SEC Filing – Agios Pharmaceuticals, Inc.

View:

Download DOC

Download PDF

Download XLS

Download XBRL

agio-20230331

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-36014

AGIOS PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware									26-0662915
(State or Other Jurisdiction of Incorporation or Organization)									(I.R.S. Employer Identification No.)

88 Sidney Street, Cambridge, Massachusetts									02139
(Address of Principal Executive Offices)									(Zip Code)

(617) 649-8600

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.001 per share	AGIO	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of the registrant’s Common Stock, $0.001 par value, outstanding on April 28, 2023: 55,580,791

Table of Contents

AGIOS PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE THREE MONTHS ENDED MARCH 31, 2023

TABLE OF CONTENTS


		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of March 3 1 , 202 3 and December 31, 20 2 2	1
	Condensed Consolidated Statements of Operations for the Three Months Ended March 3 1 , 202 3 and 20 2 2	2
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 3 1 , 202 3 and 20 2 2	3
	Condensed Consolidated Statements of Stockholders' Equity for the Three Months Ended March 3 1 , 202 3 and 20 2 2	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 3 1 , 202 3 and 20 2 2	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II. OTHER INFORMATION		26
Item 1A.	Risk Factors	26
Item 6.	Exhibits	56
	Signatures	57

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

AGIOS PHARMACEUTICALS, INC.

Condensed Consolidated Balance Sheets

(Unaudited)


(In thousands, except share and per share data)	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	104,139	$	139,259
Marketable securities	635,062		643,860
Accounts receivable, net	1,778		2,206



Inventory	11,374		8,492
Prepaid expenses and other current assets	39,303		38,955

Total current assets	791,656		832,772
Marketable securities	271,727		313,874
Operating lease assets	62,521		65,129
Property and equipment, net	21,438		22,987
Other non-current assets	3,956		3,956

Total assets	$	1,151,298	$	1,238,718
Liabilities and stockholders’ equity
Current liabilities:

Accounts payable	$	8,662	$	18,616
Accrued expenses	22,459		30,350

Operating lease liabilities	13,992		13,663




Total current liabilities	45,113		62,629

Operating lease liabilities, net of current portion	68,346		71,996
Other non-current liabilities	1,313		3,279


Total liabilities	114,772		137,904
Stockholders’ equity:
Preferred stock, $0.001 par value; 25,000,000 shares authorized; no shares issued or outstanding at March 31, 2023 and December 31, 2022	—		—
Common stock, $0.001 par value; 125,000,000 shares authorized; 71,757,778 shares issued and 55,541,367 shares outstanding at March 31, 2023, and 71,256,118 shares issued and 55,039,707 shares outstanding at December 31, 2022	72		71
Additional paid-in capital	2,398,930		2,386,325
Accumulated other comprehensive loss	(8,411)		(12,535)
Treasury stock, at cost (16,216,411 shares at March 31, 2023 and December 31, 2022)	(802,486)		(802,486)
Accumulated deficit	(551,579)		(470,561)
Total stockholders’ equity	1,036,526		1,100,814
Total liabilities and stockholders’ equity	$	1,151,298	$	1,238,718

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

AGIOS PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended March 31,
(In thousands, except share and per share data)	2023		2022
Revenues:
Product revenue, net	$	5,609	$	832


Total revenue	5,609		832
Operating expenses:
Cost of sales	$	554	$	339
Research and development	67,301		70,123
Selling, general and administrative	28,367		31,515
Total operating expenses	96,222		101,977
Loss from operations	(90,613)		(101,145)
Royalty income from gain on sale of oncology business	—		2,704
Interest income, net	8,091		694
Other income, net	1,504		2,973




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



Net loss per share - basic and diluted	$	(1.47)	$	(1.74)

Weighted-average number of common shares used in computing net loss per share – basic and diluted	55,265,390		54,555,467

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

AGIOS PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)


	Three Months Ended March 31,
(In thousands)	2023		2022
Net loss	$	(81,018)	$	(94,774)
Other comprehensive income (loss)
Unrealized gain (loss) on available-for-sale securities	4,124		(6,547)
Comprehensive loss	$	(76,894)	$	(101,321)

See accompanying Notes to Condensed Consolidated Financial Statements.

