AGIOS PHARMACEUTICALS, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-looking Information The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements as of September 30, 2023 and for the three and nine months ended September 30, 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, and the sufficiency of our cash for future operations. 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. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by our forward-looking statements are those discussed under the heading “Risk Factors” in Part II, Item 1A and elsewhere in this report, and in our Annual Report on Form 10-K for the year ended December 31, 2022. We undertake no obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law. Overview We are a biopharmaceutical company committed to transforming patients’ lives through leadership in the field of cellular metabolism, with the goal of creating differentiated 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. 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. 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 17 Table of Contents 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, Servier is responsible for conducting certain clinical development activities within the IDHIFA® development program. 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. Financial Operations Overview Impact of COVID-19 on our Business As of September 30, 2023, we have not experienced a significant financial or supply chain impact directly related to the recent 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 ended on May 11, 2023, the extent of the effect of any future pandemics or public health emergencies on our operational and financial performance will depend in large part on future developments, which cannot be predicted and are out of our control. General Since inception, our operations have primarily focused on organizing and staffing our company, business planning, raising capital, assembling our core capabilities in cellular metabolism, identifying potential product candidates, undertaking preclinical studies, conducting clinical trials, establishing a commercial infrastructure, preparing for and executing on the commercial launch of PYRUKYND® and, prior to the sale of our oncology business to Servier on March 31, 2021, marketing TIBSOVO® and IDHIFA®. Through March 31, 2021, we 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 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 nine months ended September 30, 2023 and 2022 were $256.1 million and $268.3 million, respectively. As of September 30, 2023, we had an accumulated deficit of $726.7 million. We expect to incur significant expenses and net losses until such time we are able to report profitable results. Our net losses may fluctuate significantly from year to year. We expect that we will continue to incur significant expenses as we continue to advance and expand clinical development activities for our lead programs: PYRUKYND®, and 18 Table of Contents AG-946; continue to prioritize advancement of our PAH stabilizer; initiate development of a licensed siRNA development candidate pursuant to our license agreement with Alnylam; expand and protect our intellectual property portfolio, including by in-licensing or acquiring assets for pipeline growth; and hire additional commercial and development personnel. Revenues Our wholly owned product, PYRUKYND®, received approval from the FDA on February 17, 2022, for the treatment of hemolytic anemia in adults with PK deficiency in the United States. Upon FDA approval of PYRUKYND® in the United States, we began generating product revenue from sales of PYRUKYND®. We sell PYRUKYND® to a limited number of specialty distributors and specialty pharmacy providers, or collectively, the Customers. These Customers subsequently resell PYRUKYND® to pharmacies or dispense directly to patients. In addition to distribution agreements with Customers, we enter into arrangements with healthcare providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of PYRUKYND®. For further discussion of our revenue recognition policy, see Note 8, Product Revenue , to the condensed consolidated financial statements in this Form 10-Q. In the future, we expect to continue to generate revenue from a combination of product sales, royalties on product sales, cost reimbursements, milestone payments, and upfront payments to the extent we enter into future collaborations or licensing agreements. Cost of Sales Cost of sales consists primarily of manufacturing costs for sales of PYRUKYND®. Based on our policy to expense costs associated with the manufacturing of our products prior to regulatory approval, certain of the manufacturing costs associated with product shipments of PYRUKYND® recorded during the three and nine months ended September 30, 2023 and 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, 2023 and 2022. Research and development expenses Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs related to our portfolio to increase significantly for the foreseeable future as our product candidate development programs progress. However, the successful development of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development and to commercialize these product candidates. We are unable to predict the amount of net cash inflows from PYRUKYND® or any of our product candidates. This is due to the numerous risks and uncertainties associated with developing medicines, including the uncertainty of: • establishing an appropriate safety profile with an investigational new drug application, or IND, and/or NDA-enabling toxicology and clinical trials; • the successful enrollment in, and completion of, clinical trials; • the receipt of marketing approvals from applicable regulatory authorities; • establishing compliant commercial manufacturing capabilities or making arrangements with third-party manufacturers; • obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; • launching commercial sales of the products, if and when approved, whether alone or in collaboration with others; and • maintaining an acceptable safety profile of the products following approval. A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that product candidate. Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include: • employee-related expenses, including salaries, benefits and stock-based compensation expense; • expenses incurred under agreements with third parties, including CROs, that conduct research and development and both preclinical and clinical activities on our behalf, and the cost of consultants; • the cost of lab supplies and acquiring, developing and manufacturing preclinical and clinical study materials; and 19 Table of Contents • facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and the maintenance of facilities, insurance and other operating costs. The following summarizes our most advanced programs: PYRUKYND® (mitapivat): First-in-Class PK Activator We are developing PYRUKYND® for the treatment of PK deficiency and other hemolytic anemias such as thalassemia and SCD. PYRUKYND® is an orally available small molecule and a potent activator of the wild-type and mutated PK enzymes. In February 2022, the FDA approved PYRUKYND® for the treatment of hemolytic anemia in adults with PK deficiency in the United States. In 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 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. In connection with our regulatory approvals in the EU and Great Britain, we are currently providing access to PYRUKYND® free of charge for eligible patients in those jurisdictions through a global managed access program. We may provide access to PYRUKYND® for adult patients with PK deficiency in other jurisdictions upon request through the global managed access program, on either a free of charge or for charge basis. Beyond the global managed access program, we continue to evaluate options for the commercialization of PYRUKYND® outside of the United States, including through exploring potential partnership opportunities. We are evaluating PYRUKYND® in the following clinical trials: • ENERGIZE, a phase 3, double-blind, randomized, placebo-controlled multicenter study evaluating the efficacy and safety of PYRUKYND® as a potential treatment for adults with non-transfusion-dependent α- or β-thalassemia, defined as ≤5 red blood cell, or RBC, units during the 24-week period before randomization and no RBC transfusions ≤8 weeks before providing informed consent or during the screening period. The primary endpoint of the trial is percentage of patients with hemoglobin response, defined as a ≥1.0 g/dL increase in average hemoglobin concentration from Week 12 through Week 24 compared with baseline. Secondary endpoints include markers of hemolysis and ineffective erythropoiesis, as well as patient-reported outcome measures. This trial has completed enrollment and we expect to announce topline data from this trial in the first half of 2024. • ENERGIZE-T, a phase 3, double-blind, randomized, placebo-controlled multicenter study evaluating the efficacy and safety of PYRUKYND® as a potential treatment for adults with transfusion-dependent α- or β-thalassemia, defined as 6 to 20 RBC units transfused and ≤6-week transfusion-free period during the 24-week period before randomization. The primary endpoint of the trial is percentage of patients with transfusion reduction response, defined as a ≥50% reduction in transfused RBC units with a reduction of ≥2 units of transfused RBCs in any consecutive 12-week period through Week 48 compared with baseline. Secondary endpoints include additional transfusion reduction measures and percentage of participants with transfusion-independence. This trial has completed enrollment and we expect to announce topline data from this trial in the second half of 2024. • 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. In June 2023, we announced the phase 2 portion of this trial had achieved its primary endpoint of hemoglobin response in patients in both 50 mg and 100 mg twice daily mitapivat arms. 46.2% of patients (n=12) in the 50 mg twice daily mitapivat arm and 50.0% of patients (n=13) in the 100 mg twice daily mitapivat arm achieved a hemoglobin response, compared to 3.7% of patients (n=1) in the placebo arm (2-sided p=0.0003 and 0.0001, respectively). The safety profile for mitapivat observed in the phase 2 portion of the study was generally consistent with previously reported data in other studies of sickle cell disease and other hemolytic anemias, and there were no adverse events leading to discontinuation in either the mitapivat or the placebo arms. In October 2023, we enrolled the first patient in the phase 3 portion of this trial. 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 (100 mg twice daily) PYRUKYND® dose level or placebo. The primary endpoints are hemoglobin response, defined as ≥1 g/dL increase in average hemoglobin from baseline to Week 52, and annualized rate of sickle cell pain crises. Participants who complete either the phase 2 or phase 3 portion will have the option to move into a 216-week open-label extension period to continue to receive PYRUKYND®. 20 Table of Contents • 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 patients between one and 18 years old, respectively. The primary endpoint of ACTIVATE-kids is percentage of patients with hemoglobin response, defined as ≥1.5 g/dL increase in hemoglobin concentration from baseline that is sustained at two or more scheduled assessments at weeks 12, 16, and 20 during the double-blind period. The primary endpoint of ACTIVATE-kidsT is transfusion reduction response, defined as ≥33% reduction in total RBC transfusion volume from week 9 through week 32 of the double-blind period. ACTIVATE-kidsT has completed enrollment. ACTIVATE-kids is currently enrolling patients and we have enrolled more than half of the patients in this trial. • An extension study evaluating the long-term safety, tolerability and efficacy of treatment with PYRUKYND® in patients from ACTIVATE and ACTIVATE-T, our completed pivotal trials of PYRUKYND® in not regularly transfused and regularly transfused adult patients with PK deficiency. • An extension study evaluating the long-term safety, tolerability and efficacy of treatment with PYRUKYND® in patients from DRIVE PK, our completed global phase 2, first-in-patient, open-label safety and efficacy clinical trial of PYRUKYND® in adult, not regularly transfused patients with PK deficiency. • An extension study evaluating the safety, tolerability and efficacy of treatment with PYRUKYND® in patients from our completed phase 2, open-label safety and efficacy clinical trial of PYRUKYND® in adults with non-transfusion-dependent α- and β-thalassemia. • In collaboration with the 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 the Company, UMC Utrecht 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 initiated for patients who complete the follow-up period. AG-946: Novel PK Activator We are developing AG-946, a novel PK activator, for the potential treatment of 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. We have presented data from the healthy volunteer cohorts, 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 the trial has completed enrollment. We expect to report the topline results of this trial by the end of 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 the end of 2023. Also, in July 2023, we entered into a license agreement with Alnylam for the development and commercialization of products containing or comprised of an siRNA development candidate discovered by Alnylam and targeting the TMPRSS6 gene, and we intend to pursue development of a licensed product for the potential treatment of patients with PV. 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, information technology 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 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. Critical Accounting Estimates Our critical accounting estimates are those which require the most significant judgments and estimates in the preparation of our condensed consolidated financial statements. We have determined that our most critical accounting estimates are those relating to revenue recognition, accrued research and development expenses and stock-based compensation. As of September 30, 2023, 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. 21 Table of Contents Results of Operations Comparison of the three and nine months ended September 30, 2023 and 2022 Revenues Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 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 Total Revenue - Three Months Ended September 30, 2023 vs. Three Months Ended September 30, 2022 – The increase in total revenue of $3.9 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was due to increased product revenue associated with PYRUKYND®, which was approved by the FDA in February 2022. Total Revenue - Nine Months Ended September 30, 2023 vs. Nine Months Ended September 30, 2022 – The increase in total revenue of $9.8 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was due to increased product revenue associated with PYRUKYND®, which was approved by the FDA in February 2022, partially offset by revenue recognized in the nine months ended September 30, 2022 associated with the licensing of intellectual property for our Friedreich's Ataxia preclinical program. Total Operating Expenses Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2023 2022 2023 2022 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 Total Operating Expenses - Three Months Ended September 30, 2023 vs. Three Months Ended September 30, 2022 – The increase in total operating expenses of $13.7 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was primarily due to a increase in research and development expenses of $16.9 million which is described below under Research and Development Expenses, partially offset by a decrease in selling, general and administrative expenses of $3.3 million, driven by a decrease in stock-based compensation expense and external professional fees. Total Operating Expenses - Nine Months Ended September 30, 2023 vs. Nine Months Ended September 30, 2022 – The increase in total operating expenses of $5.1 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily due to a increase in research and development expenses of $8.4 million which is described below under Research and Development Expenses, partially offset by a decrease of $4.3 million in selling, general and administrative expenses driven by a decrease in stock-based compensation expense. 22 Table of Contents Research and Development Expenses Our research and development expenses, by major program, are outlined in the table below: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2023 2022 2023 2022 PK activator (PYRUKYND®) $ 24,000 $ 20,906 $ 71,491 $ 57,036 Novel PK activator (AG-946) 4,220 2,943 11,817 11,517 In-process research and development 17,500 — 17,500 — Other research and platform programs 1,250 4,945 6,775 20,669 Total direct research and development expenses 46,970 28,794 107,583 89,222 Compensation and related expenses 25,529 25,959 81,483 86,481 Facilities and IT related expenses & other 9,342 10,213 28,971 32,392 Other expenses - transition services — — — 1,517 Total indirect research and development expenses 34,871 36,172 110,454 120,390 Total research and development expense $ 81,841 $ 64,966 $ 218,037 $ 209,612 Total Research and Development Expenses - Three Months Ended September 30, 2023 vs. Three Months Ended September 30, 2022 – The increase in total research and development expenses of $16.9 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was primarily due to an $18.2 million increase in our direct expenses. The increase in direct expenses was primarily due to in-process research and development as a result of the $17.5 million up-front payment associated with the agreement with Alnylam discussed above under Overview and an increase in PYRUKYND® costs due to increased process development and medical affairs expenses. The increase in direct expenses was partially offset by 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. Total Research and Development Expenses - Nine Months Ended September 30, 2023 vs. Nine Months Ended September 30, 2022 – The increase in total research and development expenses of $8.4 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was due to an $18.4 million increase in our direct expenses, partially offset by a $9.9 million decrease in our indirect expenses. The increase in direct expenses was primarily due to in-process research and development as a result of the $17.5 million up-front payment associated with the agreement with Alnylam discussed above under Overview and 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 increased process development and medical affairs expenses, partially offset by 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. The decrease in indirect expenses was due to a $5.0 million decrease in compensation and related expenses as a result of lower stock-based compensation expense and reduced headcount related to the evolution of our research organization, a $3.4 million decrease in facilities and IT related expenses & other due to a reduction in facility expenses associated with the evolution of our research organization, and the $1.5 million of reimbursable transition related services we provided to Servier in the nine months ended September 30, 2022 related to the sale of the oncology business for discovery, clinical development, technical operations, and related activities, which were completed during the three months ended March 31, 2022. Other Income and Expense Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2023 2022 2023 2022 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 Other Income and Expense - Three Months Ended September 30, 2023 vs. Three Months Ended September 30, 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®. Other income, net in the three months ended September 30, 2023 was relatively consistent with the three months ended September 30, 2022. Other Income and Expense - Nine Months Ended September 30, 2023 vs. Nine Months Ended September 30, 2022 – The increase in interest income, net was primarily attributable to an increase in interest rates. The decrease in royalty income from 23 Table of Contents 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 nine months ended September 30, 2022, partially offset by $1.8 million of additional sublease income recognized in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. Net Loss 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) Net Loss - Three Months Ended September 30, 2023 vs. Three Months Ended September 30, 2022 – The increase in net loss for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was primarily driven by the $17.5 million up-front payment associated with the agreement with Alnylam discussed above under Overview and the decrease in royalty income from gain on sale of oncology business discussed above under Other Income and Expense , partially offset by the increase in interest income, net discussed above under Other Income and Expense and the increase in revenue discussed above under Revenues. Net Loss - Nine Months Ended September 30, 2023 vs. Nine Months Ended September 30, 2022 – The decrease in net loss for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily driven by the increase in interest income, net discussed above under Other Income and Expense and the increase in revenue discussed above under Revenues, partially offset by the increase in research and development expenses discussed above under Research and Development Expenses, which includes the $17.5 million up-front payment associated with the agreement with Alnylam discussed above under Overview , and 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 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 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. In addition, we may pursue opportunistic debt offerings, and equity or equity-linked offerings. On March 31, 2021, we completed the sale of our oncology business to Servier. The transaction included the sale of our oncology business, including TIBSOVO®, our clinical-stage product candidates vorasidenib, AG-270 and AG-636, and our oncology research programs for a payment of approximately $1.8 billion in cash at the closing, subject to certain adjustments, and a payment of $200.0 million in cash, if, prior to January 1, 2027, vorasidenib is granted NDA approval from the FDA with an approved label that permits vorasidenib’s use as a single agent for the adjuvant treatment of patients with Grade 2 glioma that have an isocitrate dehydrogenase 1 or 2 mutation (and, to the extent required by such approval, the vorasidenib companion diagnostic test is granted an FDA premarket approval), as well as a royalty of 5% of U.S. net sales of TIBSOVO® from the close of the transaction through loss of exclusivity, and a royalty of 15% of U.S. net sales of vorasidenib from the first commercial sale of vorasidenib through loss of exclusivity. 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 and Basis of Presentation , 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. Our cash, cash equivalents and marketable securities balance was $872.4 million at September 30, 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 24 Table of Contents outside our control. 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 prior to the loss of exclusivity of vorasidenib. Cash flows The following table provides information regarding our cash flows for the nine months ended September 30, 2023 and 2022: Nine Months Ended September 30, (In thousands) 2023 2022 Net cash used in operating activities $ (223,574) $ (243,315) Net cash provided by investing activities 144,062 160,310 Net cash provided by financing activities 4,586 2,328 Net change in cash and cash equivalents $ (74,926) $ (80,677) Net cash used in operating activities. Cash used in operating activities of $223.6 million during the nine months ended September 30, 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 interest income of $23.6 million and product revenues of $22.9 million. Cash used in operating activities of $243.3 million during the nine months ended September 30, 2022 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. Net cash provided by investing activities . Cash provided by investing activities of $144.1 million during the nine months ended September 30, 2023 was primarily due to higher proceeds from maturities and sales of marketable securities than purchases of marketable securities, partially offset by the $17.5 million up-front payment associated with the Alnylam agreement discussed above under Overview . Cash provided by investing activities of $160.3 million during the nine months ended September 30, 2022 was primarily due to higher proceeds from maturities and sales of marketable securities than purchases of marketable securities. Net cash provided by financing activities . Cash provided by financing activities of $4.6 million during the nine months ended September 30, 2023, was the result of net 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 $2.3 million during the nine months ended September 30, 2022 was primarily the result of $2.6 million of proceeds received from stock option exercises and purchases made pursuant to our 2013 ESPP. Funding requirements 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 September 30, 2023, together with anticipated product revenue, interest income and the potential vorasidenib milestone will enable us to fund our operating expenses and capital expenditures through several value-creating milestones and at least into 2026. This guidance does not include cash inflows from potential royalties from vorasidenib, commercializing mitapivat outside of the U.S. through one or more partnerships, or other potential strategic business or financial agreements. Our future capital requirements will depend on many factors, including: • the amount and timing of future revenue received from commercial sales of PYRUKYND® or any of our product candidates for which we may receive marketing approval; • the amount of contingent consideration we ultimately receive from Servier; • the costs and timing of our ongoing commercialization activities, including product manufacturing, sales, marketing and distribution for PYRUKYND® for the treatment of hemolytic anemia in adults with PK deficiency in approved jurisdictions; • 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, including the amount and timing of future milestone and royalty payments potentially payable to Alnylam pursuant to the license agreement; 25 Table of Contents • the costs, timing and outcome of regulatory review of our product candidates; • the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; • the costs and timing of future commercialization activities, including product manufacturing, sales, marketing and distribution, for any of our product candidates for which we may receive marketing approval; • our ability to establish and maintain collaborations on favorable terms, if at all; • our ability to successfully execute on our strategic plans; • operational delays due to public health epidemics, including the recent COVID-19 pandemic; and • operational delays, disruptions and/or increased costs associated with rising global energy prices or energy shortages or rationing. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs primarily through cash on hand, 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, we may pursue opportunistic debt offerings, and equity or equity-linked offerings. We do not have any committed external source of funds other than the potential milestone and royalty payments that we are eligible to receive with respect to vorasidenib under our purchase agreement with Servier. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed or on attractive terms, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Contractual Obligations In July 2023, Agios entered into a license agreement with Alnylam as discussed above under Overview . Under the license agreement, Agios may be required 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.