The following discussion of our financial condition and results of operations
should be read in conjunction with our condensed consolidated financial
statements and related notes included elsewhere in this report. Some of the
information contained in this discussion and analysis and set forth elsewhere in
this report, including information with respect to our plans and strategy for
our business, the possible achievement of development goals and milestones, our
future development efforts, our collaborations, and our future operating results
and financial position, includes forward-looking statements that involve risks
and uncertainties. We often use words such as "anticipate," "believe,"
"estimate," "expect," "intend," "may," "plan," "predict," "project," "seek,"
"target," "goal," "potential," "will," "would," "could," "should," "continue,"
and other words and terms of similar meaning to help identify forward-looking
statements, although not all forward-looking statements contain these
identifying words. You can also identify these forward-looking statements by the
fact that they do not relate strictly to historical or current facts. There are
a number of important risks and uncertainties that could cause actual results or
events to differ materially from those indicated by forward-looking statements
made herein. These risks and uncertainties include those inherent in
pharmaceutical research and development, such as adverse results in our drug
discovery and clinical development activities, decisions made by the U.S. Food
and Drug Administration, or FDA, and other regulatory authorities with respect
to the development and commercialization of our product candidates, our ability
to obtain, maintain and enforce intellectual property rights for our product
candidates, our dependence on our alliance partners, competition, our ability to
obtain any necessary financing to conduct our planned activities, our ability to
implement our strategic plans, our ability to achieve cost-savings benefits from
our restructuring and other risk factors described herein. These risks also
include the direct and indirect impact of COVID-19 on our business and
operations, including expenses, supply chain, manufacturing, research and
development costs, clinical trials, the period in which we expect to have cash
to fund our clinical trials, and employees. We have included, and you should
review, important factors in the cautionary statements included in this
Quarterly Report on Form 10-Q, particularly in the section titled "Risk Factors"
in Part II, Item 1A that could cause actual results to differ materially from
the results described in or implied by the forward-looking statements contained
in the following discussion and analysis and elsewhere in this report. Unless
required by law, we do not undertake any obligation to update any
forward-looking statements.
Business Overview
We are an innovative biopharmaceutical company dedicated to developing novel
medicines for people with cancer. We combine proven scientific expertise with a
passion for developing novel small molecule drugs that target disease pathways
for potential applications in oncology. We are focusing our efforts on advancing
IPI-549, an orally administered, clinical-stage, immuno-oncology product
candidate that selectively inhibits the enzyme phosphoinositide-3-kinase-gamma,
or PI3K-gamma. We believe IPI-549 is the only selective inhibitor of PI3K-gamma
being investigated in clinical trials.
In December 2019, a novel strain of coronavirus surfaced in China causing the
respiratory disease COVID-19. This disease has spread worldwide and was deemed a
"pandemic" by the World Health Organization on March 11, 2020. The governor of
Massachusetts, where our offices are located, issued a "stay-at-home order"
effective March 24, 2020, requiring all "non-essential" businesses to close
their physical workplaces and facilities and encouraging individuals to stay in
their homes as much as possible in the coming weeks. Similar restrictions have
been recommended by governments throughout the world. We discuss the impact of
the pandemic on our operations in the section entitled "Business Update
Regarding COVID-19," below.
Clinical Development Program
We are conducting the following clinical trials investigating IPI-549 in solid
tumors:
MARIO-275 (MAcrophage Reprogramming in Immuno-Oncology)
MARIO-275 is our global, randomized, controlled Phase 2 study designed to
evaluate the effect of adding IPI-549 to nivolumab, also known as Opdivo®, in
approximately 160 checkpoint-naïve advanced urothelial cancer, or UC, patients
whose cancer has progressed or recurred following treatment with platinum-based
chemotherapy. Nivolumab is an immune checkpoint inhibitor therapy commercialized
by Bristol-Myers Squibb Company, or BMS, that targets programmed death receptor
1, or PD-1, a checkpoint protein that helps regulate the body's immune system.
Based on a retrospective analysis of exploratory biomarker data from BMS's
approval study, CheckMate-275, UC patients with high baseline levels of
myeloid-derived suppressor cells, or MDSCs, had a shorter overall survival when
treated with nivolumab as a single agent. Data from our ongoing Phase 1/1b study
MARIO-1, described below, have demonstrated that treatment with the combination
of IPI-549 and nivolumab is associated with a reduction in blood MDSC levels. We
believe that adding IPI-549 to nivolumab can potentially improve outcomes for
patients with advanced urothelial cancer. We entered into a clinical supply
agreement in November 2018 with BMS under which BMS has agreed to supply
nivolumab for our use in MARIO-275. On March 25, 2020, we announced

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that we received Fast Track Designation from the U.S. Food and Drug
Administration for IPI-549 in combination with nivolumab for the treatment of
advanced urothelial cancer.
On May 11, 2020, we announced that the MARIO-275 Independent Data Monitoring
Committee, or IDMC, held its first scheduled meeting to review safety data on
the initial 42 patients treated in the study. Liver enzyme elevations of Grade 3
or higher were seen in seven of 42 patients: five with Grade 3 and two with
Grade 4, one of which is newly observed and has not yet been reviewed by the
IDMC. Liver enzyme elevations from the six patients reviewed by the IDMC were
reversible and have resolved without sequela. Of 17 patients evaluable for
efficacy, objective responses have been observed in patients with Grade 3 and
above liver enzyme elevations as well as in patients without these elevations.
We are continuing to review this data with the IDMC and plan to continue the
treatment of patients now on study with modifications, including additional
patient monitoring and a dose reduction. In parallel, we are voluntarily pausing
enrollment in MARIO-275 and amending the protocol in order to ensure patient
safety while evaluating the potential benefit of IPI-549 plus nivolumab.
MARIO-3

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We are currently enrolling patients in MARIO-3, a multi-arm Phase 2 study
designed to evaluate IPI-549 in the front-line setting for triple negative
breast cancer, or TNBC, and front-line renal cell carcinoma, or RCC. One cohort
of the study is evaluating IPI-549 in combination with atezolizumab, also known
as Tecentriq®, and nab-paclitaxel, also known as Abraxane®, in 60 patients with
front-line TNBC. The second cohort is evaluating IPI-549 in combination with
atezolizumab and bevacizumab, also known as Avastin®, in 30 patients with
front-line RCC. MARIO-3 is intended to evaluate whether IPI-549 can improve upon
the response rates of these approved combination therapies in patients with
unmet needs. We entered into a clinical supply agreement with F. Hoffmann-La
Roche Ltd., or Roche, in March 2019 under which Roche has agreed to supply
atezolizumab for our use in MARIO-3. The TNBC cohort of MARIO-3 is experiencing
initial enrollment and site initiation delays, independent of a COVID-19 impact,
which we are evaluating while working closely with our CRO and investigators.
MARIO-1
Enrollment is complete in MARIO-1, our Phase 1/1b clinical study designed to
evaluate the safety, tolerability, pharmacokinetics, pharmacodynamics, and
activity for IPI-549 - both as a monotherapy and in combination with nivolumab -
in 219 patients with advanced solid tumors. The combination therapy expansion
cohorts, described in the table below, are designed to evaluate patients dosed
at 40 mg once daily, or QD, of IPI-549 in combination with the standard regimen
of nivolumab.
MARIO-1 Cohorts                     Inclusion/Exclusion Criteria
                                    Patients showed initial resistance, or
Non-small cell lung cancer (NSCLC)  initially responded to but subsequently
Melanoma                            developed resistance, to immune checkpoint
Head and neck cancer                blockade therapy
                                    Patients naive to treatment with PD-1/PD-L1
TNBC                                therapy
Mesothelioma                        Patients previously received at least

Adrenocortical carcinoma (ACC) first-line treatment High baseline blood levels of MDSCs Varied based on indication




Additional data from MARIO-1 are expected in 2020 to the extent that they inform
potential future IPI-549 development paths. We reported data from the
combination expansion cohorts of the MARIO-1 study in a late-breaking poster
presentation at the 33rd Annual Meeting of the Society for Immunotherapy of
Cancer on November 10, 2018. Among the 44 patients evaluable for activity as of
the October 14, 2018 data-cutoff date, 15 patients showed a best response of
stable disease or better, including one partial response in an advanced melanoma
patient who had progressed on immediate prior nivolumab therapy. Among the 82
patients evaluable for safety, the majority of side effects reported were Grade
1 or Grade 2, with three (4%) patients discontinuing the study due to
treatment-related toxicities. The most common Grade 3+ adverse events were rash
(n=6, 7%) and increased liver enzymes AST (n=7, 9%) and ALT (n=5, 6%). There
were no treatment-related deaths.
Safety data from the dose-escalation portion of MARIO-1, presented at the 2018
annual meeting of the American Society of Clinical Oncology, or ASCO 2018,
demonstrated that IPI-549 combined with nivolumab was well tolerated at all
doses tested, up to the recommended combination therapy expansion dose of
IPI-549 at 40 mg QD plus the standard regimen of nivolumab. No maximum tolerated
dose was determined, and there were no treatment-related deaths. The
pharmacokinetic/pharmacodynamic profile of IPI-549 up to the recommended
combination expansion dose of 40 mg QD was unaffected by nivolumab
co-administration, and IPI-549 in combination with nivolumab reduced immune
suppression and increased immune activation, as indicated by analyses of
peripheral blood. At ASCO 2018, we also presented updated clinical and
translational data from the fully enrolled monotherapy expansion portion of
MARIO-1 that demonstrated that IPI-549 as a monotherapy continued to be well
tolerated at all doses studied up to the recommended dose for monotherapy
expansion of 60 mg QD, and that IPI-549 as a monotherapy reduced immune
suppression and increased immune activation, as indicated by analyses of
peripheral blood and paired tumor biopsies.
Arcus Collaboration Trial

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Arcus Biosciences, Inc., or Arcus, is currently enrolling patients in its Phase
1/1b collaboration study designed to evaluate a novel triple-combination regimen
of IPI-549 in combination with AB928, Arcus's dual adenosine receptor
antagonist, and liposomal doxorubicin chemotherapy, also known as Doxil®, in up
to 40 patients with previously treated, advanced TNBC. AB928 is an orally
bioavailable, highly potent antagonist of the adenosine 2a and 2b receptors. The
activation of these receptors by adenosine interferes with the activity of key
populations of immune cells and inhibits the body's optimal anti-tumor immune
response. By blocking these receptors, AB928 has the potential to reverse
adenosine-induced immune suppression within the tumor microenvironment. As both
macrophages and high adenosine levels are believed to play critical roles in
creating a highly immunosuppressive tumor microenvironment in cancer after
treatment with chemotherapy, the novel immuno-oncology combination being
evaluated in this setting represents a potentially promising approach to
treating TNBC.
Business Update Regarding COVID-19
The following guidance regarding the impact of the COVID-19 pandemic on our
business operations is highly uncertain and subject to change. We cannot know
with certainty what the ultimate impact of the pandemic will be.
Clinical Development Operations
We are continuing to evaluate early enrollment trends in our studies as well as
the impact of COVID-19 on our clinical programs. Patients enrolled on MARIO-275,
MARIO-3 and MARIO-1 have continued treatment and study visits with limited
disruption to date, and we are working closely with trial sites to support the
continued treatment of patients in compliance with study protocols. The pandemic
is impacting new patient enrollment and site initiation across our clinical
programs. New patient screening and enrollment and new site initiation are being
assessed on a case-by-case basis and are ongoing in MARIO-3. There are no
anticipated disruptions to drug supply.
Business Operations
As a result of the delays in enrollment in our MARIO-3 and MARIO-275 clinical
trials, we anticipate that our existing financial resources will not be
sufficient to fully fund us through key data readouts on all of our IPI-549
trials and that we will need to seek additional capital resources in order to
fund our operations through key data readouts. The safety and well-being of our
employees remains a top priority, and we are working to mitigate risk while
minimizing disruptions through our work-from-home policy. We are well suited to
operate remotely as a clinically focused company.

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Alliances, Collaborations, and Other Arrangements
We have primarily incurred operating losses since inception and will continue to
fund our operations through collaboration and license arrangements or other
strategic arrangements, as well as through the sale of securities or incurring
debt, until such time as we are able to generate significant revenue from
product sales. Such arrangements have provided access to breakthrough science,
significant research and development support and funding, supply of clinical
trial materials, and innovative drug development programs, all intended to help
us realize the full potential of our product pipeline.
In July 2010, we entered into a development and license agreement with
Intellikine, Inc., or Intellikine, under which we obtained rights to discover,
develop and commercialize pharmaceutical products targeting the gamma and/or
delta isoforms of PI3K, including IPI-549 and duvelisib, an oral, dual inhibitor
of PI3K delta and gamma we outlicensed to Verastem Inc., or Verastem. In January
2012, Intellikine was acquired by Takeda Pharmaceutical Company Limited, or
Takeda. In December 2012, we amended and restated our development and license
agreement with Takeda and further amended the agreement in July 2014, September
2016, July 2017, and March 2019. We refer to the amended and restated
development and license agreement, as amended, as the Takeda Agreement. We are
obligated to pay Takeda up to $3.0 million in remaining success-based
development milestone payments and up to $165.0 million in remaining regulatory
and commercialization success-based milestone payments, for one product
candidate other than duvelisib, which could be IPI-549.
PellePharm and BVF Financing
In June 2013, we entered into a license agreement with PellePharm, Inc., or
PellePharm, under which we granted PellePharm exclusive global development and
commercialization rights to our hedgehog inhibitor program, including IPI-926,
or patidegib, a clinical-stage product candidate. We refer to our license
agreement with PellePharm as the PellePharm Agreement and products covered by
the PellePharm Agreement as Hedgehog Products. In November 2018, PellePharm
announced that it had entered into a development and commercialization
collaboration with LEO Pharma under which LEO Pharma A/S, or LEO Pharma,
provided research and development funding and received an option to acquire all
shares in PellePharm.
In January 2020, we entered into a funding agreement, or the BVF Funding
Agreement, with BVF Partners, L.P., which we refer to as BVF, and Royalty
Security, LLC, a wholly owned subsidiary of BVF, which we refer to as the Buyer.
Under the BVF Funding Agreement, we received a one-time payment of $20.0
million, less certain transaction expenses, and in exchange we assigned the
PellePharm Agreement to the Buyer together with our interest in certain royalty
payments due to us under the PellePharm Agreement (as described in more detail
below). We have agreed to perform certain servicing, management and
administrative functions on behalf of Buyer with respect to the PellePharm
Agreement.
We have retained our rights under the PellePharm Agreement to receive up to $9.0
million in remaining regulatory and commercial-based milestone payments through
the first commercial sale of a Hedgehog Product. We earned a $2.0 million
milestone payment for PellePharm's initiation of a Phase 3 study of a Hedgehog
Product that fully enrolled in 2019. PellePharm is also obligated to pay us up
to $37.5 million in success-based milestone payments upon the achievement of
certain annual net sales thresholds, as well as a share of certain revenue
received by PellePharm in the event that PellePharm sublicenses its rights under
the PellePharm Agreement. Additionally, under the BVF Funding Agreement, we are
eligible to receive a $5.0 million milestone payment from the Buyer based on the
outcome of PellePharm's ongoing Phase 3 clinical trial of patidegib topical gel
in Gorlin's syndrome.
PellePharm is obligated to pay the Buyer tiered royalties on annual net sales of
patidegib, or the BVF Licensed Product, excluding a portion of the royalties
that remain payable to us to satisfy our obligation to third parties.
PellePharm's royalty obligations are subject to reduction after a certain
aggregate funding threshold has been achieved and expire on a country-by-country
and Hedgehog Product-by-Hedgehog Product basis. The PellePharm Agreement expires
upon the expiration of the last royalty obligation owed by PellePharm, at which
time the license to Hedgehog Products and licenses to our know-how as described
in the PellePharm Agreement become fully-paid-up and non-royalty-bearing
licenses. PellePharm has the right to terminate the PellePharm Agreement upon at
least 180 days' prior written notice to us at any time, and the Buyer has the
right to terminate the PellePharm Agreement if PellePharm puts forth or actively
assists a patent challenge related to our Hedgehog Product patent rights. Either
party may terminate the PellePharm Agreement if the other party materially
breaches or defaults in the performance of its obligations. Upon termination by
either party, all rights and licenses granted by us to PellePharm under the
PellePharm Agreement terminate and PellePharm shall, to the extent applicable,
transfer and assign to Buyer all rights, title, and interest in and to the
trademark(s) used for Hedgehog Products in the territory covered under the
PellePharm Agreement.

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For a further description of our strategic alliances, collaborations, and other
arrangements with BVF, PellePharm, Takeda, Verastem, and others, see Note 9,
Note 10, and Note 12 of the notes to our unaudited condensed consolidated
financial statements included elsewhere in this Quarterly Report on Form 10-Q
and our prior disclosure included in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2019 filed with the U.S. Securities and Exchange
Commission, or SEC, on March 3, 2020, which we refer to as our 2019 Annual
Report on Form 10-K.
To date, substantially all of our resources have been devoted to clinical
development, conducting preclinical and translational research, organizing and
staffing our company, and otherwise raising capital and business planning. We
expect to continue to spend significant resources to fund the development and
potential commercialization of IPI-549 and will continue to incur significant
operating losses for the foreseeable future. If we are unable to raise capital
or enter into a collaboration or license arrangement on terms that ensure
adequate funding on terms favorable to us, we may have to delay, reduce or
discontinue the development or commercialization of IPI-549.
Due to the risks and uncertainties inherent in pharmaceutical product
development and commercialization, as described in this Quarterly Report on Form
10-Q, including the section entitled "Risk Factors" in Part II, Item 1A, we are
unable to predict future expenses and future profitability. We may fail to
obtain marketing approval for IPI-549 or to successfully commercialize IPI-549.
If we are unable to create sustained profitability, we may be forced to reduce,
delay, or terminate our operations.
Financial Overview
Revenue
To date, all of our revenue has been generated under strategic
agreements, including payments to us of upfront license fees, funding or
reimbursement of research and development efforts, milestone payments upon
achievement of specified objectives, and royalties on product sales.
At the inception of each agreement, we follow a five-step model: 1) identify the
customer contract; 2) identify the contract's performance obligations; 3)
determine the transaction price; 4) allocate the transaction price to the
performance obligations; and 5) recognize revenue when or as a performance
obligation is satisfied. We evaluate all promised goods and services within a
customer contract and determine which of those are separate performance
obligations. This evaluation includes an assessment of whether the good or
service is capable of being distinct and whether the good or service is
separable from other promises in the contract. When a performance obligation is
satisfied, we recognize as revenue the amount of the transaction price,
excluding estimates of variable consideration that are constrained, that is
allocated to that performance obligation. For contracts that contain variable
consideration, such as milestone payments, we estimate the amount of variable
consideration by using either the expected value method or the most likely
amount method. In making this assessment, we evaluate factors such as the
clinical, regulatory, commercial and other risks that must be overcome to
achieve the milestone. Each reporting period we re-evaluate the probability of
achievement of such milestones and any related constraints. We will include
variable consideration, without constraint, in the transaction price to the
extent it is probable that a significant reversal in the amount of cumulative
revenue recognized will not occur when the uncertainty associated with the
variable consideration is subsequently resolved.
We recognize sales-based milestones and royalty revenue based upon net sales by
the licensee of licensed products in licensed territories, and in the period the
sales occur under the sales- and usage-based royalty exception when the sole or
predominate item to which the royalty relates is a license to intellectual
property.
In the event of an early termination of a collaboration agreement, any contract
liabilities would be recognized in the period in which all our obligations under
the agreement have been fulfilled.
Research and Development Expense
We are a drug development company. Our research and development expense has
historically consisted primarily of the following:
•compensation of personnel associated with research and development activities;
•clinical testing costs, including payments made to contract research
organizations;
•costs of combination and comparator drugs used in clinical studies;
•costs of manufacturing product candidates for preclinical testing and clinical
studies;
•costs associated with the licensing of research and development programs;
•preclinical testing costs, including costs of toxicology studies;
•fees paid to external consultants;
•fees paid to professional service providers for independent monitoring and
analysis of our clinical trials;
•         costs for collaboration partners to perform research activities,

including development milestones for which a payment is due when

achieved;




•depreciation of equipment; and
•allocated costs of facilities.
General and Administrative Expense
General and administrative expense primarily consists of compensation of
personnel in executive, finance, accounting, legal and intellectual property,
information technology infrastructure, corporate communications, corporate
development and human resources functions. Other costs include facilities costs
not otherwise included in research and development expense and professional fees
for legal and accounting services.
Royalty Expense
Royalty expense represents expense associated with amounts owed to third parties
as a result of royalty revenue recognized and the amounts owed by us to Takeda
in relation to the sale of future royalties.
Other Income and Expense
Other income and expense typically consist of interest earned on cash, cash
equivalents and available-for-sale securities, and non-cash interest expense.
Critical Accounting Policies and Significant Judgments and Estimates
The discussion and analysis of our financial condition and results of operations
is based on our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
judgments, estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. On an ongoing basis, we evaluate
our estimates, including those related to cumulative revenue related to variable
consideration, accrued expenses, estimates of future net royalty payments used
in the calculation of our liability related to the sale of future royalties, and
assumptions in the valuation of stock-based compensation. We base our estimates
on historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results could differ from those
estimates.
There have been no material changes to our critical accounting policies during
the three months ended March 31, 2020. Please refer to Part II, Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of our 2019 Annual Report on Form 10-K for a discussion of our
critical accounting policies and significant judgments and estimates.
Results of Operations
The following table summarizes our results of operations for each of the three
months ended March 31, 2020 and 2019, together with the change in these items in
dollars and as a percentage:
                                          Three Months Ended March 31,
                                          2020                   2019

$ Change % Change


                                                         (in thousands)
Collaboration revenue              $            -         $           2,000     $    (2,000 )         (100 )%
Royalty revenue                               428                       142             286            201  %
Research and development expense            7,346                     5,766           1,580             27  %
General and administrative expense          3,324                     3,398             (74 )           (2 )%
Royalty expense                               258                     6,761          (6,503 )          (96 )%
Investment and other income                   186                       289            (103 )          (36 )%
Interest expense                              (38 )                    (304 )           266            (88 )%
Related party interest expense               (534 )                       -            (534 )            -  %
Income taxes benefit                            -                        54             (54 )         (100 )%


Revenue
Collaboration revenue for the three months ended March 31, 2019 consisted of
$2.0 million of revenue related to the milestone from PellePharm for the
initiation of a Phase 3 study investigating patidegib in patients with Gorlin
Syndrome.

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Royalty revenue consisted of approximately $0.4 million and $0.1 million for the
three months ended March 31, 2020 and 2019, respectively, related to royalties
from Verastem on net sales of duvelisib. A portion of royalties received from
Verastem is owed to Mundipharma International Corporation Limited, or
Mundipharma, and Purdue Pharmaceutical Products L.P., or Purdue. We refer to
such portion as the Trailing Mundipharma Royalties (see Note 12 of the notes to
our unaudited condensed consolidated financial statements included elsewhere in
this Quarterly Report on Form 10-Q). We and HealthCare Royalty Partners III,
L.P., or HCR, entered into a purchase and sale agreement in March 2019, or the
HCR Agreement. Pursuant to the HCR Agreement, HCR acquired our interest in
royalties received from Verastem on net sales of duvelisib, less the Trailing
Mundipharma Royalties (see Note 9 of the notes to our unaudited condensed
consolidated financial statements included elsewhere in this Quarterly Report on
Form 10-Q).
Research and Development Expense
Research and development expense increased for the three months ended March 31,
2020 as compared to the three months ended March 31, 2019 primarily due to an
increase in clinical and development expenses for IPI-549 of $1.7 million.
We began to track and accumulate expenses by major program starting on
January 1, 2006. These expenses primarily relate to payroll and related expenses
for personnel working on our programs, process development and manufacturing,
preclinical toxicology studies, clinical trial costs and allocated costs of
facilities. During the three months ended March 31, 2020 and 2019, we estimate
that we incurred $7.3 million and $5.8 million, respectively, on IPI-549. From
January 1, 2006 through March 31, 2020, we estimate that we incurred $664.0
million on our PI3K inhibitor program, including IPI-549 and duvelisib.
We do not believe that the historical costs associated with our drug development
programs are indicative of the future costs associated with these programs. Due
to the variability in the length of time and scope of activities necessary to
develop a product candidate and uncertainties related to our cost estimates and
our ability to obtain marketing approval for our product candidates, accurate
and meaningful estimates of the total costs required to bring our product
candidates to market are not available.
Because of the risks inherent in drug development, we cannot reasonably estimate
or know:
•the nature, timing and estimated costs of the efforts necessary to complete the
development of our programs;
•the completion dates of these programs; or
•         the period in which material net cash inflows are expected to commence,
          if at all, from the programs described above and any potential future
          product candidates.

There is significant uncertainty regarding our ability to successfully develop any product candidates. These risks include the uncertainty of: • the scope, rate of progress and cost of our clinical trials that we are

currently conducting or may commence in the future;

• clinical trial results;

• the cost of establishing clinical supplies of any product candidates;

• the cost and availability of comparator and combination drugs;




•         the cost of filing, prosecuting, defending and enforcing any patent
          claims and other intellectual property rights relating to our programs
          under development;


•         the terms and timing of any collaborations, licensing and other
          arrangements that we have or may establish in the future relating to
          our programs under development;

• the cost and timing of regulatory approvals;

• the effect of competing technological and market developments; and

• the impact of the COVID-19 pandemic (see "Business Update Regarding

COVID-19").

General and Administrative Expense General and administrative expense is comparable for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019. Royalty Expense


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Royalty expense for the three months ended March 31, 2020 and 2019 included the
Trailing Mundipharma Royalties of $0.2 million and $0.1 million, respectively.
Royalty expense decreased for the three months ended March 31, 2020 as compared
to the three months ended March 31, 2019 primarily due to the $6.7 million paid
to Takeda in March 2019 in relation to the upfront proceeds received under the
HCR Agreement (see Note 12 of the notes to our unaudited condensed consolidated
financial statements included elsewhere in this Quarterly Report on Form 10-Q).
Investment and Other Income
Investment and other income decreased for the three months ended March 31, 2020
as compared to the three months ended March 31, 2019 primarily as a result of
lower average cash and investment balances.
Interest Expense
Interest expense for the three months ended March 31, 2020 and 2019 was due to
non-cash interest expense related to the sale of future royalties in relation to
the HCR Agreement, which we recognized as a liability that is being amortized
using the effective interest method over the life of the arrangement.
Related Party Interest Expense
Related party interest expense for the three months ended March 31, 2020 was due
to non-cash interest expense related to the sale of future royalties in relation
to the BVF Funding Agreement, which we recognized as a liability that is being
amortized using the effective interest method over the life of the arrangement
(see Note 10 of the notes to our unaudited condensed consolidated financial
statements included elsewhere in this Quarterly Report on Form 10-Q).
Liquidity and Capital Resources
We have not generated any revenue from product sales to date, and we do not
expect to generate any such revenue for the foreseeable future, if at all. We
have instead relied on the proceeds from sales of equity securities, sales of
future royalties, debt, interest on investments, up-front license fees, expense
reimbursement, milestones, royalties and cost sharing under our collaborations
to fund our operations. Because IPI-549 is in clinical development, and the
outcome of this effort is uncertain, we cannot estimate the actual amounts
necessary to successfully complete the development and commercialization of our
product candidate or whether, or when, we may achieve profitability.
The following table summarizes the components of our financial condition:
                                                 March 31, 2020

December 31, 2019


                                                             (in thousands)
Cash, cash equivalents and available-for-sale
securities                                    $           50,348     $            42,444
Working capital                                           44,562                  34,883


                                Three Months Ended March 31,
                                  2020                 2019
                                       (in thousands)
Cash provided by (used in):
Operating activities        $      (11,777 )     $      (15,675 )
Investing activities                   430               (7,612 )
Financing activities                19,572               27,618


Cash Flows
For the three months ended March 31, 2020 compared to the three months ended
March 31, 2019, our cash used in operating activities decreased primarily due to
our payment to Takeda related to the HCR Agreement during the three months ended
March 31, 2019. Our cash used in operating activities in future periods may vary
significantly.
Net cash provided by investing activities for the three months ended March 31,
2020 primarily included purchases of available-for-sale securities of $19.7
million and proceeds of $20.2 million from maturities of available-for-sale
securities. Net cash used in investing activities for the three months ended
March 31, 2019 primarily included purchases of available-for-sale securities of
$12.6 million and proceeds of $5.0 million from maturities of available-for-sale
securities.

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Net cash provided by financing activities for the three months ended March 31,
2020 was due to $19.6 million in net proceeds from the sale of future royalties
due to us from BVF (see Note 10 of the notes to our unaudited condensed
consolidated financial statements included elsewhere in this Quarterly Report on
Form 10-Q). Net cash provided by financing activities for the three months ended
March 31, 2019 included $27.6 million in net proceeds from the sale of future
royalties due to us from Verastem (see Note 9 of the notes to our unaudited
condensed consolidated financial statements included elsewhere in this Quarterly
Report on Form 10-Q).
Operating Capital Requirements
As of March 31, 2020, we had cash, cash equivalents and available-for-sale
securities of $50.3 million. We believe that our existing cash, cash equivalents
and available-for-sale securities at March 31, 2020 will be adequate to satisfy
our capital needs for at least the next twelve months from the issuance date of
these financial statements based on our current operational plans. As a result
of the delays in enrollment in our MARIO-3 and MARIO-275 clinical trials, we
anticipate that we will need additional capital resources in order to have
sufficient funds through key data readouts. We expect to continue to spend
significant resources to fund the development and potential commercialization of
IPI-549 and to incur significant operating losses for the foreseeable future.
Our estimate as to how long we expect our existing cash, cash equivalents and
available-for-sale securities to be able to continue to fund our operations is
based on assumptions that may prove to be wrong, and we could use our available
capital resources sooner than we currently expect. Further, changing
circumstances, some of which may be beyond our control, could cause us to
consume capital significantly faster than we currently anticipate. Our future
funding requirements, both short-term and long-term, will depend on many
factors, including, but not limited to:
•         the scope, progress, results and costs of developing IPI-549, currently
          in clinical development;


•         the impact of delays in patient enrollment, site activation, and
          protocol amendment approvals related to the COVID-19 pandemic (see
          "Business Update Regarding COVID-19");


•         the timing of, and the costs involved in, obtaining regulatory
          approvals for IPI-549;

• subject to receipt of marketing approval, revenue, if any, received


          from commercial sales of IPI-549;


•         the timing and amount of additional revenues, if any, received from
          strategic agreements and funding arrangements, including:


•             milestone payments from entities affiliated with BVF under the
              funding agreement we entered into with such parties;


•             regulatory and commercial-based milestone payments from PellePharm
              under the license agreement we entered into with PellePharm related
              to the development and commercialization of patidegib, the hedgehog
              inhibitor we licensed to PellePharm under the PellePharm Agreement;
              and


•             milestone payments related to commercial sales of products
              containing duvelisib (Copiktra®), or Licensed Products, we might
              receive under the purchase and sale agreement, or HCR

Agreement, we


              entered into with HCR or any additional royalties we might

receive


              from Verastem, if such rights reverted to us in accordance

with the


              HCR Agreement upon satisfaction of our obligations to HCR
              thereunder;

• the timing and amount of additional royalty and milestone payments owed

to Takeda based on sales of Licensed Products by Verastem;

• the costs involved in preparing, filing, prosecuting, maintaining,


          defending and enforcing patent claims, including litigation costs and
          the outcome of such litigation;

• any breach, acceleration event or event of default under any agreements

with third parties;

• the outcome of any lawsuits that could be brought against us;




•         the cost of acquiring raw materials for, and of manufacturing, IPI-549
          is higher than anticipated;

• the cost or quantity required of comparator or combination drugs used

in clinical studies increases;

• the effect of competing technological and market developments;




•         any federal government shutdown that prevents or delays the SEC from
          processing any future registration statements we may file to register
          shares for capital raising purposes; and

• a loss in our investments due to general market conditions or other reasons.





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We may seek additional funds through arrangements with collaborators or other
third parties, or through project financing. These arrangements would generally
require us to relinquish or encumber rights to some of our technologies or
product candidates, and we may not be able to enter into such agreements on
acceptable terms, if at all. We may also seek additional funding through public
or private financings of equity or debt securities, but such financings may not
be available on acceptable terms, if at all. In addition, the terms of our
financings may be dilutive to, or otherwise adversely affect, holders of our
common stock, and such terms may impact our ability to make capital expenditures
or incur additional debt. If we are unable to obtain additional funding on a
timely basis, we may be required to curtail or terminate some or all of our
development programs or to scale back, suspend or terminate our business
operations.
Common Stock Sales Facility
On June 28, 2019, we entered into a Capital on Demand Sales Agreement with
JonesTrading Institutional Services LLC, or JonesTrading, and on July 29, 2019
we amended and restated the sales agreement to add B. Riley FBR, Inc., or B.
Riley FBR, as a party to the agreement. We refer to the amended and restated
sales agreement as the ATM Sales Agreement. Pursuant to the ATM Sales Agreement
we may offer and sell shares of our common stock having an aggregate offering
price of up to $20.0 million from time to time through JonesTrading or B. Riley
FBR, each acting as our sales agent. We have agreed to pay commissions to the
sales agents for their services in acting as agents in the sale of our common
stock in the amount of up to 3.0% of the gross proceeds from sales of our common
stock pursuant to the ATM Sales Agreement. Sales of shares of our common stock
under the ATM Sales Agreement may be made in sales deemed to be "at the market
offerings" as defined in Rule 415(a)(4) promulgated under the Securities Act of
1933, as amended. With our prior written approval, JonesTrading or B. Riley FBR
may also sell the shares by any other method permitted by law, including in
negotiated transactions. We, JonesTrading, or B. Riley FBR may suspend or
terminate the offering of shares upon notice to the other party and subject to
other conditions. During the three months ended March 31, 2020, we did not sell
any shares under the ATM Sales Agreement.
Off-Balance Sheet Arrangements
Since inception, we have not engaged in any off-balance sheet financing
activities, including the use of structured finance, special purpose entities or
variable interest entities.
Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

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