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Item 2. Management’s Discussion and Analysis

2023-05-04 compared with 2022-11-03 · 115 added, 162 removed, 149 unchanged (65% 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 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.

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, 2023 and for the three months ended March 31, 2023 and 2022, 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, 2022 filed with the SEC on February 23, 2023.

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.

Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “strategy,” “target,” “vision” “will,” “would,” and similar expressions are intended to identify these forward-looking statements, although not all forward-looking statements contain these identifying words.

Readers are cautioned that these forward-looking statements are predictions and are subject to risks, uncertainties and assumptions that are difficult to predict.

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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 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.

Building on this expertise, these learnings can be rapidly applied to our clinical trials with the goal of developing medicines that can have a significant impact for patients.

The lead product candidate in our portfolio, PYRUKYND® (mitapivat), is an activator of both wild-type and mutant pyruvate kinase, or PK, enzymes for the potential treatment of hemolytic anemias.

In February 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 November 2022, we received marketing authorization from the European Commission for PYRUKYND® for the treatment of PK deficiency in adult patients in the European Union, or EU.

In December 2022, we received marketing authorization in Great Britain for PYRUKYND® for the treatment of PK deficiency in adult patients under the European Commission Decision Reliance Procedure.

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.

We are also developing AG-946, a novel PK activator, for the potential treatment of lower-risk myelodysplastic syndrome, or LR MDS, and hemolytic anemias.

In addition to the aforementioned development programs, we continue to invest in our late-stage research program focused on advancing a phenylalanine hydroxylase, or PAH, stabilizer for the treatment of phenylketonuria, or PKU.

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.

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.

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 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.

Sale of Contingent Payments

The consideration for the sale of our oncology business to Servier included a royalty of 5% of U.S.

net sales of TIBSOVO® from the close of the transaction through the loss of exclusivity, referred to as contingent payments.

We recognized the contingent payments in the royalty income from gain on sale of oncology business line item in our consolidated statements of operations in the period when realizable.

In October 2022, we sold our rights to future contingent payments to entities affiliated with Sagard Healthcare Partners, or Sagard, and recognized income of $127.9 million within the gain on sale of contingent payments line item in our consolidated statements of operations for the year ended December 31, 2022.

We retain our rights to the potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA.

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.

As of March 31, 2023, 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 certain clinical and research activities at our contract research organizations, or CROs.

Although the public health emergency declaration related to COVID-19 will end on May 11, 2023, the extent of COVID-19's effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted and are out of our control.

Future developments may include changes in the duration, scope and severity of the pandemic, emergence of another pandemic or other public health emergency, 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.

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.

Through March 31, 2021, we 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

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.

net sales of TIBSOVO® prior to the sale of these contingent payments to Sagard, proceeds from the sale of contingent payments 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.

Additionally, since inception, we have historically incurred operating losses.

Our net loss for the three months ended March 31, 2023 and 2022 were $81.0 million and $94.8 million, respectively.

As of March 31, 2023, we had an accumulated deficit of $551.6 million.

We expect to incur significant expenses and net losses until such time we are able to report profitable results.

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PYRUKYND®, and AG-946;

continue to prioritize advancement of our late lead-optimization research;

continue to prioritize advancement of our PAH stabilizer;

expand and protect our intellectual property portfolio, including by in-licensing or acquiring assets for pipeline growth;

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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 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 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.

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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 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.

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, 2023 and 2022 were expensed prior to February 17, 2022, and, therefore, are not included in costs of sales during the three months ended March 31, 2023 and 2022.

Research and development expenses

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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.

We expect research and development costs related to our 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.

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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.

In November 2022, we received marketing authorization from the European Commission for PYRUKYND® for the treatment of PK deficiency in adult patients in the EU.

In December 2022, we received marketing authorization in Great

Britain for PYRUKYND® for the treatment of PK deficiency in adult patients under the European Commission Decision Reliance Procedure.

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

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.

PYRUKYND® has been granted orphan drug designation for the treatment of PK deficiency by the FDA and the European Medicines Agency, or 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.

We are currently providing access to PYRUKYND® free of charge for eligible patients in the EU and Great Britain through a global managed access program.

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.

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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.

This trial has closed screening for patient enrollment.

• 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.

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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.

This trial has closed screening for patient enrollment.

• 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 phase 2 portion of the trial 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.

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The phase 3 portion includes a 52-week randomized, placebo-controlled period in which participants will be randomized in a 2:1 ratio to receive the recommended PYRUKYND® dose level or placebo.

The primary endpoints are hemoglobin response, defined as ≥1 g/dL increase in average hemoglobin from baseline to Week 52, and annualized rate of sickle

cell pain crises.

The primary endpoints are hemoglobin response, defined as ≥1 g/dL increase in average hemoglobin from baseline to Week 52, and annualized rate of sickle cell pain crises.

Participants who complete either the phase 2 or phase 3 portion will have the option to move into a 216-week open-label extension period to continue to receive PYRUKYND®.

The phase 2 portion of this trial is enrolling patients, and we expect to complete enrollment in the phase 2 portion of the trial by the end of 2022.

• 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 phase 2 portion of this trial has been fully enrolled, and we expect to announce data from the phase 2 portion of this trial and decide whether we are initiating the phase 3 portion of this trial by mid-year 2023.

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.

Both trials are enrolling patients, and we expect to enroll at least half of the patients by year-end 2023.

• 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.

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• 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 collaboration with the Company, the National Institutes of Health, or NIH, is 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, and 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.

• In collaboration with the Company, UMC Utrecht, or UMC, is 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.

Novel PK Activator

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

We are developing AG-946, a novel PK activator, for the potential treatment of LR MDS and hemolytic anemias.

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

The trial has completed the healthy volunteer cohort, and we have initiated the SCD patient cohort of this trial.

We 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.

We have presented data from 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 LR MDS in the third quarter of 2022, and we expect to complete enrollment by year-end 2023.

Other Programs

In addition to the aforementioned development programs, we are advancing our late-stage research program focused on a PAH stabilizer for the treatment of PKU, for which we expect to file an IND by year-end 2023.

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.

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 portfolio, including the ongoing 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.

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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 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.

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, 2022.

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

Three Months Ended September 30, Nine Months Ended September 30,

Comparison of the three months ended March 31, 2023 and 2022

Three Months Ended March 31,

(In thousands) 2023 2022

Product revenue, net $ 5,609 $ 832

Milestone revenue — — 2,500 —

Total revenue $ 5,609 $ 832

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 Revenue - Three Months Ended March 31, 2023 vs.

Three Months Ended March 31, 2022 – The increase in total revenue of $4.8 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was due to increased product revenue associated with PYRUKYND®, which was approved by the FDA in February 2022.

Total Operating Expenses

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2023 2022

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Total operating expenses $ 96,222 $ 101,977

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.

Total Operating Expenses - Three Months Ended March 31, 2023 vs.

Three Months Ended March 31, 2022 – The decrease in total operating expenses of $5.8 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily due to a decrease in selling, general and administrative expenses of $3.1 million, driven by a reduction in workforce-related expenses, and a decrease in research and development expenses of $2.8 million which is described below under Research and Development Expenses.

Included in selling, general and administrative expenses for the three months ended March 31, 2022 is approximately $1.1 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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2023 2022

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Total research and development expense $ 67,301 $ 70,123

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.

Total Research and Development Expenses - Three Months Ended March 31, 2023 vs.

Three Months Ended March 31, 2022 – The decrease in total research and development expenses of $2.8 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was due to a $0.6 million decrease in our direct expenses and a $2.2 million decrease in our indirect expenses.

The decrease in direct expenses was due to a decrease in expenses related to our other research and platform programs as a result of our decision to evolve our approach to exploratory research and drug discovery to focus on our existing late-lead optimization programs.

This decrease in direct expenses was partially offset by an increase in PYRUKYND®

costs due to increased costs for the 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.

The decrease in indirect expenses was primarily due to the $1.5 million of reimbursable transition related services we provided to Servier in the three months ended March 31, 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,

Three Months Ended March 31,

(In thousands) 2023 2022

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Other income, net 1,504 2,973

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.

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,

Other Income and Expense - Three Months Ended March 31, 2023 vs.

Three Months Ended March 31, 2022 – The increase in interest income, net was primarily attributable to an increase in interest rates.

The decrease in royalty income from gain on sale of oncology business was due to the sale to Sagard in the fourth quarter of 2022 of our rights to future contingent payments associated with royalties on U.S.

net sales of TIBSOVO®.

The decrease in other income, net 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, partially offset by $1.0 million of additional sublease income recognized in the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

Three Months Ended March 31,

(In thousands) 2023 2022

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.

Net loss $ (81,018) $ (94,774)

Net Loss - Three Months Ended March 31, 2023 vs.

Three Months Ended March 31, 2022 – The decrease in net loss for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily driven by the increase in interest income, net discussed above under Other Income and Expense, the increase in revenue discussed above under Revenues, lower selling, general and administrative expenses discussed above under Total Operating Expenses, and lower research and development expenses discussed above under Research and Development Expenses, partially offset by the decrease in royalty income from gain on sale of oncology business discussed above under Other Income and Expense.

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.

Since our inception, and through March 31, 2021, we 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.

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.

On March 31, 2021, we completed the sale of our oncology business to Servier.

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net sales of vorasidenib from the first commercial sale of vorasidenib through loss of exclusivity.

Servier also acquired our co-commercialization rights for Bristol Myers Squibb’s IDHIFA® and the right to receive a $25.0 million potential milestone payment under our prior collaboration agreement with Celgene, and following the sale Servier is responsible for conducting certain clinical development activities

within the IDHIFA® development progra m.

As discussed above in Note 12, Subsequent Events , on October 27, 2022, we sold our rights to the royalty on U.S.

The milestone payment for approval of vorasidenib and royalty payments related to vorasidenib and TIBSOVO® represent contingent consideration.

Servier also acquired our co-commercialization rights for Bristol Myers Squibb''s IDHIFA® and the right to receive a $25.0 million potential milestone payment under our prior collaboration agreement with Celgene, and following the sale Servier is responsible for conducting

certain clinical development activities within the IDHIFA® development progra m.

As discussed above in Note 1, Overview , in October 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.

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

Nine Months Ended September 30,

Our cash, cash equivalents and marketable securities balance was $1.0 billion at March 31, 2023.

The $200.0 million milestone payment and royalty payments discussed above are 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, which are outside our control, including adverse clinical developments with respect to vorasidenib.

The following table provides information regarding our cash flows for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

(In thousands) 2023 2022

Net cash used in operating activities $ (95,183) $ (97,735)

Net cash provided by investing activities 160,310 1,343,197

Net cash provided by (used in) financing activities 2,328 (747,182)

Net cash provided by (used in) investing activities 57,596 (26,573)

Net cash provided by financing activities 2,467 1,208

Net change in cash and cash equivalents $ (35,120) $ (123,100)

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

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.

Cash used in operating activities of $95.2 million during the three months ended March 31, 2023 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 product revenues.

Cash used in operating activities of $97.7 million during the three months ended March 31, 2022 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 from Servier on U.S.

net sales of TIBSOVO®.

Net cash provided by (used in) investing activities .

Cash provided by investing activities of $57.6 million during the three months ended March 31, 2023 was primarily due to higher proceeds from maturities and sales of marketable securities than purchases of marketable securities.

Cash used in investing activities of $26.6 million for the three months ended March 31, 2022 was primarily due to higher purchases of marketable securities than proceeds from maturities and sales of marketable securities.

Net cash provided by financing activities .

Cash provided by financing activities of $2.5 million during the three months ended March 31, 2023, was the result 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 of $1.2 million for the three months ended March 31, 2022 was primarily the result of $1.3 million of proceeds received from stock option exercises and purchases made pursuant to our 2013 ESPP.

Funding requirements

Although our expenses decreased following the completion of the sale of our oncology business to Servier on March 31, 2021, we 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.

We expect our expenses to increase as we continue the research, development and clinical trials of, seek marketing approvals for, and commercialize our product candidates in our portfolio, including as we continue to commercialize PYRUKYND®.

If we obtain additional marketing approvals for PYRUKYND® in other indications or 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, 2023, together with anticipated product revenue and interest income will enable us to execute our operating plan, including funding our currently planned development programs for mitapivat, AG-946 and PAH stabilization, and commercializing mitapivat outside of the United States through one or more partnerships.

Our future capital requirements will depend on many factors, including:

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

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

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• our ability to successfully execute on our strategic plans;

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

• operational delays due to public health epidemics, including the COVID-19 pandemic;

• 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.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs primarily through cash on hand, 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.

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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.

commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

If we are unable to raise additional funds through equity or debt financings when needed or on attractive terms, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations

During the 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.

During the three months ended March 31, 2023, 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, 2022.

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