.4% for the six
months ended June 30, 2020, and the maturity dates range from 2022 to 2029.
Shareholder Loan
On March 7, 2017, BeiGene Biologics Co., Ltd. ("BeiGene Biologics") entered into
a Shareholder Loan Contract with Guangzhou GET Technology Development Co., Ltd.
(now Guangzhou High-tech Zone Technology Holding Group Co., Ltd.) ("GET"),
pursuant to which, GET provided a shareholder loan to BeiGene Biologics in the
principal amount of RMB900.0 million at a fixed 8% annual interest rate. The
term of the shareholder loan is 72 months, commencing from the actual drawdown
date of April 14, 2017 and ending on April 13, 2023, unless converted earlier.
On April 14, 2017, we drew down the entire RMB900.0 million from GET.
Co-development funding commitment
    Under the Amgen collaboration, we are responsible for co-funding global
development costs for the licensed Amgen oncology pipeline assets up to a total
cap of $1,250,000. We are funding our portion of the co-development costs by
contributing cash and development services. As of June 30, 2020, our remaining
co-development funding commitment was $1,138,057.
Capital Commitments
We had capital commitments amounting to $61.0 million for the acquisition of
property, plant and equipment as of June 30, 2020, which was primarily for
BeiGene Guangzhou Factory's manufacturing facility in Guangzhou, China.
Other Business Agreements
We enter into agreements in the ordinary course of business with CROs to provide
research and development services. These contracts are generally cancelable at
any time by us with prior written notice.
We also enter into collaboration agreements with institutions and companies to
license intellectual property. We may be obligated to make future development,
regulatory and commercial milestone payments and royalty payments on future
sales of specified products associated with its collaboration agreements.
Payments under these agreements generally become due and payable upon
achievement of such milestones or sales. These commitments are not recorded on
our balance sheet because the achievement and timing of these milestones are not
fixed and determinable. When the achievement of these milestones or sales have
occurred, the corresponding amounts are recognized in our financial statements.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined under SEC rules, such as
relationships with unconsolidated entities or financial partnerships, which are
often referred to as structured finance or special purpose entities, established
for the purpose of facilitating financing transactions that are not required to
be reflected on our balance sheets.
Critical Accounting Policies and Significant Judgments and Estimates
Our discussion and analysis of our financial condition and results of operations
is based on our financial statements, which have been prepared in accordance
with U.S. generally accepted accounting principles ("GAAP"). The preparation of
these financial statements requires us to make estimates, assumptions and
judgments that affect the reported amounts of assets, liabilities, revenues,
costs and expenses. We evaluate our estimates and judgments on an ongoing basis,
and our actual results may differ from these estimates. These include, but are
not limited to, estimating the useful lives of long-lived assets, estimating
variable consideration in product sales and collaboration revenue arrangements,
estimating the incremental borrowing rate for operating lease liabilities,
identifying separate accounting units and the standalone selling price of each
performance obligation in the Company's revenue arrangements, assessing the
impairment of long-lived assets, share-based compensation expenses,
realizability of deferred tax assets and the fair value of financial
instruments. We base our estimates on historical experience, known trends and
events, contractual milestones and other various factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Our actual results may differ from
these estimates under different assumptions or conditions.
There have been no material changes to our critical accounting policies as of
and for the three and six months ended June 30, 2020, as compared to those
described in the section titled "Part II-Item 7-Management's Discussion and
Analysis of
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Financial Condition and Results of Operations" included in our Annual Report on
Form 10-K for the year ended December 31, 2019.
For new accounting policies adopted during the three and six months ended June
30, 2020 , see "Part I-Item 1. Financial Statements-Notes to the Condensed
Consolidated Financial Statements-1. Description of Business, Basis of
Presentation and Consolidation and Significant Accounting Policies-Significant
accounting policies" in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
See Note 1 to our condensed consolidated financial statements included in this
Quarterly Report on Form 10-Q for information regarding recent accounting
pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest and Credit Risk
Financial instruments that are potentially subject to credit risk consist of
cash, cash equivalents, restricted cash and short-term investments. The carrying
amounts of cash, cash equivalents, restricted cash and short-term investments
represent the maximum amount of loss due to credit risk. We had cash and cash
equivalents of $1.3 billion and $618.0 million, restricted cash of $4.9 million
and $2.8 million, and short-term investments of $1.8 billion and $364.7 million
at June 30, 2020 and December 31, 2019, respectively. At June 30, 2020, the
majority of our cash and cash equivalents is held in U.S. treasury securities
and U.S. money market funds. We also have cash and cash equivalent deposits with
various major reputable financial institutions located both within and outside
the PRC. The deposits placed with these financial institutions are not protected
by statutory or commercial insurance. In the event of bankruptcy of one of these
financial institutions, we may be unlikely to claim our deposits back in full.
We believe that these financial institutions are of high credit quality, and we
continually monitor the credit worthiness of these financial institutions.
Restricted cash represents secured deposits held in designated bank accounts for
issuance of letters of credit. At June 30, 2020, our short-term investments
consisted of U.S. treasury securities. We believe that the U.S. treasury
securities are of high credit quality and continually monitor the credit
worthiness of these institutions.
The primary objectives of our investment activities are to preserve principal,
provide liquidity and maximize income without significant increasing risk. Our
primary exposure to market risk relates to fluctuations in the interest rates
which are affected by changes in the general level of PRC and U.S. interest
rates. Given the short-term nature of our cash equivalents, we believe that a
sudden change in market interest rates would not be expected to have a material
impact on our financial condition and/or results of operation. We estimate that
a hypothetical 100-basis point change in market interest rates would impact the
fair value of our investment portfolio as of June 30, 2020 by $7.4 million.
We do not believe that our cash, cash equivalents and short-term investments
have significant risk of default or illiquidity. While we believe that our cash,
cash equivalents, restricted cash and short-term investments do not contain
excessive risk, we cannot provide absolute assurance that in the future our
investments will not be subject to adverse changes in market value.
Foreign Currency Exchange Rate Risk
We are exposed to foreign exchange risk arising from various currency exposures.
Our reporting currency is the U.S. dollar, but a portion of our operating
transactions and assets and liabilities are in other currencies, such as RMB,
Australian dollar and Euro. We do not believe that we currently have any
significant direct foreign exchange risk and have not used any derivative
financial instruments to hedge exposure to such risk.
RMB is not freely convertible into foreign currencies for capital account
transactions. The value of RMB against the U.S. dollar and other currencies is
affected by, among other things, changes in China's political and economic
conditions and China's foreign exchange prices. From July 21, 2005, the RMB is
permitted to fluctuate within a narrow and managed band against a basket of
certain foreign currencies. For the RMB against U.S. dollars, there was
depreciation of approximately 1.5% in the six months ended June 30, 2020 and
depreciation of approximately 1.3% in the year ended December 31, 2019,
respectively. It is difficult to predict how market forces or PRC or U.S.
government policy may impact the exchange rate between the RMB and the U.S.
dollar in the future.
To the extent that we need to convert U.S. dollars into RMB for capital
expenditures and working capital and other business purposes, appreciation of
RMB against the U.S. dollar would have an adverse effect on the RMB amount we
would receive from the conversion. Conversely, if we decide to convert RMB into
U.S. dollars for the purpose of making payments for dividends on our ordinary
shares, strategic acquisitions or investments or other business purposes,
appreciation of the U.S. dollar against RMB would have a negative effect on the
U.S. dollar amount available to us.
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In addition, a significant depreciation of the RMB against the U.S. dollar may
significantly reduce the U.S. dollar equivalent of our receivables, earnings or
losses. Further, volatility in exchange rate fluctuations may have a significant
impact on the foreign currency translation adjustments recorded in other
comprehensive income (loss).
Currency Convertibility Risk
A significant portion of our expenses, assets and liabilities are denominated in
RMB. On January 1, 1994, the PRC government abolished the dual rate system and
introduced a single rate of exchange as quoted daily by the People's Bank of
China (the "PBOC"). However, the unification of exchange rates does not imply
that the RMB may be readily convertible into U.S. dollars or other foreign
currencies. All foreign exchange transactions continue to take place either
through the PBOC or other banks authorized to buy and sell foreign currencies at
the exchange rates quoted by the PBOC. Approvals of foreign currency payments by
the PBOC or other institutions require submitting a payment application form
together with suppliers' invoices, shipping documents and signed contracts.
Additionally, the value of the RMB is subject to changes in central government
policies and international economic and political developments affecting supply
and demand in the PRC foreign exchange trading system market.
Effects of Inflation
Inflation generally affects us by increasing our cost of labor and clinical
trial costs. We do not believe that inflation has had a material effect on our
results of operations during the six months ended June 30, 2020.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Based on their evaluation, required by paragraph (b) of Rules 13a-15 or 15d-15,
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), our principal executive officer and principal financial officer have
concluded that our disclosure controls and procedures as defined in Rules
13a-15(e) and 15d-15(e) of the Exchange Act are effective, at a reasonable
assurance level, as of June 30, 2020, to ensure that information required to be
disclosed in reports that we file or submit under the Exchange Act is recorded,
processed, summarized, and reported within the time periods specified in U.S.
Securities and Exchange Commission rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is accumulated and communicated to our
management, including our principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, our management recognized that any controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurances of achieving the desired control objectives, and
management necessarily was required to apply its judgment in designing and
evaluating the controls and procedures.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting
identified in connection with the evaluation required by Rule 13a­15(d) and
15d­15(d) of the Exchange Act that occurred during the quarter ended June 30,
2020 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

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