What changed in this filing

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Item 1. Financial Statements

2020-11-05 compared with 2020-07-30 · 106 added, 88 removed, 500 unchanged (28% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

September 30,

2020 December 31,

31 unchanged sentences

25,000,000 shares authorized;

no shares issued or outstanding at June 30, 2020 and December 31, 2019

no shares issued or outstanding at September 30, 2020 and December 31, 2019

Common stock, $ 0.001 par value;

125,000,000 shares authorized;

69,058,696 and 68,401,105 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

69,198,063 and 68,401,105 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital 2,225,538 2,156,363

6 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands, except share and per share data)

19 unchanged sentences

Condensed Consolidated Statements of Comprehensive Loss

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands)

1 unchanged sentence

Net loss $ ( 98,979 ) $ ( 106,173 ) $ ( 229,713 ) $ ( 309,122 )

Other comprehensive income

Unrealized gain on available-for-sale securities 1,562 974 1,434 2,661

Other comprehensive (loss) income

Unrealized (loss) gain on available-for-sale securities ( 973 ) ( 26 ) 461 2,635

Comprehensive loss $ ( 99,952 ) $ ( 106,199 ) $ ( 229,252 ) $ ( 306,487 )

20 unchanged sentences

Balance at June 30, 2020 69,058,696 $ 69 $ 2,203,599 $ 1,636 $ ( 1,646,839 ) $ 558,465

Common stock issued under stock incentive plan and ESPP 139,367 $ — $ 3,532 $ — $ — $ 3,532

Stock-based compensation expense — — 18,407 — — 18,407

Other comprehensive loss — — — ( 973 ) — ( 973 )

Net loss — — — — ( 98,979 ) ( 98,979 )

Balance at September 30, 2020 69,198,063 $ 69 $ 2,225,538 $ 663 $ ( 1,745,818 ) $ 480,452

See accompanying Notes to Condensed Consolidated Financial Statements.

AGIOS PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Stockholders' Equity (Continued)

Common Stock Additional

16 unchanged sentences

Balance at June 30, 2019 58,749,186 $ 59 $ 1,839,710 $ 490 $ ( 1,307,582 ) $ 532,677

Common stock issued under stock incentive plan and ESPP 128,505 $ — $ 3,225 $ — $ — $ 3,225

Stock-based compensation expense — — 18,588 — — 18,588

Other comprehensive loss — — — ( 26 ) — ( 26 )

Net loss — — — — ( 106,173 ) ( 106,173 )

Balance at September 30, 2019 58,877,691 $ 59 $ 1,861,523 $ 464 $ ( 1,413,755 ) $ 448,291

See accompanying Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

(In thousands) 2020 2019

2 unchanged sentences

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation 4,906 4,042

Depreciation and amortization 7,307 6,124

Stock-based compensation expense 58,527 55,243

Net accretion of premium and discounts on investments 1,521 ( 2,772 )

Gain on disposal of property and equipment — 466

Non-cash operating lease expense 6,691 6,341

28 unchanged sentences

Additions to property and equipment in accounts payable and accrued expenses $ 185 $ 2,089

Proceeds from stock option exercises in other current assets $ — $ 112

Operating lease liabilities arising from obtaining operating lease assets $ — $ 42,322

6 unchanged sentences

and its consolidated subsidiaries, and “our Board of Directors” refers to the board of directors of Agios Pharmaceuticals, Inc.

We are a biopharmaceutical company committed to the fundamental transformation of 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 patients in the areas of hematologic malignancies, solid tumors and rare genetic diseases, or RGDs.

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 patients in the areas of hematologic malignancies, solid tumors and rare genetic diseases, or RGDs.

To address these focus areas, 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.

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Basis of presentation

The condensed consolidated balance sheet as of June 30, 2020, the condensed consolidated statements of operations, comprehensive loss and stockholders' equity for the three and six months ended June 30, 2020 and 2019, and the condensed consolidated statements of cash flows for the six months ended June 30, 2020 and 2019 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 June 30, 2020, our results of operations and stockholders' equity for the three and six months ended June 30, 2020 and 2019, and cash flows for the six months ended June 30, 2020 and 2019.

The financial data and the other financial information disclosed in these notes to the condensed consolidated financial statements related to the three and six-month periods are also unaudited.

The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any other future annual or interim period.

The condensed consolidated balance sheet as of September 30, 2020, the condensed consolidated statements of operations, comprehensive loss and stockholders' equity for the three and nine months ended September 30, 2020 and 2019, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019 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 September 30, 2020, our results of operations and stockholders' equity for the three and nine months ended September 30, 2020 and 2019, and cash flows for the nine months ended September 30, 2020 and 2019.

The financial data and the other financial information disclosed in these notes to the condensed consolidated financial statements related to the three and nine-month periods are also unaudited.

The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any other future annual or interim period.

The condensed consolidated balance sheet data as of December 31, 2019 was derived from our audited financial statements, but does not include all disclosures required by U.S.

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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 sales, 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 the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including sales, 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 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.

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commercial milestone event, as well as reimbursement for costs incurred for our co-commercialization efforts and development activities.

As of June 30, 2020, we had cash, cash equivalents and marketable securities of $ 794.4 million, which included the $ 255.0 million proceeds from RPI received in the second quarter of 2020.

As of September 30, 2020, we had cash, cash equivalents and marketable securities of $ 722.4 million.

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.

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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.

The following table summarizes our cash equivalents and marketable securities measured at fair value on a recurring basis as of June 30, 2020:

The following table summarizes our cash equivalents and marketable securities measured at fair value on a recurring basis as of September 30, 2020:

(In thousands) Level 1 Level 2 Level 3 Total

9 unchanged sentences

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 June 30, 2020.

There have been no changes to the valuation methods during the six months ended June 30, 2020.

After completing our validation procedures, we did not adjust or override any fair value measurements provided by the pricing services as of September 30, 2020.

There have been no changes to the valuation methods during the nine months ended September 30, 2020.

We evaluate transfers between levels at the end of each reporting period.

We have no financial assets or liabilities that were classified as Level 3 at any point during the six months ended June 30, 2020.

We have no financial assets or liabilities that were classified as Level 3 at any point during the nine months ended September 30, 2020.

Marketable Securities

4 unchanged sentences

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 and six months ended June 30, 2020 and 2019.

Marketable securities at June 30, 2020 consisted of the following:

There were no material realized gains or losses on marketable securities for the three and nine months ended September 30, 2020 or 2019.

Marketable securities at September 30, 2020 consisted of the following:

(In thousands) Amortized

23 unchanged sentences

Total marketable securities $ 636,673 $ 470 $ ( 268 ) $ 636,875

As of June 30, 2020 and December 31, 2019, we held both current and non-current investments.

As of September 30, 2020 and December 31, 2019, we held both current and non-current investments.

Investments classified as current have maturities of less than one year.

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(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 June 30, 2020 and December 31, 2019, we held 28 and 113 debt securities, respectively, that were in an unrealized loss position for less than one year.

We did no t record an allowance for credit losses as of June 30, 2020 and December 31, 2019 related to these securities.

The aggregate fair value of debt securities in an unrealized loss position at June 30, 2020 and December 31, 2019 was $ 129.7 million and $ 345.7 million, respectively.

There were no individual securities that were in a significant unrealized loss position as of June 30, 2020 and December 31, 2019.

Given our intent and ability to hold such securities until recovery, and the lack of significant change in the credit risk of these investments, we do not consider these marketable securities to be impaired as of June 30, 2020 and December 31, 2019.

As of September 30, 2020 and December 31, 2019, we held 74 and 113 debt securities, respectively, that were in an unrealized loss position for less than one year.

We did no t record an allowance for credit losses as of September 30, 2020 and December 31, 2019 related to these securities.

The aggregate fair value of debt securities in an unrealized loss position at September 30, 2020 and December 31, 2019 was $ 247.7 million and $ 345.7 million, respectively.

There were no individual securities that were in a significant unrealized loss position as of September 30, 2020 and December 31, 2019.

Inventory, which consists of commercial supply of TIBSOVO®, consists of the following:

(In thousands) June 30,

(In thousands) September 30,

2020 December 31,

4 unchanged sentences

Our building leases are comprised of office and laboratory space under non-cancelable operating leases.

These lease agreements have remaining lease terms of eight 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 option is not reasonably certain of being exercised.

These lease agreements have remaining lease terms of seven 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.

Operating lease costs for the three and six months ended June 30, 2020 were $ 3.8 million and $ 7.6 million, respectively, and cash paid for amounts included in the measurement of operating lease liabilities for the three and six months ended June 30, 2020 were $ 3.5 million and $ 7.4 million, respectively.

Operating lease costs for the three and six months ended June 30, 2019 were $ 3.8 million and $ 6.8 million, respectively, and cash paid for amounts included in the measurement of operating lease liabilities for the three and six months ended June 30, 2019 were $ 3.2 million and $ 6.3 million, respectively.

We have not entered into any material short-term leases or financing leases as of June 30, 2020.

As of June 30, 2020, undiscounted minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter were as follows:

Operating lease costs for the three and nine months ended September 30, 2020 were $ 3.8 million and $ 11.4 million, respectively, and cash paid for amounts included in the measurement of operating lease liabilities for the three and nine months ended September 30, 2020 were $ 3.5 million and $ 10.9 million, respectively.

Operating lease costs for the three and nine months ended September 30, 2019 were $ 3.8 million and $ 10.6 million, respectively, and cash paid for amounts included in the measurement of operating lease liabilities for the three and nine months ended September 30, 2019 were $ 2.2 million and $ 8.5 million, respectively.

We have not entered into any material short-term leases or financing leases as of September 30, 2020.

As of September 30, 2020, undiscounted minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter were as follows:

(In thousands)

4 unchanged sentences

Operating lease liabilities $ 106,574

In arriving at the operating lease liabilities as of June 30, 2020 and December 31, 2019, we applied the weighted-average incremental borrowing rate of 5.7 % for both periods over a weighted-average remaining lease term of 7.7 years and 8.2 years, respectively.

In arriving at the operating lease liabilities as of September 30, 2020 and December 31, 2019, we applied the weighted-average incremental borrowing rate of 5.7 % for both periods over a weighted-average remaining lease term of 7.4 years and 8.2 years, respectively.

Accrued Expenses

Accrued expenses consist of the following:

(In thousands) June 30,

(In thousands) September 30,

2020 December 31,

2 unchanged sentences

Accrued professional fees 3,474 8,335

Accrued other 5,924 4,048

Accrued revenue-related reserves and other 11,018 4,048

Total accrued expenses $ 49,724 $ 53,142

4 unchanged sentences

The performance obligation related to the sale of TIBSOVO® 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.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2020 2019 2020 2019

9 unchanged sentences

Government Rebates

Government rebates consist of 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.

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.

2 unchanged sentences

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 six months ended June 30, 2020:

The following table summarizes balances and activity in each of the product revenue allowance and reserve categories for the nine months ended September 30, 2020:

(In thousands) Contractual Adjustments Government Rebates Returns Total

4 unchanged sentences

Payments/returns relating to sales in the prior years ( 653 ) ( 677 ) — ( 1,330 )

Balance at June 30, 2020 $ 1,218 $ 3,313 $ 2,048 $ 6,579

Balance at September 30, 2020 $ 1,513 $ 7,608 $ 2,618 $ 11,739

Total revenue-related reserves above, included in our condensed consolidated balance sheets, are summarized as follows:

(In thousands) June 30,

(In thousands) September 30,

2020 December 31,

2 unchanged sentences

Total revenue-related reserves $ 11,739 $ 3,796

The following table presents changes in our contract assets during the six months ended June 30, 2020:

The following table presents changes in our contract assets during the nine months ended September 30, 2020:

(In thousands) December 31,

2019 Additions Deductions June 30,

2019 Additions Deductions September 30,

Contract assets (1)

42 unchanged sentences

Collaboration revenue

During the three and six months ended June 30, 2020 and 2019, we recognized the following collaboration revenue:

Three Months Ended June 30, Six Months Ended June 30,

During the three and nine months ended September 30, 2020 and 2019, we recognized the following collaboration revenue:

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2020 2019 2020 2019

4 unchanged sentences

Total collaboration revenue - related party $ 1,206 $ 5,516 $ 67,038 $ 32,414

The following table presents changes in our contract assets and liabilities during the six months ended June 30, 2020:

The following table presents changes in our contract assets and liabilities during the nine months ended September 30, 2020:

(In thousands) December 31,

2019 Additions Deductions June 30,

2019 Additions Deductions September 30,

Contract assets

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Deductions relate to deferred revenue recognized as revenue during the reporting period.

The change in collaboration revenue from on-going research and development services during the three and six months ended June 30, 2020 is primarily due to our updated estimate of the future costs that would be incurred from on-going research and development services to complete one of our performance obligations under the 2016 collaboration agreement that is recognized over time using an input method, due to Celgene’s decision to decline extending the research term in Q1 2020.

During the three and six months ended June 30, 2020 and 2019, we recognized the following as revenue due to changes in the contract liability balances:

Three Months Ended June 30, Six Months Ended June 30,

The change in collaboration revenue from on-going research and development services during the three and nine months ended September 30, 2020 is primarily due to our updated estimate of the future costs that would be incurred from on-going research and development services to complete one of our performance obligations under the 2016 Agreement that is recognized over time using an input method, due to Celgene’s decision to decline extending the research term in the first quarter of 2020.

During the three and nine months ended September 30, 2020 and 2019, we recognized the following as revenue due to changes in the contract liability balances:

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2020 2019 2020 2019

1 unchanged sentence

Performance obligations satisfied in previous periods — — — —

As of June 30, 2020, the aggregate amount of the transaction price allocated to performance obligations that are partially unsatisfied was $ 5.2 million.

As of September 30, 2020, the aggregate amount of the transaction price allocated to performance obligations that are partially unsatisfied was $ 4.5 million.

This amount is expected to be recognized as performance obligations are satisfied through September 2023.

1 unchanged sentence

As the underlying performance obligation, or delivery of the enasidenib license, had been satisfied as of June 2014, royalty revenue is recognized as the related sales occur.

During the three and six months ended June 30, 2020 and 2019, we recognized the following as royalty revenue:

Three Months Ended June 30, Six Months Ended June 30,

During the three and nine months ended September 30, 2020 and 2019, we recognized the following as royalty revenue:

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2020 2019 2020 2019

3 unchanged sentences

Milestone revenue

No milestones were achieved during the three and six months ended June 30, 2020 or 2019.

No milestones were achieved during the three and nine months ended September 30, 2020 or 2019.

The next potential milestone expected to be achieved under the remaining terms of our Collaboration Agreements is the achievement of a specified ex-U.S.

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Collaboration revenue

During the three and six months ended June 30, 2020 and 2019, we recognized the following collaboration revenue -other:

Three Months Ended June 30, Six Months Ended June 30,

During the three and nine months ended September 30, 2020 and 2019, we recognized the following collaboration revenue -other:

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2020 2019 2020 2019

4 unchanged sentences

Total collaboration revenue - other $ 1,101 $ 420 $ 2,786 $ 2,202

The following table presents changes in our contract assets during the six months ended June 30, 2020:

The following table presents changes in our contract assets during the nine months ended September 30, 2020:

(In thousands) December 31,

2019 Additions Deductions June 30,

2019 Additions Deductions September 30,

Contract assets (1)

2 unchanged sentences

Deductions to contract assets relate to collection of receivables during the reporting period.

As of June 30, 2020, the aggregate amount of the transaction price allocated to performance obligations that are partially unsatisfied was $ 0.5 million.

As of September 30, 2020, the aggregate amount of the transaction price allocated to performance obligations that are partially unsatisfied was $ 0.5 million.

Royalty revenue

3 unchanged sentences

Milestone revenue

No milestones were earned during the three and six months ended June 30, 2020 and 2019.

No milestones were earned during the three and nine months ended September 30, 2020 and 2019.

The next potential milestone expected to be achieved under the CStone Agreement is the dosing of the first patient in a local study in a solid tumor indication in mainland China.

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Changes to any of these factors could result in increases or decreases to both royalty revenues and interest expense.

The following table shows the activity of the Royalty Obligation since the transaction inception through June 30, 2020:

(in thousands) June 30, 2020

The following table shows the activity of the Royalty Obligation since the transaction inception through September 30, 2020:

(in thousands) September 30, 2020

Proceeds from the sale of future revenue $ 255,000

Issuance costs ( 4,463 )

Non-cash royalty revenue ( 1,650 )

Non-cash royalty related to the sale of future revenue

Non-cash interest expense associated with the sale of future revenue 11,818

Amortization of issuance costs 107

Liability related to the sale of future royalties

During the three and six months ended June 30, 2020, $ 3.3 million and $ 6.7 million of royalty revenue from net sales of IDHIFA® were recognized, respectively, of which $ 1.65 million is non-cash royalty revenue.

Liability related to the sale of future revenue

During the three and nine months ended September 30, 2020, $ 2.7 million and $ 4.3 million of non-cash royalty revenue from net sales of IDHIFA® were recognized, respectively .

Share-Based Payments

4 unchanged sentences

Any options or awards outstanding under the 2007 Plan at the time of adoption of the 2013 Plan remain outstanding and effective.

As of June 30, 2020, the total number of shares reserved under the 2007 Plan and the 2013 Plan was 10,749,789 , and we had 2,688,890 shares available for future issuance under the 2013 Plan.

As of September 30, 2020, the total number of shares reserved under the 2007 Plan and the 2013 Plan was 10,680,089 , and we had 2,919,442 shares available for future issuance under the 2013 Plan.

Stock options

The following table presents stock option activity for the six months ended June 30, 2020:

The following table presents stock option activity for the nine months ended September 30, 2020:

Stock Options Weighted-Average

4 unchanged sentences

Forfeited/Expired ( 448,901 ) 65.98

Outstanding at June 30, 2020 6,597,951 $ 58.72

Exercisable at June 30, 2020 3,927,185 $ 61.05

Vested and expected to vest at June 30, 2020 6,597,951 $ 58.72

At June 30, 2020, there was approximately $ 94.2 million of total unrecognized compensation expense related to unvested stock option awards, which we expect to recognize over a weighted-average period of approximately 2.5 years.

Outstanding at September 30, 2020 6,370,245 $ 58.85

Exercisable at September 30, 2020 4,067,553 $ 61.23

Vested and expected to vest at September 30, 2020 6,370,245 $ 58.85

At September 30, 2020, there was approximately $ 77.4 million of total unrecognized compensation expense related to unvested stock option awards, which we expect to recognize over a weighted-average period of approximately 2.4 years.

Restricted stock units

The following table presents RSU activity for the six months ended June 30, 2020:

The following table presents RSU activity for the nine months ended September 30, 2020:

Stock Units Weighted-Average

4 unchanged sentences

Forfeited ( 132,805 ) 58.31

Unvested shares at June 30, 2020 1,260,408 $ 54.35

As of June 30, 2020, there was approximately $ 51.1 million of total unrecognized compensation expense related to RSUs, which we expect to recognize over a weighted-average period of approximately 2.1 years.

Unvested shares at September 30, 2020 1,205,478 $ 53.77

As of September 30, 2020, there was approximately $ 41.7 million of total unrecognized compensation expense related to RSUs, which we expect to recognize over a weighted-average period of approximately 1.9 years.

Performance-based stock units

The following table presents PSU activity for the six months ended June 30, 2020:

The following table presents PSU activity for the nine months ended September 30, 2020:

Stock Units Weighted-Average

3 unchanged sentences

Vested ( 78,920 ) 54.82

Unvested shares at June 30, 2020 159,845 $ 55.13

Forfeited ( 17,616 ) 61.93

Unvested shares at September 30, 2020 142,229 $ 54.28

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 June 30, 2020, there was no unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered probable of achievement, and $ 6.9 million of total unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered not probable of achievement.

As of September 30, 2020, there was no unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered probable of achievement, and $ 5.9 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 six months ended June 30, 2020:

The following table presents market-based stock unit, or MSU, activity for the nine months ended September 30, 2020:

Stock Units Weighted-Average

1 unchanged sentence

Unvested shares at December 31, 2019 42,695 $ 41.50

Unvested shares at June 30, 2020 42,695 $ 41.50

Unvested shares at September 30, 2020 42,695 $ 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 June 30, 2020, there was approximately $ 0.2 million of total unrecognized compensation expense related to MSUs, which we expect to recognize over the remaining derived service period of 0.2 years.

As of September 30, 2020, 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 62,694 and 32,410 shares of common stock during the six months ended June 30, 2020 and 2019, respectively, under the 2013 ESPP.

We issued and sold 120,293 and 77,981 shares of common stock during the nine months ended September 30, 2020 and 2019, respectively, under the 2013 ESPP.

The 2013 ESPP provides participating employees with the opportunity to purchase up to an aggregate of 836,363 shares of our common stock.

As of June 30, 2020, we had 528,952 shares of common stock available for future issuance under the 2013 ESPP.

As of September 30, 2020, we had 471,353 shares of common stock available for future issuance under the 2013 ESPP.

Stock-based compensation expense

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2020 2019 2020 2019

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2020 2019 2020 2019

6 unchanged sentences

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 June 30, 2020 are not considered to be common stock equivalents.

be common stock equivalents, while PSUs and MSUs with performance and market vesting conditions, respectively, that were not deemed probable as of September 30, 2020 are not considered to be common stock equivalents.

Since we had a net loss for all periods presented, the effect of all potentially dilutive securities is anti-dilutive.

1 unchanged sentence

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 and Six Months Ended June 30,

Three and Nine Months Ended September 30,

Stock options 6,370,245 6,185,935

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements