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BeiGene operates in a tremendously complex, highly regulated, and capital-intensive industry. Since launching, BeiGene has experienced rapid organic growth, resulting in a host of global banking and treasury inefficiencies:
Fragmented banking infrastructure and inefficient operational processes – with more than 100 bank accounts across 20+ banking relationships, BeiGene incurred excessive operating costs related to managing local banking relationships and know your customer (KYC) administrations.
Significant financing costs, regulatory hurdles, and sub-optimal deployment of capital – the capital-intensive nature of developing pharmaceutical drugs led to a high cash-burn rate as well as recurring financing costs associated with debt financings. Capital injection into emerging markets are subject to local regulations.
Volatility of capital expenditures and FX exposures – clinical studies and commercial business conducted in various markets across the world, leading to requirements in various local currencies.
Ongoing international expansion with limited global connectivity – continued efforts to expand into markets such as Europe and emerging markets require mobilisation of cash between global affiliates and subsidiaries in different regions to support capital injections and ongoing working capital needs.
Navigating the COVID-19 environment – travel restrictions implemented around the world impacted treasury operation, from executing and submitting banking documentation, to implementing a global cash management structure without causing a major disruption.
In March 2021, J.P. Morgan was tasked with implementing a regional cash management solution that leveraged a multi-entity, multicurrency notional pool (MEMCNP) in Hong Kong to centralise liquidity across 14 markets – six in Asia Pacific and another eight in Europe.
The solution will leverage the extensive experience and expertise of the bank in obtaining the regulatory approvals required from the People’s Bank of China (PBOC) and State Administration of Foreign Exchange (SAFE) to connect the domestic cash concentration structure in China to the notional pool in Hong Kong via an automated two-way cross border sweep.
Best practice and innovation
This structure makes BeiGene one of the first corporates in China to leverage the recently announced SAFE cross-border framework (Program 7) allowing companies to eliminate certain quotas and minimum number of onshore participating entities and relax lending/borrowing time horizons beyond one year. The solution will be further extended globally in the future via a ‘follow-the-sun’ mechanism, integrating the notional pool in Hong Kong with a regional liquidity structure based in Europe.
Accounts rationalised – estimated US$70,000 annualised cost savings with further potential cost savings in excess US$100,000.
Internal financing via the MEMCNP leading to estimated US$2.4m in annual cost savings.
Global transparent and preferential FX pricing for approximately US$700m, further reducing estimated conversion costs by over US$1m.
Trapped cash reduced.
Streamlined operational efficiencies.
Improved visibility and control.
“The solution has helped streamline our cash management within the region and connect with our global operations in a more efficient and effective way, resulting in a treasury function with best in class standards. The solution marks the start of our global treasury reinvention and serves as a foundation for our ambitions to set up a global cash pool and in-house banking structure,” says Cecilia Li, Global Treasury Director.