AGIOS PHARMACEUTICALS, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-looking Information The following discussion of our financial condition and results of operations should be read with our unaudited condensed consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020, and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, forecasts and projections, and the beliefs and assumptions of our management, and include, without limitation, statements with respect to our expectations regarding our research, development and commercialization plans and prospects, results of operations, selling, general and administrative expenses, research and development expenses, the sufficiency of our cash for future operations and business activity disruption due to the COVID-19 pandemic. Words such as “anticipate,” “believe,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “predict,” “project,” “strategy,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “vision” and similar statements or variation of these terms or the negative of those terms and similar expressions are intended to identify these forward-looking statements. Readers are cautioned that these forward-looking statements are predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by our forward-looking statements are those discussed under the heading “Risk Factors” in Part II, Item 1A and elsewhere in this report, and in our Annual Report on Form 10-K for the year ended December 31, 2020. We undertake no obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law. Overview We are a biopharmaceutical company committed to transforming patients’ lives through scientific leadership in the field of cellular metabolism and adjacent areas of biology, with the goal of creating differentiated, small molecule medicines for genetically defined diseases, or GDDs, and, prior to the completion of the sale of our oncology business to Servier Pharmaceuticals LLC, or 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. Sale of our Oncology Business to Servier On March 31, 2021, we completed the sale of our oncology business to Servier. We entered into a Purchase and Sale Agreement, or the Purchase Agreement, with Servier on December 20, 2020. The transaction included the sale of our oncology business, including TIBSOVO®, our clinical-stage product candidates vorasidenib, AG-270 and AG-636, and our oncology research programs for a payment of approximately $1.8 billion in cash at the closing, subject to certain adjustments, and a payment of $200 million in cash, if, prior to January 1, 2027, vorasidenib is granted new drug application, or NDA, approval from the 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 mutation (and, to the extent required by such approval, the vorasidenib companion diagnostic test is granted an FDA premarket approval), as well as a royalty of 5% of U.S. net sales of TIBSOVO® from the close of the transaction through loss of exclusivity, and a royalty of 15% of U.S. net sales of vorasidenib from the first commercial sale of vorasidenib through loss of exclusivity. Servier also acquired our co-commercialization rights for Bristol Myers Squibb’s IDHIFA® and the right to receive a $25.0 million potential milestone payment under our prior collaboration agreement with Celgene Corporation, and following the sale Servier will conduct certain clinical development activities within the IDHIFA® development program. The oncology business met the criteria within Accounting Standards Codification 205-20 to be reported as discontinued operations because the transaction was a strategic shift in business that had a major effect on our operations and financial results. Therefore, we have reported the historical results of the oncology business including the results of operations and cash flows as discontinued operations, and related assets and liabilities were retrospectively reclassified as assets and liabilities of discontinued operations for all periods presented herein. Unless otherwise noted, applicable amounts in the prior year have been recast to conform to this discontinued operations presentation. Refer to Note 3 of our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information. Unless otherwise indicated, the following information relates to our continuing operations following the sale to Servier. A more complete description of our business prior to the consummation of the transaction is included in Item 1. “Business”, in Part I of the Annual Report on Form 17 Table of Contents 10-K for the year ended December 31, 2020 that was previously filed with the Securities and Exchange Commission (“SEC”) on February 25, 2021. GDDs Our primary focus in the GDD area relates to therapeutic categories where we believe we have differentiated expertise and demonstrated capabilities (e.g-enzyme stabilizers, pyruvate kinase, phenylalanine hydroxylase). As a result, we expect the new therapies that we plan to advance through the discovery, development and commercialization stages to be in the areas of non-malignant hematology and inborn errors of metabolism, though our future efforts may not be limited to these categories. The lead product candidate in our GDD portfolio, mitapivat, targets pyruvate kinase-R, or PKR, for the treatment of pyruvate kinase, or PK, deficiency and other hemolytic anemias including thalassemia and sickle cell disease, or SCD. Mitapivat is an orally available small molecule and a potent activator of the wild-type (normal) and mutated PKR enzymes, which has resulted in restoration of adenosine triphosphate levels and a decrease in 2,3-diphosphoglycerate levels in blood sampled from patients with PK deficiency and treated ex-vivo with mitapivat. PK deficiency is a rare genetic disorder that often results in severe hemolytic anemia, jaundice and lifelong conditions associated with chronic anemia and secondary complications due to inherited mutations in the pyruvate kinase enzyme within red blood cells. We are currently developing mitapivat for the treatment of patients with PK deficiency, thalassemia and SCD in the following ongoing or planned pivotal clinical trials: Pyruvate Kinase Deficiency: • ACTIVATE-T, a single arm, global, pivotal trial of mitapivat in regularly-transfused patients with PK deficiency. • ACTIVATE, a 1:1 randomized, placebo-controlled, global, pivotal trial of mitapivat in patients with PK deficiency who do not receive regular transfusions. Thalassemia: • ENERGIZE and ENERGIZE-T, phase 3 trials of mitapivat in not regularly transfused and regularly transfused adults with thalassemia, which we expect to initiate in the second half of 2021. SCD: • A phase 2/3 trial of mitapivat in patients with SCD, which we expect to initiate by the end of 2021. We have worldwide development and commercial rights to mitapivat and expect to fund the future development and commercialization costs related to this program. The FDA and European Medicines Agency, or EMA, granted orphan drug designations for mitapivat for the treatment of patients with PK deficiency, and the FDA granted orphan drug designation for mitapivat for the treatment of patients with thalassemia. We anticipate filing for regulatory approval for mitapivat in adults with PK deficiency in the U.S. in the second quarter of 2021 and in the European Union in mid-2021, with a potential commercial launch in both geographies in 2022 if we receive regulatory approvals. We also expect to continue to grow our U.S. commercial infrastructure and evaluate all options to maximize the patient impact and value of mitapivat globally, including strategic transactions. We are also developing AG-946, a next-generation activator of both the PKR and PKM2 isoforms of pyruvate kinase. PKR activation is specific to red blood cells and hemolytic anemias, while PKM2 activation occurs in other tissues which express this isoform, and is potentially important in a variety of disease indications. In addition to these development programs, we are seeking to advance a number of early-stage discovery programs for GDDs. Drug candidates for PK activation and other mechanisms, while primarily targeting GDD may also have utility in nongenetically defined disease indications. Where differentiated, nonclinical proof of concept emerges for these non-GDD indications, appropriate partnership may be used to drive the best patient benefit. Critical Accounting Policies and Estimates Our critical accounting policies are those policies which require the most significant judgments and estimates in the preparation of our condensed consolidated financial statements. We have determined that our most critical accounting policies are those relating to accrued research and development expenses and stock-based compensation. Except those that have been disclosed in Note 2, Summary of Significant Accounting Policies, of the notes to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, there have been no significant changes to our existing critical accounting policies discussed in our Annual Report on Form 10-K for the year ended December 31, 2020. Financial Operations Overview Impact of COVID-19 on our Business As of March 31, 2021, we have not experienced a significant financial or supply chain impact directly related to the COVID-19 pandemic but have experienced some disruptions to clinical operations, including timelines to complete patient enrollment in some of our clinical trials, as further described below. We are continuing to serve our customers while taking precautions to 18 Table of Contents provide a safe work environment for our employees and customers. Our lab-based employees who need to be onsite to fulfill their job responsibilities have been onsite since late May 2020, and since September 2020 we have opened our Cambridge office to limited numbers of employees who prefer to work onsite. Our field-based employees engage with healthcare providers and other third parties remotely and, where local regulations allow, on a limited in-person basis. We are conducting our return to work program under strict guidelines as required by federal, state, and local authorities. We have been monitoring our supply chain network for disruptions due to the COVID-19 pandemic, and our third-party manufacturers remain largely unaffected, with any campaign delays experienced to date being limited to a few days in duration. Although global shipping continues to be disrupted due to the pandemic, we have not experienced a supply impact. The extent of the pandemic’s effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time. Future developments include changes in the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the supply and distribution of vaccines, and the resumption of widespread economic activity. Any prolonged material disruption of our employees, suppliers, manufacturing, or customers could negatively impact our consolidated financial position, consolidated results of operations and consolidated cash flows. As a result, we may have to take further actions that we determine are in the best interests of our employees or as required by federal, state, or local authorities. General Since inception, our operations have primarily focused on organizing and staffing our company, business planning, raising capital, assembling our core capabilities in cellular metabolism, identifying potential product candidates, undertaking preclinical studies, conducting clinical trials, establishing a commercial infrastructure and, prior to the sale of our oncology business to Servier on March 31, 2021, marketing our approved products. Through March 31, 2021, we have financed our operations primarily through proceeds from the sale of our royalty rights, commercial sales of TIBSOVO®, funding received from our collaboration agreements, private placements of our preferred stock, our initial public offering of our common stock and concurrent private placement of common stock to an affiliate of Celgene, and our follow-on public offerings. Following the sale of our oncology business to Servier on March 31, 2021, we expect to finance our operations primarily through cash on hand, and, potentially, collaborations, strategic alliances, licensing arrangements and other nondilutive strategic transactions. We have historically incurred operating losses. Our net income for the three months ended March 31, 2021 was $1.9 billion and our net loss for the three months ended March 31, 2020 was $40.3 million. As of March 31, 2021, we had retained earnings of $30.9 million. The net income we generated in the three months ended March 31, 2021 was primarily due to the sale of our oncology business to Servier, which was consummated on March 31, 2021. Following the consummation of the sale of our oncology business, we expect to incur significant expenses and net losses until such time we are able to report profitable results. Our net losses may fluctuate significantly from year to year. We expect that we will continue to incur significant expenses as we continue to advance and expand clinical development activities for our lead programs: mitapivat, and AG-946; continue to discover and validate novel targets and drug product candidates; expand and protect our intellectual property portfolio; and hire additional commercial, development and scientific personnel. Research and development expenses Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs related to our GDD portfolio to increase significantly for the foreseeable future as our product candidate development programs progress. However, the successful development of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development and to commercialize these product candidates. We are also unable to positively predict when future net cash inflows will commence from mitapivat, AG-946 or any of our other product candidates. This is due to the numerous risks and uncertainties associated with developing medicines, including the uncertainty of: • establishing an appropriate safety profile with an investigational new drug application, or IND, and/or NDA enabling toxicology and clinical trials; • the successful enrollment in, and completion of, clinical trials; • the receipt of marketing approvals from applicable regulatory authorities; • establishing compliant commercial manufacturing capabilities or making arrangements with third-party manufacturers; • obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; • launching commercial sales of the products, if and when approved, whether alone or in collaboration with others; and • maintaining an acceptable safety profile of the products following approval. 19 Table of Contents A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that product candidate. Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include: • employee-related expenses, including salaries, benefits and stock-based compensation expense; • expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research and development and both preclinical and clinical activities on our behalf, and the cost of consultants; • the cost of lab supplies and acquiring, developing and manufacturing preclinical and clinical study materials; and • facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and the maintenance of facilities, insurance and other operating costs. The following summarizes the clinical development activities related to our most advanced programs. The timing of trial and site initiations, enrollment and data readouts may be impacted depending on the duration, scope and severity of the COVID-19 pandemic : Mitapivat: PK Activator • DRIVE PK, a global phase 2, first-in-patient, open-label safety and efficacy clinical trial of mitapivat in adult, transfusion-independent patients with PK deficiency. This trial has completed enrollment. • ACTIVATE-T, a single arm, global, pivotal trial of mitapivat in regularly-transfused patients with PK deficiency. The trial has completed enrollment. We reported in January 2021 that this trial met its primary endpoint of a statistically significant and clinically meaningful reduction in transfusion burden. • ACTIVATE, a 1:1 randomized, placebo-controlled, global, pivotal trial of mitapivat in patients with PK deficiency who do not receive regular transfusions. The trial has completed enrollment. We reported in December 2020 that this trial met its primary endpoint of a statistically significant, sustained increase in hemoglobin compared to placebo. In addition, data from the trial demonstrated that treatment with mitapivat showed statistically significant improvement in key pre-specified secondary endpoints including patient reported outcomes. • A phase 2, open-label safety and efficacy clinical trial of mitapivat in adult patients with non-transfusion-dependent α- and β-thalassemia. The trial has completed enrollment. • In collaboration with the National Institutes of Health, or NIH, we are evaluating mitapivat in a phase 1 trial in patients with SCD pursuant to a cooperative research and development agreement. The trial is ongoing and enrolling patients, although the NIH experienced disruptions related to the COVID-19 pandemic. • In collaboration with UMC Utrecht, or UMC, we are evaluating mitapivat in patients with SCD pursuant to an investigator sponsored trial agreement. The trial is ongoing and enrolling patients, although UMC experienced disruptions related to the COVID-19 pandemic. We expect to initiate two phase 3 trials of mitapivat, ENERGIZE and ENERGIZE-T, in not regularly transfused and regularly transfused adults with thalassemia in the second half of 2021, and we expect to initiate a phase 2/3 trial of mitapivat in patients with SCD by the end of 2021. AG-946: Next-generation PKR Activator • A phase 1 trial of AG-946 in healthy volunteers and in patients with SCD. The trial is currently enrolling healthy volunteers. Other research and platform programs Other research and platform programs include activities related to exploratory efforts, target validation and lead optimization for our discovery and follow-on programs, and our proprietary metabolomics platform. Selling, general and administrative expenses Selling, general and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, business development, commercial, legal and human resources functions. Other significant costs include facility related costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters, and fees for accounting and consulting services. We anticipate that our selling, general and administrative expenses will increase in the future to support continued research and development activities and future commercialization activities related to our GDD portfolio, including the potential 20 Table of Contents commercialization of our product candidates. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses. Results of Operations Certain amounts in prior periods have been reclassified to reflect the impact of the discontinued operations treatment of the oncology business in order to conform to the current period presentation. Comparison of the three months ended March 31, 2021 and 2020 Total Operating Expenses Three Months Ended March 31, (In thousands) 2021 2020 Cost and expenses: Research and development $ 57,667 $ 55,358 Selling, general and administrative 33,550 31,672 Total Operating Expenses $ 91,217 $ 87,030 Total Operating Expenses - First Quarter of 2021 vs. First Quarter of 2020 - The increase in total operating expenses of $4.2 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily due an increase in research and development expenses of $2.3 million which is described below under Research and Development Expenses, and an increase in selling, general and administrative expenses of $1.9 million was due to ex-U.S. workforce related expenses. Research and Development Expenses Our research and development expenses, by major program, are outlined in the table below: Three Months Ended March 31, (In thousands) 2021 2020 Mitapivat (PKR activator) $ 12,364 $ 9,720 AG-946 (Next-Gen PKR activator) 1,771 2,406 Other research and platform programs 4,214 3,175 Total direct research and development expenses 18,349 15,301 Compensation and related expenses 26,753 26,935 Facilities and IT related expenses & other 12,565 13,122 Total indirect research and development expenses 39,318 40,057 Total research and development expense $ 57,667 $ 55,358 Total Research and Development Expenses - First Quarter of 2021 vs. First Quarter of 2020 - The increase in total research and development expenses of $2.3 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily due to a $2.6 million increase in mitapivat costs due to start up costs for the planned phase 3 trials of mitapivat, ENERGIZE and ENERGIZE-T, and the planned phase 2/3 trial of mitapivat in patients with SCD. Interest Income and Expense Three Months Ended March 31, (In thousands) 2021 2020 Interest income, net $ 340 $ 2,936 Interest Income and Expense- First Quarter of 2021 vs. First Quarter of 2020 - The decrease in interest income, net is primarily attributable to the decrease in interest rates at the end of the first quarter of 2020, which reduced the interest rates earned by 0.50% to 1.50% from prior periods and the decrease in our outstanding marketable securities balance for the three months ended March 31, 2021. 21 Table of Contents Loss from Operations and Net Income (Loss) Three Months Ended March 31, (In thousands) 2021 2020 Net loss from continuing operations $ (90,877) $ (84,094) Net income from discontinued operations 1,965,202 43,838 Net income (loss) 1,874,325 (40,256) Loss from Operations and Net Income (Loss) – First Quarter of 2021 vs. First Quarter of 2020 – The increase in loss from continuing operations for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily driven by the higher research and development expenses discussed above under Research and Development Expenses, and higher selling, general and administrative expenses discussed above under Total Operating Expenses. The change in net income from discontinued operations and net income (loss) for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily driven by the sale of our oncology business to Servier for approximately $1.8 billion in cash in the first quarter of 2021, which is included within net income from discontinued operations. Liquidity and Capital Resources Sources of liquidity Since our inception, and through March 31, 2021, we have funded our operations through commercial sales of TIBSOVO®, upfront, milestone, extension, cost reimbursement and royalty payments related to our collaboration agreements, product sales, proceeds from the sale of our royalty rights, proceeds received from our issuance of preferred stock, our initial public offering and concurrent private placement of common stock to an affiliate of Celgene, and our follow-on public offerings. As of March 31, 2021, we had cash, cash equivalents and marketable securities of $2.4 billion, which includes the $1.8 billion in cash received from the completion of the sale of our oncology business to Servier. On March 25, 2021, we announced that our board of directors authorized the repurchase of up to $1.2 billion of our outstanding shares of common stock, or the Repurchase Program, using the proceeds from the sale of our oncology business to Servier. On March 31, 2021, in connection with the Repurchase Program, we entered into a definitive share repurchase agreement with Bristol-Myers Squibb Company, or BMS, to repurchase 7,121,658 shares of our common stock held by certain subsidiaries of BMS for an aggregate purchase price of $344.5 million, or $48.3785 per share. This repurchase was completed on April 5, 2021. Further, on April 2, 2021, in connection with the Repurchase Program, we entered into a Rule 10b5-1 repurchase plan pursuant to which we may repurchase up to $600 million of shares of our common stock. We expect to conduct the remaining repurchases under the Repurchase program over 12—18 months, including executing a meaningful portion of the planned repurchases by the end of 2021 through a combination of 10b5-1 plans, open market purchases and privately negotiated block sales. In addition to our existing cash, cash equivalents and marketable securities, under the Purchase Agreement we are eligible to receive a $200 million milestone payment upon regulatory approval of vorasidenib and royalty payments with respect to U.S. net sales of TIBSOVO® and, if approved, vorasidenib. Our right to such payments from Servier is our only committed potential external source of funds. Whether the regulatory approval milestone for vorasidenib will be achieved is subject to various risks and uncertainties, many of which are outside our control, including adverse clinical developments with respect to vorasidenib. Furthermore, we cannot predict what success, if any, Servier may have in the United States with respect to sales of TIBSOVO® and, if approved, vorasidenib and consequently we cannot estimate the amount of royalty payments that we can expect to receive from Servier under the Purchase Agreement prior to the loss of exclusivity of these products. Cash flows The following table provides information regarding our cash flows for the three months ended March 31, 2021 and 2020: Three Months Ended March 31, (In thousands) 2021 2020 Net cash used in operating activities $ (120,749) $ (105,358) Net cash provided by investing activities 1,874,077 108,135 Net cash provided by financing activities 7,261 5,385 Net change in cash and cash equivalents $ 1,760,589 $ 8,162 Net cash used in operating activities. Cash used in operating activities of $120.7 million during the three months ended March 31, 2021, of which $90.2 million was used by continuing operations and $30.5 million was used by discontinued operations, 22 Table of Contents was primarily due to cash received of $39.5 million from sales of TIBSOVO®, and $1.2 million in cost reimbursements related to our Collaboration Agreements with Celgene, These amounts were offset by operating expenses driven by research and development costs described above under Research and Development Expenses and selling, general and administrative costs described above under Total Operating Expenses. Cash used in operating activities of $105.4 million during the three months ended March 31, 2020, of which $78.8 million was used by continuing operations and $26.6 million was used by discontinued operations, was primarily due to cash received $22.1 million from sales of TIBSOVO®, $5.2 million in cost reimbursements and royalty payments under our Collaboration Agreements with Celgene, $2.9 million in interest received, and $0.9 million in cost reimbursement related to our Collaboration agreement with CStone. These amounts were offset by increased operating expenses that relate to increased staffing needs due to our expanding operations and expanded facilities and IT related costs. Net cash provided by investing activities . Cash provided by investing activities of $1.9 billion for the three months ended March 31, 2021, of which $71.1 million was provided by operating activities and $1.8 billion was provided by discontinued operations, was primarily due to the approximately $1.8 billion in cash proceeds received from the sale of our oncology business to Servier that was completed on March 31, 2021. We also received higher proceeds from maturities and sales of marketable securities than purchases of marketable securities. Cash provided by investing activities of $108.1 million for three months ended March 31, 2020, of which $108.4 million was provided by operating activities and $0.3 million was used by discontinued operations, was primarily the result of higher proceeds from maturities and sales of marketable securities than purchases of marketable securities, offset by $4.5 million in purchases of property and equipment. Net cash provided by financing activities . Cash provided by financing activities for the three months ended March 31, 2021 was primarily the result of the $7.3 million of proceeds received from stock option exercises and purchases made pursuant to our 2013 ESPP. Cash provided by financing activities for the three months ended March 31, 2020 was primarily the result of the $5.5 million of proceeds received from stock option exercises and purchases made pursuant to our 2013 ESPP. Funding requirements Although we expect our expenses to decrease following the completion of the sale of our oncology business to Servier on March 31, 2021, we anticipate that this decrease will be offset as we transition our operations to focus solely on GDDs, particularly as we continue the research, development and clinical trials of, seek marketing approvals for, and commercialize our product candidates. If we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. We expect that our existing cash, cash equivalents and marketable securities as of March 31, 2021, together with anticipated interest income, future product sales and TIBSOVO® royalties, but excluding any transaction-specific milestone payments, will be sufficient to fund operations through major catalysts and to cash-flow positivity without the need to raise additional equity. Our future capital requirements will depend on many factors, including: • the amount of contingent consideration we ultimately receive in connection with the sale of our oncology business to Servier; • the scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our product candidates; • the costs, timing and outcome of regulatory review of our product candidates; • the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; • the amount and timing of revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; • our ability to establish and maintain collaborations on favorable terms, if at all; • our ability to successfully execute on our strategic plans; • operational delays due to the ongoing COVID-19 pandemic; and • the extent to which we acquire or in-license, or monitor or out-license, other medicines and technologies. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs primarily through cash on hand and, potentially, collaborations, strategic alliances, licensing arrangements and other nondilutive strategic transactions. In addition, in connection with potential future strategic transactions, we may pursue opportunistic debt offerings, and equity or equity-linked offerings. We do not have any committed external source of funds other than the potential milestone and royalty payments that we are eligible to receive under our Purchase Agreement with Servier. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our 23 Table of Contents common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed or on attractive terms, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Off-Balance Sheet Arrangements We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules. Contractual Obligations We have entered into agreements in the normal course of business with CROs for clinical trials and contract manufacturing organizations for supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes. These contractual obligations are cancelable at any time by us, generally upon prior written notice to the vendor. During the three months ended March 31, 2021, there were no significant changes to our contractual obligations and commitments described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020.