AGIOS PHARMACEUTICALS, INC. 10-Q

Item 1. Financial Statements (Unaudited) AGIOS PHARMACEUTICALS, INC. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share and per share data) September 30, 2023 December 31, 2022 Assets Current assets: Cash and cash equivalents $ 64,333 $ 139,259 Marketable securities 583,155 643,860 Accounts receivable, net 1,176 2,206 Inventory 17,274 8,492 Prepaid expenses and other current assets 38,414 38,955 Total current assets 704,352 832,772 Marketable securities 224,902 313,874 Operating lease assets 57,162 65,129 Property and equipment, net 16,785 22,987 Other non-current assets 4,057 3,956 Total assets $ 1,007,258 $ 1,238,718 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 13,271 $ 18,616 Accrued expenses 30,490 30,350 Operating lease liabilities 14,664 13,663 Total current liabilities 58,425 62,629 Operating lease liabilities, net of current portion 60,834 71,996 Other non-current liabilities 1,156 3,279 Total liabilities 120,415 137,904 Stockholders’ equity: Preferred stock, $ 0.001 par value; 25,000,000 shares authorized; no shares issued or outstanding at September 30, 2023 and December 31, 2022 — — Common stock, $ 0.001 par value; 125,000,000 shares authorized; 72,100,384 shares issued and 55,883,973 shares outstanding at September 30, 2023, and 71,256,118 shares issued and 55,039,707 shares outstanding at December 31, 2022 72 71 Additional paid-in capital 2,421,862 2,386,325 Accumulated other comprehensive loss ( 5,896 ) ( 12,535 ) Treasury stock, at cost ( 16,216,411 shares at September 30, 2023 and December 31, 2022) ( 802,486 ) ( 802,486 ) Accumulated deficit ( 726,709 ) ( 470,561 ) Total stockholders’ equity 886,843 1,100,814 Total liabilities and stockholders’ equity $ 1,007,258 $ 1,238,718 See accompanying Notes to Condensed Consolidated Financial Statements. 1 Table of Contents AGIOS PHARMACEUTICALS, INC. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except share and per share data) 2023 2022 2023 2022 Revenues: Product revenue, net $ 7,399 $ 3,516 $ 19,720 $ 7,430 Milestone revenue — — — 2,500 Total revenue 7,399 3,516 19,720 9,930 Operating expenses: Cost of sales $ 633 $ 517 $ 2,295 $ 1,291 Research and development 81,841 64,966 218,037 209,612 Selling, general and administrative 25,822 29,123 84,598 88,902 Total operating expenses 108,296 94,606 304,930 299,805 Loss from operations ( 100,897 ) ( 91,090 ) ( 285,210 ) ( 289,875 ) Royalty income from gain on sale of oncology business — 4,443 — 9,851 Interest income, net 8,375 3,818 24,720 6,305 Other income, net 1,198 1,082 4,342 5,392 Net loss $ ( 91,324 ) $ ( 81,747 ) $ ( 256,148 ) $ ( 268,327 ) Net loss per share - basic and diluted $ ( 1.64 ) $ ( 1.49 ) $ ( 4.61 ) $ ( 4.90 ) Weighted-average number of common shares used in computing net loss per share – basic and diluted 55,803,663 54,844,579 55,559,766 54,734,301 See accompanying Notes to Condensed Consolidated Financial Statements. 2 Table of Contents AGIOS PHARMACEUTICALS, INC. Condensed Consolidated Statements of Comprehensive Loss (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2023 2022 2023 2022 Net loss $ ( 91,324 ) $ ( 81,747 ) $ ( 256,148 ) $ ( 268,327 ) Other comprehensive income (loss) Unrealized gain (loss) on available-for-sale securities 2,974 ( 4,581 ) 6,639 ( 13,885 ) Comprehensive loss $ ( 88,350 ) $ ( 86,328 ) $ ( 249,509 ) $ ( 282,212 ) See accompanying Notes to Condensed Consolidated Financial Statements. 3 Table of Contents AGIOS PHARMACEUTICALS, INC. Condensed Consolidated Statements of Stockholders' Equity (Unaudited) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Accumulated Deficit Treasury Stock Total Stockholders’ Equity (in thousands, except share amounts) Shares Amount Shares Amount Balance at December 31, 2022 71,256,118 $ 71 $ 2,386,325 $ ( 12,535 ) $ ( 470,561 ) ( 16,216,411 ) $ ( 802,486 ) $ 1,100,814 Unrealized gain on available-for-sale securities — — — 4,124 — — — 4,124 Common stock issued under stock incentive plan and ESPP 501,660 1 2,466 — — — — 2,467 Stock-based compensation expense — — 10,139 — — — — 10,139 Net loss — — — — ( 81,018 ) — — ( 81,018 ) Balance at March 31, 2023 71,757,778 $ 72 $ 2,398,930 $ ( 8,411 ) $ ( 551,579 ) ( 16,216,411 ) $ ( 802,486 ) $ 1,036,526 Unrealized loss on available-for-sale securities — — — ( 459 ) — — — ( 459 ) Common stock issued under stock incentive plan and ESPP 193,408 — 238 — — — — 238 Stock-based compensation expense — — 11,737 — — — — 11,737 Net loss — — — — ( 83,806 ) — — ( 83,806 ) Balance at June 30, 2023 71,951,186 $ 72 $ 2,410,905 $ ( 8,870 ) $ ( 635,385 ) ( 16,216,411 ) $ ( 802,486 ) $ 964,236 Unrealized gain on available-for-sale securities — — — 2,974 — — — 2,974 Common stock issued under stock incentive plan and ESPP 149,198 — 1,881 — — — — 1,881 Stock-based compensation expense — — 9,076 — — — — 9,076 Net loss — — — — ( 91,324 ) — — ( 91,324 ) Balance at September 30, 2023 72,100,384 72 2,421,862 ( 5,896 ) ( 726,709 ) ( 16,216,411 ) ( 802,486 ) 886,843 4 Table of Contents Common Stock Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Accumulated Deficit Treasury Stock Total Stockholders’ Equity (in thousands, except share amounts) Shares Amount Shares Amount Balance at December 31, 2021 70,550,631 $ 71 $ 2,334,348 $ ( 1,198 ) $ ( 238,760 ) ( 16,216,411 ) $ ( 802,486 ) $ 1,291,975 Unrealized loss on available-for-sale securities — — — ( 6,547 ) — — — ( 6,547 ) Common stock issued under stock incentive plan and ESPP 442,646 — 1,289 — — — — 1,289 Stock-based compensation expense — — 15,510 — — — — 15,510 Net loss — — — — ( 94,774 ) — — ( 94,774 ) Balance at March 31, 2022 70,993,277 $ 71 $ 2,351,147 $ ( 7,745 ) $ ( 333,534 ) ( 16,216,411 ) $ ( 802,486 ) $ 1,207,453 Unrealized loss on available-for-sale securities — — — ( 2,757 ) — — — ( 2,757 ) Common stock issued under stock incentive plan and ESPP 38,515 — 15 — — — 15 Stock-based compensation expense — — 11,165 — — — — 11,165 Net loss — — — — ( 91,806 ) — — ( 91,806 ) Balance at June 30, 2022 71,031,792 $ 71 $ 2,362,327 $ ( 10,502 ) $ ( 425,340 ) ( 16,216,411 ) $ ( 802,486 ) $ 1,124,070 Unrealized loss on available-for-sale securities — — — ( 4,581 ) — — — ( 4,581 ) Common stock issued under stock incentive plan and ESPP 78,650 — 1,272 — — — — 1,272 Stock-based compensation expense — — 11,156 — — — — 11,156 Net loss — — — — ( 81,747 ) — ( 81,747 ) Balance at September 30, 2022 71,110,442 $ 71 $ 2,374,755 $ ( 15,083 ) $ ( 507,087 ) ( 16,216,411 ) $ ( 802,486 ) $ 1,050,170 See accompanying Notes to Condensed Consolidated Financial Statements. 5 Table of Contents AGIOS PHARMACEUTICALS, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, (In thousands) 2023 2022 Operating activities Net loss $ ( 256,148 ) $ ( 268,327 ) Adjustments to reconcile net loss from operations to net cash used in operating activities: Depreciation and amortization 5,220 6,750 Stock-based compensation expense 30,952 37,831 Net (accretion of discount) amortization of premium on marketable securities ( 4,658 ) 721 Loss on disposal of property and equipment 278 29 Non-cash operating lease expense 7,967 7,432 Expense associated with license agreement 17,500 — Realized gain on investments ( 28 ) — Changes in operating assets and liabilities: Accounts receivable, net 1,030 ( 1,818 ) Inventory ( 8,782 ) ( 5,176 ) Other receivables — 604 Prepaid expenses and other current and non-current assets 440 ( 7,655 ) Accounts payable ( 5,201 ) ( 4,628 ) Accrued expenses and other current liabilities 140 ( 2,211 ) Operating lease liabilities ( 10,161 ) ( 7,646 ) Other non-current liabilities ( 2,123 ) 779 Net cash used in operating activities ( 223,574 ) ( 243,315 ) Investing activities Purchases of marketable securities ( 327,490 ) ( 782,218 ) Proceeds from maturities and sales of marketable securities 488,492 947,296 Payments associated with license agreement ( 17,500 ) — Purchases of property and equipment ( 765 ) ( 4,768 ) Proceeds from sale of equipment 1,325 — Net cash provided by investing activities 144,062 160,310 Financing activities Payments on financing lease obligations — ( 248 ) Net proceeds from stock option exercises and employee stock purchase plan 4,586 2,576 Net cash provided by financing activities 4,586 2,328 Net change in cash and cash equivalents ( 74,926 ) ( 80,677 ) Cash and cash equivalents at beginning of the period 139,259 203,126 Cash and cash equivalents at end of the period $ 64,333 $ 122,449 Supplemental disclosure of non-cash investing and financing transactions Additions to property and equipment in accounts payable and accrued expenses $ 14 $ 21 Net cash taxes paid $ 1,586 $ 1,940 See accompanying Notes to Condensed Consolidated Financial Statements. 6 Table of Contents AGIOS PHARMACEUTICALS, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Overview and Basis of Presentation References to Agios Throughout this Quarterly Report on Form 10-Q, “we,” “us,” and “our,” and similar expressions, except where the context requires otherwise, refer to Agios Pharmaceuticals, Inc. and its consolidated subsidiaries, and “our Board of Directors” refers to the board of directors of Agios Pharmaceuticals, Inc. Overview We are a biopharmaceutical company committed to transforming patients’ lives through leadership in the field of cellular metabolism, with the goal of creating differentiated medicines for rare diseases. 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. 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. 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 rare diseases. We are located in Cambridge, Massachusetts. 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 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, 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. Also, in July 2023 we entered into a license agreement with Alnylam Pharmaceuticals, Inc., or Alnylam, for the development and commercialization of products containing or comprised of an siRNA development candidate discovered by Alnylam and targeting the transmembrane serine protease 6, or TMPRSS6, gene, and we intend to pursue development of a licensed product for the potential treatment of patients with polycythemia vera, or PV, a rare blood disorder. See below for more information on the license agreement with Alnylam. We are subject to risks common to companies in our industry including, but not limited to, uncertainties relating to conducting preclinical and clinical research and development, the manufacture and supply of products for clinical and commercial use, obtaining and maintaining regulatory approvals and pricing and reimbursement for our products, market acceptance, managing global growth and operating expenses, availability of additional capital, competition, obtaining and enforcing patents, stock price volatility, dependence on collaborative relationships and third-party service providers, dependence on key personnel, potential litigation, potential product liability claims and potential government investigations. Sale of our Oncology Business to Servier On March 31, 2021, we completed the sale of our oncology business to Servier Pharmaceuticals, LLC, or Servier, 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 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 7 Table of Contents IDHIFA® and the right to receive a $ 25.0 million potential milestone payment under our prior collaboration agreement with Celgene Corporation, Servier is responsible for conducting certain clinical development activities within the IDHIFA® development program. We recorded income from royalties of approximately $ 4.4 million and $ 9.9 million on U.S. net sales of TIBSOVO® by Servier in the royalty income from gain on sale of oncology business line item within the condensed consolidated statements of operations, for the three and nine months ended September 30, 2022, respectively. 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. Alnylam License Agreement On July 28, 2023, Agios and Alnylam Pharmaceuticals, Inc., or Alnylam, entered into a license agreement under which Agios acquired the rights to develop and commercialize Alnylam’s novel preclinical siRNA targeting TMPRSS6, as a potential disease-modifying treatment for patients with PV. Because the acquired assets do not meet the definition of a business in accordance with ASC 805, Business Combinations, Agios will account for the agreement as an asset acquisition. In accordance with the agreement, in the three months ended September 30, 2023, Agios made an up-front payment to Alnylam and recognized in-process research and development of $ 17.5 million which was recorded in research and development expense within our Consolidated Statements of Operations and classified as investing activities within our Consolidated Statements of Cash Flows. Agios will also pay Alnylam for certain expenses associated with the development of TMPRSS6 and these will be recorded in our Consolidated Statements of Operations as incurred. Additionally, Agios is responsible to pay up to $ 130.0 million in potential development and regulatory milestones, in addition to sales milestones as well as tiered royalties on annual net sales, if any, of licensed products, which may be subject to specified reductions and offsets. Basis of Presentation The condensed consolidated balance sheet as of September 30, 2023, the condensed consolidated statements of operations, comprehensive loss and stockholders' equity for the three and nine months ended September 30, 2023 and 2022, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022 are unaudited. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of our management, reflect all adjustments, which include only normal recurring adjustments, necessary to fairly state our financial position as of September 30, 2023, our results of operations and stockholders' equity for the three and nine months ended September 30, 2023 and 2022, and cash flows for the nine months ended September 30, 2023 and 2022. The financial data and the other financial information disclosed in these notes to the condensed consolidated financial statements related to the three and nine-month periods are also unaudited. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other future annual or interim period. The condensed consolidated balance sheet data as of December 31, 2022 was derived from our audited financial statements, but does not include all disclosures required by U.S. generally accepted accounting principles, or U.S. GAAP. The condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022 that was filed with the Securities and Exchange Commission, or SEC, on February 23, 2023. Our condensed consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared in conformity with U.S. GAAP. Use of Estimates The preparation of our condensed consolidated financial statements requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments and methodologies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses. The full extent to which the recent COVID-19 pandemic, or other pandemics or public health emergencies, may in the future directly or indirectly impact our business, results of operations and financial condition, including expenses, reserves and allowances, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are 8 Table of Contents highly uncertain. We have made estimates of the impact of the recent COVID-19 pandemic within our financial statements and there may be changes to those estimates in future periods. Actual results may differ from these estimates. Liquidity As of September 30, 2023, we had cash, cash equivalents and marketable securities of $ 872.4 million. Although we have incurred recurring losses and expect to continue to incur losses for the foreseeable future, we expect our cash, cash equivalents and marketable securities will be sufficient to fund current operations for at least the next twelve months from the issuance date of these financial statements. 2. Summary of Significant Accounting Policies There have been no material changes to the significant accounting policies previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022. Recent Accounting Pronouncements Accounting standards that have been issued by the Financial Accounting Standards Board or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption. 3. Fair Value Measurements We record cash equivalents and marketable securities at fair value. Accounting Standards Codification, or ASC, 820, Fair Value Measurements and Disclosures , establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs). The hierarchy consists of three levels: Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 – Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, directly or indirectly, for substantially the full term of the asset or liability. Level 3 – Unobservable inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. The following table summarizes our cash equivalents and marketable securities measured at fair value and by level on a recurring basis as of September 30, 2023: (In thousands) Level 1 Level 2 Level 3 Total Cash equivalents $ 5,187 $ — $ — $ 5,187 Total cash equivalents 5,187 — — 5,187 Marketable securities: U.S. Treasuries — 32,973 — 32,973 Government securities — 363,542 — 363,542 Corporate debt securities — 411,542 — 411,542 Total marketable securities — 808,057 — 808,057 Total cash equivalents and marketable securities $ 5,187 $ 808,057 $ — $ 813,244 Cash equivalents and marketable securities have been initially valued at the transaction price and are subsequently valued, at the end of each reporting period, utilizing third-party pricing services or other observable market data. The pricing services utilize industry standard valuation models, including both income and market-based approaches, and observable market inputs to determine value. After completing our validation procedures, we did not adjust or override any fair value measurements provided by the pricing services as of September 30, 2023. There have been no changes to the valuation methods during the nine months ended September 30, 2023, and we had no financial assets or liabilities that were classified as Level 3 at any point during the nine months ended September 30, 2023. 4. Marketable Securities Our marketable securities are classified as available-for-sale pursuant to ASC 320, Investments – Debt and Equity Securities , and are recorded at fair value. Unrealized gains and losses are included as a component of accumulated other comprehensive loss in the condensed consolidated balance sheets and statements of stockholders’ equity and a component of total 9 Table of Contents comprehensive loss in the condensed consolidated statements of comprehensive loss, until realized. Unrealized losses are evaluated for impairment under ASC 326, Financial Instruments - Credit Losses , to determine if the impairment is credit-related or noncredit-related. Credit-related impairment is recognized as an allowance on the condensed consolidated balance sheets with a corresponding adjustment to earnings, and noncredit-related impairment is recognized in other comprehensive income, net of taxes. Realized gains and losses are included in investment income on a specific-identification basis. There were no material realized gains or losses on marketable securities for the three and nine months ended September 30, 2023 or 2022. Marketable securities at September 30, 2023 consisted of the following: (In thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value Current: U.S. Treasuries $ 33,214 $ — $ ( 241 ) $ 32,973 Government securities 293,501 — ( 2,136 ) 291,365 Corporate debt securities 260,658 — ( 1,841 ) 258,817 Total Current 587,373 — ( 4,218 ) 583,155 Non-current: U.S. Treasuries — — — — Government securities 72,630 — ( 453 ) 72,177 Corporate debt securities 153,950 — ( 1,225 ) 152,725 Total Non-current 226,580 — ( 1,678 ) 224,902 Total marketable securities $ 813,953 $ — $ ( 5,896 ) $ 808,057 Marketable securities at December 31, 2022 consisted of the following: (In thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value Current: U.S. Treasuries $ 68,175 $ 3 $ ( 811 ) $ 67,367 Government securities 220,901 8 ( 5,289 ) 215,620 Corporate debt securities 363,263 1 ( 2,391 ) 360,873 Total Current 652,339 12 ( 8,491 ) 643,860 Non-current: U.S. Treasuries 17,418 4 ( 193 ) 17,229 Government securities 117,475 7 ( 1,659 ) 115,823 Corporate debt securities 183,037 76 ( 2,291 ) 180,822 Total Non-current 317,930 87 ( 4,143 ) 313,874 Total marketable securities $ 970,269 $ 99 $ ( 12,634 ) $ 957,734 As of September 30, 2023 and December 31, 2022, we held both current and non-current investments. Investments classified as current have maturities of less than one year. Investments classified as non-current are those that: (i) have a maturity of greater than one year, and (ii) we do not intend to liquidate within the next twelve months, although these funds are available for use and, therefore, are classified as available-for-sale. As of September 30, 2023 and December 31, 2022, we held 233 and 259 debt securities, respectively, that were in an unrealized loss position for less than one year. We did no t record an allowance for credit losses as of September 30, 2023 and December 31, 2022 related to these securities. The aggregate fair value of debt securities in an unrealized loss position at September 30, 2023 and December 31, 2022 was $ 808.1 million and $ 868.2 million, respectively. There were no individual securities that were in a significant unrealized loss position as of September 30, 2023 and December 31, 2022. We regularly review the securities in an unrealized loss position and evaluate the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions. We do not consider these marketable securities to be impaired as of September 30, 2023 and December 31, 2022. 10 Table of Contents 5. Inventory Inventory, which consists of commercial supply of PYRUKYND®, consisted of the following: (In thousands) September 30, 2023 December 31, 2022 Raw materials $ 470 $ — Work-in-process 15,743 7,550 Finished goods 1,061 942 Total inventory $ 17,274 $ 8,492 6. Leases Our building leases are comprised of office and laboratory space under non-cancelable operating leases. These lease agreements have remaining lease terms of approximately four years and contain various clauses for renewal at our option. The renewal options were not included in the calculation of the operating lease assets and the operating lease liabilities as the renewal options are not reasonably certain of being exercised. The lease agreements do not contain residual value guarantees. The components of lease expense and other information related to leases were as follows: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2023 2022 2023 2022 Operating lease costs $ 3,807 $ 3,807 $ 11,420 $ 11,420 Cash paid for amounts included in the measurement of operating lease liabilities $ 4,550 $ 4,420 $ 13,614 $ 12,610 We have not entered into any material short-term leases or financing leases as of September 30, 2023. In arriving at the operating lease liabilities as of September 30, 2023 and December 31, 2022, we applied the weighted-average incremental borrowing rate of 5.7 % for both periods over a weighted-average remaining lease term of 4.4 and 5.2 years, respectively. As of September 30, 2023, undiscounted minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter were as follows: (In thousands) Remaining 2023 $ 3,037 2024 18,660 2025 19,507 2026 20,151 2027 20,755 2028 3,479 Thereafter — Undiscounted minimum rental commitments $ 85,589 Interest ( 10,091 ) Operating lease liabilities $ 75,498 We provided our landlord a security deposit of $ 2.9 million as security for our leases, which is included within other non-current assets on our condensed consolidated balance sheet. In August 2021, we entered into a long-term sublease agreement for 13,000 square feet of the office space at 38 Sidney Street, Cambridge, Massachusetts, with the term of the lease running through December 2024. In April 2022, we entered into a long-term sublease agreement for 27,000 square feet of the office space at 64 Sidney Street, Cambridge, Massachusetts, with the term of the lease running through April 2025. In May 2023, we entered into a long-term sublease agreement for 7,407 square feet of office space on the first floor of 64 Sidney Street, Cambridge, Massachusetts, with the term of the lease running through April 2025. We recorded operating sublease income of $ 1.7 million and $ 1.0 million for the three months ended September 30, 2023 and 2022, respectively, and $ 4.5 million and $ 2.7 million for the nine months ended September 30, 2023 and 2022, 11 Table of Contents respectively, in other income, net in the condensed consolidated statements of operations. We received security deposits from our sublessees of approximately $ 1.2 million which is recorded within other non-current assets on our condensed consolidated balance sheet. As of September 30, 2023, the future minimum lease payments to be received under the long-term sublease agreements were as follows: (In thousands) Remaining 2023 $ 1,247 2024 5,078 2025 1,310 Total $ 7,635 7. Accrued Expenses Accrued expenses consisted of the following: (In thousands) September 30, 2023 December 31, 2022 Accrued compensation $ 14,022 $ 18,105 Accrued research and development costs 12,528 8,425 Accrued professional fees 1,369 2,435 Accrued other 2,571 1,385 Total accrued expenses $ 30,490 $ 30,350 8. Product Revenue We sell PYRUKYND®, our wholly owned product, to a limited number of specialty distributors and specialty pharmacy providers, or collectively, the Customers. The 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®. The performance obligation related to the sale of PYRUKYND® is satisfied and revenue is recognized when the Customer obtains control of the product, which occurs at a point in time, typically upon delivery to the Customer. Product revenue, net, were as follows: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2023 2022 2023 2022 Product revenue, net $ 7,399 $ 3,516 $ 19,720 $ 7,430 Reserves for Variable Consideration Revenues from product sales are recorded at the net sales price, or transaction price, which includes estimates of variable consideration for which reserves are established and result from contractual adjustments, government rebates, returns and other allowances that are offered within the contracts with our Customers, healthcare providers, payors and other indirect customers relating to the sale of our products. Contractual Adjustments We generally provide Customers with discounts, including prompt pay discounts, and allowances that are explicitly stated in the contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, we receive sales order management, data and distribution services from certain Customers. Chargebacks and discounts represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from us. Customers charge us for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These reserves are estimated using the expected value method, based upon a range of possible outcomes that are probability-weighted for the estimated channel mix and are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue. 12 Table of Contents Government Rebates Government rebates include Medicare, TriCare, and Medicaid rebates, which we estimate using the expected value method, based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue. For Medicare, we also estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program. Returns / Replacement We estimate the amount of product sales that may be returned by Customers or replaced by Agios and record this estimate as a reduction of revenue in the period the related product revenue is recognized. We currently estimate product return and replacement liabilities using the expected value method, based on available industry data, including our visibility into the inventory remaining in the distribution channel. The following table summarizes balances and activity in each of the product revenue allowance and reserve categories for the nine months ended September 30, 2023: (In thousands) Contractual Adjustments Government Rebates Returns/ Replacement Total Balance at December 31, 2022 $ 65 $ 573 $ 133 $ 771 Current provisions relating to sales in the current year 919 1,631 2,147 4,697 Adjustments relating to prior years — ( 7 ) — ( 7 ) Payments/returns relating to sales in the current year ( 793 ) ( 495 ) ( 1,958 ) ( 3,246 ) Payments/returns relating to sales in the prior years ( 49 ) ( 306 ) ( 48 ) ( 403 ) Balance at September 30, 2023 $ 142 $ 1,396 $ 274 $ 1,812 Total revenue-related reserves above, included in our condensed consolidated balance sheets, are summarized as follows: (In thousands) September 30, 2023 December 31, 2022 Reduction of accounts receivable $ 137 $ 60 Component of accrued expenses 1,675 711 Total revenue-related reserves $ 1,812 $ 771 The following table presents changes in our contract assets during the nine months ended September 30, 2023: (In thousands) December 31, 2022 Additions Deductions September 30, 2023 Contract assets (1) Accounts receivable, net $ 2,206 $ 24,411 $ ( 25,441 ) $ 1,176 (1) Additions to contract assets relate to amounts billed to Customers for product sales and deductions to contract assets primarily relate to collection of receivables during the reporting period. 9. Share-Based Payments 2023 Stock Incentive Plan and Inducement Grants In June 2023, our stockholders approved the 2023 Stock Incentive Plan, or the 2023 Plan. The 2023 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units, or RSUs, performance-based share units, or PSUs, and other stock-based awards to employees, advisors, consultants and non-employee directors. Following the adoption of the 2023 Plan, we ceased granting equity awards under the 2013 Stock Incentive Plan, or the 2013 Plan. Any outstanding equity awards that were previously granted under the 2013 Plan continue to be governed by their terms. Following adoption of the 2013 Plan, we ceased granting equity awards under the 2007 Stock Incentive Plan, or the 2007 Plan. There are no outstanding equity awards under the 2007 Plan. In connection with the start of employment of our Chief Executive Officer and Chief Financial Officer in 2022, and our Chief Commercial Officer in 2023, our board of directors granted each of them equity awards in the form of stock options, RSUs and 13 Table of Contents PSUs, which awards were made outside our equity incentive plans as inducements material to their respective entry into employment with us in accordance with Nasdaq Listing Rule 5635(c)(4). As of September 30, 2023, the maximum number of shares reserved under the 2007 Plan, the 2013 Plan, the 2023 Plan and the inducement grants described above was 12,065,656 , and we had 4,762,423 shares available for future issuance under the 2023 Plan. Stock options The following table presents stock option activity for the nine months ended September 30, 2023: Number of Stock Options Weighted-Average Exercise Price Outstanding at December 31, 2022 5,772,564 $ 48.81 Granted 870,924 25.88 Exercised ( 188,591 ) 11.52 Forfeited/Expired ( 912,479 ) 55.49 Outstanding at September 30, 2023 5,542,418 $ 45.37 Exercisable at September 30, 2023 3,485,110 $ 54.14 Vested and expected to vest at September 30, 2023 5,542,418 $ 45.37 At September 30, 2023, there was approximately $ 31.9 million of total unrecognized compensation expense related to unvested stock option awards, which we expect to recognize over a weighted-average period of approximately 2.55 years. Restricted stock units The following table presents RSU activity for the nine months ended September 30, 2023: Number of Stock Units Weighted-Average Grant Date Fair Value Unvested shares at December 31, 2022 1,117,921 $ 38.30 Granted 899,072 25.97 Vested ( 450,586 ) 41.42 Forfeited ( 210,420 ) 33.46 Unvested shares at September 30, 2023 1,355,987 $ 29.84 As of September 30, 2023, there was approximately $ 27.5 million of total unrecognized compensation expense related to RSUs, which we expect to recognize over a weighted-average period of approximately 1.87 years. Performance-based stock units The following table presents PSU activity for the nine months ended September 30, 2023: Number of Stock Units Weighted-Average Grant Date Fair Value Unvested shares at December 31, 2022 430,243 $ 35.87 Granted 125,897 25.23 Vested ( 92,257 ) 30.18 Forfeited ( 101,750 ) 46.39 Unvested shares at September 30, 2023 362,133 $ 30.66 Stock-based compensation expense associated with these PSUs is recognized if the underlying performance condition is considered probable of achievement using our management’s best estimates. As of September 30, 2023, there was no unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered probable of achievement, and $ 11.1 million of total unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered not probable of achievement. 14 Table of Contents Market-based stock units The following table presents market-based stock unit, or MSU, activity for the nine months ended September 30, 2023: Number of Stock Units Weighted-Average Grant Date Fair Value Unvested shares at December 31, 2022 42,695 $ 41.50 Granted — — Unvested shares at September 30, 2023 42,695 $ 41.50 The fair value of MSUs are estimated using a Monte Carlo simulation model. Assumptions and estimates utilized in the model include the risk-free interest rate, dividend yield, expected stock volatility and the estimated period to achievement of the market condition. As of September 30, 2023, there was no remaining unrecognized compensation expense related to MSUs. 2013 Employee Stock Purchase Plan In June 2013, our Board of Directors adopted, and in July 2013 our stockholders approved, the 2013 Employee Stock Purchase Plan, or the 2013 ESPP. We issued and sold 112,832 and 104,867 shares of common stock during the nine months ended September 30, 2023 and 2022, respectively, under the 2013 ESPP. The 2013 ESPP provides participating employees with the opportunity to purchase up to an aggregate of 2,363,636 shares of our common stock. As of September 30, 2023, we had 1,686,039 shares of common stock available for future issuance under the 2013 ESPP. Stock-based compensation expense Stock-based compensation expense by award type included within the condensed consolidated statements of operations is as follows: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2023 2022 2023 2022 Stock options $ 4,171 $ 5,864 $ 13,065 $ 17,720 Restricted stock units 4,735 5,115 14,436 16,512 Performance-based stock units — — 2,784 2,919 Employee stock purchase plan 170 177 667 680 Total stock-based compensation expense $ 9,076 $ 11,156 $ 30,952 $ 37,831 Expenses related to stock options and stock-based awards were allocated as follows in the condensed consolidated statements of operations: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2023 2022 2023 2022 Research and development expense $ 3,635 $ 4,628 $ 12,530 $ 16,207 Selling, general and administrative expense 5,441 6,528 18,422 21,624 Total stock-based compensation expense $ 9,076 $ 11,156 $ 30,952 $ 37,831 10. Loss per Share Basic net loss per share is calculated by dividing net loss by the weighted-average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting the weighted-average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury stock method. For purposes of the dilutive net loss per share calculation, stock options, RSUs, PSUs and MSUs for which the performance and market vesting conditions, respectively, have been deemed probable, and 2013 ESPP shares are considered to be common stock equivalents, while PSUs and MSUs with performance and market vesting conditions, respectively, that were not deemed probable as of September 30, 2023 are not considered to be common stock equivalents. We utilize the control number concept in the computation of diluted earnings per share to determine whether potential common stock equivalents are dilutive. The control number used is net loss from continuing operations. The control number concept requires that the same number of potentially dilutive securities applied in computing diluted earnings per share from continuing operations be applied to all other categories of income or loss, regardless of their anti-dilutive effect on such categories. Since 15 Table of Contents we had a net loss for all periods presented, no dilutive effect has been recognized in the calculation of loss per share. Basic and diluted net loss per share was the same for all periods presented. The following common stock equivalents were excluded from the calculation of diluted net loss per share applicable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect: Three and Nine Months Ended September 30, 2023 2022 Stock options 5,542,418 5,909,087 Restricted stock units 1,355,987 1,264,377 Employee stock purchase plan shares 11,383 10,503 Total common stock equivalents 6,909,788 7,183,967 16 Table of Contents