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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________________
FORM 10-Q
___________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  to
Commission File Number: 001-37686
___________________________________________________________
BEIGENE, LTD.
(Exact name of registrant as specified in its charter)
___________________________________________________________
Cayman Islands 98-1209416
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
c/o Mourant Governance Services (Cayman) Limited
94 Solaris Avenue, Camana Bay
Grand Cayman
Cayman Islands KY1-1108
(Address of principal executive offices)
(Zip Code)
+1 (345) 949-4123
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
American Depositary Shares, each representing 13 Ordinary Shares, par value $0.0001 per share BGNE The NASDAQ Global Select Market
Ordinary Shares, par value $0.0001 per share* 06160 The Stock Exchange of Hong Kong Limited
*Included in connection with the registration of the American Depositary Shares with the Securities and Exchange Commission. The ordinary shares are not registered or listed for trading in the United States but are listed for trading on The Stock Exchange of Hong Kong Limited.
As of April 30, 2021, 1,197,609,020 ordinary shares, par value $0.0001 per share, were outstanding, of which 973,810,305 ordinary shares were held in the form of 74,908,485 American Depositary Shares, each representing 13 ordinary shares.
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes      No   
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes     No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐     No  


Table of Contents

BeiGene, Ltd.
Quarterly Report on Form 10-Q
TABLE OF CONTENTS
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Summary of Risk Factors
Below is a summary of the principal factors that make an investment in our American Depositary Shares (“ADSs”) or ordinary shares speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, are summarized in “Part II – Item 1A – Risk Factors” and should be carefully considered, together with other information in this Form 10-Q and our other filings with the Securities and Exchange Commission (“SEC”), before making an investment decision regarding our ADSs or ordinary shares.
Our medicines may fail to achieve and maintain the degree of market acceptance by physicians, patients, third-party payors, and others in the medical community necessary for commercial success.
We have limited experience in launching and marketing our internally developed and in-licensed medicines. If we are unable to further develop marketing and sales capabilities or enter into agreements with third parties to market and sell our medicines, we may not be able to generate substantial product sales revenue.
We face substantial competition, which may result in others discovering, developing, or commercializing competing medicines before or more successfully than we do.
The market opportunities for our medicines may be limited to those patients who are ineligible for or have failed prior treatments and may be small.
If we are not able to continue to obtain, or experience delays in obtaining, required regulatory approvals, we will not be able to commercialize our medicines and drug candidates, and our ability to generate revenue will be materially impaired.
We have limited manufacturing capability and must rely on third-party manufacturers to manufacture some of our commercial products and clinical supplies, and if they fail to meet their obligations, the development and commercialization of our medicines and drug candidates could be adversely affected.
If we or any third parties with which we may collaborate to market and sell our medicines are unable to achieve and maintain coverage and adequate level of reimbursement, our commercial success and business operations could be adversely affected.
We depend substantially on the success of the clinical development of our medicines and drug candidates. If we are unable to successfully complete clinical development, obtain regulatory approvals and commercialize our medicines and drug candidates, or experience significant delays in doing so, our business will be materially harmed.
Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.
If clinical trials of our drug candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our drug candidates.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
All material aspects of the research, development, manufacturing and commercialization of pharmaceutical products are heavily regulated, and we may face difficulties in complying with or be unable to comply with such regulations, which could have a material adverse effect on our business.
The approval processes of regulatory authorities in the United States, China, Europe and other comparable regulatory authorities are lengthy, time consuming and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our drug candidates, our business will be substantially harmed.
Our medicines and any future approved drug candidates will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our medicines and drug candidates.
Even if we are able to commercialize our medicines and any approved drug candidates, the medicines may become subject to unfavorable pricing regulations or third-party reimbursement practices or healthcare reform initiatives, which could harm our business.
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Table of Contents

We have incurred significant net losses since our inception and anticipate that we will continue to incur net losses for the foreseeable future and may not become profitable.
We have limited experience in obtaining regulatory approvals and commercializing pharmaceutical products, which may make it difficult to evaluate our current business and predict our future performance.
We may need to obtain additional financing to fund our operations, and if we are unable to obtain such financing, we may be unable to complete the development of our drug candidates or achieve profitability.
If we are unable to obtain and maintain patent protection for our medicines and drug candidates through intellectual property rights, or if the scope of such intellectual property rights is not sufficiently broad, third parties may compete against us.
If we fail to maintain an effective distribution channel for our medicines, our business and sales could be adversely affected.
We rely on third parties to manufacture some of our commercial and clinical drug supplies. Our business could be harmed if those third parties fail to provide us with sufficient quantities of product or fail to do so at acceptable quality levels or prices.
If third-party manufacturers fail to comply with manufacturing regulations, our financial results and financial condition could be adversely affected.
We have entered into licensing and collaboration arrangements and may enter into additional collaborations, licensing arrangements, or strategic alliances in the future, and we may not realize the benefits of such arrangements.
If we are not able to successfully develop and/or commercialize Amgen’s oncology products, the expected benefits of the collaboration will not materialize.
We have significantly increased and expect to continue to increase our research, development, manufacturing, and commercial capabilities, and we may experience difficulties in managing our growth.
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
Our business is subject to complex and evolving industry-specific laws and regulations regarding the collection and transfer of personal data. These laws and regulations can be complex and stringent, and many are subject to change and uncertain interpretation, which could result in claims, changes to our data and other business practices, significant penalties, increased cost of operations, or otherwise adversely impact our business.
We manufacture some of our medicines and intend to manufacture some of our drug candidates, if approved. Delays in completing and receiving regulatory approvals for our manufacturing facilities, or damage to, destruction of or interruption of production at such facilities, could delay our development plans or commercialization efforts.
Changes in the political and economic policies of the PRC government or in relations between China and the United States or other governments may materially and adversely affect our business, financial condition, and results of operations and may result in our inability to sustain our growth and expansion strategies.
The audit report included in our Annual Report on Form 10-K filed with the SEC is prepared by auditors who are not inspected fully by the Public Company Accounting Oversight Board, and as such, investors are deprived of the benefits of such inspection.
The trading prices of our ordinary shares and/or ADSs can be volatile, which could result in substantial losses to you.
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PART I.     FINANCIAL INFORMATION
Item 1.     Financial Statements
BEIGENE, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of U.S. Dollars (“$”), except for number of shares and per share data)
    As of
    March 31, December 31, 
  Note 2021 2020
    $ $
    (unaudited) (audited)
Assets      
Current assets:      
Cash and cash equivalents   1,901,819  1,381,950 
Short-term restricted cash 4 305  307 
Short-term investments 4 2,910,472  3,268,725 
Accounts receivable, net 10 84,010  60,403 
Inventories 5 72,974  89,293 
Prepaid expenses and other current assets 10 171,399  160,012 
Total current assets   5,140,979  4,960,690 
Long-term restricted cash 4 8,282  7,748 
Property, plant and equipment, net 6 373,949  357,686 
Operating lease right-of-use assets 86,946  90,581 
Intangible assets, net 8 4,813  5,000 
Deferred tax assets 9 78,215  65,962 
Other non-current assets 10 127,820  113,090 
Total non-current assets   680,025  640,067 
Total assets   5,821,004  5,600,757 
Liabilities and shareholders' equity  
Current liabilities:  
Accounts payable   146,923  231,957 
Accrued expenses and other payables 10 312,134  346,144 
Deferred revenue, current portion 3 71,651  — 
Tax payable 9 27,463  20,380 
Operating lease liabilities, current portion 13,993  13,895 
Research and development cost share liability, current portion 3 135,333  127,808 
Short-term debt 11 405,045  335,015 
Total current liabilities   1,112,542  1,075,199 
Non-current liabilities:  
Long-term bank loans 11 193,017  183,637 
Deferred revenue, non-current portion 3 78,594  — 
Operating lease liabilities, non-current portion 26,565  29,417 
Deferred tax liabilities 9 10,794  10,792 
Research and development cost share liability, non-current portion 3 340,585  375,040 
Other long-term liabilities 10 55,320  57,429 
Total non-current liabilities   704,875  656,315 
Total liabilities   1,817,417  1,731,514 
Commitments and contingencies 18
Equity:  
Ordinary shares, US$0.0001 par value per share; 9,500,000,000 shares authorized; 1,197,322,617 and 1,190,821,941 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
  119  118 
Additional paid-in capital   7,486,518  7,414,932 
Accumulated other comprehensive income 15 3,204  6,942 
Accumulated deficit   (3,486,254) (3,552,749)
Total equity 4,003,587  3,869,243 
Total liabilities and equity   5,821,004  5,600,757 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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BEIGENE, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands of U.S. Dollars (“$”), except for number of shares and per share data)
(Unaudited)
    Three Months Ended
    March 31,
  Note 2021 2020
   
Revenues      
Product revenue, net 12 106,117  52,059 
Collaboration revenue 3 499,755  — 
Total revenues   605,872  52,059 
Expenses  
Cost of sales - product   32,685  14,149 
Research and development   320,726  304,302 
Selling, general and administrative   182,106  107,081 
Amortization of intangible assets   188  283 
Total expenses   535,705  425,815 
Income (loss) from operations   70,167  (373,756)
Interest (expense) income, net   (4,179) 6,690 
Other (expense) income, net   (4,123) 3,681 
Income (loss) before income taxes   61,865  (363,385)
Income tax (benefit) expense 9 (4,630) 1,554 
Net income (loss)   66,495  (364,939)
Less: net loss attributable to noncontrolling interests   —  (1,204)
Net income (loss) attributable to BeiGene, Ltd.   66,495  (363,735)
Earnings (loss) per share attributable to BeiGene, Ltd.
Basic 13 0.06  (0.36)
Diluted 13 0.05  (0.36)
Weighted-average shares outstanding—basic 1,188,943,726  1,005,347,581 
Weighted-average shares outstanding—diluted 13 1,257,489,671  1,005,347,581 
Earnings (loss) per American Depositary Share ("ADS")
Basic 0.73  (4.70)
Diluted 0.69  (4.70)
Weighted-average ADSs outstanding—basic 91,457,210  77,334,429 
Weighted-average ADSs outstanding—diluted 96,729,975  77,334,429 
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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BEIGENE, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Amounts in thousands of U.S. Dollars (“$”), except for number of shares and per share data)
(Unaudited)
  Three Months Ended
  March 31,
  2021 2020
  $ $
Net income (loss) 66,495  (364,939)
Other comprehensive (loss) income, net of tax of nil:
Foreign currency translation adjustments (3,762) (4,349)
Pension liability adjustments 497  — 
Unrealized holding (loss) gain, net (473) 5,698 
Comprehensive income (loss) 62,757  (363,590)
Less: comprehensive loss attributable to noncontrolling interests —  (1,308)
Comprehensive income (loss) attributable to BeiGene, Ltd. 62,757  (362,282)
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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BEIGENE, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of U.S. Dollars (“$”), except for number of shares and per share data)
(Unaudited)
    Three months ended March 31,
  Note 2021 2020
    $ $
Operating activities:      
Net income (loss)   66,495  (364,939)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:  
Depreciation and amortization expense   9,632  7,750 
Share-based compensation expenses 14 45,833  38,255 
Unrealized gains on equity method investments 4 3,327  (6,964)
Acquired in-process research and development 8,500  43,000 
Amortization of research and development cost share liability 3 (26,930) (27,634)
Deferred income tax benefits   (12,251) (206)
Other items, net   5,263  3,489 
Changes in operating assets and liabilities:  
Accounts receivable   (23,656) 3,236 
Inventories   16,319  (222)
Prepaid expenses and other current assets   (11,453) (36,075)
Other non-current assets   (6,495) (2,710)
Accounts payable   (73,178) (21,450)
Accrued expenses and other payables   (34,010) 15,775 
Tax payable   7,149  6,080 
Deferred revenue   150,245  — 
Operating lease liabilities   1,215  1,927 
Other long-term liabilities (910) (1,256)
Net cash provided by (used in) operating activities   125,095  (341,944)
Investing activities:  
Purchases of property, plant and equipment   (42,389) (21,533)
Purchases of investments   (764,163) (1,307,179)
Proceeds from sale or maturity of investments   1,107,000  256,743 
Purchase of in-process research and development (8,500) (43,000)
Net cash provided by (used in) investing activities   291,948  (1,114,969)
Financing activities:  
Proceeds from sale of ordinary shares, net of cost 16 —  2,162,407 
Proceeds from research and development cost share liability   —  616,834 
Proceeds from long-term loan 11 10,664  — 
Proceeds from short-term loans 11 71,001  11,298 
Proceeds from option exercises and employee share purchase plan   25,754  11,629 
Net cash provided by financing activities   107,419  2,802,168 
Effect of foreign exchange rate changes, net   (4,061) (6,212)
Net increase in cash, cash equivalents, and restricted cash   520,401  1,339,043 
Cash, cash equivalents, and restricted cash at beginning of period   1,390,005  620,775 
Cash, cash equivalents, and restricted cash at end of period   1,910,406  1,959,818 
Supplemental cash flow information:  
Cash and cash equivalents   1,901,819  1,957,101 
Short-term restricted cash   305  282 
Long-term restricted cash 8,282  2,435 
Income taxes paid   478  531 
Interest paid   6,927  1,136 
Supplemental non-cash information:  
Acquisitions of equipment included in accounts payable   30,906  26,412 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Table of Contents

BEIGENE, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Amounts in thousands of U.S. Dollars (“$”), except for number of shares and per share data)
(Unaudited)
  Attributable to BeiGene, Ltd.    
  Ordinary Shares Additional
Paid-In
Capital
Accumulated
Other Comprehensive Income
Accumulated
Deficit
Total Noncontrolling
Interests
 
  Shares Amount Total
$ $ $ $ $ $ $
Balance at December 31, 2020 1,190,821,941  118  7,414,932  6,942  (3,552,749) 3,869,243  —  3,869,243 
Use of shares reserved for share option exercises (123,097) —  —  —  —  —  —  — 
Exercise of options, ESPP and release of Restricted Share Units ("RSUs") 6,623,773  25,753  —  —  25,754  —  25,754 
Share-based compensation —  —  45,833  —  —  45,833  —  45,833 
Other comprehensive loss —  —  —  (3,738) —  (3,738) —  (3,738)
Net income —  —  —  —  66,495  66,495  —  66,495 
Balance at March 31, 2021 1,197,322,617  119  7,486,518  3,204  (3,486,254) 4,003,587  —  4,003,587 
Balance at December 31, 2019 801,340,698  79  2,925,970  (8,001) (1,955,843) 962,205  16,150  978,355 
Issuance of ordinary shares in connection with collaboration 206,635,013  21  2,162,386  —  —  2,162,407  —  2,162,407 
Use of shares reserved for share option exercises (3,705,468) —  —  —  —  —  —  — 
Exercise of options, ESPP and release of Restricted Share Units ("RSUs") 3,706,573  11,628  —  —  11,629  —  11,629 
Share-based compensation —  —  38,255  —  —  38,255  —  38,255 
Other comprehensive income —  —  —  1,453  —  1,453  (104) 1,349 
Net loss —  —  —  —  (363,735) (363,735) (1,204) (364,939)
Balance at March 31, 2020 1,007,976,816  101  5,138,239  (6,548) (2,319,578) 2,812,214  14,842  2,827,056 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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BEIGENE, LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“$”) and Renminbi (“RMB”), except for number of shares and per share data)
(Unaudited)
1. Description of Business, Basis of Presentation and Consolidation and Significant Accounting Policies
Description of business
BeiGene, Ltd. (the "Company", "BeiGene", "it", "its") is a global, commercial-stage biotechnology company focused on discovering, developing, manufacturing, and commercializing innovative medicines to improve treatment outcomes and expand access for patients worldwide.
The Company has delivered ten molecules into the clinic in its first ten years, including its two lead commercial medicines, BRUKINSA®, a small molecule inhibitor of Bruton’s Tyrosine Kinase (“BTK”) for the treatment of various blood cancers, and tislelizumab, an anti-PD-1 antibody immunotherapy for the treatment of various solid tumor and blood cancers. The Company is marketing BRUKINSA® in the world’s two largest pharmaceutical markets, the United States and the People's Republic of China ("China" or the "PRC"), and tislelizumab in China, with an established, science-based commercial organization. The Company has built state-of-the-art biologic and small molecule manufacturing facilities in China to support the potential future demand of its medicines, and it also works with high quality contract manufacturing organizations (“CMOs”) to manufacture its internally developed clinical and commercial products.
The Company is a leader in China-inclusive global clinical development, which it believes can facilitate faster and more cost-effective development of innovative medicines. Its internal clinical development capabilities are deep, including a more than 1,600-person global clinical development team that is running more than 100 ongoing or planned clinical trials. This includes more than 25 pivotal or registration-enabling trials for three drug candidates that have enrolled more than 12,000 patients and healthy volunteers, of which approximately one-half have been outside of China, as of March 2021. The Company has over 45 medicines and drug candidates in commercial stage or clinical development, including 7 approved medicines, 5 pending approval, and over 30 in clinical development.
Supported by its development and commercial capabilities, the Company has entered into collaborations with world-leading biopharmaceutical companies such as Amgen and Novartis to develop and commercialize innovative medicines globally. Since its inception in 2010 in Beijing, the Company has become a fully integrated global organization of approximately 6,000 employees in 16 countries and regions, including China, the United States, Europe and Australia.
Basis of presentation and consolidation
The accompanying condensed consolidated balance sheet as of March 31, 2021, the condensed consolidated statements of operations and comprehensive income/(loss) for the three months ended March 31, 2021 and 2020, the condensed consolidated statements of cash flows for the three months ended March 31, 2021 and 2020, and the condensed consolidated statements of shareholders' equity for the three months ended March 31, 2021 and 2020, and the related footnote disclosures are unaudited. The accompanying unaudited interim condensed financial statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), including guidance with respect to interim financial information and in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. These financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the "Annual Report").
The unaudited interim condensed consolidated interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all normal recurring adjustments, necessary to present a fair statement of the results for the interim periods presented. Results of the operations for the three months ended March 31, 2021 are not necessarily indicative of the results expected for the full fiscal year or for any future annual or interim period.
The unaudited interim condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant intercompany transactions and balances between the Company and its subsidiaries are eliminated upon consolidation.
Noncontrolling interests are recognized to reflect the portion of the equity of subsidiaries which are not attributable, directly or indirectly, to the controlling shareholders. For a portion of fiscal 2020, the Company consolidated its interests in its joint venture, BeiGene Biologics Co., Ltd. ("BeiGene Biologics") and MapKure, LLC ("MapKure"), under the voting model
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and recognized the minority shareholder's equity interest as a noncontrolling interest in its condensed consolidated financial statements. In June 2020, the Company deconsolidated MapKure and recorded an equity method investment for its remaining ownership interest in the joint venture (see Note 4). In November 2020, the Company acquired the remaining equity interest in BeiGene Biologics. Subsequent to the share purchase, BeiGene Biologics is a wholly-owned subsidiary of the Company (see Note 7).
Use of estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Areas where management uses subjective judgment include, but are not limited to, estimating the useful lives of long-lived assets, estimating variable consideration in product sales and collaboration revenue arrangements, identifying separate accounting units and determining the standalone selling price of each performance obligation in the Company’s revenue arrangements, estimating the fair value of net assets acquired in business combinations, assessing the impairment of long-lived assets, valuation and recognition of share-based compensation expenses, realizability of deferred tax assets, estimating uncertain tax positions, valuation of inventory, estimating the allowance for credit losses, determining defined benefit pension plan obligations, measurement of right-of-use assets and lease liabilities and the fair value of financial instruments. Management bases the estimates on historical experience, known trends and various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from these estimates.
Recent accounting pronouncements
New accounting standards which have been adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This update simplifies the accounting for income taxes as part of the FASB's overall initiative to reduce complexity in accounting standards. The amendments include removal of certain exceptions to the general principles of ASC 740, Income taxes, and simplification in several other areas such as accounting for a franchise tax (or similar tax) that is partially based on income. Certain amendments in this update should be applied retrospectively or modified retrospectively, and all other amendments should be applied prospectively. The Company adopted this standard on January 1, 2021. There was no material impact to the Company's financial position or results of operations upon adoption.
Significant accounting policies
For a more complete discussion of the Company’s significant accounting policies and other information, the unaudited interim condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report for the year ended December 31, 2020.
There have been no material changes to the Company’s significant accounting policies as of and for the three months ended March 31, 2021, as compared to the significant accounting policies described in the Annual Report.
2. Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value. Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows:
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in market with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability.
The Company considers an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and considers an inactive market to be one in which
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there are infrequent or few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers.
The following tables present the Company’s financial assets and liabilities measured and recorded at fair value on a recurring basis using the above input categories as of March 31, 2021 and December 31, 2020:
  Quoted Price    
  in Active Significant  
  Market for Other Significant
  Identical Observable Unobservable
  Assets Inputs Inputs
As of March 31, 2021 (Level 1) (Level 2) (Level 3)
  $ $ $
Cash equivalents      
U.S. treasury securities 652,519  —  — 
Money market funds 268,697  —  — 
Short-term investment (Note 4):
U.S. Treasury securities 2,910,472  —  — 
Other non-current assets (Note 4):
Equity securities with readily determinable fair values 9,129  5,299  — 
Total 3,840,817  5,299  — 
 
  Quoted Price    
  in Active Significant  
  Market for Other Significant
  Identical Observable Unobservable
  Assets Inputs Inputs
As of December 31, 2020 (Level 1) (Level 2) (Level 3)
  $ $ $
Cash equivalents      
U.S. treasury securities 286,072  —  — 
Money market funds 80,838  —  — 
Short-term investment (Note 4):
U.S. Treasury securities 3,268,725  —  — 
Other non-current assets (Note 4):
Equity securities with readily determinable fair values 10,810  6,669  — 
Total 3,646,445  6,669  — 
The Company's cash equivalents are highly liquid investments with original maturities of 3 months or less. Short-term investments represent the Company's investments in available-for-sale debt securities. The Company determines the fair value of cash equivalents and available-for-sale debt securities using a market approach based on quoted prices in active markets.
The Company's equity securities carried at fair value consist of holdings in common stock and warrants to purchase additional shares of common stock of Leap Therapeutics, Inc. ("Leap"), which were acquired in connection with a collaboration and license agreement entered into in January 2020. The common stock investment in Leap, a publicly-traded biotechnology company, is measured and carried at fair value and classified as Level 1. The warrants to purchase additional shares of common stock in Leap are classified as a Level 2 investment and are measured using the Black-Scholes option-pricing valuation model, which utilizes a constant maturity risk-free rate and reflects the term of the warrants, dividend yield and stock price volatility, that is based on the historical volatility of similar companies. Refer to Note 4, Restricted Cash and Investments for details of the determination of the carrying amount of private equity investments without readily determinable fair values and equity method investments.
As of March 31, 2021 or December 31, 2020, the fair values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and short-term debt approximated their carrying values due to their short-term nature. Long-term
12


bank loans approximate their fair value due to the fact that the related interest rates approximate the rates currently offered by financial institutions for similar debt instrument of comparable maturities.
3. Collaborative Arrangements
The Company enters into collaborative arrangements for the research and development, manufacture and/or commercialization of medicines and drug candidates. To date, these collaborative arrangements have included out-licenses of internally developed products and drug candidates to other parties, in-licenses of products and drug candidates from other parties, and profit- and cost-sharing arrangements. These arrangements may include non-refundable upfront payments, contingent obligations for potential development, regulatory and commercial performance milestone payments, cost-sharing and reimbursement arrangements, royalty payments, and profit sharing.
Out-Licensing Arrangements
For the three months ended March 31, 2021, the Company’s collaboration revenue consisted entirely of revenue recognized under its out-licensing collaborative agreement with Novartis Pharma AG ("Novartis"). There was no collaboration revenue recognized for the three months ended March 31, 2020.
The following table summarizes total collaboration revenue recognized for the three months ended March 31, 2021 and 2020:
Three Months Ended
March 31,
2021 2020
Revenue from Collaborators $ $
License revenue 484,646 — 
Research and development service revenue 15,109 — 
Total 499,755 — 
Novartis
In January 2021, the Company entered into a collaboration and license agreement with Novartis, granting Novartis rights to develop, manufacture and commercialize tislelizumab in North America, Europe, and Japan (the "Novartis Territory"). The Company and Novartis have agreed to jointly develop tislelizumab in these licensed countries, with Novartis responsible for regulatory submissions after a transition period and for commercialization upon regulatory approvals. In addition, both companies may conduct clinical trials globally to explore combinations of tislelizumab with other cancer treatments, and the Company has an option to co-detail the product in North America, funded in part by Novartis.
Under the agreement the Company received an upfront cash payment of $650,000 from Novartis. The Company is eligible to receive up to $1,300,000 upon the achievement of regulatory milestones, $250,000 upon the achievement of sales milestones, and royalties on future sales of tislelizumab in the licensed territory. Under the terms of the agreement, the Company is responsible for funding ongoing clinical trials of tislelizumab, Novartis has agreed to fund new registrational, bridging, or post-marketing studies in its territory, and each party will be responsible for funding clinical trials evaluating tislelizumab in combination with its own or third party products. Each party retains the worldwide right to commercialize its propriety products in combination with tislelizumab.
The Company evaluated the Novartis agreement under ASC 606 as all the material units of account within the agreement represented transactions with a customer. The Company identified the following material components under the agreement: (1) exclusive license for Novartis to develop, manufacture, and commercialize tislelizumab in the Novartis Territory, transfer of know-how and use of the tislelizumab trademark; (2) conducting and completing ongoing trials of tislelizumab (“R&D services”); and (3) supplying Novartis with required quantities of the tislelizumab drug product, or drug substance, upon receipt of an order from Novartis.
The Company determined that the license, transfer of know-how and use of trademarks are not distinct from each other and represent a single performance obligation. The R&D services represent a material promise and were determined to be a separate performance obligation at the outset of the agreement as the promise is distinct and has standalone value to Novartis. The Company evaluated the supply component of the contract and noted the supply will not be provided at a significant incremental discount to Novartis. The Company concluded that, for the purpose of ASC 606, the provision related to providing clinical and commercial supply of tislelizumab in the Novartis Territory was an option but not a performance obligation of the Company at
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the outset of the Novartis collaboration agreement. A performance obligation for the clinical and commercial supply will be established as quantities of drug product or drug substance are ordered by Novartis.

The Company determined that the transaction price as of the outset of the arrangement was the upfront payment of $650,000. The potential milestone payments that the Company is eligible to receive were excluded from the transaction price, as all milestone amounts were fully constrained due to uncertainty of achievement. The transaction price was allocated to the two identified performance obligations based on a relative fair value basis. The standalone selling price of the license, transfer of know-how and use of trademarks performance obligation was determined using the adjusted market assessment approach. Based on the valuation performed by the Company, the standalone selling price of the license, transfer of know-how and use of trademarks was valued at $1,231,000. The standalone selling price of the R&D services was valued at $420,000 using a cost plus margin valuation approach. Based on the relative standalone selling prices of the two performance obligations, $484,646 of the total transaction price was allocated to the license and $165,354 was allocated to the R&D services.

The Company satisfied the license performance obligation at a point in time when the license was delivered and the transfer of know-how completed which occurred during the three months ended March 31, 2021. As such, the Company recognized the entire amount of the transaction price allocated to the license as collaboration revenue during the three months ended March 31, 2021. The portion of the transaction price allocated to the R&D services was deferred and is being recognized as collaboration revenue as the R&D services are performed using a percentage-of-completion method. Estimated costs to complete are reassessed on a periodic basis and any updates to the revenue earned are recognized on a prospective basis. The Company recognized R&D service revenue of $15,109 during the three months ended March 31, 2021.

In-Licensing Arrangements - Commercial
Amgen
In October 2019, the Company entered into a global strategic oncology collaboration with Amgen (the "Amgen Collaboration Agreement") for the commercialization and development in China, excluding Hong Kong, Taiwan and Macao, of Amgen’s XGEVA®, KYPROLIS®, and BLINCYTO®, and the joint global development of a portfolio of oncology assets in Amgen’s pipeline, with BeiGene responsible for development and commercialization in China. The agreement became effective on January 2, 2020, following approval by the Company's shareholders and satisfaction of other closing conditions.
Under the agreement, the Company is responsible for the commercialization of XGEVA®, KYPROLIS® and BLINCYTO® in China for five or seven years. Amgen is responsible for manufacturing the products globally and will supply the products to the Company at an agreed upon price. The Company and Amgen will share equally in the China commercial profits and losses during the commercialization period. Following the commercialization period, the Company has the right to retain one product and is entitled to receive royalties on sales in China for an additional five years on the products not retained. XGEVA® was approved in China in 2019 for patients with giant cell tumor of the bone and in November 2020 for the prevention of skeletal-related events in cancer patients with bone metastases. In July 2020, the Company began commercializing XGEVA® in China. In December 2020, BLINCYTO® was approved in China for injection for the treatment of adult patients with relapsed or refractory (R/R) B-cell precursor acute lymphoblastic leukemia (ALL). Additionally, a new drug application has been filed in China for KYPROLIS® as a treatment for patients with multiple myeloma.
Amgen and the Company are also jointly developing a portfolio of Amgen oncology pipeline assets under the collaboration. The Company is responsible for conducting clinical development activities in China and co-funding global development costs by contributing cash and development services up to a total cap of $1,250,000. Amgen is responsible for all development, regulatory and commercial activities outside of China. For each pipeline asset that is approved in China, the Company will receive commercial rights for seven years from approval. The Company has the right to retain approximately one out of every three approved pipeline assets, other than sotorasib (AMG 510), Amgen's investigational KRAS G12C inhibitor, for commercialization in China. The Company and Amgen will share equally in the China commercial profits and losses during the commercialization period. The Company is entitled to receive royalties from sales in China for pipeline assets returned to Amgen for five years after the seven-year commercialization period. The Company is also entitled to receive royalties from global sales of each product outside of China (with the exception of sotorasib).
The Amgen Collaboration Agreement is within the scope of ASC 808, as both parties are active participants and are exposed to the risks and rewards dependent on the commercial success of the activities performed under the agreement. The Company is the principal for product sales to customers in China during the commercialization period and recognizes 100% of net product revenue on these sales. Amounts due to Amgen for its portion of net product sales are recorded as cost of sales. Cost reimbursements due to or from Amgen under the profit share are recognized as incurred and recorded to cost of sales; selling, general and administrative expense; or research and development expense, based on the underlying nature of the related
14


activity subject to reimbursement. Costs incurred for the Company's portion of the global co-development funding are recorded to research and development expense as incurred.
In connection with the Amgen Collaboration Agreement, a Share Purchase Agreement ("SPA") was entered into by the parties in October 2019. On January 2, 2020, the closing date of the transaction, Amgen purchased 15,895,001 of the Company's ADSs for $174.85 per ADS, representing a 20.5% ownership stake in the Company. Per the SPA, the cash proceeds shall be used as necessary to fund the Company's development obligations under the Amgen Collaboration Agreement. Pursuant to the SPA, Amgen also received the right to designate one member of the Company's board of directors, and Anthony Hooper joined the Company's board of directors as the Amgen designee in January 2020.
In determining the fair value of the common stock at closing, the Company considered the closing price of the common stock on the closing date of the transaction and included a lack of marketability discount because the shares are subject to certain restrictions. The fair value of the shares on the closing date was determined to be $132.74 per ADS, or $2,109,902 in the aggregate. The Company determined that the premium paid by Amgen on the share purchase represents a cost share liability due to the Company's co-development obligations. The fair value of the cost share liability on the closing date was determined to be $601,857 based on the Company's discounted estimated future cash flows related to the pipeline assets. The total cash proceeds of $2,779,241 were allocated based on the relative fair value method, with $2,162,407 recorded to equity and $616,834 recorded as a research and development cost share liability. The cost share liability is being amortized proportionately as the Company contributes cash and development services to its total co-development funding cap.
Amounts recorded related to the Company's portion of the co-development funding on the pipeline assets for the three months ended March 31, 2021 and 2020 were as follows:
  Three Months Ended
  March 31,
  2021 2020
  $ $
Research and development expense 27,643  28,366 
Amortization of research and development cost share liability 26,930  27,634 
Total amount due to Amgen for BeiGene's portion of the development funding 54,573  56,000 
As of
March 31,
2021
Remaining portion of development funding cap 964,437 
As of March 31, 2021 and December 31, 2020, the research and development cost share liability recorded in the Company's balance sheet was as follows:
  As of
  March 31, December 31,
  2021 2020
  $ $
Research and development cost share liability, current portion 135,333  127,808 
Research and development cost share liability, non-current portion 340,585  375,040 
Total research and development cost share liability 475,918  502,848 
The total reimbursement due under the commercial profit-sharing agreement for in-line product sales is classified in the income statement for the three months ended March 31, 2021 and 2020 as follows:
  Three Months Ended
  March 31,
  2021 2020
  $ $
Cost of sales - product 710  — 
Research and development (259) — 
Selling, general and administrative (6,699) — 
Total (6,248) — 
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4. Restricted Cash and Investments
Restricted Cash
The Company’s restricted cash balance of $8,587 and $8,055 as of March 31, 2021 and December 31, 2020, respectively, primarily consists of RMB-denominated cash deposits held in designated bank accounts for collateral for letters of credit. The Company classifies restricted cash as current or non-current based on the term of the restriction.
Short-Term Investments
Short-term investments as of March 31, 2021 consisted of the following available-for-sale debt securities:
    Gross Gross Fair Value
  Amortized Unrealized Unrealized (Net Carrying
  Cost Gains Losses Amount)
  $ $ $ $
U.S. treasury securities 2,910,074  398  —  2,910,472 
Total 2,910,074  398  —  2,910,472 
 Short-term investments as of December 31, 2020 consisted of the following available-for-sale debt securities:
    Gross  Gross  Fair Value
  Amortized Unrealized Unrealized (Net Carrying
  Cost Gains Losses Amount)
  $ $ $ $
U.S. treasury securities 3,267,875  850  —  3,268,725 
Total 3,267,875  850  —  3,268,725 
As of March 31, 2021, the Company's available-for-sale debt securities consisted entirely of short-term U.S. treasury securities, which were determined to have zero risk of expected credit loss. Accordingly, no allowance for credit loss was recorded as of March 31, 2021.
Equity Securities with Readily Determinable Fair Values
Leap
In January 2020, the Company purchased $5,000 of Series B mandatorily convertible, non-voting preferred stock of Leap in connection with a strategic collaboration and license agreement the Company entered into with Leap. The Series B shares were subsequently converted into shares of Leap common stock and warrants to purchase additional shares of common stock upon approval of Leap's shareholders in March 2020. As of March 31, 2021, the Company's ownership interest in the outstanding common stock of Leap was 8.1% based on information from Leap. Inclusive of the shares of common stock issuable upon the exercise of the currently exercisable warrants, the Company's interest is approximately 14.9% based on information from Leap. The Company measures the investment in the common stock and warrants at fair value, with changes in fair value recorded to other (expense) income, net. During the three months ended March 31, 2021 and 2020, the Company recorded an unrealized (loss)/gain of $(3,051) and $6,964, respectively, in the consolidated statements of operations. As of March 31, 2021 and December 31, 2020, the fair value of the common stock and warrants was as follows:
  As of
  March 31, December 31,
  2021 2020
  $ $
Fair value of Leap common stock 9,129  10,810 
Fair value of Leap warrants 5,299  6,669 

Private Equity Securities without Readily Determinable Fair Values
The Company invests in equity securities of certain companies whose securities are not publicly traded and fair value is not readily determinable and where the Company has concluded it does not have significant influence based on its ownership
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percentage and other factors. These investments are recorded at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company held investments of $18,702 and $9,705 in equity securities without readily determinable fair values as of March 31, 2021 and December 31, 2020, respectively. There were no adjustments to the carrying values of these securities for the three months ended March 31, 2021.
Equity-Method Investments
MapKure
In June 2019, the Company announced the formation of MapKure, LLC ("MapKure"), an entity jointly owned by the Company and SpringWorks Therapeutics, Inc. ("SpringWorks"). The Company out-licensed to MapKure the Company's product candidate BGB-3245, an oral, selective small molecule inhibitor of monomer and dimer forms of activating B-RAF mutations including V600 BRAF mutations, non-V600 B-RAF mutations, and RAF fusions. The Company received 10,000,000 Series A preferred units of MapKure, or a 71.4% ownership interest in exchange for its contribution of the intellectual property. SpringWorks purchased 3,500,000 Series A preferred units, or a 25% ownership interest, and other investors purchased 250,000 Series A preferred units or 1.8% ownership each. Following the initial closing, the Company consolidated its interests in MapKure under the voting model due to its controlling financial interest.
In June 2020, MapKure held a second closing under the existing terms of the SPA in which it issued additional Series A preferred units to SpringWorks and the other investors that purchased units in the first closing (the "Second Closing"), and the Company's ownership interest decreased to 55.6%. As the requisite Series A voting requirements in MapKure's governing documents require 70% combined voting power for certain actions, the Company determined that it lost its controlling financial interest after the Second Closing. Therefore, the Company deconsolidated MapKure and recognized a gain of $11,307 for the excess of the fair value of its 55.6% ownership interest in MapKure and carrying amount of the prior non-controlling interest over the carrying amount of MapKure's net assets within other income during the year ended December 31, 2020.
Upon deconsolidation, the Company recorded an equity investment of $10,000, which represents the estimated fair value of its 55.6% ownership interest in MapKure. Effective June 8, 2020, the Company is accounting for the investment as an equity-method investment and records its portion of MapKure's earnings or losses within other (expense) income, net. The Company recognized losses of $236 for its portion of MapKure's net loss for the three months ended March 31, 2021. As of March 31, 2021 and December 31, 2020, the carrying amount of the Company's investment in MapKure was $9,273 and $9,509, respectively.
Guangzhou GET Phase I Biomedical Industry Investment Fund Partnership (Limited Partnership)
On July 23, 2020, BeiGene (Guangzhou) invested $11,782 (RMB80,000) in an existing investment fund, Guangzhou GET Phase I Biomedical Industry Investment Fund Partnership (Limited Partnership) (“GET Bio-fund”). The stated purpose of GET Bio-fund is to promote and upgrade the local industrial transformation in Guangzhou and it is committed to invest at least 60% of the total fund in the biotechnology, medical device, and medical information industries.
GET Bio-fund has four limited partners and one general partner, Guangzhou GET Biomedical Industry Investment Fund Management Co., Ltd. (“GET Bio-fund Management”). GET Bio-fund has an agreed duration for seven years, with the first five years as the investment period and the following two years as the projected payback period. The agreed upon duration may be extended for two additional years with the approval of all of the partners. BeiGene Guangzhou, as a limited partner, holds an ownership interest in the fund of 26.3%. The investment committee for the fund has seven members, and requires resolutions to be approved by at least five of the seven members. BeiGene Guangzhou holds one position on the investment committee and GET Bio-fund Management holds three positions. The Company determined that it has the ability to exercise significant influence over the fund due to the Company's ownership interest and involvement on the investment committee, and the investment represents an equity method investment. The Company recognized losses of $134 for its portion of the fund's net loss for the three months ended March 31, 2021. As of March 31, 2021 and December 31, 2020, the carrying amount of the Company's investment in the fund was $12,005 and $12,189, respectively. In addition to the GET Bio-fund Management investment, the Company also plans to enter into a cooperative investment agreement with GET to form a joint venture for the construction of a new research center in Guangzhou.
Other Equity-Method Investments
In addition to the equity-method investments mentioned above, the Company made additional equity-method investments during the year ended December 31, 2020 and the three months ended March 31, 2021 that it does not consider to be individually significant to its financial statements. The Company recognized the equity-method investments at cost and
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subsequently adjusted the basis based on the Company's share of the results of operations. The Company records its share of the investees' results of operations within other (expense) income, net.
5. Inventories
The Company’s inventory balance consisted of the following:
  As of
  March 31, December 31, 
  2021 2020
  $ $
Raw materials 26,894  19,330 
Work in process 9,504  1,378 
Finished goods 36,576  68,585 
Total inventories 72,974  89,293 
6. Property, plant and equipment
Property, plant and equipment are recorded at cost and consisted of the following:
  As of
  March 31, December 31, 
  2021 2020
  $ $
Laboratory equipment 88,136  78,640 
Leasehold improvements 38,357  37,643 
Building 131,789  111,527 
Manufacturing equipment 105,775  96,669 
Software, electronics and office equipment 22,947  20,782 
Property, plant and equipment, at cost 387,004  345,261 
Less accumulated depreciation (83,829) (73,354)
Construction in progress 70,774  85,779 
Property, plant and equipment, net 373,949  357,686 
 As of March 31, 2021 and December 31, 2020, construction in progress ("CIP") of $70,774 and $85,779, respectively, was primarily related to the buildout of additional capacity at the Guangzhou manufacturing facility and expansion of BeiGene (Guangzhou) Co., Ltd.'s ("BGC") research and development activities in Guangzhou, China. Subsequent phases of the Guangzhou factory buildout and BGC research and development expansion will continue to be recorded as CIP until they are placed into service.
Depreciation expense for the three months ended March 31, 2021 and 2020 was $9,444 and $7,467, respectively.
7. Guangzhou Biologics Business
In March 2017, BeiGene HK, a wholly owned subsidiary of the Company, and Guangzhou GET Technology Development Co., Ltd. (now Guangzhou High-tech Zone Technology Holding Group Co., Ltd.) ("GET"), entered into a definitive agreement to establish a commercial scale biologics manufacturing facility in Guangzhou, Guangdong Province, PRC. BeiGene HK and GET entered into an Equity Joint Venture Contract (the “JV Agreement”).
Under the terms of the JV Agreement, BeiGene HK made an initial cash capital contribution of RMB200,000 and a subsequent contribution of one or more biologics assets in exchange for a 95% equity interest in BeiGene Biologics. GET made a cash capital contribution of RMB100,000 to BeiGene Biologics, representing a 5% equity interest in BeiGene Biologics. In addition, on March 7, 2017, BeiGene Biologics entered into a contract with GET, under which GET agreed to provide a RMB900,000 loan (the “Shareholder Loan”) to BeiGene Biologics. In September 2019, BeiGene Biologics completed the first phase of construction of a biologics manufacturing facility in Guangzhou, through a wholly-owned subsidiary, BeiGene Guangzhou Biologics Manufacturing Co., Ltd. ("BeiGene Guangzhou Factory"), to manufacture biologics for the Company and its subsidiaries.
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In September 2020, BeiGene HK entered into a share purchase agreement (“JV Share Purchase Agreement”) with GET to acquire GET’s 5% equity interest in BeiGene Biologics for a total purchase price of $28,723 (RMB195,262). The transaction was finalized in November 2020 upon completion of the business registration filing. The share purchase was recorded as an equity transaction. The carrying amount of the noncontrolling interest balance of $9,116 was adjusted to nil to reflect the increase in BeiGene HK’s ownership interest to 100%, and the difference in the fair value of the consideration paid and the carrying amount of the noncontrolling interest of $19,599 was recorded to additional paid in capital. In conjunction with the JV Share Purchase Agreement, BeiGene Biologics repaid the outstanding principal of the shareholder loan of $132,061 (RMB900,000) and accrued interest of $36,558 (RMB249,140).
In connection with the JV share purchase, the Company entered into a loan agreement with China Minsheng Bank for a total loan facility of up to $200,000 ("Senior Loan"), of which $120,000 will be used to fund the JV share repurchase and repayment of the shareholder loan and $80,000 can be used for general working capital purposes. The Company may extend the original maturity date for up to two additional twelve month periods. In October 2020, the Company drew down $80,000 of the working capital facility and $118,320 of the acquisition facility to be used for the JV share repurchase. In addition, the Company entered into a loan agreement with Zhuhai Hillhouse Zhaohui Equity Investment Partnership ("Zhuhai Hillhouse") for a total loan facility of $73,640 (RMB500,000) ("Related Party Loan"), of which $14,728 (RMB100,000) can be used for general corporate purposes and $58,912 (RMB400,000) can only be applied towards the repayment of the Senior Loan facility, including principal, interest and fees. The Company has drawn down $14,728 (RMB100,000) of the Related Party Loan as of March 31, 2021. See Note 11 for further discussion of the loans.
8. Intangible Assets
Intangible assets as of March 31, 2021 and December 31, 2020 are summarized as follows:
  As of
  March 31, 2021 December 31, 2020
  Gross     Gross    
  carrying Accumulated Intangible carrying Accumulated Intangible
  amount amortization assets, net amount amortization assets, net
  $ $ $ $ $ $
Finite-lived intangible assets:            
Product distribution rights 7,500  (2,687) 4,813  7,500  (2,500) 5,000 
Trading license 816  (816) —  816  (816) — 
Total finite-lived intangible assets 8,316  (3,503) 4,813  8,316  (3,316) 5,000 
 Product distribution rights consist of distribution rights on the approved cancer therapies licensed from BMS, REVLIMID®, VIDAZA®, and ABRAXANE®, acquired as part of the transaction with BMS (then Celgene) in 2017. The Company is amortizing the product distribution rights over a period of 10 years which is the term of the agreement. The trading license represents the Guangzhou drug distribution license acquired on September 21, 2018. The Company amortized the drug distribution trading license over the remainder of the initial license term through February 2020. The trading license has been renewed through February 2024.
Amortization expense of intangible assets for the three months ended March 31, 2021 and 2020 was $188 and $283, respectively.
As of March 31, 2021, expected amortization expense for the unamortized finite-lived intangible assets is approximately $563 for the remainder of 2021, $750 in 2022, $750 in 2023, $750 in 2024, and $2,000 in 2025 and thereafter.
9. Income Taxes
Income tax benefit was $4,630 for the three months ended March 31, 2021, compared to expense of $1,554 for the three months ended March 31, 2020. The income tax benefit for the three months ended March 31, 2021 was primarily attributable to the deferred tax benefit of U.S. stock-based compensation deductions in excess of tax expense on income reported in certain China subsidiaries as adjusted for certain non-deductible expenses. The income tax expense for the three months ended March 31, 2020 was primarily attributable to tax expense on income reported in certain China subsidiaries as adjusted for certain non-deductible expenses offset by the tax benefit of deferred U.S. stock-based compensation deductions.
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On a quarterly basis, the Company evaluates the realizability of deferred tax assets by jurisdiction and assesses the need for a valuation allowance. In assessing the realizability of deferred tax assets, the Company considers historical profitability, evaluation of scheduled reversals of deferred tax liabilities, projected future taxable income and tax-planning strategies. Valuation allowances have been provided on deferred tax assets where, based on all available evidence, it was considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. After consideration of all positive and negative evidence, the Company believes that as of March 31, 2021, it is more likely than not that deferred tax assets will not be realized for the Company’s subsidiaries in Australia and Switzerland, for certain subsidiaries in China, and for all U.S. tax credit carryforwards.
As of March 31, 2021, the Company had gross unrecognized tax benefits of $7,727. The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly change within the next 12 months. The Company’s reserve for uncertain tax positions increased by $604 in the three months ended March 31, 2021 primarily due to U.S. federal and state tax credits and incentives.
The Company has elected to record interest and penalties related to income taxes as a component of income tax expense. As of March 31, 2021 and December 31, 2020, the Company's accrued interest and penalties, where applicable, related to uncertain tax positions were not material.
The Company conducts business in a number of tax jurisdictions and, as such, is required to file income tax returns in multiple jurisdictions globally. As of March 31, 2021, Australia tax matters are open to examination for the years 2013 through 2021, China tax matters are open to examination for the years 2014 through 2021, Switzerland tax matters are open to examination for the years 2017 through 2021, and U.S. federal tax matters are open to examination for years 2015 through 2021. Various U.S. states and other non-US tax jurisdictions in which the Company files tax returns remain open to examination for 2010 through 2021.
10. Supplemental Balance Sheet Information
The roll-forward of the allowance for credit losses related to trade accounts receivable for the three months ended March 31, 2021 and 2020 consists of the following activity:
Three Months Ended
March 31,
2021 2020
$ $
Balance at beginning of the period 112  — 
Current period provision for expected credit losses 48  2,022 
Amounts written-off —  — 
Exchange rate changes — 
Balance at end of the period 161  2,022 


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Prepaid expenses and other current assets consist of the following:
  As of
  March 31, December 31, 
  2021 2020
  $ $
Prepaid research and development costs 69,382  71,341 
Prepaid taxes 30,299  30,392 
Payroll tax receivable 6,120  3,580 
Non-trade receivable 2,974  4,464 
Interest receivable 6,284  6,619 
Prepaid insurance 10,459  1,347 
Prepaid manufacturing cost 23,238  25,996 
Prepayment of facility capacity expansion activities (1) 4,004  — 
Income tax receivable 4,540  4,607 
Other 14,099  11,666 
Total 171,399  160,012 
Other non-current assets consist of the following:
  As of
  March 31, December 31, 
  2021 2020
  $ $
Goodwill 109  109 
Prepayment of property and equipment 22,584  16,984 
Prepayment of facility capacity expansion activities (1) 25,652  29,778 
Prepaid VAT 16,781  10,913 
Rental deposits and other 6,983  5,962 
Long-term investments (Note 4) 55,711  49,344 
Total 127,820  113,090 
(1) Represents payments for facility expansions under commercial supply agreements. The payments will provide future benefit to the Company through credits on future supply purchases.
Accrued expenses and other payables consist of the following:
  As of
  March 31, December 31, 
  2021 2020
  $ $
Compensation related 49,056  106,765 
External research and development activities related 126,228  143,302 
Commercial activities 63,219  66,131 
Individual income tax and other taxes 19,762  14,373 
Sales rebates and returns related 45,665  11,874 
Professional fees and other 8,204  3,699 
Total 312,134  346,144 

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Other long-term liabilities consist of the following:
  As of
  March 31, December 31, 
  2021 2020
  $ $
Deferred government grant income 47,528  49,139 
Pension liability 7,616  8,113 
Other 176  177 
Total 55,320  57,429 
11. Debt
The following table summarizes the Company's short-term and long-term debt obligations as of March 31, 2021 and December 31, 2020:
Lender Agreement Date Line of Credit Term Maturity Date Interest Rate March 31, 2021 December 31, 2020
$ RMB $ RMB
China Construction Bank April 4, 2018 RMB580,000
9-year
April 4, 2027 (1) 305  2,000  307  2,000 
China Merchants Bank January 22, 2020 (2)
 9-year
January 20, 2029 (2) 382  2,500  —  — 
China Minsheng Bank (the "Senior Loan") September 24, 2020 $200,000 (3) 5.8  % 198,320  1,299,351  198,320  1,294,010 
Zhuhai Hillhouse (the "Related Party Loan") September 24, 2020 RMB500,000 (4) 5.8  % 15,263  100,000  15,326  100,000 
Other short-term debt (5) 190,775  1,249,918  121,062  789,918 
Total short-term debt 405,045  2,653,769  335,015  2,185,928 
China Construction Bank April 4, 2018 RMB580,000
 9-year
April 4, 2027 (1) 88,220  578,000  88,584  578,000 
China Merchants Bank January 22, 2020 (2)
 9-year
January 20, 2029 (2) 53,039  347,500  53,641  350,000 
China Merchants Bank November 9, 2020 RMB378,000
9-year
November 8, 2029 (6) 51,758  339,111  41,412  270,206 
Total long-term bank loans 193,017  1,264,611  183,637  1,198,206 
1.The outstanding borrowings bear floating interest rates benchmarking RMB loan interest rates of financial institutions in the PRC. The loan interest rate was 4.9% as of March 31, 2021. The loan is secured by BeiGene Guangzhou Factory's land use right and certain Guangzhou Factory fixed assets in the first phase of the Guangzhou manufacturing facility's build out.
2.On January 22, 2020, BeiGene Guangzhou Factory entered into a nine-year bank loan with China Merchants Bank to borrow up to RMB1,100,000 at a floating interest rate benchmarked against prevailing interest rates of certain PRC financial institutions. The loan is 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's build out. In connection with the Company's short-term loan agreements with China Merchants Bank entered into during the year ended December 31, 2020, the borrowing capacity was reduced from RMB1,100,000 to RMB350,000. The loan interest rate was 4.4% as of March 31, 2021.
3.$120,000 of the Senior Loan was designated to fund the JV share purchase and repayment of the shareholder loan and $80,000 was designated for general working capital purposes. The Senior Loan has an original maturity date of October 8, 2021, which is the first anniversary of the first date of utilization of the loan. The Company may extend the original maturity date for up to two additional 12 month periods.
4.RMB100,000 of the Related Party Loan was designated for general corporate purposes and RMB400,000 was designated for repayment of the Senior Loan, including principal, interest and fees. The loan matures at the earlier of: (i) November 9, 2021, which is one month after the Senior Loan maturity date, if not extended, or (ii) 10 business days after the Senior Loan is fully repaid. Zhuhai Hillhouse is a related party of the Company, as it is an affiliate of Hillhouse Capital. Hillhouse Capital is a shareholder of the Company, and a Hillhouse Capital employee is a member of the Company's board of directors.
5.During the year ended December 31, 2020, the Company entered into additional short-term working capital loans with China Industrial Bank and China Merchants Bank to borrow up to RMB1,480,000 in aggregate, with maturity dates ranging from April 19, 2021 to March 7, 2022. The Company drew down $71,001 (RMB460,000) during the three months ended March 31, 2021. The weighted average interest rate for the short-term working capital loans was approximately 4.4% as of March 31, 2021. One of the short-term working capital loans outstanding in the amount of $24,421 (RMB160,000) is secured by the Company's research and development facility in Beijing and the associated land use right owned by its subsidiary, Beijing Innerway Bio-tech Co., Ltd.
6.The outstanding borrowings bear floating interest rates benchmarking RMB loan interest rates of financial institutions in the PRC. The loan interest rate was 4.3% as of March 31, 2021. The Company drew down $10,664 (RMB68,905) during the three months ended March 31, 2021. The loan is secured by fixed assets that will be placed into service upon completion of the third phase of the Guangzhou manufacturing facility's build out.

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Interest Expense
Interest expense recognized for the three months ended March 31, 2021 and 2020 was $6,950 and $4,291, respectively, among which, $104 and $66 was capitalized, respectively.
12. Product Revenue
The Company’s product revenue is derived from the sale of its internally developed products BRUKINSA® in the United States and China and tislelizumab in China, as well as the sale of REVLIMID®, VIDAZA® and ABRAXANE® in China under a license from BMS and XGEVA® in China under a license from Amgen. On March 25, 2020, the Company announced that the China National Medical Products Administration ("NMPA") suspended the importation, sales and use of ABRAXANE® in China supplied to BeiGene by Celgene, a BMS company, and the drug was subsequently recalled by BMS and is not currently available for sale in China.
The table below presents the Company’s net product sales for the three months ended March 31, 2021 and 2020.
  Three Months Ended
  March 31,
  2021 2020
  $ $
Product revenue – gross 143,482  53,188 
Less: Rebates and sales returns (37,365) (1,129)
Product revenue – net 106,117  52,059 
The following table disaggregates net product sales by product for the three months ended March 31, 2021 and March 31, 2020:
  Three Months Ended
  March 31,
  2021 2020
  $ $
Tislelizumab 48,879  20,526 
BRUKINSA®
22,090  717 
REVLIMID®
16,629  7,628 
VIDAZA®
3,706  6,043 
ABRAXANE®
—  17,145 
XGEVA®
14,454  — 
Other 359  — 
Total product revenue – net 106,117  52,059 
The following table presents the roll-forward of accrued sales rebates and returns for the three months ended March 31, 2021 and 2020:
Three Months Ended
March 31,
  2021 2020
  $ $
Balance at beginning of the period 11,874  3,198 
Accrual 37,365  1,129 
Payments (3,574) (313)
Balance at end of the period 45,665  4,014 
The rebate accrual at March 31, 2021 includes an accrual of $24.2 million for compensating distributors for products previously sold at the pre-NRDL price, that remained in the distribution channel, due to the first inclusion of tislelizumab, BRUKINSA and XGEVA in the NRDL.

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13. Earnings (Loss) Per Share
The following table reconciles the numerator and denominator in the computations of basic and diluted earnings (loss) per share:
  Three Months Ended
  March 31,
  2021 2020
  $ $
Numerator:    
Net income (loss) 66,495  (364,939)
Less: Net loss attributable to noncontrolling interest —  (1,204)
Net income (loss) attributable to BeiGene, Ltd. 66,495  (363,735)
Denominator:
Weighted average shares outstanding—basic 1,188,943,726  1,005,347,581 
Effect of dilutive securities:
Stock options, restricted stock units and ESPP shares 68,545,945  — 
Weighted average shares outstanding—diluted 1,257,489,671  1,005,347,581 
For the three months ended March 31, 2021, basic earnings per share was computed using the weighted-average number of ordinary shares outstanding during the period. Diluted earnings per share was computed using the weighted-average number of ordinary shares and the effect of potentially dilutive shares outstanding during the periods. Potentially dilutive shares consist of stock options, restricted stock units and ESPP shares. The dilutive effect of outstanding stock options, restricted stock units and ESPP shares is reflected in diluted net earnings per share by application of the treasury stock method.
For the three months ended March 31, 2020, the computation of basic earnings per share using the two-class method was not applicable as the Company was in a net loss position, and the effects of all share options, restricted shares, restricted share units and ESPP shares were excluded from the calculation of diluted earnings per share, as their effect would have been anti-dilutive.
14. Share-Based Compensation Expense
2016 Share Option and Incentive Plan
In January 2016, in connection with the Company's initial public offering ("IPO") on the NASDAQ Stock Market, the board of directors and shareholders of the Company approved the 2016 Share Option and Incentive Plan (the “2016 Plan”), which became effective in February 2016. The Company initially reserved 65,029,595 ordinary shares for the issuance of awards under the 2016 Plan, plus any shares available under the 2011 Option Plan (the “2011 Plan”), and not subject to any outstanding options as of the effective date of the 2016 Plan, along with underlying share awards under the 2011 Plan that are cancelled or forfeited without issuance of ordinary shares. As of March 31, 2021, ordinary shares cancelled or forfeited under the 2011 Plan that were carried over to the 2016 Plan totaled 5,166,432. In December 2018, the shareholders approved an amended and restated 2016 Plan to increase the number of shares authorized for issuance by 38,553,159 ordinary shares, as well as amend the cap on annual compensation to independent directors and make other changes. In June 2020, the shareholders approved an Amendment No. 1 to the 2016 Plan to increase the number of shares authorized for issuance by 57,200,000 ordinary shares and to extend the term of the plan through April 13, 2030. The number of shares available for issuance under the 2016 Plan is subject to adjustment in the event of a share split, share dividend or other change in the Company’s capitalization.
During the three months ended March 31, 2021, the Company granted options for 229,606 ordinary shares and restricted share units for 2,480,478 ordinary shares under the 2016 Plan. As of March 31, 2021, options and restricted share units for ordinary shares outstanding under the 2016 Plan totaled 60,263,469 and 34,105,032, respectively.
2018 Inducement Equity Plan
In June 2018, the board of directors of the Company approved the 2018 Inducement Equity Plan (the “2018 Plan”) and reserved 12,000,000 ordinary shares to be used exclusively for grants of awards to individuals that were not previously employees of the Company or its subsidiaries, as a material inducement to the individual’s entry into employment with the Company or its subsidiaries within the meaning of Rule 5635(c)(4) of the NASDAQ Listing Rules. The 2018 Plan was approved by the board of directors upon recommendation of the compensation committee, without shareholder approval
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pursuant to Rule 5635(c)(4) of the NASDAQ Listing Rules. The terms and conditions of the 2018 Plan, and the forms of award agreements to be used thereunder, are substantially similar to the 2016 Plan and the forms of award agreements thereunder. In August 2018, in connection with the Hong Kong IPO, the board of directors of the Company approved an amended and restated 2018 Plan to implement changes required by the listing rules of the HKEx.
During the three months ended March 31, 2021, the Company did not grant any options or restricted share units under the 2018 Plan. As of March 31, 2021, options and restricted share units for ordinary shares outstanding under the 2018 Plan totaled 34,996 and 1,244,867, respectively.
2018 Employee Share Purchase Plan
In June 2018, the shareholders of the Company approved the 2018 Employee Share Purchase Plan (the “ESPP”). Initially, 3,500,000 ordinary shares of the Company were reserved for issuance under the ESPP. In December 2018, the board of directors of the Company approved an amended and restated ESPP to increase the number of shares authorized for issuance by 3,855,315 ordinary shares to 7,355,315 ordinary shares. In June 2019, the board of directors adopted an amendment to revise the eligibility criteria for enrollment in the plan. The ESPP allows eligible employees to purchase the Company’s ordinary shares (including in the form of ADSs) at the end of each offering period, which will generally be six months, at a 15% discount to the market price of the Company’s ADSs at the beginning or the end of each offering period, whichever is lower, using funds deducted from their payroll during the offering period. Eligible employees are able to authorize payroll deductions of up to 10% of their eligible earnings, subject to applicable limitations.
The following tables summarizes the shares issued under the ESPP:
Market Price1
Purchase Price2
Issuance Date Number of Ordinary Shares Issued ADS Ordinary ADS Ordinary Proceeds
February 26, 2021 436,124  $ 236.30  $ 18.18  $ 200.86  $ 15.45  $ 6,738 
August 31, 2020 485,069  $ 164.06  $ 12.62  $ 139.45  $ 10.73  $ 5,203 
February 28, 2020 425,425  $ 145.54  $ 11.20  $ 123.71  $ 9.52  $ 4,048 
1 The market price is the lower of the closing price on the NASDAQ Stock Market on the issuance date or the offering date, in accordance with the terms of the ESPP.
2 The purchase price is the price which was discounted from the applicable market price, in accordance with the terms of the ESPP.
The following table summarizes total share-based compensation expense recognized for the three months ended March 31, 2021 and 2020:
  Three Months Ended
  March 31,
  2021 2020
  $ $
Research and development 21,889  20,399 
Selling, general and administrative 23,944  17,856 
Total 45,833  38,255 
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15. Accumulated Other Comprehensive Income
The movement of accumulated other comprehensive income was as follows:
    Unrealized  
  Foreign Currency Gains on Pension  
  Translation Available-for-Sale Liability  
  Adjustments Securities Adjustments Total
  $ $
Balance as of December 31, 2020 14,184  871  (8,113) 6,942 
Other comprehensive (loss) income before reclassifications (3,762) (421) 497  (3,686)
Amounts reclassified from accumulated other comprehensive income (1) —  (52) —  (52)
Net-current period other comprehensive (loss) income (3,762) (473) 497  (3,738)
Balance as of March 31, 2021 10,422  398  (7,616) 3,204 
(1) The amounts reclassified from accumulated other comprehensive income were included in other (expense) income, net in the consolidated statements of operations.
16. Shareholders’ Equity
Share Purchase Agreement
In January 2020, the Company sold 15,895,001 ADSs, representing a 20.5% ownership stake in the Company, to Amgen for aggregate cash proceeds of $2,779,241, or $174.85 per ADS, pursuant to the SPA executed in connection with the Amgen Collaboration Agreement.
17. Restricted Net Assets
The Company’s ability to pay dividends may depend on the Company receiving distributions of funds from its PRC subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by the Company’s PRC subsidiaries only out of the subsidiary's retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the condensed consolidated financial statements prepared in accordance with GAAP differ from those reflected in the statutory financial statements of the Company’s PRC subsidiaries.
In accordance with the company law of the PRC, a domestic enterprise is required to provide statutory reserves of at least 10% of its annual after-tax profit until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. A domestic enterprise is also required to provide discretionary surplus reserve, at the discretion of the board of directors, from the profits determined in accordance with the enterprise’s PRC statutory accounts. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. The Company’s PRC subsidiaries were established as domestic enterprises and therefore are subject to the above-mentioned restrictions on distributable profits.
As a result of these PRC laws and regulations, including the requirement to make annual appropriations of at least 10% of after-tax income and set aside as general reserve fund prior to payment of dividends, the Company’s PRC subsidiaries are restricted in their ability to transfer a portion of their net assets to the Company.
Foreign exchange and other regulations in the PRC may further restrict the Company's PRC subsidiaries from transferring funds to the Company in the form of dividends, loans and advances. As of March 31, 2021 and December 31, 2020, amounts restricted were the net assets of the Company’s PRC subsidiaries, which amounted to $439,268 and $119,776, respectively.
18. Commitments and Contingencies
Purchase Commitments
As of March 31, 2021, the Company had purchase commitments amounting to $141,159, of which $88,024 related to minimum purchase requirements for supply purchased from contract manufacturing organizations and $53,135 related to binding purchase obligations of inventory from BMS and Amgen. The Company does not have any minimum purchase requirements for inventory from BMS or Amgen.

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Capital Commitments
The Company had capital commitments amounting to $51,421 for the acquisition of property, plant and equipment as of March 31, 2021, which were mainly for BeiGene Guangzhou Factory’s manufacturing facility, expansion of BGC's research and development activities in Guangzhou, China, and research and development operations at the Changping facility in Beijing, China.
Co-Development Funding Commitment
    Under the Amgen Collaboration Agreement, the Company is responsible for co-funding global development costs for the Amgen oncology pipeline assets up to a total cap of $1,250,000. The Company is funding its portion of the co-development costs by contributing cash and development services. As of March 31, 2021, the Company's remaining co-development funding commitment was $964,437.
Funding Commitment
The Company had committed capital related to one equity method investment in the amount of $15,000. As of March 31, 2021, the remaining capital commitment was $14,250 and is expected to be paid from time to time over the investment period.
Pension Commitment
The Company maintains a defined benefit pension plan in Switzerland. Funding obligations under the defined benefit pension plan are equivalent to $1,300 per year based on annual funding contributions in effect as of March 31, 2021 to achieve fully funded status where the market value of plan assets equals the projected benefit obligations. Future funding requirements will be subject to change as a result of future changes in staffing and compensation levels, various actuarial assumptions and actual investment returns on plan assets.
Other Business Agreements
The Company enters into agreements in the ordinary course of business with contract research organizations ("CROs") to provide research and development services. These contracts are generally cancelable at any time by us with prior written notice.
The Company also enters into collaboration agreements with institutions and companies to license intellectual property. The Company 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 the Company's 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 the Company’s financial statements.
19. Segment and Geographic Information
The Company operates in one segment: pharmaceutical products. Its chief operating decision maker is the Chief Executive Officer, who makes operating decisions, assesses performance and allocates resources on a consolidated basis.
The Company’s long-lived assets are substantially located in the PRC.
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Net product revenues by geographic area are based upon the location of the customer, and net collaboration revenue is recorded in the jurisdiction in which the related income is expected to be sourced from. Total net revenues by geographic area are presented as follows:
  Three Months Ended
  March 31,
  2021 2020
  $ $
PRC 95,982  51,342 
United States 359,963  717 
Other 149,927  — 
Total 605,872  52,059 
U.S. revenues for the three months ended March 31, 2021 consisted of $349,828 of collaboration revenue and $10,135 of BRUKINSA® product sales. U.S. revenues for the three months ended March 31, 2020 consisted entirely of BRUKINSA® product sales.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations 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 medicines and to obtain approvals in additional indications and territories for our medicines; our ability to successfully develop and commercialize our in-licensed medicines and drug candidates and any other medicines and drug candidates 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 and commercialize new medicines, if approved; our ability to maintain and expand regulatory approvals for our medicines and drug candidates, if approved; the pricing and reimbursement of our medicines 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 and obtain regulatory approvals; 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; our expectations about the successful restoration of supply of ABRAXANE® (paclitaxel albumin-bound particles for injectable suspension) in China; the implementation of our business model, strategic plans for our business, medicines, drug candidates and technology; the scope of protection we (or our licensors) are able to establish and maintain for intellectual property rights covering our medicines, drug candidates and technology; the scope of protection we (or our licensors) are able to establish and maintain for intellectual property rights covering our medicines, 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 ("EU") 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 medicines for commercial sale; the rate and degree of market access and acceptance and the pricing and reimbursement of our medicines and drug candidates, if approved; developments relating to our competitors and industry, including competing therapies; the size of the potential markets for our medicines 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 our 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 expand access for patients worldwide.

Our research organization has delivered ten molecules into the clinic in our first ten years, including our two lead commercial medicines, BRUKINSA®, a small molecule inhibitor of Bruton’s Tyrosine Kinase (“BTK”) for the treatment of various blood cancers, and tislelizumab, an anti-PD-1 antibody immunotherapy for the treatment of various solid tumor and
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blood cancers. We are marketing BRUKINSA® in the world’s two largest pharmaceutical markets, the United States and China, and tislelizumab in China, with an established, science-based commercial organization. We have built state-of-the-art biologic and small molecule manufacturing facilities in China to support the potential future demand of our medicines, and we also work with high quality contract manufacturing organizations (“CMOs”) to manufacture our internally developed clinical and commercial products.
We are a leader in China-inclusive global clinical development, which we believe can facilitate faster and more cost-effective development of innovative medicines. Our internal clinical development capabilities are deep, including a more than 1,600-person global clinical development team that is running more than 100 ongoing or planned clinical trials. This includes more than 25 pivotal or registration-enabling trials for three drug candidates that have enrolled more than 12,000 patients and healthy volunteers, of which approximately one-half have been outside of China, as of March 2021. We have over 45 medicines and drug candidates in commercial stage or clinical development, including 7 approved medicines, 5 pending approval, and over 30 in clinical development.
Supported by our development and commercial capabilities, we have entered into collaborations with world-leading biopharmaceutical companies such as Amgen and Novartis to develop and commercialize innovative medicines globally. Since our inception in 2010 in Beijing, we have become a fully integrated global organization of approximately 6,000 employees in 16 countries and regions, including China, the United States, Europe and Australia.
Recent Developments
Recent Business Developments
On April 28, 2021, we announced positive results from a planned interim analysis of the Phase 3 ALPINE trial comparing BRUKINSA® against ibrutinib in adults with relapsed or refractory ("R/R") chronic lymphocytic leukemia ("CLL") or small lymphocytic lymphoma ("SLL"). BRUKINSA® met the primary endpoint of the trial, demonstrating non-inferiority in objective response rate ("ORR") by both investigator and independent review committee (IRC) assessments (p < 0.0001). The trial also demonstrated superior ORR with a statistically significant improvement in ORR for BRUKINSA vs. ibrutinib (p = 0.0006) by investigator assessment, as well as a numerically higher ORR but not statistically significant improvement by IRC (p = 0.0121 compared to the two-sided stringent statistical boundary of p < 0.0099 set for the interim analysis). The interim analysis from this fully-enrolled, ongoing trial is based on 415 of 652 patients followed for a minimum of 12 months.
On April 7, 2021, we announced approval from the China National Medical Products Administration ("NMPA") for us to begin manufacturing commercial supply of tislelizumab at our state-of-the-art biologics facility in Guangzhou, China. At over one million square feet (100,000 square meters) and 8,000 liters of biologics capacity approved for commercial supply, this wholly owned facility will immediately begin production of commercial supply of tislelizumab for the China market. An additional phase of construction currently in progress to bring total capacity to 64,000 liters is expected to be completed by the end of 2022.
On March 10, 2021, we announced that the first patient was dosed in a Phase 1 clinical trial of BGB-15025, its investigational hematopoietic progenitor kinase 1 ("HPK1") inhibitor. BGB-15025 is designed to be a potent and highly selective small molecule oral inhibitor of HPK1, a kinase downstream of the T cell receptor ("TCR") signaling pathway that is believed to play a key role in T cell activation.
On March 5, 2021, we announced that a supplemental Biologics License Application ("sBLA") for tislelizumab was accepted by the Center for Drug Evaluation ("CDE") of the NMPA for treatment in the second- or third-line setting of patients with locally advanced or metastatic non-small cell lung cancer ("NSCLC") who have progressed on prior platinum-based chemotherapy.
On March 2, 2021, we announced that BRUKINSA® was accepted by Health Canada for the treatment of adult patients with Waldenström’s macroglobulinemia ("WM").
On February 26, 2021, we announced the closing of the collaboration and license agreement with Novartis Pharma AG ("Novartis"), previously announced on January 11, 2021, granting Novartis rights to develop, manufacture, and commercialize tislelizumab in the United States, Canada, Mexico, member countries of the European Union, United Kingdom, Norway, Switzerland, Iceland, Liechtenstein, Russia, and Japan. We have agreed to jointly develop tislelizumab with Novartis in these licensed countries, with Novartis responsible for regulatory submissions after a transition period and for commercialization upon regulatory approvals. In addition, both companies may conduct clinical trials globally to explore combinations of tislelizumab with other cancer treatments, and we have an option to co-detail the product in North America, funded in part by Novartis.
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Components of Operating Results
Revenue
Product Revenue
We began generating product revenue in September 2017 through our in-license agreement with BMS (then Celgene) to distribute the approved cancer therapies REVLIMID®, VIDAZA®, and ABRAXANE® in China. Following approval from the FDA in November 2019, we launched our first internally developed medicine, BRUKINSA®, in the United States. We launched our second internally developed medicine, tislelizumab, in China in March 2020 and in June 2020, we launched BRUKINSA® in China. In July 2020, we began selling XGEVA® under our in-license agreement with Amgen. In December 2020, we announced the inclusion of tislelizumab, BRUKINSA®, and XGEVA® in the updated National Reimbursement Drug List (the "NRDL") by the China National Healthcare Security Administration ("NHSA"), which became effective on March 1, 2021. We received approval for BLINCYTO® in China in December 2020 and plan to launch additional in-licensed products from our collaborations in 2021, and continue to expand our efforts to promote our existing commercial products.
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.
Collaboration Revenue
We recognize collaboration revenues for amounts earned under collaborative and out-licensing arrangements. In January 2021, we entered into a collaboration and license agreement with Novartis, granting Novartis rights to develop, manufacture and commercialize tislelizumab in the United States, Canada, Mexico, member countries of the European Union, United Kingdom, Norway, Switzerland, Iceland, Liechtenstein, Russia, and Japan (the "Novartis Territory"). There were two performance obligations identified at the outset of the agreement: (1) the exclusive license to develop, manufacture, and commercialize tislelizumab in the Novartis Territory, transfer of know-how and use of the tislelizumab trademark and (2) conducting and completing ongoing trials of tislelizumab (“R&D services”). Under this agreement, we received an upfront cash payment, which was allocated between the two performance obligations identified in the agreement based on the relative standalone selling prices of the performance obligations. The portion allocated to the license was recognized upon the delivery of the license right and transfer of know-how. The portion of the upfront payment allocated to the R&D services was deferred and is being recognized as collaboration revenue as the R&D services are performed using a percentage of completion method. Estimated costs to complete are reassessed on a periodic basis and any updates to the revenue earned are recognized on a prospective basis.
The potential milestone payments that we are eligible to receive under the Novartis collaboration were excluded from the initial transaction price, as all milestone amounts are variable consideration and were fully constrained due to uncertainty of achievement. Performance-based milestones will be recognized when the milestone event is achieved or when the risk of revenue reversal is remote. Sales-based milestones and royalties will be recognized when the underlying sales occur.
Expenses
Cost of Sales
Cost of sales includes the cost of products purchased from Amgen and BMS and distributed in China and the costs to manufacture our internally developed commercial products. Also included in cost of sales are amounts paid to Amgen for its share of net sales or gross margin earned on sales of products in-licensed from Amgen. 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. To date, the Company's initial pre-launch inventory for its commercial products has been immaterial, and the consumption of the remaining pre-launch inventory on hand is not expected to have a significant impact on the Company's gross margin.

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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 medicines 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;
BGB-A1217, an investigational humanized monoclonal antibody against TIGIT;
BGB-15025, an investigational hematopoietic progenitor kinase 1 (HPK1) inhibitor;
BGB-11417, an investigational small molecular inhibitor of Bcl-2;
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; and
BGB-A425, an investigational humanized monoclonal antibody against TIM-3.
Research and development activities also include costs associated with in-licensed drug candidates, including:
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 the R&D cost share liability;
sitravatinib, an investigational, spectrum-selective kinase inhibitor, licensed from Mirati Therapeutics, Inc. ("Mirati");
zanidatamab (ZW25) and ZW49, two investigational bispecific antibody-based product candidates targeting HER2, licensed from Zymeworks Inc. ("Zymeworks");
BA3071, an investigational CAB-CTLA-4 antibody, licensed from BioAtla, Inc. ("BioAtla");
BAT1706, an investigational biosimilar to Avastin® (bevacizumab), licensed from Bio-Thera Solutions, Ltd. ("Bio-Thera"); and
DXP-593 and DXP-604, investigational anti-COVID-19 antibodies, licensed from Singlomics (Beijing DanXu) Biopharmaceuticals Co., Ltd. ("Singlomics").
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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 employee‑related 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 medicines and drug candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales of our medicines and drug candidates, if approved. This is due to the numerous risks and uncertainties associated with developing such medicines 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 third‑party manufacturers;
receipt of marketing and other required approvals from applicable regulatory authorities;
successfully launching and commercializing our medicines and drug candidates, if and when approved, whether as monotherapies or in combination with our internally developed medicines and drug candidates or third‑party products;
market acceptance, pricing and reimbursement;
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our medicines 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 medicines and drug candidates would significantly change the costs, timing and viability associated with the commercialization or development of that medicine 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 medicines and drug candidates as treatments for various cancers and as we move these medicines and drug candidates into additional clinical trials, including potential pivotal trials. There are numerous factors associated with the successful commercialization of any of our medicines 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.
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®, XGEVA® and BLINCYTO® and the preparation for potential launch and commercialization of additional in-licensed products from our collaborations and internally developed products, 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 treatments for various cancers and the initiation of clinical trials for potential new indications or drug candidates. These cost
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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 (Expense) Income, 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 bank loans, related party loan and shareholder loan.
Other (Expense) Income, Net
Other (expense) income consists primarily of gains recognized related to equity 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 months ended March 31, 2021 and 2020:
  Three Months Ended
March 31, Change
  2021 2020 $ %
  (dollars in thousands)
Revenues        
Product revenue, net $ 106,117  $ 52,059  $ 54,058  103.8  %
Collaboration revenue 499,755  —  499,755  NM
Total revenues 605,872  52,059  553,813  1,063.8  %
Expenses
Cost of sales 32,685  14,149  18,536  131.0  %
Research and development 320,726  304,302  16,424  5.4  %
Selling, general and administrative 182,106  107,081  75,025  70.1  %
Amortization of intangible assets 188  283  (95) (33.6) %
Total expenses 535,705  425,815  109,890  25.8  %
Income (loss) from operations 70,167  (373,756) 443,923  (118.8) %
Interest (expense) income, net (4,179) 6,690  (10,869) (162.5) %
Other (expense) income, net (4,123) 3,681  (7,804) (212.0) %
Income (loss) before income taxes 61,865  (363,385) 425,250  (117.0) %
Income tax (benefit) expense (4,630) 1,554  (6,184) (397.9) %
Net income (loss) 66,495  (364,939) 431,434  (118.2) %
Less: Net loss attributable to noncontrolling interest —  (1,204) 1,204  (100.0) %
Net income (loss) attributable to BeiGene, Ltd. $ 66,495  $ (363,735) $ 430,230  (118.3) %
Comparison of the Three Months Ended March 31, 2021 and 2020
Revenue
Total revenue increased to $605.9 million for the three months ended March 31, 2021, from $52.1 million for the three months ended March 31, 2020, primarily due to collaboration revenue resulting from the upfront fee allocated to the license rights provided to Novartis, increased sales of our internally developed products, as well as sales of XGEVA®, the first product licensed under our collaboration with Amgen, which commenced sales in China in July 2020. The following table summarizes the components of revenue for the three months ended March 31, 2021 and 2020, respectively:
Three Months Ended
March 31, Changes
2021 2020 $ %
(dollars in thousands)
Product revenue $ 106,117  0 $ 52,059  $ 54,058  103.8  %
Collaboration revenue:
License revenue 484,646  —  484,646  NM
Research and development service revenue 15,109  —  15,109  NM
Total collaboration revenue 499,755  —  499,755  NM
Total Revenue $ 605,872  $ 52,059  $ 553,813  1,063.8  %

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Net product revenues consisted of the following:
Three Months Ended
March 31, Changes
2021 2020 $ %
(dollars in thousands)
Tislelizumab $ 48,879  $ 20,526  $ 28,353  138.1  %
BRUKINSA®
22,090  717  21,373  2,980.9  %
REVLIMID®
16,629  7,628  9,001  118.0  %
VIDAZA®
3,706  6,043  (2,337) (38.7) %
ABRAXANE®
—  17,145  (17,145) (100.0) %
XGEVA®
14,454  —  14,454  NM
Other 359  —  359  NM
Total product revenue $ 106,117  $ 52,059  $ 54,058  103.8  %
Net product revenue increased 103.8% to $106.1 million for the three months ended March 31, 2021, compared to $52.1 million in the prior year period, primarily due to increased sales of tislelizumab in China and BRUKINSA® in the United States and China, partially offset by decreased sales of the BMS products distributed in China. In addition, product revenues in the first quarter of 2021 were positively impacted by sales of Amgen's XGEVA® in China, which we began distributing in July 2020, and the strengthening of the RMB against the United States dollar in the current quarter compared to the prior year period.
Product revenues in the first quarter of 2021 were negatively impacted by an adjustment of $24.2 million as a result of compensating distributors for products that remained in the distribution channel which were sold during the quarter, prior to applying the lower prices of the NRDL, due to the first inclusion of tislelizumab, BRUKINSA®, and XGEVA® in the updated NRDL by the NHSA, which became effective on March 1, 2021. In the first quarter, the inclusion of tislelizumab, BRUKINSA®, and XGEVA® in the NRDL significantly increased patient demand that more than offset the net effect of price reductions as a result of NRDL inclusion. Overall, we expect sales of our internally-developed products and in-licensed products from Amgen to lead to total product revenue growth in 2021, driven by an increase in sales volume as our launches progress.
We expect product revenue from the in-licensed products from BMS 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 for REVLIMID® and the loss of volume-based procurement ("VBP") bidding for VIDAZA®. Although the impact of COVID-19 on commercial activities in China lessened in the second half of 2020, there is continued uncertainty regarding the future potential impact of the pandemic both in China and the United States, 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®.
Collaboration revenue totaled $499.8 million for the three months ended March 31, 2021. $484.7 million was recognized upon delivery of the license right and transfer of know-how to Novartis under our collaboration and license agreement with Novartis, and $15.1 million was recognized from deferred revenue for R&D services performed during the three months ended March 31, 2021 (see Footnote 3). We did not have any collaboration revenue during the three months ended March 31, 2020.
Cost of Sales
Cost of sales increased to $32.7 million for the three months ended March 31, 2021 from $14.1 million for the three months ended March 31, 2020, primarily due to increased product sales of tislelizumab, BRUKINSA®, and XGEVA®, and were partially offset by lower sales of BMS in-licensed products.
Gross Margin
Gross margin on product sales increased to $73.4 million for the three months ended March 31, 2021, compared to $37.9 million in the prior year period, primarily due to increased product revenue in the current year period. Gross margin as a percentage of product sales decreased to 69% for the three months ended March 31, 2021, from 73% in the comparable period of the prior year. The decrease is primarily due to the impact of the accrued compensation to customers for sales of tislelizumab, BRUKINSA®, and XGEVA® that remained in the channel and were sold at the pre-NRDL price. We expect gross
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margin to normalize in the remainder of 2021 and be consistent with the prior year, as the sales mix evolves toward our higher margin internally developed products. We anticipate that the effect to gross margin for significant reductions in listing prices effective March 1, 2021 as a result of inclusion in the NRDL for tislelizumab, BRUKINSA and XGEVA will be partially mitigated by adjustments to the Company’s patient assistance programs. Pre-launch inventory carried at zero or low cost consumed during the three months ended March 31, 2021 and March 31, 2020 was immaterial and did not have a significant impact on our gross margin.
Research and Development Expense
Research and development expense increased by $16.4 million, or 5.4%, to $320.7 million for the three months ended March 31, 2021 from $304.3 million for the three months ended March 31, 2020. The following table summarizes external clinical, external non-clinical and internal research and development expense for the three months ended March 31, 2021 and 2020, respectively:
  Three Months Ended     
  March 31, Changes
  2021 2020 $ %
  (dollars in thousands)
External research and development expense:
Cost of development programs $ 122,946  $ 111,734  $ 11,212  10.0  %
Upfront license fees 8,500  43,000  (34,500) (80.2) %
Amgen co-development expense1
27,643  28,366  (723) (2.5) %
Total external research and development expenses 159,089  183,100  (24,011) (13.1) %
Internal research and development expenses 161,637  121,202  40,435  33.4  %
Total research and development expenses $ 320,726  $ 304,302  $ 16,424  5.4  %
1 Our co-funding obligation for the development of the pipeline assets under the Amgen collaboration for the three months ended March 31, 2021 totaled $54.6 million, of which $27.6 million was recorded as R&D expense. The remaining $26.9 million was recorded as a reduction of the R&D cost share liability.
The decrease in external research and development expenses in the first quarter was primarily attributable to:
a decrease of $34.5 million related to license fees under collaboration agreements; and
a decrease of $0.7 million related to expense recognized on co-development fees to Amgen.
The overall decrease in external research and development expense was partially offset in the period by increases in external spending for tislelizumab, ociperlimab, and other clinical programs.
Internal research and development expense increased $40.4 million and was primarily attributable to the expansion of our global development organization and our clinical and preclinical drug candidates, and included the following:
$24.6 million increase of employee salary and benefits, primarily attributable to hiring more research and development personnel to support our expanding research and development activities;
$5.0 million increase of materials and reagent expenses, primarily in connection with the in-house manufacturing of drug candidates used for clinical purposes;
$4.6 million increase of consulting fees, which was mainly attributable to increased travel and meeting expense related to scientific, regulatory and development consulting activities, in connection with the advancement of our drug candidates;
$1.5 million increase of share-based compensation expense, primarily attributable to our increased headcount of research and development employees, resulting in more awards being expensed related to the growing research and development employee population; and
$4.8 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 $75.0 million, or 70.1%, to $182.1 million for the three months ended March 31, 2021, from $107.1 million for the three months ended March 31, 2020. The increase was primarily attributable to the following:
$34.7 million increase of employee salary and benefits, which was primarily attributable to the expansion of our commercial organizations in China, the United States, Canada, Europe and other emerging markets, and the hiring of more personnel to support our growing business;
$27.5 million increase in external commercial-related expenses, including market research, sales and marketing, consulting and conference related expenses, related to the growth of our global commercial organization, as we continue to build our worldwide footprint and capabilities;
$6.7 million increase of professional fees, consulting, recruiting, information technology, tax, accounting and audit services, and 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; and
$6.1 million increase of share-based compensation expense, primarily attributable to our increased headcount of sales and administrative employees, resulting in more awards being expensed related to the growing sales and administrative employee population.
Interest (Expense) Income, Net
Interest (expense) income, net decreased by $10.9 million, or 162.5%, to $4.2 million of net interest expense for the three months ended March 31, 2021, from $6.7 million of net interest income for three months ended March 31, 2020. The decrease in interest income, net, was primarily attributable to decreased interest income, compared to the prior year period.
Other (Expense) Income, Net
Other (expense) income, net decreased to $4.1 million of net other expense for the three months ended March 31, 2021, from $3.7 million of net other income for the three months ended March 31, 2020. The decrease was mainly attributable to unrealized losses on equity investments in the current period.
Income Tax (Benefit) Expense
Income tax benefit was $4.6 million for the three months ended March 31, 2021, as compared to $1.6 million of income tax expense for the three months ended March 31, 2020. The income tax benefit for three months ended March 31, 2021 was primarily attributable to the deferred tax benefit of U.S. stock-based compensation deductions in excess of tax expense on income reported in certain China subsidiaries as adjusted for certain non-deductible expenses. The income tax expense for the three months ended March 31, 2020 was primarily attributable to tax expense on income reported in certain China subsidiaries offset by the tax benefit of deferred U.S. stock-based compensation deductions.
Liquidity and Capital Resources
The following table represents our cash, short-term investments, and debt balances as of March 31, 2021 and December 31, 2020: