Forward-looking Information
The following discussion of our financial condition and results of operations
should be read with our unaudited condensed consolidated financial statements as
of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020,
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, 2020 filed with the SEC on February 25, 2021. This Management's
Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are based on
current expectations, estimates, forecasts and projections, and the beliefs and
assumptions of our management, and include, without limitation, statements with
respect to our expectations regarding our research, development and
commercialization plans and prospects, results of operations, selling, general
and administrative expenses, research and development expenses, the sufficiency
of our cash for future operations and business activity disruption due to the
COVID-19 pandemic. Words such as "anticipate," "believe," "estimate," "expect,"
"goal," "intend," "may," "plan," "predict," "project," "strategy," "target,"
"potential," "will," "would," "could," "should," "continue," "vision" and
similar statements or variation of these terms or the negative of those terms
and similar expressions are intended to identify these forward-looking
statements. Readers are cautioned that these forward-looking statements are
predictions and are subject to risks, uncertainties and assumptions that are
difficult to predict. Therefore, actual results may differ materially and
adversely from those expressed in any forward-looking statements. Among the
important factors that could cause actual results to differ materially from
those indicated by our forward-looking statements are those discussed under the
heading "Risk Factors" in Part II, Item 1A and elsewhere in this report, and in
our Annual Report on Form 10-K for the year ended December 31, 2020. 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 scientific leadership in the field of cellular metabolism and adjacent
areas of biology, with the goal of creating differentiated, small molecule
medicines for genetically defined diseases, or GDDs. To address our focus areas,
we take a systems biology approach to deeply understand disease states, drive
the discovery and validation of novel therapeutic targets, and define patient
selection strategies, thereby increasing the probability that our experimental
medicines will have the desired therapeutic effect.
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. 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 million in cash, if, prior to January 1,
2027, vorasidenib is granted new drug application, or NDA, approval from the
U.S. Food and Drug Administration, or 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.
The oncology business met the criteria within Accounting Standards Codification
205-20 to be reported as discontinued operations because the transaction was a
strategic shift in business that had a major effect on our operations and
financial results. Therefore, we have reported the historical results of the
oncology business including the results of operations and cash flows as
discontinued operations, and related assets and liabilities were retrospectively
reclassified as assets and liabilities of discontinued operations for all
periods presented herein. Unless otherwise noted, applicable amounts in the
prior year have been recast to conform to this discontinued operations
presentation. Refer to Note 3 of our condensed consolidated financial statements
included in this Quarterly Report on Form 10-Q for additional information.
Unless otherwise indicated, the following information relates to our continuing
operations following the sale to Servier. A more complete description of our
business prior to the consummation of the transaction is included in Item 1.
"Business", in Part I of the Annual Report on Form 10-K for the year ended
December 31, 2020 that was previously filed with the Securities and Exchange
Commission ("SEC") on February 25, 2021.
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GDDs
Our primary focus in the GDD area relates to therapeutic categories where we
believe we have differentiated expertise and demonstrated capabilities
(e.g-enzyme stabilizers, pyruvate kinase, phenylalanine hydroxylase). As a
result, we expect the new therapies that we plan to advance through the
discovery, development and commercialization stages to be in the areas of
non-malignant hematology and inborn errors of metabolism, though our future
efforts may not be limited to these categories.
The lead product candidate in our GDD portfolio, mitapivat, targets pyruvate
kinase-R, or PKR, for the treatment of pyruvate kinase, or PK, deficiency and
other hemolytic anemias including thalassemia and sickle cell disease, or SCD.
Mitapivat is an orally available small molecule and a potent activator of the
wild-type (normal) and mutated PKR enzymes, which has resulted in restoration of
adenosine triphosphate levels and a decrease in 2,3-diphosphoglycerate levels in
blood sampled from patients with PK deficiency and treated ex-vivo with
mitapivat. PK deficiency is a rare genetic disorder that often results in severe
hemolytic anemia, jaundice and lifelong conditions associated with chronic
anemia and secondary complications due to inherited mutations in the pyruvate
kinase enzyme within red blood cells. We are currently developing mitapivat for
the treatment of patients with PK deficiency, thalassemia and SCD in the
following ongoing or planned pivotal clinical trials:
Pyruvate Kinase Deficiency:
•ACTIVATE-T, a single arm, global, pivotal trial of mitapivat in
regularly-transfused patients with PK deficiency. This trial has completed
enrollment and we are conducting an extension study for previously enrolled
patients, which is designed to evaluate the long-term safety, tolerability and
efficacy of treatment with mitapivat.
•ACTIVATE, a 1:1 randomized, placebo-controlled, global, pivotal trial of
mitapivat in patients with PK deficiency who do not receive regular
transfusions. This trial has completed enrollment and we are conducting an
extension study for previously enrolled patients, which is designed to evaluate
the long-term safety, tolerability and efficacy of treatment with mitapivat.
•Pivotal trials in pediatric PK deficiency, which we expect to initiate in 2022.
Thalassemia:
•ENERGIZE and ENERGIZE-T, phase 3 trials of mitapivat in
not-regularly-transfused and regularly-transfused adults with thalassemia, which
we expect to initiate in the second half of 2021.
SCD:
•A phase 2/3 trial of mitapivat in patients with SCD, which we expect to
initiate by the end of 2021.
We have worldwide development and commercial rights to mitapivat and expect to
fund the future development and commercialization costs related to this program.
The FDA and European Medicines Agency, or EMA, granted orphan drug designations
for mitapivat for the treatment of patients with PK deficiency, and the FDA
granted orphan drug designation for mitapivat for the treatment of patients with
thalassemia and patients with SCD. In June 2021, we submitted an NDA for
mitapivat to the FDA for the treatment of adults with PK deficiency in the
United States and a marketing authorization application, or MAA, to the EMA for
the treatment of adults with PK deficiency the European Union. We anticipate a
potential commercial launch of mitapivat in the United States and the European
Union in 2022 if we receive regulatory approvals. We also expect to continue to
grow our U.S. commercial infrastructure and evaluate all options to maximize the
patient impact and value of mitapivat globally, including strategic
transactions. We are also developing AG-946, a next-generation activator of both
the PKR and PKM2 isoforms of pyruvate kinase. PKR activation is specific to red
blood cells and hemolytic anemias, while PKM2 activation occurs in other tissues
which express this isoform, and is potentially important in a variety of disease
indications.
In addition to these development programs, we are seeking to advance a number of
early-stage discovery programs for GDDs. Drug candidates for PK activation and
other mechanisms, while primarily targeting GDD may also have utility in
nongenetically defined disease indications. Where differentiated, nonclinical
proof of concept emerges for these non-GDD indications, appropriate partnership
may be used to drive the best patient benefit.
Critical Accounting Policies and Estimates
Our critical accounting policies are those policies 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 policies are those relating to accrued research and development
expenses and stock-based compensation. Except those that have been disclosed in
Note 2, Summary of Significant Accounting Policies, of the notes to our
condensed consolidated financial statements included in this Quarterly Report on
Form 10-Q, there have been no significant changes to our existing critical
accounting policies discussed in our Annual Report on Form 10-K for the year
ended December 31, 2020.
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Financial Operations Overview
Impact of COVID-19 on our Business
As of June 30, 2021, 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, including timelines to complete patient
enrollment in some of our clinical trials, as further described below. We are
continuing to serve our customers while taking precautions to provide a safe
work environment for our employees and customers. Our lab-based employees who
need to be onsite to fulfill their job responsibilities have been onsite since
late May 2020, and we have opened our Cambridge office to employees who prefer
to work onsite. Our field-based employees engage with healthcare providers and
other third parties remotely and, where local regulations allow, on a limited
in-person basis. We are conducting our return to work program under strict
guidelines as required by federal, state, and local authorities. We have been
monitoring our supply chain network for disruptions due to the COVID-19
pandemic, and our third-party manufacturers remain largely unaffected, with any
campaign delays experienced to date being limited to a few days in duration.
Although global shipping continues to be disrupted due to the pandemic, we have
not experienced a supply impact.
The extent of the pandemic's effect on our operational and financial performance
will depend in large part on future developments, which cannot be predicted with
confidence at this time. Future developments include changes in the duration,
scope and severity of the pandemic, including and variant strains of the
COVID-19 virus, the actions taken to contain or mitigate its impact, the impact
on governmental programs and budgets, the supply, distribution and efficacy of
vaccines, and the resumption of widespread economic activity. Any prolonged
material disruption of our employees, suppliers, manufacturing, or customers
could negatively impact our consolidated financial position, consolidated
results of operations and consolidated cash flows. As a result, we may have to
take further actions that we determine are in the best interests of our
employees or as required by federal, state, or local authorities.
General
Since inception, our operations have primarily focused on organizing and
staffing our company, business planning, raising capital, assembling our core
capabilities in cellular metabolism, identifying potential product candidates,
undertaking preclinical studies, conducting clinical trials, establishing a
commercial infrastructure and, prior to the sale of our oncology business to
Servier on March 31, 2021, marketing our approved products. Through March 31,
2021, we have financed our operations primarily through proceeds from the sale
of our royalty rights, commercial sales of TIBSOVO®, funding received from our
collaboration agreements, private placements of our preferred stock, our initial
public offering of our common stock and concurrent private placement of common
stock to an affiliate of Celgene, and our follow-on public offerings. Following
the sale of our oncology business to Servier on March 31, 2021, we expect to
finance our operations primarily through cash on hand, royalty payments from
Servier with respect to U.S. net sales of TIBSOVO®, a potential milestone
payment from Servier if vorasidenib is approved by the FDA, and future potential
sales of mitapivat if approved for marketing by regulatory authorities and
successfully launched by us and, potentially, collaborations, strategic
alliances, licensing arrangements and other nondilutive strategic transactions.
We have historically incurred operating losses. Our net income for the six
months ended June 30, 2021 was $1,788.1 million and our net loss for the six
months ended June 30, 2020 was $130.7 million. As of June 30, 2021, we had an
accumulated deficit of $55.4 million. The net income we generated in the six
months ended June 30, 2021 was primarily due to the sale of our oncology
business to Servier, which was consummated on March 31, 2021. Following the
consummation of the sale of our oncology business, 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: mitapivat, and AG-946; continue to discover and validate novel targets
and drug product candidates; expand and protect our intellectual property
portfolio; and hire additional commercial, development and scientific personnel.
Research and development expenses
Research and development activities are central to our business model. Product
candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
We expect research and development costs related to our GDD portfolio to
increase significantly for the foreseeable future as our product candidate
development programs progress. However, the successful development of our
product candidates is highly uncertain. As such, at this time, we cannot
reasonably estimate or know the nature, timing and estimated costs of the
efforts that will be necessary to complete the remainder of the development and
to commercialize these product candidates. We are also unable to positively
predict when future net cash inflows will commence from mitapivat, AG-946 or any
of our other product candidates. This is due to the numerous risks and
uncertainties associated with developing medicines, including the uncertainty
of:
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•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 contract
research organizations, or 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 the clinical development activities related to our most
advanced programs. The timing of trial and site initiations, enrollment and data
readouts may be impacted depending on the duration, scope and severity of the
COVID-19 pandemic:
Mitapivat: PK Activator
•DRIVE PK, a global phase 2, first-in-patient, open-label safety and efficacy
clinical trial of mitapivat in adult, transfusion-independent patients with PK
deficiency. This trial has completed enrollment.
•ACTIVATE-T, a single arm, global, pivotal trial of mitapivat in
regularly-transfused patients with PK deficiency. The trial has completed
enrollment. We reported in June 2021, in a full analysis of updated data, that
this trial met its primary endpoint of a statistically significant and
clinically meaningful reduction in transfusion burden and that improvements were
also observed for certain patient reported outcomes. This trial has completed
enrollment and we are conducting an extension study for previously enrolled
patients, which is designed to evaluate the long-term safety, tolerability and
efficacy of treatment with mitapivat.
•ACTIVATE, a 1:1 randomized, placebo-controlled, global, pivotal trial of
mitapivat in patients with PK deficiency who do not receive regular
transfusions. The trial has completed enrollment. We reported in June 2021, in a
full analysis of updated data, that this trial met its primary endpoint of a
statistically significant, sustained increase in hemoglobin compared to placebo.
In addition, data from the trial demonstrated that treatment with mitapivat
showed statistically significant improvement in key pre-specified secondary
endpoints including patient reported outcomes This trial has completed
enrollment and we are conducting an extension study for previously enrolled
patients, which is designed to evaluate the long-term safety, tolerability and
efficacy of treatment with mitapivat.
•A phase 2, open-label safety and efficacy clinical trial of mitapivat in adult
patients with non-transfusion-dependent ?- and ?-thalassemia. The trial has
completed enrollment We reported in June 2020 that this trial met its primary
endpoint of hemoglobin increase of greater than or equal to 1.0 gram per
deciliter from baseline at one or more assessments during weeks 4-12 of the
trial.
•In collaboration with the National Institutes of Health, or NIH, we are
evaluating mitapivat in a phase 1 trial in patients with SCD pursuant to a
cooperative research and development agreement. The trial is ongoing and
enrolling patients, although the NIH experienced disruptions related to the
COVID-19 pandemic.
•In collaboration with UMC Utrecht, or UMC, we are evaluating mitapivat in
patients with SCD pursuant to an investigator sponsored trial agreement. The
trial is ongoing and enrolling patients, although UMC experienced disruptions
related to the COVID-19 pandemic.
We expect to initiate two phase 3 trials of mitapivat, ENERGIZE and ENERGIZE-T,
in not regularly transfused and regularly transfused adults with thalassemia in
the second half of 2021, and we expect to initiate a phase 2/3 trial of
mitapivat in patients with SCD by the end of 2021. We expect to initiate pivotal
trials in pediatric PK deficiency in 2022.
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AG-946: Next-generation PKR Activator
•A phase 1 trial of AG-946 in healthy volunteers and in patients with SCD. The
trial is currently enrolling healthy volunteers.
Other research and platform programs
Other research and platform programs include activities related to exploratory
efforts, target validation and lead optimization for our discovery and follow-on
programs, and our proprietary metabolomics platform.
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of salaries and
other related costs, including stock-based compensation, for personnel in
executive, finance, business development, commercial, legal and human resources
functions. Other significant costs include facility related costs not otherwise
included in research and development expenses, legal fees relating to patent and
corporate matters, and fees for accounting and consulting services.
We anticipate that our selling, general and administrative expenses will
increase in the future to support continued research and development activities
and future commercialization activities related to our GDD portfolio, including
the potential commercialization of our 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.
Results of Operations
Certain amounts in prior periods have been reclassified to reflect the impact of
the discontinued operations treatment of the oncology business in order to
conform to the current period presentation.
Comparison of the three and six months ended June 30, 2021 and 2020
Total Operating Expenses
                                                         Three Months Ended June 30,                Six Months Ended June 30,
(In thousands)                                             2021                 2020                 2021                  2020
Cost and expenses:

Research and development                             $       62,007

$ 54,086 $ 119,674 $ 109,445 Selling, general and administrative

                          29,215            29,178                  62,765             60,849
Total Operating Expenses                             $       91,222

$ 83,264 $ 182,439 $ 170,294




Total Operating Expenses - Three Months ended June 30, 2021 vs. Three Months
ended June 30, 2020 - The increase in total operating expenses of $8.0 million
for the three months ended June 30, 2021 compared to the three months ended June
30, 2020 was primarily due an increase in research and development expenses of
$7.9 million which is described below under Research and Development Expenses.
Included in selling, general and administrative expenses is approximately $2.1
million of reimbursable transition related services we provided to Servier
related to the sale of the oncology business.
Total Operating Expenses - Six Months ended June 30, 2021 vs. Six Months ended
June 30, 2020 - The increase in total operating expenses of $12.1 million for
the six months ended June 30, 2021 compared to the six months ended June 30,
2020 was primarily due an increase in research and development expenses of
$10.2 million which is described below under Research and Development Expenses.
Included in selling, general and administrative expenses is approximately $2.1
million of reimbursable transition related services we provided to Servier
related to the sale of the oncology business.
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Research and Development Expenses
Our research and development expenses, by major program, are outlined in the
table below:
                                                  Three Months Ended June 30,                Six Months Ended June 30,
(In thousands)                                      2021                 2020                 2021                  2020

Mitapivat (PKR activator)                     $       17,049          $

11,056 $ 29,413 $ 20,776



AG-946 (Next-Gen PKR activator)                        2,258             2,432                   4,029              4,838
Other research and platform programs                   4,361             2,781                   8,575              5,956
Total direct research and development
expenses                                              23,668            16,269                  42,017             31,570
Compensation and related expenses                     22,396            26,036                  49,149             52,971
Facilities and IT related expenses & other            11,539            11,781                  24,104             24,904
Other expenses - transition services                   4,404                 -                   4,404                  -
Total indirect research and development
expenses                                              38,339            37,817                  77,657             77,875

Total research and development expense $ 62,007 $ 54,086 $ 119,674 $ 109,445

Total Research and Development Expenses - Three Months ended June 30, 2021 vs.
Three Months ended June 30, 2020 - The increase in total research and
development expenses of $7.9 million for the three months ended June 30, 2021
compared to the three months ended June 30, 2020 was primarily due to a $6.0
million increase in mitapivat costs due to start up costs for the planned phase
3 trials of mitapivat, ENERGIZE and ENERGIZE-T, the planned phase 2/3 trial of
mitapivat in patients with SCD, and filing and launch preparation activities
which includes $0.5 million in filing fees. Included in total indirect research
and development expenses was $4.4 million of reimbursable transition related
services we provided to Servier related to the sale of the oncology business for
discovery, clinical development, technical operations, and commercial related
activities which will continue for periods ranging from one month to
approximately one year after March 31, 2021.
Total Research and Development Expenses - Six Months ended June 30, 2021 vs. Six
Months ended June 30, 2020 - The increase in total research and development
expenses of $10.2 million for the six months ended June 30, 2021 compared to the
six months ended June 30, 2020 was primarily due to a $8.6 million increase in
mitapivat costs due to start up costs for the planned phase 3 trials of
mitapivat, ENERGIZE and ENERGIZE-T, the planned phase 2/3 trial of mitapivat in
patients with SCD, and filing and launch preparation activities which includes
$0.5 million in filing fees. Included in total indirect research and development
expenses was $4.4 million of reimbursable transition related services we
provided to Servier related to the sale of the oncology business related to
discovery, clinical development, technical operations, and commercial related
activities which will continue for periods ranging from one month to
approximately one year after March 31, 2021.
Other Income and Expense
                                                   Three Months Ended June 30,              Six Months Ended June 30,
(In thousands)                                      2021                2020                2021                2020
Gain on sale of oncology business               $    2,000          $        -          $    2,000          $        -
Interest (expense) income, net                         (92)              1,769                 248               4,705
Other income, net                                    6,524                   -               6,524                   -


Other Income and Expense- Three Months ended June 30, 2021 vs. Three Months
ended June 30, 2020 - The increase in other income, net primarily relates to
approximately $6.5 million of reimbursable transition related services and fees
for the sale of the oncology business. The increase in gain on sale of oncology
business primarily relates to income from royalties on U.S. net sales of
TIBSOVO® by Servier of approximately $2.0 million in the second quarter of 2021.
The decrease in interest income, net is primarily attributable to a decrease in
interest rates.
Other Income and Expense- Six Months ended June 30, 2021 vs. Six Months ended
June 30, 2020 - The increase in other income, net primarily relates to
approximately $6.5 million of reimbursable transition related services and fees
for the sale of the oncology business in the second quarter of 2021. The
increase in gain on sale of oncology business primarily relates to income from
royalties on U.S. net sales of TIBSOVO® by Servier of approximately $2.0 million
in the second quarter of 2021. The decrease in interest income, net is primarily
attributable to a decrease in interest rates.
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Loss from Operations and Net Income (Loss)
                                                    Three Months Ended June 30,                    Six Months Ended June 30,
(In thousands)                                        2021                  2020                   2021                    2020
Net loss from continuing operations             $      (82,790)         $ (81,495)         $     (173,667)             $ (165,589)
Net income (loss) from discontinued operations          (3,427)            (8,983)              1,961,775                  34,855
Net income (loss)                                      (86,217)           (90,478)              1,788,108                (130,734)


Loss from Operations and Net Income (Loss) - Three Months ended June 30, 2021
vs. Three Months ended June 30, 2020 - The increase in net loss from continuing
operations for the three months ended June 30, 2021 compared to the three months
ended June 30, 2020 was primarily driven by the higher research and development
expenses discussed above under Research and Development Expenses, partially
offset by $6.5 million of reimbursable transition related services and fees
related to the sale of the oncology business and a $2.0 million gain on sale of
oncology business related to income from royalties on U.S. net sales of TIBSOVO®
by Servier, both occurring in the second quarter of 2021. The change in net loss
from discontinued operations for the three months ended June 30, 2021 compared
to the three months ended June 30, 2020 was primarily driven by the sale of our
oncology business to Servier in the first quarter of 2021, which significantly
reduced revenues and expenses related to our oncology programs. The decrease in
net income (loss) for the three months ended June 30, 2021 compared to the three
months ended June 30, 2020 was primarily driven by the increase in net loss from
continuing operations discussed above, partially offset by a lower net loss from
discontinued operations for the three months ended June 30, 2021 on the sale of
the oncology business discussed above.
Loss from Operations and Net Income (Loss) - Six Months ended June 30, 2021 vs.
Six Months ended June 30, 2020 - The increase in loss from continuing operations
for the six months ended June 30, 2021 compared to the six months ended June 30,
2020 was primarily driven by the higher research and development expenses
discussed above under Research and Development Expenses, partially offset by
$6.5 million of reimbursable transition related services and fees related to the
sale of the oncology business and a $2.0 million gain on sale of oncology
business related to income from royalties on U.S. net sales of TIBSOVO® by
Servier, both occurring in the second quarter of 2021. The change in net income
from discontinued operations and net income (loss) for the six months ended June
30, 2021 compared to the six months ended June 30, 2020 was primarily driven by
the sale of our oncology business to Servier for approximately $1.8 billion in
cash in the first quarter of 2021, which is included within net income from
discontinued operations.
Liquidity and Capital Resources
Sources of liquidity
Since our inception, and through June 30, 2021, we have funded our operations
through proceeds from the sale of our oncology business, commercial sales of
TIBSOVO®, upfront, milestone, extension, cost reimbursement and royalty payments
related to our collaboration agreements, product sales, proceeds from the sale
of our royalty rights, proceeds received from our issuance of preferred stock,
our initial public offering and concurrent private placement of common stock to
an affiliate of Celgene, and our follow-on public offerings.
As of June 30, 2021, we had cash, cash equivalents and marketable securities of
$1.7 billion. On March 25, 2021, we announced that our board of directors
authorized the repurchase of up to $1.2 billion of our outstanding shares of
common stock, or the Repurchase Program, using the proceeds from the sale of our
oncology business to Servier. On March 31, 2021, in connection with the
Repurchase Program, we entered into a definitive share repurchase agreement with
Bristol-Myers Squibb Company, or BMS, to repurchase 7,121,658 shares of our
common stock held by certain subsidiaries of BMS for an aggregate purchase price
of $344.5 million, or $48.3785 per share. This repurchase was completed on April
5, 2021. Further, on April 2, 2021, in connection with the Repurchase Program,
we entered into a Rule 10b5-1 repurchase plan pursuant to which we may
repurchase up to $600 million of shares of our common stock. As of June 30,
2021, we have repurchased approximately 3.4 million shares of common stock for
$184.5 million, or $54.71 per share, under the plan with approximately
$415.5 million remaining under the plan for additional repurchases.
In addition to our existing cash, cash equivalents and marketable securities,
under the purchase agreement we are eligible to receive a $200 million milestone
payment upon regulatory approval of vorasidenib and royalty payments with
respect to U.S. net sales of TIBSOVO® and, if approved, vorasidenib. Our right
to such payments from Servier is our only committed potential external source of
funds. Whether the regulatory approval milestone for vorasidenib will be
achieved is subject to various risks and uncertainties, many of which are
outside our control, including adverse clinical developments with respect to
vorasidenib. Furthermore, we cannot predict what success, if any, Servier may
have in the United States with respect to sales of TIBSOVO®
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and, if approved, vorasidenib and consequently we cannot estimate the amount of
royalty payments that we can expect to receive from Servier under the purchase
agreement prior to the loss of exclusivity of these products.
Cash flows
The following table provides information regarding our cash flows for the six
months ended June 30, 2021 and 2020:
                                                                       Six Months Ended June 30,
(In thousands)                                                         2021                     2020
Net cash used in operating activities                          $     (238,043)             $  (173,155)
Net cash provided by investing activities                           1,575,928                  130,594
Net cash (used in) provided by financing activities                  (496,197)                 257,488
Net change in cash and cash equivalents                        $      841,688              $   214,927


Net cash used in operating activities. Cash used in operating activities of
$238.0 million during the six months ended June 30, 2021, of which
$159.2 million was used by continuing operations and $78.8 million was used by
discontinued operations, was primarily due to cash received of $39.5 million
from sales of TIBSOVO®, and $1.2 million in cost reimbursements related to our
collaboration agreements with Celgene. These amounts were offset by operating
expenses primarily driven by research and development costs described above
under Research and Development Expenses.
Cash used in operating activities of $173.2 million during the six months ended
June 30, 2020, of which $136.2 million was used by continuing operations and
$37.0 million was used by discontinued operations, was primarily due to cash
received $52.3 million from sales of TIBSOVO®, $9.6 million in royalty payments
and cost reimbursements under our collaboration agreements with Celgene, $4.8
million in interest received, and $1.8 million in cost reimbursement related to
our collaboration agreement with CStone. These amounts were offset by decreased
operating expenses driven by lower research and development costs described
above in Research and Development Expenses partially offset by increased
staffing needs due to our expanding operations.
Net cash provided by investing activities. Cash provided by investing activities
of $1.6 billion for the six months ended June 30, 2021, of which $227.0 million
was used by operating activities and $1.8 billion was provided by discontinued
operations, was primarily due to the approximately $1.8 billion in cash proceeds
received from the sale of our oncology business to Servier that was completed on
March 31, 2021, partially offset by lower proceeds from maturities and sales of
marketable securities than purchases of marketable securities. Cash provided by
investing activities of $130.6 million for six months ended June 30, 2020, of
which approximately all was provided by operating activities and $348.0 thousand
was used by discontinued operations, was primarily the result of higher proceeds
from maturities and sales of marketable securities than purchases of marketable
securities, offset by $8.7 million in purchases of property and equipment.
Net cash (used in) provided by financing activities. Cash used in financing
activities for the six months ended June 30, 2021, of which all was provided by
operating activities and none was used by discontinued operations, was primarily
the result of $529.0 million in common stock repurchases in the second quarter
of 2021 under our Repurchase Program, partially offset by the $33.0 million of
proceeds received from stock option exercises and purchases made pursuant to our
2013 ESPP. Cash provided by financing activities for the six months ended June
30, 2020, of which $7.0 million was provided by continuing operations and
$250.5 million was provided by discontinued operations, was primarily the result
of net proceeds of $250.5 million from the sale of our tiered, sales-based
royalty rights on worldwide net sales of IDHIFA® (enasidenib) and our ex-US
regulatory milestones to Royalty Pharma in June 2020 and $7.1 million of
proceeds received from stock option exercises and purchases made pursuant to our
2013 ESPP.
Funding requirements
Although we expect our expenses to decrease following the completion of the sale
of our oncology business to Servier on March 31, 2021, we anticipate that this
decrease will be offset as we transition our operations to focus solely on GDDs,
particularly as we continue the research, development and clinical trials of,
seek marketing approvals for, and commercialize our product candidates. If we
obtain marketing approval 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 June 30, 2021, will enable us to execute our operating plan through major
catalysts and to cash-flow positivity without the need to raise additional
equity. Our future capital requirements will depend on many factors, including:
•the amount of contingent consideration we ultimately receive in connection with
the sale of our oncology business to Servier;
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•the scope, progress, results and costs of drug discovery, preclinical
development, laboratory testing and clinical trials for our product candidates;
•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;
•the amount and timing of revenue, if any, received from commercial sales of our
product candidates for which we receive marketing approval;
•our ability to establish and maintain collaborations on favorable terms, if at
all;
•our ability to successfully execute on our strategic plans;
•operational delays due to the ongoing COVID-19 pandemic; and
•the extent to which we acquire or in-license, or monitor or out-license, other
medicines and technologies.
Until such time, if ever, as we can generate substantial product revenue, we
expect to finance our cash needs primarily through cash on hand, royalty
payments from Servier with respect to U.S. net sales of TIBSOVO®, a potential
milestone payment from Servier if vorasidenib is approved by the FDA 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 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.
Off-Balance Sheet Arrangements
We did not have, during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined under applicable SEC rules.
Contractual Obligations
We have entered into agreements in the normal course of business with CROs for
clinical trials and contract manufacturing organizations for supply
manufacturing and with vendors for preclinical research studies and other
services and products for operating purposes. These contractual obligations are
cancelable at any time by us, generally upon prior written notice to the vendor.
During the three and six months ended June 30, 2021, there were no significant
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,
2020.
Item 3.  Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk related to changes in interest rates. As of
June 30, 2021 and December 31, 2020, we had cash, cash equivalents and
marketable securities of $1.7 billion and $670.5 million, 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.
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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 June 30, 2021 and December 31,
2020, liabilities denominated in foreign currencies were immaterial.
Item 4.  Controls and Procedures
Disclosure Controls and Procedures
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 June 30, 2021, 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
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
On March 25, 2021, we announced that our board of directors authorized a share
repurchase program to purchase up to $1.2 billion of our outstanding shares of
common stock, or the Repurchase Program, using the proceeds from the sale of our
oncology business to Servier. On March 31, 2021, we entered into a definitive
share repurchase agreement with BMS, to repurchase 7,121,658 shares of our
common stock held by certain subsidiaries of BMS for an aggregate purchase price
of $344.5 million, or $48.3785 per share. The repurchase was completed on April
5, 2021. Further, on April 2, 2021, in connection with the Repurchase Program,
we entered into a Rule 10b5-1 repurchase plan pursuant to which we may
repurchase up to $600 million of shares of our common stock. As a result, during
the three months ended June 30, 2021, we made the following modifications to our
internal control over financial reporting, as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act, including changes to accounting policies and
procedures, operational processes, and documentation practices that materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting:
•updated our policies and procedures related to identification of accounts
related to the share repurchase and added documentation processes related to
accounting for the share repurchases;
•added internal controls over the accounting for the share repurchases; and
•added controls to address related disclosures for the share repurchases
Other than the items described above, there were no changes in our internal
control over financial reporting that occurred during the fiscal quarter ended
June 30, 2021 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

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