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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, 2020
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, 2020, 1,008,198,947 ordinary shares, par value $0.0001 per share, were outstanding, of which 850,615,805 ordinary shares were held in the form of 65,431,985 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
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2

Table of Contents


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
 
2020
 
2019
 
 
 
 
$
 
$
 
 
 
 
(unaudited)
 
(audited)
Assets
 
 
 
 
 
 

Current assets:
 
 
 
 
 
 

Cash and cash equivalents
 
 
 
1,957,101

 
618,011

Short-term restricted cash
 
4
 
282

 
288

Short-term investments
 
4
 
1,417,097

 
364,728

Accounts receivable, net
 
10
 
65,620

 
70,878

Inventories
 
5
 
28,775

 
28,553

Prepaid expenses and other current assets
 
10
 
126,312

 
90,238

Total current assets
 
 
 
3,595,187

 
1,172,696

Long-term restricted cash
 
4
 
2,435

 
2,476

Property, plant and equipment, net
 
6
 
240,331

 
242,402

Operating lease right-of-use assets
 
 
 
91,509

 
82,520

Intangible assets, net
 
8
 
5,563

 
5,846

Deferred tax assets
 
9
 
37,937

 
37,894

Other non-current assets
 
10
 
94,250

 
68,455

Total non-current assets
 
 
 
472,025

 
439,593

Total assets
 
 
 
4,067,212

 
1,612,289

Liabilities and shareholders' equity
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Accounts payable
 
 
 
98,364

 
122,488

Accrued expenses and other payables
 
10
 
179,331

 
163,556

Tax payable
 
9
 
19,535

 
13,454

Operating lease liabilities, current portion
 
 
 
14,597

 
10,814

Research and development cost share liability, current portion
 
3
 
128,672

 

Short-term bank loan
 
11
 
11,298

 

Total current liabilities
 
 
 
451,797

 
310,312

Non-current liabilities:
 
 
 
 
 
 
Long-term bank loan
 
11
 
81,913

 
83,311

Shareholder loan
 
12
 
157,278

 
157,384

Operating lease liabilities, non-current portion
 
 
 
32,967

 
25,833

Deferred tax liabilities
 
 
 
10,368

 
10,532

Research and development cost share liability, non-current portion
 
3
 
460,528

 

Other long-term liabilities
 
10
 
45,305

 
46,562

Total non-current liabilities
 
 
 
788,359

 
323,622

Total liabilities
 
 
 
1,240,156

 
633,934

Commitments and contingencies
 
19
 

 

Equity:
 
 
 

 

Ordinary shares, US$0.0001 par value per share; 9,500,000,000 shares authorized; 1,007,976,816 and 801,340,698 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively
 
 
 
101

 
79

Additional paid-in capital
 
 
 
5,138,239

 
2,925,970

Accumulated other comprehensive loss
 
16
 
(6,548
)
 
(8,001
)
Accumulated deficit
 
 
 
(2,319,578
)
 
(1,955,843
)
Total BeiGene, Ltd. shareholders’ equity
 
 
 
2,812,214

 
962,205

Noncontrolling interest
 
 
 
14,842

 
16,150

Total equity
 
 
 
2,827,056

 
978,355

Total liabilities and equity
 
 
 
4,067,212

 
1,612,289

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Table of Contents


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
 
2020
 
2019
 
 
 
 
 
Revenues
 
 
 
 

 
 

Product revenue, net
 
13
 
52,059

 
57,421

Collaboration revenue
 
3
 

 
20,412

Total revenues
 
 
 
52,059

 
77,833

Expenses
 
 
 
 
 
 
Cost of sales - product
 
 
 
14,149

 
15,261

Research and development
 
 
 
304,302

 
178,351

Selling, general and administrative
 
 
 
107,081

 
57,645

Amortization of intangible assets
 
 
 
283

 
331

Total expenses
 
 
 
425,815

 
251,588

Loss from operations
 
 
 
(373,756
)
 
(173,755
)
Interest income, net
 
 
 
6,690

 
4,477

Other income, net
 
 
 
3,681

 
1,728

Loss before income taxes
 
 
 
(363,385
)
 
(167,550
)
Income tax expense
 
9
 
1,554

 
519

Net loss
 
 
 
(364,939
)
 
(168,069
)
Less: net loss attributable to noncontrolling interests
 
 
 
(1,204
)
 
(429
)
Net loss attributable to BeiGene, Ltd.
 
 
 
(363,735
)
 
(167,640
)
 
 
 
 
 
 
 
Net loss per share attributable to BeiGene, Ltd., basic and diluted
 
14
 
(0.36
)
 
(0.22
)
Weighted-average shares outstanding, basic and diluted
 
14
 
1,005,347,581

 
774,750,255

 
 
 
 
 
 
 
Net loss per American Depositary Share (“ADS”), basic and diluted
 
 
 
(4.70
)
 
(2.81
)
Weighted-average ADSs outstanding, basic and diluted

 
 
 
77,334,429

 
59,596,173

 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Table of Contents


BEIGENE, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in thousands of U.S. Dollars (“$”), except for number of shares and per share data)
(Unaudited)
 
 
Three Months Ended
 
 
March 31,
 
 
2020
 
2019
 
 
$
 
$
Net loss
 
(364,939
)
 
(168,069
)
Other comprehensive (loss)/ income, net of tax of nil:
 
 
 
 
Foreign currency translation adjustments
 
(4,349
)
 
3,755

Unrealized holding gain, net
 
5,698

 
685

Comprehensive loss
 
(363,590
)
 
(163,629
)
Less: comprehensive loss attributable to noncontrolling interests
 
(1,308
)
 
(535
)
Comprehensive loss attributable to BeiGene, Ltd.
 
(362,282
)
 
(163,094
)
 
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
 
2020
 
2019
 
 
 
 
$
 
$
Operating activities:
 
 
 
 
 
 
Net loss
 
 
 
(364,939
)
 
(168,069
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
Depreciation and amortization expense
 
 
 
7,750

 
3,416

Share-based compensation expenses
 
15
 
38,255

 
26,392

Provision for doubtful accounts
 
 
 
2,022

 

Unrealized gain on equity securities
 
4
 
(6,964
)
 

Acquired in-process research and development
 
 
 
43,000

 
29,000

Amortization of research and development cost share liability
 
 
 
(27,634
)
 

Non-cash interest expense
 
 
 
2,572

 
1,858

Deferred income tax benefits
 
 
 
(206
)
 
(983
)
Other items, net
 
 
 
(1,105
)
 
(3,218
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
Accounts receivable
 
 
 
3,236

 
(17,920
)
Inventories
 
 
 
(222
)
 
3,102

Prepaid expenses and other current assets
 
 
 
(36,075
)
 
(5,772
)
Operating lease right-of-use assets
 
 
 
(8,990
)
 
(1,588
)
Other non-current assets
 
 
 
(2,710
)
 
(10,212
)
Accounts payable
 
 
 
(21,450
)
 
(20,364
)
Accrued expenses and other payables
 
 
 
15,775

 
(8,790
)
Tax payable
 
 
 
6,080

 
969

Deferred revenue
 
 
 

 
(2,238
)
Operating lease liabilities
 
 
 
10,917

 
1,550

Other long-term liabilities
 
 
 
(1,256
)
 
892

Net cash used in operating activities
 
 
 
(341,944
)
 
(171,975
)
Investing activities:
 
 
 
 
 
 
Purchases of property, plant and equipment
 
 
 
(21,533
)
 
(21,828
)
Purchases of investments
 
 
 
(1,307,179
)
 
(487,354
)
Proceeds from sale or maturity of investments
 
 
 
256,743

 
710,598

Purchase of in-process research and development
 
 
 
(43,000
)
 
(29,000
)
Net cash (used in) provided by investing activities
 
 
 
(1,114,969
)
 
172,416

Financing activities:
 
 
 
 
 
 
Proceeds from sale of ordinary shares, net of cost
 
 
 
2,162,407

 

Proceeds from research and development cost share liability
 
 
 
616,834

 

Proceeds from long-term bank loan
 
11
 

 
36,695

Proceeds from short-term bank loan
 
11
 
11,298

 

Proceeds from option exercises and employee share purchase plan
 
 
 
11,629

 
6,269

Net cash provided by financing activities
 
 
 
2,802,168

 
42,964

Effect of foreign exchange rate changes, net
 
 
 
(6,212
)
 
4,265

Net increase in cash, cash equivalents, and restricted cash
 
 
 
1,339,043

 
47,670

Cash, cash equivalents, and restricted cash at beginning of period
 
 
 
620,775

 
740,713

Cash, cash equivalents, and restricted cash at end of period
 
 
 
1,959,818

 
788,383

Supplemental cash flow information:
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
1,957,101

 
764,492

Short-term restricted cash
 
 
 
282

 
14,900

Long-term restricted cash
 
 
 
2,435

 
8,991

Income taxes paid
 
 
 
531

 
360

Interest paid
 
 
 
1,136

 
888

Supplemental non-cash information:
 
 
 
 
 
 
Acquisitions of equipment included in accounts payable
 
 
 
26,412

 
32,462

The accompanying notes are an integral part of these condensed consolidated financial statements.

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BEIGENE, LTD.
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, 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


1


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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
776,263,184


77


2,744,814


1,526


(1,007,215
)

1,739,202


14,445


1,753,647

Use of shares reserved for share option exercises
(916,383
)














Exercise of options, ESPP and release of RSUs
2,066,383


1


6,268






6,269




6,269

Share-based compensation




26,392






26,392




26,392

Other comprehensive income






4,546




4,546


(106
)

4,440

Net loss








(167,640
)

(167,640
)

(429
)

(168,069
)
Balance at March 31, 2019
777,413,184


78


2,777,474


6,072


(1,174,855
)

1,608,769


13,910


1,622,679


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”) is a global, commercial-stage biotechnology company focused on discovering, developing, manufacturing and commercializing innovative medicines to improve treatment outcomes and access for patients worldwide. The Company started as a research and development company in Beijing in 2010. Over the last ten years, it has developed into a fully-integrated global biotechnology company, with significant commercial, manufacturing, and research and development capabilities.
The Company has built substantial commercial capabilities in China and the United States and is currently marketing both internally-developed drugs and in-licensed drugs. In the United States, the Company markets BRUKINSA (zanubrutinib) for adult patients with mantle cell lymphoma ("MCL") who have received at least one prior therapy. In China, the Company markets tislelizumab for patients with classical Hodgkin’s Lymphoma ("cHL") who have received at least two prior therapies and for patients with locally advanced or metastatic urothelial carcinoma ("UC"), a form of bladder cancer, with PD-L1 high expression whose disease progressed during or following platinum-containing chemotherapy or within 12 months of neoadjuvant or adjuvant treatment with platinum-containing chemotherapy. As of May 1, 2020, the Company has filed three additional new or supplementary new drug applications ("sNDA") for regulatory approvals in China for its internally-developed products and is planning for launches in these additional products or indications in 2020 and beyond. The Company's in-licensed portfolio includes ABRAXANE®, REVLIMID® and VIDAZA®, which it has been marketing in China since 2017 under a license from Celgene Logistics Sàrl, a Bristol Myers Squibb (“BMS”) company. The Company plans on launching additional in-licensed products in China from its collaborations, including XGEVA® (denosumab), KYPROLIS® (carfilzomib) and BLINCYTO® (blinatumomab) from Amgen Inc. ("Amgen"), and SYLVANT® (siltuximab) and QARZIBA® (dinutuximab beta), from EUSA Pharma ("EUSA").
Basis of presentation and consolidation
The accompanying condensed consolidated balance sheet as of March 31, 2020, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2020 and 2019, the condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019, and the condensed consolidated statements of shareholders' equity for the three months ended March 31, 2020 and 2019, and the related footnote disclosures are unaudited. The accompanying unaudited interim 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, 2019 (the "Annual Report").
The unaudited 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, 2020 are not necessarily indicative of the results expected for the full fiscal year or for any future annual or interim period.
The 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. The Company consolidates its interests in its joint venture, BeiGene Biologics Co., Ltd. ("BeiGene Biologics") and MapKure, LLC, under the voting model and recognizes the minority shareholders' equity interest as a noncontrolling interest in its condensed consolidated financial statements.

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Use of estimates
The preparation of the condensed 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 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, share-based compensation expenses, realizability of deferred tax assets, estimating uncertain tax positions, 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 June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses. Subsequently, the FASB issued ASU 2019-05, Financial Instruments- Credit Losses (Topic 326): Targeted Transition Relief and ASU 2019-11 Codification Improvements to Topic 326, Financial Instruments- Credit Losses (collectively, the "Credit Loss ASUs"). The Credit Loss ASUs change the methodology to be used to measure credit losses for certain financial instruments and financial assets, including trade receivables. The new methodology requires the recognition of an allowance that reflects the current estimate of credit losses expected to be incurred over the life of the financial asset. This new standard also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. The Company adopted the standard on January 1, 2020. Based on the composition of the Company's trade receivables and investment portfolio, the adoption of this standard did not have a material impact on the Company’s financial position or results of operations upon adoption. The Company has updated its accounting policy for trade accounts receivable and is providing additional disclosure about its allowance for credit losses, as required by the standard, upon adoption.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement. The update eliminates, modifies, and adds certain disclosure requirements for fair value measurements. The added disclosure requirements and the modified disclosure on the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented. All other changes to disclosure requirements in this update should be applied retrospectively to all periods presented upon their effective date. The Company adopted this standard on January 1, 2020. There was no material impact to the Company's financial position or results of operations upon adoption.
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This update requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to defer and recognize as an asset. This guidance should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted this standard on January 1, 2020. There was no material impact to the Company's financial position or results of operations upon adoption.
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This update clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer and precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. This guidance should be applied retrospectively to the date of initial application of Topic 606. The Company adopted this standard on January 1, 2020. There was no material impact to the Company's financial position or results of operations upon adoption.
 New accounting standards which have not yet 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

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income. The update is effective in fiscal years beginning after December 15, 2020, and interim periods therein, and early adoption is permitted. Certain amendments in this update should be applied retrospectively or modified retrospectively, and all other amendments should be applied prospectively. The Company is currently evaluating the impact on its financial statements of adopting this guidance.
Significant accounting policies
For a more complete discussion of the Company’s significant accounting policies and other information, the 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, 2019.
Accounts Receivable and Allowance for Credit Losses
Trade accounts receivable are recorded at their invoiced amounts, net of trade discounts and allowances as well as an allowance for credit losses. The allowance for credit losses reflects the Company's current estimate of credit losses expected to be incurred over the life of the receivables. The Company considers various factors in establishing, monitoring, and adjusting its allowance for credit losses including the aging of receivables and aging trends, customer creditworthiness and specific exposures related to particular customers. The Company also monitors other risk factors and forward-looking information, such as country specific risks and economic factors that may affect a customer's ability to pay in establishing and adjusting its allowance for credit losses. Accounts receivable are written off after all collection efforts have ceased.
Except for the changes to the Company’s significant accounting policies related to the adoption of the Credit Loss ASUs, there have been no other material changes to the Company’s significant accounting policies as of and for the three months ended March 31, 2020, 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 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.

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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, 2020 and December 31, 2019:
 
 
Quoted Price
 
 
 
 
 
 
in Active
 
Significant
 
 
 
 
Market for
 
Other
 
Significant
 
 
Identical
 
Observable
 
Unobservable
 
 
Assets
 
Inputs
 
Inputs
As of March 31, 2020
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
$
 
$
 
$
Short-term investments (Note 4):
 
 

 
 
 
 
U.S. treasury securities
 
1,417,097

 

 

Cash equivalents:
 
 
 
 
 
 
U.S. treasury securities
 
251,505

 

 

Money market funds
 
1,144,458

 

 

Other non-current assets:
 
 
 
 
 
 
Equity securities (Note 4)
 
7,592

 
4,372

 

Total
 
2,820,652

 
4,372

 

 
 
 
Quoted Price
 
 
 
 
 
 
in Active
 
Significant
 
 
 
 
Market for
 
Other
 
Significant
 
 
Identical
 
Observable
 
Unobservable
 
 
Assets
 
Inputs
 
Inputs
As of December 31, 2019
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
$
 
$
 
$
Short-term investments (Note 4):
 
 
 
 
 
 
U.S. treasury securities
 
364,728

 

 

Cash equivalents
 
 
 
 
 
 
U.S. treasury securities
 
16,442

 

 

Money market funds
 
50,461

 

 

Total
 
431,631

 

 


The Company's equity securities 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 strategic 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.
The Company had no liabilities measured and recorded at fair value on a recurring basis as of March 31, 2020 or December 31, 2019. 
3. Collaborative Arrangements
The Company enters into collaborative arrangements for the research and development, manufacture and/or commercialization of drug products and drug candidates. To date, these collaborative arrangements have included out-licenses of internally-developed drug candidates to other parties, in-licenses of drug products and drug candidates from other parties, and profit and cost sharing arrangements.
Amgen
On October 31, 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

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Amgen’s pipeline, with BeiGene responsible for development and commercialization in China. On January 2, 2020, following approval by the Company's shareholders and satisfaction of other closing conditions, the agreement became effective.
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 of 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 a supplemental new drug application has been filed for prevention of skeletal-related events in cancer patients with bone metastases. Additionally, new drug applications have been filed in China for KYPROLIS as a treatment for patients with multiple myeloma and BLINCYTO a as a treatment for adult patients with relapsed or refractory acute lymphoblastic leukemia (ALL).
Amgen and the Company are also jointly developing a portfolio of Amgen oncology pipeline assets under the collaboration. In April 2020, two Amgen oncology pipeline assets were removed from the collaboration due to portfolio prioritization, and the parties expect that the development plan for the assets in the portfolio will continue to evolve over time. 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 AMG 510, 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 AMG 510).
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 will recognize 100% of net product revenue on these sales. Amounts due to Amgen for its portion of net product sales will be recorded as cost of sales. Cost reimbursements due to or from Amgen under the profit share will be 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 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 collaboration, a Share Purchase Agreement ("SPA") was entered into by the parties on October 31, 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.
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.

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Amounts recorded related to the cash proceeds received from the Amgen collaboration for the three months ended March 31, 2020 were as follows:
 
 
Three Months Ended
 
 
March 31,
 
 
2020
 
 
$
Fair value of equity issued to Amgen
 
2,162,407

Fair value of research and development cost share liability
 
616,834

Total cash proceeds
 
2,779,241

Amounts recorded related to the Company's portion of the co-development funding on the pipeline assets for the three months ended March 31, 2020 were as follows:
 
 
Three Months Ended
 
 
March 31,
 
 
2020
 
 
$
Research and development expense
 
28,366

Amortization of research and development cost share liability
 
27,634

Total amount due to Amgen for BeiGene's portion of the development funding
 
56,000

 
 
 
Total amount of development funding payable in cash
 
56,000

Total amount of development funding paid with development services
 

 
 
 
Remaining portion of development funding cap at March 31, 2020
 
1,194,000

At March 31, 2020, the research and development cost share liability recorded in the Company's balance sheet was as follows:
 
 
As of
 
 
March 31,
 
 
2020
 
 
$
Research and development cost share liability, current portion
 
128,672

Research and development cost share liability, non-current portion
 
460,528

Total research and development cost share liability
 
589,200


There were no product sales or commercial profit share payments related to the Amgen collaboration during the three months ended March 31, 2020.
Celgene Corporation, a Bristol Myers Squibb company ("BMS")
On July 5, 2017, the Company entered into a license agreement with Celgene Corporation, now BMS, pursuant to which the Company granted to the BMS parties an exclusive right to develop and commercialize the Company’s investigational PD-1 inhibitor, tislelizumab, in all fields of treatment, other than hematology, in the United States, Europe, Japan and the rest of world other than Asia (the “PD-1 License Agreement”). The Company entered into a mutual agreement with BMS to terminate the Amended and Restated PD-1 License Agreement effective June 14, 2019 in advance of the acquisition of Celgene by BMS.

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The following table summarizes total collaboration revenue recognized related to the BMS collaboration for the three months ended March 31, 2020 and 2019:
 
 
Three Months Ended
 
 
March 31,
 
 
2020
 
2019
 
 
$
 
$
Reimbursement of research and development costs
 

 
18,174

Research and development service revenue
 

 
2,238

Total
 

 
20,412


For the three months ended March 31, 2019, the Company recognized collaboration revenue of $20,412 related to its former collaboration with BMS. The Company recognized $18,174 of research and development reimbursement revenue for the three months ended March 31, 2019 for the clinical trials that Celgene had opted into. The $2,238 of research and development services revenue for the three months ended March 31, 2019, reflected the recognition of upfront consideration that was allocated to research and development services at the time of the collaboration and was recognized over the term of the respective clinical studies for the specified indications.
In-Licensing Arrangements
The Company has in-licensed the rights to develop, manufacture and, if approved, commercialize multiple development stage drug candidates and drug products globally or in specific territories. These arrangements typically include non-refundable, upfront payments, contingent obligations for potential development, regulatory and commercial performance milestone payments, cost sharing arrangements, royalty payments, and profit sharing.
Upfront and development milestones paid under these arrangements for the three months ended March 31, 2020 and 2019 are set forth below. All upfront and development milestones were expensed to research and development expense. There have been no regulatory or commercial milestones paid under these arrangements to date.
 
Three Months Ended
 
March 31,
 
2020
 
2019
Research and development payments to Collaboration Partners
$
 
$
Upfront payments
43,000

 
10,000

Milestone payments
5,000

 

Total
48,000

 
10,000


EUSA Pharma
On January 13, 2020, the Company entered into an exclusive development and commercialization agreement with EUSA Pharma ("EUSA") for the orphan biologic products SYLVANT® (siltuximab) and QARZIBA® (dinutuximab beta) in China. Under the terms of the agreement, EUSA granted the Company exclusive rights to SYLVANT in greater China and to QARZIBA in mainland China. Under the agreement, the Company will fund and undertake all clinical development and regulatory submissions in the territories, and will commercialize both products once approved. EUSA received a $40,000 upfront payment and will be eligible to receive payments upon the achievement of regulatory and commercial milestones up to a total of $160,000. EUSA will also be eligible to receive tiered royalties on future product sales. The upfront payment was expensed to research and development expense during the three months ended March 31, 2020 in accordance with the Company's acquired in-process research and development expense policy.
Other
In addition to the collaborations discussed above, the Company has entered into additional collaborative arrangements during the three months ended March 31, 2020 and 2019. The Company may be required to pay additional amounts upon the achievement of various development, regulatory and commercial milestones under these agreements. The Company may also incur significant research and development costs if the related product candidates advance to late-stage clinical trials. In addition, if any products related to these collaborations are approved for sale, the Company may be required to pay milestones and royalties on future sales. The payment of these amounts, however, is contingent upon the occurrence of various future events, which have a high degree of uncertainty of occurrence.

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4. Restricted Cash and Investments
Restricted Cash
The Company’s restricted cash balance of $2,717 as of March 31, 2020 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, 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
 
1,410,129

 
6,968

 

 
1,417,097

Total
 
1,410,129

 
6,968

 

 
1,417,097

 Short-term investments as of December 31, 2019 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
 
363,440

 
1,288

 

 
364,728

Total
 
363,440

 
1,288

 

 
364,728


As of March 31, 2020, 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, 2020.
Equity Method Investment
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. Upon conversion, the Company's ownership interest in the outstanding common stock of Leap is 13.4%. Inclusive of the shares of common stock issuable upon the exercise of the currently exercisable warrants, the Company's interest is approximately 23.7%. The Company determined that it has the ability to exercise significant influence over the operating and financial policies of Leap based on our ownership percentage and collaborative relationship, and the investment represents an equity method investment upon conversion. The Company elected to apply the fair value option to the equity method investment, and measure the investment in the common stock and warrants at fair value, with changes in fair value recorded to other income. The fair value of the common stock and warrants was $7,592 and $4,372, respectively, as of March 31, 2020. During the three months ended March 31, 2020, the Company recorded an unrealized gain of $6,964 in the statement of operations.
5. Inventories
The Company’s inventory balance consisted of the following:
 
 
As of
 
 
March 31,
 
December 31, 
 
 
2020
 
2019
 
 
$
 
$
Work in process
 
444

 

Finished goods
 
28,331

 
28,553

Total inventories
 
28,775

 
28,553



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6. Property, plant and equipment
Property, plant and equipment are recorded at cost and consisted of the following:
 
 
As of
 
 
March 31,
 
December 31, 
 
 
2020
 
2019
 
 
$
 
$
Laboratory equipment
 
49,059

 
47,154

Leasehold improvements
 
23,866

 
24,008

Building
 
107,992

 
109,514

Manufacturing equipment
 
65,123

 
62,775

Software, electronics and office equipment
 
14,688

 
14,705

Property, plant and equipment, at cost
 
260,728

 
258,156

Less accumulated depreciation
 
(43,375
)
 
(36,709
)
Construction in progress
 
22,978

 
20,955

Property, plant and equipment, net
 
240,331

 
242,402


 As of March 31, 2020 and December 31, 2019, construction in progress ("CIP") of $22,978 and $20,955, respectively, was primarily related to the buildout of additional capacity at the Guangzhou manufacturing facility. Subsequent phases of the Guangzhou factory buildout will continue to be recorded as CIP until they are placed into service.
Depreciation expense for the three months ended March 31, 2020 and 2019 was $7,467 and $3,085, respectively.
7. Guangzhou Biologics Business
Manufacturing legal entity structure
BeiGene (Shanghai) Co., Ltd. ("BeiGene Shanghai"), originally established as a wholly-owned subsidiary of BeiGene (Hong Kong) Co., Limited ("BeiGene HK"), and currently a wholly-owned subsidiary of BeiGene Biologics, as described below, provides clinical development services for BeiGene affiliates and is the clinical trial authorization ("CTA") holder and marketing authorization application ("MAA") holder for tislelizumab in China.
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.
In March 2017, 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 (see Note 12). 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.
In April 2017, BeiGene HK, GET and BeiGene Biologics amended the JV Agreement and the capital contribution agreement, among other things, to adjust the capital contribution schedules and adjust the initial term of the governing bodies and a certain management position. In the second quarter of 2017, BeiGene HK made cash capital contributions of RMB137,830 and RMB2,415, respectively, into BeiGene Biologics. The remainder of the cash capital contribution from BeiGene HK to BeiGene Biologics was paid in June 2019. In April 2017, GET made cash capital contributions of RMB100,000 into BeiGene Biologics, and BeiGene Biologics drew down the Shareholder Loan of RMB900,000 from GET (as further described in Note 12).
In the fourth quarter of 2017, BeiGene HK and BeiGene Biologics entered into an Equity Transfer Agreement to transfer 100% of the equity interest of BeiGene Shanghai to BeiGene Biologics, as required by the JV agreement, such that the CTA holder and MAA holder for tislelizumab in China was controlled by BeiGene Biologics. The transfer consideration for the purchased interests under this Equity Transfer Agreement is the fair value of the 100% equity of BeiGene Shanghai appraised

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by a qualified Chinese valuation firm under the laws of the PRC. Upon the transfer of equity in BeiGene Shanghai, BeiGene HK’s equity interest in BeiGene Shanghai became 95%. As of March 31, 2020, the Company and GET held 95% and 5% equity interests in BeiGene Biologics, respectively.
As of March 31, 2020, the Company had $83,126 of cash and cash equivalents and $1,961 of restricted cash held by BeiGene Biologics to be used to build the commercial-scale biologics facility and to fund research and development of the Company's biologics drug candidates in China.
Commercial distribution legal entity structure
BeiGene (Guangzhou) Co., Ltd. (“BGC”), a wholly-owned subsidiary of BeiGene HK, was organized on July 11, 2017. In September 2018, BGC acquired 100% of the equity interests of Baiji Shenzhou (Guangzhou) Pharmaceuticals Co., Ltd. (formerly known as Huajian Pharmaceuticals Co., Ltd.), which subsequently changed its name to BeiGene Pharmaceuticals (Guangzhou) Co., Ltd. (“BPG”). BPG owns drug distribution licenses necessary to distribute pharmaceutical products in China. The Company acquired these drug distribution licenses through the acquisition of BPG, which was accounted for as an asset acquisition, as it is difficult to obtain a newly issued domestic drug distribution license in China.
Commercial supply agreement and facility expansion
In January 2018, the Company entered into a commercial supply agreement with Boehringer Ingelheim Biopharmaceuticals (China) Ltd. (“Boehringer Ingelheim”) for tislelizumab, which is being manufactured at Boehringer Ingelheim’s facility in Shanghai, China as part of a Marketing Authorization Holder (“MAH”) project pioneered by the Company and Boehringer Ingelheim. Under the terms of the commercial supply agreement, Boehringer Ingelheim has agreed to manufacture tislelizumab in China under an exclusive multi-year arrangement, with contract extension possible. In addition, the Company obtained certain preferred rights for future capacity expansion by Boehringer Ingelheim in China.
In October 2018, the Company entered into a binding letter of intent ("LOI") with Boehringer Ingelheim to increase the amount of tislelizumab supplied under the agreement through the expansion of Boehringer Ingelheim's facility to add a second bioreactor production line. Under the terms of the binding LOI, the Company provided initial funding for the facility expansion and may make additional payments for contingency costs. This initial funding payment and any subsequent contingency payments will be credited against future purchases of tislelizumab over the term of the supply agreement.
The payment was recorded as a noncurrent asset since it is considered a long-term prepayment for future product costs that will provide future benefit to the Company through credits on purchases of tislelizumab from Boehringer Ingelheim over the life of the supply agreement.
8. Intangible Assets
Intangible assets as of March 31, 2020 and December 31, 2019 are summarized as follows:
 
 
As of
 
 
March 31, 2020
 
December 31, 2019
 
 
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

 
(1,937
)
 
5,563

 
7,500

 
(1,750
)
 
5,750

Trading license
 
816

 
(816
)
 

 
816

 
(720
)
 
96

Total finite-lived intangible assets
 
8,316

 
(2,753
)
 
5,563

 
8,316

 
(2,470
)
 
5,846


 Product distribution rights consist of distribution rights on the approved cancer therapies licensed from BMS, ABRAXANE, REVLIMID, and VIDAZA acquired as part of the BMS transaction 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.
Amortization expense of intangible assets for the three months ended March 31, 2020 and 2019 was $283 and $331, respectively.

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As of March 31, 2020, expected amortization expense for the unamortized finite-lived intangible assets is approximately $563 for the remainder of 2020, $750 in 2021, $750 in 2022, $750 in 2023, $750 in 2024, and $2,000 in 2025 and thereafter.
9. Income Taxes
Income tax expense was $1,554 and $519, respectively, for the three months ended March 31, 2020 and 2019. The income tax expense for the three months ended March 31, 2020 was primarily attributable to 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. The resulting current U.S. tax was reduced by windfall stock compensation deductions, research and development tax credits and other special tax deductions. The income tax expense for the three months ended March 31, 2019 was primarily attributable to income reported in the U.S. and certain China subsidiaries offset by U.S. research and development tax credits and other special tax deductions.
In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law on March 27, 2020. The CARES Act removes certain net operating loss deduction and carry-back limitations originally imposed by the Tax Cuts and Jobs Act of 2017. Specifically, the Company may now carry back net operating losses (NOLs) originating in 2018 and 2019 to 2017 and 2016, resulting in an increase to the Company's income tax receivable of $5,586 as of March 31, 2020. The enactment of the CARES Act did not have a material effect on our income tax expense.
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, 2020, 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 carry-forwards.
As of March 31, 2020, the Company had gross unrecognized tax benefits of $5,003. 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 $369 in the three months ended March 31, 2020 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, 2020 and December 31, 2019, 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, 2020, Australia tax matters are open to examination for the years 2013 through 2020, China tax matters are open to examination for the years 2014 through 2020, Switzerland tax matters are open to examination for the years 2017 through 2020, and U.S. federal tax matters are open to examination for years 2015 through 2020. Various U.S. states and other non-US tax jurisdictions in which the Company files tax returns remain open to examination for 2010 through 2020.
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, 2020 consists of the following activity:
 
 
Allowance for Credit Losses
 
 
$
Balance as of December 31, 2019
 

Current period provision for expected credit losses
 
2,022

Amounts written-off
 

Recoveries of amounts previously written-off
 

Balance as of March 31, 2020
 
2,022



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Prepaid expenses and other current assets consist of the following:
 
 
As of
 
 
March 31,
 
December 31, 
 
 
2020
 
2019
 
 
$
 
$
Prepaid research and development costs
 
75,867

 
69,715

Prepaid taxes
 
17,392

 
9,498

Other receivables
 
6,414

 

Interest receivable
 
5,941

 
1,932

Prepaid insurance
 
4,298

 

Prepaid manufacturing costs
 
3,525

 

Other
 
12,875

 
9,093

Total
 
126,312

 
90,238


Other non-current assets consist of the following:
 
 
As of
 
 
March 31,
 
December 31, 
 
 
2020
 
2019
 
 
$
 
$
Goodwill
 
109

 
109

Prepayment of property and equipment
 
20,421

 
10,289

Prepayment of facility capacity expansion activities (1)
 
25,963

 
24,881

Prepaid VAT
 
32,396

 
29,967

Rental deposits and other
 
3,397

 
3,209

Long-term investment (Note 4)
 
11,964

 

Total
 
94,250

 
68,455

(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 as further described in Note 7.
Accrued expenses and other payables consist of the following:
 
 
As of
 
 
March 31,
 
December 31, 
 
 
2020
 
2019
 
 
$
 
$
Compensation related
 
27,272

 
54,156

External research and development activities related
 
53,428

 
62,794

Development funding payable- Amgen
 
56,000

 

Commercial activities
 
18,522

 
25,645

Income tax and other taxes
 
11,944

 
9,648

Sales rebates and returns related
 
4,014

 
3,198

Professional fees and other
 
8,151

 
8,115

Total
 
179,331

 
163,556



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Other long-term liabilities consist of the following:
 
 
As of
 
 
March 31,
 
December 31, 
 
 
2020
 
2019
 
 
$