Overview

BGNE is a global commercial-stage biotechnology company focused on developing and commercializing innovative molecularly-targeted and immuno-oncology cancer therapeutics. BGNE started as a research and development company in Beijing in 2010. Over the last ten years, they have developed into a fully-integrated global biotechnology company, with significant commercial, manufacturing, and research and development capabilities.

BGNE have built substantial commercial capabilities in the People's Republic of China ("PRC" or "China") and the United States, and are currently marketing two internally-developed drugs and three in-licensed drugs. BGNE also anticipate introducing five more in-licensed drugs into the China market in the next one to two years. In the United States, BGNE market BRUKINSA™ (zanubrutinib) for adult patients with mantle cell lymphoma ("MCL") who have received at least one prior therapy and in China, BGNE have received marketing approval and are in the process of launching tislelizumab for patients with classical Hodgkin’s Lymphoma ("cHL") who have received at least two prior therapies. BGNE have filed four additional supplementary new drug applications ("sNDA") for regulatory approvals in China and are planning for launches in these additional indications in 2020. Their in-licensed portfolio includes ABRAXANE®, REVLIMID® and VIDAZA®, which BGNE have been marketing in China since 2017 under a license from Celgene Logistics Sàrl, a Bristol-Myers Squibb company ("BMS"). BGNE plan on launching additional in-licensed products in China from our collaborations, including XGEVA® (denosumab), KYPROLIS® (carfilzomib) and BLINCYTO® (blinatumomab) from Amgen Inc. ("Amgen"), and SYLVANT® (siltuximab) and QARZIBA® ▼ (dinutuximab beta), from EUSA Pharma ("EUSA").

BGNE have built deep clinical development capabilities, including a more than 1,100-person global clinical development team that is running over 60 ongoing or planned clinical trials that have enrolled over 7,500 patients and healthy subjects. BGNE are conducting late-stage clinical trials of BRUKINSA and tislelizumab, including 26 registration or registration-enabling trials in 15 discrete cancer indications. Their internal research capabilities have yielded another late-stage asset, pamiparib, and five other internally-developed drug candidates are currently in early-stage clinical development. In addition, BGNE have been able to leverage Their capabilities and China’s rising importance as a clinical science center to expand Their clinical and pre-clinical portfolio with in-licensed drug candidates. BGNE are also working with high-quality contract manufacturing organizations ("CMOs") to manufacture Their internally-developed commercial and clinical products in China and globally and have built state-of-the-art small molecule and biologic manufacturing facilities in China to support the launches and potential future demand of Their internally-developed products.

Based on the strength of Their China-inclusive global development and commercial capabilities, BGNE have entered into collaborations with leading pharmaceutical and biotechnology companies to develop and commercialize innovative medicines in China and the Asia-Pacific region. In October 2019, BGNE entered into a strategic collaboration with Amgen pursuant to which BGNE have agreed to collaborate on the commercialization of Amgen’s oncology products XGEVA, KYPROLIS, and BLINCYTO in China, and the global development and future commercialization in China of up to 20 of Amgen's clinical- and late pre-clinical-stage pipeline products, including AMG 510, Amgen’s first-in-class investigational KRAS G12C inhibitor.

Prodcuts:

Pipeline:

Operating Results

Revenue:

BGNE began generating product revenue in September 2017 through Their in-license agreement with BMS to distribute the approved cancer therapies ABRAXANE, REVLIMID and VIDAZA in China. Following FDA approval on November 14, 2019, BGNE launched Their first internally developed drug, BRUKINSA, in the United States. 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. BGNE expect revenue from product sales to increase in 2020 as BGNE launch Their internally developed drugs, BRUKINSA and tislelizumab, and launch additional in-licensed products from Their collaborations with Amgen and EUSA and continue to expand Their efforts to promote Their existing commercial products.

In January 2020, BGNE BGNEre notified that Their tender offer for ABRAXANE was one of the winning tenders in China’s centralized procurement process, with a reduction from the current pricing, which is expected to take effect in the second quarter of 2020. Once ABRAXANE is included in the centralized procurement process, BGNE anticipate that demand will increase significantly, although at a significantly loBGNEr price than BGNE have been charging during 2019 and into 2020, which could have a material impact on Their commercialization efforts and results of operations.

To date, BGNE have also recorded revenue from Their 2017 collaboration and license agreement with BMS for tislelizumab, which was terminated in June 2019. Under this agreement, BGNE received an upfront payment related to the license fee, which was recognized upon the delivery of the license right. Additionally, the portion of the upfront payment related to the reimbursement of undelivered research and development services was deferred and recognized over the performance period of the collaboration arrangement. BGNE recognized the remainder of the deferred research and development services revenue balance upon termination of the collaboration agreement. BGNE also received research and development reimbursement revenue for the basket study trials that BMS opted into through the termination of the collaboration agreement. Pursuant to the terms of the termination agreement, BGNE received a one-time payment of $150 million in June 2019. The entire payment was recognized in the period the termination occurred, as BGNE had no further performance obligations under the collaboration. BGNE also recognized revenue for upfront license fees and milestone payments from a prior collaboration agreement with Merck KGaA, Darmstadt Germany during the years ended December 31, 2017 and 2018, respectively.

Expense:

Cost of Sales

Cost of sales includes the acquisition costs of Their commercial products that have been sold during the period. To date, cost of sales has consisted of the cost of products purchased from BMS and distributed in the People's Republic of China ("PRC" or "China"). Costs to manufacture inventory in preparation for commercial launch of a product incurred prior to regulatory approval are expensed to research and development expense as incurred. Cost of sales for newly launched products will not be recorded until the initial pre-launch inventory is depleted and additional inventory is manufactured.

Research and Development Expenses

Research and development expenses consist of the costs associated with Their research and development activities, conducting preclinical studies and clinical trials and activities related to regulatory filings. Their research and development expenses consist of:

•expenses incurred under agreements with contract research organizations, or CROs, contract manufacturing organizations, and consultants that conduct and support Their clinical trials and preclinical studies;

•costs of comparator drugs in certain of Their 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;

•other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies used in research and development activities.Their current research and development activities mainly relate to the clinical advancement of Their internally-developed drug candidates:

•zanubrutinib, an investigational small molecule inhibitor of BTK;

•tislelizumab, an investigational humanized monoclonal antibody against PD‑1;

•pamiparib, an investigational small molecule inhibitor of PARP1 and PARP2;

•lifirafenib, a novel small molecule inhibitor of both the monomer and dimer forms of BRAF;

•BGB-A333, an investigational humanized monoclonal antibody against PD-L1;

•BGB-A425, an investigational humanized monoclonal antibody against TIM-3;

•BGB-A1217, an investigational humanized monoclonal antibody against TIGIT; and

•BGB-11417, an investigational small molecular inhibitor of Bcl-2.

Research and development activities also include costs associated with in-licensed drug candidates, including:

•sitravatinib, an investigational, spectrum-selective kinase inhibitor in clinical development by Mirati Therapeutics, Inc. ("Mirati");

•ZW25 and ZW49, two bispecific antibody-based product candidates targeting HER2, under development by Zymeworks Inc.; and

•BA3071, an investigational CAB-CTLA-4 antibody, under development by BioAtla LLC.

BGNE expense research and development costs when BGNE incur them. BGNE 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 Their vendors provide to them.

Revenue Breakdown:

Total revenue increased by $230.0 million to $428.2 million for the year ended December 31, 2019, from $198.2 million for the year ended December 31, 2018. The following table summarizes the components of our revenue for the year ended December 31, 2019 and 2018, respectively:

Net product revenue was $222.6 million for the year ended December 31, 2019, which related primarily to sales of ABRAXANE, REVLIMID and VIDAZA in China. They began recognizing product revenue with sales to our distributors in China, beginning in September 2017 following the closing of our strategic collaboration with BMS. For the year ended December 31, 2019, ABRAXANE, REVLIMID and VIDAZA represented 50%, 36% and 14%, respectively, of net product revenue for their marketed products in China. Following FDA approval on November 14, 2019, BGNE launched our first internally developed drug, BRUKINSA, in the United States. BGNE had $130.9 million product revenue for the year ended December 31, 2018. Collaboration revenue totaled $205.6 million for the year ended December 31, 2019, and was comprised primarily of a $150.0 million payment received upon termination of the collaboration agreement with BMS for tislelizumab, as well as the revenue recognition of previously deferred amounts. Additionally, BGNE recognized $27.6 million for the reimbursement of research and development costs for the clinical trials that BMS had opted into prior to the agreement being terminated.

Cost of Sales:

Cost of sales increased to $71.2 million for the year ended December 31, 2019 from $28.7 million for the year ended December 31, 2018, primarily due to increased volume of sales compared to the prior year. Cost of sales for the year ended December 31, 2019 consisted entirely of the cost of products purchased from BMS and distributed in the PRC.

Research and Development Expense:

Research and development expense increased by $248.3 million, or 36.6%, to $927.3 million for the year ended December 31, 2019, from $679.0 million for the year ended December 31, 2018. The following table summarizes external clinical, external non-clinical and internal research and development expense for the year ended December 31, 2019 and 2018: