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Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-05 · 127 added, 96 removed, 177 unchanged (56% of the section changed)

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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.

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 June 30, 2022 and for the three and six months ended June 30, 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.

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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.

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.

We are a biopharmaceutical company committed to transforming patients’ lives through leadership in the field of cellular metabolism, with the goal of creating differentiated, small molecule medicines for genetically defined diseases, or GDDs.

With a history of focused study on cellular metabolism, we have a deep and mature understanding of this biology, which is involved in the healthy functioning of nearly every system in the body.

We accelerate the impact of our portfolio by 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.

On February 17, 2022, the U.S.

Food and Drug Administration, or 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 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.

We expect a regulatory decision by the end of 2022.

In addition, we are currently evaluating PYRUKYND® in clinical trials for the treatment of thalassemia, sickle cell disease, or SCD, and in pediatric patients with PK deficiency.

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

In addition to the aforementioned development programs, we continue to prioritize investment in advancing our late lead-optimization research programs – a branched chain amino acid aminotransferase-2, or BCAT2, inhibitor, for the treatment of propionic and methylmalonic acidemia, or MMA, and a phenylalanine hydroxylate, or PAH, stabilizer, for the treatment of phenylketonuria, or PKU.

We believe this combination of assets represents an attractive portfolio of programs that aligns with our strategy and core expertise in non-malignant hematology and inborn errors of metabolism, and leaves room for continued growth of our pipeline.

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.

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 will conduct certain clinical development activities within the IDHIFA® development program.

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 will conduct certain clinical development activities within the IDHIFA® development program.

Evolution of our Research Organization

In May 2022, we announced our determination to evolve our approach to exploratory research and drug discovery to focus on our existing late-lead optimization programs and to prioritize in-licensing or acquiring assets for pipeline growth.

We reduced approximately 45 roles focused on exploratory research in connection with the evolution of our research organization, and plan to retain an internal research team focused on roles critical to advancing our current and future late-stage research and early clinical programs.

We estimate that this initiative may provide annual average cost savings of approximately $40 million to $50 million associated with research and related expenses between 2023 and 2026.

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.

As of June 30, 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 clinical and research activities at our contract research organizations, or CROs, due to the recent COVID-19 surges.

We have been monitoring our supply chain network for disruptions due to the COVID-19 pandemic, and our third-party manufacturers, other than certain CROs based in China, 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.

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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.

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®.

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 and executing on 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.

net sales of TIBSOVO®, the potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA, the actual 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 loss for the six months ended June 30, 2022 was $186.6 million and our net income for the six months ended June 30, 2021 was $1,788.1 million.

As of June 30, 2022, we had an accumulated deficit of $425.3 million.

The net income we generated in the six months ended June 30, 2021 was primarily due to the sale of our oncology business to Servier, which was consummated on March 31, 2021.

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.

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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.

continue to prioritize advancement of our late lead-optimization programs for PAH stabilization in PKU and for BCAT2 inhibition in propionic acidemia and MMA;

expand and protect our intellectual

property portfolio, including by in-licensing or acquiring assets for pipeline growth;

and hire additional commercial and development personnel.

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.

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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.

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 and six months ended June 30, 2022 were expensed prior to February 17, 2022, and, therefore, are not included in costs of sales during the three and six months ended June 30, 2022.

Research and development expenses

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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®

or any of our product candidates.

We are unable to predict the amount of net cash inflows from PYRUKYND® or any of our product candidates.

This is due to the numerous risks and uncertainties associated with developing medicines, including the uncertainty of:

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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.

PYRUKYND® is an orally available small molecule and a potent activator of the wild-type and mutated PK enzymes.

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.

In June 2021 , we submitted an MAA to the EMA for the treatmen t of adults with PK deficiency the European Union.

The MAA has passed validation, and the regulatory review process is ongoing.

We expect a regulatory decision by the end of 2022.

We have worldwide development and commercial rights to PYRUKYND® and expect to fund the future development and commercialization costs related to this program.

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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 have built our 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:

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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

erythropoiesis, as well as patient-reported outcome measures.

Secondary endpoints include markers of hemolysis and ineffective 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.

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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.

• ACTIVATE-kids and ACTIVATE-kidsT, double-blind phase 3 studies evaluating the efficacy and safety of PYRUKYND® as a potential treatment for PK deficiency in not regularly transfused and regularly transfused patents between one and 18 years old, respectively.

The primary endpoint of ACTIVATE-kids is percentage of patients with hemoglobin response, defined as ≥1.5 g/dL increase in hemoglobin concentration from baseline that is sustained at two or more scheduled assessments at weeks 12, 16, and 20 during the double-blind period.

The primary endpoint of ACTIVATE-kidsT is transfusion reduction response, defined as ≥33% reduction in total RBC transfusion volume from week 9 through week 32 of the double-blind period.

Both trials are enrolling patients.

• 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.

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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.

Novel, Next-generation PKR Activator

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

Novel, Next-generation PK Activator

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

We are evaluating AG-946, in a phase 1 trial of AG-946 in healthy volunteers and in patients with SCD.

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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.

Other research and platform programs include our late lead-optimization research programs for PAH stabilization in PKU and for BCAT2 inhibition in propionic acidemia and MMA.

Selling, general and administrative expenses

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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.

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 material 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

Three Months Ended March 31,

Comparison of the three and six months ended June 30, 2022 and 2021

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2022 2021 2022 2021

Product revenue, net $ 3,082 $ — $ 3,914 $ —

Milestone revenue 2,500 — 2,500 —

Total revenue $ 5,582 $ — $ 6,414 $ —

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 Revenue - Three Months Ended June 30, 2022 vs.

Three Months Ended June 30, 2021 – The increase in total revenue of $5.6 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was due to product revenue associated with PYRUKYND®, which was approved in February 2022, and revenue recognized associated with the licensing of intellectual property for our Friedreich's Ataxia preclinical program.

Total Revenue - Six Months Ended June 30, 2022 vs.

Six Months Ended June 30, 2021 – The increase in total revenue of $6.4 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was due to product revenue associated with PYRUKYND®, which was approved in February 2022, and revenue recognized associated with the licensing of intellectual property for our Friedreich's Ataxia preclinical program.

Total Operating Expenses

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2022 2021 2022 2021

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Total Operating Expenses $ 103,222 $ 91,222 $ 205,199 $ 182,439

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.

Total Operating Expenses - Three Months Ended June 30, 2022 vs.

Three Months Ended June 30, 2021 – The increase in total operating expenses of $12.0 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was primarily due an increase in research and development expenses of $12.5 million which is described below under Research and Development Expenses.

Total Operating Expenses - Six Months Ended June 30, 2022 vs.

Six Months Ended June 30, 2021 – The increase in total operating expenses of $22.8 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to an increase in research and development expenses of $25.0 million which is described below under Research and Development Expenses, partially offset by a decrease in selling, general and administrative expenses of $3.0 million due to a reduction in workforce-related expenses.

Included in selling, general and administrative expenses for the six months ended June 30, 2021 is approximately $2.1 million of reimbursable transition related services we provided to Servier related to the sale of the oncology business.

Research and Development Expenses

Our research and development expenses, by major program, are outlined in the table below:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2022 2021 2022 2021

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Total research and development expense $ 74,523 $ 62,007 $ 144,646 $ 119,674

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.

Total Research and Development Expenses - Three Months Ended June 30, 2022 vs.

Three Months Ended June 30, 2021 – The increase in total research and development expenses of $12.5 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was due to an $8.2 million increase in our direct expenses and a $4.3 million increase in our indirect expenses.

The increase in direct expenses was due to a $3.4 million increase in other research and platform programs, a $2.9 million increase in AG-946 costs, and a $1.9 million increase in PYRUKYND® costs.

The increase in other research and platform programs was primarily driven by planned increased activity associated with our preclinical PAH program as well as planned increased activity on various other exploratory activities.

The increase in AG-946 costs was primarily due to start-up costs for the phase 2 trial of AG-946 in patients with MDS and increased spend for the phase 1 trial of AG-946 in healthy volunteers and in patients with SCD.

The increase in PYRUKYND® costs was primarily due to startup costs for the phase 3 trials of PYRUKYND® in pediatric patients with PKD, ACTIVATE-kids and ACTIVATE-kidsT, and the phase 2/3 trial of PYRUKYND® in patients with SCD, RISE UP, offset by closeouts of the ACTIVATE and ACTIVATE-T studies.

The increase in indirect expenses was primarily due to an $8.9 million increase in compensation and related expenses primarily due to increased headcount and workforce-related expenses associated with the evolution of our research organization.

This increase was partially offset by $4.4 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 was recorded in the second quarter of 2021.

Total Research and Development Expenses - Six Months Ended June 30, 2022 vs.

Six Months Ended June 30, 2021 – The increase in total research and development expenses of $25.0 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was due to an $18.4 million increase in our direct expenses and a $6.6 million increase in our indirect expenses.

The increase in direct expenses was due to a $7.1 million increase in other research and platform programs, a $6.7 million increase in PYRUKYND® costs and a $4.5 million increase in AG-946 costs.

The increase in PYRUKYND® costs was primarily due to startup costs for the phase 3 trials of PYRUKYND® in patients with thalassemia, ENERGIZE and ENERGIZE-T, the phase 3 trials of PYRUKYND® in pediatric patients with PKD, ACTIVATE-kids and ACTIVATE-kidsT, and the phase 2/3 trial of PYRUKYND® in patients with SCD, RISE UP, offset by closeouts of the ACTIVATE and ACTIVATE-T studies.

The increase in indirect expenses was primarily due to an $11.4 million increase in compensation and related expenses primarily due to increased headcount and workforce-related expenses associated with the evolution of our research organization.

Included in total indirect research and development expenses for the six months ended June 30, 2022 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,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2022 2021 2022 2021

Royalty income from gain on sale of oncology business $ 2,704 $ 2,000 $ 5,408 $ 2,000

Interest income, net 694 340

Interest income (expense), net 1,793 (92) 2,487 248

Other income, net 1,337 6,524 4,310 6,524

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.

Other Income and Expense - Three Months Ended June 30, 2022 vs.

Three Months Ended June 30, 2021 – The $5.2 million decrease in other income, net in the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily relates to approximately $6.5 million of reimbursable transition related services and fees for the sale of the oncology business in the three months ended June 30, 2021, partially offset by sublease income of $1.3 million in the three months ended June 30, 2022.

The $1.9 million increase in interest income, net is primarily attributable to an increase in interest rates.

The $0.7 million increase in royalty income from gain on sale of oncology business relates to higher income from royalties on U.S.

net sales of TIBSOVO® by Servier in the three months ended June 30, 2022 compared to the three months ended June 30, 2021.

Other Income and Expense - Six Months Ended June 30, 2022 vs.

Six Months Ended June 30, 2021 – The $3.4 million increase in royalty income from gain on sale of oncology business relates to higher income from royalties on U.S.

net sales of TIBSOVO® by Servier in the the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

The $2.2 million increase in interest income, net in the the six months ended June 30, 2022 compared to the six months ended June 30, 2021 is primarily attributable to an increase in interest rates.

The $2.2 million decrease in other income, net in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily relates to approximately $6.5 million of reimbursable transition related services and fees for the sale of the oncology business in the six months ended June 30, 2021 compared to $2.6 million in the six months ended June 30, 2022, partially offset by sublease income of $1.7 million in the six months ended June 30, 2022.

Loss from Operations and Net (Loss) Income

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2022 2021 2022 2021

Net loss from continuing operations $ (91,806) $ (82,790) $ (186,580) $ (173,667)

Net income from discontinued operations — 1,965,202

Net (loss) income from discontinued operations, net of tax — (3,427) — 1,961,775

Net (loss) income $ (91,806) $ (86,217) $ (186,580) $ 1,788,108

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

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.

Loss from Operations and Net (Loss) Income - Three Months Ended June 30, 2022 vs.

Three Months Ended June 30, 2021 – The $9.0 million increase in net loss from continuing operations for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was primarily driven by the higher research and development expenses discussed above under Research and Development Expenses and the decrease in other income, net discussed above under Other Income and Expense, partially offset by the increase in revenue discussed above under Revenues.

The change in net (loss) income from discontinued operations for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was driven by the sale of our oncology business to Servier.

Loss from Operations and Net (Loss) Income - Six Months Ended June 30, 2022 vs.

Six Months Ended June 30, 2021 – The $12.9 million increase in net loss from continuing operations for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily driven by the higher research and development expenses discussed above under Research and Development Expenses, partially offset by the increase in revenue in the six months ended June 30, 2022 discussed above under Revenues and a the increase in royalty income from gain on sale of oncology business related to income from royalties on U.S.

net sales of TIBSOVO® by Servier discussed above under Other Income and Expense.

The change in net (loss) income from discontinued operations and net (loss) income for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily driven by the sale of our oncology business to Servier for approximately $1.8 billion in cash in the first quarter of 2021, which is included within net (loss) 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.

Since our inception, and through June 30, 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, the actual and 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.

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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.

As of June 30, 2022 and 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.

As of June 30, 2022, we have not repurchased any shares under the Rule 10b-18 repurchase plan.

In total, as of June 30, 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.

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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.

The following table provides information regarding our cash flows for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

The following table provides information regarding our cash flows for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

(In thousands) 2022 2021

Net cash used in operating activities $ (171,964) $ (238,043)

Net cash (used in) provided by investing activities (26,573) 1,874,077

Net cash provided by financing activities 1,208 7,261

Net cash provided by investing activities 56,240 1,575,928

Net cash provided by (used in) financing activities 1,141 (496,197)

Net change in cash and cash equivalents $ (114,583) $ 841,688

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.

Cash used in operating activities of $172.0 million during the six months ended June 30, 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, partially offset by cash received from revenues of $5.2 million and royalties of $5.3 million 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.

Cash used in operating activities of $238.0 million during the six months ended June 30, 2021, of which $159.2 million was used by continuing operations and $78.8 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, partially 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 provided by investing activities .

Cash provided by investing activities of $56.2 million during the six months ended June 30, 2022, of which all was used by continuing operations, was primarily due to higher proceeds from maturities and sales of marketable securities than purchases of marketable securities.

Cash provided by investing activities of $1.6 billion for the six months ended June 30, 2021, of which $227.0 million was used 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, partially offset by lower proceeds from maturities and sales of marketable securities than purchases of marketable securities.

Net cash provided by (used in) financing activities .

Cash provided by financing activities of $1.1 million during the six months ended June 30, 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 used in financing activities for the six months ended June 30, 2021, of which all was provided by continuing operations, was primarily the result of the $529.0 million in common stock repurchases in the second quarter of 2021 under our Repurchase Program, partially offset by the $33.0 million of proceeds received from stock option exercises and purchases made pursuant to our 2013 ESPP.

Funding requirements

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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.

We expect that our existing cash, cash equivalents and marketable securities as of June 30, 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 and timing of future revenue received from commercial sales of PYRUKYND® or any of our product candidates for which we may receive marketing approval;

• 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 anticipated cost-savings associated with the evolution of our research organization;

• the scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our product candidates;

• the costs associated with in-licensing or acquiring assets for pipeline growth;

• the costs, timing and outcome of regulatory review of our product candidates;

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• operational delays due to the ongoing COVID-19 pandemic.

• 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.

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.

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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.

During the six months ended June 30, 2022, there were no material 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis