What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-05 compared with 2020-07-30 · 106 added, 98 removed, 205 unchanged (50% of the section changed)

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Forward-looking Information

The following discussion of our financial condition and results of operations should be read with our unaudited condensed consolidated financial statements as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019, 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, 2019 filed with the SEC on February 19, 2020.

The following discussion of our financial condition and results of operations should be read with our unaudited condensed consolidated financial statements as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019, 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, 2019 filed with the SEC on February 19, 2020.

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.

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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.

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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The FDA has approved TIBSOVO® (ivosidenib) for the treatment of adult patients with R/R AML and a susceptible IDH1 mutation and for the treatment of patients with newly diagnosed AML with a susceptible IDH1 mutation as detected by an FDA-approved test who are at least 75 years old or who have comorbidities that preclude use of intensive induction chemotherapy.

In December 2018, we submitted a marketing authorization application, or MAA to the European Medicines Agency, or EMA for TIBSOVO® for the treatment of adult patients with R/R AML.

In December 2018, we submitted a marketing authorization application, or MAA to the European Medicines Agency, or EMA for TIBSOVO® for the treatment of adult patients with IDH1 mutant-positive R/R AML.

In October 2020, we announced the withdrawal of the MAA based on feedback from the EMA's Committee for Medicinal Products for Human Use (CHMP) that the available clinical data from our single arm, uncontrolled Phase 1 trial did not sufficiently support a positive benefit-risk balance for the proposed indication.

The FDA granted orphan drug designation for ivosidenib for the treatment of cholangiocarcinoma, granted Breakthrough Therapy designation for ivosidenib in combination with azacitidine for the treatment of newly diagnosed AML with an IDH1 mutation in adult patients who are at least 75 years old or who have comorbidities that preclude use of intensive induction chemotherapy, and granted Breakthrough Therapy designation for ivosidenib for the treatment of adult patients with relapsed or refractory MDS with a susceptible IDH1 mutation as detected by an FDA-approved test.

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Enasidenib is an orally available, selective, potent inhibitor of the mutated IDH2 protein, making it a highly targeted therapeutic candidate for the treatment of patients with cancers that harbor IDH2 mutations, including those with AML, who have a historically poor prognosis.

The FDA has granted Celgene approval of IDHIFA® (enasidenib) for the treatment of adult patients with R/R AML and an IDH2 mutation.

Celgene has worldwide development and commercialization rights for IDHIFA®, and we are eligible to receive royalties at tiered low-double digit to mid-teen percentage rates on any net sales of

IDHIFA® and have exercised our rights to provide up to one-third of the field-based commercialization efforts in the United States.

The FDA has granted Celgene approval of IDHIFA® (enasidenib) for the treatment of

adult patients with R/R AML and an IDH2 mutation.

Celgene has worldwide development and commercialization rights for IDHIFA®, and we are eligible to receive royalties at tiered low-double digit to mid-teen percentage rates on any net sales of IDHIFA® and have exercised our rights to provide up to one-third of the field-based commercialization efforts in the United States.

On June 11, 2020 we sold our tiered, sales-based royalty rights on worldwide net sales of IDHIFA®, as well as our rights to receive up to $55.0 million in outstanding regulatory milestone payments from Bristol Myers Squibb, or BMS, to Royalty Pharma, or RPI, for $255.0 million.

Our pre-commercial clinical cancer product candidates are vorasidenib, AG-270, AG-946, and AG-636.

Our pre-commercial clinical cancer product candidates are vorasidenib, AG-270, and AG-636.

We are developing vorasidenib for the treatment of IDH mutant-positive low grade glioma.

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AG-270 is an orally available selective potent inhibitor of MAT2A.

On March 25, 2020, Celgene declined to exercise its right to opt into co-development and co-commercialization for the for AG-270, our MAT2A inhibitor development program, under the 2016 Agreement.

We are developing AG-946, a next-generation PKR activator, for the potential treatment of hemolytic anemias.

In the first quarter of 2020, we made the decision to cease the internal development of AG-636 for the treatment of hematologic malignancies, including lymphoma due to limited enrollment in our phase 1 study in lymphoma.

On March 25, 2020, Celgene declined to exercise its right to opt into co-development and co-commercialization for AG-270, our MAT2A inhibitor development program, under the 2016 Agreement.

AG-636 is an inhibitor of the metabolic enzyme dihydroorotate dehydrogenase, or DHODH, licensed by us from Aurigene Discovery Technologies Limited, or Aurigene.

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Mitapivat is an orally available small molecule and a potent activator of the wild-type (normal) and mutated PKR enzymes, which has resulted in restoration of adenosine triphosphate levels and a decrease in 2,3-diphosphoglycerate levels in blood sampled from patients with PK deficiency and treated ex-vivo with mitapivat.

We are also developing mitapivat for the treatment of patients with thalassemia and sickle cell disease.

We are also developing mitapivat for the treatment of patients with thalassemia and sickle cell disease, or SCD.

We have worldwide development and commercial rights to mitapivat and expect to fund the future development and commercialization costs related to this program.

The FDA and EMA granted orphan drug designations for mitapivat for the treatment of patients with PK deficiency, and the FDA granted orphan drug designation for mitapivat for the treatment of patients with thalassemia.

We are also developing AG-946, our next -generation PKR activator, and plan to initiate a phase 1 study in healthy volunteers in the third quarter of 2020.

In addition to the aforementioned development programs, we are seeking to advance a number of early-stage discovery programs in the areas of hematological malignancies and solid tumors, RGDs.

We are also developing AG-946, a next-generation PKR activator, for the potential treatment of hemolytic anemias.

In addition to the aforementioned development programs, we are seeking to advance a number of early-stage discovery programs in the areas of hematological malignancies, solid tumors, and RGDs.

Collaboration and license agreements

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Impact of COVID-19 on our Business

The spread of SARS-CoV-2 and the resulting disease COVID-19 during the first half of 2020 has caused an economic downturn on a global scale, as well as significant volatility in the financial markets.

The spread of SARS-CoV-2 and the resulting disease COVID-19 has caused an economic downturn on a global scale, as well as significant volatility in the financial markets.

In March 2020 the World Health Organization declared COVID-19 a pandemic.

As of June 30, 2020, we have not experienced a significant financial or supply chain impact directly related to the pandemic but ha ve experienced some disruptions to clinical operations, including timelines to complete patient enrollment in some of our clinical trials , as further described below .

In this time of uncertainty as a result of

the C OVID-19 pandemic, we are continuing to serve our customers while taking precautions to provide a safe work environment for our employees and customers.

As of September 30, 2020, we have not experienced a significant financial or supply chain impact directly related to the pandemic but ha ve experienced some disruptions to clinical operations, including timelines to complete patient enrollment

in some of our clinical trials , as further described below .

In this time of uncertainty as a result of the C OVID-19 pandemic, we are continuing to serve our customers while taking precautions to provide a safe work environment for our employees and customers.

In March 2020, we established and implemented a work from home policy for our employees.

In April 2020, we made internal resource allocation decisions in order to deliver on key business objectives and to increase our financial flexibility, including, pausing the development of certain preclinical research programs, delaying the start of certain longer-term clinical studies, limiting staff hiring, reducing the number of contract workers, and delaying or limiting information technology and facilities infrastructure projects.

Lastly, in June 2020, we began implementing Phase 1 of our return to work program, which enables all of our lab-based employees and related support personnel to return to our Cambridge office under strict guidelines as required by federal, state, and local authorities.

In June 2020, we implemented Phase 1 of our return to work program, which enabled all of our lab-based employees and related support personnel to return to our Cambridge office, and in September 2020 we began implementing Phase 2 of our return to work program by opening our Cambridge office to an additional, limited number of employees who prefer to work onsite.

Our field-based employees engage with healthcare providers and other third parties remotely and, where local regulations 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.

We have been monitoring our supply chain network for disruptions due to the COVID-19 pandemic, and our third-party manufacturers remain largely unaffected, with any campaign delays experienced to date being limited to a few days in duration.

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Future developments include changes in the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the resumption of widespread economic activity.

Any prolonged material disruption of the Company’s employees, suppliers, manufacturing, or customers could negatively impact its consolidated financial position, consolidated results of operations and consolidated cash flows.

Any prolonged material disruption of our employees, suppliers, manufacturing, or customers could negatively impact our consolidated financial position, consolidated results of operations and consolidated 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.

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 and marketing our approved products.

To date, we have financed our operations primarily through funding received from our various collaboration agreements discussed above, 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.

To date, we have financed our operations primarily through commercial sales of TIBSOVO® funding received from our various collaboration agreements discussed above, 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.

Additionally, since inception, we have incurred significant operating losses.

Our net losses were $130.7 million and $202.9 million for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, we had an accumulated deficit of $1.6 billion.

Our net losses were $229.7 million and $309.1 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, we had an accumulated deficit of $1.7 billion.

We expect to continue to incur significant expenses and net losses until such time we are able to report profitable results.

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We expect that we will continue to incur significant expenses as we continue to advance and expand clinical development activities for our lead programs:

ivosidenib, vorasidenib, mitapivat, and AG-270;

ivosidenib, vorasidenib, mitapivat, AG-270, and AG-946;

continue to discover and validate novel targets and drug product candidates;

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Upon FDA approval of TIBSOVO® in the U.S., we began generating product revenue from sales of TIBSOVO®.

We sell TIBSOVO® to a limited number of specialty distributors and specialty pharmacy providers in the U.S., or collectively, the Customers.

We sell TIBSOVO® to a limited number of specialty distributors and specialty pharmacy providers, or collectively, the Customers.

These Customers subsequently resell TIBSOVO® to pharmacies or dispense directly to patients.

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Cost of sales consists primarily of manufacturing costs for sales of TIBSOVO®.

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 TIBSOVO® recorded during the three and six months ended June 30, 2020 and three and six months ended June 30, 2019, respectively, were expensed prior to July 20, 2018 and, therefore, are not included in costs of sales during the three and six months ended June 30, 2020 and three and six months ended June 30, 2019, respectively.

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 TIBSOVO® recorded during the three and nine months ended September 30, 2020 and three and nine months ended September 30, 2019, respectively, were expensed prior to July 20, 2018 and, therefore, are not included in costs of sales during the three and nine months ended September 30, 2020 and three and nine months ended September 30, 2019, respectively.

Research and development expenses

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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 also unable to positively predict when future net cash inflows will commence from TIBSOVO® (ivosidenib), vorasidenib, mitapivat, AG-270 or any of our other product candidates.

We are also unable to positively predict when future net cash inflows will commence from TIBSOVO® (ivosidenib), vorasidenib, mitapivat, AG-270, AG-946 or any of our other product candidates.

This is due to the numerous risks and uncertainties associated with developing medicines, including the uncertainty of:

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• 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 the clinical development activities related to our most advanced programs:

The following summarizes the clinical development activities related to our most advanced programs The timing of trial and site initiations, enrollment and data readouts may be impacted depending on the duration, scope and severity of the COVID-19 pandemic :

Ivosidenib (mutant IDH1 inhibitor)

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• AGILE, a global, registration-enabling phase 3 clinical trial, combining ivosidenib and VIDAZA® (azacitidine) in newly diagnosed AML patients with an IDH1 mutation who are ineligible for intensive chemotherapy.

The trial is enrolling patients and, due to ongoing disruptions related to the COVID-19 pandemic, we expect to complete enrollment in 2021.

• HOVON150/AMLSG29, an intergroup sponsored, global, registration-enabling phase 3 trial, supported in collaboration with Celgene, combining ivosidenib or enasidenib with standard induction and consolidation chemotherapy in frontline AML patients with an IDH1 or IDH2 mutation.

The trial is currently enrolling patients, although disruptions related to the COVID-19 pandemic slowed enrollment compared to our expectations in the first half of 2020.

The trial is enrolling patients.

Although we experienced disruptions related to the COVID-19 pandemic, we expect to complete enrollment in 2021.

• HO150/AMLSG29, an intergroup sponsored, global, registration-enabling phase 3 trial, supported in collaboration with Celgene, combining ivosidenib or enasidenib with standard induction and consolidation chemotherapy in frontline AML patients with an IDH1 or IDH2 mutation.

The trial is currently enrolling patients, although we experienced disruptions related to the COVID-19 pandemic.

• A phase 1 multicenter, open-label, dose-escalation and expansion clinical trial, designed to assess its safety, clinical activity and tolerability as a single agent in patients with advanced hematologic malignancies with an IDH1 mutation.

The trial recently reopened enrollment of its relapsed or refractory MDS arm, and due to ongoing disruptions related to the COVID-19 pandemic, we expect to complete enrollment in 2021.

The trial recently reopened enrollment of its relapsed or refractory MDS arm.

Although we experienced disruptions related to the COVID-19 pandemic, we expect to complete enrollment in 2021.

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The trial has completed enrollment.

The primary endpoint of the trial was met and, due to ongoing disruptions related to the COVID-19 pandemic, we expect to file an sNDA with the FDA for TIBSOVO® in cholangiocarcinoma in the first quarter of 2021.

The primary endpoint of the trial was met and, although we experienced disruptions related to the COVID-19 pandemic, we expect to file an sNDA with the FDA for TIBSOVO® in cholangiocarcinoma in the first quarter of 2021.

• A phase 1 multi-center, open-label clinical trial of ivosidenib in patients with advanced IDH1 mutant-positive solid tumors, including glioma.

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• INDIGO, a registration-enabling phase 3 clinical trial of vorasidenib in low-grade (grade 2) glioma with an IDH1 or IDH 2 mutation.

The trial is enrolling patients although disruptions related to the COVID-19 pandemic slowed enrollment in the first half of 2020.

The trial is enrolling patients, although we experienced disruptions related to the COVID-19 pandemic.

• DRIVE PK, a global phase 2, first-in-patient, open-label safety and efficacy clinical trial of mitapivat in adult, transfusion-independent patients with PK deficiency.

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The trial has completed enrollment.

Due to ongoing challenges in accessing clinical sites following completion of dosing as a result of the COVID-19 pandemic, we expect to report topline data from the trial between the end of 2020 and mid-2021.

Although we experienced disruptions related to the COVID-19 pandemic, we expect to report topline data from the trial in the first quarter of 2021.

• ACTIVATE, a 1:1 randomized, placebo-controlled, global, pivotal trial of mitapivat in patients with PK deficiency who do not receive regular transfusions.

The trial has completed enrollment.

Although we experienced disruptions related to the COVID-19 pandemic, we expect to report topline data from the trial by the end of 2020.

• A phase 2, open-label safety and efficacy clinical trial of mitapivat in adult patients with non-transfusion-dependent thalassemia.

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• In collaboration with the National Institutes of Health, or NIH, we are evaluating mitapivat in a phase 1 trial in patients with sickle cell disease pursuant to a cooperative research and development agreement.

New enrollment has been paused during the COVID-19 pandemic.

The trial is ongoing and enrolling patients, although the NIH experienced disruptions related to the COVID-19 pandemic.

Targeting MAT2A for the treatment of MTAP-deleted cancers

• A phase 1 trial in multiple tumor types carrying an MTAP deletion.

The first part of the trial, which is complete, is a single agent dose-escalation phase in which cohorts of patients received ascending doses of AG-270 to determine the pharmacokinetics, pharmacodynamics and optimal dose, and schedule.

The next phase of development, which was initiated in September 2019, is evaluating AG-270 in combination with taxanes in two areas of high unmet needs.

One arm of the study will test AG-270 in combination with docetaxel in MTAP-deleted non-small cell lung cancer and the other arm will test AG-270 in combination with nab-paclitaxel and gemcitabine in MTAP-deleted pancreatic ductal adenocarcinoma.

Both combination arms have initiated and are enrolling patients.

The first part of the trial, is a dose-escalation of AG-270 and is complete.

The next phase of development consists of two arms evaluating AG-270 in combination with taxanes.

One arm of the study will test AG-270 in combination with docetaxel in MTAP-deleted non-small cell lung

cancer and the other arm will test AG-270 in combination with nab-paclitaxel and gemcitabine in MTAP-deleted pancreatic ductal adenocarcinoma.

Both combination arms are enrolling patients, although we experienced disruptions related to the COVID-19 pandemic.

Targeting DHODH for the treatment of hematologic malignancies

• A phase 1 dose-escalation trial of AG-636 in subjects with advanced lymphoma.

In the first quarter of 2020, we made the decision to halt internal development of AG-636, due to limited enrollment in this study, and will wind down the study during 2020.

In the first quarter of 2020, we made the decision to halt internal development of AG-636, due to limited enrollment in this trial, and will wind down the trial during 2020.

Next-generation PKR Activator

• We plan to initiate a phase 1 study of AG-946 in healthy volunteers in the third quarter of 2020.

• A phase 1 trial of AG-946 in healthy volunteers and in patients with SCD.

The trial is currently enrolling healthy volunteers, although we experienced disruptions related to the COVID-19 pandemic.

Other research and platform programs

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Certain prior-year amounts have been reclassified to conform with current presentation.

Comparison of the three and six months ended June 30, 2020 and 2019

Comparison of the three and nine months ended September 30, 2020 and 2019

Total Revenue

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

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Total revenue $ 34,706 $ 26,024 $ 159,151 $ 82,472

Total Revenue - Second Quarter of 2020 vs.

Second Quarter of 2019 - The increase in total revenue of $11.1 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to an increase in product revenue of $13.9 million driven by increased sales volume of TIBSOVO®.

Total Revenue - Six Months ended June 30, 2020 vs.

Six Months ended June 30, 2019 - The increase in total revenue of $68.0 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to an increase in collaboration revenue - related party of $38.9 million and an increase in product revenue of $27.4 million.

The increase in collaboration revenue - related party for the 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.

The increase in product revenue is primarily the result of increased sales volume of TIBSOVO®.

Total Revenue - Third Quarter of 2020 vs.

Third Quarter of 2019 - The increase in total revenue of $8.7 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 was primarily due to an increase in product revenue of $14.3 million, partially offset by a decrease in collaboration revenue - related party of $4.3 million.

The increase in product revenue was driven by increased sales volume of TIBSOVO®.

The decrease in collaboration revenue - related party was due to the completion of the performance obligation under the 2016 Agreement in the second quarter of 2020.

Total Revenue - Nine Months ended September 30, 2020 vs.

Nine Months ended September 30, 2019 - The increase in total revenue of $76.7 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily due to an increase in in product revenue of $41.7 million and an increase in collaboration revenue - related party of $34.6 million.

The increase in collaboration revenue - related party for the nine months ended September 30, 2020 was 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.

The increase in product revenue was primarily the result of increased sales volume of TIBSOVO®.

Total Operating Expenses

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

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Total Operating Expenses $ 125,033 $ 135,084 $ 382,866 $ 402,876

Total Operating Expenses - Second Quarter of 2020 vs.

Second Quarter of 2019 - The decrease in total operating expenses of $12.5 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due a decrease in research and development expenses of $16.5 million which is described below under Research and Development Expenses.

We expect cost of sales to increase moderately in 2020 as we have depleted our finished goods inventory that was expensed prior to receiving FDA approval of TIBSOVO®.

Total Operating Expenses - Six Months ended June 30, 2020 vs.

Six Months ended June 30, 2019 - The decrease in total operating expenses of $10.0 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to a decrease in research and development expenses of $20.8 million which is described below under Research and Development Expenses partially offset by an increase in selling, general and administrative expense of $10.3 million due to higher personnel costs, including stock-based compensation expense, related to additional hiring for our workforce.

We expect cost of sales to increase moderately in 2020 as we have depleted our finished goods inventory that was expensed prior to receiving FDA approval of TIBSOVO®.

Total Operating Expenses - Third Quarter of 2020 vs.

Third Quarter of 2019 - The decrease in total operating expenses of $10.1 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 was primarily due a decrease in research and development expenses of $12.1 million which is described below under Research and Development Expenses.

Cost of sales has increased moderately in 2020 as we have depleted our finished goods inventory that was expensed prior to receiving FDA approval of TIBSOVO®.

Total Operating Expenses - Nine Months ended September 30, 2020 vs.

Nine Months ended September 30, 2019 - The decrease in total operating expenses of $20.0 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily due to a decrease in research and development expenses of $32.9 million which is described below under Research and Development Expenses partially offset by an increase in selling, general and administrative expense of $12.1 million due to higher personnel costs, including stock-based compensation expense, related to additional hiring for our workforce.

Cost of sales has increased moderately in 2020 as we have depleted our finished goods inventory that was expensed prior to receiving FDA approval of TIBSOVO®.

Research and Development Expenses

Our research and development expenses, by major program, are outlined in the table below:

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

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Total research and development expense $ 89,555 $ 101,672 $ 271,728 $ 304,646

Total Research and development Expenses - Second Quarter of 2020 vs.

Second Quarter of 2019 - The decrease in total research and development expenses of $16.5 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to a $6.4 million decrease in ivosidenib costs and and a $5.0 million decrease in other research and platform programs, partially offset by a $1.9 million increase in our compensation and related expenses.

The decrease in ivosidenib costs was primarily due to decreased trial activities as a result of slowed enrollment due to the COVID-19 pandemic and decreased clinical costs driven by $1.0 million in milestones achieved by HOVON during the three months ended June 30, 2019 for the initiation of the HO150/AMLSG29 trial.

The decrease in other research and platform programs was primarily driven by planned decreased activity on various exploratory and discovery activities and a $4.0 million upfront payment for exploratory efforts in the second quarter of 2019.

The increase in compensation and related expenses was primarily due to additional hiring during the three months ended June 30, 2020 to support increased clinical program activity, partially offset by reduced employee travel related expenses due to restrictions and reduced industry engagement during the COVID-19 pandemic.

Total Research and development Expenses - Six Months ended June 30, 2020 vs.

Six Months ended June 30, 2019 - The decrease in total research and development expenses of $20.8 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to a $13.6 million decrease in ivosidenib costs and a $5.5 million decrease in other research and platform programs, partially offset by a $3.5 million increase in our compensation and related expenses.

The decrease in ivosidenib costs was primarily due to decreased trial activities as a result of slowed enrollment due to the COVID-19 pandemic and decreased clinical costs driven by $4.2 million in milestones achieved by HOVON during the six months ended June 30, 2019 for the initiation of the HO150/AMLSG29 trial.

Total Research and Development Expenses - Third Quarter of 2020 vs.

Third Quarter of 2019 - The decrease in total research and development expenses of $12.1 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 was primarily due to a $6.6 million decrease in ivosidenib costs.

The decrease in ivosidenib costs was primarily due to decreased trial activities for the ClarIDHy trial and decreased clinical costs driven by $1.1 million in milestones achieved by HOVON during the three months ended September 30, 2019 for the initiation of the HO150/AMLSG29 trial.

Total Research and Development Expenses - Nine Months ended September 30, 2020 vs.

Nine Months ended September 30, 2019 - The decrease in total research and development expenses of $32.9 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily due to a $20.3 million decrease in ivosidenib costs, a $5.8 million decrease in other research and platform programs, and a $4.6 million decrease in AG-636 costs.

The decrease in ivosidenib costs was primarily due to decreased trial activities for the ClarIDHy trial and decreased clinical costs driven by $5.3 million in milestones achieved by HOVON during the nine months ended September 30, 2019 for the initiation of the HO150/AMLSG29 trial.

The increase in compensation and related expenses was primarily due to additional hiring during the six months ended June 30, 2020 to support increased clinical program activity, partially offset by reduced employee travel related expenses due to restrictions and reduced industry engagement during the COVID-19 pandemic.

The decrease in AG-636 costs was primarily due to the decision to halt internal development of AG-636 in the first quarter of 2020 due to limited enrollment, and a $2.0 million milestone due to Aurigene upon first patient dosing within the phase 1 lymphoma trial in in the second quarter of 2019.

Interest Income and Expense

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

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Non-cash interest expense for the sale of future revenue (9,767) — (11,818) —

Interest Income and Non-cash interest expense for the sale of future revenue- Second Quarter of 2020 vs.

Second Quarter of 2019 - The change in interest income, net is primarily attributable to the decrease in our outstanding marketable securities and changes in interest rates earned on our marketable securities recorded in the three months ended June 30, 2020.

The change in non-cash interest expense for the sale of future revenue is due to the interest expense associated with the sale of future revenue recorded in the three months ended June 30, 2020.

Interest Income and Non-cash interest expense for the sale of future revenue- Six Months ended June 30, 2020 vs.

Six Months ended June 30, 2019 - The change in interest income, net is primarily attributable to the decrease in our outstanding marketable securities and changes in interest rates earned on our marketable securities in the six months ended June 30, 2020.

The change in non-cash interest expense for the sale of future revenue is due to the interest expense associated with the sale of future revenue recorded in the six months ended June 30, 2020.

Interest Income and Non-Cash Interest Expense for the Sale of Future Revenue- Third Quarter of 2020 vs.

Third Quarter of 2019 - The change in interest income, net is primarily attributable to the decrease in interest rates at the end of the first quarter of 2020, which reduced the interest rates earned by 0.50% to 1.50% from prior periods and the decrease in our outstanding marketable securities balance for the three months ended September 30, 2020.

The change in non-cash interest expense for the sale of future revenue was due to the interest expense associated with the sale of future revenue recorded in the three months ended September 30, 2020.

Interest Income and Non-Cash Interest Expense for the Sale of Future Revenue- Nine Months ended September 30, 2020 vs.

Nine Months ended September 30, 2019 - The change in interest income, net is primarily attributable to the decrease in interest rates at the end of the first quarter of 2020, which reduced the interest rates earned by 0.50% to 1.50% from prior periods and the decrease in our outstanding marketable securities balance for the nine months ended September 30, 2020.

The change in non-cash interest expense for the sale of future revenue was due to the interest expense associated with the sale of future revenue recorded in the nine months ended September 30, 2020.

Loss from Operations and Net Loss

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

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

Loss from Operations and Net Loss – Second Quarter of 2020 vs.

Second Quarter of 2019 – The decrease in loss from operations and net loss for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily driven by higher total revenue as described above in Total Revenue and by lower total expenses as described above in Total Operating Expenses.

Loss from Operations and Net Loss – Six Months ended June 30, 2020 vs.

Six Months ended June 30, 2019 – The decrease in loss from operations and net loss for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily driven by higher total revenue as described above in Total Revenue and by lower total expenses as described above in Total Operating Expenses.

Loss from Operations and Net Loss – Third Quarter of 2020 vs.

Third Quarter of 2019 – The decrease in loss from operations and net loss for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 was primarily driven by higher total revenue as described above in Total Revenue and by lower total expenses as described above in Total Operating Expenses.

Loss from Operations and Net Loss – Nine Months ended September 30, 2020 vs.

Nine Months ended September 30, 2019 – The decrease in loss from operations and net loss for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily driven by higher total revenue as described above in Total Revenue and by lower total expenses as described above in Total Operating Expenses.

Liquidity and Capital Resources

Sources of liquidity

Since our inception, and through June 30, 2020, we have funded our operations through commercial sales of TIBSOVO®, upfront, milestone, extension, cost reimbursement and royalty payments related to our collaboration agreements, product sales, proceeds received from our issuance of preferred stock, our initial public offering and concurrent private placement of common stock to an affiliate of Celgene, and our follow-on public offerings.

Since our inception, and through September 30, 2020, we have funded our operations through commercial sales of TIBSOVO®, upfront, milestone, extension, cost reimbursement and royalty payments related to our collaboration agreements, product sales, proceeds received from our issuance of preferred stock, our initial public offering and concurrent private placement of common stock to an affiliate of Celgene, and our follow-on public offerings.

On April 30, 2020, we entered into an at-the-market sales agreement, or the 2020 sales agreement, with Cowen & Company LLC, or Cowen, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $250.0 million through Cowen pursuant to a universal shelf registration statement on Form S-3 filed with the SEC on April 30, 2020.

As of June 30, 2020, $250.0 million in common stock remained available for future issuance under the 2020 sales agreement.

As of September 30, 2020, $250.0 million in common stock remained available for future issuance under the 2020 sales agreement.

On June 11, 2020, we sold our tiered, sales-based royalty rights on worldwide net sales of IDHIFA® (enasidenib), as well as our rights to receive up to $55.0 million in outstanding regulatory milestone payments from BMS, to RPI for $255.0 million.

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

In addition to our existing cash, cash equivalents and marketable securities, which included the $255.0 million proceeds from RPI received in the second quarter of 2020, we are eligible to earn milestone payments, cost reimbursements, and royalty payments under our collaboration agreements with Celgene and CStone.

In addition to our existing cash, cash equivalents and marketable securities, we are eligible to earn milestone payments, cost reimbursements, and royalty payments under our collaboration agreements with Celgene and CStone.

Our ability to earn the milestone payments, cost reimbursements and royalty payments, and the timing of earning these amounts are dependent upon the timing and outcome of our development, regulatory and commercial activities, and is uncertain at this time.

Our right to payments under our collaboration agreements with Celgene and CStone are our only committed potential external source of funds.

The following table provides information regarding our cash flows for the six months ended June 30, 2020 and 2019:

Six Months Ended June 30,

The following table provides information regarding our cash flows for the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

(In thousands) 2020 2019

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Net cash used in operating activities .

During the six months ended June 30, 2020, we received $52.3 million from sales of TIBSOVO®, $6.3 million in royalty payments and $3.3 million in cost reimbursements and related to our Collaboration Agreements with Celgene, $4.8 million in interest received, and $1.8 million in cost reimbursement related to our Collaboration agreement with CStone.

These amounts were offset by decreased operating expenses driven by lower research and development costs described above in Research and Development Expenses partially offset by increased staffing needs due to our expanding operations.

During the six months ended June 30, 2019, we received $22.7 million from sales of TIBSOVO® and $8.8 million in cost reimbursements and royalty payments under our Collaboration Agreements with Celgene.

These amounts were offset by increased operating expenses which relate to increases in clinical study costs due to advancements in our most advanced product candidates, commercialization efforts, expanded facilities and increased staffing needs due to our expanding operations.

During the nine months ended September 30, 2020, we received $83.3 million from sales of TIBSOVO®, $7.9 million in royalty payments and $4.7 million in cost reimbursements related to our Collaboration Agreements with Celgene, $6.1 million in interest received, and $2.7 million in cost reimbursements related to our CStone Agreement.

These amounts were offset by operating expenses driven by research and development costs described above in Research and Development Expenses and increased staffing needs due to our expanding operations.

During the nine months ended September 30, 2019, we received $41.3 million from sales of TIBSOVO® and $14.3 million in cost reimbursements and royalty payments under our Collaboration Agreements with Celgene.

These amounts were offset by increased operating expenses which relate to increases in clinical trial costs due to advancements in our most advanced product candidates, commercialization efforts, expanded facilities and increased staffing needs due to our expanding operations.

Net cash provided by investing activities .

Cash provided by investing activities for the six months ended June 30, 2020 was primarily the result of higher proceeds from maturities and sales of marketable securities than purchases of marketable securities, offset by $8.7 million in purchases of property and equipment.

Cash provided by investing activities for the six months ended June 30, 2019 was primarily the result of higher proceeds from maturities and sales of marketable securities than purchases of marketable securities, offset by $3.3 million in purchases of property and equipment.

Cash provided by investing activities for the nine months ended September 30, 2020 was primarily the result of higher proceeds from maturities and sales of marketable securities than purchases of marketable securities, offset by $13.9 million in purchases of property and equipment.

Cash provided by investing activities for the nine months ended September 30, 2019 was primarily the result of higher proceeds from maturities and sales of marketable securities than purchases of marketable securities, offset by $5.3 million in purchases of property and equipment.

Net cash provided by financing activities .

Cash provided by financing activities for the six months ended June 30, 2020 was primarily the result of net proceeds of $250.5 million from the sale of our tiered, sales-based royalty rights on worldwide net sales of IDHIFA® (enasidenib) and our ex-US regulatory milestones to RPI in June 2020, and the $7.1 million of proceeds received from stock option exercises and purchases made pursuant to our 2013 ESPP.

Cash provided by financing activities for the six months ended June 30, 2019 was primarily the result of the $8.7 million of proceeds received from stock option exercises and purchases made pursuant to our 2013 ESPP.

Cash provided by financing activities for the nine months ended September 30, 2020 was primarily the result of net proceeds of $250.5 million from the sale of our tiered, sales-based royalty rights on worldwide net sales of IDHIFA® (enasidenib) and our ex-US regulatory milestones to RPI in June 2020, and the $10.6 million of proceeds received from stock option exercises and purchases made pursuant to our 2013 ESPP.

Cash provided by financing activities for the nine months ended September 30, 2019 was primarily the result of the $12.0 million of proceeds received from stock option exercises and purchases made pursuant to our 2013 ESPP.

Funding requirements

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Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

We expect that our existing cash, cash equivalents and marketable securities as of June 30, 2020, together with anticipated product revenue, anticipated interest income and anticipated expense reimbursements under our collaboration and license agreements, but excluding any additional program-specific milestone payments, will enable us to fund our operating expenses and capital expenditure requirements through the end of December 2022.

We expect that our existing cash, cash equivalents and marketable securities as of September 30, 2020, together with anticipated product revenue, anticipated interest income and anticipated expense reimbursements under our collaboration and license agreements, but excluding any additional program-specific milestone payments, will enable us to fund our operating expenses and capital expenditure requirements to the end of 2022.

Our future capital requirements will depend on many factors, including:

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• our ability to establish and maintain additional collaborations on favorable terms, if at all;

• our ability to successfully execute on our strategic plans;

• operational delays due to the ongoing COVID-19 pandemic;

• the extent to which we acquire or in-license other medicines and technologies.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements.

• the extent to which we acquire or in-license, or monitor or out-license, other medicines and technologies.

We do not have any committed potential external source of funds other than our collaborations.

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Contractual Obligations

We have entered into agreements in the normal course of business with CROs for clinical trials and CMOs for supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes.

We have entered into agreements in the normal course of business with CROs for clinical trials and contract manufacturing organization for supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes.

These contractual obligations are cancelable at any time by us, generally upon prior written notice to the vendor.

During the six months ended June 30, 2020, except for the minimum rental commitments disclosed in Note 6, Leases , to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q, there were no significant changes to our contractual obligations and commitments described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2019.

During the nine months ended September 30, 2020, there were no significant changes to our contractual obligations and commitments described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2019.

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 2. Management’s Discussion and Analysis