What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-02-25 compared with 2020-02-19 · 293 added, 199 removed, 1189 unchanged (29% of the section changed)

8 unchanged sentences

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting.

Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and

the preparation of financial statements for external purposes in accordance with U.S.

Our internal control over financial reporting includes those policies and procedures that:

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The information required by this Item 13 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

Principal Accounting Fees and Services

Principal Accountant Fees and Services

The information required by this Item 14 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

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Date of Filing Exhibit

2.1+ Purchase and Sale Agreement, dated as of December 20, 2020, by and among the Registrant, Servier Pharmaceuticals, LLC, and, solely for purposes of guaranteeing certain obligations of the Purchaser, Servier S.A.S

8-K 001-36014 December 22, 2020 2.1

3.1 Restated Certificate of Incorporation of the Registrant

4 unchanged sentences

S-1 333-189216 June 24, 2013 4.1

4.2 Second Amended and Restated Investor Rights Agreement dated as of November 16, 2011

S-1 333-189216 June 10, 2013 4.2

4.2 Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934

10-K 001-36014 February 19, 2020 4.3

10.1# 2007 Stock Incentive Plan

12 unchanged sentences

S-1 333-189216 June 24, 2013 10.7

10.8# Letter Agreement, dated as of July 22, 2010, between the Registrant and Scott Biller, Ph.D.

S-1 333-189216 July 11, 2013 10.10

Description of Exhibit Incorporated by Reference Filed

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10.34# Letter Agreement, dated as of September 17, 2019, between the Registrant and Jonathan Biller

10-K 001-36014 February 19, 2020 10.35

10.35# Letter Agreement, dated as of October 7, between the Registrant and Bruce Car

10-Q 001-36014 April 30, 2020 10.1

10.36† Amendment to Master Research and Collaboration Agreement, dated as of February 5, 2020, by and among the Registrant, Celgene Corporation and Celgene RIVOT Ltd

10-Q 001-36014 April 30, 2020 10.2

10.37† Amendment I to License Agreement, dated as of March 2, 2020, by and between the Registrant and CStone Pharmaceuticals

10-Q 001-36014 April 30, 2020 10.3

10.38† Amendment II to License Agreement, dated as of March 2, 2020, by and between the Registrant and CStone Pharmaceuticals

10-Q 001-36014 April 30, 2020 10.4

10.39 Sales Agreement, dated April 30, 2020, by and between the Registrant and Cowen and Company, LLC

S-3ASR 333-237930 April 30, 2020 1.2

Description of Exhibit Incorporated by Reference Filed

Date of Filing Exhibit

10.40† Royalty Purchase Agreement, dated as of June 11, 2020, by and between the Registrant and RPI 2019 Intermediate Finance Trust

10-Q 001-36014 July 30, 2020 10.2

21.1 Subsidiaries of the Registrant

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§1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Description of Exhibit Incorporated by Reference Filed

Date of Filing Exhibit

101.INS XBRL Instance Document X

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† Confidential treatment has been granted as to certain portions, which portions have been omitted and filed separately with the Securities and Exchange Commission.

+ Pursuant to Item 601(6)(2) of Regulation S-K, the disclosure schedules to the Purchase Agreement (identified therein) have been omitted from this Current Report on Form 8-K and will be furnished to the SEC supplementally upon request.

* This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liability of that section.

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February 25, 2021

/s/ Andrew Hirsch Chief Financial Officer

/s/ Jonathan Biller Chief Financial Officer and Head of Legal and Corporate Affairs

(Principal financial officer)

February 25, 2021

Andrew Hirsch

Jonathan Biller

/s/ Carman Alenson Vice President of Accounting, Treasury and Tax

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue recognition – Celgene Collaboration Agreement Research and Development Services Recognized Under an Input Method

As described in Notes 2 and 11 to the consolidated financial statements, the Company recognizes revenue arising from collaboration agreements with Celgene.

A significant portion of revenue generated from the Company’s collaboration agreements with Celgene relates to the provision of research and development services whereby revenue is recognized under an input method using the ratio of effort incurred to date compared to the total estimated effort required to complete the performance obligation.

The calculation of the total estimated effort includes the total amount of forecasted costs associated with the completion of discovery, pre-clinical or clinical trials, as well as the assumed timing of these activities and estimated patient populations.

Such cost estimates include forecasted direct labor and material costs, subcontractor costs, and external contract research organization costs.

Research and development services revenue recognized from the collaboration with Celgene were $36.0 million during the year-ended December 31, 2019.

The principal considerations for our determination that performing procedures relating to revenue recognition – Celgene collaboration agreement research and development services recognized under an input method – is a critical audit matter are there was significant judgment and estimation by management in determining the total estimated effort required to complete the performance obligation, specifically the estimation of forecasted direct labor and material costs, and external contract research organization costs.

This in turn led to a high degree of auditor judgment, effort and subjectivity in performing procedures and in evaluating audit evidence relating to the cost estimates made by management.

Liability related to sale of future revenue

As described in Notes 3 and 10 to the consolidated financial statements, on June 11, 2020 the Company sold its tiered, sales-based royalty rights on worldwide net sales of IDHIFA®, as well as rights to receive up to $55 million in regulatory milestone payments from Bristol Myers Squibb to Royalty Pharma (“RPI”) for $255 million.

Management accounted for the sale of future revenue to RPI as a debt financing, as the Company continues to have significant continuing involvement in the generation of the cash flows.

Management applied significant judgment in determining the appropriate accounting treatment for the transaction.

The liability related to sale of future revenue and the related interest expense are based on Management’s current estimates of future royalties expected to be paid over the life of the arrangement.

Management periodically assesses the expected royalty payments using forecasts from external sources.

Th e Company recognized non-cash interest expense for the sale of future revenue of $17.8 million for the year ended December 31, 2020, and the liability related to the sale of future revenue was $261.3 million as of December 31, 2020.

The principal considerations for our determination that performing procedures relating to the liability related to the sale of future revenue is a critical audit matter are the significant judgment by management in determining the appropriate accounting for the transaction and the valuation of the liability related to sale of future revenue.

This in turn led to a high degree of auditor judgment, effort, and subjectivity in performing procedures and evaluating management’s determination of the accounting for the transaction and the assumption related to the current estimates of future royalties expected to be paid over the life of the arrangement.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the revenue recognized for research and development services, controls over the costs incurred to date for each performance obligation, and controls over the inputs and assumptions used to estimate the total effort required to complete each performance obligation.

These procedures also included, among others, testing the actual costs incurred to date for each identified performance obligation, and evaluating and testing management’s process for estimating total costs to complete each performance obligation which included evaluating the reasonableness of management’s estimates of total forecasted direct labor and materials costs and total external contract research organization costs.

Evaluating the reasonableness of the assumptions used involved evaluating the appropriateness of changes to management’s estimates of total costs to complete and performing a comparison of management’s prior period cost estimates to actual costs incurred.

These procedures included testing the effectiveness of controls relating to management’s determination of the accounting treatment for the transaction, as well as controls over the development of the assumption related to the current estimates of future royalties expected to be paid over the life of the arrangement.

These procedures also included, among others, evaluating whether the transaction has been properly accounted for in accordance with the relevant accounting standards, testing management’s process for determining the valuation of the liability related to the sale of future revenue, testing the completeness and accuracy of underlying data used in determining the valuation of the liability, and evaluating the significant assumption used by management related to the current estimate of future royalties expected to be paid over the life of the arrangement.

Evaluating management’s assumption related to the current estimate of future royalties expected to be paid over the life of the arrangement involved evaluating whether the assumption used by management was reasonable considering the terms of the agreement, consistency with external market and industry data, and consistency with evidence obtained in other areas of the audit.

/s/ PricewaterhouseCoopers LLP

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Operating lease liabilities 7,093 6,642

Deferred rent — 766

Financing lease liabilities 317 273

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Operating lease liabilities, net of current portion 97,458 106,074

Deferred rent, net of current portion — 17,608

Financing lease liabilities, net of current portion 331 673

Liability related to the sale of future revenue, net of debt issuance costs 261,269 —

Total liabilities 453,452 250,213

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Additional paid-in capital 2,242,801 2,156,363

Accumulated other comprehensive income (loss) 202 ( 2,171 )

Accumulated other comprehensive income 105 202

Accumulated deficit ( 1,843,475 ) ( 1,516,105 )

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Research and development 367,470 410,894 341,324

410,894 341,324 292,681

Selling, general and administrative 149,070 132,034 114,145

2 unchanged sentences

Interest income, net 6,611 14,861 16,451

Non-cash interest expense for the sale of future revenue ( 17,832 ) — —

Net loss $ ( 327,370 ) $ ( 411,472 ) $ ( 346,028 )

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Weighted-average number of common shares used in computing net loss per share – basic and diluted 68,997,879 59,994,539 57,418,300

(1) Total research and development expenses are net of cost reimbursements from related party of $ 0 , $ 0 , and $ 7,811 for the years ended December 31, 2019, 2018 and 2017, respectively.

See accompanying Notes to Consolidated Financial Statements.

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Net loss $ ( 327,370 ) $ ( 411,472 ) $ ( 346,028 )

Other comprehensive income (loss):

Unrealized gain (loss) on available-for-sale securities 2,373 ( 782 ) ( 1,076 )

Other comprehensive (loss) income:

Unrealized (loss) gain on available-for-sale securities ( 97 ) 2,373 ( 782 )

Comprehensive loss $ ( 327,467 ) $ ( 409,099 ) $ ( 346,810 )

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Net loss — — — — ( 346,028 ) ( 346,028 )

Adjustment to beginning accumulated deficit resulting from adoption of ASC 606 — — — — 39,456 39,456

Stock-based compensation expense — — 73,357 — — 73,357

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Balance at December 31, 2018 58,218,653 $ 58 $ 1,794,283 $ ( 2,171 ) $ ( 1,104,633 ) $ 687,537

Unrealized loss on available-for-sale securities — — — ( 782 ) — ( 782 )

Unrealized gain on available-for-sale securities — — — 2,373 — 2,373

Net loss — — — — ( 411,472 ) ( 411,472 )

Adjustment to beginning accumulated deficit resulting from adoption of ASC 606 — — — — 39,456 39,456

Stock-based compensation expense — — 72,373 — — 72,373

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Balance at December 31, 2019 68,401,105 $ 68 $ 2,156,363 $ 202 $ ( 1,516,105 ) $ 640,528

Unrealized gain on available-for-sale securities — — — 2,373 — 2,373

Unrealized loss on available-for-sale securities — — — ( 97 ) — ( 97 )

Net loss — — — — ( 327,370 ) ( 327,370 )

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Stock-based compensation expense 75,122 72,373 73,357

Net accretion of discount on marketable securities ( 3,195 ) ( 3,837 ) ( 11 )

Net amortization of premium (accretion of discount) on marketable securities 3,022 ( 3,195 ) ( 3,837 )

Loss on disposal of property and equipment — 1,052 20

Non-cash operating lease expense 8,982 8,532 —

Non-cash interest expense associated with the sale of future revenue 17,832 — —

Non-cash royalty revenue ( 7,294 ) — —

Changes in operating assets and liabilities:

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Reimbursement (payment) of public offering costs — — ( 391 )

Proceeds from the sale of future revenue, net of issuance costs 250,537 — —

Net proceeds from stock option exercises and employee stock purchase plan 11,317 12,523 30,209

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References to Agios

Throughout this Annual Report on Form 10-K, “we,” “us,” and “our,” and similar expressions, except where the context requires otherwise, refer to Agios Pharmaceuticals, Inc.

Throughout this Annual Report on Form 10-K, “the Company,” “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.

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.

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.

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 in the areas of genetically defined diseases, or GDDs, and, until the completion of the sale of our oncology business to Servier as described below, hematologic malignancies and solid tumors.

To address our 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.

We are located in Cambridge, Massachusetts.

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Food and Drug Administration, or FDA-approved therapy for the treatment of adult patients with (i) relapsed or refractory acute myeloid leukemia, or R/R AML, with a susceptible IDH1 mutation as detected by an FDA-approved test (approved by the FDA in July 2018) and (ii) 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 (approved by the FDA in May 2019).

In December 2018, we submitted an Marketing Authorization Application, or MAA, to the European Medicines Agency, or EMA, for TIBSOVO® for the treatment of adult patients with R/R AML with an IDH1 mutation.

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 with an IDH1 mutation.

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.

Our other marketed product is IDHIFA® (enasidenib), an oral targeted inhibitor of the mutated isocitrate dehydrogenase 2, or IDH2 enzyme and the first and only FDA-approved therapy for patients with R/R AML and an IDH2 mutation.

In August 2017, the FDA granted our collaboration partner Celgene approval of IDHIFA® for the treatment of adult patients with R/R AML and an IDH2, mutation as detected by an FDA-approved test.

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.

We were 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.

In June 2018, Celgene submitted an MAA to the EMA for IDHIFA® for IDH2 mutant-positive AML which it subsequently withdrew in December 2019.

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

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 and AG-270.

Vorasidenib is an orally available, selective brain-penetrant pan-IDH mutant inhibitor.

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AG-636 is an inhibitor of the metabolic enzyme dihydroorotate dehydrogenase, or DHODH.

We are currently evaluating AG-636 in the phase 1 dose-escalation trial in lymphoma.

The lead product candidate in our RGD portfolio, mitapivat, is an activator of both wild-type and mutant pyruvate kinase-R for the potential treatment of hemolytic anemias.

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 continue to wind down the trial during 2021.We are currently evaluating AG-636 in the phase 1 dose-escalation trial in lymphoma.

The lead product candidate in our GDD portfolio, mitapivat, is an activator of both wild-type and mutant pyruvate kinase-R for the potential treatment of hemolytic anemias.

We are currently evaluating mitapivat for the treatment of pyruvate kinase, or PK, deficiency, thalassemia and sickle cell disease, or SCD, in clinical trials.

In addition to the aforementioned development programs, we are seeking to advance a number of early-stage discovery programs in our focus areas of malignant hematology, solid tumors and RGDs based on our scientific leadership in the field of cellular metabolism and adjacent areas of biology.

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

In addition to the aforementioned development programs, we are seeking to advance a number of early-stage discovery programs in our focus areas of GDDs, malignant hematology and solid tumors 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.

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.

Under the 2010 Agreement, we remain eligible to receive a $ 25.0 million potential milestone payment for the enasidenib program.

The potential payment is a $ 25.0 million milestone payment upon achievement of a specified ex-U.S.

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

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 December 31, 2020, $ 250.0 million in common stock remained available for future issuance under the 2020 sales agreement.

In November 2019, we completed a public offering of 8,250,000 shares of common at an offering price of $ 31.00 per share.

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If the Company is unable to raise additional funds through equity or debt financings, the Company may be required to delay, limit, reduce or terminate product development or future commercialization efforts or grant rights to develop and market products or product candidates that the Company would otherwise prefer to develop and market itself.

Proposed Sale of Oncology Business to Servier Pharmaceuticals, LLC (Servier)

On December 20, 2020, we entered into a Purchase and Sale Agreement, or the Purchase Agreement, with Servier.

The Purchase Agreement provides for the sale of our commercial, clinical and research-stage oncology portfolio assets and pipeline, or oncology business, for a payment of $ 1.8 billion in cash at the closing, subject to certain adjustments for working capital of the oncology business at the closing and amounts for a representation and warranty insurance policy, 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 U.S.

Food and Drug Administration, or 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, or IDH1 or IDH2, 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 of TIBSOVO® and a royalty of 15 % of U.S.

net sales of vorasidenib from the first commercial sale of vorasidenib through loss of exclusivity of vorasidenib.

The transaction includes the proposed sale of our oncology business, including TIBSOVO®, our clinical-stage product candidates vorasidenib, AG-270 and AG-636, and our oncology research programs.

Servier will also acquire our co-commercialization rights for Bristol Myers Squibb’s IDHIFA®, the $ 25.0 million potential milestone payment, and conduct certain clinical development activities within the IDHIFA® development program.

The proposed sale has been approved by our Board of Directors.

The parties’ obligations to consummate the proposed sale are subject to customary conditions, including the approval of the sale by the holders of at least a majority of our outstanding shares of common stock, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of required regulatory approvals in Germany.

Subject to certain exceptions, we and Servier have agreed to use reasonable best efforts to cause the sale to be completed.

The Purchase Agreement includes certain termination provisions for both Servier and us and provides that, in connection with a

termination of the Purchase Agreement under specified circumstances, we may be required to pay Servier a termination fee of $ 45 million.

We currently expect to complete the transaction at the end of the first quarter of or in the beginning of the second quarter of 2021.

Summary of Significant Accounting Policies

Principles of consolidation

The consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries, Agios Securities Corporation, Agios International Sarl, Agios Germany GmbH, Agios Netherlands B.V., and Agios Limited.

All intercompany transactions have been eliminated in consolidation.

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GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

Actual results could differ from those estimates.

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 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.

Actual results may differ from these estimates.

Cash and cash equivalents

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Marketable securities

Marketable securities at December 31, 2019 and 2018 consisted of investments in certificates of deposit, U.S.

Marketable securities at December 31, 2020 and 2019 consisted of investments in U.S.

Treasuries, government securities and corporate debt securities.

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We classify our marketable securities as available-for-sale pursuant to Accounting Standards Codification, or ASC, 320, Investments – Debt and Equity Securities .

Marketable securities are recorded at fair value, with unrealized gains and losses included as a component of accumulated other comprehensive loss in stockholders’ equity and a component of total comprehensive loss in the consolidated statements of comprehensive loss, until realized.

Marketable securities are recorded at fair value.

Unrealized gains are included as a component of accumulated other comprehensive income in the consolidated balance sheets and statements of stockholders’ equity and a component of total comprehensive loss in the consolidated statements of comprehensive loss, until realized.

Realized gains and losses are included in investment income on a specific-identification basis.

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(i) have a maturity of one to two years , and (ii) we do not intend to liquidate within the next twelve months , although these funds are available for use and therefore classified as available-for-sale.

We review marketable securities for other-than-temporary impairment whenever the fair value of a marketable security is less than the amortized cost and evidence indicates that a marketable security’s carrying amount is not recoverable within a reasonable period of time.

Other-than-temporary impairments of investments are recognized in the consolidated statements of operations if we experience a credit loss, have the intent to sell the marketable security, or if it is more likely than not that we will be required to sell the marketable security before recovery of the amortized cost basis.

Evidence considered in this assessment includes reasons for the impairment, compliance with our investment policy, the severity and the duration of the impairment, and changes in value subsequent to the end of the period.

We review marketable securities for impairment whenever the fair value of a marketable security is less than the amortized cost and evidence indicates that a marketable security’s carrying amount is not recoverable.

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 balance sheet with a corresponding adjustment to earnings, and noncredit-related impairment is recognized in other comprehensive income, net of taxes.

Evidence considered in this assessment includes reasons for the impairment, compliance with our investment policy, the severity of the impairment, collectibility of the security, and any adverse conditions specifically related to the security, an industry, or geographic area.

Fair value measurements

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Concentrations of credit risk with respect to receivables, which are typically unsecured, are somewhat mitigated due to the number of customers using our products.

Our trade receivables arise from product sales in the U.S.

and have standard payment terms that generally require payment within 30 to 60 days.

Our trade receivables arise from product sales and have standard payment terms that generally require payment within 30 to 60 days.

We have evaluated the creditworthiness of our customers, including Celgene, and determined them to be creditworthy.

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We have not entered into any material short-term leases or financing leases as of December 31, 2020.

Liability related to sale of future revenue

We treat the sale of future revenue to RPI as a debt financing, as we have significant continuing involvement in the generation of the cash flows.

As result, we recorded the proceeds from this transaction as a liability related to the sale of future revenue to be amortized to interest expense using the effective interest rate method over the life of the arrangement.

The liability related to sale of future revenue and the related interest expense are based on our current estimates of future royalties expected to be paid over the life of the arrangement.

We will periodically assess the expected royalty payments using forecasts from external sources.

To the extent our future estimates of royalty payments are greater or less than previous estimates or the estimated timing of such payments is materially different than its previous estimates, we will prospectively recognize related non-cash interest expense.

For further discussion of the sale of future revenue, refer to Note 10, Sale of Future Revenue .

Amortization of issuance costs

We treated the liability related to sale of future revenue as a debt financing.

As such, the long-term liability is initially recorded at its proceeds, net of deferred costs.

Issuance costs, fees directly related to the sale of future revenue, are offset against initial carrying value of the long-term liability and are amortized on a straight-line basis over the remaining patent life of the product to an operating expense.

Revenue from contracts with customers

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Product revenue

We generate product revenue from sales of TIBSOVO® to a limited number of specialty distributors and specialty pharmacy providers in the U.S., or collectively, the Customers.

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

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

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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.

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.

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.

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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.

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We evaluate the presentation of amounts due from our collaborative partners associated with activities in the collaborative arrangement based on the nature of each activity.

For transactions with customers, we have reported revenues and costs in accordance with ASC 606, Revenue from Contracts with Customers , ASC 606-10-55-36 through 55-40, Principal versus Agent Considerations .

For transactions with customers, we have reported revenues and costs in accordance with ASC 606 and ASC 606-10-55-36 through 55-40, Principal versus Agent Considerations .

We recognize revenue 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:

the contract(s) with a customer;

(i) identify the contract(s) with a customer;

(ii) identify the performance obligations in the contract based on the relative standalone selling prices of the goods or services provided;

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These milestones are generally categorized into three types:

development milestones, which are generally based on the initiation of clinical trials;

development milestones, which are generally based on

the initiation of clinical trials;

regulatory milestones, which are generally based on the submission, filing or approval of regulatory applications such as a new drug application, or NDA, in the U.S.;

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We adopted ASC 606 using the modified retrospective method.

Under this method, we recognized the cumulative effect of the change in the opening balance of accumulated deficit in the December 31, 2018 consolidated balance sheet.

Under this method, we recognized the cumulative effect of the change in the opening balance of accumulated deficit in the January 1, 2018 consolidated balance sheet.

In adopting ASC 606, we applied the practical expedient that permits aggregating the effect of all contract modifications that occurred prior to January 1, 2018.

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Consolidated Balance Sheets December 31, 2018

(In thousands)

(In thousands) Under Topic

606 Under Topic

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Total liabilities and stockholders’ equity 858,457 858,017 440

Consolidated Statements of Operations

Year ended December 31, 2018

(In thousands, except per share data)

Consolidated Statements of Operations Year ended December 31, 2018

(In thousands, except per share data) Under Topic

606 Under Topic

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Consolidated Statements of Comprehensive Loss Year ended December 31, 2018

(In thousands)

(In thousands) Under Topic

606 Under Topic

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Cost of sales consists primarily of manufacturing costs 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 years ended December 31, 2019 and December 31, 2018 were expensed prior to July 20, 2018 and, therefore, are not included in costs of sales during the years ended December 31, 2019 or 2018.

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® r ecorded during the years ended December 31, 2020, 2019, and 2018 were expensed prior to July 20, 2018 and, therefore, are not included in costs of sales during the years ended December 31, 2020, 2019 or 2018.

Research and development costs

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For awards subject to both performance and service-based vesting conditions, we recognize stock-based compensation expense over the remaining service period if the performance condition is considered probable of achievement using management’s best estimates.

In 2017, we adopted ASU 2016-09, Compensation—Stock Compensation (Topic 718):

Improvements to Employee Share-Based Payment Accounting , which simplifies several aspects of the accounting for employee share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification in the statement of

Upon adoption of this standard, we recorded a cumulative-effect adjustment of approximately $ 32.7 million through retained earnings and deferred tax assets.

Income taxes are recorded in accordance with ASC 740, Accounting for Income Taxes , or ASC 740, which provides for deferred taxes using an asset and liability approach.

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Diluted net loss per share is calculated by adjusting 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, restricted stock units, performance-based stock units and market-based stock units for which the performance vesting conditions have been met, and employee stock purchase plan shares are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive.

For purposes of the dilutive net loss per share calculation, stock options, restricted stock units, or RSUs, performance-based stock units, or PSUs, and market-based stock units, or MSUs, for which the performance vesting conditions have been met, and employee stock purchase plan shares are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive.

Segment and geographic information

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Recent accounting pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which was codified as ASC 842, Leases , and amended through subsequent ASUs.

In February 2016, the Financial Accounting Standard Board, or FASB issued Accounting Standards Update, or ASU, No.

2016-02, Leases (Topic 842) , which was codified as ASC 842, Leases , and amended through subsequent ASUs.

We adopted ASC 842 effective January 1, 2019 using the optional transition method provided for under ASU 2018-11, Leases (Topic 842):

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Other recent accounting pronouncements

In June 2018, the FASB issued Accounting Standards Update No.

2018-07 – Compensation-Stock Compensation (Topic 718)-Improvements to Nonemployee Share-Based Payment Accounting .

ASU 2018-07 simplifies the accounting for share-based

payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions.

In June 2018, the FASB issued ASU 2018-07 – Compensation-Stock Compensation (Topic 718)-Improvements to Nonemployee Share-Based Payment Accounting .

ASU 2018-07 simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions.

ASU 2018-07 is effective for fiscal years beginning after December 15, 2018.

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There was no material impact to the Company’s consolidated financial position, results of operation, or cash flows.

In December 2019, the FASB issued Accounting Standards Update No.

2019-12 – Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in the accounting standards.

In December 2019, the FASB issued ASU 2019-12 – Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in the accounting standards.

The amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

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There was no material impact to the Company’s consolidated financial position, results of operation, or cash flows.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) , which introduces new guidance for the accounting for credit losses on instruments within its scope.

The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments.

Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.

The guidance is effective for fiscal years beginning after December 31, 2019, including interim periods within those years.

The Company adopted this amendment as of January 1, 2020, which eliminated the concept of other-than-temporary impairments and required credit losses on debt securities to be recorded through an allowance for credit losses instead of as a reduction in the amortized cost basis of the securities.

Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date.

There was no material impact to the Company’s consolidated financial position, results of operation, or cash flows.

Other accounting standards that have been issued by the FASB 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.

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Marketable securities:

Certificates of deposit — — — —

Treasuries — 128,809 — 128,809

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Total cash equivalents and marketable securities $ 69,424 $ 543,101 $ — $ 612,525

There were no transfers between Level 1 and Level 2 and we had no financial assets or liabilities that were classified as Level 3 at any point during the year ended December 31, 2019.

There were no transfers between Level 1 and Level 2 and we had no financial assets or liabilities that were classified as Level 3, except for the liability related to the sale of future revenue as discussed in Note 10, Sale of Future Revenue , at any point during the year ended December 31, 2020.

Marketable Securities

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Gains Unrealized

Certificates of deposit $ — $ — $ — $ —

Treasuries $ 113,559 $ 134 $ ( 21 ) $ 113,672

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(In thousands) Amortized

Certificates of deposit $ 960 $ — $ ( 4 ) $ 956

Treasuries $ 178,721 $ 58 $ ( 38 ) $ 178,741

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There were no material realized gains or losses on marketable securities for the years ended December 31, 2020 and 2019.

At December 31, 2019 and 2018, we held 113 and 242 debt securities that were in an unrealized loss position for less than one year, respectively.

At December 31, 2020 and 2019, we held 87 and 113 debt securities, respectfully, that were in an unrealized loss position for less than one year.

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

The aggregate fair value of debt securities in an unrealized loss position at December 31, 2020 and 2019 was $ 299.0 million and $ 345.7 million, respectively.

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

Given our intent and ability to hold such securities until recovery, and the lack of material change in the credit risk of these investments, we do not consider these marketable securities to be other-than-temporarily impaired as of December 31, 2019 and 2018.

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 December 31, 2020 and 2019.

Property and Equipment, net

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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.

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 option is not reasonably certain of being exercised.

The lease agreements do not contain residual value guarantees.

Operating lease costs for the year ended December 31, 2019 were $ 15.1 million, and cash paid for amounts included in the measurement of operating lease liabilities for the year ended December 31, 2019 was $ 12.8 million.

On April 11, 2019, we entered into an agreement to lease approximately 13,000 square feet of office space located at 38 Sidney Street, Cambridge, Massachusetts, or the 38 Sidney Lease, with Thirty-Eight Sidney Street, LLC.

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Our existing extension options for the 88 Sidney Street building and 64 Sidney Street building continue as set forth in the existing leases for those buildings.

The components of lease expense and other information related to leases were as follows:

(In millions) 2020 2019

Operating Lease Costs $ 15.2 $ 15.1

Cash paid for amounts included in the measurement of operating lease liabilities 14.4 12.8

Rental expense under these leases, net of tenant improvement reimbursements, amounted to $ 11.4 million, for the year ended December 31, 2018.

In addition to rent, the leases may require us to pay additional amounts for taxes, insurance, maintenance and other operating expenses.

We have not entered into any material short-term leases or financing leases as of December 31, 2020.

In arriving at the operating lease liabilities as of December 31, 2020, we applied the weighted-average incremental borrowing rate of 5.7 % over a weighted-average remaining lease term of 7.2 years.

In arriving at the operating lease liabilities as of December 31, 2019, we applied the weighted-average incremental borrowing rate of 5.7 % over a weighted-average remaining lease term of 8.2 years.

As of December 31, 2020, undiscounted minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter, were as follows:

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Total operating lease liabilities $ 104,551

As of December 31, 2018, minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter, were as follows:

(In thousands)

2019 $ 12,759

Thereafter 19,223

Total minimum rental commitments $ 91,287

Rental expense under these leases, net of tenant improvement reimbursements, amounted to $ 11.4 million, and $ 6.0 million for the years ended December 31, 2018 and 2017, respectively.

In addition to rent, the leases may require us to pay additional amounts for taxes, insurance, maintenance and other operating expenses.

We provided our landlord a standby letter of credit of $ 2.9 million as security for our leases.

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Accrued Expenses

Accrued expenses and other current liabilities consisted of the following at December 31:

Accrued expenses consisted of the following at December 31:

(In thousands) 2020 2019

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Accrued professional fees 3,366 8,335

Accrued other 4,048 1,086

Accrued revenue-related reserves and other 15,584 4,048

Total accrued expenses $ 60,140 $ 53,142

Sale of Future Revenue

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 BMS, to RPI for $ 255.0 million.

The gross proceeds of $ 255.0 million approximate the fair value of the liability related to the sale of future revenue based on a discounted cash flow model.

The fair value for the liability related to the sale of future revenue at December 31, 2020 was based on our current estimates of future royalties expected to be paid to RPI over the remaining patent life of the product, which are considered level 3 inputs.

Under the terms of the purchase agreement with RPI, although we sold all of our rights to receive royalties on worldwide net sales of IDHIFA® and future regulatory milestone payments, we continue to co-promote IDHIFA® and are therefore involved in the generation of these royalties.

Due to our continuing involvement, we will continue to account for any royalties earned as revenue.

We recorded the net proceeds from this transaction as a liability related to sale of future revenue, or the Royalty Obligation, that will be amortized using the effective interest method over the remaining patent life.

Significant judgment was applied in determining the appropriate accounting treatment for the transaction.

As royalties are remitted to RPI from BMS, the balance of the Royalty Obligation will be effectively repaid over the life of the BMS license agreement.

In order to determine the amortization of the Royalty Obligation, we are required to estimate the total amount of future royalty payments to RPI over the life of the BMS license agreement.

The $ 255.0 million recorded will be accreted to the total of these royalty payments as interest expense over the life of the Royalty Obligation.

At December 31, 2020, our estimate of this total interest expense resulted in an effective annual interest rate of approximately 9.5 %.

This estimate contains significant assumptions that impact both the amount recorded at execution and the interest expense that will be recognized over the royalty period.

We will periodically assess the estimated royalty payments to RPI from BMS and to the extent the amount or timing of such payments is materially different than the original estimates, an adjustment will be recorded prospectively to increase or decrease interest expense.

There are a number of factors that could materially affect the amount and timing of royalty payments to RPI from BMS, and correspondingly, the amount of interest expense recorded by us, most of which are not within our control.

Such factors include, but are not limited to, delays or discontinuation of development of enasidenib, regulatory approval, changing standards of care, the introduction of competing products, manufacturing or other delays, generic competition, intellectual property matters, adverse events that result in governmental health authority imposed restrictions on the use of the drug products, significant changes in foreign exchange rates as the royalties remitted to RPI are made in U.S.

dollars (USD) while the underlying sales of enasidenib will be made in currencies other than USD, and other events or circumstances that are not currently foreseen.

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 December 31, 2020:

(in thousands) December 31, 2020

Proceeds from the sale of future revenue $ 255,000

Issuance costs ( 4,463 )

Non-cash royalty related to the sale of future revenue

Non-cash interest expense associated with the sale of future revenue 17,832

Amortization of issuance costs 194

Liability related to the sale of future revenue

During the year ended December 31, 2020, $ 7.3 million of non-cash royalty revenue from net sales of IDHIFA® were recognized.

Commitments and Contingent Liabilities

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Product Revenue

Our wholly owned product, TIBSOVO®, received approval from the FDA on July 20, 2018 for the treatment of adult patients with R/R AML with a susceptible IDH1 mutation.

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

sales of TIBSOVO®.

Upon FDA approval of TIBSOVO® in the U.S., on July 20, 2018, we began generating product revenue from sales of TIBSOVO®.

(In thousands) 2020 2019 2018

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Total revenue-related reserves $ 14,371 $ 3,796

The following table presents changes in our contract assets and liabilities during the year ended December 31, 2019:

The following table presents changes in our contract assets during the year ended December 31, 2020:

(In thousands) December 31,

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(1) Additions to accounts receivable, net relate to amounts billed to Customers for product sales and deductions primarily relate to collection of receivables during the reporting period.

The following table presents changes in our contract assets and liabilities during the year ended December 31, 2018:

The following table presents changes in our contract assets during the year ended December 31, 2019:

(In thousands) December 31,

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The 2010 Agreement was amended in October 2011 and July 2014.

Under the 2010 Agreement, we are eligible to receive a $ 25.0 million potential milestone payment for the enasidenib program upon achievement of a specified ex-U.S.

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

In April 2015, we entered into a joint worldwide development and profit share collaboration and license agreement with Celgene, and our wholly owned subsidiary, Agios International Sarl, entered into a collaboration and license agreement with Celgene International II Sarl, or collectively, the AG-881 Agreements, to establish a worldwide collaboration focused on the development and commercialization of vorasidenib products.

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In May 2016, we entered into a master research and collaboration agreement with Celgene, or the 2016 Agreement.

The initial four-year research term for the 2016 Agreement expired on May 17, 2020.

On March 25, 2020 Celgene declined the option to extend the research agreement.

Further, on April 10, 2020 Celgene notified us that they declined to elect any program as a continuation program under the 2016 agreement.

Celgene had designated AG-270, our inhibitor MAT2A, as a development candidate under the 2016 Agreement.

On March 25, 2020, Celgene notified us of their decision to decline their option to enter into a development & commercialization agreement with respect to the MAT2A program under the 2016 Agreement.

2016 Agreement

In May 2016, we entered into the 2016 Agreement focused on metabolic immuno-oncology, a developing field which aims to modulate the activity of relevant immune cells by targeting critical metabolic nodes, thereby enhancing the immune mediated anti-tumor response.

In addition to new programs identified under the 2016 Agreement, both parties also agreed that all future development and commercialization of two remaining cancer metabolism programs discovered under the 2010 Agreement, including AG-270, will now be governed by the 2016 Agreement.

During the research term of the 2016 Agreement, we plan to conduct research programs focused on discovering compounds that are active against metabolic targets in the immuno-oncology, or IO, field.

The initial four -year research term will expire on May 17, 2020, and may be extended for up to two , or in specified cases, up to four additional one -year terms.

For each program under the 2016 Agreement, we may nominate compounds that meet specified criteria as development candidates and, in limited circumstances, Celgene may also nominate compounds as development candidates for each such program.

Celgene may designate the applicable program for further development following any such nomination, after which we may conduct, at our expense, additional preclinical and clinical development for such program through the completion of an initial phase 1 dose escalation study.

At the end of the research term, Celgene may designate for continued development up to three research programs for which development candidates have yet to be nominated, which are referred to as continuation programs.

We may conduct further research and preclinical and clinical development activities on any continuation program, at our expense, through the completion of an initial phase 1 dose escalation study.

We granted Celgene the right to obtain exclusive options for development and commercialization rights for each program that Celgene has designated for further development, and for each continuation program.

Celgene may exercise each such option beginning on the designation of a development candidate for such program (or on the designation of such program as a continuation program) and ending on the earlier of:

The 2016 Agreement focused on metabolic immuno-oncology, a developing field which aims to modulate the activity of relevant immune cells by targeting critical metabolic nodes, thereby enhancing the immune mediated anti-tumor response.

The initial four-year research term expired on May 17, 2020.

On March 25, 2020 Celgene declined the option to extend the research agreement for up to two , or in specified cases, up to four additional one-year terms which would have required the payment of a $ 40.0 million extension fee.

Further, on April 10, 2020 Celgene notified us that they declined to elect any program as a continuation program under the 2016 agreement.

Celgene had designated AG-270, our inhibitor of methionine adenosyltransferase 2a, or MAT2A, as a development candidate under the 2016 Agreement.

On March 25, 2020, Celgene notified us of their decision to decline their option to enter into a development & commercialization agreement with respect to the MAT2A program under the 2016 Agreement which would have required the payment of a $ 30.0 million fee.

As a result of the decisions, the research services were fully satisfied as of May 17, 2020, no additional performance obligations remain under the 2016 Agreement and we are no longer eligible for any milestone payments for the 2016 Agreement.

During the research term of the 2016 Agreement, we conducted research programs focused on discovering compounds that are active against metabolic targets in the immuno-oncology, or IO, field.

For each program under the 2016 Agreement, we could have nominated compounds that meet specified criteria as development candidates and, in limited circumstances, Celgene could also nominate compounds as development candidates for each such program.

Celgene could designate the applicable program for further development following any such nomination, after which we could conduct, at our expense, additional preclinical and clinical development for such program through the completion of an initial phase 1 dose escalation study.

At the end of the research term, Celgene could designate for continued development up to three research programs for which development candidates have yet to be nominated, which are referred to as continuation programs.

We could conduct further research and preclinical and clinical development activities on any continuation program, at our expense, through the completion of an initial phase 1 dose escalation study.

We granted Celgene the right to obtain exclusive options for development and commercialization rights for each program that Celgene designated for further development, and for each continuation program.

Celgene could have exercised each such option beginning on the designation of a development candidate for such program (or on the designation of such program as a continuation program) which ended on the earlier of:

(i) the end of a specified period after we have furnished Celgene with specified information about the initial phase 1 dose escalation study for such program, or (ii) January 1, 2030.

Research programs that have applications in the inflammation or autoimmune, or I&I, field that may result from the 2016 Agreement will also be subject to the exclusive options described above.

We will retain rights to any program that Celgene does not designate for further development or as to which it does not exercise its option.

Under the terms of the 2016 Agreement, following Celgene’s exercise of its option with respect to a program, the parties will enter into either a co-development and co-commercialization agreement if such program is in the IO field, or a license agreement if such program is in the I&I field.

Under each co-development and co-commercialization agreement, the two parties will co-develop and co-commercialize licensed products worldwide.

Either we or Celgene will lead development and commercialization of licensed products for the United States, and Celgene will lead development and commercialization of

licensed products outside of the United States.

Depending on the country, the parties will each have the right to provide a portion of field-based marketing activities.

Under each license agreement, Celgene will have the sole right to develop and commercialize licensed products worldwide.

Research programs that have applications in the inflammation or autoimmune, or I&I, field that may result from the 2016 Agreement would also subject to the exclusive options described above.

We retain rights to all program that Celgene did not designate for further development or as to which it did not exercise its option.

Under the terms of the 2016 Agreement, if Celgene had exercised their option, the parties would enter into either a co-development and co-commercialization agreement if such program is in the IO field, or a license agreement if such program is in the I&I field.

Under each co-development and co-commercialization agreement, the two parties would co-develop and co-commercialize licensed products worldwide.

Either we or Celgene would lead development and commercialization of licensed products for the United States, and Celgene would lead development and commercialization of licensed products outside of the United States.

Depending on the country, the parties would each have the right to provide a portion of field-based marketing activities.

Under each license agreement, Celgene would have the sole right to develop and commercialize licensed products worldwide.

Co-development and co-commercialization agreements

Under each co-development and co-commercialization agreement entered into under the 2016 Agreement, the parties will split all post-option exercise worldwide development costs, subject to specified exceptions, as well as any profits from any net sales of, or commercialization losses related to, licensed products in the IO field.

Celgene has the option to designate one program in the IO field as the 65/35 program, for which Celgene will be the lead party for the United States and will have a 65 % profit or loss share.

For programs in the IO field other than the 65/35 program, we and Celgene will alternate, on a program-by-program basis, being the lead party for the United States, with us having the right to be the lead party for the first such program, and each party will have a 50 % profit or loss share.

The lead party for the United States will book commercial sales of licensed products, if any, in the United States, and Celgene will book commercial sales of licensed products, if any, outside of the United States.

Under each co-development and co-commercialization agreement entered into under the 2016 Agreement, if Celgene had exercised their option, the parties would have split all post-option exercise worldwide development costs, subject to specified exceptions, as well as any profits from any net sales of, or commercialization losses related to, licensed products in the IO field.

Celgene had the option to designate one program in the IO field as the 65/35 program, for which Celgene would be the lead party for the United States and would have a 65 % profit or loss share.

For programs in the IO field other than the 65/35 program, we and Celgene would alternate, on a program-by-program basis, being the lead party for the United States, with us having the right to be the lead party for the first such program, and each party will have a 50 % profit or loss share.

The lead party for the United States would book commercial sales of licensed products, if any, in the United States, and Celgene would book commercial sales of licensed products, if any, outside of the United States.

License agreements

Under each license agreement under the 2016 Agreement, Celgene will be responsible for all post-option exercise worldwide development and associated costs, subject to specified exceptions, as well as worldwide commercialization and associated costs, for licensed products in the I&I field.

Under each license agreement under the 2016 Agreement, Celgene would be responsible for all post-option exercise worldwide development and associated costs, subject to specified exceptions, as well as worldwide commercialization and associated costs, for licensed products in the I&I field.

Financial terms

Under the terms of the 2016 Agreement, we received an initial upfront payment in the amount of $ 200.0 million.

The 2016 Agreement provides specified rights to extend the research term for up to two , or in specified cases, up to four , additional years by paying a $ 40.0 million per-year extension fee.

Celgene will pay an $ 8.0 million designation fee for each program that Celgene designates for further development and for each continuation program.

The 2016 Agreement provided specified rights to extend the research term for up to two , or in specified cases, up to four , additional years by paying a $ 40.0 million per-year extension fee.

On March 25, 2020, Celgene declined the option to extend the research agreement for up to two, or in specified cases, up to four additional one-year terms.

Celgene was also required to pay an $ 8.0 million designation fee for each program that Celgene designated for further development and for each continuation program.

On April 10, 2020, Celgene notified us that they declined to elect any program as a continuation program under the 2016 agreement.

During the year ended December 31, 2017, we received $ 8.0 million from Celgene upon the designation of AG-270 as a development candidate.

For each program as to which Celgene exercises its option to develop and commercialize, subject to antitrust clearance, Celgene will pay an option exercise fee of at least $ 30.0 million for any designated development program and at least $ 35.0 million for any continuation programs.

In certain cases, Celgene may exercise its option to develop and commercialize two early-stage I&I programs, prior to Celgene designating the program for further development, by paying an option exercise fee of $ 10.0 million.

We are eligible to receive the following milestone-based payments associated with the 2016 Agreement:

For each program as to which Celgene exercised its option to develop and commercialize, subject to antitrust clearance, Celgene would be required to pay an option exercise fee of at least $ 30.0 million for any designated development program and at least $ 35.0 million for any continuation programs.

On March 25, 2020, Celgene notified us of their decision to decline their option to enter into a Development & Commercialization Agreement with respect to the MAT2A

program under the 2016 Agreement.

In certain cases, Celgene could exercise its option to develop and commercialize two early-stage I&I programs, prior to Celgene designating the program for further development, by paying an option exercise fee of $ 10.0 million, which was not exercised during the year ended December 31, 2020.

We were eligible to receive the following milestone-based payments associated with the 2016 Agreement:

Program Milestone Amount

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I&I field Specified commercial milestone events Up to $ 125.0 million

Additionally, for each licensed program in the I&I field, we are eligible to receive royalties at tiered, low double-digit percentage rates on Celgene’s net sales, if any, of the applicable licensed products.

Additionally, for each licensed program in the I&I field, we were eligible to receive royalties at tiered, low double-digit percentage rates on Celgene’s net sales, if any, of the applicable licensed products.

Opt-out right

Under the 2016 Agreement, we may elect to opt out of the cost and profit share under any co-development and co-commercialization agreement, subject to specified exceptions.

Upon opting out, Celgene will have the sole right to develop, manufacture and commercialize the applicable licensed products throughout the world, at its cost, and we will undertake transitional activities reasonably necessary to transfer the development, manufacture and commercialization of such licensed products to Celgene, at our expense.

Under the 2016 Agreement, we could elect to opt out of the cost and profit share under any co-development and co-commercialization agreement, subject to specified exceptions.

Upon opting out, Celgene would have the sole right to develop, manufacture and commercialize the applicable licensed products throughout the world, at its cost, and we would undertake transitional activities reasonably necessary to transfer the development, manufacture and commercialization of such licensed products to Celgene, at our expense.

Further, in lieu of the profit or loss sharing described above, we would be eligible to receive royalties at tiered, low double-digit percentage rates on Celgene’s net sales, if any, of the applicable licensed products.

However, we would continue to be eligible to receive the developmental and regulatory milestone-based payments described above.

The term of the 2016 Agreement commenced on May 17, 2016 and, if not terminated earlier, will expire upon the later of the last-to-expire of the research term and all option exercise periods, or, if an option is exercised by Celgene for one or more

programs in the collaboration, upon the termination or expiration of the last-to-exist co-development and co-commercialization agreement or license agreement, as applicable, for any such program.

Subject to specified exceptions, Celgene may terminate the 2016 Agreement in its entirety for any reason by providing us with prior written notice if there are no active co-development and co-commercialization agreements or license agreements in place or on a program-by-program basis if there are no active co-development and co-commercialization agreements or license agreements in place for the terminated program(s).

Either party may terminate the 2016 Agreement for the insolvency of the other party.

On a program-by-program basis, prior to the exercise of an option, either party may terminate the 2016 Agreement either in its entirety or with respect to one or more programs on prior written notice to the other party in the case of an uncured material breach by the other party that frustrates the fundamental purpose of the 2016 Agreement.

Following the exercise of an option for a program, either party may terminate the 2016 Agreement with respect to such program if such party terminates the co-development and co-commercialization agreement or license agreement for such program for an uncured material breach by the other party that frustrates the fundamental purpose of such agreement.

Either party may terminate a co-development and co-commercialization agreement or a license agreement upon the bankruptcy or insolvency of the other party.

Either party also has the right to terminate the co-development and co-commercialization agreement or license agreement if the other party or any of its affiliates challenges the validity, scope or enforceability of or otherwise opposes, any patent included within the intellectual property rights licensed to the other party under such agreement.

While any of Celgene’s options remain available under the 2016 Agreement, subject to specified exceptions, we may not directly or indirectly develop, manufacture or commercialize, outside of the 2016 Agreement, any therapeutic modality in the IO or I&I field with specified activity against a metabolic target.

During the term of each co-development and co-commercialization agreement and license agreement, subject to specified exceptions, neither we nor Celgene may directly or indirectly develop, manufacture or commercialize outside of such agreement any therapeutic modality in any field with specified activity against the metabolic target that is the focus of the program licensed under such agreement.

The term of the 2016 Agreement commenced on May 17, 2016 and expired on May 17, 2020 in its entirety.

The research services were fully satisfied as of May 17, 2020, no additional performance obligations remain under the 2016 Agreement and we are no longer eligible for any milestone payments for the 2016 Agreement.

While any of Celgene’s options remained available under the 2016 Agreement, subject to specified exceptions, we could not directly or indirectly develop, manufacture or commercialize, outside of the 2016 Agreement, any therapeutic modality in the IO or I&I field with specified activity against a metabolic target.

During the term of each co-development and co-commercialization agreement and license agreement, subject to specified exceptions, neither we nor Celgene could directly or indirectly develop, manufacture or commercialize outside of such agreement any therapeutic modality in any field with specified activity against the metabolic target that is the focus of the program licensed under such agreement.

Ivosidenib Letter Agreement

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On August 1, 2017, the FDA granted Celgene approval of IDHIFA® for the treatment of adult patients with R/R AML with an IDH2 mutation as detected by an FDA-approved test.

Under the remaining terms of the 2010 Agreement, we are eligible to receive up to $ 80.0 million in potential milestone payments for the IDHIFA® program.

The potential milestone payments are comprised of:

(i) up to $ 55.0 million in milestone payments upon achievement of specified ex-U.S.

regulatory milestone events, of which $ 35.0 million relates to the first regulatory approval in any of China, Japan or a major European country, and (ii) a $ 25.0 million milestone payment upon achievement of a specified commercial milestone event.

Under the 2010 Agreement, we receive royalties at tiered, low-double digit to mid-teen percentage rates on net sales of IDHIFA®.

Under the 2010 Agreement, we received royalties at tiered, low-double digit to mid-teen percentage rates on net sales of IDHIFA®.

Under the 2010 Agreement, we were eligible to receive a $ 25.0 million potential milestone payment for the enasidenib program upon achievement of a specified ex-U.S.

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

Unless terminated earlier by either party, the term of the 2010 Agreement will continue until the expiration of all royalty terms with respect to IDHIFA®.

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Similar to the accounting under ASC 605-25, the 2016 Agreement was determined to be a modification of the 2010 Agreement and the AG-881 Agreements.

In determining the appropriate amount of revenue to be recognized under ASC 606, we performed the following steps:

In determining the appropriate amount of revenue to be recognized under ASC 606, we perform the following steps:

(i) identified the promised goods or services in the contract;

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The transaction price was subsequently allocated to the individual performance obligations based on their relative standalone selling prices.

We developed assumptions that require judgment to determine the stand-alone selling price, or SSP, for each performance obligation identified in the contract.

We use key assumptions to determine the SSP, which include forecast of

revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.

We developed assumptions that require judgment to determine the SSP for each performance obligation identified in the contract.

We use key assumptions to determine the SSP, which include forecast of revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.

The satisfied and unsatisfied performance obligations at the time of the adoption of ASC 606, each of which are considered by us to be distinct within the context of the contract, their SSP, the method of recognizing the allocated consideration, and the period through which they are expected to be recognized were as follows:

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Remaining performance obligations

As of December 31, 2019, the remaining performance obligations under the Celgene agreements, their SSP, the method of recognizing the allocated consideration, and the period through which they are expected to be recognized are as follows:

Obligations SSP No.

of Remaining Performance

Obligations Recognition

Research and development services $ 175.4 million 2 Proportionally as services are delivered over the performance period

A significant portion of revenue generated from our collaboration agreements with Celgene relates to the provision of research and development services whereby revenue is recognized under an input method using the ratio of effort incurred to date compared to the total estimated effort required to complete the performance obligation.

Such cost estimates include forecasted direct labor and material costs, subcontractor costs, and external contract research organization costs.

As of December 31, 2019, the aggregate amount of the transaction price allocated to performance obligations that are partially unsatisfied was $ 70.0 million.

As of December 31, 2020, there are no remaining performance obligations under the 2016 Agreement.

As of December 31, 2020, the aggregate amount of the transaction price allocated to performance obligations under the 2010 Agreement that are remaining was $ 3.9 million.

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

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Total collaboration revenue - related party $ 68,274 $ 39,257 $ 60,661

(1) Amounts prior to 2018 do not reflect the impact of the adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), in the first quarter of 2018.

Summary of Significant Accounting Policies for additional information.

We also recognized certain consideration received from Celgene as a reduction of research and development expenses of zero for 2019 and 2018, respectively and $ 7.8 million for 2017.

The following table presents changes in our contract assets and liabilities during the year ended December 31, 2020:

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$ 1,539 $ 5,610 $ ( 6,141 ) $ 1,008

Unbilled receivable – related party (2)

— 1,821 ( 706 ) 1,115

Royalty receivable – related party (3)

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

(2) Additions to receivables relate to amounts billed to Celgene during the reporting period.

(2) Unbilled receivables - related party amounts relate to future reimbursable costs to Celgene.

(3) Additions to royalty receivables - related party relate to amounts billed to Celgene during the reporting period.

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

(3) Additions to deferred revenue relate to consideration from Celgene during the reporting period.

(4) Additions to deferred revenue - related party relate to consideration from Celgene during the reporting period.

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

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(3) Additions to deferred revenue relate to consideration from Celgene during the reporting period.

Deductions relate to deferred revenue recognized as revenue during the reporting period and the cumulative catch-up adjustment recognized upon adoption of ASC 606 on January 1, 2018.

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

During the years ended December 31, 2020, 2019 and 2018, we recognized the following as revenue due to changes in the contract liability balances:

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Performance obligations satisfied in previous periods — — 469

(1) Amounts prior to 2018 do not reflect the impact of the adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), in the first quarter of 2018.

Summary of Significant Accounting Policies for additional information.

Royalty revenue

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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.

For further discussion of the sale of future revenue, refer to Note 10, Sale of Future Revenue .

Milestone revenue (variable consideration)

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Milestone payments that are not within our control, such as regulatory approvals, are not considered probable of being achieved and are excluded from the transaction price until those approvals are received.

During the year ended December 31, 2019, we did not receive any milestone payments related to our Celgene Agreements, and all variable consideration relating to the remaining development, regulatory and sales-based milestones that can be earned under the terms of the agreement remain fully constrained.

During the years ended December 31, 2020, and 2019 we did no t receive any milestone payments related to our Collaboration Agreements, and all variable consideration relating to the remaining development, regulatory and sales-based milestones that can be earned under the terms of the 2010 Agreement remain fully constrained.

For further discussion of the sale of future revenue, refer to Note 10, Sale of Future Revenue .

During the year ended December 31, 2018, Celgene submitted an MAA to the EMA for IDHIFA® for IDH2 mutant-positive R/R AML.

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As the underlying performance obligation, or delivery of the license to IDHIFA®, had been satisfied as of June 2014, the milestone payment was recognized in full as collaboration revenue.

The next potential milestone expected to be achieved under our collaboration agreements with Celgene is the first regulatory approval in any of China, Japan or a major European country.

The next potential milestone expected to be achieved under our 2010 Agreement is the achievement of a specified ex-U.S.

commercial milestone event.

Achievement of this event will result in a milestone payment of $ 25.0 million under the 2010 Agreement.

We remain eligible to receive this milestone payment under our purchase agreement with RPI.

CStone Pharmaceuticals

In June 2018, we entered into an exclusive license agreement with CStone, or the CStone Agreement, to grant CStone specified intellectual property licenses to enable CStone to develop and commercialize certain products containing ivosidenib in mainland China, Hong Kong, Macau, and Taiwan.

We retain development and commercialization rights for the rest of the world.

On March 2, 2020, we amended the CStone Agreement to include Singapore as part of the CStone Territory.

Pursuant to the CStone Agreement, CStone will initially be responsible for the development and commercialization of ivosidenib in AML, cholangiocarcinoma, and, at our discretion, brain cancer indications.

Under the terms of the CStone Agreement, we received an initial upfront payment in the amount of $ 12.0 million and are entitled to receive up to an additional $ 407.0 million in milestone payments upon the achievement of certain development, regulatory and sales milestone events.

Pursuant to the CStone Agreement, we received an initial upfront payment in the amount of $ 12.0 million and are entitled to receive up to an additional $ 407.0 million in milestone payments upon the achievement of certain development, regulatory and sales milestone events.

Approximately one third of the milestone payments are related to development and regulatory milestones, half of which are related to ivosidenib in AML and cholangiocarcinoma and the other half are related to brain cancer indications, including glioma.

We will also be entitled to receive tiered royalties, ranging from 15 % to 19 % percent, on annual net sales, if any, of ivosidenib.

CStone is responsible for all costs it incurs in developing, obtaining regulatory approval of, and commercializing ivosidenib in mainland China, Hong Kong, Macau, and Taiwan, as well as certain costs incurred by us.

During the term of the CStone Agreement, each party and its affiliates are prohibited from developing or commercializing any other compound or product that inhibits IDH1 mutations at specified levels of binding, in the case of CStone, anywhere in the world, and in our case, in mainland China, Hong Kong, Macau, and Taiwan.

CStone is responsible for all costs it incurs in developing, obtaining regulatory approval of, and commercializing ivosidenib in the CStone Territory, as well as certain costs incurred by us.

Unless earlier terminated, the CStone Agreement will expire upon the expiration of the last royalty term for the last licensed product within the scope of the CStone Agreement.

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Milestone revenue (variable consideration)

During the year ended December 31, 2020, no milestone payments were received.

During the year ended December 31, 2019, upon the dosing of the first patient in a local study in a hematological indication in mainland China, we earned and received a milestone payment of $ 5.0 million, which was recognized as collaboration revenue.

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Milestone payments

During the year ended December 31, 2020, no milestone payments were made.

During the year ended December 31, 2019, we achieved the milestone relating to the initiation of the first phase 1 clinical trial for DHODH, and we made a payment of $ 2.0 million.

During the year ended December 31, 2018, no milestone payments were made.

We are authorized to issue 125,000,000 shares of our common stock.

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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 stock units, or PSUs, and other stock-based awards to employees, non-employees and non-employee directors.

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, RSUs, 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.

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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 December 31, 2019, there was approximately $ 1.5 million of total unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered probable of achievement, which we expect to recognize over a weighted-average period of 0.33 years, and $ 8.0 million of total unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered not probable of achievement.

As of December 31, 2020, there was no unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered probable of achievement that we expect to recognize.

There is $ 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

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

Granted 42,695 41.50

Unvested shares at December 31, 2020 42,695 $ 41.50

As of December 31, 2019, there was approximately $ 0.8 million of total unrecognized compensation expense related to MSUs, which we expect to recognize over the remaining derived service period of 0.72 years.

As of December 31, 2020, there was no remaining unrecognized compensation expense related to MSUs.

2013 Employee Stock Purchase Plan

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Total $ ( 327,449 ) $ ( 411,472 ) $ ( 346,028 )

We did no t have any provision for income taxes for the years ended December 31, 2019, 2018 and 2017.

We did not have any material provision for income taxes for the years ended December 31, 2020, 2019 and 2018.

A reconciliation of the expected income tax benefit (expense) computed using the federal statutory income tax rate to our effective income tax rate is as follows for the years ended December 31, 2020, 2019 and 2018:

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Permanent differences and other adjustments ( 1.6 ) % ( 1.3 ) % ( 0.7 ) %

Incentive stock options ( 0.6 ) % 2.2 % 0.3 %

Stock based compensation ( 0.6 ) % ( 0.6 ) % 2.2 %

Foreign rate differential — % 0.3 % ( 0.6 ) %

Impact of federal rate change — % — % ( 28.7 ) %

Total — % — % — %

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Operating lease liability 25,085 27,173

Deferred rent — 4,458

Non-deductible accruals and reserves, including inventory 12,730 4,729

RPI Royalty Sale 58,048 —

Other 1,230 —

Total deferred tax assets 619,350 527,447

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Net deferred taxes $ — $ —

In December 2017, the Tax Cuts and Jobs Act, or TCJA, was signed into law.

Among other things, the TCJA permanently lowers the corporate federal income tax rate to 21% from the existing maximum rate of 35%, effective for tax years including or commencing January 1, 2018.

As a result of the reduction of the corporate federal income tax rate to 21%, U.S.

GAAP requires companies to revalue their deferred tax assets and deferred tax liabilities as of the date of enactment, with the resulting tax effects accounted for in the reporting period of enactment.

This revaluation resulted in a provision of $ 90.0 million to income tax expense in continuing operations and a corresponding reduction in the valuation allowance.

As a result, there was no impact on our consolidated statements of operations from the reduction in tax rate.

The other provisions of the TCJA did not have a material impact on the consolidated financial statements.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law making several changes to the Internal Revenue Code.

The changes include, but are not limited to:

increasing the limitation on the amount of deductible interest expense, allowing companies to carryback certain net operating losses, and increasing the amount of net operating loss carryforwards that corporations can use to offset taxable income.

The tax law changes in the Act did not have a material impact on the Company’s income tax provision.

As of December 31, 2020, we had net operating loss carryforwards, or NOLs, available to reduce federal, state and foreign income taxes of approximately $ 1,201.6 million, $ 906.0 million and $ 67.0 million, respectively.

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At December 31, 2020, we also had available research and development tax credits for federal and state income tax purposes of approximately $ 36.9 million and $ 18.4 million, respectively.

If not utilized, the credits begin to expire in 2027 and 2020 for federal and state income tax purposes, respectively.

If not utilized, the credits begin to expire in 2027 for both federal and state income tax purposes, respectively.

We engaged in clinical testing activities and incurred expenses that qualify for the federal orphan drug tax credit.

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As provided by Section 382 of the Internal Revenue Code of 1986, or Section 382, and similar state provisions, utilization of NOLs and tax credit carryforwards may be subject to substantial annual limitations due to ownership change limitations that have previously occurred or that could occur in the future.

Ownership changes may limit the amount of NOLs and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively.

Ownership changes may limit the amount of NOLs and tax credit

carryforwards that can be utilized annually to offset future taxable income and tax, respectively.

In general, an ownership change, as defined by Section 382, results from transactions that increase the ownership of five percent stockholders in the stock of a corporation by more than 50 percent in the aggregate over a three year period.

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The impact of the historical ownership changes has been reflected in our deferred tax assets in the table above.

There could be additional ownership changes after December 31, 2019 that could further limit the amount of NOLs and tax credit carryforwards that we can utilize.

As required by ASC 740, we have evaluated the positive and negative evidence bearing upon the realizability of our deferred tax assets.

Based on the weight of available evidence, both positive and negative, we recorded a valuation allowance of $ 594.8 million and $ 502.2 million as of December 31, 2020 and December 31, 2019, respectively, because we have determined that it is more likely than not that these assets will not be fully realized.

The valuation allowance increased by $ 111.4 million and $ 88.8 million for the years ended December 31, 2019 and, 2018, respectively.

In December 2019, the FASB issued Accounting Standards Update No.

2019-12 – Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in the accounting standards.

ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes.

The amendments in ASU 2019-12 are effective for the fiscal years beginning after December 15, 2020.

Early adoption is permitted, including adoption in any interim period.

The Company has early adopted this amendment as of January 1, 2019.

There was no material impact to the Company’s consolidated financial position, results of operation, or cash flows.

The following table presents our change in valuation allowance for the years ended December 31, 2020 and, 2019:

(in thousands) 2020 2019

Valuation allowance at the beginning of the year $ 502,209 $ 390,753

Increase for the current period 92,543 111,456

Valuation allowance at the end of the year $ 594,752 $ 502,209

As of December 31, 2020, the unremitted earnings of our foreign subsidiaries are not material.

We have not provided for U.S.

income taxes or foreign withholding taxes on these earnings as it is our current intention to permanently reinvest these earnings outside the U.S.

The tax liability on these earnings is also not material.

Events that could trigger a tax liability include, but are not limited to, distributions, reorganizations or restructurings and/or tax law changes.

We apply the accounting guidance in ASC 740 related to accounting for uncertainty in income taxes.

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Unrecognized tax benefits at the end of the year $ 21,131 $ 17,460

We will recognize interest and penalties related to uncertain tax positions above the line as an expense to continuing operations.

As of December 31, 2020 and 2019, we had no accrued interest or penalties related to uncertain tax positions and no such amounts have been recognized.

If all of the Company’s unrecognized tax benefits as of December 31, 2020 were to become recognizable in the future, we would record a $ 21.1 million of unrecognized tax benefits.

Upon close of the proposed sale to Servier, we will evaluate the tax impact of the transaction.

The uncertain tax position does not impact our effective income tax rate due to the full valuation allowance.

We are subject to taxation in the United States and Switzerland.

We are subject to taxation in the United States, Switzerland, Netherlands, Germany, Italy and France.

The statute of limitations for assessment by the IRS and state tax authorities is open for tax years ending December 31, 2020, 2019, 2018, and 2017, although carryforward attributes that were generated for tax years prior to 2017 may still be adjusted upon examination by the IRS or state tax authorities if they either have been, or will be, used in a future period.

The statute of limitations for assessment in Switzerland remains open for tax year ending December 31, 2020, 2019, 2018, and 2017.

The Company’s subsidiaries in the Netherlands and Germany were incorporated in 2019 and therefore the statute of limitations for assessment that remain open in these jurisdictions are for the tax year ending December 31, 2020 and 2019.

The Company’s subsidiaries in the Italy and France were incorporated in 2020 and therefore the statute of limitations for assessment that remain open in these jurisdictions are for the tax year ending December 31, 2020.

There are currently no federal, state or foreign audits in progress.

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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-K

Item 9A. Controls and Procedures