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 September 30, 2022 and for the three and nine months ended September 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. 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 leadership in the field of cellular metabolism, with the goal of creating differentiated, small molecule medicines for rare and 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 U.S. Food and Drug Administration, or FDA, approved PYRUKYND® for the treatment of hemolytic anemia in adults with 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, or EU. In September 2022, the Committee for Medicinal Products for Human Use of the EMA, or CHMP, adopted a positive opinion recommending the granting of a marketing authorization for PYRUKYND®. In October 2022, we submitted a marketing authorization application in Great Britain for PYRUKYND® under the European Commission Decision Reliance Procedure. We expect to receive a decision from both the EU and Great Britain regulatory authorities 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 PK activator, for the potential treatment of lower-risk myelodysplastic syndrome, hemolytic anemias and other indications. In addition to the aforementioned development programs, we continue to prioritize investment in advancing our late lead-optimization research. 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 $200.0 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 19 Table of Contents that permits vorasidenib’s use as a single agent for the adjuvant treatment of patients with Grade 2 glioma that have an isocitrate dehydrogenase 1 or 2 mutation (and, to the extent required by such approval, the vorasidenib companion diagnostic test is granted an FDA premarket approval), as well as a royalty of 5% of U.S. net sales of TIBSOVO® from the close of the transaction through loss of exclusivity, and a royalty of 15% of U.S. net sales of vorasidenib from the first commercial sale of vorasidenib through loss of exclusivity. Servier also acquired our co-commercialization rights for Bristol Myers Squibb’s IDHIFA® and the right to receive a $25.0 million potential milestone payment under our prior collaboration agreement with Celgene Corporation, or Celgene, and following the sale Servier will conduct certain clinical development activities within the IDHIFA® development program. As discussed above in Note 12, Subsequent Eve nts , on October 27 2022, we sold our rights to the royalty on U.S. net sales of TIBSOVO® to entities affiliated with Sagard Healthcare Partners, or Sagard, for $131.8 million. We retained our rights to the potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA. 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 September 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 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. 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 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 continue to finance our operations primarily through cash on hand, royalty payments from Servier with respect to U.S. net sales of TIBSOVO® prior to the sale of these royalty rights to Sagard, proceeds from the sale of our rights to the royalty on U.S. net sales of TIBSOVO® to Sagard, a potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA, the actual and potential future sales of PYRUKYND® and, potentially, collaborations, strategic alliances, licensing arrangements and other nondilutive strategic transactions. We have historically incurred operating losses. Our net loss for the nine months ended September 30, 2022 was $268.3 million and our net income for the nine months ended September 30, 2021 was $1,699.3 million. As of September 30, 2022, we had an 20 Table of Contents accumulated deficit of $507.1 million. The net income we generated in the nine months ended September 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. 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 prioritize advancement of our late lead-optimization research; expand and protect our intellectual property portfolio, including by in-licensing or acquiring assets for pipeline growth; and hire additional commercial and development personnel. Revenues 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 and nine months ended September 30, 2022 were expensed prior to February 17, 2022, and, therefore, are not included in costs of sales during the three and nine months ended September 30, 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® 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: 21 Table of Contents • 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 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 in the EU. In September 2022, the Committee for Medicinal Products for Human Use of the EMA, or CHMP, adopted a positive opinion recommending the granting of a marketing authorization for PYRUKYND®. In October 2022, we submitted a marketing authorization application in Great Britain for PYRUKYND® under the European Commission Decision Reliance Procedure. We expect to receive a decision on marketing authorization from both the EU and Great Britain regulatory authorities 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. 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 commercial infrastructure to support the commercial launch of PYRUKYND® in adult PK deficiency in the United States. If approved, we are committed to providing patient access in the EU and Great Britain. Our current plan is to provide access through a global managed access program, which provides a pathway for eligible adults receiving care in the EU and Great Britain who are diagnosed with PK deficiency to have access to PYRUKYND® free of charge. Beyond the global managed access program, we continue to evaluate options for the commercialization of PYRUKYND® outside of the United States, 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 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 22 Table of Contents 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. • 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 adult 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. AG-946: Novel PK Activator We are developing AG-946, a novel 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. The trial has completed the healthy volunteer cohort, and we have initiated the SCD patient cohort of this trial. We initiated a phase 2a study of AG-946 in adults with lower-risk myelodysplastic syndrome, or MDS, in the third quarter of 2022. In addition to the aforementioned development programs, we are advancing our late lead-optimization research. Selling, general and administrative expenses Selling, general and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, business development, commercial, legal and human resources functions. Other significant costs include facility-related costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters, and fees for accounting and consulting services. We anticipate that our selling, general and administrative expenses will increase in the future to support continued research and development activities and 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 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. 23 Table of Contents 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 and nine months ended September 30, 2022 and 2021 Revenues Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2022 2021 2022 2021 Revenues: Product revenue, net $ 3,516 $ — $ 7,430 $ — Milestone revenue — — 2,500 — Total revenue $ 3,516 $ — $ 9,930 $ — Total Revenue - Three Months Ended September 30, 2022 vs. Three Months Ended September 30, 2021 – The increase in total revenue of $3.5 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was due to product revenue associated with PYRUKYND®, which was approved in February 2022. Total Revenue - Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021 – The increase in total revenue of $9.9 million for the nine months ended September 30, 2022 compared to the nine months ended September 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 September 30, Nine Months Ended September 30, (In thousands) 2022 2021 2022 2021 Operating expenses: Cost of sales $ 517 $ — $ 1,291 $ — Research and development 64,966 64,000 209,612 183,674 Selling, general and administrative 29,123 27,152 88,902 89,917 Total operating expenses $ 94,606 $ 91,152 $ 299,805 $ 273,591 Total Operating Expenses - Three Months Ended September 30, 2022 vs. Three Months Ended September 30, 2021 – The increase in total operating expenses of $3.5 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily due to an increase in selling, general and administrative expenses of $2.0 million, driven by an increase in workforce-related expenses. Total Operating Expenses - Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021 – The increase in total operating expenses of $26.2 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to an increase in research and development expenses of $25.9 million which is described below under Research and Development Expenses, partially offset by a decrease in selling, general and administrative expenses of $1.0 million due to a reduction in workforce-related expenses. Included in selling, general and administrative expenses for the nine months ended September 30, 2021 is approximately $3.4 million of reimbursable transition related services we provided to Servier related to the sale of the oncology business. 24 Table of Contents Research and Development Expenses Our research and development expenses, by major program, are outlined in the table below: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2022 2021 2022 2021 PK activator (PYRUKYND®) $ 20,906 $ 20,130 $ 57,036 $ 49,543 Novel PK activator (AG-946) 2,943 2,820 11,517 6,849 Other research and platform programs 4,945 6,109 20,669 14,684 Total direct research and development expenses 28,794 29,059 89,222 71,076 Compensation and related expenses 25,959 21,816 86,481 70,965 Facilities and IT related expenses & other 10,213 9,883 32,392 33,987 Other expenses - transition services — 3,242 1,517 7,646 Total indirect research and development expenses 36,172 34,941 120,390 112,598 Total research and development expense $ 64,966 $ 64,000 $ 209,612 $ 183,674 Total Research and Development Expenses - Three Months Ended September 30, 2022 vs. Three Months Ended September 30, 2021 – Total research and development expenses for the three months ended September 30, 2022 remained relatively consistent with the three months ended September 30, 2021. Total Research and Development Expenses - Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021 – The increase in total research and development expenses of $25.9 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was due to an $18.1 million increase in our direct expenses and a $7.8 million increase in our indirect expenses. The increase in direct expenses was due to a $7.5 million increase in PYRUKYND® costs, a $6.0 million increase in other research and platform programs, and a $4.6 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 PK deficiency, 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 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 lower-risk MDS and increased spend for the phase 1 trial of AG-946 in healthy volunteers and in patients with SCD. The increase in indirect expenses was primarily due to an $15.5 million increase in compensation and related expenses primarily due to increased headcount, as well as certain workforce-related expenses associated with the evolution of our research organization. This increase was partially offset by $6.1 million of additional reimbursable transition related services we provided to Servier in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2022 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 September 30, Nine Months Ended September 30, (In thousands) 2022 2021 2022 2021 Royalty income from gain on sale of oncology business $ 4,443 $ 1,996 $ 9,851 $ 3,996 Interest income, net 3,818 256 6,305 504 Other income, net 1,082 4,641 5,392 11,165 Other Income and Expense - Three Months Ended September 30, 2022 vs. Three Months Ended September 30, 2021 – The $3.6 million decrease in other income, net in the three months ended September 30, 2022 compared to the three months ended September 30, 2021 primarily related to approximately $4.5 million of reimbursable transition related services and fees for the sale of the oncology business in the three months ended September 30, 2021, partially offset by sublease income of $1.0 million in the three months ended September 30, 2022. The $3.6 million increase in interest income, net in the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily attributable to an increase in interest rates. The $2.4 million increase in royalty income from gain on sale of oncology business related to higher income from royalties on U.S. net sales of TIBSOVO® by Servier in the three months ended September 30, 2022 compared to the three months ended September 30, 2021. Other Income and Expense - Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021 – The $5.9 million increase in royalty income from gain on sale of oncology business related to higher income from royalties on U.S. 25 Table of Contents net sales of TIBSOVO® by Servier in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The $5.8 million increase in interest income, net in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 is primarily attributable to an increase in interest rates. The $5.8 million decrease in other income, net in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily related to approximately $11.0 million of reimbursable transition related services and fees for the sale of the oncology business in the nine months ended September 30, 2021 compared to $2.6 million in the nine months ended September 30, 2022, partially offset by sublease income of $2.7 million in the nine months ended September 30, 2022. Loss from Operations and Net (Loss) Income Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2022 2021 2022 2021 Net loss from continuing operations $ (81,747) $ (84,259) $ (268,327) $ (257,926) Net (loss) income from discontinued operations, net of tax — (4,507) — 1,957,268 Net (loss) income $ (81,747) $ (88,766) $ (268,327) $ 1,699,342 Loss from Operations and Net (Loss) Income - Three Months Ended September 30, 2022 vs. Three Months Ended September 30, 2021 – The $2.5 million decrease in net loss from continuing operations for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily driven by the increase in revenue discussed above under Revenues and the increase in interest income, net and royalty income from gain on sale of oncology business discussed above under Other Income and Expense, partially offset by a decrease in other income, net discussed above under Other Income and Expense, higher selling, general and administrative expenses discussed above under Total Operating Expenses and higher research and development expenses discussed above under Research and Development Expenses. The change in net (loss) income from discontinued operations for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was driven by the sale of our oncology business to Servier. Loss from Operations and Net (Loss) Income - Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021 – The $10.4 million increase in net loss from continuing operations for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily driven by the higher research and development expenses discussed above under Research and Development Expenses and a decrease in other income, net discussed above under Other Income and Expense, partially offset by the increase in revenue in the nine months ended September 30, 2022 discussed above under Revenues and the increase in interest income, net and royalty income from gain on sale of oncology business discussed above under Other Income and Expense. The change in net (loss) income from discontinued operations and net (loss) income for the nine months ended September 30, 2022 compared to the nine months ended September 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 September 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® prior to the sale of these royalty rights to Sagard, proceeds from the sale of our rights to the royalty on U.S. net sales of TIBSOVO® to Sagard, a potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA, the actual and potential future sales of PYRUKYND® 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 26 Table of Contents within the IDHIFA® development progra m. As discussed above in Note 12, Subsequent Events , on October 27, 2022, we sold our rights to the royalty on U.S. net sales of TIBSOVO® to Sagard for $131.8 million. We retained our rights to the potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA. 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. 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. We have not repurchased any shares of common stock in fiscal year 2022 and 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. As of September 30, 2022, we have not repurchased any shares under the Rule 10b-18 repurchase plan. In total, as of September 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. In addition to our cash, cash equivalents and marketable securities of $1.0 billion and the $131.8 million payment received from Sagard on October 27, 2022, we are eligible to receive a $200.0 million milestone payment and royalty payments on U.S. net sales of vorasidenib 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 vorasidenib, if approved, 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 vorasidenib. Cash flows The following table provides information regarding our cash flows for the nine months ended September 30, 2022 and 2021: Nine Months Ended September 30, (In thousands) 2022 2021 Net cash used in operating activities $ (243,315) $ (323,227) Net cash provided by investing activities 160,310 1,343,197 Net cash provided by (used in) financing activities 2,328 (747,182) Net change in cash and cash equivalents $ (80,677) $ 272,788 Net cash used in operating activities. Cash used in operating activities of $243.3 million during the nine months ended September 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 $8.8 million and royalties on U.S. net sales of TIBSOVO® of $8.6 million. Cash used in operating activities of $323.2 million during the nine months ended September 30, 2021, of which $234.1 million was used by continuing operations and $89.1 million was used by discontinued operations, was primarily driven by research and development costs described above under Research and Development Expenses, 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 $160.3 million during the nine months ended September 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 $1.3 billion for the nine months ended September 30, 2021, of which $459.7 million was used by continuing operations 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 $2.3 million during the nine months ended September 30, 2022, of which all was provided by continuing operations, was primarily the result of the $2.6 million of 27 Table of Contents 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 of $747.2 million for the nine months ended September 30, 2021, of which all was provided by continuing operations, was primarily the result of $783.4 million in common stock repurchases in the nine months ended September 30, 2021 under our Repurchase Program, partially offset by the $37.0 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 anticipate 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 September 30, 2022 and the $131.8 million payment received from Sagard on October 27, 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 from Servier; • 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; • the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; • 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 • operational delays, disruptions and/or increased costs associated with rising global energy prices or energy shortages or rationing. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs primarily through cash on hand, proceeds from the sale of our rights to the royalty on U.S. net sales of TIBSOVO® to Sagard, the potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA, the actual and potential sales of PYRUKYND® 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 with respect to vorasidenib 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 28 Table of Contents 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 nine months ended September 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.