AGIOS PHARMACEUTICALS, INC. 10-Q

Item 1. Financial Statements (Unaudited) AGIOS PHARMACEUTICALS, INC. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share and per share data) June 30, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 969,124 $ 127,436 Marketable securities 703,864 445,493 Other receivable 8,131 — Prepaid expenses and other current assets 21,443 15,889 Current assets of discontinued operations — 47,859 Total current assets 1,702,562 636,677 Marketable securities 61,313 97,608 Operating lease assets 79,901 84,661 Property and equipment, net 27,056 30,815 Financing lease assets 871 590 Other non-current assets 2,900 — Non-current assets of discontinued operations — 2,601 Total assets $ 1,874,603 $ 852,952 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 7,654 $ 17,724 Accrued expenses 36,054 30,801 Operating lease liabilities 8,932 7,093 Financing lease liabilities 839 317 Taxes payable 7,170 — Current liabilities of discontinued operations — 38,459 Total current liabilities 60,649 94,394 Operating lease liabilities, net of current portion 91,971 97,458 Financing lease liabilities, net of current portion 167 331 Non-current liabilities of discontinued operations — 261,269 Total liabilities 152,787 453,452 Stockholders’ equity: Preferred stock, $ 0.001 par value; 25,000,000 shares authorized; no shares issued or outstanding at June 30, 2021 and December 31, 2020 — — Common stock, $ 0.001 par value; 125,000,000 shares authorized; 70,404,782 shares issued and 59,910,814 outstanding at June 30, 2021, and 69,293,920 shares issued and outstanding at December 31, 2020 70 69 Additional paid-in capital 2,306,304 2,242,801 Accumulated other comprehensive (loss) income ( 144 ) 105 Accumulated deficit ( 55,367 ) ( 1,843,475 ) Treasury stock, at cost ( 10,493,968 shares at June 30, 2021 and no shares at December 31, 2020) ( 529,047 ) — Total stockholders’ equity 1,721,816 399,500 Total liabilities and stockholders’ equity $ 1,874,603 $ 852,952 See accompanying Notes to Condensed Consolidated Financial Statements. 1 Table of Contents AGIOS PHARMACEUTICALS, INC. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended June 30, Six Months Ended June 30, (In thousands, except share and per share data) 2021 2020 2021 2020 Cost and expenses: Research and development $ 62,007 $ 54,086 $ 119,674 $ 109,445 Selling, general and administrative 29,215 29,178 62,765 60,849 Total cost and expenses 91,222 83,264 182,439 170,294 Loss from operations ( 91,222 ) ( 83,264 ) ( 182,439 ) ( 170,294 ) Gain on sale of oncology business 2,000 — 2,000 — Interest (expense) income, net ( 92 ) 1,769 248 4,705 Other income, net 6,524 — 6,524 — Net loss from continuing operations ( 82,790 ) ( 81,495 ) ( 173,667 ) ( 165,589 ) Net income (loss) from discontinued operations, net of tax ( 3,427 ) ( 8,983 ) 1,961,775 34,855 Net income (loss) $ ( 86,217 ) $ ( 90,478 ) $ 1,788,108 $ ( 130,734 ) Net loss from continuing operations per share - basic and diluted $ ( 1.36 ) $ ( 1.18 ) $ ( 2.66 ) $ ( 2.41 ) Net income (loss) from discontinued operations per share - basic and diluted $ ( 0.06 ) $ ( 0.13 ) $ 30.05 $ 0.51 Net income (loss) per share - basic and diluted $ ( 1.41 ) $ ( 1.31 ) $ 27.39 $ ( 1.90 ) Weighted-average number of common shares used in computing net loss per share from continuing operations, net income (loss) per share from discontinued operations and net income (loss) per share – basic and diluted 61,066,977 68,958,091 65,281,827 68,784,109 See accompanying Notes to Condensed Consolidated Financial Statements. 2 Table of Contents AGIOS PHARMACEUTICALS, INC. Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2021 2020 2021 2020 Net income (loss) $ ( 86,217 ) $ ( 90,478 ) $ 1,788,108 $ ( 130,734 ) Other comprehensive (loss) income Unrealized (loss) gain on available-for-sale securities ( 141 ) 1,562 ( 249 ) 1,434 Comprehensive income (loss) $ ( 86,358 ) $ ( 88,916 ) $ 1,787,859 $ ( 129,300 ) See accompanying Notes to Condensed Consolidated Financial Statements. 3 Table of Contents AGIOS PHARMACEUTICALS, INC. Condensed Consolidated Statements of Stockholders' Equity (Unaudited) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Accumulated Deficit Treasury Stock Total Stockholders’ Equity (in thousands, except share amounts) Shares Amount Shares Amount Balance at December 31, 2020 69,293,920 $ 69 $ 2,242,801 $ 105 $ ( 1,843,475 ) — $ — $ 399,500 Common stock issued under stock incentive plan and ESPP 518,285 1 7,346 — — — — 7,347 Stock-based compensation expense — — 14,854 — — — — 14,854 Other comprehensive loss — — — ( 108 ) — — — ( 108 ) Net income — — — — 1,874,325 — — 1,874,325 Disposition of oncology business — — 712 — — — — 712 Balance at March 31, 2021 69,812,205 $ 70 $ 2,265,713 $ ( 3 ) $ 30,850 — $ — $ 2,296,630 Common stock issued under stock incentive plan and ESPP 592,577 $ — $ 25,673 $ — $ — — $ — $ 25,673 Stock-based compensation expense — — 14,885 — — — — 14,885 Repurchase of common stock — — — — — ( 10,493,968 ) ( 529,047 ) ( 529,047 ) Other comprehensive loss — — — ( 141 ) — — — ( 141 ) Net loss — — — — ( 86,217 ) — — ( 86,217 ) Disposition of oncology business — — 33 — — — — 33 Balance at June 30, 2021 70,404,782 $ 70 $ 2,306,304 $ ( 144 ) $ ( 55,367 ) ( 10,493,968 ) $ ( 529,047 ) $ 1,721,816 See accompanying Notes to Condensed Consolidated Financial Statements. 4 Table of Contents AGIOS PHARMACEUTICALS, INC. Condensed Consolidated Statements of Stockholders' Equity (Unaudited) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Accumulated Deficit Total Stockholders’ Equity (in thousands, except share amounts) Shares Amount Balance at December 31, 2019 68,401,105 $ 68 $ 2,156,363 $ 202 $ ( 1,516,105 ) $ 640,528 Common stock issued under stock incentive plan and ESPP 388,820 1 5,464 — — 5,465 Stock-based compensation expense — — 15,670 — — 15,670 Other comprehensive loss — — — ( 128 ) — ( 128 ) Net loss — — — — ( 40,256 ) ( 40,256 ) Disposition of oncology business — — 4,020 — — 4,020 Balance at March 31, 2020 68,789,925 $ 69 $ 2,181,517 $ 74 $ ( 1,556,361 ) $ 625,299 Common stock issued under stock incentive plan and ESPP 268,771 $ — $ 1,652 $ — $ — $ 1,652 Stock-based compensation expense — — 17,614 — — 17,614 Other comprehensive income — — — 1,562 — 1,562 Net loss — — — — ( 90,478 ) ( 90,478 ) Disposition of oncology business — — 2,816 — — 2,816 Balance at June 30, 2020 69,058,696 $ 69 $ 2,203,599 $ 1,636 $ ( 1,646,839 ) $ 558,465 See accompanying Notes to Condensed Consolidated Financial Statements. 5 Table of Contents AGIOS PHARMACEUTICALS, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, (In thousands) 2021 2020 Operating activities Net income (loss) $ 1,788,108 $ ( 130,734 ) Less: Net Income from discontinued operations 1,961,775 34,855 Net loss from continuing operations ( 173,667 ) ( 165,589 ) Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: Depreciation and amortization 4,829 4,887 Stock-based compensation expense 29,739 33,284 Net amortization of premium (accretion of discount) on marketable securities 3,422 473 Loss on disposal of property and equipment 12 — Non-cash operating lease expense 4,760 4,435 Changes in operating assets and liabilities: Other receivables ( 8,131 ) — Prepaid expenses and other current and non-current assets ( 8,454 ) 1,295 Accounts payable ( 5,561 ) ( 2,562 ) Accrued expenses and other current liabilities ( 2,547 ) ( 8,265 ) Operating lease liabilities ( 3,631 ) ( 4,149 ) Net cash used in operating activities - continuing operations ( 159,229 ) ( 136,191 ) Net cash used in operating activities - discontinued operations ( 78,814 ) ( 36,964 ) Net cash used in operating activities ( 238,043 ) ( 173,155 ) Investing activities Purchases of marketable securities ( 498,896 ) ( 189,601 ) Proceeds from maturities and sales of marketable securities 273,149 328,883 Purchases of property and equipment ( 1,261 ) ( 8,340 ) Net cash (used in) provided by investing activities - continuing operations ( 227,008 ) 130,942 Net cash provided by (used in) investing activities - discontinued operations 1,802,936 ( 348 ) Net cash provided by investing activities 1,575,928 130,594 Financing activities Payments on financing lease obligations ( 170 ) ( 166 ) Purchase of treasury stock ( 529,047 ) — Net proceeds from stock option exercises and employee stock purchase plan 33,020 7,117 Net cash (used in) provided by financing activities - continuing operations ( 496,197 ) 6,951 Net cash provided by financing activities - discontinued operations — 250,537 Net cash (used in) provided by financing activities ( 496,197 ) 257,488 Net change in cash and cash equivalents 841,688 214,927 Cash and cash equivalents at beginning of the period 127,436 80,931 Cash and cash equivalents at end of the period $ 969,124 $ 295,858 Supplemental disclosure of non-cash investing and financing transactions Additions to property and equipment in accounts payable and accrued expenses $ 56 $ 3,621 Operating lease liabilities arising from obtaining operating lease assets $ — $ — Financing lease liabilities arising from obtaining financing lease assets $ 511 $ — See accompanying Notes to Condensed Consolidated Financial Statements. 6 Table of Contents AGIOS PHARMACEUTICALS, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Overview and Basis of Presentation References to Agios Throughout this Quarterly Report on Form 10-Q, “we,” “us,” and “our,” and similar expressions, except where the context requires otherwise, refer to Agios Pharmaceuticals, Inc. and its consolidated subsidiaries, and “our Board of Directors” refers to the board of directors of Agios Pharmaceuticals, Inc. Overview We are a biopharmaceutical company committed to transforming patients’ lives through scientific leadership in the field of cellular metabolism and adjacent areas of biology, with the goal of creating differentiated, small molecule medicines for genetically defined diseases, or GDDs. 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. Sale of our Oncology Business to Servier On March 31, 2021, we completed the sale of our oncology business to Servier Pharmaceuticals LLC, or Servier. 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. We recorded income from royalties of approximately $ 2.0 million on U.S. net sales of TIBSOVO® by Servier in the gain on sale of oncology business line item within the condensed consolidated statements of operation s , for the three and six months ended June 30, 2021. We also recorded approximately $ 3.5 million of cash receipts from customers owed to Servier within the prepaid expenses and other current assets line item within the condensed consolidated balance sheet as of June 30, 2021. Basis of presentation The condensed consolidated balance sheet as of June 30, 2021, the condensed consolidated statements of operations, comprehensive income (loss) and stockholders' equity for the three and six months ended June 30, 2021 and 2020, and the condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020 are unaudited. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of our management, reflect all adjustments, which include only normal recurring adjustments, necessary to fairly state our financial position as of June 30, 2021, our results of operations and stockholders' equity for the three and six months ended June 30, 2021 and 2020, and cash flows for the six months ended June 30, 2021 and 2020. The financial data and the other financial information disclosed in these notes to the condensed consolidated financial statements related to the three and six-month periods are also unaudited. The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other future annual or interim period. The condensed consolidated balance sheet data as of December 31, 2020 was derived from our audited financial statements, but does not include all disclosures required by U.S. generally accepted accounting principles, or U.S. GAAP. The condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 that was filed with the Securities and Exchange Commission, or the SEC, on February 25, 2021. In late March 2021, our oncology business met all the conditions to be classified as held for sale and, because we consider the disposal of the oncology business to be a strategic shift that had a major effect on our operations and financial results, 7 Table of Contents represented a discontinued operation. All assets and liabilities associated with our oncology business were therefore classified as assets and liabilities of discontinued operations in our condensed consolidated balance sheets for the periods presented. Further, all historical operating results for our oncology business are reflected within discontinued operations in the condensed consolidated statements of operations for all periods presented. For additional information, see Note 3, Discontinued Operations. Our condensed consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared in conformity with U.S. GAAP. Reclassifications Certain amounts in prior periods have been reclassified to reflect the impact of the discontinued operations treatment of the oncology business in order to conform to the current period presentation. Use of estimates The preparation of our condensed consolidated financial statements requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments and methodologies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including expenses, reserves and allowances, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and any variant strains of the virus and the actions taken to contain the pandemic or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. We have made estimates of the impact of COVID-19 within our financial statements and there may be changes to those estimates in future periods. Actual results may differ from these estimates. Liquidity On March 31, 2021 we completed the sale of our oncology business to Servier, and received approximately $ 1.8 billion in cash at closing. In connection with the sale, on March 25, 2021, we announced that our board of directors authorized the repurchase of up to $ 1.2 billion of our outstanding shares of common stock, or the Repurchase Program, using the proceeds from the sale of our oncology business to Servier. On March 31, 2021, in connection with the Repurchase Program, we entered into a definitive share repurchase agreement with Bristol-Myers Squibb Company, or BMS, to repurchase 7,121,658 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. As of June 30, 2021, we have repurchased approximately 3.4 million shares for $ 184.5 million, or $ 54.71 per share, under the plan with approximately $ 415.5 million remaining under the plan for additional repurchases. In total, as of June 30, 2021, we have repurchased 10.5 million common shares for $ 529.0 million under the Repurchase Program. As of June 30, 2021, we had cash, cash equivalents and marketable securities of $ 1.7 billion. Although we have incurred recurring losses and expect to continue to incur losses for the foreseeable future, we expect our cash, cash equivalents and marketable securities will be sufficient to fund current operations for at least the next twelve months from the issuance date of these financial statements. 2. Summary of Significant Accounting Policies Discontinued Operations We accounted for the sale of our oncology business in accordance with Accounting Standards Codification, ASC, 205 Discontinued Operations and Accounting Standards Update, ASU, No. 2014-08, Reporting of Discontinued Operations and Disclosures of Disposals of Components of an Entity . We followed the held-for-sale criteria as defined in ASC 306 and ASC 205. ASC 205 requires that a component of an entity that has been disposed of or is classified as held for sale and has operations and cash flows that can be clearly distinguished from the rest of the entity be reported as assets held for sale and discontinued operations. In the period a component of an entity has been disposed of or classified as held for sale, the results of operations for the periods presented are reclassified into separate line items in the unaudited condensed consolidated statements of operations. Assets and liabilities are also reclassified into separate line items on the related condensed consolidated balance sheets for the periods presented. The statements of cash flows for the periods presented are also reclassified to reflect the results of discontinued operations as separate line items. ASU 2014-08 requires that only a disposal of a component of an entity, or a 8 Table of Contents group of components of an entity, that represents a strategic shift that has, or will have, a major effect on the reporting entity’s operations and financial results be reported in the financial statements as discontinued operations. ASU 2014-08 also provides guidance on the financial statement presentations and disclosures of discontinued operations. Due to the sale of the oncology business during the first quarter of 2021, see Note 3, Discontinued Operations , in accordance with ASC 205, Discontinued Operations , we have classified the results of the oncology business as discontinued operations in our unaudited condensed consolidated statements of operations and cash flows for all periods presented. All assets and liabilities associated with our oncology business were therefore classified as assets and liabilities of discontinued operations in our condensed consolidated balance sheets for the periods presented. All amounts included in the notes to the unaudited condensed consolidated financial statements relate to continuing operations unless otherwise noted. Treasury Stock Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. There have been no other material changes to the significant accounting policies previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020. Recent accounting pronouncements Other accounting standards that have been issued by the Financial Accounting Standards Board or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption. 3. Discontinued Operations On March 31, 2021, we completed the sale of our oncology business to Servier. We have determined the sale of the oncology business represents a strategic shift that had a major effect on our business and therefore met the criteria for classification as discontinued operations at March 31, 2021. Accordingly, the oncology business is reported as discontinued operations in accordance with ASC 205-20, Discontinued Operations . The related assets and liabilities of the oncology business are classified as assets and liabilities of discontinued operations in the condensed consolidated balance sheets and the results of operations from the oncology business as discontinued operations in the condensed consolidated statements of operations. Applicable amounts in prior years have been recast to conform to this discontinued operations presentation. We recognized a gain on the sale of the oncology business upon closing. The following table presents the assets and liabilities of the discontinued operations as of December 31, 2020: (in thousands) December 31, 2020 Assets Current assets: Accounts receivable, net $ 21,328 Collaboration receivable – related party 2,123 Collaboration receivable – other 1,948 Inventory 14,698 Prepaid expenses and other current assets 7,762 Total current assets of discontinued operations 47,859 Other non-current assets 2,601 Total assets of discontinued operations $ 50,460 Liabilities Current liabilities: Accounts payable $ 9,120 Accrued expenses 29,339 Total current liabilities of discontinued operations 38,459 Liability related to the sale of future revenue, net of debt issuance costs 261,269 Total liabilities of discontinued operations $ 299,728 9 Table of Contents The following table presents the net liabilities transferred for the sale oncology business for the quarter ended March 31, 2021: (in thousands) March 31, 2021 Assets Current assets: Accounts receivable, net $ 25,386 Collaboration receivable – related party 2,253 Collaboration receivable – other 2,438 Inventory 16,190 Prepaid expenses and other current assets 7,125 Total current assets of discontinued operations 53,392 Other non-current assets 2,234 Total assets of discontinued operations $ 55,626 Liabilities Current liabilities: Accounts payable $ 4,245 Accrued expenses 30,288 Total current liabilities of discontinued operations 34,533 Liability related to the sale of future revenue, net of debt issuance costs 264,281 Total liabilities of discontinued operations 298,814 Net liabilities distributed to Servier $ ( 243,188 ) The following table presents the gain on the sale for the quarter ended March 31, 2021: (in thousands) March 31, 2021 Cash proceeds $ 1,802,936 Less: transaction and insurance costs ( 53,573 ) Less: net liabilities distributed ( 243,188 ) Gain on sale, pre-tax 1,992,551 Income tax ( 12,867 ) Gain on sale, net of tax $ 1,979,684 As of June 30, 2021, there were no assets or liabilities classified as discontinued operations. 10 Table of Contents The following table presents the financial results of the discontinued operations: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2021 2020 2021 2020 Revenues: Product revenue, net $ — $ 27,581 $ 36,909 $ 50,255 Collaboration revenue – related party — 5,735 1,350 65,832 Collaboration revenue – other — 692 491 1,685 Royalty revenue – related party — 3,339 2,659 6,673 Total revenue — 37,347 41,409 124,445 Cost and expenses: Cost of sales — 675 706 1,208 Research and development 207 36,831 41,564 72,728 Selling, general and administrative 420 6,773 8,551 13,603 Total cost and expenses 627 44,279 50,821 87,539 (Loss) income from discontinued operations ( 627 ) ( 6,932 ) ( 9,412 ) 36,906 Non-cash interest expense for the sale of future revenue — ( 2,051 ) ( 5,697 ) ( 2,051 ) Gain on the sale of the oncology business ( 2,800 ) — 1,989,751 — Income from discontinued operations, pre-tax ( 3,427 ) ( 8,983 ) 1,974,642 34,855 Income tax expense — — ( 12,867 ) — Net income from discontinued operations $ ( 3,427 ) $ ( 8,983 ) $ 1,961,775 $ 34,855 In accordance with ASC 205-20, only expenses specifically identifiable and related to a business to be disposed may be presented in discontinued operations. As such, the research and development, marketing, selling and general and administrative expenses in discontinued operations include corporate costs incurred directly to solely support our oncology business. We have also entered into a Transition Services Agreement with Servier, through which we will provide transitional services related to discovery, clinical development, technical operations, commercial and general and administrative related activities for periods ranging from one month to approximately one year after March 31, 2021. The milestone payment for approval of vorasidenib and royalty payments related to vorasidenib and TIBSOVO® represent contingent consideration. Contingent consideration has been accounted for as a gain contingency in accordance with ASC 450, Contingencies , and will be recognized in earnings in the period when realizable. 4. Fair Value Measurements We record cash equivalents and marketable securities at fair value. ASC 820, Fair Value Measurements and Disclosures , establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs). The hierarchy consists of three levels: Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 – Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, directly or indirectly, for substantially the full term of the asset or liability. Level 3 – Unobservable inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. 11 Table of Contents The following table summarizes our cash equivalents and marketable securities measured at fair value on a recurring basis as of June 30, 2021: (In thousands) Level 1 Level 2 Level 3 Total Cash equivalents $ 834,786 $ 70,898 $ — $ 905,684 Total cash equivalents 834,786 70,898 — 905,684 Marketable securities: U.S. Treasuries — 85,251 — 85,251 Government securities — 101,976 — 101,976 Corporate debt securities — 577,950 — 577,950 Total marketable securities — 765,177 — 765,177 Total cash equivalents and marketable securities $ 834,786 $ 836,075 $ — $ 1,670,861 Cash equivalents and marketable securities have been initially valued at the transaction price and subsequently, at the end of each reporting period, valued utilizing third-party pricing services or other observable market data. The pricing services utilize industry standard valuation models, including both income and market-based approaches, and observable market inputs to determine value. After completing our validation procedures, we did not adjust or override any fair value measurements provided by the pricing services as of June 30, 2021. There have been no changes to the valuation methods during the six months ended June 30, 2021. We have no financial assets or liabilities that were classified as Level 3 at any point during the six months ended June 30, 2021. 5. Marketable Securities Our marketable securities are classified as available-for-sale pursuant to ASC 320, Investments – Debt and Equity Securities , and are recorded at fair value. Unrealized gains are included as a component of accumulated other comprehensive (loss) income in the condensed consolidated balance sheets and statements of stockholders’ equity and a component of total comprehensive loss in the condensed consolidated statements of comprehensive (loss) income, until realized. Unrealized losses are evaluated for impairment under ASC 326, Financial Instruments - Credit Losses , to determine if the impairment is credit-related or noncredit-related. Credit-related impairment is recognized as an allowance on the balance sheet with a corresponding adjustment to earnings, and noncredit-related impairment is recognized in other comprehensive income, net of taxes. Realized gains and losses are included in investment income on a specific-identification basis. There were no material realized gains or losses on marketable securities for the three and six months ended June 30, 2021 or 2020. 12 Table of Contents Marketable securities at June 30, 2021 consisted of the following: (In thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value Current: U.S. Treasuries $ 85,256 $ 2 $ ( 7 ) $ 85,251 Government securities 76,980 16 — 76,996 Corporate debt securities 541,713 11 ( 107 ) 541,617 Total Current 703,949 29 ( 114 ) 703,864 Non-current: Government securities 25,000 — ( 20 ) 24,980 Corporate debt securities 36,372 — ( 39 ) 36,333 Total Non-current 61,372 — ( 59 ) 61,313 Total marketable securities $ 765,321 $ 29 $ ( 173 ) $ 765,177 Marketable securities at December 31, 2020 consisted of the following: (In thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value Current: U.S. Treasuries $ 113,559 $ 134 $ ( 21 ) $ 113,672 Government securities 108,263 37 ( 8 ) 108,292 Corporate debt securities 223,461 140 ( 72 ) 223,529 Total Current 445,283 311 ( 101 ) 445,493 Non-current: U.S. Treasuries 15,147 — ( 10 ) 15,137 Government securities 26,831 8 — 26,839 Corporate debt securities 55,735 2 ( 105 ) 55,632 Total Non-current 97,713 10 ( 115 ) 97,608 Total marketable securities $ 542,996 $ 321 $ ( 216 ) $ 543,101 As of June 30, 2021 and December 31, 2020, we held both current and non-current investments. Investments classified as current have maturities of less than one year. Investments classified as non-current are those that: (i) have a maturity of greater than one year, and (ii) we do not intend to liquidate within the next twelve months, although these funds are available for use and, therefore, are classified as available-for-sale. As of June 30, 2021 and December 31, 2020, we held 113 and 87 debt securities, respectively, that were in an unrealized loss position for less than one year. We did no t record an allowance for credit losses as of June 30, 2021 and December 31, 2020 related to these securities. The aggregate fair value of debt securities in an unrealized loss position at June 30, 2021 and December 31, 2020 was $ 559.3 million and $ 299.0 million, respectively. There were no individual securities that were in a significant unrealized loss position as of June 30, 2021 and December 31, 2020. 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 June 30, 2021 and December 31, 2020. 6. Leases Our building leases are comprised of office and laboratory space under non-cancelable operating leases. These lease agreements have remaining lease terms of seven years and contain various clauses for renewal at our option. The renewal options were not included in the calculation of the operating lease assets and the operating lease liabilities as the renewal options are not reasonably certain of being exercised. The lease agreements do not contain residual value guarantees. 13 Table of Contents The components of lease expense and other information related to leases were as follows: Three Months Ended June 30, Six Months Ended June 30, (In millions) 2021 2020 2021 2020 Operating lease costs $ 3.8 $ 3.8 $ 7.6 $ 7.6 Cash paid for amounts included in the measurement of operating lease liabilities $ 3.6 $ 3.5 $ 7.2 $ 7.4 We have not entered into any material short-term leases or financing leases as of June 30, 2021. As of June 30, 2021, undiscounted minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter were as follows: (In thousands) Remaining 2021 $ 6,039 2022 16,773 2023 18,126 2024 18,660 2025 19,507 Thereafter 44,385 Undiscounted minimum rental commitments $ 123,490 Interest ( 22,587 ) Operating lease liabilities $ 100,903 In arriving at the operating lease liabilities as of June 30, 2021 and December 31, 2020, we applied the weighted-average incremental borrowing rate of 5.7 % for both periods over a weighted-average remaining lease term of 6.7 years and 7.2 years, respectively. 7. Accrued Expenses Accrued expenses consist of the following: (In thousands) June 30, 2021 December 31, 2020 Accrued compensation $ 10,559 $ 20,345 Accrued research and development costs 7,627 5,444 Accrued professional fees 3,075 2,897 Accrued other 14,793 2,115 Total accrued expenses $ 36,054 $ 30,801 8. Share-Based Payments 2013 Stock Incentive Plan In June 2013, our Board of Directors adopted and, in July 2013 our stockholders approved, the 2013 Stock Incentive Plan, or the 2013 Plan. The 2013 Plan became effective upon the closing of our initial public offering and provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, or RSUs, performance-based share units, or PSUs, and other stock-based awards to employees, non-employees and non-employee directors. Following the adoption of the 2013 Plan, we granted no further stock options or other awards under the 2007 Stock Incentive Plan, or the 2007 Plan. Any options or awards outstanding under the 2007 Plan at the time of adoption of the 2013 Plan remain outstanding and effective. As of June 30, 2021, the total number of shares reserved under the 2007 Plan and the 2013 Plan was 11,532,771 , and we had 4,814,051 shares available for future issuance under the 2013 Plan. 14 Table of Contents Stock options The following table presents stock option activity for the six months ended June 30, 2021: Number of Stock Options Weighted-Average Exercise Price Outstanding at December 31, 2020 6,143,046 $ 58.46 Granted 999,488 56.17 Exercised ( 677,154 ) 45.79 Forfeited/Expired ( 1,213,538 ) 61.89 Outstanding at June 30, 2021 5,251,842 $ 58.87 Exercisable at June 30, 2021 3,412,161 $ 61.00 Vested and expected to vest at June 30, 2021 5,251,842 $ 58.87 At June 30, 2021, there was approximately $ 58.8 million of total unrecognized compensation expense related to unvested stock option awards, which we expect to recognize over a weighted-average period of approximately 2.6 years. Restricted stock units The following table presents RSU activity for the six months ended June 30, 2021: Number of Stock Units Weighted-Average Grant Date Fair Value Unvested shares at December 31, 2020 1,284,378 $ 50.78 Granted 785,094 56.02 Vested ( 374,307 ) 57.74 Forfeited ( 510,152 ) 51.84 Unvested shares at June 30, 2021 1,185,013 $ 51.60 As of June 30, 2021, there was approximately $ 47.2 million of total unrecognized compensation expense related to RSUs, which we expect to recognize over a weighted-average period of approximately 2.1 years. Performance-based stock units The following table presents PSU activity for the six months ended June 30, 2021: Number of Stock Units Weighted-Average Grant Date Fair Value Unvested shares at December 31, 2020 142,229 $ 54.28 Granted 121,000 56.68 Vested — — Forfeited ( 24,059 ) 49.49 Unvested shares at June 30, 2021 239,170 $ 55.98 Stock-based compensation expense associated with these PSUs is recognized if the underlying performance condition is considered probable of achievement using our management’s best estimates. As of June 30, 2021, there was no unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered probable of achievement, and $ 13.4 million of total unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered not probable of achievement. 15 Table of Contents Market-based stock units The following table presents market-based stock unit, or MSU, activity for the six months ended June 30, 2021: Number of Stock Units Weighted-Average Grant Date Fair Value Unvested shares at December 31, 2020 42,695 $ 41.50 Granted — — Unvested shares at June 30, 2021 42,695 $ 41.50 The fair value of MSUs are estimated using a Monte Carlo simulation model. Assumptions and estimates utilized in the model include the risk-free interest rate, dividend yield, expected stock volatility and the estimated period to achievement of the market condition. As of June 30, 2021, there was no remaining unrecognized compensation expense related to MSUs. 2013 Employee Stock Purchase Plan In June 2013, our Board of Directors adopted, and in July 2013 our stockholders approved, the 2013 Employee Stock Purchase Plan, or the 2013 ESPP. We issued and sold 59,401 and 62,694 shares of common stock during the six months ended June 30, 2021 and 2020, respectively, under the 2013 ESPP. The 2013 ESPP provides participating employees with the opportunity to purchase up to an aggregate of 1,345,454 shares of our common stock. As of June 30, 2021, we had 921,043 shares of common stock available for future issuance under the 2013 ESPP. Stock-based compensation expense Stock-based compensation expense by award type included within the condensed consolidated statements of operations is as follows: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2021 2020 2021 2020 Stock options $ 8,789 $ 10,143 $ 17,185 $ 19,452 Restricted stock units 5,784 6,377 11,989 10,836 Performance-based stock units — 425 — 1,760 Employee stock purchase plan 312 399 565 696 Other stock awards — 270 — 540 Total stock-based compensation expense $ 14,885 $ 17,614 $ 29,739 $ 33,284 Expenses related to stock options and stock-based awards were allocated as follows in the condensed consolidated statements of operations: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2021 2020 2021 2020 Research and development expense $ 6,422 $ 7,594 $ 13,395 $ 14,593 Selling, general and administrative expense 8,463 10,020 16,344 18,691 Total stock-based compensation expense $ 14,885 $ 17,614 $ 29,739 $ 33,284 9. Loss per Share Basic net loss per share is calculated by dividing net loss by the weighted-average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting the weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury stock method. For purposes of the dilutive net loss per share calculation, stock options, RSUs, PSUs and MSUs for which the performance and market vesting conditions, respectively, have been deemed probable, and 2013 ESPP shares are considered to be common stock equivalents, while PSUs and MSUs with performance and market vesting conditions, respectively, that were not deemed probable as of June 30, 2021 are not considered to be common stock equivalents. 16 Table of Contents We utilize the control number concept in the computation of diluted earnings per share to determine whether potential common stock equivalents are dilutive. The control number used is loss from continuing operations. The control number concept requires that the same number of potentially dilutive securities applied in computing diluted earnings per share from continuing operations be applied to all other categories of income or loss, regardless of their anti-dilutive effect on such categories. Since we had a net loss for continuing operations for all periods presented, no dilutive effect has been recognized in the calculation of income from discontinued operations per share. Basic and diluted net loss per share was the same for all periods presented. The following common stock equivalents were excluded from the calculation of diluted net loss per share applicable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect: Three and Six Months Ended June 30, 2021 2020 Stock options 5,251,842 6,749,373 Restricted stock units 1,185,013 1,290,875 Performance-based stock units — 78,920 Employee stock purchase plan shares 29,422 13,430 Total common stock equivalents 6,466,277 8,132,598 10. Income Taxes No income tax provision was recorded for the three months ended June 30, 2021. We recorded a provision for income taxes of $ 12.9 million for the six months ended June 30, 2021. No income tax provision was recorded for the three and six months ended June 30, 2020. The tax provision has been recorded within discontinued operations as it relates to the income tax impact on the sale of its oncology business to Servier. There is no income tax expense recorded in continuing operations for the three and six months ended June 30, 2021 and 2020, respectively. Cash taxes paid were $ 6.2 million for the six months ended June 30, 2021. No cash taxes were paid during the six months ended June 30, 2020. 11. Share Repurchase Program On March 25, 2021, we announced that our board of directors authorized the Repurchase Program for the repurchase of up to $ 1.2 billion of our outstanding shares of common stock. On March 31, 2021, in connection with the Repurchase Program, we entered into a definitive share repurchase agreement with 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 to which we may repurchase up to $ 600 million of shares of our common stock. As of June 30, 2021, we have repurchased approximately 3.4 million shares of common stock for $ 184.5 million, or $ 54.71 per share, under the plan with approximately $ 415.5 million remaining under the plan for additional repurchases. In total, as of June 30, 2021, we have repurchased 10.5 million common shares for $ 529.0 million under the Repurchase Program. Repurchased shares are held as treasury stock until they are retired or re-issued. Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. Repurchases of our common stock are accounted for as of the settlement date. There were no retirements or re-issuances of treasury stock during the three months ended June 30, 2021. 17 Table of Contents