10-Q 1 agio-20220331.htm 10-Q agio-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-36014
AGIOS PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware26-0662915
(State or Other Jurisdiction of
 Incorporation or Organization)
(I.R.S. Employer
 Identification No.)
88 Sidney Street, Cambridge, Massachusetts
02139
(Address of Principal Executive Offices)(Zip Code)
(617649-8600
(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, Par Value $0.001 per shareAGIONasdaq Global Select Market
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 filerAccelerated 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    ☒
Number of shares of the registrant’s Common Stock, $0.001 par value, outstanding on April 29, 2022: 54,788,927


AGIOS PHARMACEUTICALS, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2022
TABLE OF CONTENTS
 
Page
No.
Item 1.
Item 2.
Item 3.
Item 4.
Item 1A.
Item 6.



PART I. FINANCIAL INFORMATION
Item 1.        Financial Statements (Unaudited)
AGIOS PHARMACEUTICALS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share and per share data)
March 31,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$80,026 $203,126 
Marketable securities843,503 816,892 
Accounts receivable, net540  
Other receivable5,365 4,378 
Inventory 2,485  
Prepaid expenses and other current assets43,226 39,835 
Total current assets975,145 1,064,231 
Marketable securities255,836 266,375 
Operating lease assets72,688 75,124 
Property and equipment, net29,195 28,923 
Financing lease assets95 183 
Other non-current assets2,900 2,900 
Total assets$1,335,859 $1,437,736 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$11,551 $16,700 
Accrued expenses19,747 31,967 
Operating lease liabilities11,744 10,828 
Financing lease liabilities250 331 
Deferred revenue2,500  
Total current liabilities45,792 59,826 
Operating lease liabilities, net of current portion82,338 85,659 
Financing lease liabilities, net of current portion276 276 
Total liabilities128,406 145,761 
Stockholders’ equity:
Preferred stock, $0.001 par value; 25,000,000 shares authorized; no shares issued or outstanding at March 31, 2022 and December 31, 2021
  
Common stock, $0.001 par value; 125,000,000 shares authorized; 70,993,277 shares issued and 54,776,467 shares outstanding at March 31, 2022, and 70,550,631 shares issued and 54,334,220 shares outstanding at December 31, 2021
71 71 
Additional paid-in capital2,351,147 2,334,348 
Accumulated other comprehensive loss(7,745)(1,198)
Treasury stock, at cost (16,216,411 shares at March 31, 2022 and December 31, 2021)
(802,486)(802,486)
Accumulated deficit(333,534)(238,760)
Total stockholders’ equity1,207,453 1,291,975 
Total liabilities and stockholders’ equity$1,335,859 $1,437,736 
See accompanying Notes to Condensed Consolidated Financial Statements.
1

AGIOS PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended March 31,
(In thousands, except share and per share data)
20222021
Revenues:
Product revenue, net$832 $ 
Total revenue832  
Cost and expenses:
Cost of sales$339 $ 
Research and development70,123 57,667 
Selling, general and administrative31,515 33,550 
Total cost and expenses101,977 91,217 
Loss from operations(101,145)(91,217)
Royalty income from gain on sale of oncology business 2,704  
Interest income, net694 340 
Other income, net2,973  
Net loss from continuing operations(94,774)(90,877)
Net income from discontinued operations, net of tax 1,965,202 
Net (loss) income$(94,774)$1,874,325 
Net loss from continuing operations per share - basic and diluted$(1.74)$(1.31)
Net income from discontinued operations per share - basic and diluted$ $28.26 
Net (loss) income per share - basic and diluted$(1.74)$26.95 
Weighted-average number of common shares used in computing net loss per share from continuing operations, net income from discontinued operations and net (loss) income per share – basic and diluted54,555,467 69,543,510 

See accompanying Notes to Condensed Consolidated Financial Statements.
2

AGIOS PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(Unaudited)

Three Months Ended March 31,
(In thousands)
20222021
Net (loss) income$(94,774)$1,874,325 
Other comprehensive (loss) income
Unrealized loss on available-for-sale securities(6,547)(108)
Comprehensive (loss) income$(101,321)$1,874,217 

See accompanying Notes to Condensed Consolidated Financial Statements.

3

AGIOS PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
(Loss) Income
Accumulated
Deficit
TreasuryTotal
Stockholders’
Equity
(in thousands, except share amounts)SharesAmountSharesAmount
Balance at December 31, 202170,550,631 $71 $2,334,348 $(1,198)$(238,760)(16,216,411)$(802,486)$1,291,975 
Common stock issued under stock incentive plan and ESPP442,646 — 1,289 — — — — 1,289 
Stock-based compensation expense— — 15,510 — — — — 15,510 
Other comprehensive loss— — — (6,547)— — — (6,547)
Net loss— — — — (94,774)— — (94,774)
Balance at March 31, 202270,993,277 $71 $2,351,147 $(7,745)$(333,534)(16,216,411)$(802,486)$1,207,453 

Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
(Loss) Income
Accumulated
Deficit
Total
Stockholders’
Equity
(in thousands, except share amounts)SharesAmount
Balance at December 31, 202069,293,920 $69 $2,242,801 $105 $(1,843,475)$399,500 
Common stock issued under stock incentive plan and ESPP518,285 1 7,346 — — 7,347 
Stock-based compensation expense— — 14,854 — — 14,854 
Other comprehensive loss— — — (108)— (108)
Net income— — — — 1,874,325 1,874,325 
Disposition of oncology business— — 712 — — 712 
Balance at March 31, 202169,812,205 $70 $2,265,713 $(3)$30,850 $2,296,630 

See accompanying Notes to Condensed Consolidated Financial Statements.
4

AGIOS PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
(In thousands)20222021
Operating activities
Net (loss) income$(94,774)$1,874,325 
Less: Net income from discontinued operations 1,965,202 
Net loss from continuing operations(94,774)(90,877)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
Depreciation and amortization2,478 2,479 
Stock-based compensation expense15,510 14,854 
Net amortization of premium (accretion of discount) on marketable securities1,150 1,664 
Non-cash operating lease expense2,436 2,417 
Changes in operating assets and liabilities:
Accounts receivable, net(540) 
Inventory(2,485) 
Other receivables(987) 
Prepaid expenses and other current and non-current assets(3,391)(3,621)
Accounts payable(5,007)(2,941)
Accrued expenses and other current liabilities(12,220)(12,697)
Deferred revenue2,500  
Operating lease liabilities(2,405)(1,504)
Net cash used in operating activities - continuing operations(97,735)(90,226)
Net cash used in operating activities - discontinued operations (30,523)
Net cash used in operating activities(97,735)(120,749)
Investing activities
Purchases of marketable securities(355,916)(61,863)
Proceeds from maturities and sales of marketable securities332,147 134,016 
Purchases of property and equipment(2,804)(1,012)
Net cash (used in) provided by investing activities - continuing operations(26,573)71,141 
Net cash provided by investing activities - discontinued operations 1,802,936 
Net cash (used in) provided by investing activities(26,573)1,874,077 
Financing activities
Payments on financing lease obligations(81)(86)
Net proceeds from stock option exercises and employee stock purchase plan1,289 7,347 
Net cash provided by financing activities - continuing operations1,208 7,261 
Net cash provided by financing activities - discontinued operations  
Net cash provided by financing activities1,208 7,261 
Net change in cash and cash equivalents(123,100)1,760,589 
Cash and cash equivalents at beginning of the period203,126 127,436 
Cash and cash equivalents at end of the period$80,026 $1,888,025 
Supplemental disclosure of non-cash investing and financing transactions
5

Additions to property and equipment in accounts payable and accrued expenses$1,536 $6 
Cash taxes paid$1,842 $ 

See accompanying Notes to Condensed Consolidated Financial Statements.
6

AGIOS PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Overview and Basis of Presentation
References to Agios
Throughout this Quarterly Report on Form 10-Q, “we,” “us,” and “our,” and similar expressions, except where the context requires otherwise, refer to Agios Pharmaceuticals, Inc. and its consolidated subsidiaries, and “our Board of Directors” refers to the board of directors of Agios Pharmaceuticals, Inc.
Overview
We are a biopharmaceutical company committed to transforming patients’ lives through scientific leadership in the field of cellular metabolism and adjacent areas of biology, with the goal of creating differentiated, small molecule medicines for genetically defined diseases, or GDDs. We take a systems biology approach to deeply understand disease states, drive the discovery and validation of novel therapeutic targets, and define patient selection strategies, thereby increasing the probability that our experimental medicines will have the desired therapeutic effect, while cultivating connections with patient communities, healthcare professionals, partners and colleagues to discover, develop and deliver potential therapies for GDDs. We are located in Cambridge, Massachusetts.

The lead product candidate in our GDD portfolio, PYRUKYND® (mitapivat), is an activator of both wild-type and mutant pyruvate kinase, or PK, enzymes for the potential treatment of hemolytic anemias. On February 17, 2022, the U.S. Food and Drug Administration, or FDA, approved PYRUKYND® for the treatment of hemolytic anemia in adults with pyruvate kinase (PK) deficiency in the United States. In June 2021, we submitted a marketing authorization application, or MAA, to the European Medicines Agency, or EMA, for the treatment of adults with PK deficiency in the European Union. The MAA has passed validation, and the regulatory review process is ongoing. In addition, we are currently evaluating PYRUKYND® for the treatment of thalassemia and sickle cell disease, or SCD, in clinical trials. We are also developing AG-946, a novel, next-generation PKR activator, for the potential treatment of hemolytic anemias and other indications.

In addition to the aforementioned development programs, we foster a productive research engine and are seeking to advance multiple novel, investigational therapies in clinical and preclinical development in our focus area of GDDs, based on our scientific leadership in the field of cellular metabolism and adjacent areas of biology.

We are subject to risks common to companies in our industry including, but not limited to, uncertainties relating to conducting clinical research and development, the manufacture and supply of products for clinical and commercial use, obtaining and maintaining regulatory approvals and pricing and reimbursement for our products, market acceptance, managing global growth and operating expenses, availability of additional capital, competition, obtaining and enforcing patents, stock price volatility, dependence on collaborative relationships and third-party service providers, dependence on key personnel, potential litigation, product liability claims and government investigations.

Sale of our Oncology Business to Servier
On March 31, 2021, we completed the sale of our oncology business to Servier Pharmaceuticals, LLC, or Servier, which represented a discontinued operation. The transaction included the sale of our oncology business, including TIBSOVO®, our clinical-stage product candidates vorasidenib, AG-270 and AG-636, and our oncology research programs for a payment of approximately $1.8 billion in cash at the closing, subject to certain adjustments, and a payment of $200 million in cash, if, prior to January 1, 2027, vorasidenib is granted new drug application, or NDA, approval from the FDA with an approved label that permits vorasidenib’s use as a single agent for the adjuvant treatment of patients with Grade 2 glioma that have an isocitrate dehydrogenase 1 or 2 mutation (and, to the extent required by such approval, the vorasidenib companion diagnostic test is granted an FDA premarket approval), as well as a royalty of 5% of U.S. net sales of TIBSOVO® from the close of the transaction through loss of exclusivity, and a royalty of 15% of U.S. net sales of vorasidenib from the first commercial sale of vorasidenib through loss of exclusivity. Servier also acquired our co-commercialization rights for Bristol Myers Squibb’s IDHIFA® and the right to receive a $25.0 million potential milestone payment under our prior collaboration agreement with Celgene Corporation, and following the sale Servier will conduct certain clinical development activities within the IDHIFA® development program.
7

We recorded income from royalties of approximately $2.7 million on U.S. net sales of TIBSOVO® by Servier in the royalty income from gain on sale of oncology business line item within the condensed consolidated statements of operations, for the three months ended March 31, 2022.
Basis of presentation
The condensed consolidated balance sheet as of March 31, 2022, the condensed consolidated statements of operations, comprehensive (loss) income and stockholders' equity for the three months ended March 31, 2022 and 2021, and the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 are unaudited. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of our management, reflect all adjustments, which include only normal recurring adjustments, necessary to fairly state our financial position as of March 31, 2022, our results of operations and stockholders' equity for the three months ended March 31, 2022 and 2021, and cash flows for the three months ended March 31, 2022 and 2021. The financial data and the other financial information disclosed in these notes to the condensed consolidated financial statements related to the three-month periods are also unaudited. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other future annual or interim period. The condensed consolidated balance sheet data as of December 31, 2021 was derived from our audited financial statements, but does not include all disclosures required by U.S. generally accepted accounting principles, or U.S. GAAP. The condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021 that was filed with the Securities and Exchange Commission, or the SEC, on February 24, 2022.
Our condensed consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared in conformity with U.S. GAAP.
Reclassifications
Certain amounts in prior periods have been reclassified to reflect the impact of the discontinued operations treatment of the oncology business in order to conform to the current period presentation.
Use of estimates
The preparation of our condensed consolidated financial statements requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments and methodologies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including expenses, reserves and allowances, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and any variant strains of the virus and the actions taken to contain the pandemic or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. We have made estimates of the impact of COVID-19 within our financial statements and there may be changes to those estimates in future periods. Actual results may differ from these estimates.
Liquidity
On March 31, 2021, we completed the sale of our oncology business to Servier, and received approximately $1.8 billion in cash at closing. In connection with the sale, on March 25, 2021, we announced that our Board of Directors authorized the repurchase of up to $1.2 billion of our outstanding shares of common stock, or the Repurchase Program, using the proceeds from the sale of our oncology business to Servier. On March 31, 2021, in connection with the Repurchase Program, we entered into a definitive share repurchase agreement with Bristol-Myers Squibb Company, or BMS, to repurchase 7.1 million shares of our common stock held by certain subsidiaries of BMS for an aggregate purchase price of $344.5 million, or $48.38 per share. This repurchase was completed on April 5, 2021. Further, on April 2, 2021, in connection with the Repurchase Program, we entered into a Rule 10b5-1 repurchase plan pursuant to which we could repurchase up to $600.0 million of shares of our common stock. On October 5, 2021, we terminated our Rule 10b5-1 share repurchase program and on October 13, 2021 we entered into a Rule 10b-18 repurchase plan that allows us to conduct open market repurchases over time up to our remaining authorization. As of December 31, 2021 and March 31 2022, we repurchased approximately 9.1 million shares of common stock for $458.0 million, or $50.35 per share, under the Rule 10b5-1 repurchase plan. As of March 31, 2022, we have not repurchased any shares under the Rule 10b-18 repurchase plan. In total, as of December 31, 2021, we repurchased 16.2 million shares of common stock for $802.5 million, or $49.49 per share, under the Repurchase Program. We have paused our share repurchases for the foreseeable future.
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As of March 31, 2022, we had cash, cash equivalents and marketable securities of $1.2 billion. Although we have incurred recurring losses and expect to continue to incur losses for the foreseeable future, we expect our cash, cash equivalents and marketable securities will be sufficient to fund current operations for at least the next twelve months from the issuance date of these financial statements.
2. Summary of Significant Accounting Policies
Accounts receivable, net

Our trade accounts receivable arise from product sales and represent amounts due from specialty distributors and specialty pharmacy providers in the U.S. We monitor the financial performance and creditworthiness of our customers so that we can properly assess and respond to changes in their credit profile. We reserve against these receivables for estimated losses that may arise from a customer’s inability to pay. Amounts determined to be uncollectible are charged or written-off against the reserve.

Inventory

Inventory is stated at the lower of cost or estimated net realizable value on a first-in, first-out basis. Prior to the regulatory approval of our product candidates, we incur expenses for the manufacture of drug product that could potentially be available to support the commercial launch of those products. Until the date at which regulatory approval has been received or is otherwise considered probable, we record all such costs as research and development expenses. Upon approval of our wholly owned product, PYRUKYND®, by the FDA on February 17, 2022 for the treatment of hemolytic anemia in adults with PK deficiency in the United States, we began to capitalize inventories of PYRUKYND®.

Revenue recognition

Under Accounting Standards Codification 606, Revenue from Contracts with Customers, or ASC 606, revenue is recognized when the customer obtains control of promised goods or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that have been determined to be within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.

This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.

Once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and assess whether each promised good or service is distinct. We will then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Product Revenue

We generate product revenue from sales of PYRUKYND® to a limited number of specialty distributors and specialty pharmacy providers, or collectively, the Customers. The Customers subsequently resell PYRUKYND® to pharmacies or dispense directly to patients. In addition to distribution agreements with Customers, we enter into arrangements with healthcare providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of PYRUKYND®.

The performance obligation related to the sale of PYRUKYND® is satisfied and revenue is recognized when the Customer obtains control of the product, which occurs at a point in time, typically upon delivery to the Customer.

Revenues from product sales are recorded at the net sales price, or transaction price, which includes estimates of variable consideration for which reserves are established and result from contractual adjustments, government rebates, returns and other allowances that are offered within the contracts with our Customers, healthcare providers, payors and other indirect customers relating to the sale of our products.
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Contractual Adjustments. We generally provide Customers with discounts, including prompt pay discounts, and allowances that are explicitly stated in the contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, we receive sales order management, data and distribution services from certain Customers.

Chargebacks and discounts represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from us. Customers charge us for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These reserves are estimated using the expected value method, based upon a range of possible outcomes that are probability-weighted for the estimated channel mix and are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue.

Government Rebates. Government rebates include Medicare, TriCare, and Medicaid rebates, which we estimate using the expected value method, based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue. For Medicare, we also estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program.

Returns. We estimate the amount of product sales that may be returned by Customers and record this estimate as a reduction of revenue in the period the related product revenue is recognized. We currently estimate product return liabilities using the expected value method, based on available industry data, including our visibility into the inventory remaining in the distribution channel.
Cost of sales
Cost of sales consists primarily of manufacturing costs of PYRUKYND®. Based on our policy to expense costs associated with the manufacturing of our products prior to regulatory approval, certain of the manufacturing costs associated with product shipments of PYRUKYND® recorded during the three months ended March 31, 2022 were expensed prior to February 17, 2022 and, therefore, are not included in costs of sales during the three months ended March 31, 2022.

There have been no other material changes to the significant accounting policies previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.
Recent accounting pronouncements
Other accounting standards that have been issued by the Financial Accounting Standards Board or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.
3. Fair Value Measurements
We record cash equivalents and marketable securities at fair value. ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, directly or indirectly, for substantially the full term of the asset or liability.
Level 3 – Unobservable inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.
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The following table summarizes our cash equivalents and marketable securities measured at fair value and by level on a recurring basis as of March 31, 2022:
(In thousands)Level 1Level 2Level 3Total
Cash equivalents$8,092 $57,989 $ $66,081 
Total cash equivalents8,092 57,989  66,081 
Marketable securities:
U.S. Treasuries 272,760  272,760 
Government securities 170,626  170,626 
Corporate debt securities 655,953  655,953 
Total marketable securities 1,099,339  1,099,339 
Total cash equivalents and marketable securities$8,092 $1,157,328 $ $1,165,420 
Cash equivalents and marketable securities have been initially valued at the transaction price and subsequently, at the end of each reporting period, valued utilizing third-party pricing services or other observable market data. The pricing services utilize industry standard valuation models, including both income and market-based approaches, and observable market inputs to determine value. After completing our validation procedures, we did not adjust or override any fair value measurements provided by the pricing services as of March 31, 2022.
There have been no changes to the valuation methods during the three months ended March 31, 2022, and we had no financial assets or liabilities that were classified as Level 3 at any point during the three months ended March 31, 2022.
4. Marketable Securities
Our marketable securities are classified as available-for-sale pursuant to ASC 320, Investments – Debt and Equity Securities, and are recorded at fair value. Unrealized gains are included as a component of accumulated other comprehensive loss in the condensed consolidated balance sheets and statements of stockholders’ equity and a component of total comprehensive loss in the condensed consolidated statements of comprehensive (loss) income, until realized. Unrealized losses are evaluated for impairment under ASC 326, Financial Instruments - Credit Losses, to determine if the impairment is credit-related or noncredit-related. Credit-related impairment is recognized as an allowance on the condensed consolidated balance sheets with a corresponding adjustment to earnings, and noncredit-related impairment is recognized in other comprehensive income, net of taxes. Realized gains and losses are included in investment income on a specific-identification basis. There were no material realized gains or losses on marketable securities for the three months ended March 31, 2022 or 2021.
Marketable securities at March 31, 2022 consisted of the following:
(In thousands)Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Current:
U.S. Treasuries$243,892 $14 $(352)$243,554 
Government securities24,753  (164)24,589 
Corporate debt securities577,541 1 (2,182)575,360 
Total Current846,186 15 (2,698)843,503 
Non-current:
U.S. Treasuries29,695  (489)29,206 
Government securities149,378  (3,341)146,037 
Corporate debt securities81,825  (1,232)80,593 
Total Non-current260,898  (5,062)255,836 
Total marketable securities$1,107,084 $15 $(7,760)$1,099,339 
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Marketable securities at December 31, 2021 consisted of the following:
(In thousands)Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Current:
U.S. Treasuries$269,109 $ $(36)$269,073 
Government securities17,764 1 (10)17,755 
Corporate debt securities530,490 3 (429)530,064 
Total Current817,363 4 (475)816,892 
Non-current:
U.S. Treasuries40,607  (23)40,584 
Government securities148,820  (470)148,350 
Corporate debt securities77,675  (234)77,441 
Total Non-current267,102  (727)266,375 
Total marketable securities$1,084,465 $4 $(1,202)$1,083,267 
As of March 31, 2022 and December 31, 2021, we held both current and non-current investments. Investments classified as current have maturities of less than one year. Investments classified as non-current are those that: (i) have a maturity of greater than one year, and (ii) we do not intend to liquidate within the next twelve months, although these funds are available for use and, therefore, are classified as available-for-sale.
As of March 31, 2022 and December 31, 2021, we held 307 and 294 debt securities, respectively, that were in an unrealized loss position for less than one year. We did not record an allowance for credit losses as of March 31, 2022 and December 31, 2021 related to these securities. The aggregate fair value of debt securities in an unrealized loss position at March 31, 2022 and December 31, 2021 was $1,066.8 million and $950.5 million, respectively. There were no individual securities that were in a significant unrealized loss position as of March 31, 2022 and December 31, 2021. We regularly review the securities in an unrealized loss position and evaluate the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions. We do not consider these marketable securities to be impaired as of March 31, 2022 and December 31, 2021.
5. Inventory
Inventory, which consists of commercial supply of PYRUKYND®, consisted of the following:
(In thousands)March 31,
2022
December 31,
2021
Raw materials$ $ 
Work-in-process2,185  
Finished goods300  
Total inventory$2,485 $ 
6. Leases
Our building leases are comprised of office and laboratory space under non-cancelable operating leases. These lease agreements have remaining lease terms of six years and contain various clauses for renewal at our option. The renewal options were not included in the calculation of the operating lease assets and the operating lease liabilities as the renewal options are not reasonably certain of being exercised. The lease agreements do not contain residual value guarantees.
The components of lease expense and other information related to leases were as follows:
Three Months Ended
March 31,
(In millions)20222021
Operating lease costs$3.8 $3.8 
Cash paid for amounts included in the measurement of operating lease liabilities$3.8 $3.6 
We have not entered into any material short-term leases or financing leases as of March 31, 2022.
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In arriving at the operating lease liabilities as of March 31, 2022 and December 31, 2021, we applied the weighted-average incremental borrowing rate of 5.7% for both periods over a weighted-average remaining lease term of 5.9 years and 6.2 years, respectively.
As of March 31, 2022, undiscounted minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter were as follows:
(In thousands)
Remaining 2022$11,784 
202318,126 
202418,660 
202519,507 
202620,151 
202720,755 
Thereafter3,479 
Undiscounted minimum rental commitments$112,462 
Interest(18,380)
Operating lease liabilities$94,082 
We provided our landlord a standby letter of credit of $2.9 million as security for our leases. We are not required to maintain any cash collateral for the standby letter of credit.
In August 2021, we entered into a long-term sublease agreement for 13,000 square feet of the office space at 38 Sidney Street Cambridge, Massachusetts. The term of the lease runs until December 2024. We recorded operating sublease income of $0.4 million for the three months ended March 31, 2022 in other income, net in the condensed consolidated statements of operations.

As of March 31, 2022, the future minimum lease payments to be received under the long-term sublease agreement were as follows:
(In thousands)
Remaining 2022$842 
20231,152
20241,186
Total$3,180 
7. Accrued Expenses
Accrued expenses consisted of the following:
(In thousands)March 31,
2022
December 31,
2021
Accrued compensation$5,387 $19,818 
Accrued research and development costs8,626 5,980 
Accrued professional fees1,952 2,335 
Accrued other3,782 3,834 
Total accrued expenses$19,747 $31,967 

8. Product Revenue
We sell PYRUKYND®, our wholly owned product, to the Customers. The Customers subsequently resell PYRUKYND® to pharmacies or dispense directly to patients. In addition to distribution agreements with Customers, we enter into arrangements with healthcare providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of PYRUKYND®.
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The performance obligation related to the sale of PYRUKYND® is satisfied and revenue is recognized when the Customer obtains control of the product, which occurs at a point in time, typically upon delivery to the Customer.
Product revenue, net, were as follows:
Three Months Ended March 31,
(In thousands)20222021
Product revenue, net$832 $ 
Reserves for Variable Consideration
Revenues from product sales are recorded at the net sales price, or transaction price, which includes estimates of variable consideration for which reserves are established and result from contractual adjustments, government rebates, returns and other allowances that are offered within the contracts with our Customers, healthcare providers, payors and other indirect customers relating to the sale of our products.
Contractual Adjustments
We generally provide Customers with discounts, including prompt pay discounts, and allowances that are explicitly stated in the contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, we receive sales order management, data and distribution services from certain Customers.
Chargebacks for fees and discounts represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from us. Customers charge us for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These reserves are estimated using the expected value method, based upon a range of possible outcomes that are probability-weighted for the estimated channel mix and are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue.
Government Rebates
Government rebates include Medicare, TriCare, and Medicaid rebates, which we estimate using the expected value method, based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue. For Medicare, we also estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program.
Returns
We estimate the amount of product sales that may be returned by Customers and record this estimate as a reduction of revenue in the period the related product revenue is recognized. We currently estimate product return liabilities using the expected value method, based on available industry data, including our visibility into the inventory remaining in the distribution channel.
The following table summarizes balances and activity in each of the product revenue allowance and reserve categories for the three months ended March 31, 2022:
(In thousands)Contractual AdjustmentsGovernment RebatesReturnsTotal
Balance at December 31, 2021$ $ $ $ 
Current provisions relating to sales in the current year37 56 9 102 
Adjustments relating to prior years    
Payments/returns relating to sales in the current year(11)  (11)
Payments/returns relating to sales in the prior years    
Balance at March 31, 2022$26 $56 $9 $91 
Total revenue-related reserves above, included in our condensed consolidated balance sheets, are summarized as follows:
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(In thousands)March 31, 2022December 31, 2021
Reduction of accounts receivable$17 $ 
Component of accrued expenses 74  
Total revenue-related reserves$91 $ 
The following table presents changes in our contract assets during the three months ended March 31, 2022:
(In thousands)December 31, 2021AdditionsDeductionsMarch 31, 2022
Contract assets(1)
Accounts receivable, net$ $934 $(394)$540 
(1) Additions to contract assets relate to amounts billed to Customers for product sales and deductions to contract assets primarily relate to collection of receivables during the reporting period.
9. Share-Based Payments
2013 Stock Incentive Plan
In June 2013, our Board of Directors adopted and, in July 2013 our stockholders approved, the 2013 Stock Incentive Plan, or the 2013 Plan. The 2013 Plan became effective upon the closing of our initial public offering and provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, or RSUs, performance-based share units, or PSUs, and other stock-based awards to employees, non-employees and non-employee directors. Following the adoption of the 2013 Plan, we granted no further stock options or other awards under the 2007 Stock Incentive Plan, or the 2007 Plan. Any options or awards outstanding under the 2007 Plan at the time of adoption of the 2013 Plan remain outstanding and effective. As of March 31, 2022, the total number of shares reserved under the 2007 Plan and the 2013 Plan was 13,027,919, and we had 6,142,929 shares available for future issuance under the 2013 Plan.
Stock options
The following table presents stock option activity for the three months ended March 31, 2022:
Number of
Stock Options
Weighted-Average
Exercise Price
Outstanding at December 31, 20214,798,826 $58.51 
Granted647,713 32.23 
Exercised(3,250)4.92 
Forfeited/Expired(168,145)68.62 
Outstanding at March 31, 20225,275,144 $55.02 
Exercisable at March 31, 20223,494,909 $59.81 
Vested and expected to vest at March 31, 20225,275,144 $55.02 
At March 31, 2022, there was approximately $44.0 million of total unrecognized compensation expense related to unvested stock option awards, which we expect to recognize over a weighted-average period of approximately 2.6 years.
Restricted stock units
The following table presents RSU activity for the three months ended March 31, 2022:
Number of
Stock Units
Weighted-Average
Grant Date Fair 
Value
Unvested shares at December 31, 20211,002,924 $51.51 
Granted634,232 32.75 
Vested(337,463)53.98 
Forfeited(16,156)46.26 
Unvested shares at March 31, 20221,283,537 $41.70 
As of March 31, 2022, there was approximately $43.4 million of total unrecognized compensation expense related to RSUs, which we expect to recognize over a weighted-average period of approximately 2.1 years.
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Performance-based stock units
The following table presents PSU activity for the three months ended March 31, 2022:
Number of
Stock Units
Weighted-Average
Grant Date Fair 
Value
Unvested shares at December 31, 2021234,059 $54.28 
Granted108,500 32.44 
Vested(53,777)54.28 
Forfeited(5,168)61.93 
Unvested shares at March 31, 2022283,614 $45.78 
Stock-based compensation expense associated with these PSUs is recognized if the underlying performance condition is considered probable of achievement using our management’s best estimates.
As of March 31, 2022, there was no unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered probable of achievement, and $13.0 million of total unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered not probable of achievement.
Market-based stock units
The following table presents market-based stock unit, or MSU, activity for the three months ended March 31, 2022:
Number of
Stock Units
Weighted-Average
Grant Date Fair
Value
Unvested shares at December 31, 202142,695 $41.50 
Granted  
Unvested shares at March 31, 202242,695 $41.50 
The fair value of MSUs are estimated using a Monte Carlo simulation model. Assumptions and estimates utilized in the model include the risk-free interest rate, dividend yield, expected stock volatility and the estimated period to achievement of the market condition. As of March 31, 2022, there was no remaining unrecognized compensation expense related to MSUs.
2013 Employee Stock Purchase Plan
In June 2013, our Board of Directors adopted, and in July 2013 our stockholders approved, the 2013 Employee Stock Purchase Plan, or the 2013 ESPP. We issued and sold 48,156 and 59,401 shares of common stock during the three months ended March 31, 2022 and 2021, respectively, under the 2013 ESPP. The 2013 ESPP provides participating employees with the opportunity to purchase up to an aggregate of 1,854,545 shares of our common stock. As of March 31, 2022, we had 1,346,491 shares of common stock available for future issuance under the 2013 ESPP.
Stock-based compensation expense
Stock-based compensation expense by award type included within the condensed consolidated statements of operations is as follows:
Three Months Ended
March 31,
(In thousands)20222021
Stock options$6,201 $8,396 
Restricted stock units6,165 6,205 
Performance-based stock units2,919  
Employee stock purchase plan225 253 
Other stock awards  
Total stock-based compensation expense$15,510 $14,854 
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Expenses related to stock options and stock-based awards were allocated as follows in the condensed consolidated statements of operations:
Three Months Ended
March 31,
(In thousands)20222021
Research and development expense$6,656 $6,973 
Selling, general and administrative expense8,854 7,881 
Total stock-based compensation expense$15,510 $14,854 

10. Loss per Share
Basic net loss per share is calculated by dividing net loss by the weighted-average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting the weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury stock method. For purposes of the dilutive net loss per share calculation, stock options, RSUs, PSUs and MSUs for which the performance and market vesting conditions, respectively, have been deemed probable, and 2013 ESPP shares are considered to be common stock equivalents, while PSUs and MSUs with performance and market vesting conditions, respectively, that were not deemed probable as of March 31, 2022 are not considered to be common stock equivalents.
We utilize the control number concept in the computation of diluted earnings per share to determine whether potential common stock equivalents are dilutive. The control number used is loss from continuing operations. The control number concept requires that the same number of potentially dilutive securities applied in computing diluted earnings per share from continuing operations be applied to all other categories of income or loss, regardless of their anti-dilutive effect on such categories. Since we had a net loss for continuing operations for all periods presented, no dilutive effect has been recognized in the calculation of income from discontinued operations per share. Basic and diluted net loss per share was the same for all periods presented.
The following common stock equivalents were excluded from the calculation of diluted net loss per share applicable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
Three Months Ended March 31,
20222021
Stock options5,275,144 6,181,953 
Restricted stock units1,283,537 1,263,094 
Performance-based stock units  
Employee stock purchase plan shares12,472 7,384 
Total common stock equivalents6,571,153 7,452,431 

11. Income Taxes
We recorded no provision for income taxes for the three months ended March 31, 2022 and $12.9 million income tax provision for the three months ended March 31, 2021. The tax provision for the three months ended March 31, 2021 has been recorded within discontinued operations as it relates to the income tax impact on the sale of its oncology business to Servier. There is no income tax expense recorded in continuing operations for the three months ended March 31, 2022 and 2021, respectively.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking Information
The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021, and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 24, 2022. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, forecasts and projections, and the beliefs and assumptions of our management, and include, without limitation, statements with respect to our expectations regarding our research, development and commercialization plans and prospects, results of operations, selling, general and administrative expenses, research and development expenses, the sufficiency of our cash for future operations and business activity disruption due to the COVID-19 pandemic. Words such as “anticipate,” “believe,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “predict,” “project,” “strategy,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “vision” and similar statements or variation of these terms or the negative of those terms and similar expressions are intended to identify these forward-looking statements. Readers are cautioned that these forward-looking statements are predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by our forward-looking statements are those discussed under the heading “Risk Factors” in Part II, Item 1A and elsewhere in this report, and in our Annual Report on Form 10-K for the year ended December 31, 2021. We undertake no obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.
Overview
We are a biopharmaceutical company committed to transforming patients’ lives through scientific leadership in the field of cellular metabolism and adjacent areas of biology, with the goal of creating differentiated, small molecule medicines for genetically defined diseases, or GDDs. We take a systems biology approach to deeply understand disease states, drive the discovery and validation of novel therapeutic targets, and define patient selection strategies, thereby increasing the probability that our experimental medicines will have the desired therapeutic effect, while cultivating connections with patient communities, healthcare professionals, partners and colleagues to discover, develop and deliver potential therapies for GDDs.
The lead product candidate in our GDD portfolio, PYRUKYND® (mitapivat), is an activator of both wild-type and mutant pyruvate kinase, or PK, enzymes for the potential treatment of hemolytic anemias. On February 17, 2022, the FDA approved PYRUKYND® for the treatment of hemolytic anemia in adults with pyruvate kinase (PK) deficiency in the United States. In June 2021, we submitted a marketing authorization application, or MAA, to the European Medicines Agency, or EMA, for PYRUKYND® for the treatment of adults with PK deficiency in the European Union. The MAA has passed validation, and the regulatory review process is ongoing. In addition, we are currently evaluating PYRUKYND® for the treatment of thalassemia and sickle cell disease, or SCD, in the clinical trials described below and we intend to evaluate PYRUKYND® in pediatric patients with PK deficiency in the planned clinical trials described below. We are also developing AG-946, a novel, next-generation PKR activator, for the potential treatment of hemolytic anemias and other indications.

In addition to the aforementioned development programs, we foster a productive research engine and are seeking to advance multiple novel, investigational therapies in clinical and preclinical development in our focus area of GDDs, based on our scientific leadership in the field of cellular metabolism and adjacent areas of biology.
Sale of our Oncology Business to Servier
On March 31, 2021, we completed the sale of our oncology business to Servier Pharmaceuticals, LLC, or Servier, which represented a discontinued operation. The transaction included the sale of our oncology business, including TIBSOVO®, our clinical-stage product candidates vorasidenib, AG-270 and AG-636, and our oncology research programs for a payment of approximately $1.8 billion in cash at the closing, subject to certain adjustments, and a payment of $200 million in cash, if, prior to January 1, 2027, vorasidenib is granted new drug application, or NDA, approval from the FDA with an approved label that permits vorasidenib’s use as a single agent for the adjuvant treatment of patients with Grade 2 glioma that have an isocitrate dehydrogenase 1 or 2 mutation (and, to the extent required by such approval, the vorasidenib companion diagnostic test is granted an FDA premarket approval), as well as a royalty of 5% of U.S. net sales of TIBSOVO® from the close of the transaction through loss of exclusivity, and a royalty of 15% of U.S. net sales of vorasidenib from the first commercial sale of vorasidenib through loss of exclusivity. Servier also acquired our co-commercialization rights for Bristol Myers Squibb’s
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IDHIFA® and the right to receive a $25.0 million potential milestone payment under our prior collaboration agreement with Celgene Corporation, or Celgene, and following the sale Servier will conduct certain clinical development activities within the IDHIFA® development program.
Financial Operations Overview
Impact of COVID-19 on our Business
As of March 31, 2022, we have not experienced a significant financial or supply chain impact directly related to the COVID-19 pandemic but have experienced some disruptions to clinical operations, including timelines to complete patient enrollment in some of our clinical trials, and we may in the future experience further such disruptions. In addition, we have experienced disruptions to certain research activities at our contract research organizations, or CROs, based in China, due to the recent COVID-19 surge in China. We are continuing to serve our customers while taking precautions to provide a safe work environment for our employees and customers. Our lab-based employees who need to be onsite to fulfill their job responsibilities have been onsite since late May 2020, and since September 2020 we have opened our Cambridge office to limited numbers of employees who prefer to work onsite. Our field-based employees continue to engage with healthcare providers and other third parties on a primarily remote basis and, where local regulations and other conditions allow, on a limited in-person basis. We are conducting our return to work program under strict guidelines as required by federal, state, and local authorities. Effective November 8, 2021, we require all employees, regardless of role or work location, to be fully vaccinated against COVID-19, as defined by the Center of Disease Control and Prevention's guidelines, subject to limited exception. We have been monitoring our supply chain network for disruptions due to the COVID-19 pandemic, and our third-party manufacturers, other than the China-based CROs discussed above, remain largely unaffected, with any campaign delays experienced to date being limited to a few days in duration. Although global shipping continues to be disrupted due to the pandemic, we have not experienced a supply impact.
The extent of the pandemic’s effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time. Future developments include changes in the duration, scope and severity of the pandemic, including any variant strains of the COVID-19 virus, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the supply, distribution and efficacy of vaccines, and the resumption of widespread economic activity. Any prolonged material disruption of our employees, suppliers, manufacturing, or customers could negatively impact our consolidated financial position, results of operations and cash flows. As a result, we may have to take further actions that we determine are in the best interests of our employees or as required by federal, state, or local authorities.
General
Since inception, our operations have primarily focused on organizing and staffing our company, business planning, raising capital, assembling our core capabilities in cellular metabolism, identifying potential product candidates, undertaking preclinical studies, conducting clinical trials, establishing a commercial infrastructure, preparing for the commercial launch of PYRUKYND® and, prior to the sale of our oncology business to Servier on March 31, 2021, marketing TIBSOVO® and IDHIFA®. Through March 31, 2021, we have financed our operations primarily through proceeds from the sale of our royalty rights, commercial sales of TIBSOVO®, funding received from our collaboration agreements, private placements of our preferred stock, our initial public offering of our common stock and concurrent private placement of common stock to an affiliate of Celgene, and our follow-on public offerings. Following the sale of our oncology business to Servier on March 31, 2021, we have financed and expect to finance our operations primarily through cash on hand, royalty payments from Servier with respect to U.S. net sales of TIBSOVO®, the potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA, and potential sales of PYRUKYND® if successfully launched by us and, potentially, collaborations, strategic alliances, licensing arrangements and other nondilutive strategic transactions.
We have historically incurred operating losses. Our net loss for the three months ended March 31, 2022 was $94.8 million and our net income for the three months ended March 31, 2021 was $1,874.3 million. As of March 31, 2022, we had an accumulated deficit of $333.5 million. The net income we generated in the three months ended March 31, 2021 was primarily due to the sale of our oncology business to Servier, which was consummated on March 31, 2021. Following the consummation of the sale of our oncology business, we expect to incur significant expenses and net losses until such time we are able to report profitable results. Our net losses may fluctuate significantly from year to year. We expect that we will continue to incur significant expenses as we continue to advance and expand clinical development activities for our lead programs: PYRUKYND®, and AG-946; continue to discover and validate novel targets and drug product candidates; expand and protect our intellectual property portfolio; and hire additional commercial, development and scientific personnel.
Revenues
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Our wholly owned product, PYRUKYND®, received approval from the FDA on February 17, 2022, for the treatment of hemolytic anemia in adults with PK deficiency in the United States. Upon FDA approval of PYRUKYND® in the United States, we began generating product revenue from sales of PYRUKYND®. We sell PYRUKYND® to a limited number of specialty distributors and specialty pharmacy providers, or collectively, the Customers. These Customers subsequently resell PYRUKYND® to pharmacies or dispense directly to patients. In addition to distribution agreements with Customers, we enter into arrangements with healthcare providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of PYRUKYND®. For further discussion of our revenue recognition policy, see Note 2, Summary of Significant Accounting Polices and Note 8, Product Revenue, to the condensed consolidated financial statements in this Form 10-Q.

In the future, we expect to continue to generate revenue from a combination of product sales, royalties on product sales, cost reimbursements, milestone payments, and upfront payments to the extent we enter into future collaborations or licensing agreements.

Cost of Sales

Cost of sales consists primarily of manufacturing costs for sales of PYRUKYND®. Based on our policy to expense costs associated with the manufacturing of our products prior to regulatory approval, certain of the manufacturing costs associated with product shipments of PYRUKYND® recorded during the three months ended March 31, 2022 were expensed prior to February 17, 2022, and, therefore, are not included in costs of sales during the three months ended March 31, 2022.
Research and development expenses
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs related to our GDD portfolio to increase significantly for the foreseeable future as our product candidate development programs progress. However, the successful development of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development and to commercialize these product candidates. We are unable to predict the amount of net cash inflows from PYRUKYND®
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or any of our product candidates. This is due to the numerous risks and uncertainties associated with developing medicines, including the uncertainty of:
establishing an appropriate safety profile with an investigational new drug application, or IND, and/or NDA-enabling toxicology and clinical trials;
the successful enrollment in, and completion of, clinical trials;
the receipt of marketing approvals from applicable regulatory authorities;
establishing compliant commercial manufacturing capabilities or making arrangements with third-party manufacturers;
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;
launching commercial sales of the products, if and when approved, whether alone or in collaboration with others; and
maintaining an acceptable safety profile of the products following approval.
A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that product candidate.
Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include:
employee-related expenses, including salaries, benefits and stock-based compensation expense;
expenses incurred under agreements with third parties, including CROs, that conduct research and development and both preclinical and clinical activities on our behalf, and the cost of consultants;
the cost of lab supplies and acquiring, developing and manufacturing preclinical and clinical study materials; and
facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and the maintenance of facilities, insurance and other operating costs.
The following summarizes our most advanced programs:
PYRUKYND® (mitapivat): First-in-Class PK Activator
We are developing PYRUKYND® for the treatment of PK deficiency and other hemolytic anemias such as thalassemia and SCD. PYRUKYND® is an orally available small molecule and a potent activator of the wild-type and mutated PKR enzymes. To date, we have demonstrated in clinical trials that treatment with PYRUKYND® can lead to durable sustained increases in hemoglobin in patients with amenable mutations in the PKR gene and a statistically significant and clinically meaningful reduction in transfusion burden in regularly transfused patients with PK deficiency, and we have observed in clinical trials of PYRUKYND® durable improvements in hemoglobin concentration and markers of hemolysis and ineffective erythropoeiesis in both α- and β- thalassemia patients and reductions in 2,3-DPG and increases in ATP in SCD patients.
In February 2022, the FDA approved PYRUKYND® for the treatment of hemolytic anemia in adults with PK deficiency in the United States. In June 2021, we submitted an MAA to the EMA for the treatment of adults with PK deficiency the European Union. The MAA has passed validation, and the regulatory review process is ongoing. We have worldwide development and commercial rights to PYRUKYND® and expect to fund the future development and commercialization costs related to this program. PYRUKYND® has been granted orphan drug designation for the treatment of PK deficiency by the FDA and the EMA. Additionally, PYRUKYND® has received orphan drug designation from the FDA for the treatment of thalassemia and SCD. We have built our US commercial infrastructure to support the commercial launch of PYRUKYND® in the United States and continue to evaluate all options for the commercialization and continued development of PYRUKYND® outside of the United States in order to maximize the benefit to patients and value to our shareholders, including through exploring potential partnership opportunities.
We are evaluating PYRUKYND® in the following clinical trials:
ENERGIZE, a phase 3, double-blind, randomized, placebo-controlled multicenter study evaluating the efficacy and safety of PYRUKYND® as a potential treatment for adults with non-transfusion-dependent α- or β-thalassemia, defined as ≤5 red blood cell, or RBC, units during the 24-week period before randomization and no RBC transfusions ≤8 weeks before providing informed consent or during the screening period. The primary endpoint of the trial is percentage of patients with hemoglobin response, defined as a ≥1.0 g/dL increase in average hemoglobin concentration from Week 12 through Week 24 compared with baseline. Secondary endpoints include markers of hemolysis and ineffective
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erythropoiesis, as well as patient-reported outcome measures. This trial is enrolling patients, and we expect to enroll a meaningful portion of the patients by the end of 2022.
ENERGIZE-T, a phase 3, double-blind, randomized, placebo-controlled multicenter study evaluating the efficacy and safety of PYRUKYND® as a potential treatment for adults with transfusion-dependent α- or β-thalassemia, defined as 6 to 20 RBC units transfused and ≤6-week transfusion-free period during the 24-week period before randomization. The primary endpoint of the trial is percentage of patients with transfusion reduction response, defined as a ≥50% reduction in transfused RBC units with a reduction of ≥2 units of transfused RBCs in any consecutive 12-week period through Week 48 compared with baseline. Secondary endpoints include additional transfusion reduction measures and percentage of participants with transfusion-independence. This trial is enrolling patients, and we expect to enroll a meaningful portion of the patients by the end of 2022.
RISE UP, a phase 2/3 study evaluating the efficacy and safety of PYRUKYND® in SCD patients who are 16 years of age or older, have had between two and 10 sickle cell pain crises in the past 12 months, and have hemoglobin within the range of 5.5 to 10.5 g/dL during screening. The phase 2 portion of the trial, which has initiated, includes a 12-week randomized, placebo-controlled period in which participants will be randomized in a 1:1:1 ratio to receive 50 mg PYRUKYND® twice daily, 100 mg PYRUKYND® twice daily or matched placebo. The primary endpoints are hemoglobin response, defined as ≥1 g/dL increase in average hemoglobin concentration from Week 10 through Week 12 compared to baseline, and safety. These data will be used to establish a clear dosing paradigm for the phase 3 portion. The phase 3 portion includes a 52-week randomized, placebo-controlled period in which participants will be randomized in a 2:1 ratio to receive the recommended PYRUKYND® dose level or placebo. The primary endpoints are hemoglobin response, defined as ≥1 g/dL increase in average hemoglobin from baseline to Week 52, and annualized rate of sickle cell pain crises. Participants who complete either the phase 2 or phase 3 portion will have the option to move into a 216-week open-label extension period to continue to receive PYRUKYND®. The phase 2 portion of this trial is enrolling patients, and we expect to complete enrollment in the phase 2 portion of the trial by the end of 2022.
An extension study evaluating the long-term safety, tolerability and efficacy of treatment with PYRUKYND® in patients from ACTIVATE and ACTIVATE-T, our completed pivotal trials of PYRUKYND® in not regularly transfused and regularly transfused patients with PK deficiency.
An extension study evaluating the long-term safety, tolerability and efficacy of treatment with PYRUKYND® in patients from DRIVE PK, our completed global phase 2, first-in-patient, open-label safety and efficacy clinical trial of PYRUKYND® in adult, not regularly transfused patients with PK deficiency.
An extension study evaluating the safety, tolerability and efficacy of treatment with PYRUKYND® in patients from our completed phase 2, open-label safety and efficacy clinical trial of PYRUKYND® in adults with non-transfusion-dependent α- and β-thalassemia.
In collaboration with the National Institutes of Health, or NIH, we are evaluating PYRUKYND® in a phase 1 trial in patients with SCD pursuant to a cooperative research and development agreement. The core trial period has completed. The long-term extension study is ongoing. In June 2020, clinical proof of concept was established based on a preliminary analysis of the data from this trial.
In collaboration with UMC Utrecht, or UMC, we are evaluating PYRUKYND® in patients with SCD pursuant to an investigator sponsored trial agreement. The trial has completed enrollment and patient follow-up is ongoing, and a 2-year extension study has been activated for patients who complete the follow-up period.
We expect to initiate two phase 3 trials of PYRUKYND®, ACTIVATE-kids and ACTIVATE-kidsT, in not regularly transfused and regularly transfused pediatric patients with PK deficiency in mid-2022.
AG-946: Novel, Next-generation PKR Activator
We are developing AG-946, a novel, next-generation PKR activator, for the potential treatment of hemolytic anemias. We are evaluating AG-946, in a phase 1 trial of AG-946 in healthy volunteers and in patients with SCD. The trial has completed the healthy volunteer cohort, and we have initiated the SCD patient cohort of this trial. We expect to initiate a phase 2a study of AG-946 in adults with L-IR MDS by year-end 2022.
Other research and platform programs
Other research and platform programs include activities related to exploratory efforts, target validation and lead optimization for our discovery and follow-on programs, and our proprietary metabolomics platform.
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, business development, commercial, legal and human resources functions.
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Other significant costs include facility-related costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters, and fees for accounting and consulting services.
We anticipate that our selling, general and administrative expenses will increase in the future to support continued research and development activities and ongoing and future commercialization activities related to our GDD portfolio, including the commercialization of PYRUKYND® and any of our other product candidates. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses.

Critical Accounting Estimates

Our critical accounting estimates are those which require the most significant judgments and estimates in the preparation of our condensed consolidated financial statements. We have determined that our most critical accounting estimates are those relating to revenue recognition, accrued research and development expenses and stock-based compensation. Except those that have been disclosed in Note 2, Summary of Significant Accounting Policies, of the notes to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, there have been no significant changes to our existing critical accounting estimates discussed in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.
Results of Operations
Certain amounts in prior periods have been reclassified to reflect the impact of the discontinued operations treatment of the oncology business in order to conform to the current period presentation.
Comparison of the three months ended March 31, 2022 and 2021
Revenues
Three Months Ended March 31,
(In thousands)20222021
Revenues:
Product revenue, net$832 $— 
Total revenue$832 $— 
Total Revenue – First Quarter of 2022 vs. First Quarter of 2021 – The increase in total revenue of $0.8 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was due to product revenue associated with PYRUKYND®, which was approved in February 2022.
Total Operating Expenses
Three Months Ended March 31,
(In thousands)20222021
Cost and expenses:
Cost of sales$339 $— 
Research and development70,123 57,667 
Selling, general and administrative31,515 33,550 
Total Operating Expenses$101,977 $91,217 
Total Operating Expenses - First Quarter of 2022 vs. First Quarter of 2021 - The increase in total operating expenses of $10.8 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily due an increase in research and development expenses of $12.5 million which is described below under Research and Development Expenses, partially offset by a decrease in selling, general and administrative expenses of $2.0 million due to a reduction in workforce-related expenses. Included in selling, general and administrative expenses is approximately $1.1 million of reimbursable transition related services we provided to Servier related to the sale of the oncology business.
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Research and Development Expenses
Our research and development expenses, by major program, are outlined in the table below:
Three Months Ended March 31,
(In thousands)20222021
PK activator (PYRUKYND®)$17,204 $12,364 
Novel PK activator (AG-946)3,437 1,771 
Other research and platform programs7,914 4,214 
Total direct research and development expenses28,555 18,349 
Compensation and related expenses29,186 26,753 
Facilities and IT related expenses & other10,865 12,565 
Other expenses - transition services1,517 — 
Total indirect research and development expenses41,568 39,318 
Total research and development expense$70,123 $57,667 
Total Research and Development Expenses - First Quarter of 2022 vs. First Quarter of 2021 - The increase in total research and development expenses of $12.5 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily due to a $10.2 million increase in our direct expenses. The increase in direct expenses was primarily due to a $4.8 million increase in PYRUKYND® costs and a $3.7 million increase in other research and platform programs. The increase in PYRUKYND® costs was primarily due to startup costs for the initiated phase 3 trials of PYRUKYND® in patients with thalassemia, ENERGIZE and ENERGIZE-T, and the phase 2/3 trial of PYRUKYND® in patients with SCD, RISE UP, offset by closeouts of ACTIVATE and ACTIVATE-T studies. The increase in other research and platform programs was primarily driven by planned increased activity on various exploratory activities. Included in total indirect research and development expenses was $1.5 million of reimbursable transition related services we provided to Servier related to the sale of the oncology business for discovery, clinical development, technical operations, and related activities which were completed during the three months ended March 31, 2022.
Other Income and Expense
Three Months Ended March 31,
(In thousands)20222021
Royalty income from gain on sale of oncology business$2,704 $— 
Interest income, net694 340 
Other income, net2,973 — 
Other Income and Expense - First Quarter of 2022 vs. First Quarter of 2021 - The increase in other income, net in the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily relates to approximately $2.6 million of reimbursable transition related services and fees for the sale of the oncology business for the three months ended March 31, 2022. The increase in royalty income from gain on sale of oncology business relates to income from royalties on U.S. net sales of TIBSOVO® by Servier of approximately $2.7 million for the three months ended March 31, 2022. The increase in interest income, net is primarily attributable to an increase in interest rates.
Loss from Operations and Net (Loss) Income
Three Months Ended March 31,
(In thousands)20222021
Net loss from continuing operations$(94,774)$(90,877)
Net income from discontinued operations— 1,965,202 
Net (loss) income(94,774)1,874,325 
Loss from Operations and Net Income (Loss) – First Quarter of 2022 vs. First Quarter of 2021 – The increase in net loss from continuing operations for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily driven by the higher research and development expenses discussed above under Research and Development Expenses, partially offset by approximately $2.6 million of reimbursable transition related services and fees for the sale of the oncology business and $2.7 million of royalty income from gain on sale of oncology business related to income from royalties on U.S. net sales of TIBSOVO® by Servier. The change in net income from discontinued operations and net (loss) income for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily driven by the sale
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of our oncology business to Servier for approximately $1.8 billion in cash in the first quarter of 2021, which is included within net income from discontinued operations.
Liquidity and Capital Resources
Sources of liquidity

Since our inception, and through March 31, 2022, we have funded our operations through proceeds from the sale of our royalty rights, commercial sales of TIBSOVO®, funding received from our collaboration agreements, private placements of our preferred stock, our initial public offering of our common stock and concurrent private placement of common stock to an affiliate of Celgene, and our follow-on public offerings. Following the sale of our oncology business to Servier on March 31, 2021, we have financed and expect to continue to finance our operations primarily through cash on hand, royalty payments from Servier with respect to U.S. net sales of TIBSOVO®, the potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA, potential sales of PYRUKYND®, if successfully launched by us and, potentially, collaborations, strategic alliances, licensing arrangements and other nondilutive strategic transactions.

On March 31, 2021, we completed the sale of our oncology business to Servier. The transaction included the sale of our oncology business, including TIBSOVO®, our clinical-stage product candidates vorasidenib, AG-270 and AG-636, and our oncology research programs for a payment of approximately $1.8 billion in cash at the closing, subject to certain adjustments, and a payment of $200.0 million in cash, if, prior to January 1, 2027, vorasidenib is granted NDA approval from the FDA with an approved label that permits vorasidenib’s use as a single agent for the adjuvant treatment of patients with Grade 2 glioma that have an isocitrate dehydrogenase 1 or 2 mutation (and, to the extent required by such approval, the vorasidenib companion diagnostic test is granted an FDA premarket approval), as well as a royalty of 5% of U.S. net sales of TIBSOVO® from the close of the transaction through loss of exclusivity, and a royalty of 15% of U.S. net sales of vorasidenib from the first commercial sale of vorasidenib through loss of exclusivity. Servier also acquired our co-commercialization rights for Bristol Myers Squibb’s IDHIFA® and the right to receive a $25.0 million potential milestone payment under our prior collaboration agreement with Celgene, and following the sale Servier is responsible for conducting certain clinical development activities within the IDHIFA® development program.
On March 25, 2021, we announced that our Board of Directors authorized the repurchase of up to $1.2 billion of our outstanding shares of common stock, or the Repurchase Program, using the proceeds from the sale of our oncology business to Servier. On March 31, 2021, in connection with the Repurchase Program, we entered into a definitive share repurchase agreement with Bristol-Myers Squibb Company, or BMS, to repurchase 7.1 million shares of our common stock held by certain subsidiaries of BMS for an aggregate purchase price of $344.5 million, or $48.38 per share. This repurchase was completed on April 5, 2021. Further, on April 2, 2021, in connection with the Repurchase Program, we entered into a Rule 10b5-1 repurchase plan pursuant to which we could repurchase up to $600.0 million of shares of our common stock. As of December 31, 2021, we repurchased approximately 9.1 million shares of common stock for $458.0 million, or $50.35 per share, under the Rule 10b5-1 repurchase plan. On October 5, 2021, we terminated our Rule 10b5-1 share repurchase program and on October 13, 2021 entered into a Rule 10b-18 repurchase plan that allows us to conduct open market repurchases over time up to our remaining authorization under the Repurchase Program. In total, as of December 31, 2021 and March 31, 2022, we repurchased 16.2 million shares of common stock for $802.5 million, or $49.49 per share, under the Repurchase Program. We have paused our share repurchases and for the foreseeable future, we expect that our capital allocation will be prioritized towards opportunities to accelerate programs in our development pipeline and/or pursue potential complementary business development opportunities.
In addition to our existing cash, cash equivalents and marketable securities, we are eligible to receive a $200.0 million milestone payment and royalty payments under our transaction agreement with Servier. Our right to such payments under our transaction agreement with Servier is our only committed potential external source of funds. Whether the regulatory approval milestone for vorasidenib will be achieved is subject to various risks and uncertainties, many of which are outside our control, including adverse clinical developments with respect to vorasidenib. Furthermore, we cannot predict what success, if any, Servier may have in the United States with respect to sales of TIBSOVO® and, if approved, vorasidenib and consequently we cannot estimate the amount of royalty payments that we can expect to receive from Servier under the Purchase Agreement prior to the loss of exclusivity of these products.
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Cash flows
The following table provides information regarding our cash flows for the three months ended March 31, 2022 and 2021:
Three Months Ended March 31,
(In thousands)20222021
Net cash used in operating activities$(97,735)$(120,749)
Net cash (used in) provided by investing activities(26,573)1,874,077 
Net cash provided by financing activities1,208 7,261 
Net change in cash and cash equivalents$(123,100)