AGIOS PHARMACEUTICALS, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-looking Information The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021, and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 24, 2022. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, forecasts and projections, and the beliefs and assumptions of our management, and include, without limitation, statements with respect to our expectations regarding our research, development and commercialization plans and prospects, results of operations, selling, general and administrative expenses, research and development expenses, the sufficiency of our cash for future operations and business activity disruption due to the COVID-19 pandemic. Words such as “anticipate,” “believe,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “predict,” “project,” “strategy,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “vision” and similar statements or variation of these terms or the negative of those terms and similar expressions are intended to identify these forward-looking statements. Readers are cautioned that these forward-looking statements are predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by our forward-looking statements are those discussed under the heading “Risk Factors” in Part II, Item 1A and elsewhere in this report, and in our Annual Report on Form 10-K for the year ended December 31, 2021. We undertake no obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law. Overview We are a biopharmaceutical company committed to transforming patients’ lives through scientific leadership in the field of cellular metabolism and adjacent areas of biology, with the goal of creating differentiated, small molecule medicines for genetically defined diseases, or GDDs. 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 GDDs. 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 June 2021, we submitted a marketing authorization application, or MAA, to the European Medicines Agency, or EMA, for PYRUKYND® for the treatment of adults with PK deficiency in the European Union. The MAA has passed validation, and the regulatory review process is ongoing. In addition, we are currently evaluating PYRUKYND® for the treatment of thalassemia and sickle cell disease, or SCD, in the clinical trials described below and we intend to evaluate PYRUKYND® in pediatric patients with PK deficiency in the planned clinical trials described below. 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. 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, which represented a discontinued operation. 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 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 18 Table of Contents 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 will conduct certain clinical development activities within the IDHIFA® development program. Financial Operations Overview Impact of COVID-19 on our Business As of March 31, 2022, we have not experienced a significant financial or supply chain impact directly related to the COVID-19 pandemic but have experienced some disruptions to clinical operations, including timelines to complete patient enrollment in some of our clinical trials, and we may in the future experience further such disruptions. In addition, we have experienced disruptions to certain research activities at our contract research organizations, or CROs, based in China, due to the recent COVID-19 surge in China. We are continuing to serve our customers while taking precautions to provide a safe work environment for our employees and customers. Our lab-based employees who need to be onsite to fulfill their job responsibilities have been onsite since late May 2020, and since September 2020 we have opened our Cambridge office to limited numbers of employees who prefer to work onsite. Our field-based employees continue to engage with healthcare providers and other third parties on a primarily remote basis and, where local regulations and other conditions allow, on a limited in-person basis. We are conducting our return to work program under strict guidelines as required by federal, state, and local authorities. Effective November 8, 2021, we require all employees, regardless of role or work location, to be fully vaccinated against COVID-19, as defined by the Center of Disease Control and Prevention's guidelines, subject to limited exception. We have been monitoring our supply chain network for disruptions due to the COVID-19 pandemic, and our third-party manufacturers, other than the China-based CROs discussed above, remain largely unaffected, with any campaign delays experienced to date being limited to a few days in duration. Although global shipping continues to be disrupted due to the pandemic, we have not experienced a supply impact. The extent of the pandemic’s effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time. Future developments include changes in the duration, scope and severity of the pandemic, including any variant strains of the COVID-19 virus, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the supply, distribution and efficacy of vaccines, and the resumption of widespread economic activity. Any prolonged material disruption of our employees, suppliers, manufacturing, or customers could negatively impact our consolidated financial position, results of operations and cash flows. As a result, we may have to take further actions that we determine are in the best interests of our employees or as required by federal, state, or local authorities. General Since inception, our operations have primarily focused on organizing and staffing our company, business planning, raising capital, assembling our core capabilities in cellular metabolism, identifying potential product candidates, undertaking preclinical studies, conducting clinical trials, establishing a commercial infrastructure, preparing for the commercial launch of PYRUKYND® and, prior to the sale of our oncology business to Servier on March 31, 2021, marketing TIBSOVO® and IDHIFA®. Through March 31, 2021, we have financed our operations primarily through proceeds from the sale of our royalty rights, commercial sales of TIBSOVO®, funding received from our collaboration agreements, private placements of our preferred stock, our initial public offering of our common stock and concurrent private placement of common stock to an affiliate of Celgene, and our follow-on public offerings. Following the sale of our oncology business to Servier on March 31, 2021, we have financed and expect to finance our operations primarily through cash on hand, royalty payments from Servier with respect to U.S. net sales of TIBSOVO®, the potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA, and potential sales of PYRUKYND® if successfully launched by us and, potentially, collaborations, strategic alliances, licensing arrangements and other nondilutive strategic transactions. We have historically incurred operating losses. Our net loss for the three months ended March 31, 2022 was $94.8 million and our net income for the three months ended March 31, 2021 was $1,874.3 million. As of March 31, 2022, we had an accumulated deficit of $333.5 million. The net income we generated in the three months ended March 31, 2021 was primarily due to the sale of our oncology business to Servier, which was consummated on March 31, 2021. Following the consummation of the sale of our oncology business, we expect to incur significant expenses and net losses until such time we are able to report profitable results. Our net losses may fluctuate significantly from year to year. We expect that we will continue to incur significant expenses as we continue to advance and expand clinical development activities for our lead programs: PYRUKYND®, and AG-946; continue to discover and validate novel targets and drug product candidates; expand and protect our intellectual property portfolio; and hire additional commercial, development and scientific personnel. Revenues 19 Table of Contents Our wholly owned product, PYRUKYND®, received approval from the FDA on February 17, 2022, for the treatment of hemolytic anemia in adults with PK deficiency in the United States. Upon FDA approval of PYRUKYND® in the United States, we began generating product revenue from sales of PYRUKYND®. We sell PYRUKYND® to a limited number of specialty distributors and specialty pharmacy providers, or collectively, the Customers. These Customers subsequently resell PYRUKYND® to pharmacies or dispense directly to patients. In addition to distribution agreements with Customers, we enter into arrangements with healthcare providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of PYRUKYND®. For further discussion of our revenue recognition policy, see Note 2, Summary of Significant Accounting Polices and Note 8, Product Revenue, to the condensed consolidated financial statements in this Form 10-Q. In the future, we expect to continue to generate revenue from a combination of product sales, royalties on product sales, cost reimbursements, milestone payments, and upfront payments to the extent we enter into future collaborations or licensing agreements. Cost of Sales Cost of sales consists primarily of manufacturing costs for sales of PYRUKYND®. Based on our policy to expense costs associated with the manufacturing of our products prior to regulatory approval, certain of the manufacturing costs associated with product shipments of PYRUKYND® recorded during the three months ended March 31, 2022 were expensed prior to February 17, 2022, and, therefore, are not included in costs of sales during the three months ended March 31, 2022. Research and development expenses Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs related to our GDD portfolio to increase significantly for the foreseeable future as our product candidate development programs progress. However, the successful development of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development and to commercialize these product candidates. We are unable to predict the amount of net cash inflows from PYRUKYND® 20 Table of Contents or any of our product candidates. This is due to the numerous risks and uncertainties associated with developing medicines, including the uncertainty of: • establishing an appropriate safety profile with an investigational new drug application, or IND, and/or NDA-enabling toxicology and clinical trials; • the successful enrollment in, and completion of, clinical trials; • the receipt of marketing approvals from applicable regulatory authorities; • establishing compliant commercial manufacturing capabilities or making arrangements with third-party manufacturers; • obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; • launching commercial sales of the products, if and when approved, whether alone or in collaboration with others; and • maintaining an acceptable safety profile of the products following approval. A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that product candidate. Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include: • employee-related expenses, including salaries, benefits and stock-based compensation expense; • expenses incurred under agreements with third parties, including CROs, that conduct research and development and both preclinical and clinical activities on our behalf, and the cost of consultants; • the cost of lab supplies and acquiring, developing and manufacturing preclinical and clinical study materials; and • facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and the maintenance of facilities, insurance and other operating costs. The following summarizes our most advanced programs: PYRUKYND® (mitapivat): First-in-Class PK Activator We are developing PYRUKYND® for the treatment of PK deficiency and other hemolytic anemias such as thalassemia and SCD. PYRUKYND® is an orally available small molecule and a potent activator of the wild-type and mutated PKR enzymes. To date, we have demonstrated in clinical trials that treatment with PYRUKYND® can lead to durable sustained increases in hemoglobin in patients with amenable mutations in the PKR gene and a statistically significant and clinically meaningful reduction in transfusion burden in regularly transfused patients with PK deficiency, and we have observed in clinical trials of PYRUKYND® durable improvements in hemoglobin concentration and markers of hemolysis and ineffective erythropoeiesis in both α- and β- thalassemia patients and reductions in 2,3-DPG and increases in ATP in SCD patients. In February 2022, the FDA approved PYRUKYND® for the treatment of hemolytic anemia in adults with PK deficiency in the United States. In June 2021 , we submitted an MAA to the EMA for the treatment of adults with PK deficiency the European Union. The MAA has passed validation, and the regulatory review process is ongoing. We have worldwide development and commercial rights to PYRUKYND® and expect to fund the future development and commercialization costs related to this program. PYRUKYND® has been granted orphan drug designation for the treatment of PK deficiency by the FDA and the EMA. Additionally, PYRUKYND® has received orphan drug designation from the FDA for the treatment of thalassemia and SCD. We have built our US commercial infrastructure to support the commercial launch of PYRUKYND® in the United States and continue to evaluate all options for the commercialization and continued development of PYRUKYND® outside of the United States in order to maximize the benefit to patients and value to our shareholders, including through exploring potential partnership opportunities. We are evaluating PYRUKYND® in the following clinical trials: • ENERGIZE, a phase 3, double-blind, randomized, placebo-controlled multicenter study evaluating the efficacy and safety of PYRUKYND® as a potential treatment for adults with non-transfusion-dependent α- or β-thalassemia, defined as ≤5 red blood cell, or RBC, units during the 24-week period before randomization and no RBC transfusions ≤8 weeks before providing informed consent or during the screening period. The primary endpoint of the trial is percentage of patients with hemoglobin response, defined as a ≥1.0 g/dL increase in average hemoglobin concentration from Week 12 through Week 24 compared with baseline. Secondary endpoints include markers of hemolysis and ineffective 21 Table of Contents erythropoiesis, as well as patient-reported outcome measures. This trial is enrolling patients, and we expect to enroll a meaningful portion of the patients by the end of 2022. • ENERGIZE-T, a phase 3, double-blind, randomized, placebo-controlled multicenter study evaluating the efficacy and safety of PYRUKYND® as a potential treatment for adults with transfusion-dependent α- or β-thalassemia, defined as 6 to 20 RBC units transfused and ≤6-week transfusion-free period during the 24-week period before randomization. The primary endpoint of the trial is percentage of patients with transfusion reduction response, defined as a ≥50% reduction in transfused RBC units with a reduction of ≥2 units of transfused RBCs in any consecutive 12-week period through Week 48 compared with baseline. Secondary endpoints include additional transfusion reduction measures and percentage of participants with transfusion-independence. This trial is enrolling patients, and we expect to enroll a meaningful portion of the patients by the end of 2022. • RISE UP, a phase 2/3 study evaluating the efficacy and safety of PYRUKYND® in SCD patients who are 16 years of age or older, have had between two and 10 sickle cell pain crises in the past 12 months, and have hemoglobin within the range of 5.5 to 10.5 g/dL during screening. The phase 2 portion of the trial, which has initiated, includes a 12-week randomized, placebo-controlled period in which participants will be randomized in a 1:1:1 ratio to receive 50 mg PYRUKYND® twice daily, 100 mg PYRUKYND® twice daily or matched placebo. The primary endpoints are hemoglobin response, defined as ≥1 g/dL increase in average hemoglobin concentration from Week 10 through Week 12 compared to baseline, and safety. These data will be used to establish a clear dosing paradigm for the phase 3 portion. The phase 3 portion includes a 52-week randomized, placebo-controlled period in which participants will be randomized in a 2:1 ratio to receive the recommended PYRUKYND® dose level or placebo. The primary endpoints are hemoglobin response, defined as ≥1 g/dL increase in average hemoglobin from baseline to Week 52, and annualized rate of sickle cell pain crises. Participants who complete either the phase 2 or phase 3 portion will have the option to move into a 216-week open-label extension period to continue to receive PYRUKYND®. The phase 2 portion of this trial is enrolling patients, and we expect to complete enrollment in the phase 2 portion of the trial by the end of 2022. • An extension study evaluating the long-term safety, tolerability and efficacy of treatment with PYRUKYND® in patients from ACTIVATE and ACTIVATE-T, our completed pivotal trials of PYRUKYND® in not regularly transfused and regularly transfused patients with PK deficiency. • An extension study evaluating the long-term safety, tolerability and efficacy of treatment with PYRUKYND® in patients from DRIVE PK, our completed global phase 2, first-in-patient, open-label safety and efficacy clinical trial of PYRUKYND® in adult, not regularly transfused patients with PK deficiency. • An extension study evaluating the safety, tolerability and efficacy of treatment with PYRUKYND® in patients from our completed phase 2, open-label safety and efficacy clinical trial of PYRUKYND® in adults with non-transfusion-dependent α- and β-thalassemia. • In collaboration with the National Institutes of Health, or NIH, we are evaluating PYRUKYND® in a phase 1 trial in patients with SCD pursuant to a cooperative research and development agreement. The core trial period has completed. The long-term extension study is ongoing. In June 2020, clinical proof of concept was established based on a preliminary analysis of the data from this trial. • In collaboration with UMC Utrecht, or UMC, we are evaluating PYRUKYND® in patients with SCD pursuant to an investigator sponsored trial agreement. The trial has completed enrollment and patient follow-up is ongoing, and a 2-year extension study has been activated for patients who complete the follow-up period. We expect to initiate two phase 3 trials of PYRUKYND®, ACTIVATE-kids and ACTIVATE-kidsT, in not regularly transfused and regularly transfused pediatric patients with PK deficiency in mid-2022. AG-946: Novel, Next-generation PKR Activator We are developing AG-946, a novel, next-generation PKR activator, for the potential treatment of hemolytic anemias. We are evaluating AG-946, in a phase 1 trial of AG-946 in healthy volunteers and in patients with SCD. The trial has completed the healthy volunteer cohort, and we have initiated the SCD patient cohort of this trial. We expect to initiate a phase 2a study of AG-946 in adults with L-IR MDS by year-end 2022. Other research and platform programs Other research and platform programs include activities related to exploratory efforts, target validation and lead optimization for our discovery and follow-on programs, and our proprietary metabolomics platform. Selling, general and administrative expenses Selling, general and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, business development, commercial, legal and human resources functions. 22 Table of Contents Other significant costs include facility-related costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters, and fees for accounting and consulting services. We anticipate that our selling, general and administrative expenses will increase in the future to support continued research and development activities and ongoing and future commercialization activities related to our GDD portfolio, including the commercialization of PYRUKYND® and any of our other product candidates. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses. Critical Accounting Estimates Our critical accounting estimates are those which require the most significant judgments and estimates in the preparation of our condensed consolidated financial statements. We have determined that our most critical accounting estimates are those relating to revenue recognition, accrued research and development expenses and stock-based compensation. Except those that have been disclosed in Note 2, Summary of Significant Accounting Policies , of the notes to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, there have been no significant changes to our existing critical accounting estimates discussed in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021. Results of Operations Certain amounts in prior periods have been reclassified to reflect the impact of the discontinued operations treatment of the oncology business in order to conform to the current period presentation. Comparison of the three months ended March 31, 2022 and 2021 Revenues Three Months Ended March 31, (In thousands) 2022 2021 Revenues: Product revenue, net $ 832 $ — Total revenue $ 832 $ — Total Revenue – First Quarter of 2022 vs. First Quarter of 2021 – The increase in total revenue of $0.8 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was due to product revenue associated with PYRUKYND®, which was approved in February 2022. Total Operating Expenses Three Months Ended March 31, (In thousands) 2022 2021 Cost and expenses: Cost of sales $ 339 $ — Research and development 70,123 57,667 Selling, general and administrative 31,515 33,550 Total Operating Expenses $ 101,977 $ 91,217 Total Operating Expenses - First Quarter of 2022 vs. First Quarter of 2021 - The increase in total operating expenses of $10.8 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily due an increase in research and development expenses of $12.5 million which is described below under Research and Development Expenses, partially offset by a decrease in selling, general and administrative expenses of $2.0 million due to a reduction in workforce-related expenses. Included in selling, general and administrative expenses is approximately $1.1 million of reimbursable transition related services we provided to Servier related to the sale of the oncology business. 23 Table of Contents Research and Development Expenses Our research and development expenses, by major program, are outlined in the table below: Three Months Ended March 31, (In thousands) 2022 2021 PK activator (PYRUKYND®) $ 17,204 $ 12,364 Novel PK activator (AG-946) 3,437 1,771 Other research and platform programs 7,914 4,214 Total direct research and development expenses 28,555 18,349 Compensation and related expenses 29,186 26,753 Facilities and IT related expenses & other 10,865 12,565 Other expenses - transition services 1,517 — Total indirect research and development expenses 41,568 39,318 Total research and development expense $ 70,123 $ 57,667 Total Research and Development Expenses - First Quarter of 2022 vs. First Quarter of 2021 - The increase in total research and development expenses of $12.5 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily due to a $10.2 million increase in our direct expenses. The increase in direct expenses was primarily due to a $4.8 million increase in PYRUKYND® costs and a $3.7 million increase in other research and platform programs. The increase in PYRUKYND® costs was primarily due to startup costs for the initiated phase 3 trials of PYRUKYND® in patients with thalassemia, ENERGIZE and ENERGIZE-T, and the phase 2/3 trial of PYRUKYND® in patients with SCD, RISE UP, offset by closeouts of ACTIVATE and ACTIVATE-T studies. The increase in other research and platform programs was primarily driven by planned increased activity on various exploratory activities. Included in total indirect research and development expenses was $1.5 million of reimbursable transition related services we provided to Servier related to the sale of the oncology business for discovery, clinical development, technical operations, and related activities which were completed during the three months ended March 31, 2022. Other Income and Expense Three Months Ended March 31, (In thousands) 2022 2021 Royalty income from gain on sale of oncology business $ 2,704 $ — Interest income, net 694 340 Other income, net 2,973 — Other Income and Expense - First Quarter of 2022 vs. First Quarter of 2021 - The increase in other income, net in the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily relates to approximately $2.6 million of reimbursable transition related services and fees for the sale of the oncology business for the three months ended March 31, 2022. The increase in royalty income from gain on sale of oncology business relates to income from royalties on U.S. net sales of TIBSOVO® by Servier of approximately $2.7 million for the three months ended March 31, 2022. The increase in interest income, net is primarily attributable to an increase in interest rates. Loss from Operations and Net (Loss) Income Three Months Ended March 31, (In thousands) 2022 2021 Net loss from continuing operations $ (94,774) $ (90,877) Net income from discontinued operations — 1,965,202 Net (loss) income (94,774) 1,874,325 Loss from Operations and Net Income (Loss) – First Quarter of 2022 vs. First Quarter of 2021 – The increase in net loss from continuing operations for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily driven by the higher research and development expenses discussed above under Research and Development Expenses, partially offset by approximately $2.6 million of reimbursable transition related services and fees for the sale of the oncology business and $2.7 million of royalty income from gain on sale of oncology business related to income from royalties on U.S. net sales of TIBSOVO® by Servier. The change in net income from discontinued operations and net (loss) income for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily driven by the sale 24 Table of Contents of our oncology business to Servier for approximately $1.8 billion in cash in the first quarter of 2021, which is included within net income from discontinued operations. Liquidity and Capital Resources Sources of liquidity Since our inception, and through March 31, 2022, we have funded our operations through proceeds from the sale of our royalty rights, commercial sales of TIBSOVO®, funding received from our collaboration agreements, private placements of our preferred stock, our initial public offering of our common stock and concurrent private placement of common stock to an affiliate of Celgene, and our follow-on public offerings. Following the sale of our oncology business to Servier on March 31, 2021, we have financed and expect to continue to finance our operations primarily through cash on hand, royalty payments from Servier with respect to U.S. net sales of TIBSOVO®, the potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA, potential sales of PYRUKYND®, if successfully launched by us and, potentially, collaborations, strategic alliances, licensing arrangements and other nondilutive strategic transactions. On March 31, 2021, we completed the sale of our oncology business to 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 $200.0 million in cash, if, prior to January 1, 2027, vorasidenib is granted NDA approval from the 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, and following the sale Servier is responsible for conducting certain clinical development activities within the IDHIFA® development program. 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 could repurchase up to $600.0 million of shares of our common stock. As of December 31, 2021, we 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. 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 under the Repurchase Program. In total, as of December 31, 2021 and March 31, 2022, we 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 and for the foreseeable future, we expect that our capital allocation will be prioritized towards opportunities to accelerate programs in our development pipeline and/or pursue potential complementary business development opportunities. In addition to our existing cash, cash equivalents and marketable securities, we are eligible to receive a $200.0 million milestone payment and royalty payments under our transaction agreement with Servier. Our right to such payments under our transaction agreement with Servier is our only committed potential external source of funds. Whether the regulatory approval milestone for vorasidenib will be achieved is subject to various risks and uncertainties, many of which are outside our control, including adverse clinical developments with respect to vorasidenib. Furthermore, we cannot predict what success, if any, Servier may have in the United States with respect to sales of TIBSOVO® and, if approved, vorasidenib and consequently we cannot estimate the amount of royalty payments that we can expect to receive from Servier under the Purchase Agreement prior to the loss of exclusivity of these products. 25 Table of Contents Cash flows The following table provides information regarding our cash flows for the three months ended March 31, 2022 and 2021: Three Months Ended March 31, (In thousands) 2022 2021 Net cash used in operating activities $ (97,735) $ (120,749) Net cash (used in) provided by investing activities (26,573) 1,874,077 Net cash provided by financing activities 1,208 7,261 Net change in cash and cash equivalents $ (123,100) $ 1,760,589 Net cash used in operating activities. Cash used in operating activities of $97.7 million during the three months ended March 31, 2022, of which all was used by continuing operations, was primarily due to operating expenses driven by research and development costs described above under Research and Development Expenses, offset by cash received of $4.4 million from Servier for reimbursable transition related services and fees, and royalties on U.S. net sales of TIBSOVO®. Cash used in operating activities of $120.7 million during the three months ended March 31, 2021, of which $90.2 million was used by continuing operations and $30.5 million was used by discontinued operations, was primarily due to operating expenses driven by research and development costs described above under Research and Development Expenses and selling, general and administrative costs described above under Total Operating Expenses. These amounts were offset by cash received of $39.5 million from sales of TIBSOVO®, and $1.2 million in cost reimbursements related to our collaboration agreements with Celgene. Net cash (used in) provided by investing activities . Cash used in investing activities of $26.6 million during the three months ended March 31, 2022, of which all was used by continuing operations, was primarily due to higher purchases of marketable securities than proceeds from maturities and sales of marketable securities. Cash provided by investing activities of $1.9 billion for the three months ended March 31, 2021, of which $71.1 million was provided by operating activities and $1.8 billion was provided by discontinued operations, was primarily due to the approximately $1.8 billion in cash proceeds received from the sale of our oncology business to Servier that was completed on March 31, 2021. We also received higher proceeds from maturities and sales of marketable securities than purchases of marketable securities. Net cash provided by financing activities . Cash provided by financing activities for the three months ended March 31, 2022, of which all was provided by continuing operations, was primarily the result of the $1.3 million of proceeds received from stock option exercises and purchases made pursuant to our 2013 Employee Stock Purchase Plan, or 2013 ESPP. Cash provided by financing activities for the three months ended March 31, 2021, of which all was provided by continuing operations, was primarily the result of the $7.3 million of proceeds received from stock option exercises and purchases made pursuant to our 2013 ESPP. Funding requirements Although our expenses decreased following the completion of the sale of our oncology business to Servier on March 31, 2021, we anticipated that this decrease will be offset as we continue the research, development and clinical trials of, seek marketing approvals for, and commercialize our product candidates in our GDD portfolio, including as we commercialize PYRUKYND®. If we obtain marketing approval for PYRUKYND® in other indications outside of the United States or for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. We expect that our existing cash, cash equivalents and marketable securities as of March 31, 2022, will enable us to execute our operating plan through major catalysts and to cash-flow positivity without the need to raise additional equity. Our future capital requirements will depend on many factors, including: • the amount of contingent consideration we ultimately receive in connection with the sale of our oncology business to Servier; • the amount and timing of future revenue, if any, received from commercial sales of PYRUKYND® or any of our product candidates for which we may receive marketing approval; • the costs and timing of our ongoing commercialization activities, including product manufacturing, sales, marketing and distribution for PYRUKYND® for the treatment of hemolytic anemia in adults with PK deficiency; • the scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our product candidates; • the costs, timing and outcome of regulatory review of our product candidates; • the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; 26 Table of Contents • the costs and timing of future commercialization activities, including product manufacturing, sales, marketing and distribution, for any of our product candidates for which we may receive marketing approval; • our ability to establish and maintain collaborations on favorable terms, if at all; • our ability to successfully execute on our strategic plans; • operational delays due to the ongoing COVID-19 pandemic; and • the extent to which we acquire or in-license, or monitor or out-license, other medicines and technologies. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs primarily through cash on hand, royalty payments from Servier with respect to U.S. net sales of TIBSOVO®, a potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA and, potentially, collaborations, strategic alliances, licensing arrangements and other nondilutive strategic transactions. In addition, in connection with potential future strategic transactions, we may pursue opportunistic debt offerings, and equity or equity-linked offerings. We do not have any committed external source of funds other than the potential milestone and royalty payments that we are eligible to receive under our purchase agreement with Servier. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed or on attractive terms, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Contractual Obligations During the three months ended March 31, 2022, there were no significant changes to our contractual obligations and commitments described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021.