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


	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

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

AGIOS PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows
(Unaudited)


	Three Months Ended March 31,
(In thousands)	2023		2022
Operating activities
Net loss	(81,018)		(94,774)


Adjustments to reconcile net loss from operations to net cash used in operating activities:
Depreciation and amortization	1,790		2,478
Stock-based compensation expense	10,139		15,510
Net amortization of premium (accretion of discount) on marketable securities	(2,776)		1,150
Gain on disposal of property and equipment	(150)		—
Non-cash operating lease expense	2,608		2,436





Changes in operating assets and liabilities:
Accounts receivable, net	428		(540)



Inventory	(2,882)		(2,485)

Other receivables	—		(987)
Prepaid expenses and other current and non-current assets	(348)		(3,391)
Accounts payable	(9,796)		(5,007)
Accrued expenses and other current liabilities	(7,891)		(12,220)

Deferred revenue	—		2,500
Operating lease liabilities	(3,321)		(2,405)

Other non-current liabilities	(1,966)		—


Net cash used in operating activities	(95,183)		(97,735)
Investing activities
Purchases of marketable securities	(128,351)		(355,916)
Proceeds from maturities and sales of marketable securities	186,196		332,147
Purchases of property and equipment	(399)		(2,804)
Proceeds from sale of equipment	150		—


Net cash provided by (used in) investing activities	57,596		(26,573)
Financing activities
Payments on financing lease obligations	—		(81)


Net proceeds from stock option exercises and employee stock purchase plan	2,467		1,289


Net cash provided by financing activities	2,467		1,208
Net change in cash and cash equivalents	(35,120)		(123,100)
Cash and cash equivalents at beginning of the period	139,259		203,126
Cash and cash equivalents at end of the period	$	104,139	$	80,026


Supplemental disclosure of non-cash investing and financing transactions
Additions to property and equipment in accounts payable and accrued expenses	$	—	$	1,536




Cash taxes paid	$	—	$	1,842

See accompanying Notes to Condensed Consolidated Financial Statements.

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, small molecule 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.

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, or NDA, approval from the FDA with an approved label that permits vorasidenib’s use as a single agent for the adjuvant treatment of patients with Grade 2 glioma that have an isocitrate dehydrogenase 1 or 2 mutation (and, to the extent required by such approval, the vorasidenib companion diagnostic test is granted an FDA premarket approval), as well as a royalty of 5% of U.S. net sales of TIBSOVO® from the close of the transaction through loss of exclusivity, and a royalty of 15% of U.S. net sales of vorasidenib from the first commercial sale of vorasidenib through loss of exclusivity. Servier also acquired our co-commercialization rights for Bristol Myers Squibb’s IDHIFA® and the right to receive a $25.0 million potential milestone payment under our prior collaboration agreement with Celgene Corporation, and following the sale Servier will conduct certain clinical development activities within the IDHIFA® development program.

Table of Contents

We recorded income from royalties of approximately $2.7 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 months ended March 31, 2022.

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.

Basis of Presentation

The condensed consolidated balance sheet as of March 31, 2023, the condensed consolidated statements of operations, comprehensive loss and stockholders' equity for the three months ended March 31, 2023 and 2022, and the condensed consolidated statements of cash flows for the three months ended March 31, 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 March 31, 2023, our results of operations and stockholders' equity for the three months ended March 31, 2023 and 2022, and cash flows for the three months ended March 31, 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-month periods are also unaudited. The results of operations for the three months ended March 31, 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 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 highly uncertain. We have made estimates of the impact of COVID-19 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 March 31, 2023, we had cash, cash equivalents and marketable securities of $1.0 billion. 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.

Table of Contents

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 March 31, 2023:


(In thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	13,026	$	47,178	$	—	$	60,204
Total cash equivalents	13,026		47,178		—		60,204

Marketable securities:


U.S. Treasuries	—		58,217		—		58,217
Government securities	—		384,918		—		384,918
Corporate debt securities	—		463,654		—		463,654
Total marketable securities	—		906,789		—		906,789
Total cash equivalents and marketable securities	$	13,026	$	953,967	$	—	$	966,993

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 March 31, 2023.

There have been no changes to the valuation methods during the three months ended March 31, 2023, and we had no financial assets or liabilities that were classified as Level 3 at any point during the three months ended March 31, 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 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 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 months ended March 31, 2023 or 2022.

Marketable securities at March 31, 2023 consisted of the following:

Table of Contents


(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Current:

U.S. Treasuries	$	47,187	$	3	$	(604)	$	46,586
Government securities	285,068		25		(4,320)		280,773
Corporate debt securities	309,963		1		(2,261)		307,703
Total Current	642,218		29		(7,185)		635,062

Non-current:

U.S. Treasuries	11,617		15		(1)		11,631
Government securities	104,621		88		(564)		104,145
Corporate debt securities	156,744		175		(968)		155,951
Total Non-current	272,982		278		(1,533)		271,727
Total marketable securities	$	915,200	$	307	$	(8,718)	$	906,789

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 March 31, 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 March 31, 2023 and December 31, 2022, we held 221 and 259 debt securities, respectively, that were in an unrealized loss position for less than one year. We did not record an allowance for credit losses as of March 31, 2023 and December 31, 2022 related to these securities. The aggregate fair value of debt securities in an unrealized loss position at March 31, 2023 and December 31, 2022 was $779.3 million and $868.2 million, respectively. There were no individual securities that were in a significant unrealized loss position as of March 31, 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 March 31, 2023 and December 31, 2022.

Table of Contents

5. Inventory

Inventory, which consists of commercial supply of PYRUKYND®, consisted of the following:


(In thousands)	March 31, 2023		December 31, 2022

Work-in-process	$	10,412	$	7,550
Finished goods	962		942
Total inventory	$	11,374	$	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 five 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 March 31,
(In thousands)	2023		2022
Operating lease costs	$	3,807	$	3,807
Cash paid for amounts included in the measurement of operating lease liabilities	$	4,520	$	3,776

We have not entered into any material short-term leases or financing leases as of March 31, 2023.

In arriving at the operating lease liabilities as of March 31, 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 4.9 and 5.2 years, respectively.

As of March 31, 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	$	12,131
2024	18,660
2025	19,507
2026	20,151
2027	20,755
2028	3,479
Thereafter	—
Undiscounted minimum rental commitments	$	94,683
Interest	(12,345)
Operating lease liabilities	$	82,338

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. We recorded operating sublease income of $1.4 million and $0.4 million for the three months ended March 31, 2023 and 2022, respectively, in other income, net in the condensed consolidated statements of operations. We received a security deposit from our sublessee of approximately $1.1 million which is recorded within other non-current assets on our condensed consolidated balance sheet.

Table of Contents

As of March 31, 2023, the future minimum lease payments to be received under the long-term sublease agreements were as follows:


(In thousands)
Remaining 2023	$	3,266
2024	4,459
2025	1,101

Total	$	8,826

7. Accrued Expenses

Accrued expenses consisted of the following:


(In thousands)	March 31, 2023		December 31, 2022
Accrued compensation	$	6,651	$	18,105
Accrued research and development costs	11,110		8,425
Accrued professional fees	1,520		2,435
Accrued other	3,178		1,385
Total accrued expenses	$	22,459	$	30,350

8. Product Revenue

We sell PYRUKYND®, our wholly owned product, to a limited number of specialty distributors and specialty pharmcy 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 March 31,
(In thousands)	2023		2022
Product revenue, net	$	5,609	$	832

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.

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

We estimate the amount of product sales that may be returned by Customers and record this estimate as a reduction of revenue in the period the related product revenue is recognized. We currently estimate product return 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 three months ended March 31, 2023:


(In thousands)	Contractual Adjustments		Government Rebates		Returns		Total
Balance at December 31, 2022	$	65	$	573	$	133	$	771
Current provisions relating to sales in the current year	291		418		64		773
Adjustments relating to prior years	—		—		—		—
Payments/returns relating to sales in the current year	(233)		—		—		(233)
Payments/returns relating to sales in the prior years	(48)		(288)		—		(336)
Balance at March 31, 2023	$	75	$	703	$	197	$	975

Total revenue-related reserves above, included in our condensed consolidated balance sheets, are summarized as follows:


(In thousands)	March 31, 2023		December 31, 2022
Reduction of accounts receivable	$	69	$	60
Component of accrued expenses	906		711
Total revenue-related reserves	$	975	$	771

The following table presents changes in our contract assets during the three months ended March 31, 2023:


(In thousands)	December 31, 2022		Additions		Deductions		March 31, 2023
Contract assets(1)
Accounts receivable, net	$	2,206	$	6,382	$	(6,810)	$	1,778

(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

2013 Stock Incentive Plan and Inducement Grants

In June 2013, our Board of Directors adopted and, in July 2013 our stockholders approved, the 2013 Stock Incentive Plan, or the 2013 Plan. The 2013 Plan became effective upon the closing of our initial public offering and provides for the grant of incentive stock options, non-qualified 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, non-employees and non-employee directors. Following the adoption of the 2013 Plan, we granted no further stock options or other awards under the 2007 Stock Incentive Plan, or the 2007 Plan. Any options or awards that were outstanding under the 2007 Plan at the time of adoption of the 2013 Plan continue to be governed by their terms.

In connection with the start of employment of our Chief Executive Officer, Chief Financial Officer and Chief Commercial Officer in 2022 and 2023, our board of directors granted each of them equity awards in the form of stock options, RSUs and PSUs, which awards were made outside our 2013 Stock Incentive Plan as inducements material to their respective entry into employment with us in accordance with Nasdaq Listing Rule 5635(c)(4).

Table of Contents

As of March 31, 2023, the total number of shares reserved under the 2007 Plan, the 2013 Plan and the inducement grants described above was 14,374,996, and we had 6,369,723 shares available for future issuance under the 2013 Plan.

Stock options

The following table presents stock option activity for the three months ended March 31, 2023:


	Number of Stock Options	Weighted-Average Exercise Price
Outstanding at December 31, 2022	5,772,564	$	48.81
Granted	631,679	25.67
Exercised	(131,486)	9.78
Forfeited/Expired	(302,871)	54.77
Outstanding at March 31, 2023	5,969,886	$	46.91
Exercisable at March 31, 2023	3,448,569	$	58.53
Vested and expected to vest at March 31, 2023	5,969,886	$	46.91

At March 31, 2023, there was approximately $38.6 million of total unrecognized compensation expense related to unvested stock option awards, which we expect to recognize over a weighted-average period of approximately 2.92 years.

Restricted stock units

The following table presents RSU activity for the three months ended March 31, 2023:


	Number of Stock Units	Weighted-Average Grant Date Fair Value
Unvested shares at December 31, 2022	1,117,921	$	38.30
Granted	798,189	25.88
Vested	(315,307)	44.54
Forfeited	(69,001)	36.81
Unvested shares at March 31, 2023	1,531,802	$	30.61

As of March 31, 2023, there was approximately $38.8 million of total unrecognized compensation expense related to RSUs, which we expect to recognize over a weighted-average period of approximately 2.17 years.

Performance-based stock units

The following table presents PSU activity for the three months ended March 31, 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	—	—
Forfeited	(95,250)	46.53
Unvested shares at March 31, 2023	460,890	$	30.76

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 March 31, 2023, there was no unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered probable of achievement, and $14.2 million of total unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered not probable of achievement.

Table of Contents

Market-based stock units

The following table presents market-based stock unit, or MSU, activity for the three months ended March 31, 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 March 31, 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 March 31, 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 54,867 and 48,156 shares of common stock during the three months ended March 31, 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 March 31, 2023, we had 1,744,004 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 March 31,
(In thousands)	2023		2022
Stock options	$	4,957	$	6,201
Restricted stock units	4,947		6,165
Performance-based stock units	—		2,919
Employee stock purchase plan	235		225

Total stock-based compensation expense	$	10,139	$	15,510

Expenses related to stock options and stock-based awards were allocated as follows in the condensed consolidated statements of operations:


	Three Months Ended March 31,
(In thousands)	2023		2022
Research and development expense	$	4,355	$	6,656
Selling, general and administrative expense	5,784		8,854
Total stock-based compensation expense	$	10,139	$	15,510

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 March 31, 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

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 Months Ended March 31,
	2023	2022
Stock options	5,969,886	5,275,144
Restricted stock units	1,531,802	1,283,537

Employee stock purchase plan shares	14,143	12,472
Total common stock equivalents	7,515,831	6,571,153

Table of Contents

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 March 31, 2023 and for the three months ended March 31, 2023 and 2022, and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 23, 2023. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, forecasts and projections, and the beliefs and assumptions of our management, and include, without limitation, statements with respect to our expectations regarding our research, development and commercialization plans and prospects, results of operations, selling, general and administrative expenses, research and development expenses, the sufficiency of our cash for future operations and business activity disruption due to the COVID-19 pandemic. Words such as “anticipate,” “believe,” “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

Sale of our Oncology Business to Servier

Table of Contents

transaction through loss of exclusivity, and a royalty of 15% of U.S. net sales of vorasidenib from the first commercial sale of vorasidenib through loss of exclusivity. Servier also acquired our co-commercialization rights for Bristol Myers Squibb’s IDHIFA® and the right to receive a $25.0 million potential milestone payment under our prior collaboration agreement with Celgene Corporation, or Celgene, and following the sale Servier will conduct certain clinical development activities within the IDHIFA® development program.

Sale of Contingent Payments

Financial Operations Overview

Impact of COVID-19 on our Business

As of March 31, 2023, we have not experienced a significant financial or supply chain impact directly related to the COVID-19 pandemic, but have experienced some disruptions to clinical operations and certain clinical and research activities at our contract research organizations, or CROs. Although the public health emergency declaration related to COVID-19 will end on May 11, 2023, the extent of COVID-19's effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted and are out of our control. Future developments may include changes in the duration, scope and severity of the pandemic, emergence of another pandemic or other public health emergency, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the supply, distribution and efficacy of vaccines, and the resumption of widespread economic activity.

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 three months ended March 31, 2023 and 2022 were $81.0 million and $94.8 million, respectively. As of March 31, 2023, we had an accumulated deficit of $551.6 million. We expect to incur significant expenses and net losses until such time we are able to report profitable results. Our net losses may fluctuate significantly from year to year. We expect that we will continue to incur significant expenses as we continue to advance and expand clinical development activities for our lead programs: PYRUKYND®, and AG-946; continue to prioritize advancement of our PAH stabilizer; 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

Table of Contents

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

Research and development expenses

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

•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

Table of Contents

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. We are currently providing access to PYRUKYND® free of charge for eligible patients in the EU and Great Britain through a global managed access program. Beyond the global managed access program, we continue to evaluate options for the commercialization of PYRUKYND® outside of the United States, including through exploring potential partnership opportunities.

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 closed screening for patient enrollment.

•ENERGIZE-T, a phase 3, double-blind, randomized, placebo-controlled multicenter study evaluating the efficacy and safety of PYRUKYND® as a potential treatment for adults with transfusion-dependent α- or β-thalassemia, defined as 6 to 20 RBC units transfused and ≤6-week transfusion-free period during the 24-week period before randomization. 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 closed screening for patient enrollment.

•RISE UP, a phase 2/3 study evaluating the efficacy and safety of PYRUKYND® in SCD patients who are 16 years of age or older, have had between two and 10 sickle cell pain crises in the past 12 months, and have hemoglobin within the range of 5.5 to 10.5 g/dL during screening. The phase 2 portion of the trial includes a 12-week randomized, placebo-controlled period in which participants will be randomized in a 1:1:1 ratio to receive 50 mg PYRUKYND® twice daily, 100 mg PYRUKYND® twice daily or matched placebo. The primary endpoints are hemoglobin response, defined as ≥1 g/dL increase in average hemoglobin concentration from Week 10 through Week 12 compared to baseline, and safety. These data will be used to establish a clear dosing paradigm for the phase 3 portion. The phase 3 portion includes a 52-week randomized, placebo-controlled period in which participants will be randomized in a 2:1 ratio to receive the recommended PYRUKYND® dose level or placebo. The primary endpoints are hemoglobin response, defined as ≥1 g/dL increase in average hemoglobin from baseline to Week 52, and annualized rate of sickle cell pain crises. Participants who complete either the phase 2 or phase 3 portion will have the option to move into a 216-week open-label extension period to continue to receive PYRUKYND®. The phase 2 portion of this trial has been fully enrolled, and we expect to announce data from the phase 2 portion of this trial and decide whether we are initiating the phase 3 portion of this trial by mid-year 2023.

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

•An extension study evaluating the long-term safety, tolerability and efficacy of treatment with PYRUKYND® in patients from ACTIVATE and ACTIVATE-T, our completed pivotal trials of PYRUKYND® in not regularly transfused and regularly transfused adult patients with PK deficiency.

•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.

Table of Contents

•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, or UMC, is evaluating PYRUKYND® in patients with SCD pursuant to an investigator sponsored trial agreement. The trial has completed enrollment and patient follow-up is ongoing, and a 2-year extension study has been activated for patients who complete the follow-up period.

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 cohort, and we have initiated the SCD patient cohort of this trial. We initiated a phase 2a study of AG-946 in adults with LR MDS in the third quarter of 2022, and we expect to complete enrollment by year-end 2023.

Other Programs

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

Selling, general and administrative expenses

Selling, general and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, business development, commercial, legal, 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. 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.

Table of Contents

Results of Operations

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

Revenues


	Three Months Ended March 31,
(In thousands)	2023		2022
Revenues:
Product revenue, net	$	5,609	$	832



Total revenue	$	5,609	$	832

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

Total Operating Expenses


	Three Months Ended March 31,
(In thousands)	2023		2022
Operating expenses:
Cost of sales	$	554	$	339
Research and development	67,301		70,123
Selling, general and administrative	28,367		31,515
Total operating expenses	$	96,222	$	101,977

Total Operating Expenses - Three Months Ended March 31, 2023 vs. Three Months Ended March 31, 2022 – The decrease in total operating expenses of $5.8 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily due to a decrease in selling, general and administrative expenses of $3.1 million, driven by a reduction in workforce-related expenses, and a decrease in research and development expenses of $2.8 million which is described below under Research and Development Expenses. Included in selling, general and administrative expenses for the three months ended March 31, 2022 is approximately $1.1 million of reimbursable transition related services we provided to Servier related to the sale of the oncology business.

Research and Development Expenses

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


	Three Months Ended March 31,
(In thousands)	2023		2022



PK activator (PYRUKYND®)	$	20,999	$	17,204


Novel PK activator (AG-946)	3,468		3,437
Other research and platform programs	3,467		7,914
Total direct research and development expenses	27,934		28,555
Compensation and related expenses	29,691		29,186
Facilities and IT related expenses & other	9,676		10,865
Other expenses - transition services	—		1,517
Total indirect research and development expenses	39,367		41,568
Total research and development expense	$	67,301	$	70,123

Total Research and Development Expenses - Three Months Ended March 31, 2023 vs. Three Months Ended March 31, 2022 – The decrease in total research and development expenses of $2.8 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was due to a $0.6 million decrease in our direct expenses and a $2.2 million decrease in our indirect expenses. The decrease in direct expenses was due to a decrease in expenses related to our other research and platform programs as a result of our decision to evolve our approach to exploratory research and drug discovery to focus on our existing late-lead optimization programs. This decrease in direct expenses was partially offset by an increase in PYRUKYND®

Table of Contents

costs due to increased costs for the phase 3 trials of PYRUKYND® in patients with thalassemia, ENERGIZE and ENERGIZE-T, and the phase 2/3 trial of PYRUKYND® in patients with SCD, RISE UP. The decrease in indirect expenses was primarily due to the $1.5 million of reimbursable transition related services we provided to Servier in the three months ended March 31, 2022 related to the sale of the oncology business for discovery, clinical development, technical operations, and related activities, which were completed during the three months ended March 31, 2022.

Other Income and Expense


	Three Months Ended March 31,
(In thousands)	2023		2022
Royalty income from gain on sale of oncology business	$	—	$	2,704
Interest income, net	8,091		694
Other income, net	1,504		2,973

Other Income and Expense - Three Months Ended March 31, 2023 vs. Three Months Ended March 31, 2022 – The increase in interest income, net was primarily attributable to an increase in interest rates. The decrease in royalty income from gain on sale of oncology business was due to the sale to Sagard in the fourth quarter of 2022 of our rights to future contingent payments associated with royalties on U.S. net sales of TIBSOVO®. The decrease in other income, net primarily relates to approximately $2.6 million of reimbursable transition related services and fees for the sale of the oncology business for the three months ended March 31, 2022, partially offset by $1.0 million of additional sublease income recognized in the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

Net Loss


	Three Months Ended March 31,
(In thousands)	2023		2022


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

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

Liquidity and Capital Resources

Sources of liquidity

Since our inception, and through 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.

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

Table of Contents

certain clinical development activities within the IDHIFA® development program. As discussed above in Note 1, Overview, in October 2022, we sold our rights to the royalty on U.S. net sales of TIBSOVO® to Sagard for $131.8 million. We retained our rights to the potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA.

Our cash, cash equivalents and marketable securities balance was $1.0 billion at March 31, 2023. The $200.0 million milestone payment and royalty payments discussed above are our only committed potential external source of funds. Whether the regulatory approval milestone for vorasidenib will be achieved is subject to various risks and uncertainties, which are outside our control, including adverse clinical developments with respect to vorasidenib. 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 three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
(In thousands)	2023		2022
Net cash used in operating activities	$	(95,183)	$	(97,735)
Net cash provided by (used in) investing activities	57,596		(26,573)
Net cash provided by financing activities	2,467		1,208
Net change in cash and cash equivalents	$	(35,120)	$	(123,100)

Net cash used in operating activities. Cash used in operating activities of $95.2 million during the three months ended March 31, 2023 was primarily due to operating expenses driven by research and development costs described above under Research and Development Expenses, partially offset by cash received from product revenues. Cash used in operating activities of $97.7 million during the three months ended March 31, 2022 was primarily due to operating expenses driven by research and development costs described above under Research and Development Expenses, offset by cash received of $4.4 million from Servier for reimbursable transition related services and fees, and royalties from Servier on U.S. net sales of TIBSOVO®.

Net cash provided by (used in) investing activities. Cash provided by investing activities of $57.6 million during the three months ended March 31, 2023 was primarily due to higher proceeds from maturities and sales of marketable securities than purchases of marketable securities. Cash used in investing activities of $26.6 million for the three months ended March 31, 2022 was primarily due to higher purchases of marketable securities than proceeds from maturities and sales of marketable securities.

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

Funding requirements

We expect our expenses to increase as we continue the research, development and clinical trials of, seek marketing approvals for, and commercialize our product candidates in our portfolio, including as we continue to commercialize PYRUKYND®. If we obtain additional marketing approvals for PYRUKYND® in other indications or outside of the United States or for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

We expect that our existing cash, cash equivalents and marketable securities as of March 31, 2023, together with anticipated product revenue and interest income will enable us to execute our operating plan, including funding our currently planned development programs for mitapivat, AG-946 and PAH stabilization, and commercializing mitapivat outside of the United States through one or more partnerships. Our future capital requirements will depend on many factors, including:

•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;

Table of Contents

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

•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;

•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 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, in connection with potential future strategic transactions, we may pursue opportunistic debt offerings, and equity or equity-linked offerings. We do not have any committed external source of funds other than the potential milestone and royalty payments that we are eligible to receive with respect to vorasidenib under our purchase agreement with Servier. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed or on attractive terms, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations

During the three months ended March 31, 2023, there were no material changes to our contractual obligations and commitments described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk related to changes in interest rates. As of March 31, 2023 and December 31, 2022, we had cash, cash equivalents and marketable securities of $1.0 billion and $1.1 billion, respectively. Our marketable securities consist primarily of investments in U.S. Treasuries, government securities and corporate debt securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are primarily in short-term marketable securities. Our marketable securities are subject to interest rate risk and could fall in value if market interest rates increase. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, we do not believe an immediate and uniform 100 basis point change in interest rates would have a material effect on the fair market value of our investment portfolio.

We are also exposed to market risk related to changes in foreign currency exchange rates. We have contracts with CROs located in Asia and Europe that are denominated in foreign currencies, and we are subject to fluctuations in foreign currency rates in connection with these agreements. We do not currently hedge our foreign currency exchange rate risk. As of March 31, 2023 and December 31, 2022, liabilities denominated in foreign currencies were immaterial.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Table of Contents

Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures. Based on that evaluation of our disclosure controls and procedures as of March 31, 2023, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports it files or submits under the Exchange Act is accumulated and communicated to its management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the fiscal quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION