AGIOS PHARMACEUTICALS, INC. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures. Based on that evaluation of our disclosure controls and procedures as of December 31, 2021, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management’s Annual Report on Internal Control over Financial Reporting 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. GAAP. Our internal control over financial reporting includes those policies and procedures that: • pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its 2013 Internal Control – Integrated Framework. Based on our assessment, our management has concluded that, as of December 31, 2021, our internal control over financial reporting is effective based on those criteria. The effectiveness of our internal control over financial reporting as of December 31, 2021, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included herein. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. 70 Table of Contents Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 71 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this Item 10 will be included in our definitive proxy statement to be filed with the Securities and Exchange Commission, or SEC, with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference. Item 11. Executive Compensation The information required by this Item 11 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item 12 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence 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 2022 Annual Meeting of Stockholders and is incorporated herein by reference. Item 14. 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 2022 Annual Meeting of Stockholders and is incorporated herein by reference. 72 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules (1) Financial Statements The following documents are included on pages F-1 through F-27 attached hereto and are filed as part of this Annual Report on Form 10-K. Report of Independent Registered Public Accounting Firm (PCAOB ID 238) 2 Consolidated Balance Sheets 4 Consolidated Statements of Operations 5 Consolidated Statements of Comprehensive Income (Loss) 6 Consolidated Statements of Stockholders’ Equity 7 Consolidated Statements of Cash Flows 8 Notes to Consolidated Financial Statements 9 (2) Financial Statement Schedules Schedules have been omitted since they are either not required or not applicable or the information is otherwise included herein. (3) Exhibits Exhibit Number Description of Exhibit Incorporated by Reference Filed Herewith Form File Number Date of Filing Exhibit Number 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 8-K 001-36014 July 30, 2013 3.1 3.2 Second Amended and Restated By-Laws 8-K 001-36014 December 19, 2018 3.1 4.1 Specimen Stock Certificate evidencing the shares of common stock S-1 333-189216 June 24, 2013 4.1 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 S-1 333-189216 June 10, 2013 10.1 10.2# Form of Incentive Stock Option Agreement under 2007 Stock Incentive Plan S-1 333-189216 June 10, 2013 10.2 10.3# Form of Nonstatutory Stock Option Agreement under 2007 Stock Incentive Plan S-1 333-189216 June 10, 2013 10.3 10.4# 2013 Stock Incentive Plan S-1 333-189216 June 24, 2013 10.4 10.5# Form of Incentive Stock Option Agreement under 2013 Stock Incentive Plan S-1 333-189216 June 24, 2013 10.5 10.6# Form of Nonstatutory Stock Option Agreement under 2013 Stock Incentive Plan S-1 333-189216 June 24, 2013 10.6 10.7# 2013 Employee Stock Purchase Plan S-1 333-189216 June 24, 2013 10.7 73 Table of Contents Exhibit Number Description of Exhibit Incorporated by Reference Filed Herewith Form File Number Date of Filing Exhibit Number 10.8 Form of Indemnification Agreement between the Registrant and each of its Executive Officers and Directors S-1 333-189216 July 11, 2013 10.12 10.9# Letter Agreement, dated as of April 1, 2014, between the Registrant and Christopher Bowden, Ph.D. 10-K 001-36014 February 26, 2016 10.13 10.10† Discovery and Development Collaboration and License Agreement, dated as of April 14, 2010, as amended on October 3, 2011, between the Registrant and Celgene Corporation S-1 333-189216 July 16, 2013 10.14 10.11† Third Amendment to Discovery and Development Collaboration and License Agreement, dated July 14, 2014 between the Registrant and Celgene Corporation 10-K 001-36014 February 24, 2015 10.15 10.12 Common Stock Purchase Agreement, dated as of July 16, 2013, between the Registrant and Celgene Alpine Investment Co., LLC S-1 333-189216 July 16, 2013 10.15 10.13 Lease, dated as of September 15, 2014, between the Registrant and Forest City 88 Sidney, LLC 8-K 001-36014 September 19, 2014 10.1 10.14 First Amendment to Lease for 88 Sidney Street, dated as of November 21, 2014, between the Registrant and Forest City 88 Sidney, LLC 8-K 001-36014 November 26, 2014 10.1 10.15# Summary Description of Annual Cash Incentive Program 10-Q 001-36014 May 11, 2015 10.1 10.16 Second Amendment to Lease for 88 Sidney Street, dated July 20, 2015, by and between the Registrant and Forest City 88 Sidney Street, LLC 8-K 001-36014 July 23, 2015 10.1 10.17† Collaboration and License Agreement by and between the Registrant and Celgene Corporation Re: AGI-23088 for the US Territory, dated as of April 27, 2015 10-Q 001-36014 August 7, 2015 10.1 10.18† Collaboration and License Agreement by and between Agios International Sarl and Celgene International II Sarl Re: AGI-23088 for the ROW Territory, dated as of April 27, 2015 10-Q 001-36014 August 7, 2015 10.2 10.19# Form of Performance Share Unit Agreement under 2013 Stock Incentive Plan 10-K 001-36014 February 26, 2016 10.25 10.20# Severance Benefits Plan 8-K 001-36014 April 22, 2016 10.1 10.21† Master Research and Collaboration Agreement, dated May 17, 2016, by and among the Registrant, Celgene Corporation and Celgene RIVOT Ltd. 10-Q 001-36014 August 8, 2016 10.1 10.22# Letter Agreement between the Registrant and Andrew Hirsch, effective August 11, 2016 8-K 001-36014 August 16, 2016 99.2 10.23 Lease, dated as of November 17, 2017, between the Registrant and UP 64 Sidney Street, LLC 8-K 001-36014 November 22, 2017 10.1 74 Table of Contents Exhibit Number Description of Exhibit Incorporated by Reference Filed Herewith Form File Number Date of Filing Exhibit Number 10.24 Third Amendment to Lease for 88 Sidney Street, dated November 17, 2017, by and between the Registrant and Forest City 88 Sidney Street, LLC 8-K 001-36014 November 22, 2017 10.2 10.25 First Amendment of Lease, dated April 11, 2018, by and between UP 64 Sidney Street, LLC and Agios Pharmaceuticals. Inc. 8-K 001-36014 April 13, 2018 10.1 10.26# Form of Restricted Stock Unit Agreement under 2013 Stock Incentive Plan (for employees) 10-Q 001-36014 May 4, 2018 10.1 10.27† License Agreement, dated June 25, 2018, by and between Agios Pharmaceuticals, Inc. and CStone Pharmaceuticals 10-Q 001-36014 August 2, 2018 10.2 10.28# Amended and Restated Letter Agreement, dated as of August 30, 2018, between the Registrant and David P. Schenkein, M.D. 10-Q 001-36014 November 1, 2018 10.1 10.29# Letter Agreement, dated as of August 30, 2018, between the Registrant and Jacqualyn A. Fouse, Ph.D. 10-Q 001-36014 November 1, 2018 10.2 10.30# Form of Restricted Stock Unit Agreement under 2013 Stock Incentive Plan (for directors) 10-K 001-36014 February 14, 2019 10.32 10.31 Lease, dated as of April 11, 2019, by and between the Registrant and Thirty-Eight Sidney Street Limited LLC 10-Q 001-36014 August 1, 2019 10.1 10.32 Fourth Amendment to Lease, dated as of April 11, 2019, by and between the Registrant and Forest City 88 Sidney Street, LLC 10-Q 001-36014 August 1, 2019 10.2 10.33 Third Amendment of Lease, dated as of April 11, 2019, by and between the Registrant and UP 64 Sidney Street, LLC 10-Q 001-36014 August 1, 2019 10.3 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 75 Table of Contents Exhibit Number Description of Exhibit Incorporated by Reference Filed Herewith Form File Number Date of Filing Exhibit Number 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 10.41 Share Repurchase Agreement, dated as of March 31, 2021, by and between the Registrant and Bristol-Myers Squibb Company 10-Q 001-36014 April 29, 2021 10.1 10.42# Letter Agreement, dated as of July 27, 2021, between the Registrant and Chris Bowden, M.D. 10-Q 001-36014 November 3, 2021 10.1 10.43 Sublease Agreement, dated July 27, 2021, between the Registrant and Prime Medicine, Inc. (38 Sidney Street) 10-Q 001-36014 November 3, 2021 10.2 10.44 Sublease Agreement, dated July 27, 2021, between the Registrant and Prime Medicine, Inc. (64 Sidney Street) X 21.1 Subsidiaries of the Registrant X 23.1 Consent of PricewaterhouseCoopers LLP, an Independent Registered Public Accounting Firm 31.1 Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended X 31.2 Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended. X 32.1* Certification of principal executive officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 32.2* Certification of principal financial officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 101.INS XBRL Instance Document X 101.SCH XBRL Taxonomy Extension Schema Document X 101.CAL XBRL Taxonomy Calculation Linkbase Document X 101.DEF XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB XBRL Taxonomy Label Linkbase Document X 101.PRE XBRL Taxonomy Presentation Linkbase Document X 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) X # Indicates management contract or compensatory plan or arrangement. † Confidential treatment has been granted as to certain portions, which portions have been omitted and filed separately with the Securities and Exchange Commission. 76 Table of Contents Exhibit Number Description of Exhibit Incorporated by Reference Filed Herewith Form File Number Date of Filing Exhibit Number + 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. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent specifically incorporated by reference into such filing. Item 16. Form 10-K Summary None. 77 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AGIOS PHARMACEUTICALS, INC. February 24, 2022 By: /s/ Jacqualyn A. Fouse Jacqualyn A. Fouse, Ph.D. Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Jacqualyn A. Fouse Chief Executive Officer and Director (Principal executive officer) February 24, 2022 Jacqualyn A. Fouse, Ph.D. /s/ Jonathan Biller Chief Financial Officer and Head of Corporate Affairs (Principal financial officer) February 24, 2022 Jonathan Biller /s/ T.J. Washburn Senior Director of Accounting (Principal accounting officer) February 24, 2022 T.J. Washburn /s/ Paul J. Clancy Director February 24, 2022 Paul J. Clancy /s/ Ian Clark Director February 24, 2022 Ian Clark /s/ Kaye Foster Director February 24, 2022 Kaye Foster /s/ Maykin Ho Director February 24, 2022 Maykin Ho, Ph.D. /s/ John M. Maraganore Director February 24, 2022 John M. Maraganore, Ph.D. /s/ David Scadden Director February 24, 2022 David Scadden, M.D. /s/ David P. Schenkein Director February 24, 2022 David P. Schenkein, M.D. 78 Table of Contents Agios Pharmaceuticals, Inc. Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 2 Consolidated Balance Sheets 4 Consolidated Statements of Operations 5 Consolidated Statements of Comprehensive Income (Loss) 6 Consolidated Statements of Stockholders’ Equity 7 Consolidated Statements of Cash Flows 8 Notes to Consolidated Financial Statements 9 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Agios Pharmaceuticals, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Agios Pharmaceuticals, Inc. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020 , and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or F-2 Table of Contents disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. 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. Discontinued Operations - Expenses Directly Attributable to the Oncology Business As described in Notes 2 and 3 to the consolidated financial statements, on March 31, 2021, the Company completed the sale of its oncology business, including TIBSOVO®, its clinical-stage product candidates vorasidenib, AG-270 and AG-636, and its oncology research programs, to Servier Pharmaceuticals LLC for a payment of approximately $1.8 billion, a payment of $200 million if, prior to January 1, 2027, vorasidenib is granted new drug application approval from the U.S. Food and Drug Administration, 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. Management accounted for the sale of the oncology business as a discontinued operation given the sale of the business represented a strategic shift that had a major effect on the Company’s operations and financial results. As a result, management has classified the results of the oncology business, including the research and development, marketing, selling and general and administrative expenses incurred directly to solely support the oncology business, as discontinued operations in the consolidated statements of operations for all periods presented. The Company has included in discontinued operations $41.6 million in research and development expenses and $8.6 million in selling, general and administrative expenses for the year ended December 31, 2021. The principal consideration for our determination that performing procedures relating to discontinued operations - expenses directly attributable to the oncology business is a critical audit matter is the significant audit effort involved in performing procedures related to management’s determination and classification of the expenses incurred directly to solely support the oncology business as discontinued operations. 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 discontinued operations, including controls over management’s determination of the expenses incurred directly to solely support the oncology business. These procedures also included, among others, evaluating management’s process for identifying expenses incurred directly to solely support the oncology business and testing the completeness, accuracy, and classification of operating expenses between discontinued operations and continuing operations in the consolidated financial statements. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 24, 2022 We have served as the Company’s auditor since 2017. F-3 Table of Contents Agios Pharmaceuticals, Inc. Consolidated Balance Sheets (In thousands) December 31: 2021 2020 Assets Current assets: Cash and cash equivalents $ 203,126 $ 127,436 Marketable securities 816,892 445,493 Other receivable 4,378 — Prepaid expenses and other current assets 39,835 15,889 Current assets of discontinued operations — 47,859 Total current assets 1,064,231 636,677 Marketable securities 266,375 97,608 Operating lease assets 75,124 84,661 Property and equipment, net 28,923 30,815 Financing lease assets 183 590 Other non-current assets 2,900 — Non-current assets of discontinued operations — 2,601 Total assets $ 1,437,736 $ 852,952 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 16,700 $ 17,724 Accrued expenses 31,967 30,801 Operating lease liabilities 10,828 7,093 Financing lease liabilities 331 317 Current liabilities of discontinued operations — 38,459 Total current liabilities 59,826 94,394 Operating lease liabilities, net of current portion 85,659 97,458 Financing lease liabilities, net of current portion 276 331 Non-current liabilities of discontinued operations — 261,269 Total liabilities 145,761 453,452 Commitments and contingent liabilities (Note 9) Stockholders’ equity: Preferred stock, $ 0.001 par value; 25,000,000 shares authorized, no shares issued and outstanding at December 31, 2021 and 2020 — — Common stock, $ 0.001 par value; 125,000,000 shares authorized; 70,550,631 shares issued and 54,334,220 outstanding at December 31, 2021 and 69,293,920 shares issued and outstanding at December 31, 2020 71 69 Additional paid-in capital 2,334,348 2,242,801 Accumulated other comprehensive (loss) income ( 1,198 ) 105 Accumulated deficit ( 238,760 ) ( 1,843,475 ) Treasury stock, at cost ( 16,216,411 shares at December 31, 2021 and no shares at December 31, 2020) ( 802,486 ) — Total stockholders’ equity 1,291,975 399,500 Total liabilities and stockholders’ equity $ 1,437,736 $ 852,952 See accompanying Notes to Consolidated Financial Statements. F-4 Table of Contents Agios Pharmaceuticals, Inc. Consolidated Statements of Operations (In thousands, except share and per share data) Years Ended December 31: 2021 2020 2019 Cost and expenses: Research and development $ 256,973 $ 220,811 $ 214,262 Selling, general and administrative 121,445 115,105 102,007 Total cost and expenses 378,418 335,916 316,269 Loss from operations ( 378,418 ) ( 335,916 ) ( 316,269 ) Gain on sale of oncology business 6,639 — — Interest income, net 836 6,611 14,861 Other income, net 14,433 — — Net loss from continuing operations ( 356,510 ) ( 329,305 ) ( 301,408 ) Net income (loss) from discontinued operations, net of tax 1,961,225 1,935 ( 110,064 ) Net income (loss) $ 1,604,715 $ ( 327,370 ) $ ( 411,472 ) Net loss from continuing operations per share - basic and diluted $ ( 5.90 ) $ ( 4.77 ) $ ( 5.02 ) Net income (loss) from discontinued operations per share - basic and diluted $ 32.45 $ 0.03 $ ( 1.84 ) Net income (loss) per share - basic and diluted $ 26.55 $ ( 4.74 ) $ ( 6.86 ) 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 60,447,346 68,997,879 59,994,539 See accompanying Notes to Consolidated Financial Statements. F-5 Table of Contents Agios Pharmaceuticals, Inc. Consolidated Statements of Comprehensive Income (Loss) (In thousands) Years Ended December 31: 2021 2020 2019 Net income (loss) $ 1,604,715 $ ( 327,370 ) $ ( 411,472 ) Other comprehensive (loss) income: Unrealized (loss) gain on available-for-sale securities ( 1,303 ) ( 97 ) 2,373 Comprehensive income (loss) $ 1,603,412 $ ( 327,467 ) $ ( 409,099 ) See accompanying Notes to Consolidated Financial Statements. F-6 Table of Contents Agios Pharmaceuticals, Inc. Consolidated Statements of Stockholders’ Equity Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Treasury Total Stockholders’ Equity (In thousands, except share amounts) Shares Amount Shares Amount Balance at December 31, 2018 58,218,653 $ 58 $ 1,794,283 $ ( 2,171 ) $ ( 1,104,633 ) — $ — $ 687,537 Unrealized gain on available-for-sale securities — — — 2,373 — — — 2,373 Net loss — — — — ( 411,472 ) — — ( 411,472 ) Stock-based compensation expense — — 58,050 — — — — 58,050 Issuance of common stock under stock incentive and employee stock purchase plans 694,952 1 12,515 — — — — 12,516 Issuance of common stock for follow-on offering 9,487,500 9 277,192 — — — — 277,201 Disposition of oncology business — — 14,323 — — — — 14,323 Balance at December 31, 2019 68,401,105 $ 68 $ 2,156,363 $ 202 $ ( 1,516,105 ) — $ — $ 640,528 Unrealized loss on available-for-sale securities — — — ( 97 ) — — — ( 97 ) Net loss — — — — ( 327,370 ) — — ( 327,370 ) Stock-based compensation expense — — 61,602 — — — — 61,602 Issuance of common stock under stock incentive and employee stock purchase plans 892,815 1 11,316 — — — — 11,317 Disposition of oncology business — — 13,520 — — — — 13,520 Balance at December 31, 2020 69,293,920 $ 69 $ 2,242,801 $ 105 $ ( 1,843,475 ) — $ — $ 399,500 Unrealized loss on available-for-sale securities — — — ( 1,303 ) — — — ( 1,303 ) Net income — — — — 1,604,715 — — 1,604,715 Stock-based compensation expense — — 53,508 — — — — 53,508 Issuance of common stock under stock incentive and employee stock purchase plans 1,256,711 2 37,294 — — — — 37,296 Repurchase of common stock — — — — — ( 16,216,411 ) ( 802,486 ) ( 802,486 ) Disposition of oncology business — — 745 — — — — 745 Balance at December 31, 2021 70,550,631 $ 71 $ 2,334,348 $ ( 1,198 ) $ ( 238,760 ) ( 16,216,411 ) $ ( 802,486 ) $ 1,291,975 See accompanying Notes to Consolidated Financial Statements. F-7 Table of Contents Agios Pharmaceuticals, Inc. Consolidated Statements of Cash Flows (In thousands) Years Ended December 31: 2021 2020 2019 Operating activities Net income (loss) $ 1,604,715 $ ( 327,370 ) $ ( 411,472 ) Less: Net income (loss) from discontinued operations 1,961,225 1,935 ( 110,064 ) Net loss from continuing operations ( 356,510 ) ( 329,305 ) ( 301,408 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 9,240 9,790 8,088 Stock-based compensation expense 53,508 61,602 58,050 Net amortization of premium (accretion of discount) on marketable securities 6,949 3,022 ( 3,195 ) Loss on disposal of property and equipment 12 — 1,052 Non-cash operating lease expense 9,537 8,982 8,532 Changes in operating assets and liabilities: Other receivables ( 4,378 ) — — Prepaid expenses and other current and non-current assets ( 26,846 ) ( 3 ) ( 3,751 ) Accounts payable 1,863 3,330 4,162 Accrued expenses 66 6,765 ( 825 ) Operating lease liabilities ( 7,527 ) ( 8,127 ) ( 6,861 ) Net cash used in operating activities ( 314,086 ) ( 243,944 ) ( 236,156 ) Net cash used in operating activities - discontinued operations ( 93,234 ) ( 46,815 ) ( 134,466 ) Net cash used in operating activities ( 407,320 ) ( 290,759 ) ( 370,622 ) Investing activities Purchases of marketable securities ( 1,378,221 ) ( 557,030 ) ( 488,566 ) Proceeds from maturities and sales of marketable securities 829,804 647,685 592,177 Purchases of property and equipment ( 5,741 ) ( 14,106 ) ( 12,028 ) Net cash (used in) provided by investing activities ( 554,158 ) 76,549 91,583 Net cash provided by (used in) investing activities - discontinued operations 1,802,936 ( 803 ) ( 143 ) Net cash provided by investing activities 1,248,778 75,746 91,440 Financing activities Payments on financing lease obligations ( 578 ) ( 336 ) ( 113 ) Purchase of treasury stock ( 802,486 ) — — Proceeds from public offering of common stock, net of reimbursements — — 277,201 Net proceeds from stock option exercises and employee stock purchase plan 37,296 11,317 12,523 Net cash (used in) provided by financing activities ( 765,768 ) 10,981 289,611 Net cash provided by financing activities - discontinued operations — 250,537 — Net cash (used in) provided by financing activities ( 765,768 ) 261,518 289,611 Net change in cash and cash equivalents 75,690 46,505 10,429 Cash and cash equivalents at beginning of the period 127,436 80,931 70,502 Cash and cash equivalents at end of the period $ 203,126 $ 127,436 $ 80,931 Supplemental disclosure of non-cash investing and financing transactions: Additions to property and equipment in accounts payable and accrued expenses $ 1,678 $ 465 $ 5,168 Cash taxes paid $ 16,078 $ — $ — Operating lease liabilities arising from obtaining operating lease assets $ — $ — $ 42,322 Financing lease liabilities arising from obtaining financing lease assets $ 511 $ — $ 1,052 See accompanying Notes to Consolidated Financial Statements. F-8 Table of Contents Agios Pharmaceuticals, Inc. Notes to Consolidated Financial Statements Note 1. Nature of Business References to Agios 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. 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. 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, while cultivating connections with patient communities, healthcare professionals, partners and colleagues to discover, develop and deliver potential therapies for genetically defined diseases, or GDDs. We are located in Cambridge, Massachusetts. The lead product candidate in our GDD portfolio, PYRUKYND® (mitapivat), is an activator of both wild-type and mutant pyruvate kinase, or PK, enzymes for the potential treatment of hemolytic anemias. On February 17, 2022, the FDA approved PYRUKYND® for the treatment of hemolytic anemia in adults with pyruvate kinase (PK) deficiency in the United States. In addition, we are currently evaluating PYRUKYND® for the treatment of thalassemia and sickle cell disease, or SCD, in clinical trials. We are also developing AG-946, a novel, next-generation PKR activator, for the potential treatment of hemolytic anemias and other indications. In addition to the aforementioned development programs, we foster a productive research engine and are seeking to advance multiple novel, investigational therapies in clinical and preclinical development in our focus area of GDDs, 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. 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, or Celgene, and following the sale Servier is responsible for conducting certain clinical development activities within the IDHIFA® development program. We recorded income from royalties of approximately $ 6.6 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 year ended December 31, 2021. 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. F-9 Table of Contents 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 7.1 million shares of our common stock held by certain subsidiaries of BMS for an aggregate purchase price of $ 344.5 million, or $ 48.38 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. On October 5, 2021, we terminated our Rule 10b5-1 share repurchase program and on October 13, 2021 entered into a Rule 10b-18 repurchase plan that allows us to conduct open market repurchases over time up to our remaining authorization. As of December 31, 2021, we have repurchased approximately 9.1 million shares of common stock for $ 458.0 million, or $ 50.35 per share, under the Rule 10b5-1 repurchase plan. As of December 31, 2021, we have not repurchased any shares under the Rule 10b-18 repurchase plan. In total, as of December 31, 2021, we have repurchased 16.2 million shares of common stock for $ 802.5 million, or $ 49.49 per share, under the Repurchase Program. We have paused our share repurchases for the foreseeable future. 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, 2021, $ 250.0 million in common stock remained available for future issuance under the 2020 sales agreement. As of December 31, 2021, we had cash, cash equivalents and marketable securities of $ 1,286.4 million. Although we have incurred recurring losses and expect to continue to incur losses for the foreseeable future, we expect our cash, cash equivalents and marketable securities to be sufficient to fund current operations for at least the next twelve months from the issuance of the financial statements. If we are unable to raise additional funds through equity or debt financings, we 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 we would otherwise prefer to develop and market ourselves. Note 2. 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 (GmbH), Agios Germany GmbH, Agios Netherlands B.V., Agios Italy S.R.L., Agios France SARL, and Agios Limited. All intercompany transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles, or U.S. GAAP. Use of estimates The preparation of financial statements in conformity with U.S. 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. 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. Cash and cash equivalents We consider highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are stated at fair value. F-10 Marketable securities Marketable securities at December 31, 2021 and 2020 consisted of investments in U.S. Treasuries, government securities and corporate debt securities. We determine the appropriate classification of the securities at the time they are acquired and evaluate the appropriateness of such classifications at each balance sheet date. 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. Unrealized gains are included as a component of accumulated other comprehensive (loss) income in the consolidated balance sheets and statements of stockholders’ equity and a component of total comprehensive income (loss) in the consolidated statements of comprehensive income (loss), until realized. Realized gains and losses are included in investment income on a specific-identification basis. At December 31, 2021 and 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 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 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 (loss), net of taxes. Evidence considered in this assessment includes reasons for the impairment, compliance with our investment policy, the severity of the impairment, collectability of the security, and any adverse conditions specifically related to the security, an industry, or geographic area. 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, either 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. Our financial assets, which include cash equivalents and marketable securities, have been initially valued at the transaction price, and subsequently revalued at the end of each reporting period, 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 December 31, 2021 or 2020. Fair value information for these assets, including their classification in the fair value hierarchy is included in Note 4. Fair Value Measurements . There have been no changes to the valuation methods during the years ended December 31, 2021 and 2020. We evaluate transfers between levels at the end of each reporting period. The carrying amounts of other receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their fair values due to their short-term maturities. Concentrations of credit risk Financial instruments which potentially subject us to credit risk consist primarily of cash, cash equivalents, and marketable securities. We hold these investments in highly rated financial institutions, and, by policy, limit the amounts of credit exposure to any one financial institution. These amounts at times may exceed federally insured limits. We have not experienced any credit losses in such accounts and do not believe we are exposed to any significant credit risk on these funds. We have no off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts, or other hedging arrangements. F-11 Property and equipment Property and equipment consist of laboratory equipment, computer equipment and software, leasehold improvements, furniture and fixtures, and office equipment. Costs of major additions and betterment are capitalized; maintenance and repairs, which do not improve or extend the life of the respective assets, are charged to expense as incurred. Upon retirement or sale, the cost of the disposed asset and the related accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized. Property and equipment is stated at cost, and depreciated using the straight-line method over the estimated useful lives of the respective assets: Years Laboratory equipment 5 Computer equipment and software 3 Furniture and fixtures 5 Office equipment 5 Leasehold improvements are amortized over the lesser of the remaining lease term or the estimated useful life of the improvement. Impairment of long-lived assets We periodically evaluate our long-lived assets for potential impairment in accordance with ASC 360, Property, Plant and Equipment . Potential impairment is assessed when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Recoverability of these assets is assessed based on the undiscounted expected future cash flows from the assets, considering a number of factors, including past operating results, budgets and economic projections, market trends and product development cycles. If impairments are identified, assets are written down to their estimated fair value. We did not recognize any impairment charges through December 31, 2021. Leases We determine if an arrangement is a lease at inception. An arrangement is determined to contain a lease if the contract conveys the right to control the use of an identified property or equipment for a period of time in exchange for consideration. If we can benefit from the various underlying assets of a lease on their own or together with other resources that are readily available, or if the various underlying assets are neither highly dependent on nor highly interrelated with other underlying assets in the arrangement, they are considered to be a separate lease component. In the event multiple underlying assets are identified, the lease consideration is allocated to the various components based on each of the component’s relative fair value. Operating lease assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the leasing arrangement. Operating lease assets and operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, in determining the operating lease liabilities, we use an estimate of our incremental borrowing rate. The incremental borrowing rate is determined using two alternative credit scoring models to estimate our credit rating, adjusted for collateralization. The calculation of the operating lease assets includes any lease payments made and excludes any lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. For operating leases, we record operating lease assets and lease liabilities in our consolidated balance sheets. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Short-term leases, or leases that have a lease term of 12 months or less at commencement date, are excluded from this treatment and are recognized on a straight-line basis over the term of the lease. We have not entered into any material short-term leases or financing leases as of December 31, 2021. Research and development costs Research and development costs, including those accrued as of each balance sheet date, are expensed as incurred. These costs include salaries and personnel-related costs, consulting fees, fees paid for contract research services, fees paid to contract research organizations, or CROs, and other third parties in connection with clinical trials and preclinical development activities, fees paid to investigative sites in connection with clinical studies, the costs associated with the product manufacturing, development, and distribution of clinical supplies, the costs of laboratory equipment and facilities, and other external costs. F-12 Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. Additionally, there may be instances in which payments made to our vendors will exceed the level of services provided, and result in a prepayment of the research and development expense. The capitalized amounts are expensed as the related goods are delivered or the services are performed. We estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly. Stock-based compensation We account for stock-based compensation awards in accordance with ASC 718, Compensation –Stock Compensation , or ASC 718. For stock-based awards granted to employees and to members of the board of directors for their services and for participation in our employee stock purchase plan, we primarily estimate the grant date fair value of each option award using the Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires us to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock. For awards subject to service-based vesting conditions, we recognize stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period. 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. Income taxes 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. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns. We determine our deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We also account for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, we recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. Comprehensive income (loss) Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions, and other events and circumstances, and currently consists of net loss and unrealized gains and losses on available-for-sale securities. Accumulated other comprehensive (loss) income consists entirely of unrealized gains and losses from available-for-sale securities as of December 31, 2021 and 2020. Net income (loss) per share Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average shares outstanding during the period, without consideration for common stock equivalents. Diluted net income (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 income (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 income (loss) per share as their effect would be anti-dilutive. 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 (loss) from discontinued operations per share or net income (loss) per share. Segment and geographic information Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions on how to F-13 allocate resources and assess performance. Our chief operating decision maker is the chief executive officer. Our chief operating decision maker and we view our operations and manage our business as one operating segment. 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 360 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 consolidated statements of operations. Assets and liabilities are also reclassified into separate line items on the related 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 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, in accordance with ASC 205, Discontinued Operations , we have classified the results of the oncology business as discontinued operations in our consolidated statements of operations and cash flows for all periods presented, see Note 3, Discontinued Operations. All assets and liabilities associated with our oncology business were therefore classified as assets and liabilities of discontinued operations in our consolidated balance sheets for the periods presented. All amounts included in the notes to the 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. Recent accounting pronouncements Leases 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): Targeted Improvements , whereby we applied the new lease requirements through a cumulative-effect adjustment, which after completing our implementation analysis, resulted in no material adjustment to our January 1, 2019 beginning accumulated deficit balance. We also elected the package of practical expedients provided for under ASU 2018-11, which allows us not to reassess whether contracts are or contain leases, lease classification, and whether initial direct costs qualify for capitalization. Additionally, as an accounting policy, for our building leases, we chose not to separate the non-lease components from the lease components and, instead, accounted for each non-lease component and lease component as a single component. We completed our assessment over the impact of the standard and determined that the only material leases that we hold are our building leases. Upon adoption of the standard on January 1, 2019, we recorded operating right of use assets of $ 59.9 million and operating lease liabilities of $ 77.3 million on our consolidated balance sheets. Other recent accounting pronouncements 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. The Company adopted the new standard as of January 1, 2019. There was no material impact to the Company’s consolidated financial position, results of operation, or cash flows. 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. 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 F-14 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. 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. Subsequent events We considered events or transactions occurring after the balance sheet date, but prior to the issuance of the consolidated financial statements, for potential recognition or disclosure in our consolidated financial statements. All significant subsequent events have been properly disclosed in the consolidated financial statements. Note 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 consolidated balance sheets and the results of operations from the oncology business as discontinued operations in the 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 F-15 The following table presents the net liabilities transferred for the sale of the oncology business at 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 year ended December 31, 2021: (in thousands) December 31, 2021 Cash proceeds $ 1,802,936 Less: transaction and insurance costs ( 53,573 ) Plus: net liabilities distributed, including working capital adjustment 239,770 Gain on sale, pre-tax 1,989,133 Income tax expense ( 12,799 ) Gain on sale, net of tax $ 1,976,334 As of December 31, 2021, there were no assets or liabilities classified as discontinued operations. F-16 The following table presents the financial results of the discontinued operations: (in thousands) 2021 2020 2019 Revenues: Product revenue, net $ 36,909 $ 121,089 $ 59,851 Collaboration revenue – related party 1,350 68,274 39,257 Collaboration revenue – other 491 3,571 8,262 Royalty revenue – related party 2,659 10,262 10,542 Total revenue 41,409 203,196 117,912 Cost and expenses: Cost of sales 706 2,805 1,317 Research and development 41,564 146,659 196,632 Selling, general and administrative 8,551 33,965 30,027 Total cost and expenses 50,821 183,429 227,976 (Loss) income from discontinued operations ( 9,412 ) 19,767 ( 110,064 ) Non-cash interest expense for the sale of future revenue ( 5,697 ) ( 17,832 ) — Gain on the sale of the oncology business 1,989,133 — (Loss) income from discontinued operations, pre-tax 1,974,024 1,935 ( 110,064 ) Income tax expense ( 12,799 ) — — Net (loss) income from discontinued operations $ 1,961,225 $ 1,935 $ ( 110,064 ) 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 through March 31, 2022. 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. Note 4. Fair Value Measurements The following table summarizes our cash equivalents and marketable securities measured at fair value and by level (as described in Note 2. Summary of Significant Accounting Policies ) on a recurring basis as of December 31, 2021: (In thousands) Level 1 Level 2 Level 3 Total Cash equivalents $ 156,229 $ 21,524 $ — $ 177,753 Total cash equivalents 156,229 21,524 — 177,753 Marketable securities: U.S. Treasuries — 309,658 — 309,658 Government securities — 166,104 — 166,104 Corporate debt securities — 607,505 — 607,505 Total marketable securities — 1,083,267 — 1,083,267 Total cash equivalents and marketable securities $ 156,229 $ 1,104,791 $ — $ 1,261,020 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, 2021. F-17 Note 5. Marketable Securities Marketable securities at December 31, 2021 consisted of the following: (In thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value Current: U.S. Treasuries $ 269,109 $ — $ ( 36 ) $ 269,073 Government securities 17,764 1 ( 10 ) 17,755 Corporate debt securities 530,490 3 ( 429 ) 530,064 Total Current 817,363 4 ( 475 ) 816,892 Non-current: U.S. Treasuries 40,607 — ( 23 ) 40,584 Government securities 148,820 — ( 470 ) 148,350 Corporate debt securities 77,675 — ( 234 ) 77,441 Total Non-current 267,102 — ( 727 ) 266,375 Total marketable securities $ 1,084,465 $ 4 $ ( 1,202 ) $ 1,083,267 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 There were no material realized gains or losses on marketable securities for the years ended December 31, 2021 and 2020. At December 31, 2021 and 2020, we held 294 and 87 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, 2021 and December 31, 2020 related to these securities. The aggregate fair value of debt securities in an unrealized loss position at December 31, 2021 and 2020 was $ 950.5 million and $ 299.0 million, respectively. There were no individual securities that were in a significant unrealized loss position as of December 31, 2021 and 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 December 31, 2021 and 2020. F-18 Note 6. Property and Equipment, net Property and equipment, net consisted of the following at December 31: (In thousands) 2021 2020 Laboratory equipment $ 22,165 $ 23,858 Computer equipment and software 6,913 6,945 Leasehold improvements 32,726 32,568 Furniture and fixtures 3,035 3,035 Office equipment 1,690 1,651 Construction in progress 7,368 4,111 Total property and equipment 73,897 72,168 Less: accumulated depreciation ( 44,974 ) ( 41,353 ) Total property and equipment, net $ 28,923 $ 30,815 Depreciation expense for the years ended December 31, 2021, 2020 and 2019 was $ 8.8 million, $ 9.4 million and $ 8.0 million, respectively. Note 7. Leases Our building leases are comprised of office and laboratory space under non-cancelable operating leases. These lease agreements have remaining lease terms of six 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. 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. The initial term of the 38 Sidney Lease commenced on May 1, 2019 and expires on February 29, 2028. At the end of the lease term, we have the option to extend the 38 Sidney Lease for two consecutive terms of five years at fair market rent at the time of the extension. The 38 Sidney Lease provides us with the right to lease additional space within the 38 Sidney Street building and also includes rent escalation clauses and a tenant improvement allowance of $ 1.0 million. In connection with the 38 Sidney Lease, we also amended our existing building leases at 88 Sidney Street, Cambridge, Massachusetts and at 64 Sidney Street, Cambridge, Massachusetts to extend the initial terms of those leases by approximately three years through February 29, 2028. The amendments also provide us with the right to lease additional space at the 64 Sidney Street building. 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) 2021 2020 2019 Operating Lease Costs $ 15.2 $ 15.2 $ 15.1 Cash paid for amounts included in the measurement of operating lease liabilities 14.4 14.4 12.8 We have not entered into any material short-term leases or financing leases as of December 31, 2021. In arriving at the operating lease liabilities as of December 31, 2021, we applied the weighted-average incremental borrowing rate of 5.7 % from inception over a weighted-average remaining lease term of 6.2 years. 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. F-19 As of December 31, 2021, undiscounted minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter, were as follows: (In thousands) 2022 $ 15,560 2023 18,126 2024 18,660 2025 19,507 2026 20,151 Thereafter 24,234 Undiscounted minimum rental commitments 116,238 Interest ( 19,751 ) Total operating lease liabilities $ 96,487 We provided our landlord a standby letter of credit of $ 2.9 million as security for our leases. We are not required to maintain any cash collateral for the standby letter of credit. In August 2021, we entered into a long-term sublease agreement for 13,000 square feet of the office space at 38 Sidney Street Cambridge, Massachusetts. The term of the lease runs until December 2024. We recorded operating sublease income of $ 0.5 million for the year ended December 31, 2021 in other income, net in the consolidated statements of operations. As of December 31, 2021, the future minimum lease payments to be received under the long-term sublease agreement were as follows: (In thousands) 2022 1,118 2023 1,152 2024 1,186 Total $ 3,456 Note 8. Accrued Expenses Accrued expenses consisted of the following at December 31: (In thousands) 2021 2020 Accrued compensation $ 19,818 $ 20,345 Accrued research and development costs 5,980 5,444 Accrued professional fees 2,335 2,897 Accrued other 3,834 2,115 Total accrued expenses $ 31,967 $ 30,801 Note 9. Commitments and Contingent Liabilities Manufacturing Commitments We are party to various agreements with contract manufacturing organizations that we are not contractually able to terminate for convenience and avoid any and all future obligations to the vendors. Under such agreements, we are obligated to make certain minimum payments, with the exact amounts in the event of termination to be based on the timing of the termination and the exact terms of the agreement. F-20 Legal Contingencies From time to time, we may be involved in disputes and legal proceedings in the ordinary course of business. These proceedings may include allegations of infringement of intellectual property, employment or other matters. We do no t have any ongoing legal proceedings that, based on our estimates, could have a material effect on our consolidated financial statements. Note 10. Common Stock We are authorized to issue 125,000,000 shares of our common stock. Holders of common stock are entitled to one vote per share. Additionally, holders of common stock are entitled to receive dividends, if and when declared by our board of directors, and to share ratably in our assets legally available for distribution to our shareholders in the event of liquidation. Note 11. Share-Based Payments Stock incentive plans 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 December 31, 2021, the total number of shares reserved under the 2007 Plan and the 2013 Plan was 11,422,409 , and we had 5,343,905 shares available for future issuance under the 2013 Plan. The 2013 Plan provides for an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2014 and continuing until the expiration of the 2013 Plan, equal to the lesser of (i) 2,000,000 shares of common stock, (ii) 4 % of the outstanding shares of common stock on such date or (iii) an amount determined by our Board of Directors. On January 1, 2022, the annual increase for the 2013 Plan resulted in an additional 2,000,000 shares authorized for issuance. Stock options The following table summarizes the stock option activity of all stock incentive plans for the year ended December 31, 2021: Number of Stock Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2020 6,143,046 $ 58.46 6.68 $ 13,714 Granted 1,073,989 55.54 Exercised ( 758,685 ) 44.73 Forfeited/Expired ( 1,659,524 ) 62.70 Outstanding at December 31, 2021 4,798,826 $ 58.51 6.24 $ 4,697 Exercisable at December 31, 2021 3,367,239 $ 60.52 5.25 $ 4,697 Vested and expected to vest at December 31, 2021 4,798,826 $ 58.51 6.24 $ 4,697 The weighted-average grant date fair value of options granted was $ 31.20 , $ 32.10 and $ 36.44 during the years ended December 31, 2021, 2020 and 2019, respectively. The total intrinsic value of options exercised was $ 8.5 million, $ 10.4 million and $ 6.4 million during the years ended December 31, 2021, 2020 and 2019, respectively. At December 31, 2021, the total unrecognized compensation expense related to unvested stock option awards was $ 39.8 million, which we expect to recognize over a weighted-average period of approximately 2.33 years. F-21 Restricted stock units Upon vesting, each RSU entitles the holder to receive a specified number of shares of our common stock. The following table presents RSU activity for the year ended December 31, 2021: Number of Stock Units Weighted-Average Grant Date Fair Value Unvested shares at December 31, 2020 1,284,378 $ 50.78 Granted 835,698 55.49 Vested ( 403,138 ) 56.90 Forfeited ( 714,014 ) 51.81 Unvested shares at December 31, 2021 1,002,924 $ 51.51 As of December 31, 2021, there was approximately $ 29.5 million of total unrecognized compensation expense related to RSUs, which we expect to be recognized over a weighted-average period of 1.74 years. Performance-based stock units At the achievement of the performance-based and service-based vesting criteria, each PSU entitles the holder to receive a specified number of shares of our common stock. The following table presents PSU activity for the year ended December 31, 2021: Number of Stock Units Weighted-Average Grant Date Fair Value Unvested shares at December 31, 2020 142,229 $ 54.28 Granted 141,000 54.20 Vested — — Forfeited ( 49,170 ) 54.08 Unvested shares at December 31, 2021 234,059 $ 54.28 Stock-based compensation expense associated with these PSUs is recognized if the underlying performance condition is considered probable of achievement using our management’s best estimates. As of December 31, 2021, 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 $ 12.7 million of total unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered not probable of achievement. Market-based stock units The Company has issued certain equity awards that contain market based vesting conditions, in which shares of stock are earned at vesting based on stock price performance. 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. The following table presents MSU activity for the year ended December 31, 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 December 31, 2021 42,695 $ 41.50 As of December 31, 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. On January 1, 2022, the annual increase for the 2013 ESPP resulted in an additional 509,091 shares authorized for issuance. We issued 94,888 shares and 120,293 shares during the years ended December 31, 2021 and 2020, respectively, under the 2013 ESPP. The 2013 ESPP provides participating employees with the opportunity to purchase up to an F-22 aggregate of 1,345,454 shares of our common stock. As of December 31, 2021, we had 885,556 shares available for future issuance under the 2013 ESPP. Stock-based compensation expense During the years ended December 31, 2021, 2020 and 2019, we recorded stock-based compensation expense for employee and non-employee stock options, RSUs, PSUs, ESPP shares and other stock-based awards. Stock-based compensation expense by award type included within the consolidated statements of operations is as follows: (In thousands) 2021 2020 2019 Stock options $ 30,985 $ 37,705 $ 38,650 Restricted stock units 21,510 19,893 14,733 Performance-based stock units — 1,760 2,239 Employee Stock Purchase Plan 1,013 1,463 1,437 Other stock awards — 781 991 Total stock-based compensation expense $ 53,508 $ 61,602 $ 58,050 Expenses related to equity-based awards were allocated as follows in the consolidated statements of operations: (In thousands) 2021 2020 2019 Research and development expense $ 24,527 $ 27,119 $ 27,287 Selling, general and administrative expense 28,981 34,483 30,763 Total stock-based compensation expense $ 53,508 $ 61,602 $ 58,050 No related tax benefits were recognized for the years ended December 31, 2021, 2020 and 2019. The fair value of each stock option granted to employees and nonemployees is estimated on the date of grant using the Black-Scholes option-pricing model. The following table summarizes the weighted average assumptions used in calculating the grant date fair value of the awards: 2021 2020 2019 Risk-free interest rate .72 % 1.24 % 2.32 % Expected dividend yield — — — Expected term (in years) 6.05 6.05 6.06 Expected volatility 61.72 % 73.80 % 76.19 % Expected term We use the “simplified method” as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share Based Payments , to estimate the expected term of stock option grants. Under this approach, the weighted-average expected life is presumed to be the average of the contractual term of ten years and the weighted-average vesting term of the stock options, taking into consideration multiple vesting tranches. We utilize this method due to lack of historical data and the plain-vanilla nature of our share-based awards. Volatility The expected volatility has been determined using Agios' historical volatilities for a period equal to the expected term of the option grant. Risk-free rate The risk-free rate is based on the yield curve of U.S. Treasury securities with periods commensurate with the expected term of the options being valued. Dividends We have never paid, and do not anticipate paying, any cash dividends in the foreseeable future, and, therefore, use an expected dividend yield of zero in the option-pricing model. Forfeitures We account for forfeitures as they occur and, therefore, do not estimate forfeitures. F-23 Note 12. Income Taxes The domestic and foreign components of loss from continuing operations before income taxes are as follows: (In thousands) 2021 2020 2019 Domestic $ ( 356,665 ) $ ( 330,669 ) $ ( 322,471 ) Foreign 155 1,364 21,063 Total $ ( 356,510 ) $ ( 329,305 ) $ ( 301,408 ) We did not have any material provision for income taxes for the years ended December 31, 2021, 2020 and 2019. 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, 2021, 2020 and 2019: 2021 2020 2019 Income tax benefit computed at federal statutory tax rate 21.0 % 21.0 % 21.0 % State taxes, net of federal benefit 2.6 % 2.5 % 3.9 % Change in valuation allowance ( 24.5 ) % ( 28.2 ) % ( 29.5 ) % General business credits and other credits 5.3 % 7.0 % 6.9 % Permanent differences and other adjustments ( 3.9 ) % ( 1.6 ) % ( 1.9 ) % Stock based compensation ( 0.5 ) % ( 0.7 ) % ( 0.9 ) % Foreign rate differential — % — % 0.5 % Total — % — % — % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities for the years ended December 31, 2021 and 2020 are as follows: (In thousands) 2021 2020 Deferred tax assets: Net operating loss carryforwards $ 39,186 $ 310,841 Tax credit carryforwards 152,128 163,589 Purchased intangible assets 12,150 13,543 Stock-based compensation 27,217 34,284 Operating lease liability 22,963 25,085 Non-deductible accruals and reserves, including inventory 4,033 12,730 RPI Royalty Sale — 58,048 Other — 1,230 Total deferred tax assets 257,677 619,350 Depreciation and amortization ( 3,168 ) ( 4,002 ) Operating lease right of use asset ( 18,031 ) ( 20,596 ) Less: valuation allowance ( 236,478 ) ( 594,752 ) Net deferred taxes $ — $ — 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, 2021, we had net operating loss carryforwards, or NOLs, available to reduce federal, state and foreign income taxes of approximately $ 22.1 million, $ 420.0 million and $ 65.2 million, respectively. The federal NOLs have an indefinite life, however, if not utilized, the state and foreign NOLs begin to expire in 2035 and 2024, respectively. At December 31, 2021, we also had available research and development tax credits for federal and state income tax purposes of F-24 approximately $ 13.5 million and $ 24.0 million, respectively. If not utilized, the credits begin to expire in 2029 and 2027 for federal and state income tax purposes. We engaged in clinical testing activities and incurred expenses that qualify for the federal orphan drug tax credit. At December 31, 2021, we had available orphan drug tax credits for federal purposes only of approximately $ 119.6 million. If not utilized, the orphan drug credits begin to expire in 2035. 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. 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. We completed a review of our changes in ownership through December 31, 2021 and determined that transactions have resulted in no ownership changes during the year ended December 31, 2021, as defined by Section 382. The impact of the historical ownership changes has been reflected in our deferred tax assets in the table above. 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 $ 236.5 million and $ 594.8 million as of December 31, 2021 and December 31, 2020, respectively, because we have determined that it is more likely than not that these assets will not be fully realized. The valuation allowance decreased by $ 358.3 million for the year ended December 31, 2021 primarily due to the utilization of net operating losses and tax credits and increased by $ 92.5 million for the year ended December 31, 2020 primarily due to the generation of net operating losses. The following table presents our change in valuation allowance for the years ended December 31, 2021 and, 2020: (in thousands) 2021 2020 Valuation allowance at the beginning of the year $ 594,752 $ 502,209 (Decrease) Increase for the current period ( 358,274 ) 92,543 Valuation allowance at the end of the year $ 236,478 $ 594,752 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. 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. 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. As of December 31, 2021, 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. Our reserves related to taxes are based on a determination of whether, and how much of, a tax benefit taken by us in our tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. The following table presents our unrecognized tax benefits activity for the years ended December 31, 2021 and 2020: (In thousands) 2021 2020 Unrecognized tax benefits at the beginning of the year $ 21,131 $ 17,460 Gross increases - current period tax positions 3,089 3,671 Unrecognized tax benefits at the end of the year $ 24,220 $ 21,131 We will recognize interest and penalties related to uncertain tax positions above the line as an expense to continuing operations. As of December 31, 2021 and 2020, 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, 2021 were to become recognizable in the future, we would record $ 24.2 million of unrecognized tax benefits. The uncertain tax position does not impact our effective income tax rate due to the full valuation allowance. F-25 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, 2021, 2020, 2019, and 2018, although carryforward attributes that were generated for tax years prior to 2018 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 years ending December 31, 2021, 2020, 2019, and 2018. 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 years ending December 31, 2021, 2020 and 2019. The Company’s subsidiaries in 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 years ending December 31, 2021 and 2020. There are currently no federal, state or foreign audits in progress. As of December 31, 2021, we have an income tax receivable of $ 2.9 million recorded within prepaid expenses and other assets. There was no income tax receivable at December 31, 2020. Note 13. Defined Contribution Benefit Plan We sponsor a 401(k) retirement plan, in which substantially all of our full-time employees are eligible to participate. Participants may contribute a percentage of their annual compensation to this plan, subject to statutory limitations. We will make matching contributions equal to 100 % of the employee’s contributions, subject to a maximum of 4 % of eligible compensation. Note 14. Net Income (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 December 31, 2021 are not considered to be common stock equivalents. 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: Years ended December 31, 2021 2020 2019 Stock options 4,798,826 6,143,046 6,201,485 Restricted stock units 1,002,924 1,284,378 766,953 Performance-based stock units — — 72,046 Employee Stock Purchase Plan shares 39,864 46,439 49,418 Total 5,841,614 7,473,863 7,089,902 Note 15. 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 7.1 million shares of our common stock held by certain subsidiaries of BMS for an aggregate purchase price of $ 344.5 million, or $ 48.38 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 December 31, 2021, we have repurchased F-26 approximately 9.1 million shares of common stock for $ 458.0 million, or $ 50.35 per share, under the Rule 10b5-1 repurchase plan. In total, as of December 31, 2021, we have repurchased 16.2 million shares of common stock for $ 802.5 million, or $ 49.49 per share, under the Repurchase Program. On October 5, 2021, we terminated our Rule 10b5-1 share repurchase plan and on October 13, 2021 we entered into a Rule 10b-18 repurchase plan that allows us to conduct open market repurchases over time up to our remaining authorization 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 year ended December 31, 2021. Note 16. Selected Quarterly Financial Data (Unaudited) The following table contains quarterly financial information for 2021 and 2020: 2021 (in thousands, except per share data) First Quarter Second Quarter Third Quarter Fourth Quarter Loss from continuing operations $ ( 90,877 ) $ ( 82,790 ) $ ( 84,259 ) $ ( 98,584 ) Net income (loss) from discontinued operations, net of tax 1,965,202 ( 3,427 ) ( 4,507 ) 3,957 Net income (loss) 1,874,325 ( 86,217 ) ( 88,766 ) ( 94,627 ) Net loss from continuing operations per share - basic and diluted ( 1.31 ) ( 1.36 ) ( 1.48 ) ( 1.81 ) Net income (loss) from discontinued operations per share - basic and diluted 28.26 ( 0.06 ) ( 0.08 ) 0.07 Net income (loss) per share - basic and diluted 26.95 ( 1.41 ) ( 1.56 ) ( 1.74 ) 2020 (in thousands, except per share data) First Quarter Second Quarter Third Quarter Fourth Quarter Loss from continuing operations $ ( 84,094 ) $ ( 81,495 ) $ ( 79,175 ) $ ( 84,541 ) Net income (loss) from discontinued operations, net of tax 43,838 ( 8,983 ) ( 19,804 ) ( 13,116 ) Net income (loss) ( 40,256 ) ( 90,478 ) ( 98,979 ) ( 97,657 ) Net loss from continuing operations per share - basic and diluted ( 1.23 ) ( 1.18 ) ( 1.15 ) ( 1.22 ) Net income (loss) from discontinued operations per share - basic and diluted 0.64 ( 0.13 ) ( 0.29 ) ( 0.19 ) Net income (loss) per share - basic and diluted ( 0.59 ) ( 1.31 ) ( 1.43 ) ( 1.41 ) 17. Subsequent Events On February 17, 2022, the FDA approved PYRUKYND® for the treatment of hemolytic anemia in adults with pyruvate kinase (PK) deficiency in the United States. F-27